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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934)
ECOLAB INC.
(Name of issuer)
ECOLAB INC.
(Name of person(s) filing statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(Title of class of securities)
278865100
(CUSIP number of class of securities)
WILLIAM R. ROSENGREN, ESQ.
SENIOR VICE PRESIDENT -- LAW AND
GENERAL COUNSEL
ECOLAB INC.
ECOLAB CENTER
ST. PAUL, MINNESOTA 55102
(612) 293-2233
(Name, address and telephone number of person
authorized to receive notices and communications
on behalf of the person(s) filing statement)
------------------------
COPY TO:
CHARLES W. MULANEY, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700
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MAY 17, 1995
(Date tender offer first published, sent or given to security holders)
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CALCULATION OF FILING FEE
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Transaction valuation*: $75,000,000 Amount of filing fee: $15,000
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/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: N/A Filing party: N/A
Form or registration no.: N/A Date filed: N/A
- ------------------------
* Based upon the purchase of 3,000,000 shares at the maximum tender offer price,
$25.00 per share.
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ITEM 1. SECURITY AND ISSUER.
(a) The Issuer of the securities to which this Issuer Tender Offer Statement
on Schedule 13E-4 (the "Statement") relates is Ecolab Inc., a Delaware
corporation (the "Company"), and the address of its principal executive office
is Ecolab Center, St. Paul, Minnesota 55102.
(b) This Statement relates to a tender offer by the Company to purchase
3,000,000 shares (or such lesser number of shares as are validly tendered) of
its common stock, par value $1.00 per share (including the associated Preferred
Stock Purchase Rights, the "Shares"), at prices, net to the seller in cash, not
greater than $25.00 nor less than $21.75 per Share, specified by stockholders,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated May 17, 1995 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer"), copies of which are filed
as Exhibits (a)(1) and (a)(2), respectively. The information set forth in the
"Introduction," "Section 1. Number of Shares; Proration," "Section 8. Interest
of Directors and Executive Officers; Transactions and Arrangements Concerning
the Shares," "Section 9. Background and Purpose of the Offer" and "Section 15.
Extension of the Offer; Termination; Amendments" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in "Introduction" and "Section 7. Price Range
of Shares; Dividends" of the Offer to Purchase is incorporated herein by
reference.
(d) This Statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "Section 11. Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth in the "Introduction" and "Section 9. Background
and Purpose of the Offer" of the Offer to Purchase is incorporated herein by
reference.
(a)-(j) The information set forth in the "Introduction," "Section 8.
Interest of Directors and Executive Officers; Transactions and Arrangements
Concerning the Shares," "Section 9. Background and Purpose of the Offer,"
"Section 11. Source and Amount of Funds" and "Section 12. Effects of the
Offer on the Market for Shares; Registration under the Exchange Act" of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "Section 8. Interest of Directors and Executive
Officers; Transactions and Arrangements Concerning the Shares" and "Schedule
I Certain Transactions Involving Shares" of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in the "Introduction" and "Section 8. Interest of
Directors and Executive Officers; Transactions and Arrangements Concerning the
Shares" of the Offer to Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and "Section 16. Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in "Section 10. Certain Information About
the Company" of the Offer to Purchase is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
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(b) The information set forth in "Section 13. Certain Legal Matters;
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in "Section 12. Effects of the Offer on the
Market for Shares; Registration under the Exchange Act" of the Offer to Purchase
is incorporated herein by reference.
(d) Not applicable.
(e) Reference is hereby made to the Offer to Purchase and the related Letter
of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and
(a)(2), respectively, and incorporated in their entirety herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase, dated May 17, 1995
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9
(a)(7) News Release issued by the Company on May 12, 1995
(a)(8) Letter to the Company's Stockholders from Pierson M. Grieve, Chairman of the
Board, and Allan L. Schuman, President and Chief Executive Officer, of the
Company, dated May 17, 1995
(a)(9) Summary Advertisement, dated May 17, 1995
(a)(10) Form of Letter to Participants for use by the Trustee of the Company's 401(k)
Savings Plan
(a)(11) Form of Letter to Participants in the Company's 401(k) Savings Plan from Diane
A. Wigglesworth, Compensation Vice President of the Company
(b)(1) Multicurrency Credit Agreement, dated as of September 29, 1993, as amended and
restated as of January 1, 1995, among the Company, the financial institutions
party thereto, Citibank, N.A., as Agent, Citibank International Plc, as
Euro-Agent, and Morgan Guaranty Trust Company of New York, as Co-Agent
(c)(1) Amended and Restated Stockholder's Agreement, dated June 26, 1991, between the
Company and Henkel KGaA
(c)(2) Agreement and Plan of Merger, dated November 2, 1994, among the Company, EKH,
Inc. I, EKH, Inc. II, EKH, Inc. III, Kay Chemical Company, Kay Chemical
International, Inc., Kay Europe, Inc. and the stockholders of Kay Chemical
Company, Kay Chemical International, Inc. and Kay Europe, Inc.
(d) Not applicable
(e) Not applicable
(f) Not applicable
</TABLE>
3
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SIGNATURE
After due 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.
ECOLAB INC.
By:_______/S/ KENNETH A. IVERSON______
Name: Kenneth A. Iverson
Title: Vice President and Secretary
Dated: May 16, 1995
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
PAPER (P) OR
EXHIBIT NO. DESCRIPTION ELECTRONIC (E)
- ----------- ------------------------------------------------------------------------------------- -------------------
<S> <C> <C>
(a)(1) Offer to Purchase, dated May 17, 1995................................................ E
(a)(2) Letter of Transmittal................................................................ E
(a)(3) Notice of Guaranteed Delivery........................................................ E
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees..... E
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees...................................................................... E
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9................................................................................. E
(a)(7) News Release issued by the Company on May 12, 1995................................... E
(a)(8) Letter to the Company's Stockholders from Pierson M. Grieve, Chairman of the Board,
and Allan L. Schuman, President and Chief Executive Officer, of the Company, dated
May 17, 1995........................................................................ E
(a)(9) Summary Advertisement, dated May 17, 1995............................................ E
(a)(10) Form of Letter to Participants for use by the Trustee of the Company's 401(k) Savings
Plan................................................................................ E
(a)(11) Form of Letter to Participants in the Company's 401(k) Savings Plan from Diane A.
Wigglesworth, Compensation Vice President of the Company............................ E
(b)(1) Multicurrency Credit Agreement, dated as of September 29, 1993, as amended and
restated as of January 1, 1995, among the Company, the financial institutions party
thereto, Citibank, N.A., as Agent, Citibank International Plc, as Euro-Agent, and
Morgan Guaranty Trust Company of New York, as Co-Agent.............................. E
(c)(1) Amended and Restated Stockholder's Agreement, dated June 26, 1991, between the
Company and Henkel KGaA............................................................. E
(c)(2) Agreement and Plan of Merger, dated November 2, 1994, among the Company, EKH, Inc. I,
EKH, Inc. II, EKH, Inc. III, Kay Chemical Company, Kay Chemical International, Inc.,
Kay Europe, Inc. and the stockholders of Kay Chemical Company, Kay Chemical
International, Inc. and Kay Europe, Inc............................................. E
</TABLE>
5
<PAGE>
ECOLAB INC.
OFFER TO PURCHASE FOR CASH
UP TO 3,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT GREATER THAN
$25.00 NOR LESS THAN $21.75 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JUNE 14, 1995,
UNLESS THE OFFER IS EXTENDED.
Ecolab Inc., a Delaware corporation (the "Company"), hereby invites its
stockholders to tender shares of its common stock, par value $1.00 per share
(including the associated Preferred Stock Purchase Rights (the "Rights"), the
"Shares"), to the Company at prices, net to the seller in cash, not greater than
$25.00 nor less than $21.75 per Share, specified by such stockholders, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which together constitute the "Offer"). The
Company will determine a single per Share price (not greater than $25.00 nor
less than $21.75 per Share) (the "Purchase Price") that it will pay for Shares
validly tendered pursuant to the Offer taking into account the number of Shares
so tendered and the prices specified by tendering stockholders. The Company will
select the Purchase Price which will allow it to buy 3,000,000 Shares (or such
lesser number of Shares as are validly tendered at prices not greater than
$25.00 nor less than $21.75 per Share) pursuant to the Offer. All Shares validly
tendered at prices at or below the Purchase Price will be purchased at the
Purchase Price, net to the seller in cash, upon the terms and subject to the
conditions of the Offer, including the proration terms hereof.
Shares tendered and purchased by the Company will not receive or otherwise
be entitled to the regular quarterly cash dividend of $.125 per Share to be paid
by the Company on July 17, 1995 to stockholders of record on June 27, 1995,
unless the Offer is extended beyond June 15, 1995 for any reason whatsoever.
Shares which are tendered but not purchased as a result of proration or
otherwise will remain entitled to receipt of the dividend to be paid on July 17,
1995. See Section 7.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE
TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE
OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
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THE DEALER MANAGER FOR THE OFFER IS:
SALOMON BROTHERS INC
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May 17, 1995
<PAGE>
IMPORTANT
Any stockholder desiring to tender all or any portion of his Shares should
either (1) complete and sign the Letter of Transmittal or a facsimile copy
thereof in accordance with the instructions in the Letter of Transmittal, mail
or deliver it and any other required documents to the Depositary, First Chicago
Trust Company of New York, and either mail or deliver his stock certificates for
such Shares to the Depositary or follow the procedure for book-entry delivery
set forth in Section 3, or (2) request his broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for him. A stockholder
having Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact that broker, dealer, commercial bank,
trust company or other nominee if such stockholder desires to tender such
Shares. Stockholders who desire to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply with the procedure for
book-entry transfer by the expiration of the Offer must tender such Shares by
following the procedures for guaranteed delivery set forth in Section 3.
STOCKHOLDERS MUST PROPERLY COMPLETE THE LETTER OF TRANSMITTAL INCLUDING THE
SECTION OF THE LETTER OF TRANSMITTAL RELATING TO THE PRICE AT WHICH THEY ARE
TENDERING SHARES IN ORDER TO EFFECT A VALID TENDER OF THEIR SHARES.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL.
IF GIVEN OR MADE, SUCH RECOMMENDATION, INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<C> <S> <C>
Introduction........................................................................................ 3
1. Number of Shares; Proration......................................................................... 4
2. Tenders by Holders of Fewer than 100 Shares......................................................... 6
3. Procedure for Tendering Shares...................................................................... 6
4. Withdrawal Rights................................................................................... 10
5. Purchase of Shares and Payment of Purchase Price.................................................... 10
6. Certain Conditions of the Offer..................................................................... 11
7. Price Range of Shares; Dividends.................................................................... 13
8. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares... 13
9. Background and Purpose of the Offer................................................................. 15
10. Certain Information About the Company............................................................... 16
11. Source and Amount of Funds.......................................................................... 24
12. Effects of the Offer on the Market for Shares; Registration under the Exchange Act.................. 25
13. Certain Legal Matters; Regulatory Approvals......................................................... 25
14. Certain Federal Income Tax Consequences............................................................. 25
15. Extension of the Offer; Termination; Amendments..................................................... 28
16. Fees and Expenses................................................................................... 29
17. Miscellaneous....................................................................................... 30
Schedule I Certain Transactions Involving Shares................................................... S-1
</TABLE>
2
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TO THE HOLDERS OF COMMON
STOCK OF ECOLAB INC.:
INTRODUCTION
The Company hereby invites its stockholders to tender Shares to the Company
at prices, net to the seller in cash, not greater than $25.00 nor less than
$21.75 per Share, specified by such stockholders, upon the terms and subject to
the conditions set forth in the Offer. The Company will determine a single per
Share Purchase Price (not greater than $25.00 nor less than $21.75 per Share)
that it will pay for Shares validly tendered pursuant to the Offer taking into
account the number of Shares so tendered and the prices specified by tendering
stockholders. The Company will select the Purchase Price which will allow it to
buy 3,000,000 Shares (or such lesser number of Shares as are validly tendered at
prices not greater than $25.00 nor less than $21.75 per Share) pursuant to the
Offer. All Shares validly tendered at prices at or below the Purchase Price will
be purchased at the Purchase Price, net to the seller in cash, upon the terms
and subject to the conditions of the Offer, including the proration terms
described below.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
If, before the Expiration Date (as defined in Section 1), more than
3,000,000 Shares (or such greater number of Shares as the Company may elect to
purchase) are validly tendered at or below the Purchase Price, the Company will
accept Shares for purchase first from all Odd Lot Owners (as defined in Section
2) who validly tender all their Shares at or below the Purchase Price and then
on a pro rata basis, if necessary, from all other stockholders who validly
tender Shares at or below the Purchase Price. See Sections 1 and 2. The Company
will return all Shares not purchased under the Offer, including Shares tendered
and not withdrawn at prices greater than the Purchase Price and Shares not
purchased because of proration. Tendering stockholders will not be obligated to
pay brokerage fees or commissions, solicitation fees or, subject to Instruction
7 of the Letter of Transmittal, stock transfer taxes on the Company's purchase
of Shares pursuant to the Offer. In addition, the Company will pay all fees and
expenses of Salomon Brothers Inc (the "Dealer Manager"), First Chicago Trust
Company of New York (the "Depositary") and Georgeson & Company Inc. (the
"Information Agent") in connection with the Offer. See Section 16.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
Stockholders must make their own decisions whether to tender Shares and, if so,
how many Shares to tender and the price or prices at which Shares should be
tendered. The Company has been advised that none of its directors or executive
officers intends to tender any Shares pursuant to the Offer.
Over the past several years, the Company's operations have generated
substantial excess cash. Historically, the Company has used this cash to reduce
debt, resulting in a strong balance sheet. However, the continuing strong cash
flow and relatively low debt levels leave the Company under-leveraged. The Board
of Directors believes the Company's financial condition and outlook for
continuing favorable cash generation will allow it to meet the Company's first
priority, which is to reinvest in the business, including through acquisitions,
and to use its excess cash and debt capacity to fund the repurchase program. The
Board of Directors believes that the purchase of Shares is an attractive use of
the Company's financial resources and that the use of cash and borrowing to fund
the Offer will result in a more efficient capital structure for the Company.
Accordingly, the Offer is consistent with the Company's long-term corporate goal
of increasing stockholder value.
Even after this share repurchase is completed, the Company will have ready
access to sources of capital sufficient to fund investments in the business,
including through attractive acquisition opportunities that might become
available.
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not
greater than $25.00 nor less than $21.75 per Share) at
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which they are willing to sell their Shares and, if any such Shares are
purchased pursuant to the Offer, to sell those Shares for cash without the usual
transaction costs associated with open-market sales. In addition, the Offer may
give stockholders the opportunity to sell Shares at prices greater than market
prices prevailing prior to announcement of the Offer.
In connection with its authorization of the Offer, the Board of Directors
has also authorized the Company to purchase in open market or privately
negotiated transactions, or otherwise, additional Shares after the consummation
of the Offer in amounts such that the total number of Shares purchased by the
Company pursuant to the Offer and pursuant to such open market and privately
negotiated transactions does not exceed 6,000,000 Shares. Any such open market
or privately negotiated purchase may be on the same terms or on terms more
favorable or less favorable to stockholders than the terms of the Offer.
However, the Company is not obligated to make any such open market or privately
negotiated purchase, and no assurance can be given that the Company will engage
in such transactions.
As of May 12, 1995, there were 67,894,827 Shares outstanding (including
Shares held under restricted stock awards which are subject to events of
forfeiture) and 4,376,219 Shares issuable upon exercise of stock options under
the Company's stock option plans. The 3,000,000 Shares that the Company is
offering to purchase represent approximately 4.42% of the Shares outstanding as
of May 12, 1995 and approximately 4.15% of the sum of the Shares then
outstanding and all Shares which may be issuable upon the exercise of stock
options. The Shares are traded principally on the New York Stock Exchange, Inc.
("NYSE") and are also traded on the Pacific Stock Exchange, Incorporated (the
"PSE"), in each case under the symbol "ECL." On May 12, 1995, the last trading
day prior to the announcement of the Offer, the closing per Share sales price as
reported on the NYSE Composite Tape was $23.375. On May 16, 1995, the last full
trading day prior to the commencement of the Offer, the closing per Share sales
price as reported on the NYSE Composite Tape was $24.625. THE COMPANY URGES
STOCKHOLDERS TO OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES.
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment and purchase 3,000,000 Shares or such lesser number of Shares
as are validly tendered on or prior to the Expiration Date at a price
(determined in the manner set forth below) not greater than $25.00 nor less than
$21.75 per Share. The term "Expiration Date" means 12:00 midnight, New York City
time, on Wednesday, June 14, 1995, unless the Company, in its sole discretion,
shall have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall refer to the latest time and date at
which the Offer, as so extended by the Company, shall expire. See Section 15 for
a description of the Company's right to extend the time during which the Offer
is open and to delay, terminate or amend the Offer. See also Section 6. Subject
to Section 2, if the Offer is oversubscribed, Shares tendered at or below the
Purchase Price prior to the Expiration Date will be subject to proration. The
proration period also expires on the Expiration Date.
The Company will, upon the terms and subject to the conditions of the Offer,
determine the Purchase Price (not greater than $25.00 nor less than $21.75 per
Share) that it will pay for Shares validly tendered pursuant to the Offer taking
into account the number of Shares so tendered and the prices specified by
tendering stockholders. The Company will select a single per Share Purchase
Price that will allow it to buy 3,000,000 Shares (or such lesser number as are
validly tendered at prices not greater than $25.00 nor less than $21.75 per
Share) pursuant to the Offer. The Company reserves the right, in its sole
discretion, to purchase more than 3,000,000 Shares pursuant to the Offer.
If (i) the Company increases or decreases the price to be paid for Shares,
increases the number of Shares being sought and any such increase in the number
of Shares being sought exceeds 2% of the outstanding Shares, or decreases the
number of Shares being sought, and (ii) the Offer is scheduled to expire less
than ten business days from and including the date that notice of such increase
or decrease is first published, sent or given in the manner specified in Section
15, the Offer will be extended for ten
4
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business days from and including the date of such notice. For purposes of the
Offer, a "business day" means any day other than a Saturday, Sunday or federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time.
In accordance with Instruction 5 of the Letter of Transmittal, each
stockholder desiring to tender Shares must specify the price or prices (not
greater than $25.00 nor less than $21.75 per Share) at which such stockholder is
willing to have the Company purchase his Shares. All Shares purchased pursuant
to the Offer will be purchased at the Purchase Price. All Shares not purchased
pursuant to the Offer, including Shares tendered at prices greater than the
Purchase Price and Shares not purchased because of proration, will be returned
to the tendering stockholders at the Company's expense as promptly as
practicable following the Expiration Date.
Upon the terms and subject to the conditions of the Offer, if the number of
Shares validly tendered prior to the Expiration Date is less than or equal to
3,000,000 Shares (or such greater number of Shares as the Company may elect to
purchase pursuant to the Offer), the Company will purchase at the Purchase Price
all Shares so tendered.
Upon the terms and subject to the conditions of the Offer, in the event that
prior to the Expiration Date more than 3,000,000 Shares (or such greater number
of Shares as the Company elects to purchase) are validly tendered at or below
the Purchase Price, the Company will accept Shares for purchase in the following
order of priority:
(a) first, all Shares validly tendered at or below the Purchase Price
prior to the Expiration Date and not withdrawn by any Odd Lot Owner (as
defined in Section 2) who:
(1) tenders all Shares beneficially owned by such Odd Lot Owner at or
below the Purchase Price (partial tenders will not qualify for this
preference); and
(2) completes the section captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and
(b) then, after purchase of all of the foregoing Shares, all other
Shares validly tendered at or below the Purchase Price before the Expiration
Date on a pro rata basis, if necessary (with adjustments to avoid purchases
of fractional shares).
In the event that proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable after the
Expiration Date. Proration for each stockholder tendering Shares other than Odd
Lot Owners shall be based on the ratio of the number of Shares tendered by such
stockholder at or below the Purchase Price to the total number of Shares
tendered by all stockholders at or below the Purchase Price other than Odd Lot
Owners. Although the Company does not expect to be able to announce the final
results of such proration until approximately seven NYSE trading days after the
Expiration Date, it will announce preliminary results of proration by press
release as promptly as practicable after the Expiration Date. Stockholders may
obtain such preliminary information from the Information Agent and may be able
to obtain such information from their brokers or financial advisors.
On February 14, 1986, the Company's Board of Directors declared a dividend
distribution of one Right for each Share outstanding on March 11, 1986 (the
"Record Date"). Shares issued subsequent to the Record Date automatically
receive the Rights. The Rights expire on March 11, 1996 unless redeemed earlier
by the Company. Because of adjustments to account for stock splits effected in
the form of stock dividends paid after the Record Date, currently each Share
entitles the holder to one-quarter of one Right. Each Right entitles the
registered holder to purchase from the Company a unit consisting of one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company at an exercise price of $150, subject to adjustment. The Rights are not
currently exercisable and trade together with the Shares associated therewith.
The Rights will not become exercisable or separately tradeable as a result of
the Offer. Absent circumstances causing the Rights to become exercisable or
separately tradeable prior to the Expiration Date, the tender of any Shares
pursuant to the Offer will include the tender of the
5
<PAGE>
associated Rights. No separate consideration will be paid for such Rights. Upon
the purchase of Shares by the Company pursuant to the Offer, the sellers of the
Shares so purchased will no longer own the Rights associated with such Shares.
As described in Section 14, the number of Shares that the Company will
purchase from a stockholder may affect the federal income tax consequences to
the stockholder of such purchase and therefore may be relevant to a
stockholder's decision whether to tender Shares. The Letter of Transmittal
affords each tendering stockholder the opportunity to designate the order of
priority in which Shares tendered are to be purchased in the event of proration.
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES.
The Company, upon the terms and subject to the conditions of the Offer, will
accept for purchase, without proration, all Shares validly tendered on or prior
to the Expiration Date at or below the Purchase Price by or on behalf of
stockholders who beneficially held, as of the close of business on May 12, 1995,
and continue to own beneficially as of the Expiration Date, an aggregate of
fewer than 100 Shares, including Shares held in the Company's Dividend
Reinvestment Plan and in the Company's 401(k) Savings Plan ("Odd Lot Owners").
To avoid proration, however, an Odd Lot Owner must validly tender at or below
the Purchase Price all Shares that such Odd Lot Owner beneficially owns; partial
tenders will not qualify for this preference. This preference is not available
to holders of 100 or more Shares, even if such holders have separate stock
certificates for fewer than 100 Shares. Any Odd Lot Owner wishing to tender all
Shares beneficially owned by him free of proration pursuant to this Offer must
complete the section captioned "Odd Lots" in the Letter of Transmittal and, if
applicable, on the Notice of Guaranteed Delivery. By accepting the Offer, a
stockholder owning fewer than 100 Shares would not only avoid the payment of
brokerage commissions but would also avoid any applicable odd lot discounts
payable in a sale of his Shares on a stock exchange, including the NYSE.
3. PROCEDURE FOR TENDERING SHARES.
PROPER TENDER OF SHARES. For Shares to be validly tendered pursuant to the
Offer:
(a) the certificates for such Shares (or confirmation of receipt of such
Shares pursuant to the procedures for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees, and any other
documents required by the Letter of Transmittal, must be received on or
before the Expiration Date by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase; or
(b) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
As specified in Instruction 5 of the Letter of Transmittal, each stockholder
desiring to tender Shares pursuant to the Offer must properly indicate in the
section captioned "Price (In Dollars) Per Share At Which Shares Are Being
Tendered" on the Letter of Transmittal the price (in multiples of $.125) at
which his Shares are being tendered; provided, however, that an Odd Lot Owner
may check the box in the section entitled "Odd Lots" indicating that he is
tendering all of his Shares at the Purchase Price. STOCKHOLDERS DESIRING TO
TENDER SHARES AT MORE THAN ONE PRICE MUST COMPLETE SEPARATE LETTERS OF
TRANSMITTAL FOR EACH PRICE AT WHICH SHARES ARE BEING TENDERED, EXCEPT THAT THE
SAME SHARES CANNOT BE TENDERED (UNLESS PROPERLY WITHDRAWN PREVIOUSLY IN
ACCORDANCE WITH THE TERMS OF THE OFFER) AT MORE THAN ONE PRICE. IN ORDER TO
VALIDLY TENDER SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE
APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL.
In addition, Odd Lot Owners who tender all of their Shares must complete the
section entitled "Odd Lots" in the Letter of Transmittal and, if applicable, on
the Notice of Guaranteed Delivery in order to qualify for the preferential
treatment available to Odd Lot Owners as set forth in Section 1.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required on the Letter of Transmittal (i) if the Letter of Transmittal is signed
by the registered holder of the Shares exactly as the
6
<PAGE>
name of the registered holder (which term, for purposes of this Section 3,
includes any participant in The Depository Trust Company, the Midwest Securities
Trust Company or the Philadelphia Depository Trust Company (collectively, the
"Book-Entry Transfer Facilities") whose name appears on a security position
listing as the holder of the Shares) appears on the certificate tendered
therewith, and payment and delivery are to be made directly to such registered
holder, or (ii) if Shares are tendered for the account of a member firm of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. or by a commercial bank or trust company having an
office, branch or agency in the United States which is a member of one of the
Stock Transfer Association's approved medallion programs (such as Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchange Medallion Program) (each such entity, an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of
the Letter of Transmittal. If a certificate representing Shares is registered in
the name of a person other than the signer of a Letter of Transmittal, or if
payment is to be made, or Shares not purchased or tendered are to be issued, to
a person other than the registered holder, the certificate must be endorsed or
accompanied by an appropriate stock power, in either case signed exactly as the
name of the registered holder appears on the certificate, with the signature on
the certificate or stock power guaranteed by an Eligible Institution. In all
cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares (or a timely confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and any other
documents required by the Letter of Transmittal.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING STOCK CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
FEDERAL INCOME TAX BACKUP WITHHOLDING. To prevent federal income tax backup
withholding equal to 31% of the gross payments made pursuant to the Offer, each
stockholder who does not otherwise establish an exemption from such withholding
must notify the Depositary of such stockholder's correct taxpayer identification
number (or certify that such taxpayer is awaiting a taxpayer identification
number) and provide certain other information by completing a Substitute Form
W-9 (included in the Letter of Transmittal). Foreign stockholders may be
required to submit Form W-8, certifying non-United States status, in order to
avoid backup withholding. See Instructions 12 and 13 of the Letter of
Transmittal.
EACH STOCKHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO WHETHER SUCH
STOCKHOLDER IS SUBJECT TO OR EXEMPT FROM FEDERAL INCOME TAX WITHHOLDING.
For a discussion of certain other federal income tax consequences to
tendering stockholders, see Section 14.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by causing such
facility to transfer such Shares into the Depositary's account in accordance
with such facility's procedure for such transfer. Even though delivery of Shares
may be effected through book-entry transfer into the Depositary's account at one
of the Book-Entry Transfer Facilities, a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and other required documents must, in any case, be transmitted to and
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be followed. Delivery of the Letter of
Transmittal and any other required documents to one of the Book-Entry Transfer
Facilities does not constitute delivery to the Depositary.
7
<PAGE>
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates are not immediately available (or
the procedures for book-entry transfer cannot be completed on a timely basis) or
time will not permit all required documents to reach the Depositary by the
Expiration Date, such Shares may nevertheless be tendered provided that all of
the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission), on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the form the
Company has provided with this Offer to Purchase (indicating the price at
which the Shares are being tendered) and includes a guarantee by an Eligible
Institution in the form set forth in such Notice; and
(c) the certificates for all tendered Shares in proper form for transfer
(or confirmation of book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal, are
received by the Depositary within five NYSE trading days after the date the
Depositary receives such Notice of Guaranteed Delivery.
SAVINGS PLAN. As of May 12, 1995, the Company's 401(k) Savings Plan (the
"Savings Plan") owned 3,546,934 Shares, all of which were allocated to the
Ecolab Stock Fund for the benefit of the Savings Plan participants. Shares
representing a participant's proportional interest in the Ecolab Stock Fund
will, subject to the limitations of the Employee Retirement Income Security Act
of 1974, as amended, and applicable regulations thereunder ("ERISA"), be
tendered by Fidelity Management Trust Company, as the Trustee of the Savings
Plan, according to the instructions of such participant to the Trustee. Shares
for which the Trustee has not received timely instructions from participants
will not be tendered. Shares not allocated to participants' accounts, if any,
will be tendered in the same proportion as allocated Shares. The Trustee will
make available to the participants whose accounts hold allocated Shares all
documents furnished to the stockholders in connection with the Offer generally.
Each such participant will also receive a form upon which the participant may
instruct the Trustee regarding the Offer. Each participant may direct that all,
some or none of the Shares allocated to the participant's account be tendered
and the price at which his Shares are to be tendered. The Company will also
provide additional information in a separate letter with respect to the
operations of the Offer to the participants of the Savings Plan. Participants in
the Savings Plan may not use the Letter of Transmittal to direct the tender of
the Shares attributed to their accounts, but must use the separate form sent to
them. Participants in the Savings Plan are urged to read the separate form and
related materials carefully.
The portion of the proceeds received by the Trustee on account of Shares
purchased from the Savings Plan in the Offer that is attributable to a
participant's contributions to the Savings Plan will be reinvested by the
Trustee according to the instructions of such participant. As required by the
Savings Plan, the portion of the proceeds received by the Trustee on account of
Shares purchased from the Savings Plan in the Offer that is attributable to the
Company's matching contributions and profit-sharing contributions to the Savings
Plan will be reinvested by the Trustee in Shares.
Under ERISA the Company will be prohibited from purchasing any Shares from
the Savings Plan (including Shares allocated to the accounts of participants) if
the Purchase Price is less than the prevailing market price of the Shares on the
date the Shares are accepted for payment pursuant to the Offer. If Shares
tendered from the Savings Plan would have been accepted pursuant to the terms of
the Offer except for this prohibition, such Shares shall automatically be deemed
to be properly withdrawn.
Any participant's Shares tendered from the Savings Plan but not purchased
will be returned to such participant's Savings Plan account.
DIVIDEND REINVESTMENT PLAN. Any tender of Dividend Reinvestment Plan Shares
held in the account of a participant must be for all Dividend Reinvestment Plan
Shares in such account and must be
8
<PAGE>
made at a single price. Participants in the Dividend Reinvestment Plan who wish
to tender all, but not less than all, of the Dividend Reinvestment Plan Shares
held in their accounts at a single price pursuant to the Offer should so
indicate by checking the appropriate space in the box captioned "Tender of
Dividend Reinvestment Plan Shares" in the Letter of Transmittal and returning to
the Depositary the properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees and any other
documents required by the Letter of Transmittal. If a participant authorizes the
tender of his Dividend Reinvestment Plan Shares at a single price, all such
Shares beneficially owned by him in the Dividend Reinvestment Plan, including
any fractional Share, will be tendered at that price. Fractional Shares will
not, however, be accepted for payment pursuant to the Offer or otherwise sold to
the Company, unless a participant is deemed to have withdrawn from the Dividend
Reinvestment Plan pursuant to the following paragraph. Any Dividend Reinvestment
Plan Shares tendered but not purchased will be returned to the participant's
Dividend Reinvestment Plan account.
If a participant tenders all of his Dividend Reinvestment Plan Shares at or
below the Purchase Price and all such Dividend Reinvestment Plan Shares (other
than fractional Shares) are purchased by the Company under the terms of the
Offer, such tender will be deemed to be authorization and written notice to the
Company of such participant's withdrawal from the Dividend Reinvestment Plan (a
"Withdrawing Participant"), unless otherwise indicated by such participant. Such
authorization will also be deemed to constitute authorization by such
Withdrawing Participant to sell to the Company at the Purchase Price any
fractional Dividend Reinvestment Plan Share remaining in his account after the
purchase of his Dividend Reinvestment Plan Shares by the Company pursuant to the
Offer. The proceeds of any such sale will be forwarded directly to the
Withdrawing Participant. If, however, all Shares of a participant in the
Dividend Reimbursement Plan are not purchased, such participant will not be
deemed to have withdrawn from the Dividend Reinvestment Plan, and any Dividend
Reinvestment Plan Shares tendered but not purchased (including fractional
Shares) will be returned to such participant's Dividend Reinvestment Plan
account.
DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the number of Shares
to be accepted, the price to be paid therefor, the form of documents and the
validity, form, eligibility (including the time of receipt) and acceptance for
payment of any tender of Shares will be determined by the Company, in its sole
discretion, which determination shall be final and binding on all parties. The
Company reserves the absolute right to reject any or all tenders it determines
not to be in proper form or the acceptance of or payment for which may in the
opinion of the Company's counsel be unlawful. The Company also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any particular Shares. No tender of Shares will be
deemed to be validly made until all defects and irregularities have been cured
or waived. None of the Company, the Dealer Manager, the Depositary, the
Information Agent or any other person is or will be obligated to give notice of
any defects or irregularities in tenders, and none of them will incur any
liability for failure to give such notice.
TENDER CONSTITUTES AN AGREEMENT. The Company's acceptance for payment of
Shares tendered pursuant to the Offer will constitute a binding agreement
between the tendering stockholder and the Company upon the terms and subject to
the conditions of the Offer.
It is a violation of Rule 14e-4 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), for a person (directly or
indirectly) to tender Shares for his own account unless, at the time of tender
and at the end of the proration period (including any extension thereof), the
person so tendering (i) has a net long position equal to or greater than the
amount of (x) Shares tendered or (y) other securities immediately convertible
into, exercisable, or exchangeable for the amount of Shares tendered and will
acquire such Shares for tender by conversion, exercise or exchange of such other
securities and (ii) will cause such Shares to be delivered in accordance with
the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person. The tender of
Shares pursuant to any one of the procedures described above will constitute the
tendering stockholder's acceptance of the terms and conditions of the Offer as
well as the
9
<PAGE>
tendering stockholder's representation and warranty that (i) such stockholder
has a net long position in the Shares being tendered within the meaning of Rule
14e-4 and (ii) the tender of such Shares complies with Rule 14e-4.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, the tender of Shares
pursuant to the Offer is irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Company, may also be withdrawn after 12:00 midnight,
New York City time, on July 13, 1995.
For a withdrawal to be effective, the Depositary must timely receive (at one
of its addresses set forth on the back cover of this Offer to Purchase) a
written, telegraphic or facsimile transmission notice of withdrawal. Such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder, if different from that of the person who tendered such Shares. If the
certificates have been delivered or otherwise identified to the Depositary,
then, prior to the release of such certificates, the tendering stockholder must
also submit the serial numbers shown on the particular certificates evidencing
the Shares to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution (except in the case of Shares tendered by
an Eligible Institution). All questions as to the form and validity (including
time of receipt) of notices of withdrawal will be determined by the Company, in
its sole discretion, which determination shall be final and binding on all
parties. None of the Company, the Dealer Manager, the Depositary, the
Information Agent or any other person is or will be obligated to give any notice
of any defects or irregularities in any notice of withdrawal, and none of them
will incur any liability for failure to give such notice. Any Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. Withdrawn Shares may, however, be retendered by the Expiration Date by
again following any of the procedures described in Section 3.
If the Company extends the Offer, is delayed in its purchase of Shares or is
unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain on behalf of the Company all tendered Shares, and the
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in this Section 4.
Participants in the Savings Plan should follow the procedures for withdrawal
included in the letter furnished to such participants by the Trustee.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, the Company will
determine the Purchase Price it will pay for validly tendered Shares taking into
account the number of Shares tendered and the prices specified by tendering
stockholders and will accept for payment (and thereby purchase) Shares validly
tendered at or below the Purchase Price as soon as practicable after the
Expiration Date. For purposes of the Offer, the Company will be deemed to have
accepted for payment (and therefore purchased), subject to proration, Shares
which are tendered at or below the Purchase Price and not withdrawn when, as and
if it gives oral or written notice to the Depositary of its acceptance of such
Shares for payment pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer (including
proration), the Company will purchase and pay a single per Share Purchase Price
for 3,000,000 Shares (subject to increase or decrease as provided in Section 1
and Section 15) or such lesser number of Shares as are validly tendered at
prices not greater than $25.00 nor less than $21.75 per Share, as promptly as
practicable after the Expiration Date.
10
<PAGE>
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which will
act as agent for tendering stockholders solely for the purpose of receiving
payment from the Company and transmitting payment to the tendering stockholders.
In the event of proration, the Company will determine the proration factor
and pay for those tendered Shares accepted for payment as soon as practicable
after the Expiration Date; however, the Company does not expect to be able to
announce the final results of any such proration until approximately seven NYSE
trading days after the Expiration Date. Certificates for all Shares not
purchased, including all Shares tendered at prices greater than the Purchase
Price and Shares not purchased due to proration, will be returned (or, in the
case of Shares tendered by book-entry transfer, such Shares will be credited to
the account maintained with one of the Book-Entry Transfer Facilities by the
participant therein who so delivered such Shares) as soon as practicable after
the Expiration Date or termination of the Offer without expense to the tendering
stockholder. Under no circumstances will the Company pay interest on the
Purchase Price. In addition, if certain events occur, the Company may not be
obligated to purchase Shares pursuant to the Offer. See Section 6.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however,
that (i) if payment of the Purchase Price is to be made to, or (ii) (in the
circumstances permitted by the Offer) if unpurchased Shares are to be registered
in the name of, any person other than the registered owner, or if tendered
certificates are registered in the name of any person other than the person
signing the Letter of Transmittal, the amount of all stock transfer taxes, if
any (whether imposed on the registered owner or such other person), payable on
account of the transfer to such person will be deducted from the Purchase Price
unless evidence satisfactory to the Company of the payment of such taxes or
exemption therefrom is submitted. See Instruction 7 of the Letter of
Transmittal.
THE COMPANY MAY BE REQUIRED TO WITHHOLD AND REMIT TO THE INTERNAL REVENUE
SERVICE (THE "IRS"), 31% OF THE GROSS PROCEEDS PAID TO ANY TENDERING STOCKHOLDER
OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND SIGN THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. SEE SECTION 3.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, the
purchase of and the payment for, Shares tendered if at any time on or after May
12, 1995, and at or before the time of purchase of any such Shares, any of the
following events shall have occurred (or shall have been determined by the
Company to have occurred) which, in the Company's sole judgment in any such case
and regardless of the circumstances (including any action or omission to act by
the Company), makes it inadvisable to proceed with the Offer or with such
purchase or payment:
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person, domestic
or foreign, or before any court or governmental, regulatory or
administrative authority or agency or tribunal, domestic or foreign, which:
(1) challenges, seeks to make illegal, delays or otherwise, directly or
indirectly, restrains or prohibits the making of the Offer, the acquisition
of Shares pursuant to the Offer or otherwise relates in any manner to or
affects the Offer or (2) in the Company's sole judgment, could materially
affect the business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries, taken as a whole, or
otherwise materially impair in any way the contemplated future conduct of
the business of the Company or any of its subsidiaries or materially impair
the Offer's contemplated benefits to the Company; or
(b) there shall have been any action threatened, instituted, pending or
taken, or approval withheld, or any statute, rule, regulation, judgment,
order or injunction threatened, proposed,
11
<PAGE>
sought, promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer or the Company or any of its subsidiaries, by any
court or any government or governmental, regulatory or administrative
authority or agency or tribunal, domestic or foreign, which, in the
Company's sole judgment, would or might directly or indirectly: (1)
challenge, seek to make illegal, delay or otherwise, directly or indirectly,
restrain or prohibit the making of the Offer, the acquisition of Shares
pursuant to the Offer or otherwise relate in any manner to or affect the
Offer or (2) materially affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries, taken
as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company or any of its subsidiaries or
materially impair the Offer's contemplated benefits to the Company; or
(c) there shall have occurred: (1) the declaration of any banking
moratorium or suspension of payments in respect of banks in the United
States, (2) any general suspension of trading in, or limitation on prices
for, securities on any United States national securities exchange or in the
over-the-counter market, (3) the commencement of a war, armed hostilities or
any other national or international crisis directly or indirectly involving
the United States, (4) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or any
event which, in the Company's sole judgment, might affect, the extension of
credit by banks or other lending institutions in the United States, (5) any
significant decrease in the market price of the Shares or in the general
level of market prices of equity securities in the United States or abroad,
(6) any change in the general political, market, economic or financial
conditions in the United States or abroad that could have a material adverse
effect on the Company's business, operations or prospects or the trading in
the Shares or that, in the sole judgment of the Company, makes it
inadvisable to proceed with the Offer or (7) in the case of any of the
foregoing existing at the time of the commencement of the Offer, in the
Company's sole judgment, a material acceleration or worsening thereof; or
(d) any change shall have occurred or be threatened in the business,
condition (financial or other), income, operations, Share ownership or
prospects of the Company and its subsidiaries, taken as a whole, which, in
the Company's sole judgment, is or may be material to the Company or any
other event shall have occurred which, in the Company's sole judgment,
materially impairs the Offer's contemplated benefits to the Company; or
(e) a tender or exchange offer for any or all of the Shares (other than
the Offer), or any merger, business combination or other similar transaction
with or involving the Company or any subsidiary, shall have been proposed,
announced or made by any person; or
(f) (1) any entity, "group" (as that term is used in Section 13(d)(3)
of the Exchange Act) or person shall have acquired or proposed to acquire
beneficial ownership of more than 5% of the outstanding Shares (other than
any such person, entity or group who has filed a Schedule 13D or Schedule
13G with the Securities and Exchange Commission (the "Commission") before
May 12, 1995), (2) any such entity, group or person who has filed a Schedule
13D or Schedule 13G with the Commission before May 12, 1995 shall have
acquired or proposed to acquire beneficial ownership of an additional 2% or
more of the outstanding Shares or (3) any person, entity or group shall have
filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or made a public announcement reflecting an intent
to acquire the Company or any of its subsidiaries or any of their respective
assets or securities.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company) or may be waived by
the Company in whole or in part. The Company's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time. Any determination by the Company concerning the
events described in this Section 6 shall be final and shall be binding on all
parties.
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<PAGE>
7. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are traded principally on the NYSE and are also traded on the
PSE, in each case under the symbol "ECL." The following table sets forth for the
calendar periods indicated the high and low per Share sales prices on the NYSE
Composite Tape as reported in published financial sources and the dividends paid
per Share:
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW PAID
------- ------- ----
<S> <C> <C> <C>
1993
1st Quarter................................................................. 20 1/16 18 1/8 .095
2nd Quarter................................................................. 21 5/8 18 1/4 .095
3rd Quarter................................................................. 22 1/2 20 9/16 .095
4th Quarter................................................................. 23 13/16 20 11/16 .095
1994
1st Quarter................................................................. 23 1/2 20 1/8 .11
2nd Quarter................................................................. 23 1/2 19 3/4 .11
3rd Quarter................................................................. 23 1/4 20 1/4 .11
4th Quarter................................................................. 22 19 1/4 .11
1995
1st Quarter................................................................. 24 7/8 20 .125
2nd Quarter................................................................. 24 3/4 22 1/2 .125
(through May 16)
</TABLE>
On May 12, 1995, the last trading day prior to the announcement of the
Offer, the closing per Share sales price as reported on the NYSE Composite Tape
was $23.375. On May 16, 1995, the last full trading day prior to the
commencement of the Offer, the closing per Share sales price as reported on the
NYSE Composite Tape was $24.625. THE COMPANY URGES STOCKHOLDERS TO OBTAIN
CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES. The per Share sales prices
and dividends paid per Share set forth in the table above have been adjusted to
reflect the Company's two-for-one stock split effected in the form of a stock
dividend paid January 18, 1994 to stockholders of record on December 28, 1993.
Shares tendered and purchased by the Company will not receive or otherwise
be entitled to the regular quarterly cash dividend of $.125 per Share to be paid
by the Company on July 17, 1995 to stockholders of record on June 27, 1995,
unless the Offer is extended beyond June 15, 1995 for any reason whatsoever.
Shares which are tendered but not purchased as a result of proration or
otherwise will remain entitled to receipt of the dividend to be paid on July 17,
1995.
8. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES.
As of May 12, 1995, the Company's directors and executive officers as a
group beneficially owned (including restricted stock and Shares issuable upon
the exercise of options exercisable within 60 days) an aggregate of 2,257,418
Shares (approximately 3.21% of the outstanding Shares including restricted stock
and Shares issuable upon the exercise of options exercisable within 60 days).
Such ownership includes (i) 121,650 Shares held under restricted stock awards
which are subject to events of forfeiture and (ii) 1,146,400 Shares
(approximately 1.63% of the outstanding Shares including restricted stock and
Shares issuable upon the exercise of options exercisable within 60 days) which
are subject to stock options exercisable within 60 days. If the Company
purchases 3,000,000 Shares (or approximately 4.42% of the Shares outstanding at
May 12, 1995) pursuant to the Offer and no executive officer or director tenders
Shares pursuant to the Offer, then after the purchase of Shares pursuant to the
Offer, the Company's executive officers and directors as a group would
beneficially own approximately 3.35% of the outstanding Shares, including
restricted stock and Shares issuable upon the exercise of options exercisable
within 60 days. The Company has been advised that no director or executive
officer of the Company intends to tender any Shares pursuant to the Offer.
13
<PAGE>
Except as set forth in Schedule I hereto, based upon the Company's records
and upon information provided to the Company by its directors, executive
officers and affiliates, neither the Company nor any of its subsidiaries nor, to
the best of the Company's knowledge, any of the directors or executive officers
of the Company, nor any associates of any of the foregoing, has effected any
transactions in the Shares during the 40 business day period prior to the date
hereof, other than transactions which occurred automatically pursuant to the
operation of the Company's employee benefit plans and Dividend Reinvestment
Plan.
As of May 12, 1995, Henkel KGaA, a partnership limited by shares organized
under the laws of Germany ("Henkel"), and its affiliates owned, directly or
indirectly, approximately 15.47 million Shares. Henkel's equity ownership in the
Company is subject to an agreement (the "Stockholder's Agreement") containing
certain restrictions pertaining to, among other things, maximum shareholding,
transfer and voting rights. A copy of the Stockholder's Agreement is filed as
Exhibit (c)(1) of the Schedule 13E-4 (as defined herein) and is incorporated
herein by reference. Generally, the Stockholder's Agreement terminates on June
26, 2009. During the year second preceding such date, Henkel and the Company
will commence negotiations for an extension of the term. If an agreement to
extend such term is not reached, Henkel would have the right, and in certain
circumstances the obligation, to purchase the Company's interest in the
Henkel-Ecolab joint venture which is engaged in industrial and institutional
cleaning and sanitizing businesses throughout Europe (the "Joint Venture"). The
purchase price shall be paid by Henkel in Shares owned by it, with any excess
price payable in cash. If the value of Henkel's Share ownership exceeds the
purchase price, then the Company may acquire such remaining Shares at market
value. After any such purchase, the Stockholder's Agreement would remain in
effect for an additional two years. In addition, the Stockholder's Agreement
provides that if the Joint Venture is terminated or Henkel owns less than one
percent of the Company's outstanding Shares, the Stockholder's Agreement will
terminate two years after the latest of such events.
Pursuant to the Stockholder's Agreement, Henkel is precluded from acquiring
more than 26% of the Company's outstanding Shares prior to July 11, 2000 and 30%
thereafter or from acting, alone or in concert with others, to control or
influence the Company. Henkel may sell its Shares under certain conditions
specified in the Stockholder's Agreement subject to the Company's right of first
refusal. Henkel is not restricted under the Stockholder's Agreement from
tendering Shares in the Offer. In addition, Henkel has agreed to vote its
Shares, in the case of election of directors of the Company or certain
stockholder proposals, in accordance with the recommendations or directions of
the Board of Directors of the Company. In all other cases, except with respect
to certain "strategic transactions," Henkel may vote, at its option, either in
accordance with the recommendation of the Board of Directors or pro rata in the
same manner and proportion that votes of the stockholders of the Company (other
than Henkel and officers or directors of the Company) have been cast. Any vote
with respect to "strategic transactions" (among other things, a disposition,
recapitalization or dissolution of the Company, a change in the Company's
Restated Certificate of Incorporation or other transaction which could have a
material effect upon Henkel's investment in Shares) may be cast at Henkel's sole
discretion. Henkel also is entitled to designate individuals to be nominated for
election to the Company's Board of Directors proportionate to the percentage of
its holding of voting securities in the Company (rounded to the nearest whole
number). In accordance with the Stockholder's Agreement, three persons have been
elected to the Board of Directors pursuant to such procedures.
On December 7, 1994, the Company acquired Kay Chemical Company and certain
of its affiliates ("Kay") pursuant to a Merger Agreement, dated as of November
2, 1994 (the "Merger Agreement"), among the Company, Kay, the stockholders of
Kay (the "Kay Stockholders") and certain other parties. A copy of the Merger
Agreement is filed as Exhibit (c)(2) of the Schedule 13E-4 and is incorporated
herein by reference. The terms of the Merger Agreement require the Company to
file a shelf registration statement (the "Registration Statement") covering the
Shares issued to the Kay Stockholders under the Merger Agreement. The
Registration Statement has been filed with and declared effective by the
Commission, and the Company has agreed to use its reasonable efforts to keep the
Registration Statement effective until the earlier of (i) such time as all the
Shares covered thereby have been disposed
14
<PAGE>
or (ii) December 7, 1997. Pursuant to the Merger Agreement, the Kay Stockholders
have agreed to refrain from selling or offering to sell by means of the
prospectus which is part of the Registration Statement Shares covered by the
Registration Statement in certain circumstances.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its affiliates, directors or
executive officers, or any of the executive officers or directors of its
subsidiaries, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer with respect to any securities of the Company (including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies, consents or authorizations).
9. BACKGROUND AND PURPOSE OF THE OFFER.
Over the past several years, the Company's operations have generated
substantial excess cash. Historically, the Company has used this cash to reduce
debt, resulting in a strong balance sheet. However, the continuing strong cash
flow and relatively low debt levels leave the Company under-leveraged. The Board
of Directors believes the Company's financial condition and outlook for
continuing favorable cash generation will allow it to meet the Company's first
priority, which is to reinvest in the business, including through acquisitions,
and to use its excess cash and debt capacity to fund the repurchase program. The
Board of Directors believes that the purchase of Shares is an attractive use of
the Company's financial resources and that the use of cash and borrowing to fund
the Offer will result in a more efficient capital structure for the Company.
Accordingly, the Offer is consistent with the Company's long-term corporate goal
of increasing stockholder value.
Even after this share repurchase is completed, the Company will have ready
access to sources of capital sufficient to fund investments in the business,
including through attractive acquisition opportunities that might become
available.
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not
greater than $25.00 nor less than $21.75 per Share) at which they are willing to
sell their Shares and, if any such Shares are purchased pursuant to the Offer,
to sell those Shares for cash without the usual transaction costs associated
with open-market sales. The Offer also allows stockholders to sell a portion of
their Shares while retaining a continuing equity interest in the Company if they
so desire. Any stockholders owning an aggregate of less than 100 Shares whose
Shares are purchased pursuant to the Offer not only will avoid any payment of
brokerage commissions, but also will avoid any applicable odd lot discounts
payable on sales of odd lots on a stock exchange, including the NYSE. In
addition, the Offer may give stockholders the opportunity to sell Shares at
prices greater than market prices prevailing prior to announcement of the Offer.
To the extent the purchase of Shares in the Offer results in a reduction in the
number of stockholders of record, the costs of the Company for services to
stockholders may be reduced.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF
SUCH STOCKHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. STOCKHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE
PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED.
In connection with its authorization of the Offer, the Board of Directors
has also authorized the Company to purchase in open market or privately
negotiated transactions, or otherwise, additional Shares after the consummation
of the Offer in amounts such that the total number of Shares purchased by the
Company pursuant to the Offer and pursuant to such open market and privately
negotiated transactions does not exceed 6,000,000 Shares. Any such open market
or privately negotiated purchase
15
<PAGE>
may be on the same terms or on terms more favorable or less favorable to
stockholders than the terms of the Offer. However, the Company is not obligated
to make any such open market or privately negotiated purchase, and no assurance
can be given that the Company will engage in such transactions. Any possible
future purchases by the Company will depend on many factors, including the
market price of the Shares, the results of the Offer, the Company's business and
financial position and general economic and market conditions. Rule 13e-4 under
the Exchange Act prohibits the Company and its affiliates from purchasing any
Shares, other than pursuant to the Offer, until at least ten business days after
the Expiration Date.
Shares the Company acquires pursuant to the Offer will be held in the
Company's treasury and will be available for the Company to issue without
further stockholder action (except as required by applicable law or the rules of
the securities exchanges on which the Shares are listed). Such Shares could be
issued without stockholder approval for such purposes as, among others, the
acquisition of other businesses, the raising of additional capital for use in
the Company's business, the distribution of stock dividends and the
implementation of employee benefit plans.
10. CERTAIN INFORMATION ABOUT THE COMPANY.
GENERAL. The Company is engaged in the development and marketing of premium
products and services for the hospitality, institutional and industrial markets.
The Company provides cleaning, sanitizing, pest elimination and maintenance
products, systems and services primarily to hotels and restaurants, foodservice
and healthcare facilities, commercial and institutional laundries and to dairy
plants, farms and food and beverage processors. The Company manufactures most of
its products and related equipment in Company-owned manufacturing facilities.
The Company's principal executive offices are located at Ecolab Center, St.
Paul, Minnesota 55102, and the Company's telephone number is (612) 293-2233.
SUMMARY HISTORICAL FINANCIAL INFORMATION
The table below includes summary historical financial information of the
Company. The summary financial information has been derived from the audited
consolidated financial statements as reported in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994 and the unaudited consolidated
financial statements of the Company as reported in the Company's quarterly
report on Form 10-Q for the first quarter ended March 31, 1995. In the opinion
of management, the unaudited financial statements for the quarters ended March
31, 1995 and 1994 reflect all adjustments necessary for a fair statement of the
results of operations for the interim periods. However, the results of
operations for any interim period are not necessarily indicative of results for
the full year. The summary historical financial information should be read in
conjunction with, and is qualified in its entirety by reference to, the
consolidated financial statements and related notes included in the reports
referred to above. Copies of these reports may be obtained from the Commission
in the manner specified in "Additional Information" below.
16
<PAGE>
ECOLAB INC.
SUMMARY HISTORICAL FINANCIAL INFORMATION
(THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
-------------------------- ----------------------------
SUMMARY CONSOLIDATED INCOME STATEMENT 1995 1994 1994 1993
------------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.............................................. $ 309,560 $ 274,913 $ 1,207,614 $ 1,102,396
Cost of sales.......................................... 138,619 121,053 533,143 491,306
Selling, general and administrative expenses........... 139,870 125,838 529,507 481,639
Merger costs and expenses.............................. 8,000
------------- ----------- ------------- -------------
Operating income....................................... 31,071 28,022 136,964 129,451
Interest expense, net.................................. 2,573 4,039 12,909 21,384
------------- ----------- ------------- -------------
Income before income taxes and equity in earnings of
joint venture......................................... 28,498 23,983 124,055 108,067
Provision for income taxes............................. 11,458 9,245 50,444 33,422
Equity in earnings of Henkel-Ecolab joint venture...... 1,355 1,880 10,951 8,127
------------- ----------- ------------- -------------
Income before extraordinary loss and cumulative effect
of change in accounting............................... 18,395 16,618 84,562 82,772
Extraordinary loss and change in accounting
principle............................................. 715
------------- ----------- ------------- -------------
Net income, as reported................................ 18,395 16,618 84,562 83,487
Adjustments related to Kay merger...................... (324) 5,902 (2,667)
------------- ----------- ------------- -------------
Net income, as adjusted for Kay merger................. $ 18,395 $ 16,294 $ 90,464 $ 80,820
------------- ----------- ------------- -------------
------------- ----------- ------------- -------------
Income per common share, as reported
Income before extraordinary loss and change in
accounting.......................................... $ .27 $ .25 $ 1.25 $ 1.23
Extraordinary loss and change in accounting
principle........................................... .01
Net income, as reported.............................. $ .27 $ .25 $ 1.25 $ 1.24
Net income per common share, as adjusted for Kay
merger................................................ $ .27 $ .24 $ 1.34 $ 1.20
Average common shares outstanding...................... 67,742 67,563 67,550 67,528
Dividends per common share............................. $ .125 $ .11 $ .455 $ .395
Ratio of earnings to fixed charges..................... 5.48 4.38 5.79 4.02
</TABLE>
See Notes to Summary Historical Financial Information.
17
<PAGE>
ECOLAB INC.
SUMMARY HISTORICAL FINANCIAL INFORMATION
(THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------------- ----------------------------
SUMMARY CONSOLIDATED BALANCE SHEET 1995 1994 1994 1993
------------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets......................................... $ 405,134 $ 323,513 $ 401,179 $ 311,051
Property, plant and equipment, net..................... 251,196 224,942 246,191 219,268
Investment in Henkel-Ecolab joint venture.............. 301,651 259,177 284,570 255,804
Other assets........................................... 91,862 109,422 88,416 105,607
------------- ----------- ------------- -------------
Total assets........................................... $ 1,049,843 $ 917,054 $ 1,020,356 $ 891,730
------------- ----------- ------------- -------------
------------- ----------- ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities.................................... $ 257,857 $ 212,523 $ 253,665 $ 201,498
Long-term debt......................................... 105,185 128,534 105,393 131,861
Postretirement health care and pension benefits........ 75,608 77,830 70,882 72,647
Other liabilities...................................... 129,500 93,682 128,608 93,917
Shareholders' equity................................... 481,693 404,485 461,808 391,807
------------- ----------- ------------- -------------
Total liabilities and shareholders' equity............. $ 1,049,843 $ 917,054 $ 1,020,356 $ 891,730
------------- ----------- ------------- -------------
------------- ----------- ------------- -------------
Total assets less excess cost of assets acquired over
book value............................................ $ 825,876 $ 720,261 $ 808,259 $ 695,376
Working capital........................................ 147,277 110,990 147,514 109,553
Total debt............................................. 147,629 151,078 147,213 151,281
Total debt to capitalization........................... 23.5% 27.2% 24.2% 27.9%
Book value per common share............................ $ 7.10 $ 5.99 $ 6.82 $ 5.80
</TABLE>
See Notes to Summary Historical Financial Information.
18
<PAGE>
ECOLAB INC.
NOTES TO SUMMARY HISTORICAL FINANCIAL INFORMATION
KAY MERGER
The summary consolidated income statement includes certain adjustments
related to the Company's December 1994 merger with Kay in order to present
information on the basis on which it will be reported subsequent to the merger.
As a result of the merger, $8.0 million of merger costs and expenses ($6.9
million after-tax) were incurred and charged to expense in the fourth quarter of
1994. Also, Kay was a Subchapter S corporation for income tax purposes and,
accordingly, did not pay U.S. federal income taxes. Kay is included in the
Company's U.S. federal income tax return effective December 7, 1994 and,
therefore, a net deferred tax liability and corresponding charge to income tax
expense of $1.3 million was recorded in the fourth quarter of 1994 to reflect
Kay's net taxable temporary differences.
The unaudited adjustments related to the Kay merger reflect the elimination
of the nonrecurring merger costs and expenses in 1994 and adjustments to present
income taxes on the basis on which they are being reported subsequent to the
merger, as shown in the following table.
<TABLE>
<CAPTION>
YEAR ENDED
FIRST QUARTER DECEMBER 31,
ENDED MARCH 31, --------------------
(THOUSANDS) 1994 1994 1993
----------------- --------- ---------
<S> <C> <C> <C>
Merger costs and expenses................................................. $ -- $ 6,900 $ --
Kay net deferred tax liability............................................ -- 1,300 --
Kay Subchapter S status................................................... (324) (2,298) (2,667)
------ --------- ---------
Total adjustments related to Kay merger................................... $ (324) $ 5,902 $ (2,667)
------ --------- ---------
------ --------- ---------
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges were computed by dividing earnings
before fixed charges by the fixed charges. Earnings consist of income before
income taxes and before equity in earnings of the Henkel-Ecolab joint venture,
plus fixed charges. Fixed charges consist of interest expense, plus the
estimated interest portion of rent expense.
19
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information sets forth the
historical financial information as adjusted to give effect for the purchase of
3,000,000 Shares at a Purchase Price of $21.75 per Share and at a Purchase Price
of $25.00 per Share, the minimum and maximum possible Share Purchase Prices in
the Offer. Expenses related to the Offer are estimated to be $550,000. The pro
forma adjustments assume the transaction occurred, for purposes of the summary
consolidated income statement, as of the first day of the period presented, and,
for purposes of the consolidated balance sheet, as of the balance sheet date.
The pro forma financial information does not purport to be indicative of the
results that may be obtained in the future or that would have actually been
obtained had the Offer occurred as of the dates indicated. The pro forma
information should be read in conjunction with the Summary Historical Financial
Information and accompanying notes.
20
<PAGE>
ECOLAB INC.
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
(THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
1995
-------------------------------
AT $21.75 AT $25.00
AS PURCHASE PURCHASE
SUMMARY CONSOLIDATED INCOME STATEMENT REPORTED PRICE PRICE
--------- --------- ---------
<S> <C> <C> <C>
Net sales................................................... $ 309,560 $ 309,560 $ 309,560
Cost of sales............................................... 138,619 138,619 138,619
Selling, general and administrative expenses................ 139,870 139,870 139,870
--------- --------- ---------
Operating income............................................ 31,071 31,071 31,071
Interest expense, net....................................... 2,573 3,423 3,573
--------- --------- ---------
Income before income taxes and equity in earnings of joint
venture.................................................... 28,498 27,648 27,498
Provision for income taxes.................................. 11,458 11,200 11,150
Equity in earnings of Henkel-Ecolab joint venture........... 1,355 1,355 1,355
--------- --------- ---------
Net income.................................................. $ 18,395 $ 17,803 $ 17,703
--------- --------- ---------
--------- --------- ---------
Net income per common share................................. $ .27 $ .27 $ .27
Average common shares outstanding........................... 67,742 64,742 64,742
Dividends per common share.................................. $ .125 $ .125 $ .125
Ratio of earnings to fixed charges.......................... 5.48 5.35 5.30
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995
--------------------------------
AT $21.75 AT $25.00
AS PURCHASE PURCHASE
SUMMARY CONSOLIDATED BALANCE SHEET REPORTED PRICE PRICE
---------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets............................................ $ 405,134 $ 350,134 $ 350,134
Property, plant and equipment, net........................ 251,196 251,196 251,196
Investment in Henkel-Ecolab joint venture................. 301,651 301,651 301,651
Other assets.............................................. 91,862 91,862 91,862
---------- --------- ---------
Total assets.............................................. $1,049,843 $ 994,843 $ 994,843
---------- --------- ---------
---------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities....................................... $ 257,857 $ 257,857 $ 257,857
Long-term debt............................................ 105,185 115,985 125,735
Postretirement health care and pension benefits........... 75,608 75,608 75,608
Other liabilities......................................... 129,500 129,500 129,500
Shareholders' equity...................................... 481,693 415,893 406,143
---------- --------- ---------
Total liabilities and shareholders' equity................ $1,049,843 $ 994,843 $ 994,843
---------- --------- ---------
---------- --------- ---------
Total assets less excess cost of assets acquired
over book value.......................................... $ 825,876 $ 770,876 $ 770,876
Working capital........................................... 147,277 92,277 92,277
Total debt................................................ 147,629 158,429 168,179
Total debt to capitalization.............................. 23.5% 27.6% 29.3%
Book value per common share............................... $ 7.10 $ 6.41 $ 6.26
</TABLE>
See Notes to Summary Unaudited Pro Forma Financial Information.
21
<PAGE>
ECOLAB INC.
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
(THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------
AT $21.75 AT $25.00
AS PURCHASE PURCHASE
SUMMARY CONSOLIDATED INCOME STATEMENT REPORTED PRICE PRICE
---------- ------------ ------------
<S> <C> <C> <C>
Net sales.......................................... $1,207,614 $1,207,614 $1,207,614
Cost of sales...................................... 533,143 533,143 533,143
Selling, general and administrative expenses....... 529,507 529,507 529,507
Merger costs and expenses.......................... 8,000 8,000 8,000
---------- ------------ ------------
Operating income................................... 136,964 136,964 136,964
Interest expense, net.............................. 12,909 15,559 16,009
---------- ------------ ------------
Income before income taxes and equity in earnings
of joint venture.................................. 124,055 121,405 120,955
Provision for income taxes......................... 50,444 49,675 49,500
Equity in earnings of Henkel-Ecolab joint
venture........................................... 10,951 10,951 10,951
---------- ------------ ------------
Net income, as reported............................ 84,562 82,681 82,406
Adjustments related to Kay merger.................. 5,902 5,902 5,902
---------- ------------ ------------
Net income, as adjusted for Kay merger............. $ 90,464 $ 88,583 $ 88,308
---------- ------------ ------------
---------- ------------ ------------
Net income per common share
As reported...................................... $ 1.25 $ 1.28 $ 1.28
As adjusted for Kay merger....................... $ 1.34 $ 1.37 $ 1.37
Average common shares outstanding.................. 67,550 64,550 64,550
Dividends per common share......................... $ .455 $ .455 $ .455
Ratio of earnings to fixed charges................. 5.79 5.53 5.45
<CAPTION>
DECEMBER 31, 1994
--------------------------------------
AT $21.75 AT $25.00
AS PURCHASE PURCHASE
SUMMARY CONSOLIDATED BALANCE SHEET REPORTED PRICE PRICE
---------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets..................................... $ 401,179 $ 346,179 $ 346,179
Property, plant and equipment, net................. 246,191 246,191 246,191
Investment in Henkel-Ecolab joint venture.......... 284,570 284,570 284,570
Other assets....................................... 88,416 88,416 88,416
---------- ------------ ------------
Total assets....................................... $1,020,356 $ 965,356 $ 965,356
---------- ------------ ------------
---------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities................................ $ 253,665 $ 253,665 $ 253,665
Long-term debt..................................... 105,393 116,193 125,943
Postretirement health care and pension benefits.... 70,882 70,882 70,882
Other liabilities.................................. 128,608 128,608 128,608
Shareholders' equity............................... 461,808 396,008 386,258
---------- ------------ ------------
Total liabilities and shareholders' equity......... $1,020,356 $ 965,356 $ 965,356
---------- ------------ ------------
---------- ------------ ------------
Total assets less excess cost of assets acquired
over book value................................... $ 808,259 $ 753,259 $ 753,259
Working capital.................................... 147,514 92,514 92,514
Total debt......................................... 147,213 158,013 167,763
Total debt to capitalization....................... 24.2% 28.5% 30.3%
Book value per common share........................ $ 6.82 $ 6.12 $ 5.97
</TABLE>
See Notes to Summary Unaudited Pro Forma Financial Information.
22
<PAGE>
ECOLAB INC.
NOTES TO SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The summary unaudited pro forma consolidated income statements assume that
the purchase of Shares pursuant to the Offer had occurred as of the first day of
the period presented. These income statements also assume that the purchase of
Shares was funded, first with short-term investments which were available on a
month-by-month basis throughout the periods and, secondly, through funds
borrowed under the Company's revolving multicurrency credit facility. The
assumed annualized yields on short-term investments ranged from 2.3% to 5.9% and
represent the average yield actually experienced with respect to the Company's
short-term investments. The assumed annualized interest rates on funds borrowed
under the revolving multicurrency credit facility ranged from 3.3% to 6.2% and
are equal to the estimated rate each month under the revolving multicurrency
credit facility. The provision for income taxes has been adjusted based on the
appropriate statutory rates of the localities in which the additional net
interest expense is assumed to have been incurred.
The unaudited pro forma summary consolidated balance sheets assume that the
purchase of Shares occurred as of the balance sheet dates. These balance sheets
also assume that the purchase of Shares was funded by $55 million of short-term
investments, which were available as of the balance sheet dates, with the
balance funded through borrowings under the Company's revolving multicurrency
credit facility.
23
<PAGE>
ADDITIONAL INFORMATION. The Company is subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. The Company is required to
disclose in such proxy statements and reports certain information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal owners of the
Company's securities and any material interest of such persons in transactions
with the Company. The Company has also filed an Issuer Tender Offer Statement on
Schedule 13E-4 (the "Schedule 13E-4") with the Commission, which includes
certain additional information relating to the Offer.
Such material may be inspected at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and also should be available for inspection and copying at the following
regional offices of the Commission: Seven World Trade Center, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison, Suite 1400, Chicago,
Illinois 60661. Reports, proxy materials and other information about the Company
are also available at the offices of the NYSE, 20 Broad Street, New York, New
York 10005, and the PSE, 301 Pine Street, San Francisco, California 94104.
Copies may also be obtained by mail for prescribed rates from the Commission's
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Schedule 13E-4 will not be available at the Commission's regional offices.
11. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases 3,000,000 Shares pursuant to the Offer
at a Purchase Price of $25.00 per Share (the highest price in the range of
possible Purchase Prices), the Company expects the maximum aggregate cost of the
Offer, including all fees and expenses applicable to the Offer, to be
approximately $75,550,000. The Company anticipates that the funds necessary to
purchase Shares pursuant to the Offer and to pay the related fees and expenses
will come from a combination of (i) cash, cash equivalents and marketable
securities of the Company and (ii) initially an estimated $20,550,000 in
unsecured borrowings. At March 31, 1995, the Company had cash, cash equivalents
and marketable securities of approximately $91.5 million. The Company plans to
obtain the unsecured borrowings under the $150 million revolving multicurrency
credit facility, expiring September 29, 1998 (the "Credit Facility"), provided
to the Company by a syndicate of financial institutions, with Citibank, N.A.
("Citibank"), as Agent, Citibank International Plc, as Euro-Agent, and Morgan
Guaranty Trust Company of New York, as Co-Agent. A copy of the Credit Facility
is filed as Exhibit (b)(1) to the Schedule 13E-4 and is incorporated herein by
reference.
Borrowings under the Credit Facility may, at the option of the Company, take
the form of committed advances ("A Advances") or competitive bid advances ("B
Advances").
The Company, at its option, may request A Advances as either base rate
advances ("Base Rate Advances") or Eurocurrency advances ("Eurocurrency
Advances"). Base Rate Advances are denominated in U.S. dollars and bear interest
at a rate equal to the highest of (i) Citibank's base rate, (ii) the sum of the
three-month certificate of deposit rate ("CD") and 50 basis points, or (iii) the
sum of the federal funds rate and 50 basis points. Citibank's current base rate
is 9.00% per annum and the current interest rate for a three-month CD is
approximately 6.38% per annum. Eurocurrency Advances may, at the option of the
Company, be denominated in U.S. dollars or any other currency freely
transferable and convertible into U.S. dollars ("Alternative Currency"). Such
advances will bear interest at a rate equal to the sum of the rate per annum at
which deposits in U.S. dollars or in the relevant Alternative Currency are
offered in the London interbank market ("Eurocurrency Rate") and the applicable
margin, as described below. The Eurocurrency Rate varies with the interest
period chosen by the Company. The Company may choose interest periods of one,
two, three or six months. The current three-month Eurocurrency Rate for U.S.
dollars is approximately 6.13% per annum.
The B Advances may, at the option of the Company, be denominated in U.S.
dollars or in an Alternative Currency. Such advances will bear interest at a
rate determined by a competitive bid system among the financial institutions
party to the Credit Facility.
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<PAGE>
The applicable margins and certain fees payable by the Company are subject
to adjustment based on the Company's rating from time to time by Standard &
Poor's Corporation and Moody's Investors Service, Inc. The margin on
Eurocurrency Advances ranges from 16 to 50 basis points when utilization of the
Credit Facility does not exceed 50% and 16 to 60 basis points when such
utilization exceeds 50%. No margin is payable for Base Rate advances. The
Company is also subject to facility fees (ranging from 9 to 25 basis points per
annum) on the Credit Facility.
The Credit Facility includes representations and warranties, covenants,
events of default and other terms customary to financings of that type.
The Company expects to repay the borrowings used to purchase Shares pursuant
to the Offer through, depending on business and market conditions, public or
private offerings of securities, additional bank borrowings, issuance of
commercial paper, internally generated funds or other financings, or such
combination of the foregoing as the Company may deem appropriate. See "Pro Forma
Financial Information" for further information concerning the assumed cost of
funds for the Offer.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of stockholders. Nonetheless, the Company anticipates that there will
still be a sufficient number of Shares outstanding and publicly traded following
the Offer to ensure a continued trading market in the Shares.
Based on the published guidelines of the NYSE and the PSE, the Company
believes that its purchase of Shares pursuant to the Offer will not cause its
remaining Shares to be delisted from any such exchange.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. The Company believes that,
following the purchase of Shares pursuant to the Offer, the Shares will continue
to be "margin securities" for purposes of the Federal Reserve Board's margin
regulations.
The Shares are registered under the Exchange Act which requires, among other
things, that the Company furnish certain information to its stockholders and to
the Commission and comply with the Commission's proxy rules in connection with
meetings of the Company's stockholders. The Company believes that its purchase
of Shares pursuant to the Offer will not result in the Shares becoming eligible
for deregistration under the Exchange Act.
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its acquisition
of Shares as contemplated in the Offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the Company's acquisition or
ownership of Shares as contemplated by the Offer. Should any such approval or
other action be required, the Company currently contemplates that it will seek
such approval or other action. The Company cannot predict whether it may
determine that it is required to delay the acceptance for payment of, or payment
for, Shares tendered pursuant to the Offer pending the outcome of any such
matter. There can be no assurance that any such approval or other action, if
needed, would be obtained or would be obtained without substantial conditions or
that the failure to obtain any such approval or other action might not result in
adverse consequences to the Company's business. The Company's obligations under
the Offer to accept for payment and pay for Shares are subject to certain
conditions. See Section 6.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a general discussion of certain of the United
States federal income tax consequences of the Offer. This summary is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change, possibly retroactively. No ruling as to any matter discussed in this
summary has been requested or received from the IRS.
25
<PAGE>
EACH STOCKHOLDER IS URGED TO CONSULT AND RELY ON THE STOCKHOLDER'S OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE STOCKHOLDER OF TENDERING
SHARES PURSUANT TO THE OFFER.
IN GENERAL. A stockholder's exchange of Shares for cash pursuant to the
Offer will be a taxable transaction for federal income tax purposes, and may
also be a taxable transaction under applicable state, local, foreign or other
tax laws. This summary does not discuss any aspects of state, local, foreign or
other tax laws. Certain stockholders (including insurance companies, tax-exempt
organizations, financial institutions and broker dealers) may be subject to
special rules not discussed below. For purposes of this discussion, stockholders
are assumed to hold their Shares as capital assets.
TREATMENT AS A SALE OR EXCHANGE. Under Section 302 of the Internal Revenue
Code of 1986, as amended (the "Code"), a transfer of Shares to the Company
pursuant to the Offer will, as a general rule, be treated as a sale or exchange
of the Shares (rather than as a dividend distribution) if the receipt of cash
upon the sale (a) is "substantially disproportionate" with respect to the
stockholder, (b) results in a "complete termination" of the stockholder's
interest in the Company or (c) is "not essentially equivalent to a dividend"
with respect to the stockholder. These tests (the "Section 302 tests") are
explained more fully below.
If any of the Section 302 tests is satisfied, a tendering stockholder will
recognize capital gain or loss equal to the difference between the amount of
cash received by the stockholder pursuant to the Offer and the stockholder's
basis in the Shares sold pursuant to the Offer. If the Shares have been held for
more than one year, the gain or loss will be long-term capital gain or loss.
CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether any of the Section
302 tests is satisfied, a stockholder must take into account not only Shares
actually owned by the stockholder, but also Shares that are constructively owned
pursuant to Section 318 of the Code. Under Section 318, a stockholder may
constructively own Shares actually owned, and in some cases constructively
owned, by certain related individuals and certain entities in which the
stockholder has an interest, or, in the case of stockholders that are entities,
by certain individuals or entities that have an interest in the stockholder, as
well as any Shares the stockholder has a right to acquire by exercise of an
option or by the conversion or exchange of a security. With respect to option
and convertible security attribution, the IRS takes the position that Shares
constructively owned by a stockholder by reason of a right on the stockholder's
part to acquire the Shares from the Company are not to be considered outstanding
for purposes of applying the Section 302 tests to other stockholders; however,
there are both contrary and supporting judicial decisions with respect to this
issue.
THE SECTION 302 TESTS. One of the following tests must be satisfied in
order for the exchange of shares pursuant to the Offer to be treated as a sale
rather than as a dividend distribution.
(a) SUBSTANTIALLY DISPROPORTIONATE TEST. The receipt of cash by a
stockholder will be substantially disproportionate with respect to the
stockholder if the percentage of the outstanding Shares actually and
constructively owned by the stockholder immediately following the exchange
of Shares pursuant to the Offer (treating Shares exchanged pursuant to the
Offer as not outstanding) is less than 80% of the percentage of the
outstanding Shares actually and constructively owned by the stockholder
immediately before the exchange (treating Shares exchanged pursuant to the
Offer as outstanding).
(b) COMPLETE TERMINATION TEST. The receipt of cash by a stockholder will
be a complete termination of the stockholder's interest if either (i) all of
the Shares actually and constructively owned by the stockholder are sold
pursuant to the Offer or (ii) all of the shares actually owned by the
stockholder are sold pursuant to the Offer and the stockholder is eligible
to waive, and effectively waives, the attribution of Shares constructively
owned by the stockholder in accordance with the procedures described in
Section 302(c)(2) of the Code. Stockholders considering terminating their
interest in accordance with Section 302(c)(2) of the Code should do so in
consultation with their own tax advisors.
26
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(c) NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. The receipt of cash
by a stockholder will not be essentially equivalent to a dividend if the
stockholder's exchange of Shares pursuant to the Offer results in a
"meaningful reduction" of the stockholder's proportionate interest in the
Company. Whether the receipt of cash by a stockholder will result in a
meaningful reduction of the stockholder's proportionate interest will depend
on the stockholder's particular facts and circumstances. However, in the
case of a small minority stockholder, even a small reduction may satisfy
this test where, as with the Offer, payments are not expected to be pro rata
with respect to all outstanding Shares. The IRS has indicated in a published
ruling that, in the case of a small minority stockholder of a publicly held
corporation who exercises no control over corporate affairs, a reduction in
the stockholder's proportionate interest in the corporation from .0001118%
to .0001081% would constitute a meaningful reduction.
Although the issue is not free from doubt, a stockholder may be able to take
into account acquisitions or dispositions of Shares (including market purchases
and sales) substantially contemporaneous with the Offer in determining whether
any of the Section 302 tests is satisfied.
In the event that the Offer is oversubscribed, the Company's purchase of
Shares pursuant to the Offer will be prorated. Thus, in such case even if all
the Shares actually and constructively owned by a stockholder are tendered
pursuant to the Offer, not all of the Shares will be purchased by the Company,
which in turn may affect the stockholder's ability to satisfy the Section 302
tests.
TREATMENT AS A DIVIDEND. If none of the Section 302 tests is satisfied and,
as anticipated (although there can be no assurances), the Company has sufficient
earnings and profits, a tendering stockholder will be treated as having received
a dividend includible in gross income in an amount equal to the entire amount of
cash received by the stockholder pursuant to the Offer. This amount will not be
reduced by the stockholder's basis in the Shares exchanged pursuant to the
Offer, and (except as described below for corporate stockholders eligible for
the dividends-received deduction) the stockholder's basis in those Shares will
be added to the stockholder's basis in his remaining Shares. No assurance can be
given that any of the Section 302 tests will be satisfied as to any particular
stockholder, and thus no assurance can be given that any particular stockholder
will not be treated as having received a dividend taxable as ordinary income. If
none of the Section 302 tests is satisfied, any cash received for Shares
pursuant to the Offer in excess of the Company's earnings and profits will be
treated, first, as a non-taxable return of capital to the extent of the
stockholder's basis for such stockholder's shares, and, thereafter, as a capital
gain to the extent it exceeds such basis.
SPECIAL RULES FOR CORPORATE STOCKHOLDERS. If the exchange of shares by a
corporate stockholder does not satisfy any of the Section 302 tests and,
assuming the Company has sufficient earnings and profits, is therefore treated
as a dividend, the corporate stockholder generally will be entitled to a
dividends-received deduction equal to 70% of the dividend, subject to applicable
limitations, including those relating to "debt-financed portfolio stock" under
Section 246A of the Code and to the 45-day holding period requirement of Section
246(c) of the Code. Also, since it is expected that purchases pursuant to the
Offer will not be pro rata as to all stockholders, any amount treated as a
dividend to a corporate stockholder will constitute an "extraordinary dividend"
subject to the provisions of Section 1059 of the Code (except as may otherwise
be provided in regulations yet to be promulgated by the Treasury Department).
Under Section 1059 of the Code, a corporate stockholder must reduce the tax
basis of all such stockholder's stock (but not below zero) by the portion of any
"extraordinary dividend" that is equal to the deduction allowable under the
dividends-received deduction rules, and, if such portion exceeds the
stockholder's tax basis for the stock, must treat any such excess as additional
gain on the subsequent sale or other disposition of such stock.
Corporate stockholders should be aware that legislation has been introduced
in the United States House of Representatives which, if enacted in its current
form, would generally treat any non-pro rata redemption of Shares that is
otherwise eligible for the dividends-received deduction as a sale of the
27
<PAGE>
Shares rather than as a dividend. It is impossible to predict whether this or
similar legislation will be enacted. Corporate stockholders should consult their
own tax advisors concerning possible legislation affecting their ability to
claim a dividends-received deduction in connection with the Offer.
EMPLOYEE OPTION PLANS. If an employee exercises a nonqualified stock option
granted under a stock option plan of the Company in order to acquire Shares to
tender pursuant to the Offer, the employee will be required to recognize
ordinary income in an amount equal to the excess of the fair market value of the
Shares on the date the option is exercised over the exercise price. The
employee's basis in the Shares will equal the fair market value of the Shares on
the date the option is exercised, and the employee's holding period for purposes
of determining eligibility for long-term capital gain will begin after the
option is exercised. The exchange of the Shares pursuant to the Offer will be
taxed in accordance with the rules described in the preceding sections.
FOREIGN STOCKHOLDERS. The Company will assume that the exchange is a
dividend as to foreign stockholders and will therefore withhold federal income
tax at a rate equal to 30% of the gross proceeds paid to a foreign stockholder
or his agent pursuant to the Offer, unless the Depositary determines that a
reduced rate of withholding is available pursuant to a tax treaty or that an
exemption from withholding is applicable because the gross proceeds are
effectively connected with the conduct of a trade or business by the foreign
stockholder within the United States. For this purpose, a foreign stockholder is
any stockholder that is not (i) a citizen or resident of the United States, (ii)
a corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or (iii) any
estate or trust the income of which is subject to United States federal income
taxation regardless of the source of such income.
Generally, the determination of whether a reduced rate of withholding is
applicable is made by reference to a foreign stockholder's address or to a
properly completed Form 1001 furnished by the stockholder, and the determination
of whether an exemption from withholding is available on the grounds that gross
proceeds paid to a foreign stockholder are effectively connected with a United
States trade or business is made on the basis of a properly completed Form 4224
furnished by the stockholder. The Depositary will determine a foreign
stockholder's eligibility for a reduced rate of, or exemption from, withholding
by reference to the stockholder's address and any Forms 1001 or 4224 submitted
to the Depositary by a foreign stockholder unless facts and circumstances
indicate that such reliance is not warranted or unless applicable law requires
some other method for determining whether a reduced rate of withholding is
applicable. These forms can be obtained from the Depositary. See the
instructions to the Letter of Transmittal.
A foreign stockholder with respect to whom tax has been withheld may be
eligible to obtain a refund of all or a portion of the withheld tax if the
stockholder satisfies one of the Section 302 tests for capital gain treatment or
is otherwise able to establish that no tax or a reduced amount of tax was due.
Foreign stockholders are urged to consult their own tax advisors regarding the
application of federal income tax withholding, including eligibility for a
withholding tax reduction or exemption and the refund procedure.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, at any time or from time to time,
in its sole discretion, and regardless of whether any of the conditions
specified in Section 6 shall have occurred, to extend the period of time during
which the Offer is open by giving oral or written notice of such extension to
the Depositary and making a public announcement thereof. The Company also
expressly reserves the right, in its sole discretion, to terminate the Offer and
not accept for payment or pay for any Shares not theretofore accepted for
payment or paid for or, subject to applicable law, to postpone payment for
Shares upon the occurrence of any of the conditions specified in Section 6 by
giving oral or written notice of such termination or postponement to the
Depositary and making a public announcement thereof. The Company's reservation
of the right to delay payment for Shares which it has accepted for payment is
limited by Rules 13e-4(f)(2) and 13e-4(f)(5) promulgated under the Exchange Act.
Rule 13e-4(f)(2) requires that the Company permit Shares tendered pursuant to
the Offer to be withdrawn: (i) at any time during the period the Offer remains
open; and (ii) if not yet accepted for payment,
28
<PAGE>
after the expiration of forty business days from the commencement of the Offer.
Rule 13e-4(f)(5) requires that the Company must either pay the consideration
offered or return the Shares tendered promptly after the termination or
withdrawal of the Offer. Subject to compliance with applicable law, the Company
further reserves the right, in its sole discretion, at any time or from time to
time to amend the Offer in any respect, including increasing or decreasing the
number of Shares the Company may purchase or the range of prices it may pay
pursuant to the Offer. Amendments to the Offer may be made at any time or from
time to time effected by public announcement thereof, such announcement, in the
case of an extension, to be issued no later than 9:00 A.M., New York City time,
on the next business day after the previously scheduled Expiration Date. Any
public announcement made pursuant to the Offer will be disseminated promptly to
stockholders in a manner reasonably designed to inform stockholders of such
change. Without limiting the manner in which the Company may choose to make a
public announcement, except as required by applicable law, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules require that the
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer (other than a
change in price or a change in percentage of securities sought) will depend on
the facts and circumstances, including the relative materiality of such terms or
information. If (i) the Company increases or decreases the price to be paid for
Shares, or the Company increases the number of Shares being sought and any such
increase in the number of Shares being sought exceeds 2% of the outstanding
Shares, or the Company decreases the number of Shares being sought and (ii) the
Offer is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that notice of
such increase or decrease is first published, sent or given, the Offer will be
extended until the expiration of such period of ten business days.
16. FEES AND EXPENSES.
The Company has retained Salomon Brothers Inc ("Salomon") as its financial
advisor and as Dealer Manager in connection with the Offer. For its services in
connection with the Offer, Salomon will receive a fee of $50,000 plus $.05 for
each Share purchased pursuant to the Offer. The Company will also reimburse
Salomon for its reasonable out-of-pocket expenses relating to the Offer,
including reasonable fees and expenses of counsel. The Company has agreed to
indemnify Salomon against certain liabilities in connection with the Offer,
including certain liabilities under the federal securities laws.
The Company has retained Georgeson & Company Inc. as Information Agent and
First Chicago Trust Company of New York as Depositary in connection with the
Offer. The Information Agent may contact stockholders by mail, telephone, telex,
telegraph and personal interviews, and may request brokers, dealers and other
nominee stockholders to forward materials relating to the Offer to beneficial
owners. The Information Agent and the Depositary will receive reasonable and
customary compensation for their services. The Company will also reimburse the
Information Agent and the Depositary for out-of-pocket expenses, including
reasonable attorneys' fees, and has agreed to indemnify the Information Agent
and the Depositary against certain liabilities in connection with the Offer,
including certain liabilities under the federal securities laws. Neither the
Information Agent nor the Depositary has been retained to make solicitations or
recommendations in connection with the Offer.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person (other than the Dealer Manager)
for soliciting any Shares pursuant to the Offer. The Company will, however, on
request through the Information Agent, reimburse such persons for customary
handling and mailing expenses incurred in forwarding materials in respect of the
Offer to the beneficial owners for which they act as nominees. No such broker,
dealer, commercial bank or trust
29
<PAGE>
company has been authorized to act as the Company's agent for purposes of this
Offer. The Company will pay (or cause to be paid) any stock transfer taxes on
its purchase of Shares, except as otherwise provided in Instruction 7 of the
Letter of Transmittal.
17. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders from,
holders of Shares in any jurisdiction in which the Offer or its acceptance would
not comply with the securities or Blue Sky laws of such jurisdiction. The
Company is not aware of any jurisdiction in which the making of the Offer or the
tender of Shares would not be in compliance with the laws of such jurisdiction.
However, the Company reserves the right to exclude holders in any jurisdiction
in which it is asserted that the Offer cannot lawfully be made. So long as the
Company makes a good faith effort to comply with any state law deemed applicable
to the Offer, if it cannot do so, the Company believes that the exclusion of
holders residing in such jurisdiction is permitted under Rule 13e-4(f)(9)
promulgated under the Exchange Act. In any jurisdiction the securities or Blue
Sky laws of which require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on the Company's behalf by Salomon as
Dealer Manager or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
ECOLAB INC.
May 17, 1995
30
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SCHEDULE I
CERTAIN TRANSACTIONS INVOLVING SHARES
On March 29, 1995, the Company issued 4,672 Shares, in the aggregate, to
Leonard J. Kaplan, Bernard Gutterman and Randall R. Kaplan to acquire Kay
Caribbean, Inc.
On May 12, 1995, the stockholders, at the Company's Annual Meeting, approved
the Company's 1995 Non-Employee Director Stock Option Plan ("Director Option
Plan") which was approved by the Board of Directors in December 1994. The
Director Option Plan operates as a formula plan, and directors have no
discretion as to granting of options, number of Shares underlying options,
exercise price and vesting. In accordance with the terms of the Director Option
Plan, each of the non-employee directors of the Company automatically received a
ten-year stock option on May 12, 1995. The exercise price for each option is
$23.1875. Non-employee directors elected to a full three-year term on May 12,
1995 (Philip L. Smith, Hugo Uyterhoeven and Albrecht Woeste) each received an
option for 6,000 Shares, with the option vesting as to 2,000 Shares on each of
the following three annual meetings of stockholders. Non-employee directors with
two years remaining in their term as of May 12, 1995 (Ruth S. Block and Russell
G. Cleary) each received an option for 2,400 Shares, with the option vesting as
to 1,200 Shares on each of the following two annual meetings of stockholders.
Non-employee directors with one year remaining in their term as of May 12, 1995
(James J. Howard, Jerry W. Levin, Reuben F. Richards, Richard L. Schall and
Roland Schulz) each received an option for 1,200 Shares, with the option vesting
in full on the next annual meeting of stockholders.
In addition, on May 12, 1995, restricted stock awards granted on August 17,
1990 under the Company's 1977 Stock Incentive Plan ("1977 Plan"), including
awards held by certain executive officers of the Company, vested in accordance
with the performance criteria for such awards. Under the terms of the 1977 Plan,
and pursuant to Rule 16b-3(e) promulgated under the Exchange Act, executive
officers of the Company may irrevocably elect to withhold Shares from the
vesting of a restricted stock award to satisfy their withholding tax obligation
resulting from such vesting ("Withholding Election"). Prior to this year,
certain executive officers made Withholding Elections and such elections
operated automatically as to awards vesting on May 12, 1995. The number of
Shares withheld on May 12, 1995 for each of such executive officers is as
follows: Gerald K. Carlson, 1,166 Shares; Arthur E. Henningsen, Jr., 364 Shares;
James L. McCarty, 364 Shares; Maurizio Nisita, 364 Shares; William R. Rosengren,
729 Shares; Allan L. Schuman, 2,186 Shares; Michael E. Shannon, 2,186 Shares;
and F. William Tuominen, 364 Shares.
S-1
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Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for the Shares and any other required documents
should be sent or delivered by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below:
THE DEPOSITARY:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
COURIER:
P.O. Box 2559 (201) 222-4720 14 Wall Street, 8th Floor
Mail Suite 4660-ECO or Suite 4680-ECO
Jersey City, New Jersey (201) 222-4721 New York, New York 10005
07303-2559
TO CONFIRM RECEIPT OF
NOTICE OF GUARANTEED
DELIVERY:
(201) 222-4707
</TABLE>
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at the telephone numbers and
addresses below. You may also contact the Dealer Manager or your broker, dealer,
commercial bank or trust company for assistance concerning the Offer. To confirm
delivery of your Shares, you are directed to contact the Depositary.
THE INFORMATION AGENT:
[LOGO]
<TABLE>
<S> <C> <C>
Wall Street Plaza
New York, New York 10005
Banks and Brokers call
collect: (212) 440-9800
ALL OTHERS CALL TOLL-FREE:
1-800-223-2064
</TABLE>
<TABLE>
<S> <C> <C>
THE DEALER MANAGER:
SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
(212) 783-2947
(call collect)
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
ECOLAB INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED MAY 17, 1995
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JUNE 14, 1995,
UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
BY MAIL: BY HAND OR OVERNIGHT COURIER:
P.O. Box 2559 14 Wall Street, 8th Floor
Mail Suite 4660-ECO Suite 4680-ECO
Jersey City, New Jersey 07303-2559 New York, New York 10005
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY SHARE CERTIFICATE(S) AND SHARES TENDERED
AS NAME(S) (ATTACH ADDITIONAL SIGNED LIST, IF
APPEAR(S) ON SHARE CERTIFICATE(S)) NECESSARY)
- --------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED NUMBER OF
CERTIFICATE BY SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
TOTAL SHARES
- --------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which Shares are
to be purchased in the event of proration.*** (Attach additional signed list
if necessary.)
See Instruction 16.
1st: ; 2nd: ; 3rd:
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by
each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
*** If you do not designate an order, then in the event less than all Shares
tendered are purchased due to proration, Shares will be selected for
purchase by the Depositary.
- --------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL CAREFULLY.
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC"), the Midwest
Securities Trust Company ("MSTC") or the Philadelphia Depository Trust Company
("PDTC") (each a "Book-Entry Transfer Facility" and collectively, the
"Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure
described in Section 3 of the Offer to Purchase (as defined below). Delivery of
documents to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
Absent circumstances causing the Rights (as defined below) to become
exercisable or separately tradeable prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase), a tender of Shares will also constitute a
tender of the associated Rights. Unless the context requires otherwise, all
references herein to Shares include the associated Rights. Stockholders whose
certificates evidencing Shares ("Share Certificates") are not immediately
available or who cannot deliver their Share Certificates and all other documents
required hereby to the Depositary prior to the Expiration Date or who cannot
complete the procedure for delivery by book-entry transfer on a timely basis and
who wish to tender their Shares must do so pursuant to the guaranteed delivery
procedure described in Section 3 of the Offer to Purchase. See Instruction 2.
<PAGE>
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________________________________________
Check Box of applicable Book-Entry Transfer Facility:
/ / DTC / / MSTC / / PDTC
Account No. _______________________________________________________________
Transaction Code No. ______________________________________________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ___________________________________________
Date of Execution of Notice of Guaranteed Delivery ________________________
Name of Institution which Guaranteed Delivery _____________________________
Check Box of applicable Book-Entry Transfer Facility and give Account
Number and Transaction Code Number if delivered by book-entry transfer:
/ / DTC / / MSTC / / PDTC
Account No. _______________________________________________________________
Transaction Code No. ______________________________________________________
Ladies and Gentlemen:
The undersigned hereby tenders to Ecolab Inc., a Delaware corporation (the
"Company"), the above-described shares of common stock, par value $1.00 per
share (including the associated Preferred Stock Purchase Rights (the "Rights"),
the "Shares"), at the price per Share indicated in this Letter of Transmittal,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Company's Offer to Purchase, dated May 17, 1995 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"). Absent circumstances causing the Rights to become exercisable or
separately tradeable prior to the Expiration Date, a tender of Shares will also
constitute a tender of the associated Rights. Unless the context requires
otherwise, all references herein to Shares include the associated Rights.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to all Shares
tendered hereby or orders the registration of such Shares tendered by book-entry
transfer that are purchased pursuant to the Offer to or upon the order of the
Company and hereby irrevocably constitutes and appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares, with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest), to (i) deliver Share
Certificates evidencing such Shares, or transfer ownership of such Shares on the
account books maintained by a Book-Entry Transfer Facility, together, in either
case, with all accompanying evidences of transfer and authenticity, to or upon
the order of the Company, upon receipt by the Depositary, as the undersigned's
agent, of the Purchase Price (as defined below) with respect to such Shares,
(ii) present Share Certificates for cancellation and transfer on the books of
the Company and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms of the
Offer.
The undersigned hereby represents and warrants to the Company that (i) the
undersigned understands that tenders of Shares pursuant to any one of the
procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer, including the undersigned's representation and
warranty that (a) the undersigned has a net long position in Shares or
equivalent securities at least equal to the Shares tendered within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and (b) such tender of Shares complies with Rule 14e-4;
(ii) when and to the extent the Company accepts the Shares for purchase, the
Company will acquire good, marketable and unencumbered title to them, free and
clear of all security interests, liens, charges, encumbrances, conditional sales
agreements or other obligations relating to their sale or transfer, and not
subject to any adverse claim; (iii) on request, the undersigned will execute and
deliver any additional documents the Depositary or the Company deems necessary
or desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; (iv) the undersigned has read and agrees to all of the terms of
the Offer; and (v) the undersigned has full power and authority to tender, sell,
assign and transfer Shares tendered hereby.
The names and addresses of the registered holders should be printed, if they
are not already printed above, exactly as they appear on the Share Certificates
tendered hereby. The certificate numbers, the number of Shares represented by
such Share Certificates, the number of Shares that the undersigned wishes to
tender and the purchase price at which such Shares are being tendered should be
indicated in the appropriate boxes.
The undersigned understands that the Company will determine a single per
Share price (not greater than $25.00 nor less than $21.75 per Share) (the
"Purchase Price") that it will pay for Shares validly tendered pursuant to the
Offer taking into account the number of Shares so tendered and the prices
specified by tendering stockholders. The undersigned understands that the
Company will select the Purchase Price that will allow it to buy 3,000,000
Shares (or such lesser number of Shares as are validly tendered at prices not
greater than $25.00 nor less than $21.75 per Share) pursuant to the Offer. The
undersigned understands that all Shares validly tendered at prices at or below
the Purchase Price will be purchased at the Purchase Price, net to the seller in
cash, upon the terms and subject to the conditions of the Offer, including its
proration provisions, and that the Company will return all other Shares,
including Shares tendered and not withdrawn at prices greater than the Purchase
Price and Shares not purchased because of proration.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Company may terminate or amend the Offer or may not be
required to purchase any of the Shares tendered hereby or may accept for payment
fewer than all of the Shares tendered hereby. The undersigned understands that
Share Certificates not tendered or not purchased will be returned to the
undersigned at the address indicated above, unless otherwise indicated under the
"Special Payment Instructions" or "Special Delivery Instructions" below. The
undersigned recognizes that the Company has no obligation, pursuant to the
"Special Payments Instructions," to transfer any Share Certificate from the name
of its registered holder, or to order the registration or transfer of such
Shares tendered by book-entry transfer, if the Company purchases none of the
Shares represented by such certificate or tendered by such book-entry transfer.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price for such of the tendered Shares as are
purchased will be issued to the order of the undersigned and mailed to the
address indicated above unless otherwise indicated under the "Special Payment
Instructions" or the "Special Delivery Instructions" below.
<PAGE>
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligations of the undersigned under this Letter of Transmittal shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
PRICE (IN DOLLARS) PER SHARE AT
WHICH SHARES ARE BEING TENDERED
----------------------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE
PRICE, USE A SEPARATE LETTER OF TRANSMITTAL
FOR EACH PRICE SPECIFIED.
(See Instruction 5)
---------------------------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED,
OR IF NO BOX IS CHECKED (EXCEPT AS
PROVIDED IN THE ODD LOTS
INSTRUCTIONS TO THE RIGHT), THERE IS
NO PROPER TENDER OF SHARES.
---------------------------------------------
/ / 22 1/8 / / 23 1/8 / / 24 1/8
/ / 22 1/4 / / 23 1/4 / / 24 1/4
/ / 21 3/4 / / 22 3/8 / / 23 3/8 / / 24 3/8
/ / 21 7/8 / / 22 1/2 / / 23 1/2 / / 24 1/2
/ / 22 / / 22 5/8 / / 23 5/8 / / 24 5/8
/ / 22 3/4 / / 23 3/4 / / 24 3/4
/ / 22 7/8 / / 23 7/8 / / 24 7/8
/ / 23 / / 24 / / 25
ODD LOTS
(See Instruction 8)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially, as of the close of business on May 12, 1995, and who
continues to own beneficially as of the Expiration Date, an aggregate of fewer
than 100 Shares.
The undersigned either (check one box):
/ / was the beneficial owner, as of the close of business on May 12, 1995,
of an aggregate of fewer than 100 Shares (including any Shares held in
the Company's Dividend Reinvestment Plan and any Shares held in the
Company's 401(k) Savings Plan) all of which are being tendered, or
/ / is a broker, dealer, commercial bank, trust company or other nominee
which
(a) is tendering, for the beneficial owners thereof, Shares with
respect to which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner, as of the
close of business on May 12, 1995, of an aggregate of fewer than
100 Shares (including any Shares held in the Company's Dividend
Reinvestment Plan and any Shares held in the Company's 401(k) Sav-
ings Plan) and is tendering all of such Shares.
If you do not wish to specify a purchase price, check the following box, in
which case you will be deemed to have tendered at the Purchase Price determined
by the Company in accordance with the terms of the Offer (persons checking this
box need not indicate the price per Share in the box entitled "Price (in
Dollars) Per Share at Which Shares are Being Tendered" in this Letter of
Transmittal). / /
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 4, 6, 7 and 9) (See Instructions 1, 4, 6 and 9)
To be completed ONLY if the check To be completed ONLY if the check
for the purchase price of Shares issued in the name of the undersigned
purchased or Share Certificates for the purchase price of Shares
evidencing Shares not tendered or not purchased or Share Certificates
purchased are to be issued in the name evidencing Shares not tendered or not
of some one other than the purchased are to be mailed to someone
undersigned. other than the undersigned, or to the
undersigned at an address other than
that shown under "Description of
Shares Tendered."
Issue / / check / / Share Mail / / check / / Share
Certificate(s) to: Certificate(s) to:
Name: Name:
- -------------------------------------- --------------------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address: Address:
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
- --------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 BELOW)
TENDER OF DIVIDEND REINVESTMENT PLAN SHARES
(See Instruction 14)
To be completed ONLY if the undersigned intends to tender all Shares held
in the Company's Dividend Reinvestment Plan.
/ / CHECK HERE TO TENDER ALL SHARES HELD IN THE COMPANY'S DIVIDEND
REINVESTMENT PLAN.
IMPORTANT
STOCKHOLDERS: SIGN HERE
(See Instructions 1 and 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Dated:______________________________, 1995
Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a person(s) authorized to
become registered holder(s) by certificates and documents transmitted with
this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 6.
Name(s): _____________________________________________________________________
______________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _______________________________________________________
Address: _____________________________________________________________________
______________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ______________________________________________
Taxpayer Identification or Social Security Number(s): ________________________
(SEE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
GUARANTEE OF SIGNATURE(S)
(If required -- See Instructions 1 and 6)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Area Code and Telephone Number: ________________ Dated: _______________, 1995
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member firm of a registered national
securities exchange or the National Association of Securities Dealers, Inc. or
by a commercial bank or trust company having an office, branch or agency in the
United States which is a member of one of the Stock Transfer Association's
approved medallion programs (such as Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program) (each of the foregoing being referred to as an
"Eligible Institution"), unless (i) this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered hereby
and such holder(s) has (have) completed neither the box entitled "Special
Payment Instructions" nor the box entitled "Special Delivery Instructions" on
this Letter of Transmittal or (ii) such Shares are tendered for the account of
an Eligible Institution. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be used either if Share
Certificates are to be forwarded herewith or if Shares are to be delivered by
book-entry transfer pursuant to the procedure set forth in Section 3 of the
Offer to Purchase. Share Certificates evidencing ALL physically tendered Shares,
or a confirmation of a book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility of all Shares delivered by book-entry transfer as
well as a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date. If Share Certificates are forwarded
to the Depositary in multiple deliveries, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery.
Stockholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described in Section 3 of the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by the
Company, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Depositary within five New York
Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such
Notice of Guaranteed Delivery, all as described in Section 3 of the Offer to
Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate signed schedule and attached hereto.
4. PARTIAL TENDERS AND UNPURCHASED SHARES (NOT APPLICABLE TO STOCKHOLDERS
WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by
any Share Certificate delivered to the Depositary herewith are to be tendered
hereby, fill in the number of Shares which are to be tendered in the column
entitled "Number of Shares Tendered" of the box captioned "Description of Shares
Tendered." In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in either the "Special Payment
Instructions" or "Special Delivery Instructions" box on this Letter of
Transmittal, as soon as practicable after the expiration or termination of the
Offer. All Shares evidenced by Share Certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.
5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to
be properly tendered, the stockholder must check the box indicating the price
per Share at which he is tendering Shares under "Price (In Dollars) Per Share at
Which Shares Are Being Tendered" on this Letter of Transmittal, provided,
however, that an Odd Lot Owner (as defined in Section 2 of the Offer to
Purchase) may check the box above in the section entitled "Odd Lots" indicating
that he is tendering all Shares at the Purchase Price. ONLY ONE PRICE BOX MAY BE
CHECKED. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO
VALID TENDER OF SHARES (other than pursuant to tenders by Odd Lot Owners as
provided herein). A stockholder wishing to tender portions of his Share holdings
at different prices must complete a separate Letter of Transmittal for each
price at which he wishes to tender each such portion of his Shares. The same
Shares cannot be tendered (unless previously properly withdrawn as provided in
Section 4 of the Offer to Purchase) at more than one price.
6. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
<PAGE>
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Company of such person's authority so to act must be
submitted.
7. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
7, the Company will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased is (are) to be
issued in the name of, a person other than the registered holder(s), the amount
of any stock transfer taxes (whether imposed on the registered holder(s), such
other person or otherwise) payable on account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to the Company of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 7, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
8. ODD LOTS. As described in Section 1 of the Offer to Purchase, if the
Company is to purchase less than all Shares tendered before the Expiration Date,
the Shares purchased first will consist of all Shares tendered by any
stockholder who owned beneficially, as of the close of business on May 12, 1995,
and continues to own beneficially as of the Expiration Date, an aggregate of
fewer than 100 Shares, including any Shares held in the Company's Dividend
Reinvestment Plan and any Shares held in the Company's 401(k) Savings Plan, and
who tenders all of his Shares at or below the Purchase Price (including by not
designating a purchase price). This preference will not be available unless the
box captioned "Odd Lots" is completed.
9. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased is (are) to be issued, in the
name of a person other than the person(s) signing this Letter of Transmittal or
if a check issued in the name of the person(s) signing this Letter of
Transmittal or any such Share Certificate is to be sent to someone other than
the person(s) signing this Letter of Transmittal or to the person(s) signing
this Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on this Letter of Transmittal, the
appropriate boxes captioned "Special Payment Instructions" and/or "Special
Delivery Instructions" on this Letter of Transmittal must be completed.
10. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the number of Shares to be accepted, the price to be paid
therefor and the validity, form, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares and its determination shall be
final and binding on all parties. The Company reserves the absolute right to
reject any or all tenders of Shares determined by it not to be in proper form or
the acceptance of or payment for which may be unlawful. The Company also
reserves the absolute right to waive any of the conditions of the Offer or any
defect or irregularity in the tender of any particular Shares and the Company's
interpretation of the terms of the Offer (including these instructions) will be
final and binding on all parties. No tender of Shares will be deemed to be
validly made until all defects and irregularities have been cured or waived.
Unless waived, any defects or irregularities in connection with tenders must be
cured within such time as the Company shall determine. None of the Company, the
Dealer Manager, the Depositary, the Information Agent nor any other person is or
will be obligated to give notice of defects of irregularities in tenders, nor
shall any of them incur any liability for failure to give any such notice.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be obtained from the Information Agent
or from brokers, dealers, commercial banks or trust companies.
12. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such stockholder. If the tendering stockholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such stockholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part 1 and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
13. WITHHOLDING ON FOREIGN STOCKHOLDERS. The Depositary will withhold
federal income taxes equal to 30% of the gross payments payable to a foreign
stockholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. For this purpose, a foreign
stockholder is any stockholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) any estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. The
Depositary will determine a stockholder's status as a foreign stockholder and
eligibility for a reduced rate of, or an exemption from, withholding by
reference to the stockholder's address and to any outstanding certificates or
statements concerning eligibility for a reduced rate of, or exemption from,
withholding unless facts and circumstances indicate that reliance is not
warranted. A foreign stockholder who has not previously submitted the
appropriate certificates or statements with respect to a reduced rate of, or
exemption from, withholding for which such stockholder may be eligible should
consider doing so in order to avoid overwithholding. A foreign stockholder may
be eligible to obtain a refund of tax withheld if such stockholder meets one of
the three tests for capital gain or loss treatment described in Section 14 of
the Offer to Purchase or is otherwise able to establish that no tax or a reduced
amount of tax was due.
14. DIVIDEND REINVESTMENT PLAN. Shares held in the Company's Dividend
Reinvestment Plan may be tendered by checking the appropriate space in the box
captioned "Tender of Dividend Reinvestment Plan Shares" on this Letter of
Transmittal. Any tender of Dividend Reinvestment Plan Shares held in the account
of a participant must be for all Dividend Reinvestment Plan Shares in such
account and must be made at a single price. See Section 3 of the Offer to
Purchase for a further explanation of the procedures for tendering and
consequences of tendering Dividend Reinvestment Plan Shares.
<PAGE>
15. SAVINGS PLAN. Participants in the Company's 401(k) Savings Plan may
not use this Letter of Transmittal to direct the tender of Shares allocated to
such participant's Savings Plan account, but must use the separate instruction
form sent to them by the Savings Plan Trustee.
16. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of
the Offer to Purchase, stockholders may designate the order in which their
Shares are to be purchased in the event of proration. The order of purchase may
have an effect on the federal income tax classification of any gain or loss on
the Shares purchased. See Section 1 of the Offer to Purchase.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN), and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
<TABLE>
<CAPTION>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
<S> <C> <C>
SUBSTITUTE PART I - Taxpayer Identification Number - For all accounts,
FORM W-9 enter taxpayer identification number in the box at right.
DEPARTMENT OF THE TREASURY (For most individuals, this is your social security number. ----------------------------
INTERNAL REVENUE SERVICE If you do not have a number, see Obtaining a Number in the Social Security Number
Payer's Request for enclosed Guidelines.) Certify by signing and dating below.
Taxpayer Identification Note: If the account is in more than one name, see the
Number (TIN) chart in the enclosed Guidelines to determine which number
to give the payer. OR ------------------------
Employer Identification
Number
(If awaiting TIN write
"Applied For")
PART II -- For Payees Exempt From Backup Withholding, see the enclosed GUIDELINES and complete as instructed therein.
CERTIFICATION -- Under penalties of perjury, I certify that:
(l) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued
to me), and
(2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are subject to
backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by
the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer
subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SIGNATURE DATE , 1995
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect:
(212) 440-9800
ALL OTHERS CALL TOLL-FREE:
1-800-223-2064
THE DEALER MANAGER FOR THE OFFER IS:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
(212) 783-2947 (call collect)
May 17, 1995
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
ECOLAB INC.
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if: (i) certificates ("Share
Certificates") evidencing shares of common stock, par value $1.00 per share
(including the associated Preferred Stock Purchase Rights (the "Rights"), the
"Shares"), of Ecolab Inc., a Delaware corporation (the "Company"), are not
immediately available, (ii) Share Certificates and all other required documents
cannot be delivered to First Chicago Trust Company of New York, as Depositary
(the "Depositary"), prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase (as defined below)) or (iii) the procedure for delivery by
book-entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand, overnight courier or mail or
transmitted by telegram or facsimile transmission to the Depositary. See Section
3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
P.O. Box 2559 (201) 222-4720 14 Wall Street, 8th Floor
Mail Suite 4660--ECO or Suite 4680--ECO
Jersey City, New Jersey (201) 222-4721 New York, New York 10005
07303-2559
</TABLE>
TO CONFIRM RECEIPT OF
NOTICE OF GUARANTEED DELIVERY:
(201) 222-4707
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Ecolab Inc., a Delaware corporation (the
"Company"), upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated May 17, 1995 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together, as from time to time amended, constitute
the "Offer"), receipt of each of which is hereby acknowledged, __________ shares
of common stock, par value $1.00 per share, of the Company (including the
associated Preferred Stock Purchase Rights (the "Rights"), the "Shares")
pursuant to the guaranteed delivery procedures described in Section 3 of the
Offer to Purchase. Unless the Rights become exercisable or separately tradeable
prior to the Expiration Date, a tender of Shares will also constitute a tender
of the associated Rights. Unless the context requires otherwise, all references
herein to Shares include the associated Rights.
<PAGE>
PRICE (IN DOLLARS) PER SHARE AT
WHICH SHARES ARE BEING TENDERED
-------------------------------------
IF SHARES ARE BEING TENDERED AT
MORE THAN ONE PRICE, USE A
SEPARATE NOTICE OF GUARANTEED
DELIVERY FOR EACH PRICE SPECIFIED.
-------------------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED,
OR IF NO BOX IS CHECKED (EXCEPT AS
PROVIDED IN THE ODD LOTS
INSTRUCTIONS TO THE RIGHT), THERE
IS NO PROPER TENDER OF SHARES.
-------------------------------------
/ / 22 1/8 / / 23 1/8 / / 24 1/8
/ / 22 1/4 / / 23 1/4 / / 24 1/4
/ / 21 3/4 / / 22 3/8 / / 23 3/8 / / 24 3/8
/ / 21 7/8 / / 22 1/2 / / 23 1/2 / / 24 1/2
/ / 22 / / 22 5/8 / / 23 5/8 / / 24 5/8
/ / 22 3/4 / / 23 3/4 / / 24 3/4
/ / 22 7/8 / / 23 7/8 / / 24 7/8
/ / 23 / / 24 / / 25
ODD LOTS
To be completed ONLY if Shares are being tendered by or on behalf of a person
owning beneficially, as of the close of business on May 12, 1995, and who
continues to own beneficially as of the Expiration Date, an aggregate of fewer
than 100 Shares.
The undersigned either (check one box):
/ / was the beneficial owner, as of the close of business on May 12, 1995, of
an aggregate of fewer than 100 Shares (including any Shares held in the
Company's Dividend Reinvestment Plan and any Shares held in the Company's
401(k) Savings Plan), all of which are being tendered, or
/ / is a broker, dealer, commercial bank, trust company or other nominee which
(a) is tendering, for the beneficial owners thereof, Shares with respect to
which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner, as of the close
of business on May 12, 1995, of an aggregate of fewer than 100 Shares
(including any Shares held in the Company's Dividend Reinvestment Plan
and any Shares held in the Company's 401(k) Savings Plan), and is
tendering all of such Shares.
If you do not wish to specify a purchase price, check the following box, in
which case you will be deemed to have tendered at the Purchase Price determined
by the Company in accordance with the terms of the Offer (persons checking this
box need not indicate the price per Share in the box entitled "Price (in
Dollars) Per Share at Which Shares Are Being Tendered"). / /
<PAGE>
<TABLE>
<S> <C> <C>
PLEASE TYPE OR PRINT SIGN HERE:
-------------------------------------- -----------------------------------------
(CERTIFICATE NUMBER(S) (IF AVAILABLE))
- ----------------------------------------- -----------------------------------------
(NAME(S))
-------------------------------------- Dated:------------------, 1995
(ADDRESS(ES))
- ----------------------------------------- If Shares will be tendered by
- ----------------------------------------- book-entry transfer, check one box:
(AREA CODE AND TELEPHONE / / The Depository Trust Company
NUMBER) / / Midwest Securities Trust Company
/ / Philadelphia Depository Trust
Company
Account Number:
-------------------------------------
</TABLE>
<TABLE>
<S> <C>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch
or agency in the United States which is a member of one of the Stock Transfer Association's approved
medallion programs (such as Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program) (each, an "Eligible Institution"),
hereby (i) guarantees to deliver to the Depositary, at one of its addresses set forth above, Share
Certificates evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of
book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company, in each case with
delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, and any
other required documents, all within five New York Stock Exchange, Inc. trading days of the date hereof,
(ii) represents that the undersigned has a net long position in Shares or equivalent securities within
the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, at least
equal to the Shares tendered and (iii) represents that such tender of Shares complies with Rule 14e-4.
- ------------------------------------------- -------------------------------------------
(NAME OF FIRM) (AUTHORIZED SIGNATURE)
- ------------------------------------------- -------------------------------------------
(ADDRESS) (TITLE)
- ------------------------------------------- Name: --------------------------------------
(INCLUDE ZIP CODE) (PLEASE TYPE OR PRINT)
- -------------------------------------------
(AREA CODE AND TELEPHONE NUMBER) Dated: -------------------------------, 1995
</TABLE>
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
ECOLAB INC.
OFFER TO PURCHASE FOR CASH
UP TO 3,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT GREATER THAN
$25.00 NOR LESS THAN $21.75 PER SHARE
May 17, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Ecolab Inc., a Delaware corporation (the "Company"), has appointed us to act
as Dealer Manager in connection with its offer to purchase for cash up to
3,000,000 shares of its common stock, par value $1.00 per share (including the
associated Preferred Stock Purchase Rights (the "Rights"), the "Shares"), at
prices not greater than $25.00 nor less than $21.75 per Share and upon the terms
and subject to the conditions set forth in its Offer to Purchase, dated May 17,
1995, and in the related Letter of Transmittal (which together constitute the
"Offer"). Unless the Rights become exercisable or separately tradeable prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase), a tender
of Shares will also constitute a tender of the associated Rights. Unless the
context otherwise requires all references herein to Shares include the
associated Rights. We enclose the materials listed below relating to the Offer.
The Company will determine a single per Share price (not greater than $25.00
nor less than $21.75 per Share) (the "Purchase Price"), that it will pay for
Shares validly tendered pursuant to the Offer taking into account the number of
Shares so tendered and the prices specified by tendering stockholders. The
Company will select the Purchase Price which will allow it to buy 3,000,000
Shares (or such lesser number of Shares as are validly tendered at prices not
greater than $25.00 nor less than $21.75 per Share) pursuant to the Offer. All
Shares validly tendered at prices at or below the Purchase Price will be
purchased at the Purchase Price, net to the seller in cash, upon the terms and
subject to the conditions of the Offer, including the proration terms thereof.
See Section 1 of the Offer to Purchase.
If, prior to the Expiration Date, more than 3,000,000 Shares (or such
greater number of Shares as the Company may elect to purchase) are validly
tendered, the Company will, upon the terms and subject to the conditions of the
Offer, accept Shares for purchase first from Odd Lot Owners (as defined in
Section 2 of the Offer to Purchase) who validly tender all of their Shares at or
below the Purchase Price and then on a pro rata basis, if necessary, from all
other stockholders whose Shares are validly tendered at or below the Purchase
Price.
The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer. See Section 6 of the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase, dated May 17, 1995.
2. Letter to Clients which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer;
3. Letter, dated May 17, 1995, from Pierson M. Grieve, Chairman of the
Board, and Allan L. Schuman, President and Chief Executive Officer, of the
Company, to stockholders of the Company;
4. Letter of Transmittal for your use and for the information of your
clients (together with accompanying Substitute Form W-9 Guidelines);
<PAGE>
5. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis; and
6. Return envelope addressed to First Chicago Trust Company of New
York, the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER,
PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 14, 1995, UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers or any other
persons (other than fees to the Dealer Manager as described in the Offer to
Purchase) for soliciting tenders of Shares pursuant to the Offer. The Company
will, however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to the
beneficial owners of Shares held by you as a nominee or in a fiduciary capacity.
The Company will pay or cause to be paid any stock transfer taxes on its
purchase of Shares, except as otherwise provided in Instruction 7 of the Letter
of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be sent
to the Depositary with either certificate(s) representing the tendered Shares,
or confirmation of their book-entry transfer, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
As described in Section 3 of the Offer to Purchase, tenders may be made
without the concurrent deposit of stock certificates or concurrent compliance
with the procedure for book-entry transfer, if such tenders are made by or
through a broker or dealer which is a member firm of a registered national
securities exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office, branch or agency in the
United States which is a member of one of the Stock Transfer Association's
approved medallion programs (such as Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program). Certificates for Shares so tendered (or a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the "Book-Entry Transfer Facilities" described in the Offer to
Purchase), together with a properly completed and duly executed Letter of
Transmittal and any other documents required by the Letter of Transmittal, must
be received by the Depositary within five New York Stock Exchange, Inc. trading
days after timely receipt by the Depositary of a properly completed and duly
executed Notice of Guaranteed Delivery.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager or to the Information Agent at their respective addresses and
telephone numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, Georgeson & Company Inc., telephone 1-800-223-2064
(toll-free).
Very truly yours,
Salomon Brothers Inc
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
ECOLAB INC.
OFFER TO PURCHASE FOR CASH
UP TO 3,000,000 SHARES OF ITS COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
AT A PURCHASE PRICE NOT GREATER THAN
$25.00 NOR LESS THAN $21.75 PER SHARE
May 17, 1995
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated May 17,
1995, and the related Letter of Transmittal (which together constitute the
"Offer"), in connection with the Offer by Ecolab Inc., a Delaware corporation
(the "Company"), to purchase for cash up to 3,000,000 shares of its common
stock, par value $1.00 per share (including the associated Preferred Stock
Purchase Rights (the "Rights"), the "Shares"), at prices not greater than $25.00
nor less than $21.75 per Share, upon the terms and subject to the conditions of
the Offer. Unless the Rights become exercisable or separately tradeable prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase), a tender
of Shares will also constitute a tender of the associated Rights. Unless the
context otherwise requires all references herein to Shares include the
associated Rights. Also enclosed herewith is certain other material related to
the Offer, including a letter, dated May 17, 1995, from Pierson M. Grieve,
Chairman of the Board, and Allan L. Schuman, President and Chief Executive
Officer, of the Company, to stockholders of the Company.
The Company will determine a single per Share price (not greater than $25.00
nor less than $21.75 per Share) (the "Purchase Price") that it will pay for
Shares validly tendered pursuant to the Offer taking into account the number of
Shares so tendered and the prices specified by tendering stockholders. The
Company will select the Purchase Price which will allow it to buy 3,000,000
Shares (or such lesser number of Shares as are validly tendered at prices not
greater than $25.00 nor less than $21.75 per Share) pursuant to the Offer. All
Shares validly tendered prior to the Expiration Date at prices at or below the
Purchase Price will be purchased at the Purchase Price, net to the seller in
cash, upon the terms and subject to the conditions of the Offer, including the
proration terms thereof. The Company will return all other Shares, including
Shares tendered at prices greater than the Purchase Price and Shares not
purchased because of proration. See Section 1 of the Offer to Purchase.
If, prior to the Expiration Date, more than 3,000,000 Shares (or such
greater number of Shares as the Company may elect to purchase) are validly
tendered, the Company will, upon the terms and subject to the conditions of the
Offer, accept Shares for purchase first from Odd Lot Owners (as defined in
Section 2 of the Offer to Purchase) who validly tender all of their Shares at or
below the Purchase Price and then on a pro rata basis, if necessary, from all
other stockholders whose Shares are validly tendered at or below the Purchase
Price.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. AS SUCH, WE ARE
THE ONLY ONES WHO CAN TENDER YOUR SHARES, AND THEN ONLY PURSUANT TO THE
INSTRUCTIONS YOU SET FORTH ON THE ATTACHED INSTRUCTION FORM. WE ARE SENDING YOU
THE LETTER OF TRANSMITTAL FOR YOUR INFORMATION ONLY; YOU CANNOT USE IT TO TENDER
SHARES WE HOLD FOR YOUR ACCOUNT.
Please instruct us as to whether you wish us to tender any or all of the
Shares we hold for your account on the terms and subject to the conditions of
the Offer.
We call your attention to the following:
1. You may tender Shares at prices (in multiples of $.125), not greater
than $25.00 nor less than $21.75 per Share, as indicated in the attached
Instruction Form, net to you in cash.
2. The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set
forth in the Offer.
3. The Offer, proration period, and withdrawal rights will expire at
12:00 midnight, New York City time, on Wednesday, June 14, 1995, unless the
Company extends the Offer.
<PAGE>
4. The Offer is for up to 3,000,000 Shares, constituting approximately
4.42% of the Shares outstanding as of May 12, 1995.
5. Tendering stockholders will not be obligated to pay any brokerage
commissions, solicitation fees or, subject to Instruction 7 of the Letter of
Transmittal, stock transfer taxes on the Company's purchase of Shares
pursuant to the Offer.
6. If you owned beneficially as of the close of business on May 12,
1995, an aggregate of fewer than 100 Shares (including any Shares held in
the Company's Dividend Reinvestment Plan and any Shares held in the
Company's 401(k) Savings Plan), and you instruct us to tender on your behalf
all the Shares of which we are the holder of record at or below the Purchase
Price before the expiration of the Offer and you check the appropriate space
in the box captioned "Odd Lots" in the attached Instruction Form, the
Company will accept all such Shares for purchase before proration, if any,
of the purchase of other Shares tendered at or below the Purchase Price.
7. If you wish to tender portions of your Shares at different prices
you must complete a separate Instruction Form for each price at which you
wish to tender each portion of your Shares. We must submit separate Letters
of Transmittal on your behalf for each price you will accept.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, and returning to us the attached Instruction Form.
An envelope to return your Instruction Form to us is enclosed. If you authorize
us to tender your Shares, we will tender all such Shares unless you specify
otherwise on the attached Instruction Form.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF THE OFFER. THE
OFFER, PRORATION PERIOD, AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON WEDNESDAY, JUNE 14, 1995, UNLESS THE COMPANY EXTENDS THE
OFFER.
As described in Section 1 of the Offer to Purchase, if before the Expiration
Date more than 3,000,000 Shares (or such greater number of Shares as the Company
elects to purchase) are validly tendered at or below the Purchase Price, the
Company will accept Shares for purchase at the Purchase Price in the following
order of priority:
(a) first, all Shares validly tendered at or below the Purchase Price
prior to the Expiration Date by any Odd Lot Owner (as defined in Section 2
of the Offer to Purchase) who:
(1) tenders all Shares beneficially owned by such Odd Lot Owner at or
below the Purchase Price (partial tenders will not qualify for this
preference); and
(2) completes the section captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and
(b) then, after purchase of all of the foregoing Shares, all other
Shares validly tendered at or below the Purchase Price before the Expiration
Date on a pro rata basis, if necessary (with adjustments to avoid purchases
of fractional Shares).
The Offer is not being made to, nor will the Company accept tenders from,
holders of Shares in any jurisdiction in which the Offer or its acceptance would
not comply with the securities or Blue Sky laws of such jurisdiction. The
Company is not aware of any jurisdiction in which the making of the Offer or the
tender of Shares would not be in compliance with the laws of such jurisdictions.
However, the Company reserves the right to exclude holders in any jurisdiction
in which it is asserted that the Offer cannot lawfully be made. So long as the
Company makes a good faith effort to comply with any state law deemed applicable
to the Offer, if it cannot do so, the Company believes that the exclusion of
holders residing in such jurisdictions is permitted under Rule 13e-4(f)(9)
promulgated under the Exchange Act. In any jurisdiction the securities or Blue
Sky laws of which require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on the Company's behalf by Salomon Brothers
Inc as Dealer Manager or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTION FORM
WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 3,000,000 SHARES OF COMMON STOCK OF
ECOLAB INC.
AT A PURCHASE PRICE NOT GREATER THAN
$25.00 NOR LESS THAN $21.75 PER SHARE
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated May 17, 1995, and the related Letter of Transmittal (which
together constitute the "Offer"), in connection with the offer by Ecolab Inc., a
Delaware corporation (the "Company"), to purchase for cash 3,000,000 shares of
its common stock, par value $1.00 per share (including the associated Preferred
Stock Purchase Rights (the "Rights"), the "Shares"), at prices not greater than
$25.00 nor less than $21.75 per Share, upon the terms and subject to the
conditions of the Offer. Unless the Rights become exercisable or separately
tradeable prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase), a tender of Shares will also constitute a tender of the associated
Rights. Unless the context otherwise requires all references herein to Shares
include the associated Rights.
The Company will determine a single per Share price (not greater than $25.00
nor less than $21.75 per Share) (the "Purchase Price") that it will pay for the
Shares validly tendered pursuant to the Offer taking into account the number of
Shares so tendered and the prices specified by tendering stockholders. The
Company will select the Purchase Price which will allow it to buy 3,000,000
Shares (or such lesser number of Shares as are properly tendered at prices not
greater than $25.00 nor less than $21.75 per Share) pursuant to the Offer. All
Shares validly tendered at prices at or below the Purchase Price will be
purchased at the Purchase Price, net to the seller in cash, upon the terms and
subject to the conditions of the Offer, including the proration terms thereof.
The Company will return all other Shares, including Shares tendered at prices
greater than the Purchase Price and Shares not purchased because of proration.
See Section 1 of the Offer to Purchase.
/ / By checking this box, all Shares held by us for your account will be
tendered. If fewer than all of the Shares are to be tendered, please
check the box and indicate below the aggregate number of Shares to
be tendered by us.
_______ Shares(1)
- ------------------------
(1) Unless otherwise indicated, it will be assumed that all Shares, including
the associated Rights, held for the account of the undersigned are to be
tendered.
3
<PAGE>
PRICE (IN DOLLARS) PER SHARE AT
WHICH SHARES ARE BEING TENDERED
______________________________________________________
IF SHARES ARE BEING TENDERED AT MORE THAN ONE
PRICE, USE A SEPARATE INSTRUCTION FORM FOR
EACH PRICE SPECIFIED.
______________________________________________________
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED,
OR IF NO BOX IS CHECKED (EXCEPT AS PROVIDED
IN THE ODD LOTS INSTRUCTIONS BELOW),
THERE IS NO PROPER TENDER OF SHARES.
______________________________________________________
/ / 22 1/8 / / 23 1/8 / / 24 1/8
/ / 22 1/4 / / 23 1/4 / / 24 1/4
/ / 21 3/4 / / 22 3/8 / / 23 3/8 / / 24 3/8
/ / 21 7/8 / / 22 1/2 / / 23 1/2 / / 24 1/2
/ / 22 / / 22 5/8 / / 23 5/8 / / 24 5/8
/ / 22 3/4 / / 23 3/4 / / 24 3/4
/ / 22 7/8 / / 23 7/8 / / 24 7/8
/ / 23 / / 24 / / 25
ODD LOTS
/ / By checking this box, the undersigned represents
that the undersigned owned beneficially, as of the
close of business on May 12, 1995, an aggregate of
fewer than 100 Shares (including any Shares held in
the Company's Dividend Reinvestment Plan and any
Shares held in the Company's 401(k) Savings Plan), and
is tendering or is instructing the applicable record
holder(s) to tender all such Shares.
If you do not wish to specify a purchase price, check
the following box, in which case you will be deemed to
have tendered at the Purchase Price determined by the
Company in accordance with the terms of the Offer
(persons checking this box need not indicate the price
per Share in the box entitled "Price (in Dollars) Per
Share at Which Shares Are Being Tendered"). / /
SIGNATURE BOX
Signature(s): __________________________________________________________________
Dated: _________________________________________________________________________
Name(s) and Address(es): _______________________________________________________
(PLEASE PRINT)
Area Code and Telephone Number: ________________________________________________
Taxpayer Identification or Social Security Number: _____________________________
4
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. --Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
8. Sole proprietorship The owner(4)
account
- ------------------------------------------------------
- ------------------------------------------------------
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C> <C>
- ------------------------------------------------------
9. A valid trust, estate, Legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a State or local
government, school
district, or prison)
that receives
agricultural program
payments
- ------------------------------------------------------
<FN>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
</TABLE>
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or
an individual retirement plan.
- - The United States or any agency or instrumentality
thereof.
- - A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof.
- - An international organization or any agency, or
instrumentality thereof.
- - A registered dealer in securities or commodities
registered in the U.S. or a possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section
584(a).
- - A middleman known in the investment community as a
nominee or listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List.
- - An exempt charitable remainder trust, or a nonexempt
trust described in section 4947(a)(1).
- - An entity registered at all times under the Investment
Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding
under section 1441.
- - Payments to partnerships not engaged in a trade or
business in the U.S. and which have at least one nonresident partner.
- - Payments of patronage dividends where the amount
received is not paid in money.
- - Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by
individuals. Note: You may be subject to backup withholding if this interest is
$600 or more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number to the
payer.
- - Payments of tax-exempt interest (including
exempt-interest dividends under section 852.)
- - Payments described in section 6049(b)(5) to
non-resident aliens.
- - Payments on tax-free covenant bonds under section
1451.
- - Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
May 12, 1995
Release Date: FOR IMMEDIATE RELEASE
Contact: Michael J. Monahan 612-293-2809 (Tel)
612-225-3123 (Fax)
ECOLAB INC. ANNOUNCES DUTCH AUCTION
SELF-TENDER OFFER FOR UP TO 3 MILLION SHARES
AS PART OF A 6 MILLION SHARE STOCK REPURCHASE
St. Paul, Minn., May 12, 1995: Ecolab Inc. announced today that its Board of
Directors has authorized the purchase by the Company of up to 6 million shares
of its common stock, representing approximately 9% of its outstanding shares.
The Ecolab board authorized a Dutch Auction self-tender offer for up to 3
million shares of the Company's common stock as the first step of the 6 million
share repurchase program. The tender price range will be from $21.75 to $25.00
per share. The offer is expected to commence on Wednesday, May 17, 1995 and
expire at midnight on Wednesday, June 14, 1995, unless extended. On March 31,
1995, Ecolab had 67.9 million shares outstanding. Ecolab shares closed today at
$23.375.
The tender offer will be subject to various terms and conditions described
in offering materials to be distributed to shareholders next week. The Company
indicated it would use cash on hand and borrowings under its revolving credit
facility to purchase the shares.
Under the terms of the Dutch Auction offer, Ecolab shareholders will be
given the opportunity to specify prices within the Company's stated price range
at which they are willing to tender their shares. Upon receipt of the tenders,
Ecolab will determine a final price that enables it to purchase up to the stated
amount of shares from those shareholders who agreed to sell at or below the
company-selected purchase price. All shares purchased will be at that determined
price. If more than 3 million shares are tendered at or below the purchase
price, there will be a proration. The tender offer will not be contingent upon
any minimum number of shares being tendered.
Salomon Brothers Inc. will act as dealer manager for the tender offer.
Following completion of the tender offer, the Company may purchase the
remaining portion of the 6 million share repurchase program from time to time
through open market and privately negotiated transactions or otherwise.
Ecolab is the leading global developer and marketer of premium cleaning,
sanitizing and maintenance products and services for the hospitality,
institutional and industrial markets. For the year ended December 31, 1994,
Ecolab reported sales of $1.2 billion; including European joint venture sales of
$0.8 billion, Ecolab's global coverage approximated $2 billion. Ecolab shares
are traded on the New York Stock Exchange and the Pacific Stock Exchange under
the symbol ECL.
<PAGE>
[LOGO] ECOLAB INC.
- --------------------------------------------------------------------------------
Ecolab Center
St. Paul, Minnesota 55102
May 17, 1995
To Our Stockholders:
We are pleased to inform you that Ecolab Inc. is offering to purchase
3,000,000 shares (representing approximately 4.42% of the currently outstanding
shares) of its common stock from its stockholders through a tender offer at
prices not greater than $25.00 nor less than $21.75 per share. The Company is
conducting the tender offer through a procedure commonly referred to as a "Dutch
Auction." This procedure allows you to select the price within that price range
at which you are willing to sell your shares to the Company. Based upon the
number of shares tendered and the prices specified by the tendering
stockholders, the Company will determine the single per share price within that
price range that will allow it to buy 3,000,000 shares (or such lesser number of
shares as are validly tendered). All of the shares that are validly tendered at
prices at or below that purchase price will, subject to possible proration, be
purchased at that purchase price, net to the selling stockholder. All other
shares which have been tendered and not purchased will be returned to the
stockholder. The tender offer is not conditioned on any minimum number of shares
being tendered.
Over the past several years, the Company's operations have generated
substantial excess cash. Historically, the Company has used this cash to reduce
debt, resulting in a strong balance sheet. However, the continuing strong cash
flow and relatively low debt levels leave the Company underleveraged. The Board
of Directors believes the Company's financial condition and outlook for
continuing favorable cash generation will allow it to meet the Company's first
priority, which is to reinvest in the business, including through acquisitions,
and to use its excess cash and debt capacity to fund the repurchase program. The
Board of Directors believes that the purchase of shares is an attractive use of
the Company's financial resources and that the use of cash and borrowing to fund
the tender offer will result in a more efficient capital structure for the
Company. Accordingly, the tender offer is consistent with the Company's
long-term corporate goal of increasing stockholder value.
The tender offer provides stockholders the opportunity to sell shares for
cash without the usual transaction costs and, in the case of those holders who
own less than 100 shares, without incurring any applicable odd lot discounts.
The tender offer is explained in detail in the enclosed Offer to Purchase
and Letter of Transmittal. If you wish to tender your shares, detailed
instructions on how to tender shares are also in the enclosed materials. We
encourage you to read these materials carefully before making any decision with
respect to the tender offer. Neither the Company nor its Board of Directors
makes any recommendation to any stockholder as to whether to tender or refrain
from tendering shares.
Please note that the tender offer is scheduled to expire at midnight, New
York City time, on Wednesday, June 14, 1995, unless extended by the Company.
Questions regarding the tender offer may be directed to Georgeson & Company
Inc., the Information Agent, at 1-800-223-2064 (toll free) or Salomon Brothers
Inc, the Dealer Manager, at (212) 783-2947 (call collect).
<TABLE>
<S> <C>
Sincerely,
/s/ALLAN L. SCHUMAN /s/PIERSON M. GRIEVE
President and Chief Executive Officer Chairman of the Board
</TABLE>
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated
May 17, 1995, and the related Letter of Transmittal and is being made to all
holders of Shares. Capitalized terms not defined in this notice are defined in
the Offer to Purchase. The Offer is not being made to nor will the Company
accept tenders from holders of Shares in any jurisdiction in which the Offer or
its acceptance would violate that jurisdiction's laws. The Company is not aware
of any jurisdiction in which the making of the Offer or the tender of Shares
would not be in compliance with the laws of such jurisdiction. In those
jurisdictions whose laws require that the Offer be made by a licensed broker or
dealer, the Offer shall be deemed to be made on the Company's behalf by Salomon
Brothers Inc or one or more registered brokers or dealers licensed under the
laws of such jurisdictions.
Notice of Offer by
ECOLAB INC.
to Purchase for Cash up to
3,000,000 Shares of its Common Stock
(including the associated
Preferred Stock Purchase Rights)
at a Purchase Price not Greater than $25.00
nor Less than $21.75 per Share
Ecolab Inc., a Delaware corporation (the "Company"), invites its
stockholders to tender shares of its common stock, par value $1.00 per share
(including the associated Preferred Stock Purchase Rights (the "Rights"), the
"Shares") to the Company at prices net to the seller in cash, not greater than
$25.00 nor less than $21.75 per Share, specified by such stockholders upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
May 17, 1995 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which together constitute the "Offer"). Absent circumstances causing the Rights
to become exercisable or separately tradeable prior to the Expiration Date
(defined below), the tender of Shares will also constitute a tender of the
associated Rights. Unless the context requires otherwise, all references herein
to Shares include the associated Rights. The information contained in the Offer
to Purchase and the Letter of Transmittal is incorporated by reference herein in
its entirety.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH IN THE
OFFER.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, JUNE 14, 1995 (THE "EXPIRATION DATE"), UNLESS
THE OFFER IS EXTENDED.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price (not greater than $25.00 nor less than $21.75
per Share) (the "Purchase Price") that it will pay for Shares validly tendered
pursuant to the Offer taking into account the number of Shares so tendered and
the prices specified by tendering stockholders. The Company will select the
Purchase Price which will allow it to buy 3,000,000 Shares (or such lesser
number as are validly tendered at prices not greater than $25.00 nor less than
$21.75 per Share) pursuant to the Offer. All Shares validly tendered at prices
at or below the Purchase Price will be purchased at the Purchase Price, net to
the seller in cash, upon the terms and subject to the conditions of the Offer,
including the proration terms described below. For purposes of the Offer, the
Company will be deemed to have accepted for payment (and thereby purchased),
subject to proration, Shares which are validly tendered at or below the Purchase
Price when, as and if it gives oral or written notice to the Depositary of its
acceptance of such Shares for payment pursuant to the Offer. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of certificates for such
Shares (or a timely confirmation of a book-entry transfer of such Shares into
the Depositary's account at one of the Book-Entry Transfer Facilities (as
defined in the Offer to Purchase)), a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and any other documents required by
the Letter of Transmittal. Under no circumstances will the Company pay interest
on the Purchase Price.
<PAGE>
Shares tendered and purchased by the Company will not receive or otherwise
be entitled to the regular quarterly cash dividend of $.125 per Share to be paid
by the Company on July 17, 1995 to stockholders of record on June 27, 1995,
unless the Offer is extended beyond June 15, 1995 for any reason whatsoever.
Shares which are tendered but not purchased as a result of proration will remain
entitled to receive the dividend to be paid on July 17, 1995.
Upon the terms and subject to the conditions of the Offer, in the event that
prior to the Expiration Date more than 3,000,000 Shares (or such greater number
of Shares as the Company may elect to purchase pursuant to the Offer) are
validly tendered at or below the Purchase Price, the Company will accept Shares
for purchase, in the following order of priority: (a) first, all Shares validly
tendered by any Odd Lot Owner (as defined in the Offer) who tenders all such
Shares beneficially owned by such Odd Lot Owner at or below the Purchase Price
(partial tenders will not qualify for this preference) and who completes the box
captioned "Odd Lots" on the Letter of Transmittal, and, if applicable, on the
Notice of Guaranteed Delivery, and (b) then, after purchase of all of the
foregoing Shares, all other Shares validly tendered at or below the Purchase
Price before the Expiration Date on a pro rata basis, if necessary (with
adjustments to avoid purchases of fractional Shares).
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares the opportunity to determine the price or prices (not
greater than $25.00 nor less than $21.75 per Share) at which they are willing to
sell their Shares and, if any such Shares are purchased pursuant to the Offer,
to sell those Shares for cash without the usual transaction costs associated
with open-market sales. The Company is making the Offer because the Board of
Directors believes that the purchase of Shares is an attractive use of the
Company's financial resources and that the use of cash and borrowing to fund the
Offer will result in a more efficient capital structure for the Company.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE
TENDERED. THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF
THE COMPANY INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
The Company reserves the right, at any time or from time to time, in its
sole discretion, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary and making a
public announcement thereof. Subject to certain conditions set forth in the
Offer, the Company also expressly reserves the right to terminate the Offer and
not accept for payment any Shares not theretofore accepted for payment.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by the Company,
may also be withdrawn after 12:00 midnight, New York City time, on July 13,
1995. For a withdrawal to be effective, the Depositary must timely receive a
written, telegraphic or facsimile transmission notice of withdrawal. Such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder (if different from that of the person who tendered such Shares). If the
certificates have been delivered or otherwise identified to the Depositary,
then, prior to the release of such certificates, the tendering stockholder must
also submit the serial numbers of the particular certificates evidencing the
Shares to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution (except in the case of Shares tendered by
an Eligible Institution). If Shares have been tendered pursuant to the
procedures for book-entry transfer set forth in the Offer to Purchase, the
notice of withdrawal must specify the name and number of the account at the
applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares
and otherwise comply with the procedures of such facility.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION, WHICH SHOULD BE READ BEFORE STOCKHOLDERS DECIDE WHETHER TO ACCEPT
OR REJECT THE OFFER AND, IF ACCEPTED, AT WHAT PRICE OR PRICES TO TENDER THEIR
SHARES.
2
<PAGE>
The Offer to Purchase, the Letter of Transmittal and related documents are
being mailed to record holders of Shares and are being furnished to brokers,
banks and similar persons whose names, or the names of whose nominees, appear on
the Company's stockholder list (or, if applicable, who are listed as
participants in a clearing agency's security position listing) for transmittal
to beneficial holders of Shares.
The information required to be disclosed by Rule 13e-4(d)(1) of the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated in this notice by reference.
Please contact the Information Agent for copies of the Offer to Purchase,
the related Letter of Transmittal and other materials related to the Offer. It
will furnish copies promptly at the Company's expense.
The Information Agent for the Offer is:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
CALL TOLL-FREE 1-800-223-2064
The Dealer Manager for the Offer is:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
(212) 783-2947
(call collect)
May 17, 1995
3
<PAGE>
IMMEDIATE ATTENTION REQUIRED
May 17, 1995
RE: DIRECTION CONCERNING TENDER OF SHARES
ALLOCATED TO YOUR ECOLAB SAVINGS PLAN ACCOUNT
Dear Ecolab Savings Plan Participant:
Enclosed are materials that require your immediate attention. They describe
matters directly affecting your interest in the Ecolab Savings Plan (the
"Savings Plan"). Read all the materials carefully. You will need to complete
the enclosed Direction Form and return it in the postage paid envelope provided.
The Offer described below will expire at 12:00 midnight, New York City time, on
Wednesday, June 14, 1995, unless extended. ACCORDINGLY, IN ORDER FOR THE
TRUSTEE OF THE SAVINGS PLAN TO MAKE A TIMELY TENDER OF YOUR SHARES, YOU MUST
COMPLETE AND RETURN THE ENCLOSED DIRECTION FORM IN THE RETURN ENVELOPE SO THAT
IT IS RECEIVED NOT LATER THAN 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY,
JUNE 12, 1995, UNLESS EXTENDED. PLEASE COMPLETE AND RETURN THE DIRECTION FORM
EVEN IF YOU DECIDE NOT TO PARTICIPATE IN THE OFFER DESCRIBED BELOW.
The remainder of this letter summarizes the transaction and your rights and
options under the Savings Plan, but you also should review the more detailed
explanation provided in the other materials described below.
BACKGROUND
As you no doubt have heard, Ecolab Inc. (the "Company") has made a tender offer
to purchase up to 3 million shares of its common stock, par value $1.00 per
share (including the associated Preferred Stock Purchase Rights, the "Shares"),
at prices not greater than $25.00 nor less than $21.75 per Share. The enclosed
Offer to Purchase, dated May 17, 1995 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer"), set forth the
objectives, terms and conditions of the Offer and are being provided to all of
the Company's stockholders.
As a participant in the Savings Plan, you are directly affected because the
Company's Offer to Purchase extends to the approximately 3,546,934 million
Shares currently held by the Savings Plan. Only Fidelity Management Trust
Company ("Fidelity"), as the Trustee of the Savings Plan, actually can tender
these Shares for sale. However, as a Savings Plan participant, you have the
right pursuant to the terms of the Savings Plan to direct the Trustee whether or
not to tender the Shares that are allocated to your Savings Plan account. If
you elect to have the Trustee tender these Shares, you also are entitled to
specify the price or prices at which they should be tendered.
<PAGE>
Please note that the Trustee is the holder of record of Shares allocated to your
account as a participant in the Savings Plan. A tender of such Shares can be
made only by the Trustee as the holder of record; however, the Trustee generally
must act pursuant to your directions as explained herein. The Letter of
Transmittal is furnished to you for your information only and cannot be used by
you to tender Shares allocated to your Savings Plan account.
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THE MAKING OF THE OFFER TO
PURCHASE. HOWEVER, NEITHER THE COMPANY, ITS BOARD OF DIRECTORS, FIDELITY AS
TRUSTEE, NOR ANY OTHER PARTY MAKES ANY RECOMMENDATIONS TO PARTICIPANTS AS TO
WHETHER TO TENDER SHARES, THE PRICE AT WHICH TO TENDER, OR TO REFRAIN FROM
TENDERING SHARES. EACH PARTICIPANT MUST MAKE HIS OR HER OWN DECISION ON THESE
MATTERS.
To assure the confidentiality of your decision, the Trustee has retained
Management Information Services Corp. to tabulate the directions of Savings Plan
participants set forth on the enclosed direction form (the "Direction Form").
You will note from the included envelope that your Direction Form is to be
returned to Management Information Services Corp.
The Savings Plan provides that (1) the Trustee will not tender Shares that are
allocated to accounts of participants who fail to return a timely or complete
Direction Form, and (2) the Trustee will tender any Shares of the Savings Plan
that have not been allocated to participants' accounts in the same proportion as
the total number of Shares credited to participants' accounts for which it has
received directions from participants. Should the Trustee determine that the
implementation of a participant direction or adherence to any plan provision
relative to tender offers is in violation of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), it may ignore such direction or plan
provision and exercise its discretion as Trustee in lieu of such direction or
plan provision in connection with the Offer.
HOW THE OFFER WORKS
The details of the Offer are described in the enclosed materials, which you
should review carefully. However, in broad outline, the transaction will work
as follows with respect to Savings Plan participants.
- The Company has offered to purchase up to 3 million of its Shares at a
single per Share price not greater than $25.00 nor less than $21.75.
- If you want any of the Shares allocated to your Savings Plan account
sold on the terms and subject to the conditions of the Offer, you need
to instruct the Trustee by completing the enclosed Direction Form and
returning it to Management Information Services Corp. in the return
envelope.
2
<PAGE>
- You need to specify on the Direction Form the per Share price (in
multiples of $.125), not greater than $25.00 nor less than $21.75, at
which you wish to tender the Shares allocated to your Savings Plan
account.
- The Offer, proration period and withdrawal rights will expire at 12:00
midnight, New York City time, on Wednesday, June 14, 1995, unless the
Company extends the Offer. ACCORDINGLY, IN ORDER FOR THE TRUSTEE TO
MAKE A TIMELY TENDER OF YOUR SHARES, YOU MUST COMPLETE AND RETURN THE
ENCLOSED DIRECTION FORM IN THE RETURN ENVELOPE SO THAT IT IS RECEIVED
BY MANAGEMENT INFORMATION SERVICES CORP. NOT LATER THAN 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 12, 1995, UNLESS
EXTENDED. PLEASE COMPLETE AND RETURN THE DIRECTION FORM EVEN IF YOU
DECIDE NOT TO PARTICIPATE IN THE OFFER.
- After the deadline above for returning the Direction Form to
Management Information Services Corp., Management Information Services
Corp. will complete the tabulation of all directions and Fidelity, as
Trustee, will tender the appropriate number of Shares.
- The Company will then determine the per Share purchase price, (not
greater than $25.00 nor less than $21.75 Share) (the "Purchase
Price"), at which the Company can purchase 3 million Shares.
- Unless the Offer is voided or discontinued in accordance with its
terms, the Company then will buy all of the Shares, up to 3 million,
that were tendered at the Purchase Price or below. However, all
sellers will receive the same per Share Purchase Price, even if they
tendered at or below the Purchase Price.
- If you direct the tender of any Shares at a price in excess of the
Purchase Price as finally determined, those Shares will not be
purchased, and they will remain allocated to your Savings Plan
account.
- Finally, if there is an excess of Shares tendered over the exact
number desired by the Company at the Purchase Price, Shares tendered
pursuant to the Offer may be subject to proration as set forth in
Section 1 of the Offer to Purchase; however, if you own fewer than 100
Shares (including Shares held in the Savings Plan and in the Company's
Dividend Reinvestment Plan) as of May 12, 1995, and you tender or
direct the tender of all of your Shares at or below the Purchase
Price, the Company will purchase your shares before any proration.
This preference is available only if you complete the box captioned
"Odd Lots" on the Direction Form.
3
<PAGE>
This form of transaction is commonly called a "Dutch Auction" and requires some
strategy on your part. For example, if you are anxious to sell, you may want to
tender your Shares at a price at or near the lower limit. If you are not sure
whether or not you want to participate, but would be willing to sell at a price
above the lower limit, then you may want to specify a higher price, not to
exceed the upper limit, of course. If you do not want to sell under any
circumstances, an option is provided for you to direct that Shares allocated to
your Savings Plan account will not be tendered into the Offer.
Of course, the Trustee may override any direction that it determines to be in
violation of ERISA, as previously described. For example, the Trustee will be
prohibited from selling Shares from the Savings Plan to the Company if the
Purchase Price, as finally determined, is less than the prevailing market price
of the Shares on the date the Shares are accepted for purchase.
PROCEDURE FOR DIRECTING TRUSTEE
A Direction Form for making your direction is enclosed. You must complete
and return the enclosed Direction Form in the return envelope so that it is
received not later than 12:00 midnight, New York City time, on Monday, June
12, 1995, unless extended. PLEASE COMPLETE AND RETURN THE DIRECTION FORM
EVEN IF YOU DECIDE NOT TO PARTICIPATE IN THE OFFER. If your Direction Form
is not received by this deadline, or if it is not fully and properly
completed, the Shares allocated to your Savings Plan account will not be
tendered by the Trustee. Please note that on the reverse side of the
Direction Form the approximate number of Shares allocated to your account
(based on your proportional interest in the Ecolab Stock Fund as of Friday,
May 12, 1995) is indicated to the right of your address. This number of
Shares may fluctuate somewhat between May 12, 1995 and June 7, 1995, the date
the Trustee will begin the process of tabulating directions, due to
additional employee and employer contributions and changes in the cash
position of the Ecolab Stock Fund itself. Because of this fluctuation, the
instructions on the Direction Form refer to the percentage of Shares
allocated to your account.
To properly complete your Direction Form, you must do the following:
(1) On the face of the Direction Form, check Box 1 or 2. CHECK ONLY ONE
BOX. Make your decision which box to check as follows:
- CHECK BOX 1 if you do not want the Shares allocated to your
Savings Plan account tendered for sale at any price and simply
want the Savings Plan to continue holding Shares allocated to
your account.
- CHECK BOX 2 in all other cases and complete the table immediately
below Box 2, unless you qualify for the Odd Lot preference, in
which case you should disregard the remainder of this instruction
(1) and refer
4
<PAGE>
to instruction (2) below. Specify the percentage of Shares that
you want to tender at each price indicated. Typically, you would
elect to tender Shares at a single price. However, the Direction
Form gives you the option of splitting your Shares among several
prices. You must state the percentage of Shares to be sold at
each indicated price by filling in the percentage of Shares on
the line immediately before the price. Leave a line blank if you
want no Shares tendered at that price. The total percentage of
Shares tendered may not exceed 100%, but it may be less than
100%.
If you elect to have only a portion of your Savings Plan Shares
tendered, Shares attributable to your employee before-tax
contribution and after-tax contribution accounts will be tendered
first and Shares attributable to employer matching contribution
and profit sharing contribution accounts will be tendered
thereafter. See Investment of Tender Proceeds, below.
(2) If you own fewer than 100 Shares (including Shares held in the Savings
Plan and in the Company's Dividend Reinvestment Plan) as of May 12,
1995 and you tender or direct the tender of all your Shares, you
should complete the box captioned "Odd Lots" if you wish to receive
the Odd Lot preference. In order to receive this preference, you must
check the first box in the "Odd Lots" box to represent that you
qualify for the Odd Lot preference and you also must either direct the
Trustee to tender all Shares at one price (by inserting 100% next to
one of the prices in the "Price" box) or check the second box in the
"Odd Lots" box indicating that you do not wish to specify a purchase
price, in which case all of your Shares will be tendered at the
Purchase Price established by the Company. If you check this second
box in the "Odd Lots" box, DO NOT SPECIFY A PURCHASE PRICE IN THE
"PRICE" BOX.
(3) Then, turn the Direction Form over, date and sign it in the space
provided.
(4) Finally, return the enclosed Direction Form in the return envelope so
that it is received by Management Information Services Corp. not later
than 12:00 midnight, New York City time, on Monday, June 12, 1995,
unless extended. Please complete and return the Direction Form even
if you decide not to participate in the Offer. No facsimile
transmittals of the Direction Form will be accepted.
Your direction will be deemed irrevocable unless withdrawn by 12:00
midnight, New York City time, on Monday, June 12, 1995, unless
extended. In order to make an effective withdrawal, you must submit a
notice of withdrawal of your direction, which must be in writing, or
submit a new Direction Form in accordance with the previous
instructions for directing the
5
<PAGE>
tendering set forth in this letter, either of which must be received
by Management Information Services Corp. at the following address:
Management Information Services Corp.
P. O. Box 9109
Hingham, MA 02043-9109
Your notice must include your name, address, Social Security number,
and the approximate number of Shares allocated to your Savings Plan
account as noted on the Direction Form. Upon receipt of your notice
or new Direction Form by Management Information Services Corp., your
previous direction will be deemed cancelled. You may direct the re-
tendering of any Shares in your account by repeating the previous
instructions for directing the tendering set forth in this letter.
INVESTMENT OF TENDER PROCEEDS
For any Savings Plan Shares that are tendered and purchased by the Company, the
Company will pay cash to the Savings Plan. The Trustee then will reinvest (1)
the proceeds from Shares attributable to your employer matching contribution
account with respect to which you do not have investment discretion and profit-
sharing contribution account back into the Ecolab Stock Fund of the Savings
Plan, and (2) the proceeds from Shares attributable to your before-tax
contribution account, after-tax contribution account, and any pre-July 1, 1986
employer matching contribution account with respect to which you do have
investment discretion, into the Fidelity Retirement Money Market Portfolio
pending investment instructions from you, subject to the limitations of ERISA.
INDIVIDUAL PARTICIPANTS IN THE SAVINGS PLAN WILL NOT RECEIVE ANY PORTION OF THE
TENDER PROCEEDS. ALL SUCH PROCEEDS AND THE ASSETS WILL REMAIN IN THE SAVINGS
PLAN AND MAY BE WITHDRAWN ONLY IN ACCORDANCE WITH THE SAVINGS PLAN TERMS.
No gain or loss will be recognized by participants in the Savings Plan for
federal income tax purposes in connection with the tender or sale of Shares held
in the Savings Plan at this time. However, certain tax benefits that may
otherwise be available in connection with the future withdrawal or distribution
of Savings Plan Shares may be adversely affected if Savings Plan Shares are
tendered and the proceeds from such tender are then reinvested in the Ecolab
Stock Fund. Specifically, as is more fully described in the prospectus issued
with respect to the Savings Plan, under current federal income tax rules, if a
participant receives Savings Plan Shares as part of a lump sum withdrawal or
distribution, the excess of the fair market value of the Shares on the date of
such withdrawal or distribution over the cost to the Savings Plan of those
Shares is excluded from the value of the withdrawal or distribution for purposes
of determining the participant's federal income tax liability with respect to
such withdrawal or distribution. If the Trustee tenders Shares into the Offer
and reinvests the
6
<PAGE>
proceeds in Shares, the cost of the newly acquired Shares for purposes of
determining the value of a participant's distribution as outlined above may be
greater than the cost of the Shares tendered, thus reducing the portion of the
withdrawal or distribution that is excluded for purposes of determining the
participant's tax liability. For a more complete description of these rules,
please see the Prospectus and Summary Plan Description for the Ecolab Savings
Plan, a copy of which can be obtained from the Company's Human Resources
Department.
IF YOU DIRECT THE TRUSTEE TO TENDER SHARES ALLOCATED TO YOUR ACCOUNT IN THE
OFFER, YOU MAY ADVERSELY AFFECT YOUR ABILITY TO TAKE ADVANTAGE OF THIS TAX
BENEFIT. IF YOU DIRECT THE TRUSTEE NOT TO TENDER ANY SHARES ALLOCATED TO YOUR
ACCOUNT, THE COST OF SHARES ALLOCATED TO YOUR ACCOUNT WILL NOT BE AFFECTED.
CONFIDENTIALITY
AS MENTIONED ABOVE, BOTH THE COMPANY AND FIDELITY WILL PROTECT THE
CONFIDENTIALITY OF YOUR DECISION AS A SAVINGS PLAN PARTICIPANT. UNDER NO
CIRCUMSTANCES WILL YOUR DECISION BE DISCLOSED TO ANY DIRECTORS, OFFICERS, OR
EMPLOYEES OF THE COMPANY EXCEPT TO A LIMITED NUMBER OF ADMINISTRATORS FOR THE
SOLE PURPOSE OF ALLOCATING PROCEEDS TO YOUR SAVINGS PLAN ACCOUNT IN THE EVENT
THAT ALL OR A PORTION OF YOUR SHARES ARE SOLD.
FURTHER INFORMATION
Although the Trustee has no recommendation and cannot advise you what to do, its
representatives are prepared to answer any questions that you may have on the
procedures involved in the Dutch Auction and your direction. The Trustee also
can help you complete your Direction Form.
- If you require additional information concerning the procedure to
tender Plan Shares, please contact Fidelity's Client Information
Services between 8:30 a.m. and 8:00 p.m. Eastern time, Monday
through Friday at
1-800-835-5091
- If you have any questions about the terms and conditions of the
Offer, please contact the information agent for the Offer,
Georgeson & Company Inc., between 9:00 a.m. and 5:00 p.m. Eastern
time, (between 9:00 a.m. and 8:00 p.m. Eastern time if west of
the Mississippi River), Monday through Friday at
1-800-223-2064
7
<PAGE>
Your ability to instruct the Trustee concerning whether or not to tender Shares
allocated to your account is an important part of your rights as a Savings Plan
participant. Please consider this letter and the enclosed materials carefully
and then return your Direction Form promptly.
Sincerely,
Fidelity Management Trust Company
8
<PAGE>
ECOLAB SAVINGS PLAN
DIRECTION FORM
BEFORE COMPLETING THIS FORM, PLEASE READ CAREFULLY
THE ACCOMPANYING OFFER TO PURCHASE
AND THE RELATED LETTER OF TRANSMITTAL
AND ALL OTHER ENCLOSED MATERIALS
SEE THE REVERSE SIDE OF THIS FORM FOR THE
NUMBER OF SHARES ALLOCATED TO YOUR ECOLAB SAVINGS PLAN ACCOUNT
The undersigned hereby directs Fidelity Management Trust Company, as Trustee of
the Ecolab Savings Plan (the "Savings Plan"), to tender to Ecolab Inc. (the
"Company"), in accordance with the Offer to Purchase, dated May 17, 1995, a copy
of which I have received and read, the indicated percentage of shares of the
Company's common stock, par value $1.00 per share (including the associated
Preferred Stock Purchase Rights, the "Shares"), allocated to my Savings Plan
account, or to hold such Shares for my account, in either case as provided
below. (CHECK ONLY ONE BOX):
/ / 1. Please refrain from tendering and continue to HOLD all Shares
allocated to my Savings Plan account.
/ / 2. Please TENDER Shares allocated to my Savings Plan account in the
percentage indicated below for each of the prices provided or as
provided in the "Odd Lots" box below. (The total of the percentages
may NOT exceed 100%, but it may be less than 100%). A blank space
before a given price will be taken to mean that no Shares are to be
tendered at that price. FILL IN THE TABLE BELOW ONLY IF YOU HAVE
CHECKED BOX NUMBER 2.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
PRICE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of Shares to be ____% at $21.75 ____% at $22.875 ____% at $24.00
Tendered (The total of all ____% at $21.875 ____% at $23.00 ____% at $24.125
percentages must be less ____% at $22.00 ____% at $23.125 ____% at $24.25
than or equal to 100%) ____% at $22.125 ____% at $23.25 ____% at $24.375
____% at $22.25 ____% at $23.375 ____% at $24.50
____% at $22.375 ____% at $23.50 ____% at $24.625
____% at $22.50 ____% at $23.625 ____% at $24.75
____% at $22.625 ____% at $23.75 ____% at $24.875
____% at $22.75 ____% at $23.875 ____% at $25.00
- ------------------------------------------------------------------------------------------------
</TABLE>
Check the box or boxes below only if you qualify for and wish to receive
the Odd Lot preference.
ODD LOTS
(See Instruction 8 to
the Letter of Transmittal)
/ / By checking this box, the undersigned represents that the undersigned owned
beneficially, as of the close of business on May 12, 1995, an aggregate of fewer
than 100 Shares (including any Shares held in the Company's Dividend
Reinvestment Plan and any Shares held in the Savings Plan), and is tendering or
is instructing the applicable record holder(s) (in the case of Shares held in
the Savings Plan, the Trustee) to tender all such Shares.
INDICATE IN THE "PRICE" BOX ABOVE THE PRICE AT WHICH YOU WISH TO TENDER 100% OF
THE SHARES IN YOUR ACCOUNT OR CHECK THE BOX BELOW TO TENDER AT THE PURCHASE
PRICE ESTABLISHED BY THE COMPANY.
If you do not wish to specify a purchase price, check the following box, in
which case you will be deemed to have tendered at the Purchase Price determined
by the Company in accordance with the terms of the Offer. / /
<PAGE>
INSTRUCTIONS
Carefully complete the front side of this Direction Form. Then insert today's
date and sign your name in the spaces provided immediately below. Enclose the
Direction Form in the included postage prepaid envelope and mail it promptly.
YOUR DIRECTION FORM MUST BE RECEIVED BY MANAGEMENT INFORMATION SERVICES CORP.
NOT LATER THAN 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JUNE 12, 1995,
UNLESS EXTENDED. PLEASE COMPLETE AND RETURN THE DIRECTION FORM EVEN IF YOU
DECIDE NOT TO PARTICIPATE IN THE OFFER. Direction Forms that are not fully or
properly completed, dated, and signed, or that are received after the deadline,
will be ignored, and the Shares allocated to your account will not be tendered.
Note that the Trustee also has the right to ignore any direction that it
determines cannot be implemented without violation of applicable law.
Neither the Company, its Board of Directors, the Trustee, nor any other party
makes any recommendation to participants as to whether to tender Shares, the
price at which to tender, or to refrain from tendering Shares. Each participant
must make his or her own decision on these matters.
The Company has been advised that none of its directors or executive officers
intends to tender any Shares pursuant to the terms of the Offer.
Date: ____________________, 1995 ___________________________________
Your Signature (Please sign as your name
appears below)
As of Friday, May 12, 1995, the approximate number of Shares of Ecolab Inc.
common stock reflecting your proportional interest in the Ecolab Stock Fund of
the Ecolab Savings Plan is shown to the right of your address.
<PAGE>
Date: May 17, 1995
TO: Ecolab Associates
FROM: Diane Wigglesworth
SUBJECT: ECOLAB SAVINGS PLAN
As an Ecolab associate, you are aware that Ecolab Inc. has a very strong balance
sheet and low debt levels. The Board of Directors, after careful review, has
approved a share repurchase plan. The repurchase plan is an efficient use of
Ecolab's financial resources and is intended to make its capital structure more
efficient. The Board believes that this action will prove beneficial to Ecolab,
its stockholders and to its employees.
In the next several days you will be receiving materials from Fidelity
Management Trust Company ("Fidelity"), the Trustee of the Ecolab Savings Plan
("Savings Plan"), in connection with Ecolab's offer to purchase up to 3 million
shares of its common stock ("Shares") at prices not greater than $25.00 nor less
than $21.75 per Share (the "Offer"). The Offer extends to the approximately 3.5
million Shares held in the Ecolab Stock Fund of the Savings Plan.
Please review all the materials carefully. They contain important information
about the Offer, including the objectives, terms and conditions of the Offer.
When reviewing the materials, please keep the following in mind:
- Only Fidelity, as Trustee, can actually tender Shares held in the
Ecolab Stock Fund of the Savings Plan for sale.
- As a Savings Plan participant, you have the right under the terms of
the Savings Plan to direct the Trustee whether or not to tender your
proportionate interest in the Shares held in the Ecolab Stock Fund.
If you direct the Trustee to tender such Shares, you also are entitled
to specify the price or prices at which they should be tendered
(within the limits of the Offer itself).
- Instructions on how to direct the Trustee and a "Direction Form" will
be included in the materials.
- Neither Ecolab Inc., its Board of Directors, Fidelity as Trustee, nor
any other party makes any recommendations to you as to whether to
tender Shares, the price at which to tender, or to refrain from
tendering Shares in your Savings Plan account. You must make your own
decision on this matter.
- BE SURE TO COMPLETE AND RETURN THE DIRECTION FORM TO THE TRUSTEE, EVEN
IF YOU DECIDE NOT TO TENDER ANY SHARES.
<PAGE>
- Proceeds received from any shares tendered which are attributable to
either your before-tax contributions, after-tax contributions and
certain pre-July 1, 1986 employer contributions over which you have
investment discretion, will be deposited into a money market account
at Fidelity pending investment instructions from you.
- Proceeds received from any shares tendered which are attributable to
either your mandatory employer matching contributions or the "Thanks-
a-Million" profit sharing contribution will be deposited back into the
Ecolab Stock Fund and reinvested in Ecolab common stock. THAT MEANS
THAT YOU WILL NOT BE ABLE TO DIRECT THE TRUSTEE TO REINVEST ANY TENDER
OFFER PROCEEDS FROM THESE TWO SOURCES IN ANOTHER INVESTMENT. INSTEAD,
SUCH PROCEEDS WILL STAY IN THE ECOLAB STOCK FUND AS THE SAVINGS PLAN
REQUIRES.
- If you elect to have only a portion of your Savings Plan Shares
tendered, Shares attributable to your employee before-tax contribution
and after-tax contribution accounts will be tendered first and Shares
attributable to employer matching contribution and profit-sharing
contribution accounts will be tendered thereafter.
- IF YOU DIRECT THE TRUSTEE TO TENDER SHARES ALLOCATED TO YOUR ACCOUNT
INTO THE OFFER, YOU MAY ADVERSELY AFFECT YOUR ABILITY TO TAKE
ADVANTAGE OF A POTENTIAL TAX BENEFIT WHICH MAY OTHERWISE BE AVAILABLE
TO YOU IN CONNECTION WITH A WITHDRAWAL OR DISTRIBUTION FROM THE
SAVINGS PLAN. IF YOU DIRECT THE TRUSTEE NOT TO TENDER ANY SHARES
ALLOCATED TO YOUR ACCOUNT, THIS TAX BENEFIT WILL NOT BE AFFECTED. FOR
MORE INFORMATION ON THIS IMPORTANT ISSUE, PLEASE READ THE SECTION
ENTITLED "INVESTMENT OF TENDER PROCEEDS" FOUND IN THE LETTER FROM
FIDELITY.
- Fidelity will protect the confidentiality of your decision and will
not disclose your decision to any directors, officers or employees of
Ecolab except as to a limited number of administrators for the sole
purpose of allocating proceeds to your Savings Plan account in the
event all or a portion of your Shares are sold.
- Your Direction Form must be received by the Trustee's tabulation agent
by 12:00 midnight, New York City time, on June 12, 1995, unless
extended.
- If you still have questions after reviewing the materials,
representatives are available to help answer questions at the
following toll-free numbers.
- For questions concerning the procedure to tender Shares in your
Savings Plan account, please contact Fidelity's Client
Information Services, Monday through Friday, between 8:30 and
8:00 Eastern time, at 1-800-835-5091.
<PAGE>
- For questions about the terms and conditions of the Offer, please
contact the information agent for the Offer, Georgeson & Company
Inc., Monday through Friday, between 9:00 and 5:00 Eastern time
for locations east of the Mississippi River, and between 9:00 and
8:00 Eastern time for locations west of the Mississippi, at
1-800-223-2064.
Regards,
<PAGE>
MULTICURRENCY CREDIT AGREEMENT
Dated as of September 29, 1993
As Amended and Restated as of January 1, 1995
ECOLAB INC., a Delaware corporation (the "COMPANY"), the banks (the
"BANKS") listed on the signature pages hereof, CITIBANK, N.A. ("CITIBANK") as
agent (the "AGENT") for the Banks hereunder, CITIBANK INTERNATIONAL PLC, as
agent for the banks in connection with certain of the Eurocurrency Advances (the
"EURO-AGENT") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as co-agent (the
"CO-AGENT"), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"A ADVANCE" means an advance by a Bank to a Borrower as part of
an A Borrowing and refers to a Base Rate Advance or a Eurocurrency
Advance, each of which shall be a "TYPE" of A Advance.
"A BORROWING" means a borrowing consisting of simultaneous A
Advances of the same Type made to a single Borrower by each of the
Banks pursuant to SECTION 2.01.
"A NOTE" means a promissory note of a Borrower payable to the
order of any Bank, in substantially the form of EXHIBIT A-1 hereto,
evidencing the aggregate indebtedness of such Borrower to such Bank
resulting from the A Advances made by such Bank to such Borrower.
"ADVANCE" means an A Advance or a B Advance.
"AGREEMENT" means this Multicurrency Credit Agreement, as it may
from time to time be amended, restated, supplemented or otherwise
modified.
"ALTERNATIVE CURRENCY" means any lawful currency other than
Dollars which is freely transferable and convertible into Dollars.
"APPLICABLE LENDING OFFICE" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of a Base Rate Advance
and such Bank's Eurocurrency Lending Office in the case of a
Eurocurrency Advance and, in the case of a B Advance, the office of
<PAGE>
such Bank notified by such Bank to the Agent as its applicable Lending
office with respect to such B Advance.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance in
substantially the form of EXHIBIT C hereto pursuant to which a Bank assigns
all or a portion of such Bank's rights and obligations under this Agreement
in accordance with the terms of SECTION 9.08.
"B ADVANCE" means an advance by a Bank to a Borrower as part of a
B Borrowing resulting from the applicable auction bidding procedure
described in SECTION 2.03.
"B BORROWING" means a borrowing consisting of simultaneous B
Advances to a Borrower from each of the Banks whose offer to make a B
Advance as part of such borrowing has been accepted by the Company on
behalf of such Borrower under the applicable auction bidding procedure
described in SECTION 2.03.
"B NOTE" means a promissory note of a Borrower payable to the
order of any Bank, in substantially the form of EXHIBIT A-2 hereto,
evidencing the indebtedness of such Borrower to such Bank resulting
from a B Advance made by such Bank.
"B REDUCTION" has the meaning specified in SECTION 2.01.
"BASE RATE" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time which rate per annum
shall at all times be equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate; or
(b) one-half of one percent per annum above the latest
three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money market
banks, such three-week moving average being determined
weekly by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the
Federal Reserve Bank of New York or, if such
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publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected by
Citibank, in either case adjusted to the nearest 1/4 of one percent
or, if there is no nearest 1/4 of one percent, to the next higher 1/4
of one percent; or
(c) one-half of one percent per annum above the
Federal Funds Rate.
"BASE RATE ADVANCE" means an A Advance denominated in Dollars
which bears interest as provided in SECTION 2.07(a).
"BORROWER" means the Company or any Borrowing Subsidiary, and
their respective successors and permitted assigns, and "BORROWERS"
means all of the foregoing.
"BORROWING" means an A Borrowing or a B Borrowing.
"BORROWING SUBSIDIARY" means any Subsidiary (i) that is a Wholly-
Owned Consolidated Subsidiary, (ii) that is organized under the laws
of the jurisdiction in which the Alternative Currency requested in
connection with its initial Borrowing hereunder as a Borrowing
Subsidiary is the official currency, and (iii) as to which an Election
to Participate shall have been delivered to the Agent, duly executed
on behalf of such Borrowing Subsidiary and the Company, prior to the
date of any Notice of Borrowing on behalf of such Borrowing
Subsidiary.
"BUSINESS DAY" means a day of the year (i) on which banks are not
required or authorized to close in New York City, (ii) if the
applicable Business Day relates to any Eurocurrency Advance, on which
dealings are carried on in the London interbank market and (iii) if
the applicable Business Day relates to a disbursement to or payment by
a Borrowing Subsidiary, on which banks are not required or authorized
to close in the city in which the chief executive office or principal
place of business of such Borrowing Subsidiary is located.
"CAPITALIZATION" means, as of any date, the sum of Total Debt
plus Shareholders' Equity.
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"CHANGE OF CONTROL" means an event which shall be deemed to have
occurred if any person or group of persons (within the meaning of
Section 13 or 14 of the Exchange Act) acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Exchange Act) of stock of the Company of
any class or classes where the stock the beneficial ownership of which
is so acquired carries (otherwise than by reason only of the happening
of a contingency) more than 50 percent of the ordinary voting power
for the election of directors generally of the Company; or, during any
period of 12 consecutive calendar months, individuals:
(i) who were directors of the Company on the first day of such
period, or
(ii) whose election or nomination for election to the board of
directors of the Company was recommended or approved by at least
a majority of the directors then still in office who were
directors of the Company on the first day of such period, or
whose election or nomination for election was so approved
shall cease to constitute a majority of the board of directors of the
Company.
"CITIBANK" means Citibank, N.A.
"COMMITMENT" has the meaning specified in SECTION 2.01.
"CONSOLIDATED ASSETS" means at any date all assets which would
appear as such on a consolidated balance sheet as of such date of the
Company and its Consolidated Subsidiaries, as determined in accordance
with GAAP.
"CONSOLIDATED EARNINGS BEFORE INTEREST AND TAXES" means, for the
period of four consecutive fiscal quarters ending on or most recently
ended prior to such date of determination, the Consolidated Net Income
of the Company and its Consolidated Subsidiaries, before deduction for
Consolidated Net Interest Expense, provision for income taxes and
provisions for income taxes relating to earnings from the Joint
Venture and royalties received from the Joint Venture by the Company
and its Consolidated Subsidiaries, all as determined in accordance
with GAAP.
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<PAGE>
"CONSOLIDATED NET INCOME" means, for any period, all amounts
which would be included under net income on a consolidated income
statement of the Company and its Consolidated Subsidiaries for such
period, all as determined in accordance with GAAP.
"CONSOLIDATED NET INTEREST EXPENSE" means, for any period, the
aggregate amount of consolidated interest expense minus amounts which
have been added as interest income, each of which has been taken into
account in the determination of Consolidated Net Income of the Company
and its Consolidated Subsidiaries for such period, all as determined
in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary the
accounts of which would be consolidated with those of the Company in
its consolidated financial statements at such date in accordance with
GAAP.
"CREDIT RATING" means, at any time, the credit rating on the
Company's long-term senior unsecured debt then most recently publicly
announced by either Moody's or S&P and "CREDIT RATINGS" means both
such credit ratings.
"DEBT" means (but without duplication of any item) (i)
indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations to
pay the deferred purchase price of property or services, excluding
trade obligations and other accounts payable arising in the ordinary
course of business, (iv) obligations as lessee under leases which
shall have been or should be, in accordance with GAAP, recorded as
capital leases, (v) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (iv) above, (vi) Subsidiary
Statutory Liabilities in respect of indebtedness or obligations of
others of the kinds referred to in clauses (i) through (iv) above and
(vii) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA. Except for Subsidiary Statutory
Liabilities, "DEBT" shall not include contingent obligations for the
liabilities of any Joint Venture Entity imposed solely as a matter of
law by virtue of ownership of equity interests in such Joint Venture
Entity.
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"DM" means the lawful currency (deutschmarks) of the Federal
Republic of Germany.
"DOLLARS" and the sign "$" each means lawful money of the United
States.
"DOMESTIC LENDING OFFICE" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office"
opposite its name on SCHEDULE I hereto or such other office of such
Bank as such Bank may from time to time specify to the Company and the
Agent.
"ELECTION TO PARTICIPATE" means an Election to Participate in
substantially the form of EXHIBIT D hereto.
"ELIGIBLE ASSIGNEE" means (i) a Bank or any affiliate of a Bank;
(ii) a commercial bank organized under the laws of the United States,
or any State thereof, and having a combined capital and surplus of at
least $250,000,000; or (iii) a commercial bank organized under the
laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political
subdivision of any such country, and having a combined capital and
surplus of at least $250,000,000 or the local currency equivalent
thereof, provided that such bank is acting through a branch or agency
located in the United States.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended from time to time and the regulations promulgated and
rulings issued thereunder.
"ERISA AFFILIATE" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Internal Revenue Code) as the Company
or any of its Subsidiaries, (ii) partnership, trade or business under
common control (within the meaning of Section 414(c) of the Internal
Revenue Code) with the Company or any of its Subsidiaries, and (iii)
member of the same affiliated service group (within the meaning of
Section 414(m) of the Internal Revenue Code) as the Company or any of
its Subsidiaries, any corporation described in clause (i) or any
partnership, trade or business described in clause (ii).
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<PAGE>
"EUROCURRENCY ADVANCE" means an Advance denominated in Dollars or
in an Alternative Currency which bears interest as provided in SECTION
2.07(b).
"EUROCURRENCY LENDING OFFICE" means, with respect to any Bank,
the office of such Bank specified as its "Eurocurrency Lending Office"
opposite its name on SCHEDULE I hereto (or, if no such office is
specified, its Domestic Lending Office), or such other office of such
Bank as such Bank may from time to time specify to the Company and the
Agent. A Bank may specify different offices for its A Advances
denominated in Dollars and its A Advances denominated in Alternative
Currencies, respectively, and the term "Eurocurrency Lending Office"
shall refer to any or all such offices, collectively, as the context
may require when used in respect of such Bank.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"EUROCURRENCY RATE" means, for the Interest Period for each
Eurocurrency Advance comprising part of the same A Borrowing, an
interest rate per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in Dollars or
in the relevant Alternative Currency are offered by the principal
office of each of the Reference Banks in London, England to prime
banks in the London interbank market at 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an
amount substantially equal to such Reference Bank's Eurocurrency
Advance comprising part of such A Borrowing and for a period equal to
such Interest Period. The Eurocurrency Rate for the Interest Period
for each Eurocurrency Advance comprising part of the same A Borrowing
shall be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, SUBJECT,
HOWEVER, to the provisions of SECTION 2.09.
"EUROCURRENCY RATE RESERVE PERCENTAGE" of any Bank for the
Interest Period for any Eurocurrency Advance means the reserve
percentage applicable during such Interest Period (or if more than one
such percentage shall be so applicable, the daily average of such
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percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for such Bank with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities having a term equal to such
Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in SECTION 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"FIXED RATE AUCTION" has the meaning specified in SECTION
2.03(b)(i).
"GAAP" means generally accepted accounting principles set forth
in the opinions, statements and pronouncements of the Financial
Accounting Standards Board, Accounting Principles Board and the
American Institute of Certified Public Accountants or in such other
statements by such other entity as may be in general use by
significant segments of the accounting profession, which are
applicable to the circumstances as of the date of determination and in
any event applied in a manner consistent with the application thereof
used in the preparation of the financial statements referred to in
SECTION 4.01(e).
"INDEXED RATE AUCTION" has the meaning specified in SECTION
2.03(b)(i).
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<PAGE>
"INSUFFICIENCY" means, with respect to any Plan, the amount, if
any, by which the present value of the vested benefits under such Plan
exceeds the fair market value of the assets of such Plan allocable to
such benefits.
"INTEREST PERIOD" means, for each Eurocurrency Advance comprising
part of the same A Borrowing, the period commencing on the date of
such A Advance and ending on the last day of the period selected by
the Company (on behalf of the respective Borrower) in a Notice of A
Borrowing submitted in accordance with the terms of SECTION 2.02. The
duration of each such Interest Period shall be one, two, three or six
months, in each case as the Company may select; PROVIDED, HOWEVER,
that: (i) Interest Periods commencing on the same date for A Advances
comprising part of the same A Borrowing shall be of the same duration;
and (ii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day; PROVIDED that if such extension would cause the last day
of such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day. If, in accordance with SECTION 2.12 or otherwise, any A
Borrowing shall include both Eurocurrency Advances and Base Rate
Advances, each such Base Rate Advance shall be assigned an Interest
Period that is coextensive with the Interest Period then assigned to
such Eurocurrency Advances.
"JOINT VENTURE" means the Joint Venture Entities, the equity in
the income of which is reported on the consolidated income statements
of the Company and its Consolidated Subsidiaries.
"JOINT VENTURE AGREEMENT" means the Amended and Restated Umbrella
Agreement dated as of June 26, 1991 between the Company and Henkel
Kommanditgesellschaft auf Aktien.
"JOINT VENTURE ENTITIES" means the joint venture entities and
their subsidiaries collectively, from time to time established in
accordance with the terms of the Joint Venture Agreement.
"MAJORITY BANKS" means at any time Banks holding at least 60% of
the then aggregate unpaid principal amount of the A Notes held by
Banks, or, if no such
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principal amount is then outstanding, Banks having at least 60% of the
Commitments. If at any time there shall be no principal amount outstanding
under the A Notes and the Commitments shall have been terminated, "MAJORITY
BANKS" shall mean the holders of 60% of the then aggregate unpaid principal
amount of the B Notes.
"MARGIN STOCK" has the meaning specified in Regulation U issued
by the Board of Governors of the Federal Reserve System.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Company or any of its ERISA
Affiliates is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"MULTIPLE EMPLOYER PLAN" means an employee benefit plan, other
than a Multiemployer Plan, subject to Title IV of ERISA to which the
Company or any of its ERISA Affiliates, and more than one employer
other than the Company or any of its ERISA Affiliates, is making or
accruing an obligation to make contributions or, in the event that any
such plan has been terminated, to which the Company or any of its
ERISA Affiliates made or accrued an obligation to make contributions
during any of the five plan years preceding the date of termination of
such plan.
"NOTE" means an A Note or a B Note.
"NOTICE OF A BORROWING" has the meaning specified in SECTION
2.02(a).
"NOTICE OF B BORROWING" means (i) in the case of a B Borrowing
proposed to be made pursuant to SECTION 2.03(b), a written request for
such B Borrowing substantially in the form of EXHIBIT B-2 hereto and
(ii) in the case of a B Borrowing proposed to be made pursuant to
SECTION 2.03(c), a written request for such B Borrowing substantially
in the form of EXHIBIT B-3 hereto.
"PAYMENT OFFICE" means (i) for Dollars, the principal office of
Citibank in New York City, located on the date hereof at 399 Park
Avenue, New York, New York 10043 and (ii) for any Alternative
Currency, the office of Citibank International Plc located at 335
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Strand, London WC2R ILS England, or in either case such other office of the
Agent or the Euro-Agent as shall be from time to time selected by it by
written notice to the Company and the Banks.
"PERSON" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any
political subdivision or agency thereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PLAN" means an employee benefit plan, other than a Multiemployer
Plan, which is (or, in the event that any such plan has been
terminated within five years after a transaction described in Section
4069 of ERISA, was) maintained for employees of the Company or any of
its ERISA Affiliates and subject to Title IV of ERISA.
"REFERENCE BANKS" means Citibank and Morgan Guaranty Trust
Company of New York.
"S&P" means Standard & Poor's Corporation.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDERS' EQUITY" means at any date the consolidated
shareholders' equity of the Company and its Consolidated Subsidiaries
which would appear as such on a consolidated balance sheet as of such
date of the Company and its Consolidated Subsidiaries, after deducting
treasury stock and as determined in accordance with GAAP.
"SIGNIFICANT SUBSIDIARY" shall have the meaning assigned to such
term in Regulation S-X issued pursuant to the Securities Act and the
Exchange Act.
"SUBSIDIARY" means any corporation or other entity of which
securities having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are
at the time directly or indirectly (through one or more Subsidiaries)
owned or controlled by the Company.
"SUBSIDIARY STATUTORY LIABILITIES" means, with respect to any
Consolidated Subsidiary, any contingent obligations of such
Consolidated Subsidiary imposed
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solely as a matter of law by virtue of such Consolidated Subsidiary's
ownership of equity interests in any Joint Venture Entity with respect to
indebtedness or obligations of such Joint Venture Entity (i) outstanding in
a principal amount of at least $5,000,000 (or its equivalent in any other
currency) in the aggregate, (ii) held by or owed to a Person other than a
Person controlling, controlled by, or under common control with such Joint
Venture Entity, and (iii) with respect to which any default in the payment
of principal or interest shall exist.
"TERMINATION DATE" means September 29, 1998 or the earlier date
of termination in whole of the Commitments pursuant to SECTION 2.05 or
6.01.
"TERMINATION EVENT" means (i) a "reportable event," as such term
is described in Section 4043 of ERISA (other than a "reportable event"
not subject to the provision for 30-day notice to the PBGC), or an
event described in Section 4062(f) of ERISA, or (ii) the withdrawal of
the Company or any of its ERISA Affiliates from a Multiple Employer
Plan during a plan year in which it was a "substantial employer", as
such term is defined in Section 4001(a)(2) of ERISA, or the incurrence
of liability by the Company or any of its ERISA Affiliates under
Section 4064 of ERISA upon the termination of a Multiple Employer
Plan, or (iii) the distribution of a notice of intent to terminate a
Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, or (iv)
the institution of proceedings to terminate a Plan by the PBGC under
Section 4042 of ERISA, or (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan.
"TOTAL DEBT" means, as of any date, all Debt of the Company and
its Consolidated Subsidiaries on a consolidated basis.
"TYPE", in respect of any A Advance, has the meaning assigned
thereto in the definition herein of "A ADVANCE".
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated
Subsidiary in which all of the shares of capital stock or other equity
interests are, at the time, directly or indirectly owned by the
Company; PROVIDED that up to 10% of each class of such shares of
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capital stock or other equity interests may be directors' qualifying shares
or shares or equity interests issued by such Subsidiary under employee
compensation or incentive plans.
"WITHDRAWAL LIABILITY" shall have the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding."
SECTION 1.03. ACCOUNTING TERMS AND CHANGE IN ACCOUNTING PRINCIPLES.
All accounting terms not specifically defined herein shall be construed in
accordance with GAAP. If any changes in accounting principles from those used
in the preparation of the financial statements referred to in SECTION 4.01(e)
are hereafter required or permitted by the rules, regulations, pronouncements
and opinions of the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) and are adopted by the Company with the agreement of its
independent certified public accountants and such changes result in a change in
the components of the calculation of any of the financial covenants, standards
or terms found in ARTICLE V hereof, the Company and the Agent agree to enter
into negotiations in order to amend such provisions so as to equitably reflect
such changes with the desired result that the criteria for evaluating the
Company's financial condition shall be the same after such changes as if such
changes had not been made, PROVIDED, HOWEVER, that no change in GAAP that would
affect the components of the calculation of any of such financial covenants,
standards or terms shall be given effect in such calculations until such
provisions are amended, in a manner satisfactory to the Agent, to so reflect
such change in accounting principles.
SECTION 1.04. CURRENCY EQUIVALENTS GENERALLY. For all purposes of
this Agreement, except as otherwise provided in ARTICLE II, the equivalent in
any Alternative Currency of an amount in Dollars shall be determined at the rate
of exchange quoted by Citibank, in New York City, at 9:00 A.M. (New York City
time) on the date of determination, to prime banks in New York City for the spot
purchase in the New York foreign exchange market of such amount of Dollars with
such Alternative Currency.
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. THE A ADVANCES. (a) Each Bank severally agrees, on
the terms and conditions hereinafter set forth, to make A Advances to the
Borrowers from time to time on any Business Day during the period from the date
hereof until the Termination Date in an aggregate amount (determined in Dollars)
not to exceed at any time outstanding the Dollar amount set opposite such Bank's
name on the signature pages hereof, as such amount may be reduced pursuant to
SECTION 2.05 (such Bank's "COMMITMENT"), PROVIDED that the aggregate amount of
the Commitments of the Banks shall be deemed used from time to time to the
extent of the aggregate amount of the B Advances then outstanding and such
deemed use of the aggregate amount of the Commitments shall be applied to the
Banks ratably according to their respective Commitments (such deemed use of the
aggregate amount of the Commitments being a "B REDUCTION").
(b) Each A Borrowing shall consist of A Advances of the same Type
made on the same day to the same Borrower by the Banks ratably according to
their respective Commitments, and shall be in an aggregate amount:
(i) in the case of an A Borrowing comprised of Base Rate
Advances, not less than $1,000,000 or an integral multiple of $1,000,000 in
excess thereof;
(ii) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in Dollars, not less than $9,000,000 or an integral
multiple of $1,000,000 in excess thereof; and
(iii) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in DM, not less than DM 9,000,000 or an integral
multiple of DM 1,000,000 in excess thereof; and
(iv) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in any Alternative Currency other than DM, not less
than any amount (and an integral multiple in excess thereof) advised to the
Company by the Euro-Agent on the basis of then prevailing market conditions
and conventions;
PROVIDED, that in the case of any such A Borrowing comprised of Eurocurrency
Advances denominated in an Alternative Currency, the proceeds of which shall be
used to repay a then maturing A Borrowing comprised of Eurocurrency Advances
denominated in such Alternative Currency, such new A Borrowing may, subject to
the
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terms and conditions otherwise set forth herein, be in an aggregate principal
amount equal to the aggregate principal amount of such maturing A Borrowing.
(c) Within the limits of each Bank's Commitment, a Borrower may
borrow, repay pursuant to SECTION 2.06 or prepay pursuant to SECTION 2.10, and
reborrow under this SECTION 2.01. For purposes of this SECTION 2.01 and all
other provisions of this ARTICLE II, the equivalent in Dollars of any
Alternative Currency or the equivalent in any Alternative Currency of Dollars or
of any other Alternative Currency shall be determined in accordance with SECTION
2.15.
SECTION 2.02. MAKING THE A ADVANCES. (a) Each A Borrowing shall be
made on notice, given not later than 11:00 A.M. (New York City time) by the
Company (on behalf of the applicable Borrower):
(x) in the case of a proposed A Borrowing comprised of Base Rate
Advances, to the Agent on the date of such proposed Borrowing;
(y) in the case of a proposed A Borrowing comprised of Eurocurrency
Advances denominated in Dollars, to the Agent two Business Days prior to
the date of such proposed Borrowing; and
(z) in the case of a proposed A Borrowing comprised of Eurocurrency
Advances denominated in an Alternative Currency, to the Euro-Agent three
Business Days prior to the date of such proposed Borrowing.
The Agent or Euro-Agent, as applicable, shall give each Bank prompt notice
thereof by telecopy, telex or cable. Each such notice of an A Borrowing (a
"NOTICE OF A BORROWING") shall be by telecopy, telex or cable, confirmed
immediately in writing, in substantially the form of EXHIBIT B-1 hereto,
specifying therein the requested (i) Borrower, (ii) date of such A Borrowing,
(iii) Type of A Advances comprising such A Borrowing, (iv) in the case of a
proposed A Borrowing comprised of Eurocurrency Advances, currency of such A
Advances and Interest Period for each such Advance and (v) aggregate amount of
such A Borrowing. The Company shall certify, in each Notice of A Borrowing, the
Credit Ratings, if any, then in effect. In the case of an A Borrowing comprised
of Eurocurrency Advances denominated in an Alternative Currency, the Company
shall request, within one-half hour prior to the issuance of the applicable
Notice of A Borrowing, the advice of the Euro-Agent as to the applicable
exchange rate then in effect with respect to such Alternative Currency, and the
Company shall specify in such Notice of A Borrowing the exchange rate so advised
to it by the Euro-Agent. In the case of a
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proposed A Borrowing comprised of Eurocurrency Advances, the Agent or the Euro-
Agent, as applicable, shall promptly notify each Bank and the Company of the
applicable interest rate under SECTION 2.07(b).
(b) Each Bank shall make available for the account of its Applicable
Lending Office:
(i) in the case of an A Borrowing comprised of Base Rate
Advances, to the Agent before 12:00 noon (New York City time)(or, if
the applicable Notice of A Borrowing shall have been given on the date
of such A Borrowing, before 4:00 P.M. (New York City time)) on the
date of such A Borrowing, at such account maintained at the Payment
Office for Dollars as shall have been notified by the Agent to the
Banks prior thereto and in same day funds, such Bank's ratable portion
of such A Borrowing;
(ii) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in Dollars, to the Agent before 12:00 noon (New
York City time) on the date of such A Borrowing, at such account
maintained at the Payment Office for Dollars as shall have been
notified by the Agent to the Banks prior thereto and in same day
funds, such Bank's ratable portion of such A Borrowing in Dollars; and
(iii) in the case of an A Borrowing comprised of Eurocurrency
Advances denominated in an Alternative Currency, to the Euro-Agent
before 12:00 noon (London time) on the date of such A Borrowing, at
such account maintained at the Payment Office for such Alternative
Currency as shall have been notified by the Euro-Agent to the Banks
prior thereto and in same day funds, such Bank's ratable portion of
such A Borrowing in such Alternative Currency.
After the Agent's or the Euro-Agent's receipt of such funds and upon fulfillment
of the applicable conditions set forth in ARTICLE III, the Agent or the Euro-
Agent, as applicable, will make such funds available to the applicable Borrower
at the aforesaid applicable Payment Office.
(c) Anything hereinabove to the contrary notwithstanding,
(i) if any Bank shall, at least one Business Day before the date
of any requested A Borrowing, notify the Agent or the Euro-Agent that
the introduction of or any change in or in the interpretation of any
law or
- 16 -
<PAGE>
regulation makes it unlawful, or that any central bank or other
governmental authority asserts that it is unlawful, for such Bank or its
Eurocurrency Lending Office to perform its obligations hereunder to make
Eurocurrency Advances in a particular currency or generally or to fund or
maintain any Eurocurrency Advances hereunder, the right of the Borrowers to
select Eurocurrency Advances in the affected currency or currencies for
such A Borrowing or any subsequent A Borrowing shall be suspended until
such Bank shall notify the Agent or the Euro-Agent that the circumstances
causing such suspension no longer exist, and each A Advance comprising such
A Borrowing shall be a Eurocurrency Advance denominated in Dollars (or, if
one of the affected currencies is Dollars, a Base Rate Advance);
(ii) if the Agent or the Euro-Agent shall, at least one Business
Day before the date of any requested A Borrowing, notify the Company
and the Banks that either Reference Bank shall have failed to furnish
timely information to the Agent or the Euro-Agent for determining the
Eurocurrency Rate for Eurocurrency Advances denominated in a
particular currency and comprising any requested A Borrowing, the
right of the Borrowers to select Eurocurrency Advances in such
currency for such A Borrowing or to select such currency for any
subsequent A Borrowing shall be suspended until the Agent or Euro-
Agent shall notify the Company and the Banks that the circumstances
causing such suspension no longer exist, and each A Advance comprising
such A Borrowing shall be a Eurocurrency Advance denominated in
Dollars (or, if the affected currency is Dollars, a Base Rate
Advance);
(iii) if the Majority Banks shall, at least one Business Day
before the date of any requested A Borrowing, notify the Agent or the
Euro-Agent that the Eurocurrency Rate for Eurocurrency Advances
denominated in a particular currency and comprising such A Borrowing
will not adequately reflect the cost to such Majority Banks of making
or funding their respective Eurocurrency Advances for such A
Borrowing, the right of the Company (on behalf of the Borrowers) to
select Eurocurrency Advances in such currency for such A Borrowing or
to select such currency for any subsequent A Borrowing shall be
suspended until the Agent shall notify the Company and the Banks that
the circumstances causing such suspension no longer exist, and each A
Advance comprising such A Borrowing shall be a
- 17 -
<PAGE>
Eurocurrency Advance denominated in Dollars (or, if the affected currency
is Dollars, a Base Rate Advance);
(iv) if any Bank shall, not later than 10:00 A.M. (London time)
two Business Days before the date of any requested Eurocurrency
Advance, notify the Agent or the Euro-Agent that such Bank is not
satisfied that deposits in the relevant Alternative Currency will be
freely available to it in the relevant amount and for the relevant
Interest Period, the right of the Borrowers to request Eurocurrency
Advances in such Alternative Currency from such Bank as part of such A
Borrowing or any subsequent A Borrowing shall be suspended until such
Bank shall notify the Agent or the Euro-Agent that the circumstances
causing such suspension no longer exist, and the A Advance to be made
by such Bank as part of such A Borrowing (and the A Advance to be made
by such Bank as part of any subsequent A Borrowing in respect of which
such Alternative Currency shall have been requested during such period
of suspension) shall be a Eurocurrency Advance denominated in Dollars
and having an Interest Period coextensive with the Interest Period in
effect in respect of all other A Advances comprising a part of such A
Borrowing; and
(v) if any Bank shall, not later than 10:00 A.M. (London time)
two Business Days before the date of any requested Eurocurrency
Advance in an Alternative Currency other than DM, notify the Agent or
the Euro-Agent that such Bank, in its sole discretion, does not wish
to fund the requested Eurocurrency Advance in such Alternative
Currency for the relevant Interest Period, the right of the Borrowers
to request Eurocurrency Advances in such Alternative Currency from
such Bank as part of such A Borrowing shall be suspended as to such A
Borrowing, and the A Advance to be made by such Bank as part of such A
Borrowing shall be a Eurocurrency Advance denominated in Dollars and
having an Interest Period coextensive with the Interest Period in
effect in respect of all other A Advances comprising a part of such A
Borrowing.
Each of the Agent and the Euro-Agent shall, upon becoming aware that the
circumstances causing any such suspension no longer apply, promptly so notify
the Company, PROVIDED that the failure of the Agent or the Euro-Agent to so
notify the Company shall not impair the rights of the Banks under this SECTION
2.02(c) or expose the Agent or the Euro-Agent to any liability.
- 18 -
<PAGE>
(d) Each Notice of A Borrowing shall be irrevocable and binding on
the Borrower on whose behalf it shall have been submitted. In the case of any A
Borrowing which the related Notice of A Borrowing specifies is to be comprised
of Eurocurrency Advances, the applicable Borrower shall indemnify each Bank
against any loss, cost or expense incurred by such Bank as a result of any
failure to fulfill on or before the date specified in such Notice of A Borrowing
for such A Borrowing the applicable conditions set forth in ARTICLE III,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such Bank
to fund the A Advance to be made by such Bank as part of such A Borrowing when
such A Advance, as a result of such failure, is not made on such date.
(e) Unless the Agent or Euro-Agent, as applicable, shall have
received notice from a Bank prior to the date of any A Borrowing that such Bank
will not make available to the Agent or Euro-Agent such Bank's ratable portion
of such A Borrowing, the Agent or Euro-Agent, as applicable, may assume that
such Bank has made such portion available to it on the date of such A Borrowing
in accordance with SUBSECTION (b) of this SECTION 2.02 and it may, in reliance
upon such assumption, make (but shall not be required to make) available to the
applicable Borrower on such date a corresponding amount. If and to the extent
that such Bank shall not have so made such ratable portion available to the
Agent or the Euro-Agent, as applicable, such Bank and such Borrower severally
agree to repay to the Agent or Euro-Agent, as applicable, forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to such Borrower until the date such amount
is repaid to the Agent or the Euro-Agent, as applicable, at (i) in the case of
such Borrower, the interest rate applicable at the time to A Advances comprising
such A Borrowing and (ii) in the case of such Bank, the Federal Funds Rate. If
such Bank shall repay to the Agent or Euro-Agent, as applicable, such
corresponding amount, such amount so repaid shall constitute such Bank's A
Advance as part of such A Borrowing for purposes of this Agreement.
(f) The failure of any Bank to make the A Advance to be made by it as
part of any A Borrowing shall not relieve any other Bank of its obligation, if
any, hereunder to make its A Advance on the date of such A Borrowing, but no
Bank shall be responsible for the failure of any other Bank to make the A
Advance to be made by such other Bank on the date of any A Borrowing.
SECTION 2.03. THE B ADVANCES. (a) Each Bank severally agrees that
the Company and any Borrowing Subsidiary may make B Borrowings under this
SECTION 2.03 from time to time on any
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<PAGE>
Business Day during the period from the date hereof until the date occurring 15
days prior to the Termination Date in the manner set forth below; PROVIDED that,
following the making of each B Borrowing, the aggregate amount (determined in
Dollars) of the Advances then outstanding shall not exceed the aggregate amount
of the Commitments of the Banks (computed without regard to any B Reduction).
(b) The procedures for the solicitation and acceptance of B Advances
to be denominated in Dollars are set forth below:
(i) The Company (on behalf of itself or any Borrowing
Subsidiary) may request a B Borrowing denominated in Dollars under
this SECTION 2.03(b) by delivering to the Agent, by telecopier, telex
or cable, confirmed immediately in writing, a Notice of B Borrowing,
identifying the applicable Borrower and specifying the date and
aggregate amount of the proposed B Borrowing, the maturity date for
repayment of each B Advance to be made as part of such B Borrowing
(which maturity date may not be earlier than the date occurring 15
days after the date of such B Borrowing or later than the Termination
Date), the interest payment date or dates relating thereto, and any
other terms to be applicable to such B Borrowing, not later than 10:00
A.M. (New York City time) (A) one Business Day prior to the date of
the proposed B Borrowing, if the Company shall specify in the Notice
of B Borrowing that the rates of interest to be offered by the Banks
shall be fixed rates per annum (such type of solicitation being a
"FIXED RATE AUCTION") and (B) three Business Days prior to the date of
the proposed B Borrowing, if the Company shall instead specify in the
Notice of B Borrowing an index or other basis to be used by the Banks
in determining the rates of interest to be offered by them (such type
of solicitation being an "INDEXED RATE AUCTION"). The Company shall,
in addition, certify in each Notice of B Borrowing the Credit Ratings,
if any, then in effect. The Agent shall, promptly following its
receipt of a Notice of B Borrowing under this SECTION 2.03(b), notify
each Bank of such request by sending such Bank a copy of such Notice
of B Borrowing.
(ii) Each Bank may, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more B Advances to the applicable
Borrower as part of such proposed B Borrowing at a rate or rates of
interest specified by such Bank in its sole discretion, by notifying
the Agent (which shall give prompt notice thereof to the Company),
before 10:00 A.M. (New York
- 20 -
<PAGE>
City time) (A) on the date of such proposed B Borrowing, in the case of a
Fixed Rate Auction, and (B) two Business Days before the date of such
proposed B Borrowing, in the case of an Indexed Rate Auction, of the
minimum amount and maximum amount of each B Advance which such Bank would
be willing to make as part of such proposed B Borrowing (which amounts may,
subject to the proviso to the first sentence of SECTION 2.03(a), exceed
such Bank's Commitment), the rate or rates of interest therefor and such
Bank's Applicable Lending Office with respect to such B Advance; PROVIDED
that if the Agent in its capacity as a Bank shall, in its sole discretion,
elect to make any such offer, it shall notify the Company of such offer
before 9:00 A.M. (New York City time) on the date on which notice of such
election is to be given to the Agent by the other Banks.
(iii) The Company shall, in turn, before 11:00 A.M. (New York
City time) (A) on the date of such proposed B Borrowing, in the case
of a Fixed Rate Auction, and (B) two Business Days before the date of
such proposed B Borrowing, in the case of an Indexed Rate Auction,
either:
(x) cancel such B Borrowing by giving the Agent notice to
that effect, or
(y) accept (on behalf of the applicable Borrower), subject
to SECTION 2.03(e), one or more of the offers made by any Bank or
Banks pursuant to PARAGRAPH (ii) above, in its sole discretion,
by giving notice to the Agent of the amount of each B Advance
(which amount shall be equal to or greater than the minimum
amount, and equal to or less than the maximum amount, notified to
the Company by the Agent on behalf of such Bank for such B
Advance pursuant to PARAGRAPH (ii) above) to be made by each Bank
as part of such B Borrowing, and reject any remaining offers made
by Banks pursuant to PARAGRAPH (ii) above by giving the Agent
notice to that effect.
(iv) If the Company notifies the Agent that such B Borrowing is
cancelled pursuant to PARAGRAPH (iii)(x) above, the Agent shall give
prompt notice thereof to the Banks and such B Borrowing shall not be
made.
(v) If the Company accepts (on behalf of the applicable
Borrower) one or more of the offers made by any Bank or Banks pursuant
to PARAGRAPH (iii)(y) above,
- 21 -
<PAGE>
the Agent shall in turn promptly notify (A) each Bank that has made an
offer as described in paragraph (ii) above of the date and aggregate amount
of such B Borrowing and whether or not any offer or offers made by such
Bank pursuant to paragraph (ii) above have been accepted by the Company,
(B) each Bank that is to make a B Advance as part of such B Borrowing, of
the amount of each B Advance to be made by such Bank as part of such B
Borrowing, and (C) each Bank that is to make a B Advance as part of such B
Borrowing, upon receipt, that the Agent has received forms of documents
appearing to fulfill the applicable conditions set forth in ARTICLE III.
Each Bank that is to make a B Advance as part of such B Borrowing shall,
before 12:00 noon (New York City time) on the date of such B Borrowing
specified in the notice received from the Agent pursuant to clause (A) of
the preceding sentence or any later time when such Bank shall have received
notice from the Agent pursuant to clause (C) of the preceding sentence,
make available for the account of its Applicable Lending Office to the
Agent at the Payment Office such Bank's portion of such B Borrowing, in
same day funds. Upon fulfillment of the applicable conditions set forth in
ARTICLE III and after receipt by the Agent of such funds, the Agent will
make such funds available to the applicable Borrower at the Agent's
aforesaid address. Promptly after each B Borrowing the Agent will notify
each Bank of the amount of the B Borrowing, the consequent B Reduction and
the dates upon which such B Reduction commenced and will terminate.
(c) The procedures for the solicitation and acceptance of B Advances
to be denominated in an Alternative Currency are set forth below:
(i) The Company (on behalf of itself or any Borrowing
Subsidiary) may request a B Borrowing denominated in an Alternative
Currency under this SECTION 2.03(c) by delivering to the Euro-Agent,
by telecopier, telex or cable, confirmed immediately in writing, a
Notice of a B Borrowing identifying the applicable Borrower and
specifying the date and aggregate amount of the proposed B Borrowing,
the maturity date for repayment of each B Advance to be made as part
of such B Borrowing (which maturity date may not be earlier than the
date occurring 15 days after the date of such B Borrowing or later
than the Termination Date), the interest payment date or dates
relating thereto, the requested Alternative Currency and any other
terms to be applicable to such B Borrowing, not later than 4:00 P.M.
(London time) four
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<PAGE>
Business Days prior to the date of the proposed B Borrowing. Each
solicitation made under this SUBSECTION (c) shall contemplate an Indexed
Rate Auction. The Company shall request, within one-half hour prior to the
issuance of a Notice of B Borrowing under this SECTION 2.03(c), the advice
of the Euro-Agent as to the exchange rate then in effect with respect to
the applicable Alternative Currency, and the Company shall specify in such
Notice of B Borrowing the exchange rate so advised to it by the Euro-Agent.
The Company shall, in addition, certify in each Notice of B Borrowing the
Credit Ratings, if any, then in effect. The Euro-Agent shall, promptly
following its receipt of a Notice of B Borrowing under this SECTION
2.03(c), notify each Bank of such request by sending such Bank a copy of
such Notice of B Borrowing.
(ii) Each Bank may, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more B Advances to the applicable
Borrower as part of such proposed B Borrowing in the requested
Alternative Currency and at a rate or rates of interest specified by
such Bank in its sole discretion, by notifying the Euro-Agent (which
shall give prompt notice thereof to the Company), before Noon (London
time) three Business Days before the date of such proposed B
Borrowing, of the minimum amount and maximum amount of each B Advance
which such Bank would be willing to make as part of such proposed B
Borrowing (which amounts may, subject to the proviso to the first
sentence of SECTION 2.03(a), exceed such Bank's Commitment), the rate
or rates of interest therefor and such Bank's Applicable Lending
Office with respect to such B Advance; PROVIDED that if the Euro-Agent
in its capacity as a Bank shall, in its sole discretion, elect to make
any such offer, it shall notify the Company of such offer before 11:30
A.M. (London time) on the date on which notice of such election is to
be given to the Euro-Agent by the other Banks.
(iii) The Company shall, in turn, before 4:00 P.M. (London time)
three Business Days before the date of such proposed B Borrowing
either:
(x) cancel such B Borrowing by giving the Euro-Agent notice
to that effect, or
(y) accept (on behalf of the applicable Borrower), subject
to SECTION 2.03(e), one or more of the offers made by any Bank or
Banks pursuant to PARAGRAPH (ii) above, in its sole discretion,
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<PAGE>
by giving notice to the Euro-Agent of the amount of each B Advance
(which amount shall be equal to or greater than the minimum amount,
and equal to or less than the maximum amount, notified to the Company
by the Euro-Agent on behalf of such Bank for such B Advance pursuant
to PARAGRAPH (ii) above) to be made by each Bank as part of such B
Borrowing, and reject any remaining offers made by Banks pursuant to
PARAGRAPH (ii) above by giving the Euro-Agent notice to that effect.
(iv) If the Company notifies the Euro-Agent that such B
Borrowing is cancelled pursuant to PARAGRAPH (iii)(x) above, the Euro-
Agent shall give prompt notice thereof to the Banks and such B
Borrowing shall not be made.
(v) If the Company accepts (on behalf of the applicable
Borrower) one or more of the offers made by any Bank or Banks pursuant
to PARAGRAPH (iii)(y) above, the Euro-Agent shall in turn promptly
notify (A) each Bank that has made an offer as described in paragraph
(ii) above of the Borrower, Alternative Currency, date and aggregate
amount of such B Borrowing and whether or not any offer or offers made
by such Bank pursuant to paragraph (ii) above have been accepted by
the Company, (B) each Bank that is to make a B Advance as part of such
B Borrowing, of the amount of each B Advance to be made by such Bank
as part of such B Borrowing, and (C) each Bank that is to make a B
Advance as part of such B Borrowing, upon receipt, that the Euro-Agent
has received forms of documents appearing to fulfill the applicable
conditions set forth in ARTICLE III. Each Bank that is to make a B
Advance as part of such B Borrowing shall, before 12:00 noon (London
time) on the date of such B Borrowing specified in the notice received
from the Euro-Agent pursuant to clause (A) of the preceding sentence
or any later time when such Bank shall have received notice from the
Euro-Agent pursuant to clause (C) of the preceding sentence, make
available for the account of its Applicable Lending Office to the
Euro-Agent at the Payment Office for the applicable Alternative
Currency such Bank's portion of such B Borrowing, in same day funds.
Upon fulfillment of the applicable conditions set forth in ARTICLE III
and after receipt by the Euro-Agent of such funds, the Euro-Agent will
make such funds available to the applicable Borrower at the Euro-
Agent's aforesaid address. Promptly after each B Borrowing the Euro-
Agent will notify each Bank of the Borrower, Alternative Currency and
amount of the B Borrowing, the
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<PAGE>
consequent B Reduction and the dates upon which such B Reduction commenced
and will terminate.
(d) Each B Borrowing shall, (i) in the case of a B Borrowing to be
denominated in Dollars, be in an aggregate amount not less than $10,000,000 or
an integral multiple of $1,000,000 in excess thereof (ii) in the case of a B
Borrowing to be denominated in an Alternative Currency, be in such minimum
amount as shall be advised by the Euro-Agent as being appropriate in light of
the prevailing market conditions and conventions at the time notice is given
pursuant to SECTION 2.03(c)(i), and, following the making of each B Borrowing,
the Borrowers shall be in compliance with the limitation set forth in the
proviso to the first sentence of SUBSECTION (a) above.
(e) Each acceptance by the Company pursuant to SECTION
2.03(b)(iii)(y) or SECTION 2.03(c)(iii)(y) of the offers made in response to a
Notice of B Borrowing shall be treated as an acceptance of such offers in
ascending order of the rates or margins, as applicable, at which the same were
made but if, as a result thereof, two or more offers at the same such rate or
margin would be partially accepted, then the amounts of the B Advances in
respect of which such offers are accepted shall be treated as being the amounts
which bear the same proportion to one another as the respective amounts of the B
Advances so offered bear to one another but, in each case, rounded as the Euro-
Agent may consider necessary to ensure that the amount of each such B Advance is
$500,000 (or, if the currency in which such B Advance is denominated is an
Alternative Currency, such comparable and convenient multiple thereof as the
Euro-Agent shall consider appropriate for the purpose) or an integral multiple
thereof.
(f) Within the limits and on the conditions set forth in this SECTION
2.03, each Borrower may from time to time borrow under this SECTION 2.03, repay
pursuant to SUBSECTION (g) below, and reborrow under this SECTION 2.03.
(g) Each Borrower shall repay to the Agent for the account of each
Bank which has made a B Advance to it or (if different) for the account of the
holder of the applicable B Note, on the maturity date of each B Advance (such
maturity date being that specified by the Company for repayment of such B
Advance in the related Notice of B Borrowing and provided in the B Note
evidencing such B Advance), the then unpaid principal amount of such B Advance.
No Borrower shall have any right to prepay any principal amount of any B Advance
unless, and then only on the terms, specified by the Company for such B Advance
in the related Notice of B Borrowing and set forth in the B Note evidencing such
B Advance.
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<PAGE>
(h) Each Borrower shall pay interest on the unpaid principal amount
of each B Advance made to it, from the date of such B Advance to the date the
principal amount of such B Advance is repaid in full, at the rate of interest
for such B Advance specified by the Bank making such B Advance in the related
notice submitted by such Bank pursuant to SECTION 2.03(b)(ii) or SECTION
2.03(c)(ii), as applicable, payable on the interest payment date or dates
specified by the Company for such B Advance in such Notice of B Borrowing, in
each case as provided in the B Note evidencing such B Advance. In the event the
term of any B Advance shall be longer than three months, interest thereon shall
be payable not less frequently than once each three-month period during such
term.
(i) The indebtedness of each Borrower resulting from each B Advance
made to it shall be evidenced by a separate B Note of such Borrower payable to
the order of the Bank making such B Advance.
SECTION 2.04. FEES. (a) FACILITY FEE. The Company agrees to pay
each Bank a facility fee at the respective rate per annum set forth below on
such Bank's average daily Commitment (irrespective of usage and without giving
effect to any B Reduction) from the date hereof until the Termination Date,
payable on the last day of each March, June, September and December during the
term of such Bank's Commitment, commencing December 31, 1993, and on the
Termination Date. The facility fee in respect of any period shall be determined
on the basis of the Credit Ratings in effect during such period, in accordance
with the table set forth below. The rate per annum at which such facility fee
is calculated shall change when and as any Credit Rating changes.
- 26 -
<PAGE>
<TABLE>
<CAPTION>
CREDIT RATING FACILITY FEE
------------- ------------
(Rate per annum)
<S> <C>
A or better (S&P) AND 0.09%
A2 or better (Moody's)
Below A (S&P) or A2 (Moody's)
but
A- or better (S&P) OR 0.11%
A3 or better (Moody's)
Below A- (S&P) and A3 (Moody's)
but 0.125%
BBB+ or better (S&P) AND
Baa1 or better (Moody's)
Below BBB+ (S&P) or Baa1 (Moody's)
but 0.15%
BBB or better (S&P) AND
Baa2 or better (Moody's)
Below BBB (S&P) or Baa2 (Moody's) 0.25%
</TABLE>
If, during any period, the Company shall not have Credit Ratings from both S&P
and Moody's, the Credit Rating of the Company for purposes of this SECTION
2.04(a) shall be deemed to be below BBB (S&P) and below Baa2 (Moody's) during
such period.
(b) AGENCY FEE. The Company agrees to pay to the Agent and the Euro-
Agent those fees as are described in that certain letter agreement dated January
1, 1995 (as the same may from time to time be amended, supplemented, restated or
otherwise modified), when and as the same shall become due and payable by the
Company as provided therein.
SECTION 2.05. REDUCTION OF THE COMMITMENTS. The Company shall have
the right, upon at least five Business Days' notice to the Agent, to terminate
in whole or reduce ratably in part the unused portions of the respective
Commitments of the Banks; PROVIDED, that the aggregate amount of the Commitments
of the Banks shall not be reduced to an amount which is less than the aggregate
principal amount of the B Advances then outstanding; and PROVIDED, FURTHER, that
each partial reduction shall be in the aggregate amount of $10,000,000 or an
integral multiple of $5,000,000 in excess thereof.
SECTION 2.06. REPAYMENT OF A ADVANCES. Each Borrower shall repay the
principal amount of each Eurocurrency Advance made to it by each Bank on the
last day of the Interest Period for such Eurocurrency Advance. Except as
otherwise provided in
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<PAGE>
SECTION 2.12, each Borrower shall repay on the Termination Date the principal
amount of each Base Rate Advance made to it.
SECTION 2.07. INTEREST ON A ADVANCES. Each Borrower shall pay
interest on the unpaid principal amount of each A Advance made by each Bank to
such Borrower from the date of such A Advance until such principal amount shall
be paid in full, at the following rates per annum:
(a) BASE RATE ADVANCES. If such A Advance is a Base Rate
Advance, a rate per annum equal at all times to the Base Rate in
effect from time to time, payable monthly on the tenth day of each
month and on the date such Base Rate Advance shall be paid in full;
PROVIDED, that any amount of principal which is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until such amount
is paid in full, payable on demand, at a rate per annum equal at all
times to 2% per annum above the Base Rate in effect from time to time.
The Agent shall provide telephonic notice to the Company (which in
turn shall advise the applicable Borrower) of the amount of interest
due and payable on Base Rate Advances by a date not later than the
date such payment is due; PROVIDED, HOWEVER, that the Agent's failure
to give such notice shall not discharge the applicable Borrower from
the payment of interest but shall only delay the due date of such
interest until such telephonic notice is given.
(b) EUROCURRENCY ADVANCES. If such A Advance is a Eurocurrency
Advance, a rate per annum equal at all times during the Interest
Period for such A Advance to the sum of the Eurocurrency Rate for such
Interest Period plus the Applicable Eurocurrency Margin, payable on
the last day of such Interest Period and, if such Interest Period has
a duration of more than three months, on each day which occurs during
such Interest Period every three months from the first day of such
Interest Period; PROVIDED that any amount of principal which is not
paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest, from the date on which such amount is
due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to 2% per annum above (x) if the
originally scheduled Interest Period shall then be in effect, the sum
of the Eurocurrency Rate plus the Applicable Eurocurrency Margin then
in effect with respect to such A Advance, and (y) in all other cases,
the Base Rate in effect from time to time. "APPLICABLE EUROCURRENCY
MARGIN" means, in respect of any Eurocur-
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<PAGE>
rency Advance, a rate per annum determined as of the first day of the
Interest Period for such Eurocurrency Advance in reference to the table set
forth below on the basis of the Credit Ratings and the Utilization Factor
at such time. "UTILIZATION FACTOR" means, in respect of any Eurocurrency
Advance, the percentage amount that the aggregate outstanding principal
amount of Advances as of the date such Eurocurrency Advance is made (after
giving effect to the making of such Eurocurrency Advance and all other
Advances to be made on such day and after giving effect to all payments and
prepayments of Advances occurring on such day) bears to the aggregate
Commitments (without regard to any B Reductions) on such day.
<TABLE>
<CAPTION>
Applicable Eurocurrency Margin
(Rate per annum)
------------------------------------------------------------
Credit Rating Utilization Factor
------------- -----------------------
Not Greater Greater
than 50% than 50%
------------------------
<S> <C> <C>
A or better (S&P) AND 0.160% 0.160%
A2 or better (Moody's)
Below A (S&P) or A2 (Moody's)
but
A- or better (S&P) OR 0.190% 0.240%
A3 or better (Moody's)
Below A- (S&P) and A3 (Moody's) 0.275% 0.325%
but
BBB+ or better (S&P) AND
Baa1 or better (Moody's)
Below BBB+ (S&P) or Baa1 (Moody's) 0.300% 0.350%
but
BBB or better (S&P) AND
Baa2 or better (Moody's)
Below BBB (S&P) or 0.500% 0.600%
Baa2 (Moody's)
</TABLE>
If, on the first day of the Interest Period for any Eurocurrency Advance, the
Company shall not have Credit Ratings from both S&P and Moody's, the Credit
Ratings of the Company, for purposes of this SECTION 2.07(b), shall be deemed to
be below BBB (S&P) and below Baa2 (Moody's) during such period.
- 29 -
<PAGE>
SECTION 2.08. ADDITIONAL INTEREST ON EUROCURRENCY ADVANCES. Each
Borrower shall pay to each Bank, so long as such Bank shall be required under
regulations of the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
each Eurocurrency Advance made by such Bank to such Borrower, from the date of
such A Advance until such principal amount is paid in full, at an interest rate
per annum equal at all times to the remainder obtained by subtracting (i) the
Eurocurrency Rate for the Interest Period for such A Advance from (ii) the rate
obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus
the Eurocurrency Rate Reserve Percentage of such Bank for such Interest Period,
payable on each date on which interest is payable on such A Advance. Such
additional interest so notified to the Company (which in turn shall advise the
applicable Borrower) by any Bank shall be payable to the Agent (or, in the case
of any Eurocurrency Advance denominated in an Alternative Currency, the Euro-
Agent) for the account of such Bank on the dates specified for payment of
interest for such Advance in SECTION 2.07.
SECTION 2.09. INTEREST RATE DETERMINATION. Each Reference Bank
agrees to furnish to the Agent (in the case of Eurocurrency Advances denominated
in Dollars) and the Euro-Agent (in the case of Eurocurrency Advances denominated
in any Alternative Currency) timely information for the purpose of determining
each Eurocurrency Rate. The Agent and Euro-Agent, as applicable, shall give
prompt notice to the Company (which in turn shall advise the applicable
Borrower) and the Banks of the applicable interest rate determined by the Agent
for purposes of SECTION 2.07(a) or (b), and the applicable rate, if any,
furnished by each Reference Bank for the purpose of determining the applicable
interest rate under SECTION 2.07(b).
SECTION 2.10. PREPAYMENTS. Subject to SECTION 9.04(b) hereof, a
Borrower may (i) following notice given to the Agent by the Company (on behalf
of such Borrower) not later than 11:00 A.M. (New York City time) on the proposed
date of prepayment, such notice specifying the applicable Borrower, the proposed
date and aggregate principal amount of the prepayment, and if such notice is
given such Borrower shall, prepay the outstanding principal amounts of the Base
Rate Advances comprising part of the same A Borrowing in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid and (ii) following notice given to the Agent (or, in
the case of Eurocurrency Advances denominated in any Alternative Currency, the
Euro-Agent) by the Company (on behalf of such Borrower) not later than 11:00
A.M. (London time) three Business Days prior to the proposed date of prepayment,
such notice specifying the applicable Borrower, the proposed date of
- 30 -
<PAGE>
the prepayment, and if such notice is given such Borrower shall, prepay the
outstanding principal amounts of the Eurocurrency Advances comprising an A
Borrowing in whole (and not in part), together with accrued interest to the date
of such prepayment on the principal amount prepaid. In the case of an A
Borrowing comprised of Base Rate Advances, each partial prepayment shall be in
an aggregate principal amount not less than $1,000,000.
SECTION 2.11. INCREASED COSTS AND REDUCED RETURN. (a) If, due to
either (i) the introduction of or any change (other than any change by way of
imposition or increase of reserve requirements, in the case of Eurocurrency
Advances, included in the Eurocurrency Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase after the
date hereof in the cost to any Bank of agreeing to make or making, funding or
maintaining Eurocurrency Advances, by an amount deemed by such Bank to be
material, then the Company shall from time to time, within 15 days after demand
by such Bank, accompanied by the certificate required therefor under SECTION
2.11(c) (with a copy of such demand and such certificate to the Agent), pay to
the Agent for the account of such Bank additional amounts sufficient to
compensate such Bank for such increased cost.
(b) If any Bank shall have determined that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office or any corporation controlling such Bank) with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect after the date hereof of reducing the rate of return on such
Bank's capital or the capital of any corporation controlling such Bank as a
consequence of such Bank's obligation hereunder to a level below that which such
Bank could have achieved but for such adoption, change or compliance by an
amount deemed by such Bank to be material, then the Company shall, from time to
time, within 15 days after demand by such Bank, accompanied by the certificate
required therefor under SECTION 2.11(c) (with a copy of such demand and such
certificate to the Agent), pay to the Agent for the account of such Bank such
additional amount or amounts as will compensate such Bank or such controlling
corporation for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of any
event of which it has knowledge, occurring after the
- 31 -
<PAGE>
date hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable judgment of such Bank, be otherwise
disadvantageous to such Bank. In determining such amount, such Bank may use any
reasonable averaging and attribution methods. A certificate of any Bank
claiming compensation under this Section and setting forth in reasonable detail
the additional amount or amounts to be paid to it hereunder and the basis for
the calculation thereof shall be conclusive in the absence of manifest error.
SECTION 2.12. ILLEGALITY. (a) In the event that any Bank shall have
determined (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) at any time that the making or
continuance of any of its Eurocurrency Advances in Dollars or in any Alternative
Currency has become unlawful because of the introduction of or any change in or
in the interpretation of any law or regulation or because of the assertion of
unlawfulness by any central bank or other governmental authority, then, in any
such event, such Bank shall give prompt notice (by telephone confirmed in
writing) to the Company and to the Agent of such determination (which notice the
Agent shall promptly transmit to the other Banks).
(b) Upon the giving of the notice to the Company referred to in
SUBSECTION (a) above, if the affected Eurocurrency Advances are then
outstanding, the Company shall (or shall cause the affected Borrower), upon at
least one Business Day's written notice to the Agent (and, if the affected
Eurocurrency Advances are denominated in any Alternative Currency, the Euro-
Agent) and the affected Bank, or if permitted by applicable law no later than
the date permitted thereby, in the Company's sole discretion, either (i) prepay
the principal amount of all outstanding Eurocurrency Advances of such Bank to
which such notice related, together with accrued interest thereon to the date of
payment or (ii) convert each such Eurocurrency Advance into a Base Rate Advance,
and, in each case be obligated to reimburse the Banks in respect thereof
pursuant to SECTION 9.04(b) hereof. If more than one Bank gives notice pursuant
to SECTION 2.12(a) at any time, then all outstanding Eurocurrency Advances of
such Banks must be treated the same by the applicable Borrower pursuant to this
SECTION 2.12(b). Any Base Rate Advance arising by reason of this SECTION
2.12(b) shall have an Interest Period assigned to it that ends on the date that
the Eurocurrency Advance for which it shall have been substituted would have
expired, and the principal thereof and interest thereon shall be payable on the
date that principal and interest would otherwise have been payable on such
Eurocurrency Advance (whether on the last day of such Interest Period or on any
earlier date that the
- 32 -
<PAGE>
other A Advances comprising a part of the related A Borrowing shall be prepaid
in accordance with SECTION 2.10). Such Base Rate Advance may not be prepaid at
any time prior to the date that the Eurocurrency Advances comprising a part of
such A Borrowing shall be prepaid.
SECTION 2.13. PAYMENTS AND COMPUTATIONS. (a) The Borrowers shall
make each payment hereunder and under the Notes (except with respect to
principal of, interest on, and other amounts relating to Advances denominated in
an Alternative Currency) not later than 11:00 A.M. (New York City time) on the
day when due in Dollars to the Agent in same day funds by deposit of such funds
to the Agent's account maintained at the Payment Office for Dollars in New York
City. The Borrowers shall make each payment hereunder and under the Notes with
respect to principal of, interest on, and other amounts relating to Advances
denominated in an Alternative Currency not later than 11:00 A.M. (London time)
on the day when due in such Alternative Currency to the Euro-Agent in same day
funds by deposit of such funds to the Euro-Agent's account maintained at the
Payment Office for such Alternative Currency. The Agent or Euro-Agent, as
applicable, will promptly thereafter cause to be distributed like funds relating
to the payment of principal or interest or fees ratably (other than amounts
payable pursuant to SECTION 2.03, 2.08, 2.11 or 2.16) to the Banks for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Bank to such Bank for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement.
(b) Each Borrower hereby authorizes each Bank, if and to the extent
payment owed to such Bank by such Borrower is not made when due hereunder or
under the Note held by such Bank, to charge from time to time against any or all
of such Borrower's accounts with such Bank any amount so due. Each Bank agrees
promptly to notify the Company after any such charge, provided that the failure
to give such notice shall not affect the validity of such charge.
(c) All computations of interest based on the Base Rate shall be made
by the Agent on the basis of a year of 365 or 366 days, as the case may be, and
all computations of interest based on the Eurocurrency Rate or the Federal Funds
Rate and of fees shall be made by the Agent or Euro-Agent, as applicable, and
all computations of interest pursuant to SECTION 2.08 shall be made by a Bank,
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or commitment fees are payable. Each determination by the
Agent or Euro-Agent (or, in the case of SECTION 2.08, by a
- 33 -
<PAGE>
Bank) of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such cases be
included in the computation of payment of interest or commitment fee, as the
case may be; PROVIDED, HOWEVER, if such extension would cause payment of
interest on or principal of Eurocurrency Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Unless the Agent or Euro-Agent shall have received notice from a
Borrower prior to the date on which any payment is due from such Borrower to the
Banks hereunder that such Borrower will not make such payment in full, the Agent
or Euro-Agent, as applicable, may assume that such Borrower has made such
payment in full to it on such date and it may, in reliance upon such assumption,
cause (but shall not be required to cause) to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent such Borrower shall not have so made such payment in full to the Agent or
Euro-Agent, as applicable, each Bank shall repay to the Agent or Euro-Agent, as
applicable, forthwith on demand such amount distributed to such Bank together
with interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Agent or Euro-
Agent, as applicable, at the Federal Funds Rate.
SECTION 2.14. SHARING OF PAYMENTS, ETC. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the A Advances made by it (other than
pursuant to SECTION 2.08, 2.11 or 2.16) in excess of its ratable share of
payments on account of the A Advances obtained by all the Banks, such Bank shall
forthwith purchase from the other Banks such participations in the A Advances
made by them as shall be necessary to cause such purchasing Bank to share the
excess payment ratably with each of them, PROVIDED, HOWEVER, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Bank, such purchase from each Bank shall be rescinded and such Bank shall repay
to the purchasing Bank the purchase price to the extent of such recovery
together with an amount equal to such Bank's ratable share (according to the
proportion of (i) the amount of such Bank's required repayment to (ii) the total
amount so recovered from the purchasing Bank) of any interest or other amount
paid or payable by the purchasing Bank in respect of the total amount so
recovered. Each Borrower agrees that any Bank so purchasing a participation
from another Bank pursuant to this SECTION 2.14 may, to the fullest extent
permitted by law,
- 34 -
<PAGE>
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Bank were the direct creditor of such
Borrower in the amount of such participation.
SECTION 2.15. CURRENCY EQUIVALENTS. For purposes of determining
compliance with SECTION 2.01 or 2.03(a) at any time, and for purposes of
determining the "Utilization Factor" at any time under SECTION 2.07(b), the
equivalent in Dollars in respect of any Advance denominated (or proposed to be
denominated) in an Alternative Currency shall be determined in accordance with
SECTION 2.02(a) or SECTION 2.03(c)(i) by the Euro-Agent, in consultation with
the Company, immediately prior to the issuance by the Company of the Notice of
Borrowing requesting such Advances. Any equivalent determined in accordance
with SECTION 2.02(a), SECTION 2.03(c)(i) or this SECTION 2.15 shall be deemed to
remain in effect at all times during (and until the last day of) the Interest
Period in respect of the Advances comprising the applicable Borrowing,
notwithstanding any fluctuation in exchange rates occurring prior to the last
day of such Interest Period.
SECTION 2.16. TAXES. (a) Subject to SECTION 2.16(f), any and all
payments by each Borrower hereunder or under the Notes shall be made, in
accordance with SECTION 2.13, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, EXCLUDING, in the case
of each Bank, the Agent and the Euro-Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Bank, the Agent or the Euro-Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Bank, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction of such
Bank's Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "TAXES"). Subject to SECTION
2.16(f), if any Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any Note to any Bank, the Agent or
the Euro-Agent, (i) the sum payable by such Borrower shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this SECTION 2.16(a)) such Bank, the
Agent or the Euro-Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (ii) such Borrower
shall make such deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
- 35 -
<PAGE>
(b) In addition, the Borrowers jointly and severally agree to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
under the Notes or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER
TAXES"). The Agent and Euro-Agent may demand payment of, and seek recourse on,
any Other Taxes from any Borrower, without any requirement that the Agent or the
Euro-Agent allocate the reimbursement obligation for such Other Taxes among the
Borrowers.
(c) Each Borrower will indemnify each Bank, the Agent and the Euro-
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this SECTION 2.16) paid by such Bank, the Agent or the Euro-Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall
be made within 30 days from the date such Bank, the Agent or the Euro-Agent (as
the case may be) makes written demand therefor.
(d) The Agent and Euro-Agent may, from time to time, request that the
Company furnish (and the Company shall, promptly following any such request,
furnish) to the Agent and the Euro-Agent the originals or certified copies of
receipts evidencing the payment of Taxes by and on behalf of the Borrowers or,
if no Taxes are payable in respect of any payment hereunder or under the Notes,
a certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Agent, in either case stating that such payment is exempt from
or not subject to Taxes.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrowers contained in
this SECTION 2.16 shall survive the payment in full of principal and interest
hereunder and under the Notes.
(f) Promptly following the date hereof (or, in the case of any
assignee party to an Assignment and Acceptance, on the effective date of its
becoming a "Bank" hereunder), each Bank organized under the laws of a
jurisdiction outside the United States shall provide the Agent with the forms
prescribed by the Internal Revenue Service of the United States certifying such
Bank's exemption from United States withholding taxes with respect to all
payments to be made to such Bank hereunder and under any of the Notes, and each
such Bank shall thereafter provide the Agent with such supplements and
amendments thereto and such additional forms as may from time to time be
required by
- 36 -
<PAGE>
applicable law. If a Bank that is organized under the laws of a jurisdiction
outside the United States shall fail to deliver, or improperly delivers, the
forms described in this SECTION 2.16(f), SECTION 2.16(a) shall not apply with
respect to any payments made to such Bank under this Agreement during the period
that such failure or deficiency shall continue, and the Borrowers, the Agent or
the Euro-Agent shall be permitted to withhold United States federal, state and
local income taxes from any payments made under this Agreement at the applicable
statutory rate.
SECTION 2.17. SUBSTITUTION OF BANKS. In the event that (x) any one
or more Banks, pursuant to SECTION 2.11 hereof, incurs any increased costs,
receives a reduced payment or is required to make any payment for which any such
Bank demands compensation pursuant to such Section, which compensation increases
the effective lending rate of such Bank with respect to its share of the A
Advances to greater than 25 basis points in excess of the effective lending rate
of the other Banks, and such Bank has not mitigated such increased costs,
reduced payment or additional payment within 60 days after receipt by such Bank
from the Company of a written notice that such Bank's effective lending rate has
so exceeded the effective lending rate of the other Banks, or (y) any one or
more Banks have determined pursuant to SECTION 2.02(c)(i), 2.02(c)(iv) or
2.12(a) hereof that it may not make or maintain all or certain of its
Eurocurrency Advances at such time (and the other Banks shall continue to be
able to make or maintain their corresponding Eurocurrency Advances at such time)
and the inability of such Bank to make or maintain such Eurocurrency Advances
continues for 60 or more days after the receipt by such Bank from the Company of
written notice of such inability and that the Company's request that such Bank
alleviate such inability, then and in any such event, the Company may substitute
another financial institution for such Bank which is acceptable to the Agent to
assume the Commitment of such Bank and to purchase the A Note of such Bank
hereunder, without recourse to or warranty (other than as to unencumbered
ownership) by, or expense to, such Bank for a purchase price equal to the
outstanding principal amount of the A Advances then payable to such Bank plus
any accrued but unpaid interest and accrued but unpaid fees with respect
thereto. Such purchase shall be effected by execution and delivery by such Bank
and its replacement of an Assignment and Acceptance, and shall otherwise be made
in the manner described in SECTION 9.08. Upon such purchase, such Bank shall no
longer be a party hereto or have any rights or benefits hereunder (except for
rights or benefits that such Bank would retain hereunder upon termination of
this Agreement) and the replacement Bank shall succeed to the rights and
benefits, and shall assume the obligations, of such Bank hereunder and under
such A Note.
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<PAGE>
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES. The
obligation of each Bank to make its initial Advance on the occasion of the
initial Borrowing by each Borrower (including each Borrowing Subsidiary) is
subject to the conditions precedent that (i) there shall be no outstanding
borrowings under the Credit Agreement dated as of January 15, 1988, as amended,
among the Company, Citibank, N.A., as Agent and the banks named therein, or the
Facilities Agreement dated December 21, 1990, among the Company, Morgan Guaranty
Trust Company of New York, as Facility Agent and Tender Agent, J.P. Morgan
Securities Ltd., as Arranger, and the banks named therein (collectively, the
"CREDIT AGREEMENTS"), and the Company shall have terminated in full the
commitments of the banks parties to the Credit Agreements, (ii) all commitment,
facility, agency and administrative fees provided for under the terms of the
Credit Agreements, accrued to the date hereof, shall have been paid by the
Company and (iii) the Agent shall have received on or before the day of such
initial Borrowing the following, each dated such day, in form and substance
satisfactory to the Agent and (except for the Notes) in sufficient copies for
each Bank:
(a) The A Notes of such Borrower payable to the order of the
Banks, respectively.
(b) For the initial Borrowing by each Borrowing Subsidiary, an
Election to Participate executed by such Borrowing Subsidiary and by
the Company.
(c) Certified copies of (i) for the initial Borrowing by the
Company, the resolutions of the Board of Directors of the Company
approving this Agreement and the Notes of the Company; (ii) for the
initial Borrowing by each Borrowing Subsidiary, the resolutions or
other authorizing action of the Board of Directors or other governing
body of such Borrowing Subsidiary approving its Election to
Participate, this Agreement and the Notes of such Borrowing Subsidiary
and the resolutions of the Board of Directors of the Company approving
this Agreement and the Election to Participate of such Borrowing
Subsidiary; and (iii) for the initial Borrowing by each Borrower, all
documents evidencing other necessary corporate or other authorizing
action and governmental approvals, if any, with respect to this
Agreement and the Notes of such Borrower.
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<PAGE>
(d) Signed copies of (i) a certificate of the Secretary or an
Assistant Secretary or other appropriate officer or representative of
such Borrower certifying the names and true signatures of the officers
or other representatives of such Borrower authorized to sign this
Agreement (if the Borrower is the Company), such Borrower's Election
to Participate (if the Borrower is a Borrowing Subsidiary) and the
Notes of such Borrower and the other documents or certificates to be
delivered by such Borrower pursuant to this Agreement and (ii) for the
initial Borrowing by each Borrower other than the Company, a
certificate of the Secretary or an Assistant Secretary or other
appropriate officer of the Company certifying the names and true
signatures of the officers of the Company authorized to sign this
Agreement and such Borrower's Election to Participate. The Agent may
conclusively rely on each such certificate of such Borrower or of the
Company until the Agent shall receive a further certificate of the
Secretary or an Assistant Secretary or other representative of such
Borrower or of the Company, as the case may be, cancelling or amending
the prior certificate of such Borrower or of the Company, as the case
may be, and submitting the signatures of the officers or other
representatives named in such further certificate.
(e) Favorable opinions of (i) for the initial Borrowing by the
Company, the General Counsel of the Company in substantially the form
of EXHIBIT E hereto and special counsel for the Company in
substantially the form of EXHIBIT F hereto, (ii) for the initial
Borrowing by each Borrowing Subsidiary, counsel for such Borrowing
Subsidiary in substantially the form of EXHIBIT G hereto, the General
Counsel of the Company in substantially the form of EXHIBIT H hereto
and special counsel for the Company in substantially the form of
EXHIBIT I hereto, and (iii) for any initial Borrowing, counsel for the
Company or the applicable Borrowing Subsidiary as to such other
matters as any Bank through the Agent may reasonably request. Such
counsel shall be satisfactory to the Agent.
(f) A favorable opinion of Sidley & Austin, counsel for the
Agent and the Euro-Agent, in substantially the form of EXHIBIT J
hereto.
SECTION 3.02. CONDITIONS PRECEDENT TO EACH A BORROWING. The
obligation of each Bank to make an A Advance on the occasion of each A Borrowing
(including the initial A Borrowing) by each Borrower (including each Borrowing
Subsidiary)
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<PAGE>
shall be subject to the further conditions precedent that on the date of such A
Borrowing (a) the following statements shall be true and the Agent shall have
received for the account of such Bank a certificate signed by a duly authorized
officer of the Company as follows:
(i) The representations and warranties contained in subsections (a),
(b), (c) and (d) of SECTION 4.01 and, if such A Borrowing is by a Borrowing
Subsidiary, SECTION 4.02 (as to such Borrowing Subsidiary) are correct in
all material respects on and as of the date of such A Borrowing, before and
after giving effect to such A Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date, and
(ii) No event has occurred and is continuing, or would result from
such A Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any bank through the Agent may reasonably request for the purpose
of verifying compliance by the Company or any Borrower with the terms of this
Agreement or with applicable law.
SECTION 3.03. CONDITIONS PRECEDENT TO CERTAIN BORROWINGS. The
obligation of each Bank to make that portion of an A Advance on the occasion of
any A Borrowing which would increase the aggregate outstanding amount in any
currency of A Advances owing to such Bank from all Borrowers over the aggregate
amount of A Advances owing to such Bank in such currency outstanding immediately
prior to the making of such A Advance shall be subject to the further conditions
precedent that on the date of such A Borrowing (i) the representations and
warranties contained in subsections (e), (f), (g), (h), (i), (k), (l), (m) and
(n) of SECTION 4.01 are correct in all material respects on and as of the date
of such A Borrowing, before and after giving effect to such A Borrowing and to
the application of the proceeds therefrom, as though made on and as of such
date; (ii) no event has occurred and is continuing, or would result from such A
Borrowing or from the application of the proceeds therefrom, which would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both; and (iii) the certificate furnished pursuant to SECTION
3.02 shall include statements to the effect of clauses (i) and (ii) above.
SECTION 3.04. CONDITIONS PRECEDENT TO EACH B BORROWING. The
obligation of each Bank which is to make a B Advance on the occasion of a B
Borrowing (including the initial B Borrowing) to make such B Advance as part of
such B Borrowing is subject to the conditions precedent that (i) at least three
Business Days
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before the date of such B Borrowing, the Agent shall have received the Notice of
B Borrowing with respect thereto, (ii) at least one Business Day before the date
of such B Borrowing, the Agent shall have received the written confirmatory
notice of such B Borrowing to be given by the Company pursuant to SECTION
2.03(b)(iii) or SECTION 2.03(c)(iii), as applicable, (iii) on or before the date
of such B Borrowing but prior to such B Borrowing, the Agent shall have received
a B Note signed by the applicable Borrower payable to the order of such Bank for
each of the one or more B Advances to be made by such Bank as part of such B
Borrowing, in a principal amount equal to the principal amount of the B Advance
to be evidenced thereby and otherwise on such terms as were agreed to for such B
Advance in accordance with SECTION 2.03, and (iv) on the date of such B
Borrowing the following statements shall be true (and each of the giving of the
applicable Notice of B Borrowing and the acceptance by such Borrower of the
proceeds of such B Borrowing shall constitute a representation and warranty by
the Company that on the date of such B Borrowing such statements are true):
(a) the representations and warranties contained in SECTION 4.01
(other than SUBSECTION (j) thereof) and, if such B Borrowing is by a
Borrowing Subsidiary, SECTION 4.02 (as to such Borrowing Subsidiary) are
correct in all material respects on and as of the date of such B Borrowing,
before and after giving effect to such B Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date, and
(b) No event has occurred and is continuing, or would result from
such B Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default, or would constitute an Event of Default
but for the requirement that notice be given or time elapse or both.
ARTICLE IV
REPRESENTATION AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Banks and the Agent as follows:
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction indicated at the
beginning of this Agreement.
(b) The execution, delivery and performance by the Company of this
Agreement and its Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, and do not
contravene (i) the
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Company's restated certificate of incorporation or by-laws or (ii) law or
any contractual restriction binding on or affecting the Company.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of this
Agreement or the Notes.
(d) This Agreement is, and the Company's Notes when delivered
hereunder will be, legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to
general principles of equity.
(e) The consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of December 31, 1992, and the related
statements of income, cash flows and shareholders' equity of the Company
and its Consolidated Subsidiaries for the fiscal year then ended, copies of
which have been furnished to each Bank, fairly present the financial
condition of the Company and its Consolidated Subsidiaries as at such date
and the consolidated results of the operations of the Company and its
Consolidated Subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied.
(f) There are no pending actions, suits or proceedings against the
Company or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official, in which there is (in the best
judgment of the Company) a reasonable possibility of an adverse decision
which would affect (i) the business, consolidated financial position or
consolidated results of operations of the Company and its Consolidated
Subsidiaries, to the extent that there is (in the best judgment of the
Company) a reasonable possibility that such decision would prevent the
Company from repaying its obligations in accordance with the terms of this
Agreement or, (ii) the legality, validity or enforceability of this
Agreement or any Note.
(g) United States Federal income tax returns of the Company and its
Subsidiaries have been examined and closed through the year ended December
31, 1987. The Company and its Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment
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received by the Company or any of its Subsidiaries, except such taxes or
assessments, if any, as are being contested in good faith by appropriate
proceedings. The charges, accruals and reserves on the books of the
Company and its Subsidiaries in respect of taxes are, in the opinion of the
Company, adequate.
(h) Each of the Company's Significant Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
(i) The sum of the Insufficiencies of any and all Plans with respect
to which a Termination Event has occurred and is still in existence (or, in
the case of a Plan with respect to which a Termination Event described in
clause (ii) of the definition of Termination Event has occurred, the
liability related thereto) does not exceed $25,000,000.
(j) Schedule B (Actuarial Information) to the 1992 annual report
(Form 5500 Series) with respect to each Plan, copies of which have been
filed with the Internal Revenue Service and furnished to the Agent, was
complete and accurate and fairly presented the funding status and financial
condition of such Plan as of the date of such Schedule B, and since such
date there has been no material adverse change in such funding status or
financial condition, considered in the aggregate, except for a decline in
the funded ratio of the Ecolab Pension Plan primarily attributable to a
decrease in the interest rate used to measure liabilities and a July 1,
1993 improvement in the Ecolab Pension Plan benefit formula.
(k) Neither the Company nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer
Plans in connection with Withdrawal Liabilities (determined as of the date
of such notification), is greater than $25,000,000 or which would require
payments greater than $5,000,000 per annum.
(l) Neither the Company nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, if as a result of such reorganization or
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termination the aggregate annual contributions of the Company and its ERISA
Affiliates to all Multiemployer Plans which are then in reorganization or
being terminated have been or will be increased over the amounts
contributed to such Multiemployer Plans for the respective plan years most
recently ended by an amount exceeding $5,000,000 per annum.
(m) The Company and its Subsidiaries are in compliance in all
material respects with all environmental and hazardous waste laws, rules
and regulations, and neither the Company nor any of its Subsidiaries has
been cited by or is otherwise on any listing of any Federal, state or local
governmental agency or other authority responsible for or having
jurisdiction over hazardous waste disposal, where the failure to so comply
or being so cited or listed would (in the best judgment of the Company)
affect the business, consolidated financial position or consolidated
results of operations of the Company and its Subsidiaries, to the extent
that there is (in the best judgment of the Company) a reasonable
possibility that such non-compliance or being so cited or listed would
prevent the Company from repaying its obligations under this Agreement in
accordance with the terms hereof.
(n) There are no pending or, to the knowledge of the Company,
threatened actions, suits or proceedings against the Company or any of its
Subsidiaries before any court or arbitrator or other governmental agency or
authority arising out of or relating to hazardous waste disposal or
environmental compliance or asserting a claim for damages based upon the
use or other application of any products of the Company or any of its
Subsidiaries, in which there is (in the best judgment of the Company) a
reasonable possibility of an adverse decision which would affect the
business, consolidated financial position or consolidated results of
operations of the Company and its Consolidated Subsidiaries to the extent
that there is (in the best judgment of the Company) a reasonable
possibility that such decision would prevent the Company from repaying its
obligations under this Agreement in accordance with the terms hereof.
SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF BORROWING
SUBSIDIARIES. Each Borrowing Subsidiary shall be deemed by the execution and
delivery of its Election to Participate to have represented and warranted as of
the date thereof that:
(a) It is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization.
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(b) The execution and delivery by it of its Election to Participate
and in its Notes and the performance by it of this Agreement and its Notes
are within its powers, have been duly authorized by all necessary action,
and do not contravene (i) its constituent documents or (ii) law or any
contractual restriction binding on or affecting such Borrowing Subsidiary.
(c) This Agreement constitutes a legal, valid and binding agreement
of such Borrowing Subsidiary, and its Notes, when executed and delivered in
accordance with this Agreement, will constitute legal, valid and binding
obligations of such Borrowing Subsidiary, enforceable against such
Borrowing Subsidiary in accordance with their respective terms, subject to
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and to general
principles of equity.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Note shall
remain unpaid or any Bank shall have any Commitment hereunder, the Company will,
unless the Majority Banks shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, (i) paying before the same become delinquent all
taxes, assessments and governmental charges imposed upon it or upon
its property except to the extent contested in good faith, and (ii)
required capitalization of each Borrowing Subsidiary.
(b) REPORTING REQUIREMENTS. Furnish to the Banks:
(i) as soon as available and in any event within 60 days
after the end of each of the first three quarters of each fiscal
year of the Company, the consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such
quarter and the consolidated statement of income and
shareholders' equity and the consolidated statement of cash flows
of the Company and its Consolidated Subsidiaries for the period
commencing at the end of the previous fiscal year
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and ending with the end of such quarter, certified by a designated
financial officer of the Company;
(ii) as soon as available and in any event within 120 days
after the end of each fiscal year of the Company, a copy of the
annual report for such year for the Company and its Consolidated
Subsidiaries, containing financial statements for such year
certified in a manner acceptable to the Majority Banks by Coopers
& Lybrand or other independent public accountants acceptable to
the Majority Banks;
(iii) simultaneously with the delivery of each set of
financial statements referred to in clauses (i) and (ii) above, a
certificate of a designated financial officer of the Company (A)
setting forth in reasonable detail the calculations required to
establish whether the Company was in compliance with the
requirements of SECTIONS 5.02(a), 5.03(a) and 5.03(b) on the date
of such financial statements and (B) stating whether there exists
on the date of such certificate any Event of Default or condition
or event which with notice or lapse of time or both would become
an Event of Default and, if any Event of Default or any such
condition or event then exists, setting forth the details thereof
and the action which the Company is taking with respect thereto;
(iv) promptly after the sending or filing thereof, copies of
all reports which the Company sends generally to its security
holders, and copies of all periodic reports (including reports on
Form 8-K) and all registration statements which the Company or
any Subsidiary files with the Securities and Exchange Commission
(other than registration statements on Form S-8 or Form 11-K);
(v) as soon as possible and, in any event, within 14
Business Days after the Company (in its best judgment) has made a
determination pursuant to any notice or claim received by the
Company or any of its Subsidiaries to the effect that the Company
or any of its Subsidiaries is a potentially responsible party for
response costs incurred or to be incurred at any facility, other
than a facility owned or operated by the Company or any of its
Subsidiaries under the Comprehensive Environmental Response,
Compensation and Liability
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Act ("CERCLA") or any state equivalent, that the potential liability
(other than potential liability arising from the provisions of CERCLA
authorizing environmental agencies to impose joint and several
liability unless joint and several liability is being asserted by
such environmental agencies) of the Company or any of its Subsidiaries
may exceed $25,000,000, a copy of such notice or claim and a statement
of an officer of the Company explaining the Company's understanding of
the basis for such notice or claim;
(vi) as soon as possible and, in any event, within 14
Business Days from the date the Company (in its best judgment)
makes a determination, pursuant to any notice given with respect
to property owned or operated by the Company or any of its
Subsidiaries, to Federal or state environmental agencies under
any applicable environmental requirement of law, reporting the
release of a hazardous or toxic waste, substance, pollutant or
contaminant, including petroleum-based substances or wastes, into
the environment, that the potential liability (other than
potential liability arising from the provisions of CERCLA
authorizing environmental agencies to impose joint and several
liability unless joint and several liability is being asserted by
such environmental agencies) of the Company or any of its
Subsidiaries may exceed $25,000,000, a copy of such notice and a
statement of an officer of the Company explaining the Company's
understanding of the basis for such notice;
(vii) as soon as possible and, in any event, within 14
Business Days after the Company or any of its Subsidiaries
acquires actual knowledge that the operations or facilities of
the Company or any of its Subsidiaries has become the subject of
any state or federal investigation evaluating whether any
remedial action pursuant to the National Contingency Plan, or any
state equivalent, is needed to respond to a release or threatened
release of a hazardous or toxic waste, substance, pollutant or
contaminant, including petroleum-based substances or wastes, into
the environment, a statement by an officer of the Company
informing the Banks of such investigation and explaining the
Company's understanding of the basis for such investigation;
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(viii) as soon as possible and, in any event, within 10
Business Days after the Company or any of its Subsidiaries
acquires actual knowledge that any of the operations or
facilities of the Company or any of its Subsidiaries becomes
listed or is proposed for listing on the National Priorities List
in accordance with 40 C.F.R. Part 300, Appendix B, or any state
equivalent, or receives any notice or claim to the effect that it
is a potentially responsible party for response costs involving
an aggregate cost to the Company or its Subsidiaries of
$25,000,000 or more incurred or to be incurred under CERCLA or
any state equivalent, at any facility owned or operated by the
Company or any of its Subsidiaries, a statement by an officer of
the Company so informing the Banks and explaining the Company's
understanding of the basis for such listing or notice;
(ix) as soon as possible and in any event (A) within 45 days
after the Company or any of its ERISA Affiliates acquires actual
knowledge that any Termination Event described in clause (i) of
the definition of Termination Event with respect to any Plan has
occurred, and (B) within 14 days after the Company or any of its
ERISA Affiliates acquires actual knowledge that any other
Termination Event with respect to any Plan has occurred,
(PROVIDED, HOWEVER, that the statement referred to below would
not be required if (1) such Termination Event is described in
clause (ii) of the definition of Termination Event, unless the
occurrence of such Termination Event may or does result in
aggregate liability of the Company and all ERISA Affiliates of
the Company to any Multiple Employer Plan or to the PBGC of more
than $25,000,000, or (2) such Termination Event is described in
clause (iii) of the definition of Termination Event, unless such
Termination Event is not a "standard termination" as defined in
Section 4041 of ERISA) a statement of an officer of the Company
describing such Termination Event and the action, if any, which
the Company or any of its ERISA Affiliates proposes to take with
respect thereto;
(x) promptly and in any event within 5 Business Days after
receipt thereof by the Company or any of its ERISA Affiliates,
copies of each notice received by the Company or any such ERISA
Affiliate from the PBGC stating its intention to
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terminate any Plan or to have a trustee appointed to administer any
Plan;
(xi) promptly and in any event within 14 Business Days after
receipt thereof by the Company or any of its ERISA Affiliates
from the sponsor of a Multiemployer Plan, with respect to which
the aggregate annual contributions of the Company and its ERISA
Affiliates to such Multiemployer Plan for the three Plan years
preceding the day of such receipt averages in excess of
$1,000,000 per year, or, if the amount of liability incurred or
expected to be incurred pursuant to such notice exceeds
$10,000,000 (regardless of the amount of aggregate annual
contributions of the Company and its ERISA Affiliates to such
Multiemployer Plan for purposes of determining whether such an
event has occurred) a copy of each such notice received by the
Company or such ERISA Affiliate concerning (A) the imposition of
Withdrawal Liability by such Multiemployer Plan, (B) the
determination that such Multiemployer Plan is, or is expected to
be, in reorganization within the meaning of Title IV of ERISA,
(C) the termination of such Multiemployer Plan within the meaning
of Title IV of ERISA, or (D) the amount of liability incurred, or
expected to be incurred, by the Company or any such ERISA
Affiliate, as the case may be, in connection with any event
described in clause (A), (B) or (C) above;
(xii) as soon as possible and, in any event, within 5
Business Days after the Company acquires actual knowledge that
either of its Credit Ratings has changed, written notice
informing the Agent of such change; and
(xiii) such other information with respect to the condition
or operations, financial or otherwise, of the Company or any of
its Subsidiaries or ERISA Affiliates as any Bank through the
Agent may from time to time reasonably request, including,
without limitation, Schedule B (Actuarial Information) to the
annual reports (Form 5500 Series) filed with the Internal Revenue
Service for each Plan.
(c) CORPORATE EXISTENCE. Subject to SECTION 5.02(b), preserve and
keep, and will cause each of its Subsidiaries to preserve and keep, its
corporate existence, rights, franchises and licenses in full force and
effect, PROVIDED,
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HOWEVER, that the Company may terminate the corporate existence of any
Subsidiary, or permit the termination or abandonment of any Subsidiary, or
permit the termination or abandonment of any right, franchise or license
if, in the good faith judgment of the appropriate officer or officers of
the Company, such termination or abandonment is not materially
disadvantageous to the Company and is not materially disadvantageous to the
Banks or the holders of the Notes.
(d) INSURANCE. Maintain, and cause each of its Subsidiaries to
maintain, insurance with sound and reputable insurers covering all such
properties and risks as are customarily insured by, and in amounts not less
than those customarily carried by, corporations engaged in similar
businesses and similarly situated.
(e) PROPERTIES. Maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, all of its properties deemed by the
Company or such Subsidiary to be necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted.
(f) BUSINESS. Without prohibiting the Company from making
acquisitions or divestitures permitted under SECTION 5.02(b), remain in the
same businesses, similar businesses or other manufacturing or service
businesses reasonably related thereto, taken as a whole, as are carried on
at the date of this Agreement.
(g) USE OF PROCEEDS. Use the proceeds of the Advances made under
this Agreement only for general corporate purposes, including, without
limitation, the repurchase of shares of capital stock of the Company (as
duly approved by the Company's board of directors from time to time), the
repayment of other indebtedness and acquisitions.
SECTION 5.02. NEGATIVE COVENANTS. So long as any Note shall remain
unpaid or any Bank shall have any Commitment hereunder, the Company will not,
without the written consent of the Majority Banks:
(a) LIENS, ETC. Create or suffer to exist, or permit any of its
Consolidated Subsidiaries to create or suffer to exist, any lien, security
interest or other charge or encumbrance ("LIEN") upon or with respect to
any of its properties (other than Margin Stock), whether now owned or
hereafter acquired, or assign, or permit any of its Consolidated
Subsidiaries to assign, any right to receive income, in each case to secure
any Debt of any Person or
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entity, other than (i) Liens securing Debt which in the aggregate does not
exceed $50,000,000 or (ii) Liens granted by any Consolidated Subsidiary as
security for any Debt owing to the Company or to a Wholly-Owned
Consolidated Subsidiary.
(b) CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. Consolidate with or
merge with or into any other Person or sell, lease or otherwise transfer
all or a majority of its assets (other than Margin Stock) to any other
Person or permit any Significant Subsidiary to consolidate with, merge into
or sell, lease or otherwise transfer all or a majority of its assets to any
Person other than the Company or a Wholly-Owned Consolidated Subsidiary
except:
(i) the Company may merge or consolidate with any other
corporation so long as the Company is the surviving corporation in
such transaction and immediately after consummation of such
transaction no event has occurred and is continuing which constitutes
an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both;
(ii) the Company may merge into any corporation solely for
the purpose of redomiciling so long as the surviving corporation
in such transaction expressly assumes all of the obligations of
the Company under this Agreement, under its Notes and under the
letter agreement referred to in SECTION 2.04(b) and immediately
after consummation of such transaction no event has occurred and
is continuing which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that
notice be given or time elapse or both; and
(iii) any Significant Subsidiary may consolidate or merge with or
sell, lease or otherwise transfer all or more than a majority of its
assets to any other Person so long as immediately after consummation
of such transaction no event has occurred and is continuing which
constitutes an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse or
both.
(c) USE OF PROCEEDS FOR SECURITIES PURCHASES. Use any proceeds of
any Advance to acquire any security in any transaction which is subject to
Section 13(d), 13(g) or 14(d) of the Exchange Act except to the extent such
trans-
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action complies with such Act and the rules and regulations thereunder.
SECTION 5.03. FINANCIAL COVENANTS. So long as any Note shall remain
unpaid or any Bank shall have any Commitment hereunder, the Company will not,
without the written consent of the Majority Banks:
(a) INTEREST COVERAGE. Maintain, as reported at the end of each
fiscal quarter, a ratio of (i) Consolidated Earnings Before Interest
and Taxes to (ii) Consolidated Net Interest Expense of less than 2.75
to 1.00.
(b) TOTAL DEBT. Create or suffer to exist, or permit any of its
Consolidated Subsidiaries to create or suffer to exist, any Debt, if,
immediately after giving effect to such Debt and the receipt and
application of any proceeds thereof, the ratio of Total Debt to
Capitalization exceeds 0.48 to 1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Note
when due; or
(b) Any Borrower shall fail to pay any fee under this Agreement
or any interest on any Note within ten days after the due date
thereof; or
(c) Any written representation or warranty made by any Borrower
herein or in connection with this Agreement shall prove to have been
incorrect in any material respect when made; provided that if any such
representation or warranty shall have been incorrect through
inadvertence or oversight, no Event of Default shall occur if such
representation or warranty shall be made correct within 30 days after
any Borrower shall have discovered the error; or
(d) The Company shall fail to perform or observe any of the
covenants contained in SECTION 5.02 (other than with respect to any
involuntary Lien for purposes of SECTION 5.02(a)) or SECTION 5.03(a);
or the Company shall fail to perform or observe any other term,
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covenant (including SECTION 5.02(a) with respect to any involuntary Lien)
or agreement contained in this Agreement, other than in (a) or (b) above,
on its part to be performed or observed and such failure shall remain
unremedied for 30 days after written notice thereof shall have been given
to the Company by the Agent or any Bank; or
(e) The Company or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt (other than Subsidiary
Statutory Liabilities) which is outstanding in a principal amount of
at least $5,000,000 (or its equivalent in any other currency) in the
aggregate (but excluding Debt evidenced by the Notes) of the Company
or such Subsidiary (as the case may be), when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to
any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such
event or condition is to accelerate the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment or a
prepayment required due to a voluntary sale or condemnation of
collateral securing such Debt), prior to the stated maturity thereof;
or
(f) The Company or any of its Significant Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit
in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Company or any of its
Significant Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property, and in
the event of any such proceeding instituted against the Company or any
of its Significant Subsidiaries, such proceeding shall remain
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undismissed or unstayed for a period of 60 days or shall result in the
entry of an order for relief, the appointment of a trustee or receiver, or
other result adverse to the Company or such Significant Subsidiary; or the
Company or any of its Significant Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this subsection
(f); or
(g) Any judgment or order for the payment of money (to the
extent not covered by insurance under which the insurer has admitted
its liability in writing) in excess of $3,000,000 (or its equivalent
in any other currency) shall be rendered against the Company or any of
its Subsidiaries and (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order and there shall
be any time at which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect or
(ii) enforcement proceedings shall not have been commenced by any
creditor upon such judgment or order and there shall be any period of
10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Majority Banks, by notice to the Company, declare the obligation
of each Bank to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Majority Banks, by notice to the Company, declare the Notes, all interest
thereon and all other amounts payable under this Agreement to be forthwith due
and payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Company; PROVIDED, HOWEVER, that in the event of an Event of Default described
in SECTION 6.01(f), (A) the obligation of each Bank to make Advances shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Company.
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ARTICLE VII
THE AGENT AND THE EURO-AGENT
SECTION 7.01. AUTHORIZATION AND ACTION. Each Bank hereby appoints
and authorizes each of the Agent and the Euro-Agent to take such action as agent
on its behalf and to exercise powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), neither the Agent nor the Euro-Agent shall be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Banks, and such instructions shall be
binding upon all Banks and all holders of Notes; PROVIDED, HOWEVER, that neither
the Agent nor the Euro-Agent shall be required to take any action which exposes
the Agent or the Euro-Agent to personal liability or which is contrary to this
Agreement or applicable law. Each of the Agent and the Euro-Agent agrees to
give to each Bank prompt notice of each written notice given to it by the
Company pursuant to the terms of this Agreement.
SECTION 7.02. AGENT'S RELIANCE, ETC. Neither the Agent, the Euro-
Agent, or any Affiliate of either of them, nor any of their respective
Directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, each of the Agent and the Euro-
Agent: (i) may treat the Bank that made any Advance as the holder of the Debt
resulting therefrom until the Agent receives and accepts an Assignment and
Acceptance entered into by such Bank, as assignor, and an Eligible Assignee, as
assignee, as provided in SECTION 9.08; (ii) may consult with legal counsel
(including counsel for any of the Borrowers), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (iii) makes no warranty or representation to
any Bank and shall not be responsible to any Bank for any statements, warranties
or representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of any of the Borrowers or to inspect the property
(including the books and records) of any of the Borrowers; (v) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness,
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sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. CITIBANK AND AFFILIATES. With respect to its
Commitment the Advances made by it and the notes issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Company, any of its Subsidiaries (including, without
limitation, any Borrowing Subsidiary) and any Person who may do business with or
own securities of the Company or any of its Subsidiaries all as if Citibank were
not the Agent and Citibank International Plc were not the Euro-Agent and without
any duty to account therefor to the Banks.
SECTION 7.04. BANK CREDIT DECISION. Each Bank acknowledges that it
has, independently and without reliance upon the Agent, the Euro-Agent or any
other Bank and based on the financial statements referred to in SECTION 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent,
the Euro-Agent or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement.
SECTION 7.05. INDEMNIFICATION. The Banks agree to indemnify the
Agent and the Euro-Agent (to the extent not reimbursed by the Borrowers),
ratably according to the respective principal accounts of the A Notes then held
by each of them (or if no A Notes are at the time outstanding or if any A Notes
are held by Persons which are not Banks, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent or the Euro-Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Agent or the Euro-Agent under this Agreement, PROVIDED that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions,
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judgments, suits, costs, expenses or disbursements resulting from the Agent's or
the Euro-Agent's gross negligence or wilful misconduct. Without limitation of
the foregoing, each Bank agrees to reimburse the Agent or the Euro-Agent, as
applicable, promptly on demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent and the Euro-Agent are not reimbursed for such
expenses by the Borrowers.
SECTION 7.06. SUCCESSOR AGENTS. Either of the Agents may resign at
any time by giving written notice thereof to the Banks and the Company and may
be removed at any time with or without cause by the Majority Banks. Upon any
such resignation or removal, the Majority Banks shall the right to appoint one
of the Banks as the successor Agent and such Bank or an affiliate of such Bank
as the successor Euro-Agent. If no successor Agent or Euro-Agent, as
applicable, shall have been so appointed by the Majority Banks, and shall have
accepted such appointment, within 30 days after the retiring Agent's or retiring
Euro-Agent's giving of notice of resignation or the Majority Banks' removal of
the retiring Agent or retiring Euro-Agent, then the retiring Agent or retiring
Euro-Agent may, on behalf of the Banks, appoint one of the Banks (or an
affiliate of one of the Banks, in the case of a successor Euro-Agent) as its
successor. If none of the Banks will accept such an appointment, the retiring
Agent or Euro-Agent, as applicable, may, on behalf of the Banks, appoint a
successor Agent or Euro-Agent, as applicable, which, in the case of a successor
Agent, shall be a commercial bank organized under the laws of the United States
of America or of any State thereof and having a combined capital and surplus of
at least $50,000,000, and in the case of a successor Euro-Agent, shall be a
commercial bank organized under the laws of any country which is a member of the
OECD, or a political subdivision of any such country, and having a combined
capital and surplus of at least $50,000,000 or the local currency equivalent
thereof, PROVIDED that such bank is located in, or acting through a branch or
agency located in, London, England. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, or as Euro-Agent hereunder by a successor
Euro-Agent, such successor shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Agent or the retiring
Euro-Agent, as applicable, and the retiring Agent or the retiring Euro-Agent, as
applicable, shall be discharged from its duties and obligations under this
Agreement. The successor Agent or the successor Euro-Agent, as applicable,
shall immediately notify the Company of such appointment. After any retiring
Agent's or retiring Euro-Agent's resignation or removal hereunder
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as Agent or Euro-Agent, as applicable, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent or Euro-Agent, as applicable, under this Agreement.
ARTICLE VIII
GUARANTY
SECTION 8.01. THE GUARANTY. The Company hereby unconditionally and
irrevocably guarantees the due and punctual payment (whether at stated maturity,
upon acceleration or otherwise) of the principal of and interest on each Note
issued by any Borrowing Subsidiary pursuant to this Agreement, and the due and
punctual payment of all other amounts payable by any Borrowing Subsidiary under
this Agreement. Upon failure by any Borrowing Subsidiary to pay punctually any
such amount, the Company shall forthwith on demand pay the amount not so paid in
the currency, at the place, in the manner and with the effect otherwise
specified in Article II of this Agreement.
SECTION 8.02. GUARANTY UNCONDITIONAL. The obligations of the Company
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any obligation of any Borrowing
Subsidiary under this Agreement or any Note or the exchange,
release or non-perfection of any collateral security therefor;
(ii) any modification or amendment of or supplement to this
Agreement or any Note:
(iii) any change in the corporate existence, structure or
ownership of any Borrowing Subsidiary, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
any Borrowing Subsidiary or its assets;
(iv) the existence of any claim, set-off or other rights
which the Company may have at any time against any Borrowing
Subsidiary, the Agent, the Euro-Agent, any Bank or any other
Person, whether in connection herewith or any unrelated
transactions, PROVIDED that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
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(v) any invalidity or unenforceability relating to or
against any Borrowing Subsidiary for any reason of any provision
or all of this Agreement or any Note, or any provision of
applicable law or regulation purporting to prohibit the payment
by any Borrowing Subsidiary of the principal of or interest on
any Note or any other amount payable by it under this Agreement;
or
(vi) any other act or omission to act or delay of any kind
by any Borrowing Subsidiary, the Agent, the Euro-Agent, any Bank
or any other Person or any other circumstance whatsoever which
might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of the Company's obligations
hereunder.
SECTION 8.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full
force and effect until the principal of and interest on the Notes and all other
amounts payable by the Company and each Borrowing Subsidiary under this
Agreement shall have been paid in full and shall survive the Termination Date.
If at any time any payment of the principal of or interest on any Note or any
other amount payable by any Borrowing Subsidiary under this Agreement is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of any Borrowing Subsidiary or otherwise, the
Company's obligations hereunder with respect to such payment shall be reinstated
at such time as though such payment had been due but not made at such time.
SECTION 8.04. WAIVER BY THE COMPANY. The Company irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any right be exhausted or
any action be taken by the Agent, the Euro-Agent, any Bank or any other Person
against any Borrowing Subsidiary or any other Person or any collateral security.
SECTION 8.05. SUBROGATION. Upon making any payment hereunder, the
Company shall be subrogated to the rights of the Banks against any such
Borrowing Subsidiary with respect to such payment; PROVIDED that the Company
shall not enforce any right or demand or receive any payment by way of
subrogation until all amounts of principal of and interest on the Notes of such
Borrowing Subsidiary and all other amounts payable by such Borrowing Subsidiary
under this Agreement have been paid in full.
SECTION 8.06. STAY OF ACCELERATION. In the event that acceleration
of the time for payment of any amount payable by any
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Borrowing Subsidiary under this Agreement or any of its Notes is stayed upon the
insolvency, bankruptcy or reorganization of such Borrowing Subsidiary, all such
amounts otherwise subject to acceleration under the terms of this Agreement
shall nonetheless be payable by the Company hereunder forthwith on demand by the
Agent for the account of the Banks.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or the A Notes, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Majority Banks, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; PROVIDED, HOWEVER, that (a) no amendment, waiver or consent shall,
unless in writing and signed by all the Banks, do any of the following: (i)
waive any of the conditions specified in SECTION 3.01, 3.02, 3.03 (if and to the
extent that the A Borrowing which is the subject of such waiver would involve an
increase in the aggregate outstanding amount of A Advances over the aggregate
amount of A Advances outstanding immediately prior to such A Borrowing) OR 3.04,
(ii) increase the Commitments of the Banks or subject the Banks to any
additional obligations, (iii) reduce the principal of, or interest on, the A
Notes or any fees or other amounts payable hereunder, (iv) postpone any date
fixed for any payment of principal of, or interest on, the A Notes or any fees
or other amounts payable hereunder, (v) release the Company's guaranty
obligations pursuant to ARTICLE VIII, (vi) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes which shall
be required for the Banks or any of the Banks to take any action hereunder or
(vii) amend this SECTION 9.01; (b) after a Change of Control has occurred, no
amendment, waiver or consent shall be effective with respect to SECTION 5.03
unless the same shall be in writing and signed by Banks holding at least 65% of
the then aggregate unpaid principal amount of the A Notes held by Banks, or, if
no such principal amount is then outstanding, Banks having at least 65% of the
Commitments; and (c) no amendment, waiver or consent shall, unless in writing
and signed by the Agent and/or the Euro-Agent in addition to the Banks required
above to take such action, affect the rights or duties of the Agent and/or the
Euro-Agent, as applicable, under this Agreement.
SECTION 9.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication)
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and mailed, telecopied, telegraphed, telexed, cabled or delivered,
(i) if to the Company, at its address at Ecolab Center, St. Paul,
Minnesota 55102, Attention: Treasurer, Telecopier No. 612-293-2379, with a
copy to the Company at the same address, Attention: General Counsel;
(ii) if to any Borrowing Subsidiary, at its address specified in its
Election to Participate;
(iii) if to any Bank, at its Domestic Lending Office specified
opposite its name on SCHEDULE I hereto or specified in the Assignment and
Acceptance pursuant to which it became a party hereto;
(iv) if to the Agent, at its address at Bank Loan Syndications, One
Court Square, 7th Floor, Long Island City, New York 11120, Attention:
Brigitte Milian, Telecopier No. 718-248-4844, with a copy to Citicorp
Securities, Inc., 200 South Wacker Drive, Chicago, Illinois 60606,
Attention: Lesley Noer, Telecopier No. 312-993-1050; and
(v) if to the Euro-Agent, at its address at Riverdale House, 68
Molesworth Street, Lewisham SE13 7EU, England, Attention: Kenneth
Purchase, Loans Agency, Telecopier No. 081-852-7007, Telex No. 299831
CIBLA;
or, as to the Company, the Agent or the Euro-Agent, at such other address as
shall be designated by such party in a written notice to the other parties and,
as to each other party, at such other address as shall be designated by such
party in a written notice to the Company, the Agent and the Euro-Agent. All
such notices and communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answerback or delivered
to the cable company, respectively, except that notices and communications to
the Agent or the Euro-Agent pursuant to ARTICLE II OR VII shall not be effective
until received by the Agent or the Euro-Agent, as applicable.
SECTION 9.03. NO WAIVER; REMEDIES. No failure on the part of any
Bank or the Agent or Euro-Agent to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. COSTS AND EXPENSES. (a) The Company agrees to pay on
demand all reasonable, out-of-pocket costs and
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expenses of the Agent and the Euro-Agent in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, the notes and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Agent and the Euro-Agent with respect thereto and with respect
to advising the Agent and the Euro-Agent as to rights and responsibilities under
this Agreement, and all costs and expenses, if any, of the Agent, the Euro-Agent
and the Banks (including, without limitation, reasonable counsel fees and
expenses, which may be allocated costs of counsel who are employees of any Bank)
in connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Notes and the other documents
to be delivered hereunder, including, without limitation, reasonable counsel
fees and expenses in connection with the enforcement of rights under this
SECTION 9.04(a).
(b) If any payment of principal of any Eurocurrency Advance is made
other than on the last day of the Interest Period for such Eurocurrency Advance,
as a result of acceleration of the maturity of the Notes pursuant to SECTION
6.01 or for any other reason, the applicable Borrower shall, upon demand by any
Bank (with a copy of such demand to the Agent), pay to the Agent for the account
of such Bank any amounts required to compensate such Bank for any additional
losses, costs or expenses which it may reasonably incur as a result of such
payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
any Bank to fund or maintain such Eurocurrency Advance. Such Bank's demand
shall set forth the reasonable basis for calculation of such loss, cost or
expense.
SECTION 9.05. RIGHT OF SET-OFF. Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by SECTION 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of SECTION 6.01,
each Bank is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the credit or the account
of the Company or the applicable Borrowing Subsidiary against any and all of the
obligations of the Company or the applicable Borrowing Subsidiary now or
hereafter existing under this Agreement and the Note held by such Bank
irrespective of whether or not such Bank shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Each
Bank agrees promptly to notify the Company after any such set-off and
application made by such Bank, PROVIDED that the failure to give
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such notice shall not affect the validity of such set-off and application. The
rights of each Bank under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which such
Bank may have.
SECTION 9.06. JUDGMENT. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder or under
the Notes in any currency (the "Original Currency") into another currency (the
"Other Currency") the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Euro-Agent could purchase the
Original Currency with the Other Currency at London, England on the third
Business Day preceding that on which final judgment is given.
(b) The obligation of the applicable Borrower in respect of any sum
due in the Original Currency from it to any Bank or the Agent or Euro-Agent
hereunder or under the Note held by such Bank shall, notwithstanding any
judgment in any Other Currency, be discharged only to the extent that on the
Business Day following receipt by such Bank or the Agent or Euro-Agent (as the
case may be) of any sum adjudged to be so due in such Other Currency such Bank
or the Agent or Euro-Agent (as the case may be) may in accordance with normal
banking procedures purchase the Original Currency with such Other Currency; if
the amount of the Original Currency so purchased is less than the sum originally
due to such Bank or the Agent or Euro-Agent (as the case may be) in the Original
Currency, such Borrower agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Bank or the Agent or Euro-Agent (as the case
may be) against such loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due to any Bank or the Agent or Euro-Agent
(as the case may be) in the Original Currency, such Bank or the Agent or Euro-
Agent (as the case may be) agrees to remit to such Borrower such excess.
SECTION 9.07. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Company and the Agent and Euro-Agent and
when the Agent shall have been notified by each Bank that such Bank has executed
it and thereafter shall be binding upon and inure to the benefit of the
Borrowers, the Agent, the Euro-Agent and each Bank and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign their respective rights hereunder or any interest herein without the
prior written consent of the Banks.
SECTION 9.08. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Bank may,
upon obtaining the prior written consent of the Company (which consent shall not
be unreasonably withheld or
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delayed), assign to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment, the Advances owing to it and the Note or Notes
held by it); PROVIDED, HOWEVER, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all of the assigning Bank's rights
and obligations so assigned, (ii) the amount of the Commitment of the assigning
Bank being assigned pursuant to each such assignment (determined as of the date
of the Assignment and Acceptance with respect to such assignment) may be in the
amount of such Bank's entire Commitment but otherwise shall not be less than
$10,000,000 and shall be an integral multiple of $500,000, (iii) each such
assignment shall be to an Eligible Assignee and (iv) the parties to each such
assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a
processing and recordation fee of $3,000; and PROVIDED, FURTHER, that,
notwithstanding the foregoing, each Bank may, without the consent of the Company
and without the payment of the processing and recordation fee, assign to one or
more affiliates of such Bank all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it). Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which effective date shall be
at least two Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Bank hereunder and (y) the Bank
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Bank's rights and obligations under this Agreement, such Bank
shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Bank assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Bank makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation
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or warranty and assumes no responsibility with respect to the financial
condition of the Company or any Borrowing Subsidiary or the performance or
observance by the Company or any Borrowing Subsidiary of any of its obligations
under this Agreement or any other instrument or document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements referred to in
SECTION 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes each of the Agent and the Euro-Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent and the Euro-Agent, as applicable, by
the terms hereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Bank.
(c) The Agent shall maintain at its address referred to in SECTION
9.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Banks and
the Commitment of, and principal amount of the Advances owing to, each Bank from
time to time (the "REGISTER"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrowers, the
Agent, the Euro-Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrowers or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee, the
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of EXHIBIT C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrowers.
(e) Each Bank may sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment and the
Advances owing to it
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and the Note or Notes held by it); PROVIDED, HOWEVER, that (i) such Bank's
obligations under this Agreement (including, without limitation, its Commitment
to the Borrowers hereunder) shall remain unchanged, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrowers, the Agent, the Euro-Agent and
the other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement, and (v)
any agreement between such Bank and any participant in connection with such
participating interest shall not restrict such Bank's right to agree to any
amendment or waiver of any provision of this Agreement, or any consent to any
departure by any Borrower therefrom, except (to the extent such participant
would be affected thereby) a reduction of the principal of, or interest on, any
Note or postponement of any date fixed for payment thereof or a release of the
Company's guaranty obligations pursuant to ARTICLE VIII.
(f) Any Bank may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this SECTION 9.08, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrowers furnished to such Bank by or on behalf of
the Borrowers; PROVIDED that, prior to any such disclosure of non-public
information, such Bank shall have obtained the Company's consent (which consent
shall not be unreasonably withheld or delayed) and, the assignee or participant
or proposed assignee or participant shall agree to preserve the confidentiality
of any confidential information relating to the Borrowers received by it from
such Bank.
(g) Notwithstanding any other provisions set forth in this Agreement,
any Bank at any time may assign, as collateral or otherwise, any of its rights
(including, without limitation, rights to payments of principal of and/or
interest on the Advances) under this Agreement to any Federal Reserve Bank
without notice to or consent of the Company, any Borrowing Subsidiary, any other
Bank, the Agent or the Euro-Agent.
SECTION 9.09. CONSENT TO JURISDICTION. (a) Each Borrowing
Subsidiary hereby irrevocably submits to the jurisdiction of any New York State
or Federal court sitting in New York City and any appellate court from any
thereof in any action or proceeding arising out of or relating to this Agreement
and hereby irrevocably agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or in such Federal
court. Each Borrowing Subsidiary hereby irrevocably waives, to the fullest
extent that it may effectively do so, the defense of an inconvenient forum to
the
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<PAGE>
maintenance of any such action or proceeding. Each Borrowing Subsidiary hereby
irrevocably appoints CT Corporation System (the "Process Agent"), with an office
on the date hereof at 1633 Broadway, New York, New York 10019, United States, as
its agent to receive on behalf of such Borrowing Subsidiary and its property
service of copies of the summons and complaint and any other process which may
be served in any such action or proceeding. Such service may be made by mailing
or delivering a copy of such process to such Borrowing Subsidiary in care of the
Process Agent at the Process Agent's above address with a copy to such Borrowing
Subsidiary at its address specified in its Election to Participate, and such
Borrowing Subsidiary hereby irrevocably authorizes and directs the Process Agent
to accept such service on its behalf. As an alternative method of service, each
Borrowing Subsidiary also irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of copies of such
process to such Borrowing Subsidiary at its address specified in its Election to
Participate. Each Borrowing Subsidiary agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this SECTION 9.09 shall affect the right of the Agent,
the Euro-Agent or any Bank to serve legal process in any other manner permitted
by law or affect the right of the Agent or any Bank to bring any action or
proceeding against any Borrowing Subsidiary or its property in the courts of any
other jurisdictions.
SECTION 9.10. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
SECTION 9.11. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 9.12. INDEMNIFICATION. The Company agrees to indemnify and
hold harmless the Agent, the Euro-Agent and each Bank from and against any and
all claims, damages, liabilities and expenses (including, without limitation,
fees and disbursements of counsel) which may be incurred by or asserted against
the Agent, the Euro-Agent or such Bank in connection with or arising out of any
investigation, litigation or proceeding related to the use of the proceeds of
the Borrowings by the Borrowers, whether or not the Agent or such Bank is a
party thereto, PROVIDED, HOWEVER, that the Company shall not be liable for any
portion of such claims, damages, liabilities and expenses
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<PAGE>
resulting from the Agent's, the Euro-Agent's or any Bank's gross negligence or
willful misconduct or for such claims and liabilities settled without the
consent of the Company. Each Bank agrees to give the Company prompt written
notice of any investigation, litigation or proceeding which may lead to a claim
for indemnification under this Section, PROVIDED that the failure to give such
notice shall not affect the validity or enforceability of the indemnification
hereunder.
SECTION 9.13. CONFIDENTIALITY. Each Bank hereby agrees that it will
use reasonable efforts to keep confidential any information from time to time
supplied to it by the Company under SECTION 5.01(b) which the Company designates
in writing at the time of its delivery to the Bank is to be treated
confidentially; PROVIDED, HOWEVER, that nothing herein shall affect the
disclosure of any such information to: (i) the extent required by statute,
rule, regulation or judicial process; (ii) counsel for any Bank or the Agent or
the Euro-Agent or to their respective accountants; (iii) bank examiners and
auditors; (iv) the Agent, the Euro-Agent, any other Bank, or any transferee or
prospective transferee of any Note; or (v) any other Person in connection with
any litigation to which any one or more of the Banks is a party; PROVIDED
FURTHER, HOWEVER, that each Bank hereby agrees that it will use reasonable
efforts to promptly notify the Company of any request for information under this
subpart (v) or with respect to any request for information not enumerated in
this SECTION 9.13.
SECTION 9.14. NON-RELIANCE BY THE BANKS. Each Bank by its signature
to this Agreement represents and warrants that (i) it has not relied in the
extension of the credit contemplated by this Agreement, nor will it rely in the
maintenance thereof, upon any assets of the Company or its Subsidiaries
consisting of Margin Stock as collateral and (ii) after reviewing the financial
statements of the Company and its Subsidiaries referred to in SECTION 4.01(e),
such Bank has concluded therefrom that the consolidated cash flow of the Company
and its Subsidiaries is sufficient to support the credit extended to the Company
pursuant to this Agreement.
SECTION 9.15. NO INDIRECT SECURITY. Notwithstanding any Section or
provision of this Agreement to the contrary, nothing in this Agreement shall (i)
restrict or limit the right or ability of the Company or any of its Subsidiaries
to pledge, mortgage, sell, assign, or otherwise encumber or dispose of any
Margin Stock, or (ii) create an Event of Default arising out of or relating to
any such pledge, mortgage, sale, assignment or other encumbrance or disposition.
SECTION 9.16. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE
BORROWING SUBSIDIARIES, THE AGENT, THE EURO-AGENT
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<PAGE>
AND THE BANKS IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG ANY OF THE PARTIES
HERETO ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY NOTE. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.
SECTION 9.17. EFFECTIVENESS OF AMENDMENT AND RESTATEMENT. The
amendment and restatement of this Agreement dated as of January 1, 1995, shall
be effective as of such date when, and only when, the Agent shall have received
counterparts of this Agreement (as so amended and restated) executed by the
Borrower and all of the Banks and a counterpart of the letter agreement dated as
of January 1, 1995, referred to in SECTION 2.04(b) executed by the Borrower.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
ECOLAB INC.
By /s/ Timothy M. Wesolowski
---------------------------
Assistant Treasurer
CITIBANK, N.A., as Agent
By /s/ Michael Mandracchia
---------------------------
Vice President
CITIBANK INTERNATIONAL PLC,
as Euro-Agent
By /s/ Stewart Holmes
---------------------------
Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Co-Agent
By /s/ William J. Stevenson
---------------------------
Vice President
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<PAGE>
BANKS
COMMITMENT
$30,000,000 CITIBANK, N.A.
By /s/ Michael Mandracchia
----------------------------
Vice President
$21,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ William J. Stevenson
----------------------------
Title: Vice President
$16,500,000 COMMERZBANK AKTIENGESELLSCHAFT
GRAND CAYMAN BRANCH
By /s/ William Brent Peterson
----------------------------
Title: Assistant Treasurer
By /s/ Joachim G. Fuchs
----------------------------
Title: Executive V. P.
$16,500,000 CREDIT SUISSE
By /s/ Harry R. Olsen
----------------------------
Title: Member of Senior Mgmt.
By /s/ William P. Murray
----------------------------
Title: Member of Senior Mgmt.
$16,500,000 THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Steven T. Standbridge
----------------------------
Title: Vice President
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<PAGE>
$16,500,000 NATIONSBANK OF NORTH
CAROLINA, N.A.
By /s/ E. Brooke Bauer
----------------------------
Title: Vice President
$16,500,000 SOCIETE GENERALE
By /s/ Susan Hummel
----------------------------
Title: Asst. Vice President
By /s/ Joseph A. Philbin
----------------------------
Title: Vice President
$16,500,000 WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Tina P. Hayes
----------------------------
Title: Senior V. P.
$150,000,000 Total of the Commitments
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<PAGE>
AMENDED AND RESTATED STOCKHOLDER'S AGREEMENT
AMENDED AND RESTATED STOCKHOLDER'S AGREEMENT, dated as of June 26,
1991, between Ecolab Inc., a Delaware corporation (the "Company") and Henkel
Kommanditgesellschaft auf Aktien, organized under the laws of the Federal
Republic of Germany (the "Stockholder").
WHEREAS, simultaneously with the execution of this Agreement, the
Stockholder and the Company have executed an Amended and Restated Joint Venture
Agreement (the "Joint Venture Agreement"), an Amended and Restated Umbrella
Agreement (the "Umbrella Agreement") and Amended and Restated ROW Purchase
Agreement (the "Purchase Agreement"), each dated as of June 26, 1991 (the Joint
Venture Agreement, Umbrella Agreement and Purchase Agreement are collectively
referred to herein as the "Transaction Agreements"), pursuant to which the
Stockholder and the Company will combine their European and certain other
cleaning and sanitizing businesses in a joint venture (the "Joint Venture") and
the Stockholder will sell to the Company, and the Company will purchase from the
Stockholder, certain other assets and equity interests of the Stockholder, and
in partial consideration therefor, the Company will issue to the Stockholder, or
a designee of the Stockholder who will execute a counterpart of this Agreement
and agree to be bound by the provisions hereof, 7,469,999 shares of the
Company's common stock, par value $1.00 per share (the "Common Stock"), some of
which shall be issued upon conversion of the 1,100,000 shares of Series A
Cumulative Convertible Preferred Stock of the Company (the "Preferred Stock")
held by a wholly owned subsidiary of the Stockholder (the Common Stock acquired
by the Stockholder pursuant to the Transaction Agreements, including upon such
conversion, together with any equity securities of the Company acquired by the
Stockholder during the Agreement Period (as hereinafter defined), are sometimes
collectively referred to herein as the "Shares"), subject to the terms and
conditions of the Transaction Agreements and this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and in the Transaction Agreements and intending to be legally bound
hereby, the parties hereto agree as follows:
<PAGE>
Section 1. THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Stockholder as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Company has the full power and authority to execute,
deliver and carry out the terms and provisions of this Agreement and to
consummate the transactions contemplated hereby, and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement.
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting creditors' rights generally and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the court before
which any proceedings therefor may be brought; and
(d) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with,
result in the breach of any of the terms or conditions of, constitute default
under or violate, accelerate or permit the acceleration of any other similar
right of any other party under, the Restated Certificate of Incorporation or
By-Laws of the Company, any law, rule or regulation or any agreement, lease,
mortgage, note, bond, indenture, license or other document or undertaking, to
which the Company is a party or by which the Company or its properties may be
bound, nor will such execution, delivery and consummation violate any order,
writ, injunction or decree of any federal, state, local or foreign court,
administrative agency or governmental or regulatory authority or body (each, an
"Authority") to which the
2
<PAGE>
Company or any of its properties is subject, the effect of any of which, either
individually or in the aggregate, would impair the ability of the Company to
perform its obligations hereunder.
Section 2. THE STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
The Stockholder represents and warrants to the Company as follows:
(a) The Stockholder is a Kommanditgesellschaft auf Aktien
validly existing under the laws of the Federal Republic of Germany;
(b) The Stockholder has the full power and authority to
execute, deliver and carry out the terms and provisions of this Agreement and
consummate the transactions contemplated hereby, and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Stockholder, and constitutes a legal, valid and
binding agreement of the Stockholder, enforceable against the Stockholder in
accordance with its terms, except to the extent that (i) such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to certain equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought;
(d) Except for 1,100,000 shares of Preferred Stock, neither
the Stockholder nor any of its Affiliates (for purposes of this Agreement, the
term "Affiliates" shall be defined as such term is defined on the date hereof
under the rules and regulations promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
Securities Act")), beneficially owns any equity securities of the Company
entitled to vote any meeting of stockholders of the Company ("Voting Securities"
which, for purposes of this Agreement, shall be deemed to be
3
<PAGE>
outstanding only if actually entitled to vote at the time the calculation of
outstanding Voting Securities is to be made) and, expect for the right to
acquire Shares pursuant to the Transaction Agreements and the Preferred Stock,
does not possess any rights to acquire any Voting Securities;
(e) The Stockholder is an "accredited investor" within the
meaning of Regulation D under the Securities Act and it is acquiring the Shares
for its own account and not with a view to the public distribution thereof; and
(f) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with,
result in the breach of any of the terms or conditions of, constitute a default
under or violate, accelerate or permit the acceleration of any other similar
right of any other party under, the charter or bylaws of the Stockholder, any
law, rule or regulation, or any agreement, lease, mortgage, note, bond,
indenture, license or other document or undertaking, to which the Stockholder is
a party or by which the Stockholder or its properties may be bound, nor will
such execution, delivery and consummation violate any order, writ, injunction or
decree of any Authority to which the Stockholder or any of its properties is
subject, the effect of any of which, either individually or in the aggregate,
would impair the ability of the Stockholder to perform its obligations
hereunder.
Section 3. COVENANTS AND AGREEMENTS OF THE STOCKHOLDER; EXTENSION
OF AGREEMENT PERIOD.
(a) During the Agreement Period (as defined below), except
(x) in connection with the consummation of the transactions contemplated by the
Transaction Agreements, (y) by way of stock dividend, stock split,
reorganization, recapitalization, merger, consolidation or other like
distributions made available to holders of Common Stock generally or (z) as
specifically permitted by the terms of this Agreement, the Stockholder will not,
and will cause each of its Affiliates not to, acquire, offer or propose to
acquire, or agree to acquire, directly or indirectly, by purchase or otherwise,
or exercise any attribute of beneficial ownership (as defined on the date hereof
in Rule 13d-3 of the Commis-
4
<PAGE>
sion under Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act")) with respect to, any equity
securities of the Company, or direct or indirect rights or options to acquire
(through purchase, exchange, conversion or otherwise) any equity securities of
the Company. The term "Agreement Period" means, except as otherwise provided
in paragraph (b) of this Section 3, the period beginning on the First Closing
Date (as defined in the Umbrella Agreement) (such date being referred to herein
as the "Closing Date") and ending the earlier of (i) two years after the later
of (A) the termination of the Joint Venture Agreement and (B) the Stockholder
beneficially owning less than 1% of outstanding Voting Securities and (ii) the
eighteenth anniversary of this Agreement.
(b) During the seventeenth year of the Agreement Period, the
Company and the Stockholder shall negotiate in good faith with respect to the
extension of the Agreement Period and the repurchase rights and obligations
provided for in Section 11.02 of the Joint Venture Agreement (the "Repurchase
Provisions"). Such extension, if agreed to, shall be for an additional period
of not less than two years. If as a result of such negotiations the Company and
the Stockholder determine not to extend the Agreement Period, the Company and
the Stockholder, by mutual consent, may terminate this Agreement prior to the
eighteenth anniversary. If, after negotiating for a period of six months
commencing on the sixteenth anniversary of this Agreement, the Company and the
Stockholder do not mutually agree to extend the Agreement Period and the
Repurchase Provisions and the Company exercises its right to purchase the Shares
as provided in Section 11.02 of the Joint Venture Agreement or the Stockholder
exercises its right to purchase the Company's interest in the Joint Venture as
provided in Section 11.02 of the Joint Venture Agreement, then the Agreement
Period shall be extended through the second anniversary of the closing date of
such purchase and sale.
(c) During the Agreement Period, except (i) upon the prior
written invitation of the Company and (ii) as otherwise specifically permitted
by this Agreement, the Stockholder will not, directly or indirectly, through one
or more intermediaries or otherwise, and will cause each of its Affiliates not
to, singly or as part of
5
<PAGE>
a partnership, limited partnership, syndicate or other group (as those terms are
used within the meaning of Section 13(d)(3) of the 1934 Act, which meanings
shall apply for all purposes of this Agreement):
(i) make, or in any way participate in, any
"solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A under the 1934 Act) with respect to any Voting Securities
(including by the execution of actions by written consent), become a
"participant" in any "election contest" (as such terms are defined or used
in Rule 14a-11 under the 1934 Act) with respect to the Company or seek to
advise, encourage or influence any person or entity with respect to the
voting of any Voting Securities; provided, however, that the Stockholder
shall not be prevented hereunder from being a "participant" in support of
the management of the Company, by reason of the membership of the
Stockholder's designees on the Company's Board of Directors or the
inclusion of the Stockholder's designees on the slate of nominees for
election to the Board of Directors proposed by the Company;
(ii) initiate, propose or otherwise solicit, or
participate in the solicitation of, stockholders for the approval of one
or more stockholder proposals with respect to the Company as described in
Rule 14a-8 under the 1934 Act or knowingly induce any other individual or
entity to initiate any stockholder proposal relating to the Company;
(iii) form, join or in any way participate in a "group,"
act in concert with any other person or entity or otherwise take any
action or actions which would cause it to be deemed a "person" (for
purposes of Section 13(d) of the 1934 Act) (other than to the extent it is
a "person" at the time of consummation of the transactions contemplated by
the Transaction Agreements and this Agreement), with respect to any
equity securities of the Company;
6
<PAGE>
(iv) participate in or encourage the formation of any
group which owns or seeks or offers to acquire beneficial ownership of
securities of the Company or rights to acquire such securities or which
seeks or offers to affect control of the Company or for the purpose of
circumventing any provision of this Agreement;
(v) solicit, seek or offer to effect, negotiate with
or provide any information to any party with respect to, make any
statement or proposal, whether written or oral, either alone or in concert
with others, to the Board of Directors of the Company, to any director or
officer of the Company or to any other stockholder of the Company with
respect to, or otherwise formulate any plan or proposal or make any public
announcement, proposal, offer or filing under the 1934 Act, any similar or
successor statute or otherwise, or take action to cause the Company to
make any such filing, with respect to: (A) any form of business
combination or transaction involving the Company (other than transactions
contemplated by this Agreement, including without limitation giving the
Company an Offer pursuant to Section 5(c) or the Transaction Agreements)
or any Affiliate thereof, including, without limitation, a merger,
exchange offer or liquidation of the Company's assets, (B) any form of
restructuring, recapitalization or similar transaction with respect to the
Company or any Affiliate thereof, including, without limitation, a merger,
exchange offer or liquidation of the Company's assets, (C) any acquisition
or disposition of assets material to the Company, (D) any request to
amend, waive or terminate the provisions of this Agreement or (E) any
proposal or other statement inconsistent with the terms of this Agreement;
provided, however, that the Stockholder and its Affiliates may discuss the
affairs and prospects of the Company, the status of the Stockholder's
investment in the Company and any of the matters described in clauses (A)
through (E) of this paragraph at any time, and from time to time, with the
Board
7
<PAGE>
of Directors of the Company or any director or executive officer of the
Company and the Stockholder may discuss any matter, including any of the
foregoing, with its outside legal and financial advisors, if as a result
of any such discussions the Stockholder is not required to make, and does
not make, any public announcement or filing under the 1934 Act otherwise
prohibited by this Agreement as a result thereof;
(vi) otherwise act, alone or in concert with others
(including by providing financing for another party), to seek or offer to
control or influence, in any manner, the management, Board of Directors or
policies of the Company; provided, however, that this provision shall not
prevent the Stockholder's designees form participating in, or otherwise
seeking to affect the outcome of, discussions and votes of the Board of
Directors of the Company with respect to matters coming before it; or
(vii) knowingly instigate or encourage any third party
to take any of the actions enumerated in this Section 3(d).
(d) During the Agreement Period, except as permitted by
Section 5(a)(ii) hereof, the Stockholder will not (i) merge with or into, or
consolidate or combine with, any other corporation unless (A) the Stockholder is
the surviving corporation or the surviving corporation and its Affiliates and
any person controlling it and any such controlling person's Affiliates agree in
writing to be bound by this Agreement and (B) after consummation of the
transaction, the surviving corporation and its Affiliates and any person
controlling it and any such controlling person's Affiliates do not beneficially
own equity securities of the Company in excess of the aggregate number of Shares
the Stockholder was permitted to own pursuant to this Agreement immediately
prior to the consummation of such transaction, or (ii) liquidate, dissolve or
otherwise make a distribution of all of its assets to its stockholders unless,
after such liquidation or other distribution, each person receiving equity
securities of the Company in such liquidation or
8
<PAGE>
other distribution and each of such person's Affiliates and each person
controlling such person and each of such controlling person's Affiliates does
not beneficially own equity securities of the Company representing 2% or more of
the total outstanding equity securities of the Company.
(e) During the Voting Agreement Period (as hereinafter
defined), the Stockholder shall be present, in person or by proxy, and without
further action hereby agrees that it shall be deemed to be present, at all
meetings of stockholders of the Company so that all Voting Securities
beneficially owned by the Stockholder shall be counted for purposes of
determining the presence of a quorum at such meetings. For a period of ten
years from the Closing Date, subject to extension as hereinafter provided (such
period, including any extensions thereof, the "Voting Agreement Period"), all
Voting Securities beneficially owned by the Stockholder and its Affiliates shall
be voted by the Stockholder and its Affiliates, at the option of the
Stockholder, either in accordance with the recommendation or direction of the
Company's Board of Directors or pro rata in the same manner and proportion that
votes of the stockholders of the Company, other than the Stockholder's and its
Affiliates' votes and the votes of all executive officers and directors of the
Company and of the members of their immediate families, have been cast;
provided, however, that the Stockholder and its Affiliates shall cast their
votes in accordance with the recommendation of the Company's Board of Directors
(i) in all elections of directors of the Company in which the designees of the
Stockholder are included in the slate of nominees in accordance with the terms
of this Agreement and (ii) on all matters (A) submitted to the vote of
stockholders of the Company which have been proposed by any stockholder or
stockholders, (B) affecting or regarding the compensation or benefits of
directors, officers or employees of the Company and (C) relating to matters
concerning the continued independent, publicly traded nature of the Company or
any potential change in control of the Company (other than the matters set forth
in items (V)-(X) below) or concerning federal or state statutes relating to such
matters; and provided, further, that the Stockholder and its Affiliates may vote
the Voting Securities owned by them as the Stockholder determines in its sole
discretion with respect to any of the following transactions initi-
9
<PAGE>
ated by the
Board of Directors of the Company which are presented at a meeting of
stockholders of the Company for their approval (any such transaction being
referred to herein as a "Strategic Transaction"): (V) any disposition of the
Company (by way of merger, sale of assets or otherwise) or a substantial part of
its assets, (W) any recapitalization of the Company (other than a
recapitalization for the purpose of forming a holding company or to effect a
change in the Company's state of incorporation), (X) any liquidation of, or
consolidation involving, the Company, (Y) any increase in the Company's
authorized shares or other amendment to the Restated Certificate of
Incorporation or By-Laws of the Company or (Z) any transaction not otherwise
provided for in this paragraph (e) that could reasonably be expected to have a
material effect on the Stockholder's investment in the Shares. The Voting
Agreement Period shall be extended automatically for a period of one year on the
last day of each year of the Voting Agreement Period (each a "Voting Extension
Date") unless, prior to any Voting Extension Date, the Stockholder delivers to
the Company a written notice of election that the Voting Agreement Period shall
not be extended for an additional one-year period. If the Stockholder elects
not to extend the Voting Agreement Period on or prior to any Voting Extension
Date, (i) the Voting Agreement Period shall not thereafter be extended and the
provisions contained in this Section 3(e) will terminate on the last day of the
Voting Agreement Period, and (ii) the Company shall have the right to repurchase
during the six-month period following the Stockholder's election, at the
Company's discretion either (A) the Shares held by the Stockholder, in whole or
in part, at any time at the Market Price (as hereinafter defined) of such Shares
on the date of the Company's notice to the Stockholder to repurchase Shares
pursuant to this Section 3(e) or (B) the Stockholder's entire interest in the
Joint Venture in accordance with the provisions of Section 11.06 of the Joint
Venture Agreement. The failure of the Company to deliver such notice to the
Stockholder during such six-month period shall constitute a waiver of the
Company's right under clause (ii) of the preceding sentence. In no event shall
the remaining term of the Voting Agreement Period exceed the Agreement Period.
10
<PAGE>
Section 4. THE STOCKHOLDER'S RIGHT TO PURCHASE.
(a) If, after the Closing Date, the Company issues any
additional Voting Securities (an "Additional Issuance"), except for issuances
pursuant to (i) any presently outstanding stock option, warrant, convertible
security or other right to purchase shares of any equity securities of the
Company, (ii) any benefit plan or other employee or director arrangement, (iii)
an employee stock ownership plan not in excess of 10% of the outstanding Voting
Securities or (iv) any stock split, stock dividend or similar distribution made
available to holders of Common Stock generally (each a "Permitted Issuance"),
then the Stockholder shall be entitled to purchase from the Company during the
90-day period following the date on which the Company has given the Stockholder
written notice of the occurrence of the Additional Issuance, at the then Market
Price of the Shares, that number of shares of Voting Securities obtained by
calculating (l) the product of (A) the quotient of (x) the number of shares of
Voting Securities owned by the Stockholder immediately prior to the Additional
Issuance divided by (y) the aggregate number of outstanding shares of Voting
Securities immediately prior to the Additional Issuance and (B) the aggregate
number of shares of Voting Securities being issued by the Company in the
Additional Issuance, rounded up to the nearest whole share and (2) subtracting
from such product the number of shares of Voting Securities, if any, issued to
the Stockholder and its Affiliates in such Additional Issuance; provided,
however, that the Stockholder shall not have the right to acquire any shares of
Voting Securities pursuant to this Section 4(a) to the extent that the
acquisition of such shares would result in the Stockholder owning more than the
applicable Permitted Percentage (as hereinafter defined) of outstanding Voting
Securities; provided further, however, that the failure of the Company to give
written notice of the occurrence of the Additional Issuance shall not prevent
the Stockholder from exercising its rights hereunder if it shall otherwise
become aware of the occurrence of the Additional Issuance.
(b) The Stockholder may purchase from time to time, in the
open market or in privately negotiated transactions, up to an aggregate number
of shares of Voting Securities which, when added to the shares of
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Voting Securities then owned by the Stockholder and its Affiliates, would result
in the Stockholder and its Affiliates owning no more than (i) 26% of the then
outstanding shares of Voting Securities prior to the ninth anniversary of the
Closing Date and (ii) 30% of the then outstanding shares of Voting Securities on
or after the ninth anniversary of the Closing Date (each such percentage, as
applied to its applicable period of time, being referred to herein as the
"Permitted Percentage").
(c) If within any consecutive 60-month or less period (a
"Measuring Period") commencing after September 11, 1990 the Company issues
additional Voting Securities (other than Voting Securities issued pursuant to
conversion or similar rights of the underlying Voting Securities) to any person
other than the Stockholder or its Affiliates, in a single issuance or series of
issuances, in an amount that would cause the percentage ownership of Voting
Securities of a holder of the applicable Permitted Percentage of Voting
Securities as of the end of the Measuring Period to be reduced to less than
two-thirds of such Permitted Percentage of the outstanding Voting Securities
(the date such event first occurs being the "Dilution Date"), then for a
six-month period commencing on the date on which the Company has given the
Stockholder written notice of the occurrence of the Dilution Date, the
stockholder shall have the option to purchase the Company's entire interest in
the Joint Venture in accordance with the provisions of Section 11.03 of the
Joint Venture Agreement; provided, however, that the failure of the Company to
give written notice of the occurrence of such event shall not prevent the
Stockholder from exercising its rights hereunder if it shall otherwise become
aware of the occurrence of the Dilution Date.
Section 5. DISPOSITIONS OF SHARES AND THE COMPANY'S RIGHT OF
FIRST REFUSAL.
(a) Except as otherwise provided in this Section 5, during
the Agreement Period and subject to the provisions of Section 5(c) hereof, the
Stockholder will not sell, transfer, pledge, encumber or dispose of, directly or
indirectly, any Shares except:
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(i) to the Company or in a transaction approved by the
Board of Directors of the Company;
(ii) to an Affiliate of the Stockholder provided that
such Affiliate agrees to be bound by this Agreement;
(iii) in any transaction permitted by Section 3(d);
(iv) after the fifth anniversary of the date hereof, to
a person other than the Stockholder or any Affiliate of the Stockholder (a
"Third Person") pursuant to Rule 144 under the Securities Act; provided,
however, that (A) the Stockholder will use all reasonable efforts to
insure that such Third Person and such Third Person's Affiliates, or any
group such Third Person may be a member of shall not hold in the aggregate
more than 2% (any such Third Person who would hold in excess of such limit
being referred to herein as a "Prohibited Holder") of the outstanding
Voting Securities after such transaction or (B) such Third Person agrees
in writing to be bound by the terms of this Agreement and the Board of
Directors of the Company approves such transaction;
(v) after the fifth anniversary of the date hereof, in
a valid private placement to a person that (A) the Stockholder reasonably
believes after due inquiry would not be a Prohibited Holder following such
transaction and obtains a written representation from the purchaser to
that effect or (B) agrees in writing to be bound by the terms of this
Agreement and the Board of Directors approves such transaction;
(vi) after the fifth anniversary of the date hereof,
pursuant to an underwritten public offering under the Securities Act in
accordance with the terms for registration rights attached hereto as
Exhibit A, pursuant to which the managing underwriter agrees to effect the
sale of the Voting Securities in a
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manner which will effect a broad distribution thereof and provided that
the Stockholder shall use all reasonable efforts to insure that no sales
of Voting Securities are made to any Prohibited Holder (other than the
underwriters or any selected dealers);
(vii) pursuant to any tender or exchange offer made
pursuant to Section 14(d) of the 1934 Act by a person with respect to
which the Company does not recommend rejection (it being understood that
the Stockholder may not tender its Shares pursuant to such tender or
exchange offer until the Company has publicly taken a position with
respect to such offer or has stated that it will remain neutral or is
unable to take a position with respect thereto) in accordance with Rule
14e-2 of the 1934 Act, any successor regulation or otherwise; or
(viii) to a bona fide financial institution in connection
with the grant of a pledge or other encumbrance securing a bona fide loan
so long as the pledgee agrees in writing prior to the execution of the
pledge that upon any transfer to the pledgee of any Shares upon any
foreclosure, such Shares and the pledge thereof will remain and become
subject to the restrictions contained in this Agreement.
The Stockholder shall give the Company notice promptly upon the disposition
hereunder of any Shares. Purchases, transfers or other distributions of Shares
in violation of the provisions of this Agreement shall be null and void and the
Shares subject to such purchase, transfer or other disposition shall remain
subject to this Agreement.
(b) If at any time and from time to time the Company
repurchases or acquires any outstanding Voting Securities by means of a share
repurchase program, a self-tender offer or otherwise (a "Share Repurchase") such
that the percentage of outstanding Voting Securities owned by the Stockholder
and its Affiliates is greater than the applicable Permitted Percentage and the
Company so requests by written notice to the Stockholder, the Stockholder,
notwithstanding the provisions of Section
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5(a) hereof, shall, or shall cause its Affiliates to, sell, within six months
after the date on which the Stockholder receives the Company's written notice,
Voting Securities as required in accordance with the terms of this Agreement so
that the percentage of outstanding shares of Voting Securities owned by the
Stockholder and its Affiliates shall not exceed the applicable Permitted
Percentage; provided, however, that the Stockholder and its Affiliates shall use
all reasonable efforts to insure that sales of Voting Securities are not made to
any Prohibited Holder; provided further, however, that if the Stockholder or any
of its Affiliates is required to dispose of Shares pursuant to this Section 5(b)
and such disposition during such six-month period would result in liability to
the Stockholder or such Affiliate under Section 16(b) of the 1934 Act or any
similar statute that may replace it, then the six-month period during which the
Stockholder or such Affiliate shall be required to dispose of Shares pursuant to
this Section 5(b) shall begin on the first date on which the Stockholder and
such Affiliate may dispose of Shares without incurring liability under Section
16(b) of the 1934 Act as a result of such disposition. If the Stockholder and
its Affiliates fail to reduce their holdings of Voting Securities within six
months after the Company so requests in connection with a Share Repurchase (or
such longer period not to exceed seven (7) months as provided in the second
proviso to the preceding sentence), in addition to any other remedies the
Company may have, the Company shall be entitled to repurchase from the
Stockholder or its Affiliates, from time to time for a period of 90 days
thereafter, at the greater of (x) the Market Price of such Shares on the date of
the Company's notice to the Stockholder to repurchase Shares pursuant to this
Section 5(b) and (y) the highest price paid per share by the Company in such
Share Repurchase during the 30-day period prior to the date on which the
Stockholder receives the written notice referred to in the first sentence of
this Section 5(b), such number of shares of Voting Securities as will reduce the
Stockholder's and its Affiliates' aggregate percentage ownership of Voting
Securities to the applicable Permitted Percentage.
(c) During the Agreement Period, notwithstanding any other
provision of this Agreement, any sale, transfer or other disposition of the
Shares by the Stockholder permitted by this Agreement shall not be made
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without first making an offer in writing to sell such Shares to the Company at
the bona fide proposed price per share (the "Offer Price"), and upon such other
bona fide terms and conditions upon which the Stockholder proposes to make such
sale, transfer or disposition (the "Offer"). Upon receipt of such Offer (which
shall also set forth the method of payment, the amount and class of Shares to be
sold, the identity (if known) of the person or persons to whom the Stockholder
proposes to sell, transfer or otherwise dispose of such Shares, the other
material terms (to the extent known) upon which such sale is to be made and all
other relevant information reasonably requested by the Company), the Company
shall have that number of days set forth in the following sentence within which
to accept such Offer by delivering a written notice to the Stockholder
irrevocably electing to purchase all, but not less than all, of the Shares
covered thereby. Subject to Section 5(f), if the Offer is with respect to
Shares having an aggregate market value on the date of such notice (a) of less
than or equal to $50 million, the Company shall have 5 days to accept such
Offer, (b) greater than $50 million and less than or equal to $150 million, the
Company shall have 10 days to accept such Offer, (c) greater than $150 million
and less than or equal to $250 million, the Company shall have 15 days to accept
such Offer or (d) greater than or equal to $250 million, the Company shall have
20 days to accept such Offer, provided, however, that if the proposed sale is to
be made pursuant to a tender or exchange offer, the Company shall have one day
less than the number of days remaining before the tender or exchange offer
expires to accept such Offer. If the Company elects to accept such Offer, the
closing of the purchase pursuant thereto shall occur, with payment in
immediately available funds, on the latest of (i) 20 days after the acceptance
by the Company of such Offer, (ii) the closing date provided for in the Offer or
(iii) the end of such period of time as the Company and the Stockholder may
reasonably require in order to comply with applicable laws and regulations.
Transfers pursuant to Section 5(a)(i), 5(a)(ii), 5(a)(iii) and 5(a)(viii) hereof
are not subject to the provisions of this Section 5(c).
(d) If the Offer specifies that the Shares are to be sold in
the market in a method whereby the price cannot be determined at the time of the
making of the Offer (as "Market Sale"), the purchase price for
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the Shares proposed to be sold shall be equal to the Market Price of such Shares
on the date of such Offer. For purposes of this Agreement, the term "Market
Price" shall mean the average of the daily Closing Prices of the Shares for the
20 consecutive trading days immediately prior to the date on which the Market
Price is to be determined. The "Closing Price" for each day with respect to any
securities shall be the last sale price of such securities on the national
securities exchange on which such securities are listed and principally traded
or, if such securities are not listed on any national securities exchange, as
reported by NASDAQ, or, if not so reported by NASDAQ, the average of the high
bid and low asked quotations for such securities as reported by the National
Quotations Bureau Incorporated or similar organization, or, if on any such date
such securities are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such securities mutually selected by the Company and the
Stockholder. Market Sales shall be deemed to be for cash.
(e) If the purchase price specified in the Offer includes any
property other than cash, such purchase price shall be deemed to be the amount
of any cash included in the purchase price plus the value (determined as
provided below) of such other property included in such price. The value of any
noncash property shall be determined in the following manner:
(i) The value of securities which are publicly traded
shall be deemed to be the Market Price of such securities on the date of
the Offer; and
(ii) The value of any other property shall be
determined by an appropriate expert mutually selected by the Company and
the Stockholder. The determination of the dollar value of the noncash
consideration at issue by any such expert shall be made promptly (but in
no event more than 15 business days after receipt of the Offer) and shall
be conclusive and binding on all the parties hereto.
(f) The sale, transfer or other disposition to any third
party of such Voting Securities shall
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not be made until such determination referred to in Section 5(e)(ii) has been
completed and delivered to all the parties hereto. The Company shall have the
later of (i) five business days after the receipt of such determination by the
expert referred to in section 5(e)(ii) and (ii) the applicable time period set
forth in Section 5(c) within which to accept such Offer.
(g) If the Company has not exercised its option to purchase
the Shares pursuant to the Offer, the Stockholder shall be free, for a period of
60 days (or, if longer, 60 days from the effective date of a registration
statement under the Securities Act, if such registration is required) from the
date of the Company's rejection of the Offer (which, unless the Company shall
have given written notice of its rejection of the Offer, shall be deemed to have
occurred on the last day on which the Company could accept the Offer in
accordance herewith), to sell all of the Shares to the third-party transferee
subject to the provisions of this Agreement, at a price equal to or greater than
the price specified in the Offer and in the manner and on terms no less
favorable to the Stockholder than were specified in the Offer. If the Shares
are not sold within such 60-day period, they shall again become subject to the
procedures provided in this Section 5.
Section 6. ECONOMIC PARITY. If at any time during the Agreement
Period any person or group acquires beneficial ownership of Voting Securities,
whether pursuant to a tender or exchange offer made pursuant to Section 14(d) of
the 1934 Act as to which te Company has recommended that its stockholders reject
such offer or otherwise, such that such person or group beneficially owns more
than 50% of the outstanding Voting Securities (a "Change in Control
Transaction"), in addition to any other rights the Stockholder may have, the
Stockholder shall have the right for a period of six months after such person or
group acquires such beneficial ownership to deliver a purchase notice relating
to all, but not less than all, of the Shares then held by the Stockholder at
that time (the "Purchase Shares") to the Company. Within 20 days following
receipt of such notice, the Company shall notify the Stockholder of the
Company's election either to purchase the Purchase Shares in accordance with the
provisions of clause (i) of the following sentence or to make a payment to the
Stockholder in
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accordance with the provisions of clause (ii) of the following sentence. The
Company shall to the extent funds are legally available therefor (and, if not
then legally available therefor, as soon thereafter as such funds are legally
available therefor), either (i) purchase the Purchase Shares within 45 days
after receipt of notice of the Stockholder's exercise of such right (or, if
later, after such funds are legally available therefor), at the consideration
per Share equal to the highest price per share paid by such person or group in
acquiring Voting Securities (the "Offer Consideration") or (ii) pay to the
Stockholder 45 days after notice to the Stockholder of the Company's election to
make payment pursuant to the provisions of this clause an amount of cash
consideration per share for each Purchase Share equal to the positive difference
between (a) the Offer Consideration and (b) in the case of Purchase Shares held
by the Stockholder on the date of such payment, the Market Price on the day
before the payment and in the case of Purchase Shares sold by the Stockholder
after the Change in Control Transaction and prior to such payment, the amount
realized by the Stockholder pursuant to such dispositions, net of transaction
costs. If the Company elects to make a payment pursuant to clause (ii) of the
preceding sentence, the Company shall indemnify and hold the Stockholder
harmless against any adverse tax consequences suffered by the Stockholder as a
result of the Company's election to make a payment pursuant to clause (ii)
instead of purchasing the Purchase Shares pursuant to clause (i).
Section 7. LEGEND ON CERTIFICATES. The Stockholder hereby
acknowledges and agrees that each of the certificates representing the Shares
held by the Stockholder shall be subject to stop transfer instructions and shall
include the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY BE OFFERED OR SOLD ONLY IF
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE. THESE SHARES ARE SUBJECT TO CERTAIN
LIMITATIONS ON TRANSFER SET FORTH IN AN AGREEMENT DATED JUNE 26, 1991
BETWEEN ECOLAB INC. AND HENKEL KGaA INCLUDING, BUT NOT LIMITED TO,
RESTRICTIONS ON THE SALE, TRANSFER, PLEDGE, ENCUM-
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BRANCE OR OTHER DISPOSITION TO ANY PERSON AND THAT PERSON'S AFFILIATES OR
ANY GROUP THAT PERSON MAY BE A MEMBER OF THAT WOULD HOLD IN THE AGGREGATE
MORE THAN 2% OF THE OUTSTANDING VOTING SECURITIES AFTER SUCH TRANSACTION.
A COPY OF SUCH AGREEMENT IS ON FILE WITH THE SECRETARY OF ECOLAB INC.
Within one business day after receipt by the Company of a demand by
the Stockholder, the Company agrees to (i) terminate the stop transfer
instructions and remove the legend in connection with transfers pursuant to
Section 5(a)(vi) of this Agreement, (ii) terminate stop transfer instructions
and remove all but the first sentence of the above legend (A) in connection with
transfers pursuant to Section 5(a)(iv), 5(a)(v) and 5(a)(vii) and (B) after the
Agreement Period and (iii) remove the first sentence of the above legend if the
Company is furnished an opinion of counsel reasonably satisfactory to the
Company that such Shares may be freely transferred under applicable securities
laws.
Promptly upon the acquisition by the Stockholder of any shares of
Voting Securities other than pursuant to the Transaction Agreements, the
Stockholder shall surrender the certificates representing such Shares to the
Company and the Company shall place the last two sentences of the foregoing
legend on such certificates and thereafter reissue such certificates to the
Stockholder.
Section 8. DIRECTORS DESIGNATED BY THE STOCKHOLDER. As promptly
as practicable after the date which is one month after the Closing Date, the
Company will take or cause to be taken all necessary actions to appoint or elect
to the Board of Directors of the Company, and at each annual meeting of the
stockholders of the Company following the Closing Date and prior to the end of
the Agreement Period, the Company will nominate, or cause to be nominated, a
number of individuals (rounded to the nearest whole number) to be designated by
the Stockholder for election as members of the Board of Directors (which
designees shall not include individuals whose membership on the Board of
Directors would be a violation of law) such that the percentage of the total
number of members of the Board of Directors designated by the Stockholder equals
the percentage of Voting Securi-
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ties then beneficially owned by the Stockholder
and its Affiliates. The Board of Directors of the Company shall consider any
request by the Stockholder to increase the Stockholder's percentage
representation on the Board if between annual meetings the Stockholder's
percentage ownership of Voting Securities has increased such that the
Stockholder would be entitled to designate additional nominees to the Board of
Directors at the next annual meeting of the Board. The members of the Board of
Directors of the Company that have been designated by the Stockholder pursuant
to this Section 8 shall be allocated as equally as possible among the three
classes of the Company's Board of Directors. Upon the date the Stockholder is
no longer entitled to designate nominees for election to the Board of Directors
of the Company, the Stockholder shall cause the members of the Board of
Directors of the Company that have been designated by the Stockholder to resign
from the Board of Directors, effective immediately.
Section 9. COVENANTS OF THE COMPANY.
(a) ISSUANCE OF SECURITIES HAVING DISPROPORTIONATE VOTING
RIGHTS. During the Agreement Period, the Company shall not issue Voting
Securities having voting rights disproportionately greater than the equity
investment in the Company represented by such Voting Securities.
(b) For so long as the Stockholder owns Shares which
represent more than 2% of the voting power of the Company's then outstanding
Voting Securities:
(i) the Company, as soon as practicable and in any
event within 50 days after the end of each quarterly period (other than
the last quarterly period) in each fiscal year, will furnish to the
Stockholder statements of consolidated net income and cash flows and a
statement of changes in consolidated stockholders' equity of the Company
and its subsidiaries for the period from the beginning of the then current
fiscal year to the end of such quarterly period, and a consolidated
balance sheet of the Company and its subsidiaries as of the end of such
quarterly period, setting forth in each case in comparative form figures
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for the corresponding period or date in the preceding fiscal year, all in
reasonable detail and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments;
PROVIDED, HOWEVER, that delivery pursuant to paragraph (iii) below of
a copy of the Quarterly Report on Form 10-Q (without exhibits unless
requested by the Stockholder) of the Company for such quarterly period
filed with the Commission shall be deemed to satisfy the requirements of
this paragraph (i);
(ii) the Company, as soon as practicable and in any
event within 95 days after the end of each fiscal year, will furnish to
the Stockholder statements of consolidated net income and cash flows and a
statement of changes in consolidated stockholders' equity of the Company
and its subsidiaries for such year, and a consolidated balance sheet of
the Company and its subsidiaries as of the end of such year, setting forth
in each case in comparative form the corresponding figures for the
preceding fiscal year, all in reasonable detail and examined and reported
on by independent public accountants of recognized standing selected by
the Company; PROVIDED, HOWEVER, that delivery pursuant to paragraph
(iii) below of a copy of the Annual Report on Form 10-K (without exhibits
unless requested by the Stockholder) of the Company for such fiscal year
filed with the Commission shall be deemed to satisfy the requirements of
this paragraph (ii);
(iii) the Company, promptly upon transmission thereof,
will furnish to the Stockholder copies of all such financial statements,
proxy statements, notices and reports as it shall send to its stockholders
and copies of all such registration statements (without exhibits) and all
such regular and periodic reports as it shall file with the Commission;
and
(iv) the Company will furnish to the Stockholder such
other nonconfidential
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financial data of the Company and its Subsidiaries as the Stockholder may
reasonably request.
Section 10. EXCEPTIONS TO RESTRICTIONS. Notwithstanding anything
contained in this Agreement to the contrary, the restrictions set forth in
Sections 3(a), 3(c), 3(d), 3(e) and 5 shall terminate and be of no further force
and effect upon the occurrence of any of the following events:
(a) (i) At any time, any Third Person (other than the
Company, an employee stock ownership plan or other pension, stock bonus or stock
incentive plan of the Company or any of its subsidiaries) is or becomes the
beneficial owner of, or makes a tender or exchange offer pursuant to Section
14(d) of the 1934 Act with respect to which the Company does not recommend
rejection (it being understood that such restrictions shall not be terminated
until the Company has publicly taken a position with respect to such offer or
has stated that it will remain neutral or is unable to take a position with
respect thereto) in accordance with Rule 14e-2 of the 1934 Act, any successor
regulation or otherwise for, an amount of Voting Securities greater than
one-half of the excess of (A) the number of outstanding Voting Securities over
(B) the number of Voting Securities which result from multiplying the number of
outstanding Voting Securities by the then Permitted Percentage of Voting
Securities, (ii) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof or (iii) at any time any
Third Person, by way of ownership of Voting Securities, representation on the
Board of Directors of the Company or both, is in fact controlling the operations
of the Company;
(b) The Company's Board of Directors determines to effect, or
to solicit proposals to effect,
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a Sale of the Company or causes the Company to enter into a definitive agreement
providing for the Sale of the Company; or
(c) The Company shall fail in any material respect to comply
with any of its material obligations hereunder.
For purposes of this Section 10, a "Sale of the Company" shall mean a merger
(other than a merger for the purpose of forming a holding company or to effect a
change in the Company's state of incorporation), combination or, in any one or
more related transactions, sale of all or substantially all of the Company's
assets as a result of which the Directors of the Company immediately prior to
such transaction do not represent a majority of the board of directors, or the
stockholders of the Company immediately prior to such transaction do not
continue to own equity securities representing more than 50% of the vote and of
the equity of the Company, of the ultimate controlling corporation following
such merger or combination or succeeding to ownership of all or substantially
all of the Company's assets.
Section 11. AFFILIATES. A person or entity who at any time may
be an Affiliate of the Stockholder shall be deemed to be an Affiliate of the
Stockholder for purposes of this Agreement while such person is an Affiliate of
the Stockholder regardless of whether such person was such an Affiliate on the
date hereof.
Section 12. SPECIFIC PERFORMANCE. Each of the parties hereto
recognizes and acknowledges that this Agreement is an integral part of the
transactions contemplated in the Transaction Agreements, that the Company would
not have entered into the Transaction Agreements unless this Agreement was
executed and that a breach by a party of any covenants or agreements contained
in this Agreement will cause the other party to sustain injury for which it
would not have an adequate remedy at law for money damages. Therefore each of
the parties hereto agrees that in the event of any such breach, the aggrieved
party shall be entitled to the remedy of specific performance of such covenants
and agreements and preliminary and permanent injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity, and the parties hereto further
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agree to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such injunctive or other equitable relief.
Section 13. AMENDMENT AND MODIFICATION. This agreement may be
amended, modified and supplemented only by written agreement of the Stockholder
and the Company.
Section 14. NOTICES. All notices, requests, demands and other
communications required or permitted shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier or air courier guaranteeing
overnight delivery:
(a) If to the Stockholder, to:
Henkel KGaA
Henkelstrasse 67, Postfach 1100
D-4000 Dusseldorf 1, West Germany
Attention: General Counsel
(with a copy to:)
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Alan Appelbaum, Esq.
or to such other person or address as the Stockholder shall furnish to the
Company;
(b) If to the Company, to:
Ecolab Inc.
Ecolab Center
St. Paul, Minnesota 55102
Attention: General Counsel
(with a copy to:)
Skadden, Arps, Slate,
Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Charles W. Mulaney,
Jr., Esq.
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<PAGE>
or to such other person or address as the Company shall furnish to the
Stockholder in writing.
All such notices, requests, demands and other communications shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Section 15. SEVERABILITY. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall fail to be
in effect only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement or of any such provision.
Section 16. ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but except as otherwise
provided for or permitted herein neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other party.
Section 17. GOVERNING LAW. This Agreement and the legal
relations among the parties hereto shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
conflicts-of-law doctrine.
Section 18. JURISDICTION AND VENUE. Each of the Company and the
Stockholder hereby agrees that any proceeding relating to this Agreement shall
be brought in a state court of Delaware. Each of the Company and the
Stockholder hereby consents to personal jurisdiction in any such action brought
in any such Delaware court, consents to service of process by registered mail
made upon such party and such party's agent and waives any objection to venue in
any such Delaware court or to any claim that any such Delaware court is an
inconvenient forum.
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Section 19. COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 20. HEADINGS. The headings of the Sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
Section 21. ENTIRE AGREEMENT. This Agreement and the Transaction
Agreements set forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and supersede all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto, except that the Stock Purchase Agreement,
dated as of December 11, 1989, by and among the Stockholder, HC Investments,
Inc. and the Company, as amended, and the Confidentiality Agreement dated as of
November 13, 1989 between the Stockholder and the Company shall remain in effect
until the earlier of (x) the Closing Date and (y) the date on which each such
agreement terminates in accordance with its terms.
Section 22. THIRD PARTIES. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation, other than the
parties hereto and their successors or assigns, any rights or remedies under or
by reason of this Agreement.
Section 23. TAX REPORTING. The Stockholder agrees to provide the
Company with, and shall retain, for the time periods prescribed by law, all of
the information concerning the Stockholder and its Subsidiaries which is
reasonably required to be included in the Company's tax returns as a result of
the Stockholder's direct and/or indirect ownership of Common Stock. The Company
and the Stockholder agree that the Stockholder shall have no liability under
this Section 23 if the Stockholder shall have retained the same type and amount
of information concerning transactions and relationships between
27
<PAGE>
the Stockholder and its Subsidiaries on the one hand and the Company on the
other hand as it retains concerning transactions and relationships between the
Stockholder and its Subsidiaries on the one hand and Henkel of America Inc. and
its Subsidiaries on the other hand as prescribed by law.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be duly executed, all as of the day and year first above
written.
Henkel KGaA Ecolab Inc.
/s/ Gruter /s/ Steinebach By: /s/ James M. Millsap
- ----------------------------- -----------------------------
Title:
HC Investments Inc.
____________________________
Agreeing to be bound by the
terms hereof as if it were a
party hereto
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EXHIBIT A
REGISTRATION RIGHTS
Capitalized terms used herein shall have the meanings defined in the
Stockholder's Agreement.
1. "PIGGYBACK" REGISTRATION. Whenever the Company proposes to
file a registration statement relating to any of its capital stock under the
Securities Act (other than a registration statement required to be filed in
respect of employee benefit plans of the Company on Form S-8 or any similar form
from time to time in effect or any registration statement on Form S-4 or similar
successor form), the Company shall, at least twenty-one days (or if such
twenty-one day period is not practicable, then a reasonable shorter period which
shall not be less than seven days) prior to such filing, give written notice of
such proposed filing to the Stockholder. Upon receipt by the Company not more
than seven days (unless the notice given to the Stockholder pursuant to the
previous sentence is less than ten days, in which case such seven-day period
shall be shortened to five days) after such notice of a written request from the
Stockholder for registration of Shares (i) the Company shall include such Shares
in such registration statement or in a separate registration statement
concurrently filed, and shall use all reasonable efforts to cause such
registration statement to become effective with respect to such Shares, unless
the managing underwriter therefor concludes in its reasonable judgment that
compliance with this clause (i) would materially adversely affect such offering,
in which event the Company shall cause such Shares to be registered under a
separate registration statement a limited period of time thereafter, which in no
event shall be more than 60 days and (ii) if such proposed registration is in
connection with an underwritten offering of Common Stock, upon request of the
Stockholder, the Company shall use all reasonable efforts to cause the managing
underwriter therefor to include in such offering the Shares as to which the
Stockholder requests such inclusion, on terms and conditions comparable to those
of the securities offered on behalf of the Company, unless the managing
underwriter therefor concludes in its reasonable judgment that the inclusion of
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such Shares in such offering would materially adversely affect such offering.
2. DEMAND REGISTRATION. If the Company shall receive at any
time or from time to time a written request from the Stockholder requesting the
Company to register under the Securities Act on Form S-3 (or if the Company is
not eligible to use Form S-3, then on Form S-1 or S-2), or any other similar
form then in effect, at least 500,000 Shares, the Company agrees that it will
use all reasonable efforts to cause the prompt registration of all Shares as to
which such request is made. The Company may postpone for a limited time, which
in no event shall be longer than 90 days, compliance with a request for
registration pursuant to this Section 2 if (i) such compliance would materially
adversely affect (including, without limitation, through the premature
disclosure thereof) a proposed financing, reorganization, recapitalization,
merger, consolidation or similar transaction or (ii) the Company is conducting a
public offering of capital stock and the managing underwriter concludes in its
reasonable judgment that such compliance would materially adversely affect such
offering. Notwithstanding anything in this Section 2 to the contrary, the
Company shall not be required to: (a) comply with more than two (2) requests of
the Stockholder pursuant to this Section 2 in any twelve (12) month period or
(b) prepare or cause to be prepared audited financial statements of the Company
other than those prepared in the normal course of the Company's business at its
fiscal year end. Any underwriter selected by the Stockholder to act as such in
connection with a registration pursuant to this Section 2 shall be reasonably
acceptable to the Company.
3. GENERAL PROVISIONS. The Company will use all reasonable
efforts to cause any registration statement referred to in Sections 1 and 2 to
become effective and to remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the earlier of 45 days from the
effective date of the registration statement and the date the Stockholder
completes its distribution of Shares. The Company will use all reasonable
efforts to effect such qualifications under applicable Blue Sky or other state
securities laws as may be reasonably requested by the Stockholder (provided that
the Company shall not be obligated to file a general
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consent to service of process or qualify to do business as a foreign corporation
or otherwise subject itself to taxation in any jurisdiction solely for the
purpose of any such qualification) to permit or facilitate such sale or other
distribution. The Company will cause the Shares to be listed on the principal
stock exchange on which the shares of Common Stock are listed.
4. INFORMATION, DOCUMENTS, ETC. Upon making a request for
registration pursuant to Sections 1 or 2, the Stockholder shall furnish to the
Company such information regarding its holdings and the proposed manner of
distribution thereof as the Company may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to herein. The Company agrees that it will furnish to the Stockholder
the number of prospectuses, offering circulars or other documents, or any
amendments or supplements thereto, incident to any registration, qualification
or compliance referred to herein as the Stockholder from time to time may
reasonably request.
5. EXPENSES. The Company will bear all expenses of
registration (other than underwriting discounts and commissions and brokerage
commissions and fees, if any, payable with respect to Shares sold by the
Stockholder and fees and expenses of counsel and any accountants for the
Stockholder), including, without limitation, registration fees, printing
expenses, expenses of compliance with Blue Sky or other state securities laws,
and legal and audit fees incurred by the Company in connection with such
registration and amendments or supplements in connection therewith.
6. COOPERATION. In connection with any registration of Shares,
the Company agrees to:
(a) enter into such customary agreements (including an
underwriting agreement containing such representations and warranties by the
Company and such other terms and provisions, including indemnification
provisions, as are customarily contained in underwriting agreements for
comparable offerings and, if no underwriting agreement is entered into, an
indemnification agreement on such terms as is customary in transactions of such
nature) and take all such other actions as the Stockholder or the underwriters,
if any, participat-
A-3
<PAGE>
ing in such offering and sale may reasonably request in order
to expedite or facilitate such offering and sale;
(b) furnish, at the request of the Stockholder or any
underwriters participating in such offering and sale, (i) a comfort letter or
letters, dated the date of the final prospectus with respect to the Shares
and/or the date of the closing for the sale of the Shares from the independent
certified public accountants of the Company and addressed to the Stockholder and
any underwriters participating in such offering and sale, which letter or
letters shall state that such accountants are independent with respect to the
Company within the meaning of Rule 1.01 of the Code of Professional Ethics of
the American Institute of Certified Public Accountants and shall address such
matters as the Stockholder and underwriters may reasonably request and as may be
customary in transactions of a similar nature for similar entities and (ii) an
opinion, dated the date of the closing for the sale of the Shares, of the
counsel representing the Company with respect to such offering and sale (which
counsel may be the General Counsel of the Company or other counsel reasonably
satisfactory to the Stockholder), addressed to the Stockholder and any such
underwriters, which opinion shall address such matters as they may reasonably
request and as may be customary in transactions of a similar nature for similar
entities;
(c) make available for inspection by the Stockholder, the
underwriters, if any, participating in such offering and sale (which inspecting
underwriters shall, if reasonably possible, be limited to any manager or
managers for such participating underwriters), the counsel for the Stockholder,
one accountant or accounting firm retained by the Stockholder and any such
underwriters, or any other agent retained by the Stockholder or such
underwriters, all financial and other records, corporate documents and
properties of the Company, and supply such additional information, as they shall
reasonably request; PROVIDED that any such party shall keep the contents
thereof confidential in the manner prescribed by Section 7.07 of the Umbrella
Agreement.
7. ACTION TO SUSPEND EFFECTIVENESS; SUPPLEMENT TO REGISTRATION
STATEMENT. (a) The Company will notify the Stockholder and its counsel
promptly of (i) any action by the Commission to suspend the effectiveness
A-4
<PAGE>
of the registration statement covering the Shares or the institution or
threatening of any proceeding for such purpose (a "stop order") or (ii) the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. Immediately upon receipt of any
such notice, the Stockholder shall cease to offer or sell any Shares pursuant to
the registration statement in the jurisdiction to which such stop order or
suspension relates. The Company will use all reasonable efforts to prevent the
issuance of any such stop order or the suspension of any such qualification and,
if any such stop order is issued or any such qualification is suspended, to
obtain as soon as possible the withdrawal or revocation thereof, and will notify
the Stockholder and its counsel at the earliest practicable date of the date on
which the Stockholder may offer and sell Shares pursuant to the registration
statement.
(b) Within the applicable period referred to in Section 3
following the effectiveness of a registration statement filed pursuant to these
registration rights, the Company will notify the Stockholder and its counsel
promptly of the occurrence of any event or the existence of any state of facts
that, in the judgment of the Company, should be set forth in such registration
statement. Immediately upon receipt of such notice, the Stockholder shall cease
to offer or sell any Shares pursuant to such registration statement, cease to
deliver or use such registration statement and, if so requested by the Company,
return to the Company, at its expense, all copies (other than permanent file
copies) of such registration statement. The Company will, as promptly as
practicable, take such action as may be necessary to amend or supplement such
registration statement in order to set forth or reflect such event or state of
facts. The Company will furnish copies of such proposed amendment or supplement
to the Stockholder and its counsel and will not file or distribute such
amendment or supplement without the prior consent of the Stockholder, which
consent shall not be unreasonably withheld.
A-5
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated November 2, 1994, among Ecolab Inc., a Delaware corporation ("Parent"),
EKH, Inc. I, a North Carolina corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), EKH, Inc. II, a North Carolina corporation and a wholly
owned subsidiary of Parent ("Merger Sub II"), EKH, Inc. III, a North Carolina
corporation and a wholly owned subsidiary of Parent ("Merger Sub III" and
together with Merger Sub and Merger Sub II, the "Merger Subsidiaries"), Kay
Chemical Company, a North Carolina corporation (the "Company"), Kay Chemical
International, Inc., a North Carolina corporation ("Kay International"), Kay
Europe, Inc., a North Carolina corporation ("Kay Europe," and together with Kay
International and the Company, the "Related Companies") and the stockholders of
the Related Companies listed on Schedule I (each a "Stockholder" and
collectively the "Stockholders").
RECITALS
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
each have determined that it is in the best interests of their respective
stockholders for Merger Sub to merge with and into the Company upon the terms
and subject to the conditions of this Agreement;
WHEREAS, Parent and the Stockholders desire that, concurrently with
the Merger, Merger Sub II be merged with and into Kay International and Merger
Sub III be merged with and into Kay Europe (collectively, the "Affiliate
Mergers");
WHEREAS, in connection with the Merger and the Affiliate Mergers,
Parent and the Stockholders desire that the Stockholders grant Parent an option
with respect to purchasing all of the outstanding capital stock of Kay
Caribbean, Inc., an affiliate of the Related Companies ("KC");
<PAGE>
WHEREAS, Parent, the Merger Subsidiaries, the Related Companies and
the Stockholders desire to make certain representations, warranties, covenants
and agreements in connection with the Merger (as hereinafter defined) and the
Affiliate Mergers;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger and each of the Affiliate Mergers shall qualify as a reorganization under
the provisions of Section 368(a) of the United States Internal Revenue Code of
1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger and
each of the Affiliate Mergers shall be accounted for as a "pooling of
interests"; and
WHEREAS, Parent and the Stockholders intend to enter into the Escrow
Agreement (as defined in Section 9.5 hereof) in connection with the Merger and
the Affiliate Mergers.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein and the
merger agreements with respect to the Affiliate Mergers (the "Affiliate Merger
Agreements"), Parent, the Merger Subsidiaries, the Related Companies and the
Stockholders hereby agree as follows:
Article 1
The Merger; Effective Time; Closing
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement and the North Carolina Business Corporation Act (the "NCBCA"), at the
Effective Time (as hereinafter defined), the Company and Merger Sub shall
consummate a merger (the "Merger") in which (a) Merger Sub shall be merged with
and into the Company and the separate corporate existence of Merger Sub shall
thereupon cease, (b) the Company shall be the successor or surviving corporation
in the Merger and shall continue to be governed by the laws of the State of
North Carolina, and (c) the separate corporate existence of the Company with all
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the
2
<PAGE>
Merger. The corporation surviving the Merger is sometimes hereinafter referred
to as the "Surviving Corporation."
1.2 EFFECTIVE TIME. Subject to the terms and conditions of this
Agreement, Parent, Merger Sub and the Company will cause the appropriate
Articles of Merger (the "Articles of Merger") to be executed and filed on the
date of the Closing (as hereinafter defined) (or on such other date as Parent
and the Company may agree) with the Secretary of State of the State of North
Carolina in the manner provided in the NCBCA. The Articles of Merger shall
specify that the Merger shall become effective at 12:01 a.m., Raleigh, North
Carolina time, on the day following the Closing Date, and such time is
hereinafter referred to as the "Effective Time."
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in North Carolina law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 CLOSING. The closing of the Merger (the "Closing") shall take
place (a) at the offices of Skadden, Arps, Slate, Meagher & Flom, 333 West
Wacker Drive, Chicago, Illinois 60606, as soon as practicable following (but not
later than 10:00 a.m. on the second business day following) the date on which
the last of the conditions set forth in Sections 7.1(c), (d) and (i) and
Sections 7.2(c) and (f) hereof shall be fulfilled or waived in accordance with
this Agreement (the "Closing Date") or (b) at such other place, time and date as
Parent and the Company may agree; provided, however, that if on the scheduled
Closing Date any of the other conditions to closing set forth in Article 7 have
not been satisfied then the Closing Date shall be postponed for up to 10
business days to enable the parties to seek to satisfy such other conditions
prior to the rescheduled Closing Date, provided further that if, after such 10-
business-day period, the other conditions to closing have not been satisfied (A)
as a result of a breach by any of the Related Companies or the Stockholders,
Parent may termi-
3
<PAGE>
nate this Agreement and the Merger may be abandoned, (B) as a result of a breach
by Parent or any of the Merger Subsidiaries, the Company may terminate this
Agreement and the Merger may be abandoned, or (C) as a result of some action,
condition or event which is not the result of a breach by any party, either
party may terminate this Agreement and the Merger may be abandoned, in each
case, in accordance with Article 8.
ARTICLE 2
Articles of Incorporation and Bylaws
of the Surviving Corporation
2.1 ARTICLES OF INCORPORATION. At the Effective Time and in
accordance with the NCBCA, the Articles of Incorporation of the Company shall be
amended in its entirety in the Merger by adoption of the Articles of
Incorporation of Merger Sub, except that the name of the Surviving Corporation
initially shall be "Kay Chemical Company."
2.2 THE BYLAWS. At the Effective Time and without any further action
on the part of the Company, Merger Sub or the Surviving Corporation, the Bylaws
of Merger Sub shall be the Bylaws of the Surviving Corporation.
ARTICLE 3
Directors and Officers
of the Surviving Corporation
3.1 DIRECTORS. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified.
3.2 OFFICERS. The officers of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified.
4
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ARTICLE 4
Merger Consideration;
Conversion or Cancellation
of Shares in the Merger
4.1 CONSIDERATION FOR THE MERGER; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER. The manner and basis of converting or canceling shares of
the Company and Merger Sub in the Merger shall be as follows:
(a) At the Effective Time, each share of Class A voting common
stock, par value $1.00 per share, and Class B non-voting common stock, par value
$1.00 per share, of the Company (collectively the "Shares") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into 17.642155 shares (the "Exchange Ratio") of common stock, par value $1.00
per share, of Parent ("Parent Common Stock") together with the associated rights
(the "Parent Rights") to purchase shares of Series A Junior Participating
Preferred Stock of Parent issued pursuant to the Amended and Restated Rights
Agreement dated, February 14, 1986, as amended and restated on July 15, 1988,
and as further amended, between Parent and Morgan Shareholder Services Trust
Corporation as Rights Agent (the "Parent Rights Agreement") (the shares of
Parent Common Stock together with the Parent Rights are referred to herein as
the "Parent Shares").
(b) All Shares to be converted into Parent Shares pursuant to
this Section 4.1 shall, by virtue of the Merger and without any action on the
part of the holders thereof, cease to be outstanding, be canceled and retired
and cease to exist, and each holder of a certificate representing any such
Shares shall thereafter cease to have any rights with respect to such Shares,
except the right to receive for each of the Shares, upon the surrender of such
certificate in accordance with Section 4.3, the amount of Parent Shares
specified above (the "Merger Consideration").
(c) At the Effective Time, each share of common stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Merger Sub
5
<PAGE>
or the holder thereof, be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(d) If between the date of this Agreement and the Effective
Time, the outstanding Parent Shares shall be changed into a different number of
shares or a different class by reason of any reclassification, reorganization,
consolidation, merger, recapitalization, split-up, combination or exchange of
shares or if a stock dividend thereon shall be declared with a record date
within said period, the number of Parent Shares to be issued in the Merger shall
be appropriately adjusted.
(e) The certificates representing Parent Shares issuable to the
Stockholders pursuant to this Section 4.1 shall bear the following legend:
"The securities represented hereby may not be offered, sold, or
otherwise transferred, pledged or hypothecated unless registered under
the Securities Act of 1933, as amended, or unless a transfer, pledge
or hypothecation is in accordance with the provisions of Rule 144
under such act or otherwise exempt from the registration requirements
of such act."
The Stockholders will comply with the above restriction, provided, however, that
it is agreed and acknowledged that any such legend shall be removed promptly
upon the receipt of a notice from the Stockholders that such shares will be
transferred pursuant to a binding agreement (including by a confirmation of a
public sale) in connection with an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect to such
Parent Shares, provided that if such shares are not so transferred the legend
shall be reapplied to such shares. Parent agrees to cooperate with the
Stockholders to remove the legend in order to facilitate sales in accordance
with the Securities Act.
4.2 MERGER CONSIDERATION ADJUSTMENT. As soon as practicable, but in
no event later than 90 days following the Closing Date, Parent shall prepare a
consolidated balance sheet of the Related Companies as of the close of business
on the Closing Date (including the notes thereto, the "Closing Date Balance
Sheet"), a
6
<PAGE>
related consolidated statement of income for the period from January 1, 1994
through the close of business on the Closing Date (including the notes thereto,
the "Closing Date Income Statement") and a calculation of the Formula Net Book
Value (as defined in Section 4.2(e)), audited by Coopers & Lybrand L.L.P.,
certified public accountants (the "Accountants"). The Stockholders shall
request Bernard Robinson & Co. to (i) close the books for the Related Companies
and prepare normal year-end financial statements for delivery to Parent and the
Accountants and (ii) cooperate with Parent and the Accountants in the
preparation of the Closing Date Balance Sheet, Closing Date Income Statement and
the calculation of the Formula Net Book Value. The Closing Date Balance Sheet
and the Closing Date Income Statement shall be prepared in conformity with
United States generally accepted accounting principles ("GAAP") as consistently
applied by the Related Companies; provided, however, that (i) the Closing Date
Balance Sheet shall utilize the results of the physical inventory taken pursuant
to Section 4.2(d), and (ii) the value of assets may not be written up on the
Closing Date Balance Sheet from the values set forth on the 1993 Balance Sheet
(as defined in Section 5.1(f)).
(b) Parent, or the Accountants, shall deliver a copy of the
Closing Date Balance Sheet, the Closing Date Income Statement and the
calculation of the Formula Net Book Value, together with the work papers used in
the preparation thereof, to the Stockholders promptly after they have been
prepared. After receipt of the Closing Date Balance Sheet, the Closing Date
Income Statement and the calculation of the Formula Net Book Value, the
Stockholders shall have 20 business days to review the Closing Date Balance
Sheet, the Closing Date Income Statement and the calculation of the Formula Net
Book Value, together with work papers used in the preparation thereof. The
Stockholders and their authorized representatives (including specifically
Bernard Robinson & Co.) shall have reasonable access at reasonable times and
upon reasonable notice to all relevant books and records and employees of the
Related Companies, Parent and the Accountants to the extent required to complete
their review of the Closing Date Balance Sheet, the Closing Date Income
Statement and the calculation of the Formula Net Book Value. Unless the
Stockholders deliver written notice to Parent on or prior to the 20th business
day after the Stockholders' receipt of the
7
<PAGE>
Closing Date Balance Sheet, the Closing Date Income Statement and the
calculation of the Formula Net Book Value specifying all disputed items and the
basis therefor, the Stockholders shall be deemed to have accepted and agreed to
the Closing Date Balance Sheet, the Closing Date Income Statement and the
Formula Net Book Value. If the Stockholders so notify Parent of the
Stockholders' objection to the Closing Date Balance Sheet, the Closing Date
Income Statement or the calculation of the Formula Net Book Value, Parent and
the Stockholders shall, within 30 days following the date of such notice (the
"Resolution Period"), attempt to resolve their differences and any resolution by
them as to any disputed amounts shall be final, binding and conclusive. If
following resolution of any disputed amounts there do not remain in dispute (in
good faith) amounts the aggregate net effect of which exceeds $5,000, then all
amounts remaining in dispute shall be deemed to have been resolved in favor of
the Closing Date Balance Sheet, the Closing Date Income Statement and the
Formula Net Book Value delivered by Parent to the Stockholders.
(c) If at the conclusion of the Resolution Period the aggregate
net effect of all amounts remaining in dispute exceeds $5,000, then all amounts
remaining in dispute shall be submitted to Price Waterhouse & Company, LLP (the
"Neutral Auditor"). Each party agrees to execute, if requested by the Neutral
Auditor, a reasonable engagement letter. All fees and expenses relating to the
work, if any, to be performed by the Neutral Auditor shall be borne equally by
Parent and the Stockholders. The Neutral Auditor shall act as an arbitrator to
determine, based solely on presentations by Parent and the Stockholders, only
those issues still in dispute. The Neutral Auditor's determination shall be
made within 30 days of the submission to it of the dispute, shall be set forth
in a written statement delivered to Parent and the Stockholders and shall be
final, binding and conclusive. The terms "Adjusted Closing Date Balance Sheet"
and "Adjusted Closing Date Income Statement" as hereinafter used, shall mean the
definitive Closing Date Balance Sheet or Closing Date Income Statement, as the
case may be, agreed to by the Stockholders and Parent in accordance with Section
4.2(b) or the definitive Closing Date Balance Sheet or Closing Date Income
Statement, as the case may be, resulting from the determination made by the
Neutral Auditor in accordance
8
<PAGE>
with this Section 4.2(c) (in addition to those items previously agreed to by
Parent and the Stockholders), in each case prepared in the manner set forth in
the last sentence of Section 4.2(a) hereof.
(d) On a date or dates mutually agreeable to Parent and the
Stockholders, not more than six days prior to nor six days after the Closing
Date (the "Inventory Date"), the Stockholders shall cause the Company (or its
representatives) to take a physical inventory, observed by the Stockholders
and/or their representatives and the Accountants. The inventory shall only
include finished goods, work in process and raw materials which are usable or
saleable in the ordinary course of the Related Companies' business, as presently
conducted by the Related Companies, within the lesser of one year from the
Closing Date (except for packaging material not usable within one year with a
book value not in excess of $75,000) or the shelf life of any particular part of
such inventory, except for obsolete products and materials of below standard
quality (including, without limitation, as a result of infringing third party
patent or other industrial property rights or for failing to meet the Related
Companies' specifications for such inventory), which shall be written down to
their realizable market value (including provision for anticipated disposal
costs) in accordance with GAAP consistently applied, or for which adequate
reserves, including LIFO reserves, shall have been provided for. Said physical
inventory shall list the type and quantity of the inventory as of the Inventory
Date. Representatives of the Stockholders and Parent will initial the various
inventory lists.
(e) If the amount equal to the total assets less total
liabilities set forth on the Adjusted Closing Date Balance Sheet (the "Adjusted
Net Book Value") is less than the Formula Net Book Value, then the Stockholders
shall surrender to Parent previously distributed Parent Shares (the "Surrender
Parent Shares") in an amount equal to (A) the difference between (1) the Formula
Net Book Value and (2) the Adjusted Net Book Value divided by (B) $21.00. The
Stockholders shall be jointly and severally, obligated to deliver Surrender
Parent Shares to the Parent, within two business days following the
determination of the Adjusted Closing Date Balance Sheet; provided, however, the
Stockholders in their sole discretion may pay Parent the difference
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<PAGE>
between the Formula Net Book Value and the Adjusted Net Book Value in cash in
lieu of Surrender Parent Shares. The Formula Net Book Value equals (A) the
total assets less total liabilities of the Related Companies as reflected on the
1993 Balance Sheet; plus (B) the combined earnings of the Related Companies as
shown on the Adjusted Closing Date Income Statement (the "Combined Earnings");
plus (C) to the extent reflected in the Combined Earnings (1) any and all write-
downs or write-offs of assets other than in the ordinary course of the Related
Companies businesses consistent with past practices, (2) any and all increases
to reserves or accruals other than increases to reserves and accruals in the
ordinary course of the Related Companies' businesses consistent with past
practices, (3) without duplication of (1) or (2), any and all accruals required
to reflect as liabilities any employee bonus plans for which there were under or
non-accruals in prior years (other than the 1993-1995 Long Term Incentive Plan
and the payment pursuant to a Special Incentive Agreement with one employee) and
(4) any expenses of the Merger or the Affiliate Mergers paid or accrued by the
Related Companies in excess of the Expense Amount (defined below); minus (D) to
the extent not reflected in the Combined Earnings (1) the distribution to
Stockholders of a cash dividend in the amount of $2.3 million, (2) the book
value of the real estate assets permitted to be distributed pursuant to Section
6.1(d) hereof plus $40,000 per month since January 1994 (prorated for any
partial month), (3) past service bonuses to non-Stockholders paid or accrued
prior to the Effective Time for an amount up to $3,500,000 (the "Past Service
Bonuses"), amounts paid or accrued pursuant to the 1993-1995 Long-Term Incentive
Plan, and amounts paid or accrued pursuant to a Special Incentive Agreement with
one employee, (4) expenses related to the Merger in an amount equal to $900,000
plus an amount equal to $3,500,000 minus the amount of the Past Service Bonuses
actually paid or accrued prior to the Effective Time (the "Expense Amount"), (5)
if the Closing has not occurred by December 31, 1994 (aa) an amount equal to the
additional tax liabilities of the Stockholders for income taxes with respect to
the Related Companies in excess of the amount that the Stockholders would have
paid had the Closing occurred on December 31, 1994, plus (bb) an amount equal to
15% of the pre-tax earnings of the Company for the period from December 31, 1994
to the Closing Date, (6) bonuses paid to Stockholders in 1994 in an aggregate
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amount equal to $500,000 and (7) to the extent reflected on the Adjusted Closing
Date Balance Sheet, any payments or reserves or any liability for the guarantee
by the Related Companies of $900,000 of indebtedness to First Union National
Bank of North Carolina related to KC or any writedowns (or reserves) of accounts
receivable, loans or advances owed by KC to any of the Related Companies.
4.3 EXCHANGE OF SHARES IN THE MERGER. At the Effective Time, and
upon a Stockholder's surrender of the certificates representing all such
Stockholder's Shares to Parent for cancellation, which certificates shall be
properly endorsed for surrender or accompanied by duly executed stock powers and
otherwise in a form reasonably acceptable to Parent for surrender, Parent shall
deliver to such Stockholder the certificates representing the Parent Shares
issuable pursuant to Section 4.1, less those shares to be deposited in escrow
pursuant to the terms of the Escrow Agreement and Section 9.5 hereof.
4.4 FRACTIONAL SHARES. No fractional Parent Shares shall be issued
in the Merger or returned to Parent pursuant to Section 4.2. Each Stockholder
who would otherwise have been entitled to a fraction of a Parent Share upon
surrender of certificates for exchange pursuant to this Article 4 will be issued
one additional Parent Share. If Parent is entitled to a fractional Surrender
Parent Share, one additional Surrender Parent Share shall be delivered to Parent
in lieu of such fractional share.
4.5 TRANSFER OF SHARES. The Stockholders agree not to sell, pledge,
encumber or otherwise transfer their Shares, Kay International Shares or Kay
Europe Shares (as such capitalized terms are defined in Section 5.1(b)), except
in accordance with the terms of this Agreement and the Affiliate Merger
Agreements. No transfer of Shares shall be made on the stock transfer books of
the Company. No transfer of Kay International Shares shall be made on the stock
transfer books of Kay International. No transfer of Kay Europe Shares shall be
made on the stock transfer books of Kay Europe.
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ARTICLE 5
Representations and Warranties
5.1 REPRESENTATIONS AND WARRANTIES OF THE RELATED COMPANIES AND THE
STOCKHOLDERS. Each of the Related Companies and each Stockholder, jointly and
severally, represent and warrant to Parent and the Merger Subsidiaries that:
(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of the
Related Companies is a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina and is qualified and in
good standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except where failure to so qualify or be in good standing would
not have a Material Adverse Effect (as hereinafter defined in Section 10.9) with
respect to the Related Companies. Each of the Related Companies has all
requisite power and authority (corporate or otherwise) to own its properties and
to carry on its business as it is now being conducted. None of the Related
Companies has any subsidiaries. The Related Companies and the Stockholders have
heretofore provided to Parent true and complete copies of each of the Related
Companies' Articles of Incorporation and Bylaws as currently in effect.
(b) CAPITALIZATION. The authorized capital stock of the Company
consists of 600,000 Shares, 300,000 of which are designated as Class A Shares
and 300,000 of which are designated as Class B Shares. Ten thousand Class A
Shares and 190,000 Class B Shares are issued and outstanding. No Shares are
held in the Company's treasury. The authorized capital stock of Kay
International consists of 100,000 shares of common stock, par value of $1.00 per
share, 5,000 of which are designated as Class A shares and 95,000 of which are
designated as Class B shares (the "Kay International Shares"). No Kay
International Shares are held in Kay International's treasury. The authorized
capital stock of Kay Europe consists of 100,000 shares of common stock, par
value $1.00 per share, 5,000 of which are designated as Class A shares and
95,000 of which are designated as Class B shares (the "Kay Europe Shares," and
together
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with the Shares and the Kay International Shares, the "Related Companies
Shares"). No Kay Europe Shares are held in Kay Europe's treasury. All of the
outstanding shares of capital stock of the Related Companies have been duly
authorized and validly issued and are fully paid and nonassessable. The only
holders of record and the only beneficial owners of Related Companies Shares are
the Stockholders. Except as set forth in Section 5.1(b) of the disclosure
schedule delivered by the Related Companies (the "Related Companies Disclosure
Schedule"), there are not as of the date hereof, and there will not be at the
Effective Time, any outstanding or authorized options, warrants, calls, rights,
commitments or any other agreements of any character requiring any of the
Related Companies or any Stockholder to issue, transfer, sell, purchase, redeem
or acquire Related Companies Shares or any shares of capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the right
to subscribe for, any shares of capital stock of any of the Related Companies.
The Stockholders have, and will have at the Effective Time, good and marketable
title to the Related Companies Shares, free and clear of any and all
encumbrances. None of the Related Companies nor any Stockholder has received
any notice of any adverse claim to the ownership of any Related Companies
Shares. Except as set forth in Section 5.1(b) of the Related Companies
Disclosure Schedule, there are no stockholder agreements, voting trusts or other
agreements or understandings to which any of the Related Companies or any of the
Stockholders is a party or to which any of them is bound relating to the voting
of any shares of the capital stock of any of the Related Companies. The Related
Companies and the Stockholders have heretofore provided to Parent a true and
complete copy of the agreements set forth in Section 5.1(b) of the Related
Companies Disclosure Schedule. The persons set forth in Section 5.1(b) of the
Related Companies Disclosure Schedule as the holders of KC Shares (as defined in
Section 6.14) are the only holders of KC Shares. There are not any outstanding
or authorized options, warrants, calls, rights, commitments or any other
agreements of any character requiring KC or any Stockholder to issue, transfer,
sell, purchase, redeem or acquire KC Shares or any shares of capital stock or
any securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of capital stock of KC. The Stockholders
have, and will have at the Effec-
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tive Time, good and marketable title to the KC Shares, free and clear of any and
all encumbrances. None of the Stockholders has received any notice of any
adverse claim to the ownership of any KC Shares.
(c) AUTHORITY RELATIVE TO THIS AGREEMENT AND THE RELATED
AGREEMENTS. Each of the Stockholders has the full right, power and authority to
execute and deliver this Agreement and the Related Agreements and to consummate
the transactions contemplated hereby and thereby. Each of the Related Companies
has the requisite corporate power and authority to approve, authorize, execute
and deliver this Agreement and, to the extent it is a party thereto, the Related
Agreements (as defined in Section 10.9) and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the Merger and
the Affiliate Mergers. To the extent they are parties hereto and thereto, this
Agreement and the Related Agreements and the consummation by the Related
Companies of the transactions contemplated hereby and thereby have been duly and
validly authorized by each of the Boards of Directors of the Related Companies
and by each of the Stockholders and no other corporate proceedings on the part
of any of the Related Companies or the Stockholders are necessary to authorize
this Agreement or the Related Agreements or to consummate the transactions
contemplated hereby or thereby. This Agreement has been duly and validly
executed and delivered by the Related Companies and the Stockholders and,
assuming this Agreement constitutes the valid and binding agreement of Parent
and the Merger Subsidiaries, constitutes the valid and binding agreements of the
Related Companies and the Stockholders, enforceable against the Related
Companies and the Stockholders in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity. The Related Agreements will be duly and validly executed
and delivered by the Stockholders and, to the extent it is party thereto, each
of the Related Companies and, assuming the Related Agreements constitute the
valid and binding agreement of Parent and the other parties thereto (other than
the Stockholders and the Related Companies) and, in the case of the Escrow
Agreement, the Escrow Agent, will constitute the valid and binding agreement of
the Stockholders and, to the extent it is party thereto, each of the Related
Compa-
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nies, enforceable against the Stockholders and, to the extent it is party
thereto, each of Related Companies in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
(d) NO VIOLATION. Neither the execution and delivery of this
Agreement by the Related Companies and the Stockholders and the Related
Agreements by the Stockholders and, to the extent they are parties thereto, the
Related Companies, and the performance by each of the Related Companies and the
Stockholders of their respective obligations hereunder and thereunder nor the
consummation by the Related Companies or the Stockholders of the transactions
contemplated hereby and thereby will (i) violate, conflict with or result in any
breach of any provision of the Articles of Incorporation or Bylaws of any of the
Related Companies, (ii) except as set forth in Section 5.1(d) of the Related
Companies Disclosure Schedule, in any material respect, violate, conflict with
or result in a violation or breach of, or constitute a default (with or without
due notice or lapse of time or both) under, or permit the termination of, or
result in the acceleration of, or entitle any party to accelerate (whether as a
result of a change in control of any of the Related Companies or otherwise) any
obligation, or result in the loss of any benefit, or give rise to the creation
of any lien, charge, security interest or encumbrance upon any of the respective
properties or assets of any of the Related Companies under any of the terms,
conditions or provisions of any contract, agreement, license, lease or other
instrument or obligation to which any of the Related Companies or the
Stockholders are a party or by which they or any of their respective properties
or assets may be bound or affected or (iii) violate in any material respect any
order, writ, judgment, injunction, decree, statute, rule or regulation of any
court or domestic or foreign governmental authority applicable to any of the
Related Companies or the Stockholders or any of their respective properties or
assets.
(e) CONSENTS AND APPROVALS. No filing or registration with, no
notice to and no permit, authorization, consent or approval of any third party
or any domestic or foreign governmental authority is necessary for the
consummation by the Related Companies or the
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Stockholders of the transactions contemplated by this Agreement or the Related
Agreements or to enable Parent to continue to conduct the Related Companies'
businesses at their present location after the Closing Date in a manner which is
consistent with that in which they are presently conducted except: (i) as set
forth in Section 5.1(e) of the Related Companies Disclosure Schedule, (ii) in
connection with the applicable requirements, if any, of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), (iii) the filing of each of the Articles
of Merger pursuant to the NCBCA with respect to the Merger and the Affiliate
Mergers and appropriate documents with the relevant authorities of other states
in which the Related Companies are authorized to do business, (iv) filings with
or consents or approvals of a foreign governmental authority required solely as
a result of Parent's involvement in the Merger and Affiliate Mergers and (v)
such other filings where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not in
the aggregate have a Material Adverse Effect with respect to the Related
Companies.
(f) FINANCIAL STATEMENTS. (i) The combined balance sheet of the
Related Companies as of December 31, 1993 (the "1993 Balance Sheet"), and the
related combined statements of income, retained earnings and cash flows for the
year ended December 31, 1993 (the "1993 Financial Statements"), and (ii) the
unaudited combined balance sheet of the Related Companies as of June 30, 1994,
and the related combined statements of income, retained earnings and cash flows
for the six-month period then ended (the "Interim Financial Statements"), are
set forth in Section 5.1(f) of the Related Companies Disclosure Schedule. The
1993 Financial Statements and the Interim Financial Statements are true,
complete and accurate in all material respects and present fairly in all
material respects the results of operations and financial condition of the
Related Companies as of the dates and for the periods specified therein, all in
accordance with GAAP consistently applied.
(g) ABSENCE OF UNDISCLOSED LIABILITIES. There are no
liabilities or obligations of any of the Related Companies of any kind
whatsoever (whether abso-
16
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lute, accrued, contingent or otherwise, and whether due or to become due) other
than:
(i) liabilities and obligations adequately accounted for in the
Interim Financial Statements;
(ii) liabilities and obligations incurred in the ordinary and
usual course of business consistent with past practice since June 30, 1994;
(iii) liabilities and obligations that are set forth in Section
5.1(g) of the Related Companies Disclosure Schedule; and
(iv) other liabilities and obligations which individually or in
the aggregate would not have a Material Adverse Effect with respect to the
Related Companies.
(h) ABSENCE OF CERTAIN CHANGES. Except as and to the extent set
forth in Section 5.1(h) of the Related Companies Disclosure Schedule and except
as permitted by this Agreement, since December 31, 1993, none of the Related
Companies has:
(i) suffered any adverse change in its business, operations,
properties, assets, working capital, liabilities or condition (financial or
otherwise) which resulted in or could reasonably be expected to result in a
Material Adverse Effect with respect to the Related Companies and there has
not been any damage, destruction, loss or other event which resulted in or
could reasonably be expected to result in a Material Adverse Effect with
respect to the Related Companies;
(ii) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities and obligations reflected or
reserved against in the Interim Financial Statements or incurred in the
ordinary course of business and consistent with past practice;
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(iii) permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any
kind, except for liens for current taxes not yet due;
(iv) written down the value of any inventory (including write-
downs by reason of shrinkage or mark-down) or written off as uncollectible
any notes or accounts receivable, except for immaterial write-downs and
write-offs in the ordinary course of business and consistent with past
practice;
(v) cancelled any debts or waived any claims or rights of
substantial value;
(vi) sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary course of business and consistent with past
practice;
(vii) disposed of or permitted to lapse any rights to the use of
any patent or any trademark, trade name or copyright used in its business,
or disposed of or disclosed (except as necessary in the conduct of its
business) to any Person other than representatives of Parent any trade
secrets, formula, process or know-how (other than information which is a
matter of public knowledge);
(viii) except for increases in compensation granted in the
ordinary course of business and in accordance with its customary past
practices, granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment, except past service bonuses to
employees in an aggregate amount not to exceed $4,000,000 as contemplated
under Section 6.1(d) and bonuses to Stockholders in the aggregate amount of
$500,000) or any increase in the compensation payable or to become payable
to any officer or employee;
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(ix) made any capital expenditure or commitment in excess of
$50,000 individually, or $250,000 in the aggregate, for additions to
property, plant, equipment or intangible capital assets;
(x) declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock except for cash
dividends not to exceed in the aggregate for the Related Companies
$2,300,000 and other dividends and distributions permitted by Section
6.1(d) nor redeemed, purchased or otherwise acquired, directly or
indirectly, any of its shares of capital stock or other securities or those
of any other Related Company;
(xi) made any material change in any method of financial or tax
accounting or financial or tax accounting practice;
(xii) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement
with, any of its officers or directors or any affiliate or associate of any
of its officers or directors except as permitted by Section 6.1(d); or
(xiii) agreed, whether in writing or otherwise, to take any
action described in this Section.
(i) LITIGATION. Except as set forth in Section 5.1(i) of the
Related Companies Disclosure Schedule, there is no action, suit, judicial or
administrative proceeding, arbitration or investigation pending before any
court, arbitrator or administrative or governmental body or, to the best of the
Related Companies' and the Stockholders' knowledge, threatened (i) against or
involving any of the Related Companies or any of the properties, assets or
rights of any of the Related Companies, (ii) against any of the Stockholders and
involving any of the Related Companies or any of the properties, assets or
rights of any of the Related Companies or (iii) against any of the Stockholders
that could impair the ability of any of the Stockholders to consummate the
transactions contemplated by this Agreement or the Related Agreements. Except
as set forth on Section 5.1(i) of the Related
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<PAGE>
Companies Disclosure Schedule, there is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against (A) any of the Stockholders that could impair
the ability of any of the Stockholders to consummate the transactions
contemplated by this Agreement or the Related Agreements or (B) any of the
Related Companies that could impair the ability of any of the Related Companies
to consummate the transactions contemplated by this Agreement or the Related
Agreements.
(j) ASSETS OF THE BUSINESS. Except as set forth in Section
5.1(j) of the Related Companies Disclosure Schedule, each of the Related
Companies owns all of its real and personal properties and assets free and clear
of all title defects, liens, pledges, claims, security interests, restrictions,
mortgages, options or encumbrances of any kind (collectively, "Liens") (other
than Liens for taxes not yet due and payable and other immaterial Liens which do
not adversely affect such Related Companies' ability to operate in the ordinary
course of business). Except as set forth in Section 5.1(j) of the Related
Companies Disclosure Schedule, all of the real and personal properties and
assets which are necessary or useful for the conduct of the businesses of the
Related Companies as such businesses have been heretofore conducted are owned by
the Related Companies or leased by the Related Companies pursuant to leases with
remaining terms of not less than one year and are in reasonably good working
condition and as such are, in the aggregate, adequate to conduct the businesses
of the Related Companies as presently conducted, normal wear and tear excepted.
Neither the whole nor any portion of the leaseholds or any other assets of any
of the Related Companies is subject to any governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to the best of
the Related Companies' and Stockholders' knowledge, has any such condemnation,
expropriation or taking been proposed. Except as set forth in Section 5.1(j) of
the Related Companies Disclosure Schedule, none of the Related Companies has
received notification that it is in violation of any applicable building,
zoning, health or other law, ordinance or regulation in respect of its plants or
structures or their operations, except any violations
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<PAGE>
which in the aggregate would not have a Material Adverse Effect with respect to
the Related Companies.
(k) CERTAIN CONTRACTS.
(i) Section 5.1(k) of the Related Companies Disclosure Schedule
lists all (A) employment or other contracts (including, without limitation,
consulting, non-competition, severance or indemnification agreements) with
any employee, agent, consultant or current or former officer or director of
any of the Related Companies (or any company which is controlled by any
such individual) whose total rate of annual remuneration exceeds $25,000,
except those that are terminable by such Related Company on 60 days' notice
or less without liability, penalty or premium; (B) union, guild or
collective bargaining contracts relating to employees of any of the Related
Companies; (C) instruments for money borrowed (including, without
limitation, any indentures, guarantees, loan agreements, sale and leaseback
agreements, or purchase money obligations incurred in connection with the
acquisition of property other than in the ordinary and usual course of
business consistent with past practice) in excess of $25,000; (D)
underwriting, purchase or similar agreements entered into in connection
with any of the Related Companies' currently existing indebtedness; (E)
agreements for acquisitions or dispositions (by merger, purchase or sale of
assets or stock or otherwise) of a business unit entered into within the
last five years, as to which the transactions contemplated have been
consummated or are currently pending; (F) joint venture or partnership
agreements; (G) purchase and supply contracts with a remaining term of six
months or greater; (H) guarantees, suretyships, indemnification and
contribution agreements, in excess of $25,000; and (I) other agreements,
contracts, notes, security agreements, understandings or commitments (in
each case written or oral) that obligate the Related Companies for an
amount in excess of $50,000 per agreement or, in the case of purchase and
supply contracts, for an amount in excess of $250,000 per agreement (the
agreements described in (A) through (I) above are collectively referred to
as the "Listed Agreements"). Except as indicated in Section 5.1(k) of the
Related Companies
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Disclosure Schedule, a true and complete copy of each Listed Agreement
(together with all amendments thereto) has been provided to Parent. Each
Listed Agreement is a valid and binding obligation of the Related Company
party thereto, enforceable against such Related Company in accordance with
its terms. To the best of the Related Companies' and the Stockholders'
knowledge, each Listed Agreement is a valid and binding obligation of the
other parties thereto, enforceable against such parties in accordance with
its terms. None of the Related Companies is in breach or default in any
material respect under any of the Listed Agreements and to the best of the
Related Companies' and the Stockholders' knowledge there has not been any
breach or default in any material respect of any Listed Agreement by any
party thereto (other than one of the Related Companies).
(ii) Except as set forth in Section 5.1(k) of the Related
Companies Disclosure Schedule, no contract, commitment, agreement or other
understanding, license or permit restricts the ability of any of the
Related Companies or the Stockholders to own, possess or use any of the
Related Companies' assets or conduct any of the Related Companies'
operations in any geographic area.
(iii) Except as set forth in Section 5.1(k) of the Related
Companies' Disclosure Schedule:
(A) To the best of the Related Companies' and the
Stockholders' knowledge, there are no outstanding sales contracts,
commitments or proposals of any of the Related Companies which are intended
to result in any loss to any of the Related Companies after allowance for
direct distribution expenses, nor are there any outstanding contracts,
bids, sales or service proposals quoting prices which are not reasonably
expected to result in a profit in the ordinary course of business; and
(B) None of the Related Companies is under any
liability or obligation in excess of $50,000 in the aggregate with respect
to the return of inventory or merchandise in the possession
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<PAGE>
of wholesalers, distributors, retailers or other customers.
(iv) Except as set forth on Schedule 5.1(k)(iv), each of the
Related Companies has entered into an employment agreement with non-
competition provisions substantially similar to those previously provided
to Parent, with each of its employees listed on Schedule 6.11(c) and all
other salaried employees that have a material contact or relationship with
its customers or access to confidential proprietary information. While the
enforceability of non-competition agreements is inherently uncertain, the
Company has no specific reason to believe that any agreement would be
unenforceable to an extent that could reasonably be expected to have a
Material Adverse Effect with respect to the Related Companies
(l) EMPLOYEE BENEFIT PLANS; ERISA.
(i) Section 5.1(l) of the Related Companies Disclosure Schedule
sets forth a true and complete list of each employee benefit or
compensation plan of each of the Related Companies (a "Benefit Plan"),
including, without limitation, each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, employment, consulting,
severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing,
pension or retirement plan, program, agreement or arrangement, and each
other "employee benefit plan" (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA")), whether formal or
informal, written or oral and whether legally binding or not, that is
sponsored, maintained or contributed to or was sponsored, maintained or
contributed to at any time by such Related Company or by any trade or
business, whether or not incorporated which together with such Related
Company would be deemed a "single employer" within the meaning of Section
4001 of ERISA (an "ERISA Affiliate"), within the last three years, for the
benefit of any employee, former employee, con-
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sultant, officer, or director of any of the Related Companies or any ERISA
Affiliate.
(ii) With respect to each Benefit Plan, the Related Companies
have heretofore delivered to Parent true and complete copies of each of the
following documents:
(A) a copy of the Benefit Plan (including all
amendments thereto);
(B) a copy of any annual report, including any
annual report required under ERISA or other applicable law, with
respect to each such Benefit Plan for the last three most recently
completed plan years;
(C) a copy of any actuarial report, including any
actuarial report required under ERISA or other applicable law, with
respect to each such Benefit Plan for the three most recently
completed plan years;
(D) a copy of the most recent Summary Plan
Description, together with each Summary of Material Modifications, if
required under ERISA with respect to each such Benefit Plan, and all
material employee communications relating to each such Benefit Plan;
(E) if the Benefit Plan is funded through a trust
or any third party funding vehicle, a copy of the trust or other
funding agreement (including all amendments thereto) and the latest
financial statements thereof;
(F) all contracts relating to any Benefit Plan
with respect to which any of the Related Companies or any ERISA
Affiliate may have any liability, including without limitation,
insurance contracts, investment management agreements, subscription
and participation agreements and record keeping or other servicing or
administration agreements relating to any Benefit Plan with respect to
which any of
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the Related Companies or any ERISA Affiliate may have any liability; and
(G) the most recent determination letter received
from the Internal Revenue Service with respect to each Benefit Plan
that is intended to be qualified under section 401 of the Code.
(iii) No Benefit Plan is a "multiemployer plan," as such term is
defined in Section (3)(37) of ERISA or a "multiple employer plan" within
the meaning of Section 4063 or 4064 of ERISA; each of the Benefit Plans is,
and has always been, operated in all material respects in accordance with
the requirements of all applicable law, and all Persons who participate in
the operation of such Benefit Plans and all Benefit Plan "fiduciaries"
(within the meaning of Section 3(21) of ERISA) have always acted in
accordance with the provisions of all applicable law; each of the Benefit
Plans intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified and has received a favorable determination letter
from the Internal Revenue Service to that effect; no Benefit Plan has an
accumulated or waived funding deficiency within the meaning of Section 412
of the Code; none of the Related Companies nor any ERISA Affiliate has
incurred, directly or indirectly, any liability (including any material
contingent liability) to or on account of a Benefit Plan pursuant to Title
IV of ERISA; no proceedings have been instituted to terminate any Benefit
Plan that is subject to Title IV of ERISA; no "reportable event," as such
term is defined in Section 4043(b) of ERISA, has occurred with respect to
any Benefit Plan; no condition exists that presents a material risk to any
of the Related Companies or any ERISA Affiliate of incurring a liability to
or on account of a Benefit Plan pursuant to Title IV of ERISA; and none of
the Related Companies nor any ERISA Affiliate has maintained or been
obligated to make contributions to any Benefit Plan subject to Title IV of
ERISA during the last six years prior to the date hereof.
(iv) The current value of the assets of each of the Benefit
Plans that is subject to Title
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IV of ERISA exceeds the present value of the accrued benefits under each
such Benefit Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared for such Benefit
Plan. Full payment has been made, or will be made in accordance with
section 404(a)(6) of the Code, of all amounts which each of the Related
Companies or any ERISA Affiliate is required to pay under the terms of each
of the Benefit Plans as of the last day of the most recent plan year
thereof ended prior to the date of this Agreement, and all such amounts
properly accrued through the Closing Date with respect to the current plan
year thereof will be paid by such Related Company on or prior to the
Closing Date or will be properly reflected on the Adjusted Closing Date
Balance Sheet.
(v) No Benefit Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with
respect to current or former employees of any of the Related Companies or
any ERISA Affiliate for periods extending beyond their retirement or other
termination of service (other than (i) coverage mandated by applicable law,
(ii) death benefits or retirement benefits under any "employee pension
plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of the Related
Companies or an ERISA Affiliate or (iv) benefits the full cost of which is
borne by the current or former employee (or his beneficiary)). No amounts
payable under the Benefit Plans will fail to be deductible for federal
income tax purposes by virtue of section 280G of the Code.
(vi) With respect to each Benefit Plan that is funded wholly or
partially through an insurance policy, there will be no liability of any of
the Related Companies or any ERISA Affiliate, as of the Closing Date, under
any such insurance policy or ancillary agreement with respect to such
insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly
or partially out of events occurring prior to the Closing Date.
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(vii) There has been no non-exempt prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code)
with respect to any Benefit Plan; none of the Related Companies has
incurred any liability for any excise tax arising under Section 4972 or
4980B of the Code and no fact or event exists that could give rise to any
such liability with respect to the filing of reports with respect to any
Benefit Plan; there are no pending or to the Related Companies' and the
Stockholders' best knowledge threatened claims (other than routine claims
for benefits) by, on behalf of or against any of the Benefit Plans, or any
trusts related thereto or any trustee or administrator thereof, and no
litigation or administrative or other proceeding (including, without
limitation, any litigation or proceeding under Title IV of ERISA) has
occurred or, to the best of the Related Companies' and the Stockholders'
knowledge, is threatened against any Benefit Plan or any trusts related
thereto or any trustee or administrator thereof.
(viii) The consummation of the transactions contemplated by this
Agreement and the Related Agreements will not (i) entitle any current or
former employee or officer of any of the Related Companies or any of its
subsidiaries to severance pay, unemployment compensation or any other
similar payment, except as expressly provided in this Agreement or the
Related Agreements, (ii) accelerate the time of payment or vesting or
increase the amount of compensation due any such employee or officer, (iii)
result in any employment-related expenses or liabilities the full cost of
which will not be paid by the Stockholders, or (iv) result in any
prohibited transaction described in Section 406 of ERISA or Section 4975 of
the Code for which an exemption is not available.
(m) ENVIRONMENTAL PROTECTION. Except as set forth in Section
5.1(m) of the Related Companies Disclosure Schedule:
(i) Each of the Related Companies has obtained all material
permits, licenses and other authorizations which are required under the
Environmental Laws in effect as of the date hereof for the
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ownership, use and operation of each location owned, operated or leased by
such Related Company (the "Property"); all such permits, licenses and
authorizations are in effect, no appeal nor any other action is pending to
revoke any such permit, license or authorization; and such Related Company
is in full compliance with all terms and conditions of all such permits,
licenses and authorizations except where noncompliance would not in the
aggregate have a Material Adverse Effect with respect to the Related
Companies. The Related Companies have listed all such permits, licenses
and other authorizations, including the expiration dates of such permits,
licenses and authorizations, in Section 5.1(m) of the Related Companies
Disclosure Schedule.
(ii) Each of the Related Companies and the Property are in full
compliance with all applicable Environmental Laws including, without
limitation, all restrictions, conditions, standards, limitations,
prohibitions, requirements, obligations, schedules and timetables contained
in the Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder except where noncompliance
would not in the aggregate have a Material Adverse Effect with respect to
the Related Companies.
(iii) The Related Companies have heretofore delivered to Parent
true and complete copies of all environmental studies made by or on behalf
of any of the Related Companies in the last five years relating to the
Property or any other property or facility previously owned, operated or
leased by any of the Related Companies.
(iv) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter that is asserted or pending, or to the best of the
Related Companies' and the Stockholders' knowledge that is threatened,
relating to any of the Related Companies, the Property or any other
property previously owned operated or leased by any of the Related
Companies, relating in any way to the Environmental Laws or any regulation,
code,
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plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder to which any of the Related
Companies or such property or facility is or may be subject.
(v) None of the Related Companies has, and no other Person has,
Released, placed, stored, buried or dumped any Hazardous Substances, Oils,
Pollutants or Contaminants or any other wastes produced by, or resulting
from, any business, commercial or industrial activities, operations or
processes, on, beneath or adjacent to the Property or any property formerly
owned, operated or leased by any of the Related Companies except for
inventories of such substances to be used, and wastes generated therefrom,
in the ordinary course of business of the Related Companies (which
inventories and wastes, if any, were and are stored or disposed of in
accordance with applicable laws and regulations and in a manner such that
there has been no Release of any such substances into the environment)
except for such actions which in the aggregate would not have a Material
Adverse Effect with respect to the Related Companies.
(vi) No Release (other than Releases which in the aggregate
would not have a Material Adverse Effect with respect to the Related
Companies) or Cleanup has occurred at the Property or any other properties
formerly owned or used by any of the Related Companies at any time during
such Related Company's ownership or operation thereof or, to the best of
the Related Companies' and the Stockholders' knowledge, prior to such
Related Company's ownership or operation which could result in the
assertion or creation of a Lien on the Property by any governmental body or
agency with respect thereto, nor has any such assertion of a Lien been made
by any governmental body or agency with respect thereto.
(vii) Since January 1, 1989, no employee of any of the Related
Companies in the course of his or her employment with the Related Companies
was injured by any Hazardous Substances, Oils, Pollutants, Contaminants or
other substance, generated, produced
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or used by any of the Related Companies which could reasonably be expected
to give rise to any material claim against any of the Related Companies and
no such employee has asserted any written or, to the best of the Related
Companies' or the Stockholders' knowledge, oral claim, demand or complaint
that he or she was so injured.
(viii) None of the Related Companies has received any written,
or to the best of the Related Companies' and the Stockholders' knowledge,
oral notice or any order from any governmental agency or private or public
entity advising it that it is responsible for or potentially responsible
for Cleanup or paying for the cost of Cleanup of any Hazardous Substances,
Oils, Pollutants or Contaminants or any other waste or substance and none
of the Related Companies has entered into any agreements concerning such
Cleanup, nor does it have actual knowledge of any facts which in its
reasonable judgment may give rise to such notice, order or agreement.
(ix) The Property does not contain any: (a) underground storage
tanks; (b) asbestos; (c) equipment containing PCBs; (d) underground
injection wells; or (e) septic tanks in which process waste water or any
Hazardous Substances, Oils, Pollutants or Contaminants have been disposed.
(x) None of the Related Companies has entered into any agreement
that may require it to pay to, reimburse, guarantee, pledge, defend,
indemnify or hold harmless any Person for or against any Environmental
Liabilities and Costs.
(n) TAXES.
(i) All Tax Returns required to be filed with respect to any of
the Related Companies and its affiliates or any of their income, properties
or operations have been timely filed and all information reported therein
is true, complete and accurate. All Taxes attributable to the assets,
business or operations of each of the Related Companies and its affiliates
for which such Related Company could be liable that are or were due and
payable
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have been paid and adequate provision for Taxes not yet due in respect of
each of the Related Companies' current taxable year is reflected on the
Interim Financial Statements. The Related Companies and their affiliates
have withheld from their employees, customers and any other applicable
payees proper amounts in compliance with all tax withholding provisions
(including, without limitation, income, social security and employment tax
withholding and withholding on payments to non-United States Persons).
Except as set forth in Section 5.1(n) of the Related Companies Disclosure
Schedule, there is no claim or assessment pending, or to the best of the
Related Companies' and the Stockholders' knowledge, threatened against any
of the Related Companies or any of its affiliates for which any of the
Related Companies could be liable for any Tax deficiency, and there is no
audit or investigation currently being conducted that could cause any of
the Related Companies to be liable for any Taxes. Except as set forth in
Section 5.1(n) of the Related Companies Disclosure Schedule, there are no
agreements in effect extending the period of limitations for the assessment
or collection of any Tax for which any of the Related Companies may be
liable.
(ii) Each of the Related Companies has qualified and validly
elected to be treated as an "S corporation" within the meaning of Section
1361(a) of the Code with respect to the entire period of its existence or
qualified and validly elected to be treated as an S corporation prior to
1983 and has continued to qualify as an S corporation since that time.
Except as set forth in Section 5.1(a) of the Related Companies Disclosure
Schedule, none of the Related Companies has, nor has had for any prior
taxable year, subchapter C earnings and profits within the meaning of
Section 1362(d)(3) of the Code and gross receipts more than 25% of which
are passive investment income within the meaning of Section 1362(d)(3) of
the Code. Except as set forth in Section 5.1(m) of the Related Companies
Disclosure Schedule, none of the Related Companies has ever acquired any
assets from another corporation in a carryover basis transaction, acquired
another entity in a transaction that would be subject to Section 381 of the
Code, or been a party to a divisive
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reorganization under Section 355 of the Code. Except as set forth in
Section 5.1(n) of the Related Companies Disclosure Schedule, none of the
Related Companies (a) own any assets with respect to which it has claimed
investment tax credits that could be recaptured after the Effective Time;
(b) is a party to any agreement providing for the payment of "excess
parachute payments" under Section 280G of the Code, or to any tax sharing
agreement or other arrangement under which it has or may have any
obligation to contribute to the payment of any Tax; (c) has made any
election under Section 341 of the Code and (d) is required to include in
income for any period after Closing any adjustments required under Section
481 of the Code. No tax is required to be withheld pursuant to Section
1445 of the Code as a result of any of the transfers contemplated by this
Agreement or the Related Agreements.
(o) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Section 5.1(o) of the Related Companies Disclosure Schedule, each of the Related
Companies holds all licenses, franchises, permits and authorizations necessary
for the lawful conduct of its businesses under and pursuant to, and its business
is not being and has not been conducted in violation of, any provision of any
Federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other domestic or foreign governmental authorization or approval applicable to
it, except to the extent that the failure to hold any such licenses, franchises,
permits or authorization, or any such violation would not in the aggregate, have
a Material Adverse Effect with respect to the Related Companies, and, except as
set forth in Section 5.1(o) of the Related Companies Disclosure Schedule, no
consent will be necessary to transfer (including by reapplication by the
Surviving Corporation or any surviving corporation in the Affiliate Mergers)
such licenses, franchises, permits or authorizations to the Surviving
Corporation or the surviving corporations in the Affiliate Mergers upon
consummation of the Merger or the Affiliate Mergers except to the extent failure
to transfer such licenses, franchises, permits or authorizations would not have
a Material Adverse Effect with respect to the Related Companies (assuming
consummation of the Merger and the Affiliate Mergers).
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(p) PROPRIETARY RIGHTS. Except as set forth in Section 5.1(p)
of the Related Companies Disclosure Schedule, each of the Related Companies
owns, or has an exclusive, unrestricted license or otherwise has the full and
exclusive, unrestricted right to use, in the manner in which it is currently
used or is proposed to be used, free and clear of all Liens, all (i) Patents
used in or necessary for the conduct of its businesses as heretofore conducted
and (ii) all other Proprietary Rights material to its business. Section 5.1(p)
of the Related Companies Disclosure Schedule contains an accurate and complete
description of all Patents, Trademarks and Trade Names which are material to
each of the Related Companies' business and certain other Trademarks and Trade
Names used in such businesses. The consummation of the transactions
contemplated hereby and by the Related Agreements will not alter or impair any
Patents or any other material Proprietary Rights. Except as set forth in
Section 5.1(p) of the Related Companies Disclosure Schedule, no claims have been
asserted or, to the best of the Related Companies' and the Stockholders'
knowledge, threatened by any Person with respect to the use by any of the
Related Companies of any such Proprietary Rights or challenging or questioning
the validity or effectiveness of any such license or agreement, or by any of the
Related Companies or the Stockholders to protect or defend such rights; and, to
the best of the Related Companies' and the Stockholders' knowledge, the use of
such Proprietary Rights by the Related Companies does not infringe on the rights
of any Person. No notice of infringement has been asserted or, to the best of
the Related Companies' and the Stockholders' knowledge, threatened against any
of the Related Companies or the Stockholders.
(i) "Proprietary Rights" shall mean (A) Patents, (B) Trademarks,
(C) Trade Names, (D) rights in trade dress and packaging and (E) shop
rights, copyrights, inventions, trade secrets, service marks and all other
intellectual property rights whether registered or not, in each case
wherever such rights exist throughout the world, and including the right to
recover for any past infringements and (F) Know-how.
(ii) "Patents" shall mean patents (including all reissues,
divisions, continuations,
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continuations in part and extensions thereof), patent applications and
patent disclosures docketed.
(iii) "Know-how" shall mean laboratory journals, know-how
(including, without limitation, product know-how and use and application
know-how), formulae, processes, product designs, specifications, quality
control, procedures, manufacturing, engineering and other drawings,
computer data bases and software, technology, other intangibles, technical
information, safety information, engineering data and design and
engineering specifications, research records, market surveys and all
promotional literature, customer and supplier lists and similar data.
(iv) "Trademarks" shall mean trademarks, service marks, brand
marks, registrations thereof, pending applications for registration
thereof, and such unregistered rights which are material to the business of
any of the Related Companies as may exist through use.
(v) "Trade Names" shall mean (A) trade names, (B) brand names,
and (C) logos and all other names and slogans material to the business of
any of the Related Companies, in each case embodying business or product
goodwill for which no trademark registration has been obtained or applied
for.
(q) LABOR RELATIONS. Except to the extent set forth in Section
5.1(q) of the Related Companies Disclosure Schedule, (i) none of the Related
Companies is a party to any collective bargaining agreement, (ii) each of the
Related Companies is in compliance in all material respects with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice
which individually or in the aggregate would have a Material Adverse Effect with
respect to the Related Companies, (iii) there is no unfair labor practice
complaint against any of the Related Companies or the Stockholders pending
before the National Labor Relations Board, (iv) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the best of the Related
Companies' and the Stockholders' knowledge, threatened against or affecting any
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of the Related Companies, (v) with respect to each of the Related Companies, no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements is pending and, to the best of the Related Companies' and
the Stockholders' knowledge, is threatened against any of the Related Companies,
and (vi) none of the Related Companies has experienced any work stoppage since
December 31, 1992.
(r) ACCOUNTS RECEIVABLE. Except as set forth in Section 5.1(r)
of the Related Companies Disclosure Schedule, all accounts receivable of each of
the Related Companies, whether reflected in the 1993 Balance Sheet or arising
thereafter in the ordinary course of business (i) arose or will arise in the
ordinary course of business from bona fide arm's-length transactions for the
sale of goods or performance of services by the Related Companies, (ii) are
valid and (iii) are fully collectible in the ordinary course of business (except
to the extent reserved for on the Adjusted Closing Date Balance Sheet and cash
discounts for early payment taken by customers in the ordinary course of
business consistent with past practice) and are not subject to counterclaims or
setoffs.
(s) INVENTORY. Except as set forth in Section 5.1(s) of the
Related Companies Disclosure Schedule, the inventories of each of the Related
Companies (i) do not infringe third party patent or other industrial property
rights, (ii) meet such Related Company's specifications applicable to such
inventories and (iii) are usable or saleable in the ordinary course of such
Related Company's business, as presently conducted by it, within the lesser of
one year from the Closing Date (except for packaging material not usable within
one year with a book value not in excess of $75,000) or the shelf life of any
particular part of such inventory, except for obsolete products and materials
and materials of below standard quality, which have either been written down to
their realizable market value (including provision for anticipated disposal
costs) in the accounts and records of the Related Companies in accordance with
GAAP consistently applied, or for which adequate reserves, including LIFO
reserves, have been provided in such accounts and such inventories are not
excessive in light of present operations.
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(t) INSURANCE. Section 5.1(t) of the Related Companies
Disclosure Schedule contains a true and complete list and description of all
liability (including general and automobile liability), property, workers'
compensation, directors and officers liability and other similar insurance of
each of the Related Companies relating to the ownership, use or operation of any
of its assets or properties (those policies expired on October 1, 1994 and the
Related Companies have binders for the renewals). The Related Companies have
delivered copies of the liability (including general and automobile liability)
insurance policies to Parent prior to the date hereof. Except as set forth in
Section 5.1(t) of the Related Companies Disclosure Schedule, the insurance
coverage provided by the policies described above will not terminate or lapse by
reason of the transactions contemplated by this Agreement or the Related
Agreements, all such policies are presently in full force and effect, and none
of the Related Companies is in default thereunder or in the payment of any
premium, nor has it received notification of, and has no actual knowledge, and
the Stockholders have no actual knowledge, of the existence of any grounds for,
the cancellation or proposed cancellation of any such policies or bonds or any
reason why, in the Stockholders' reasonable judgment, any such policies or bonds
would not be valid, binding and enforceable in all material respects. Except as
set forth in Section 5.1(t) of the Related Companies Disclosure Schedule, to the
best of the Related Companies' and the Stockholders' knowledge, none of the
Related Companies has failed to give or present any notice or claim thereunder
in accordance with such policies, such as would permit the insurer to deny
coverage under such policies.
(u) INSIDER INTERESTS. Except as set forth in Section 5.1(u) of
the Related Companies Disclosure Schedule, none of the Stockholders, no present
officer or director who is an employee of any of the Related Companies, nor any
relative of any such officer or director, (i) has received a loan or advance
from any of the Related Companies which is currently outstanding, (ii) has the
right to borrow from any of the Related Companies, (iii) has any obligation to
make any loan to any of the Related Companies or (iv) has any other business
relationship with any of the Related Companies other than in his or her capacity
as an officer, director, or significant employee.
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(v) BROKERS' FEES AND COMMISSIONS. Except for the fees and
expenses payable to Tanner & Co., Inc., none of the Stockholders, the Related
Companies nor any of their affiliates has employed any investment banker,
broker, finder, consultant or intermediary which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement, the Related Agreements or the transactions
contemplated hereby or thereby.
(w) PRODUCTS AND WARRANTIES. Except as set forth in Section
5.1(o) of the Related Companies Disclosure Schedule, the products sold by each
of the Related Companies meet, in all material respects, the standards required
by all applicable laws, ordinances and regulations now in effect where the
Related Companies' products are sold and, to the best of the Related Companies'
and the Stockholders' knowledge, where sales are anticipated in the present
plans or sales projections of the Related Companies. A written description of
the Related Companies' recurring warranty problems is set forth in Section
5.1(w) of the Related Companies Disclosure Schedule.
(x) CUSTOMERS AND SUPPLIERS. Except as set forth in Section
5.1(x) of the Related Companies Disclosure Schedule, since December 31, 1993,
(i) there has not been any material adverse change in the business relationship
between any of the Related Companies and any customer of the Related Companies
which customer accounts for annual sales to the Related Companies of $1,000,000
or more on an annualized basis, (ii) no such customer has advised any of the
Related Companies or the Stockholders that it intends to terminate its
relationship with any of the Related Companies or reduce its purchases from any
of the Related Companies to an extent that could reasonably be expected to
result in a material adverse change in the relationship between such customer
and any of the Related Companies, and (iii) no such customer has advised any of
the Related Companies or the Stockholders that it intends to terminate its
relationship with any of the Related Companies or reduce its purchases from any
of the Related Companies because of Parent's involvement in the Merger, the
Affiliate Mergers or the transactions contemplated hereby or thereby. Except as
set forth in Section 5.1(x) of the Related Companies Disclosure Schedule, since
December 31, 1993, there has not been any material ad-
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verse change in the business relationship between any of the Related Companies
and any supplier of the Related Companies which supplier accounts for sales to
the Related Companies of $1,000,000 or more on an annualized basis or provides
supplies to the Related Companies which are not readily obtainable from other
sources in the ordinary course of business.
(y) TAX MATTERS. None of the Related Companies nor the
Stockholders has taken or agreed to take any action that would prevent the
Merger and the Affiliate Mergers from constituting transactions qualifying under
Section 368(a) of the Code.
5.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND THE MERGER
SUBSIDIARIES. Parent and the Merger Subsidiaries each represents and warrants
to the Related Companies and the Stockholders that:
(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of Parent
and the Merger Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and is qualified and in good standing as a foreign corporation in
each jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification, except where the failure
to so qualify or be in such good standing would not have a Material Adverse
Effect with respect to Parent. Parent has all requisite power and authority
(corporate or otherwise) to own its properties and to carry on its business as
it is now being conducted. Parent and the Merger Subsidiaries have heretofore
provided to the Company true and complete copies of their respective Certificate
of Incorporation and Articles of Incorporation, as the case may be, and their
respective Bylaws as currently in effect.
(b) CAPITALIZATION. The authorized capital stock of Parent
consists of (i) 100,000,000 Parent Shares of which, as of September 30, 1994,
63,094,855 Parent Shares were issued and outstanding (excluding 1,993,441 Parent
Shares held in treasury) and (ii) 15,000,000 shares of preferred stock, no par
value per share (the "Parent Preferred Shares"), of which, as of the date
hereof, no Parent Preferred Shares were issued and outstanding. All of the
outstanding shares of
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capital stock of Parent have been duly authorized and validly issued and are
fully paid and nonassessable. None of the Parent Shares or the Parent Preferred
Shares are, by virtue of any agreement to which Parent is a party, subject to
any option, warrant, right or call, preemptive right or commitment of any kind
or character except (A) 4,344,184 Parent Shares are reserved for issuance
pursuant to outstanding options under the 1977 Stock Incentive Plan, the 1988
Non-Employee Director Stock Option Plan and the 1993 Stock Incentive Plan
(collectively, the "Parent Option Plans"), and (B) 500,000 shares of Series A
Junior Participating Preferred Stock are reserved for issuance pursuant to the
Parent Rights Agreement. Except for (x) options to purchase Parent Shares
outstanding on the date hereof under the Parent Option Plans and (y) Henkel
KGaA's right, pursuant to the Amended and Restated Stockholder's Agreement,
dated as of June 26, 1991, between Parent and Henkel KGaA, to purchase
additional Parent Shares, there are not as of the date hereof any outstanding or
authorized options, warrants, calls, rights, commitments or any other agreements
of any character which Parent or any of its subsidiaries is a party to, or may
be bound by, requiring it to issue, transfer, sell, purchase, redeem or acquire
any Parent Shares or any shares of capital stock or any of its securities or
rights convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of capital stock of Parent.
(c) AUTHORITY RELATIVE TO THIS AGREEMENT AND THE RELATED
AGREEMENTS. Each of Parent and the Merger Subsidiaries has the requisite
corporate power and authority to approve, authorize, execute and deliver this
Agreement and, to the extent it is a party thereto, the Related Agreements, and
to consummate the transactions contemplated hereby and thereby including,
without limitation, the Merger and the Affiliate Mergers. To the extent they
are parties hereto and thereto, this Agreement and the Related Agreements and
the consummation by Parent and the Merger Subsidiaries of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
respective Boards of Directors of Parent and the Merger Subsidiaries and by
Parent as sole stockholder of each of the Merger Subsidiaries, and no other
corporate proceedings on the part of Parent and the Merger Subsidiaries are
necessary to authorize this Agreement or the Related Agreements or to consummate
the
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transactions contemplated hereby and thereby. This Agreement has been duly and
validly executed and delivered by each of Parent and the Merger Subsidiaries
and, assuming this Agreement constitutes the valid and binding agreement of the
Related Companies and the Stockholders, constitutes valid and binding agreements
of Parent and the Merger Subsidiaries, enforceable against them in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity. The Affiliate Merger
Agreements will be duly and validly executed by Parent and, to the extent it is
party thereto, Merger Sub II or Merger Sub III and, assuming the Affiliate
Merger Agreements constitute the valid and binding agreement of the Stockholders
and the other parties thereto (other than Parent and the Merger Subsidiaries),
will constitute the valid and binding agreement of Parent and, to the extent it
is a party thereto, Merger Sub II or Merger Sub III, enforceable against Parent
and, to the extent it is party thereto, Merger Sub II or Merger Sub III in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity.
(d) NO VIOLATION. Neither the execution and delivery of this
Agreement by Parent and the Merger Subsidiaries and the Related Agreements by
Parent and, to the extent they are parties thereto, the Merger Subsidiaries, and
the performance by each of Parent and the Merger Subsidiaries of their
respective obligations hereunder and thereunder nor the consummation by Parent
and the Merger Subsidiaries of the transactions contemplated hereby and thereby
will (i) violate, conflict with or result in any breach of any provision of the
Certificate of Incorporation or Articles of Incorporation, as the case may be,
or Bylaws of Parent or the Merger Subsidiaries, (ii) except as set forth in
Section 5.2(d) of the disclosure schedule delivered by Parent (the "Parent
Disclosure Schedule"), violate, conflict with or result in a violation or breach
of, or constitute a default (with or without due notice or lapse of time or
both) under, or permit the termination of, or result in the acceleration of, or
entitle any party to accelerate any obligation under, or result in the loss of
any benefit
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under, or give rise to the creation of any lien, charge, security interest or
encumbrance upon any of the respective properties or assets of Parent or the
Merger Subsidiaries under any of the terms, conditions or provisions of any
material contract, agreement, license, lease or other instrument or obligation
to which Parent or the Merger Subsidiaries are a party or by which they or any
of their respective properties or assets may be bound or affected or (iii)
violate in any material respect any order, writ, judgment, injunction, decree,
statute, rule or regulation of any court or domestic or foreign governmental
authority applicable to Parent or the Merger Subsidiaries or any of their
respective properties or assets.
(e) CONSENTS AND APPROVALS. No filing or registration with, no
notice to and no permit, authorization, consent or approval of any third party
or any domestic or foreign governmental authority is necessary for the
consummation by Parent or the Merger Subsidiaries of the transactions
contemplated by this Agreement or the Related Agreements except: (i) as set
forth in Section 5.2(e) of the Parent Disclosure Schedule, (ii) in connection
with the applicable requirements, if any, of the HSR Act, (iii) the filing of
each of the Articles of Merger pursuant to the NCBCA with respect to the Merger
and the Affiliate Mergers and appropriate documents with the relevant
authorities of other states in which the Parent is authorized to do business,
(iv) pursuant to the applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations promulgated thereunder, (v) such filing or consent as may be
required by any applicable state securities laws, (vi) filings with, and
approval of the listing of the Parent Shares on, the NYSE, or (vii) such filing
where the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not in the aggregate have a Material
Adverse Effect with respect to the Parent.
(f) SEC REPORTS; FINANCIAL STATEMENTS.
(i) Since December 31, 1991, Parent has filed all forms, reports
and documents with the Securities and Exchange Commission (the "SEC")
required to be filed by it pursuant to the federal
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securities laws and the SEC rules and regulations thereunder, all of which
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder (all such reports, together with any such reports
filed after the date hereof and prior to the Effective Time, collectively,
the "SEC Reports"). None of the SEC Reports, including, without
limitation, any financial statements or schedules included therein, at the
time filed contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein not misleading.
(ii) The consolidated balance sheets and the related statements
of income, stockholders' equity and cash flow (including the related notes
thereto) of Parent included in the SEC Reports comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with GAAP applied on a basis consistent with prior periods
(except as otherwise noted therein or, in the case of unaudited financial
statements, as permitted by Form 10-Q), and present fairly the consolidated
financial position of Parent and its consolidated subsidiaries as of their
respective dates, and the consolidated results of their operations and
their cash flows for the periods presented therein (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments
and the absence of footnotes).
(g) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Reports or set forth in Section 5.2(g) of the Parent Disclosure Schedule, since
June 30, 1994, there has not been any change in the businesses, operations,
properties, assets, working capital, liabilities or condition (financial or
otherwise) of Parent which resulted in or could reasonably be expected to result
in a Material Adverse Effect with respect to Parent.
(h) AUTHORIZATION. Parent Shares issued pursuant to Article 4
will, when issued, be validly
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issued, fully paid and nonassessable and no stockholder of Parent will have any
preemptive right of subscription or purchase in respect thereof.
(i) LITIGATION. Except as disclosed in the SEC Reports, there
is no action, suit, judicial or administrative proceeding, arbitration or
investigation pending before any court, arbitrator or administrative or
governmental body or, to the best of Parent's and the Merger Subsidiaries'
knowledge, threatened against or involving Parent or any of the Merger
Subsidiaries or any of their properties, assets or rights that would reasonably
be expected to have a Material Adverse Effect with respect to Parent.
(j) ENVIRONMENTAL PROTECTION. Except as disclosed in the SEC
Reports or set forth in Section 5.2(j) of the Parent Disclosure Schedule, (i)
Parent and each of the Merger Subsidiaries is in compliance with all applicable
Environmental Laws, except for non-compliance that would not reasonably be
expected to have a Material Adverse Effect with respect to Parent and (ii)
neither Parent nor any of the Merger Subsidiaries has received written or, to
the best of Parent's and the Merger Subsidiaries' knowledge, oral notice of any
action, cause of action, claim, investigation, demand or notice by any person
alleging liability under any Environmental Law which would reasonably be
expected to have a Material Adverse Effect with respect to Parent.
(k) BROKERS' FEES AND COMMISSIONS. Except for the fees and
expenses payable to CS First Boston Corporation, neither Parent nor any of the
Merger Subsidiaries has employed any investment banker, broker, finder,
consultant or intermediary which would be entitled to any investment banking,
brokerage, finder's or similar fee or commission in connection with this
Agreement, the Related Agreements or the transactions contemplated hereby or
thereby.
(l) ACCOUNTING AND TAX MATTERS. Neither Parent nor any of the
Merger Subsidiaries has taken or agreed to take any action that would prevent
the Merger and the Affiliate Mergers from being effected as pooling of interests
or would prevent the Merger and the Affiliate Mergers from constituting
transactions qualifying under Section 368(a) of the Code.
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(m) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Section 5.2(m) of the Parent Disclosure Schedule, Parent holds all licenses,
franchises, permits and authorizations necessary for the lawful conduct of its
businesses under and pursuant to, and the business of Parent is not being and
has not been conducted in violation of, any provision of any Federal, state,
local or foreign statute, law, ordinance, rule, regulation, judgment, decree,
order, concession, grant, franchise, permit or license or other domestic or
foreign governmental authorization or approval applicable to Parent, except to
the extent that the failure to hold any such licenses, franchises, permits or
authorization, or any such violation would not, individually or in the
aggregate, have a Material Adverse Effect with respect to Parent.
5.3 SEVERAL REPRESENTATIONS AND WARRANTIES BY STOCKHOLDERS.
(a) Each Stockholder severally represents and warrants to
Parent, as to itself, that such Stockholder is acquiring Parent Shares pursuant
to this Agreement and the Affiliate Merger Agreements for its own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act and has no present intention of selling, granting
participation in or otherwise distributing the same unless and until a
registration statement under the Securities Act with respect to such Parent
Shares shall become effective.
(b) Each Stockholder understands that (i) the Parent Shares to
be issued under Article 4 and the Affiliate Merger Agreements have not been
registered under the Securities Act, by reason of their issuance by Parent in a
transaction exempt from the registration requirements of the Securities Act
which exemption depends, among other things, upon the bona fide nature of the
Stockholder's investment intent as expressed herein and (ii) Parent Shares to be
acquired by such Stockholder must be held by such Stockholder indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
or is exempt from registration.
(c) Each Stockholder further understands that the exemption from
registration afforded by Rule 144
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(the provisions of which are known to such Stockholder) promulgated under the
Securities Act depends on the satisfaction of various conditions, and that, if
applicable, Rule 144 may only afford the basis for sales only in limited
amounts.
(d) Each Stockholder, except those listed in Section 5.3(d) of
the Related Companies Disclosure Schedule, severally represents and warrants to
Parent, as to itself, that it is an "accredited investor," as defined in Rule
501(a) promulgated under the Securities Act. Each Stockholder listed in Section
5.3(d) of the Related Companies Disclosure Schedule severally represents and
warrants to Parent that it will acquire the Parent Shares pursuant to this
Agreement and the Affiliate Merger Agreements upon the advice and after
consultation with a "purchaser representative," as defined in Rule 501(a)
promulgated under the Securities Act who shall be Leonard J. Kaplan or some
other party reasonably acceptable to Parent.
(e)(i) Each of the Stockholders understands that the merger
transactions contemplated by this Agreement are intended to be treated for
accounting purposes as a "pooling of interests" in conformity with the
requirements of APB Opinion No. 16, as amended and interpreted to date.
(ii) The Related Companies and KC are the only wholly owned
corporations of the Stockholders.
(iii) None of the Related Companies has ever been a subsidiary
or division of another corporation.
(iv) No stock options, warrants, convertible debt or any similar
type of equity instrument have ever been issued by any of the Related
Companies.
(v) One of the Related Companies has investments in real estate
assets comprising the Dutch Village Apartments and the general partnership
interest in the Artdan Company which were acquired for tax reasons and are
unrelated to the cleaning and sanitizing business, and are operated and
man-
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aged separately from the cleaning and sanitizing business.
(vi) Historically, the Related Companies have paid cash
dividends annually. While no formal dividend policy exists, the
established pattern of historical dividends indicates that dividends were
paid each year in the maximum amount possible given the Related Companies'
aggregate net cash flow for the year and (i) without any liquidation of
normal working capital levels, (ii) without incurring any debt and (iii)
while ensuring that sufficient cash remained in the Related Companies to
meet normal working capital needs in the short term consistent with past
practices. Cash dividends for the Related Companies during 1994 are being
made consistent with past practices, except for up to $1.3 million in costs
of this transaction paid or estimated to be paid by the Related Companies
on behalf of the Stockholders.
(vii) None of the Related Companies owns any Parent Shares
directly, and one of the Stockholders owns 20 Parent Shares which were
acquired more than two years prior to the date hereof for purposes
unrelated to this transaction.
(viii) The Stockholders will exchange all voting and nonvoting
stock of the Related Companies for Parent Shares.
(ix) The Related Companies have had no transactions changing the
total voting and nonvoting common stockholders' equity interests in the two
years prior to the date of this letter (other than the initial
capitalization of Kay International, Kay Europe and KC), nor are any equity
transactions of this type planned prior to consummation.
(x) During the five years prior to the date hereof, changes in
relative ownership of the Stockholders' voting and nonvoting common stock
holdings of each of the Related Companies have been limited to transfers
between family members and certain trusts set up for the benefit of family
members, and none of the Stockholders will transfer his or its shares of
voting or nonvoting common stock in
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any of the Related Companies prior to the Effective Time.
(xi) The Stockholders have no intention to, after the Closing
Date, sell Parent Shares to Parent at any time.
ARTICLE 6
Additional Covenants and Agreements
6.1 CONDUCT OF BUSINESS BY THE RELATED COMPANIES. Each of the
Related Companies and the Stockholders covenant and agree that, during the
period from the date of this Agreement to the Effective Time (unless Parent
shall otherwise agree in writing and except as otherwise contemplated by this
Agreement):
(a) Each of the Related Companies shall conduct its operations
according to its ordinary and usual course of business consistent with past
practice and with no less diligence and effort than would be applied in the
absence of this Agreement, and each of the Related Companies and the
Stockholders shall use all reasonable efforts to preserve intact each of the
Related Companies' current business organizations, keep available the services
of each of the Related Companies' current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it. Without limiting the generality of the foregoing, and except as
otherwise permitted in this Agreement, prior to the Effective Time, none of the
Related Companies shall:
(i) issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge
or other encumbrance of (A) any additional shares of capital stock of any
class (including the Related Companies Shares), or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for any shares of capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire
any shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe
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for, any shares of capital stock, or (B) any other securities in respect
of, in lieu of, or in substitution for, Related Companies Shares
outstanding on the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding securities
(including the Related Companies Shares);
(iii) split, combine, subdivide or reclassify any shares of its
capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or otherwise make any payments to the
Stockholders in their capacity as such;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization (other than the Merger and the Affiliate Mergers);
(v) adopt any amendments to its Articles of Incorporation or
By-Laws.
(vi) make any change in any method of financial or tax
accounting or financial or tax accounting practice;
(vii) except for increases in compensation granted in the
ordinary course of business and in accordance with its customary past
practices, grant any general increases in the compensation of directors,
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any director, officer or
employee;
(viii) pay or agree to pay any pension, retirement allowance or
other employee benefit not required or contemplated by any of the Related
Companies' Benefit Plans, as in effect on the date hereof;
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(ix) enter into any new or materially amend any existing
employment or severance agreement with any director, officer or employee
other than new employment agreements with newly hired employees for annual
remuneration not in excess of $60,000 (all of which contracts are
terminable by their terms on 30 days' notice or less without liability,
penalty or premium);
(x) except as may be required to comply with applicable law,
become obligated under any new Benefit Plan (including, without limitation,
any pension plan, welfare plan, multi-employer plan, employee benefit plan,
severance plan, benefit arrangement, or similar plan or arrangement), which
was not in existence on the date hereof, or amend any Benefit Plan in
existence on the date hereof if such amendment would have the effect of
enhancing any benefits thereunder;
(xi) make any acquisition, by means of merger, consolidation or
otherwise, of a business unit or securities;
(xii) make or covenant to make capital expenditures, in the
aggregate amount, in excess of $200,000 per calendar month;
(xiii) except in the ordinary course of business, enter into any
new contracts or amend the terms of any existing contract;
(xiv) incur any indebtedness for borrowed money or guarantee any
such indebtedness or make any loans, advances or capital contributions to,
or investments in, any other Person except for borrowings to fund past
service bonuses permitted by Section 6.1(d) not in excess of $3,500,000 in
the aggregate;
(xv) sell, transfer, or otherwise dispose of any of its
properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary course of business and consistent with past
practice;
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(xvi) dispose of or knowingly permit to lapse any rights to the
use of any Patent, Trademark, Trade Name or copyright or dispose of or
disclose (except as necessary in the conduct of its business) to any Person
other than representatives of Parent any trade secrets, formula, process or
Know-how (other than information which is a matter of public knowledge); or
(xvii) authorize, recommend, propose or announce an intention to
do any of the foregoing, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
(b) The Related Companies and the Stockholders shall promptly
notify Parent upon the occurrence or discovery of any matter or event which is
material to the business, operations, properties, condition (financial or
otherwise), assets, working capital or liabilities of the Related Companies
taken as a whole, or which would prevent any condition to closing specified in
Article 7 from being met.
(c) The Related Companies and the Stockholders will use all
their reasonable efforts to maintain in full force and effect all of the Related
Companies' presently existing policies of insurance or insurance comparable to
the coverage afforded by such policies.
(d) Notwithstanding the foregoing provisions of this Section
6.1, the Related Companies may take the following actions, up to the day prior
to the Effective Time: (i) transfer to the Stockholders the real estate assets
comprising the Dutch Village Apartments, and the general partnership interest in
the Artdan Company, and distribute to the Stockholders an amount equal to
$40,000 per month since January 1994 (prorated for any partial month), (ii) pay
or accrue past service bonuses to their employees, which, in the aggregate for
the Related Companies, shall not exceed the amount of $3,500,000, (iii) pay
transaction expenses incurred in connection with the transactions contemplated
by this Agreement and the Affiliate Merger Agreements not in excess of
$1,300,000, (iv) pay bonuses to Stockholders as a group in the aggregate for the
Company, Kay International and Kay Europe of $500,000 and (v) if the Closing
shall not have occurred by December 31, 1994, pay addi-
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tional dividends to the Stockholders in an amount equal to the sum of (1) the
additional tax liabilities of the Stockholders for income taxes for income with
respect to the Related Companies in excess of the amount that the Stockholders
otherwise would have paid had the Closing occurred on December 31, 1994, plus
(2) an amount equal to 15% of the pre-tax earnings of the Company for the period
from December 31, 1994 to the Closing Date. Prior to the consummation of each
of the transactions contemplated in the immediately preceding sentence, the
Related Companies shall make available to Parent all documentation related to
the consummation of such transactions, and Parent shall have the opportunity to
review such documents to insure that the consummation of such transaction would
not jeopardize the treatment of the Merger and the Affiliate Mergers as pooling
of interest transactions. If in the good faith judgment of Parent the
transaction would jeopardize pooling treatment, the parties shall in good faith
restructure such transaction in order to effect the purpose of such transaction
without jeopardizing pooling treatment for the Merger and the Affiliate Mergers.
6.2 CONDUCT OF BUSINESS BY PARENT. Parent covenants and agrees that,
during the period from the date of this Agreement to the Effective Time (unless
the Company shall otherwise agree in writing and except as otherwise
contemplated by this Agreement), Parent will not split, combine, subdivide or
reclassify any shares of its capital stock or declare, set aside for payment or
pay any dividend, or make any other actual, constructive or deemed distribution
in respect of any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such except for regular quarterly dividends or
systematic repurchases of Parent Shares consistent with past practices for use
in connection with Parent's employee benefits plans.
6.3 FURTHER EFFORTS. The Related Companies and Parent shall: (i)
promptly make their respective filings and thereafter make any other submissions
required under all applicable laws with respect to the Merger and the Affiliate
Mergers and the other transactions contemplated hereby and the Related
Agreements; and (ii) use all reasonable efforts to promptly take, or cause to be
taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropri-
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ate to consummate and make effective the transactions contemplated by this
Agreement and the Related Agreements. In addition, in the event of any action,
suit, proceeding or investigation relating to this Agreement or to the Related
Agreements or to the transactions contemplated hereby or thereby, the parties
hereto agree to cooperate and use all reasonable efforts to vigorously defend
against and respond thereto.
(b) Without limiting the generality of the foregoing, each of
the Related Companies, Parent and the Merger Subsidiaries agrees to make within
one day of the date of this Agreement all filings necessary under the HSR Act in
order to commence the waiting periods thereunder in connection with the Merger
and the Affiliate Mergers. Subject to the limitations contained in the last
sentence of this Section 6.3(b), each of the Related Companies, Parent and the
Merger Subsidiaries shall use all reasonable efforts to resolve such objections,
if any, that any governmental or regulatory authorities with jurisdiction over
the enforcement of the HSR Act may assert with respect to the Merger or the
Affiliate Mergers. The parties agree that Parent shall have the primary
responsibility for dealing with such authorities and for resolving any such
objections; provided, that the parties shall consult with each other before
submitting any application or other written communication to any such authority.
Notwithstanding the foregoing or any other provisions contained in this
Agreement to the contrary, neither Parent nor any of its affiliates shall be
under any obligation of any kind to enter into any negotiations or to otherwise
agree with any governmental or regulatory authority, including but not limited
to any governmental or regulatory authority with jurisdiction over the
enforcement of the HSR Act, or any other party to sell or otherwise dispose of,
hold separate (through the establishment of a trust or other wise) particular
assets or categories of assets or businesses of any of the Related Companies,
Parent or any of Parent's affiliates.
(c) Without limiting the generality of the foregoing, as soon as
practicable after the execution of this Agreement, Parent shall prepare and file
a listing application with the NYSE with respect to the Parent Shares to be
delivered to Stockholders at the Effective
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Time and use all reasonable efforts to have such listing approved at the
earliest practicable time.
6.4 ACCESS TO INFORMATION. From the date hereof until the Closing
Date, the Stockholders and the Related Companies will afford Parent and its
representatives, during regular business hours and upon reasonable notice, such
access to those employees who the Company and Parent mutually agree Parent may
contact and the properties, books and records of the Related Companies as Parent
may reasonably request in connection with the transactions contemplated by this
Agreement and the Related Agreements; provided that such access shall not affect
Parent's right to rely on the representations and warranties of the Related
Companies and the Stockholders set forth herein and such investigations shall
not unreasonably interfere with the operation of the Related Companies'
businesses. The rights granted pursuant to this Section shall not include the
right to access certain highly confidential or strategic information which the
Company determines in good faith should not be disclosed to Parent prior to the
Closing Date.
6.5 PUBLICITY. The parties hereto shall not make any public
statement disclosing information relating to this Agreement or the Related
Agreements or the transactions contemplated hereby or thereby that is in
addition to information the parties previously agreed to disclose; provided that
any disclosure that either the Company or Parent consider to be required to be
made to any governmental agency or to be mandated by law or applicable stock
exchange requirements may be made at the time required or mandated whether or
not there is any agreement on the need for, or text of, such disclosure;
provided, however, the party required to make such disclosure shall, to the
extent that time permits taking into account applicable reporting requirements,
first provide the other party with the opportunity to review such disclosure and
submit to the disclosing party within a reasonable time comments and suggestions
with respect thereto. Neither the Related Companies nor the Stockholders shall
make any disclosures or representations to any employee of any of the Related
Companies with respect to such employee's benefits which is inconsistent with
this Agreement.
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6.6 AFFILIATES LETTERS. Each of the Stockholders shall deliver to
Parent on or prior to the Effective Time a written agreement in the form
attached hereto as Exhibit A (the "Affiliate Letter").
6.7 REPRESENTATIONS AND WARRANTIES. None of the Related Companies
and the Stockholders, on the one hand, nor Parent and Merger Sub, on the other,
will take any action that would cause any of their representations and
warranties set forth in Section 5.1, 5.2 or 5.3, as the case may be, not to be
true and correct in all material respects at and as of the Effective Time.
6.8 ACQUISITION PROPOSALS. Unless and until this Agreement is
terminated pursuant to Article 8, neither the Related Companies, the
Stockholders nor any of their respective agents shall solicit, discuss,
negotiate, offer or accept any other proposal with respect to a merger,
consolidation, share exchange or similar transaction involving any of the
Related Companies, any purchase of Related Companies Shares, any purchase of all
or any significant portion of the assets of any of the Related Companies or any
equity interest in any of the Related Companies, or any purchase of all or any
significant portion of the assets of or any equity interest in any business or
any corporation, partnership, association or other business organization or
division thereof, other than the transactions contemplated hereby and by the
Related Agreements.
6.9 SUPPLEMENTS TO DISCLOSURE SCHEDULE. Every two weeks from the
date hereof through the Closing Date and two days prior to the Closing Date, the
Related Companies will supplement or amend the Related Companies Disclosure
Schedule with respect to any matter, condition or occurrence hereafter arising
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in the Related Companies Disclosure
Schedule and deliver such supplemented or amended Related Company Disclosure
Schedule to Parent. No supplement to or amendment of the Related Companies
Disclosure Schedule shall be deemed to cure any breach of any representation or
warranty made in this Agreement so as to (a) permit the Closing to occur unless
Parent specifically agrees thereto in writing or (b) affect Parent's rights to
indemnification hereunder.
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6.10 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and inter est in, to and under any of the rights,
properties or assets of the Company and Merger Sub acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
6.11 EMPLOYEE MATTERS. Parent will maintain for a period of not less
than one year after the Effective Time benefit plans (other than plans under
which the employees' interests are based upon the Related Companies Shares)
which are substantially equivalent, in the aggregate, to the Benefit Plans
(other than plans under which the employees' interests are based upon the
Related Companies Shares) of the Related Companies in effect on the date of this
Agreement; provided, however, that nothing contained herein shall be construed
as requiring Parent or the Surviving Corporation or either of the surviving
corporations in the Affiliate Mergers to continue any specific plans or to
continue the employment of any specific Person.
(b) All service credited to each employee by the Related
Companies through the Effective Time shall be recognized by Parent for purposes
of determining eligibility and vesting of benefits (but, except with respect to
those plans set forth on Schedule 6.11(b), not for benefit accruals or the right
to receive post retirement medical benefit subsidies) beginning as of the date
such employees are allowed to participate under any employee benefit plan
provided by Parent.
(c) As soon as practicable following the date hereof, the
respective Related Company shall execute and deliver a bonus agreement
reflecting the terms set forth below with each of its employees identified in
Schedule 6.11(c) providing for a stay pay bonus with the amount and terms set
forth on Schedule 6.11(c), payable on the 36-month anniversary of the Closing
Date so long as such employee has been continuously employed by the
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Related Companies from the Closing Date through the 36-month anniversary date,
provided, however, that any employee who shall have terminated employment prior
to the 36-month anniversary date shall not forfeit the right to the bonus
payment (and such bonus shall be payable within 30 days of termination) if (i)
such employee's employment with the Related Companies is terminated by the
Related Companies without cause, (ii) such employee terminates employment as a
result of a decision not to relocate under circumstances where a relocation to a
facility outside of a 35 mile radius of the facility where such employee was
formerly located was required as a condition for continued employment (iii) the
termination of employment is the result of a material decrease in salary and
bonus target compensation unrelated to performance and cost of living, or (iv)
the termination is the result of retirement at normal retirement age, disability
or death. Prior to the Closing Date, the Stockholders, with the prior written
consent of Parent (which consent shall not be unreasonably withheld), may amend
Schedule 6.11(c) to amend the amount of bonus paid to an employee listed on
Schedule 6.11(c) or add additional non-Stockholders employees who are entitled
to bonuses; provided that the aggregate amount of bonuses paid to all employees
as set forth on such amended Schedule shall not exceed $3,500,000.
(d) Promptly following the Closing Date, Parent agrees to cause
the Surviving Corporation or one of the surviving corporations in the Affiliate
Mergers, as applicable, to execute and deliver an employment agreement
reflecting the terms set forth below with (i) each employee of the Related
Companies identified in Schedule 6.11(d)(i), which agreement will entitle the
employee to a severance benefit of one year's salary and the ordinary course
(regularly scheduled) annual bonus target in the event such employee's
employment with the Related Companies is terminated, without cause, within two
years of the Closing Date and (ii) each salaried employee of the Related
Companies not listed on Schedule 6.11(d)(i), which agreement will entitle the
employee to a severance benefit of six-months' salary and one-half of the
ordinary course (regularly scheduled) annual bonus target in the event such
employee's employment with the Related Companies is terminated, without cause,
within one year of the Closing Date. For purposes of this provision,
termination without cause shall include the
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following: (i) termination of employment as a result of a decision not to
relocate under circumstances where a relocation to a facility outside of a 35
mile radius of the facility where such employee was formerly located was
required as a condition for continued employment or (ii) termination of
employment as the result of a material decrease in salary and bonus target
compensation unrelated to performance and cost of living. After the termination
of the severance agreements described above, employees of the Companies shall
become subject to the severance program of Parent, giving credit for purposes of
calculating the amount of severance due to an employee under such plan, to the
employee's length of service with the Related Companies prior to the Effective
Time and with Surviving Corporation thereafter.
(e) Parent represents that it does not currently intend to make
any significant reduction in the work force of the Related Companies or to
relocate any significant operations of the Related Companies; provided that the
parties acknowledge that certain actions will need to be taken in connection
with the Related Companies' Dallas facility and that such actions have not yet
been determined. For a period of two years after the Closing Date, Parent
agrees to consult with Randall R. Kaplan prior to making any significant
reduction in the work force of the Related Companies or relocating any
significant operations of the Related Companies.
(f) Parent shall cause the Surviving Corporation or one of the
surviving corporations in the Affiliate Mergers, as applicable, to (1) pay
within 60 days of the Effective Time the payment to be made to the employees of
the Related Companies for 1994 under the Related Companies' annual bonus plan
and profit sharing plan consistent with the Related Companies' past practices
and the terms of each of the plans, (2) make all payments required by the
Related Companies' long term incentive bonus plan and (3) pay the amount payable
to one employee under a Special Incentive Agreement with the Company.
(g) So long as Parent determines, in its sole discretion, to
continue the Related Companies' defined contribution plans, Parent shall cause
the Surviving Corporation to continue to make contributions to such plans
consistent with the past practices of the
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Related Companies. In the event Parent, in its sole discretion, determines to
discontinue contributions to the Related Companies' defined contribution plans,
Parent shall cause the Surviving Corporation to provide for the full vesting of
all amounts held in such accounts for the participants and, in the sole
discretion of Parent, Parent shall continue the plan as a frozen plan, merge the
plan into Parent's qualified defined contribution plan, or terminate the plan
and distribute assets to the participants.
6.12 TAXES. The Stockholders shall pay any and all Taxes of each of
the Related Companies with respect to any period (or any portion thereof) up to
and including the Effective Time, except for Taxes of the Related Companies
which are reflected as current liabilities for Taxes that exist as of the
Effective Time on the Adjusted Closing Date Balance Sheet.
(b) The Stockholders shall file, or cause to be filed, all Tax
Returns of each of the Related Companies required to be filed with respect to
any periods ending on or before the Effective Time (and the Surviving
Corporation and the surviving corporations in the Affiliate Mergers shall
designate a Stockholder as an officer of the Surviving Corporation and the
surviving corporations in the Affiliate Mergers for purposes of signing and
filing the Returns). The Stockholders shall make available for review, by the
Parent, thirty (30) days before filing, all Returns of each of the Related
Companies required to be filed with respect to any periods ending on or before
the Effective Date. Parent shall prepare and file any and all Tax Returns of
each of the Related Companies which are required to be filed with respect to
periods after the Effective Time. With respect to payments for Taxes required
to be made for periods commencing before and ending after the Effective Time,
Tax liability shall be based upon the actual Tax Return filed that includes the
Effective Time, such Tax Return to be consistent with past practice, if any, and
such liability shall be apportioned between the period through and including the
Effective Time, on the one hand, and the balance of the tax year, on the other
hand, based upon the amount of Taxes that would be due if the actual books and
records were closed immediately after the Effective Time.
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(c) Parent, the Merger Subsidiaries, the Related Companies and
the Stockholders shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the preparation of any Tax
Return or income tax return, any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include particularly the preparation
and timely filing of the final Subchapter S corporate tax return for the taxable
period ending as of the Effective Time and the retention and (upon the other
party's request) the provision of records and information which includes but is
not limited to hardcopy and microfiche copy of financial statements, general
ledger detail, accounts payable records (including any expense invoices located
on premises or at third party storage locations), customer sales invoices,
payroll records, book and tax fixed asset records, and state apportionment
records (which includes sales, payroll, property, inventory and rent expense by
location), which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The parties agree (A) to retain all books and records with respect
to Tax matters pertinent to the Related Companies relating to any taxable period
beginning before the Effective Date until the expiration of the statute of
limitations (and, to the extent notified by any party, any extensions thereof)
of the respective taxable periods, and to abide by all record retention
agreements, entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, it shall be
allowed to take possession of such books and records.
(d) Each Stockholder agrees that he or it shall not, without
Parent's prior written consent, make any retroactive tax election or otherwise
amend or supplement any of the Related Companies' or the Stockholders' Tax
Returns with any local, state, Federal or foreign governmental authority
following the Merger that could reasonably be expected to have an adverse
financial impact on Parent or the Surviving Corporation or either of the
surviving corporations in the Affiliate Mergers following the Closing Date.
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(e) Parent shall (i) promptly notify the Stockholders of the
commencement of any examination with respect to the tax liability of any of the
Related Companies for any taxable year that includes any period prior to the
Effective Time, (ii) promptly provide the Stockholders with copies of all
correspondence with any taxing authority with respect to that tax liability,
(iii) solely at the Stockholders' expenses, permit the Stockholders to control
the defense with respect to such examination and any administrative and court
proceedings resulting therefrom to the extent such proceedings affect the tax
liability of the Stockholders or the tax liability of the Related Companies with
respect to which the Stockholders may be liable to indemnify Parent; provided,
if Parent reasonably determines that such examination or proceedings could have
an adverse effect on Parent or the Surviving Corporation or any surviving
corporation in the Affiliate Mergers, Parent shall have the right to control the
defense of such examination or proceeding and the Stockholders shall be
permitted to participate therein at their own expense and (iv) not enter into
any settlement of tax liability of the Stockholders or the tax liability of the
Related Companies with respect to which the Stockholders may be liable to
indemnify Parent without the written approval of the Stockholders (which
approval shall not be unreasonably withheld). If the Stockholders are
controlling the defense of any such examination or proceeding pursuant to the
foregoing sentence, the Stockholders shall not enter into any settlement of tax
liability of the Related Companies without Parent's prior written approval
(which approval shall not be unreasonably withheld).
6.13 REGISTRATION RIGHTS.
(a) SHELF REGISTRATION.
(i) Parent shall, as soon as reasonably practicable and in any
event within 30 days following the Closing, prepare and file a "shelf"
registration statement (a "Shelf Registration") covering the resale of the
Parent Shares to be issued to each of the Stockholders at the Closing, and
thereafter Parent shall use its reasonable efforts to cause such
registration statement to become effective, and (ii) Parent shall use its
reasonable efforts to keep the Shelf Registration continuously effective
until
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the earlier of such time as all of such shares have been disposed of or
three years after the Effective Time. Parent will use all reasonable
efforts to effect such qualifications under applicable Blue Sky or other
state securities laws as may be reasonably requested by the Stockholders
(provided that Parent shall not be obligated to file a general consent to
service of process or qualify to do business as a foreign corporation or
otherwise subject itself to taxation in any jurisdiction solely for the
purpose of any such qualification) to permit or facilitate the sale or
other distribution of the Parent Shares to be registered hereunder (the
"Registered Securities"). In connection with the Shelf Registration, each
Stockholder will furnish to Parent in writing such information as Parent
reasonably requests for use in connection with the Shelf Registration or
the Final Prospectus (defined below).
(ii) Subject to the other provisions of Section 6.13, each
Stockholder agrees that he or it will only make offers to sell and sell
Registered Securities with a final prospectus ("Final Prospectus") which is
part of the effective Shelf Registration. Notwithstanding any other
provision of this Section 6.13, each Stockholder agrees not to offer to
sell or sell any Registered Securities at any time after the date two years
following the Effective Time with a prospectus (including a Final
Prospectus) if he or it could sell those securities pursuant to Rule 144
under the Securities Act in the manner and in the amount he or it intends
to sell those securities.
(iii) Parent shall furnish to each Stockholder such number of
copies of the Final Prospectus and any amendment or supplement thereto as
the Stockholder may reasonably request in order to effect the sale of the
Registered Securities to be offered and sold by the Stockholder, but only
while the Parent is required to cause the Shelf Registration to remain
current.
(iv) Parent shall afford the Stockholders and their
representatives the opportunity at reasonable times and in a reasonable
manner to make such reasonable examination and inquire into the finan-
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cial condition and business of Parent and its affiliates as the
Stockholders' counsel may deem necessary or prudent in connection with the
preparation of the Shelf Registration.
(b) BLACKOUT PERIODS. Anything in this Agreement to the
contrary notwithstanding, Parent shall be entitled to postpone for such period
of time reasonably determined by Parent (a "Blackout Period") the filing of any
amendments or supplements (including, without limitation, on Form 8-K) that
Parent reasonably determines are required for the Shelf Registration or Final
Prospectus to comply with all applicable securities laws if Parent reasonably
determines that any such filing would impede, delay or interfere with any
financing, offer or sale of securities, acquisition, corporate reorganization or
other significant transaction involving Parent or any of its affiliates, or
require disclosure of material information which Parent has a bona fide business
purpose for preserving as confidential. Upon notice by Parent to the
Stockholders of such determination, each of the Stockholders covenants that he
or it shall (i) keep the fact of any such notice strictly confidential, (ii)
promptly halt any offer, sale, trading or transfer by him or it or any of his or
its affiliates of any of the Registered Securities until Parent has notified the
Stockholders that the Blackout Period has ended and (iii) promptly halt any use,
publication, dissemination or distribution of the Shelf Registration, the Final
Prospectus included therein and any amendment or supplement thereto by him or it
and any of his or its affiliates for the duration of the Blackout Period.
Parent will, as promptly as practicable after the Blackout Period, take such
actions as may be necessary to file and have declared effective any required
amendment or supplement to the Shelf Registration or Final Prospectus. Parent
agrees to promptly notify the Stockholders of the ending of any Blackout Period.
(c) EXPENSES. Parent will bear all expenses of any Shelf
Registration pursuant to this Section 6.13 (other than underwriters' commissions
and expenses and brokerage commissions and fees, if any, payable with respect to
Registered Securities sold by the Stockholders and fees and expenses of counsel,
any accountants or any experts for the Stockholders), including, without
limitation, registration fees, printing
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expenses, expenses of compliance with Blue Sky or other state securities laws,
and legal and audit fees incurred by Parent in connection with such Shelf
Registration and amendments or supplements in connection therewith.
(d) ACTION TO SUSPEND EFFECTIVENESS; SUPPLEMENT TO REGISTRATION
STATEMENT.
(i) Parent will notify the Stockholders promptly of (A) any
action by the SEC to suspend the effectiveness of a Shelf Registration or
the institution or threatening of any proceeding for such purpose (a "stop
order") or (B) the receipt by Parent of any notification with respect to
the suspension of the qualification of the Registered Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose. Immediately upon receipt of any such notice, the
Stockholders shall cease to offer or sell any Registered Securities
pursuant to the Shelf Registration in the jurisdiction to which such stop
order or suspension relates. Parent will use all reasonable efforts to
prevent the issuance of any such stop order or the suspension of any such
qualification and, if any such stop order is issued or any such
qualification is suspended, to obtain as soon as possible the withdrawal or
revocation thereof, and will notify the Stockholders at the earliest
practicable date of the date on which the Stockholders may offer and sell
Registered Securities pursuant to the Shelf Registration.
(ii) Parent will notify the Stockholders promptly of the
occurrence of any event or the existence of any state of facts that, in the
judgment of Parent, should be set forth in the Shelf Registration or Final
Prospectus such that the Shelf Registration or Final Prospectus could not
then be available for the resale of the Registered Securities. Immediately
upon receipt of such notice, the Stockholders shall cease to offer or sell
any Registered Securities pursuant to the Shelf Registration and the Final
Prospectus, cease to deliver or use the Shelf Registration and the Final
Prospectus and, if so requested by Parent, return to Parent, at its
expense, all copies (other than permanent file copies) of the Shelf
Registration and Final Prospec-
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tus. Subject to the Parent's right to declare a Blackout Period, Parent
will, as promptly as practicable, take such action as may be necessary to
amend or supplement the Shelf Registration in order to set forth or reflect
such event or state of facts. Parent will furnish copies of such proposed
amendment or supplement to the Stockholders.
6.14 AGREEMENTS WITH RESPECT TO KC.
(a) Solely at the option of Parent, and if Parent so elects, the
Stockholders who own shares of capital stock of KC ("KC Shares") agree to cause
KC to enter into a merger agreement providing for a subsidiary of Parent to be
merged into KC pursuant to which such Stockholders will receive in the aggregate
4,762 Parent Shares and such Stockholders will approve such merger. Such Parent
Shares will be allocated to the Stockholders pro rata based on the number of KC
Shares held by such Stockholder. The option set forth in this Section 6.14
above (the "Option") is irrevocable and shall be exercisable at any time prior
to January 31, 1995. Parent agrees to promptly notify the Stockholders of
Parent's decision not to exercise the Option. Parent and the Stockholders agree
that if the Option is exercised by Parent, they shall enter into a merger
agreement reasonably acceptable to Parent and the Stockholders which provides
for a merger in accordance with this Section 6.14 (the "KC Merger Agreement").
The KC Merger Agreement will contain (i) the same form of representations and
warranties by the Stockholders with respect to KC which are set forth herein
with respect to the Related Companies subject to any required exceptions to be
set forth in the disclosure schedule for such agreement, (ii) a provision which
adds KC to the Stockholder's indemnification obligations set forth herein for
breaches of representations and warranties set forth in such agreement, (iii) a
provision relating to employees of KC which is substantially similar to the
terms of Section 6.11 and (iv) a balance sheet adjustment substantially similar
to Section 4.2; provided that the Stockholders liability related to such
adjustment shall be capped at $100,000 in the aggregate.
(b) The Stockholders agree to cause KC and the Related Companies
to enter into a binding supply and license agreement prior to the Closing Date
which is
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reasonably acceptable to Parent and (i) terminates automatically (without
penalty) on a date 6 months from the Closing Date, (ii) reflects current
purchasing terms between the Related Companies, (iii) grants KC a non-exclusive
and non-assignable license, limited to Puerto Rico and the Caribbean, to use the
Related Companies' Proprietary Rights to sell products in Puerto Rico and the
Caribbean, and (iv) limits the Related Companies' obligations to sell products
to KC if KC is not paying for such products, or would not be able to pay for
such products, within 30 days of delivery on a current basis.
(c) Each Stockholder agrees not to sell, pledge or otherwise
transfer his KC Shares to any person or entity, other than Parent (or a wholly
owned subsidiary of Parent), until the Option expires or the Stockholders
receive notice by Parent of its determination not to exercise the Option. In
addition, the Stockholders agree to cause KC to take all action necessary to
comply, during the Option period, with the terms of Sections 6.1(a), (b) and (c)
as if KC were one of the Related Companies, provided that (i) Section
6.1(a)(xii) shall apply to capital expenditures in excess of $5,000 per month
and (ii) Section 6.1(a)(xiv) shall not have any exceptions for the incurrence of
indebtedness; PROVIDED that KC may incur up to $50,000 of additional
indebtedness under the Letter Agreement (defined below) at any time up to the
Closing Date.
(d) The Stockholders, jointly and severally, agree to cause KC
not to incur any indebtedness under the Letter Agreement (the "Letter
Agreement") dated June 3, 1993 between First Union National Bank of North
Carolina (the "Bank"), KC and the Company in excess of $950,000 and to
immediately reimburse the Company for any amounts paid to the Bank by the
Company in excess of $950,000 pursuant to the terms of the Letter Agreement.
ARTICLE 7
Conditions
7.1 CONDITIONS TO THE OBLIGATIONS OF PARENT AND THE MERGER
SUBSIDIARIES. The respective obligations of Parent and the Merger Subsidiaries
to consummate the Merger and the Affiliate Mergers are subject to the
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fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by Parent or the Merger
Subsidiaries, as the case may be, to the extent permitted by applicable law.
(a) CERTIFICATE. (i) (A) The representations and warranties of
each of the Related Companies and the Stockholders set forth in this Agreement
shall be true and correct in all material respects on and as of the Effective
Time with the same force and effect as though the same had been made on and as
of the Effective Time (except to the extent they relate to a particular date)
and (B) each of the Related Companies and the Stockholders shall have performed
in all material respects all of its or his obligations under this Agreement
theretofore to be performed, and (ii) Parent shall have received at the
Effective Time a certificate to that effect dated the Effective Time and
executed by each of the Stockholders in his or its capacity as a Stockholder of
each of the Related Companies of which he or it is a stockholder and as an
officer of each of the Related Companies of which he or it is an officer.
Notwithstanding the foregoing and solely for the purposes of this Section
7.1(a), the Related Companies and the Stockholders representations and
warranties contained in this Agreement shall not be deemed untrue, incorrect or
breached for purposes of the preceding sentence unless the aggregate losses to
the Related Companies that resulted or would reasonably be expected to result
from such failure to be true and correct or from such breach exceed, or would
reasonably be expected to exceed, $10,000,000; provided that for this purpose
the amount of any loss to the Related Companies with respect to customer
relationships, including any loss attributed to a loss of business of customers
of the Related Companies (either incurred or of which such customer has given
the Related Companies notice), shall be equal to the loss of sales (on an
annualized basis) to such customer which is not the result of Parent receiving
such business of such customer.
(b) INJUNCTION. There shall be in effect no preliminary or
permanent injunction or other order of a court or governmental or regulatory
agency of competent jurisdiction directing that the transactions contemplated
herein or in the Related Agreements not be consummated,
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and no proceeding by any governmental authority shall be pending or threatened
in writing which seeks an injunction, restraining order, or other order which
would prohibit the consummation of the Merger or the Affiliate Mergers or impair
Parent's ability to own or control the Surviving Corporation or the surviving
corporations in the Affiliate Mergers or a material amount of their assets.
(c) GOVERNMENTAL FILINGS AND CONSENTS. All governmental filings
required to be made prior to the Effective Time by each of the Related Companies
with, and all governmental consents required to be obtained prior to the
Effective Time by each of the Related Companies from, governmental and
regulatory authorities in connection with the execution and delivery of this
Agreement and the Related Agreements by the Related Companies and the
consummation of the transactions contemplated hereby and thereby listed on
Schedule 7.1(c) shall have been made or obtained and the waiting periods under
the HSR Act shall have expired or been terminated.
(d) THIRD PARTY CONSENTS. All required authorizations, consents
and approvals of any third party (other than a governmental or regulatory
authority) listed on Schedule 7.1(d) shall have been obtained.
(e) AFFILIATE LETTER. Each of the Stockholders shall have
executed and delivered to Parent an Affiliate Letter in the form attached hereto
as Exhibit A.
(f) EMPLOYMENT AND CONSULTING AGREEMENTS. The Person(s) listed
on Schedule 7.1(f) shall have entered into and delivered to Parent an employment
agreement or consulting agreement, as the case may be, in the forms attached
hereto as Exhibits B and C.
(g) OPINION OF COUNSEL. Parent shall have received the opinion
of counsel for the Related Companies and the Stockholders substantially in the
form attached hereto as Exhibit D.
(h) ESCROW AGREEMENT. Concurrently with the Closing, the
Stockholders shall have entered into and delivered to Parent the Escrow
Agreement substantially in the form attached hereto as Exhibit E.
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(i) LISTING OF PARENT SHARES. The Parent Shares constituting
the aggregate Merger Consideration shall have been authorized for listing on the
NYSE, subject to notice of official issuance.
(j) AFFILIATE MERGERS. Concurrently with the Closing, the
Affiliate Mergers shall be consummated.
(k) SECTION 1445(b)(2) AFFIDAVIT. Each Stockholder shall have
furnished to Parent an affidavit in the form attached hereto as Exhibit F that
would exempt the transactions contemplated by this Agreement and the Related
Agreements from withholding under Section 1445(b)(2) of the Code.
(l) DIRECTOR RESIGNATIONS. The Stockholders shall have
delivered the written resignations, effective at the Effective Time, of all
members of the Boards of Directors of each of the Related Companies.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE RELATED COMPANIES AND THE
STOCKHOLDERS. The obligations of the Related Companies and the Stockholders to
consummate the Merger and the Affiliate Mergers are subject to the fulfillment
at or prior to the Effective Time of the following conditions, any or all of
which may be waived in whole or in part by the Related Companies and the
Stockholders to the extent permitted by applicable law.
(a) CERTIFICATE. (i)(A) The representations and warranties of
Parent and the Merger Subsidiaries set forth in this Agreement shall be true and
correct in all material respects on and as of the Effective Time with the same
force and effect as though the same had been made on and as of the Effective
Time (except to the extent they relate to a particular date) and (B) Parent and
the Merger Subsidiaries shall have performed in all material respects all of
their respective obligations under this Agreement theretofore to be performed,
and (ii) the Related Companies and the Shareholders shall have received at the
Effective Time a certificate from Parent and the Merger Subsidiaries to that
effect dated the Effective Time.
(b) INJUNCTION. There shall be in effect no preliminary or
permanent injunction or other order of a court or governmental or regulatory
agency of competent
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jurisdiction directing that the transactions contemplated herein or in the
Related Agreements not be consummated.
(c) GOVERNMENTAL FILINGS AND CONSENTS. All governmental filings
required to be made prior to the Effective Time by Parent and the Merger
Subsidiaries with, and all governmental consents required to be obtained prior
to the Effective Time by Parent and the Merger Subsidiaries from, governmental
and regulatory authorities in connection with the execution and delivery of this
Agreement and the Related Agreements by Parent and the Merger Subsidiaries and
the consummation of the transactions contemplated hereby and thereby listed on
Schedule 7.1(c) shall have been made or obtained and the waiting periods under
the HSR Act shall have expired or been terminated.
(d) EMPLOYMENT AND CONSULTING AGREEMENTS. Parent shall have
tendered to the Persons listed on Schedule 7.1(f) an employment agreement or
consulting agreement, as the case may be, in the forms attached hereto as
Exhibit B and C.
(e) OPINION OF COUNSEL. The Related Companies shall have
received the opinion of counsel of Parent substantially in the form attached
hereto as Exhibit G.
(f) ESCROW AGREEMENT. Concurrently with the Closing, Parent
shall have entered into and delivered to the Stockholders the Escrow Agreement
substantially in the form attached hereto as Exhibit E.
(g) LISTING OF PARENT SHARES. The Parent Shares shall have been
authorized for listing on the NYSE, subject to notice of official issuance.
(h) AFFILIATE MERGERS. Concurrently with the Closing, the
Affiliate Mergers shall be consummated.
ARTICLE 8
Termination
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
and the Merger may be aban-
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doned at any time prior to the Effective Time by the mutual written consent of
Parent and the Company.
8.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement may
be terminated and the Merger may be abandoned by either Parent or the Company if
(i) the Merger shall not have been consummated by March 31, 1995 (provided that
the right to terminate this Agreement under this Section 8.2(i) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date), (ii) any court of competent jurisdiction in the
United States or some other governmental body or regulatory authority shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger or permitting
consummation of the Merger only subject to a condition or restriction
unacceptable to Parent and such order, decree, ruling or other action shall have
become final and nonappealable.
8.3 TERMINATION BY PARENT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by Parent, if
(i) any of the Related Companies or the Stockholders shall have failed to comply
in any material respect with any of the covenants, conditions or agreements
contained in this Agreement to be complied with or performed by such Related
Company or Stockholder at or prior to such date of termination, which failure to
comply has not been cured within 10 business days following receipt by the
Company of notice of such failure to comply or (ii) any representation or
warranty of any of the Related Companies or the Stockholders contained in the
Agreement is or becomes untrue or incorrect (except for changes permitted by
this Agreement and those representations which address matters only as of a
particular date that remain true and correct as of such date), except, in any
case, failures to be true and correct which (i) would cause the condition in
Section 7.1(a) to be unsatisfied and (ii) are incapable of being cured prior to
March 31, 1995.
8.4 TERMINATION BY THE COMPANY. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action of
the Company, if (i) Parent or the Merger Subsidiaries shall have failed to
comply in any material respect with any of
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the covenants, conditions or agreements contained in this Agreement to be
complied with or performed by Parent or the Merger Subsidiaries at or prior to
such date of termination, which failure to comply has not been cured within 10
business days following receipt by the breaching party of notice of such failure
to comply or (ii) any representation or warranty of Parent or the Merger
Subsidiaries contained in this Agreement is or becomes untrue or incorrect
(except for changes permitted by this Agreement and those representations which
address matters only as of a particular date that remain true and correct as of
such date), except, in any case, failures to be true and correct which (i) are
not reasonably likely to have a Material Adverse Effect with respect to Parent
and (ii) are incapable of being cured prior to March 31, 1995.
8.5 TERMINATION PURSUANT TO SECTION 1.4. Either Parent or the
Company, as the case may be, may terminate this Agreement in accordance with
Section 1.4 hereof, and any such termination shall be deemed to be made pursuant
to this Article 8.
8.6 EFFECT OF TERMINATION AND ABANDONMENT. In the event of the
termination and abandonment of this Agreement pursuant to Article 8 hereof, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders, other than as provided in the Confidentiality Agreement dated
May 5, 1994 between Parent and the Company (the "Confidentiality Agreement").
Notwithstanding the foregoing sentence, nothing contained in this Section 8.6
shall relieve any party from liability for any breach of this Agreement.
ARTICLE 9
Indemnification
9.1 INDEMNIFICATION BY THE STOCKHOLDERS. Subject to the limits set
forth in this Article 9, each Stockholder shall, jointly and severally,
indemnify, defend and hold Parent, its officers, directors, agents and
affiliates (each an "Indemnified Party"), harmless from and against any and all
losses, liabilities, Taxes,
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damages, deficiencies, claims, costs and expenses (including interest,
penalties, fees and reasonable professional fees and expenses incurred in
connection with any of the foregoing and in seeking indemnification hereunder)
("Losses") that they may suffer, sustain, incur or become subject to arising out
of, in connection with or due to any (i) inaccuracy of any representation or the
breach of any warranty in this Agreement or the Related Companies Disclosure
Schedule made as of the date of this Agreement by any of the Related Companies
or the Stockholders or (ii) breach of any covenant, undertaking or other
agreement of any of the Related Companies or the Stockholders contained in this
Agreement or the Affiliate Merger Agreements or the Related Companies'
Disclosure Schedule. Any Loss shall be determined net of any recovery of
proceeds, including proceeds from the Related Companies insurance, related
thereto; provided, however, that Parent shall have no obligation to file an
insurance claim under any of its insurance policies if Parent reasonably
believes it would be detrimental to Parent or the Company. With respect to any
Stockholder that is a trust, Parent shall look solely to the assets of the
trust, and not to the trustee of such trust, for indemnification with respect to
such Stockholder pursuant to this Article 9. In calculating Losses, Parent
shall take into account amounts paid by the Stockholders pursuant to Section
4.2.
9.2 ADDITIONAL INDEMNIFICATION BY THE STOCKHOLDERS. Each Stockholder
shall, jointly and severally, indemnify, defend and hold harmless Parent, each
Indemnified Party and Parent's successors and assigns from and against any and
all Losses, including without limitation, all Environmental Liabilities and
Costs resulting from, arising out of or otherwise relating to any of the Related
Companies' ownership, use, rental or operation of the property distributed to
the Stockholders as contemplated by Section 6.1(d).
9.3 BASKET; LIMIT ON INDEMNIFICATION. Notwithstanding the provisions
of Section 9.1, no indemnification shall be required to be made under Section
9.1 until the aggregate amount of all claims under such Section exceeds
$250,000, in which case, the Stockholders shall be liable for the full amount of
such claims. The Stockholders acknowledge that if a representation or warranty
that is qualified by materiality (including a
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Material Adverse Effect) is breached after giving effect to such materiality
qualification then the Losses incurred by Parent resulting from such breach
shall include all Losses resulting from a breach of such representation or
warranty and not solely the portion of such Losses in excess of such materiality
qualifier. Notwithstanding the provisions of Section 9.1, the maximum amount of
payments for indemnification provided pursuant to Section 9.1 shall be limited
to $20,000,000 in the aggregate.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of each of the Related Companies and the Stockholders contained
in this Agreement or in any instrument delivered pursuant hereto shall survive
the Closing Date and shall remain in full force and effect thereafter until one
year after the Closing Date. The representations and warranties of Parent and
the Merger Subsidiaries shall not survive the Closing. No action or proceeding
may be brought with respect to any claims for indemnification unless written
notice thereof, setting forth in reasonable detail each such claim, shall have
been sent to the Stockholders prior to the expiration of the period set forth
above.
9.5 ESCROW AGREEMENT. Subject to the terms and conditions of an
escrow agreement (the "Escrow Agreement") to be executed by the Stockholders,
Parent and an escrow agent reasonably acceptable to Parent and the Company
("Escrow Agent"), ten percent (10%) of the Parent Shares, to the nearest whole
share, issued to each Stockholder in exchange for their Shares pursuant to
Article 4 and in exchange for the Kay International Shares and Kay Europe Shares
pursuant to the Affiliate Merger Agreements shall be deposited with the Escrow
Agent pursuant to the terms of the Escrow Agreement for the term of one year as
collateral for the indemnification of Parent of possible Losses; it being
understood that the Stockholders shall have all voting rights with respect to
the escrowed Parent Shares (the "Escrowed Shares"). All dividends and
distributions on the Escrowed Shares or in respect thereof shall be held in
escrow and released upon distribution of the shares pursuant to the Escrow
Agreement. In the event Escrowed Shares are returned to Parent for the
indemnification of any Losses, such Escrowed Shares shall be valued, per share,
at $21.00; provided, however, that the Stockholders in their sole discretion may
satisfy any
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Parent claims hereunder by payment of cash in lieu of Escrowed Shares.
9.6 PROCEDURES FOR INDEMNIFICATION. The following procedures shall
apply to any claim for indemnification under this Article 9:
(a) If an Indemnified Party receives notice of the assertion by
any third party (a "Third Party") of any claim or of the commencement by any
Third Party of any action or proceeding (a "Third Party Claim"), the Indemnified
Party shall give the Stockholders prompt notice thereof after receiving notice
of such Third Party Claim. If the Indemnified Party fails to give prompt notice
of such Third Party Claim and such failure materially prejudices the
Stockholders' position or the ability of the Stockholders to defend such Third
Party Claim, the Stockholders' liability to the Indemnified Party shall be
reduced by the amount, if any, demonstrated by reasonable evidence to be
directly and solely attributable to the failure to give such notice in a timely
manner. The Stockholders shall be entitled to assume control of the defense of
such Third Party Claim with counsel reasonably satisfactory to the Indemnified
Party; provided, however, that (i) the Indemnified Party shall be entitled to
participate in the defense of such claim and to employ counsel to assist in the
handling of such claim at its own expense, unless the named parties to any such
proceeding (including any impleaded parties) include both the Stockholders and
the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential conflicts of interest between
them in which case the Stockholders shall pay the fees and expenses of the
Indemnified Party's counsel and (ii) no Stockholder shall consent to the entry
of any judgment or enter into any settlement (A) that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to each
Indemnified Party a release from all liability in respect of such claim or (B)
if, pursuant to or as a result of such consent or settlement, injunctive or
other equitable relief would be imposed against the Indemnified Party or such
judgment or settlement could materially interfere with the business, operations
or assets of the Indemnified Party or alter in any material respect a customer
or vendor relationship. If the Stockholders elect to compromise or defend such
Third Party Claim,
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they shall, within five business days after receiving notice of the Third Party
Claim, notify the Indemnified Party of their intent to do so, and the
Indemnified Party shall cooperate, at the expense of the Stockholders, in the
compromise of, or defense against, such Third Party Claim. If the Stockholders
elect not to compromise or defend against the Third Party Claim, or fail to
notify the Indemnified Party of their election as herein provided, or otherwise
abandon the defense of such Third Party Claim, (i) the Indemnified Party may pay
(without prejudice of any of its rights as against the Stockholders), compromise
or defend such Third Party Claim and (ii) the costs and expenses of the
Indemnified Party incurred in connection therewith shall be indemnifiable by the
Stockholders pursuant to the terms of this Article 9. Notwithstanding that the
Stockholders failed to assume the defense of a Third Party Claim within five
business days of receipt of the notice of such Third Party Claim, if such claim
has not been resolved, the Stockholders may, within 60 days of the date notice
of such Third Party Claim was sent, elect to assume the defense of such claim if
the Stockholders first reimburse the Indemnified Party for all expenses incurred
by the Indemnified Party in defending such claim (including the fees and
expenses of counsel) and if the assumption of the defense would not adversely
affect on-going settlement negotiations with respect to the claim. Except as
otherwise provided herein, the Indemnified Party and the Stockholders may each
participate, at its own expense, in the defense of such Third Party Claim.
(b) Notwithstanding the provisions of paragraph (a), the
Stockholders shall not be entitled to assume control of such defense and shall
pay the fees and expenses of counsel retained by the Indemnified Party if (i)
the claim for indemnification relates to or arises in connection with any
criminal proceeding, action, indictment, allegation or investigation, (ii) the
Indemnified Party reasonably believes an adverse determination with respect to
the action, lawsuit, investigation, proceeding or other claim giving rise to
such claim for indemnification would be detrimental in any material respect to
or injure in any material respect the Indemnified Party's reputation or future
business prospects, (iii) the claim seeks an injunction or equitable relief
against the Indemnified Party, (iv) the claim relates to the intellectual
property rights of the Indemnified Party or (v)
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the claim involves one of the Related Companies' (or their successors') 10
largest customers or material vendors or any affiliates of any such customer or
vendor. With respect to the actions, lawsuits, investigations, proceedings and
other claims the subject of this paragraph (b), the Stockholders shall have the
right to retain their own counsel (but the expenses of such counsel shall be at
the expense of the Stockholders) and participate therein, and no Stockholder
shall be liable for any settlement of any such action, proceeding or claim
without its written consent (which consent shall not be unreasonably withheld).
(c) Any claim on account of a Loss which does not involve a
Third Party Claim shall be asserted by written notice given by the Indemnified
Party to the Stockholders.
9.7 REMEDIES CUMULATIVE. The remedies provided herein shall not
preclude an Indemnified Party from asserting any other rights or seeking any
other remedies against the Stockholders or any of their respective successors or
assigns arising out of or resulting from fraudulent actions by or on behalf of
any of the Related Companies or the Stockholders taken in connection with this
Agreement or the Related Agreements or the transactions contemplated hereby or
thereby.
ARTICLE 10
Miscellaneous and General
10.1 PAYMENT OF EXPENSES. Whether or not the Merger shall be
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the Related Agreements
and the consummation of the transactions contemplated hereby and thereby
(including, without limitation, the fees and expenses of legal counsel,
accountants, investment bankers and other advisors); provided, however, that if
the Merger is consummated the Stockholders jointly and severally agree to pay
all fees and expenses incurred by the Related Companies in connection with this
Agreement and the Related Agreements and the transactions contemplated hereby
and thereby (including, without limitation, the fees and expenses of Tanner &
Co., Inc.,
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E. Michael Masinter and Proskauer Rose Goetz & Mendelsohn) in excess of
$1,300,000.
10.2 MODIFICATION OR AMENDMENT. The parties hereto may only modify
or amend this Agreement by written agreement duly executed and delivered by each
of the parties hereto.
10.3 WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
10.4 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
10.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
10.6 NOTICES. Any notice, request, instruction or other document to
be given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by registered or certified mail or overnight
courier with a national reputation, postage prepaid, or by facsimile
transmission (with a confirming copy sent by overnight courier), as follows:
(a) If to any or all of the Related Companies, to:
Kay Chemical Company
8300 Capital Drive
Greensboro, North Carolina 27419
Attention: Randall R. Kaplan
Facsimile: (910) 668-4805
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with a copy to:
Carruthers & Roth, P.A.
235 North Edgeworth Street
Greensboro, North Carolina 27402
Attention: Seldon E. Patty
Facsimile: (910) 273-7885
(b) If to Parent or any or all of the Merger Subsidiaries, to:
Ecolab Inc.
Ecolab Center
St. Paul, Minnesota 55102
Attention: General Counsel
Facsimile: (612) 293-2573
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Charles W. Mulaney, Jr.
Facsimile: (312) 407-0411
(c) If to any or all of the Stockholders, to:
Randall R. Kaplan
4009 Hazel Lane
Greensboro, North Carolina 27408
with a copy to:
Leonard J. Kaplan
7 Monmouth Court
Greensboro, North Carolina 27410
with a copy to:
Bernard Gutterman
604 Waycross Drive
Greensboro, North Carolina 27410
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with a copy to:
Carruthers & Roth, P.A.
235 North Edgeworth Street
Greensboro, North Carolina 27402
Attention: Seldon E. Patty
Facsimile: (910) 273-7885
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice.
10.7 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with the
Affiliate Merger Agreements and the Confidentiality Agreement, (i) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof, and (ii) shall not be assigned by operation of law or otherwise,
provided that upon the death of any Stockholder, this Agreement and the
Affiliate Merger Agreements shall be binding on such Stockholder's
beneficiaries, successors, heirs, legatees, assigns and testamentary or
intestate estate and the executor or administrator of such estate.
10.8 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
10.9 CERTAIN DEFINITIONS. As used herein:
(a) "Cleanup" means all actions required to: (i) cleanup,
remove, treat or remediate Hazardous Substances, Oils, Pollutants or
Contaminants in the indoor or outdoor environment; (ii) prevent the Release of
Hazardous Substances, Oils, Pollutants or Contaminants so that they do not
migrate, endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment; (iii) perform pre-remedial studies and investigations
and post-remedial monitoring and care; or (iv) respond to any government
requests for information
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or documents in any way relating to cleanup, removal, treatment or remediation
or potential clean up, removal, treatment or remediation of Hazardous
Substances, Oils, Pollutants or Contaminants in the indoor or outdoor
environment.
(b) "Environmental Laws" means all foreign, federal, state and
local laws, regulations, rules and ordinances relating to pollution or
protection of the environment, including, without limitation, laws relating to
Releases or threatened Releases of Hazardous Substances, Oils, Pollutants or
Contaminants into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Substances, Oils, Pollutants or Contaminants, and all laws and
regulations with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances, Oils, Pollutants or Contaminants,
and all laws relating to endangered or threatened species of fish, wildlife and
plants and the management or use of natural resources.
(c) "Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses, damages,
deficiencies, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all reasonable fees, disbursements and
expenses of counsel, expert and consulting fees and costs of investigations and
feasibility studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any Person or entity, whether
based in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, including any Environmental
Law, or arising from environmental, health or safety conditions, the Release or
threatened Release of Hazardous Substances, Oils, Pollutants or Contaminants
into the environment, as a result of past or present ownership, leasing or
operation of any Properties, owned, leased or operated by any of the Related
Companies;
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(d) "Hazardous Substances, Oils, Pollutants or Contaminants"
means all substances defined as such in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. 300.5, or defined as such by,
or regulated as such under, any Environmental Law.
(e) "Material Adverse Effect" with respect to the Related
Companies shall mean any individual or cumulative adverse change in or effect on
the business, customer relations, operations, properties, working capital,
condition (financial or otherwise), assets or liabilities of the Related
Companies taken as a whole that would or is reasonably expected to be materially
adverse to the business, operations, properties, working capital, condition
(financial or otherwise), assets, or liabilities of the Related Companies taken
as a whole or would prevent the Company from consummating the Merger or Kay
International or Kay Europe from consummating the applicable Affiliate Merger.
(f) "Material Adverse Effect" with respect to Parent shall mean
any individual or cumulative adverse change in or effect on the business,
operations, properties, working capital, condition (financial or otherwise),
assets or liabilities of Parent and its subsidiaries taken as a whole that would
or is reasonably expected to be materially adverse to the business, operations,
properties, working capital, condition (financial or otherwise), assets or
liabilities of Parent and its subsidiaries taken as a whole or would prevent
Parent from consummating the Merger.
(g) "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or, as
applicable, any other entity.
(h) "Related Agreements" means the Escrow Agreement and the
Affiliate Merger Agreements.
(i) "Release" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, and surface or subsurface
strata) or into or out of any
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property, including the movement of Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil, surface water, groundwater or
property.
(j) "Returns" means all reports, elections, estimates,
information statements, business licenses, registrations and returns.
(k) "subsidiary" shall mean, when used with reference to any
entity, any corporation a majority of the outstanding voting securities of which
are owned directly or indirectly by such entity.
(l) "Taxes" means all taxes, however denominated, including any
interest, penalties or additions to tax that may become payable in respect
thereof, imposed by any federal, state, local or foreign government or any
agency or political subdivision thereof, which taxes shall include, but not be
limited to, all income, gross receipts, payroll, employee, withholding,
unemployment, value added, insurance, social security, sales and use, leasing,
occupation, excise, franchise, net worth, service, real and personal property,
stamp, transfer and workers' compensation taxes.
10.10 REMEDIES FOR BREACH. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement and
the Related Agreements were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement or the Related Agreements and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.11 CAPTIONS. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
10.12 ATTORNEYS' FEES. In the event that the Stockholders prevail in
a suit against Parent for a breach of Parent's covenants herein, the Parent
agrees to reimburse the Stockholders for their reasonable
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attorneys' fees incurred in prosecuting such suit against the Parent.
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IN WITNESS WHEREOF, this Agreement and Plan of Merger has been duly
executed and delivered by the parties hereto and shall be effective as of the
date first hereinabove written.
ATTEST: ECOLAB INC.
/s/Lawrence T. Bell By: /s/James M. Millsap
- ----------------------------------- -------------------------------------
Name: Lawrence T. Bell Name: James M. Millsap
Title: Assistant Secretary Title: Senior Vice President
ATTEST: EKH, INC. I
/s/Lawrence T. Bell By: /s/James M. Millsap
- ----------------------------------- -------------------------------------
Name: Lawrence T. Bell Name: James M. Millsap
Title: President Title:
ATTEST: EKH, INC. II
/s/Lawrence T. Bell By: /s/James M. Millsap
- ----------------------------------- -------------------------------------
Name: Lawrence T. Bell Name: James M. Millsap
Title: President Title:
ATTEST: EKH, INC. III
/s/Lawrence T. Bell By: /s/James M. Millsap
- ----------------------------------- -------------------------------------
Name: Lawrence T. Bell Name: James M. Millsap
Title: President Title:
KAY CHEMICAL COMPANY
By: /s/Randall R. Kaplan
-------------------------------------
Name: Randall R. Kaplan
Title: President
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KAY CHEMICAL INTERNATIONAL, INC.
By: /s/Randall R. Kaplan
-------------------------------------
Name: Randall R. Kaplan
Title: Vice President
KAY EUROPE, INC.
By: /s/Randall R. Kaplan
-------------------------------------
Name: Randall R. Kaplan
Title: President
LEONARD J. KAPLAN
/s/Leonard J. Kaplan
----------------------------------------
BERNARD GUTTERMAN
/s/Bernard Gutterman
----------------------------------------
RANDALL R. KAPLAN
/s/Randall R. Kaplan
----------------------------------------
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THE FIRST GRANTOR RETAINED
ANNUITY TRUST OF TOBEE W. KAPLAN
By: /s/Seldon E. Patty
-------------------------------------
Name: Seldon E. Patty
Title: Trustee
By: /s/Thomas W. Sinks
-------------------------------------
Name: Thomas W. Sinks
Title: Trustee
THE SECOND GRANTOR RETAINED
ANNUITY TRUST OF TOBEE W. KAPLAN
By: /s/Seldon E. Patty
-------------------------------------
Name: Seldon E. Patty
Title: Trustee
By: /s/Thomas W. Sinks
-------------------------------------
Name: Thomas W. Sinks
Title: Trustee
86
