<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
(Name of Subject Company)
AES ACQUISITION CORP.
INDIRECT WHOLLY OWNED SUBSIDIARY OF
PHILIP SERVICES CORP.
(Bidders)
COMMON STOCK
(Title of class of securities)
007949 10 0
(CUSIP Number of Class of Securities)
COLIN SOULE
PHILIP SERVICES CORP.
100 KING STREET WEST
P.O. BOX 2440, LCD #1
HAMILTON, ONTARIO
CANADA L8N 4J6
(905) 521-1600
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidders)
with a copy to:
CHRISTOPHER W. MORGAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
SUITE 1820, NORTH TOWER
BOX 189, ROYAL BANK PLAZA
TORONTO, ONTARIO
CANADA M5J 2J4
(416) 777-4700
DECEMBER 16, 1997
(Date of Event Which Requires Filing Statement on Schedule 13D)
CALCULATION OF FILING FEE
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Transaction valuation* $1,200,463 Amount of filing fee** $240
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* For purposes of calculating the filing fee only. This calculation assumes the
purchase of 203,468,235 shares of Common Stock, par value $0.0001 per share,
of Advanced Environmental Systems, Inc. (the "Company") (the "Shares") at
$0.0059 net per Share in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent
of the aggregate value of cash offered by AES Acquisition Corp. for such
number of shares.
[ ]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: Not applicable.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Dated Filed: Not applicable.
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CUSIP NO. 007949100
14D-1 AND 13D
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1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
AES Acquisition Corp.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(SEE INSTRUCTIONS)
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCES OF FUNDS
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f). [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES [ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
None
10. TYPE OF REPORTING PERSON
CO
</TABLE>
<PAGE> 3
CUSIP NO. 007949 10 0
14D-1 AND 13D
<TABLE>
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1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Philip Services Corp.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) OR
2(f). [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Ontario
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
328,199,280
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)*
Approximately 61.7% of the Shares outstanding as of
December 15, 1997
10. TYPE OF REPORTING PERSON
CO, HC
</TABLE>
* On December 16, 1997, Parent, IST Acquisition Corp., an indirect wholly owned
subsidiary of Parent ("IAC") and Industrial Services Technologies, Inc., a
Colorado corporation ("IST") entered into an Agreement of Merger pursuant to
which IAC will be merged with and into IST (the "IST Acquisition"), with IST
continuing as the surviving corporation and an indirect wholly owned
subsidiary of Parent. As at December 16, 1997, IST owned 328,199,280 Shares,
representing approximately 61.7% of the outstanding Shares. IST also owns all
36,248,080 outstanding shares of the Company's preferred stock, par value
$0.0001 per share (the "Preferred Stock"). Each share of Preferred Stock is
convertible into a Share at the option of the holder. The Purchaser's
obligation to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for any tendered
Shares is conditioned on the completion of the IST Acquisition. It is expected
that the IST Acquisition will be completed on or about December 30, 1997.
<PAGE> 4
This statement relates to a tender offer by AES Acquisition Corp., a New
York corporation (the "Purchaser" and an indirect wholly owned subsidiary of
Philip Services Corp., an Ontario corporation ("Parent")), to purchase all
shares of Common Stock, par value $0.0001 per share (the "Shares") of Advanced
Environmental Systems, Inc., a New York corporation, at $0.0059 per Share net to
the seller in cash and without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase (the "Offer to Purchase"), a
copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of
Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (which
together constitute the "Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Advanced Environmental Systems,
Inc., a New York corporation (the "Company"). The principal executive offices of
the Company are located at 730 17th Street, Suite 712, Denver, Colorado 80202.
(b) The information set forth in the Introduction to, and in Section 1,
"Terms of the Offer," of, the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 7, "Price Range of the Shares;
Dividends," of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by the Purchaser and Parent. The information
set forth in the Introduction to, and in Section 9, "Certain Information
Concerning the Purchaser and Parent," and Schedule I, "Information Concerning
the Directors and Executive Officers of Parent and the Purchaser," of, the Offer
to Purchase is incorporated herein by reference.
(a) - (d) and (g) The name, residence or business address, citizenship,
present principal occupation or employment and material occupations during the
last 5 years of each executive officer and director of the Purchaser and Parent
is set forth in Schedule I of the Offer to Purchase.
(e) and (f) During the last five years, neither the Purchaser, Parent nor
any of the persons listed in Schedule I of the Offer to Purchase has been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any such
person was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, or finding any violation of
federal or state securities laws.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction to, and in
Section 9, "Certain Information Concerning the Purchaser and Parent," and
Section 10, "Background of the Offer; Contacts with the Company," of, the Offer
to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 13, "Source and Amount of Funds,"
of the Offer to Purchase is incorporated herein by reference.
(b) and (c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction to, and in Section
11, "Purpose of the Offer and the Merger," and Section 13, "Source and Amount of
Funds," of, the Offer to Purchase is incorporated herein by reference.
<PAGE> 5
(f) and (g) The information set forth in Section 6, "Effect of the Offer on
the Market for the Shares; Exchange Listing and Exchange Act Registration," of
the Offer to Purchase is incorporated herein by reference.
Other than as set forth in the Introduction to, or the above-referenced
sections of, the Offer to Purchase, Purchaser has no plans or proposals that
relate to, or would result in, any transaction, change or other occurrence with
respect to the Company or the Shares that is set forth in any of paragraphs (a)
through (g) of Item 5 of the Schedule 14D-1.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction to, and in
Section 9, "Certain Information Concerning the Purchaser and Parent," and
Section 12, "The Merger Agreement; Stockholder Agreements," of, the Offer to
Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction to, and in Section 9,
"Certain Information Concerning the Purchaser and Parent," Section 10,
"Background of the Offer; Contacts with the Company," and Section 12, "The
Merger Agreement; Stockholder Agreements," of, the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16, "Fees and Expenses," of the Offer
to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9, "Certain Information Concerning the
Purchaser and Parent," including the financial statements and the notes thereto
incorporated by reference in Section 9, is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction to, and in Section 11,
"Purpose of the Offer and the Merger," and Section 12, "The Merger Agreement;
Stockholder Agreements," of the Offer to Purchase is incorporated herein by
reference.
(b) and (c) The information set forth in the Introduction to, and in
Section 15, "Certain Legal Matters; Regulatory Approvals," of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in Section 6, "Effect of the Offer on the
Market for the Shares; Exchange Listing and Exchange Act Registration," of the
Offer to Purchase is incorporated herein by reference.
(e) None.
(f) Reference is hereby made to the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, and which are incorporated herein by reference in their entirety.
<PAGE> 6
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) Offer to Purchase, dated December 24, 1997.
(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) Text of Press Release, dated December 18, 1997, issued by
Advanced Environmental Systems, Inc.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of December 15, 1997 among
Philip Services Corp., AES Acquisition Corp. and Advanced
Environmental Systems, Inc.
(c)(2) Form of Stockholder Agreement, dated as of December 15, 1997,
among Philip Services Corp., AES Acquisition Corp., and the
Selling Stockholders.
(c)(3) Short Form Merger Option Agreement, dated as of December 15,
1997, among Philip Services Corp., AES Acquisition Corp. and
Advanced Environmental Systems, Inc.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE> 7
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.
Dated: December 24, 1997 AES ACQUISITION CORP.
By: /s/ COLIN SOULE
------------------------------------
Name: Colin Soule
Title: Secretary
<PAGE> 8
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.
Dated: December 24, 1997 PHILIP SERVICES CORP.
By: /s/ COLIN SOULE
------------------------------------
Name: Colin Soule
Title: Executive Vice President,
General Counsel and Secretary
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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(a)(1) Offer to Purchase, dated December 24, 1997.
(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 W-9.
(a)(7) Text of Press Release, dated December 18, 1997, issued by Advanced Environmental
Systems, Inc.
(b) None
(c)(1) Agreement and Plan of Merger, dated as of December 15, 1997 among Philip Services
Corp., AES Acquisition Corp. and Advanced Environmental Systems, Inc.
(c)(2) Form of Stockholder Agreement, dated as of December 15, 1997, among Philip
Services Corp., AES Acquisition Corp., and the Selling Stockholders.
(c)(3) Short Form Merger Option Agreement, dated as of December 15, 1997, among Philip
Services Corp., AES Acquisition Corp. and Advanced Environmental Systems, Inc.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE> 1
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
AT
$0.0059 NET PER SHARE IN CASH
BY
AES ACQUISITION CORP.,
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
PHILIP SERVICES CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF ADVANCED ENVIRONMENTAL SYSTEMS, INC. (THE
"COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (EACH AS DEFINED
HEREIN), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS, AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN SECTION 14 OF
THIS OFFER TO PURCHASE.
------------------------------------------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (a) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver the Letter of Transmittal (or such facsimile)
together with the certificate(s) representing tendered Shares and any other
required documents to the Depositary, or, in lieu of delivering certificates
representing such Shares, tender such Shares pursuant to the procedures for
book-entry transfer set forth in Section 3, or (b) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. A stockholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such Shares
by following the procedures for guaranteed delivery set forth in Section 3.
Additional copies of this Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery and other related materials may be obtained from
the Depositary or from brokers, dealers, commercial banks and trust companies.
Holders of Shares may also contact brokers, dealers, commercial banks and trust
companies for assistance concerning the Offer.
December 24, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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INTRODUCTION.......................................................................... 1
THE TENDER OFFER...................................................................... 2
1. Terms of the Offer........................................................... 2
2. Acceptance for Payment and Payment for Shares................................ 3
3. Procedures for Tendering Shares.............................................. 4
4. Withdrawal Rights............................................................ 7
5. Certain United States Federal Income Tax Consequences........................ 7
6. Effect of the Offer on the Market for the Shares; Exchange Listing and
Exchange Act Registration.................................................... 8
7. Price Range of the Shares; Dividends......................................... 9
8. Certain Information Concerning the Company................................... 9
9. Certain Information Concerning the Purchaser and Parent...................... 12
10. Background of the Offer; Contacts with the Company........................... 15
11. Purpose of the Offer and the Merger; Plans for the Company................... 17
12. The Merger Agreement; Stockholder Agreements................................. 18
13. Source and Amount of Funds................................................... 24
14. Certain Conditions of the Offer.............................................. 24
15. Certain Legal Matters; Regulatory Approvals.................................. 26
16. Fees and Expenses............................................................ 27
17. Miscellaneous................................................................ 27
Schedule I -- Information Concerning the Directors and Executive Officers of Parent and
the Purchaser............................................................ I-1
</TABLE>
<PAGE> 3
To the Holders of Shares of Common Stock
of Advanced Environmental Systems, Inc.:
INTRODUCTION
AES Acquisition Corp. (the "Purchaser"), a New York corporation and an
indirect wholly owned subsidiary of Philip Services Corp., a corporation
existing under the laws of Ontario ("Parent"), hereby offers to purchase all
outstanding shares of the Common Stock, par value $0.0001 per share (the
"Shares"), of Advanced Environmental Systems, Inc., a New York corporation (the
"Company"), at a price of $0.0059 per Share, net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer").
Tendering stockholders will be responsible for the payment of any stock
transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser
will pay all charges and expenses of Corporate Stock Transfer, Inc., as
Depositary (the "Depositary"), incurred in connection with the Offer. See
Section 16.
The purpose of the Offer is for Parent, through the Purchaser, and through
Parent's acquisition of Industrial Services Technologies, Inc., a Colorado
corporation ("IST"), to acquire control of, and the entire equity interest in,
the Company. See Section 11. The Offer is being made pursuant to an Agreement
and Plan of Merger, dated as of December 15, 1997 (the "Merger Agreement"), by
and among Parent, the Purchaser and the Company. See Section 12. The Merger
Agreement provides that, except as provided therein, following satisfaction or
waiver, if possible, of the conditions to the Offer and subject to the terms and
conditions thereof, the Purchaser will accept for payment and will pay for, in
accordance with the terms of the Offer, all Shares validly tendered pursuant to
the Offer, and not properly withdrawn, as soon as it is permitted to do so
pursuant to applicable law. See Section 2. The Offer will not remain open
following the time Shares are accepted for payment.
Pursuant to the Merger Agreement, as soon as practicable after the
satisfaction or waiver, if permissible, of all conditions to the Offer and
completion of the Offer, the Purchaser will be merged with and into the Company
(the "Merger") with the Company continuing as the surviving corporation (the
"Surviving Corporation") and an indirect wholly owned subsidiary of Parent. At
the time at which the Merger is consummated in accordance with the terms of the
Merger Agreement (the "Effective Time"), each Share then outstanding (other than
Shares owned by the Company or any wholly owned subsidiary of the Company,
Shares owned by Parent, the Purchaser or any other direct or indirect wholly
owned subsidiary of Parent and Shares ("Dissenting Shares") held by stockholders
who properly exercise appraisal rights under the New York Business Corporation
Law (the "NYBCL")) will be converted into the right to receive $0.0059 in cash
or any higher price per Share paid in the Offer. See Section 11. The Offer and
the Merger are sometimes collectively referred to herein as the "Transaction."
The Company has represented and warranted to the Purchaser and Parent in
the Merger Agreement that, as of November 21, 1997, 531,667,515 Shares were
issued and outstanding. No Shares are issuable pursuant to options granted under
any Company stock option plans.
Certain conditions to consummation of the Offer are described in Section
14. The Purchaser expressly reserves the right to waive any one or more of the
conditions to the Offer. See Section 14.
In the event that all of the conditions of the Offer have not been
satisfied or waived by the initial scheduled expiration date of the Offer (the
"Initial Expiration Date"), which is Friday, January 23, 1998, the Purchaser has
the right from time to time, in its sole discretion, to extend the expiration
date. The Purchaser will, on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, accept for payment and pay for Shares
validly tendered and not properly withdrawn as soon as it is legally permitted
to do so under applicable law.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE OFFER AND THE MERGER, HAS DETERMINED THAT THE TERMS OF THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST
<PAGE> 4
INTERESTS OF, THE COMPANY'S STOCKHOLDERS, AND RECOMMENDS THAT STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES.
Concurrently with entering into the Merger Agreement, certain selling
stockholders (together, the "Selling Stockholders") have entered into
Stockholder Agreements, dated as of December 15, 1997 (the "Stockholder
Agreements"), among Parent, the Purchaser and the Selling Stockholders. Pursuant
to the Stockholder Agreements, the Selling Stockholders have agreed to tender an
aggregate of 28,808,953 Shares (the "Stockholder Shares") (constituting in the
aggregate approximately 5.4% of the outstanding Shares) pursuant to the Offer.
The Stockholder Agreements are more fully described in Section 12.
On December 16, 1997, Parent, IST Acquisition Corp., an indirect wholly
owned subsidiary of Parent ("IAC") and IST entered into an Agreement of Merger
(the "IST Merger Agreement") pursuant to which IAC will be merged with and into
IST (the "IST Acquisition") with IST continuing as the surviving corporation and
an indirect wholly owned subsidiary of Parent. As at December 16, 1997, IST
owned 328,199,280 Shares, representing approximately 61.7% of the outstanding
Shares. IST also owns all 36,248,080 outstanding shares of Preferred Stock. Each
share of Preferred Stock is convertible into a Share at the option of the
holder. The Purchaser's obligation to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for
any tendered Shares is conditioned on the completion of the IST Acquisition. It
is expected that the IST Acquisition will be completed on or about December 30,
1997.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, as soon as it is permitted to do so under applicable law, all Shares
validly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures set forth in Section 4. The term "Expiration
Date" means 12:00 Midnight, New York City time, on Friday, January 23, 1998,
unless and until the Purchaser shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by the Purchaser,
shall expire.
Consummation of the Offer is conditioned upon satisfaction of the
conditions set forth in Section 14. Subject to the terms and conditions
contained in the Merger Agreement, the Purchaser reserves the right (but shall
not be obligated) to waive, in whole or in part, at any time and from time to
time, any or all of such conditions.
Pursuant to the Merger Agreement, the Purchaser may not, without the
written consent of the Company (such consent to be authorized by the Company
Board or a duly authorized committee thereof), (i) decrease the Offer Price,
(ii) decrease the number of Shares sought in the Offer or (iii) amend any other
condition of the Offer in any manner adverse to the holders of the Shares (other
than with respect to insignificant changes or amendments); provided, however,
that (a) if on the Initial Expiration Date, January 23, 1998, all conditions to
the Offer shall not have been satisfied or waived, the Purchaser may, from time
to time, in its sole discretion, extend the Expiration Date and (b) the Offer
Price may be increased and the Offer may be extended to the extent required by
law in connection with such increase, in each case without the consent of the
Company.
There can be no assurance that the Purchaser will exercise its rights to
extend the Offer (other than as required by the Merger Agreement or applicable
law). Any extension, amendment or termination of the Offer, or any waiver of any
condition of the Offer, will be followed as promptly as practicable by a public
2
<PAGE> 5
announcement. In the case of an extension, Rule 14e-1(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), requires that the
announcement be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date in accordance with
the public announcement requirements of Rule 14d-4(c) under the Exchange Act. As
used in this Offer to Purchase, "business day" has the meaning set forth in Rule
14d-1 under the Exchange Act. Subject to applicable law (including Rules
14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material
change in the information published, sent or given to stockholders in connection
with the Offer be promptly disseminated to stockholders in a manner reasonably
designed to inform stockholders of such change), and without limiting the manner
in which the Purchaser may choose to make any public announcement, the Purchaser
will not have any obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service. During any extension of the Offer, all Shares previously tendered and
not properly withdrawn will remain subject to the Offer, subject to the rights
of a tendering stockholder to withdraw its Shares in accordance with the
procedures set forth in Section 4. THE PURCHASER SHALL NOT HAVE ANY OBLIGATION
TO PAY INTEREST ON THE PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE
PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment for Shares (whether before or after its
acceptance for payment of Shares) or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 4.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. 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 the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to stockholders.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listing for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed by the Depositary to record holders
of Shares and will be furnished by the Depositary to brokers, dealers, banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, as soon as it is permitted to do so under applicable law, all Shares
validly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures set forth in Section 4. Subject to applicable
rules of the Securities and Exchange Commission (the "Commission"), the
Purchaser is required by the Merger Agreement to delay acceptance for payment
of, or payment for, Shares in order to comply in whole or in part with any
applicable law.
3
<PAGE> 6
Any such delays will be effected in compliance with Rule 14e-1(c)
promulgated under the Exchange Act (relating to a bidder's obligation to pay for
or return tendered securities promptly after the termination or withdrawal of
such bidder's offer). In all cases, payment for Shares purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Shares, if such procedure is available, into the Depositary's account at The
Depository Trust Company or the Philadelphia Depositary Trust Company
(collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message (as defined below), and
(iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against the participant.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn if, as and when the Purchaser gives
oral or written notice to the Depositary of the Purchaser's acceptance of such
Shares for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted pursuant to the Offer will
be made by deposit of the aggregate purchase price therefor with the Depositary,
which will act as agent for tendering stockholders for the purpose of receiving
payment from the Purchaser and transmitting payment to such tendering
stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering stockholders, the Purchaser's obligation to make
such payment shall be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. Tendering stockholders
will be responsible for the payment of any stock transfer taxes incident to the
transfer by them of validly tendered Shares. The Purchaser will pay any charges
and expenses of the Depositary.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing such
unpurchased Shares or untendered Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares tendered by book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3, such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
following the expiration, termination or withdrawal of the Offer. Certificates
representing Shares cancelled in the Merger will not be returned.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered to holders of Shares pursuant to the Offer, such increased consideration
will be paid to all holders whose Shares are purchased in the Offer whether or
not such Shares were tendered prior to such increase in consideration.
The Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to one or more of its affiliates, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer or prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal or a facsimile thereof, properly
completed and duly executed, with any required signature
4
<PAGE> 7
guarantees, or an Agent's Message in connection with a book-entry delivery of
Shares, and any other required documents, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase on or
prior to the Expiration Date and either (i) the Share Certificates evidencing
tendered Shares must be received by the Depositary along with the Letter of
Transmittal (ii) Shares must be tendered pursuant to the procedures for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary, or (iii) the tendering stockholder must comply with
the guaranteed delivery procedures described below, in each case on or prior to
the Expiration Date.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL 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 THEREOF 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.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed and with any required signature guarantees, or an Agent's
Message in connection with a book-entry delivery of Shares, and any 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 on or prior to the Expiration Date or the tendering stockholder must
comply with the guaranteed delivery procedures described below. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agents Medallion Program (each of the foregoing being referred to as an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date, or book-entry transfer cannot be completed on a
timely basis, such Shares may nevertheless be tendered if all the following
conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates for all tendered Shares, in proper form
for transfer, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile thereof) with any required
signature guarantee (or, in the case of a book-entry transfer, an Agent's
Message) and any
5
<PAGE> 8
other documents required by such Letter of Transmittal, are received by the
Depositary within three trading days after the date of execution of the
Notice of Guaranteed Delivery. A "trading day" is any day on which the New
York Stock Exchange, Inc. ("NYSE") is open for business.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares or a
Book-Entry Confirmation of the delivery of such Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) (or, in the case of a book-entry transfer, an Agent's Message) and
(iii) any other documents required by the Letter of Transmittal. Accordingly,
tendering stockholders may be paid at different times depending upon when the
foregoing materials are actually received by the Depositary. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
Backup Federal Withholding Tax. To prevent backup federal income tax
withholding with respect to payment to certain stockholders of the purchase
price of Shares purchased pursuant to the Offer, each such stockholder must
provide the Depositary with such stockholder's correct taxpayer identification
number and certify, under penalty or perjury, that such taxpayer identification
number is correct and that such stockholder is not subject to backup federal
income tax withholding by completing the Substitute Form W-9 included in the
Letter of Transmittal. Non-corporate foreign stockholders must submit a
completed Form W-8, Certificate of Foreign Status, in order to avoid backup
withholding. This form may be obtained from the Depositary. See Instruction 9
and discussion under the heading, "Important Tax Information," of the Letter of
Transmittal.
Appointment as Proxy; Distributions. By executing a Letter of Transmittal
as set forth above, a tendering stockholder irrevocably appoints designees of
the Purchaser as such stockholder's attorneys-in-fact and proxies, in the manner
set forth in the Letter of Transmittal, each with full power of substitution, to
the full extent of such stockholder's rights with respect to the Shares tendered
by such stockholder and accepted for payment by the Purchaser (and any and all
non-cash dividends, distributions, rights, other Shares, or other securities
issued or issuable in respect of such Shares on or after the date of this Offer
to Purchase). All such powers of attorney and proxies shall be considered
coupled with an interest in the tendered Shares. This appointment will be
effective if, when, and only to the extent that, the Purchaser accepts such
Shares for payment pursuant to the Offer. Upon such acceptance for payment, all
prior powers of attorney and proxies given by such stockholder with respect to
such Shares and other securities will, without further action, be revoked, and
no subsequent powers of attorney or proxies may be given (and, if given, will
not be deemed effective). The designees of the Purchaser will, with respect to
the Shares and other securities for which the appointment is effective, be
empowered to exercise all voting and other rights of such stockholder as they in
their sole discretion may deem proper at any annual, special, adjourned or
postponed meeting of the Company's stockholders, by written consent or
otherwise, and the Purchaser reserves the right to require that, in order for
Shares or other securities to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares the Purchaser must be able to
exercise full voting, consent and other rights with respect to such Shares and
other securities, including voting at any meeting of stockholders. Such powers
of attorney and proxies will be irrevocable and will be granted in consideration
of the purchase of the Shares by the Purchaser in accordance with the terms of
the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. The Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, to waive
6
<PAGE> 9
any of the conditions of the Offer or any defect or irregularity in any tender
with respect to Shares of any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders. No
tender of Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of Parent, the Purchaser, the Depositary or any other person
will be under any duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any such notification.
Binding Agreement. The Purchaser's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn on or at any time prior to the Expiration Date and, unless
theretofore accepted for payment by the Purchaser pursuant to the Offer, may
also be withdrawn at any time after Monday, February 23, 1998 or at such later
time as may apply if the Offer is extended.
If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
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 Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with such Book-Entry
Transfer Facility's procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties. None
of Parent, the Purchaser, the Depositary or any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to stockholders whose Shares are
purchased pursuant to the Offer or whose Shares are converted to cash in the
Merger (including pursuant to the exercise of perfected appraisal rights under
the NYBCL). The discussion applies only to stockholders in whose hands Shares
are capital assets, and may not apply to
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<PAGE> 10
Shares received pursuant to the exercise of employee stock options or otherwise
as compensation, or to stockholders who are in special tax situations (such as
insurance companies, tax-exempt organizations or dealers in securities). This
discussion does not discuss the federal income tax consequences to a stockholder
who, for United States federal income tax purposes, is a nonresident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER SHOULD CONSULT SUCH
STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES
DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
STOCKHOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
SUCH STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes (and also
may be a taxable transaction under applicable state, local and other income tax
laws). In general, for United States federal income tax purposes, a stockholder
will recognize gain or loss in an amount equal to the difference between his or
her adjusted tax basis in the Shares sold pursuant to the Offer or converted
into cash in the Merger and the amount of cash received therefor. Gain or loss
must be determined separately for each block of Shares (i.e., Shares acquired at
the same cost in a single transaction) sold pursuant to the Offer or converted
into cash in the Merger. Such gain or loss will be capital gain or loss if the
Shares are held as a capital asset by the stockholder on the date of sale (in
the case of the Offer) or the Effective Time of the Merger (in the case of the
Merger). The receipt of cash for Shares pursuant to the exercise of appraisal
rights will generally be taxed in the same manner as described above. In
addition, the recently enacted Taxpayer Relief Act of 1997 could affect the
federal income tax consequences of the Offer and the Merger in that, among other
things, it reduces the maximum rate of federal income tax on capital gains of
individual taxpayers for capital assets held more than eighteen months.
6. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION.
The Shares trade on the OTC Bulletin Board under the symbol "ADNV."
According to the Company, as of December 15, 1997, there were approximately
2,005 holders of record of Shares and 531,667,515 Shares were outstanding. The
purchase of Shares pursuant to the Offer will reduce the number of Shares that
might otherwise trade publicly and could reduce the number of holders of Shares,
which could adversely affect the liquidity and market value of the remaining
Shares held by the public. The extent of the public market for the Shares and
the availability of price quotations following the Effective Time would depend
upon the number of holders of Shares remaining at such time, the interests of
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would, subject to Section
15(d) of the Exchange Act, substantially reduce the information required to be
furnished by the Company to its stockholders and to the Commission and would
make certain provisions of the Exchange Act no longer applicable to the Company,
such as the short-swing profit recovery provisions of Section 16(b) of the
Exchange Act, the requirement of furnishing a proxy or information statement
pursuant to Section 14(a) or (c) of the Exchange Act in connection with
stockholders' meetings and the related requirement of furnishing an annual
report to stockholders and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or 144A promulgated
under the Securities Act of 1933, as amended, may be impaired or eliminated.
THE PURCHASER INTENDS TO SEEK TO CAUSE THE COMPANY TO APPLY FOR TERMINATION
OF REGISTRATION OF THE SHARES UNDER THE EXCHANGE ACT AS
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<PAGE> 11
SOON AFTER THE COMPLETION OF THE OFFER AS THE REQUIREMENTS FOR SUCH TERMINATION
ARE MET. IF REGISTRATION OF THE SHARES IS NOT TERMINATED PRIOR TO THE MERGER,
THEN THE REGISTRATION OF THE SHARES UNDER THE EXCHANGE ACT WILL BE TERMINATED
FOLLOWING THE CONSUMMATION OF THE MERGER.
7. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares trade on the OTC Bulletin Board under the symbol "ADNV." Trading
in the Shares is limited and sporadic and prices are highly volatile. Quotations
provided below are the high and low bid for the periods indicated based on
inter-dealer quotations, without retail mark-up, mark-down or commission, and do
not necessarily represent actual transactions.
<TABLE>
<CAPTION>
BID PRICE
----------------
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year Ended December 31, 1995:
First Quarter............................................................. $ .005 $ .002
Second Quarter............................................................ $ .005 $ .002
Third Quarter............................................................. $ .004 $ .002
Fourth Quarter............................................................ $ .006 $ .002
Fiscal Year Ended December 31, 1996:
First Quarter............................................................. $ .003 $ .002
Second Quarter............................................................ $ .010 $ .002
Third Quarter............................................................. $ .004 $ .003
Fourth Quarter............................................................ $ .003 $.0015
Fiscal Year Ending December 31, 1997:
First Quarter............................................................. $.0018 $.0018
Second Quarter............................................................ $.0018 $.0018
Third Quarter............................................................. $ .006 $.0015
Fourth Quarter (through December 17, 1997)................................ $ .003 $ .003
</TABLE>
On December 17, 1997, the last full trading day prior to the public
announcement of the commencement of the Offer, the average of the high and low
bid per Share based on inter-dealer quotations was $.003. The Offer represents
an approximately 97% premium over the average of the high and low bid per Share
on December 17, 1997. Stockholders are urged to obtain a current market
quotation for the Shares.
The Company has never paid any cash dividends on the Shares. The Merger
Agreement provides that, without the prior written consent of Parent, the
Company will not declare, set aside or pay any dividend on or make any other
distribution in respect any of its capital stock, other than current or accrued
dividends on the Preferred Stock, all of which shares are held of record by IST.
See Section 12.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been furnished by the Company or been taken
from or based upon publicly available documents and records on file with the
Commission and other public sources. Although neither Parent nor the Purchaser
has any knowledge that would indicate that the statements contained herein based
upon such documents are untrue, neither Parent, the Purchaser nor the Depositary
assumes any responsibility for the accuracy or completeness of the information
concerning the Company contained in such documents and records or for any
failure by the Company to disclose events which may have occurred or may affect
the significance or accuracy of any such information but which are unknown to
Parent, the Purchaser or the Depositary.
The Company is a New York corporation and its principal executive offices
are located at 730 17th Street, Suite 712, Denver, Colorado 80202.
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<PAGE> 12
The Company, through its indirect, wholly owned subsidiary, International
Catalyst, Inc. ("Incat"), is primarily engaged in providing highly specialized
catalyst handling services to petroleum refineries and petrochemical/chemical
plants. Incat operates from facilities in the Los Angeles and Houston
metropolitan areas.
Catalysts play a critical role in both petroleum and petrochemical
processing. A wide range of catalysts are used to stimulate a variety of
chemical processes. Catalyst materials are generally small, solid particles
composed of a porous clay base, impregnated with an active ingredient. This
active ingredient is usually a metal such as platinum with a high recovery
value. Catalysts are used to promote a chemical reaction during the
manufacturing process. The purpose may be to remove impurities from a product,
change the molecular structure, enhance octane rating or accelerate production
of a process.
The life of a catalyst ranges from a few months to several years, depending
upon the process or the build-up of impurities. When the catalysts cease to
function properly, they must be removed from the reactor vessel. The removed
material might be cleaned and reinstalled or it may be discarded and new
material loaded into the reactor. Incat's role is to perform this catalyst
change. Incat's customers are responsible for providing the new, and disposing
of the spent, catalyst.
Set forth below is certain selected consolidated financial information
excerpted from the information contained or incorporated by reference in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(the "Company 10-K") and the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 (the "Company 10-Q"). More comprehensive
financial information is included or incorporated by reference in the Company
10-K and Company 10-Q, and the reports and other documents filed by the Company
with the Commission. The following summary is qualified in its entirety by
reference to such reports and other documents and all of the financial
information and notes contained therein. Such reports and other documents may be
examined at, and copies obtained from, the offices of the Commission in the
manner set forth below.
10
<PAGE> 13
ADVANCED ENVIRONMENTAL SERVICES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Service revenues.......................... $ 11,278 $ 8,930 $ 11,195 $ 10,448 $ 12,756
Costs and expenses
Service costs and expenses................ 7,399 6,885 8,541 7,359 8,313
Selling, general and administrative..... 1,749 2,093 2,723 2,751 2,453
Retrospective insurance adjustment...... -- (238) (379) 300 --
Management fees, related party.......... 135 110 152 112 96
Service and guarantee fees, related
party -- -- -- -- 50
Interest expense........................ 203 195 275 255 211
Depreciation & amortization............. 330 344 452 480 622
Other (income) and expenses, net........ (377) -- -- -- --
-------- -------- -------- -------- --------
Total expenses............................ 9,439 9,389 11,764 11,257 11,745
-------- -------- -------- -------- --------
Income (loss) before income tax expense
(benefit)............................... 1,839 (459) (569) (809) 1,061
Income tax expense (benefit).............. 756 (303) (383) (113) 526
-------- -------- -------- -------- --------
Net income (loss)......................... 1,083 (156) (186) (696) 535
======== ======== ======== ======== ========
Net income (loss) attributable to common
stockholders............................ $ 1,052 $ (198) $ (242) $ (768) $ 453
======== ======== ======== ======== ========
Net income (loss) per common share and
common share equivalent................. $ .0020 $ (.0004) $ (.0005) $ (.0013) $ .0009
Weighted average shares outstanding....... 531,668 531,668 531,668 531,668 531,668
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ----------------
1997 1996 1995
---------------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)................................ $ 663 $ (318) $ (115)
Total assets................................................ 5,108 4,991 4,996
Total liabilities........................................... 3,295 4,298 4,155
Long-term obligations and Series A redeemable convertible
preferred stock.......................................... 804 1,015 1,408
Common and other stockholders' equity....................... 1,745 693 841
</TABLE>
The Company is subject to the informational and reporting requirements of
the Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
11
<PAGE> 14
proxy statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and also should be available for inspection and copying at prescribed
rates at the following regional offices of the Commission: Seven World Trade
Center, 13th Floor, New York, New York 10048; and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of this material may also be obtained by
mail, upon payment of the Commission's customary fees, from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a World Wide Web site on the internet at
http://www.sec.gov that contains reports and certain other information regarding
registrants that file electronically with the Commission, including the Company.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT.
The Purchaser. The Purchaser is a newly incorporated New York corporation
organized in connection with the Offer and the Merger and has not carried on any
activities other than in connection with its formation and capitalization and
the transactions contemplated by the Offer and the Merger. The principal
executive offices of the Purchaser are located at 100 King Street West, P.O. Box
2440, LCD 1, Hamilton, Ontario, Canada L8N 4J6. The Purchaser is an indirect
wholly owned subsidiary of Parent. All of the outstanding capital stock of the
Purchaser is owned by IAC, an indirect wholly owned subsidiary of Parent. Parent
is the beneficial owner of 328,199,280 Shares, representing approximately 61.7%
of the outstanding Shares as of December 15, 1997. The beneficial ownership of
all such Shares is by virtue of the IST Merger Agreement pursuant to which IAC
will be merged with and into IST with IST continuing as the surviving
corporation and an indirect wholly owned subsidiary of Parent. As at December
15, 1997, IST owned 328,199,280 Shares, representing approximately 61.7% of the
outstanding Shares. IST also owns all 36,248,080 outstanding shares of Preferred
Stock. Each share of Preferred Stock is convertible into a Share at the option
of the holder. The Purchaser's obligation to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for
any tendered Shares is conditioned on the completion of the IST Acquisition. It
is expected that the IST Acquisition will be completed on or about December 30,
1997.
Parent. Parent is a corporation organized under the laws of Ontario and its
principal executive offices are located at 100 King Street West, P.O. Box 2440,
LCD 1, Hamilton, Ontario, Canada L8N 4J6. Parent, together with its consolidated
subsidiaries, is one of North America's leading suppliers of resource recovery
and industrial services. Parent has the largest integrated network of metals
recovery and industrial services operations in North America, servicing over
50,000 industrial and commercial customers from over 300 locations. Parent
applies proprietary technologies to reduce the cost and downtime associated with
industrial cleaning and plant turnaround activities, and to recover value from
industrial by-products and metal bearing residuals. Parent has achieved its
leading position in the metals recovery and industrial services markets through
internal growth and through the acquisition and integration of more than 40
companies since the beginning of 1996.
Set forth below is certain selected historical consolidated financial
information relating to Parent and its subsidiaries excerpted or derived from
the audited financial statements presented in Parent's 1996 Annual Report on
Form 40-F filed with the Commission on May 21, 1997 (the "Parent 1996 Annual
Report") and in Parent's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14, 1997. More
comprehensive financial information is included in the Parent 1996 Annual Report
and other documents filed by Parent with the Commission. The financial
information that follows is qualified in its entirety by reference to such
reports and other documents, including the financial statements and related
notes contained in the Parent 1996 Annual Report, which are incorporated herein
by reference.
12
<PAGE> 15
PHILIP SERVICES CORP.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, FISCAL YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------
1997 1996 1996 1995 1994
---------- -------- ---------- ---------- --------
(THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
CANADIAN GAAP:
Statements of Earnings Data:
Revenue................................. $1,552,131 $522,257 $ 802,490 $ 648,311 $489,740
Operating expenses...................... 1,255,279 396,155 615,462 489,569 366,649
Selling, general and administrative..... 112,760 52,793 78,053 66,563 51,216
Depreciation and amortization........... 48,388 23,677 33,966 25,510 21,354
---------- -------- ---------- ---------- --------
Income from operations.................. 135,704 49,632 75,009 66,669 50,521
Interest expense........................ 37,318 20,845 24,598 28,187 21,750
Other income and expense-net............ (7,307) (3,046) (4,782) (3,689) (2,122)
---------- -------- ---------- ---------- --------
Earnings from continuing operations
before tax............................ 105,693 31,833 55,193 42,171 30,893
Income taxes............................ 32,739 7,808 15,180 12,354 8,769
---------- -------- ---------- ---------- --------
Earnings from continuing operations..... 72,954 24,025 40,013 29,817 22,124
Discontinued operations (net of tax).... -- (1,005) (1,005) 2,894 2,502
---------- -------- ---------- ---------- --------
Net earnings............................ $ 72,954 $ 23,020 $ 39,008 $ 32,711 $ 24,626
========== ======== ========== ========== ========
Basic earnings per share:
Continuing operations................. $ 0.94 $ 0.53 $ 0.79 $ 0.80 $ 0.61
Discontinued operations............... $ -- $ (0.02) $ (0.02) $ 0.08 $ 0.07
---------- -------- ---------- ---------- --------
$ 0.94 $ 0.51 $ 0.77 $ 0.88 $ 0.68
========== ======== ========== ========== ========
Fully diluted earnings per share:
Continuing operations................. $ 0.91 $ 0.49 $ 0.72 $ 0.68 $ 0.55
Discontinued operations............... $ -- $ (0.01) $ (0.01) $ 0.05 $ 0.05
---------- -------- ---------- ---------- --------
$ 0.91 $ 0.48 $ 0.71 $ 0.73 $ 0.60
========== ======== ========== ========== ========
Weighted average number of common shares
outstanding (000s).................... 77,844 44,814 50,632 37,342 36,209
========== ======== ========== ========== ========
Balance Sheet Data (end of period):
Working capital......................... $ 755,850 $192,785 $ 347,501 $ 106,604 $ 88,269
Total assets............................ 3,192,214 993,463 1,345,719 1,002,912 860,583
Total debt(1)........................... 1,205,146 292,000 414,768 421,355 400,251
Shareholders' equity.................... 1,368,963 472,061 623,351 312,102 277,882
Other Data:
Amortization............................ $ 13,451 $ 7,737 $ 11,720 $ 9,798 $ 7,869
Depreciation............................ 34,937 15,940 22,246 15,712 13,485
Additions to property, plant &
equipment............................. 65,211 31,390 59,847 37,016 29,910
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, FISCAL YEARS ENDED DECEMBER 31,
1997 1996 1996 1995 1994
---------- -------- ---------- ---------- --------
(THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
U.S. GAAP:
Statements of Earnings Data:
Revenue................................. $1,552,131 $522,257 $ 742,975 $ 648,311 $489,740
Operating expenses...................... 1,255,279 396,155 563,393 489,569 366,649
Selling, general and administrative..... 112,760 52,793 75,674 66,563 51,216
Depreciation and amortization........... 48,660 23,677 33,006 25,510 21,354
---------- -------- ---------- ---------- --------
Income from operations.................. 135,432 49,632 70,902 66,669 50,521
Interest expense........................ 37,318 18,863 22,157 25,557 19,339
Other income and expense-net............ (7,307) (3,046) (4,708) (3,689) (2,122)
---------- -------- ---------- ---------- --------
Earnings from continuing operations
before tax............................ 105,421 33,815 53,453 44,801 33,304
Income taxes............................ 32,656 7,808 13,755 12,354 8,769
---------- -------- ---------- ---------- --------
Earnings from continuing operations..... 72,765 26,007 39,698 32,447 24,535
Discontinued operations (net of tax).... -- (1,005) (1,005) 2,894 2,502
---------- -------- ---------- ---------- --------
Net earnings............................ $ 72,765 $ 25,002 $ 38,693 $ 35,341 $ 27,037
========== ======== ========== ========== ========
Primary earnings per share:
Continuing operations................. $ 0.93 $ 0.58 $ 0.79 $ 0.87 $ 0.68
Discontinued operations............... -- (0.02) (0.02) 0.08 0.07
---------- -------- ---------- ---------- --------
$ 0.93 $ 0.56 $ 0.77 $ 0.95 $ 0.75
========== ======== ========== ========== ========
Fully diluted earnings per share:
Continuing operations................. $ 0.92 $ 0.49 $ 0.69 $ 0.68 $ 0.55
Discontinued operations............... -- (0.01) (0.01) 0.05 0.02
---------- -------- ---------- ---------- --------
$ 0.92 $ 0.48 $ 0.68 $ 0.73 $ 0.57
========== ======== ========== ========== ========
Weighted average number of common shares
outstanding (000s).................... 77,844 44,814 50,073 37,342 36,209
========== ======== ========== ========== ========
Balance Sheet Data (end of period):
Working capital......................... $ 755,850 $192,785 $ 347,501 $ 106,604 $ 88,269
Total assets............................ 3,251,462 988,811 1,338,692 998,135 855,681
Total debt(1)........................... 1,220,209 301,574 414,768 437,100 419,082
Shareholders' equity.................... 1,413,231 457,835 616,324 291,580 254,150
Other Data:
Amortization............................ $ 13,723 $ 7,737 $ 11,016 $ 9,798 $ 7,869
Depreciation............................ 34,937 15,940 21,990 15,712 13,485
Additions to property, plant &
equipment............................. 65,211 31,390 59,847 37,016 29,910
</TABLE>
- ---------------
(1) Total debt includes the current portion of long-term debt.
14
<PAGE> 17
Parent is subject to the informational and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning Parent's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Parent's securities, any material interests of such persons in transactions with
Parent and other matters is required to be disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company in Section 8, except that Parent's common shares are listed on the NYSE,
and reports, proxy statements and other information concerning Parent should
also be available for inspection at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I hereto.
None of Parent or the Purchaser, or, to the best knowledge of Parent or the
Purchaser, any of the persons listed in Schedule I hereto, or any associate or
majority-owned subsidiary of such persons, beneficially owns any equity security
of the Company, and, except as set forth in this Offer to Purchase, neither
Parent nor the Purchaser, nor, to the best knowledge of Parent and the
Purchaser, any of the other persons referred to above, or any of the respective
directors, executive officers or subsidiaries of any of the foregoing, has
effected any transaction in any equity security of the Company during the past
60 days.
Except as set forth in this Offer to Purchase, neither Parent nor the
Purchaser, nor, to the best of the knowledge of Parent and the Purchaser, any of
the persons listed in Schedule I hereto nor any associate or majority-owned
subsidiary of any of the foregoing, has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, neither Parent nor the Purchaser,
nor, to the best of the knowledge of Parent and the Purchaser, any of the
persons listed in Schedule I hereto nor any associate or majority-owned
subsidiary of any of the foregoing has had any transactions with the Company, or
any of its executive officers, directors or affiliates that would require
reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Parent or the Purchaser, or their
respective subsidiaries, or, to the best of the knowledge of Parent or the
Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and
the Company or its executive officers, directors or affiliates, on the other
hand, concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors, or a sale or other transfer of
a material amount of assets.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
In 1996, CIBC Oppenheimer Corp., on behalf of IST and its subsidiaries,
acted as an advisor to analyze whether there existed opportunities for those
companies by means of a merger, acquisition or other reorganization. In
connection with those activities, IST's majority ownership of the Company was
examined. In February 1997, representatives of IST and the Company made a
presentation to representatives of Parent with respect to IST's and AES's
business activities. On August 29, 1997, Parent submitted a non-binding letter
of intent which was accepted by IST on September 4, 1997 for the purchase of IST
by a subsidiary of Parent in which the Purchaser would be merged with and into
IST. The letter of intent required, as a condition to the closing of the merger
with IST, that the board of directors of the Company would approve, on terms
satisfactory to it, a transaction by which a subsidiary of Parent would acquire
the remaining issued shares of the Company not owned by IST. Shortly thereafter,
the Company was advised that, especially in light of the various interests of
the Company's Board members, the amount of consideration to be received by the
Company's shareholders in any such transaction should be determined by the
Company as part of its own negotiations and that such consideration would not be
negotiated by IST.
15
<PAGE> 18
In response to this information, in October 1997 the Board of Directors of
the Company engaged Neidiger/Tucker/Bruner, Inc. (the "Financial Advisor") for
the purpose of rendering an opinion as to the fairness of a proposed
transaction, from a financial point of view, to the minority shareholders of the
Company. As no such transaction was then structured or agreed upon, the
Financial Advisor's initial task was to assist in determining a fair price to be
paid to the minority shareholders assuming a transaction by which there would be
a change in control of the Company.
On October 21, 1997, a meeting was held between representatives of Parent
and IST, one of whom is also an executive officer of the Company. At that
meeting, there was a brief discussion of the alternative structures for the
acquisition by Parent of the interest of the minority shareholders of the
Company. No agreements as to the terms for the transaction were reached at that
time.
On November 7, 1997, a Board of Directors meeting of the Company was held
for the purpose of discussing with the Financial Advisor its progress to date.
During the meeting, Mr. Bell (the then President of the Company) submitted his
resignation. He stated that he was resigning as a result of conflicts of
interest pertaining to him and his family. Although as of the meeting date,
neither the value of consideration to be received by shareholders of the Company
nor the structure of any proposed transaction with Parent had been identified, a
substantial portion of that meeting was devoted to the Financial Advisor's
presentation regarding its preliminary financial analyses concerning the
Company's financial and business condition and the value of the holdings of the
shareholders of the Company who own approximately 38% of the Shares not owned by
IST (the "Minority Interest"). After the presentation and discussion with
members of the Board of Directors, the Board of Directors decided to further
consider the matters presented by the Financial Advisor and to schedule a
subsequent meeting at which additional questioning and presentation of analyses
could occur.
After several days of informal discussions among members of the Board of
Directors, the Board of Directors again met on November 11, 1997 to continue
discussions with and questioning of the Financial Advisor, who again presented
information to the Board with respect to its financial analyses. At the end of
that meeting, the Board of Directors authorized Mr. Schmitt to discuss with
representatives of Parent whether Parent intended to propose a transaction which
would cause a change in control of the Company. Mr. Schmitt was authorized to
receive such information and communicate the terms of any proposal from Parent
to the Board of Directors for its consideration.
On November 19, 1997, Mr. Schmitt first received an oral proposal from
Parent with respect to its interest in submitting a tender offer on behalf of
the Purchaser for all of the shares of common stock of the Company. After
discussion with the Board of Directors of the Company and subsequent discussions
between Mr. Schmitt and Parent, and further negotiations between the parties,
Parent indicated that it would request its board of directors to consider making
a tender offer to the Company on the terms substantially similar to the Offer.
After further informal discussions among the members of the Board of Directors,
the Board of Directors met on November 25, 1997 to consider the pending
discussions and to engage in further discussions with the Financial Advisor.
Mr. Schmitt explained at the meeting that the transaction then being
discussed was a two-step transaction in which the first step would be a tender
offer for all of the shares of common stock of the Company and the second step
would be the merger of the Purchaser into the Company. The transaction would
result in shareholders of the Company receiving $0.0059 per share of common
stock (a total of approximately $1,200,000 to the holders of the Minority
Interest). The Board of Directors also discussed the proposed transaction by
which Parent or a subsidiary would acquire IST by merger, the closing of which
would be a condition to the closing of the transaction concerning the Company.
In addition, the Board of Directors discussed the requirement that other
shareholders of the Company (owning at least 26,264,000 shares of the common
stock of the Company) enter into Stockholder Agreements to tender their shares
in accordance with the provisions of the tender offer applicable to all other
shareholders of the Company (the effect of the IST merger agreement and
Stockholder Agreements would be to make Parent the owner of at least 66 2/3% of
the Company's Shares). Also, the Company would be asked to grant an option to
permit Parent or the Purchaser to purchase such amount of newly issued shares
from the Company to cause Parent and/or the Purchaser to own, together with
shares tendered pursuant to the tender offer and shares acquired by Parent's
acquisition of
16
<PAGE> 19
IST through a merger, at least ninety percent (90%) of the outstanding common
stock of the Company. At the time of this Board meeting, the Board understood
that it would be premature to vote on the particulars of any proposal, as the
actual making of any offer by or for the benefit of Parent could not occur until
the proposed transaction was considered by the board of directors of Parent,
which had not yet occurred.
After further discussions between the parties, and being advised by Parent
that its board of directors on December 15, 1997, had approved making the Offer,
the Board of Directors of the Company met on December 15, 1997 to consider the
Offer. At that meeting, the Board of Directors engaged in additional discussions
and reviewed the documents proposed to effectuate the Offer. In addition, the
Financial Advisor made a presentation of certain financial analyses it had
performed in connection with its review of the proposed Offer and gave its oral
opinion that the price to the owners of the Minority Interest would be fair,
from a financial point of view, if the transactions discussed at the meeting
were consummated under the terms described in the documents. At the conclusion
of that meeting, the Board of Directors of the Company authorized the officers
of the Company to proceed with the transaction on terms consistent with those
presented and to execute such documents as necessary to cause the transaction to
be completed.
On December 16, 1997, Parent, IAC and IST entered into the IST Merger
Agreement pursuant to which IST Acquisition will be merged with and into IST,
with IST continuing as the surviving corporation and an indirect wholly owned
subsidiary of Parent.
A press release was issued by the Company after the closing of the United
States stock markets on December 18, 1997 announcing the transaction and the
Company received the Financial Advisor's written opinion, dated as of December
15, 1997, which confirmed the oral opinion previously communicated.
11. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
General. The purpose of the Offer, together with the IST Acquisition, is to
acquire control of, and the entire equity interest in, the Company. The purpose
of the Merger is to acquire all Shares not beneficially owned by the Purchaser
or IST following consummation of the Offer.
The NYBCL requires, among other things, that the adoption of any plan of
merger or consolidation of the Company must be approved by the Company Board and
generally by the holders of the Company's outstanding voting securities. The
Company Board has approved the Offer and the Merger; consequently, the only
additional action of the Company that may be necessary to effect the Merger is
approval by such stockholders if the "short-form" merger procedure described
below is not available. Under the NYBCL, the affirmative vote of holders of
66 2/3% of the outstanding Shares (including any Shares owned by the Purchaser)
is generally required to approve the Merger. If the Purchaser acquires, through
the Offer or otherwise, voting power with respect to at least 66 2/3% of the
outstanding Shares (which would be the case if the Purchaser were to accept for
payment Shares tendered pursuant to the Offer, including the Shares subject to
the Stockholder Agreements sold pursuant to the Stockholder Agreements or
tendered by the Selling Stockholders pursuant to the Offer), it would have
sufficient voting power to effect the Merger without the vote of any other
stockholder of the Company. However, the NYBCL also provides that if a parent
company owns at least 90% of each class of stock of a subsidiary, the parent
company can effect a short-form merger with that subsidiary without the action
of the other stockholders of the subsidiary. Accordingly, if, as a result of the
Offer or otherwise, the Purchaser acquires or controls the voting power of at
least 90% of the outstanding Shares, the Purchaser could, and intends to, effect
the Merger without prior notice to, or any action by, any other stockholder of
the Company. Pursuant to an agreement dated December 15, 1997, among Parent, the
Purchaser and the Company (the "Option Agreement"), the Company has granted to
the Purchaser an option (the "Short Form Merger Option") to purchase up to
1,300,000,000 newly issued Shares ("Short Form Shares"). The Short Form Merger
Option may be exercised by the Purchaser at any time within six business days
after the acceptance by the Purchaser of Shares pursuant to the Offer in
accordance with the terms of the Merger Agreement; provided, however, that the
Purchaser may only exercise the Short Form Merger Option in respect of at least
that number of Short Form Shares which, when added to the number of Shares
purchased pursuant to the Offer or otherwise, represents at least 90% of the
outstanding Shares, after giving effect to the issuance of the Short Form
Shares.
17
<PAGE> 20
Plans for the Company. In connection with the Offer, Parent and the
Purchaser have reviewed, and will continue to review, on the basis of publicly
available information, various possible business strategies that they might
consider in the event that they acquire control of the Company, whether pursuant
to the Merger Agreement or otherwise. In addition, if and to the extent that
Parent and the Purchaser acquire control of the Company or otherwise obtain
access to the books and records of the Company, Parent and the Purchaser intend
to conduct a detailed review of the Company and its assets, corporate structure,
dividend policy, capitalization, operations, properties, policies, management
and personnel and consider and determine what, if any, changes would be
desirable in light of the circumstances which then exist. Such strategies also
could include, among other things, changes in the Company's business, corporate
structure, Certificate of Incorporation, Bylaws, capitalization, management or
dividend policy.
Except as indicated in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals which relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries or any material change in the Company's capitalization or dividend
policy or any other material changes in the Company's corporate structure or
business, or the composition of the Company Board or management.
The Merger. In general, under the NYBCL and the Company's Certificate of
Incorporation, the Merger requires the approval of the Company Board and the
approval by the holders of 66 2/3% of all outstanding Shares.
Accordingly, if the Purchaser acquires more than 66 2/3% of the outstanding
Shares pursuant to the Offer, the Purchaser would have the voting power to
approve the Merger without the vote of any other stockholders and could effect
the Merger by so voting and by action of the Board of Directors of the Purchaser
and the Company Board (subject to the requirements of Section 912 of the NYBCL).
Further, the NYBCL provides that if the parent corporation owns 90% or more
of each class of outstanding shares of a New York subsidiary, the New York
subsidiary may be the surviving corporation of a merger with its parent
corporation upon a majority vote of each corporation's entire board of
directors, without action or vote by the stockholders of either corporation (a
"Short-Form Merger"). Accordingly, if the Purchaser owns 90% or more of the
outstanding Shares after consummation of the Offer, a Short-Form Merger could be
effected by action of the Board of Directors of the Purchaser and the Company
Board without approval of the Company's stockholders (subject to the
requirements of Section 912 of the NYBCL). Pursuant to the Option Agreement, the
Purchaser may exercise the Short Form Merger Option at any time within six
business days after the acceptance by the Purchaser of Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement; provided, however,
that the Purchaser may only exercise the Short Form Merger Option in respect of
at least that number of Short Form Shares which, when added to the number of
Shares purchased pursuant to the Offer, represents at least 90% of the
outstanding Shares, after giving effect to the issuance of the Short Form
Shares.
Neither Parent nor the Purchaser can give any assurance as to whether, as a
result of information hereafter obtained by either Parent or the Purchaser,
changes in general economic or market conditions or in the business of the
Company, or other presently unforeseen factors, the Merger will be submitted to
the Company's stockholders or whether the Merger will be delayed or abandoned.
Whether or not the Merger is consummated, Parent and the Purchaser reserve the
right to acquire additional Shares following the expiration of the Offer through
private purchases, market transactions, tender or exchange offers or otherwise
on terms and at prices that may be more or less favorable than those of the
Offer or, subject to any applicable legal restrictions, to dispose of any or all
Shares beneficially acquired by Parent and the Purchaser.
12. THE MERGER AGREEMENT; STOCKHOLDER AGREEMENTS.
The following is a summary of certain provisions of the Merger Agreement.
The summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
thereof, which is incorporated herein by reference and a copy of which has been
filed
18
<PAGE> 21
with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement
may be examined, and copies thereof may be obtained, as set forth in Section 8.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to prior satisfaction or waiver
of the conditions of the Offer, the Purchaser will purchase all Shares validly
tendered and not properly withdrawn pursuant to the Offer. The Merger Agreement
provides that, without the written consent of the Company, the Purchaser will
not decrease the Offer Price, decrease the number of Shares sought in the Offer
or amend any condition of the Offer in a manner adverse to the holders of
Shares. In the event that all of the conditions of the Offer have not been
satisfied or waived by the Initial Expiration Date, January 23, 1998, the
Purchaser shall have the right from time to time to extend the expiration date.
The Purchaser will, on the terms and subject to the prior satisfaction or waiver
of the conditions of the Offer, accept for payment and pay for Shares validly
tendered and not properly withdrawn as soon as it is legally permitted to do so
under applicable law.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, and in accordance
with New York law, as soon as practicable following the Effective Time, the
Purchaser will be merged with and into the Company. As a result of the Merger,
the separate corporate existence of the Purchaser will cease and the Company
will continue as the Surviving Corporation.
The respective obligations of Parent and the Purchaser, on the one hand,
and the Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions, any and all of which may be
waived in whole or in part, to the extent permitted by applicable law: (i) the
Merger Agreement shall have been approved and adopted by the requisite vote of
the holders of Shares, if required by applicable law, in order to consummate the
Merger; (ii) no law, statute, rule, order, decree or regulation shall have been
enacted or promulgated by any government or any governmental entity of competent
jurisdiction which declares the Merger Agreement invalid or unenforceable in any
material respect or which prohibits the completion of the Offer or the
consummation of the Merger, and all governmental consents, orders and approvals
required for completion of the Offer or consummation of the Merger shall have
been obtained and be in effect at the Effective Time; (iii) there shall be no
order or injunction of a court or other governmental entity of competent
jurisdiction in effect precluding consummation of the Offer or the Merger; and
(iv) Parent, the Purchaser or their affiliates shall have purchased Shares
pursuant to the Offer.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Shares that are owned by the Company or any wholly owned subsidiary
of the Company, any Shares owned by Parent or any wholly owned subsidiary of
Parent, or any Shares which are held by stockholders exercising dissenters'
rights, if any, under New York law) will be converted into the right to receive
the price per Share paid pursuant to the Offer (the "Merger Consideration"), and
(ii) each issued and outstanding share of capital stock of the Purchaser will be
converted into one share of common stock of the Surviving Corporation.
The Company Board. The directors of the Purchaser at the Effective Time
shall be the initial directors of the Surviving Corporation until their
successors have been duly elected or appointed or qualified or until their
earlier death, resignation or removal in accordance with the Certificate of
Incorporation and the By-laws.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger: (i) duly call,
give notice of, convene and hold a special meeting of its stockholders (the
"Special Meeting") as promptly as practicable following the acceptance for
payment and purchase of Shares by the Purchaser pursuant to the Offer for the
purpose of considering and taking action upon the approval of the Merger and the
adoption of the Merger Agreement; (ii) prepare and file with the Commission a
preliminary proxy or information statement relating to the Merger and the Merger
Agreement and use its best efforts (a) to obtain and furnish the information
required to be included by the Commission in the Proxy Statement (as hereafter
defined) and, after consultation with Parent, to respond promptly to any
comments made by the Commission with respect to the preliminary proxy or
information statement and cause a definitive proxy or information statement,
including any amendment or supplement thereto (the "Proxy Statement") to be
mailed to its stockholders, provided that no amendment or supplement to the
Proxy
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<PAGE> 22
Statement will be made by the Company without consultation with Parent and its
counsel and (b) to obtain the necessary approvals of the Merger and the Merger
Agreement by its stockholders; and (iii) provide the recommendation of the
Company Board that stockholders of the Company vote in favor of the approval of
the Merger and the adoption of the Merger Agreement, subject to the fiduciary
obligations of the Company Board under applicable law as advised by independent
counsel. Parent has agreed that it will vote, or cause to be voted, all of the
Shares then owned by it, the Purchaser or any of its other subsidiaries and
affiliates in favor of the approval of the Merger and the adoption of the Merger
Agreement. IF THE PURCHASER ACQUIRES 66 2/3% OF THE OUTSTANDING SHARES, THE
PURCHASER WILL HAVE SUFFICIENT VOTING POWER TO APPROVE THE MERGER, EVEN IF NO
OTHER STOCKHOLDERS VOTE IN FAVOR OF THE MERGER.
The Merger Agreement provides that in the event that Parent, the Purchaser
and any other subsidiaries of Parent acquire, in the aggregate, at least 90% of
the outstanding Shares pursuant to the Offer or otherwise, Parent, the Purchaser
and the Company will, at the request of Parent and subject to the terms of the
Merger Agreement, take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after such acquisition, without a
meeting of stockholders of the Company, in accordance with Section 905 of the
NYBCL. Pursuant to the Option Agreement, the Purchaser may exercise the Short
Form Merger Option at any time within six business days after the acceptance by
the Purchaser of Shares pursuant to the Offer in accordance with the terms of
the Merger Agreement; provided, however, that the Purchaser may only exercise
the Short Form Merger Option in respect of at least that number of Short Form
Shares which, when added to the number of Shares purchased pursuant to the Offer
or otherwise, represents at least 90% of the outstanding Shares, after giving
effect to the issuance of the Short Form Shares.
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, except as expressly contemplated by the Merger Agreement or agreed
to in writing by Parent, prior to the Effective Time, (a) the business of the
Company and its subsidiaries will be conducted only in the ordinary and usual
course and, to the extent consistent therewith, each of the Company and its
subsidiaries will use its best efforts to preserve its business organization
intact and maintain its existing relations with customers, suppliers, employees,
creditors and business partners; (b) the Company will not, directly or
indirectly, amend or propose to amend its charter or by-laws or similar
organizational documents; (c) the Company will not, and will not permit its
subsidiaries to, (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock or that of its subsidiaries, other than current or accrued dividends on
the Preferred Stock; (ii) redeem, purchase or otherwise acquire directly or
indirectly any shares of the capital stock of the Company or its subsidiaries or
any other securities thereof or any rights, warrants or options to acquire any
such shares or other securities; (iii) authorize for issuance, issue, sell,
pledge, deliver or agree to commit to issue, sell, pledge or deliver (whether
through the issuance or granting of any options, warrants, calls, subscriptions,
stock appreciation rights or other rights or other agreements) or otherwise
encumber any shares of capital stock of any class of the Company or of its
subsidiaries or any securities convertible into or exchangeable for shares of
capital stock of any class of the Company or of its subsidiaries or (iv) split,
combine or reclassify the outstanding capital stock of the Company or of any of
its subsidiaries or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares in the capital stock of the Company
or of any of its subsidiaries; (d) the Company will not, and it will not permit
any of its subsidiaries to, acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, limited
liability company, joint venture, association or other business organization or
division thereof or (ii) any assets, outside of the ordinary course of business,
that individually is in excess of $25,000 or that in the aggregate are in excess
of $50,000; (e) the Company will not, and it will not permit any of its
subsidiaries to, sell, lease, license, mortgage or otherwise encumber or subject
to any lien or otherwise dispose of any assets of the Company or of its
subsidiaries other than (i) sales and dispositions of interests or rights with
respect to property having an aggregate fair market value on the date of the
Merger Agreement of less than $50,000, in each case only if in the ordinary
course of business and consistent with past practice, or (ii) encumbrances and
liens that are incurred in the ordinary course of business and consistent with
past practice; (f) neither the Company nor any of its subsidiaries will: (i)
grant any increase in the compensation payable or to become payable by the
Company or any of its subsidiaries to any of its executive officers or key
employees, (ii) adopt any new, or amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become
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<PAGE> 23
payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement or (iii) enter into any employment or severance agreement with or,
except in accordance with the existing written policies of the Company, grant
any severance or termination pay to any officer, director or employee of the
Company or any its subsidiaries; (g) neither the Company nor any of its
subsidiaries will: (i) modify, amend or terminate any of its or its
subsidiaries' material contracts or waive, release or assign any material rights
or claims, except in the ordinary course of business and consistent with past
practice, (ii) enter into any other agreements, commitments or contracts that
are material to the Company and its subsidiaries taken as a whole, other than in
the ordinary course of business and consistent with past practice, or (iii)
otherwise make any material change that is adverse to the Company (including by
way of termination) in (A) any existing agreement, commitment or arrangement
that is material to the Company and its subsidiaries taken as a whole or (B) the
conduct of the business or operations of the Company and its subsidiaries; (h)
neither the Company nor any of its subsidiaries will: (i) incur or assume any
long-term debt or, except in the ordinary course of business in amounts
consistent with past practice, incur or assume any short-term indebtedness; (ii)
incur or modify any material indebtedness or other liability; (iii) issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of the Company or of any of its subsidiaries; (iv) enter into any
"keep well" or other arrangement to maintain any financial condition of another
person; (v) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business and consistent with past
practice; (vi) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly owned subsidiaries of the
Company) or (vii) enter into any material commitment or transaction (including,
but not limited to, any material capital expenditure or purchase or lease of
assets or real estate other than the purchase of products for inventory and
supplies in the ordinary course of business); (i) neither the Company nor any of
its subsidiaries will change any of the accounting methods used by it unless
required by GAAP; (j) neither the Company nor any of its subsidiaries will,
without the prior written consent of Parent, pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, in the ordinary course of business
and consistent with past practice, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company and its consolidated
subsidiaries; (k) neither the Company nor any of its subsidiaries will take, or
agree to commit to take, any action that would or is reasonably likely to result
in any of the conditions to the Offer set forth in Annex A of the Merger
Agreement or any of the conditions to the Merger set forth in Article VI of the
Merger Agreement not being satisfied, or would make any representation or
warranty of the Company contained in the Merger Agreement inaccurate in any
respect at, or as of any time prior to, the Effective Time, or that would
materially impair the ability of the Company to consummate the Offer or the
Merger in accordance with the terms of the Merger Agreement or materially delay
such consummation; (l) neither the Company nor any of its subsidiaries will make
any Tax election or settle or compromise any Tax liability or refund, except to
the extent already provided in the Company's filings with the Commission; (m)
neither the Company nor any of its subsidiaries will permit any material
insurance policy naming it as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to Parent, except in the ordinary course
of business and consistent with past practice; (n) neither the Company nor any
of its subsidiaries will adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the Merger)
and (o) neither the Company nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that neither the Company nor any of its subsidiaries or affiliates will (and the
Company will use its best efforts to cause its officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent, any of its affiliates or representatives) concerning any
proposal or offer to acquire all or a
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<PAGE> 24
substantial part of the business and properties of the Company or any of its
subsidiaries or any capital stock of the Company or any of its subsidiaries,
whether by merger, tender offer, exchange offer, sale of assets or similar
transactions involving the Company or any subsidiary, division or operating or
principal business unit of the Company (an "Acquisition Proposal"), except that
the Company and the Company Board may furnish information concerning the Company
and its subsidiaries to any corporation, partnership, person or other entity or
group pursuant to appropriate confidentiality agreements, and may negotiate and
participate in discussions and negotiations with such entity or group concerning
an Acquisition Proposal if (i) such entity or group has, on an unsolicited
basis, submitted a bona fide written proposal to the Company Board relating to
any such transaction which the Company Board determines in good faith represents
a superior transaction to the Offer and the Merger and which is not conditioned
upon obtaining additional financing and (ii) in the opinion of the Company
Board, only after receipt of advice from independent legal counsel, the failure
to provide such information or access or to engage in such discussions or
negotiations would cause the Company Board to violate its fiduciary duties to
the Company's stockholders under applicable law (an Acquisition Proposal which
satisfies the immediately foregoing clauses (i) and (ii) is referred to in the
Merger Agreement as a "Superior Proposal"). The Company has agreed to
immediately communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by the
Company in connection with such proposal, discussion negotiation or inquiry) and
the identity of the party making such proposal or inquiry which it may receive
in respect of any such transaction.
The Company has agreed that neither the Company Board nor any committee
thereof will (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or the Purchaser, the approval or recommendation by the
Company Board or any such committee of the Offer, the Merger Agreement or the
Merger, (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal, except that prior to the time of acceptance for payment of
Shares in the Offer, the Company Board may do any of the foregoing at any time
after (A) the Company Board determines, after receipt of advice from outside
legal counsel to the Company, that the failure to take such action would cause
the Company Board to violate its fiduciary duties to the Company's stockholders
under applicable law and (B) two business days following Parent's receipt of
written notice advising Parent that the Company Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal. Furthermore, the
Company may not enter into an agreement with respect to a Superior Proposal
unless the Company furnishes Parent with written notice not later than noon (New
York time) one day in advance of any date that it intends to enter into such
agreement and shall have caused its financial and legal advisors to negotiate
with Parent to make such adjustments in the terms and conditions of the Merger
Agreement as would enable the Company to proceed with the transactions
contemplated in the Merger Agreement on such adjusted terms.
Termination. The Merger Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Time, whether before or after approval of the
stockholders of the Company, (a) by mutual written consent of Parent and the
Company; (b) by either the Company or Parent (i) if the Offer shall have expired
without any Shares being purchased therein, provided, that such right to
terminate will not be available to any party whose failure to fulfill any
obligation under the Merger Agreement was the cause of, or resulted in, the
failure of Parent or the Purchaser to purchase the Shares prior to the
expiration of the Offer; (ii) if any governmental entity shall have issued an
order, decree or ruling or taken any other action (which order, decree, ruling
or other action the parties will use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by the Merger Agreement and such order, decree, ruling
or other action shall have become final and non-appealable; (c) by the Company
(i) if, prior to the purchase of the Shares pursuant to the Offer, Parent or the
Purchaser breaches or fails in any material respect to perform or comply with
any of its material covenants and agreements contained in the Merger Agreement
or breaches its representations and warranties in any material respect, (ii) in
connection with entering into a definitive agreement with respect to an
Acquisition Proposal if the Company has complied with all of the provisions
described above under "-- No Solicitation," including the notice provisions,
(iii) if Parent or the Purchaser shall have terminated the Offer without Parent
or the Purchaser, as the case may be, purchasing any Shares pursuant thereto or
(iv) if Parent, the Purchaser or any of their
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<PAGE> 25
affiliates fail to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer; provided,
that the Company may not terminate the Merger Agreement pursuant to clause (iii)
or (iv) if the Company is in material breach of the Merger Agreement; (d) by
Parent or the Purchaser (i) if prior to the purchase of the Shares pursuant to
the Offer, the Company Board (A) withdraws, or modifies or changes in a manner
adverse to Parent or the Purchaser, its approval or recommendation of the Offer,
the Merger Agreement or the Merger, (B) approves or recommends an Acquisition
Proposal, (C) executes an agreement in principle (or similar agreement) or
definitive agreement providing for a tender offer or exchange offer for any
shares of capital stock of the Company, or a merger, consolidation or other
business combination with a person or entity other than Parent, the Purchaser or
their affiliates or (D) resolves to do any of the foregoing, (ii) if Parent or
the Purchaser terminates the Offer without Parent or the Purchaser purchasing
any Shares thereunder, provided that Parent or the Purchaser may not terminate
the Merger Agreement pursuant to this clause (ii) if Parent or the Purchaser has
failed to purchase the Shares in the Offer in violation of the material terms
thereof or (iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A to the Merger Agreement, Parent, the Purchaser
or any of their affiliates fail to commence the Offer on or prior to the fifth
business day following the date of the initial public announcement of the Offer.
Indemnification. Pursuant to the Merger Agreement, for six years after the
Effective Time, the Surviving Corporation (or any successor to the Surviving
Corporation) will indemnify, defend and hold harmless the present officers and
directors of the Company and its subsidiaries with respect to matters occurring
at or prior to the Effective Time to the full extent permitted under New York
law, the terms of the Certificate of Incorporation, By-laws and the Company's
indemnification agreements, each as in effect as of the date of the Merger
Agreement.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and the
Purchaser with respect to, among other things, its organization, capitalization,
authority, financial statements, need for consents or approvals, public filings,
conduct of business, employee benefit plans, intellectual property, employment
matters, excess parachute payments, compliance with laws, tax matters,
insurance, litigation, title to properties, environmental matters, undisclosed
liabilities, finders fees, the opinion of its financial advisor, and the absence
of any material adverse change since September 30, 1997.
Pursuant to the Merger Agreement, Parent and the Purchaser have made
substantially similar representations and warranties as to their organization,
authority, need for consents or approvals.
The following is a summary of the material terms of the Stockholder
Agreements. This summary is not a complete description of the terms and
conditions of the Stockholder Agreements and is qualified in its entirety by
reference to the full text thereof, which is incorporated herein by reference
and a copy of which has been filed with the Commission as an exhibit to the
Schedule 14D-1. The Stockholder Agreements may be examined, and copies thereof
may be obtained, as set forth in Section 8.
Tender of Shares. In connection with the execution of the Merger Agreement,
Parent and the Purchaser entered into Stockholder Agreements with the Selling
Stockholders. Upon the terms and subject to the conditions of such agreements,
each of the Selling Stockholders has agreed to validly tender (and not withdraw)
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer, the number of Shares owned
beneficially by such Selling Stockholder (or a total of 28,808,953 Shares,
representing approximately 5.4% of the outstanding Shares).
Provisions Concerning the Shares. The Selling Stockholders have agreed that
during the period commencing on the date of the Stockholder Agreements and
continuing until the first to occur of the Effective Time or the termination of
the Merger Agreement in accordance with its terms, at any meeting of the
Company's stockholders or in connection with any written consent of the
Company's stockholders, the Selling Stockholders will vote (or cause to be
voted) the Shares held of record or beneficially owned by each of such Selling
Stockholders: (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other actions contemplated by the Merger Agreement and the Stockholder
Agreements and any actions required in furtherance thereof; and (ii) against
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any Acquisition Proposal and against any action or agreement that would impede,
frustrate, prevent or nullify the Stockholder Agreements or result in a breach
in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which would
result in any of the conditions to the Offer or the Merger not being fulfilled.
Each of the Selling Stockholders has also agreed not to transfer such Selling
Stockholder's Shares and not to, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent, any of its affiliates or representatives) concerning any
Acquisition Proposal.
Other Covenants, Representations, Warranties. In connection with the
Stockholder Agreements, the Selling Stockholders made certain customary
representations and warranties, including with respect to (i) ownership of the
Shares, (ii) the Selling Stockholder's authority to enter into and perform its
or his obligations under the Stockholder Agreements, (iii) the absence of
conflicts and requisite governmental consents and approvals, and (iv) the
absence of encumbrances on and in respect of the Selling Stockholder's Shares.
Parent and the Purchaser have made certain representations and warranties with
respect to Parent and the Purchaser's authority to enter into the Stockholder
Agreements and the absence of conflicts and requisite governmental consents and
approvals.
13. SOURCE AND AMOUNT OF FUNDS.
The Purchaser estimates that the total funds required to purchase all
Shares validly tendered pursuant to the Offer and to consummate the Merger, will
be approximately $1,200,000. Parent and the Purchaser intend to obtain such
funds from working capital.
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion (subject to the provisions of the Merger
Agreement), the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate or amend the Offer as to any Shares not then paid for, if (A) the
Company, Parent and the Purchaser, as required, have not obtained all necessary
material consents, approvals, orders, authorizations, registrations,
declarations, permits or filings required to be obtained by it in connection
with the Merger Agreement and the transactions contemplated thereby or (B) at
any time on or after the date of the Merger Agreement and before the time of
payment for any such Shares, any of the following events shall occur or shall be
determined by the Purchaser to have occurred:
(i) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity (as defined in the Merger Agreement)
against the Purchaser, Parent, the Company or any subsidiary of the Company
(a) seeking to prohibit or impose any material limitations on Parent's or
the Purchaser's ownership or operation (or that of any of their respective
subsidiaries or affiliates) of all or a material portion of their or the
Company's businesses or assets, or to compel Parent or the Purchaser or
their respective subsidiaries and affiliates to dispose of or hold separate
any material portion of the business or assets of the Company or Parent and
their respective subsidiaries, in each case taken as a whole, (b)
challenging the acquisition by Parent or the Purchaser of any Shares under
the Offer, the Merger or pursuant to the Stockholder Agreements, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger
or the performance of any of the other transactions contemplated by the
Merger Agreement (including the voting provisions thereunder), or seeking
to obtain from the Company, Parent or the Purchaser any damages that are
material in relation to the Company and its subsidiaries taken as a whole,
(c) seeking to impose material limitations on the ability of the Purchaser,
or render the Purchaser unable, to accept for payment, pay for or purchase
some or all of the Shares pursuant to the Offer and the Merger, (d) seeking
to impose material limitations on the ability of the Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all
matters properly presented to the Company's stockholders or (e) which
otherwise
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<PAGE> 27
is reasonably likely to have a material adverse affect on the Company and
its subsidiaries, taken as a whole;
(ii) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger, or any other action shall be taken by
any Governmental Entity that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (a) through
(d) of paragraph (i) above;
(iii) there shall have occurred (a) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
The Toronto Stock Exchange, the Montreal Exchange or in The Nasdaq Stock
Market, for a period in excess of 24 hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (b) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or Canada (whether or not mandatory), (c) a commencement of a war
directly or indirectly involving the United States or Canada, (d) any
limitation (whether or not mandatory) by any United States or Canadian
governmental authority on the extension of credit generally by banks or
other financial institutions, (e) any decline in either the Dow Jones
Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 20% measured from the close of business
on the date of the Merger Agreement, (f) a change in general financial bank
or capital market conditions which materially or adversely affects the
ability of financial institutions in the United States or Canada to extend
credit or syndicate loans or (g) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(iv) (a) the representations and warranties of the Company set forth
in the Merger Agreement shall not be true and correct in any material
respect as of the date of the Merger Agreement and as of consummation of
the Offer as though made on or as of such date, (b) the Company shall have
failed to comply with its covenants and agreements under the Merger
Agreement in all material respects or (c) there shall have occurred any
events or changes which have had or will have a material adverse effect on
the Company and its subsidiaries taken as a whole;
(v) (a) the Company Board shall have withdrawn, or modified or changed
in a manner adverse to Parent or the Purchaser (including by amendment of
the Schedule 14D-9) its approval or recommendation of the Offer, the Merger
Agreement or the Merger, or approved or recommended any Acquisition
Proposal, (b) the Company shall have entered into any agreement with
respect to any Superior Proposal in accordance with Section 5.5(b) of the
Merger Agreement or (c) the Company Board, upon request of the Purchaser,
shall fail to reaffirm its recommendation of the Offer, the Merger
Agreement or the Merger;
(vi) Parent shall not have acquired all of the outstanding capital
stock, on a fully diluted basis, of IST.
(vii) the Merger Agreement shall have terminated in accordance with
its terms;
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be waived by Parent or the Purchaser, in whole or in part at
any time and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser 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 Purchaser or Parent concerning
the events described in this Section 14 will be final and binding upon all
parties.
25
<PAGE> 28
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, based on a review of
publicly available filings by the Company with the Commission, neither the
Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to the Offer or the Merger or (ii) except as described
below, any notice to, filing with, approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign that would
be required for the acquisition or ownership of Shares by the Purchaser as
contemplated herein. The Purchaser currently intends to seek such approval and
provide such notices as are required by law. There can be no assurance that any
such approval or action, where needed, will be obtained or will be obtained
without substantial conditions or that adverse consequences might not result to
the business of the Company, the Purchaser or Parent or that certain parts of
the businesses of the Company, the Purchaser or Parent might not have to be
disposed of in the event that such approvals are not obtained or any other
actions were not taken. The Purchaser's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See Section 14.
State Takeover Statutes. The Company is incorporated under the laws of the
State of New York. In general, Section 912 of the NYBCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 20% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a New York corporation unless, among other
things, prior to such date the board of directors of the corporation approved
either the business combination or the transaction in which the interested
stockholder became an interested stockholder. Since the Company Board, at a
special meeting held on December 15, 1997, approved the Merger Agreement, the
Option Agreement and the Stockholder Agreements and the transactions
contemplated thereby, Section 912 is inapplicable to Parent and the Purchaser in
connection with the Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without the prior approval of the remaining stockholders. The
state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a
Federal district court in Oklahoma ruled that the Oklahoma statutes were
unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December, 1988, a Federal district court in Florida held in Grand
Metropolitan PLC v. Butterworth that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
The Company conducts business in several states throughout the United
States, some of which have enacted state takeover laws. Except as otherwise
described in this Offer to Purchase, the Purchaser does not know whether any of
these laws will, by their terms, apply to the Offer and has not complied with
any such laws. Should any person seek to apply any state takeover law, the
Purchaser will take such action as then appears desirable, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws is applicable to the Offer and the Merger, and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer, the
Purchaser might be required to file certain information with, or receive
approvals
26
<PAGE> 29
from, the relevant state authorities. In addition, if enjoined, the Purchaser
might be unable to accept for payment any Shares tendered pursuant to the Offer,
or be delayed in continuing or consummating the Offer. In such case, the
Purchaser may not be obligated to accept for payment any Shares tendered. See
Section 14.
Other Matters. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger. However, Rule 13e-3 would be
inapplicable if (i) the Shares are deregistered under the Exchange Act prior to
the Merger or other business combination or (ii) the Merger or other business
combination is consummated within one year after the purchase of the Shares
pursuant to the Offer and the amount paid per Share in the Merger or other
business combination is at least equal to the amount paid per Share in the
Offer. If applicable, Rule 13e-3 requires, among other things, that certain
financial information concerning the fairness of the proposed transaction and
the consideration offered to minority stockholders in such transaction be filed
with the Commission and disclosed to stockholders prior to consummation of the
transaction.
16. FEES AND EXPENSES.
Except as set forth below, neither Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Shares pursuant to the Offer.
Corporate Stock Transfer, Inc. has been retained as the Depositary. The
Depositary has not been retained to make solicitations or recommendations in its
role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws. Brokers, dealers, commercial banks and trust companies
will be reimbursed by the Purchaser for customary mailing and handling expenses
incurred by them in forwarding offering material to their customers.
17. MISCELLANEOUS.
The Purchaser is not aware of any jurisdiction where the making of the
Offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, the Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the holders of Shares in such state.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT, THE PURCHASER OR THE COMPANY NOT CONTAINED
IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS OFFER TO PURCHASE NOR ANY PURCHASE
PURSUANT TO THE OFFER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PARENT, THE PURCHASER OR THE
COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE DATE OF THIS
OFFER TO PURCHASE.
Parent and the Purchaser have filed with the Commission a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), together with exhibits,
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act, furnishing certain additional information with respect to the Offer, and
may file amendments thereto. In addition, the Company has filed with the
Commission a Solicitation/Recommendation Statement on Schedule 14D-9 (including
exhibits) pursuant to Rule 14d-9 under the Exchange Act. Such statements and any
amendments thereto, including exhibits, may be inspected at, and copies may be
obtained from, the same places and in the same manner as set forth in Section 8
(except that they will not be available at the regional offices of the
Commission).
AES ACQUISITION CORP.
DECEMBER 24, 1997
27
<PAGE> 30
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE PURCHASER
1. Directors and Executive Officers of Parent. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Parent.
Unless otherwise indicated, each person identified below is employed by
Parent. The principal address of Parent and, unless otherwise indicated below,
the current business address for each individual listed below is 100 King Street
West, P.O. Box 2440, LCD1 Hamilton, Ontario, Canada L8N 4J6. Unless otherwise
indicated, each such person is a citizen of Canada. Each of the directors listed
below held the office or position last indicated as of five years ago.
<TABLE>
<CAPTION>
NAME, CURRENT POSITION
WITH PARENT AND PRINCIPAL OCCUPATION OR EMPLOYMENT;
CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Allen Fracassi................ Mr. Fracassi has been the President, Chief Executive Officer
President, Chief Executive and a director of Parent since December 1990. Allen Fracassi
Officer and Director and Philip Fracassi, the founders of Parent, are brothers.
Philip Fracassi............... Mr. Fracassi has been the Executive Vice-President, Chief
Executive Vice President, Operating Officer and a director of Parent since December
Chief Operating Officer and 1990. Philip Fracassi and Allen Fracassi, the founders of
Director Parent, are brothers.
Howard Beck................... Mr. Beck was appointed Chairman of Parent on March 9, 1994
Chairman and Director and has been a director of Parent since December 1990. From
1991 to 1993, he was Vice -- Chairman of Barrick Gold
Corporation (formerly American Barrick Gold Corporation), an
integrated gold mining company, and of The Horsham
Corporation, a holding company.
Roy Cairns.................... Mr. Cairns has been a director of Parent since December
Director 1990. Mr. Cairns has been counsel to, and was previously a
partner with, Chown, Cairns, a law firm.
Derrick Rolfe................. Mr. Rolfe has been a director of Parent since January 1991.
Director Since 1992, Mr. Rolfe has been the President and Chief
Executive Officer of RM Capital Corporation, an investment
company. Mr. Rolfe is also a director of Consolidated
Envirowaste Inc., an organic waste processing company.
Norman Foster................. Mr. Foster has been a director of Parent since January 1994.
Director Mr. Foster was the President, By-Products Recovery Group, of
Parent from February 1996 to July 1997. Mr. Foster was
President and Chief Executive Officer of Nortru, Inc. from
prior to 1991 to July 1997 and President and Chief Executive
Officer of Burlington Environmental Inc. from December 1993
to July 1997.
Felix Pardo................... Mr. Pardo has been a director of Parent since March 1994.
Director Since May 1993, Mr. Pardo has been President and Chief
Executive Officer of Ruhr-American Coal Corporation. From
1992, Mr. Pardo was Chairman of Newalta Corporation, an oil
field waste management company and a partner and director of
Quorum Funding, an investment company.
Herman Turkstra............... Mr. Turkstra has been a member of Turkstra, Mazza,
Director Shinehoft, Mihailovich, Associates, a law firm, since 1959.
</TABLE>
I-1
<PAGE> 31
<TABLE>
<CAPTION>
NAME, CURRENT POSITION
WITH PARENT AND PRINCIPAL OCCUPATION OR EMPLOYMENT;
CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
William E. Haynes............. Mr. Haynes has been a director of Parent since August 6,
Director 1997, and until July 31, 1997 was a director of Allwaste,
United States Citizen Inc. from June 1996. He is the Chairman, President and Chief
Executive Officer of Innovative Valve Technologies, Inc., an
industrial valve repair and distribution company in which
Parent owns a minority equity interest. He served as the
President and Chief Executive Officer of LYONDELL-CITGO
Refining Company Ltd. from July 1992 to December 1995.
Robert L. Knauss.............. Mr. Knauss has been a director of Parent since August 6,
Director 1997, and until July 31, 1997 was a director of Allwaste,
United States Citizen Inc. from March 1988. He is the President and Chief
Executive Officer of Baltic International U.S.A., Inc., an
aviation investment company, and a director of the Mexico
Fund, Inc., an investment fund based in Mexico City, and
Equus II, Inc., an investment fund based in Houston, Texas.
Mr. Knauss served for 12 years as the Dean and Distinguished
University Professor of the University of Houston Law
Center.
Robert Waxman................. Mr. Waxman has been a director of Parent since January 1994.
President, Metals Recovery Mr. Waxman has been the President, Metals Recovery Group,
Group and Director since February 28, 1996. Since September 1993, Mr. Waxman
has been President and Chief Executive Officer of Waxman
Resources Inc. From 1989 to 1993, Mr. Waxman was Chief
Operating Officer of I. Waxman & Sons Limited.
Marvin Boughton............... Mr. Boughton has been the Executive Vice-President and Chief
Executive Vice President and Financial Officer of Parent since January 1994 and May 1992,
Chief Financial Officer respectively. He was Vice-President, Finance of Parent from
September 1991 to December 1993.
Robert M. Chiste.............. Mr. Chiste became President of the Parent's Industrial
President, Industrial Services Services Group upon completion of Parent's acquisition of
Group Allwaste, Inc. Prior to that he was President and Chief
United States Citizen Executive Officer of Allwaste, Inc. from 1994. Prior to that
he was Chief Executive Officer of American National Power,
Inc., a successor to Transco Energy Company focused on the
power generation business in North and South America, from
1984 to 1986. Mr. Chiste is a director of Franklin Credit
Management Corp., a financial services company.
Peter Chodos.................. Mr. Chodos has been Executive Vice-President, Corporate
Executive Vice President, Development, of Parent since June 1996. Prior to that time,
Corporate Development he was Vice President and Director of BZW Canada, an
investment bank, from May 1992 to June 1996 and was Managing
Partner of Loewen, Ondaatje, McCutcheon & Company Limited,
an investment bank, from May 1983 to April 1992.
</TABLE>
I-2
<PAGE> 32
<TABLE>
<CAPTION>
NAME, CURRENT POSITION
WITH PARENT AND PRINCIPAL OCCUPATION OR EMPLOYMENT;
CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Antonio Pingue................ Mr. Pingue has been Executive Vice-President, Corporate and
Executive Vice President, Government Affairs of Parent since May 1997. Prior to that
Corporate and Government he was Senior Vice-President, Corporate & Government
Affairs Affairs, of Parent from March 1995. Prior to that, he was
Senior Vice-President, Environmental Services and Regulatory
Affairs of the Company from January 1994, and was
Vice-President, Environmental and Regulatory Affairs, of
Parent from 1991 to December 1993.
Colin Soule................... Mr. Soule has been the General Counsel of Parent since
Executive Vice President, October 1991, was appointed Corporate Secretary of Parent in
General Counsel and Corporate January 1992, was appointed Senior Vice-President of Parent
Secretary in May 1994 and Executive Vice-President of Parent in May
1997.
John Woodcroft................ Mr. Woodcroft has been Executive Vice-President, Operations
Executive Vice President, of Parent since May 1997. Prior to that he was Senior Vice
Operations President, Operations, of Parent from January 1994 and was
Vice-President, Acquisitions and Development, of Parent from
May 1991 to December 1993.
</TABLE>
2. Directors and Executive Officers of the Purchaser. Set forth below is
the name, current business address, citizenship and the present principal
occupation or employment and material occupations, positions, offices or
employments for the past five years of each director/officer of the Purchaser.
Unless otherwise indicated, each person identified below is employed by the
Purchaser. The principal address of the Purchaser and, unless otherwise
indicated below, the current business address for each individual listed below
is 100 King Street, West, P.O. Box 2440 LCD1, Hamilton, Ontario, Canada L8N 4J6.
Unless otherwise indicated, each such person is a citizen of Canada.
<TABLE>
<CAPTION>
NAME, CURRENT POSITION WITH
PURCHASER PRINCIPAL OCCUPATION OR EMPLOYMENT;
AND CURRENT BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Robert M. Chiste.............. Mr. Chiste became President of Parent's Industrial Services
President and Director Group upon completion of Parent's acquisition of Allwaste,
United States Citizen Inc. Prior to that he was President and Chief Executive
Officer of Allwaste, Inc. from 1994. Prior to that he was
Chief Executive Officer of American National Power, Inc., a
successor to Transco Energy Company focused on the power
generation business in North and South America, from 1984 to
1986. Mr. Chiste is a director of Franklin Credit Management
Corp., a financial services company.
Philip Fracassi............... Mr. Fracassi has been the Executive Vice-President, Chief
Director Operating Officer and a director of Parent since December
1990. Philip Fracassi and Allen Fracassi, the founders of
Parent, are brothers.
John Woodcroft................ Mr. Woodcroft has been Executive Vice-President, Operations
Director of Parent since May 1997. Prior to that he was Senior Vice
President, Operations, of Parent from January 1994 and was
Vice-President, Acquisitions and Development, of Parent from
May 1991 to December 1993.
Colin Soule................... Mr. Soule has been the General Counsel of Parent since
Secretary October 1991, was appointed Corporate Secretary of Parent in
January 1992, was appointed Senior Vice-President of Parent
in May 1994 and Executive Vice-President of Parent in May
1997.
</TABLE>
I-3
<PAGE> 33
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each stockholder of the
Company or his broker-dealer, commercial bank, trust company or other nominee to
the Depositary as follows:
The Depositary for the Offer is:
CORPORATE STOCK TRANSFER, INC.
<TABLE>
<CAPTION>
Facsimile Transmission By Hand or
By Mail: Copy Numbers: Overnight Courier:
<S> <C> <C>
370 17th Street 303-592-8821 370 17th Street
Suite 2350 Suite 2350
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Carylyn Bell Attn: Carylyn Bell
</TABLE>
(For Eligible Institutions Only)
Confirm by Telephone
303-595-3300
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to the Depositary. You
may also contact your broker, dealer, commercial bank or trust company or other
nominee for assistance concerning the Offer.
<PAGE> 1
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 24, 1997
BY
AES ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
PHILIP SERVICES CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JANUARY 23, 1998,
UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CORPORATE STOCK TRANSFER, INC.
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission By Hand or
370 17th Street Copy Numbers: Overnight Courier:
Suite 2350 (303) 592-8821 370 17th Street
Denver, Colorado 80202 Suite 2350
Attn: Carylyn Bell Denver, Colorado 80202
Attn: Carylyn Bell
</TABLE>
(For Eligible Institutions Only)
Confirm by Telephone
(303) 595-3300
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
THAT LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders if
certificates for Shares (as defined below) are to be forwarded herewith.
IF YOU HAVE POSSESSION OF YOUR SHARE CERTIFICATES, YOU SHOULD FILL OUT THE
BOX TITLED "DESCRIPTION OF SHARES TENDERED", BELOW. IF YOUR SHARES ARE HELD
THROUGH A BROKER, DEALER, COMMERCIAL BANK OR TRUST COMPANY, THEN YOU NEED TO
CHECK ONE OF THE FOLLOWING BOXES AND FILL OUT THE BOX TITLED "DESCRIPTION OF
SHARES TENDERED", BELOW.
Stockholders whose certificates are not immediately available or who cannot
deliver their certificates and all other documents required hereby to the
Depositary so that they are received prior to 12:00 Midnight, New York City
time, on January 23, 1998 (or if the Offer is extended as provided in the Offer
to Purchase, prior to the time specified in such extension) must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase. See Instruction 2 of this Letter of Transmittal. Delivery
of documents to the Purchaser or Parent (as both are defined below) does not
constitute a delivery to the Depositary.
<PAGE> 2
This Letter of Transmittal must also be completed if delivery of shares is
to be made by book-entry transfer to the Depositary's account at the Depositary
Trust Company ("DTC") or the Philadelphia Depositary Trust Company ("PTDC")
(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.
[ ]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(s) of Tendering Institution:
--------------------------------------------
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) [ ] DTC [ ] PDTC
Account Number Transaction Code Number
-------------------------- -------------
[ ]CHECK HERE IF THE CERTIFICATES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY PRIOR TO THE DATE
HEREOF AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
----------------------------------------------
Window Ticket Number (if any)
------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------------
Name of Institution that Guaranteed Delivery
---------------------------------
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------------------------------
PRINT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATES ENCLOSED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
=====================================================================
TOTAL SHARES..................................
- ----------------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders delivering shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the
Depositary are tendered. See Instruction 4.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE> 3
STOCKHOLDER'S AGREEMENT
Ladies and Gentlemen:
The undersigned hereby tenders to AES Acquisition Corp., a New York
corporation (the "Purchaser"), the above-described shares of Common Stock, par
value $0.0001 per share ("Shares"), of Advanced Environmental Systems, Inc., a
New York corporation (the "Company"), at $0.0059 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Purchaser's
Offer to Purchase dated December 24, 1997 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which, together
with the Offer to Purchase, each as amended or supplemented from time to time,
constitute the "Offer").
Accordingly, the undersigned hereby deposits with you the above-described
certificates representing the Shares. Subject to, and effective upon, acceptance
for payment of and payment for the Shares validly tendered herewith in
accordance with the terms of the Offer, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Purchaser, all right, title and
interest in and to all Shares tendered hereby that are purchased pursuant to the
Offer (and any and all other distributions, rights, Shares or other securities
issued or issuable in respect thereof on or after December 16, 1997) and hereby
irrevocably constitutes and appoints the Depositary as the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
such other distributions, rights, Shares or other securities), with full power
of substitution and resubstitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) deliver certificates for
such Shares (and any such other distributions, rights, Shares, or other
securities), together, in any such case, with all accompanying evidences of
transfer and authenticity, to or upon the order of the Purchaser, (b) present
such certificates (and any such other distributions, rights, Shares or other
securities) for cancellation and transfer of such Shares on the Company's books,
and (c) receive all benefits (including all dividends or distributions resulting
from any stock split, combination or exchange of Shares) and otherwise exercise
all rights of beneficial ownership of such Shares (and all such other
distributions, rights, Shares or other securities), all in accordance with the
terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any other distributions, rights, Shares or other securities
issued or issuable in respect thereof on or after December 16, 1997) and that
the Purchaser will acquire good, marketable and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale or transfer thereof, and
the same will not be subject to any adverse claim, when and to the extent the
same are purchased by the Purchaser. Upon request, the undersigned will execute
and deliver any additional documents deemed by the Depositary or the Purchaser
to be necessary or desirable to complete the sale, assignment and transfer of
the Shares tendered hereby.
The undersigned hereby irrevocably appoints Marvin Boughton, Colin Soule or
any other designee of the Purchaser, and each of them, the attorneys and proxies
of the undersigned, each with full power of substitution, to vote in such manner
as such attorney and proxy or his substitute shall in his sole discretion deem
proper, and otherwise to act (including pursuant to written consent) with
respect to all the Shares tendered hereby which have been accepted for payment
by the Purchaser prior to the time of such vote or other action (whether at an
annual, special, adjourned or postponed meeting or by means of written consent
in lieu of such meetings or otherwise) of the Company's stockholders or
otherwise and any and all other shares of capital stock or other securities
issued or issuable in respect of such Shares on or after December 16, 1997. This
appointment is effective upon the purchase of such Shares by the Purchaser as
provided in the Offer to Purchase. This proxy is irrevocable and coupled with an
interest and is granted in consideration of the purchase of such Shares. Such
purchase shall revoke all prior proxies given by the undersigned at any time
with respect to such Shares (and such other distributions, rights, Shares or
other securities issued in respect thereof) and no subsequent proxies will be
given with respect thereto by the undersigned, and if given shall not be valid.
The undersigned understands that the valid tender of Shares pursuant to one
of the procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute an agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, trustees
in bankruptcy and legal representatives, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
<PAGE> 4
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of any Shares
purchased and/or return any certificates for Shares not tendered or not accepted
for payment in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price for any Shares purchased and return any certificates for Shares
not tendered or accepted for payment (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered." In the event that the boxes entitled "Special
Payment Instructions" and "Special Delivery Instructions" are both completed,
please issue the check for the purchase price of all Shares purchased and return
all certificates representing Shares not purchased or not tendered in the
name(s) of, and mail such check and certificates to, the person(s) so indicated.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please credit any Shares tendered hereby and delivered by
book-entry transfer, but which are not purchased, by crediting the account at
the Book-Entry Transfer Facility designated above. The undersigned recognizes
that the Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if the Purchaser does not purchase any of the Shares tendered hereby.
---------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Certificates evidencing Shares not tendered or not purchased are
to be issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer which are not purchased
are to be returned by credit to an account at one of the Book-Entry Transfer
Facilities other than that designated above.
Issue [ ] check [ ] Certificate(s) to:
Name:
--------------------------------------------------------------
(Print)
Address:
--------------------------------------------------------------
--------------------------------------------------------------
(Include Zip Code)
--------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9)
[ ] Credit Shares delivered by book-entry
transfer and not purchased to the account
set forth below:
Check appropriate box:
[ ] DTC [ ] PDTC
Account Number
-------------------------------------------------------------
===============================================================
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Certificates evidencing Shares not tendered or not purchased are
to be mailed to someone other than that shown under "Description of Shares
Tendered."
Mail [ ] check [ ] Certificate(s) to:
Name:
--------------------------------------------------------------
(Print)
Address:
--------------------------------------------------------------
--------------------------------------------------------------
(Include Zip Code)
---------------------------------------------------------------
<PAGE> 5
SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature(s) of Owner(s))
- --------------------------------------------------------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on security position listing or by person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by an officer of a corporation, trustee, executor,
administrator, guardian, attorney or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 5. For
information concerning signature guarantees, see Instruction 1.)
Dated:
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (Full Title):
- --------------------------------------------------------------------------------
(See Instructions)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURES
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY, PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
(Please Print)
Title:
- --------------------------------------------------------------------------------
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
Dated:
- --------------------------------------------------------------------------------
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution which is a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing in the Security Transfer
Agents Medallion Program (each an "Eligible Institution"). No signature
guarantee is required on this Letter of Transmittal (a) if this Letter of
Transmittal is signed by the registered holder(s) (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) of
Shares tendered herewith, unless such holder(s) has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the reverse hereof, or (b) if such Shares are tendered for the
account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal (or a manually signed facsimile thereof)
is to be used if certificates are to be forwarded herewith. Except as
hereinafter provided, for a stockholder to tender Shares validly, certificates
for all physically tendered Shares, together with a properly completed and duly
executed Letter of Transmittal or facsimile thereof, and any other documents
required by this Letter of Transmittal, should be mailed or delivered to the
Depositary at one of the appropriate addresses set forth herein and must be
received by the Depositary on or prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). If stock certificates are not immediately
available or time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date, such Shares may be tendered if all the
following conditions are met: (a) such tender is made by or through an Eligible
Institution; (b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser is received by the
Depositary on or prior to the Expiration Date; and (c) the certificates for all
physically delivered Shares, together with a properly completed and duly
executed Letter of Transmittal and any other documents required by this Letter
of Transmittal, are received by the Depositary within three days after the date
of the execution of the Notice of Guaranteed Delivery. The Notice of Guaranteed
Delivery may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or letter to the Depositary and must include a signature guaranteed
by an Eligible Institution and by otherwise complying with the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
The stockholder understands that tenders of Shares pursuant to any one of
the procedures described in "Procedure for Tendering Shares" -- Section 3 of the
Offer to Purchase and in the instructions hereto will constitute a binding
agreement between the stockholder and the Purchaser upon the terms and
conditions of the Offer.
THE METHOD OF DELIVERY OF STOCK CERTIFICATES AND OTHER DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED OF THE DEPOSITARY. IF SENT BY MAIL, REGISTERED MAIL
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
fractions of Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal, waive any right to receive any notice of the
acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided is inadequate, the certificate
numbers and number of Shares should be listed on a separate signed schedule and
attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares evidenced by any
certificate are to be tendered, fill in the number of Shares which are to be
tendered in the column entitled "Number of Shares Tendered." A new certificate
for the remainder of the Shares evidenced by your old certificate(s) will be
sent to you as soon as practicable after the Expiration Date. All Shares
represented by certificates delivered to the Depositary are deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, the signature(s) must correspond exactly with the
names as written on the face of the certificate(s) without any change
whatsoever.
(b) If the Shares tendered are held of record by two or more joint holders,
all such holders must sign this Letter of Transmittal.
(c) If any Shares tendered are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
(d) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required. If, however, payment is to be made to, or the certificates
for Shares not tendered or accepted for payment are to be issued to, a person
other than the registered holder(s), then the certificates transmitted hereby
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appears on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution.
<PAGE> 7
(e) If this Letter of Transmittal is signed by a person other than the
registered holder of the certificates tendered, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificates.
Signatures on such certificates or stock powers required by Instruction 1 above
must be guaranteed by an Eligible Institution.
(f) If this Letter of Transmittal or any certificates or stock powers are
signed by officers of corporations, trustees, executors, administrators,
guardians, attorneys-in-fact or others acting in a fiduciary representative
capacity, such persons should so indicate when signing, and must submit proper
evidence satisfactory to the Purchaser of their authority so to act.
6. STOCK TRANSFER TAXES. The Tendering Stockholder will be responsible for
the payment of all stock transfer taxes, if any, payable on the transfer to it
of Shares purchased pursuant to the Offer. The amount of any stock transfer
taxes will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or certificate(s)
representing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such 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", the appropriate boxes in this Letter
of Transmittal must be completed. Stockholders delivering Shares tendered hereby
by book entry transfer may request that Shares not purchased be credited to such
account maintained at a Book-Entry Transfer Facility as such stockholder may
designate in the box entitled "Special Payment Instructions". If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated herein as
the account from which such Shares were delivered.
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including timeless of receipt) and acceptance for payment of any tender of
Shares will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders of any determined by it to be not in
appropriate form or the acceptance of or payment for which may, in the opinion
of the Purchaser's counsel, be unlawful. The Purchaser also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in any tender with respect to any particular Shares or any
particular stockholder, and the Purchaser's interpretations of the terms and
conditions of the Offer (including these instructions) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders must be cured within such time as the Purchaser shall
determine. None of the Purchaser, the Depositary or the Information Person or
any other person will be under duty to give notification of any defects or
irregularities in tenders, or incur any liability for failure to give such
notification. Tenders will not be deemed to have been validly made until all
defects and irregularities have been cured or waived.
9. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9. Failure to provide the information on the form may subject
the tendering stockholder to 31% federal income tax withholding on any amount
otherwise payable to the stockholder. The box in Part 2 of the form may be
checked 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. If the box in
Part 2 is checked and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% on all payments of the purchase price
thereafter until a TIN is provided to the Depositary.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or additional copies of the Offer to Purchase and this Letter of Transmittal may
be directed to the Information Person at the address set forth below or your
broker, dealer, commercial bank or trust company.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO
THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
<PAGE> 8
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 his correct taxpayer identification number on Substitute For W-9. If such a
stockholder is an individual, the taxpayer identification number is his Social
Security number. For businesses and other entities, the taxpayer identification
number is its Employer Identification Number. If the Depositary is not provided
with the correct taxpayer identification number, the stockholder may be subject
to a $50 penalty imposed by the Internal Revenue Service, and payments made to
such stockholder with respect to Shares purchased pursuant to the Offer may be
subject to federal income tax backup withholding. To prevent federal income tax
backup withholding on payments made to a stockholder with respect to Shares
purchased pursuant to the Offer, each stockholder is required to notify the
Depositary with his correct taxpayer identification number by completing the
form certifying that the taxpayer identification number provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a taxpayer
identification number) and that (1) the stockholder has not been notified by the
Internal Revenue Service that he is subject to federal income tax backup
withholding as a result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified the stockholder that he is no longer
subject to federal income tax backup withholding.
Exempt stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these federal income tax backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, that stockholder must submit a statement, signed
under penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number of Substitute Form W-9 for
additional instructions.
If federal income tax backup withholding applies, the Depositary is
required to withhold 31% of the payments made to a stockholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to federal income tax backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund
generally may be obtained.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the Social Security
number or Employer Identification Number of the registered holder of the Shares.
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.
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 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.
<PAGE> 9
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT AND
FORM W-9 CERTIFY BY SIGNING AND DATING BELOW. TIN:
------------------------
Social Security Number
or Employer
Identification Number
-------------------------------------------------------------------------------------------------
Department of the
Treasury, Internal Name (Please Print) PART 2
Revenue Service Awaiting [ ]
Address TIN
PAYOR'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER City State Zip Code
("TIN") AND CERTIFICATION --------------------------------------------------------------------------------------------------
PART 3--CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: (1) the
number shown on this form is my correct taxpayer identification number (or a TIN has not been
issued to me but I have mailed or delivered an application to receive a TIN or intend to do so in
the near future), (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 a failure to report all interest or dividends or the IRS has notified me that I am no
longer subject to backup withholding, and (3) all other information provided on this form is true,
correct and complete.
--------------------------------------------------------------------------------------------------
SIGNATURE DATE:
-------------------------------------------- -------------------------
You must cross out item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because of underreporting interest or dividends on your tax return.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") representing shares of Common Stock, par value $0.0001
per share (the "Shares"), of Advanced Environmental Systems, Inc., a New York
corporation, are not immediately available, (ii) or time will not permit all
required documents to reach Corporate Stock Transfer, Inc., as Depositary (the
"Depositary"), prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase (as defined below)) or (iii) if 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 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:
CORPORATE STOCK TRANSFER, INC.
<TABLE>
<CAPTION>
By Hand or
By Mail: By Facsimile Transmission: Overnight Courier:
<S> <C> <C>
370 17th Street (303) 592-8821 370 17th Street
Suite 2350 Confirm by Telephone: Suite 2350
Denver, Colorado 80202 (303) 595-3300 Denver, Colorado 80202
Attn: Carylyn Bell Attn: Carylyn Bell
</TABLE>
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.
1
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to AES Acquisition Corp., a New York
corporation and an indirect wholly owned subsidiary of Philip Services Corp., an
Ontario corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 24, 1997 and the related Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer"), receipt of which is hereby acknowledged,
- ------------ Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
Certificate No(s). (if available):
-----------------------------------------------------
-----------------------------------------------------
Check ONE box if shares will be tendered by book-entry transfer:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
-----------------------------------------------------
Dated:
-----------------------------------------------------
Name(s) of Record Holder(s):
-----------------------------------------------------
-----------------------------------------------------
(Please Type or Print)
Address(es):
-----------------------------------------------------
-----------------------------------------------------
(Zip Code)
Area Code and Telephone No(s):
-----------------------------------------------------
Signature(s):
-----------------------------------------------------
-----------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity that is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby (a) represents that the
tender of Shares effected hereby complies with Rule 14e-4 under the Securities
Exchange Act of 1934, as amended, and (b) guarantees delivery to the
Depositary, at one of its addresses set forth above, of certificates
representing the Shares tendered hereby in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's
accounts at The Depository Trust Company or the Philadelphia Depository Trust
Company, in each case with delivery of a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), and any other required
documents, within three New York Stock Exchange, Inc. trading days after the
date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm:
-----------------------------------------------------
-----------------------------------------------------
(Authorized Signature)
Address:
-----------------------------------------------------
-----------------------------------------------------
(Zip Code)
Title:
-----------------------------------------------------
Name:
-----------------------------------------------------
(Please Print or Type)
Area Code and Telephone No.:
-----------------------------------------------------
Dated:
------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT WITH LETTER OF TRANSMITTAL
2
<PAGE> 1
EXHIBIT (a)(4)
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
AT
$0.0059 NET PER SHARE IN CASH
BY
AES ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
PHILIP SERVICES CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED.
December 24, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
AES Acquisition Corp., a New York corporation (the "Purchaser") and an
indirect wholly owned subsidiary of Philip Services Corp. ("Parent"), is making
an offer to purchase all outstanding shares of Common Stock, $0.0001 par value
(the "Shares"), of Advanced Environmental Systems, Inc., a New York corporation
(the "Company"), at a purchase price of $0.0059 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Purchaser's
Offer to Purchase dated December 24, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer") enclosed herewith. The Offer is being
made pursuant to an Agreement and Plan of Merger dated as of December 15, 1997
(the "Merger Agreement"), among Parent, the Purchaser and the Company. All
capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whom you hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. The Offer to Purchase dated December 24, 1997;
2. The Letter of Transmittal to be used by stockholders of the Company
accepting the Offer and tendering Shares pursuant thereto;
3. A letter that may be sent to your clients for whose account you
hold Shares in your name or in the name of your nominee, with space
provided for obtaining such client's instructions with regard to the Offer;
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
the certificates evidencing Shares 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 on or
prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase);
5. The Company's Solicitation/Recommendation Statement on Schedule
14D-9;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. A return envelope addressed to the Depositary.
1
<PAGE> 2
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
FRIDAY, JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THE OFFER TO
PURCHASE. SEE SECTION 14 OF THE OFFER TO PURCHASE.
The Company Board has unanimously approved the Offer and the Merger, has
determined that the terms of the Offer and the Merger are fair to, and in the
best interests of, the Company's stockholders, and recommends that stockholders
accept the Offer and tender their Shares.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, all Shares validly tendered on or prior to the Expiration Date and not
properly withdrawn (in accordance with the procedures set forth in Section 4),
promptly after the Expiration Date. In all cases, payment for Shares purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the Share Certificates or timely Book-Entry Confirmation of such Shares,
if such procedure is available, into the Depositary's account at the Book-Entry
Transfer Facilities pursuant to the procedures set forth in Section 3 of the
Offer to Purchase, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message and (iii) any other
documents required by the Letter of Transmittal.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker, dealer or other person (other than the Depositary, as described in the
Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. You
will be reimbursed upon request for reasonable expenses incurred by you in
forwarding the enclosed offering materials to your customers.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained from,
Corporate Stock Transfer, Inc., the Depositary, at 370 17th Street, Suite 2350,
Denver, Colorado 80202 (Tel: 303-595-3300).
Very truly yours,
AES Acquisition Corp.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEALER MANAGER, THE
DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR
ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
EXHIBIT (a)(5)
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
AT
$0.0059 NET PER SHARE IN CASH
BY
AES ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
PHILIP SERVICES CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 23, 1998, UNLESS THE OFFER IS EXTENDED.
December 24, 1997
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated December 24,
1997 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to an offer by AES Acquisition Corp., a New York corporation (the
"Purchaser") and an indirect wholly owned subsidiary of Philip Services Corp.,
an Ontario corporation ("Parent"), to purchase all outstanding shares of Common
Stock, $0.0001 par value (the "Shares"), of Advanced Environmental Systems,
Inc., a New York corporation (the "Company"), at a purchase price of $0.0059 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer. Also enclosed is the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. All capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the Offer to Purchase.
THIS MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF THE SHARES
HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER
OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE
MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE
LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT
BE USED TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The tender price is $0.0059 per Share, net to the seller in cash.
2. THE COMPANY BOARD HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER, HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS, AND
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
3. The Offer is being made for all outstanding Shares.
4. The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of December 15, 1997 (the "Merger Agreement"), among Parent, the
Purchaser and the Company. The Merger Agreement provides that the Purchaser
will be merged (the "Merger") with and into the Company after
1
<PAGE> 2
the completion of the Offer and the satisfaction of certain conditions. As
a result of the Merger, each Share issued and outstanding immediately prior
to the Effective Time (as defined in the Merger Agreement) (other than
Shares then owned by the Company, Parent, the Purchaser, any other direct
or indirect subsidiary of Parent or by the stockholders of the Company, if
any, who dissent from the Merger and comply with all of the provisions of
the New York Business Corporation Law concerning the right, if applicable,
of holders of Shares to seek appraisal of their Shares) will be converted
into the right to receive the price paid in the Offer in cash, without
interest.
5. The Offer is subject to the terms and conditions contained in the
Offer to Purchase. See Section 14 of the Offer to Purchase.
6. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, January 23, 1998, unless the Offer is extended
by the Purchaser. In all cases, payment for Shares purchased pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
the Share Certificates or timely Book-Entry Confirmation of such Shares, if
such procedure is available, into the Depositary's account at the
Book-Entry Transfer Facilities pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message and (iii) any other documents required by the Letter of
Transmittal.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
set forth below. An envelope to return your instructions to us is enclosed. If
you authorize tender of your Shares, all such Shares will be tendered unless
otherwise specified below. YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED PROMPTLY
TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal. The Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Shares in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. If the securities laws of any jurisdiction require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase dated December 24, 1997, of AES Acquisition Corp., a New York
corporation and an indirect wholly owned subsidiary of Philip Services Corp., an
Ontario corporation, and the related Letter of Transmittal, relating to shares
of Common Stock, $0.0001 par value (the "Shares"), of Advanced Environmental
Systems, Inc., a New York corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) held by you for the account of the
undersigned on the terms and conditions set forth in such Offer to Purchase and
the related Letter of Transmittal.
Number of Shares to be Tendered:* ______ Shares
<TABLE>
<CAPTION>
<S> <C>
SIGN HERE
-----------------------------------------------
-----------------------------------------------
Signature(s)
-----------------------------------------------
-----------------------------------------------
(Print Name(s))
-----------------------------------------------
-----------------------------------------------
(Print Address(es))
-----------------------------------------------
(Area Code and Telephone Number(s))
-----------------------------------------------
(Taxpayer Identification or
Social Security Number(s))
</TABLE>
- -------------------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
3
<PAGE> 1
EXHIBIT (a)(6)
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
FOR THIS TYPE OF SOCIAL SECURITY
ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
<S> <C>
1. An individual's The individual
account
2. Two or more The actual owner of the
individuals account or, if combined
(joint account) funds, the first
individual on the
account
3. Husband and wife The actual owner of the
(joint account) account or, if joint
funds, either person(1)
4. Custodian account The minor(2)
of a minor (Uniform
Gift to Minors Act)
5. Adult and minor The adult or, if the
(joint account) minor is the only
contributor, the
minor(1)
6. Account in the name The ward, minor, or
of guardian or incompetent person(3)
committee for a
designated ward,
minor, or
incompetent person
7. a. The usual The grantor-trustee(1)
revocable
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
</TABLE>
============================================================
============================================================
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF SOCIAL SECURITY
ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
<S> <C>
8. Sole proprietorship The owner(4)
account
9. A valid trust, The legal entity (do
estate, or pension not furnish the
trust 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, The organization
charitable or
educational
organization
account
12. Partnership account The partnership
held in the name of
the business
13. Association, club The organization
or other tax-exempt
organization
14. A broker or The broker or nominee
registered nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
governmental,
school district or
prison) that
receives
agricultural
program payments.
</TABLE>
============================================================
(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.
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> 2
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 Card, or Form SS-4,
Application for Employer Identification Number at an 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).
- - An exempt charitable remainder trust or a non-exempt 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 made to a nominee.
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.
- - Payments made to a nominee.
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. Beginning January 1, 1993, 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) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) 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.
(4) 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> 1
EXHIBIT (a)(7)
NEWS RELEASE
December 18, 1997 -- Advanced Environmental Systems, Inc. ("AES") announced
today that it has agreed on the definitive terms of an Agreement and Plan of
Merger whereby AES will be acquired by a newly-formed subsidiary of Philip
Services Corp. ("Philip"). The Agreement provides for the commencement by
Philip's subsidiary of a tender offer for all of the outstanding common stock
of AES with a purchase price to be paid to the shareholders of AES of
US$0.0059 per share in cash.
Under the terms of the Agreement, after completion of the tender offer the
subsidiary of Philip will merge with and into AES, as a result of which AES
will be an indirect subsidiary of Philip on consummation of the merger. The
merger is expected to close in the first quarter of 1998. Closing of the
transaction is contingent on the satisfaction of various conditions, including
Philip's acquisition of all the outstanding capital stock of Industrial
Services Technologies, Inc. ("IST"), a privately held company. IST, which owns
approximately 62% of the outstanding common and all of the preferred stock of
AES, has also agreed on the definitive terms of an agreement of merger with
Philip.
Certain stockholders of AES have entered into Stockholder Agreements pursuant
to which they agree to tender their shares of common stock of AES in the tender
offer by the Philip subsidiary to all stockholders of AES. The Stockholders
Agreements and the Agreement of Merger regarding IST will, if consummated,
result in the acquisition by Philip and its subsidiaries of more than
two-thirds of AES's common stock an all its preferred stock.
AES through its operating subsidiary, International Catalyst, Inc., is primarily
engaged in providing highly specialized catalyst handling services to petroleum
refineries and petrochemical/chemical plants, and operates from facilities in
the Los Angeles and Houston metropolitan areas. AES trades on the OTC Bulletin
Board under the symbol ADNV.
Philip Services Corp. is a fully integrated resource recovery and industrial
services company with operations throughout the United States, Canada and the
United Kingdom. Philip trades on the New York, Toronto and Montreal stock
exchanges under the symbol "PHV".
Contact: Gary Schmitt
Vice President
Advanced Environmental Systems, Inc.
303-572-5009
<PAGE> 1
Exhibit (c)(1)
__________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
PHILIP SERVICES CORP.,
AES ACQUISITION CORP.
and
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
dated as of
December 15, 1997
__________________________________________________
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
THE OFFER AND MERGER 1
Section 1.1 The Offer 2
Section 1.2 Company Actions 2
Section 1.3 SEC Documents 4
Section 1.4 The Merger 5
Section 1.5 Effective Time 6
Section 1.6 Closing 6
Section 1.7 Stockholders' Meeting 7
Section 1.8 Merger Without Meeting of Stockholders 8
ARTICLE II
CONVERSION OF SECURITIES 8
Section 2.1 Conversion of Capital Stock 8
Section 2.2 Exchange of Certificates 9
Section 2.3 Dissenters' Rights 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11
Section 3.1 Organization 11
Section 3.2 Capitalization 12
Section 3.3 Authorization; Validity of Agreement;
Company Action 14
Section 3.4 Consents and Approvals; No Violations 14
Section 3.5 SEC Reports and Financial Statements 15
Section 3.6 Absence of Certain Changes 16
Section 3.7 No Undisclosed Liabilities 18
Section 3.8 Litigation 18
Section 3.9 Information in Proxy Statement 18
Section 3.10 No Default; Compliance with
Applicable Laws 19
Section 3.11 Intellectual Property 20
Section 3.12 Taxes 20
Section 3.13 Opinion of Financial Adviser 23
Section 3.14 Title to Properties 23
Section 3.15 Employee Benefit Plan 23
Section 3.16 Insurance 24
Section 3.17 No Excess Parachute Payments 24
Section 3.18 Environmental Matters 25
Section 3.19 Labor Matters 27
Section 3.20 Finders and Investment Bankers 27
i
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER 28
Section 4.1 Organization 28
Section 4.2 Authorization; Validity of Agreement;
Necessary Action 28
Section 4.3 Consents and Approvals; No Violations 29
Section 4.4 Information in Proxy Statement 29
ARTICLE V
COVENANTS 30
Section 5.1 Interim Operations of the Company 30
Section 5.2 Access; Confidentiality 34
Section 5.3 Additional Agreements 34
Section 5.4 Consents and Approvals 34
Section 5.5 No Solicitation 35
Section 5.6 Publicity 37
Section 5.7 Notification of Certain Matters 37
Section 5.8 Indemnification 37
ARTICLE VI
CONDITIONS 38
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger 38
ARTICLE VII
TERMINATION 39
Section 7.1 Termination 39
Section 7.2 Effect of Termination 41
ARTICLE VIII
MISCELLANEOUS 42
Section 8.1 Fees and Expenses 42
Section 8.2 Amendment and Modification 42
Section 8.3 Nonsurvival of Representations and
Warranties 42
Section 8.4 Notices 42
Section 8.5 Interpretation 43
Section 8.6 Counterparts 44
Section 8.7 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership 44
Section 8.8 Severability 44
Section 8.9 Governing Law 44
Section 8.10 Assignment 45
Section 8.11 Transfer and Similar Taxes 45
ii
<PAGE> 4
ANNEX A A-1
Certain Conditions of the Offer A-1
iii
<PAGE> 5
Index of Defined Terms
----------------------
<TABLE>
<CAPTION>
Defined Term Section No.
- ------------ -----------
<S> <C>
Acquisition Proposal ....................... 5.5(a)
Balance Sheet .............................. 3.14
By-laws .................................... 1.4
Certificate of Incorporation ............... 1.4
Certificate of Merger ...................... 1.5
Certificates ............................... 2.2(b)
Closing .................................... 1.6
Closing Date ............................... 1.6
Company .................................... Recitals
Company Agreements ......................... 3.4
Company Benefit Plans ...................... 3.6(vii)
Company Option Plans ....................... 2.4
Company Options ............................ 2.4
Company SEC Documents ...................... 3.5
Current Company SEC Documents .............. 3.6
Dissenting Stockholders .................... 2.1(c)
Effective Time ............................. 1.5
Environmental Law .......................... 3.18(ii)
ERISA ...................................... 3.15
Exchange Act ............................... 1.1
Excess parachute payments .................. 8.11
Financial Advisor .......................... 1.2(a)
GAAP ....................................... 3.5
Governmental Entity ........................ 3.4
Hazardous Substance ........................ 3.18(iii)
Indemnified Party .......................... 5.8
Intellectual Property Rights ............... 3.1l
Liens ...................................... 3.2(b)
Merger ..................................... 1.4
Merger Consideration ....................... 2.1(c)
NYBCL ...................................... 1.2(a)
Offer ...................................... 1.1
Offer Documents ............................ 1.3(a)
Offer Price ................................ 1.1
Offer to Purchase .......................... 1.1
Parent ..................................... Recitals
Paying Agent ............................... 2.2(a)
Permits .................................... 3.10(b)
Plans ...................................... 3.15
Preferred Stock ............................ 3.2
Proxy Statement ............................ 1.7(a)(ii)
Purchaser .................................. Recitals
Rights ..................................... 3.2
Rights Agreement ........................... 3.2
Schedule 14D-1 ............................. 1.3(a)
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
Defined Term Section No.
- ------------ -----------
<S> <C>
Schedule 14D-9 ............................. 1.3(a)
SEC ........................................ 1.3(a)
Secretary of State ......................... 1.5
Securities Act ............................. 3.5
Shares ..................................... 1.1
Special Meeting ............................ 1.8(a)(i)
Stockholder Agreements ..................... Recitals
Subsidiary ................................. 3.1
Superior Proposal .......................... 5.5(a)
Surviving Corporation ...................... 1.4
Taxes ...................................... 3.12(b)(i)(A)
Tax Return ................................. 3.12(b)(i)(B)
Termination Fee ............................ 8.1
Transactions ............................... 1.2(a)
Voting Debt ................................ 3.2
</TABLE>
ii
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of December 15, 1997 (this
"Agreement"), by and among Philip Services Corp., a corporation existing under
the laws of Ontario ("Parent"), AES Acquisition Corp., a New York corporation
and an indirect wholly owned subsidiary of Parent (the "Purchaser"), and
Advanced Environmental Systems, Inc., a New York corporation (the "Company").
WHEREAS, the Board of Directors of each of the Purchaser and the Company
has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by
Purchaser upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent and the Purchaser to enter into this Agreement, certain
stockholders of the Company have each entered into a Stockholder Agreement,
dated as of the date hereof (collectively, the "Stockholder Agreements"), among
Parent, the Purchaser and the stockholder named therein providing, among other
things, that each such stockholder will vote in favor of the Merger (as defined
in Section 1.5 hereof) and will grant a proxy to Parent for that purpose;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. As promptly as practicable (but in no event later
than five business days after the public announcement of the execution hereof),
the Purchaser shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) a tender
offer (the "Offer") for any and all of the outstanding shares of Common Stock,
par value $0.0001 per share (the "Shares"), of the
<PAGE> 8
Company at a price of U.S.$0.0059 per Share, net to the seller in cash (such
price, or such other price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price") and, subject to the conditions set
forth in Annex A hereto, shall consummate the Offer in accordance with its
terms.
The obligations of the Purchaser to commence the Offer and to accept for
payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not properly withdrawn shall be subject only to the
conditions set forth in Annex A hereto. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") containing the terms set forth in
this Agreement and the conditions set forth in Annex A hereto.
The Purchaser shall not decrease the Offer Price or decrease the number of
Shares sought or amend any other condition of the Offer in any manner adverse
to the holders of the Shares (other than with respect to insignificant changes
or amendments and subject to the penultimate sentence of this Section 1.1)
without the written consent of the Company (such consent to be authorized by
the Board of Directors of the Company (the "Company Board") or a duly
authorized committee thereof); provided, however, that if on the initial
scheduled expiration date of the Offer, which shall be 20 business days after
the date the Offer is commenced, all conditions to the Offer shall not have
been satisfied or waived, the Purchaser may, from time to time, in its sole
discretion, extend the expiration date. In addition, the Offer Price may be
increased, and the Offer may be extended to the extent required by law in
connection with such increase in each case without the consent of the Company.
The Purchaser shall, on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, accept for payment and pay for Shares
validly tendered as soon as it is permitted to do so under applicable law.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Company Board, at a meeting duly called and held, has (i)
unanimously determined that each of this Agreement, the Offer
2
<PAGE> 9
and the Merger (as defined in Section 1.5) are fair to and in the best
interests of the stockholders of the Company, (ii) received the opinion of
Neidiger\Tucker\Bruner, Inc. ("Financial Advisor"), financial advisor to the
Company, to the effect that the Offer and the Merger are fair to the
stockholders of the Company from a financial point of view, (iii) approved this
Agreement and the Stockholder Agreements and the transactions contemplated
hereby and thereby, including the Offer and the Merger (collectively, the
"Transactions"), and such approval constitutes approval of the Offer, this
Agreement, the Stockholder Agreements and the Transactions for purposes of
Section 912 of the New York Business Corporation Law, as amended (the "NYBCL"),
such that Section 912 of the NYBCL will not apply to the Transactions and (iv)
resolved to recommend that the stockholders of the Company accept the Offer,
tender their Shares thereunder to the Purchaser and, if necessary, approve and
adopt this Agreement and the Merger; provided, that such recommendation may be
withdrawn, modified or amended if, in the opinion of the Company Board, only
after receipt of written advice from independent legal counsel, failure to
withdraw, modify or amend such recommendation would result in the Company Board
violating its fiduciary duties to the Company's stockholders under applicable
law. The Company represents that the actions set forth in this Section 1.2(a)
and all other actions it has taken in connection herewith and therewith are
sufficient to render the relevant provisions of such Section 912 of the NYBCL
inapplicable to the Offer, the Merger and the Stockholders Agreements.
(b) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to the Purchaser mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of all recordholders of the Shares as of a recent date, and shall
furnish the Purchaser with such additional information (including, but not
limited to, updated lists of holders of the Shares and their addresses, mailing
labels and lists of security positions) and assistance as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares.
3
<PAGE> 10
Section 1.3 SEC Documents.
(a) As soon as practicable on the date the Offer is commenced, Parent and
the Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1") (the Schedule 14D-1,
together with all amendments and supplements thereto and including the exhibits
thereto, including the Offer to Purchase, being collectively the "Offer
Documents"). Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including
schedules, annexes and the exhibits thereto, the "Schedule 14D-9"), which
shall, subject to the fiduciary duties of the Company Board under applicable
law and to the provisions of this Agreement, contain the recommendation
referred to in clause (iv) of Section 1.2(a) hereof.
(b) Parent and the Purchaser will take all steps necessary to ensure that
the Offer Documents, and the Company will take all steps necessary to ensure
that the Schedule 14D-9, will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that Parent and the Purchaser make no
representation with respect to information furnished by the Company for
inclusion in the Offer Documents and the Company makes no representation with
respect to information furnished by Parent or the Purchaser for inclusion in
the Schedule 14D-9. The Company agrees that the information supplied in
writing by the Company for inclusion in the Offer Documents will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent and the Purchaser agree that the information supplied in
writing by the
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Parent or the Purchaser for inclusion in the Schedule 14D-9 will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of Parent and the Purchaser will take all steps necessary to
cause the Offer Documents, and the Company will take all steps necessary to
cause the Schedule 14D-9, to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. Each of Parent and the Purchaser, on the one hand,
and the Company, on the other hand, will promptly correct any information
provided by it for use in the Offer Documents and the Schedule 14D-9 if and to
the extent that it shall have become false or misleading in any material
respect and the Purchaser will take all steps necessary to cause the Offer
Documents, and the Company will take all steps necessary to cause the Schedule
14D-9, as so corrected to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. The Company, on the one hand, and Parent and the
Purchaser on the other hand, and their respective counsel shall be given the
opportunity to review the Offer Documents and the Schedule 14D-9 before they
are filed with the SEC. In addition, each party hereto will provide the other
parties and their counsel in writing with any comments, whether written or
oral, which they may receive from time to time from the SEC or its staff with
respect to the Offer Documents or the Schedule 14D-9 promptly after the receipt
of such comments.
Section 1.4 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.5 hereof), the
Company and the Purchaser shall consummate a merger (the "Merger") pursuant to
which (i) the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease, (ii) the
Company shall be the successor or surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of New York, and (iii) the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall
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continue unaffected by the Merger, except as set forth in this Section 1.4.
Pursuant to the Merger, (x) the Certificate of Incorporation of the
Company (the "Certificate of Incorporation"), as in effect immediately prior to
the Effective Time, shall be the initial certificate of incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation, and (y) the Restated By-laws of the Company (the
"By-laws"), as in effect immediately prior to the Effective Time, shall be the
initial By-laws of the Surviving Corporation until thereafter amended as
provided by law, by the Certificate of Incorporation or by such By-laws. The
Merger shall have the effects specified in the NYBCL.
The directors and officers of the Purchaser at the Effective Time shall be
the initial directors and officers, respectively, of the Surviving Corporation
until their successors shall have been duly elected or appointed or qualified
or until their earlier death, resignation or removal in accordance with the
Certificate of Incorporation and the By-laws.
Section 1.5 Effective Time. Parent, the Purchaser and the Company will
cause a Certificate of Merger, or, if applicable, a Certificate of Ownership
and Merger (as applicable, the "Certificate of Merger"), to be executed and
filed on the date of the Closing (as defined in Section 1.6) (or on such other
date as Parent and the Company may agree) with the Secretary of State of the
State of New York (the "Secretary of State") as provided in the NYBCL. The
Merger shall become effective on the date on which the Certificate of Merger
has been duly filed with the Secretary of State or at such later time as is
agreed upon by the parties and specified in the Certificate of Merger, and such
effective time is hereinafter referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing") shall
take place at 9:00 a.m., local time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York, 10022 unless another
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date or place is agreed to in writing by the parties hereto.
Section 1.7 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance with applicable
law:
(i) duly call, give notice of, convene and hold a special meeting
of its stockholders (the "Special Meeting"), as promptly as practicable
following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer, for the purpose of considering and
taking action upon the approval of the Merger and the adoption of this
Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use
its best efforts (x) to obtain and furnish the information required to be
included by the SEC in the Proxy Statement(as hereinafter defined) and,
after consultation with Parent, to respond promptly to any comments made
by the SEC with respect to the preliminary proxy or information statement
and cause a definitive proxy or information statement, including any
amendment or supplement thereto (the "Proxy Statement") to be mailed to
its stockholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent
and its counsel and (y) to obtain the necessary approvals of the Merger
and this Agreement by its stockholders; and
(iii) subject to the fiduciary obligations of the Company Board
under applicable law as advised by independent counsel, include in the
Proxy Statement the recommendation of the Company Board that stockholders
of the Company vote in favor of the approval of the Merger and the
adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares then owned
by it, the Purchaser
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or any of its other subsidiaries and affiliates in favor of the approval of the
Merger and the adoption of this Agreement.
Section 1.8 Merger Without Meeting of Stockholders. Notwithstanding
Section 1.7 hereof, in the event that Parent, the Purchaser and any other
subsidiaries of Parent shall acquire or hold in the aggregate at least 90% of
the outstanding shares of each class of capital stock of the Company, pursuant
to the Offer or otherwise, the parties hereto shall, at the request of Parent
and subject to Article VI hereof, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stockholders of the Company, in accordance
with Section 905 of the NYBCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
Shares or any shares of capital stock of the Purchaser:
(a) Purchaser Capital Stock. Each issued and outstanding share of
capital stock of the Purchaser shall be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Purchaser-Owned Stock. All Shares
that are owned by the Company or any wholly-owned subsidiary of the Company and
any Shares owned by the Parent or any wholly-owned subsidiary of the Parent
shall be cancelled and retired and shall cease to exist and no consideration
shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share (other than
Shares to be cancelled in accordance with Section 2.1(b) and any Shares which
are held by stockholders exercising appraisal rights pursuant to Section 910
the NYBCL ("Dissenting Stockholders")) shall be converted into the right to
receive the Offer
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Price, payable to the holder thereof, without interest (the "Merger
Consideration"), upon surrender of the certificate formerly representing such
Share in the manner provided in Section 2.2. All such Shares, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as agent for the holders of the Shares in
connection with the Merger (the "Paying Agent") to receive in trust the funds
to which holders of the Shares shall become entitled pursuant to Section
2.1(c). Parent shall, from time to time, make available to the Paying Agent
funds in amounts and at times necessary for the payment of the Merger
Consideration as provided herein. All interest earned on such funds shall be
paid to Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"), whose Shares were
converted pursuant to Section 2.1 into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon receipt of the Certificates by the Paying Agent and shall be in such
form and have such other provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share
formerly represented by such Certificate and the Certificate so surrendered
shall
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forthwith be cancelled. If payment of the Merger Consideration is to be made
to a person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
The right of any stockholder to receive the Merger Consideration shall be
subject to and reduced by any applicable withholding obligation.
(c) Transfer Books; No Further Ownership Rights in the Shares. At the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable law. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article II.
(d) Termination of Fund; No Liability. At any time following six months
after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, none of
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Parent, the Surviving Corporation or the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.3 Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to be paid the "fair value" of such holder's Shares, as provided in
Section 623 of the NYBCL, the Company shall give the Parent notice thereof and
the Parent shall have the right to participate in all negotiations and
proceedings with respect to any such demands. Neither the Company nor the
Surviving Corporation shall, except with the prior written consent of the
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. If any Dissenting Stockholder shall fail
to perfect or shall have effectively withdrawn or lost the right to dissent,
the Shares held by such Dissenting Stockholder shall thereupon be treated as
though such Shares had been converted into the Merger Consideration pursuant to
Section 2.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser that all
of the statements contained in this Article III are true and correct as of the
date of this Agreement (or, if made as of a specified date, as of such date),
and will be true and correct in all material respects as of the Closing Date as
though made on the Closing Date.
Section 3.1 Organization. Each of the Company and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has all
requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority, and governmental
approvals would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole. As used in this Agreement,
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a "subsidiary" of any entity shall mean all corporations or other entities in
which such entity owns a majority of the issued and outstanding capital stock
or equity or similar interests. As used in this Agreement, any reference to
any event, change or effect being material or having a material adverse effect
on or with respect to any entity (or group of entities taken as a whole) means
such event, change or effect as is materially adverse to (i) the consolidated
financial condition, businesses, prospects or results of operations of such
entity (or, if used with respect thereto, of such group of entities taken as a
whole) or (ii) the ability of such entity (or group) to consummate the
Transactions. The Company and each of its subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a material adverse effect on the Company
and its subsidiaries, taken as a whole. Except as set forth in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, the
Company does not own (i) any equity interest in any corporation or other entity
or (ii) marketable securities where the Company's equity interest in any entity
exceeds five percent of the outstanding equity of such entity on the date
hereof.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 2,250,000,000 Shares and 750,000,000 shares of preferred
stock, par value $0.0001 per share (collectively, the Preferred Stock"). As of
November 21, 1997, (i) 531,667,515 Shares are issued and outstanding, (ii) no
Shares are issued and held in the treasury of the Company, (iii) all shares of
Preferred Stock are held of record by Industrial Services Technologies, Inc.,
and (iv) no Shares are issuable pursuant to options granted under any Company
stock option plans. All the outstanding shares of the Company's capital stock
are duly authorized, validly issued, fully paid and non-assessable. There are
no bonds, debentures, notes or other indebtedness having general voting rights
(or convertible into securities having such rights) ("Voting Debt") of the
Company or any of its subsidiaries issued and outstanding.
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Except as set forth above, (i) there are no shares of capital stock of the
Company authorized, issued or outstanding and (ii) there are no existing
options, warrants, calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of the Company or any of its subsidiaries,
obligating the Company or any of its subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interest in, the Company or any of its subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests, or obligating the Company or any of its subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment and (iii) there are no outstanding
contractual obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any Shares, or the capital stock of the
Company, or any subsidiary or affiliate of the Company or to provide funds to
make any investment (in the form of a loan, capital contribution or otherwise)
in any subsidiary or any other entity.
(b) The Company owns all of the capital stock of Advanced Energy
Corporation, a Delaware corporation, which in turn owns all of the capital
stock of International Catalyst, Inc. a Nevada corporation ("Incat"). Except
as described in the preceding sentence, the Company does not have any
subsidiaries. All of the outstanding shares of capital stock of each of the
Company's subsidiaries are beneficially owned by the Company, directly or
indirectly, and all such shares have been validly issued and are fully paid and
nonassessable and are owned as indicated above, free and clear of all liens,
charges, claims or encumbrances ("Liens"), except that the capital stock of
Incat is pledged to FINOVA Capital Corporation as security for a loan.
(c) There are no voting trusts or other agreements or understandings to
which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the subsidiaries.
(d) None of the Company or its subsidiaries is required to redeem,
repurchase or otherwise acquire
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shares of capital stock of the Company, or any of its subsidiaries.
Section 3.3 Authorization; Validity of Agreement; Company Action.
(a) The Company has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement, and the
consummation by it of the transactions contemplated hereby, have been duly
authorized by the Company Board and, except for obtaining the approval of its
stockholders as contemplated by Section 1.7 hereof, no other corporate action on
the part of the Company is necessary to authorize the execution and delivery by
the Company of this Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, subject to the approval of its stockholders as contemplated by
Section 1.7 hereof, and assuming due and valid authorization, execution and
delivery hereof by Parent and the Purchaser, is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms
except as may be limited by (a) bankruptcy, insolvency, reorganization or other
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). The affirmative vote of the holders
66 2/3% of the outstanding Shares, voting together as a single class, are the
only votes of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
(b) The Company Board has duly and validly approved the transactions
contemplated hereby for the purposes of Section 912 of the NYBCL. Accordingly,
the provisions of Section 912 of the NYBCL will not apply to the transactions
contemplated by this Agreement. No other state takeover statute or similar
statute or regulation applies or purports to apply to the Offer, the Merger or
the other transactions contemplated hereby.
Section 3.4 Consents and Approvals; No Violations. No notice, filing or
consent is required under any environmental, health or safety law or
regulation, or under other federal or state laws, other than the filings,
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permits, orders, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act and the NYBCL,
and neither the execution, delivery or performance of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby nor compliance by the Company with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or the By-laws or similar organizational documents of the Company
or of any of its subsidiaries, (ii) require any notice to, filing with, or
permit, order, authorization, consent or approval of, any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency (a "Governmental Entity"), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound (collectively, the "Company Agreements") or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults
which would not, individually or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
Section 3.5 SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Parent, true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1995 under the Securities Act of
1933, as amended (the "Securities Act") or the Exchange Act (collectively, the
"Company SEC Documents"). As of their respective dates or, if amended, as of
the date of the last such amendment, the Company SEC Documents, including,
without limitation, any financial statements or schedules included therein (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required
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to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. None of the Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC. The financial statements of the Company included in the Company SEC
Documents have been prepared from, and are in accordance with, the books and
records of the Company and its consolidated subsidiaries, comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position and the consolidated results of operations and
cash flows (and changes in financial position, if any) of the Company and its
consolidated subsidiaries as of the respective dates and for the respective
periods indicated therein. None of the subsidiaries of the Company is subject
to the informational reporting requirements of Section 13 of the Exchange Act.
Section 3.6 Absence of Certain Changes. Except as disclosed in the
Company SEC Documents filed with the SEC since September 30, 1997 (the "Current
Company SEC Documents"), since September 30, 1997:
(i) the Company and its subsidiaries have conducted their
respective businesses only in the ordinary and usual course;
(ii) neither the Company nor any of its subsidiaries has taken any
of the actions contemplated by Section 5.1 hereof other than in the
ordinary course of business and consistent with past practice;
(iii) there has not been any event, change, effect or development
which, individually or in the aggregate, has had or is, so far as
reasonably can be foreseen, likely to have, a material adverse effect on
the Company and its subsidiaries, taken as a whole;
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(iv) there has not been any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or
property) with respect to any shares of the Company's capital stock;
(v) there has not been any split, combination or reclassification
of any of the Company's capital stock or any issuance or the
authorization of any issuance of any other securities in exchange or in
substitution for shares of the Company's capital stock;
(vi) except as has been previously disclosed in writing to Parent,
there has not been (A) any granting by the Company or any of its
subsidiaries to any executive officer or other key employee of the
Company or any of its subsidiaries of any increase in compensation,
except in the ordinary course of business consistent with prior practice
or as required under employment agreements in effect as of December 31,
1996, (B) any granting by the Company or any of its subsidiaries to any
such executive officer of any increase in severance or termination pay,
except as was required under any employment, severance or termination
agreements in effect as of December 31, 1996 or (C) any entry by the
Company or any of its subsidiaries into any employment, severance or
termination agreement with any such executive officer or key employee;
(vii) there has not been any adoption or amendment in any material
respect by the Company or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of the Company or any of
its subsidiaries (collectively, "Company Benefit Plans").
(viii) there has not been any change in accounting methods,
principles or practices by the
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Company or any of its subsidiaries materially affecting its assets,
liabilities or business, except insofar as may have been required by a
change in GAAP.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in the
Current Company SEC Documents, including any exhibits to the Current Company
SEC Documents, and (b) for liabilities and obligations (x) incurred in the
ordinary course of business and consistent with past practice or (y) pursuant
to the terms of this Agreement, since January 1, 1997, neither the Company nor
any of its subsidiaries has incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that have had, or
would be reasonably likely to have, a material adverse effect on the Company
and its subsidiaries, taken as a whole, or would be required by GAAP to be
reflected on a consolidated balance sheet of the Company and its subsidiaries
(including the notes thereto).
Section 3.8 Litigation. Except as disclosed in the Current Company SEC
Documents, there is no suit, claim, action, proceeding, including, without
limitation, arbitration proceedings or alternative dispute resolution
proceedings, or investigation pending before any Governmental Entity or, to the
best knowledge of the Company, threatened against the Company or any of its
subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the Company and its subsidiaries,
taken as a whole. Except as disclosed in the Current Company SEC Documents,
neither the Company nor any of its subsidiaries is subject to any outstanding
order, judgment, writ, injunction, rule or decree of any Governmental Entity or
arbitrator that, individually or in the aggregate, could reasonably be expected
to have a material adverse effect on the Company and its subsidiaries, taken as
a whole.
Section 3.9 Information in Proxy Statement. The Proxy Statement, if
required by Section 1.7 hereof (or any amendment thereof or supplement
thereto), will, at the date mailed to Company stockholders and at the time of
the meeting of Company stockholders to be held in connection with stockholder
approval of the Merger, not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
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or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or the Purchaser for inclusion in the
Proxy Statement. The Proxy Statement will comply in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated
thereunder by the SEC.
Section 3.10 No Default; Compliance with Applicable Laws. (a) The
business of the Company and each of its subsidiaries is not being conducted in
default or violation of any term, condition or provision of (i) its respective
Certificate of Incorporation or By-laws, (ii) any Company Agreement or (iii)
any federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to the Company or any
of its subsidiaries, excluding from the foregoing clauses (ii) and (iii),
defaults or violations which would not, individually or in the aggregate, have
a material adverse effect on the Company and its subsidiaries, taken as a
whole. As of the date of this Agreement, no investigation or review by any
Governmental Entity or other entity with respect to the Company or any of its
subsidiaries is pending or, to the best knowledge of the Company, threatened,
nor has any Governmental Entity or other entity indicated an intention to
conduct the same.
(b) The Company and each of its subsidiaries possess all certificates,
franchises, licenses, permits, authorizations and approvals issued to or
granted by Governmental Entities (collectively, "Permits") necessary to conduct
their business as such business is currently conducted, except for such
Permits, the lack of possession of which would not reasonably be expected to
have a material adverse effect on the Company and its subsidiaries, taken as a
whole. (i) All such Permits are validly held by the Company or its
subsidiaries, and the Company and each of its subsidiaries have complied in all
respects with all terms and conditions thereof, except for such instances where
the failure to validly hold such Permits or the failure to have complied with
such Permits has not, and is not reasonably expected to have, a material
adverse effect on the Company and its subsidiaries,
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taken as a whole, (ii) none of such Permits will be subject to suspension,
modification, revocation or nonrenewal as a result of the execution and
delivery of this Agreement or the consummation of the Transactions, other than
such Permits, the suspension, modification or nonrenewal of which, in the
aggregate, have not had and would not reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, taken as a whole and (iii)
neither the Company nor any of its subsidiaries has received any written
warning, notice, notice of violation or probable violation, survey report,
statement of deficiencies, notice of revocation, or other written communication
from or on behalf of any Governmental Entity that remains unresolved or which
has resulted in any restriction on the permissible operations of the Company or
any of its subsidiaries, alleging (A) any violation of any such Permit or of
any law, rule or regulation or (B) that the Company or any of its subsidiaries
requires any Permit required for its business, as such business is currently
conducted, that is not currently held by it, which violation or failure to hold
a Permit would have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
Section 3.11 Intellectual Property. Except as previously disclosed to
Parent in writing, the Company and its subsidiaries own, or are licensed or
otherwise have the rights to use, all patents, trademarks, trade names,
copyrights, technology, trade secrets, know-how and processes (collectively,
"Intellectual Property Rights") material to or necessary for the conduct of
their respective businesses, as presently conducted. Except as previously
disclosed to Parent in writing, no claims are pending by any person against the
Company or any of its subsidiaries as to the use of any Intellectual Property
Rights and, to the Company's best knowledge, the use by the Company or any of
its subsidiaries of all Intellectual Property Rights does not infringe on the
rights of any person. Except as previously disclosed to Parent in writing, to
the Company's best knowledge, no third person is infringing on the Intellectual
Property Rights of the Company or any of its subsidiaries.
Section 3.12 Taxes. (a) The Company and each of its subsidiaries have
timely filed (or have had timely filed on their behalf) all Tax Returns (as
hereinafter defined) required by applicable law to be filed by any of
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them on or prior to or as of the Effective Time of the Merger. All such Tax
Returns are, or will be at the time of filing, true, complete and correct in
all material respects.
(b) The Company and each of its subsidiaries have paid (or have had paid
on their behalf) or, where payment is not yet due, have established in
accordance with GAAP (or have had established on their behalf and for their
sole benefit and recourse) an adequate accrual for the payment of all Taxes due
with respect to any period ending on or prior to the date hereof. The Company
and each of its subsidiaries have complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes
and have, within the time and manner prescribed by law, withheld and paid over
to the proper governmental authorities all amounts required to be so withheld
and paid over under applicable laws.
(c) No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries. There are no
outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any Taxes or deficiencies
against the Company or any of its subsidiaries, and no power of attorney
granted by either the Company or any of its subsidiaries with respect to any
Taxes is currently in force.
(d) There are no Liens for Taxes upon the assets of the Company or any of
its subsidiaries except Liens for Taxes not yet due.
(e) There are no United States Federal, state, local or foreign audits or
other administrative proceedings or court proceedings presently pending with
regard to any Taxes or Tax Returns of the Company or any of its subsidiaries.
(f) Neither the Company nor any of its subsidiaries is a party to any
agreement or arrangement (written or oral) with third parties providing for the
allocation or sharing of Taxes.
(g) Neither the Company nor any of its subsidiaries has made any change in
accounting methods, received
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a ruling from any taxing authority or signed an agreement with any taxing
authority likely to have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(h) All transactions that could give rise to an understatement of the
Federal income tax liability of the Company or any of its subsidiaries within
the meaning of Section 6662(d) of the Code are adequately disclosed on Tax
Returns in accordance with Section 6662(d)(2)(B) of the Code if there is or was
no substantial authority for the treatment giving rise to such understatement.
(i) The Company is a corporation within the meaning of "7701(a)(3) of the
Code.
(j) For purposes of this Agreement, the following terms shall have the
following meanings:
(A) "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation,
income, gross receipts, excise, real or personal property, sales,
withholding, social security, occupation, use, service, service
use, license, net worth, payroll, franchise, transfer and
recording taxes, fees and charges, imposed by the Internal Revenue
Service or any taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including
a United States possession)), whether computed shall include any
interest, fines, penalties or additional amounts attributable to,
or imposed upon, or with respect to, any such amounts.
(B) "Tax Returns" shall mean any report, return document,
declaration or other information or filing required to be supplied
to any taxing authority or jurisdiction (foreign or domestic) with
respect to Taxes, including, without limitation, information
returns, any documents with respect to or accompanying payments of
estimated Taxes, or with respect to or accompanying requests for
the extension of time
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in which to file any such report, return, document, declaration or
other information.
Section 3.13 Opinion of Financial Adviser. The Company Board has
received the opinion of Financial Advisor, dated the date of this Agreement,
that, as of such date, the Offer Price and the Merger Consideration are fair
from a financial point of view to the Company's stockholders.
Section 3.14 Title to Properties. The Company and its subsidiaries have
good, valid and marketable title to the properties and assets reflected on the
most recent consolidated balance sheet included in the Current Company SEC
Documents (the "Balance Sheet") (other than properties and assets disposed of
in the ordinary course of business since the date of the Balance Sheet), and
all such properties and assets are free and clear of any Liens, except as
described in the Current Company SEC Documents and the financial statements
included therein and other than Liens for current taxes not yet due and other
Liens or title imperfections that do not have, and are not reasonably likely to
have, a material adverse effect on the Company and its subsidiaries, taken as a
whole.
Section 3.15 Employee Benefit Plan. (a) The Company and each of its
subsidiaries have complied, and currently are in compliance, in all material
respects with the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") the Code and all other applicable
laws with respect to each compensation or benefit plan, agreement, policy,
practice, program or arrangement (whether or not subject to ERISA) maintained
by the Company or any of its subsidiaries for the benefit of any employee,
former employee, independent contractor or director of the Company and its
subsidiaries (including, without limitation, any employment agreements or any
pension, savings, profit-sharing, bonus, medical, insurance, disability,
severance, equity-based or deferred compensation plans) (collectively, the
"Plans"). The Company has provided or made available a current, accurate and
complete copy of each Plan to Parent and, to the extent applicable to the
Plans, (A) copies of any funding instruments, (B) summary plan descriptions (C)
Forms 5500 for the last three years and (D) IRS determination letters.
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(b) No reportable event (within the meaning of Section 4043 of ERISA) or
prohibited transaction (within the meaning of Section 4975 of the Code or
Section 406 of ERISA) has occurred with respect to any Plan that could have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
(c) There are no pending or, to the knowledge of the Company, threatened
actions, claims or lawsuits by any individuals or entities with respect to any
Plan (other than for routine benefit claims) that could have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(d) No payments or benefits (nor acceleration of vesting or
exercisability of any benefits) under any Plan are triggered (in whole or in
part) as a result of the transactions contemplated by this Agreement.
(e) No Plan provides for any stock option that is exercisable into the
stock of any of the subsidiaries of the Company.
Section 3.16 Insurance. The Company maintains, and has maintained,
without interruption, during the past three years, policies or binders of
insurance covering such risks, and events, including personal injury, property
damage and general liability, in amounts the Company reasonably believes
adequate for its business and operations.
Section 3.17 No Excess Parachute Payments. Any amount that could be
received (whether in cash or property or the vesting of property) as a result
of any of the Transactions (whether alone or in combination with a qualifying
termination of employment) by any employee, officer or director of the Company
or any of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Company
Benefit Plan currently in effect would not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
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Section 3.18 Environmental Matters. (i) Except as disclosed in the
Current Company SEC Documents or as previously disclosed in writing to Parent,
(A) the Company and each of its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws (as hereinafter
defined) and are currently in compliance with all such laws, including, without
limitation, having all permits, licenses and other approvals and authorizations
necessary for the operation of their respective businesses as presently
conducted, (B) none of the properties currently or formerly owned or operated
by the Company or any of its subsidiaries contains any Hazardous Substance (as
hereinafter defined) in amounts exceeding the levels permitted by applicable
Environmental Laws, (C) neither the Company nor any of its subsidiaries has
received any notices, demand letters or requests for information from any
Governmental Entity or third party indicating that the Company or any of its
subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of their businesses, including,
without limitation, liability relating to sites not owned or operated by the
Company or any of its subsidiaries, (D) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings, pending or threatened, against the Company or any of its
subsidiaries relating to any violation of or liability under, or alleged
violation of or liability under, any Environmental Law, (E) all reports that
are required to be filed by the Company or any of its subsidiaries concerning
the release of any Hazardous Substance or the threatened or actual violation of
any Environmental Law have been so filed, (F) no Hazardous Substance has been
disposed of, released or transported in violation of or under circumstances
that could create liability under any applicable Environmental Law from any
properties owned by the Company or any of its subsidiaries as a result of any
activity of the Company or any of its subsidiaries during the time such
properties were owned, leased or operated by the Company or any of its
subsidiaries, (G) neither the Company, any of its subsidiaries nor any of their
respective properties are subject to any material liabilities or expenditures
(fixed or contingent) relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim asserted or
arising under any Environmental Law, except for violations of the foregoing
clauses (A) through (G) that,
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singly or in the aggregate, would not reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, taken as a whole, and (H)
the Company has provided Parent with each environmental audit, test or analysis
performed within the last three years of any property currently or formerly
owned or operated by the Company or any of its subsidiaries (x) which involves
any condition of environmental impairment which would give rise to a material
adverse effect on the Company and its subsidiaries, taken as a whole and (y) of
which the Company has knowledge.
(ii) As used herein, "Environmental Law" means any United States Federal,
territorial, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any governmental
entity relating to (x) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety or (y)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances. The term "Environmental Law" includes, without
limitation, (i) the Federal Comprehensive Environmental Response Compensation
and Liability Act of 1980, the Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the Federal
Occupational Safety and Health Act of 1970, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened
as a result of, the presence of, effects of or exposure to any Hazardous
Substance.
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(iii) As used herein, "Hazardous Substance" means any substance presently
or hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by
any government authority or any Environmental Law including, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated byphenyls.
Section 3.19 Labor Matters. Neither the Company nor any of its
subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization. There is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its subsidiaries relating to its business, except for any
such proceeding which would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole. To the knowledge of the executive
officers of the Company, there are no organizational efforts with respect to
the formation of a collective bargaining unit presently being made or
threatened involving employees of the Company or any of its subsidiaries.
Section 3.20 Finders and Investment Bankers. Neither the Company nor any
of its officers or directors has employed any investment banker, business
consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for Financial Advisor (the
fees of which will be paid by the Company), or incurred any liability for any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the Transactions, except for
fees payable to Financial Advisor. The Company has provided Parent with a true
and correct copy of the fee letter between the Company and Financial Advisor.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company that all of
the statements contained in this Article IV are true and correct as of the date
of this Agreement (or, if made as of a specified date, as of such date), and
will be true and correct in all material respects as of the Closing Date as
though made on the Closing Date.
Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of Ontario and New York, respectively, and has all requisite corporate or
other power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority, and governmental approvals would not
have a material adverse effect on Parent and its subsidiaries, taken as a
whole. Parent and each of its subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not, in the aggregate,
have a material adverse effect on Parent and its subsidiaries, taken as a
whole.
Section 4.2 Authorization; Validity of Agreement; Necessary Action. Each
of Parent and the Purchaser has full corporate power and authority to execute
and deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance by Parent and the Purchaser of this Agreement, and the
consummation of the Merger and of the Transactions, have been duly authorized
by all necessary corporate action. This Agreement has been duly executed and
delivered by each of the Parent and the Purchaser and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a valid and
binding obligation of each of Parent and the Purchaser, as the case may be,
enforceable against each of them in accordance with its respective
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terms except as may be limited by (a) bankruptcy, insolvency, reorganization or
other laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, state securities or blue
sky laws and the NYBCL, neither the execution, delivery or performance of this
Agreement by Parent or the Purchaser nor the consummation by Parent or the
Purchaser of the Transactions nor compliance by Parent or the Purchaser with
any of the provisions hereof will (i) conflict with or result in any breach of
any provision of the articles of incorporation or by-laws of Parent or the
certificate of incorporation or by-laws of the Purchaser, (ii) require any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity with respect to the business carried on by Parent or its subsidiaries as
of the date hereof, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent,
or any of its subsidiaries or the Purchaser is a party or by which any of them
or any of their respective properties or assets may be bound or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Parent, any of its subsidiaries or any of their properties or assets, excluding
from the foregoing clauses (ii),(iii) and (iv) such violations, breaches or
defaults which would not, individually or in the aggregate, have a material
adverse effect on Parent, its subsidiaries and the Purchaser taken as a whole.
Section 4.4 Information in Proxy Statement. None of the information
supplied by Parent or the Purchaser specifically for inclusion or incorporation
by reference in the Proxy Statement, if required by Section 1.7 hereof, will,
at the date mailed to Company stockholders and at the time of the meeting of
Company stockholders
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to be held in connection with Company stockholder approval of the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly contemplated by this Agreement or (ii) as
agreed in writing by Parent, after the date hereof, and prior to the Effective
Time:
(a) the business of the Company and its subsidiaries shall be conducted
only in the ordinary and usual course and, to the extent consistent therewith,
each of the Company and its subsidiaries shall use its best efforts to preserve
its business organization intact and maintain its existing relations with
customers, suppliers, employees, creditors and business partners;
(b) the Company shall not, directly or indirectly, amend or propose to
amend its Certificate of Incorporation or By-laws or similar organizational
documents;
(c) the Company shall not, and it shall not permit any of its
subsidiaries to: (i)(A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the Company's
capital stock or that of its subsidiaries, other than current or accrued
dividends on the Preferred Stock, or (B) redeem, purchase or otherwise acquire
directly or indirectly any shares of the capital stock of the Company or of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities; (ii) authorize for issuance,
issue, sell, pledge, deliver or agree to commit to issue, sell, pledge or
deliver (whether through the issuance or granting of any options, warrants,
calls, subscriptions, stock appreciation rights or other rights or other
agreements) or otherwise encumber any shares of
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capital stock of any class of the Company or of its subsidiaries or any
securities convertible into or exchangeable for shares of capital stock of any
class of the Company or of its subsidiaries other than Shares issued upon the
exercise of Company Options outstanding on the date hereof in accordance with
the Company Option Plans as in effect on the date hereof; or (iii) split,
combine or reclassify the outstanding capital stock of the Company or of any of
its subsidiaries or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares in the capital stock of the
Company or of any of its subsidiaries;
(d) the Company shall not, and it shall not permit any of its
subsidiaries to, acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, limited liability
company, joint venture, association or other business organization or division
thereof or (ii) any assets, outside of the ordinary course of business, that
individually is in excess of $25,000 or in the aggregate in excess of $50,000;
(e) the Company shall not, and it shall not permit any of its
subsidiaries to, sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any assets of the Company or of its
subsidiaries other than (i) sales and dispositions of interests or rights with
respect to property having an aggregate fair market value on the date of this
Agreement of less than $50,000, in each case only if in the ordinary course of
business and consistent with past practice or (ii) encumbrances and Liens that
are incurred in the ordinary course of business and consistent with past
practice;
(f) neither the Company nor any of its subsidiaries shall: (i) grant any
increase in the compensation payable or to become payable by the Company or any
of its subsidiaries to any of its executive officers or key employees or
(ii)(A) adopt any new, or (B) amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing, bonus, incentive compensation, deferred compensation, severance,
profit sharing, stock option, stock purchase, insurance, pension, retirement or
other employee
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benefit plan agreement or arrangement, including without limitation, the
Company Option Plans; or (iii) enter into any employment or severance agreement
with or, except in accordance with the existing written policies of the
Company, grant any severance or termination pay to any officer, director or
employee of the Company or any its subsidiaries;
(g) neither the Company nor any of its subsidiaries shall: (i) modify,
amend or terminate any of its or its subsidiaries' material contracts or waive,
release or assign any material rights or claims, except in the ordinary course
of business and consistent with past practice (ii) enter into any other
agreements, commitments or contracts that are material to the Company and its
subsidiaries taken as a whole, other than in the ordinary course of business
and consistent with past practice, or otherwise make any material change that
is adverse to the Company (including by way of termination) in (A) any existing
agreement, commitment or arrangement that is material to the Company and its
subsidiaries taken as a whole or (B) the conduct of the business or operations
of the Company and its subsidiaries;
(h) neither the Company nor any of its subsidiaries shall: (i) incur or
assume any long-term debt, or except in the ordinary course of business in
amounts consistent with past practice, incur or assume any short-term
indebtedness; (ii) incur or modify any material indebtedness or other
liability; (iii) issue or sell any debt securities or warrants or other rights
to acquire any debt securities of the Company or of any of its subsidiaries;
(iv) enter into any "keep well" or other arrangement to maintain any financial
condition of another person; (v) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person, except in the ordinary course of business and
consistent with past practice; (vi) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company); or (vii) enter into any material commitment
or transaction (including, but not limited to, any material capital expenditure
or purchase or lease of assets or real estate other than the purchase of
products for inventory and supplies in the ordinary course of business);
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(i) neither the Company nor any of its subsidiaries shall change any of
the accounting methods used by it unless required by GAAP;
(j) neither the Company nor any of its subsidiaries shall, without the
prior written consent of Parent, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, in the ordinary course of business
and consistent with past practice, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company and its consolidated
subsidiaries;
(k) neither the Company nor any of its subsidiaries will take, or agree
to commit to take, any action that would or is reasonably likely to result in
any of the conditions to the Offer set forth in Annex A or any of the
conditions to the Merger set forth in Article VI not being satisfied, or would
make any representation or warranty of the Company contained herein inaccurate
in any respect at, or as of any time prior to, the Effective Time, or that
would materially impair the ability of the Company to consummate the Offer or
the Merger in accordance with the terms hereof or materially delay such
consummation;
(l) neither the Company nor any of its subsidiaries shall make any Tax
election or settle or compromise any Tax liability or refund, except to the
extent already provided in the Current Company SEC Documents;
(m) neither the Company nor any of its subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(n) neither the Company nor any of its subsidiaries will adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the
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Company or any of its subsidiaries (other than the Merger); and
(o) neither the Company nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.2 Access; Confidentiality. Upon reasonable notice, the Company
shall (and shall cause each of its subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
Parent, reasonable access, during normal business hours during the period prior
to the Effective Date, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall (and shall cause each of its
subsidiaries to) furnish promptly to the Parent (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request.
Section 5.3 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto shall use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, legal or otherwise,
to consummate and make effective the Merger and the other transactions
contemplated by this Agreement. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of the Company and Parent shall
use all reasonable efforts to take, or cause to be taken, all such necessary
actions.
Section 5.4 Consents and Approvals. Each of the Company, Parent and the
Purchaser will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with respect to this
Agreement and the Transactions (which actions shall include, without
limitation, furnishing all information required in connection with approvals of
or filings with any other Governmental Entity) and will
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<PAGE> 41
promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their
subsidiaries in connection with this Agreement and the Transactions. Each of
the Company, Parent and the Purchaser will, and will cause its subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party
required to be obtained or made by Parent, the Purchaser, the Company or any of
their subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
Section 5.5 No Solicitation. (a) Neither the Company nor any of its
subsidiaries or affiliates shall (and the Company shall use its best efforts to
cause its officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) concerning any proposal or offer to
acquire all or a substantial part of the business and properties of the Company
or any of its subsidiaries or any capital stock of the Company or any of its
subsidiaries, whether by merger, tender offer, exchange offer, sale of assets,
sale of shares of capital stock or debt securities or similar transactions
involving the Company or any subsidiary, division or operating or principal
business unit of the Company (collectively, an "Acquisition Proposal").
Notwithstanding the foregoing, the Company may furnish information concerning
its business, properties or assets to any corporation, partnership, person or
other entity or group pursuant to appropriate confidentiality agreements, and
may negotiate and participate in discussions and negotiations with such entity
or group concerning an Acquisition Proposal (x) if such entity or group has on
an unsolicited basis submitted a bona fide written proposal to the Company
Board relating to any such transaction which the Company Board determines in
good faith represents a superior transaction to the Offer and the Merger and
which is not conditioned upon obtaining additional financing and (y) if, in
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<PAGE> 42
the opinion of the Company Board, only after receipt of advice from independent
legal counsel to the Company, the failure to provide such information or access
or to engage in such discussions or negotiations would cause the Company Board
to violate its fiduciary duties to the Company's stockholders under applicable
law (an Acquisition Proposal which satisfies clauses (x) and (y) being referred
to herein as a "Superior Proposal"). The Company will immediately communicate
to Parent the terms of any proposal, discussion, negotiation or inquiry (and
will disclose any written materials received by the Company in connection with
such proposal, discussion negotiation, or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
(b) Except as set forth herein, neither the Company Board nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or the Purchaser, the approval or
recommendation by the Company Board or any such committee of the Offer, this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal or (iii) enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to
the time of acceptance for payment of Shares in the Offer, the Company Board
may (subject to the terms of this and the following sentence) withdraw or
modify its approval or recommendation of the Offer, this Agreement or the
Merger, approve or recommend a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case at any time after the second
business day following Parent's receipt of written notice advising Parent that
the Company Board has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person
making such Superior Proposal; provided that the Company Board shall have
determined, only after receipt of advice from outside legal counsel to the
Company, that the failure to take such action would cause the Company Board to
violate its fiduciary duties to the Company's stockholders under applicable
law; provided further that the Company shall not enter into an agreement with
respect to a Superior Proposal unless the Company shall have furnished Parent
with written notice not later than noon (New York time) one day in advance of
any date that it intends to enter into such agreement and
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<PAGE> 43
shall have caused its financial and legal advisors to negotiate with Parent to
make such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with the transactions contemplated herein on such
adjusted terms. In addition, if the Company proposes to enter into an
agreement with respect to any Acquisition Proposal, it shall concurrently with
entering into such agreement pay, or cause to be paid, to Parent the
Termination Fee (as defined in Section 8.1) subject to the provisions of
Section 8.1.
Section 5.6 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, so long as this Agreement is in effect, neither
the Company, Parent nor any of their respective affiliates shall issue or cause
the publication of any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without
the prior consultation of the other party, except as may be required by law or
by any listing agreement with a national securities exchange or trading market.
Section 5.7 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior
to the Effective Time and (ii) any material failure of the Company, Parent or
the Purchaser, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.8 Indemnification. For six years after the Effective Time,
Parent shall cause the Surviving Corporation (or any successor to the Surviving
Corporation) to indemnify, defend and hold harmless the present officers and
directors of the Company and its subsidiaries (each an "Indemnified Party")
against all losses, claims, damages, liabilities, fees and expenses (including
37
<PAGE> 44
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the written consent of the Parent or the Surviving
Corporation)) arising out of actions or omissions occurring at or prior to the
Effective Time to the full extent permitted under New York law, subject to the
terms of the Company's Certificate of Incorporation, By-laws and
indemnification agreements, all as in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the defense of any
action or suit; provided that, in the event any claim or claims are asserted or
made within such six year period, all rights to indemnification in respect of
any such claim or claims shall continue until disposition of any and all such
claims; provided further, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under New York law, the Certificate of Incorporation, the By-Laws or
such agreements, as the case may be, shall be made by independent counsel
mutually acceptable to Parent and the Indemnified Party and; provided further,
that nothing herein shall impair any rights or obligations of any present or
former directors or officers of the Company.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or the Purchaser, as the case may be, to the extent permitted
by applicable law:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of the stockholders of the Company, if required
by applicable law and the Certificate of Incorporation, in order to consummate
the Merger;
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<PAGE> 45
(b) Statutes; Consents. No law, statute, rule, order, decree or
regulation shall have been enacted or promulgated by any Governmental Entity of
competent jurisdiction which declares this Agreement invalid or unenforceable
in any material respect or which prohibits completion of the Offer or
consummation of the Merger, and all governmental consents, orders and approvals
required for the completion of the Offer or consummation of the Merger and the
other transactions contemplated hereby shall have been obtained and shall be in
effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of any
Governmental Entity in effect precluding, restraining, enjoining or prohibiting
completion of the Offer or consummation of the Merger; and
(d) Purchase of Shares in Offer. Parent, the Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By the mutual written consent of the Parent and the Company.
(b) By either of the Parent or the Company:
(i) if the Offer shall have expired without any Shares being
purchased therein; provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(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 Parent or the
Purchaser, as the case may be, to purchase the Shares pursuant
39
<PAGE> 46
to the Offer on or prior to the date on which the Offer shall have
expired; or
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
Transactions and such order, decree, ruling or other action shall have
become final and non-appealable.
(c) By the Company:
(i) if, prior to the purchase of the Shares pursuant to the Offer,
Parent or the Purchaser breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained herein or breaches its representations and warranties in any
material respect; or
(ii) in connection with entering into a definitive agreement in
accordance with Section 5.5(b), provided it has complied with all
provisions thereof, including the notice provisions therein, and that it
makes simultaneous payment of the Termination Fee; or
(iii) if Parent or the Purchaser shall have terminated the Offer
without Parent or the Purchaser, as the case may be, purchasing any
Shares pursuant thereto; provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(iii) if the Company is in
material breach of this Agreement; or
(iv) if Parent, the Purchaser or any of their affiliates shall have
failed to commence the Offer on or prior to the fifth business day
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement pursuant to
this Section 7.1(c)(iv) if the Company is in material breach of this
Agreement.
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<PAGE> 47
(d) By the Parent or the Purchaser:
(i) if prior to the purchase of the Shares pursuant to the Offer,
the Company Board (A) shall have withdrawn, or modified or changed in a
manner adverse to Parent or the Purchaser, its approval or recommendation
of the Offer, this Agreement or the Merger, or (B) shall have approved or
recommended an Acquisition Proposal, or (C) shall have executed an
agreement in principle (or similar agreement) or definitive agreement
providing for a tender offer or exchange offer for any shares of capital
stock of the Company, or a merger, consolidation or other business
combination with a person or entity other than Parent, the Purchaser or
their affiliates (or the Company Board resolves to do any of the
foregoing); or
(ii) if Parent or the Purchaser shall have terminated the Offer
without Parent or the Purchaser purchasing any Shares thereunder, provided
that Parent or the Purchaser may not terminate this Agreement pursuant to
this Section 7.1(d)(ii) if Parent or the Purchaser has failed to purchase
the Shares in the Offer in violation of the material terms thereof; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, the Purchaser, or any of
their affiliates shall have failed to commence the Offer on or prior to the
fifth business day following the date of the initial public announcement of
the Offer.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.1, written notice thereof by the
terminating party shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void, and there shall be no
liability on the part of Parent, the Company, their respective stockholders and
affiliates, or the respective officers and directors thereof; provided,
however, that nothing
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<PAGE> 48
herein shall relieve any party from liability for fraud or for any material
breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the Transactions shall
be paid by the party incurring such expenses.
Section 8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, at any time
prior to the Closing Date with respect to any of the terms contained herein;
provided, however, that after the approval of this Agreement by the
stockholders of the Company, no such amendment, modification or supplement
shall reduce the amount, or change the form, of the Merger Consideration.
Section 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 8.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such
as Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Philip Services Corp.
100 King Street West
P.O. Box 2440, LCD #1
Hamilton, Ontario
L8N 4J6
42
<PAGE> 49
Attention: Joy Grahek
Telephone: (905) 540-6740
Facsimile: (905) 521-9160
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Suite 1820, North Tower
Box 189, Royal Bank Plaza
Toronto, Ontario
M5J 2J4
Attention: Christopher W. Morgan
Telephone No.: (416) 777-4700
Telecopy No.: (416) 777-4747
(b) if to the Company, to:
Advanced Environmental Systems, Inc.
370 17th Street
Denver, Colorado 80202
Attention: Gary Schmitt,
Vice-President
Telephone: (303) 572-5009
Facsimile: (303) 572-5001
with a copy to:
Waldbaum, Corn, Koff,
Berger & Cohen P.C.
303 East Seventeenth Avenue
Suite 940
Denver, Colorado 80203
Attention: Douglas B. Koff
Telephone No.: (303) 861-1166
Telecopy No.: (303) 861-0601
Section 8.5 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation". As used in this Agreement, the term "affiliate(s)"
shall
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<PAGE> 50
have the meaning set forth in Rule l2b-2 promulgated under the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitute
the entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.8 hereof, is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
Section 8.8 Severability. Any term or provision of this Agreement that
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
making such determination shall have the power to reduce the scope, duration,
area or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or provision.
Section 8.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the principles of conflicts of law thereof.
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<PAGE> 51
Section 8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 8.11 Transfer and Similar Taxes. Notwithstanding any other
provision of this Agreement to the contrary, each of the Company's stockholders
shall be responsible for the payment of any sales, use, privilege, transfer,
documentary, gains, stamp, duties, recording and similar Taxes and fees
(including any penalties, interest and additions to such fees), incurred in
connection with such stockholder's sale of Shares to the Purchaser pursuant to
this Agreement and for the accurate filing of all necessary Tax Returns and
other documentation with respect to any transfer Tax.
45
<PAGE> 52
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
PHILIP SERVICES CORP.
By: /s/ COLIN SOULE
----------------------------------------
Name: Colin Soule
Title: Executive Vice President,
General Counsel and
Corporate Secretary
AES ACQUISITION CORP.
By: /s/ COLIN SOULE
---------------------------------------
Name: Colin Soule
Title: Secretary
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
By: /s/ GARY L. SCHMITT
----------------------------------------
Name: Gary L. Schmitt
Title: Vice President
46
<PAGE> 53
ANNEX A
-------
Certain Conditions of the Offer. Notwithstanding any other provisions of
the Offer, and in addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer at any time in its sole discretion (subject to
the provisions of this Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate or amend the Offer as to any Shares
not then paid for, if (i) the Company, the Parent and the Purchaser, as
required, have not obtained all necessary material consents, approvals, orders,
authorizations, registrations, declarations, permits or filings required to be
obtained by it in connection with this Agreement and the transactions
contemplated hereby or (ii) at any time on or after the date of the Merger
Agreement and before the time of payment for any such Shares, any of the
following events shall occur or shall be determined by the Purchaser to have
occurred:
(a) there shall be threatened or pending any suit, action or proceeding by
any Governmental Entity against the Purchaser, Parent, the Company or any
subsidiary of the Company (i) seeking to prohibit or impose any material
limitations on Parent's or the Purchaser's ownership or operation (or that of
any of their respective subsidiaries or affiliates) of all or a material
portion of their or the Company's businesses or assets, or to compel Parent or
the Purchaser or their respective subsidiaries and affiliates to dispose of or
hold separate any material portion of the business or assets of the Company or
Parent and their respective subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the Purchaser of any Shares under the
Offer, the Merger or pursuant to the Stockholder Agreements, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger or
the performance of any of the other Transactions (including the voting
provisions thereunder), or seeking to obtain from the Company, Parent or the
Purchaser any damages that are material in relation to the Company and its
subsidiaries taken as a whole, (iii) seeking
A-1
<PAGE> 54
to impose material limitations on the ability of the Purchaser, or render the
Purchaser unable, to accept for payment, pay for or purchase some or all of the
Shares pursuant to the Offer and the Merger, (iv) seeking to impose material
limitations on the ability of the Purchaser or Parent effectively to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote the Shares purchased by it on all matters properly presented to
the Company's stockholders, or (v) which otherwise is reasonably likely to have
a material adverse affect on the Company and its subsidiaries, taken as a
whole;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through (iv)
of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange, The
Toronto Stock Exchange or in the Nasdaq Stock Market, for a period in excess of
24 hours (excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market conditions),
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or Canada (whether or not mandatory),
(iii) a commencement of a war directly or indirectly involving the United
States or Canada, (iv) any limitation (whether or not mandatory) by any United
States or Canadian governmental authority on the extension of credit generally
by banks or other financial institutions, (v) a change in general financial,
bank or capital market conditions which materially adversely affects the
ability of financial institutions in the United States or Canada to extend
credit or syndicate loans or (vi) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(d) (i) the representations and warranties of the Company set forth in
this Agreement shall not be true and correct in any material respect as of the
date of this Agreement and as of consummation of the Offer as though made on or
A-2
<PAGE> 55
as of such date, (ii) the Company shall have failed to comply with its
covenants and agreements under this Agreement in all material respects or (iii)
there shall have occurred any events or changes which have had or will have a
material adverse effect on the Company and its subsidiaries taken as a whole;
(e) (i) the Company Board shall have withdrawn, or modified or changed
in a manner adverse to Parent or the Purchaser (including by amendment of the
Schedule 14D-9) its approval or recommendation of the Offer, this Agreement, or
the Merger, or approved or recommended any Acquisition Proposal, (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 5.5(b) of this Agreement or (iii) the
Company Board, upon request of the Purchaser, shall fail to reaffirm its
recommendation of the Offer, this Agreement or the Merger;
(f) Parent shall not have acquired all of the outstanding capital stock,
on a fully diluted basis, of Industrial Services Technologies, Inc.; or
(g) this Agreement shall have terminated in accordance with its terms.
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be waived by Parent or the Purchaser, in whole or in part at
any time and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser 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.
A-3
<PAGE> 1
EXHIBIT (c)(2)
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of December 15, 1997, among Philip Services Corp., a
corporation existing under the laws of Ontario ("Parent"), AES Acquisition
Corp., a New York corporation and a wholly owned subsidiary of Parent (the
"Purchaser"), and _________________________________ (the "Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Purchaser and Advanced Environmental Systems, Inc., a New York
corporation (the "Company"), have entered into an Agreement and Plan of Merger
(as such agreement may hereafter be amended from time to time, the "Merger
Agreement"), pursuant to which Purchaser will be merged with and into the
Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company desire that
as soon as practicable (and not later than five business days) after the
execution and delivery of the Merger Agreement, the Purchaser shall commence a
cash tender offer (the "Offer") to purchase at a price of $0.0059 per share all
outstanding shares of Company Common Stock (as defined in Section 1 hereof)
including all of the Shares (as defined in Section 2 hereof) beneficially owned
by the Stockholders; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the Stockholder
has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding,
<PAGE> 2
whether or not in writing. Without duplicative counting of the same securities
by the same holder, securities Beneficially Owned by a Person shall include
securities Beneficially Owned by all other Persons with whom such Person would
constitute a "group" as within the meaning of Section 13(d)(3) of the Exchange
Act.
(b) "Company Common Stock" shall mean at any time the Common Stock, $.0001
par value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(d) Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, not later than the fifth business
day after commencement of the Offer pursuant to Section 1.1 of the Merger
Agreement and Rule 14d-2 under the Exchange Act, the number of shares of
Company Common Stock set forth opposite such Stockholder's name on Schedule I
hereto (the "Existing Shares", and together with any shares acquired by such
Stockholder in any capacity after the date hereof and prior to the termination
of this Agreement whether upon the exercise of Company Options or by means of
purchase, dividend, distribution or otherwise, the "Shares"), all of which are
Beneficially Owned by such Stockholder. The Stockholder hereby acknowledges
and agrees that Parent's and the Purchaser's obligation to accept for payment
and pay for the Shares in the Offer, including the Shares Beneficially Owned by
such Stockholder, is subject to the terms and conditions of the Offer.
(b) The transfer by the Stockholder of the Shares to Purchaser in the
Offer shall pass to and unconditionally vest in the Purchaser good and valid
title to the Shares, free and clear of all Liens.
(c) The Stockholder hereby permits Parent and the Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's stockholders
is
2
<PAGE> 3
required under applicable law, the Proxy Statement (including all documents and
schedules filed with the SEC) his identity and ownership of the Company Common
Stock and the nature of his commitments, arrangements and understandings under
this Agreement.
3. [left blank]
4. Additional Agreements.
(a) Voting Agreement. The Stockholder shall, during the period commencing
on the date hereof and continuing until the first to occur of the Effective
Time or the termination of the Merger Agreement in accordance with its terms,
at any meeting of the holders of Company Common Stock, however called, or in
connection with any written consent of the holders of Company Common Stock,
vote (or cause to be voted) the Shares (if any) then held of record or
Beneficially Owned by such Stockholder, (i) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the approval
of the terms thereof and each of the other actions contemplated by the Merger
Agreement and this Agreement and any actions required in furtherance thereof
and hereof; and (ii) against any Acquisition Proposal and against any action or
agreement that would impede, frustrate, prevent or nullify this Agreement, or
result in a breach in any respect of any covenant, representation or warranty
or any other obligation or agreement of the Company under the Merger Agreement
or which would result in any of the conditions set forth in Annex A to the
Merger Agreement or set forth in Article VI of the Merger Agreement not being
fulfilled.
(b) No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Company Options or any interest therein, (ii)
enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of such Shares, Company Options or any
interest therein, (iii) grant any proxy, power-of-attorney or other
authorization in or with respect to such Shares or Company Options, (iv)
deposit such Shares or Company Options into a voting trust or enter into a
voting agreement or arrangement with respect to such Shares or Company Options,
or (v) take any other action that would in any way restrict, limit or interfere
with the performance of its
3
<PAGE> 4
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement. Notwithstanding anything contained in this Section to the contrary,
the Stockholder shall have the right to transfer ownership of Shares to members
of his or her immediate family or to a trust created by the Stockholder,
provided that any and all transferees and trustees of any such trusts first
agree in writing to hold such Shares so transferred subject to this Agreement.
(c) [left blank]
(d) No Solicitation. The Stockholder hereby agrees, in its or his
capacity as a stockholder of the Company, that neither such Stockholder nor any
of its Subsidiaries or affiliates shall (and such Stockholder shall use its
best efforts to cause its officers, directors, employees, representatives and
agents, including, but not limited to, investment bankers, attorneys and
accountants, not to), directly or indirectly, encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than
Parent, any of its affiliates or representatives) concerning any Acquisition
Proposal. The Stockholder will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. The Stockholder will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry such
Stockholder, in its or his capacity as a stockholder of the Company, receives
(and will disclose any written materials received by such Stockholder, in its
or his capacity as a stockholder of the Company, in connection with such
proposal, discussion, negotiation or inquiry) and the identity of the party
making such proposal or inquiry which it may receive in respect of any such
transaction.
(e) Company Options. If the Stockholder holds Company Options to acquire
shares of Company Common Stock, it shall, if requested by the Company, consent
to the cancellation or substitution of its Company Options in accordance with
the terms of the Merger Agreement and shall execute all appropriate
documentation in connection with such cancellation or substitution.
(f) Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to
4
<PAGE> 5
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult with the other and
provide any necessary information and material with respect to all filings made
by such party with any Governmental Entity in connection with this Agreement
and the Merger Agreement and the transactions contemplated hereby and thereby.
(g) Waiver of Appraisal Rights. Each Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
(h) Acquisition of Remaining Shares. Parent agrees that, in the event
that within three years following Parent's exercise of the Stock Option,
Parent, the Purchaser or any of their Subsidiaries acquires any additional
shares of Company Common Stock from, or pursuant to an offer made to all of the
Company's stockholders, whether by merger, consolidation, tender offer or other
similar transaction, the price paid per share of Company Common Stock shall be
no less than the Purchase Price.
5. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Stockholder is the record and Beneficial
Owner of the Existing Shares, as set forth on Schedule I opposite such
Stockholder's name. On the date hereof, the Existing Shares constitute all of
the Shares owned of record or Beneficially Owned by such Stockholder. Such
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 2, 3 and 4 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights
and sole power to agree to all of the matters set forth in this Agreement, in
each case with respect to all of the Existing Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Power; Binding Agreement. Such Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by such Stockholder will not violate any
5
<PAGE> 6
other agreement to which such Stockholder is a party including, without
limitation, any voting agreement, proxy arrangement, pledge agreement,
shareholders agreement or voting trust. This Agreement has been duly and
validly executed and delivered by such Stockholder and constitutes a valid and
binding agreement of such Stockholder, enforceable against such Stockholder in
accordance with its terms. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which such Stockholder is a
trustee whose consent is required for the execution and delivery of this
Agreement or the consummation by such Stockholder of the transactions
contemplated hereby.
(c) No Conflicts. Except for filings under the Exchange Act (if
applicable), (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity for the execution of this Agreement by
such Stockholder and the consummation by such Stockholder of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by such Stockholder, the consummation by such Stockholder of the
transactions contemplated hereby or compliance by such Stockholder with any of
the provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which such Stockholder is a
party or by which such Stockholder or any of its properties or assets may be
bound, or (C) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder or any of its
properties or assets.
(d) No Liens. Except as permitted by this Agreement, the Existing Shares
and the certificates representing such Shares are now, and at all times during
the term hereof will be, held by such Stockholder, or by a nominee or custodian
for the benefit of such Stockholder, free and clear of all Liens, proxies,
voting trusts or agreements, understandings or arrangements or any other rights
whatsoever, except for any such Encumbrances or proxies arising hereunder.
6
<PAGE> 7
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) Reliance by Parent. The Stockholder understands and acknowledges that
Parent is entering into, and causing Purchaser to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
6. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholder as
follows:
(a) Power; Binding Agreement. Parent and the Purchaser each has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of this
Agreement by each of Parent and the Purchaser will not violate any other
agreement to which either of them is a party. This Agreement has been duly and
validly executed and delivered by each of Parent and the Purchaser and
constitutes a valid and binding agreement of each of Parent and the Purchaser,
enforceable against each of Parent and the Purchaser in accordance with its
terms.
(b) No Conflicts. Except for filings under the Exchange Act (if
applicable), (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and the Purchaser and the consummation by each of
Parent and the Purchaser of the transactions contemplated hereby and (ii) none
of the execution and delivery of this Agreement by each of Parent and the
Purchaser, the consummation by each of Parent and the Purchaser of the
transactions contemplated hereby or compliance by each of Parent and the
Purchaser with any of the provisions hereof shall (A) conflict with or result
in any breach of any organizational documents applicable to either of Parent or
the Purchaser, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
7
<PAGE> 8
arrangement, understanding, agreement or other instrument or obligation of any
kind to which either of Parent or the Purchaser is a party or by which either
of Parent or the Purchaser or any of their properties or assets may be bound,
or (C) violate any order, writ, injunction, decree, judgment, order, statute,
rule or regulation applicable to either of Parent or the Purchaser or any of
their properties or assets.
7. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
8. Stop Transfer. Each Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
9. Termination. Except as provided in Section 3 hereof, the covenants,
agreements and proxy shall terminate upon the termination of the Merger
Agreement in accordance with its terms.
10. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation
of law or otherwise, including, without limitation, a Stockholder's heirs,
guardians, administrators or
8
<PAGE> 9
successors. Notwithstanding any transfer of Shares, the transferor shall
remain liable for the performance of all obligations of the transferor under
this Agreement.
(c) Assignment. This Agreement shall not be assigned by operation of law
or otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with
a confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the
Stockholders: c/o Advanced Environmental Systems, Inc.
370 17th Street
Denver, Colorado 80202
Attention: Gary Schmitt, Vice President
Telephone: (303) 572-5009
Facsimile: (303) 572-5001
Copy to: Waldbaum, Corn, Koff, Berger & Cohen P.C.
303 East Seventeenth Avenue
Suite 940
Denver, Colorado 80203
Attention: Douglas B. Koff
Telephone No.: (303) 861-0601
Facsimile: (303) 861-1166
9
<PAGE> 10
If to Parent or
the Purchaser: Philip Services Corp.
100 King Street West
P.O. Box 2440, LCD #1
Hamilton, Ontario
L8N 4J6
Attention: Joy Grahek
Telephone: (905) 540-6740
Facsimile: (905) 540-9160
Copy to: Skadden, Arps, Slate,
Meagher & Flom LLP
Suite 1820, North Tower
Box 189, Royal Bank Plaza
Toronto, Ontario
M5J 2J4
Attention: Christopher W. Morgan
Telephone No.: (416) 777-4700
Telecopy No.: (416) 777-4747
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore 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 injunctive and other
equitable relief in addition to any
10
<PAGE> 11
other remedy to which it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or
to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
(l) Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Courts of the State of New York and the United States
District Court for the Southern District of New York in any action, suit or
proceeding arising in connection with this Agreement, and agrees that any such
action, suit or proceeding shall be brought only in such court (and waives any
objection based on forum non conveniens or any other objection to venue
therein). Each party hereto hereby waives any right to a trial by jury in
connection with any such action, suit or proceeding.
(m) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be
11
<PAGE> 12
an original, but all of which, taken together, shall constitute one and the
same Agreement.
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have caused
this Agreement to be duly executed as of the day and year first above written.
12
<PAGE> 13
PHILIP SERVICES CORP.
By:________________________________
Name:
Title:
AES ACQUISITION CORP.
By:________________________________
Name:
Title:
__________________________________
(Name of Stockholder)
By:________________________________
Name:
Title:
13
<PAGE> 14
Schedule I
<TABLE>
<CAPTION>
Number of Shares
and Company Options
Name of Stockholder Beneficially Owned
- ------------------- -----------------------
<S> <C> <C>
Shares Options
------ -------
</TABLE>
14
<PAGE> 1
EXHIBIT (c)(3)
SHORT FORM MERGER OPTION AGREEMENT
AGREEMENT, dated as of December 15, 1997 among Advanced Environmental
Systems, Inc., a New York corporation (the "Company"), AES Acquisition Corp., a
New York corporation ("Sub"), and Philip Services Corp., an Ontario corporation
("Parent").
WHEREAS, concurrently with the execution of this Agreement, the Company,
Sub and Parent are entering into an Agreement and Plan of Merger (the "Merger
Agreement") providing for the making of a tender offer (the "Offer") to
purchase all of the issued and outstanding shares of the Company's Common
Stock, par value $.0001 per share (the "Shares") and, following the completion
of the Offer, the merger (the "Merger") of Sub and the Company in which each
Share not purchased pursuant to the Offer (other than shares as to which
appraisal rights are asserted) will be converted into the per share
consideration paid pursuant to the Offer, in accordance with the terms of the
Merger Agreement; and
WHEREAS, the Company desires to induce Parent and Sub to enter into the
Merger Agreement and to facilitate the prompt completion of the Merger
following the purchase of Shares pursuant to the Offer,
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to Sub an
option (the "Option") to purchase up to 1,300,000,000 newly issued Shares (the
"Optioned Shares") for a consideration per share equal to $0.0059 per Optioned
Share in cash.
2. Exercise of the Option. The Option may be exercised by Sub at any time
within six business days after the acceptance for payment by Sub of Shares
pursuant to the Offer in accordance with the terms of the Merger Agreement;
provided that Sub may only exercise the Option in respect of at least that
number of Optioned Shares which, when added to the number of Shares purchased
pursuant to the Offer, represents at least 90% of the outstanding Shares, after
giving effect to the issuance of the Optioned Shares. In the event Sub wishes
to exercise the Option, Sub shall give written notice (the "Notice") to the
Company specifying the total number of Optioned Shares it will purchase
pursuant to the exercise of the Option and a place and a time not less than one
day from the date of the Notice for the closing of such purchase.
3. Payment and Delivery of Certificates. At any closing hereunder: (i) Sub
will make payment to the Company of the aggregate price for the Shares so
purchased by check or wire transfer in the amount of the aggregate cash
consideration to be paid for all such Shares; and (ii) the Company will deliver
to Sub a certificate or certificates representing the number of Shares so
purchased. Sub hereby represents to the Company that it will not offer to sell,
sell or otherwise dispose of, any Shares acquired by it pursuant to this
Agreement in violation of the Securities Act of 1933, as amended (the "1933
Act").
<PAGE> 2
4. Covenant. Each of Parent and Sub agrees to consummate the Merger as
promptly as practicable following the closing of the purchase of Optioned
Shares in accordance with Section 905 of the New York Business Corporation Law.
5. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Sub as follows:
5.1. The Company has all requisite corporate power and authority to enter
into and perform all of its obligations under this Agreement. The execution,
delivery and performance of this Agreement and all of the transactions,
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement has been duly executed and
delivered by the Company.
5.2. The Company has taken all necessary corporate action to authorize and
reserve for issuance up to 1,300,000,000 Shares upon exercise of the Option.
5.3. The Shares to be issued upon due exercise, in whole or in part, of
the Option, when paid for as provided herein, will be duly authorized, validly
issued, fully paid and non-assessable.
5.4. The execution and delivery of this Agreement do not, and the
performance of this Agreement will not, (i) conflict with any provision of the
Company's Certificate of Incorporation or By-Laws, or (ii) violate any law,
rule or regulation, or any judgment, decree or order of any court or
governmental agency or instrumentality, to which the Company or any of its
subsidiaries is subject, or (iii) conflict with, or result in a breach or
violation of, or accelerate the performance required by, or result in early
termination under, or result in any loss of benefits under, the terms of any
agreement, indenture, mortgage or other instrument to which the Company or any
of its subsidiaries is a party or to which any of its or their property is
subject, or constitute a default thereunder or any event which, with the lapse
of time or action by a third party, could result in a default thereunder or the
creation of any lien, charge or encumbrance upon any of the assets or
properties of the Company or any of its subsidiaries, except if the effect of
any of the foregoing contained in subsection (ii) or (iii) above, singly or in
the aggregate, would not be material to the business, financial condition,
results of operations or prospects of the Company and its subsidiaries,
considered as a whole.
6. Representations and Warranties of Parent and Sub. Each of Parent and
Sub hereby represents and warrants to the Company that (i) it has all requisite
power and authority to enter into
and perform all of its obligations under this Agreement, (ii) all of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of Parent and Sub and (iii) this Agreement has been duly
executed and delivered by Parent and Sub.
2
<PAGE> 3
7. Adjustment Upon Changes in Capitalization. In the event of any change
in the Shares by reason of stock dividends, split-ups, recapitalizations,
combinations, exchanges of shares or the like, the number of Optioned Shares
and/or the purchase price per Optioned Share shall be adjusted appropriately.
8. Termination. This Agreement will terminate upon termination of the
Merger Agreement.
9. Assignment. Without the prior written consent of the Company, this
Agreement shall not be assigned by Sub except to Parent or any direct or
indirect wholly-owned subsidiary of Parent.
10. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given (and shall be deemed to
have been duly received if so given) if personally delivered or sent by
registered or certified mail, postage prepaid, or telecopy addressed to the
respective parties as follows:
If to the Company:
Advanced Environmental Systems, Inc.
370 Seventeenth Street
Denver, Colorado 80202
Attention: Gary Schmitt
If to Parent or Sub:
Philip Services Corp.
100 King Street West
P.O. Box 2440, LCD #1
Hamilton, Ontario
L8N 4J6
Attention: Joy Grahek
or to such other address as any party may have furnished to the other parties
in writing in accordance herewith.
11. Specific Performance. The Company agrees that damages would be an
inadequate remedy for a breach of the provisions of this Agreement and that
this Agreement may be enforced by injunctive or other equitable relief.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.
3
<PAGE> 4
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
officers of each of the parties hereto all as of the date first above written.
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
By: /s/ GARY L. SCHMITT
-------------------------------
Gary L. Schmitt
Vice President
PHILIP SERVICES CORP.
By: /s/ COLIN SOULE
-------------------------------
Colin Soule
Executive Vice President, General
Counsel and Secretary
AES ACQUISITION CORP.
By: /s/ COLIN SOULE
-------------------------------
Colin Soule
Secretary
4
