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Item
1.01
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Entry
into a Material Definitive Agreement
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Merger
Agreement
On
June 23, 2019, NRC Group Holdings Corp., (“NRCG”) entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with US Ecology, Inc., a Delaware corporation (“US Ecology”), US Ecology Parent, Inc., a Delaware
corporation and wholly-owned subsidiary of US Ecology (“Holdco”), Rooster Merger Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of Holdco (“Rooster Merger Sub”), and ECOL Merger Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of Holdco (“ECOL Merger Sub”).
The
Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, ECOL Merger Sub will merge with and
into US Ecology, with US Ecology continuing as the surviving company and as a wholly-owned subsidiary of Holdco (the “Parent
Merger”). Substantially concurrently therewith, Rooster Merger Sub will merge with and into NRCG, with NRCG continuing as the
surviving company and as a wholly-owned subsidiary of Holdco (the “Rooster Merger,” and, together with the Parent
Merger, the “Mergers”). The parties to the Merger Agreement intend that (1) each of the Mergers will qualify as a
“reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986 (the “Code”),
(2) the Mergers together will be treated as an “exchange” described in Section 351 of the Code, and (3) the Merger
Agreement will constitute a “plan of reorganization” for purposes of Sections 354 and 361 of the Code.
In
the Parent Merger, each share of common stock, par value $0.01 per share, of US Ecology (“ECOL Common Stock”) issued
and outstanding immediately prior to the applicable Effective Time (other than cancelled shares) will be converted into the right
to receive one share of common stock, par value $0.01 per share, of Holdco (“Holdco Common Stock”). Outstanding equity
awards of US Ecology will be rolled into equity awards at Holdco on a one-for-one basis. Each share of ECOL Common Stock that
is held by US Ecology as treasury stock or that is owned by US Ecology, ECOL Merger Sub, or any other subsidiary of US Ecology,
immediately prior to the effective time of the Mergers (the “Effective Time”) will cease to be outstanding and will
be cancelled and retired and will cease to exist, and no consideration will be delivered in exchange therefor.
In
the Rooster Merger, each share of common stock, par value $0.0001 per share, of NRCG (“NRCG Common Stock”) issued
and outstanding immediately prior to the applicable Effective Time (other than cancelled shares) will be converted into the right
to receive, and become exchangeable for: (1) 0.196 shares (the “NRCG Exchange Ratio”) of Holdco Common Stock; (2)
cash in lieu of fractional shares of Holdco Common Stock payable pursuant to the Merger Agreement; and (3) any dividends or other
distributions to which the holder thereof becomes entitled to upon the surrender of such shares of NRCG Common Stock in accordance
with the Merger Agreement. Outstanding shares of NRCG’s equity awards will be converted into equity awards of Holdco pursuant
to the mechanics set forth in the Merger Agreement. In the Rooster Merger, each share of NRCG Common Stock that is held by NRCG
as treasury stock or that is owned by NRCG, Rooster Merger Sub or any other subsidiary of US Ecology or NRCG immediately prior
to the applicable Effective Time will cease to be outstanding and will be cancelled and retired and will cease to exist, and no
consideration will be delivered in exchange therefor.
In
addition, in the Rooster Merger, each share of 7.00% Series A Convertible Cumulative Preferred Stock, par value $0.0001 per share,
of NRCG (the “Series A Preferred Stock”) will be converted into, and become exchangeable for that number of shares
of Holdco Common Stock equal to the sum of: (1) the product of (a) that number of shares of NRCG Common Stock that such share
of Series A Preferred Stock could be converted into at the applicable Effective Time (including Fundamental Change Additional
Shares and Accumulated Dividends (each, as defined in the Certificate of Designation establishing the rights of the Series A Preferred
Stock)) multiplied by (b) the NRCG Exchange Ratio; (2) any cash in lieu of fractional shares of Holdco Common Stock payable pursuant
to the Merger Agreement; and (3) any dividends or other distributions to which the holder thereof becomes entitled to upon the
surrender of such shares of NRCG Common Stock in accordance with the Merger Agreement.
At
the closing of the Rooster Merger, in respect of each outstanding warrant to purchase NRCG Common Stock (each, a “NRCG Warrant”)
issued pursuant to that certain Warrant Agreement, dated as of June 22, 2017, between Continental Stock Transfer & Trust Company
and NRCG, Holdco will issue a replacement warrant (each, a “Replacement Warrant”) to each holder providing that such
Replacement Warrant will be exercisable for a number of shares of Holdco Common Stock equal to the product of (1) the number of
shares of NRCG Common Stock that would have been issuable upon the exercise of the NRCG Warrant immediately prior to the effective
time of the Rooster Merger and (2) the NRCG Exchange Ratio, at an exercise price equal to the quotient obtained by dividing (a)
the pre-Merger exercise price ($11.50 per share) by (b) the NRCG Exchange Ratio.
The
Merger Agreement contains representations, warranties and covenants, including, among others, covenants relating to the operation
of each of US Ecology’s and NRCG’s businesses during the period prior to the closing of the Mergers. US Ecology and
NRCG have agreed to convene and hold meetings of their respective stockholders for the purpose of obtaining the required approvals
of their respective stockholders, and have agreed to recommend that their stockholders approve their respective proposals.
The
Merger Agreement provides that the board of directors of each of US Ecology and NRCG may not solicit proposals relating to alternative
transactions, or, subject to certain exceptions, enter into discussions or negotiations or provide information in connection with
any proposal for an alternative transaction. However, the respective board of directors of each of US Ecology and NRCG may, subject
to certain conditions, change its recommendation to its respective stockholders, terminate the Merger Agreement and enter into
an agreement with respect to a superior alternative proposal if the respective board of directors of US Ecology or NRCG determines
in its reasonable good faith judgment, after consultation with its outside legal counsel and financial advisor, that the alternative
proposal is more favorable from a financial point of view to US Ecology’s or NRCG’s stockholders, as applicable, than
the transactions contemplated by the Merger Agreement.
The
closing of the Mergers, which is currently anticipated to occur during the fourth quarter of 2019, is subject to certain closing
conditions, including (1) requisite approvals of US Ecology’s and NRCG’s stockholders, (2) the absence of certain
legal impediments to the consummation of the Mergers, (3) the approval of the shares of Holdco Common Stock to be issued as consideration
in the Mergers for listing on the Nasdaq Global Select Market, (4) effectiveness of the registration statement on Form S-4
registering the shares of Holdco Common Stock to be issued in the Mergers, the Replacement Warrants and the shares of Holdco Common
Stock underlying the Replacement Warrants, which will include a joint proxy statement of US Ecology and NRCG and a prospectus
of Holdco (the “Proxy Statement”), (5) subject to certain exceptions, the accuracy of the representations, warranties
and compliance with the covenants of each party to the Merger Agreement, (6) written tax opinions from US Ecology’s counsel
and NRCG’s counsel and (7) expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
The
Merger Agreement also contains certain termination rights in favor of each of US Ecology and NRCG, including if the Mergers are
not completed on or before December 23, 2019, subject to extension in the event that a request for additional information has
been made by a governmental entity, if the Proxy Statement has not yet been declared effective by the date that is 60 days prior
to December 23, 2019, or if the requisite approvals of US Ecology’s or NRCG’s stockholders are not obtained. Upon
termination of the Merger Agreement under certain specified circumstances, US Ecology or NRCG may be required to pay the other
party a termination fee of $60,000,000 or $35,000,000, respectively. In addition, if the Merger Agreement is terminated by US
Ecology or NRCG as a result of US Ecology’s failure to obtain the requisite US Ecology stockholder approvals, then US Ecology
would be required to reimburse NRCG’s reasonable documented out-of-pocket expenses incurred on the transaction up to $10,000,000.
The
foregoing description of the Mergers and the Merger Agreement does not purport to be complete and is qualified in its entirety
by reference to the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated into this Current Report on
Form 8-K by reference. The representations, warranties and covenants set forth in the Merger Agreement have been made
only for purposes of such agreement and are solely for the benefit of the parties to the Merger Agreement, may be subject to limitations
agreed upon by the contracting parties, including qualified by confidential disclosures made for purposes of allocating contractual
risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards
of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the Merger Agreement
is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to
provide investors with any factual information regarding the parties to the Merger Agreement or the parties’ respective
businesses. The NRCG board of directors approved the Merger Agreement and the Mergers by a vote of 8 to 1, with the Series A Preferred
Stock director designee dissenting. Additional information about the background and reasons for the Mergers will be set forth
in the Proxy Statement to be filed with the SEC and mailed to NRCG’s stockholders.
In connection with the
execution of the Merger Agreement, US Ecology entered into an Investor Agreement (the “Investor Agreement”) with Holdco,
JFL-NRC-SES Partners, LLC, JFL-NRCG Holdings III, LLC and JFL-NRCG
Holdings IV, LLC (collectively, “JFL”) and, solely with respect to Section 4 thereof, NRCG. Pursuant to Section 4 of the Investor Agreement and subject to the closing
of the Mergers, JFL agreed to, among other things, waive its right to any remaining outstanding post-closing payment obligations
under that certain purchase agreement, dated as of June 25, 2018, and amended July 12, 2018, by and between JFL-NRC-SES Partners,
LLC and NRCG (f/k/a Hennessy Capital Acquisition Corp.).