SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LAIDLAW ENVIRONMENTAL SERVICES, INC.
------------------------------------------
Name of Registrant as Specified In Its Charter)
-------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO]
LAIDLAW ENVIRONMENTAL SERVICES, INC.
D/B/A SAFETY-KLEEN CORP.
1301 Gervais Street, Suite 300
Columbia, South Carolina 29201
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1998 Annual Meeting of Stockholders of LAIDLAW ENVIRONMENTAL
SERVICES, INC. d/b/a SAFETY-KLEEN CORP., a Delaware corporation, will be held at
the Adam's Mark Hotel, 1200 Hampton Street, Columbia, South Carolina on Tuesday,
November 24, 1998, at 9:30 a.m. (Eastern Standard Time), for the following
purposes:
1. to elect three directors to serve until the 2001 Annual Meeting;
2. to consider and vote upon a proposal to amend the Company's
Restated Certificate of Incorporation to change the name of the
Company to Safety-Kleen Corp.
3. to consider and vote upon a proposal to amend the Company's
Restated Certificate of Incorporation to effect a one-for-four
reverse stock split (the "Reverse Split") of the Company's common
stock (the "Common Stock") as a result of which holders of the
Common Stock will receive one share of Common Stock for each four
shares of Common Stock owned on the effective date of the Reverse
Split;
4. if proposal number 3 is approved, to consider and vote upon a
proposal to amend the Company's Restated Certificate of
Incorporation to decrease the number of authorized shares of
Common Stock available for issuance from 750,000,000 to
250,000,000 shares; and
5. to transact such other business as may properly come before the
meeting or any adjournment thereof.
The Proxy Statement dated October 27, 1998 is attached.
<PAGE>
The board of directors has fixed the close of business on October 16,
1998 as the record date for the determination of stockholders entitled to notice
of and to vote at the meeting.
You are cordially invited to attend the Annual Meeting. If you cannot be
present in person, please sign and date the enclosed proxy and promptly mail it
in the enclosed return postage paid envelope. Any stockholder giving a proxy has
the right to revoke it any time before such proxy is voted.
YOUR VOTE IS IMPORTANT. YOU ARE URGED TO DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT IN THE ENCLOSED POSTAGE PAID ENVELOPE AS SOON AS POSSIBLE.
YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS USE BY DELIVERING TO THE
COMPANY A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER
DATE. ANY STOCKHOLDER WHO HAS EXECUTED A PROXY BUT IS PRESENT AT THE ANNUAL
MEETING AND WHO WISHES TO VOTE IN PERSON MAY DO SO BY REVOKING HIS, HER OR ITS
PROXY AS DESCRIBED IN THE PRECEDING SENTENCE.
By Order of the Board of Directors
Henry H. Taylor, Secretary
Dated: Columbia, South Carolina
October 27, 1998
-2-
<PAGE>
LAIDLAW ENVIRONMENTAL SERVICES, INC.
d/b/a SAFETY-KLEEN CORP.
1301 Gervais Street, Suite 300
Columbia, South Carolina 29201
--------------
PROXY STATEMENT
--------------
October 27, 1998
The accompanying proxy is solicited by the board of directors for use at
the annual meeting of stockholders (the "Annual Meeting") of Laidlaw
Environmental Services, Inc. d/b/a Safety-Kleen Corp. (the "Company") to be held
at the Adam's Mark Hotel, 1200 Hampton Street, Columbia, South Carolina on
Tuesday, November 24, 1998, at 9:30 a.m., E.S.T., and at any adjournment or
adjournments thereof.
This proxy statement and the form of proxy are first being mailed to the
Company's stockholders on or about October 27, 1998.
PROXIES
The accompanying form of proxy is for use at the Annual Meeting. A
stockholder may use this proxy if he or she is unable to attend the meeting in
person or if he or she wishes to have his or her shares voted by proxy even if
he or she attends the meeting. The proxy may be revoked in writing by the person
giving it any time before the proxy is exercised by giving notice to the
Company's Secretary, or by submitting a proxy having a later date, or by such
person appearing at the meeting and electing to vote in person. All shares
represented by valid proxies received pursuant to this solicitation, and not
revoked prior to their exercise, will be voted in the manner specified therein.
If no specification is made in the proxy, the proxy will be voted "FOR" the
election of the nominees for directors listed herein; "FOR" approval of an
amendment to the Company's Restated Certificate of Incorporation to change the
Company's name to Safety-Kleen Corp. (the "Name Change"); "FOR" approval of an
amendment to the Company's Restated Certificate of Incorporation to effect a
one-for-four reverse stock split of the Common Stock (the "Reverse Split"); and,
if the Reverse Split is approved, "FOR" approval of an amendment to the
Company's Restated Certificate of Incorporation to decrease the number of
authorized shares of Common Stock available for issuance from 750,000,000 to
250,000,000 shares (the "Decrease"). The board of directors is not aware of any
other matters which may be presented for action at the meeting, but if other
matters do come properly before the meeting it is intended that shares
represented by proxies in the accompanying form will be voted by the persons
named in the proxy in accordance with their best judgment.
-3-
<PAGE>
COSTS OF SOLICITATION
The Company will bear the costs of solicitation of proxies from its
stockholders. Solicitation of proxies may be made in person, by mail or by
telephone by officers, directors and regular employees of the Company who will
not be specially compensated in such regard. Nominees, fiduciaries and other
custodians will be requested to forward solicitation materials to the beneficial
owners and secure their voting instructions and will be reimbursed for the
reasonable expenses incurred in sending proxy materials to the beneficial
owners. In addition, the Company has engaged the services of ChaseMellon
Shareholder Services to solicit proxies and will pay such proxy soliciting agent
$5,000 plus expenses in connection therewith. Solicitation by such firm may be
by mail, personal interview, telephone, fax or telegraph. Arrangements also will
be made with brokerage firms and other custodians, nominees and fiduciaries to
forward proxy solicitation material to the beneficial owners of Common Stock
held of record by such persons, and the Company will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
RECORD DATE AND VOTING RIGHTS
The board of directors of the Company has fixed the close of business on
October 16, 1998, as the record date for the determination of stockholders
entitled to receive notice of and to vote at the Annual Meeting. As of October
16, 1998, there were a total of 350,984,971 shares of the Common Stock
outstanding and entitled to vote at the Annual Meeting. Each stockholder is
entitled to one vote on each matter to come before the meeting for each share of
Common Stock held of record by such stockholder. Directors are elected by a
plurality of the votes cast by the holders of shares of Common Stock at a
meeting at which a quorum is present. "Plurality" means that the individuals who
receive the largest number of votes cast are elected as directors up to the
maximum number of directors to be chosen at the meeting. A vote indicated as
withheld from a nominee will not be cast for such nominee but will be counted in
determining the presence of a quorum. Consequently, the withholding of a vote
for a nominee will have no impact in the election of directors except to the
extent that failure to vote for an individual results in another individual
receiving a larger number of votes. Approval of the Name Change and the Decrease
will require that holders of a majority of the shares outstanding and entitled
to vote thereon vote in favor of approval. Approval of the Reverse Split will
require that the holders of 75% of the shares outstanding and entitled to vote
thereon vote in favor of the proposal. Consequently, any shares whether
represented at the meeting or not which do not vote on the proposals for the
Name Change, the Decrease or the Reverse Split will have the same effect as a
negative vote. Abstentions and broker nonvotes will be counted in determining
the presence of a quorum at the meeting. The Decrease will not be voted on
unless the Reverse Split is approved.
-4-
<PAGE>
BENEFICIAL OWNERSHIP
BENEFICIAL OWNERS OF FIVE PERCENT OR MORE OF THE COMMON STOCK
The following table sets forth the only stockholder which, to the
knowledge of management of the Company, was a beneficial owner of five percent
or more of the outstanding shares of Common Stock as of October 16, 1998. The
shareholdings reported are based on information provided by the stockholder.
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP PERCENT OF CLASS
Laidlaw Inc. (1) 126,612,717 35.8%
3221 North Service Road
Burlington, Ontario
CANADA L7R3Y8
-----------
(1) The shares of Common Stock shown as owned by Laidlaw Inc., except for 125
shares, are held of record by Laidlaw Finance (Barbados) Ltd. The total number
of shares of Common Stock shown as owned by Laidlaw Inc. includes 2,692,307
shares which represents an estimate of the number of shares to be issued on
November 15, 1998 pursuant to the Company's 5% Subordinated Convertible
Pay-in-Kind Debenture described in "Compensation Committee Interlocks and
Insider Participation." The estimate is based on the closing price of $3.250 per
share of Common Stock on October 1, 1998 as reported in the Wall Street Journal.
The actual number of shares issued on November 15, 1998 will be based on the
average of the closing price of a share of Common Stock for the ten consecutive
trading days selected by the Company commencing not more than 20 trading days
before, and ending not later than the day, such payment is due.
-5-
<PAGE>
<TABLE>
<CAPTION>
STOCK OWNERSHIP OF THE COMPANY'S DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth as of October 16, 1998, the number of
shares of Common Stock beneficially owned by (i) each of the Company's
directors, (ii) each nominee for election as a director of the Company, (iii)
each of the Company's executive officers named on the Summary Compensation Table
herein (the "Named Executive Officers") and (iv) all directors and executive
officers of the Company as a group.
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP PERCENT OF CLASS
<S> <C> <C>
James R. Bullock(2), (3) .............. 55,000 *
John R. Grainger(2), (3) .............. 30,000 *
Leslie W. Haworth(2), (3) ............. 35,000 *
John W. Rollins, Jr. (2), (4) ......... 387,862 *
John W. Rollins, Sr. (2), (5) ......... 3,727,576 *
David E. Thomas, Jr. (2) .............. 30,000 *
Henry B. Tippie(2), (6) ............... 2,268,689 *
James L. Wareham(2) ................... 31,000 *
Grover C. Wrenn(2) .................... 45,000 *
Kenneth W. Winger(1) .................. 50,000 *
Michael J. Bragagnolo(1) .............. 30,000 *
Paul R. Humphreys(1) .................. 12,000 *
Henry H. Taylor(1) .................... 4,000 *
All directors and executive
officers as a group (13 persons)....... 6,706,127 1.9%
- ------------
* Signifies less than 1%
(1) All the shares shown as owned represent shares subject to presently
exercisable options.
-6-
<PAGE>
(2) Includes 30,000 shares subject to presently exercisable options.
(3) Messrs. Bullock, Grainger and Haworth are officers of Laidlaw Inc. See
"Beneficial Owners Of Five Percent Or More Of The Common Stock" for
information regarding the beneficial ownership of Laidlaw Inc.
(4) Includes 191,737 shares held by Mr. Rollins as co-trustee. Does not
include 6,191 shares owned by Mr. Rollins' wife, as to which shares Mr.
Rollins disclaims any beneficial ownership.
(5) Does not include 235,749 shares owned by Mr. Rollins' wife and 111,875
shares held by his wife as custodian for his minor children, as to which
shares Mr. Rollins disclaims any beneficial ownership.
(6) Includes 968,689 shares held by Mr. Tippie as co-trustee; 26,000 shares
held by him as trustee; and 30,000 shares in which a wholly owned
corporation over which he has sole voting power has a beneficial
partnership interest of 300 shares and voting right for 30,000 shares.
Does not include 23,000 shares owned by Mr. Tippie's wife, as to which
shares Mr. Tippie disclaims any beneficial ownership.
</TABLE>
COMMON STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder
return of the Company with that of the former Smith Barney Hazardous Waste
Index; ("Old Peer Group Index"), the S&P Composite 500 Index, a New Peer Group
Index, and the S&P MidCap 400 Index. The comparison is for the five year period
beginning August 31, 1993 and ending August 31, 1998 and assumes the
reinvestment of dividends. In its proxy statement for its last annual meeting,
the Company compared the performance of its Common Stock with the S&P 500
Composite Index and the Old Peer Group Index. The Old Peer Group Index is no
longer published by Smith Barney and therefore a new peer group was selected by
the Company as a basis for comparison. The New Peer Group Index selected by the
Company consists of Clean Harbors, Inc., EnviroSource, Inc., International
Technology Corporation, Philip Services Corp. and U.S. Liquids Inc. As required,
the performance of the Old Peer Group Index is presented for comparative
purposes in the year of change.
Furthermore, the Company has determined that the S&P MidCap 400 Index is
a more appropriate basis for measuring the performance of the stock of the
Company and intends to use this market index for comparison in the future in
lieu of the S&P Composite 500 Index, the Company previously elected to use. As
required, the performance of the S&P Composite 500 Index is presented for
comparative purposes in the year of change.
-7-
<PAGE>
[GRAPH - COMPARISION OF 5 YEAR CUMULATIVE TOTAL RETURN*]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
8/93 8/94 8/95 8/96 8/97 8/98
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THE COMPANY 100.00 90.74 68.52 46.30 68.52 43.52
NEW PEER GROUP INDEX 100.00 75.46 67.69 64.28 110.70 20.43
OLD PEER GROUP INDEX 100.00 83.80 84.90 65.57 71.00 66.76
S & P 500 100.00 105.47 128.09 152.09 213.91 231.22
S & P MIDCAP 400 100.00 104.63 126.08 141.06 193.64 168.59
</TABLE>
Assumes $100 invested on August 31, 1993 in the Company's Common Stock, the Old
Peer Group, the S&P 500 Index, the S&P MidCap 400 Index, and the New Peer Group
Index.
*Total return assumes reinvestment of dividends.
-8-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid to the Named Executive
Officers for services rendered to the Company during the fiscal years ended
August 31, 1997 and 1998. None of the Company's Named Executive Officers served
as officers of the Company during fiscal year ended August 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
(a) (b) (c) (d) (g) (i)
NAME AND PRINCIPAL FY SALARY($) BONUS($) SECURITIES ALL OTHER
POSITION UNDERLYING COMPENSATION($)(1)
OPTIONS/SARS (#)
<S> <C> <C> <C> <C> <C>
Kenneth W. Winger 1998 $441,667(2) $325,000 250,000 $17,943
President, Chief
Executive Officer and 1997 $120,167 $100,000 250,000 $11,060
Director (3)
Michael J. Bragagnolo, 1998 $273,750 $168,356 150,000 $16,848
Executive Vice President
and Chief Operating 1997 $78,861 $46,670 150,000 $3,121
Officer (3)
Paul R. Humphreys (3) 1998 $220,333 $108,404 60,000 $14,602
1997 $68,333 $35,618 60,000 $4,837
Henry H. Taylor (3) 1998 $173,750 $74,799 20,000 $14,558
1997 $56,938 $30,862 20,000 $4,769
</TABLE>
(1) Amounts shown for 1998 consist of (i) for Mr. Winger: premiums on life
insurance policies of $1,968, matching contributions under the
Safety-Kleen Corp. 401(k) Savings Plan (the "401(k) Plan") of $3,975
and a $12,000 automobile allowance; (ii) for Mr. Bragagnolo: premiums
on life insurance policies of $1,053, matching contributions under the
401(k) Plan of $5,415 and a $10,380 automobile allowance; (iii) for
Mr. Humphreys: premiums on life insurance policies of $878, matching
contributions under the 401(k) Plan of $4,724 and a $9,000 automobile
allowance; and (iv) for Mr.
-9-
<PAGE>
Taylor: premiums on life insurance policies of $667, matching
contributions under the 401(k) Plan of $4,891 and a $9,000 automobile
allowance.
(2) The salary described in the Human Resources and Compensation Committee
Report on Executive Compensation did not become effective until
April 1, 1998.
(3) Each of the Company's Named Executive Officers became an employee of
the Company on May 15, 1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($)(1) 10% ($)(1)
- ---------------------- --------------- --------------- ---------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. Winger 250,000 17.8% $3.8125 04/01/08 $599,415 $1,519,036
Michael J. Bragagnolo 150,000 10.7% $3.8125 04/01/08 $359,649 $911,421
Paul R. Humphreys 60,000 4.3% $3.8125 04/01/08 $143,860 $364,569
Henry H. Taylor 20,000 1.4% $3.8125 04/01/08 $47,953 $121,523
</TABLE>
(1) These amounts, based on assumed appreciation rates of 5% and 10% as
prescribed by the Securities and Exchange Commission rules, are not
intended to forecast possible future appreciation, if any, of the Common
Stock price. These numbers do not take into account certain provisions of
the options providing for termination of the option following termination
of employment, nontransferability or phased-in vesting. The Company did not
use an alternative formula for a grant date valuation as it is not aware of
any formula which will determine with reasonable accuracy a present value
based on future unknown or
-10-
<PAGE>
volatile factors. Future compensation resulting
from option grants is based solely on the performance of the Common Stock.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (d) (e)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C>
Kenneth W. Winger 50,000/450,000 0/0
Michael J. Bragagnolo 30,000/270,000 0/0
Paul R. Humphreys 12,000/108,000 0/0
Henry H. Taylor 4,000/36,000 0/0
</TABLE>
DEFINED BENEFIT PLANS
Effective as of October 14, 1997, the Company adopted a Supplemental
Executive Retirement Plan (the "SERP") for certain eligible employees. A SERP is
an unfunded plan which provides for benefit payments in addition to those
payable under a qualified retirement plan.
-11-
<PAGE>
The following table shows the estimated annual benefits payable upon
retirement at normal retirement date under the SERP.
<TABLE>
<CAPTION>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE
FINAL AVERAGE PAY Service Years
15 20 25 30 35
<S> <C> <C> <C> <C> <C>
250,000 45,000 60,000 75,000 90,000 105,000
300,000 56,250 75,000 93,750 112,500 131,250
350,000 67,500 90,000 112,500 135,000 157,500
400,000 78,750 105,000 131,250 157,500 183,750
450,000 90,000 120,000 150,000 180,000 210,000
500,000 101,250 135,000 168,750 202,500 236,250
550,000 112,500 150,000 187,500 225,000 262,500
600,000 123,750 165,000 206,250 247,500 288,750
650,000 135,000 180,000 225,000 270,000 315,000
700,000 146,250 195,000 243,750 292,500 341,250
750,000 157,500 210,000 262,500 315,000 367,500
800,000 168,750 225,000 281,250 337,500 393,750
850,000 180,000 240,000 300,000 360,000 420,000
900,000 191,250 255,000 318,750 382,500 446,250
</TABLE>
For the Company's current executive officers, the compensation shown in the
columns labeled "Salary" and "Bonus" of the Summary Compensation Table is
covered by the SERP. As of August 31, 1998, Mr. Winger had credited service
under the SERP of seven years and Messrs. Bragagnolo, Humphreys and Taylor had
credited service under the SERP of three years each. Benefits under the SERP are
computed based on a straight-life annuity. The amounts in this table are subject
to deduction for a portion of Social Security benefits.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Pursuant to the approval of the Human Resources and Compensation
Committee of the board of directors at its meeting on October 24, 1997, the
Company entered into Termination of Employment and Change in Control Agreements
with each of the Named Executive Officers.
Mr. Winger's Change of Control Agreement provides that if his employment
is terminated as a result of a change in control, he will receive a lump sum
payment equal to 36 times his average aggregate monthly salary, bonus, cash
value of benefits and perquisites during the previous two fiscal years. The
Change of Control Agreements with Messrs.
-12-
<PAGE>
Bragagnolo, Humphreys and Taylor provide that if any one of their employment
is terminated as a result of a change in control he would receive a
lump sum payment equal to 18 times his average aggregate monthly salary,
bonus, cash value of benefits and perquisites during the previous
two fiscal years. All of the Change of Control Agreements
provide that for purposes of determining the pension entitlement under the SERP
the years vested in the plan would be extended for three years in the case of
Mr. Winger and one and a half years in the case of each of the other Named
Executive Officers. The Change of Control Agreements further provide that all
stock options granted to such persons would fully vest and lapse if not
exercised within 90 days following the employment termination date.
COMPENSATION OF DIRECTORS
Currently, each director who is not an employee of the Company is paid
an annual retainer of $20,000 (the "Annual Retainer") plus $750 for each board
and committee meeting attended plus expense reimbursement. During fiscal year
1998 the directors were also paid a fee of $750 for attending the 1997 Annual
Meeting of the Company. Pursuant to the Company's Nonemployee Director Stock
Plan, 50% of the Annual Retainer for each nonemployee director is paid in shares
of Common Stock. Each quarter the smallest number of whole shares of Common
Stock which when multiplied by the fair market value of such shares would equal
no more than 50% of the nonemployee director's retainer fee payable for such
quarter is calculated, and the dollar amount equivalent thereto is withheld from
the director's quarterly retainer check. A certificate evidencing the number of
shares of Common Stock so determined for each of the fiscal quarters of the
prior calendar year is delivered to the director at the first board of directors
meeting held during each calendar year. Each nonemployee director becomes vested
in the Common Stock so awarded (i) at the end of the vesting period applicable
to the award, as defined in the Nonemployee Director Stock Plan, if the
nonemployee director continues to be a member of the Board through the vesting
period or (ii) upon his death, disability or retirement or (iii) if the
nonemployee director ceases to be a director as a result of a change in control
of the Company. Each such award is subject to a separate vesting period, and all
awards become nonforfeitable and transferable on the first anniversary of the
award. The first shares under this plan will be issued to the directors in
January 1999. Additionally, during fiscal 1998 each director was granted options
to purchase 20,000 shares of Common Stock at an exercise price of $3.8125 per
share under the 1997 Directors Stock Option Plan. 20% of the options become
exercisable on April 1, 1999 with an additional 20% of the options becoming
exercisable on April 1 each year thereafter until all of the options become
exercisable.
Directors who are also employees of the Company receive no separate
compensation for serving as directors.
-13-
<PAGE>
HUMAN RESOURCES AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Human Resources and Compensation Committee reviews and approves
annual salaries, evaluates performance and reviews and approves pay increases
for the Company's executive officers and senior management. The Committee also
approves executive incentive plans and awards under those plans and recommends
salary and bonus plans and awards for the Chief Executive Officer. The full
board of directors evaluates and approves the Chief Executive Officer's salary
and the awards of stock options to executive officers. The Committee
periodically reports to the board on its activities.
COMPENSATION PHILOSOPHY
The Committee bases its decisions on a compensation philosophy designed
to reward achievement based on corporate performance against measurable goals.
The Committee communicates performance standards and assures that the total
compensation package provides an earnings opportunity that is competitive for
the industry. Generally, salary and incentive programs are positioned to be
aligned with or near the median of the range of compensation levels for other
major national "for profit," "non-utility" companies adjusted for revenue size.
Since total compensation directly impacts the ability to attract and
retain qualified individuals in key positions, several salary survey sources are
researched for salary data comparisons to assure the comparability of the
Company's salaries to those of other companies in the comparison group. When
developing policies and practices designed to attract and retain qualified
individuals, the Company also considers the compensation-related policies and
practices of companies in the comparison group.
EXECUTIVE COMPENSATION
Compensation for executive officers consists of salary and short-term
and long-term incentive compensation. In determining whether to adjust the
salary of an executive officer, the Committee takes into account individual
performance, performance of the operations directed by the executive officer and
the executive officer's salary in relation to the established salary range. In
evaluating whether an executive officer's total compensation package (base
salary plus incentive compensation) should be adjusted, the Committee also takes
into account the Company's objective of being at or near the median of the range
for total compensation for comparison companies.
MANAGEMENT INCENTIVE PLAN
In addition to receiving salary, executive officers are eligible to
receive additional cash compensation under an annual incentive plan. Under the
Management Incentive Plan ("MIP"), awards are made based on the Company's
performance during the last fiscal year, the
-14-
<PAGE>
achievement of each individual's own financial goals for his or her
business unit during such period and other individual objectives. At the
conclusion of each plan year, the Committee compares the Company's overall
performance and the performance of individual business units to established
objectives. The Committee assesses performance through an evaluation of
quantitative and qualitative measures. The quantitative measure, which is
earnings per share, accounts for 70% of each individual's target award.
The qualitative measure is comprised of preset goals and accounts for the
remaining 30% of each individual's performance rating.
STOCK OPTIONS
Stock options are designed to provide an incentive for those primarily
responsible for the growth and success of the Company. Stock option grants also
are intended to encourage stock ownership and thereby further associate the
interests of stockholders and those managing the Company.
Stock option targets have been established for each participating level
of responsibility within the Company. These targets were established based on a
survey of other companies within the group of comparison companies. Targets for
the Company are designed to be near the median long-term incentive opportunity
granted by the survey group.
Stock options are typically granted annually. Individual grants vary
based on the target for each level of responsibility and the desire to reflect
individual performance and potential. All grants are at market price at the
close of business on the day prior to the date of grant and, after they become
exercisable, have value only if the price of the Company's stock has increased
in value.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The Committee has tied the pay for the Chief Executive Officer to
benchmark comparison companies in the Watson Wyatt Executive survey, the Mercer
Accounting survey, the Hewitt Executive survey and a special survey performed by
Hewitt Associates, LLC. Some or all of these surveys may include companies which
are included in the Company's Old Peer Group Index or the New Peer Group Index;
however, the companies included in the surveys were not chosen for the same
purpose as either the Old Peer Group Index or the New Peer Group Index, and any
such overlap is purely coincidental. The objective of total compensation for the
Chief Executive Officer is the median of the market range for chief executive
officers within the "for profit," "non-utility" comparison group of companies.
Based on these surveys, Mr. Winger's salary for fiscal 1998 was
established at $500,000 per year, effective April 1, 1998. His maximum MIP award
target for fiscal 1998 was $373,500. Mr. Winger's MIP actual award for the 1998
fiscal year was $325,000 based on actual results achieved. Based on his
performance, Mr. Winger also was granted, in fiscal year 1998, options to
purchase 250,000 shares of Common Stock under the Company's 1997 Stock Option
Plan.
-15-
<PAGE>
The Committee believes the executive compensation program and practices
described above are competitive. They are designed to provide increased
compensation with improved financial results and opportunity for capital
accumulation, if stockholder value is increased.
HUMAN RESOURCES AND COMPENSATION COMMITTEE BOARD OF DIRECTORS
John R. Grainger James R. Bullock
John W. Rollins, Jr. John R. Grainger
David E. Thomas, Jr. Leslie W. Haworth
John W. Rollins, Sr.
John W. Rollins, Jr.
David E. Thomas, Jr.
Henry B. Tippie
James L. Wareham
Kenneth W. Winger
Grover C. Wrenn
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
MEMBERS
During the fiscal year ended August 31, 1998, the Human Resources and
Compensation Committee held primary responsibility for determining executive
compensation levels. John R. Grainger, John W. Rollins, Jr. and David E. Thomas,
Jr. are the members of the Human Resources and Compensation Committee.
RELATIONSHIPS
Mr. Grainger is an executive officer of Laidlaw Inc. as are Messrs.
Bullock and Haworth. Pursuant to the terms of a Stock Purchase Agreement
dated February 6, 1997 between Rollins Environmental Services, Inc. and
Laidlaw Inc. (the "Stock Purchase Agreement"), Laidlaw Inc. acquired
approximately 67% of the Common Stock. Laidlaw Inc. now beneficially owns
approximately 35.8% (including the estimated number of shares to be issued
on November 15, 1998 as more fully described in Beneficial Owners Of Five
Percent Or More Of The Common Stock) of the Common Stock. In the ordinary
course of business, the Company or its affiliates and Laidlaw Inc. or
affiliates of Laidlaw Inc. have entered from time to time into various
business transactions and agreements. The following is a summary of the
material agreements, arrangements and transactions between the Company or
its affiliates and Laidlaw Inc. or its affiliates since September 1, 1997.
LAIDLAW INC. INDEMNITIES
Pursuant to the terms of the Stock Purchase Agreement, Laidlaw Inc. and
Laidlaw Transportation, Inc. ("LTI"), a subsidiary of Laidlaw Inc., agreed to
jointly and severally
-16-
<PAGE>
indemnify and hold harmless, subject to certain limitations, the Company
and its affiliates from and against any and all Damages (as defined in the
Stock Purchase Agreement) suffered by the Company resulting from or in respect
of (i) various tax obligations and liabilities, (ii) pre-closing insurance
claims, (iii) any breach or default in the performance by Laidlaw Inc. or
LTI of (a) their covenants and agreements in the Stock Purchase Agreement to
be performed on or after May 15, 1997 (the "Closing") or (b) any
representation or warranty which survives the Closing (to the extent that
damages therefrom exceed $2,000,000) and (iv) any environmental liability or
environmental claim arising as a result of any act or omission by Laidlaw Inc.
or LTI, including any release, occurring prior to the Closing, but only to the
extent such liability or claim (a) was known to Laidlaw Inc. or certain of its
affiliates and not disclosed in writing to the Company or (b) relates to the
Marine Shale Processors or Mercier, Quebec facilities and exceeds (x) an
aggregate of $1,000,000 in a particular year and (y) an aggregate since the
Closing of $1,000,000 times the number of years elapsed since the Closing, but
only to the extent of cash expenditures incurred within six years after the date
of the Closing.
LAIDLAW INC. GUARANTIES
Prior to the Closing, Laidlaw Inc. entered into on behalf of the Company
certain guaranties, performance guaranties, bonds, performance bonds, suretyship
arrangements, surety bonds, credits, letters of credit, reimbursement agreements
and other undertakings, deposit commitments or arrangements by which Laidlaw
Inc. may be primarily, secondarily, contingently or conditionally liable for or
in respect of (or which create, constitute or evidence a lien or encumbrance on
any of the assets or properties of Laidlaw Inc. which secures the payment or
performance of) a present or future liability or obligation of the Company (each
a "Laidlaw Guaranty" and collectively the "Laidlaw Guaranties"). Pursuant to the
terms of the Stock Purchase Agreement, the Company agreed to use its best
efforts to cause Laidlaw Inc. to be fully and finally released and discharged
from all further liability or obligation in respect of all Laidlaw Guaranties
within six months following the date of the Closing. As of August 31, 1998
Laidlaw Inc. had been discharged from most of such obligations.
Financial assurance is required for the cost of clean-up or
environmental impairment restoration, if any should be incurred, following
closure of the hazardous waste management facility operated by the Company in
Pinewood, South Carolina. Prior to the Closing Laidlaw Inc. provided its
corporate guaranty to satisfy, in part, this financial assurance. Insurance
coverage has been substituted for the Laidlaw Inc. corporate guaranty under the
present financial assurance submittal, however, as of this date, the State of
South Carolina has not formalized its acceptance of this substitution.
THE PIK DEBENTURE
At the Closing, the Company issued a 5% convertible Pay-In-Kind
Debenture to LTI in the original principal amount of $350,000,000 (the "PIK
Debenture"). The principal of the PIK Debenture is payable on May 15, 2009,
subject to earlier mandatory or optional prepayment and any acceleration of its
maturity date upon default.
-17-
<PAGE>
The PIK Debenture bears interest at the fixed rate of 5% per annum.
Until April 8, 2000 (the "Mandatory PIK Interest Payment Period"), interest on
the outstanding principal balance of the PIK Debenture accrues at the 5% rate,
but will be paid in shares of Common Stock. After the Mandatory PIK Interest
Payment Period, at the election of the Company any payment due under the PIK
Debenture (except upon an optional early redemption), including any accrued
interest or principal, may be paid in shares of Common Stock or cash. The number
of shares of Common Stock for each such payment shall be equal to the dollar
amount in accrued interest or principal due divided by the average of the daily
closing prices of a share of Common Stock on the NYSE -- Composite Transactions
for the ten consecutive trading days selected by the Company commencing not more
than 20 trading days before, and ending not later than, the date such payment is
due. Interest on the outstanding principal balance of the PIK Debenture is
payable semiannually on November 15 and May 15, beginning on November 15, 1997
and continuing until the payment in full of the PIK Debenture.
Beginning on May 15, 2002, and continuing until the business day prior
to the repayment of the PIK Debenture, the PIK Debenture is convertible, in
whole or in part, at the option of the holder, into shares of Common Stock. The
conversion will be at a price equal to the conversion price (the "Conversion
Price") of $3.75 per share, subject to adjustment under certain circumstances.
During the period commencing on May 15, 2002, and continuing until
maturity, the Company has the option to prepay the PIK Debenture, in whole or in
part, only in cash, at the face amount of the PIK Debenture if the last reported
sales price of a share of Common Stock, as reported by the New York Stock
Exchange, equals or exceeds 120% of the Conversion Price for a period of at
least ten consecutive trading days prior to the date of such proposed
prepayment.
Subject to the subordination provisions of the PIK Debenture, the
maturity of the PIK Debenture may be accelerated if a "Default" occurs. Under
the PIK Debenture a "Default" includes (i) a failure by the Company to pay the
principal or accrued interest of the PIK Debenture on its maturity date or any
interest payment date respectively, (ii) the voluntary or involuntary bankruptcy
of the Company or other insolvency proceedings involving the Company and (iii)
the acceleration of the maturity of the amounts outstanding under the Amended
and Restated Credit Agreement dated as of April 3, 1998, among Safety-Kleen
Services, Inc., a subsidiary of the Company, as borrower, the Toronto-Dominion
Bank, as agent, and the other financial institutions parties thereto (the
"Credit Facility") as a result of a default thereunder.
The PIK Debenture ranks junior in right of payment to the amounts
outstanding under the Credit Facility and to substantially all other
indebtedness of the Company except (i) amounts owed (other than to banks,
insurance companies and other financing institutions and obligations under
capitalized leases) for goods, materials, services or operating lease rental
payments in the ordinary course of business or for compensation to employees and
(ii) any liability for federal, state, provincial, local or other taxes owed or
owing by the Company.
-18-
<PAGE>
SERVICE ARRANGEMENTS
Laidlaw Inc. and its affiliates have provided certain financial and
management services to the Company and its subsidiaries. Such services have
included providing general liability and workers' compensation insurance and
income tax management. Each of the service arrangements has been on arms-length
terms comparable to those available in transactions with unaffiliated parties.
During the fiscal year ended August 31, 1998, the Company paid Laidlaw Inc.
$11.3 million on account of such services.
RAYMOND JAMES & ASSOCIATES, INC.
Since September 1, 1997 Raymond James & Associates, Inc. has acted as
financial advisor to the Company for various transactions, including the
Safety-Kleen Corp. merger, and is expected to continue to act in such
capacity in the future. David E. Thomas, Jr., a director, is a Managing
Director of Raymond James & Associates, Inc.
INFORMATION AS TO THE BOARD OF DIRECTORS
GENERAL
During the fiscal year ended August 31, 1998, the Company's board of
directors held a total of 13 regular and special meetings. The board of
directors currently has two committees: the Audit Committee (which held three
meetings between September 1, 1997 and August 31, 1998) and the Human Resources
and Compensation Committee (which held five meetings between September 1, 1997
and August 31, 1998). Each incumbent director attended at least 75% of the
meetings of the board of directors and the meetings of committees on which he
served held during the period for which he was a director. The Company does not
have a nominating committee, rather the board of directors as a whole performs
those functions.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. The Audit Committee is responsible for the oversight of
the Company's financial reporting process and internal controls. Its duties
include reviewing results of external audits, management's responses to external
audit recommendations, internal audit reports and management's response to those
reports; reviewing annual financial statements and any significant disputes
between management and external auditors in connection with those financial
statements; considering major changes and major questions of choice regarding
appropriate auditing and accounting principles and practices to be followed when
preparing corporate financial statements; reviewing corporate procedures used in
preparing public financial statements and related management commentaries;
meeting periodically with management to review the Company's major financial
risk exposures; and considering indemnification issues.
-19-
<PAGE>
HUMAN RESOURCES AND COMPENSATION COMMITTEE. The Human Resources and
Compensation Committee is responsible for reviewing and recommending to the
board of directors of the Company annual salary, bonus, stock options and other
benefits, direct and indirect, of officers; reviewing new executive compensation
programs; periodically reviewing the coordination of the Company's executive
compensation programs; reviewing and recommending to the board of directors of
the Company compensation for directors; and establishing and periodically
reviewing policies in the area of management perquisites.
PROPOSAL 1: ELECTION OF DIRECTORS
GENERAL INFORMATION
The Company's Restated Certificate of Incorporation divides the board of
directors into three classes, the members of one class to be elected each year
for a three year term. The terms of the Class II directors will expire at the
Annual Meeting.
Vacancies on the board of directors may be filled by the remaining
directors at any regular or special meeting thereof. Individuals selected to
fill such vacancies will serve until the expiration of the terms of office of
the directors in the class to which such director is appointed.
NOMINEES
The following information is furnished with respect to the board of
directors' nominees for election as directors. The board of directors recommends
a vote "FOR" all the nominees. All of the nominees for election as directors are
currently serving as directors of the Company. Should any nominee for the office
of director become unable to serve, which is not anticipated, it is the
intention of the persons named in the proxy, unless otherwise specifically
instructed therein, to vote for the election in his stead of such other person
as the board of directors may recommend.
<TABLE>
<CAPTION>
CLASS II NOMINEES - TERMS TO EXPIRE AT THE 2001 ANNUAL MEETING.
Principal Occupation or Employment
Name, Present Position(s) and Term With the During the Last Five Years,
Company Age Directorships of Public Companies
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
John W. Rollins, Jr. 56 President and Chief Operating
Director of the Company since 1982 Officer and a director of Rollins
Truck Leasing Corp., a truck leasing
company, for more than five years;
Chairman of the Board of Matlack
Systems, Inc. for more than five
-20-
<PAGE>
years. Mr. Rollins was Senior Vice
Chairman of the Board of the Company
from 1988 until May 15, 1997. Mr.
Rollins also is a director of Dover
Downs Entertainment, Inc. Mr.
Rollins is a member of the Human
Resources and Compensation
Committee. Mr. Rollins is the son
of John W. Rollins, Sr.
John R. Grainger 49 Executive Vice President and Chief
Director of the Company since May 1997 Operating Officer of Laidlaw Inc., a
transportation company, since
September 1997; President and Chief
Operating Officer of Laidlaw
Transit, Inc. since May 1992. Mr.
Grainger currently serves as
Chairman of the Human Resources and
Compensation Committee.
Grover C. Wrenn 55 President and Chief Executive
Director of the Company since July 1997 Officer of Accent Health, Inc., an
educational media company, since
June 1996; Chief Executive Officer
of EnSys Environmental Products,
Inc. from April 1995 through
December 1996; and President and
Chief Executive Officer of Applied
Bioscience International from 1991
through March 1995. Mr. Wrenn also
is a director of Strategic
Diagnostics, Inc. and Pharmakinetics
Laboratories, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ALL OF
THE CLASS II NOMINEES.
-21-
<PAGE>
CONTINUING DIRECTORS
1. CLASS III DIRECTORS - TERMS EXPIRING AT THE 1999 ANNUAL MEETING.
Principal Occupation or Employment During
Name, Present Position(s) and Term With the the Last Five Years, Directorships of
Company Age Public Companies
- --------------------------------------------------------------------------------------------------
John W. Rollins, Sr. 81 Chairman of the Board and Chief Executive
Director of the Company since 1982 Officer of Rollins Truck Leasing Corp., a
truck leasing company, for more than five
years. Mr. Rollins was Chairman of the
Board and Chief Executive Officer of the
Company from 1988 until May 15, 1997.
Mr. Rollins also is a director of Matlack
Systems, Inc., Rollins, Inc., RPC, Inc.
and Dover Downs Entertainment, Inc. Mr.
Rollins is the father of John W. Rollins, Jr.
James R. Bullock 54 President and Chief Executive Officer of
Director of the Company and Chairman of the Laidlaw Inc., a transportation company,
Board since May 1997 since October 1993. Mr. Bullock also is
a director of Laidlaw Inc.
David E. Thomas, Jr. 41 Senior Managing Director and the Head of
Director of the Company since June 1997 the Investment Banking Group of Raymond
James & Associates, Inc., an investment
banking firm, since July 1996; from 1991
until July 1996, he was Managing Director
of Raymond James. Mr. Thomas also is a
director of Reynolds, Smith and Hills,
Inc. Mr. Thomas is a member of the Human
Resources and Compensation Committee.
-22-
<PAGE>
2. CLASS I DIRECTORS - TERMS TO EXPIRE AT THE 2000 ANNUAL MEETING.
Principal Occupation or Employment
During the Last Five Years,
Name, Present Position(s) and Term With the Directorships of Public Companies
Company Age
- ------------------------------------------------------------------------------------------------
Kenneth W. Winger 60 President, Chief Executive Officer
President, Chief Executive Officer and and Director of the Company since
Director of the Company since May 15, 1997 May 1997. President, Chief Operating
Officer and sole director of Laidlaw
Environmental Services (US), Inc., now merged
into a subsidiary of the Company, from July
1995 until May 1997; Executive Vice
President for Business Development of Laidlaw
Waste Systems, Ltd. from January 1995
until July 1995; from May 1991 until
December 1994, Senior Vice President for
Corporate Development of Laidlaw Inc.
Leslie W. Haworth 55 Senior Vice President and Chief
Director of the Company since May 1997 Financial Officer of Laidlaw Inc., a
transportation company, for more
than five years. Mr. Haworth
currently serves as Chairman of the
Audit Committee.
Henry B. Tippie 71 For more than five years, Chairman
Director of the Company since 1982 of the Board and President of Tippie
Services, a management services
company; for more than five years,
Chairman of the Executive Committee
and Vice Chairman of the Board of
Rollins Truck Leasing Corp. Mr.
Tippie also is a director of Matlack
Systems, Inc., Dover Downs
Entertainment, Inc., RPC, Inc. and
Rollins Inc. Mr. Tippie is a member
of the Audit Committee.
-23-
<PAGE>
James L. Wareham 59 President of AK Steel Corporation, a
Director of the Company since June 1997 steel manufacturing company, since
March 1997; from 1992 until 1996,
Chief Executive Officer of
Wheeling-Pittsburgh Steel
Corporation. Mr. Wareham is a
member of the Audit Committee.
</TABLE>
PROPOSAL 2: THE NAME CHANGE
The board of directors believes that it would be advisable and in the
Company's best interest to amend the Company's Restated Certificate of
Incorporation to change the name of the Company to Safety-Kleen Corp. The
proposed amendment would restate Article First of the Company's Restated
Certificate of Incorporation as follows:
FIRST: The name of the corporation is Safety-Kleen
Corp. ("Corporation")
Following the merger of the former Safety-Kleen Corp. with a subsidiary
of the Company on May 20, 1998, the Company changed the names of its
subsidiaries to eliminate the Laidlaw name and began doing business as
Safety-Kleen and trading its stock under the SK symbol. The Company believes the
Safety-Kleen name has significant franchise value, recognizable by customers
throughout North America and Western Europe. The Company believes it to be
advantageous in its target markets to build on the Safety-Kleen name recognition
and visibility. The board of directors also believes that the name change will
clearly distinguish the Company from its former parent, Laidlaw Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE NAME CHANGE.
PROPOSAL 3: THE REVERSE SPLIT
GENERAL
The board of directors believes that it would be advisable and in the
Company's best interest to amend the Company's Restated Certificate of
Incorporation to effect a one-for-four reverse stock split of the Company's
Common Stock. The proposed amendment would amend Article Eighth of the Company's
Restated Certificate of Incorporation as follows:
Article EIGHTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended to include the
following text after the last paragraph thereof:
-24-
<PAGE>
5. Reverse Split. Effective as of the close of business
on the date of filing this Amendment to the Restated Certificate
of Incorporation (the "Effective Time"), the filing of this
Amendment shall effect a Reverse Split (the "Reverse Split")
pursuant to which each four shares of common stock, par value $1
per share, of the Corporation issued and outstanding, shall be
combined into one validly issued, fully paid and nonassessable
share of common stock, par value $1 per share, of the
Corporation. The number of authorized shares, the number of
shares of treasury stock and the par value of the common stock
shall not be affected by the Reverse Split. Each stock
certificate that prior to the Effective Time represented shares
of common stock shall, following the Effective Time, represent
the number of shares into which the shares of common stock
represented by such certificate shall be combined. The
Corporation shall not issue fractional shares or scrip as a
result of the Reverse Split, but shall arrange for the
disposition of shares on behalf of those record holders of common
stock at the Effective Time who would otherwise be entitled to
fractional shares as a result of the Reverse Split.
If the Reverse Split is approved by the stockholders, each four shares
of Common Stock outstanding on the Effective Date (as defined below) will be
converted automatically into one share of new common stock, par value $1 per
share (the "New Common Stock"). To avoid the existence of fractional shares of
New Common Stock, stockholders who would otherwise be entitled to receive
fractional shares of New Common Stock will receive a cash distribution in lieu
thereof. See "Exchange of Stock Certificates." The "Effective Date" of the
Reverse Split will be the date on which the amendment is filed with the
Secretary of State of Delaware, which is anticipated to be as soon as
practicable following the date of the Annual Meeting.
BACKGROUND OF AND REASONS FOR THE REVERSE SPLIT
The board of directors has observed the following:
a. many brokers or other "margin loan" lenders are unwilling to lend
against stocks that trade below $4.00 per share therefore restricting
certain investors who otherwise would purchase the Common Stock;
b. many institutional investors or brokerage firms either require
additional approval to purchase stocks trading below a $5.00 or
$10.00 per share threshold or prohibit their purchase entirely and as
a result, many brokerage firms will not initiate sell side research
coverage due to these restrictions on the clients; and
c. brokerage commissions are levied on a per share, rather than trade
value, basis and thus lower share price stocks result in larger
commission costs as a percentage of amount invested.
-25-
<PAGE>
Therefore, the board of directors has concluded that in order to attract
the broadest spectrum of investors, the target share price trading range is
$10.00 to $15.00 per share and that the current per share price of the Company's
Common Stock may serve to reduce the effective marketability of the shares.
The board of directors believes that the Reverse Split should result in
a stock price of approximately four times the current price range, a price range
that is expected to eliminate or mitigate the negative marketability factors
described above. As a result, the board of directors believes that the Common
Stock would be more effectively priced, better reflecting the underlying equity
value of the Company.
There can be no assurance, however, that the foregoing will occur or as
to what the market price of the Common Stock will be after implementation of the
Reverse Split or at any other time.
DISSENTING STOCKHOLDERS HAVE NO APPRAISAL RIGHTS UNDER DELAWARE LAW OR
UNDER THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION OR BYLAWS IN
CONNECTION WITH REVERSE SPLIT.
EFFECTS OF THE REVERSE SPLIT
GENERAL EFFECTS. If the Reverse Split is approved by the stockholders,
the principal effect of the Reverse Split will be to decrease the number of
outstanding shares of Common Stock from 350,984,971 shares to approximately
87,746,242 shares, based on share information available as of October 16, 1998.
The Reverse Split would not affect the proportionate equity interest in the
Company of any holder of Common Stock, except as may result from the provisions
for the elimination of fractional shares as described below. The Reverse Split
will not affect the registration of the Common Stock under the Exchange Act or
the listing of the Common Stock on the NYSE. The relative rights and preferences
of the New Common Stock will be identical to the relative rights and preferences
of the Common Stock.
In order that the Company may avoid the expense and inconvenience of
issuing and transferring fractional shares of New Common Stock, stockholders who
would otherwise be entitled to receive a fractional share of New Common Stock
(the "Fractional Stockholders") will receive payment in cash in lieu of
receiving a fractional share of New Common Stock. See "Exchange of Stock
Certificates."
The Reverse Split may leave certain stockholders with one or more "odd
lots" of New Common Stock, i.e., stock in amounts of less than 100 shares. These
odd lots may be more difficult to sell or require greater transactions costs per
share to sell, than shares in even multiples of 100.
EFFECT ON STOCK OPTION PLANS. As of October 16, 1998, there were
outstanding options to purchase shares under the Company's stock option plans
relating to an aggregate of 3,021,250 shares of Common Stock. On that date
approximately 3,766,250 million shares of
-26-
<PAGE>
Common Stock remained available for grant under such plans. All of the stock
option plans of the Company include provisions for adjustments in the
number of shares covered by, the number of shares subject to and
the exercise price of outstanding options granted under said plans,
in the event of a Reverse Split by appropriate action of the Human
Resources and Compensation Committee of the Company's board of directors. If the
Reverse Split is approved and effected, there would be reserved for issuance
upon exercise of all outstanding options a total of approximately 1.8 million
shares of New Common Stock. Each of the outstanding options would thereafter
evidence the right to purchase that number of shares of New Common Stock equal
to 25% of the shares of Common Stock previously covered thereby and the exercise
price per share would be four times the previous exercise price. The number of
shares available for grant under the Company's stock option plans would be
decreased to approximately 941,562 shares of New Common Stock.
CHANGES IN STOCKHOLDERS' EQUITY
As a result of the Reverse Split, the Company's stated capital, which
consists of the par value per share of Common Stock multiplied by the number of
shares of Common Stock issued, will be reduced by approximately $263 million to
$87.7 million on the Effective Date. Correspondingly, the Company's capital in
excess of par value, which consists of the difference between the Company's
stated capital and the aggregate amount paid to the Company upon the issuance by
the Company of all currently outstanding Common Stock, will be increased by
approximately $263 million.
The following table illustrates the principal effects of the Reverse
Split discussed in the preceding paragraphs as of the date hereof:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PRIOR TO REVERSE SPLIT AND AFTER REVERSE SPLIT AND
COMMON STOCK AMENDMENT TO CERTIFICATE AMENDMENT TO CERTIFICATE
<S> <C> <C>
Authorized....................... 750,000,000 750,000,000
Outstanding...................... 350,984,971 87,746,242(1)
Reserved for future issuance
under Company plans and the
Company's PIK Debenture.... 113,533,139 28,383,284(1)
Available for future issuance
by action of the Board of
Directors (after giving effect
to the above reservations)..... 285,481,890 633,870,474(1)
- ------------------------------------------
1 Does not consider cash in lieu of fractional shares.
</TABLE>
-27-
<PAGE>
If the Reverse Split is approved at the Annual Meeting, the amendment to
the Restated Certificate of Incorporation will be filed with the Secretary of
State of the State of Delaware as promptly as practicable thereafter. The
Reverse Split would become effective upon the close of business on the date of
such filing (the "Effective Time").
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the federal income tax consequences of the
Reverse Split is based on current law, including the Internal Revenue Code of
1986, as amended (the "Code"), and is for general information only. The tax
treatment of a stockholder may vary depending upon the particular facts and
circumstances of such stockholder and the discussion below may not address all
the tax consequences for a particular stockholder. Certain stockholders,
including insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, non-resident aliens, foreign corporations and persons who do not
hold the Common Stock as a capital asset, may be subject to special rules not
discussed below. Furthermore, no foreign, state or local tax consequences are
discussed below.
ACCORDINGLY, EACH STOCKHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE SPLIT,
INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL OR FOREIGN INCOME
TAX AND OTHER LAWS.
The receipt of shares of New Common Stock (except to the extent that
cash is received in lieu of fractional shares of New Common Stock) in the
Reverse Split will be a nontaxable transaction under the Code for federal income
tax purposes. Consequently, except with respect to cash received in lieu of
fractional shares of New Common Stock, a stockholder receiving shares of New
Common Stock will not recognize either gain or loss with respect to shares of
New Common Stock received as a result of the Reverse Split. In addition, the
aggregate tax basis (excluding the portion of such basis allocable to fractional
shares of New Common Stock) of such stockholder's shares of Common Stock prior
to the Reverse Split will carry over as the tax basis of the stockholder's
shares of New Common Stock. Each stockholder will be required to allocate such
stockholder's basis in such stockholder's shares of Common Stock ratably among
the total number of shares of New Common Stock owned following the Reverse
Split. The holding period of the shares of New Common Stock will also include
the holding period during which the stockholder held the Common Stock, provided
that such Common Stock was held by the stockholder as a capital asset on the
Effective Date.
The receipt by a stockholder of cash in lieu of a fractional share of
New Common Stock pursuant to the Reverse Split will be a taxable transaction for
federal income tax purposes. The receipt of cash in lieu of fractional shares of
New Common Stock will generally result in gain or loss to the stockholders
measured by the difference between the amount of cash received and the adjusted
basis of the fractional share. Stockholders owning a substantial interest in the
Company, however, should consult their tax advisors as to the possibility of
dividend treatment upon the receipt of cash in lieu of a fractional share
pursuant to Section 302 of the Code. Assuming that the receipt of cash in lieu
of a fractional share is not treated as a dividend and
-28-
<PAGE>
that the Common Stock was held by the stockholder as a capital
asset on the Effective Date, any such gain or loss will be capital
gain or loss, and will be long term capital gain or loss if on the
Effective Date the shares of Common Stock have been held by the stockholder
for more than one year.
Based on certain exceptions contained in regulations issued by the
Internal Revenue Service, the Company does not believe that it or stockholders
will be subject to backup withholding or information reporting with respect to
the cash distributed to a stockholder unless the amount of cash distributed to
the stockholder is $20.00 or more.
EXCHANGE OF STOCK CERTIFICATES
If the proposal to implement the Reverse Split is adopted, stockholders
will be required to exchange their stock certificates for new certificates
representing the shares of New Common Stock. Stockholders of record on the
Effective Time will be furnished the necessary materials and instructions for
the surrender and exchange of share certificates at the appropriate time by the
Company's Transfer Agent (the "Transfer Agent"). Stockholders will not have to
pay a transfer fee or other fee in connection with the exchange of certificates.
Stockholders should not submit any certificates until requested to do so.
As soon as practicable after the Effective Time, the Transfer Agent will
send a letter of transmittal to each stockholder advising such holder of the
procedure for surrendering stock certificates in exchange for new certificates
representing the ownership of New Common Stock. No certificates representing
fractional shares shall be issued. In lieu thereof, a certificate or
certificates evidencing the aggregate of all fractional shares otherwise
issuable (rounded, if necessary, to the next higher whole share) shall be issued
to the Transfer Agent or its nominee, as agent for the accounts of all holders
of Common Stock otherwise entitled to have a fraction of a share issued to them
in connection with the Reverse Split. Sales of fractional interests will be
effected by the Transfer Agent as soon as practicable on the basis of prevailing
market prices of the New Common Stock on the NYSE at the time of sale. After the
Effective Date, the Transfer Agent will pay to such stockholders their pro rata
share of the net proceeds derived from the sale of their fractional interests
upon surrender of their stock certificates. No service charges or brokerage
commissions will be payable by stockholders in connection with the sale of
fractional interests, all of which costs will be borne by the Company.
Until they have surrendered their stock certificates for exchange,
stockholders will not be entitled to receive any dividends or other
distributions that may be declared and payable to holders of record of New
Common Stock. Upon the surrender of certificates representing Common Stock,
certificates representing New Common Stock together with any such withheld
dividends or other distributions, without interest, will be delivered. At the
same time or as soon as possible thereafter, any cash payment for a fractional
share will be paid (without interest).
-29-
<PAGE>
Any stockholder whose certificate for Common Stock has been lost,
destroyed or stolen will be entitled to issuance of a certificate representing
the shares of New Common Stock into which such shares will have been converted
upon compliance with such requirements as the Company and the Transfer Agent
customarily apply in connection with lost, stolen or destroyed certificates.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE REVERSE SPLIT.
PROPOSAL 4: THE DECREASE
GENERAL
In the event that the Reverse Split is approved by the stockholders, the
board of directors believes that it would be advisable and in the Company's best
interest to amend the Company's Restated Certificate of Incorporation to
decrease the number of authorized shares of Common Stock available for issuance
from 750,000,000 to 250,000,000.
The proposed amendment would restate Article Fourth of the Company's
Restated Certificate of Incorporation as follows:
FOURTH: The total number of shares of stock which the Corporation
is authorized to issue is two hundred fifty-one million (251,000,000)
shares, divided into two classes. The designation of each class and the
par value of the shares of each class are as follows:
CLASS NUMBER OF PER SHARE
SHARES PAR VALUE
Common 250,000,000 $1.00 per share
Preferred 1,000,000 $1.00 per share
All preferred stock authorized for issuance by the Corporation
may be issued in series or without series from time to time with the
designations, preferences and relative, participating, optional or other
special rights of the class or series of the class fixed by resolution
or resolutions of the board of directors. Such resolutions may also
provide for the convertibility of the preferred stock or any series
thereof into any other classes of stock of the company, including the
common stock, upon such terms and ratios as shall be determined by the
Board of Directors.
If the Decrease is approved at the Annual Meeting, the amendment to the
Restated Certificate of Incorporation will be filed with the Secretary of State
of the State of Delaware as
-30-
<PAGE>
promptly as practicable thereafter. The Decrease will become effective upon
the close of business on the date of such filing (the "Filing Date").
In the event that the Reverse Split is not approved by the stockholders,
Proposal number 4 will not be voted upon and the number of authorized shares of
Common Stock will remain at 750,000,000 shares.
BACKGROUND AND REASONS FOR THE DECREASE
If approved, the Reverse Split, will result in a decrease in the number
of shares of Common Stock that are issued and outstanding. The board of
directors of directors believe that 250,000,000 shares of Common Stock is
sufficient to meet the Company's present and anticipated future needs.
If the Decrease is approved by the stockholders at the Annual Meeting,
500,000,000 fewer shares of authorized Common Stock will be available for future
issuance. As of the date hereof, the Company has 350,984,971 shares of Common
Stock issued and outstanding, and 113,533,139 shares of unissued Common Stock
reserved for future issuance for various purposes, leaving 285,481,890 shares of
Common Stock presently unreserved and otherwise available for issuance. If the
Reverse Split and the Decrease are approved by the stockholders at the Annual
Meeting, approximately 133,870,474 shares of New Common Stock will be unreserved
and otherwise available for issuance. If the authorized Common Stock was to be
reduced in the same proportion as the Reverse Split, only approximately
71,370,474 shares of New Common Stock would be unreserved and otherwise
available for issuance. Such amount is less than the board of directors believes
is prudent to have available to maintain flexibility for possible future
issuances. Accordingly, if the stockholders approve the Reverse Split and the
Decrease, the proportion of unreserved authorized shares of Common Stock to
issued and reserved shares of Common Stock will be effectively increased, but to
a much lesser extent than would be the case if the Reverse Split is approved and
this Decrease is not approved; in the latter case, the authorized Common Stock
would remain at the present 750,000,000 share level. Authorized but unissued
shares of Common Stock will be available for issuance from time to time upon the
exercise of options which may in the future be granted to, among others,
employees, consultants and members of the board of directors, to take advantage
of opportunities in which the issuance of shares of Common Stock may be deemed
advisable such as in equity financings or in acquisition transactions, and for
such other purposes and consideration, and on such terms, as the board of
directors may approve.
No further vote of the stockholders will be required with respect to any
such issuance. The timing of the actual issuance of additional shares of Common
Stock will depend upon market conditions, the specific purpose for which the
stock is to be issued and other similar factors. Other than as previously
described in this Proxy Statement and for issuances upon exercise, if any, of
presently issued or authorized options and the PIK, the Company currently has no
plans, agreements, arrangements, understandings or commitments for the issuance
of Common Stock. The board of director believes it is in the Company's best
interest to have such additional shares authorized as such shares will provide
the Company added flexibility in the future to issue Common Stock for working
capital purposes, acquisitions, employee benefit compensation or otherwise.
-31-
<PAGE>
The consummation of the Reverse Split without a corresponding decrease
in the authorized Common Stock may be viewed as having the effect of
discouraging or impeding hostile takeovers of the Company or of making it more
difficult to replace management because the issuance of additional shares of
Common Stock could be made at the discretion of the board. While the board of
directors is not aware of any proposals to acquire the Company and this proposal
is not being made as a means to deter or prohibit hostile takeovers or to make
it more difficult to remove current management, the board of directors would be
able to issue additional shares of Common Stock thereby, among other things,
diluting stockholders ownership interests, increasing the costs of a hostile
takeover bid offer or placing shares of Common Stock with individuals or
entities who would support management positions. By potentially discouraging
initiation of an unsolicited takeover attempt, the effective increase of the
authorized shares of Common Stock may limit the opportunity for the stockholders
to dispose of their shares at the higher price generally available in takeover
attempts or that may be available under a merger proposal. The effective
increase of the authorized shares of Common Stock may also have the effect of
permitting the Company's current management, including the current board, to
retain its position, and place it in a better position to resist changes that
stockholders may wish to make if they are dissatisfied with the conduct of the
Company's business.
GENERAL EFFECTS OF THE DECREASE
Approval of the Decrease and the reduction in the number of authorized
shares of Common Stock would have no effect on the powers, designations,
preferences or relative, participating, optional or other special rights,
qualifications or restrictions of shares of the Common Stock of the Company.
-32-
<PAGE>
The following table illustrates the principal effects of the Decrease
discussed in the preceding paragraphs as of the date hereof:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PRIOR TO DECREASE AND AFTER DECREASE AND AMENDMENT
COMMON STOCK AMENDMENT TO CERTIFICATE TO CERTIFICATE
(ASSUMING REVERSE SPLIT) (ASSUMING REVERSE SPLIT)
<S> <C> <C>
Authorized....................... 750,000,000 250,000,000
Outstanding...................... 87,746,242(1) 87,746,242(1)
Reserved for future issuance
under Company plans and the
Company's PIK Debenture.... 28,383,284(1) 28,383,284(1)
Available for future issuance
by action of the board of
directors of Directors (after
giving effect to the above
reservations) ..................... 633,870,474(1) 133,870,474(1)
- ------------------------------------------
(1) Does not consider payment of cash in lieu of fractional shares as a result of
the Reverse Split.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE DECREASE.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16 of the Securities Exchange Act of 1934, directors
and executive officers of the Company and beneficial owners of 10% or more of
the Common Stock are required to file reports with the Securities and Exchange
Commission indicating their holdings of and transactions in the Common Stock. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, all such persons have complied with all such filing requirements with
respect to the fiscal year ended August 31, 1998, except for one Form 4 report
of Mr. Bullock's for one transaction which, due to administrative error, was
filed late.
-33-
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Representatives of PriceWaterhouseCoopers LLP, which audited the
financial statements of the Company for the most recently completed fiscal year
and which has been selected to audit such statements for the current fiscal
year, are expected to be present at the Annual Meeting and will have an
opportunity to make such statements as they may desire. Such representatives are
expected to be available to respond to appropriate questions from stockholders.
PROPOSALS FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
Stockholders who intend to present proposals for consideration at next
year's annual meeting are advised that any such proposal must be received by the
Secretary of the Company no later than the close of business on June 29, 1999,
if such proposal is to be considered for inclusion in the proxy statement and
form of proxy relating to that meeting.
OTHER BUSINESS
The board of directors is not aware of any other matter which will be
presented for action at the Annual Meeting, but if any other business is
properly brought before the meeting, it is intended that the proxies received
from this solicitation will be voted by the persons named therein in accordance
with their best judgment.
-34-
<PAGE>
APPENDIX A
LAIDLAW ENVIRONMENTAL SERVICES, INC.
D/B/A SAFETY-KLEEN CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James R. Bullock and Kenneth W. Winger,
or either of them, the attorney or attorneys and proxy or proxies of the
undersigned with full power of substitution to attend the 1998 Annual Meeting of
Stockholders of Laidlaw Environmental Services, Inc. d/b/a Safety-Kleen Corp.
(the "Company") to be held at the Adam's Mark Hotel, 1200 Hampton Street,
Columbia, South Carolina, at 9:30 a.m., E.S.T. on November 24, 1998, and at any
adjournment thereof, to vote all shares of stock of the Company that the
undersigned shall be entitled to vote. Said proxies are instructed to vote on
the matters set forth in the proxy statement as specified on the reverse. The
board of directors recommends a vote "FOR" all nominees listed on the reverse;
"FOR" approval of an amendment to the Company's Restated Certificate of
Incorporation to change the Company's name to Safety-Kleen Corp.; "FOR"
approval of an amendment to the Company's Restated Certificate of
Incorporation to effect a one-for-four reverse split of the Company's
Common Stock; and if the Reverse Split is approved, "FOR"
approval of an amendment to the Company's Restated Certificate of Incorporation
to decrease the number of shares of Common Stock available for issuance from
750,000,000 to 250,000,000 shares.
This proxy when properly signed and dated will be voted in the manner
directed herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ABOVE, FOR APPROVAL OF AN AMENDMENT
TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE COMPANY'S
NAME TO SAFETY-KLEEN CORP., FOR APPROVAL OF AN AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A ONE-FOR-FOUR REVERSE SPLIT OF
THE COMPANY'S COMMON STOCK AND, IF THE REVERSE SPLIT IS APPROVED, FOR APPROVAL
OF AN AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
DECREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE FROM
750,000,000 TO 250,000,000 SHARES.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<TABLE>
<CAPTION>
[this is reverse side]
[ X ] Please mark your votes 2358
as in this example. -------
FOR all nomi- WITHHOLD
nees listed to AUTHORITY to
the right (except vote for all
as marked to nominees listed
the contrary) to the right CLASS II - Terms to expire at 2001 Annual Meeting
John W. Rollins, Jr., John R. Grainger
1. Election of Directors. [ ] [ ] and Grover C. Wrenn
(Instructions: to withhold authority for any individual nominee write that nominee's name in the
blank space below.)
<S> <C>
FOR AGAINST ABSTAIN
- ------------------------------------------------------------- 2. Approval of an amendment to the [ ] [ ] [ ]
Company's Restated Certificate
of Incorporation to change the
Company's name to Safety-Kleen
Corp.
3. Approval of an amendment to the [ ] [ ] [ ]
Company's Restated Certificate of
Incorporation to effect a one-for-
four reverse split of the
Company's Common Stock.
4. If Proposal Number 3 is approved, [ ] [ ] [ ]
approval of an amendment to the
Company's Restated Certificate of
Incorporation to decrease the number
of shares of Common Stock available for
issuance from 750,000,000 to 250,000,000
shares.
5. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Please sign exactly as name appears to the left. When shares
are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian,
please give full title. If a corporation, please sign in full
corporate name by authorized officer. If a partnership,
sign in partnership name by authorized person. If more than
one trustee, all should sign. This proxy may be revoked any
time prior to its exercise.
____________________________________(L.S.)
____________________________________(L.S.)
SIGNATURE(S) DATE
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
- ----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
