<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
LAIDLAW ENVIRONMENTAL SERVICES, INC.
(Exact name of Registrant as specified in its charter)
---------------------
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DELAWARE 4953 51-0228924
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
1301 GERVAIS STREET
SUITE 300
COLUMBIA, SOUTH CAROLINA 29201
(803) 933-4200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
KENNETH W. WINGER
LAIDLAW ENVIRONMENTAL SERVICES, INC.
1301 GERVAIS STREET, SUITE 300
COLUMBIA, SOUTH CAROLINA 29201
(803) 933-4200
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
Copy To:
HERBERT S. WANDER, ESQ.
KATTEN MUCHIN & ZAVIS
525 WEST MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60661-3693
(312) 902-5200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
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==========================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE(2) FEE(2)
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Common Stock $1.00 par value per share
and associated Stock Purchase
Rights(3), of Laidlaw Environmental
Services, Inc. 220,008,005 N/A $868,245,877 $263,105
==========================================================================================================================
</TABLE>
(1) Represents the amount of Common Stock, par value $1.00 per share, of Laidlaw
Environmental Services, Inc., a Delaware corporation ("Laidlaw
Environmental") previously registered on Laidlaw Environmental's
Registration Statement on Form S-4 (Registration No. 333-40185) (the
"Initial Registration Statement"), which was the anticipated maximum amount
of Laidlaw Environmental Common Stock issuable upon the consummation of the
exchange offer for shares of Common Stock, par value $0.10 per share (the
"Shares") of Safety-Kleen Corp., a Wisconsin corporation ("Safety-Kleen"),
together with associated stock purchase rights. According to Safety-Kleen's
Form 10-Q for the period ended September 6, 1997, as of September 6, 1997,
there were issued and outstanding 58,400,729 Shares. Based on the foregoing
and assuming that (i) no Shares have been issued since September 6, 1997 and
(ii) no options or Shares have been issued other than the 5,059,831 options
to purchase Shares reported in Safety-Kleen's Form 10-K for the period ended
December 28, 1996, the maximum number of Shares to be received in exchange
was 62,859,430. The actual number of Shares on the date of the exchange was
.
(2) Pursuant to Rule 457(a) under the Securities Act of 1933, as amended, the
registration fee was previously paid in connection with the Initial
Registration Statement. Pursuant to Rule 457(f)(l) and 457(c) under the
Securities Act of 1933, as amended, and solely for the purposes of
calculating the registration fee, the registration fee was computed on the
Initial Registration Statement on the basis of $28.8125 per Share, the
average of the high and low prices per Share as reported on the New York
Stock Exchange on November 21, 1997. Pursuant to Rule 457(a) and (b), the
fee was reduced by $233,938 paid on November 13, 1997 upon the initial
filing under the Securities Act of 1933, as amended, of the Initial
Registration Statement.
(3) Stock Purchase Rights are attached to and trade with Laidlaw Environmental
Common Stock. Value attributable to such rights, if any, is reflected in the
market price of the Laidlaw Environmental Common Stock.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
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[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SAFETY-KLEEN CORP.
- --------------------------------------------------------------------------------
(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)(1) 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> 3
(SAFETY-KLEEN LOGO)
April , 1998
Dear Shareholder:
Our directors and officers join me in extending a cordial invitation to
attend a special meeting of shareholders of Safety-Kleen Corp. to be held at
, central time, on May , 1998 in the .
As described in the accompanying Proxy Statement/Prospectus, at the special
meeting you will be asked to consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Merger, dated as of March 16, 1998, which
provides for the merger of LES Acquisition, Inc., an indirect wholly-owned
subsidiary of Laidlaw Environmental Services, Inc., with and into Safety-Kleen.
The approval of the proposed merger at the special meeting is the second
step of a two-step transaction. In the first step, Laidlaw Environmental
acquired 55,751,582 shares pursuant to its offer to exchange cash and stock for
each outstanding share of Safety-Kleen common stock. Now the parties wish to
complete the proposed merger as contemplated by the merger agreement. The
consideration to be paid under the terms of the merger agreement is identical to
the consideration received by those who tendered shares to Laidlaw Environmental
in the first step, and therefore, each share of Safety-Kleen common stock (other
than shares owned by Laidlaw Environmental, LES Acquisition or any of their
subsidiaries and treasury shares) will be converted into the right to receive
$18.30 in cash, without interest, and 2.80 shares of Laidlaw Environmental
common stock.
Consummation of the merger is subject to certain conditions, including
approval and adoption of the merger agreement by the holders of at least
two-thirds of the outstanding shares of Safety-Kleen common stock. Having
successfully completed the first step of the transaction, Laidlaw Environmental
has sufficient votes to assure the merger's approval and has indicated that it
will vote in favor of the merger.
On March 15, 1998 (which was before the first step was completed, and
therefore, before Laidlaw Environmental designees joined the Board of Directors
of Safety-Kleen), your Board of Directors carefully reviewed and considered the
merger agreement and unanimously determined that the merger agreement and the
merger are fair to and in the best interests of Safety-Kleen and its
shareholders, and unanimously approved and adopted the merger agreement. In
addition, at that time Safety-Kleen's financial advisor, William Blair &
Company, L.L.C., rendered its opinion to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
consideration to be received by holders of Safety-Kleen's common stock in the
merger is fair, from a financial point of view, to such holders. THE BOARD OF
DIRECTORS PRIOR TO THE CONCLUSION OF THE LAIDLAW ENVIRONMENTAL OFFER RECOMMENDED
THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Detailed information concerning the proposed merger is set forth in the
accompanying Proxy Statement/ Prospectus. I urge you to read the enclosed
material carefully. Whether or not you plan to attend the special meeting,
please complete, date, sign and return the proxy card in the enclosed postage
paid envelope. After the merger is completed, each shareholder will be mailed a
transmittal form and instructions for surrender of stock certificates for
payment pursuant to the merger agreement. Please do not send in your stock
certificates until you have received the letter of transmittal and instructions
thereto.
Sincerely,
--------------------------------------
Kenneth W. Winger
Chief Executive Officer
<PAGE> 4
[LOGO]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY , 1998
A special meeting of shareholders (the "Special Meeting") of Safety-Kleen
Corp., a Wisconsin corporation ("Safety-Kleen"), will be held in the
at , central time, on , May , 1998 for the
following purpose:
To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger dated as of March 16, 1998 (the "Merger Agreement"),
among Laidlaw Environmental Services, Inc., a Delaware corporation
("Laidlaw Environmental"), LES Acquisition, Inc., a Delaware corporation
and indirect wholly owned subsidiary of Laidlaw Environmental ("LES
Acquisition"), and Safety-Kleen, pursuant to which (a) LES Acquisition will
be merged (the "Merger") with and into Safety-Kleen, with Safety-Kleen to
be the surviving corporation and to become an indirect wholly-owned
subsidiary of Laidlaw Environmental, and (b) each outstanding share of
Safety-Kleen common stock, par value $.10 per share (including, unless the
context otherwise requires, each associated Right as defined in the
accompanying Proxy Statement/Prospectus, each a "Share" and, collectively,
the "Shares") (other than Shares owned by Laidlaw Environmental, LES
Acquisition or any subsidiary thereof and treasury shares), will be
converted into the right to receive $18.30 in cash, without interest, and
2.80 shares of common stock, par value $1.00 per share, of Laidlaw
Environmental ("Laidlaw Environmental Common Stock").
April 8, 1998 has been fixed as the record date ("Record Date") for the
determination of shareholders entitled to notice of, and to vote at, the Special
Meeting or any adjournments or postponements thereof. Only holders of record of
Shares at the close of business on the Record Date will be entitled to notice
of, and to vote at, the Special Meeting or any adjournments or postponements
thereof. A list of shareholders of record as of the Record Date will be
available at the Special Meeting.
The accompanying Proxy Statement/Prospectus describes the Merger Agreement
(which is included as Annex A hereto), the proposed Merger and certain actions
to be taken in connection with the Merger. To ensure that your vote will be
counted, please complete, date and sign the enclosed Proxy Card and return it
promptly in the enclosed postage-paid envelope, whether or not you plan to
attend the Special Meeting. You may revoke your proxy in the manner described in
the accompanying Proxy Statement/Prospectus at any time before it is voted at
the Special Meeting. Executed proxies with no instructions indicated thereon
will be voted "FOR" approval and adoption of the Merger Agreement.
By Order of the Board of Directors
--------------------------------------
Scott Krill
Secretary
April , 1998
Elgin, Illinois
PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR
CERTIFICATES.
<PAGE> 5
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 10, 1998
PROXY STATEMENT/PROSPECTUS
SAFETY-KLEEN CORP.
LAIDLAW ENVIRONMENTAL SERVICES, INC.
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PROXY STATEMENT FOR SPECIAL MEETING OF SAFETY-KLEEN SHAREHOLDERS
TO BE HELD MAY , 1998
This Proxy Statement/Prospectus is being furnished to shareholders of
Safety-Kleen Corp. in connection with the solicitation of proxies by and on
behalf of Safety-Kleen's Board of Directors (which now includes designees of
Laidlaw Environmental Services, Inc.) for use at a special meeting of
shareholders to be held on , May , 1998, at , central time, in
the , , , Illinois. This Proxy
Statement/Prospectus and the accompanying Notice and Proxy Card are first being
mailed to Safety-Kleen shareholders on or about April , 1998.
At the Special Meeting, Safety-Kleen shareholders will be asked to consider
and act upon a proposal to approve and adopt the Agreement and Plan of Merger
dated as of March 16, 1998 among Laidlaw Environmental Services, Inc., LES
Acquisition, Inc., an indirect wholly-owned subsidiary of Laidlaw Environmental,
and Safety-Kleen. Pursuant to the merger agreement, (a) LES Acquisition will be
merged with and into Safety-Kleen, which will be the surviving corporation and
will thereby become an indirect wholly-owned subsidiary of Laidlaw
Environmental, and (b) each share of Safety-Kleen common stock (including,
unless the context otherwise requires, each associated common stock purchase
right issued pursuant to the Rights Agreement dated as of November 9, 1988, as
amended, between Safety-Kleen and The First National Bank of Chicago), that is
outstanding immediately prior to the merger (other than shares of Safety-Kleen
common stock owned by Laidlaw Environmental, LES Acquisition or any of their
subsidiaries or held in the treasury of Safety-Kleen) will be converted into the
right to receive $18.30 in cash, without interest, and 2.80 shares of common
stock of Laidlaw Environmental. On April , 1998, the most recent practicable
trading day prior to the mailing of this Proxy Statement/Prospectus, the closing
price of Safety-Kleen's common stock on the New York Stock Exchange was
$ per share, and the closing price of Laidlaw Environmental's common
stock on the New York Stock Exchange was $ .
Proxies are being solicited by and on behalf of Safety-Kleen's new Board of
Directors, all but one of the members of which were designated by Laidlaw
Environmental and appointed after completion of the Laidlaw Environmental
exchange. References herein to the "Safety-Kleen Board" refer to the Board of
Directors of Safety-Kleen as constituted prior to consummation of the Laidlaw
Environmental exchange offer, and references herein to the "New Board" refer to
the Board of Directors of Safety-Kleen after such time.
THE SAFETY-KLEEN BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Additional copies of this Proxy Statement/Prospectus and the Proxy Card to
be returned for the special meeting can be obtained from Safety-Kleen Corp., One
Brinckman Way, Elgin, Illinois 60123, Attention: Investor Relations, or from
Laidlaw Environmental Services, Inc., 1301 Gervais Street, Suite 300, Columbia,
South Carolina 29201. QUESTIONS OR REQUESTS FOR ASSISTANCE IN COMPLETING AND
SUBMITTING PROXY CARDS SHOULD BE DIRECTED TO SAFETY-KLEEN INVESTOR RELATIONS, AT
(847) 697-8460, OR LAIDLAW ENVIRONMENTAL'S CORPORATE SECRETARY'S DEPARTMENT AT
(803) 933-4200.
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Proxy Statement/Prospectus is April , 1998.
<PAGE> 6
TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION....................................... iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. iii
SUMMARY..................................................... 1
SELECTED HISTORICAL FINANCIAL DATA.......................... 7
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 10
RISK FACTORS................................................ 21
THE SPECIAL MEETING......................................... 24
THE MERGER.................................................. 26
OPINION OF FINANCIAL ADVISOR................................ 33
INTERESTS OF CERTAIN PERSONS IN THE MERGER.................. 37
THE MERGER AGREEMENT........................................ 41
THE COMPANIES............................................... 48
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 50
STOCK EXCHANGE LISTING...................................... 50
DESCRIPTION OF LAIDLAW ENVIRONMENTAL CAPITAL STOCK.......... 51
MARKET PRICES............................................... 51
LAIDLAW ENVIRONMENTAL AND SAFETY-KLEEN COMPARATIVE PER SHARE
DATA...................................................... 52
VALIDITY OF LAIDLAW ENVIRONMENTAL COMMON STOCK.............. 53
LITIGATION.................................................. 53
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES AND LAIDLAW
ENVIRONMENTAL COMMON STOCK................................ 55
COMPARISONS OF DELAWARE AND WISCONSIN LAW -- SIMILARITIES... 55
COMPARISON OF DELAWARE AND WISCONSIN LAW -- DIFFERENCES..... 58
OTHER COMPARISONS........................................... 61
EXPERTS..................................................... 62
SHAREHOLDER PROPOSALS....................................... 62
</TABLE>
(ii)
<PAGE> 7
AVAILABLE INFORMATION
Laidlaw Environmental and Safety-Kleen are subject to the informational
requirements of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith file reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by Laidlaw
Environmental and Safety-Kleen with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
public reference facilities in the Commission's Regional Offices at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of information may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Because Laidlaw
Environmental and Safety-Kleen each file certain documents electronically with
the Commission, reports, proxy and information statements and other information
regarding Laidlaw Environmental and Safety-Kleen may also be accessed through
the Commission's web site, http://www.sec.gov. Laidlaw Environmental Common
Stock and the Shares are listed and traded on the NYSE, and Laidlaw
Environmental Common Stock is also traded on the Pacific Exchange, Inc. (the
"Pacific Exchange") Reports, proxy statements and other information filed by
Laidlaw Environmental and Safety-Kleen with the Commission may be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005, and in the
case of Laidlaw Environmental, at the offices of the Pacific Exchange at 301
Pine Street, San Francisco, California 94104.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4 (together with all amendments
and exhibits thereto, the "Registration Statement"), covering the Laidlaw
Environmental Common Stock offered hereby, which has been filed with the
Commission, certain portions of which have been omitted pursuant to the rules
and regulations of the Commission, and to which portions reference is hereby
made for further information with respect to Laidlaw Environmental and
Safety-Kleen and the securities offered hereby. Statements contained herein
concerning the provisions of certain documents are not necessarily complete and,
in each instance, reference is made to the copies of such documents filed as
exhibits to the Registration Statement or otherwise filed with the Commission,
for a more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
No person is authorized to provide any information or to make any
representations with respect to the matters described in this Proxy
Statement/Prospectus other than those contained herein or in the documents
incorporated by reference herein. Any information or representations with
respect to such matters not contained herein or therein must not be relied upon
as having been authorized by Laidlaw Environmental and Safety-Kleen. The
delivery of this Proxy Statement/Prospectus shall not, under any circumstances,
create any implication that there has been no change in the affairs of Laidlaw
Environmental and Safety-Kleen since the date hereof or that the information
contained in this Proxy Statement/Prospectus or in the documents incorporated by
reference herein is correct as of any time subsequent to the date hereof or
thereof, as the case may be.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING EXHIBITS
TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO: CORPORATE SECRETARY,
LAIDLAW ENVIRONMENTAL SERVICES, INC., 1301 GERVAIS STREET, SUITE 300, COLUMBIA,
SOUTH CAROLINA 29201. TELEPHONE REQUESTS MAY BE DIRECTED TO THE CORPORATE
SECRETARY'S DEPARTMENT AT (803) 933-4200. IN ORDER TO ENSURE TIMELY DELIVERY OF
SUCH DOCUMENTS, ANY REQUEST FOR DOCUMENTS SHOULD BE SUBMITTED NOT LATER THAN
APRIL , 1998.
(iii)
<PAGE> 8
The following documents filed with the Commission by Laidlaw Environmental
(File No. 1-8368) are incorporated herein by reference:
(a) Laidlaw Environmental Form 10-K for the fiscal year ended August
31, 1997 (the "Laidlaw Environmental 1997 Form 10-K");
(b) Laidlaw Environmental Proxy Statement, dated October 28, 1997, for
Laidlaw Environmental's annual meeting to be held on November 25, 1997 (the
"Laidlaw Environmental 1997 Annual Meeting Proxy Statement");
(c) Laidlaw Environmental Current Report on Form 8-K, dated November
5, 1997, as amended, two Current Reports on Form 8-K, dated November 14,
1997, as amended, a Current Report on Form 8-K, dated November 19, 1997, as
amended, a Current Report on Form 8-K, dated November 21, 1997, as amended,
a Current Report on Form 8-K, dated November 25, 1997, as amended, a
Current Report on Form 8-K, dated December 8, 1997, a Current Report on
Form 8-K, dated January 28, 1998, a Current Report on Form 8-K, dated
February 5, 1998, two Current Reports on Form 8-K, dated February 9, 1998,
a Current Report on Form 8-K, dated February 11, 1998, two Current Reports
on Form 8-K, dated February 17, 1998, a Current Report on Form 8-K dated
February 18, 1998), a Current Report on Form 8-K, dated February 20, 1998,
a Current Report on Form 8-K, dated February 25, 1998, a Current Report on
Form 8-K, dated February 26, 1998, a Current Report on Form 8-K, dated
March 5, 1998, a Current Report on Form 8-K, dated March 6, 1998, a Current
Report on Form 8-K dated March 10, 1998, a Current Report on Form 8-K dated
March 12, 1998, a Current Report on Form 8-K dated March 13, 1998, a
Current Report on Form 8-K, dated March 16, 1998 and a Current Report on
Form 8-K dated March 19, 1998 (the "Laidlaw Environmental Forms 8-K");
(d) Laidlaw Environmental Registration Statement on Form S-4, dated
November 13, 1997, as amended by amendments dated November 25, 1997,
December 16, 1997, January 6, 1998, January 15, 1998, January 16, 1998,
January 27, 1998, January 28, 1998, March 16, 1998 March 18, 1998 and March
19, 1998;
(e) Laidlaw Environmental Proxy Statement, dated December 16, 1997,
for Safety-Kleen's special meeting held on January 9, 1998;
(f) Laidlaw Environmental Preliminary Proxy Statement, dated January
22, 1998, for Safety-Kleen's special meeting to be held on February 11,
1998, as amended;
(g) Laidlaw Environmental Preliminary Proxy Statement, dated January
21, 1998, for Laidlaw Environmental's special meeting at which the
stockholders of Laidlaw Environmental approved resolutions (i) increasing
Laidlaw Environmental's authorized common stock from 350,000,000 shares to
750,000,000 shares, and (ii) authorizing the issuance of Laidlaw
Environmental Common Stock pursuant to the Laidlaw Environmental Offer;
(h) Laidlaw Environmental Forms 10-Q for the periods ending November
30, 1997 and February 28, 1998; and
(i) Laidlaw Environmental Schedule 14D-1, dated January 16, 1998, as
amended.
The following documents filed with the Commission by Safety-Kleen (File No.
1-6513) are incorporated herein by reference:
(a) Safety-Kleen Form 10-K for the fiscal year ended January 3, 1998,
as filed April 3, 1998 (the "Safety-Kleen 1997 Form 10-K");
(b) Safety-Kleen Proxy Statement, dated March 28, 1997, for the
Safety-Kleen annual meeting held May 9, 1997 (the "Safety-Kleen Annual
Meeting Proxy Statement");
(c) Safety-Kleen Proxy Statement, dated January 6, 1998, for
Safety-Kleen's special meeting to be held on February 11, 1998, as amended;
(iv)
<PAGE> 9
(d) Safety-Kleen Schedule 14D-9 Solicitation/Recommendation Statement,
dated December 22, 1997, as amended and restated as of January 6, 1998, and
as further amended by Amendments 1 through 30 thereto, relating to the
Laidlaw Environmental Offer (the "Safety-Kleen Schedule 14D-9");
(e) Safety-Kleen Information Statement pursuant to Rule 14f-1, dated
March 26, 1998 (the "Safety-Kleen Information Statement"); and
(f) Safety-Kleen Current Report on Form 8-K, filed April 9, 1998.
All documents filed by either Laidlaw Environmental or Safety-Kleen
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date hereof and prior to the effective time of the Merger and the issuance
of shares of Laidlaw Environmental Common Stock in connection therewith shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of such filing. See "Available Information." Any statement contained herein
or in a document incorporated or deemed to be incorporated herein by reference
shall be deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein or in any other subsequently filed document
which also is, or is deemed to be, incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part hereof, except as so modified or superseded.
(v)
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. This summary is not intended to be complete
and is qualified in its entirety by reference to the more detailed information
contained elsewhere, or incorporated by reference, in this Proxy Statement/
Prospectus and the Annexes hereto. Shareholders are urged to read this Proxy
Statement/Prospectus and the Annexes hereto carefully and in their entirety.
SUMMARY OF LAIDLAW ENVIRONMENTAL OFFER AND THE MERGER
On April 3 and April 7, 1998, Laidlaw Environmental and LES Acquisition
acquired in the aggregate 55,751,582 Shares, representing together with
previously owned Shares, approximately 94% of the outstanding Shares. The
approval of the Merger at the Special Meeting is the second step, following the
recently completed Laidlaw Environmental Offer, in the consummation of the
Merger as contemplated by the Merger Agreement.
PARTIES TO THE MERGER AGREEMENT
Safety-Kleen Corp.......... Safety-Kleen is a leader in servicing the recycling
and waste needs of companies in the
automotive/retail repair, industrial, imaging and
other business sectors. Over 2,800 Safety-Kleen
specialists service customers from a branch network
that extends across North America and Western
Europe.
Safety-Kleen operates primarily in one business
segment -- providing businesses with
environmentally safe and convenient solutions for
managing fluid waste and other recoverable
resources. Focusing primarily on the needs of small
businesses, Safety-Kleen performed nearly five
million individual services and reclaimed more than
300 million gallons of contaminated fluid through a
network of 230 branches worldwide in 1996.
Safety-Kleen collects and recycles used products at
thirteen recycle centers, two lube oil refineries
and three fuel-blending facilities.
Safety-Kleen operates in the continental U.S.,
Canada, the United Kingdom, the Republic of
Ireland, Puerto Rico, Belgium, France, Italy, Spain
and Germany. Safety-Kleen has licensee operations
in Japan and Korea.
Safety-Kleen was incorporated in Wisconsin in July
1963 and its principal offices and corporate
headquarters are located at One Brinckman Way,
Elgin, Illinois 60123, telephone: (847) 697-8460.
Laidlaw Environmental
Services, Inc.............. Laidlaw Environmental provides hazardous and
industrial waste management services throughout
North America. Laidlaw Environmental collects,
transports, treats and disposes of waste by
incineration, landfilling and other methods at its
facilities located in the United States and Canada.
Laidlaw Environmental also operates waste
processing, recycling and repackaging facilities
and has analytical laboratories at its facilities
in several states.
Laidlaw Environmental, in providing hazardous and
industrial waste services, is engaged in five
primary lines, or classes, of business: (a) service
center; (b) landfill; (c) incineration; (d)
transportation; and (e) specialty services,
including polychlorinated biphenyl ("PCB")
management, wastewater treatment and other
specialty services.
1
<PAGE> 11
Laidlaw Environmental's revenues and income are
derived from one industry segment principally in
the United States, which includes the collection,
transportation, processing/recovery and disposal of
hazardous and industrial wastes. This segment
renders services to a variety of commercial,
industrial, governmental and residential customers.
Substantially all revenues represent income from
unaffiliated customers.
Laidlaw Environmental was incorporated in Delaware
in 1968. Its principal executive office is located
at 1301 Gervais Street, Suite 300, Columbia, South
Carolina 29201 and its telephone number is (803)
933-4200.
As of the record date, Laidlaw Environmental and
its affiliates owned 56,352,682 Shares
(approximately 94% of the issued and outstanding
Shares).
Certain information regarding the directors and
executive officers of Laidlaw Environmental is set
forth on Annex B hereto.
LES Acquisition, Inc....... LES Acquisition was recently organized at the
direction of Laidlaw Environmental for the purpose
of effecting a tender offer for the Shares and the
Merger. It has not engaged in any activities except
in connection with the Laidlaw Environmental Offer
and the proposed Merger. LES Acquisition is an
indirect wholly-owned subsidiary of Laidlaw
Environmental.
BACKGROUND OF THE MERGER
Background................. In August, 1997, Safety-Kleen announced that the
Safety-Kleen Board had engaged the services of
William Blair to act as advisor to Safety-Kleen and
manage the process of exploring strategic options
for enhancing shareholder value. On November 20,
1997, after considering proposals from various
interested parties, including an initial offer from
Laidlaw Environmental, Safety-Kleen announced that
it had entered into a merger agreement (the "Philip
Merger Agreement") with SK Acquisition Corp., an
affiliate of Philip Services Corp., Apollo
Advisors, L.P. and Blackstone Management Associates
II, L.P. (the "Philip Merger"). Pursuant to the
Philip Merger, Safety-Kleen shareholders would
receive $27.00 per share in cash. Later that day,
Laidlaw Environmental increased its initial offer.
At a special meeting of Safety-Kleen Shareholders
on March 9, 1998, Safety-Kleen failed to receive
the necessary two-thirds vote to approve the Philip
Merger, and subsequently terminated merger
agreement therewith. The following day,
Safety-Kleen entered into negotiations with Laidlaw
Environmental.
After negotiations conducted from March 10, 1998
through March 15, 1998, (i) Laidlaw Environmental,
LES Acquisition and Safety-Kleen agreed to the
terms of, and on March 16, 1998, the parties
executed, the Merger Agreement, and (ii) the
Safety-Kleen Board agreed to recommend an exchange
offer pursuant to which Laidlaw Environmental
offered to exchange each Share for the right to
receive $18.30 in cash and 2.80 shares of Common
Stock of Laidlaw Environmental (the "Laidlaw
Environmental Offer"). Pursuant to the Merger
Agreement, each Share would be exchanged for the
right to receive $18.30 net in
2
<PAGE> 12
cash and 2.80 shares of Laidlaw Environmental
Common Stock, subject to the conditions set
forth therein. On April 3 and April 7, 1998,
Laidlaw Environmental and LES Acquisition
acquired in the aggregate 55,751,582 Shares
tendered pursuant to the Laidlaw Environmental
Offer. The Merger Agreement provides that,
following consummation of the Laidlaw
Environmental Offer, in the Merger each Share
will be exchanged in the Merger for
consideration identical to the consideration
received in the Laidlaw Environmental Offer.
Recommendation of
Safety-Kleen Board....... THE SAFETY-KLEEN BOARD UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. In reaching
its determination that the Merger Agreement and
the Merger are fair to and in the best interests
of Safety-Kleen and its shareholders, the
Safety-Kleen Board, on March 15, 1998 considered
a number of factors, as more fully described
under "The Merger -- Reasons for the Merger;
Recommendation of the Safety-Kleen Board."
Opinion of Financial
Advisor.................. On March 15, 1998, William Blair rendered an
opinion to the Safety-Kleen Board to the effect
that, as of such date and based upon and subject
to certain matters stated in such opinion, the
consideration received by the holders of Shares
in the Laidlaw Environmental Offer and to be
received in the Merger is fair, from a financial
point of view, to such holders. The full text of
the opinion of William Blair, which includes the
assumptions made, matters considered and the
scope and limitations on the reviews undertaken
in rendering such opinion, is attached as Annex
C to this Proxy Statement/Prospectus and should
be read in its entirety. See "Opinion of
Financial Advisor -- March 15, 1998 Opinion."
Interests of Certain
Persons.................. Certain members of Safety-Kleen's management and
of the Safety-Kleen Board will receive economic
benefits as a result of the consummation of the
Laidlaw Environmental Offer and the Merger,
including payments with respect to stock options
and limited stock appreciation rights,
maintenance of directors' and officers'
insurance coverage and employee benefits by the
surviving corporation for specified periods of
time, indemnification rights and benefits under
Change of Control Severance Agreements. For
information concerning such benefits, see "The
Merger -- Interests of Certain Persons in the
Merger."
SAFETY-KLEEN SHAREHOLDERS' MEETING
Time, Date, and Place...... The special meeting will be held on May , 1998,
at , central time, in the , Illinois.
Purpose.................... At the special meeting, shareholders will
consider and vote upon a proposal to approve and
adopt the Merger Agreement. See "The Special
Meeting -- Matter to Be Considered at the
Special Meeting."
Record Date; Voting at the
Special Meeting.......... Only holders of record of Shares at the close of
business on April 8, 1998 (the "Record Date"),
will be entitled to notice of and to vote at the
special meeting or any postponements or
adjournments thereof. At the close of business
on the Record Date, there were 60,101,962 Shares
3
<PAGE> 13
outstanding and entitled to vote. Shareholders of
record on the Record Date are entitled to one vote
per Share, exercisable in person or by properly
executed proxy, upon the Merger. No other matters
may be properly submitted for the vote of
shareholders at the special meeting. The presence,
in person or by properly executed proxy, of the
holders of a majority of the outstanding Shares is
necessary to constitute a quorum at the special
meeting. The affirmative vote by the holders of
two-thirds of the outstanding Shares is required to
approve the Merger Agreement and the Merger.
Abstentions and broker non-votes will have the
effect of votes against the proposal to approve and
adopt the Merger Agreement. See "The Special
Meeting -- Record Date; Voting at the Special
Meeting."
AS OF THE RECORD DATE, LAIDLAW ENVIRONMENTAL AND
ITS AFFILIATES OWNED 56,352,682 SHARES
(APPROXIMATELY 94% OF THE OUTSTANDING SHARES) AND
ACCORDINGLY WILL APPROVE THE MERGER AGREEMENT AND
THE MERGER WITHOUT THE APPROVAL OF ANY OTHER
SHAREHOLDERS. LAIDLAW ENVIRONMENTAL INTENDS TO
VOTE, AND TO CAUSE ITS AFFILIATES TO VOTE, "FOR"
THE MERGER AGREEMENT AND THE MERGER.
Proxies.................... This Proxy Statement/Prospectus is being furnished
to shareholders of record at the close of business
on the Record Date in connection with the
solicitation of proxies by and on behalf of the
Safety-Kleen Board for use at the special meeting.
All Shares which are represented at the special
meeting by properly executed proxies received and
not duly and timely revoked will be voted at the
special meeting in accordance with the instructions
contained therein. In the absence of contrary
instructions, such Shares will be voted "FOR" the
approval and adoption of the Merger Agreement.
A proxy may be revoked prior to its being voted by:
(i) delivering to the Secretary of Safety-Kleen, at
or before the special meeting, a written instrument
bearing a later date than the proxy which
instrument, by its terms, revokes the proxy; (ii)
duly executing a subsequent proxy relating to the
same Shares and delivering it to the Secretary of
Safety-Kleen at or before the special meeting; or
(iii) attending the special meeting and voting in
person. Attendance at the special meeting by a
shareholder will not in and of itself revoke a
previously delivered proxy. See "The Special
Meeting -- Proxies."
THE MERGER
General.................... Upon consummation of the Merger, LES Acquisition
will be merged into Safety-Kleen and Safety-Kleen
will become an indirect wholly-owned subsidiary of
Laidlaw Environmental. Each Share outstanding
immediately prior to the Merger (other than Shares
owned by Laidlaw Environmental, LES Acquisition or
any subsidiary thereof or held in the treasury of
Safety-Kleen or any subsidiary of Safety-Kleen)
will be converted into the right to receive $18.30
in cash, without interest, and 2.80 shares of
Laidlaw Environmental Common Stock.
Effective Time............. It is expected that the Merger will become
effective as promptly as practicable following
approval of the Merger Agreement by the requisite
4
<PAGE> 14
vote of the Safety-Kleen shareholders and the
satisfaction or waiver of the other conditions
to the Merger.
Treatment of Stock
Options.................. All outstanding options to purchase Shares
became fully vested at the closing of the
acquisition of Shares pursuant to the Laidlaw
Environmental Offer. See "The Merger Agreement
-- Stock Options."
Conditions to the Merger... The Merger is subject to certain conditions,
including the approval of Safety-Kleen
shareholders at the special meeting. See "The
Merger Agreement -- Conditions to Consummation
of the Merger."
Termination................ The Merger Agreement will be subject to
termination at any time prior to the Effective
Time by the mutual consent of Safety-Kleen and
Laidlaw Environmental or by either Safety-Kleen
or Laidlaw Environmental if: (i) any
governmental body takes any action prohibiting
the Merger and such action has become final and
non-appealable; or (ii) the Merger Agreement is
not approved at the special meeting by the
holders of at least 66 2/3% of the outstanding
Shares.
Financing of Merger........ See "The Merger -- Source and Amount of Funds"
for a description of Laidlaw Environmental's
Merger financing.
Dissenters' Rights......... Laidlaw Environmental has determined that it
will not contest shareholders' right to dissent
under Wisconsin law in connection with the
Merger. See "The Merger -- Dissenters' Rights."
Certain Federal Income Tax
Consequences............. The receipt of cash and Laidlaw Environmental
Common Stock for Shares pursuant to the Merger
will be a taxable transaction for federal income
tax purposes with respect to which gain or loss,
if any, will be recognized. See "The Merger --
Certain Federal Income Tax Consequences."
Accounting Treatment....... As required by generally accepted accounting
principles, Laidlaw Environmental will use the
purchase method of accounting to account for the
Merger. See "The Merger -- Accounting
Treatment."
Market Price of Shares..... The Shares are quoted and traded on the NYSE
under the symbol "SK." On April , 1998, the
most recent practicable trading day prior to the
mailing of this Proxy Statement/Prospectus, the
high and low sale prices of the Shares on the
NYSE were $ and $ per Share,
respectively. Laidlaw Environmental Common Stock
is quoted and traded on the NYSE under the
symbol "LLE." On April , 1998, the most recent
practicable trading day prior to the mailing of
this Proxy Statement/Prospectus, the high and
low sale prices per share of Laidlaw
Environmental Common Stock on the NYSE were $
and $ per Share, respectively. See
"Market Prices."
Selected Financial Data.... For a discussion of certain historical and pro
forma financial information regarding
Safety-Kleen and Laidlaw Environmental, see
"Selected Historical Financial Data of Laidlaw
Environmental," "Selected Historical Financial
Data of Safety-Kleen," "Unaudited Pro Forma
Combined Financial Information," and "Notes to
Unaudited Pro Forma Combined Financial
Information."
5
<PAGE> 15
Description of Laidlaw
Environmental Capital
Stock.................... The authorized capital stock of Laidlaw
Environmental consists of 750,000,000 shares of
Laidlaw Environmental Common Stock, par value $1.00
per share, and 1,000,000 shares of Laidlaw
Environmental Preferred Stock, par value $1.00 per
share. As of April 7, 1998, 338,398,600 shares of
Laidlaw Environmental Common Stock were issued and
outstanding (on a fully diluted basis), and no
shares of Laidlaw Environmental preferred stock are
issued.
6
<PAGE> 16
SELECTED HISTORICAL FINANCIAL DATA
The summary below sets forth historical financial data and selected
unaudited pro forma combined financial data. This financial data should be read
in conjunction with the historical financial statements and notes thereto
contained in the filings incorporated by reference herein and in conjunction
with the unaudited pro forma combined financial information and notes thereto
appearing elsewhere in this Proxy Statement/ Prospectus. See "Unaudited Pro
Forma Combined Financial Information."
SELECTED HISTORICAL FINANCIAL DATA OF LAIDLAW ENVIRONMENTAL
The selected historical financial data of Laidlaw Environmental set forth
below has been derived from financial statements of Laidlaw Environmental as
they appeared in the Laidlaw Environmental 1997 Form 10-K and in the Laidlaw
Environmental Form 10-Q for the quarterly period ended February 28, 1998. The
Laidlaw Environmental Form 10-K and Form 10-Q should be read in conjunction with
Laidlaw Environmental's selected historical financial data.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, YEAR ENDED AUGUST 31,
--------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- -------- ---------- ---------- ---------- -------- --------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................... $ 384,767 $313,192 $ 678,619 $ 652,973 $ 599,241 $517,804 $511,554
Income (loss) from continuing
operations(1).............. 13,700 5,338 (183,452) 6,714 16,765 22,531 11,654
Basic income (loss) per share
from continuing
operations(1).............. 0.075 0.044 (1.329) 0.056 0.140 0.188 0.097
Diluted income per
share(2)................... 0.069 0.044 -- -- -- -- --
Cash dividends per common
share...................... -- -- -- -- -- -- --
BALANCE SHEET DATA:
Working capital.............. 73,911 76,095 40,677 60,075 90,831 119,522
Total assets................. 1,528,662 1,610,878 1,491,294 1,367,411 974,053 947,976
Long-term debt............... 463,247 540,096 55,838 64,256 18,454 24,253
Stockholders' equity(3)...... 349,728 327,965 1,094,777 1,056,266 798,597 795,887
Weighted average common stock
outstanding (000')......... 181,523 120,000 138,033 120,000 120,000 120,000 120,000
Weighted average common stock
outstanding and assumed
conversions (000's)........ 275,306 120,000 -- -- -- -- --
</TABLE>
- ---------------
(1) Fiscal year 1997 including restructuring charge, net of tax benefit, of $200
million ($332 million pre-tax) or $1.45 per share.
(2) Inclusion of diluted per share amounts would have been anti-dilutive in
fiscal 1997. No dilutive components existed prior to 1997.
(3) For fiscal years 1993 to 1996 inclusive, stockholder's equity represents the
net investment of Laidlaw, Inc. in Laidlaw Environmental.
7
<PAGE> 17
SELECTED HISTORICAL FINANCIAL DATA OF SAFETY-KLEEN
The selected historical financial data of Safety-Kleen set forth below has
been derived from financial statements of Safety-Kleen as they appeared in
Safety-Kleen's Form 10-K filed with the Commission for each of the five fiscal
years in the period ended January 3, 1998. The Safety-Kleen 1997 Form 10-K
should also be read in conjunction with Safety Kleen's selected historical
financial data.
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------------------------------
1997(2) 1996 1995 1994 1993
---------- ---------- ---------- -------- ---------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................. $1,007,903 $ 923,126 $ 859,251 $791,267 $ 795,508
Operating income before restructuring
charge............................. 120,425 119,490 108,463 99,324 70,656(1)
Applicable margin.................... 12.0% 12.9% 12.6% 12.6% 8.9%(1)
Income (loss) from continuing
operations......................... 63,170 61,109 53,303 50,094 (101,346)(1)
Income (loss) per share from
continuing operations:
Basic.............................. 1.08 1.05 0.92 0.87 (1.76)(1)
Diluted............................ 1.07 1.05 0.92 0.87 (1.76)(1)
Cash dividends per common share...... 0.36 0.36 0.36 0.36 0.36
BALANCE SHEET DATA:
Working capital...................... 68,983 72,340 43,532 31,766 53,472
Total assets......................... 1,034,706 1,044,823 1,009,050 973,444 950,664
Long-term debt....................... 214,234 276,954 283,715 284,125 288,633
Shareholders' equity................. 529,467 480,290 433,435 396,336 362,664
Weighted average common stock
outstanding (000's)................ 58,415 58,089 57,814 57,741 57,679
</TABLE>
- ---------------
(1) Includes restructuring and special charges, net of tax benefit, of $136
million ($229 million pre-tax) or $2.36 per share.
(2) Fiscal year 1997 was a fifty-three week year. All other years presented were
fifty-two weeks.
LAIDLAW ENVIRONMENTAL, ROLLINS AND SAFETY-KLEEN SELECTED UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
combines the consolidated income statements of Laidlaw Environmental and Rollins
Environmental Services, Inc. ("Rollins"), and the consolidated balance sheets
and income statements of Laidlaw Environmental and Safety-Kleen as if the
Rollins acquisition, Laidlaw Environmental Offer, the Merger and the other
transactions described herein had occurred for all periods presented. These
statements are prepared on the basis of accounting for the Rollins acquisition
and the Merger as a purchase and are based on the assumptions set forth in the
notes thereto. These statements and the pro forma information presented below do
not reflect the estimated cost savings of approximately $100 to $130 million
Laidlaw Environmental believes will result from the Merger or the estimated cost
savings of the Rollins acquisition. The following information is not necessarily
indicative of the financial position or the actual results of operations that
would have occurred had the transactions assumed herein occurred on such dates
or of expected future results. This information should be read in conjunction
with and is qualified in its entirety by the consolidated financial statements
and accompanying notes of Laidlaw Environmental, Rollins and Safety-Kleen
included in the documents described under "Incorporation
8
<PAGE> 18
of Certain Documents by Reference", and the pro forma combined financial
statements and accompanying discussion and notes set forth under "Unaudited Pro
Forma Combined Financial Information."
<TABLE>
<CAPTION>
PRO FORMA COMBINED
-----------------------------------
YEAR ENDED SIX MONTHS ENDED
AUGUST 31, 1997 FEBRUARY 28, 1998
--------------- -----------------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................................................... $1,802,627 $942,512
Income (loss) from continuing operations.................... (244,203) 11,003
Income (loss) from discontinued operations.................. 20 -
---------- --------
Net income (loss)........................................... $ (244,183) $ 11,003
========== ========
PER SHARE DATA(1):
Basic income per share:
Income (loss) from continuing operations.................. $ (0.676) $ 0.042
Income (loss) from discontinued operations................ -- --
---------- --------
Net income (loss)......................................... $ (0.676) $ 0.042
========== ========
Weighted average common stock outstanding (000's)........... 350,567 347,646
========== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
------------------
AS OF
FEBRUARY 28, 1998
------------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Assets:
Total current assets...................................... $ 461,329
Total assets.............................................. 4,404,428
Liabilities:
Total current liabilities................................. 404,398
Long-term debt............................................ 1,776,177
Subordinated convertible debenture........................ 350,000
Total liabilities......................................... 3,407,314
Stockholders' Equity........................................ 1,033,114
</TABLE>
- ---------------
(1) Fully diluted earnings per share, which include the dilutive effect of
potential common shares, have not been included for the historical year
ended August 31, 1997, nor for the pro forma six months ended February 28,
1998, as the effect of such inclusion would be to increase earnings per
share, and thus be anti-dilutive.
9
<PAGE> 19
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
combines the consolidated income statements of Laidlaw Environmental and
Rollins, and the consolidated balance sheets and income statements of Laidlaw
Environmental and Safety-Kleen as if the Rollins acquisition, Laidlaw
Environmental Offer, the Merger and the other transactions described herein had
occurred for all periods presented. These statements are prepared on the basis
of accounting for the acquisition pursuant to the Laidlaw Environmental Offer
and the Merger as a purchase and are based on the assumptions set forth in the
notes thereto. These statements do not reflect the estimated cost savings of the
Rollins acquisition, nor the cost savings of approximately $100 to $130 million
Laidlaw Environmental believes will result from the Merger. This information
should be read in conjunction with and is qualified in its entirety by the
consolidated financial statements and accompanying notes of Laidlaw
Environmental, Rollins and Safety-Kleen included in the documents described
under "Incorporation of Certain Documents by Reference", and the pro forma
discission and notes set forth under this section.
The following information is being presented for illustrative purposes only
and is not necessarily indicative of the financial position or operating results
that would have occurred had the transactions assumed herein been consummated at
the beginning of the periods for which the transactions are being given effect,
nor is it necessarily indicative of future operating results or financial
position.
10
<PAGE> 20
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA HISTORICAL PRO FORMA
HISTORICAL LAIDLAW ADJUSTMENTS LAIDLAW SAFETY- ADJUSTMENTS PRO FORMA
ROLLINS ENVIRONMENTAL DR/(CR) ENVIRONMENTAL KLEEN DR/(CR) COMBINED
---------- ------------- ----------- ------------- ---------- ----------- ----------
(UNAUDITED)($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $150,985 $ 678,619 $ 4,099(Da) $ 825,505 $977,122 $ -- $1,802,627
Expenses:
Operating.......... 149,791 485,062 (4,099)(Da) 630,754 645,488 -- 1,276,242
Depreciation and
amortization..... 22,606 53,506 (6,345)(Db) 69,767 77,741 31,103(D1) 178,641
Selling, general
and
administrative... 22,371 73,068 95,439 137,961 -- 233,400
Restructuring
charge........... -- 331,697 331,697 -- -- 331,697
-------- --------- -------- ---------- -------- -------- ----------
Total
expenses... 194,768 943,333 (10,444) 1,127,657 861,190 31,103 2,019,980
-------- --------- -------- ---------- -------- -------- ----------
Operating income
(loss)............. (43,783) (264,714) (6,345) (302,152) 115,932 31,103 (217,353)
Allocated interest
expense............ -- 24,030 24,030 -- -- 24,030
Interest expense..... 5,856 20,243 9,625(De) 35,724 18,504 102,040(D2) 156,268
Other income......... -- 2,865 2,865 1,587 -- 4,452
-------- --------- -------- ---------- -------- -------- ----------
Income (loss) from
continuing
operations before
income tax......... (49,639) (306,122) 3,280 (359,041) 99,015 133,173 (393,199)
Income tax expense
(benefit).......... (17,460) (122,789) 3,251(Dd) (136,998) 38,294 (50,411)(D3) (149,115)
-------- --------- -------- ---------- -------- -------- ----------
Income (loss) from
continuing
operations before
minority
interest........... (32,179) (183,333) 6,531 (222,043) 60,721 82,762 (244,084)
Minority interest
(net of tax)....... -- (119) (119) -- -- (119)
-------- --------- -------- ---------- -------- -------- ----------
Income (loss) from
continuing
operations......... $(32,179) $(183,452) $ 6,531 $ (222,162) $ 60,721 $ 82,762 $ (244,203)
======== ========= ======== ========== ======== ======== ==========
Net income (loss) per
share (Note D5).... $ (1.329) $ (0.676)(D4)
Weighted average
common and common
stock equivalents
outstanding
(000's)............ 138,033 350,567(D4)
</TABLE>
11
<PAGE> 21
LAIDLAW ENVIRONMENTAL SERVICES, INC.
PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA ADJUSTMENTS
LAIDLAW SAFETY- ---------------------- PRO FORMA
ENVIRONMENTAL KLEEN DR CR COMBINED
------------- ---------- -------- -------- ---------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues........................ $384,767 $557,745 $ -- $ -- $942,512
Expenses:
Operating..................... 269,105 369,271 -- -- 638,376
Depreciation and
amortization............... 24,819 43,924 14,613(D1) -- 83,356
Selling, general and
administrative............. 39,236 73,187 -- -- 112,423
-------- -------- ------- ------- --------
Total expenses........ 333,160 486,382 14,613 -- 834,155
-------- -------- ------- ------- --------
Operating income................ 51,607 71,363 14,613 -- 108,357
Interest expense................ 29,489 9,453 50,819(D2) -- 89,761
Other income (expense).......... 1,243 (2,347) -- -- (1,104)
-------- -------- ------- ------- --------
Income from continuing
operations before income
tax........................... 23,361 59,563 65,432 -- 17,492
Income tax expense.............. 9,555 21,572 -- 24,744(D3) 6,383
-------- -------- ------- ------- --------
Income from continuing
operations before minority
interest...................... 13,806 37,991 65,432 24,744 11,109
Minority interest (net of
tax).......................... (106) -- -- -- (106)
-------- -------- ------- ------- --------
Net income............ $ 13,700 $ 37,991 $65,432 $24,744 $ 11,003
======== ======== ======= ======= ========
Basic income per share.......... $ 0.075 $ 0.042(D4)
Weighted average common
outstanding (000's)........... 181,523 347,646(D4)
Diluted income per share........ $ 0.069 --(D5)
Weighted average common stock
outstanding and assumed
conversions (000's)........... 275,306 --(D5)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
12
<PAGE> 22
LAIDLAW ENVIRONMENTAL SERVICES, INC.
PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL LAIDLAW SAFETY-KLEEN
ENVIRONMENTAL AS OF JANUARY 3, PRO FORMA ADJUSTMENTS
AS OF FEBRUARY 28, 1998 -------------------------- PRO FORMA
1998 (SEE NOTE C) DR CR COMBINED
------------------ ---------------- ---------- ---------- ----------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents............. $ 11,766 $ 11,202 $ -- $ -- $ 22,968
Trade and other accounts
receivable.............. 186,273 131,092 -- -- 317,365
Inventories............... 7,857 51,339 -- -- 59,196
Deferred income taxes..... 13,727 10,694 -- -- 24,421
Other current assets...... 17,280 20,099 -- -- 37,379
---------- ---------- ---------- ---------- ----------
Total current
assets........... 236,903 224,426 -- -- 461,329
---------- ---------- ---------- ---------- ----------
Property, plant and
equipment, net............ 1,143,605 629,741 1,301,239(D6) -- 3,074,585
Goodwill.................... 68,890 144,536 607,334(D7) -- 820,760
Other assets................ 79,264 36,003 -- 31,513(D8) 83,754
---------- ---------- ---------- ---------- ----------
Total assets....... $1,528,662 $1,034,706 $1,908,573 $ 31,513 $4,440,428
========== ========== ========== ========== ==========
LIABILITIES
Current liabilities
Accounts payable.......... $ 64,202 $ 75,284 $ -- $ -- $ 139,486
Accrued liabilities....... 79,557 80,122 -- -- 159,679
Current portion of
long-term debt.......... 19,233 37 -- 85,963(D10) 105,233
---------- ---------- ---------- ---------- ----------
Total current
liabilities...... 162,992 155,443 -- 85,963 404,398
---------- ---------- ---------- ---------- ----------
Deferred items
Income taxes.............. 56,677 65,607 -- 519,249(D14) 641,533
Other..................... 165,251 69,955 -- -- 235,206
Long-term debt.............. 444,014 214,234 -- 1,117,929(D10) 1,776,177
Subordinated convertible
debenture................. 350,000 -- -- -- 350,000
---------- ---------- ---------- ---------- ----------
Total
liabilities...... $1,178,934 $ 505,239 $ -- $1,723,141 $3,407,314
========== ========== ========== ========== ==========
STOCKHOLDERS' EQUITY
Common stock................ $ 182,287 $ 5,919 $ -- $ 160,204(D11) $ 348,410
Additional paid-in
capital................... 392,512 212,504 -- 306,629(D12) 911,645
Cumulative foreign currency
translation adjustments... (2,971) -- (2,971)
Net unrealized gain on
securities available for
sale...................... 1,870 -- 1,870(D15)
Retained earnings
(accumulated deficit)..... (223,970) 311,044 311,044(D13) -- (223,970)
---------- ---------- ---------- ---------- ----------
Total stockholders'
equity........... 349,728 529,467 312,914 466,833 1,033,114
---------- ---------- ---------- ---------- ----------
Total liabilities
and stockholders'
equity........... $1,528,662 $1,034,706 $ 312,914 $2,189,974 $4,440,928
========== ========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
13
<PAGE> 23
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
A. SUMMARY OF LAIDLAW ENVIRONMENTAL OFFER
Laidlaw Environmental previously offered to exchange $18.30 in cash and 2.8
shares of Laidlaw Environmental Common Stock for each outstanding share of
Safety-Kleen Common Stock. Laidlaw Environmental and its subsidiaries acquired
in the aggregate 55,751,582 shares of Safety Kleen Common Stock pursuant to the
Laidlaw Environmental Offer on April 3 and April 7, 1998.
In contemplation of the Merger, Laidlaw has established a credit facility
through TD Securities (USA), Inc. ("TDSI"). The Credit Facilities consist of
five parts: (i) a $450,000,000 6-year Senior Secured Revolving Credit Facility
with a $200,000,000 letter of credit sublimit (the "Revolving Credit Facility"
or "Facility A"), (ii) a $550,000,000 6-year Senior Secured Amortizing Term Loan
("Facility B"), (iii) a $550,000,000 Minimally Amortizing 7-year Senior Secured
Term Loan ("Facility C"), (iv) a $550,000,000 Minimally Amortizing 8-year Senior
Secured Term Loan ("Facility D") and (v) a $60,000,000 6-year Senior Secured
Amortizing Term Loan Facility ("Facility E"); (Facility B, Facility C, Facility
D and Facility E, collectively, the "Term Loans"). The Credit Facilities will be
secured by all of the tangible assets of the combined companies to the extent
required by the syndicate of banks and other financial institutions
(collectively, the "Lenders") acceptable to Laidlaw Environmental and the Agent
that will make the loans pursuant to the Credit Facilities. All of the capital
stock of Laidlaw Environmental's subsidiaries, including the acquired
Safety-Kleen subsidiaries, will be pledged as part of such security for the
Credit Facilities, and such subsidiaries will guaranty the obligations of
Laidlaw Environmental to the Lenders. The Term Loans have been drawn in full
under the Revolving Credit Facility, $200,000,000 is available for letters of
credit and $300,000,000 is available for loans, subject to an aggregate maximum
of $450,000,000.
Borrowings under the Credit Facilities bear interest at a floating rate
based upon, at LES Acquisition's option, (i) the higher of the Toronto-Dominion
Bank (TD) prime rate and the federal funds rate plus 0.50% per annum, or (ii)
the London Interbank Offered Rate ("LIBOR") as determined by TD for the
respective interest period, in each case plus a margin based upon the total
leverage ratio of LES Acquisition. LES Acquisition also has and will pay
administration fees, commitment fees, re-syndication fees (under certain
circumstances), certain expenses and provides certain indemnities, all of which
LES Acquisition believes to be customary for commitments of this type.
B. ACCOUNTING TREATMENT ($ IN THOUSANDS)
If the Merger is consummated, it will be accounted for using the purchase
method of accounting applied in accordance with generally accepted accounting
principles. Accordingly, the assets and liabilities of Safety-Kleen will be
recorded at their estimated fair value, with any difference between the amount
of such fair value and the purchase price being recorded as goodwill. The
operating results of the combined company will include the results of operations
of Safety-Kleen from and after the closing date.
14
<PAGE> 24
The aggregate merger purchase price totals $1,827,148 and is comprised as
follows:
<TABLE>
<S> <C> <C>
Safety-Kleen Shares outstanding at February 28, 1998..................... 59,930,589
Safety-Kleen Shares previously acquired by Laidlaw Environmental......... (601,100)
-----------
Safety-Kleen Shares remaining to acquire................................. 59,329,489
===========
Cash cost at $18.30 per Safety-Kleen Share............................... $ 1,085,730
Cost of additional Laidlaw Environmental Shares to be issued:
Number of Laidlaw Environmental Shares to be issued at the
Exchange Ratio of 2.8..................................... 166,122,569
Price per share............................................. $ 4.125
-----------
Total cost..................................................... 685,256
1,770,986
-----------
Cost of Safety-Kleen Shares previously acquired by Laidlaw
Environmental.......................................................... 13,000
Cost of Safety-Kleen stock options....................................... 43,162
Termination fees associated with SK Parent Merger Agreement.............. 75,000
-----------
Total merger purchase price.................................... $ 1,902,148
===========
</TABLE>
The price per share of the additional Laidlaw Environmental shares to be
issued of $4.125 is the average of the closing NYSE market price for the 3
trading days prior to and the 3 trading days immediately following and including
March 16, 1998, the date of the Agreement and Plan of Merger.
The purchase price has been allocated to the assets acquired and
liabilities assumed based on estimated fair values at February 28, 1998, as
follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 224,426
Property, plant and equipment............................... 1,930,980
Goodwill.................................................... 751,870
Other assets................................................ 20,607
Current liabilities......................................... (155,406)
Deferred income taxes....................................... (586,103)
Other deferred items........................................ (69,955)
Long-term debt.............................................. (214,271)
----------
Merger purchase price............................. $1,902,148
==========
</TABLE>
C. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined balance sheet gives effect to
the Laidlaw Environmental Offer, the Merger and the other transactions described
herein as if they had occurred on February 28, 1998. The unaudited pro forma
combined statement of income for the year ended August 31, 1997 gives effect to
(a) the Rollins acquisition under the heading "Pro Forma Laidlaw Environmental,"
and (b) the Rollins acquisition, the Laidlaw Environmental Offer, the Merger and
the other transactions described herein under the heading "Pro Forma Combined"
as if each had occurred as of September 1, 1996. The unaudited pro forma
combined statement of income for the six months ended February 28, 1998 gives
effect to the Laidlaw Environmental Offer, the Merger and the other transactions
described herein as if each had occurred as of September 1, 1997.
The unaudited pro forma combined balance sheet at February 28, 1998
includes the balance sheet of Laidlaw Environmental at February 28, 1998 and the
balance sheet of Safety-Kleen at January 3, 1998. Since the February 28, 1998
balance sheet of Laidlaw Environmental reflects the acquisition of Rollins on
May 15, 1997, no pro forma disclosure is required. The unaudited pro forma
combined statement of income for the year ended August 31, 1997 includes Laidlaw
Environmental for the year ended August 31, 1997, Rollins for the period
September 1, 1996 to May 15, 1997, and for Safety-Kleen, the aggregate of the 16
weeks ended December 28, 1996 plus the 36 weeks ended September 6, 1997. The
unaudited pro forma combined
15
<PAGE> 25
statement of income for the six months ended February 28, 1998 includes Laidlaw
Environmental for the six months ended February 28, 1998 and Safety-Kleen for
the 27 weeks ended January 3, 1998. Because Safety-Kleen does not report
depreciation and amortization expense in its unaudited interim financial
statements, Laidlaw Environmental's management has estimated Safety-Kleen's
historical depreciation and amortization expense for this period on the basis
that it is the same as that reported for the fiscal year ended January 3, 1998.
Both the recent and pending acquisitions have been presented using the
purchase method of accounting. Accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based upon management's best
preliminary estimate of their fair values, based upon publicly available
documents and information. The preliminary allocation of the purchase price with
respect to Safety-Kleen will be subject to further adjustments as Laidlaw
Environmental finalizes the allocation of the purchase price in accordance with
generally accepted accounting principles. Management does not anticipate that
the final allocation of the purchase price will result in a material change to
income. The goodwill acquired is being amortized over 40 years on a
straight-line basis.
During the report periods, there were no material transactions between
Laidlaw Environmental and Safety-Kleen.
The unaudited combined pro forma financial information does not purport to
be indicative of the combined financial position or combined results of
operations of Laidlaw Environmental, Rollins and Safety-Kleen had the
transactions assumed therein occurred on the dates specified, nor are they
indicative of future financial position or results of operations. The unaudited
pro forma financial information does not give effect to potential cost savings
of the Rollins acquisition, nor the cost savings of approximately $100 to $130
million that Laidlaw Environmental management believes may be realized as a
result of the Merger. There can be no assurances that such cost savings, if any,
will be achieved.
The unaudited pro forma financial information should be read in conjunction
with the historical consolidated financial statements of Laidlaw Environmental,
Rollins and Safety-Kleen and the notes thereto incorporated by reference
included elsewhere herein.
D. PRO FORMA ADJUSTMENTS ($ AND SHARES IN THOUSANDS)
The following adjustments and elimination entries have been made to the
unaudited pro forma combined statement of income to reflect the Rollins
acquisition, as of the beginning of fiscal year 1997 using the purchase method
of accounting:
(a) To eliminate transactions between combined companies.
(b) To adjust depreciation to reflect the fair value adjustment of
property and equipment and to reflect the effects of the Rollins
acquisition upon goodwill amortization.
(c) To adjust expense to reflect financing costs associated with the
Rollins acquisition.
(d) To adjust income taxes (benefits) to record the pro forma income
taxes (benefit) as computed under Statement of Financial Accounting
Standard No. 109 on pro forma pre-tax income (loss).
16
<PAGE> 26
The following adjustments and elimination entries have been made to the
unaudited pro forma combined statement of income to reflect the acquisition of
Safety-Kleen by Laidlaw Environmental using the purchase method of accounting:
1. To adjust depreciation and amortization expense to reflect the fair
value adjustment of property, plant and equipment and the effect of the
Merger on goodwill amortization, as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
AUGUST 31, 1997 FEBRUARY 28, 1998
--------------- -----------------
<S> <C> <C>
To eliminate Safety-Kleen's estimated historical
intangible and other asset amortization
expense....................................... $(20,195) $(11,050)
To record amortization expense related to
goodwill as a result of the Merger............ 18,797 9,398
To record depreciation expense related to
certain Safety-Kleen property, plant and
equipment (primarily buildings and land
improvements), written up to estimated fair
value......................................... 32,531 16,265
-------- --------
Total adjustment...................... $ 31,133 $ 14,613
======== ========
</TABLE>
2. To adjust interest expense for the impact of the additional
long-term debt associated with the Merger as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
AUGUST 31, 1997 FEBRUARY 28, 1998
--------------- -----------------
<S> <C> <C>
To eliminate historical Safety-Kleen
interest expense......................... $(18,504) $(9,453)
To record interest expense on $1,418,163(1)
of borrowings at 8.5%(2) under the Credit
Facilities............................... 120,544 60,272
-------- -------
Total adjustment................. $102,040 $50,819
======== =======
</TABLE>
- ---------------
(1) Includes additional long-term debt associated with the Merger (Note D10) and
anticipated refinancing of Safety-Kleen historical long-term debt of
$214,271.
(2) At current rates pursuant to the terms of the Credit Facilities.
3. To adjust income taxes (benefits) to record the pro forma income
taxes (benefits) as computed under SFAS 109 on pro forma pre-tax income
(loss).
17
<PAGE> 27
4. Pro forma weighted average common and common stock equivalents
outstanding comprise:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
AUGUST 31, 1997 FEBRUARY 28, 1998
--------------- -----------------
<S> <C> <C>
Laidlaw Environmental weighted average
historical............................... $138,033 $181,523
Adjustment for Rollins acquisition......... $ 46,411
Additional Laidlaw Environmental shares to
be issued in connection with the Merger
(see Note B)............................. 166,123 166,123
Percentage of Laidlaw Environmental shares
held by former Safety-Kleen shareholders
after the Merger......................... 47.4% 47.9%
Laidlaw Environmental shares outstanding... 180,435 182,287
Pro forma Laidlaw Environmental shares..... 346,558 348,410
Pro forma weighted average total........... 350,567 347,646
-------- --------
Pro forma income (loss) per share.......... $ (0.676) $ 0.042
======== ========
</TABLE>
5. Diluted earnings per share amounts, which would include the
dilutive effect of the assumed conversions of securities convertible into
common shares, have not been included for the year ended August 31, 1997
nor for the six months ended February 28, 1997 as the effect of such
inclusion would be to increase earnings per share, and thus be
anti-dilutive.
The following adjustments and eliminations have been made to the unaudited
pro forma combined balance sheet to reflect the acquisition of Safety-Kleen by
Laidlaw Environmental using the purchase method of accounting for the Merger.
6. To write-up certain Safety-Kleen property, plant and equipment to
fair value. Total write-up represents $25,000 for land, $75,000 for land
improvements (parking lots, drainage systems, waste containment systems,
etc.) and $1,201,239 for buildings.
7. To eliminate the historical book value of Safety-Kleen's intangible
assets and record the goodwill resulting from the Merger as follows:
<TABLE>
<S> <C>
Eliminate historical Safety-Kleen intangible assets......... $(144,536)
Record goodwill arising form the Merger (See Note B)........ 751,870
---------
Net goodwill adjustment........................... $ 607,334
=========
</TABLE>
8. To adjust the historical book value of Safety-Kleen's other assets
as follows:
<TABLE>
<S> <C>
Write-off the estimated book value of Safety-Kleen's other
assets.................................................... $15,396
To eliminate cost of Safety-Kleen shares previously acquired
by Laidlaw Environmental.................................. 13,000
To eliminate unrealized gain on investment in Safety-Kleen
shares previously acquired by Laidlaw Environmental and
classified as securities available for sale............... 3,117
-------
Net other assets adjustment....................... $31,513
=======
</TABLE>
9. Laidlaw Environmental's management estimates that approximately $25
million of costs related to facility closures, severance costs and other
direct acquisition costs would be incurred in connection with the Merger,
these estimates of costs are not yet based on sufficient factual
information so as to be included as pro forma adjustments and are subject
to change as additional information becomes available.
18
<PAGE> 28
10. To record the additional long-term debt associated with the
Merger, as follows:
<TABLE>
<S> <C>
Cash component of acquiring outstanding Safety-Kleen
shares.................................................... $1,085,730
Termination fee associated with SK Parent Merger
Agreement................................................. 75,000
Cost of stock options....................................... 43,162
----------
Total long-term debt adjustment............................. 1,203,892
Less, current portion adjustment............................ (85,963)
----------
Net long-term debt adjustment..................... $1,117,928
==========
</TABLE>
11. To record the additional common stock associated with the Merger,
as follows:
<TABLE>
<S> <C>
Eliminate historical Safety-Kleen common stock.............. $ (5,919)
Issuance of additional Laidlaw Environmental stock (Note
B)........................................................ 166,123
--------
Total common stock adjustment..................... $160,204
========
</TABLE>
12. To record the impact on additional paid-in capital associated with
the Merger, as follows:
<TABLE>
<S> <C>
Eliminate historical Safety-Kleen paid-in capital........... $(212,504)
Issuance of additional Laidlaw Environmental stock.......... 519,133
---------
Total additional historical paid-in capital
adjustment...................................... $ 306,629
=========
</TABLE>
13. To eliminate historical Safety-Kleen retained earnings.
14. To record the impact on deferred income taxes as follows:
<TABLE>
<S> <C>
To record the incremental change in the Laidlaw
Environmental tax liability and benefit which results from
the adjustment of certain assets and the recording of
certain liabilities utilizing the Federal statutory rate
of 35% plus an effective state rate of 5%................. $ 520,496
To eliminate deferred taxes on unrealized gain on investment
in Safety-Kleen shares previously acquired by Laidlaw
Environmental and classified as securities available for
sale...................................................... (1,247)
---------
Total deferred tax adjustment..................... $ 519,249
=========
</TABLE>
15. To eliminate unrealized gain, net of deferred taxes on investment
in Safety-Kleen shares previously acquired by Laidlaw Environmental and
classified as securities available for sale.
19
<PAGE> 29
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Summary," "-- The Merger -- Certain
Federal Income Tax Consequences," and "-- Background of the Merger," "The
Merger -- Background of the Merger," "-- Safety-Kleen Reasons for the Merger;
Recommendation of Board of Directors," "-- Laidlaw Environmental Reasons for the
Merger," "-- Certain Federal Income Tax Consequences," and "Unaudited Pro Forma
Combined Financial Information" including any forecasts, projections and
descriptions of anticipated cost savings and synergies referred to therein, and
certain statements incorporated by reference from documents filed with the
Commission by Laidlaw Environmental and Safety-Kleen, including any statements
contained herein or therein regarding the development or possible assumed future
results of operations of Laidlaw Environmental's and Safety-Kleen's businesses,
the markets for Laidlaw Environmental's and Safety-Kleen's services and
products, anticipated capital expenditures, regulatory developments and the
effects of the Merger, any statements preceded by, followed by or that include
the words "believes," "expects," "anticipates," or similar expressions, and
other statements contained or incorporated by reference herein regarding matters
that are not historical facts, are or may constitute forward-looking statements
(as such term is defined in the Private Securities Litigation Reform Act of
1995). Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. The risks and uncertainties that may cause actual
results to differ include, among others, general economic conditions, risks
associated with acquisitions, fluctuations in operating results because of
acquisitions and variations in stock prices, changes in applicable federal,
state and local laws and regulations, especially environmental regulations,
alternate and emerging technologies, competition and pricing pressures,
overcapacity in the industry, seasonal fluctuations due to weather,
uncertainties of litigation, and risks associated with the operation, growth and
integration of the newly acquired businesses. As a result of these factors,
Laidlaw Environmental's revenue and income could vary significantly from quarter
to quarter, and past financial performance should not be considered a reliable
indicator of future performance. All subsequent written and oral forward-looking
statements attributable to Laidlaw Environmental or Safety-Kleen or persons
acting on either's behalf are expressly qualified in their entirety by the
cautionary statements set forth or referred to above in this paragraph.
Investors are cautioned not to place undue reliance on such statements, which
speak only as of the date hereof. Safety-Kleen and Laidlaw Environmental
undertake no obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events, except as may be
required by the federal securities laws.
20
<PAGE> 30
RISK FACTORS
In addition to the other information in this Proxy Statement/Prospectus,
the following are certain factors that should be considered by Safety-Kleen
shareholders in evaluating the Merger.
VALUE OF THE MERGER CONSIDERATION
In evaluating the Merger, Safety-Kleen shareholders should consider that
part of the consideration to be paid consists of 2.8 shares of Laidlaw
Environmental Common Stock. Such stock is publicly traded on the New York Stock
Exchange, and therefore, is subject to fluctuation in value. Accordingly, the
aggregate value of the Merger Consideration at the Effective Time will depend
upon the value of the Laidlaw Environmental Common Stock at that time.
UNCERTAINTIES IN INTEGRATING OPERATIONS AND ACHIEVING COST SAVINGS
Laidlaw Environmental and Safety-Kleen and certain direct and indirect
subsidiaries each are large enterprises with operations in different markets.
The success of any business combination, including the Merger, is in part
dependent on the ability following the Merger to consolidate operations and
integrate departments, systems and procedures and thereby obtain business
efficiencies, economies of scale and related cost savings. The consolidation of
operations, the integration of departments, systems and procedures and the
reallocation of staff present significant management challenges. There can be no
assurance that future consolidated results will improve as a result of the
Merger, or as to the timing or extent to which cost savings and efficiencies
anticipated by Laidlaw Environmental will be achieved. The pro forma financial
statements contained in this Proxy Statement/Prospectus do not include the
impact, positive or negative, of any cost savings or efficiencies related to
anticipated synergies. Laidlaw Environmental cannot presently quantify the
impact of achieving or failing to achieve anticipated synergies on Laidlaw
Environmental's earnings per share.
ABILITY TO EXERT SIGNIFICANT INFLUENCE
As of April 7, 1998, Laidlaw, Inc. ("Laidlaw") owned beneficially
approximately 35.8% of the outstanding Laidlaw Environmental Common Stock.
Laidlaw also holds a $350 million, 5% Subordinated Convertible Pay-In-Kind
Debenture due 2009 of Laidlaw Environmental (the "PIK Note"). For the first two
years after the issuance of the PIK Note, interest is automatically paid in
Laidlaw Environmental Common Stock and thereafter principal and interest may be
paid in Laidlaw Environmental Common Stock or cash at the election of Laidlaw
Environmental. The number of shares of Laidlaw Environmental 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
Laidlaw Environmental Common Stock on the NYSE-Composite Transactions for the
ten consecutive trading days selected by Laidlaw Environmental commencing not
more than 20 days before, and ending not later than, the date such payment is
due. Beginning on May 15, 2002, and continuing until the business day prior to
the repayment of the PIK Note, the PIK Note is convertible, in whole or in part,
at the option of the holder, into shares of Laidlaw Environmental Common Stock.
The conversion will be at a conversion price of $3.75 per share, subject to
adjustment under certain circumstances. Assuming that the entire principal
amount of the PIK Note is outstanding and the conversion price is $3.75 per
share, the PIK Note is convertible into 93,333,333 shares of Laidlaw
Environmental Common Stock. If the Merger is consummated, Laidlaw would
beneficially own 34.7% (and 48.5% taking into account the PIK Note) of the
outstanding shares of Laidlaw Environmental Common Stock. Despite the reduction
in Laidlaw's beneficial ownership, however, future sales by Laidlaw of
substantial amounts of Laidlaw Environmental Common Stock in the public market
(depending on how and when such sales are made), or the perception that such
sales could occur, could adversely affect the market price of the Laidlaw
Environmental Common Stock. Future sales by Laidlaw would increase the public
float of Laidlaw Environmental Common Stock, which increase could have a
positive impact on the market for, and market price of, Laidlaw Environmental
Common Stock.
The Board of Directors of Laidlaw Environmental is comprised of ten
members, three of whom were designated by Laidlaw, three by Rollins and three
jointly by Laidlaw and Rollins and one selected by the
21
<PAGE> 31
Board of Directors of Laidlaw Environmental. To Laidlaw Environmental's
knowledge, there are presently no agreements with respect to future nominations
to the Board of Directors of Laidlaw Environmental.
LEVERAGE
After consummation of the Merger, Laidlaw Environmental will be highly
leveraged with substantial debt service obligations, including principal and
interest obligations with respect to bank debt of as much as $2.1 billion.
Therefore, Laidlaw Environmental will be particularly susceptible to adverse
changes in its industry, the economy and the financial markets generally. In
addition, Laidlaw Environmental's ability to obtain additional debt financing
will be limited by restrictive covenants under the terms of its credit
agreements and any other debt instruments and those limits on financing may
therefore limit Laidlaw Environmental's ability to service its existing debt
obligations through additional debt financing if cash flow from operations is
insufficient to service such obligations.
ENVIRONMENTAL REGULATION
The operations of businesses of Laidlaw Environmental and Safety-Kleen are
subject to certain federal, state, territorial, provincial and local
requirements which regulate health, safety, environment, zoning and land-use.
Operating and other permits are generally required for incinerators, landfills,
transfer and storage facilities, certain collection vehicles, storage tanks and
other facilities owned or operated by Laidlaw Environmental Or Safety-Kleen, and
these permits are subject to revocation, modification and renewal. Although
Laidlaw Environmental believes that the facilities of Laidlaw Environmental and
(based on Safety-Kleen's public disclosures) Safety-Kleen meet federal, state
and local requirements in all material respects and have all of the required
operating and other permits, it may be necessary to expend considerable time,
effort and money to keep existing or acquired facilities of Laidlaw
Environmental and Safety-Kleen in compliance with applicable requirements,
including new regulations, and to maintain existing permits and approvals and to
obtain the permits and approvals necessary to increase their capacity.
Applicable requirements are enforceable by injunctions and fines or penalties,
including criminal penalties. These regulations are administered by the United
States Environmental Protection Agency (the "EPA") and various other federal,
state and local environmental and health and safety agencies and authorities,
including the Occupational Safety and Health Administration of the United States
Department of Labor and by the provincial environmental ministries in Canada.
The United States Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), imposes liability for damages and
the cleanup of sites from which there is a release or threatened release of a
hazardous substance into the environment on, among others, the current and
former owners and operators of such sites. Given the substantial costs involved
in a CERCLA cleanup and the difficulty of obtaining insurance for environmental
impairment liability, such liability could have a material impact on Laidlaw
Environmental's business, financial condition and future prospects.
With respect to various operating facilities, Laidlaw Environmental is
required to provide certain financial assurances with respect to certain
statutorily required closure and post-closure obligations. These financial
assurances may take the form of insurance, guarantees, bonds, letters of credit
or deposits of cash, to the extent acceptable to the United States, Canadian or
other foreign, state, territorial, federal, provincial or local courts,
executive offices, legislatures, governmental agencies or ministries,
commissions, or administrative, regulatory or self-regulatory authorities or
instrumentalities ("Governmental Entities") requiring such assurances. Following
the consummation of the Merger, Laidlaw Environmental will be obligated to
provide financial assurances for current Safety-Kleen operations as well. There
can be no assurance that Laidlaw Environmental will be able to provide the
required financial assurances without increased cost or at all.
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<PAGE> 32
Anticipated payments of environmental liabilities for Laidlaw Environmental
for each of the next five years and thereafter are as follows ($ in thousands):
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31
- ---------------------
<S> <C>
1998........................................................ $ 27,376
1999........................................................ 32,365
2000........................................................ 22,735
2001........................................................ 15,972
2002........................................................ 10,926
Thereafter.................................................. 170,687
--------
Total............................................. $280,061
========
</TABLE>
RISKS OF PENDING AND FUTURE LEGAL PROCEEDINGS
In addition to the costs of complying with environmental regulations,
hazardous waste treatment companies generally will continue to be involved in
legal proceedings in the ordinary course of business. Alleged failure by Laidlaw
Environmental or Safety-Kleen to comply with laws and regulations may lead to
the imposition of fines or the denial, revocation or delay of the renewal of
permits and licenses by Governmental Entities. In addition, such Governmental
Entities as well as surrounding landowners may claim that Laidlaw Environmental
or Safety-Kleen are liable for environmental damages. Citizens groups have
become increasingly active in challenging the grant or renewal of permits and
licenses for hazardous waste facilities, and responding to such challenges has
further increased the costs associated with establishing new facilities or
expanding current facilities. A significant judgment against Laidlaw
Environmental or Safety-Kleen, the loss of a significant permit or license or
the imposition of a significant fine could have a material adverse effect on
Laidlaw Environmental's business, financial condition and future prospects.
Laidlaw Environmental and Safety-Kleen are each currently a party to various
legal proceedings, as well as environmental proceedings which have arisen in the
ordinary course of its business. No assurance can be given with respect to the
outcome of these legal and environmental proceedings or the effect such outcomes
may have on Laidlaw Environmental. Although Laidlaw Environmental believes that
losses resulting from the ultimate resolution of such proceedings will not have
a material adverse effect on the business, financial condition or future
prospects of Laidlaw Environmental, an unfavorable resolution of any matter
individually or in the aggregate could have a material adverse effect on the
business, financial condition and future prospects of Laidlaw Environmental.
COMPETITIVE ENVIRONMENT
Laidlaw Environmental and Safety-Kleen operate in highly competitive
environments. In addition, the hazardous waste industry is changing as a result
of rapid consolidation. The future success of Laidlaw Environmental will be
affected by such changes, the nature of which cannot be forecast with certainty.
There can be no assurance that such developments will not create additional
competitive pressures on Laidlaw Environmental's business.
INTERNATIONAL OPERATIONS
Upon completion of the Merger, Laidlaw Environmental will have business
operations in the United States, Canada and Europe. Certain risks are inherent
in international operations, including the risks of differing regulation,
currency fluctuations and differing tax treatment. Laidlaw Environmental
currently operates under substantially Canadian and United States-based
environmental and other regulation. After the Merger, it will also be subject to
European regulation. Also, the relative value of United States dollar, Canadian
dollar and European currencies could change. The impact of future exchange rate
fluctuations on the results of operations cannot be accurately predicted. After
the Merger, Laidlaw Environmental will be subject to U.S., European and Canadian
tax laws and regulations. The application of United States and foreign tax laws
and regulations to Laidlaw Environmental and to intercompany relationships
created by the Merger will be subject to audit and review by independent
national tax authorities. In addition, business
23
<PAGE> 33
practices or laws in Europe may impose costs, restrictions or requirements on
such activities that differ in significant respects from the U.S. business
environment.
CYCLICAL AND SEASONAL NATURE OF BUSINESS
The hazardous waste business is cyclical to the extent that it is dependent
upon a stream of waste from cyclical industries. If those cyclical industries
slow significantly, the business that Laidlaw Environmental receives from those
industries is likely to slow. Also, Laidlaw Environmental's business is somewhat
seasonal in that less waste is received in winter months.
DIVIDENDS
Laidlaw Environmental has not paid cash dividends during the past two
fiscal years and does not presently anticipate paying any cash dividends in the
future. In addition, Laidlaw Environmental's existing credit facility precludes
the payment of cash dividends.
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to shareholders of
Safety-Kleen in connection with the solicitation of proxies by and on behalf of
Safety-Kleen's Board for use at the Special Meeting and any adjournments or
postponements thereof. The Special Meeting will be held on , May ,
1998, at , central time, in the .
MATTER TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, Safety-Kleen shareholders will be asked to consider
and act upon a proposal to approve and adopt the Merger Agreement. On March 15,
1998, the Safety-Kleen Board unanimously determined that the Merger Agreement
and the Merger are fair to and in the best interests of Safety-Kleen and its
shareholders and approved and adopted the Merger Agreement. THE SAFETY-KLEEN
BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT. See "The Merger -- Background of the Merger" and
"-- Reasons for the Merger; Recommendation of the Safety-Kleen Board."
VOTE REQUIRED
Approval of the Merger requires the affirmative vote of the holders of
two-thirds of the outstanding Shares. Each holder of Shares outstanding as of
the Record Date is entitled to one vote for each Share held.
AS OF THE RECORD DATE, LAIDLAW ENVIRONMENTAL AND ITS AFFILIATES OWNED
56,352,682 SHARES (APPROXIMATELY 94% OF THE OUTSTANDING SHARES) AND ACCORDINGLY
MAY APPROVE THE MERGER AGREEMENT AND THE MERGER WITHOUT THE APPROVAL OF ANY
OTHER SHAREHOLDERS. LAIDLAW ENVIRONMENTAL INTENDS TO VOTE, AND TO CAUSE ITS
AFFILIATES TO VOTE, "FOR" THE MERGER AGREEMENT AND THE MERGER.
RECORD DATE; VOTING AT THE SPECIAL MEETING
The Safety-Kleen Board has fixed April 8, 1998 as the record date for
determining shareholders entitled to notice of and to vote at the Special
Meeting (the "Record Date"). Only shareholders of record at the close of
business on the Record Date will be entitled to notice of and to vote at the
Special Meeting. On the Record Date, 60,101,962 Shares were outstanding and are
entitled to be voted at the Special Meeting.
Each holder of Shares on the Record Date will be entitled to one vote for
each Share held of record upon each matter properly submitted at the Special
Meeting. A majority of the Shares outstanding on the Record
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<PAGE> 34
Date will constitute a quorum for the transaction of business at the Special
Meeting. For quorum and voting purposes, abstentions and broker non-votes are
treated as present and entitled to vote, but have the effect of a vote "against"
the Merger Agreement. A "broker non-vote" occurs when a broker holding Shares
for a beneficial owner returns a proxy that does not vote on the proposal
because the broker has not received instructions from the beneficial owner and
does not have discretionary power.
PROXIES
If the enclosed Proxy Card is properly executed and received by
Safety-Kleen in time to be voted at the Special Meeting and not revoked, the
Shares represented thereby will be voted in accordance with the instructions
marked thereon. Executed proxies with no instructions indicated thereon will be
voted (i) "FOR" approval and adoption of the Merger Agreement and the Merger and
(ii) on such other business or matters which may properly come before the
Special Meeting in accordance with the best judgment of the persons named as
proxies in the enclosed form of proxy.
A proxy may be revoked prior to its being voted by: (i) delivering to the
Secretary of Safety-Kleen, at or before the Special Meeting, a written
instrument bearing a later date than the proxy which instrument, by its terms,
revokes the proxy; (ii) duly executing a subsequent proxy relating to the same
Shares and delivering it to the Secretary of Safety-Kleen at or before the
Special Meeting; or (iii) attending the Special Meeting and voting in person.
Attendance at the Special Meeting by a shareholder will not in and of itself
revoke a previously delivered proxy. Any written instrument revoking a proxy
should be sent to: Safety-Kleen Corp., One Brinckman Way, Elgin, Illinois 60123,
Attention: Scott Krill, Secretary of the Corporation.
Under Safety-Kleen's By-laws no business may be transacted at the Special
Meeting other than such business as is designated in the Notice of Special
Meeting of Shareholders.
INFORMATION CONCERNING THE SOLICITATION
The accompanying proxy is solicited on behalf of the Safety-Kleen Board.
The cost of soliciting proxies will be borne by Safety-Kleen. In addition to
solicitation by mail, directors, officers and employees of Safety-Kleen may
solicit proxies in person, or by telephone, telegram, personal interview,
e-mail, or facsimile, none of whom will receive additional compensation for such
solicitations. Safety-Kleen will request banks, brokerage houses and other
custodians, nominees and fiduciaries to forward its solicitation materials to
the beneficial owners of the Shares they hold of record and obtain authorization
for, and appropriate certification in connection with, the execution of Proxy
Cards. Safety-Kleen will reimburse these record holders for customary mailing
expenses incurred by them in forwarding these materials.
Except as set forth above, neither Safety-Kleen nor, to the best of
Safety-Kleen's knowledge, any person acting on its behalf has retained any
person to make solicitations or recommendations to security holders on its
behalf in connection with the solicitation of proxies.
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<PAGE> 35
THE MERGER
BACKGROUND OF THE MERGER
In August, 1997, Safety-Kleen announced that the Safety-Kleen Board had
engaged the services of William Blair to act as advisor to Safety-Kleen and
manage the process of exploring strategic options for enhancing shareholder
value. On November 20, 1997, after considering proposals from various interested
parties, including an initial offer from Laidlaw Environmental, Safety-Kleen
announced that it had entered into a merger agreement with SK Acquisition Corp.,
an affiliate of Philip Services Corp., Apollo Advisors, L.P. and Blackstone
Management Associates II, L.P. (the "Philip Merger"). Pursuant to the Philip
Merger, Safety-Kleen shareholders would receive $27.00 per Share in cash. Later
that day, Laidlaw Environmental increased its initial offer.
At a special meeting of Safety-Kleen shareholders on March 9, 1998,
Safety-Kleen failed to receive the necessary two-thirds vote to approve the
Philip Merger, and subsequently terminated its proposed merger agreement
therewith.
On March 10, 1998, Donald W. Brinckman, Chief Executive Officer, Edgar D.
Jannotta, a director and Joseph Chalhoub, President, of Safety-Kleen met with
Kenneth Winger, Chief Executive Officer of Laidlaw Environmental, and a
representative from Laidlaw Environmental's financial advisor to discuss
reaching mutually agreeable terms for the acquisition of Safety-Kleen by Laidlaw
Environmental. A further meeting was held on March 11, with Mr. Winger and
representatives of Laidlaw Environmental's financial and legal advisors and
Messrs. Jannotta and Chalhoub and representatives of Safety-Kleen's legal
advisors continuing the discussion of the previous day. Although these meetings
were unsuccessful, they were followed by further conversations about the Laidlaw
Environmental Offer through the parties' respective legal advisors from March 13
through March 15, 1998. During those meetings the parties discussed the terms on
which Safety-Kleen's Board would be willing to accept and enter into a merger
agreement with Laidlaw Environmental and continued to discuss the proposed terms
of a merger agreement.
On March 14, 1998, Safety-Kleen and Laidlaw Environmental entered into a
confidentiality agreement. On March 15, 1998, Laidlaw Environmental and
Safety-Kleen agreed to the amended terms of the Laidlaw Environmental Offer set
forth herein and the Merger Agreement, subject to the approval of their
respective Boards of Directors. The Boards of Directors of Laidlaw Environmental
and Safety-Kleen each approved the Merger Agreement on March 15, 1998. On March
16, 1998, the parties executed the Merger Agreement and issued press releases
announcing the execution of the Merger Agreement. The Merger Agreement provides
for the consummation of the Laidlaw Environmental Offer, on amended terms under
which each tendered Share was exchanged for $18.30 net in cash and 2.80 shares
of Laidlaw Environmental Common Stock, followed by a second-step merger for the
same per Share consideration subject to the conditions set forth therein.
On April 3 and April 7, 1998, Laidlaw Environmental and LES Acquisition
acquired in the aggregate 55,751,582 Shares pursuant to the Laidlaw
Environmental Offer.
On April 4, 1998, as contemplated in the Merger Agreement, Ms. Williams and
Messrs. Farmer, Gwillum, Jannotta, Otzen, Schrage and Wood resigned from the
Safety-Kleen Board and Messrs. Bullock, Haworth, Rollins, Thomas, Wareham,
Winger and Wrenn were elected as members of the Safety-Kleen Board. Each of
Messrs. Bullock, Haworth, Rollins, Thomas, Wareham, Winger and Wrenn is also a
member of the Laidlaw Environmental Board of Directors.
SAFETY-KLEEN REASONS FOR THE MERGER; RECOMMENDATION OF THE SAFETY-KLEEN BOARD
Following unsuccessful negotiations on March 10 and March 11, 1998,
representatives of Safety-Kleen and Laidlaw Environmental conducted negotiations
from March 13 through March 15, 1998, concerning the terms of the Merger
Agreement and the consideration payable thereunder. Also on March 14,
Safety-Kleen and Laidlaw Environmental entered into a confidentiality agreement.
As a result of these negotiations, Laidlaw Environmental agreed with
Safety-Kleen to amend the consideration in its proposed transaction to $18.30 in
cash and 2.80 shares of Laidlaw Environmental Common Stock.
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<PAGE> 36
At a special meeting of the Safety-Kleen Board on March 15, Safety-Kleen's
legal advisors advised the Safety-Kleen Board of the progress of the
negotiations with Laidlaw Environmental. The Safety-Kleen Board discussed the
Laidlaw Environmental Offer and the Merger, including the structure and the
improvements reflected in the revised Laidlaw Environmental Offer. William Blair
then made a presentation and rendered its written opinion to the effect that, as
of such date and based upon and subject to certain matters stated in such
opinion, the consideration to be received by the holders of Shares is fair to
such holders from a financial point of view, and reviewed with the Safety-Kleen
Board the financial analysis performed by it in connection with its opinion (see
"Opinions of Financial Advisor -- March 15, 1997 Opinion").
In the course of reaching its decision with respect to the Laidlaw
Environmental Offer, the Safety-Kleen Board, at its meeting on March 15, 1998,
consulted with Safety-Kleen legal counsel and William Blair, and considered a
number of factors, including, but not limited to:
(i) the Safety-Kleen Board's knowledge of Safety-Kleen's financial
performance and future opportunities and prospects;
(ii) the presentation of William Blair at the March 15, 1998
Safety-Kleen Board meeting and the written opinion of William Blair dated
March 15, 1998 that, based upon and subject to the matters set forth
therein and as of the date thereof, the revised Laidlaw Environmental Offer
Consideration to be received by Safety-Kleen's shareholders is fair to
Safety-Kleen's shareholders from a financial point of view; the full text
of the March 15, 1998 opinion of William Blair is attached hereto as Annex
C and should be read in its entirety (See "Opinions of Financial
Advisor -- March 15, 1998 Opinion" below);
(iii) the fact that at the conclusion of the process of exploring
strategic alternatives, the Philip Merger, providing for $27 per share all
cash consideration, failed to obtain the approval of Safety-Kleen
shareholders, leaving no viable alternative of comparable value to the
Laidlaw Environmental Transaction;
(iv) negotiated improvements reflected in the revised Laidlaw
Environmental Offer Consideration;
(v) the fact that the revised Laidlaw Environmental Offer
Consideration had a value of slightly over $30 (based on Laidlaw
Environmental's closing, stock price of $4.25 on March 13, 1998),
representing a premium of more than 68% over the closing, price of $17.81
per Share on August 7, 1997, the last trading day prior to the public
announcement that Safety-Kleen was considering strategic alternatives and
had retained William Blair in connection therewith; and
(vi) the terms and conditions of the Merger Agreement, including its
provisions concerning the improvement and protection, of benefits for
employees. The Safety-Kleen Board's consideration of these benefits was
part of its consideration under the Wisconsin Constituency Statute of the
effects of the Merger Agreement on Safety-Kleen's employees.
In addition, the Safety-Kleen Board considered the fact that Mr. Jannotta, a
Director of Safety-Kleen, is a Senior Director of William Blair.
The foregoing describes all material factors considered and given weight by
the Safety-Kleen Board in connection with its evaluation of the revised Laidlaw
Environmental Offer. In view of the variety of factors considered in connection
with its evaluation of the revised Laidlaw Environmental Offer, the Safety-Kleen
Board did not find it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determinations and recommendation. In addition, individual members of the
Safety-Kleen Board may have given different weight to different factors. The
Safety-Kleen Board viewed its position and recommendation as being based on the
totality of the information presented to and considered by it.
ENGAGEMENT OF FINANCIAL ADVISORS
Safety-Kleen retained the services of William Blair pursuant to a letter
agreement (the "William Blair Letter Agreement") dated August 8, 1997, to render
certain financial advisory and investment banking services in connection with
Safety-Kleen's analysis of strategic options including a possible business
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<PAGE> 37
combination (through tender offer, merger, sale or exchange of stock, sale of
all or a substantial part of its assets or otherwise) of Safety-Kleen with
another party (the "Possible Transaction"). In exchange for the services
provided, Safety-Kleen agreed to pay William Blair a quarterly retainer fee of
$25,000, payable in advance (with the first installment due upon execution of
the William Blair Engagement Letter), and an opinion fee of $300,000, payable in
the event William Blair renders a fairness opinion or advises the Safety-Kleen
Board that it is unable to render such an opinion. In addition, Safety-Kleen
agreed to pay William Blair an additional fee (subject to a credit of the
retainer fee and opinion fee) equal to 0.5% of the equity purchase price
received by Safety-Kleen and its shareholders as a result of the consummation of
any Possible Transaction. Consummation of the Laidlaw Environmental Offer
constituted a Possible Transaction. The William Blair Engagement Letter also
provides that Safety-Kleen shall reimburse William Blair for all itemized
out-of-pocket expenses (including reasonable fees and expenses of William
Blair's counsel and any other independent experts retained by William Blair)
reasonably incurred by William Blair in connection with its engagement by
Safety-Kleen. Safety-Kleen and William Blair also entered into a separate letter
agreement, dated August 8, 1997, whereby Safety-Kleen agreed to indemnify
William Blair against certain liabilities in connection with William Blair's
engagement under the William Blair Engagement Letter.
William Blair has provided certain investment banking services to
Safety-Kleen from time to time for which William Blair has received customary
compensation. Mr. Jannotta, a director of Safety-Kleen until April 4, 1998, is a
Senior Director of William Blair. In the ordinary course of its business,
William Blair and its affiliates may actively trade the debt and equity
securities of both Safety-Kleen and Laidlaw Environmental for their own accounts
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
LAIDLAW ENVIRONMENTAL REASONS FOR THE MERGER
The Merger provides Safety-Kleen shareholders the ability to participate in
the future growth of the combined Laidlaw Environmental and Safety-Kleen entity
and the potential appreciation of the value of its stock.
Strategic Fit. Laidlaw Environmental believes the combination of Laidlaw
Environmental and Safety-Kleen will bring together complimentary assets that on
a combined basis will be better able to compete in the hazardous waste
management marketplace. A service center network that links Laidlaw
Environmental's customers to its treatment and disposal facilities such as
landfills and incinerators is one of Laidlaw Environmental's primary operational
strengths. These service centers differentiate Laidlaw Environmental from its
competitors and allow for both responsiveness and accountability in managing a
customer's hazardous waste stream. Laidlaw Environmental believes the
acquisition of Safety-Kleen will further increase vertical integration of the
Laidlaw Environmental business and enhance its service centers' recovery
capabilities by processing waste streams collected by Safety-Kleen. In addition,
Laidlaw Environmental believes that its acquisition of Safety-Kleen will result
in a further strengthening of Laidlaw Environmental's market position by:
- providing additional service center market coverage in key geographic
regions including Kentucky, Minnesota, and New Jersey;
- introducing a smaller-sized customer base to compliment Laidlaw
Environmental's existing customer base of medium- and large-sized
customers; and
- providing significant expansion into the solvent recycling market.
Synergies. Upon consummation of the Merger, Laidlaw Environmental intends
to build upon Safety-Kleen's leading market presence and quality brand equity.
Laidlaw Environmental's management believes that annual cost savings of
approximately $100 to $130 million would result from the combination of the two
companies due to an anticipated elimination of duplicative head office and
regional office general and administrative and other public company costs, the
closure of forty (40) to fifty (50) overlapping service center facilities, the
increased utilization of those facilities that remain open from such
efficiencies as improved transportation route density, for example, and the
internalization of various waste streams.
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<PAGE> 38
These estimated cost savings from synergies are described in detail below.
Waste internalization. Laidlaw Environmental has estimated that
Safety-Kleen spends approximately $37 million annually for outside disposal of
hazardous wastes it generates, consisting of fuel blend material, as well as
waste disposed of at hazardous waste incinerators, landfills and wastewater
treatment facilities. Laidlaw Environmental currently receives an insignificant
amount of waste material for disposal from Safety-Kleen.
Laidlaw Environmental would internalize the incinerable and wastewater
waste materials for disposal at company owned facilities. The fuel blend
material would be either used as a fuel source or blended with solid waste
material for burning at Laidlaw Environmental's three solid hazardous waste
incinerator facilities. When used as a fuel source, Laidlaw Environmental avoids
incurring the cost of purchasing conventional fuel from third parties.
Based on the above, and taking into account an estimate for possible
incremental transportation costs, Laidlaw Environmental estimates the cost
savings from waste internalization to be $13.5 million to $25 million.
Facility consolidation. Laidlaw Environmental estimates that 40 to 50
processing and service center facilities can be rationalized and closed due to
the overlapping coverage areas of Laidlaw Environmental and Safety-Kleen
operations. These facility closure estimates are based upon a thorough review of
the 53 existing Laidlaw Environmental service center and processing facilities
and the 167 existing Safety-Kleen North American branch network and recycling
facilities.
Laidlaw Environmental obtained information on the Safety-Kleen facilities
from a variety of public sources to determine each facility's geographic
coverage and permit capabilities. The Safety-Kleen facilities were then
overlayed against the existing Laidlaw Environmental facilities to determine the
redundant operating locations. Based on this analysis, Laidlaw Environmental has
estimated that 5 processing facilities and 35 to 45 service center operations
could be closed.
Laidlaw Environmental estimates that the cost savings from these facility
closings would be approximately $2.0 to $2.5 million per processing facility and
$1.0 to $1.5 million per service center facility based on its historical
experience in cost savings achieved by Laidlaw Environmental following the
acquisition of Rollins Environmental Services, Inc. ("Rollins") and other
internal cost studies.
The cost savings per location are based on the concept that waste
collection and routing efficiencies would be achieved by combining the
transportation resources of the overlapping operating locations and reducing the
total number of vehicles and drivers required to service the existing combined
customer base. The closure of redundant facilities would also result in cost
savings related to the personnel and property costs associated with such
facilities.
Selling, general and administrative cost savings. Laidlaw Environmental
estimates that selling, general and administrative cost savings of approximately
$45 million to $60 million would be achieved through the elimination of
duplicative regional and head office costs. Laidlaw Environmental intends to
incorporate the Safety-Kleen operations directly into Laidlaw Environmental's
existing operational organization, which will result in the elimination of all
duplicate administrative support functions. These estimates are based on the
reduction of 600 to 800 personnel at annualized savings of $75,000 each.
Based on the estimated cost savings identified by Laidlaw Environmental
management, Laidlaw Environmental believes that it can achieve annualized
benefits of approximately $100 to $130 million. Laidlaw Environmental expects to
begin achieving cost savings within three months of the Merger, and to fully
implement the cost savings within the first year after consummation of the
Merger. Laidlaw Environmental will also consider the sale of Safety-Kleen's
European operations and its oil recovery business. This rationalization is
expected to strengthen Laidlaw Environmental's market position, improve the
overall industry fundamentals through capacity reduction and result in immediate
cost savings. Laidlaw Environmental management estimates that Laidlaw
Environmental will incur one-time costs of not more than $100 million relating
to facilities closure and severance expenses incurred in connection with
achieving these synergies. Through the successful merger with Rollins, which
took place in May of 1997, Laidlaw
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<PAGE> 39
Environmental has demonstrated its ability to manage the integration of an
acquisition and capitalize on the benefits that can accrue to merged companies
in its industry. To date, Laidlaw Environmental believes synergies achieved in
the Rollins merger, on an annualized basis, total approximately $90 million.
There can be no assurance, however, that after consummation of the Merger the
projected cost savings will be achieved or will be equal to those achieved in
the Rollins acquisition.
ACCOUNTING TREATMENT
The Merger, if consummated in accordance with the terms of the Merger
Agreement, will be treated as a purchase for accounting purposes. Accordingly,
under generally accepted accounting principles, the assets and liabilities of
Safety-Kleen will be recorded on the books of Laidlaw Environmental at their
respective fair market values at the time of the consummation of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of all the material anticipated federal
income tax consequences of the Merger. It does not address any tax consequences
of the Merger to persons who exercise appraisal rights, if any, in connection
with the Merger. This discussion does not apply to certain classes of persons
subject to special tax treatment, such as foreign persons, insurance companies,
tax-exempt organizations, financial institutions, dealers in securities, persons
who acquired Shares pursuant to the exercise of employee stock options or rights
or otherwise as compensation and persons who hold Shares as part of a straddle
or conversion transaction. This discussion is based upon laws, regulations,
ruling and decisions, all of which are subject to change (possible with
retroactive effect), and no ruling has been or will be requested from the
Internal Revenue Service (the "Service") on the tax consequences of the Merger.
The exchange of Shares for Laidlaw Environmental Common Stock and cash
pursuant to the Merger will be a taxable transaction for U.S. federal income tax
purposes and may also be taxable under applicable state, local and foreign tax
laws. In general, for U.S. federal income purposes, each Safety-Kleen
Shareholder will realize gain or loss equal to the difference between (x) the
amount of cash and the fair market value of the shares Laidlaw Environmental
Common Stock received and (y) the Safety-Kleen Shareholder's adjusted tax basis
in the Shares exchanged therefor. Such gain or loss will be capital gain or loss
if the Safety-Kleen Shareholder holds the Shares as a capital asset and will be
long-term gain or loss if the Safety-Kleen Shareholder's holding period for the
Shares is more than eighteen months. The Safety-Kleen Shareholder will have a
tax basis in the Laidlaw Environmental Common Stock received equal to the fair
market value thereof and the shareholder's holding period for the Laidlaw
Environmental Common Stock will begin on the day following the day of the
exchange.
Under federal income tax backup withholding rules, the payment agent is
required to withhold and remit to the United States Treasury 31% of the gross
proceeds paid to a shareholder or other payee pursuant to the Merger, unless an
exception applies under the applicable law or regulations (such as a Certificate
of Foreign Status on Form W-8), or unless the shareholder or other payee signs a
Substitute Form W-9 that provides his or her taxpayer identification number
(employer identification number or social security number) and certifies that
such number is correct. Therefore, unless such an exception exists and can be
proven in a manner satisfactory to Laidlaw Environmental and the payment agent,
each shareholder should complete and sign the Substitute Form W-9 which will be
included as part of the letter of transmittal from the payment agent to be used
to surrender shares for cash. The exceptions provide that certain shareholders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. In order for
a foreign individual to qualify as an exempt recipient, however, he or she must
submit a statement, signed under penalties of perjury, attesting to his or her
exempt status. Any amounts withheld will be allowed as a credit against the
shareholder's federal income tax liability, or in general, refunded by the
Internal Revenue Service ("IRS") assuming that the appropriate procedures are
followed.
The discussion relates to all of the material anticipated federal income
tax consequences of the Merger. The analysis contain herein does not address
state, local or foreign tax consequences of the Merger, and is not intended as a
substitute for careful tax planning, particularly since certain of the tax
consequences of the
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<PAGE> 40
Merger will not be the same for all taxpayers. Consequently, each holder should
consult such holder's own tax advisor as to the specific tax consequences of the
Merger to such holder.
REGULATORY APPROVALS
Consummation of the Merger requires filings with certain state governmental
authorities. Safety-Kleen and Laidlaw Environmental believe all other regulatory
approvals and/or waivers required to consummate the Merger have been obtained.
SOURCE AND AMOUNT OF FUNDS
The total funds required to pay the cash portion of the Merger
Consideration is approximately $68,611,824. Laidlaw Environmental has received
from a bank group agented by Toronto-Dominion Bank (Texas), Inc. ("TD") the
proceeds of Senior Secured Credit facilities in the aggregate principal amount
of up to $2.1 billion (the "Credit Facility"). The Credit Facility was arranged
by TD Securities (USA), Inc. ("TDSI"). Laidlaw Environmental, through its
subsidiary LES, Inc., is using the proceeds of the Credit Facility to fund the
cash portion of the Merger consideration, has refinanced Laidlaw Environmental's
and its subsidiaries' existing bank debt, will refinance Safety-Kleen's and its
subsidiaries' existing and outstanding indebtedness, has financed the
acquisition of Shares pursuant to the Laidlaw Environmental Offer and will pay
fees and expenses related to the Laidlaw Environmental Offer and the Merger. The
following is a summary of the principal terms of the loan agreement
memorializing the Credit Facility
The Credit Facility consist of five parts: (i) a $450,000,000 6-year Senior
Secured Revolving Credit Facility with a $300,000,000 loan sublimited and a
$200,000,000 letter of credit sublimit (the "Revolving Credit Facility" or
"Facility A"), (ii) a $480,000,000 6-year Senior Secured Amortizing Term Loan
("Facility B"), (iii) a $550,000,000 Minimally Amortizing 7 Year Senior Secured
Term Facility, (iv) a $550,000,000 Minimally Amortizing 8-year Senior Secured
Term Loan ("Facility D") and (v) a $60,000,000 6-year Senior Secured Amortizing
Term Loan Facility ("Facility E"); (Facility B, Facility C, Facility D and
Facility E, collectively, the "Term Loans"). The Credit Facility will be secured
by all of the tangible assets of the combined companies to the extent required
by the syndicate of banks and other financial institutions (collectively, the
"Lenders") acceptable to Laidlaw Environmental and the Agent that will make the
loans pursuant to the Credit Facility. All of the capital stock of Laidlaw
Environmental's subsidiaries, including the acquired Safety-Kleen subsidiaries,
will be pledged as part of such security for the Credit Facility, and such
subsidiaries will guaranty the obligations of Laidlaw Environmental to the
Lenders. The Term Loans have been drawn in full. Under the Revolving Credit
Facility, $200,000,000 is available for letters of credit and $300,000,000 is
available for loans, subject to an aggregate maximum of $450,000,000.
Facility A has no scheduled amortization. The Term Loans require aggregate
principal repayments of $86 million in each of years 1 and 2, $111 million in
each of years 3, 4, 5 and 6, $522.5 million in year 7 and $511.5 million in year
8.
Borrowings under the Credit Facility bear interest at a floating rate based
upon, at LES Acquisition's option, (i) the higher of the TD prime rate and the
federal funds rate plus 0.50% per annum, or (ii) the London Interbank Offered
Rate ("LIBOR") as determined by TD for the respective interest period, in each
case plus a margin based upon the total leverage ratio of LES Acquisition.
Laidlaw Environmental and its subsidiaries also have and will pay administration
fees, commitment fees, re-syndication fees (under certain circumstances),
certain expenses and provide certain indemnities, all of which Laidlaw
Environmental and its subsidiaries believe to be customary for commitments of
this type.
The Credit Facility contains conditions precedent, representations and
warranties, covenants (including financial covenants), events of default and
other provisions customary for such financings.
It is anticipated that the indebtedness incurred through borrowings under
the Credit Facility will be repaid from funds generated internally by Laidlaw
Environmental and its subsidiaries, and from other sources. No final decisions
have been made concerning the method Laidlaw Environmental will employ to repay
such indebtedness. Such decisions when made will be based on Laidlaw
Environmental's review from time to time
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of the advisability of particular actions, as well as on prevailing interest
rates and financial and other economic conditions.
DISSENTERS' RIGHTS
Under Sections 180.1301 through 180.1331 of the WBCL ("Subchapter XIII"),
dissenters' rights may be available to holders of Shares and beneficial
shareholders (each a "Dissenting Shareholder'), subject to the procedures
described therein, to object to the Merger and demand payment of the "fair
value" of their Shares in cash in connection with the consummation of the
Merger.
Dissenters' rights are available if the Merger is a "business combination"
(as defined in Section 180.1130(3) of the WBCL), or if the Shares are not
registered on a national securities exchange or quoted on the Nasdaq Stock
Market on the record date for notice to the shareholders of the Special Meeting
to vote on the Merger. The Merger will not be a "business combination" if
Safety-Kleen is not a "resident domestic corporation." For this purpose, the
term "resident domestic corporation" is defined to mean a Wisconsin corporation
that has a class of voting stock that is registered or traded on a national
securities exchange or that is registered under Section 12(g) of the Securities
Exchange Act of 1934 and that satisfies any of the following: (i) its principal
offices are located in Wisconsin; (ii) it has significant business operations
located in Wisconsin; (iii) more than 10% of the holders of record of its shares
are residents of Wisconsin; or (iv) more than 10% of its shares are held of
record by residents of Wisconsin. As of the record date for the Special Meeting
to vote on the Merger, the Shares continued to be registered on the New York
Stock Exchange ("NYSE"); whether Safety-Kleen is a "resident domestic
corporation" depends upon whether it would be deemed to have "significant
business operations" located in Wisconsin within the meaning of the statute,
which has not been determined.
If the Merger is a "business combination" and dissenters' rights are
available, the "fair value" of the Shares will be determined pursuant to Section
180.1130(9)(a) of the WBCL with reference to the public market price of the
Shares if available, or otherwise as determined in good faith by Safety-Kleen's
Board. The "fair value," as so determined, could be more or less than the value
per Share to be paid pursuant to the Merger.
In the case of a "business combination," the "fair value" of dissenters'
shares is defined by Section 180.1301(4) to mean "market value" as defined in
Section 180.1130(9)(a) 1 to 4. If a business combination involves securities
listed on the NYSE, such as the Shares, "market value" is defined as the highest
closing sales price per share reported on the NYSE during "the 30-day period
preceding the date on which the market value is to be determined."
If the Merger is a "business combination" under the WBCL and shareholders
of Safety-Kleen have the right to dissent from the Merger Agreement, Dissenting
Shareholders are required to follow certain procedures set forth in the WBCL to
receive in cash the fair value of their Shares. The following is a brief summary
of such procedures, which does not purport to be complete and is qualified by
reference to the actual statutes. Subchapter XIII is reprinted in its entirety
as Annex D hereto, together with Section 180.1130 of the WBCL to which it refers
because the Merger may be a "business combination" as defined therein, and the
summary herein is qualified by reference to the full text thereof.
HOLDERS OF SHARES SHOULD READ ANNEX D HERETO FOR A DESCRIPTION OF ALL
STATUTORY PROVISIONS RELATED TO DISSENTERS' RIGHTS.
Pursuant to Section 180.1321 of the WBCL, any shareholder or beneficial
shareholder desiring to assert dissenters' rights must do all of the following:
(i) deliver to Safety-Kleen, before the vote to approve the Merger Agreement is
taken, written notice which includes such Dissenting Shareholder's intent to
demand payment for such Shares if the proposed Merger Agreement is effectuated,
and (ii) not vote in favor of the Merger Agreement. Such written notice should
be sent to Safety-Kleen at One Brinckman Way, Elgin, Illinois 60123, must be
received by Safety-Kleen prior to the Special Meeting and must otherwise comply
with the applicable provisions of the WBCL. A VOTE AGAINST ADOPTION OF THE
MERGER AGREEMENT, IN PERSON OR BY PROXY, WILL NOT IN AND OF ITSELF CONSTITUTE A
NOTICE OF INTENT TO DEMAND PAYMENT SATISFYING THE REQUIREMENTS OF
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SUBCHAPTER XIII. A Dissenting Shareholder who fails to satisfy either or both of
clauses (i) and (ii) above is not entitled to payment for such Shares under
Subchapter XIII.
BECAUSE A PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL, UNLESS
REVOKED, BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT, A SHAREHOLDER WHO VOTES
BY PROXY AND WHO WISHES TO EXERCISE HIS DISSENTERS' RIGHTS MUST MARK THE PROXY
(I) TO VOTE AGAINST ADOPTION OF THE MERGER AGREEMENT OR (II) TO ABSTAIN FROM
VOTING ON ADOPTION OF THE MERGER AGREEMENT.
A shareholder or beneficial shareholder generally must assert dissenters'
rights for all Shares he beneficially owns. A record shareholder may assert
dissenters' rights as to fewer than all of the Shares registered in his name
only if the record shareholder dissents with respect to all Shares beneficially
owned by any one person and notifies Safety-Kleen of that person's name and
address. Any beneficial shareholder asserting dissenters' rights must also
submit to Safety-Kleen the written consent of all record shareholders of Shares
of which he is the beneficial owner no later than the time that the beneficial
shareholder asserts dissenters' rights.
Within ten (10) days after the Merger Agreement is approved at the Special
Meeting, Safety-Kleen will deliver a written dissenters' notice complying with
Section 180.1322 of the WBCL to each of its shareholders who has dissented to
the Merger Agreement in accordance with Section 180.1321 of the WBCL. Upon
receipt of such notice, each Dissenting Shareholder must demand payment in
writing and surrender the certificate or certificates representing such Shares
with respect to which he has dissented by the date specified in the dissenters'
notice as provided in Section 180.1323 of the WBCL. A Dissenting Shareholder who
does not demand payment within the designated time period is not entitled to
payment for his Shares and shall be bound by the Merger Agreement.
Upon receipt of a payment demand or on the day of the consummation of the
Merger, whichever is later, Safety-Kleen shall pay each Dissenting Shareholder
who has demanded payment the amount that Safety-Kleen estimates to be the fair
value of such Shares, plus accrued interest, as provided in Section 180.1325 of
the WBCL. A Dissenting Shareholder who does not agree with Safety-Kleen's
estimation of the fair value of his Shares or the amount of interest due must
notify Safety-Kleen of his estimate within thirty (30) days after Safety-Kleen
made or offered payment for such Shares, in accordance with Section 180.1328 of
the WBCL. If the Dissenting Shareholder and Safety-Kleen cannot agree upon the
fair value of the Shares or amount of interest due, Safety-Kleen must file a
petition in Dane County Circuit Court requesting a finding and determination of
the fair value of such Shares and the accrued interest thereon. If Safety-Kleen
fails to institute such a proceeding within sixty (60) days after the Dissenting
Shareholder notifies Safety-Kleen of his disagreement, Safety-Kleen shall pay
each of its dissenters whose demand remains unsettled the amount demanded by
such shareholder. See Sections 180.1330 and 180.1331 of the WBCL in Annex D for
the statutory provisions governing such a court proceeding.
OPINION OF FINANCIAL ADVISOR
MARCH 15, 1998 OPINION
At the March 15, 1998 meeting of the Safety-Kleen Board, William Blair
rendered its oral opinion (which opinion was subsequently confirmed by delivery
of a written opinion dated March 15, 1998), that, as of such date, and based
upon and subject to the factors and assumptions set forth in such opinion, the
consideration to be received by Safety-Kleen's shareholders in the Laidlaw
Environmental Offer and the Merger (the "Laidlaw Environmental Transaction") is
fair to Safety-Kleen's shareholders from a financial point of view. The full
text of William Blair's opinion to Safety-Kleen's Board dated as of March 15,
1998 is attached hereto as Annex C and is incorporated herein by reference and
should be read in its entirety in connection with this Proxy
Statement/Prospectus. The following summary of William Blair's opinion is
qualified in its entirety by reference to the full text of William Blair's
opinion; such summary speaks as of March 15, 1998, the date of the opinion.
William Blair's opinion was addressed to the Safety-Kleen Board for the purposes
of its evaluation of the Laidlaw Environmental Transaction and does not
constitute a recommendation to any Safety-Kleen shareholder.
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In connection with its opinion, William Blair reviewed a final draft of the
Merger Agreement, including its financial terms and conditions, as well as
certain financial and other information that was publicly available or furnished
to William Blair by Safety-Kleen, including certain internal financial analyses,
financial forecasts, reports and other information prepared by the management of
Safety-Kleen. William Blair held discussions with members of management of
Safety-Kleen concerning Safety-Kleen's historical and current operations,
financial condition and prospects. In addition, William Blair (i) compared the
financial position and operating results of Safety-Kleen with those of publicly
traded companies William Blair deemed relevant for its opinion; (ii) compared
certain financial terms of the Laidlaw Environmental Transaction to certain
financial terms of other selected business combinations William Blair deemed
relevant for its opinion and (iii) conducted such other financial studies,
analyses and investigations and reviewed such other factors as William Blair
deemed appropriate for the purposes of rendering its opinion. In connection with
William Blair's review of the Laidlaw Environmental Transaction and the
preparation of its opinion, William Blair: (a) analyzed the historical revenue,
operating earnings, net income, dividend capacity and capitalization of both
Laidlaw Environmental and certain other publicly held companies that William
Blair believes to be comparable to Laidlaw Environmental; (b) analyzed certain
publicly available financial and other information relating to Laidlaw
Environmental and the unaudited pro forma combined financial information in the
Amended Prospectus and performed a sensitivity analysis on such pro forma
financial information based upon variable synergy assumptions; (c) reviewed the
historical market prices and trading volume of the Laidlaw Environmental Common
Stock as well as its stock ownership and analyzed factors which could influence
the trading price of the Laidlaw Environmental Common Stock on the anticipated
closing date for the revised Laidlaw Environmental Offer; and (d) performed such
other analyses as William Blair deemed appropriate. William Blair's opinion with
respect to the Laidlaw Environmental Transaction reflects only limited access to
Laidlaw Environmental management and no access to internal Laidlaw Environmental
projections.
In rendering its opinion, William Blair relied upon and assumed the
accuracy, completeness and fairness of all of the financial and other
information that was available to it from public sources and that was provided
to William Blair by Safety-Kleen. With respect to the financial projections
supplied to William Blair, William Blair assumed that they were reasonably
prepared and reflected the best currently available estimates and judgments of
the management of Safety-Kleen as to the future operating and financial
performance of Safety-Kleen. William Blair's opinion relates to financial
fairness only as of the opinion date; no opinion is expressed as to the
soundness of the financial condition of Laidlaw Environmental subsequent to the
effective time of the Laidlaw Environmental Transaction. William Blair did not
assume any responsibility for making any independent evaluation of
Safety-Kleen's or Laidlaw Environmental's respective assets or liabilities or
for making any independent verification of any of the information reviewed by
William Blair.
William Blair's opinion was necessarily based on economic, market,
financial and other conditions as they existed on March 15, 1998, the date of
William Blair's opinion, and on the information made available to William Blair
as of such date. It should be understood that, although subsequent developments
may affect its opinion, William Blair does not have any obligation to update,
revise or reaffirm William Blair's opinion. The following is a summary of the
material factors considered and principal financial analyses performed by
William Blair to arrive at its opinion. William Blair performed certain
procedures, including each of the financial analyses described below, and
reviewed with the management of Safety-Kleen the assumptions upon which such
analyses were based, and other factors.
CURRENT NOMINAL VALUE RECEIVED IN THE REVISED LAIDLAW ENVIRONMENTAL OFFER
William Blair reviewed the revised Laidlaw Environmental Offer; pursuant to
its terms, Laidlaw Environmental and a subsidiary propose to exchange, for each
outstanding Share, cash in the amount of $18.30 plus 2.80 shares of Laidlaw
Environmental Common Stock. William Blair noted that on March 13, 1998, the
Laidlaw Environmental Common Stock closed at $4.25 per share. In addition,
William Blair noted that for the four days following the March 9, 1998
Safety-Kleen shareholders meeting at which the Philip Merger was not approved,
the average closing price of the Laidlaw Environmental Common Stock was $4.11,
and that the stock price at the time of the opinion of $4.25 would result in the
stock portion having a market
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value of $11.90 per Share. Therefore, at the time of the opinion, the nominal
value of the revised Laidlaw Environmental Offer was $30.20 per Share.
FACTORS WHICH COULD AFFECT LAIDLAW ENVIRONMENTAL'S SHARE PRICE PRIOR TO CLOSING
OF THE REVISED LAIDLAW ENVIRONMENTAL OFFER
William Blair identified several factors which could place downward
pressure on the price of the Laidlaw Environmental Common Stock prior to the
closing of the revised Laidlaw Environmental Offer. The analysis utilized the
same assumptions as set forth under "The Merger -- Opinions of Financial
Advisor -- December 20, 1997 Opinion" in Safety-Kleen's Schedule 14D-9 as
amended and restated on January 6, 1998 and "Recent Developments -- Opinion of
Financial Advisor -- January 31, 1998 Opinion" in the Safety-Kleen Schedule
14D-9 as amended on February 9, 1998. The principal factors include:
(1) Possible revision in financial analysts' estimates for accretion
in Laidlaw Environmental's fiscal 1998 EPS resulting from a combination of
Safety-Kleen and Laidlaw Environmental.
(2) Possible price/earnings multiple contraction in the Laidlaw
Environmental Common Stock prior to closing.
(3) The substantial market overhang resulting from the fact that
Safety-Kleen shareholders would receive approximately 164 million shares of
the Laidlaw Environmental Common Stock in the revised Laidlaw Environmental
Offer.
(4) The potential impact of an overall market correction.
Based on the foregoing, William Blair concluded that it is likely that
there would be some downward movement in the Laidlaw Environmental Common Stock
price following an announcement of a definitive agreement with Laidlaw
Environmental. However, William Blair noted that these factors have already been
communicated to investors and may already be influencing the Laidlaw
Environmental Common Stock price. Furthermore, William Blair opined that it is
unlikely that such downward movement would be of substantial magnitude prior to
closing.
SUMMARIES OF VALUATION ANALYSES
In connection with its opinion and the presentation of its opinion to the
Safety-Kleen Board, William Blair performed certain valuation analyses,
including: (i) a comparison with comparable publicly traded companies, (ii) a
discounted cash flow analysis, (iii) an analysis of certain comparable
acquisitions and (iv) a premium analysis. Such analyses are summarized below.
ANALYSIS OF CERTAIN PUBLICLY TRADED COMPANIES
William Blair reviewed and compared certain financial information relating
to Safety-Kleen to corresponding financial information, ratios and public market
multiples for nine publicly traded companies in the environmental services
industry. Five of these companies are solid waste management companies (the
"Solid Waste Comparables") and four are in the industrial waste management
industry (the "Industrial Waste Comparables"). The Solid Waste Comparables are
(i) Allied Waste Industries, Inc., (ii) Browning-Ferris Industries, Inc., (iii)
USA Waste Services, Inc., (iv) Waste Management, Inc. and (v) Waste Management
International PLC. The Industrial Waste Comparables are (i) Clean Harbors, Inc.,
(ii) Envirosource, Inc., (iii) Laidlaw Environmental and (iv) Philip Services,
Inc. William Blair selected these companies because they are publicly traded
companies which William Blair deemed most comparable to Safety-Kleen's
operations and financial condition. Although William Blair compared the trading
multiples of the selected companies at the date of William Blair's opinion to
the implied purchase multiples of Safety-Kleen, none of the selected companies
is identical to Safety-Kleen. The per Share price calculations based on such
multiples ranged from $24.24 to $28.18 per Share.
Among the information considered were revenue, operating income ("EBIT"),
earnings before interest, taxes, depreciation and amortization ("EBITDA"), net
income, earnings per share ("EPS"), gross profit
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margins, EBIT margins and net income margins, growth in revenues and net income,
return on assets and equity, and capital structure. The multiples and ratios for
Safety-Kleen and the comparable companies were based on the most recent publicly
available financial information and on EPS estimates for 1998 and 1999 from
First Call Corporation, and used the closing share prices as of March 13, 1998.
William Blair observed that the multiples of common stock share price
("Price") to EPS, as well as multiples of market equity value plus book value of
total debt (including minority interests and preferred stock) less cash and
equivalents ("Enterprise Value") to revenues, EBIT and EBITDA implied by the
terms of the Laidlaw Environmental Transaction compared favorably, from
Safety-Kleen's perspective, to the median of the corresponding multiples of the
comparable companies. Specifically, the terms of the revised Laidlaw
Environmental Offer implied 2.0x latest twelve month ("LTM") revenues, 17.0x LTM
EBIT and 10.2x LTM EBITDA. By comparison, the analysis of selected environmental
service companies resulted in a median multiple of 1.7x for Enterprise Value to
LTM revenues, 14.6x for Enterprise Value to LTM EBIT and 8.5x for Enterprise
Value to LTM EBITDA. The analysis of selected environmental service companies
also resulted in a median multiple of 26.8x for the Price to LTM EPS, 21.6x for
Price to estimated calendar 1998 EPS and 16.7x for Price to estimated calendar
1999 EPS. The terms of the revised Laidlaw Environmental Offer implied 28.2x for
Price to LTM EPS, 24.8x for Price to estimated fiscal 1998 EPS and 22.0x for
Price to estimated fiscal 1999 EPS.
DISCOUNTED CASH FLOW ANALYSIS
Using a discounted cash flow ("DCF") analysis, William Blair estimated the
net present value of the unleveraged free cash flows that Safety-Kleen could
produce on a stand-alone basis over a five-year period from 1998 to 2002. In
estimating these cash flows the management of Safety-Kleen made certain
assumptions about the operating performance of Safety-Kleen over the five-year
period. Such assumptions include assumptions regarding volume growth and pricing
in Safety-Kleen's principal businesses. Over the five-year period ending 2002,
Safety-Kleen management projected volume growth for three of Safety-Kleen's
principal businesses -- North American Parts Cleaner Services, North American
Industrial Waste Services and Automotive Parts Cleaner Services -- to be 3.2%,
5.0% and 0.0% and annual price increases to be 5.6%, 2.7% and 1.0%,
respectively. In its Oil Recovery Services business, Safety-Kleen management
projected revenue to increase at a compound annual rate of 11% over the
five-year period ending 2002. Approximately 62% of the Oil Recovery Services
growth is expected to result from increased sales of lubricating oils, primarily
blended products. Also, approximately 9% of the total increase in Oil Recovery
Services revenue over the same period reflects increases in base lubricating oil
from $0.91 in 1998 to $1.00 by 2001. The balance of the increase reflects
increases in oil collection volume and price. The estimates for cash flows are
based upon the assumption that markets for the hazardous waste industry and that
U.S. and international economic conditions remain relatively stable. Without
limitation, these cash flow estimates assumed that certain possible changes or
developments in Safety-Kleen's business, which could potentially favorably
impact value, would not affect cash flow during such period. In calculating the
"terminal value", William Blair assumed multiples of Enterprise Value to EBITDA
ranging from 6.0x to 8.0x, which multiples William Blair believed to be
appropriate for such an analysis. The annual and terminal free cash flows were
discounted to determine a net present value of the unleveraged equity value of
Safety-Kleen. Discount rates in a range of 10.0% to 12.0% were chosen based upon
an analysis of the weighted average cost of capital of the publicly traded
comparable group of companies described above. The DCF analysis indicated a
valuation of the equity of Safety-Kleen of between $1.5 billion to $1.8 billion,
or $24.95 to $29.56 per share. As a result, William Blair believes that the
price to be paid in the revised Laidlaw Environmental Offer compares favorably,
from Safety-Kleen's perspective, to the values indicated by the DCF analysis.
COMPARABLE ACQUISITIONS
William Blair performed an analysis of selected recent merger or
acquisition transactions in the environmental services industry. The selected
transactions were chosen based on William Blair's judgment that they were
generally comparable, in whole or in part, to the proposed transaction. In total
William Blair examined sixteen transactions that were announced between March
17, 1995 and March 11, 1998 involving
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certain environmental services companies. The selected transactions were not
intended to be representative of the entire range of possible transactions in
the environmental services industry. Although William Blair compared the
transaction multiples of these companies to the implied purchase multiples of
Safety-Kleen, none of the selected companies is identical to Safety-Kleen.
William Blair reviewed the consideration paid in such transactions in terms
of the Enterprise Value of such transactions as a multiple of revenues, EBIT and
EBITDA for the latest twelve months prior to the announcement of such
transactions. Additionally, William Blair reviewed the consideration paid in
such transactions in terms of the price paid for the common stock ("Equity
Purchase Price") of such transactions as a multiple of net income for the twelve
months prior to the announcement of such transactions. William Blair observed
that multiples of Equity Purchase Price to net income, as well as multiples of
Enterprise Value to revenues, EBIT and EBITDA implied by the terms of the
revised Laidlaw Environmental Offer compared favorably, from Safety-Kleen's
perspective, to the median of the corresponding multiples of the comparable
acquisitions.
Such analysis of the sixteen acquisitions in the environmental services
industry resulted in a median multiple of 1.7x for Enterprise Value to LTM
revenues, 18.2x for Enterprise Value to LTM EBIT, 9.3x for Enterprise Value to
LTM EBITDA and 25.3x for Equity Purchase Price to LTM net income. In contrast,
the implied purchase multiples for Safety-Kleen were 2.0x for Enterprise Value
to LTM revenues, 17.0x for Enterprise Value to LTM EBIT, 10.2x for Enterprise
Value to LTM EBITDA and 28.2x for Equity Purchase Price to LTM net income.
PREMIUM ANALYSIS
In addition to evaluating multiples paid in transactions in the
environmental services industry, William Blair considered, for twenty six
industrial transactions which were announced from March 29, 1996 to February 9,
1998 and whose Enterprise Value ranged from $783.4 million to $2.8 billion, the
premiums paid over each company's stock price prior to the announcement of a
transaction. The median premium paid in those transactions was 42.5%, 39.8% and
28.7%, respectively, over each company's stock price one month, one week and one
day before each respective announcement. In contrast, the premium paid over the
price of the Shares on July 8, 1997, August 1, 1997 and August 7, 1997, or one
month, one week and one day, respectively, prior to the announcement that
Safety-Kleen was evaluating strategic alternatives, was 75.1%, 71.3% and 69.6%,
respectively. As a result, William Blair believes that the premium paid over the
price of the Shares compares favorably, from Safety-Kleen's perspective, to the
values indicated by the premium analysis.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Safety-Kleen Board with respect to
the Merger, shareholders should be aware that certain directors and executive
officers may be deemed to have interests in the Merger, in addition to their
interests as shareholders. The Safety-Kleen Board has been and is aware of the
conflicts described below and considered them in addition to the other matters
described under "The Merger -- Safety-Kleen Reasons for the Merger;
Recommendation of the Safety-Kleen Board."
STOCK OPTIONS
As of March 13, 1998, directors and executive officers held in the
aggregate options to purchase 2,285,614 Shares (including 2,180,614 options
related to limited stock appreciation rights), including options that vested
upon consummation of the Laidlaw Environmental Offer. Upon consummation of the
Merger, all such options will be cancelled. The consideration for such
cancellation is as follows: (i) for directors who are not officers of
Safety-Kleen (each of whom resigned effective April 4, 1998), approximately the
following amounts: Richard T. Farmer, $94,500, Russell A. Gwillum, $94,500,
Edgar D. Jannotta, $94,500, Karl G. Otzen, $94,500, Paul D. Schrage, $94,500,
Marcia E. Williams, $216,375, and W. Gordon Wood, $94,500; and (ii) assuming
that the Shares do not trade at a price in excess of $30.30 prior to shareholder
approval of the Merger, for all directors and executive officers who served at
any time since the beginning of Safety-Kleen's
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last fiscal year as a group approximately $26,820,000, including approximately
[$6,350,000] for Mr. Brinckman. See "The Merger Agreement -- Stock Options."
INDEMNIFICATION AND INSURANCE
Pursuant to the Merger Agreement, Laidlaw Environmental has agreed that for
a period of six years after the Effective Time all rights to indemnification
existing in favor of present and former directors, officers, employees and
agents of Safety-Kleen or any of its subsidiaries, as provided in Safety-Kleen's
Articles of Incorporation (the "Safety-Kleen Articles") and By-Laws (the
"Safety-Kleen By-Laws") or the articles of incorporation and by-laws of any
Safety-Kleen subsidiary, as in effect on the date of the Merger Agreement, shall
survive the Merger and continue in full force and effect. Laidlaw Environmental
also agreed, subject to certain limitations, to cause to be maintained in effect
for not less than six years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by Safety-Kleen and its
subsidiaries with respect to matters occurring prior to the Effective Time. In
addition, the Merger Agreement provides that, without limiting the foregoing, in
the event any Indemnified Party becomes involved in any capacity in any action,
proceeding or investigation based in whole or in part on, or arising in whole or
in part out of, any matter, including the transactions contemplated by the
Merger Agreement, existing or occurring at or prior to the Effective Time, then
to the extent permitted by law, Laidlaw Environmental will cause Safety-Kleen
(or the Surviving Corporation if after the Effective Time) to, and Safety-Kleen
(or the Surviving Corporation if after the Effective Time) shall, periodically
advance to such Indemnified Party its legal and other expenses (including the
cost of any investigation and preparation incurred in connection therewith),
subject to the provision by such Indemnified Party of an undertaking to
reimburse the amounts so advanced in the event of a final determination by a
court of competent jurisdiction that such Indemnified Party is not entitled
thereto. The Merger Agreement also provides that Laidlaw Environmental must
cause Safety-Kleen (or the Surviving Corporation if after the Effective Time)
to, and Safety-Kleen (or the Surviving Corporation if after the Effective Time)
will, pay all expenses, including attorneys' fees, that may be incurred by any
Indemnified Party in enforcing such indemnity and other obligations provided for
in the Merger Agreement.
BENEFIT PLANS
The Merger Agreement provides that for a period of two years following the
Effective Time of the Merger, Laidlaw Environmental intends to provide employee
benefit plans and programs for the benefit of employees of the Surviving
Corporation and its subsidiaries that are in the aggregate no less favorable to
such employees than the employee benefit plans of Safety-Kleen and its
affiliates described in the Safety-Kleen disclosure schedule to the Merger
Agreement. All service credited to such employees by Safety-Kleen through the
Effective Time of the Merger shall be recognized by Laidlaw Environmental or the
Surviving Corporation for purposes of eligibility and vesting under any employee
benefit plan provided directly or indirectly by Laidlaw Environmental or the
Surviving Corporation for the benefit of the employees and in which the
respective employees participate.
The Merger Agreement also provides that Laidlaw Environmental shall cause
the Surviving Corporation: (i) to honor (without modification) and assume the
written employment agreements, severance agreements and other agreements listed
on the disclosure schedule to the Merger Agreement, all as in effect on the date
of the Merger Agreement; and (ii) not to terminate, or adversely amend in any
manner which adversely affects, the benefits described in the Company disclosure
schedule to the Merger Agreement that participants in such plans are entitled to
thereunder with respect to any periods prior to and including the Effective Time
of the Merger. The Merger Agreement also states that Laidlaw Environmental's
parent company intends to cause the Surviving Corporation to continue to
maintain an office in Elgin, Illinois. As permitted by the Merger Agreement, the
Safety-Kleen Board has authorized the payment of an aggregate of $3 million in
special bonuses to executive officers. Mr. Brinckman did not receive such a
bonus.
CHANGE OF CONTROL SEVERANCE AGREEMENTS
In August, 1997, Safety-Kleen entered into Change of Control Severance
Agreements with its 14 executive officers and five other employees of
Safety-Kleen who are not executive officers. The Safety-Kleen
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Board approved the Change of Control Severance Agreements in order to close the
gap between the prior change of control agreements adopted by Safety-Kleen in
1990 and current competitive practices for change of control agreements. Each
Change of Control Severance Agreement provides for, among other things: (a) a
three-year employment period, beginning on the date of a Change of Control (as
defined in such agreements; a Change of Control occurred upon consummation of
the Laidlaw Environmental Offer) at a guaranteed annual base salary equal to at
least 12 times the highest base monthly salary payable during the 12-month
period immediately preceding the Change of Control, with increases consistent
with increases in base salary awarded to other peer executives of Safety-Kleen;
(b) a guaranteed bonus for each bonus plan performance period (under each bonus
arrangement) ending within such three year employment period; (c) continued
participation in the incentive, savings, retirement, welfare and other fringe
benefit plans sponsored by Safety-Kleen; (d) full vesting on the date of the
Change of Control of all stock options (or a lump sum payment of the spread of
all non-vested, forfeited options); and (e) full payment on the date of the
Change of Control, of the value of the executive's accrued benefits under
Safety-Kleen's excess benefit, supplemental retirement and any other
nonqualified retirement plans.
If, during the three-year employment period, the executive's employment is
terminated by Safety-Kleen (other than for Cause (as defined in such agreements)
or by reason of the executive's death or disability), or if the executive
terminates employment for Good Reason (as defined in such agreements), the
executive will receive: (i) guaranteed annual base salary, guaranteed bonus and
accrued vacation pay through the date of termination; (ii) previously deferred
and unpaid compensation; (iii) an amount equal to three times the sum of the
executive's guaranteed base salary and guaranteed bonus in the year in which the
termination occurs; (iv) the value of the unvested portion of the executive's
accounts under qualified Safety-Kleen plans, (v) reimbursement for unpaid
benefits which would have accrued if the executive had remained employed by
Safety-Kleen until three years after the Change of Control under Safety-Kleen's
excess benefit and supplemental plans; and (vi) continuation of all medical,
life insurance and other welfare benefits for a period of three years from
termination. The sum of the amounts referred to in clauses (i) and (ii) is
referred to as the "Accrued Obligations".
If, during the three-year employment period, the executive's employment is
terminated (i) by the Surviving Corporation for Cause, as defined, the executive
is entitled only to his guaranteed base salary through the date of termination,
plus any deferred compensation and accrued vacation pay not previously paid;
(ii) by the executive other than for Good Reason, the executive is entitled only
to the Accrued Obligations; (iii) by Safety-Kleen for disability, the executive
is entitled to receive the Accrued Obligations and disability and other benefits
at least equal to the greater of those provided to peer executives by the
Surviving Corporation immediately prior to the executive's termination and those
provided to peer executives by Safety-Kleen at any time during the 90 day period
immediately preceding a Change of Control; and (iv) by the executive's death,
his estate is entitled to the Accrued Obligations and benefits at least equal to
the most favorable benefits provided to survivors of peer executives, and at
least as favorable in the aggregate as the most favorable provided to the
executive during the 90 days preceding closing of the Laidlaw Environmental
Offer.
Each of the Change of Control Severance Agreements provides that if it is
determined that benefits received by the executive thereunder (or otherwise) are
subject to any excise tax under Section 4999 of the Internal Revenue Code or any
similar excise taxes, then Safety-Kleen will also pay the executive an amount
(the "Gross-up Payment") such that, after the payment of all income and excise
taxes, the executive will be in the same after-tax position that he would have
been in had no excise tax been imposed.
Each Change of Control Severance Agreement contains a non-compete provision
that during the period of the executive's employment and for one year
thereafter, prohibits the executive from certain participation in the business
of any company engaged in business that directly or materially competes with
Safety-Kleen, and certain other competitive activity. Each such agreement also
obligates the executive to maintain the confidentiality of Safety-Kleen's
Confidential Information (as defined in such agreement).
Severance payments that would be made to the persons who are parties to the
Change of Control Severance Agreements in the event of their termination during
the three year employment period after the
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Change of Control (other than for Cause or by reason of the executive's death or
disability) are approximately $46,000,000 for all officers with Change of
Control Severance Agreements, including approximately $4,500,000 for Mr.
Brinckman.
Additional information relating to executive compensation and various
benefit arrangements of Safety-Kleen is set forth in and incorporated by
reference to the Safety-Kleen Information Statement.
INVESTMENT BANKING FEES
Mr. Jannotta, a director of the Company until April 4, 1998, is a Senior
Director of William Blair. William Blair will receive a fee from Safety-Kleen
upon consummation of the Merger. See "-- Engagement of Financial Advisors."
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THE MERGER AGREEMENT
Set forth below is a brief description of the material terms of the Merger
Agreement and related matters. This description does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement, which is
attached hereto as Annex A and is incorporated herein by reference.
LAIDLAW ENVIRONMENTAL OFFER
Pursuant to the Merger Agreement, Laidlaw Environmental and LES Acquisition
extended until March 31, 1998 at Midnight EST the Laidlaw Environmental Offer to
exchange the right to receive $18.30 in cash and 2.8 shares of Laidlaw
Environmental Common Stock for each outstanding Share, and Laidlaw Environmental
and LES Acquisition acquired in the aggregate 55,751,582 Shares validly tendered
pursuant to the Laidlaw Environmental Offer on April 3 and April 7, 1998.
GENERAL
The Merger Agreement provides that LES Acquisition will be merged with and
into Safety-Kleen, with Safety-Kleen becoming an indirect wholly-owned
subsidiary of Laidlaw Environmental. In the Merger, each outstanding Share
(other than Shares held by Laidlaw Environmental and its affiliates and treasury
shares) will be converted at the Effective Time (as defined below) into the
right to receive $18.30 net in cash and 2.8 shares of Laidlaw Environmental
Common Stock. Laidlaw Environmental will also make certain payments necessary to
satisfy Safety-Kleen's outstanding debt obligations. Immediately after the
purchase of Shares pursuant to the Laidlaw Environmental Offer, Safety-Kleen
made certain payments with respect to outstanding options under Safety-Kleen's
stock option plans.
As soon as practicable after the conditions to consummation of the Merger
described below have been satisfied or waived, and unless the Merger Agreement
has been terminated as provided below, articles of merger (the "Articles of
Merger") will be filed with the Secretary of State of the State of Wisconsin in
accordance with the relevant provisions of the Wisconsin Business Corporation
Law ("WBCL"), a certificate of merger (the "Certificate of Merger") will be
filed with the Secretary of State of the State of Delaware in accordance with
the relevant provisions of the General Corporation Law of the State of Delaware
("DGCL") and the parties will make such other filings, recordings or
publications required under the WBCL and the DGCL in connection with the Merger.
The Merger will become effective upon the date on which the Articles of Merger
have been received for filing by the Secretary of State of the State of
Wisconsin and the Certificate of Merger has been received for filing by the
Secretary of State of the State of Delaware, or such later date as is agreed
upon by the parties and specified in the Certificate of Merger and Articles of
Merger, and the time of such effectiveness is hereinafter referred to as the
"Effective Time." As a result of the Merger, the separate corporate existence of
LES Acquisition will cease and Safety-Kleen will continue as the surviving
corporation (the "Surviving Corporation") under the name "Safety-Kleen Corp.,"
and will become an indirect wholly-owned subsidiary of Laidlaw Environmental.
CONVERSION AND EXCHANGE OF SHARES
At the Effective Time, each Share issued and outstanding immediately prior
to the Effective Time (other than Shares owned by Laidlaw Environmental, LES
Acquisition or any subsidiary thereof or held in the treasury of Safety-Kleen or
any subsidiary of Safety-Kleen, which will be canceled without payment) will be
canceled and converted at the Effective Time into the right to receive $18.30
net in cash and 2.8 shares of Laidlaw Environmental Common Stock (the "Merger
Consideration").
Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of LES Acquisition issued and outstanding immediately prior to
the Effective Time shall be automatically converted into and become at the
Effective Time one share of common stock, par value $.01 per share, of the
Surviving Corporation.
Promptly after the Effective Time, each shareholder of record of
Safety-Kleen will be provided with written instructions from a payment agent
designated by Laidlaw Environmental, with the prior approval of
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Safety-Kleen (the "Exchange Agent") as to how Shares may be surrendered and
exchanged for payment of the Merger Consideration. Certificates evidencing
Shares should not be surrendered for payment prior to receipt of written
instructions from the Exchange Agent. As of the Effective Time, Laidlaw
Environmental will deposit with the Exchange Agent cash and Laidlaw
Environmental Common Stock sufficient to pay the Merger Consideration.
STOCK OPTIONS
The Merger Agreement provides that Safety-Kleen will (a) terminate its 1985
Stock Option Plan, 1993 Stock Option Plan and 1988 Non-Qualified Stock Option
Plan for Outside Directors (collectively the "Option Plans"), immediately prior
to the Effective Time without prejudice to the rights of the holders of options
awarded pursuant thereto and (b) grant no additional options or similar rights
under the Option Plans or otherwise on or after the date of the Merger
Agreement. "Options" is defined under the Merger Agreement to include each stock
option granted by Safety-Kleen, whether pursuant to the Option Plans or
otherwise.
Safety-Kleen has agreed in the Merger Agreement to cancel all Options
(whether or not then exercisable) that Safety-Kleen has the right to cancel, and
to use its best efforts to obtain the consent of each holder of any Options
(whether or not then exercisable) that it does not have the right to cancel, to
the cancellation of his Options, with all such cancellations to take effect
immediately prior to the Effective Time. For Options which may be settled at
exercise by issuance of Shares or cash payment pursuant to the terms of the
applicable Option Plan, Safety-Kleen has, in consideration of such cancellation,
paid to the holders of such Options, immediately after the purchase of Shares
pursuant to the Laidlaw Environmental Offer, for each Share subject to such
Option, an amount in cash equal to the excess, if any, of the Merger
Consideration (valued for this purpose at $30.30) over the per Share exercise
price of such Option, reduced by the amount of withholding or other taxes
required by law to be withheld. In the case of Options related to limited stock
appreciation rights ("LSARs"), for each Share subject to Options, Safety-Kleen
has paid or will pay (consistent with the rights under the Option Plans) upon
cancellation of such Options, an amount in cash equal to the excess, if any, of
the change of control value (generally, the highest price at which the Shares
traded in the 180 days prior to closing of the Laidlaw Environmental Offer or,
if greater, the Laidlaw Environmental Offer Consideration valued for this
purpose at $30.30), over the per Share exercise price of such Option, reduced by
the amount of withholding or other taxes required by law to be withheld.
Immediately prior to the purchase of Shares pursuant to the Laidlaw
Environmental Offer, directors, executive officers and other employees held in
the aggregate Options to purchase 3,857,152 Shares, 2,251,165 of which were
Options related to LSARs.
DIRECTORS AND OFFICERS; ARTICLES OF INCORPORATION AND BYLAWS; SEVERANCE
AGREEMENTS
The Merger Agreement provides that the directors of LES Acquisition
immediately prior to the Effective Time will be the initial directors of the
Surviving Corporation and that the officers of Safety-Kleen immediately prior to
the Effective Time will be the initial officers of the Surviving Corporation
except to the extent that Laidlaw Environmental designates other or additional
officers, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified. Although Laidlaw
Environmental anticipates making significant changes in the Safety-Kleen senior
management and executive officer team, Laidlaw Environmental has not yet
addressed specific changes in Safety-Kleen management. The Merger Agreement
provides that, at the Effective Time, the Articles of Incorporation and Bylaws
of the Surviving Corporation will be amended and restated as set forth in the
Merger Agreement.
The Merger Agreement provides that promptly following the purchase by
Laidlaw Environmental and LES Acquisition of Shares pursuant to the Laidlaw
Environmental Offer, but subject to compliance with Exchange Act Rule 14f-1,
Laidlaw Environmental shall be entitled to designate at its option up to that
number of directors, rounded to the nearest whole number, of Safety-Kleen's
Board of Directors, as will make the percentage of Safety-Kleen's directors
designated by Laidlaw Environmental approximately equal to the aggregate voting
power of the Shares held by Laidlaw Environmental (and LES Acquisition). On
April 4, 1998, Ms. Williams and Messrs. Gwillum, Farmer, Otzen, Wood, Jannotta
and Schrage resigned as directors of Safety-Kleen and Messrs. Winger, Bullock,
Rollins, Thomas, Wareham Wrenn and Haworth, designees of
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Laidlaw Environmental, were elected as directors of Safety-Kleen. Information
concerning such directors is contained in the Safety-Kleen Information
Statement. Following the election or appointment of Laidlaw Environmental's
designees and prior to the Effective Time, any amendment to the Restated
Articles of Incorporation or Bylaws of Safety-Kleen, any termination of the
Merger Agreement by Safety-Kleen, any extension by Safety-Kleen of the time for
the performance of any of the obligations or other acts of Laidlaw Environmental
or waiver or assertion of any of Safety-Kleen's rights under the Merger
Agreement, and any other consent or action by the Safety-Kleen Board with
respect to the Merger Agreement, will require the concurrence of a majority of
the directors (if any) not appointed by Laidlaw Environmental. Mr. Brinckman is
the sole remaining director not designated by Laidlaw Environmental.
REPRESENTATIONS AND WARRANTIES
Safety-Kleen, Laidlaw Environmental and LES Acquisition have made certain
representations and warranties to each other in the Merger Agreement.
Safety-Kleen represents and warrants, among other things, as to the organization
and qualifications to do business of Safety-Kleen and its significant
subsidiaries, its capitalization, its corporate authority to enter into and
perform the Merger Agreement and the absence of conflict of such actions with
its other obligations, and its ownership of its subsidiaries. Safety-Kleen also
makes certain representations and warranties concerning its financial reports,
the absence of certain changes and liabilities, employee benefit plans,
litigation and legal matters, labor matters, tax matters, environmental matters
and title to its properties. Laidlaw Environmental and LES Acquisition represent
and warrant, among other things, as to their respective organization and
qualification, capital stock, corporate authority to enter into and perform the
Merger Agreement and the absence of conflict of such actions with its other
obligations, and interim operations of Laidlaw Environmental and LES
Acquisition. Laidlaw Environmental also makes certain representations and
warranties concerning its financial reports, employee benefit plans, litigation
and legal matters, labor matters, tax matters, environmental matters and title
to its properties. The representations and warranties of Laidlaw Environmental,
LES Acquisition and Safety-Kleen will terminate upon consummation of the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Safety-Kleen has agreed that unless
Laidlaw Environmental shall otherwise agree in writing (which agreement shall
not be unreasonably withheld), prior to the Effective Time:
(a) the business of Safety-Kleen and its subsidiaries will be
conducted in the ordinary and usual course of business, and Safety-Kleen
will use its reasonable best efforts to maintain and preserve intact its
and its subsidiaries' business organization, assets, employees, officers
and consultants and advantageous business relationships;
(b) neither Safety-Kleen nor any of its subsidiaries will directly or
indirectly do any of the following: (i) except in the ordinary course of
business, sell, pledge, dispose of or encumber any assets of Safety-Kleen
or of any of its subsidiaries; (ii) amend its charter or by-laws or similar
organizational documents; (iii) split, combine or reclassify any shares of
its capital stock or declare, set aside, make or pay any dividend or
distribution payable in cash, stock, property or otherwise with respect to
any of its capital stock (except as contemplated by the Rights Agreement
and except for (x) cash dividends to shareholders of Safety-Kleen declared
in the ordinary course of business and consistent with past practice and
(y) dividends by wholly owned subsidiaries of Safety-Kleen); (iv) redeem,
purchase or otherwise acquire or offer to redeem, purchase or otherwise
acquire any capital stock of Safety-Kleen; (v) adopt a plan of liquidation
or resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of Safety-Kleen; or (vi) authorize or
propose any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(c) neither Safety-Kleen nor any of its subsidiaries will, directly or
indirectly, (i) except for Shares (and the associated Rights) issuable upon
exercise of options outstanding under the Option Plans on the date of the
Merger Agreement, issue, sell, pledge, dispose of or encumber, or
authorize, propose or agree to the issuance, sale, pledge, disposition or
encumbrance of, any shares of, or any options, warrants or
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rights of any kind to acquire any shares of or any securities convertible
into or exchangeable or exercisable for any shares of, its capital stock of
any class or any other securities in respect of, in lieu of, or in
substitution for Shares outstanding on the date hereof, (ii) make any
material acquisition, by means of merger, consolidation or otherwise, or
material disposition (other than disposition of assets in the ordinary
course of business), of assets or securities, or make any loans, advances
or capital contributions to, or investment in, any individual or entity
(other than to Safety-Kleen or a wholly owned subsidiary of Safety-Kleen);
(iii) except in the ordinary course of business, and other than
indebtedness to or guarantees for the benefit of Safety-Kleen or any
affiliate of Safety-Kleen and borrowings to fund payments to holders of
Options as contemplated by the Merger Agreement, incur any indebtedness or
issue any debt securities or assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for,
the obligations of any other individual or entity; (iv) change the
capitalization of Safety-Kleen (other than the incurrence of indebtedness
otherwise permitted in the Merger Agreement); (v) except in the ordinary
course, change any assumption underlying, or method of calculating, any bad
debt, contingency or other reserve; (vi) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, contingency or
otherwise), other than the payment, discharge or satisfaction of
liabilities in the ordinary course of business or as required by applicable
law; (vii) waive, release, grant or transfer any rights of value or modify
or change in any material respect any existing license, lease, contract or
other document, other than in the ordinary course of business; or (viii)
authorize any of the foregoing, or enter into or modify any contract,
agreement, commitment or arrangement to do any of the foregoing;
(d) except for the payment to holders of Options as contemplated by
the Merger Agreement, neither Safety-Kleen nor any of its subsidiaries will
(except for salary increases or other employee benefit arrangements in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to Safety-Kleen and its subsidiaries, taken as a whole, or as may
be required pursuant to any agreements in effect at the date of the Merger
Agreement) adopt or amend or take any actions to accelerate any rights or
benefits under (except as may be required by law) any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, severance, termination or other employee benefit
plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any employee or any officer or director or former employee or,
in the ordinary course of business, consistent with past practice, increase
the compensation or fringe benefits of any employee or former employee or
pay any benefit not permitted by any existing plan, arrangement or
agreement;
(e) except in the ordinary course of business, neither Safety-Kleen
nor any of its subsidiaries will make any tax election or settle or
compromise any federal, state, local or foreign income tax liability;
(f) except in the ordinary course of business, neither Safety-Kleen
nor any of its subsidiaries will permit any insurance policy naming it as
beneficiary or a loss payee to be cancelled or terminated without notice to
Laidlaw Environmental; and
(g) neither Safety-Kleen nor any of its subsidiaries will agree, in
writing or otherwise, to take any of the foregoing actions or any action
which would make any representation or warranty of Safety-Kleen in the
Merger Agreement untrue or incorrect so as to result in any change(s) or
effect(s) that, individually, or in the aggregate, are materially adverse
to the financial condition, properties, business of Safety-Kleen and its
subsidiaries taken as a whole, or that would prevent or materially delay
Safety-Kleen from performing its obligations under the Merger Agreement (a
"Material Adverse Effect").
NO SOLICITATION OF PROPOSALS
The Merger Agreement provides that Safety-Kleen (and its subsidiaries and
affiliates) will not, and will use their best efforts to ensure that their
respective directors, officers, employees, representatives and agents do not,
directly or indirectly, solicit or initiate inquiries or proposals from, or
provide any confidential information to, or participate in any discussions or
negotiations with, any person or entity (other than Laidlaw Environmental and
its subsidiaries and their respective directors, officers, employees,
representatives and
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agents) concerning (a) any merger, sale of assets not in the ordinary course
(except for any sale of assets otherwise permitted under the terms of the Merger
Agreement), or other similar transaction involving SafetyKleen or any subsidiary
or division of Safety-Kleen, or the sale of any equity interest in Safety-Kleen
or any subsidiary, or (b) any sale by Safety-Kleen or its subsidiaries of
authorized but unissued Shares or of any shares (whether or not outstanding) of
any of Safety-Kleen's subsidiaries (all such inquiries and proposals being
referred to herein as "Acquisition Proposals"), provided, however, that nothing
contained in such provisions of the Merger Agreement prohibits Safety-Kleen or
the Safety-Kleen Board from (i) subject to certain duties to consult with
Laidlaw Environmental and LES Acquisition, issuing a press release or otherwise
publicly disclosing the terms of the Merger Agreement; (ii) proceeding with the
transactions contemplated by the Merger Agreement; (iii) communicating to
Safety-Kleen's shareholders a position as contemplated by Rule 14e-2 promulgated
under the Exchange Act; (iv) making any disclosure to Safety-Kleen's
shareholders which, in the judgment of the Safety-Kleen Board, with the advice
of outside counsel, should reasonably be made under applicable law (including,
without limitation, laws relating to the fiduciary duties of directors) or (v)
taking any non-appealable, final action ordered to be taken by Safety-Kleen by
any court of competent jurisdiction; and, provided, further, that the
Safety-Kleen Board may, on behalf of Safety-Kleen, furnish or cause to be
furnished information and may direct Safety-Kleen, its directors, officers,
employees, representatives or agents to information, in each case pursuant to
appropriate confidentiality agreements, and to participate in discussions or
negotiations with any person or entity commencing any Acquisition Proposal which
was not solicited by Safety-Kleen or any of its subsidiaries or affiliates or
any of their respective directors, officers, employees, representatives or
agents, or which did not otherwise result from a breach of such non-solicitation
provisions of the Merger Agreement, if (x) the Safety-Kleen Board concludes in
good faith, after consultation with its financial advisor, that such person or
entity has made or is reasonably likely to make a bona fide Acquisition Proposal
for a transaction more favorable to Safety-Kleen's shareholders from a financial
point of view than the transactions contemplated hereby, and (y), in the opinion
of the Safety-Kleen Board, only after receipt of advice from its independent
legal counsel, the failure to provide such information or access or to engage in
such discussions or negotiations would cause the Safety-Kleen Board to violate
its fiduciary duties to Safety-Kleen's shareholders under applicable law (an
Acquisition Proposal which satisfies clauses (x) and (y) being hereinafter
referred to as a "Superior Proposal").
Safety-Kleen has agreed pursuant to the Merger Agreement to immediately
notify Laidlaw Environmental of the terms of any proposal, discussion,
negotiation or inquiry (and to disclose any written materials received by
Safety-Kleen in connection with such proposal, discussion, negotiation, or
inquiry) and the identity of the party making such proposal or inquiry which it
may receive in respect of any such transaction unless the Safety-Kleen Board
determines, based on the advice of outside legal counsel to Safety-Kleen, that
giving such notice would cause the Safety-Kleen Board to violate its fiduciary
duties to Safety-Kleen's shareholders under applicable law. Safety-Kleen agrees
pursuant to the Merger Agreement to, and to cause each subsidiary to,
immediately cease and cause to be terminated any existing activities,
discussions or negotiations by Safety-Kleen, its subsidiaries or any officer,
director or employee of, or investment banker, attorney, accountant or other
advisor or representative of, Safety-Kleen or any subsidiary with parties
conducted prior to the date of the Merger Agreement with respect to any of the
foregoing.
The Merger Agreement also provides that, except as set forth therein,
neither the Safety-Kleen Board nor any committee thereof shall (a) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Laidlaw
Environmental or LES Acquisition, the approval or recommendation by the
Safety-Kleen Board or any such committee of the Merger Agreement or the Merger,
(b) approve or recommend, or propose to approve or recommend, any Acquisition
Proposal, or (c) enter into any agreement with respect to any Acquisition
Proposal. Notwithstanding the foregoing, the Safety-Kleen Board may (subject to
the terms of this and the following sentence) withdraw or modify its approval or
recommendation of the Merger Agreement or the Merger, approve or recommend a
Superior Proposal or enter into an agreement with respect to a Superior Proposal
at any time after the second business day following Laidlaw Environmental's
receipt of written notice advising Laidlaw Environmental that the Safety-Kleen
Board has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal; provided that Safety-Kleen shall not enter into an agreement
with respect to a Superior Proposal unless Safety-Kleen has furnished Laidlaw
Environmental with written notice not later than noon
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(New York time) two business days in advance of any date that it intends to
enter into such agreement and caused its financial and legal advisors to
negotiate with Laidlaw Environmental to make such amendments to the terms and
conditions of the Merger Agreement as would make the Merger Agreement as so
amended at least as favorable to Safety-Kleen's shareholders from a financial
point of view as the Superior Proposal. In addition, the Merger Agreement
provides that if Safety-Kleen proposes to enter into an agreement with respect
to any Acquisition Proposal, it shall concurrently with entering into such
agreement pay, or cause to be paid, to Laidlaw Environmental the Termination
Amount (as defined and described in "-- Fees and Expenses" below). The Merger
Agreement also includes a provision authorizing the Safety-Kleen Board to
withdraw or modify the approval or recommendation by the Safety-Kleen Board of
the Laidlaw Environmental Offer or the Merger if there is a material adverse
change in the business or financial condition of Laidlaw Environmental prior to
consummation of the exchange pursuant to the Laidlaw Environmental Offer.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of the parties to cause the Merger to be
consummated are subject to the satisfaction or waiver of certain conditions,
including, among other things: (a) the approval of the Merger Agreement by the
vote of the holders of two-thirds of Safety-Kleen's outstanding Shares; (b) no
statute, rule, order, decree or regulation shall have been enacted or
promulgated by any domestic government or any agency or authority of competent
jurisdiction which prohibits the consummation of the Merger; (c) consummation of
the Merger shall not result in violation of any applicable United States federal
or state law providing for criminal penalties; and (d) no preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction in the United States preventing the consummation of the
Merger shall be in effect; provided, however, that the parties to the Merger
Agreement shall have used their best efforts to have any such injunction or
order vacated.
The obligation of Safety-Kleen to effect the Merger is further subject to
the condition that Safety-Kleen shall have received an opinion or certificate of
a reputable expert firm confirming the solvency of the Surviving Corporation
after the Merger and related financings addressed to or for the benefit of the
Safety-Kleen Board so that the Safety-Kleen Board is entitled to rely thereon
(the "Solvency Opinion Condition"). The Safety-Kleen Board received such an
opinion, dated April 1, 1998, from Houlihan, Lokey, Howard and Zukin in
connection with the closing of the Laidlaw Environmental Offer.
TERMINATION, AMENDMENT AND WAIVER
Termination. The Merger Agreement may be terminated, and the Merger
abandoned, prior to the Effective Time, either before or after its approval by
Safety-Kleen's shareholders, as follows: (a) by the mutual written consent of
Safety-Kleen and Laidlaw Environmental; or (b) by either Laidlaw Environmental
or Safety-Kleen if any governmental body or regulatory authority of the United
States of America shall have issued an order, decree or ruling or taken any
other action, in each case permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable; provided that such right to terminate the
Merger Agreement shall not be available to any party that has breached its
obligations under the Merger Agreement to use its commercially reasonable best
efforts to take such actions are necessary to consummate the transactions
contemplated by the Merger.
In the event of termination of the Merger Agreement by either Safety-Kleen
or Laidlaw Environmental, no party to the Merger Agreement (or any of its
directors, officers, employees, agents, legal and financial advisors or other
representatives) shall have any liability or further obligation to any other
party to the Merger Agreement, except with the respect to the covenants in the
Merger Agreement relating to confidential information and payment of expenses.
In addition, Laidlaw Environmental, LES Acquisition and Safety-Kleen will each
remain liable for any wilful breach by it of the Merger Agreement.
Amendment. Subject to the applicable provisions of the WBCL and the DGCL,
the Merger Agreement may be amended by the parties thereto, at any time before
or after any required approval of matters presented in connection with the
Merger by the shareholders of Safety-Kleen; provided, however, that after any
such approval, there shall be made no amendment that by law requires further
approval by such shareholders
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<PAGE> 56
without the further approval of such shareholders. The Merger Agreement may not
be amended except by an instrument in writing signed by the parties thereto.
After the purchase of Shares pursuant to the Laidlaw Environmental Offer but
prior to the Effective Time, any waiver by Safety Kleen under the Merger
Agreement requires the concurrence of a majority of the Safety-Kleen directors
(if any) not appointed by Laidlaw Environmental.
Waiver. Subject to the applicable provisions of the WBCL and the DGCL, at
any time prior to the Effective Time, any party to the Merger Agreement may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties thereto, or (b) subject to certain limitations after
shareholder approval has been obtained, waive compliance with any of the
agreements or conditions contained herein. In addition to the provisions
contained in the Merger Agreement regarding the failure to object to notice of
certain defaults, at any time prior to consummation of the Merger any party
thereto may waive any inaccuracies in the representations and warranties
contained herein or in any documents delivered pursuant thereto. Any agreement
on the part of a party to the Merger Agreement to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by such
party. After the purchase of Shares pursuant to the Laidlaw Environmental Offer
but prior to the Effective Time, any waiver by Safety-Kleen under the Merger
Agreement requires the concurrence of a majority of the Safety-Kleen directors
(if any) not appointed by Laidlaw Environmental.
FEES AND EXPENSES
The Merger Agreement provides that Safety-Kleen and Laidlaw Environmental
will each pay its own expenses in connection with the Merger Agreement and the
transactions contemplated thereby.
EFFECT ON BENEFIT PLANS AND RELATED MATTERS
The Merger Agreement provides that for a period of two years following the
Effective Time, Laidlaw Environmental intends to cause the Surviving Corporation
to provide employee benefit plans and programs for the benefit of employees of
the Surviving Corporation and its subsidiaries that are in the aggregate no less
favorable to such employees than the employee benefit plans of the Company and
its affiliates existing on the date of the Merger Agreement. All service
credited to each employee by Safety-Kleen through the Effective Time shall be
recognized by Laidlaw Environmental or the Surviving Corporation for purposes of
eligibility and vesting under any employee benefit plan provided directly or
indirectly by Laidlaw Environmental or the Surviving Corporation for the benefit
of the employees and in which the respective employees participate.
The Merger Agreement also provides that Laidlaw Environmental shall cause
the Surviving Corporation: (i) to honor (without modification) and assume
Safety-Kleen's written employment agreements, severance agreements and
consulting agreements, all as in effect on the date of the Merger Agreement; and
(ii) not to terminate or adversely amend in any manner which adversely affects
the benefits that participants in such plans are entitled to thereunder with
respect to any periods prior to and including the Effective Time. The Merger
Agreement also states that Laidlaw Environmental intends to cause the Surviving
Corporation to continue to maintain an office in Elgin, Illinois for two years
after the Effective Time.
NOTICES
Safety-Kleen, Laidlaw Environmental and LES Acquisition agree pursuant to
the Merger Agreement to give prompt notice to each other at any time from the
date of the Merger Agreement to the Effective Time of the obtaining by it of
actual knowledge as to the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause a breach of any covenant,
representation or warranty contained in the Merger Agreement so as to result in
a Material Adverse Effect or in a material adverse effect upon Laidlaw
Environmental or any of its affiliates. If any party receiving a notice shall
not object thereto within five business days after receiving such Default
Notice, then such party shall be deemed to have waived all rights accruing to it
as a result of such breach. A party shall object to such a Default Notice by
giving timely notice of such party's objection thereto as provided herein to the
party giving such notice. For purposes of this provision, the "actual knowledge"
of a party to the Merger Agreement means the best actual knowledge of its
chairman of the board, president and chief financial officer.
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<PAGE> 57
THE COMPANIES
SAFETY-KLEEN
Safety-Kleen is a leader in servicing the recycling and waste needs of
companies in the automotive/retail repair, industrial, imaging and other
business sectors. Over 2,800 Safety-Kleen specialists service customers from a
branch network that extends across North America and Western Europe. Focusing
primarily on the needs of smaller businesses, Safety-Kleen performed nearly five
million individual services and reclaimed more than 300 million gallons of
contaminated fluid through a network of 230 branches worldwide in 1996.
Safety-Kleen collects and recycles used products at thirteen recycle centers,
two lube oil re-refineries, and three fuel-blending facilities. Safety-Kleen
operates in the continental United States, Canada, the United Kingdom, the
Republic of Ireland, Puerto Rico, Belgium, France, Italy, Spain and Germany.
Safety-Kleen has licensee operations in Japan and Korea. Safety-Kleen Corp. was
incorporated in July, 1963 under the laws of the State of Wisconsin.
Safety-Kleen's principal executive offices are located at One Brinckman Way,
Elgin, Illinois 60123 and its telephone number is (847) 697-8460. For a more
detailed description of the business and properties of Safety-Kleen, see the
descriptions thereof set forth in Safety-Kleen's Annual Report on Form 10-K for
the year ended January 3, 1998, which is incorporated herein by reference. See
"Incorporation of Certain Documents by Reference."
LAIDLAW ENVIRONMENTAL
Laidlaw Environmental provides hazardous and industrial waste management
services throughout North America. Laidlaw Environmental collects, transports,
treats and disposes of waste by incineration, landfilling and other methods at
its facilities located in the United States and Canada. Laidlaw Environmental
also operates waste processing, recycling and repackaging facilities and has
analytical laboratories at its facilities in several states.
On May 15, 1997, pursuant to a February 6, 1997, stock purchase agreement
(the "Stock Purchase Agreement") between Rollins Environmental Services, Inc.
("Rollins") and Laidlaw Inc. ("Laidlaw"), Rollins acquired the hazardous and
industrial waste operations of Laidlaw ("Old LESI") (the "Acquisition"). The
Acquisition was accounted for as a reverse acquisition using the purchase method
of accounting. Rollins issued 120 million common shares and a $350 million 5%
subordinated convertible pay-in-kind debenture, and paid $349.1 million in cash
($400 million, less assumed debt of $50.9 million), to Laidlaw to consummate the
Acquisition. Coincident with the closing of the Acquisition, the continuing
legal entity changed its name from Rollins Environmental Services, Inc. to
Laidlaw Environmental Services, Inc. As a result of the Acquisition, Laidlaw
owns approximately 67% of the issued common shares of Laidlaw Environmental.
Laidlaw Environmental accordingly adopted Old LESI's fiscal year-end of August
31.
Old LESI consisted of all direct and indirect subsidiaries of Laidlaw
engaged in the hazardous and industrial waste business, other than JTM
Industries, Inc. and its subsidiary, KBK Enterprises, Inc. Prior to the
Acquisition, Old LESI provided hazardous and industrial waste services from 85
service locations in 26 states and seven Canadian provinces. Although Old LESI
was a conglomerate of separate entities, these entities conducted such services
primarily under the name "Laidlaw Environmental Services."
Laidlaw Environmental, in providing hazardous and industrial waste
services, is engaged in five primary lines, or classes, of business: (a) service
center; (b) landfill; (c) incineration; (d) transportation; and (e) specialty
services, including polychlorinated biphenyl ("PCB") management, wastewater
treatment and other specialty services.
Laidlaw Environmental's revenues and income are derived from one industry
segment principally in the United States, which includes the collection,
transportation, processing/recovery and disposal of hazardous and industrial
wastes. This segment renders services to a variety of commercial, industrial,
governmental and residential customers. Substantially all revenues represent
income from unaffiliated customers.
Laidlaw Environmental was incorporated in Delaware in 1968. Its principal
executive office is located at 1301 Gervais Street, Suite 300, Columbia, South
Carolina 29201 and its telephone number is 803-933-4200.
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<PAGE> 58
LES ACQUISITION, INC.
LES Acquisition, an indirect wholly owned subsidiary of Laidlaw
Environmental, is a newly formed Delaware corporation created for the sole
purpose of consummating the transactions contemplated by the Laidlaw
Environmental Offer and the Merger Agreement. LES Acquisition has not conducted
any activities other than those incident to its formation, its participation in
the Laidlaw Environmental Offer, its execution of the Merger Agreement and its
participation in the preparation of this Proxy Statement/Prospectus. As a result
of the Merger, LES Acquisition will be merged with and into Safety-Kleen, with
Safety-Kleen being the Surviving Corporation after the Merger.
49
<PAGE> 59
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the Share ownership as of April 8, 1998 of
(i) shareholders who, to the knowledge of Safety-Kleen, owned beneficially more
than 5% of the outstanding shares of Common Stock; (ii) each of Safety-Kleen's
directors; (iii) each executive officer; and (iv) Safety-Kleen's directors and
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME BENEFICIALLY OWNED
- ---- ------------------
<S> <C>
FIVE PERCENT SHAREHOLDERS:
Laidlaw Environmental Services, Inc....................... 56,352,682
DIRECTORS* AND EXECUTIVE OFFICERS**:
Donald W. Brinckman....................................... 175
Hyman K. Bielsky.......................................... 0
Roy D. Bullinger.......................................... 0
James R. Bullock.......................................... 0
Robert J. Burian.......................................... 0
Andrew A. Campbell........................................ 0
Michael H. Carney......................................... 0
Joseph Chalhoub........................................... 0
David A. Dattilo.......................................... 0
Lawrence Davenport........................................ 0
Scott E. Fore............................................. 0
F. Henry Habicht II....................................... 0
Leslie W. Haworth......................................... 0
John G. Johnson, Jr....................................... 0
Scott D. Krill............................................ 0
John W. Rollins, Jr....................................... 0
Clark J. Rose............................................. 0
Laurence M. Rudnick....................................... 0
C. James Schulz........................................... 0
David E. Thomas, Jr....................................... 0
James L. Wareham.......................................... 0
Robert W. Willmschen...................................... 0
Kenneth W. Winger......................................... 0
Grover C. Wrenn........................................... 0
All Directors and Executive Officers as a Group (24
persons)............................................... 175
</TABLE>
- ---------------
* In accordance with the terms of the Merger Agreement, on April 4, 1998 Ms.
Marcia E. Williams and Messrs. Russell A. Gwillum, Edgar D. Jannotta, Richard
T. Farmer, Karl G. Otzen, W. Gordon Wood and Paul D. Schrage resigned from
the Safety-Kleen Board and Messrs. Bullock, Haworth, Rollins, Thomas,
Wareham, Winger and Wrenn were appointed to the New Board. Each of the
newly-appointed directors is also a director of Laidlaw Environmental. For
information regarding the newly-appointed directors, see Annex B.
** Other than Mr. Brinckman, who with his wife currently owns 175 Shares, all
executive officers sold Shares prior to the expiration of the Laidlaw
Environmental Offer or tendered Shares in the Laidlaw Environmental Offer,
and all options held by such individuals were terminated prior to the date of
this Proxy Statement/Prospectus.
STOCK EXCHANGE LISTING
The Laidlaw Environmental Common Stock (with accompanying Rights) is listed
on the NYSE and the Pacific Exchange, Inc. (the "Pacific Exchange"). The Laidlaw
Environmental Common Stock to be issued pursuant to the Merger will (when
issued) be listed for trading on the NYSE and the Pacific Exchange.
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<PAGE> 60
DESCRIPTION OF LAIDLAW ENVIRONMENTAL CAPITAL STOCK
The authorized capital stock of Laidlaw Environmental consists of
750,000,000 shares of Laidlaw Environmental Common Stock, par value $1.00 per
share, and 1,000,000 shares of Laidlaw Environmental Preferred Stock, par value
$1.00 per share (the "Laidlaw Environmental Preferred Stock").
LAIDLAW ENVIRONMENTAL COMMON STOCK
As of April 7, 1998, there were 338,398,600 shares of Laidlaw Environmental
Common Stock issued and outstanding, 156,104,203 of which were issued to former
holders of Shares in connection with the closing of the Laidlaw Environmental
Offer. The holders of Laidlaw Environmental Common Stock are entitled to one
vote per share on all matters requiring stockholder action. The holders of the
Laidlaw Environmental Common Stock participate ratably in liquidation, subject
to the payment to the holders of any outstanding class of Laidlaw Environmental
Preferred Stock of the preferential amounts to which they are entitled.
Dividends on the Laidlaw Environmental Common Stock may be declared and
paid only out of surplus or net profits legally available for the payment of
dividends.
LAIDLAW ENVIRONMENTAL PREFERRED STOCK
Laidlaw Environmental is authorized to issue 1,000,000 shares of Laidlaw
Environmental Preferred Stock, which may be issued from time to time in one or
more series, each such series to have such distinctive designation or title as
may be fixed by the Laidlaw Environmental Board of Directors prior to the
issuance of any shares thereof. Each series may differ from each other series
already outstanding as may be declared from time to time by the Laidlaw
Environmental Board of Directors in the following respects: (i) the rate of
dividend; (ii) the amount per share, if any, which the Laidlaw Environmental
Preferred Stock shall be entitled to receive upon redemption, liquidation,
distribution or sale of assets, dissolution or winding up of Laidlaw
Environmental; (iii) terms and conditions of conversions, if any; and (iv) terms
of sinking fund, redemption or purchase account, if any. As of April 7, 1998,
Laidlaw Environmental had no Laidlaw Environmental Preferred Stock outstanding.
MARKET PRICES
The Laidlaw Environmental Common Stock is listed and principally traded on
the NYSE. The Shares are listed and traded on the NYSE. The following table sets
forth the range of high and low sales prices as reported on the NYSE Composite
Tape.
<TABLE>
<CAPTION>
LAIDLAW
ENVIRONMENTAL SAFETY-KLEEN
------------------- -------------------
PRICE RANGE PRICE RANGE
------------------- -------------------
HIGH LOW HIGH LOW
-------- ------- -------- -------
<S> <C><C> <C><C> <C><C> <C><C>
1995
First Quarter......................................... 5 1/2 4 17 7/8 14 1/2
Second Quarter........................................ 5 4 1/8 18 1/8 15
Third Quarter......................................... 5 1/4 4 1/4 18 12 7/8
Fourth Quarter........................................ 4 1/2 2 3/4 15 3/4 13 3/4
1996
First Quarter......................................... 3 1/8 2 15 7/8 13 3/8
Second Quarter........................................ 4 1/2 2 1/4 17 1/2 14 1/2
Third Quarter......................................... 4 1/8 2 5/8 18 5/8 15 1/8
Fourth Quarter........................................ 2 7/8 1 5/8 17 1/4 14 3/4
</TABLE>
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<PAGE> 61
<TABLE>
<CAPTION>
LAIDLAW
ENVIRONMENTAL SAFETY-KLEEN
------------------- -------------------
PRICE RANGE PRICE RANGE
------------------- -------------------
HIGH LOW HIGH LOW
-------- ------- -------- -------
<S> <C><C> <C><C> <C><C> <C><C>
1997
First Quarter............................................... 3 3/8 1 3/4 18 3/8 14 1/2
Second Quarter.............................................. 3 1/4 2 5/8 17 11/16 14 1/8
Third Quarter............................................... 5 15/16 2 7/8 26 16
Fourth Quarter.............................................. 5 3/4 4 1/8 29 18 1/2
1995
First Quarter............................................... 4 7/8 3 1/2 28 13/16 26
Second Quarter (through April , 1998).....................
</TABLE>
On November 3, 1997, the last trading day prior to the public announcement
of Laidlaw Environmental's offer to acquire Safety-Kleen, the closing sales
price per Share was $22.125, and the closing sales price per share of Laidlaw
Environmental Common Stock was $4.9375. On April , 1998, the closing price per
Share was $ , and the closing price per share of Laidlaw Environmental
Common Stock was $ . Past price performance is not necessarily
indicative of likely future price performance. Holders of Shares are urged to
obtain current market quotations for shares of Laidlaw Environmental Common
Stock.
Laidlaw Environmental has not paid cash dividends during the past two
fiscal years and does not presently anticipate paying any cash dividends in the
future. Laidlaw Environmental's existing credit facility precludes the payment
of cash dividends. The Bank Credit Facility also contains negative, affirmative
and financial covenants customarily found in credit agreements for financings
similar to the financing provided under the Bank Credit Facility, including
covenants limiting annual capital expenditures, restricting debt, guaranties,
liens, mergers and consolidations, sales of assets and payment of dividends. See
"The Merger -- Source and Amount of Funds."
Safety-Kleen has paid a cash dividend for 76 consecutive quarters since
March 1979 (including cash dividends of $.09 per Share in 1996 and 1997 and the
first quarter of 1998). Safety-Kleen expects to continue this policy prior to
consummation of the Merger, although there is no assurance as to future
dividends, which are dependent upon future earnings, capital requirements, the
financial condition of Safety-Kleen, contractual restrictions and such other
factors as the Board of Directors may deem relevant. The Merger Agreement
generally prohibits the payment of cash dividends by Safety-Kleen except those
declared in the ordinary course of business and consistent with Safety-Kleen's
past practice. See "The Merger Agreement -- Conduct of Business Pending the
Merger."
The Rights are listed on the NYSE, but are currently attached to all
outstanding Shares and may not be traded separately. Upon the occurrence of the
Safety-Kleen Distribution Date, the Rights are to trade separately from the
Shares.
LAIDLAW ENVIRONMENTAL AND SAFETY-KLEEN COMPARATIVE PER SHARE DATA
The following table sets forth comparative per share data of Laidlaw
Environmental and Safety-Kleen on both a historical and pro forma combined
basis. This table should be read in conjunction with each entity's historical
financial statements and notes thereto as set forth in the filings incorporated
by reference herein and in conjunction with the unaudited pro forma combined
financial information appearing elsewhere in this Proxy Statement/Prospectus.
See "Laidlaw Environmental and Safety-Kleen Unaudited Pro Forma Combined
Financial Information."
The pro forma information set forth below gives effect to (a) the Rollins
acquisition described under the heading "Laidlaw Environmental/Rollins Pro Forma
Combined", and (b) the Rollins acquisition, the Laidlaw Environmental Offer, the
Merger and the other transactions described herein under the heading "Laidlaw
Environmental/Safety-Kleen Pro Forma Combined", as if each had occurred as of
September 1, 1996. Both the Rollins acquisition and the Merger and pending
acquisitions have been presented using the
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<PAGE> 62
purchase method of accounting. This information does not reflect the estimated
cost savings of the Rollins acquisition, nor the cost savings of approximately
$100 to $130 million that Laidlaw Environmental management believes may result
from the Merger. The pro forma combined per share data is not necessarily
indicative of actual results of operations of Laidlaw Environmental, Rollins,
and Safety-Kleen had the transactions assumed therein occurred on the dates
specified, nor are they indicative of future expected results.
<TABLE>
<CAPTION>
LAIDLAW
ENVIRONMENTAL/
LAIDLAW SAFETY-KLEEN SAFETY-KLEEN
ENVIRONMENTAL SAFETY-KLEEN PRO FORMA PRO FORMA
HISTORICAL HISTORICAL COMBINED(1) EQUIVALENT(2)
------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Book value per common share:
August 31, 1997........................... $ 1.82 $ 8.49 $ 3.04 $ 8.51
February 28, 1998......................... 1.92 8.95 2.97 8.32
Year ended August 31, 1997:
Basic income (loss) per common share from
continuing operations(4)............... (1.329) 1.040 (0.676) (1.893)
Cash dividends(3)......................... -- 0.360 -- --
Six months ended February 28, 1998:
Basic income per share.................... 0.075 0.640 0.042 0.118
Diluted income per share.................. 0.069 -- -- --
</TABLE>
- ---------------
(1) See "Laidlaw Environmental and Safety-Kleen Selected Unaudited Pro Forma
Financial Information."
(2) The Safety-Kleen pro forma equivalent represents the Laidlaw
Environmental/Safety-Kleen pro forma combined book value, dividends and
income (loss) per common share multiplied by the Exchange Ratio of 2.8.
(3) Laidlaw Environmental has not paid cash dividends during the past two fiscal
years and does not presently anticipate paying any cash dividends in the
future. In addition, Laidlaw Environmental's credit facility arranged
through TD Securities (USA), Inc., precludes the payment of cash dividends.
(4) Diluted earnings per share have not been included for the historical year
ended August 31, 1997, nor for the pro forma six months ended February 28,
1998 as the effect of assumed conversion of potential common shares would be
to increase earnings per share, and thus be anti-dilutive.
VALIDITY OF LAIDLAW ENVIRONMENTAL COMMON STOCK
The validity of the shares of Laidlaw Environmental Common Stock offered
hereby will be passed upon for Laidlaw Environmental by Katten Muchin & Zavis,
525 West Monroe Street, Chicago, Illinois 60661.
LITIGATION
Between November 4 and 12, 1997, and on December 5, 1997, a total of seven
putative class actions were filed against Safety-Kleen and its directors in the
Circuit Court of Cook County, Illinois. The actions purport to have been brought
as derivative actions on behalf of Safety-Kleen. In general, the complaints
allege, among other things, that the director defendants (i) have refused to
seriously consider the Laidlaw Environmental Offer, and have failed to maximize
shareholder value by entertaining offers to purchase Safety-Kleen, (ii) have
breached their fiduciary and other common law duties due to plaintiffs and other
class members in that they have not exercised, and are not exercising,
independent business judgment and (iii) are acting to entrench themselves in
their offices and positions and maintain their salaries and prerequisites, all
at the expense and to the detriment of the public shareholders of Safety-Kleen.
As relief, the complaints seek, among other things (i) a declaration that the
action be certified as a proper class action; (ii) injunctive relief requiring
that the director defendants carry out their fiduciary duties to plaintiff and
other members of the class by announcing their intention to, among other things,
cooperate fully with any entity or person, including Laidlaw Environmental,
having a bona fide interest in proposing any transaction that would maximize
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<PAGE> 63
shareholder value; and (iii) damages, costs, and attorneys' fees. Safety-Kleen
and Laidlaw Environmental believe that the allegations contained in the
complaints are without merit and, if the plaintiffs elect to proceed with their
actions, intend to contest the actions vigorously on behalf of Safety-Kleen and
the Safety-Kleen Board. On December 5, 1997, six of the seven actions were
consolidated into a single action. On February 28, 1998, Safety-Kleen filed an
Answer denying the material allegations of the consolidated complaint and
asserting several defenses. On March 12, 1998, Safety-Kleen filed a motion for
judgment on the pleadings in the consolidated case.
On November 17, 1997, Safety-Kleen filed a lawsuit in Federal District
Court for the Northern District of Illinois against Laidlaw Environmental
seeking a declaratory judgment that Laidlaw Environmental violated the
"gun-jumping" prohibitions of federal securities laws by certain of its public
announcements made before the effectiveness of the registration statement with
the Commission relating to the Laidlaw Environmental shares proposed to be used
in its offer for Safety-Kleen. The suit also challenged Laidlaw Environmental's
asserted right under Wisconsin law to demand such a shareholders' meeting at
that time.
On November 24, 1997, Laidlaw Environmental answered the complaint, denying
liability and asserting several defenses. In addition, Laidlaw Environmental and
its subsidiary filed counterclaims against Safety-Kleen and its directors. The
counterclaims sought a declaratory judgment that Safety-Kleen is required to
hold a special meeting under Wisconsin law, and assert claims against
Safety-Kleen for violation of certain Wisconsin statutes pertaining to
furnishing of shareholder lists and takeovers, and against the directors for
breach of fiduciary duty in failing to negotiate with Laidlaw Environmental and
entering into the Philip Merger Agreement, including the termination fees and
expenses, and for failure to amend the shareholder rights plan to make it
inapplicable to the then pending Laidlaw Environmental exchange offer, and a
derivative claim for corporate waste.
On December 4, 1997, the Federal District Court of the Northern District
Court of Illinois ruled that Laidlaw Environmental could seek the approval of
Safety-Kleen shareholders at a special meeting to restore voting power to Shares
that Laidlaw Environmental may acquire in excess of 20% of the outstanding
Shares. Accordingly, Safety-Kleen scheduled a special meeting of shareholders on
January 9, 1998, to vote on such restoration of voting power at which
shareholders voted to restore such voting power. The Court also scheduled a
preliminary hearing for January 28, 1998, on Laidlaw Environmental's request
that the Rights Agreement be amended to make it inapplicable to the then-pending
Laidlaw Environmental exchange offer and that the Court void the termination fee
and certain other provisions of the Philip Merger Agreement.
On January 28, 1998, the parties commenced an evidentiary hearing on
Laidlaw Environmental's request that the Rights Agreement be amended to make it
inapplicable to the then-pending Laidlaw Environmental Offer, that the Court
order the Safety-Kleen Board to take action to make the Wisconsin Business
Combination Statute inapplicable to the then-pending Laidlaw Environmental
exchange offer and the Merger contemplated thereby, and that the Court void the
termination fee and certain other provisions of the Philip Merger Agreement. On
the first day of trial, Laidlaw Environmental voluntarily dismissed its claims
with respect to the termination fee. The hearing concluded on February 3, 1998.
On February 4, 1998, the United States District Court for the Northern District
of Illinois denied Laidlaw Environmental's requests for relief in an opinion
read from the bench, but not otherwise issued in written form.
On February 5, 1998, Laidlaw Environmental filed an Emergency Motion to
Compel Compliance with Securities Exchange Act of 1934 Rules 14d-9(b) and
14e-2(b). That motion sought an order compelling the Safety-Kleen Board to
respond immediately to Laidlaw Environmental's Amended Exchange Offer dated
January 28, 1998, and file an amended Schedule 14D-9 with respect to that
Amended Offer. The United States District Court for the Northern District of
Illinois denied that motion the same day.
On February 26, 1998, Laidlaw Environmental filed a new Motion for
Preliminary Injunction in which Laidlaw Environmental sought an order compelling
the Director Defendants (i) to amend the Rights Plan to make it inapplicable to
the then pending Laidlaw Environmental Offer or to redeem the rights; and (ii)
to make the Wisconsin Business Combination Statute, Wis. Stat. ss. 180.1140, et
seq. inapplicable to the Laidlaw Environmental exchange offer. The United States
District Court for the Northern District of Illinois
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<PAGE> 64
scheduled an argument for March 2, 1998, on the issue of when that motion should
be heard. On March 2, 1998, the Court set the motion for oral argument on
Thursday, March 5, 1998.
On March 5, 1998, the United States District Court for the Northern
District of Illinois denied Laidlaw Environmental's Motion for Preliminary
Injunction without prejudice, and set the motion for a full evidentiary hearing
at 10:30 a.m. on March 12, 1998. On March 12, 1998, the parties appeared in
court and jointly requested a postponement of the hearing. The Court held a
telephonic status hearing at 4:00 p.m. that same day. At that time, the parties
requested that the Court continue the status to March 13, 1998, at 2:25 p.m.
Prior to that time, the parties requested that the Court again reschedule the
status hearing for 2:00 p.m. on March 16, 1998.
The Merger Agreement includes a provision obligating the parties to take
all action necessary to dismiss with prejudice all pending litigation between
such parties. Accordingly, on March 16, 1998, the Federal District Court for the
Northern District of Illinois, on motion of the plaintiff, dismissed with
prejudice Laidlaw Environmental's action against Safety-Kleen, subject to
Laidlaw Environmental's right to reinstate the case on or before April 16, 1998.
Safety-Kleen believes Laidlaw Environmental's action to be without merit and
intends, if it were reinstated, to contest such action vigorously on behalf of
Safety-Kleen and the Safety-Kleen Board.
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES
AND LAIDLAW ENVIRONMENTAL COMMON STOCK
As a consequence of the exchange of Shares for shares of Laidlaw
Environmental Common Stock in the Laidlaw Environmental Offer and the
cancellation of Shares as a result of the Merger, shareholders of Safety-Kleen,
a company incorporated under the laws of the State of Wisconsin, will become
shareholders of Laidlaw Environmental, a Delaware corporation. The rights of
Safety-Kleen shareholders are currently governed by Wisconsin law (including the
Wisconsin Statutes), the Safety-Kleen Articles and the Safety-Kleen By-Laws.
Upon the exchange of Shares for Laidlaw Environmental Common Stock, the rights
of Safety-Kleen shareholders will be governed by Delaware law (including the
DGCL), the Laidlaw Environmental Certificate and the Laidlaw Environmental
By-laws.
The following is a summary of certain similarities and material differences
between the rights of holders of Shares and the rights of holders of Laidlaw
Environmental Common Stock. The summary discusses certain material aspects of
the rights of Safety-Kleen shareholders under Wisconsin law, the Safety-Kleen
Articles, the Safety-Kleen By-Laws and the Rights Agreement as compared with the
rights of Laidlaw Environmental stockholders under Delaware law, the Laidlaw
Environmental Certificate and the Laidlaw Environmental By-laws, but is
qualified in its entirety by reference to such laws and instruments, including
the aforementioned instruments of Safety-Kleen and Laidlaw Environmental.
Complete copies of all such laws and instruments may be obtained in the manner
set forth above under the caption "Available Information."
COMPARISONS OF DELAWARE AND WISCONSIN LAW -- SIMILARITIES
Modern corporation laws have evolved to the point where the laws of most
states contain substantially similar provisions regarding major features of
corporate existence. Certain relevant similarities between the DGCL and the
Wisconsin Statutes are described below:
Classified Board of Directors; Removal of Directors. Both the DGCL
and the Wisconsin Statutes allow the board of directors to be divided into
two or three classes. Under the DGCL, absent a provision to the contrary in
a corporation's certificate of incorporation, directors on a classified
board can be removed only for cause. The Wisconsin Statutes allow for the
removal of directors on a classified board with or without cause unless the
articles of incorporation or by-laws provide that the directors may be
removed only for cause.
Pursuant to the Laidlaw Environmental Certificate, Laidlaw
Environmental's Board of Directors is divided into three classes, with each
class serving a three-year term. Any director of Laidlaw Environ-
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mental may be removed at any time by the stockholders, but only for cause,
and only at a meeting of the stockholders called for that purpose by the
affirmative vote of the holders of 75% or more of the Shares of Laidlaw
Environmental entitled to vote at an election of directors. The
Safety-Kleen Articles provide that the Safety-Kleen Board will be divided
into three classes, with each class serving a three-year term. Safety-Kleen
directors may be removed only for cause and only by a vote of holders of
not less than two-thirds of the issued and outstanding shares of
Safety-Kleen.
Preferred Stock. The DGCL permits the Board of Directors to decrease
the number of authorized shares of any series of preferred stock (but not
below the number of shares then outstanding). The Wisconsin Statutes,
however, does not permit a Board of Directors to decrease the number of
shares in a series of preferred stock.
Laidlaw Environmental has one million shares of "blank check"
preferred stock authorized, none of which is issued. Safety-Kleen has one
million shares of "blank check" preferred stock authorized, none of which
is issued.
Required Vote for Authorization of Certain Actions. Both the DGCL and
the Wisconsin Statutes permit the authorization of a merger, dissolution or
disposition of substantially all the assets of corporations by the holders
of a majority of the outstanding shares of capital stock entitled to vote.
Under the Wisconsin Statutes, this majority shareholder vote also applies
to a share exchange.
Pursuant to the Laidlaw Environmental Certificate, any merger, sale,
lease, exchange, transfer or other disposition of assets of Laidlaw
Environmental having an aggregate fair market value of $5,000,000, or the
issuance of securities of Laidlaw Environmental having an aggregate fair
market value of $5,000,000, shall, if such transaction is to be consummated
with an "Interested Stockholder," require the affirmative vote of not less
than 75% of the outstanding Common Stock of Laidlaw Environmental. For
purposes of the Laidlaw Environmental Certificate, an "Interested
Stockholder" is a stockholder that owns, or upon consummation of the
transaction, will own, in excess of 30% of the voting securities of Laidlaw
Environmental, or is an affiliate of Laidlaw Environmental and at any time
within two years prior to the date of the transaction was a beneficial
owner of not less than 20% of the voting securities of Laidlaw
Environmental. Pursuant to the Safety-Kleen Articles, the affirmative vote
of not less than two-thirds of all outstanding voting securities of
Safety-Kleen is required for any merger, consolidation, sale, lease,
exchange or other disposition of all or substantially all of the property
or assets of Safety-Kleen.
Shareholder Action by Consent. Under the DGCL, unless the certificate
of incorporation provides otherwise, any action which may be taken by the
stockholders at a meeting may also be taken without a meeting by written
consent by the holders of such number of shares as, if present at a
meeting, could have so acted by vote. Under the Wisconsin Statutes,
shareholders may take action without a meeting by unanimous written
consent, or, if a Wisconsin corporation so elects in its articles of
incorporation, by less than unanimous written consent.
The Laidlaw Environmental By-Laws specifically deny stockholders the
right to take action without a meeting by written consent. The Safety-Kleen
Articles do not permit action by written consent of the shareholders with
less than unanimous written consent, and accordingly action by written
consent of the shareholders of Safety-Kleen would require unanimous
consent.
Interested Director Transactions. Under both the DGCL and the
Wisconsin Statutes, contracts or transactions in which one or more of the
corporation's directors has an interest are not void or voidable solely
because of such interest or because such director was present at the
directors' or shareholders' meeting where such contract or transaction was
approved, if certain conditions are met. Under the laws of both Wisconsin
and Delaware, if the director's interest is fully disclosed and a vote is
taken in good faith, such contracts or transactions may be approved by a
majority vote of the shareholders (excluding under the Wisconsin Statutes
shares held by the interested director or entities controlled by the
interested director) or of the disinterested directors. If the contracts or
transactions are shown to be fair and reasonable as to the corporation at
the time that they are authorized, approved or ratified by the board of
directors, then separate shareholder or disinterested director approval is
not required.
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Under the DGCL, a quorum for a separate determination by the board is
a majority of the total number of directors, with the interested director
counted for purposes of determining whether a quorum exists. Under
Wisconsin Statutes, a quorum is deemed to exist if a majority of directors
who have no interest in the transaction vote to authorize it; no separate
quorum determination is made. Finally, under Wisconsin Statutes shares
owned by or voted under control of an interested director or an entity in
which the interested director has a material financial interest or of which
he or she is a general partner may not be "counted" for purposes of a
shareholder vote respecting the transaction in which the director has an
interest.
Indemnification of Directors and Officers. Under the DGCL,
indemnification provisions are strictly elective. The Wisconsin Statutes
provides for mandatory indemnification of a director or officer against
certain liabilities and expenses (i) to the extent such officers or
directors are successful in the defense of a proceeding (whether brought in
the name of the corporation or by a third party) and (ii) in proceedings in
which the director or officer is not successful in the defense thereof,
unless (in the latter case only) it is determined that the director or
officer breached or failed to perform his or her duties to the corporation
and such breach or failure constituted (a) a willful failure by the
director or officer to deal fairly with the corporation or its shareholders
in connection with a matter in which the director or officer had a material
conflict of interest; (b) a violation of the criminal law, unless the
director or officer had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was
unlawful; (c) a transaction from which the director or officer derived an
improper personal profit; or (d) willful misconduct. The Wisconsin Statutes
specifically state that it is the public policy of Wisconsin to require or
permit indemnification in connection with a proceeding involving securities
regulation, as described therein, to the extent otherwise required or
permitted under the Wisconsin Statutes as described above. The Wisconsin
Statutes also do not limit indemnification of expenses in connection with a
claim by or on behalf of the corporation as is mandated by the DGCL.
The DGCL permits a corporation to adopt a provision in its certificate
of incorporation that limits the monetary liability of the corporation's
directors to the corporation or its stockholders for a breach of the
director's fiduciary duty of care. The Laidlaw Environmental Certificate
contains such a provision. Under the DGCL, a corporation may not limit a
director's monetary liability for (i) any breach of the director's duty of
loyalty to the corporation or its stockholders; (ii) an act or omission not
in good faith or involving intentional misconduct or knowing violation of
law; (iii) the payment of unlawful dividends or unlawful stock repurchases
or redemptions; or (iv) any transaction in which the director received an
improper personal benefit.
Unlike the DGCL, the Wisconsin Statutes automatically limit the
liability of directors of Wisconsin corporations statutorily, without
requiring a provision in a corporation's articles of incorporation. Under
the Wisconsin Statutes, the personal liability of a director to the
corporation and its shareholders is eliminated, except where (a) the
liability is based on a breach of the director's duty (whether duty of care
or duty of loyalty) to the corporation and its shareholders and (b) such
breach constitutes (i) the director's willful failure to deal fairly with
the corporation or its shareholders in connection with a matter in which
the director had a material conflict of interest; (ii) a violation of
criminal law, unless the director had reasonable cause to believe that his
or her conduct was lawful or no reasonable cause to believe his or her
conduct was unlawful; (iii) a transaction from which the director derived
an improper personal profit; or (iv) willful misconduct. The DGCL does not
specifically define the type of conduct that constitutes a breach of a
director's "duty of loyalty," while clauses (i) and (iii) above define the
specific types of behavior under the Wisconsin Statutes that constitute a
breach of a director's duty of loyalty that would preclude elimination of
personal liability. Because of the vagaries of the DGCL in this regard, it
is possible that a broad interpretation of a breach of a director's duty of
loyalty under the DGCL could result in the imposition of personal liability
on a director under the DGCL when such conduct would be shielded from
liability under the Wisconsin Statutes. A director may also be found
personally liable to a corporation for the amount of a distribution made in
violation of the Wisconsin Statutes if the director's vote constitutes
conduct described in the preceding sentence.
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Both the Safety-Kleen By-Laws and the Laidlaw Environmental By-Laws provide
for indemnification to the fullest extent permitted by law.
COMPARISON OF DELAWARE AND WISCONSIN LAW -- DIFFERENCES
Although it is impractical to note all of the differences between the
corporation laws of Delaware and Wisconsin, the following is a summary of the
significant differences between the DGCL and the Wisconsin Statutes as
applicable to the Merger:
Corporate Franchise Taxes. Under Delaware law, corporations are
assessed a franchise tax based upon the "assumed par value" of their
outstanding shares or total shares issued, whichever is less. Wisconsin has
no comparable tax for domestic corporations.
Special Meetings of Shareholders. Under Delaware law, a special
meeting of stockholders may be called only by the Board of Directors. Under
Wisconsin law, a special meeting of shareholders must also be called by the
Board of Directors pursuant to a written demand of the holders of not less
than one-tenth of the votes entitled to be cast at such meeting or by such
other person as may be designated in the articles or by-laws.
The Laidlaw Environmental Certificate provides that special meetings
of the stockholders may be called only by the Chairman of the Board of
Directors, the President of Laidlaw Environmental or the Chairman of the
Executive Committee of the Board of Directors of Laidlaw Environmental. The
Safety-Kleen By-Laws provide that special meetings of the shareholders may
be called by the Chairman of the Board of Directors, the Board of
Directors, or the President of Safety-Kleen at the request of holders of at
least 10% of all votes entitled to be cast at a meeting of the
shareholders, if such shareholders meet certain notice requirements in
requesting a meeting.
Inspection of Corporate Records. The DGCL permits any stockholder of
record to inspect the corporate records of a corporation upon a good faith
showing of a proper purpose, and the stockholder list must be made
available for inspection at least 10 days before a stockholders' meeting
and may be inspected by any stockholder. By contrast, under the Wisconsin
Statutes, in order to inspect and copy the corporate records of a
corporation, including the shareholder list, a shareholder must be a
shareholder of record and either has been a shareholder of record of the
corporation for at least 6 months before making a demand or holds at least
5% of the outstanding shares of the corporation. Under the Wisconsin
Statutes, a shareholder's demand must also be made for a proper purpose. In
addition, under the Wisconsin Statutes, all shareholders may inspect the
shareholder list for a meeting beginning two business days after the notice
of a meeting of shareholders is given and ending at the conclusion of the
meeting.
Dividends. Under the DGCL, a corporation may pay dividends and
repurchase stock out of surplus and any net profits for the fiscal year in
which the dividend was declared or for the preceding fiscal year provided
that no payment may reduce capital below the amount of capital represented
by all classes of shares having a preference upon the distribution of
assets. Under the Wisconsin Statutes, the board of directors may authorize
and the corporation may make distributions to its shareholders unless after
such distribution the corporation would not be able to pay its debts as
they become due or its total assets after the distribution would be less
than the sum of its total liabilities, plus, unless the articles of
incorporation provide otherwise, the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution.
Dissenters' Rights. Under both Delaware and Wisconsin law, a
shareholder is entitled to receive payment of the fair value of the
shareholder's common stock if the shareholder dissents from a proposed
merger or consolidation. Under the DGCL, dissenters' rights are not
available in the case of a sale of all or substantially all of the assets
of a corporation. Dissenters' rights also are not available for
stockholders of the surviving corporation if the merger did not require the
approval of the stockholders of the surviving corporation or if the shares
of the Delaware corporation that is party to a merger or consolidation are
listed on a national securities exchange or designated as a national market
system security on an
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interdealer quotation system by the National Association of Securities
Dealers, Inc., or are held of record by not less than 2,000 persons and in
the merger or consolidation stockholders receive shares of stock of the
corporation surviving or resulting from the merger or consolidation and/or
shares of stock of any other corporation that are either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 persons
and/or cash in lieu of fractional shares of the foregoing or any
combination of the foregoing.
In addition to being applicable in the case of a merger, under the
Wisconsin Statutes, dissenters' rights may be available in the case of a
share exchange or sale of all or substantially all of the assets of a
Wisconsin corporation. Dissenters' rights may also be made applicable by
affirmative provision in the articles of incorporation, by-laws or a board
of directors' resolution in the case of certain amendments to the articles
of incorporation or other actions requiring a shareholder vote. Under the
Wisconsin Statutes, holders of record and beneficial owners of the Shares
may be entitled to dissenters' rights to object to the Merger and demand
payment of the "fair value" of their Shares in cash, if they properly
exercise such rights in connection with the consummation of the Merger in
accordance with the provisions of the Wisconsin Statutes. Such dissenters'
rights will not be available if the Shares are registered on a national
securities exchange or quoted on the National Association of Securities
Dealers, Inc., automated quotations system on the record date fixed to
determine the shareholders of the company entitled to notice of a
shareholders' meeting at which shareholders are to vote on the Merger,
unless the Merger would be a "business combination" as defined in Section
180.1130(3) of the Wisconsin Statutes. The Merger would not be a "business
combination" if, among other things, it is consummated as a short-form
merger under the Wisconsin Statutes (where Laidlaw Environmental owns 90%
or more of each class of outstanding shares of a subsidiary corporation, it
may merge the subsidiary corporation into itself upon adoption of a merger
agreement by the board of directors of a parent corporation and upon
complying with certain notice requirements, but without approval of the
shareholders of the parent or the subsidiary) or, at the time, Safety-Kleen
does not have a class of equity securities held of record by 500 or more
persons and at least 100 shareholders of record who have unlimited voting
rights and who are residents of the State of Wisconsin. "Fair Value" of the
Shares would be determined immediately before the consummation of the
Merger, excluding any appreciation or depreciation in anticipation of the
Merger unless such exclusion would be inequitable; provided, however, that
if the Merger is a business combination, "fair value" will be determined
pursuant to Section 180.1130(9)(a) of the Wisconsin Statutes with reference
to the public market price of the Shares if available or, if not available,
by a good faith determination of the Safety-Kleen Board. The "fair value"
as so determined, could be equal to, more or less than the value per Share
to be paid pursuant to the Laidlaw Environmental Offer and the Merger.
The foregoing summary of the rights of dissenting shareholders does
not purport to be a complete statement of the procedures to be followed by
shareholders desiring to exercise their dissenters' rights in connection
with the Merger. The preservation and exercise of dissenters' rights are
conditioned on strict adherence to the applicable provisions of the
Wisconsin Statutes.
Director and Officer Discretion. Under the provisions of Section
180.0827 of the Wisconsin Statutes (the "Wisconsin Stakeholder
Provisions"), in discharging his or her duties to the corporation and in
determining what he or she believes to be in the best interests of the
corporation, a director or officer may, in addition to considering the
effects of any action on shareholders, consider the effects of the action
on employees, suppliers, customers, the communities in which the
corporation operates and any other factors that the director or officer
considers pertinent. Under Delaware law, the consideration that a board may
give to nonstockholder constituencies is less clear. Under Delaware
judicial doctrine, a director may generally consider the effect of a
proposed action on nonstockholder constituencies when these interests are
not adverse to the interests of stockholders.
Anti-Takeover Statutes. DGCL Section 203 (the "Delaware Business
Combination Statute") applies to certain business combinations involving a
corporation and certain of its stockholders. Unless the corporation's
certificate of incorporation expressly provides that Section 203 of the
DGCL shall not
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apply, the Delaware Business Combination Statute prevents an "Interested
Stockholder" (defined generally as a person with 15% or more of the
corporation's outstanding voting stock) from engaging in a "Business
Combination" (defined to include a variety of transactions, including the
sale of assets, mergers and almost any related party transaction) with a
Delaware corporation for three years following the date such person became
an Interested Stockholder, unless (i) before such person became an
Interested Stockholder, the board of directors of the corporation approved
the transaction in which the Interested Stockholder became an Interested
Stockholder or approved the Business Combination; (ii) upon consummation of
the transaction which resulted in the Interested Stockholder becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by certain employee stock ownership plans); or (iii)
following the transaction in which such person became an Interested
Stockholder, the Business Combination is approved by the board of directors
of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting
stock of the corporation not owned by the Interested Stockholder. The
Delaware Business Combination Statute currently applies to Laidlaw
Environmental.
Sections 180.1140 to 180.1145 of the Wisconsin Statutes (the "Wisconsin
Business Combination Statute") regulate a broad range of "business combinations"
between a Wisconsin corporation and an "interested stockholder." The Wisconsin
Business Combination Statute defines a "business combination" to include a
merger or share exchange, sale, lease, exchange, mortgage, pledge, transfer or
other disposition of assets equal to at least 5% of the market value of the
stock or assets of the company or 10% of its earning power, or issuance of stock
or rights to purchase stock with a market value equal to at least 5% of the
outstanding stock, adoption of a plan of liquidation and certain other
transactions involving an "interested stockholder." An "interested stockholder"
is defined as a person who beneficially owns, directly or indirectly, 10% of the
voting power of the outstanding voting stock of a corporation or who is an
affiliate or associate of the corporation and beneficially owned 10% of the
voting power of the then outstanding voting stock within the last three years.
The Wisconsin Business Combination Statute prohibits a corporation from engaging
in a business combination (other than a business combination of a type
specifically excluded from the coverage of the statute) with an interested
stockholder for a period of three years following the date such person becomes
an interested stockholder, unless the board of directors approved the business
combination or the acquisition of the stock that resulted in a person becoming
an interested stockholder before such acquisition. Business combinations after
the three-year period following the stock acquisition date are permitted only if
(i) the board of directors approved the acquisition of the stock prior to the
acquisition date; (ii) the business combination is approved by a majority of the
outstanding voting stock not beneficially owned by the interested stockholder;
or (iii) the consideration to be received by shareholders meets certain
requirements of the statute with respect to form and amount. Unlike the
prohibition on business combinations in the Delaware Business Combination
Statute, which is inapplicable if the interested stockholder acquires at least
85% of the outstanding voting stock at the time of becoming an interested
stockholder or if during the three-year period of the prohibition the board of
directors and holders of two-thirds of the unaffiliated shares approve the
business combination, the Wisconsin Business Combination Statute's prohibition
on business combinations applies for three years after the acquisition of at
least 10% of the outstanding shares without regard to the percentage of shares
owned by the interested stockholder and cannot be avoided by subsequent action
of the board of directors or shareholders.
Sections 180.1130 to 180.1132 of the Wisconsin Statutes provide that
certain mergers, share exchanges or sales, leases, exchanges or other
dispositions of assets in a transaction involving a "significant shareholder"
are subject to a supermajority vote of shareholders (the "Wisconsin Fair Price
Statute"), in addition to any approval otherwise required. A "significant
shareholder" is defined as a person who beneficially owns, directly or
indirectly, 10% or more of the voting stock of a corporation or an affiliate of
the corporation which beneficially owned, directly or indirectly, 10% or more of
the voting stock of the corporation within the last two years. Such business
combination must be approved by 80% of the voting power of the corporation's
stock and at least two-thirds of the voting power of the corporation's stock not
beneficially held by the significant shareholder who is party to the relevant
transaction or any of its affiliates or associates, in each case voting
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together as a single group, unless the following fair price standards have been
met: (i) the aggregate value of the per share consideration is equal to the
higher of (a) the highest price paid for any common shares of the corporation by
the significant shareholder in the transaction in which it became a significant
shareholder or within two years before the date of the business combination; (b)
the market value of the corporation's shares on the date of commencement of any
tender offer by the significant shareholder, the date on which the person became
a significant shareholder or the date of the first public announcement of the
proposed business combination, whichever is higher; or (c) the highest
liquidation or dissolution distribution to which holders of the shares would be
entitled; and (ii) either cash, or the form of consideration used by the
significant shareholder to acquire the largest number of shares, is offered.
Under Section 180.1150 (the "Wisconsin Control Share Statute") of the
Wisconsin Statutes, the voting power of shares, including shares issuable upon
conversion of convertible securities or exercise of options or warrants, of an
"issuing public corporation" held by any person or persons acting as a group in
excess of 20% of the voting power in the election of directors is limited to 10%
of the full voting power of those shares, unless the articles of incorporation
otherwise provide. This restriction does not apply to shares acquired directly
from the issuing public corporation, in certain specified transactions, or in a
transaction in which the corporation's shareholders have approved restoration of
the full voting power of the otherwise restricted shares. The DGCL does not have
a similar provision.
Section 180.1134 (the "Wisconsin Defensive Action Restrictions") of the
Wisconsin Statutes provides that in addition to the vote otherwise required by
law or the articles of incorporation of an issuing public corporation the
approval of the holders of a majority of the shares entitled to vote is required
before such a corporation can take certain action while a takeover offer is
being made or after the takeover offer has been publicly announced and before it
is concluded. Under the Wisconsin Defensive Action Restrictions, shareholder
approval is required for the corporation to (i) acquire more than 5% of the
outstanding voting shares at a price above the market price from any individual
or organization that owns more than 3% of the outstanding voting shares and has
held such shares for less than two years, unless an equal offer is made to
acquire all voting shares; or (ii) sell or option assets of the corporation
which amount to at least 10% of the market value of the corporation, unless in
the case of this clause (ii) the corporation has at least three independent
directors and a majority of the independent directors vote to opt out of this
provision. The DGCL does not have a similar provision.
Statutory Shareholder Liability. Wisconsin law provides that shareholders
of Wisconsin domestic corporations and foreign corporations registered to do
business in Wisconsin are personally liable, up to the value of the
consideration paid to the corporation for their shares, for certain debts owed
to employees for services performed. While the Wisconsin Statutes specifies that
such liability is limited to the par value of the shares, this has been
interpreted by at least one Wisconsin trial court to mean the consideration paid
to a corporation for shares. This decision was affirmed by a split decision of
the Wisconsin Supreme Court with one justice abstaining. As a result, the
affirmance is without precedential effect. Delaware has set comparable
provisions. Delaware has no comparable provision.
"Going Private" Transactions. The securities regulations of the State of
Wisconsin (Wisconsin Administrative Code Section DFI-Sec. 6.05) contain
provisions that under certain circumstances may require a filing in connection
with the fairness of certain "going private" transactions. Laidlaw Environmental
believes such provisions are not applicable to the Laidlaw Environmental Offer
or the Merger.
OTHER COMPARISONS
Preemptive Rights. No shareholder of Safety-Kleen or Laidlaw Environmental
has preemptive rights with regard to shares of common or preferred stock.
Shareholder Rights Plan. Safety-Kleen has entered into the Rights
Agreement pursuant to which Shares in issue on or after November 9, 1988 entitle
the holder thereof to one Right, subject to certain exceptions.
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Laidlaw Environmental is a party to a similar agreement which is triggered
by a tender offer for or acquisition of 15% or more of the issued and
outstanding Laidlaw Environmental Common Stock.
EXPERTS
The consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended August 31, 1997, of Laidlaw
Environmental incorporated by reference in this Proxy Statement/Prospectus and
elsewhere in the Registration Statement have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P. independent accountants,
given on the authority of that firm as experts in accounting and auditing. The
consolidated balance sheets as of September 30, 1996 and 1995 and the related
consolidated statements of operations and cash flows for each of the years in
the period ended September 30, 1996, of Rollins Environmental Services, Inc.,
incorporated by reference herein have been so incorporated in reliance on the
report of KPMG Peat Marwick LLP, independent accountants, given on the authority
of that firm as experts in accounting and auditing. The consolidated balance
sheets as of January 3, 1998 and December 28, 1996 and the consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended January 3, 1998 of Safety-Kleen incorporated by
reference in this Proxy Statement/Prospectus and elsewhere in the Registration
Statement have been incorporated herein in reliance on the report of Arthur
Andersen LLP, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
SHAREHOLDER PROPOSALS
In the event the Merger is consummated, it is not anticipated that
Safety-Kleen will conduct the 1998 annual shareholder meeting. In order to be
considered for inclusion in the Proxy Statement relating to the 1998 annual
shareholders' meeting, any proposal by a shareholder was required to have been
received by Safety-Kleen at its principal executive office in Elgin, Illinois,
by November 21, 1997.
Pursuant to Safety-Kleen's By-Laws, shareholder nominations and proposals
for business to be brought before a meeting of shareholders of Safety-Kleen must
satisfy certain advance notice provisions set forth in the bylaws. These
provisions require timely notice of shareholder nominations and proposals to be
given in writing to Safety-Kleen, generally not less than 60 days nor more than
90 days prior to the date of the meeting to which such notice relates.
By Order of the Board of Directors
Scott Krill
Secretary
April , 1998
Elgin, Illinois
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ANNEX A
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of March 16, 1998,
is by and among Laidlaw Environmental Services, Inc., a Delaware corporation
("Laidlaw Environmental"), LES Acquisition Inc., a Delaware corporation and an
indirect wholly-owned subsidiary of Laidlaw Environmental ("LES Acquisition"),
and Safety-Kleen Corp., a Wisconsin corporation (the "Company").
RECITALS
A. Laidlaw Environmental and LES Acquisition have commenced an offer to
exchange (the "Offer") $18.30 per share net to the seller in cash and 2.8 shares
of common stock, par value $1.00 per share, of Laidlaw Environmental (the
"Laidlaw Environmental Common Stock") (together, the "Offer Consideration"), for
each outstanding common share, par value $0.10 per share, of the Company,
including the Rights (as defined in Section 3.2) associated therewith (the
"Shares").
B. The respective Boards of Directors of the Company, Laidlaw Environmental
and LES Acquisition have determined that the merger of LES Acquisition with and
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth in this Agreement, would be fair and in the best interests of their
respective stockholders, and such Boards of Directors have approved such Merger,
pursuant to which each issued and outstanding Share (other than Shares owned,
directly or indirectly, by the Company or any subsidiary (as defined in Section
9.4) of the Company or by Laidlaw Environmental or any of its affiliates) will
be converted into the right to receive the Offer Consideration (the "Merger
Consideration").
C. Laidlaw Environmental has caused LES, Inc., the sole stockholder of LES
Acquisition, to vote all of its Shares by a consent of sole stockholder, dated
March 15, 1998, in favor of the Merger.
D. Laidlaw Environmental, LES Acquisition and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
AGREEMENTS
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I.
THE OFFER AND THE MERGER
1.1. The Offer and the Merger. (a) Promptly after the execution and
delivery of this Agreement, Laidlaw Environmental and LES Acquisition shall
extend the Offer until midnight (New York city time) on March 27, 1998 (or such
later date as may be required by the Securities and Exchange Commission (the
"SEC")) and upon expiration of the Offer, subject only to the conditions set
forth in Schedule 1.1 hereto (the "Offer Conditions") and Section 6.10, Laidlaw
Environmental shall pay for all of the Shares validly tendered and not withdrawn
as soon as legally permissible. Notwithstanding the foregoing, Laidlaw
Environmental may, without the consent of the Company, (i) extend the Offer, if
at the scheduled or extended expiration date of the Offer, any of the conditions
to Offer shall not be satisfied or waived, until such time as such conditions
are satisfied or waived, (ii) extend the Offer for any period required by any
rule, regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer, or (iii) extend the Offer for a period of up to five
Business Days, but only twice, if, on any scheduled expiration date on which the
Offer Conditions shall have been satisfied or waived, the number of Shares which
have been validly tendered and not withdrawn represent more than 66 2/3% of the
aggregate outstanding Shares, but less than 90% of the then issued and
outstanding Shares, provided, however, that Laidlaw Environmental acknowledges
and agrees that Laidlaw Environmental will not waive or attempt to waive Section
6.10 or the Offer Condition set forth in paragraph 1 of Schedule 1.1 without the
prior written consent of the Company.
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(b) The Company hereby approves of and consents to the Offer and represents
and warrants that the Board of Directors of the Company, at a meeting duly
called and held, has (i) unanimously determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, are fair
to and in the best interest of the Company's shareholders, (ii) unanimously
approved this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, and (iii) unanimously resolved to recommend acceptance of
the Offer and approval and adoption of this Agreement and the Merger by its
shareholders. The Company further represents and warrants that William Blair &
Company has delivered to the Company Board of Directors its written opinion that
the consideration to be received by the Company's shareholders pursuant to the
Offer and the Merger is fair to such shareholders from a financial point of
view, and a complete and correct copy of such opinion has been delivered by the
Company to Laidlaw Environmental.
(c) Not later than the third business day after the date of this Agreement,
the Company will file with the SEC an amended Solicitation/ Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9,
together with all amendments and supplements thereto, the "Schedule 14D-9")
containing the recommendations described in subparagraph 1.1(b)) above and will
disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Laidlaw
Environmental and its counsel shall be given a reasonable opportunity to review
and comment on such amendment to Schedule 14D-9 prior to its filing with the
SEC. Each of the Company and Laidlaw Environmental will promptly correct any
information provided by it for use in the Schedule 14D-9 that becomes false or
misleading in any material respect, and the Company will further take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and disseminated to the Company's shareholders, in each case as and to the
extent required by applicable law.
(d) As promptly as practicable following the consummation of the Offer and
the satisfaction or waiver of the conditions set forth in Article VII hereof,
and in accordance with the provisions of this Agreement and the provisions of
the Wisconsin Business Corporation Law (the "WBCL") and the Delaware General
Corporation Law (the "DGCL"), LES Acquisition shall be merged with and into the
Company at the Effective Time (as defined in Section 1.3). Upon the Effective
Time, the separate existence of LES Acquisition shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation") under
the name "Safety-Kleen Corp.," to be governed by the laws of the State of
Wisconsin.
1.2. Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VII, the closing of the Merger (the "Closing") will take place at 10:00
a.m. on the second business day after satisfaction of the conditions set forth
in Article VII (the "Closing Date"), at the offices of Katten Muchin & Zavis,
525 West Monroe Street, Chicago, Illinois 60661, unless another date, time or
place is agreed to in writing by the parties hereto.
1.3. Effective Time. As soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall file
appropriate Articles of Merger (the "Wisconsin Articles of Merger") and a
Certificate of Merger (the "Delaware Certificate of Merger") as provided in the
WBCL and the DGCL, respectively, and shall make such other filings, recordings
or publications required under the WBCL and DGCL in connection with the Merger.
The Merger shall become effective upon the date on which the Wisconsin Articles
of Merger have been received for filing by the Secretary of the State of
Wisconsin, which shall be the date when the Delaware Certificate of Merger has
been duly filed with the Secretary of State of Delaware, or such later date as
is agreed upon by the parties and specified in the Wisconsin Articles of Merger
and the Delaware Certificate of Merger, and the time of such effectiveness is
hereinafter referred to as the "Effective Time."
1.4. Effects of the Merger. The Merger shall have the effects set forth in
Section 180.1106 of the WBCL and in Section 259 of DGCL.
1.5. Articles of Incorporation; By-laws; Purposes. (a) At the Effective
Time of the Merger, and without any further action on the part of the Company,
Laidlaw Environmental or LES Acquisition, the
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Articles of Incorporation of the Surviving Corporation shall be in the form of
Exhibit A attached hereto, until thereafter amended as provided therein and
under the WBCL.
(b) At the Effective Time of the Merger, and without any further action on
the part of the Company or Laidlaw Environmental or LES Acquisition, the By-laws
of the Surviving Corporation shall be in the form of Exhibit B attached hereto,
until thereafter amended as provided therein or by applicable law.
1.6. Directors. The directors of LES Acquisition at the Effective Time
shall be the initial directors of the Surviving Corporation, until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
1.7. Officers. The officers of the Company at the Effective Time shall be
the initial officers of the Surviving Corporation except to the extent that
Laidlaw Environmental designates other or additional officers, until the earlier
of their resignation or removal or until their respective successors are duly
elected or appointed and qualified, as the case may be.
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1. Conversion of Shares. At the Effective Time and by virtue of the
Merger, and without any action on the part of the holders thereof:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be canceled pursuant to Subsection
2.1(b) below) shall be converted into the right to receive the Merger
Consideration. All such Shares, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such Shares
shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor, without interest, upon the
surrender of such certificate in accordance with Section 2.3.
(b) Each Share held in the treasury of the Company, if any, and each
Share owned by Laidlaw Environmental, LES Acquisition or the Company, or by
any direct or indirect subsidiary of any of them, shall be canceled and
retired without payment of any consideration therefor.
(c) Each share of common stock, par value $.01 per share, of LES
Acquisition issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and non-assessable
(except for certain statutory personal liability which may be imposed on
shareholders under Section 180.0622(2)(b) of the WBCL) share of Common
Stock of the Surviving Corporation.
2.2. Employee Stock Options. The Company shall (i) terminate its 1985
Stock Option Plan, 1993 Stock Option Plan and 1988 Non-Qualified Stock Option
Plan for Outside Directors (collectively the "Option Plans"), immediately prior
to the Effective Time without prejudice to the rights of the holders of options
awarded pursuant thereto and (ii) grant no additional options or similar rights
under the Option Plans or otherwise on or after the date hereof. As used
hereafter in this Section 2.2, "Options" shall include each stock option granted
by the Company, whether pursuant to the Option Plans or otherwise.
The Company shall use its best efforts to obtain the consent of each holder
of any Options (whether or not then exercisable) that it does not have the right
to cancel to the cancellation of his Options (irrespective of their exercise
price), and upon obtaining such consent, shall cancel the options covered by
such consent or, in the case of Options that the Company has the right to
cancel, shall cancel such Options, such cancellation (whether or not consent is
required therefor) to take effect immediately prior to the Effective Time. In
consideration of each cancellation of Options, the holders of such Options shall
receive from the Company the consideration set forth for such Options in the
Company Disclosure Schedule.
2.3. Surrender of Certificates. (a) From and after the Effective Time, a
bank or trust company to be designated by Laidlaw Environmental, with the prior
approval of the Company (the "Exchange Agent"), shall
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act as exchange agent in effecting the exchange, for the Merger Consideration
multiplied by the number of Shares formerly represented thereby, of certificates
(the "Certificates") that, prior to the Effective Time, represented Shares
entitled to payment pursuant to Section 2.1. As of the Effective Time, Laidlaw
Environmental shall, for the benefit of the holders of Shares (excluding any
Shares described in Section 2.1(b)), on behalf of LES Acquisition, deposit with
the Exchange Agent cash, and shall promptly make available to the Exchange Agent
certificates representing the shares of Laidlaw Environmental Common Stock, for
the payment in accordance with this Article II, through the Exchange Agent, in
an aggregate amount equal to the Merger Consideration multiplied by the number
of outstanding Shares immediately prior to the Effective Time (excluding any
Shares described in Section 2.1(b)) (such cash and certificates for shares of
Laidlaw Environmental Common Stock being hereinafter referred to as the
"Exchange Fund"). Laidlaw Environmental shall cause the Exchange Agent, pursuant
to irrevocable instructions, to deliver the Merger Consideration contemplated to
be paid pursuant to Section 2.1(a) out of the Exchange Fund. The Exchange Fund
shall not be used for any other purpose. Upon the surrender of each Certificate
and the delivery by the Exchange Agent of the Merger Consideration in exchange
therefor, such Certificate shall forthwith be canceled. Until so surrendered and
exchanged, each such Certificate (other than Certificates representing Shares
held by Laidlaw Environmental, LES Acquisition or the Company or any direct or
indirect subsidiary of Laidlaw Environmental, LES Acquisition or the Company)
shall represent solely the right to receive the Merger Consideration applicable
to the Shares represented by such Certificate multiplied by the number of Shares
represented by such Certificate. No interest shall be paid or shall accrue on
any amount payable on and after the Effective Time by reason of the Merger upon
the surrender of any such Certificate. Upon the surrender and exchange of such
an outstanding Certificate, the holder shall receive the Merger Consideration
applicable to the Shares represented thereby, without any interest thereon. If
the Merger Consideration is to be paid to a person other than the person in
whose name the Certificate representing Shares surrendered in exchange therefor
is registered, it shall be a condition to such payment or exchange that such
Certificate so surrendered be properly endorsed or otherwise be in proper form
for transfer, and that the person requesting such payment or exchange shall pay
to the Exchange Agent any transfer or other taxes required by reason of the
payment of such Merger Consideration to a person other than the registered
holder of the Certificate surrendered, or such person shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Shares for any Merger Consideration
or interest delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(b) Promptly following the date of the first anniversary of the Effective
Time, the Exchange Agent shall return to the Surviving Corporation all cash in
its possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing Shares may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat or
similar laws) receive in exchange therefor, without any interest thereon, (i)
the Merger Consideration applicable to the Shares represented thereby; (ii) the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Laidlaw Environmental Common Stock represented by such new
certificate and having a record date on or after the Effective Time and a
payment date prior to such surrender; (iii) the amount of any dividends or other
distributions payable with respect to such shares of Laidlaw Environmental
Common Stock and having a record date on or after the Effective Time but prior
to such surrender and a payment date on or subsequent to such surrender; and
(iv) the amount of any cash payable with respect to a fractional share of
Laidlaw Environmental Common Stock to which such holder is entitled. Holders of
Certificates shall have no greater rights against the Surviving Corporation than
may be accorded to general creditors of the Surviving Corporation under
applicable law.
(c) Promptly after the Effective Time, the Exchange Agent shall mail, to
each record holder of Certificates that immediately prior to the Effective Time
represented Shares, a form of letter of transmittal and instructions, approved
by Laidlaw Environmental, for use in surrendering such Certificates and
receiving the Merger Consideration therefor.
(d) At and after the Effective Time, holders of Certificates shall cease to
have any rights as shareholders of the Company except for the right to surrender
such Certificates in exchange for the Merger Consideration
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(and the other amounts, if any, due under Section 2.3(b)), and there shall be no
transfers on the stock transfer books of the Company or the Surviving
Corporation of any Shares that were outstanding immediately prior to the Merger.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent, they shall be canceled and exchanged for the
Merger Consideration, as provided in Section 2.1 hereof, and the other amounts,
if any, due under Section 2.3(b).
(e) The Exchange Agent shall invest any cash included in the Exchange Fund,
as directed by the Surviving Corporation, provided that such investment shall be
(i) securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six months from the Effective Time, (ii) certificates of deposit,
eurodollar time deposits and bankers' acceptances with maturities not exceeding
six months and overnight bank deposits with any commercial bank, depository
institution or trust company incorporated or doing business under the laws of
the United States of America, any state thereof or the District of Columbia,
provided that such commercial bank, depository institution or trust company has,
at the time of investment, (A) capital and surplus exceeding $250 million and
(B) outstanding short-term debt securities which are rated at least A-1 by
Standard & Poor's Rating Group Division of The McGraw-Hill Companies, Inc. or at
least P-1 by Moody's Investors Services, Inc. or carry an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease to publish ratings of investment, (iii) repurchase obligations with a term
of not more than 30 days for underlying securities of the types described in
clauses (i) and (ii) above entered into with any financial institution meeting
the qualifications specified in clause (ii) above, (iv) commercial paper having
a rating in the highest rating categories from Standard & Poor's Rating Group
Division of The McGraw-Hills Companies, Inc. or Moody's Investors Services, Inc.
or carrying an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease to publish ratings of investments
and in each case maturing within six months of the Effective Time and (v) money
market mutual or similar funds having assets in excess of $1 billion. Any
interest and other income resulting from such investments shall be paid to the
Surviving Corporation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Laidlaw Environmental and LES
Acquisition that, as of November 20, 1997 (except where such representations and
warranties are specifically stated to be as of a different date), except as
specifically disclosed or reflected (including, in the case of financial
statements, provided for) in the Company Disclosure Schedule delivered herewith
to Laidlaw Environmental and LES Acquisition, or in the Company's Form 10-K for
the fiscal year ended December 28, 1996 ("Form 10-K") as filed with the SEC, any
subsequently filed Forms 10-Q and Forms 8-K, the annual report to shareholders
for the fiscal year ended December 28, 1996 delivered to Laidlaw Environmental
(the "Annual Report"), and the proxy statement for the 1997 Annual Meeting (such
Forms, the Annual Report and such proxy statement, including without limitation
any financial statements and related notes or schedules included in such
documents and all exhibits and schedules included or incorporated by reference
therein, are herein collectively referred to as the "SEC Reports"):
3.1. Organization and Qualifications. Each of the Company and its
Significant Subsidiaries (as defined in Section 9.4) is a corporation duly
incorporated, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or operated
by it, or the business conducted by it, requires such qualification and where
failure to so qualify or be in good standing would have a Company Material
Adverse Effect (as defined in Section 9.4). Each of the Company and its
Significant Subsidiaries has the corporate power to carry on its respective
businesses as they are now being conducted. Copies of the charter and by-laws of
each of the Company and its Significant Subsidiaries, and all amendments thereto
as presently in effect, have been delivered to Laidlaw Environmental, and such
copies are complete and correct as of the date hereof.
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3.2. Capitalization. (a) The authorized capital stock of the Company
consists of (i) 300,000,000 Shares of which, as of February 28, 1998, 59,930,589
Shares were issued and outstanding and (ii) 1,000,000 Shares of preferred stock,
par value $.10 per share, of the Company (the "Preferred Stock"), none of which
is issued and outstanding. As of February 28, 1998, (i) 3,910,158 Shares were
reserved for issuance upon the exercise of outstanding options granted pursuant
to the Option Plans, 116,449 Shares are reserved for issuance under the Employee
Stock Purchase Plan and 120,000 Shares are reserved for issuance under the
Company's 1988 Non-Qualified Stock Option Plan for outside directors and (ii)
64,077,196 Shares were reserved for issuance in connection with the Common Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as
of November 9, 1988, as amended by a First Amendment to Rights Agreement dated
as of August 10, 1990, Second Amendment to Rights Agreement dated as of November
20, 1997, Third Amendment to Rights Agreement dated as of March 11, 1998, and
the Fourth Amendment to the Rights Agreement dated as of March 16, 1998 (as so
amended, the "Rights Agreement"), between the Company and The First National
Bank of Chicago, as Rights Agent. Except as set forth above, and except for
warrants dated January 27, 1995 issued to H. Wayne Huizenga to purchase up to
200,000 Shares, there are no outstanding options, warrants, agreements,
contracts, calls, commitments or demands of any character, preemptive or
otherwise, other than this Agreement, relating to any of the capital stock of
the Company. All of the outstanding Shares are duly authorized, validly issued,
fully paid and non-assessable (except as provided in Section 180.0622(2)(b) of
the WBCL and judicial interpretations thereof). The Company Disclosure Schedule
lists each subsidiary of the Company and the ownership interest therein of the
Company. All outstanding shares of capital stock of the Company's subsidiaries
are owned by the Company or a direct or indirect wholly owned subsidiary of the
Company, free and clear of all liens, charges, encumbrances, claims and options
of any nature.
(b) There are no voting trusts or other agreements or understandings to
which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the subsidiaries. None of
the Company or its subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company, or any of its subsidiaries.
3.3. Authority and Absence of Conflict. (a) The Company has the requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and unanimously
authorized by the Board of Directors of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, other than, if required in order to consummate the Merger under the
WBCL, the approval and adoption of this Agreement and the Merger by holders of
sixty-six and two-thirds percent of the outstanding Shares (the "Company
Shareholder Approval") at a meeting of the shareholders of the Company held for
this purpose (the "Shareholder Meeting"). This Agreement has been duly executed
and delivered by the Company and (assuming due authorization, execution and
delivery by Laidlaw Environmental and LES Acquisition) constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
(b) Neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company of the transactions contemplated hereby, nor
compliance by the Company with any of the provisions hereof, will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance or payment required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or any
of its subsidiaries under, any of the terms, conditions or provisions of (x) the
charter or by-laws of the Company or any of its Significant Subsidiaries, (y)
the charter or by-laws of any of its Subsidiaries that are not Significant
Subsidiaries, or (z) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Company
or
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any of its subsidiaries is a party or to which any of them or any of their
respective properties or assets may be subject, or (ii) subject to compliance
with the statutes and regulations referred to in the next subsection, violate
any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to the Company and its subsidiaries or any of their
respective properties or assets; except, in the case of each of clauses (i)(y),
(i)(z), and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests, charges
or encumbrances which would not have a Company Material Adverse Effect.
(c) Other than in connection with or in compliance with the provisions of
the WBCL, the DGCL, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Exchange Act, the laws of any foreign country in
which the Company or any of its subsidiaries conducts any business or owns any
property or assets, the federal, state and local environmental, health or safety
laws or regulations, and to the best knowledge of the Company, certain state
securities or "takeover" statutes, no notice to, filing with, or authorization,
consent or approval of, any domestic or foreign public body or authority is
necessary for the consummation by the Company of the transactions contemplated
by this Agreement, except where the failure to give such notices, make such
filings or obtain such authorizations, consents or approvals would not have a
Company Material Adverse Effect.
3.4. Reports. The Company has filed all forms, reports and documents
required under Section 13(a) under the Exchange Act with the SEC since December
31, 1995, and none of such forms, reports or documents, including without
limitation any financial statements or schedules included therein, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. The consolidated balance sheet (including the related
notes) included in the Form 10-K and in the Form 10-Q for the thirty-six weeks
ended September 6, 1997 (the "Form 10-Q") fairly presented the consolidated
financial position of the Company and its consolidated subsidiaries as of the
date thereof, and the other related statements (including the related notes)
included therein fairly presented the consolidated results of operations and the
changes in consolidated financial position of the Company and its consolidated
subsidiaries for the fiscal period set forth therein. Each of the financial
statements (including the related notes) included in the Form 10-K and in the
Form 10-Q has been prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as otherwise
noted therein and except that the quarterly financial statements do not contain
all footnotes required by generally accepted accounting principles. The
information contained in the financial statements included in the Company's Form
10-K for the year ended January 3, 1998 will conform in all material respects
with the Company's year end financial results disclosed in the Company's
February 13, 1998 press release. The representations and warranties set forth in
this Section 3.4 shall not apply to any noncompliance, non-filings,
misstatements, omissions or failures to present fairly or conform to generally
accepted accounting principles which either (i) were corrected in a subsequent
form, report or document filed with the SEC prior to the date of this Agreement,
or (ii) would not have a Company Material Adverse Effect or prevent or delay in
any material respect the consummation of the Merger. None of the Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
3.5. Absence of Certain Changes; Liabilities. Since December 28, 1996,
except for entering into and terminating the Agreement and Plan of Merger, dated
as of November 20, 1997, between and among SK Parent, SK Acquisition and the
Company (the "Buyout Merger Agreement") and except in connection with the Offer
and the Merger (i) the Company and its Subsidiaries have conducted their
respective businesses and operations only in the ordinary and usual course, (ii)
there has not been any change in the financial condition, properties, business
or results of operations of the Company and its subsidiaries that has had a
Company Material Adverse Effect, (iii) neither the Company nor any of its
subsidiaries has incurred any liabilities or obligations (secured or unsecured
and whether accrued, absolute, contingent, direct, indirect or otherwise) (the
"Liabilities") except Liabilities that do not have a Company Material Adverse
Effect, and (iv) neither the Company nor any of its subsidiaries has taken any
of the actions contemplated by Section 5 hereof.
3.6. Employee Benefit Plans. (a) With respect to all employees and former
employees of the Company, neither the Company nor any of its affiliates
presently maintains, sponsors, contributes to, is required to contribute to or
has any liability under: (i) any bonus, incentive compensation, profit sharing,
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retirement, pension, group insurance, death benefit, cafeteria, flexible
spending account, medical, dependent care, stock option, stock purchase, stock
appreciation rights, savings, deferred compensation, employment, consulting,
severance or termination pay, funded vacation pay, welfare or other employee
compensation, benefit or fringe benefit plan, program, agreement, or
arrangement, the existence of which or the failure of the Company or any of its
affiliates to comply with which or to satisfy such liability would have, either
individually or in the aggregate, a Company Material Adverse Effect; or (ii) any
plan, program, agreement, or arrangement which is an "employee pension benefit
plan" as such term is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or an "employee welfare benefit
plan" as defined in Section 3(1) of ERISA, the existence of which or the failure
of the Company or any of its affiliates to comply with which or to satisfy such
liability would have, either individually or in the aggregate, a Company
Material Adverse Effect. The Company Disclosure Schedule includes a list of all
plans, programs, agreements, and arrangements set forth in clauses (i) and (ii)
of the preceding sentence which are maintained, sponsored, contributed to or
required to be contributed to by the Company or any of its affiliates (the
"Employee Benefit Plans"). The term "affiliate" for purposes of this Section 3.6
means any organization that would be aggregated with the Company under Section
414(b), (c) or (m) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code").
(b) Each Employee Benefit Plan which is intended to comply with the
provisions of Section 401(a) of the Internal Revenue Code has been submitted to
the Internal Revenue Service (the "IRS") and received a determination letter
which states that such Employee Benefit Plan is so qualified, and to the best of
the Company's knowledge no event has occurred since the date of such letter
which would (i) cause such Employee Benefit Plan not to be so qualified or (ii)
cause any trust maintained under such Employee Benefit Plan not to be exempt
from taxation under Section 501(a) of the Internal Revenue Code.
(c) To the best knowledge of the Company, with respect to each Employee
Benefit Plan which is subject to Title I of ERISA, neither the Company nor any
of its affiliates has failed to comply with any applicable reporting, disclosure
or other requirements of ERISA and the Internal Revenue Code, except for such
failures to comply which would not have, either individually or in the
aggregate, a Company Material Adverse Effect, and there has been no "prohibited
transaction" as described in Section 4975 of the Internal Revenue Code or
Section 406 of ERISA the failure to correct which would have, either
individually or in the aggregate, a Company Material Adverse Effect.
(d) Neither the Company nor any affiliate maintains any Employee Benefit
Plans subject to the minimum funding standards of ERISA and the Internal Revenue
Code.
(e) Neither the Company nor any of its affiliates presently maintains,
contributes to or has any liability (including current or potential withdrawal
liability) with respect to any "multiemployer plan" as such term is defined in
Section 3(37) of ERISA.
(f) Neither the Company nor any of its affiliates has maintained an
employee pension benefit plan subject to Title IV of ERISA.
(g) There is no pending or, to the best knowledge of the Company,
threatened legal action, proceeding or investigation against or involving any
Employee Benefit Plan (other than routine claims for benefits), the adverse
resolution of which would have, either individually or in the aggregate, a
Company Material Adverse Effect.
(h) With respect to any employee or former employee of the Company, except
as required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), neither the Company nor any of its affiliates presently
sponsors, maintains, contributes to, is required to contribute to or has any
liability under any funded or unfunded medical, health or life insurance plan or
similar arrangement for present or future retirees or present or future
terminated employees the existence of which or the failure to satisfy which
would have, either individually or in the aggregate, a Company Material Adverse
Effect. Neither the Company nor any subsidiary or affiliate of the Company
maintains or contributes to a trust, organization or association described in
any of Sections 501(c)(9), 501(c)(17) or 501(c)(20) of the Internal Revenue
Code.
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(i) With respect to each of the Employee Benefit Plans, the Company will
deliver or make reasonably available to Laidlaw Environmental true and complete
copies of: (i) the plan documents, including any related trust agreements,
insurance contracts or other funding arrangements, or a written summary of the
terms and conditions of the plan if there is no written plan document; (ii) the
most recent IRS Form 5500; (iii) the most recent financial statement; (iv) the
most recent Summary Plan Description required under ERISA; (v) the most recent
actuarial report, if required under ERISA and (vi) the most recent determination
letter received from the IRS with respect to each Employee Benefit Plan intended
to qualify under Section 401 of the Internal Revenue Code.
(j) To the best of the Company's knowledge, each Employee Benefit Plan has
been operated and administered in all material respects in accordance with its
terms and applicable law, including but not limited to ERISA and the Internal
Revenue Code.
(k) No liability under Title IV or Section 302 of ERISA has been incurred
by the Company or any affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any affiliate
of incurring any such liability (other than for premiums due the Pension Benefit
Guaranty Corporation ("PBGC") (which premiums have been paid when due)). Insofar
as the representation made in this section 3.6(k) applies to Sections 4064, 4069
or 4204 of Title IV of ERISA, it is made with respect to any employee benefit
plan, program, agreement or arrangement subject to Title IV of ERISA to which
the Company or any affiliate made, or was required to make, contributions during
the five (5)-year period ending on the last day of the most recent plan year
ended prior to the Effective Time.
(l) The PBGC has not instituted proceedings to terminate any Employee
Benefit Plan subject to Title IV of ERISA ("Title IV Plan") and to the best of
the Company's knowledge no condition exists that presents a risk that such
proceedings will be instituted.
(m) With respect to the Title IV Plans, the present value of the
accumulated benefit obligation under such plan, calculated based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such plan's actuary with respect to such plan did not exceed,
as of its latest valuation date, the then fair value of the assets of such plans
in the aggregate as calculated pursuant to FAS 87.
(n) No Title IV Plan or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Internal Revenue Code), whether or not waived, as of the last day of
the most recent fiscal year of each Title IV Plan ended prior to the Effective
Time. All contributions required to be made with respect to any Employee Benefit
Plan on or prior to the Effective Time have been (or will have been) timely
made.
(o) The consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, entitle the current
and former employees and current and former officers of the Company and any
affiliates to severance pay, which, in the aggregate, will exceed $45,744,000
unless the Surviving Corporation does not offer employment to an employee who is
an eligible employee who is eligible for severance pay under the Safety-Kleen
Corp. Severance Pay Plan in a position with total compensation that is within 15
percent of the employee's current total compensation and at a location that is
within a 30 mile radius of the employee's current work location.
(p) All actions will have been taken, or which have failed to be taken,
with respect to the Employee Benefit Plans, would not, in the aggregate, have a
Company Material Adverse Effect.
3.7. Litigation; Violation of Law. (a) There are no claims, actions, suits
or proceedings or investigations pending or, to the best knowledge of the
Company, threatened against the Company or any of its subsidiaries, nor is the
Company or any of its subsidiaries subject to any order, judgment, writ,
injunction or decree, except in either case for matters which would not have a
Company Material Adverse Effect or materially impair the ability of the Company
to consummate the Merger, and as of the date of this Agreement there are no such
matters involving a contingent liability, within the meaning of that term in
Financial Accounting Standards Bulletin No. 5, of more than $20,000,000.
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(b) To the best knowledge of the Company, the businesses of the Company and
its subsidiaries are not being conducted in violation of any applicable law,
ordinance, rule, regulation, decree or order of any court or governmental
entity, except for violations which do not have a Company Material Adverse
Effect.
3.8. Labor. There is no material dispute, grievance, controversy, strike
or request for union representation pending, or, to the best knowledge of the
Company, threatened, against either the Company or any of its Significant
Subsidiaries.
3.9. Taxes. (a) The Company and each subsidiary of the Company have timely
filed (or have had timely filed on their behalf) or will file or cause to be
timely filed, all Tax Returns required by applicable law to be filed by any of
them prior to or as of the Effective Time, except where the failure to do so
would not have a Company Material Adverse Effect. All material Tax Returns are,
or will be at the time of filing, true, complete and correct in all material
respects.
(b) The Company and each subsidiary of the Company have paid (or have had
paid on their behalf) or, where payment is not yet due, have established (or
have had established on their behalf and for their sole benefit and recourse) or
will establish or cause to be established on or before the Effective Time an
adequate accrual for the payment of all Taxes due, except where the failure to
pay or establish adequate reserves would not have a Company Material Adverse
Effect.
(c) No deficiencies for any material Taxes have been proposed, asserted or
assessed against the Company or any subsidiary of the Company, and no requests
for waivers of the time to assess any such material Taxes are pending. The
Federal Income Tax Returns of the Company and each subsidiary of the Company
consolidated in such Tax Returns are not currently being examined for years
prior to the year ended December 31, 1992 and the statute of limitations has run
for years prior to December 31, 1992.
(d) There are no material Liens for Taxes upon the assets of the Company
except (i) with respect to matters beings contested in good faith and (ii) Liens
for Taxes not yet due.
(e) There are no material United States federal, state, local or foreign
audits or other administrative proceedings or court proceedings presently
pending with regard to any Taxes or Tax Returns of the Company.
(f) The Company is not a party to any agreement or arrangement (written or
oral) providing for the allocation or sharing of Taxes.
(g) The Company has not filed a consent pursuant to Section 341(f)(2) of
the Internal Revenue Code or agreed to have Section 341(f)(2) of the Internal
Revenue Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Internal Revenue Code) owned by the Company.
(h) The Company is a corporation within the meaning of (S)7701(a)(3) of the
Internal Revenue Code.
(i) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Taxes" shall mean all United States Federal, state, territorial,
local and foreign taxes, and other assessments of a similar nature (whether
imposed directly or through withholding), including any interest, additions
to tax, or penalties applicable thereto.
(ii) "Tax Returns" shall mean all United States Federal, state,
territorial, local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amended tax
return relating to Taxes.
3.10. Environmental Matters. (a) Except for violations of the following
clauses (i) through (vii) that would not have a Company Material Adverse Effect
on the Company, to the best knowledge of the Company, (i) the Company and its
subsidiaries have conducted their respective businesses in compliance with all
applicable Environmental Laws and are currently in compliance with all such
laws, including, without limitation, having all permits, licenses and other
approvals and authorizations necessary for the operation of their respective
businesses as presently conducted, (ii) none of the properties currently or
formerly owned or operated by the Company or any of its subsidiaries contains
any Hazardous Substance in amounts exceeding
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the levels permitted by applicable Environmental Laws, (iii) neither the Company
nor any of its subsidiaries has received any notices, demand letters or requests
for information from any court or governmental entity or third party indicating
that the Company or any of its subsidiaries may be in violation of, or liable
under, any Environmental Law in connection with the ownership or operation of
their businesses, including, without limitation, liability relating to sites not
owned or operated by the Company or any of its subsidiaries, (iv) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings, pending or threatened, against the Company or any
subsidiaries relating to any violation of or liability under, or alleged
violation of or liability under, any Environmental Law, (v) all reports that are
required to be filed by the Company or any of its subsidiaries concerning the
release of any Hazardous Substance or the threatened or actual violation of any
Environmental Law have been so filed, (vi) no Hazardous Substance has been
disposed of, released or transported in violation of or under circumstances that
could create liability under any applicable Environmental Law from any
properties owned by the Company or any of its subsidiaries as a result of any
activity of the Company or any of its subsidiaries during the time such
properties were owned, leased or operated by the Company or any subsidiaries,
(vii) neither the Company, any of its subsidiaries nor any of their respective
properties are subject to any material liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law, and (viii) the Company will provide or make available to
Laidlaw Environmental each environmental audit, test or analysis performed
within the last three years of any property currently or formerly owned or
operated by the Company or any of its subsidiaries (x) sufficient to put Laidlaw
Environmental on notice of any condition of environmental impairment which would
give rise to a Company Material Adverse Effect and (y) of which the Company has
knowledge.
(b) As used herein, "Environmental Law" means any United States Federal,
territorial, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any governmental
entity relating to (i) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety or (ii)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances, in each case as amended and as in effect on the date
hereof. The term "Environmental Law" includes, without limitation, (i) the
Federal Comprehensive Environmental Response Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal Act and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Occupational Safety
and Health Act of 1970, each as amended and as in effect on the date hereof, and
(ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of, effects of or
exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated byphenyls.
3.11. Brokers. No agent, broker, investment banker, financial advisor or
other person or entity is or will be entitled to any brokerage commission,
finder's fee or like payment in connection with any of the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
3.12. Title to Properties. The Company and its subsidiaries have good,
valid and marketable title to the properties and assets listed on the most
recent consolidated balance sheet included in the SEC Reports (the
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"Balance Sheet") as owned by it (other than properties and assets disposed of in
the ordinary course of business since the date of the Balance Sheet), and all
such properties and assets are free and clear of any liens, except as described
in the SEC Reports and the financial statements included therein or in the
Company Disclosure Schedule and other than liens for current taxes not yet due
and other liens, security interests, charges, encumbrances, easements,
covenants, restrictions or title imperfections that do not have a Company
Material Adverse Effect.
3.13. Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement (as defined in Section 6.1(a)), if any, will, at the date it is first
mailed to the Company's shareholders or at the time of the Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Proxy Statement, if any, will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied in writing by or on behalf of Laidlaw Environmental or LES
Acquisition specifically for inclusion therein.
3.14. Opinion of Financial Advisor. The Company has received the opinion
of William Blair & Company L.L.C. to the effect that the consideration to be
received in the Merger by the Company's shareholders (other than Laidlaw
Environmental or any affiliate thereof) is fair to such holders of Shares from a
financial point of view.
3.15. Board Approval and Recommendation. The Board of Directors of the
Company, at a meeting duly called and held, has duly and unanimously, subject to
the terms and conditions set forth herein, (i) determined that this Agreement
and the transactions contemplated hereby, including the Offer and the Merger,
are fair to and in the best interests of the shareholders of the Company, and
(ii) subject to the other provisions hereof, resolved to approve the Agreement
and the transactions contemplated hereby, including the Offer and the Merger,
for purposes of Section 180.1141 of the WBCL and as a result rendered
inapplicable to the Offer and the Merger the restrictions on business
combinations set forth therein, and (iii) subject to the provisions hereof,
resolved to recommend that the holders of Shares accept the Offer and approve
this Agreement and the transactions contemplated herein, including the Merger.
Notwithstanding anything to the contrary herein, the Board of Directors of the
Company shall have the right to modify or withdraw its recommendation if an
event or circumstance resulting in a Laidlaw Environmental Material Adverse
Effect occurs prior to the Effective Time.
3.16. Required Company Vote. The Company Shareholder Approval, if required
by applicable law, is the only vote of the holders of any class or series of the
Company's securities that may be necessary to approve this Agreement, the Merger
and the other transactions contemplated hereby.
3.17. Rights Agreement. The Board of Directors of the Company has amended
the Rights Agreement prior to the execution of this Agreement so that neither
the execution nor the delivery of this Agreement nor the consummation of the
Merger will (i) cause any Rights issued pursuant to the Rights Agreement to
become exercisable or to separate from the stock certificates to which they are
attached, (ii) cause Laidlaw Environmental or any of its affiliates to be an
Acquiring Person (as such term is defined in the Rights Agreement) or (iii)
trigger other provisions of the Rights Agreement, including giving rise to a
Distribution Date (as such term is defined in the Rights Agreement).
3.18. Proxy Statement and Schedule 14D-9. None of the information supplied
in writing by the Company specifically for inclusion in the Schedule 14D-9 or
the Proxy Statement (if any), will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF LAIDLAW ENVIRONMENTAL AND LES ACQUISITION
Laidlaw Environmental and LES Acquisition each represent and warrant,
jointly and severally, to the Company that, except as disclosed or reflected in
the Laidlaw Environmental Disclosure Schedule delivered herein to the Company:
4.1. Organization and Qualification. Each of Laidlaw Environmental and LES
Acquisition is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and is in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated by it, or the business conducted by it, requires such
qualification and where failure to so qualify or be in good standing would have
a Laidlaw Environmental Material Adverse Effect. Each of Laidlaw Environmental
and LES Acquisition has the corporate power to carry on its respective
businesses as they are now being conducted. Copies of the respective charter
documents and by-laws of Laidlaw Environmental and LES Acquisition have
heretofore been delivered to the Company, and such copies are complete and
correct as of the date hereof.
4.2. Capital Stock of Laidlaw Environmental and LES Acquisition. (a) As of
the date hereof, and at all times thereafter up to and including the Effective
Time, all of the outstanding shares of common stock, par value $.01 per share,
of LES Acquisition shall be duly authorized, validly issued, fully paid,
non-assessable and owned indirectly by Laidlaw Environmental, free and clear of
all liens, claims and encumbrances, except as provided by (i) the Credit
Agreement among Laidlaw Chem-Waste, Inc., Laidlaw Environmental Services
(Canada) Ltd., The Several Lenders from Time to time Parties thereto, Toronto
Dominion (Texas) Inc., as General Administrative Agent, TD Securities (USA),
Inc., as Arranger, The Bank of Nova Scotia, NationsBank, N.A. and The First
National Bank of Chicago, as Managing Agents and NationsBank, N.A. as
Syndication Agent, dated as of May 9, 1997 and (ii) a new credit agreement for
the facility being arranged by the TD Securities (USA), Inc. in connection with
the Offer and the Merger (the "New Credit Facility").
(b) The authorized capital stock of Laidlaw Environmental consists of (i)
750,000,000 shares of Laidlaw Environmental Common Stock, par value $1.00 per
share of which, as of January 30, 1998, there were 182,282,097 shares issued and
outstanding, and (ii) 1,000,000 shares of Laidlaw Environmental Preferred Stock,
par value $1.00 per share, none of which is issued and outstanding. All of the
outstanding shares of Laidlaw Environmental Common Stock, have been duly
authorized, validly issued, fully paid and non-assessable. Except as set forth
in Laidlaw Environmental's Form 10-K for the fiscal year ended August 31, 1997
or as issued since that date in accordance with the terms of Laidlaw
Environmental stock option plans referenced therein, there are no outstanding
options, warrants, agreements, contracts, calls, commitments or demands of any
character, preemptive or otherwise, other than the Offer and this Agreement,
relating to any of the capital stock of the Company.
4.3. Authority and Absence of Conflict. (a) Each of Laidlaw Environmental
and LES Acquisition has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Laidlaw Environmental and LES Acquisition and the consummation by
Laidlaw Environmental and LES Acquisition of the transactions contemplated
hereby have been duly authorized by the respective Boards of Directors of
Laidlaw Environmental and LES Acquisition, and by LES, Inc. as sole shareholder
of LES Acquisition, and no other corporate proceedings on the part of Laidlaw
Environmental or LES Acquisition are necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Laidlaw
Environmental and LES Acquisition and (assuming due authorization, execution and
delivery by the Company) constitutes a valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms except to
the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
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(b) Neither the execution and delivery of this Agreement by Laidlaw
Environmental or LES Acquisition, nor the consummation by them of the
transactions contemplated hereby, nor compliance by Laidlaw Environmental or LES
Acquisition with any of the provisions hereof, will (i) violate, conflict with,
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Laidlaw Environmental or LES Acquisition or any other
direct or indirect subsidiary or affiliate of Laidlaw Environmental under any of
the terms, conditions or provisions of (x) the charter documents or by-laws of
Laidlaw Environmental or LES Acquisition or any other direct or indirect
subsidiary or affiliate of Laidlaw Environmental or (y) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Laidlaw Environmental or LES Acquisition or
any other direct or indirect subsidiary of Laidlaw Environmental is a party, or
to which any of them, or any of their respective properties or assets, may be
subject, or (ii) subject to compliance with the statutes and regulations
referred to in the next subsection, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Laidlaw
Environmental or LES Acquisition or any other direct or indirect subsidiary or
affiliate of Laidlaw Environmental or any of their respective properties or
assets; except, in the case of each of clauses (i)(y) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances which, in the
aggregate, would not have a Laidlaw Environmental Material Adverse Effect.
(c) Other than in connection with or in compliance with the provisions of
the WBCL, the DGCL, the HSR Act, the Exchange Act, the Securities Act of 1933,
as amended, certain antitrust or competition approvals from foreign
jurisdictions, certain state securities or "takeover" statutes and the
environmental, health or safety laws or regulations of various states, no notice
to, filing with, or authorization, consent or approval of, any domestic or
foreign public body or authority is necessary for the consummation by Laidlaw
Environmental and LES Acquisition of the transactions contemplated by this
Agreement, except where the failure to give such notices, make such filings, or
obtain authorizations, consents or approvals would, in the aggregate, have a
Laidlaw Environmental Material Adverse Effect.
4.4. Reports. Laidlaw Environmental has filed all forms, reports and
documents required under Section 13(a) under the Exchange Act with the SEC since
August 31, 1997, and none of such forms, reports or documents, including without
limitation any financial statements or schedules included therein, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. The consolidated balance sheet (including the related
notes) included in the Form 10-K for the fiscal year ended August 31, 1997 (the
"Laidlaw Form 10-K") and in the Form 10-Q for the quarterly period ended
November 30, 1997 (the "Laidlaw Form 10-Q") fairly presented the consolidated
financial position of Laidlaw Environmental and its consolidated subsidiaries as
of the date thereof, and the other related statements (including the related
notes) included therein fairly presented the consolidated results of operations
and the changes in consolidated financial position of Laidlaw Environmental and
its consolidated subsidiaries for the fiscal period set forth therein. Each of
the financial statements (including the related notes) included in the Laidlaw
Form 10-K and in the Laidlaw Form 10-Q has been prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as otherwise noted therein and except that the quarterly
financial statements do not contain all footnotes required by generally accepted
accounting principles. The representations and warranties set forth in this
Section 4.4 shall not apply to any noncompliance, non-filings, misstatements,
omissions or failures to present fairly or conform to generally accepted
accounting principles which either (i) were corrected in a subsequent form,
report or document filed with the SEC prior to the date of this Agreement, or
(ii) would not have a Laidlaw Environmental Material Adverse Effect or prevent
or delay in any material respect the consummation of the Merger. None of Laidlaw
Environmental's subsidiaries is required to file any forms, reports or other
documents with the SEC.
4.5. Absence of Certain Changes; Liabilities. Except in connection with
the Offer and the Merger, including the payment of fees and expenses incurred in
connection with the New Credit Facility and the purchase and payment for Shares
pursuant to the Offer, since August 31, 1997, (i) Laidlaw Environmental
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and its Subsidiaries have conducted their respective businesses and operations
only in the ordinary and usual course, (ii) there has not been any change in the
financial condition, properties, business or results of operations of Laidlaw
Environmental and its subsidiaries that has had a Laidlaw Environmental Material
Adverse Effect, (iii) neither Laidlaw Environmental nor any of its subsidiaries
has incurred any liabilities or obligations (secured or unsecured and whether
accrued, absolute, contingent, direct, indirect or otherwise) (the "Laidlaw
Liabilities") except Laidlaw Liabilities that do not have a Laidlaw
Environmental Material Adverse Effect, and (iv) neither Laidlaw Environmental
nor any of its subsidiaries has taken any of the actions contemplated by Section
5 hereof.
4.6. Interim Operations of LES Acquisition. LES Acquisition was formed on
November 12, 1997 solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
4.7. Brokers. Except as set forth in the Offer, no agent, broker,
investment banker, financial advisor or other person or entity is or will be
entitled to any brokerage commission, finder's fee or like payment in connection
with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Laidlaw Environmental or LES Acquisition.
4.8. Proxy Statement. None of the information supplied in writing by
Laidlaw Environmental or LES Acquisition specifically for inclusion in the Proxy
Statement, if any, or the Schedule 14D-9 will, at the date it is first mailed to
the shareholders of the Company or at the time of the Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.9. No Litigation. (a) There are no claims, actions, suits or proceedings
or investigations pending or, to the best knowledge of Laidlaw Environmental,
threatened against Laidlaw Environmental, LES Acquisition or any of their
respective affiliates, nor is Laidlaw Environmental, LES Acquisition or any of
their respective affiliates subject to any order, judgment, writ, injunction or
decree, in either case which would have a Laidlaw Environmental Material Adverse
Effect.
(b) To the best knowledge of Laidlaw Environmental, the businesses of
Laidlaw Environmental and its subsidiaries are not being conducted in violation
of any applicable law, ordinance, rule, regulation, decree or order of any court
or governmental entity, except for violations which do not have a Laidlaw
Environmental Material Adverse Effect.
4.10. Employee Benefit Plans. (a) With respect to all employees and former
employees of Laidlaw Environmental, neither Laidlaw Environmental nor any of its
affiliates presently maintains, sponsors, contributes to, is required to
contribute to or has any liability under: (i) any bonus, incentive compensation,
profit sharing, retirement, pension, group insurance, death benefit, cafeteria,
flexible spending account, medical, dependent care, stock option, stock
purchase, stock appreciation rights, savings, deferred compensation, employment,
consulting, severance or termination pay, funded vacation pay, welfare or other
employee compensation, benefit or fringe benefit plan, program, agreement, or
arrangement, the existence of which or the failure of Laidlaw Environmental or
any of its affiliates to comply with which or to satisfy such liability would
have, either individually or in the aggregate, a Laidlaw Environmental Material
Adverse Effect; or (ii) any plan, program, agreement, or arrangement which is an
"employee pension benefit plan" as such term is defined in Section 3(2) of
ERISA, or an "employee welfare benefit plan" as defined in Section 3(1) of
ERISA, the existence of which or the failure of Laidlaw Environmental or any of
its affiliates to comply with which or to satisfy such liability would have,
either individually or in the aggregate, a Laidlaw Environmental Material
Adverse Effect. Laidlaw Environmental plans, programs, agreements, and
arrangements set forth in clauses (i) and (ii) of the preceding sentence which
are maintained, sponsored, contributed to or required to be contributed to by
the Company or any of its affiliates are referred to as the "Laidlaw
Environmental Employee Benefit Plans". The term "affiliate" for purposes of this
Section 4.10 means any organization that would be aggregated with the Company
under Section 414(b), (c) or (m) of the Internal Revenue Code.
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(b) Each Laidlaw Environmental Employee Benefit Plan which is intended to
comply with the provisions of Section 401(a) of the Internal Revenue Code has
been submitted to the Internal Revenue Service (the "IRS") and received a
determination letter which states that such Laidlaw Environmental Employee
Benefit Plan is so qualified, and to the best of Laidlaw Environmental's
knowledge no event has occurred since the date of such letter which would (i)
cause such Laidlaw Environmental Employee Benefit Plan not to be so qualified or
(ii) cause any trust maintained under such Laidlaw Environmental Employee
Benefit Plan not to be exempt from taxation under Section 501(a) of the Internal
Revenue Code.
(c) To the best knowledge of Laidlaw Environmental, with respect to each
Laidlaw Environmental Employee Benefit Plan which is subject to Title I of
ERISA, neither Laidlaw Environmental nor any of its affiliates has failed to
comply with any applicable reporting, disclosure or other requirements of ERISA
and the Internal Revenue Code, except for such failures to comply which would
not have, either individually or in the aggregate, a Laidlaw Environmental
Material Adverse Effect, and there has been no "prohibited transaction" as
described in Section 4975 of the Internal Revenue Code or Section 406 of ERISA
the failure to correct which would have, either individually or in the
aggregate, a Laidlaw Environmental Material Adverse Effect.
(d) There is no pending or, to the best knowledge of Laidlaw Environmental,
threatened legal action, proceeding or investigation against or involving any
Laidlaw Environmental Employee Benefit Plan (other than routine claims for
benefits), the adverse resolution of which would have, either individually or in
the aggregate, a Laidlaw Environmental Material Adverse Effect.
(e) To the best of Laidlaw Environmental's knowledge, each Laidlaw
Environmental Employee Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Internal Revenue Code.
(f) No liability under Title IV or Section 302 of ERISA has been incurred
by Laidlaw Environmental or any affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to Laidlaw Environmental
or any affiliate of incurring any such liability (other than for premiums due
the PBGC (which premiums have been paid when due)). Insofar as the
representation made in this section 4.10(e) applies to Sections 4064, 4069 or
4204 of Title IV of ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which Laidlaw
Environmental or any affiliate made, or was required to make, contributions
during the five (5)-year period ending on the last day of the most recent plan
year ended prior to the Effective Time.
(g) The PBGC has not instituted proceedings to terminate any Laidlaw
Environmental Employee Benefit Plan subject to Title IV of ERISA (a "Laidlaw
Environmental Title IV Plan") and to the best of Laidlaw Environmental's
knowledge no condition exists that presents a risk that such proceedings will be
instituted.
(h) Neither Laidlaw Environmental nor any affiliate maintains any Laidlaw
Environmental Employee Benefit Plans subject to the minimum funding standards of
ERISA and the Internal Revenue Code.
(i) Neither Laidlaw Environmental nor any of its affiliates presently
maintains, contributes to or has any liability (including current or potential
withdrawal liability) with respect to any "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
(j) Neither Laidlaw Environmental nor any of its affiliates has maintained
an employee pension benefit plan subject to Title IV of ERISA.
(k) With respect to any employee or former employee of Laidlaw
Environmental, except as required by COBRA, neither Laidlaw Environmental nor
any of its affiliates presently sponsors, maintains, contributes to, is required
to contribute to or has any liability under any funded or unfunded medical,
health or life insurance plan or similar arrangement for present or future
retirees or present or future terminated employees the existence of which or the
failure to satisfy which would have, either individually or in the aggregate, a
Laidlaw Environmental Material Adverse Effect. Neither Laidlaw Environmental nor
any subsidiary or affiliate of
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Laidlaw Environmental maintains or contributes to a trust, organization or
association described in any of Sections 501(c)(9), 501(c)(17) or 501(c)(20) of
the Internal Revenue Code.
(l) With respect to each of the Laidlaw Environmental Employee Benefit
Plans, Laidlaw Environmental will deliver or make reasonably available to the
Company true and complete copies of: (i) the plan documents, including any
related trust agreements, insurance contracts or other funding arrangements, or
a written summary of the terms and conditions of the plan if there is no written
plan document; (ii) the most recent IRS Form 5500; (iii) the most recent
financial statement; (iv) the most recent Summary Plan Description required
under ERISA; (v) the most recent actuarial report, if required under ERISA and
(vi) the most recent determination letter received from the IRS with respect to
each Laidlaw Environmental Employee Benefit Plan intended to qualify under
Section 401 of the Internal Revenue Code.
(m) With respect to the Laidlaw Environmental Title IV Plans, the present
value of the accumulated benefit obligation under such plan, calculated based
upon the actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by such plan's actuary with respect to such plan did
not exceed, as of its latest valuation date, the then fair value of the assets
of such plans in the aggregate as calculated pursuant to FAS 87.
(n) No Laidlaw Environmental Title IV Plan or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Internal Revenue Code), whether or
not waived, as of the last day of the most recent fiscal year of each Laidlaw
Environmental Title IV Plan ended prior to the Effective Time. All contributions
required to be made with respect to any Laidlaw Environmental Employee Benefit
Plan on or prior to the Effective Time have been (or will have been) timely
made.
(o) All actions will have been taken, or which have failed to be taken,
with respect to the Laidlaw Environmental Employee Benefit Plans, would not, in
the aggregate, have a Laidlaw Environmental Material Adverse Effect.
4.11. Labor. There is no material dispute, grievance, controversy, strike
or request for union representation pending, or, to the best knowledge of
Laidlaw Environmental, threatened, against either Laidlaw Environmental or any
of its subsidiaries.
4.12. Taxes. (a) Laidlaw Environmental and each subsidiary of Laidlaw
Environmental have timely filed (or have had timely filed on their behalf) or
will file or cause to be timely filed, all Tax Returns required by applicable
law to be filed by any of them prior to or as of the Effective Time, except
where the failure to do so would not have a Laidlaw Environmental Material
Adverse Effect. All material Tax Returns are, or will be at the time of filing,
true, complete and correct in all material respects.
(b) Laidlaw Environmental and each subsidiary of Laidlaw Environmental have
paid (or have had paid on their behalf) or, where payment is not yet due, have
established (or have had established on their behalf and for their sole benefit
and recourse) an adequate accrual for the payment of all Taxes due, except where
the failure to pay or establish adequate reserves would not have a Laidlaw
Environmental Material Adverse Effect.
(c) No deficiencies for any material Taxes have been proposed, asserted or
assessed against Laidlaw Environmental or any subsidiary of Laidlaw
Environmental, and no requests for waivers of the time to assess any such
material Taxes are pending. The Federal Income Tax Returns of Laidlaw
Environmental and each subsidiary of Laidlaw Environmental consolidated in such
Tax Returns are not currently being examined for years prior to the year ended
December 31, 1992 and the statute of limitations has run for years prior to
December 31, 1992.
(d) There are no material Liens for Taxes upon the assets of Laidlaw
Environmental except (i) with respect to matters beings contested in good faith
and (ii) Liens for Taxes not yet due.
(e) There are no material United States federal, state, local or foreign
audits or other administrative proceedings or court proceedings presently
pending with regard to any Taxes or Tax Returns of Laidlaw Environmental.
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4.13. Environmental Matters. Except for violations of the following
clauses (i) through (vii) that would not have a Laidlaw Environmental Material
Adverse Effect on Laidlaw Environmental, to the best knowledge of Laidlaw
Environmental, (i) Laidlaw Environmental and its subsidiaries have conducted
their respective businesses in compliance with all applicable Environmental Laws
and are currently in compliance with all such laws, including, without
limitation, having all permits, licenses and other approvals and authorizations
necessary for the operation of their respective businesses as presently
conducted, (ii) none of the properties currently or formerly owned or operated
by Laidlaw Environmental or any of its subsidiaries contains any Hazardous
Substance in amounts exceeding the levels permitted by applicable Environmental
Laws, (iii) neither Laidlaw Environmental nor any of its subsidiaries has
received any notices, demand letters or requests for information from any court
or governmental entity or third party indicating that Laidlaw Environmental or
any of its subsidiaries may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of their
businesses, including, without limitation, liability relating to sites not owned
or operated by Laidlaw Environmental or any of its subsidiaries, (iv) there are
no civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings, pending or threatened, against Laidlaw
Environmental or any subsidiaries relating to any violation of or liability
under, or alleged violation of or liability under, any Environmental Law, (v)
all reports that are required to be filed by Laidlaw Environmental or any of its
subsidiaries concerning the release of any Hazardous Substance or the threatened
or actual violation of any Environmental Law have been so filed, (vi) no
Hazardous Substance has been disposed of, released or transported in violation
of or under circumstances that could create liability under any applicable
Environmental Law from any properties owned by Laidlaw Environmental or any of
its subsidiaries as a result of any activity of Laidlaw Environmental or any of
its subsidiaries during the time such properties were owned, leased or operated
by Laidlaw Environmental or any subsidiaries, (vii) neither Laidlaw
Environmental, any of its subsidiaries nor any of their respective properties
are subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law,
and (viii) Laidlaw Environmental will provide or make available to the Company
each environmental audit, test or analysis performed within the last three years
of any property currently or formerly owned or operated by Laidlaw Environmental
or any of its subsidiaries (x) sufficient to put the Company on notice of any
condition of environmental impairment which would give rise to a Laidlaw
Environmental Material Adverse Effect and (y) of which Laidlaw Environmental has
knowledge.
4.14. Title to Properties. Laidlaw Environmental and its subsidiaries have
good, valid and marketable title to the properties and assets listed on the most
recent consolidated balance sheet included in the Laidlaw Environmental SEC
Reports (the "Laidlaw Environmental Balance Sheet") as owned by it (other than
properties and assets disposed of in the ordinary course of business since the
date of the Laidlaw Environmental Balance Sheet), and all such properties and
assets are free and clear of any liens, except as described in the Laidlaw
Environmental SEC Reports and the financial statements included therein and
other than liens for current taxes not yet due and other liens, security
interests, charges, encumbrances, easements, covenants, restrictions or title
imperfections that do not have a Laidlaw Environmental Material Adverse Effect.
ARTICLE V.
COVENANTS RELATING TO CONDUCT
OF BUSINESS PRIOR TO MERGER
5.1. Conduct of Business of the Company. Except as otherwise contemplated
hereby or as set forth in the Disclosure Schedule, the Company covenants and
agrees that, unless Laidlaw Environmental shall otherwise agree in writing
(which agreement shall not be unreasonably withheld), prior to the Effective
Time:
(a) The business of the Company and its subsidiaries shall be
conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary and usual course of business, and the
Company shall use its reasonable best efforts to maintain and preserve
intact its and its subsidiaries'
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business organization, assets, employees, officers and consultants and
advantageous business relationships.
(b) Neither the Company nor any of its subsidiaries shall directly or
indirectly do any of the following: (i) except in the ordinary course of
business, sell, pledge, dispose of or encumber any assets of the Company or
of any of its subsidiaries; (ii) amend its charter or by-laws or similar
organizational documents; (iii) split, combine or reclassify any shares of
its capital stock or declare, set aside, make or pay any dividend or
distribution payable in cash, stock, property or otherwise with respect to
any of its capital stock (except as contemplated by the Rights Agreement
and except for (x) cash dividends to shareholders of the Company declared
in the ordinary course of business and consistent with past practice and
(y) dividends by wholly-owned subsidiaries of the Company); (iv) redeem,
purchase or otherwise acquire or offer to redeem, purchase or otherwise
acquire any capital stock of the Company; (v) adopt a plan of liquidation
or resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of the Company; or (vi) authorize or
propose any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
(c) Neither the Company nor any of its subsidiaries shall, directly or
indirectly, (i) except for Shares (and the associated Rights) issuable upon
exercise of options outstanding under the Option Plans on the date hereof,
issue, sell, pledge, dispose of or encumber, or authorize, propose or agree
to the issuance, sale, pledge, disposition or encumbrance of, any shares
of, or any options, warrants or rights of any kind to acquire any shares of
or any securities convertible into or exchangeable or exercisable for any
shares of, its capital stock of any class or any other securities in
respect of, in lieu of, or in substitution for Shares outstanding on the
date hereof; (ii) make any material acquisition, by means of merger,
consolidation or otherwise, or material disposition (other than disposition
of assets in the ordinary course of business), of assets or securities, or
make any loans, advances or capital contributions to, or investment in, any
individual or entity (other than to the Company or a wholly-owned
subsidiary of the Company); (iii) except in the ordinary course of
business, and other than (A) indebtedness to or guarantees for the benefit
of the Company or any affiliate of the Company and (B) borrowings to fund
payments contemplated in Section 2.2 hereof, incur any indebtedness or
issue any debt securities or assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for,
the obligations of any other individual or entity; (iv) change the
capitalization of the Company (other than the incurrence of indebtedness
otherwise permitted in this Agreement); (v) except in the ordinary course,
change any assumption underlying, or method of calculating, any bad debt,
contingency or other reserve; (vi) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingency or otherwise),
other than the payment, discharge or satisfaction of liabilities in the
ordinary course of business or as required by applicable law; (vii) waive,
release, grant or transfer any rights of value or modify or change in any
material respect any existing license, lease, contract or other document,
other than in the ordinary course of business; or (viii) authorize any of
the foregoing, or enter into or modify any contract, agreement, commitment
or arrangement to do any of the foregoing.
(d) Subject to Section 2.2, neither the Company nor any of its
subsidiaries shall (except for salary increases or other employee benefit
arrangements in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company and its subsidiaries, taken
as a whole, or as may be required pursuant to any agreements in effect at
the date hereof) adopt or amend or take any actions to accelerate any
rights or benefits under (except as may be required by law) any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, severance, termination or other employee benefit
plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any employee or any officer or director or former employee or,
except in the ordinary course of business, consistent with past practice,
increase the compensation or fringe benefits of any employee or former
employee or pay any benefit not permitted by any existing plan, arrangement
or agreement.
(e) Except in the ordinary course of business, neither the Company nor
any of its subsidiaries shall make any tax election or, except in the
ordinary course of business, settle or compromise any federal, state, local
or foreign income tax liability.
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(f) Except in the ordinary course of business, neither the Company nor
any of its subsidiaries shall permit any insurance policy naming it as
beneficiary or a loss payee to be canceled or terminated without notice to
Laidlaw Environmental.
(g) Neither the Company nor any of its subsidiaries shall agree, in
writing or otherwise, to take any of the foregoing actions or any action
which would make any representation or warranty in Article III hereof
untrue or incorrect so as to result in a Company Material Adverse Effect.
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1. Preparation of Proxy Statement; Shareholders Meeting. (a) If the
Shareholders Meeting referred to in Section 6.1(c) below is required by
applicable law to consummate the Merger, as soon as practicable following the
purchase of the Shares pursuant to the Offer, the Company shall prepare a proxy
statement relating to the Shareholders Meeting (the "Proxy Statement"), and the
Company shall prepare and file with the SEC the Proxy Statement. Laidlaw
Environmental will cooperate with the Company in connection with the preparation
of the Proxy Statement including, but not limited to, furnishing to the Company
any and all information regarding Laidlaw Environmental or LES Acquisition and
their affiliates as may be required to be disclosed therein. The information
provided and to be provided by Laidlaw Environmental and the Company,
respectively, for use in the Proxy Statement shall, at the date it is first
mailed to the Company's shareholders and on the date of the Shareholders Meeting
referred to below, be true and correct in all material respects and shall not
omit to state any material fact required to be stated therein or necessary in
order to make such information not misleading, and the Company and Laidlaw
Environmental each agree to correct any information provided by it for use in
the Proxy Statement which shall have become false or misleading. At such
meeting, Laidlaw Environmental will vote, or cause to be voted, all Shares
acquired in the Offer in favor of the approval of the Merger and adoption of
this Agreement and the transactions contemplated hereby.
(b) The Company will as promptly as practicable notify Laidlaw
Environmental of (i) the receipt of any comments from the SEC and (ii) any
request by the SEC for any amendment to the Proxy Statement or for additional
information. All filings by the Company with the SEC, including the Proxy
Statement and any amendment thereto, and all mailings to the Company's
shareholders in connection with the Merger, including the Proxy Statement, shall
be subject to the prior review, comment and approval of Laidlaw Environmental
(such approval not to be unreasonably withheld or delayed). Laidlaw
Environmental will furnish to the Company the information relating to it and its
affiliates, including LES Acquisition, required by the Exchange Act and the
rules and regulations promulgated thereunder to be set forth in the Proxy
Statement.
(c) If required under the WBCL and the Company's Restated Articles of
Incorporation, the Company will: (i) as promptly as practicable following the
date of this Agreement, duly call, give notice of, convene and hold the
Shareholders Meeting for the purpose of approving this Agreement and the
transactions contemplated hereby; (ii) through its Board of Directors, and
subject to the other provisions hereof, recommend to its shareholders approval
of the foregoing matters; and (iii) use its reasonable best efforts to obtain
the necessary approval of this Agreement and the transactions contemplated
hereby by its shareholders; provided, however, that, subject to Section 6.7(b),
the Company may fail to make or withdraw or modify such recommendation and shall
not be obligated to use its reasonable best efforts or take any action pursuant
to this Section 6.1 if the Company shall have concluded in good faith, based on
advice from outside legal counsel to the Company, that such actions would be in
breach of the Company's Board and Directors' fiduciary duties under applicable
law. Any such recommendation, together with a copy of the opinion referred to in
Section 3.14, shall be included in the Proxy Statement.
(d) If the Shareholders Meeting is not required in order to consummate the
Merger, Laidlaw Environmental shall cause LES Acquisition to, and LES
Acquisition shall, take the actions provided in Section 180.1104 of the WBCL in
order to consummate the Merger as promptly as reasonably practical after the
purchase of Shares pursuant to the Offer.
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6.2. Access to Information. (a) From and after the date of this Agreement
and until the earlier of the Effective Time or termination of this Agreement,
(i) the Company shall, and shall cause its subsidiaries, officers, directors,
employees and agents to, afford to Laidlaw Environmental, and to the officers,
employees and agents of Laidlaw Environmental, complete access at all reasonable
times to the officers, employees, agents, properties, books, records and
contracts of the Company and its subsidiaries, and shall furnish Laidlaw
Environmental and its respective officers, employees and agents, all financial,
operating and other data and information as Laidlaw Environmental may reasonably
request; and (ii) Laidlaw Environmental shall, and shall cause its subsidiaries,
officers, directors, employees and agents to, afford to the Company, and to the
officers, employees and agents of the Company, complete access at all reasonable
times to the officers, employees, agents, properties, books, records and
contracts of the Laidlaw Environmental and its subsidiaries, and shall furnish
the Company and its respective officers, employees and agents, all financial,
operating and other data and information as the Company may reasonably request.
(b) Each of the Company and Laidlaw Environmental hereby confirms to the
other that the confidentiality agreement dated as of March 13, 1998 by and
between the Company and Laidlaw Environmental ("the Confidentiality Agreement")
is in full force and effect.
6.3. Filings; Commercially Reasonable Best Efforts. (a) Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
its commercially reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations or otherwise to consummate and
effect the transactions contemplated by this Agreement, including but not
limited to (i) determining whether any filings are required to be made or
consents, approvals, waivers, licenses, permits or authorizations are required
to be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement) under any applicable law or
regulation or from any governmental entities or third parties, including parties
to loan agreements or other debt instruments, in connection with the
transactions contemplated by this Agreement, including the Merger and the
transactions contemplated thereby, (ii) promptly making any such filings,
furnishing information required in connection therewith and timely seeking to
obtain any such consents, approvals, permits or authorizations and (iii) doing
all things necessary, proper or advisable to remove any injunctions or other
impediments or delays, legal or otherwise, to the consummation of the Merger and
the other transactions contemplated by this Agreement. Notwithstanding the
foregoing, the Company will not be required to commit to a divestiture
transaction that is to be consummated prior to the Effective Time.
(b) Notwithstanding the foregoing, none of Laidlaw Environmental, LES
Acquisition or the Company shall be obligated to use its commercially reasonable
best efforts or take any action pursuant to this Section 6.3 if it determines in
good faith, based on the advice of outside legal counsel, that such actions
would be in breach of its Board of Directors' fiduciary duties under applicable
law.
6.4. Public Announcements. Laidlaw Environmental, LES Acquisition and the
Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to the Offer, the Merger,
and this Agreement, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
any listing agreement with a national securities exchange.
6.5. Notification of Certain Matters. The Company, Laidlaw Environmental
and LES Acquisition each agree to give prompt notice (a "Default Notice") to
each other at any time from the date hereof to the Effective Time of the
obtaining by it of actual knowledge as to the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause a breach of
any covenant, representation or warranty contained in this Agreement so as to
result in a Company Material Adverse Effect or in a Laidlaw Environmental
Material Adverse Effect upon Laidlaw Environmental or any of its affiliates. If
any party receiving a Default Notice shall not object thereto within 5 business
days after receiving such Default Notice, then such party shall be deemed to
have waived all rights accruing to it as a result of such breach. A party shall
object to a Default Notice by giving timely notice of such party's objection
thereto as provided herein to the party giving such Default Notice. For purposes
of this Section 6.5, "actual knowledge" of a party to this
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Agreement shall mean the best actual knowledge of its chairman of the board,
president and chief financial officer.
6.6. Indemnification and Insurance. (a) Laidlaw Environmental agrees that
all rights to indemnification (including, without limitation, rights to advances
and related rights) existing in favor of the present or former directors,
officers, employees and agents of the Company or any of the Company subsidiaries
(collectively, the "Indemnified Parties") as provided in the Company's Restated
Articles of Incorporation or By-laws or the articles of incorporation or by-laws
or similar organizational documents of any of the Company's subsidiaries as in
effect as of the date hereof, shall survive the Merger and shall continue in
full force and effect for a period of six years after the Effective Time.
Laidlaw Environmental shall cause to be maintained in effect for not less than 6
years after the Effective Time the current policies of directors' and officers'
liability insurance maintained by the Company and the Company's subsidiaries on
the date hereof (provided that the Company may substitute therefor policies
having at least substantially the same coverage and containing terms and
conditions which are no less advantageous in any material respect to the persons
currently covered by such policies as insureds) with respect to matters existing
or occurring at or prior to the Effective Time; provided, however, that if the
aggregate annual premiums for such insurance at any time during such period
shall exceed 300% of the per annum rate of premium currently paid by the Company
and its subsidiaries for such insurance on the date of this Agreement, then
Laidlaw Environmental shall cause the Company (or the Surviving Corporation if
after the Effective Time) to, and the Company (or the Surviving Corporation if
after the Effective Time) shall, provide the maximum coverage that shall then be
available at an annual premium equal to 300% of such rate. The Company
represents to Laidlaw Environmental that such per annum rate of premium
currently paid by the Company and its subsidiaries is approximately $400,000.
Without limiting the foregoing, in the event any Indemnified Party becomes
involved in any capacity in any action, proceeding or investigation based in
whole or in part on, or arising in whole or in part out of, any matter,
including the transactions contemplated hereby, existing or occurring at or
prior to the Effective Time, then to the extent permitted by law, Laidlaw
Environmental shall cause the Company (or the Surviving Corporation if after the
Effective Time) to, and the Company (or the Surviving Corporation if after the
Effective Time) shall, periodically advance to such Indemnified Party its legal
and other expenses (including the cost of any investigation and preparation
incurred in connection therewith), subject to the provision by such Indemnified
Party of an undertaking to reimburse the amounts so advanced in the event of a
final determination by a court of competent jurisdiction that such Indemnified
Party is not entitled thereto. Laidlaw Environmental shall cause the Company (or
the Surviving Corporation if after the Effective Time) to, and the Company (or
the Surviving Corporation if after the Effective Time) shall, pay all expenses,
including attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided for in this Section 6.6.
(b) The provisions of this Section 6.6 are intended for the benefit of, and
shall be enforceable by, the respective Indemnified Parties and shall be binding
on all successors and assigns of Laidlaw Environmental, LES Acquisition, the
Company and the Surviving Corporation.
(c) Notwithstanding anything herein to the contrary, if any claim, action,
suit, proceeding or investigation (whether arising before, at or after the
Effective Time) is made or threatened against any Indemnified Party on or prior
to the sixth anniversary of the Effective Time, the provisions of this Section
6.6 shall continue in effect until the final disposition of such claim, action,
suit, proceeding or investigation.
6.7. Solicitation. (a) The Company (and its subsidiaries and affiliates)
will not, and the Company (and its subsidiaries and affiliates) will use their
best efforts to ensure that their respective directors, officers, employees,
representatives and agents do not, directly or indirectly, solicit or initiate
inquiries or proposals from, or provide any confidential information to, or
participate in any discussions or negotiations with, any person or entity (other
than Laidlaw Environmental and its subsidiaries and their respective directors,
officers, employees, representatives and agents) concerning (i) any merger, sale
of assets not in the ordinary course (except for any sale of assets otherwise
permitted under the terms of this Agreement), or other similar transaction
involving the Company or any subsidiary or division of the Company, or the sale
of any equity interest in the Company or any subsidiary, or (ii) any sale by the
Company or its subsidiaries of authorized but unissued Shares or of any shares
(whether or not outstanding) of any of the Company's subsidiaries (all
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such inquiries and proposals being referred to herein as "Acquisition
Proposals"), provided, however, that nothing contained in this Section 6.7 shall
prohibit the Company or its Board of Directors from (i) subject to the
provisions of Section 6.4, issuing a press release or otherwise publicly
disclosing the terms of this Agreement, including, without limitation, this
Section 6.7; (ii) proceeding with the transactions contemplated by this
Agreement; (iii) communicating to the Company's shareholders a position as
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act; (iv)
making any disclosure to the Company's shareholders which, in the judgment of
the Board of Directors of the Company, with the advice of outside counsel,
should reasonably be made under applicable law (including, without limitation,
laws relating to the fiduciary duties of directors) or (v) taking any
non-appealable, final action ordered to be taken by the Company by any court of
competent jurisdiction; and, provided, further, that the Board of Directors of
the Company may, on behalf of the Company, furnish or cause to be furnished
information and may direct the Company, its directors, officers, employees,
representatives or agents to furnish information, in each case pursuant to
appropriate confidentiality agreements, and to participate in discussions or
negotiations with any person or entity concerning any Acquisition Proposal which
was not solicited by the Company or any of its subsidiaries or affiliates or any
of their respective directors, officers, employees, representatives or agents,
or which did not otherwise result from a breach of this Section 6.7, if (x) the
Board of Directors of the Company shall conclude in good faith, after
consultation with its financial advisor, that such person or entity has made or
is reasonably likely to make a bona fide Acquisition Proposal for a transaction
more favorable to the Company's shareholders from a financial point of view than
the transactions contemplated hereby, and (y), in the opinion of the Board of
Directors of the Company, only after receipt of advice from independent legal
counsel to the Company, the failure to provide such information or access or to
engage in such discussions or negotiations would cause the Board of Directors of
the Company to violate its fiduciary duties to the Company's stockholders under
applicable law (an Acquisition Proposal which satisfies clauses (x) and (y)
being referred to herein as a "Superior Proposal"). The Company will immediately
notify Laidlaw Environmental of the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by the
Company in connection with such proposal, discussion negotiation, or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction unless the Board of Directors of the
Company determines, based on the advice of outside legal counsel to the Company,
that giving such notice would cause the Board of Directors of the Company to
violate its fiduciary duties to the Company's shareholders under applicable law.
The Company shall, and shall cause each subsidiary to, immediately cease and
cause to be terminated any existing activities, discussions or negotiations by
the Company, any subsidiary of the Company or any officer, director or employee
of, or investment banker, attorney, accountant or other advisor or
representative of, the Company or any subsidiary with parties conducted
heretofore with respect to any of the foregoing.
(b) Except as set forth herein, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Laidlaw Environmental or the LES
Acquisition, the approval or recommendation by the Board of Directors of the
Company or any such committee of this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal, or
(iii) enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, the Board of Directors of the Company may
(subject to the terms of this and the following sentence) withdraw or modify its
approval or recommendation of this Agreement or the Merger, approve or recommend
a Superior Proposal or enter into an agreement with respect to a Superior
Proposal at any time after the second business day following Laidlaw
Environmental's receipt of written notice advising Laidlaw Environmental that
the Board of Directors of the Company has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal; provided that the Company
shall not enter into an agreement with respect to a Superior Proposal unless the
Company shall have furnished Laidlaw Environmental with written notice not later
than noon (New York time) two business days in advance of any date that it
intends to enter into such agreement and shall have caused its financial and
legal advisors to negotiate with Laidlaw Environmental to make such amendments
to the terms and conditions of this Agreement as would make this Agreement as so
amended at least as favorable to the Company's shareholders from a financial
point of view as the Superior Proposal. In addition, if the Company proposes to
enter into an agreement with respect to any
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Acquisition Proposal, it shall concurrently with entering into such agreement
pay, or cause to be paid, to Laidlaw Environmental the Termination Amount (as
defined in Section 9.2) subject to the provisions of Section 9.2.
6.8. Board of Directors. Promptly following the purchase by Laidlaw
Environmental and LES Acquisition of Shares pursuant to the Offer, but subject
to compliance with Rule 14f-1, Laidlaw Environmental shall be entitled to
designate at its option up to that number of directors, rounded to the nearest
whole number, of the Company's Board of Directors, as will make the percentage
of the Company's directors designated by Laidlaw Environmental approximately
equal to the aggregate voting power of the Shares held by Laidlaw Environmental.
The Company shall take all actions requested by Laidlaw Environmental which are
reasonably necessary to effect the election or appointment of any such designee.
In connection with the foregoing, the Company will promptly, at the option of
Laidlaw Environmental, either increase the size of the Company's Board of
Directors and/or request the resignation of such number of its current directors
as is necessary to enable Laidlaw Environmental's designees to be elected or
appointed to the Company's Board of Directors as provided above. Following the
election or appointment of Laidlaw Environmental's designees pursuant to this
Section 6.8 and prior to the Effective Time, any amendment to the Restated
Articles of Incorporation or Bylaws of the Company, any termination of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Laidlaw Environmental or
waiver or assertion of any of the Company's rights hereunder, and any other
consent or action by the Board of Directors with respect to this Agreement, will
require the concurrence of a majority of the directors (if any) not appointed by
Laidlaw Environmental. Laidlaw Environmental agrees to assist the Company in
complying with Exchange Act Rule 14f-1 in connection with the replacement of
directors pursuant to this Section 6.8, and the Company agrees to use its
reasonable best efforts to comply with Rule 14f-1 as promptly as possible after
the date hereof, which efforts shall include, but are not limited to, the
Company requesting that the SEC shorten the notice period required under Rule
14f-1. After purchase of Shares pursuant to the Offer but before Laidlaw
Environmental designees are named as Safety-Kleen directors pursuant to this
Section 6.8, the Safety-Kleen Board of Directors will not act without notice to
and the participation of Laidlaw Environmental.
6.9. Employee Benefits, etc. (a) For a period of two years following the
Effective Time, Laidlaw Environmental intends to cause the Surviving Corporation
to, and upon being so caused, the Surviving Corporation shall, provide employee
benefit plans and programs for the benefit of employees of the Surviving
Corporation and its subsidiaries that are in the aggregate no less favorable to
such employees than the terms of such Employee Benefit Plans as described in the
Company Disclosure Schedule. All service credited to each employee by the
Company through the Effective Time shall be recognized by Laidlaw Environmental
or the Surviving Corporation for purposes of eligibility and vesting under any
employee benefit plan provided directly or indirectly by Laidlaw Environmental
or the Surviving Corporation for the benefit of the employees and in which the
respective employees participate.
(b) Notwithstanding anything in this Agreement to the contrary, Laidlaw
Environmental shall cause the Surviving Corporation to honor (without
modification) and assume the written employment agreements, severance agreements
and other agreements listed on the Disclosure Schedule, all as in effect on the
date of this Agreement.
(c) Laidlaw Environmental shall cause the Surviving Corporation not to, and
the Surviving Corporation shall not, terminate or adversely amend in any manner
which adversely affects the benefits described in the Company Disclosure
Schedule that participants in such Plans are entitled to thereunder with respect
to any periods prior to and including the Effective Time.
(d) For a period of two years from the Effective Time, Laidlaw
Environmental intends to cause the Surviving Corporation to continue to maintain
an office in Elgin, Illinois.
6.10. Purchase of Shares Pursuant to Offer; Solvency Opinion. Laidlaw
Environmental agrees that it will not purchase Shares pursuant to the Offer
unless, prior to such purchase, Laidlaw Environmental has delivered to the
Company an opinion or certificate of a reputable expert firm confirming the
solvency of the Surviving Corporation after the Merger (which opinion may assume
that the purchase of Shares pursuant to the Offer and the Merger are consummated
simultaneously) and related financings addressed to or for the
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<PAGE> 96
benefit of the Board of Directors of the Company so that the Board of Directors
of the Company is entitled to rely thereon.
6.11. Dismissal of Lawsuits. Upon the closing of the Share purchases
contemplated by the Offer, each of Laidlaw Environmental and the Company shall
take all actions necessary, and shall cause their respective subsidiaries and
affiliates to take all actions necessary, to dismiss with prejudice all pending
litigation between such parties.
ARTICLE VII.
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Shareholder Approval. The Company Shareholder Approval
shall have been obtained, if required by applicable law, or the
requirements of Section 180.1104 of the WBCL (other than the filing of
Articles of Merger) shall have been satisfied.
(b) Antitrust. The waiting periods (and any extensions thereof)
applicable to the transactions contemplated by this Agreement under the HSR
Act shall have been terminated or shall have expired. Any consents,
approvals and filings required under the Competition Act (Canada) and any
other applicable foreign law shall have been obtained or made, as
applicable.
(c) Statutes. No statute, rule, order, decree or regulation shall
have been enacted or promulgated by any domestic government or any
governmental agency or authority of competent jurisdiction which prohibits
the consummation of the Merger.
(d) Violation of Law. Consummation of the Merger shall not result in
violation of any applicable United States federal or state law providing
for criminal penalties.
(e) Litigation. No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States preventing the consummation of the Merger shall be in effect;
provided, however, that the parties hereto shall use their best efforts to
have any such injunction or order vacated.
7.2. Conditions to Obligations of Laidlaw Environmental. The obligations
of Laidlaw Environmental to effect the Merger are further subject to the
condition that Laidlaw Environmental and LES Acquisition shall have purchased
all Shares duly tendered and not withdrawn pursuant to the terms of the Offer
and subject to the terms thereof; provided that the obligation of Laidlaw
Environmental and LES Acquisition to effect the Merger shall not be conditioned
on the fulfillment of the condition set forth in this subsection (a) if the
failure of Laidlaw Environmental and LES Acquisition to purchase the Shares
pursuant to the Offer shall have constituted a breach of the Offer or of this
Agreement.
7.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is further subject to the condition that the
Company shall have received an opinion or certificate of a reputable expert firm
confirming the solvency of the Surviving Corporation after the Merger and
related financings addressed to or for the benefit of the Board of Directors of
the Company so that the Board of Directors of the Company is entitled to rely
thereon.
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ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
8.1. Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the shareholders of the Company:
(a) by mutual written consent of Laidlaw Environmental and the
Company; or
(b) by either Laidlaw Environmental or the Company if the Offer shall
expire or terminate in accordance with its terms without any Shares having
been purchased thereunder and, in the case of termination by Laidlaw
Environmental, Laidlaw Environmental shall not have been required by the
terms of the Offer or this Agreement to purchase any Shares pursuant to the
Offer; or
(c) by either Laidlaw Environmental or the Company if any governmental
body or regulatory authority of the United States of America shall have
issued an order, decree or ruling or taken any other action, in each case
permanently enjoining, restraining or otherwise prohibiting the Offer or
the Merger and such order, decree, ruling or other action shall have become
final and non-appealable; provided that the right to terminate this
Agreement pursuant to this Section 8.1(c) shall not be available to any
party that has breached its obligations under Section 6.3; or
(d) by either Laidlaw Environmental or the Company if the Offer shall
not have been consummated on or before June 30, 1998 (other than due to the
failure of the party seeking to terminate this Agreement to perform its
obligations under this Agreement required to be performed at or prior to
the Effective Time); or
(e) prior to the purchase of Shares pursuant to the Offer, by the
Board of Directors of Laidlaw Environmental, (i) if the Company shall have
breached any of its representations and warranties or failed to comply with
any of the covenants or agreements (without, in each instance, giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein) contained in this Agreement to be complied with or
performed by the Company at or prior to consummation of the Merger and such
breach or failure shall have resulted in a Material Adverse Effect, or (ii)
the Company shall have received from a third party a bona fide Acquisition
Proposal, and the Board of Directors of the Company, shall have accepted
such a proposal or (iii) if Company Shareholder Approval is required, the
Board of Directors of the Company shall have failed to recommend to the
Company Shareholders that they give the Company Shareholder Approval or
shall have withdrawn or modified in a manner adverse to Laidlaw
Environmental or LES Acquisition its approval or recommendation with
respect to the Merger, or
(f) prior to the purchase of Shares pursuant to the Offer, by the
Board of Directors of the Company, if (i) Laidlaw Environmental or LES
Acquisition shall have breached in any material respect any of its
representations and warranties or failed to comply in any material respect
with any of the covenants or agreements contained in this Agreement to be
complied with or performed by Laidlaw Environmental or LES Acquisition, or
(ii) if the Company enters into a written agreement concerning a
transaction that constitutes a Superior Proposal, provided that the Company
shall have complied with the provisions of Section 6.7(a) and (b) hereof
(including the payment of the Termination Amount).
8.2. Effect of Termination. In the event of termination of this Agreement
by either the Company or Laidlaw Environmental as provided in Section 8.1, no
party hereto (or any of its directors, officers, employees, agents, legal and
financial advisors or other representatives) shall have any liability or further
obligation to any other party to this Agreement, except as provided in this
Section 8.2 and Sections 9.1 and 9.2 of this Agreement, and except that nothing
herein will relieve any party from liability for its wilful breach of this
Agreement.
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<PAGE> 98
ARTICLE IX.
GENERAL PROVISIONS
9.1. Nonsurvival of Representations and Warranties. The representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall expire with, and be terminated and extinguished upon,
consummation of the Merger. This Section 9.1 shall have no effect upon any other
obligation of the parties hereto, whether to be performed before or after the
Effective Time. The Confidentiality Agreement shall survive the termination of
this Agreement and the provisions of such Confidentiality Agreement shall apply
to all information and material delivered by any party hereunder.
9.2. Payment of Certain Fees and Expenses. (a) All costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby and thereby shall be paid by the party incurring such expenses.
(b) Notwithstanding the foregoing, if this Agreement is terminated pursuant
to Section 8.1(e) or Section 8.1(f)(ii) hereof, then the Company shall pay to
Laidlaw Environmental, no later than two business days after being furnished
documentation in respect thereto by Laidlaw Environmental, Laidlaw
Environmental's or its affiliates' out-of-pocket fees and expenses (including
legal, investment banking, financing commitment fees, and commercial banking
fees and expenses) actually incurred in connection with the Offer and the
Merger, due diligence investigation, the negotiation and execution of this
Agreement and the transactions contemplated hereby, up to a maximum amount of
$25 million (the "Termination Amount").
(c) Notwithstanding the foregoing, if this Agreement is terminated pursuant
to Section 8.1(f)(i) hereof, then Laidlaw Environmental shall pay to the
Company, no later than two business days after being furnished documentation in
respect thereto by the Company, the Company's or its affiliates' out-of-pocket
fees and expenses (including legal and investment banking fees and expenses)
actually incurred in connection with the negotiation and execution of this
Agreement, due diligence investigation related to this Agreement, and the
transactions contemplated hereby, up to a maximum amount of $25 million. The
Company acknowledges and agrees that it shall not under any circumstances be
entitled to reimbursement by Laidlaw Environmental or LES Acquisition of any
expenses incurred in connection with the Buyout Merger Agreement.
9.3. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice:
(a) If to Laidlaw Environmental or LES Acquisition:
Laidlaw Environmental Services, Inc.
1301 Gervais
Suite 300
Columbia, SC 29201
Attention: Kenneth W. Winger
Telecopy No.: (803) 933-4345
With a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60611-3693
Attention: Herb S. Wander
Telecopy: (312) 577-8885
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<PAGE> 99
(b) If to the Company:
Safety-Kleen Corp.
One Brinckman Way
Elgin, Illinois 60123
Attention: Chairman
Telecopy No.: (847) 468-8561
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Donald G. Lubin
Telecopy No.: (312) 876-7934
9.4. Certain Definitions; Interpretation. When a reference is made in this
Agreement to subsidiaries of Laidlaw Environmental, LES Acquisition or the
Company, the word "subsidiaries" means any corporation 50 percent or more of
whose outstanding voting securities, or any partnership, joint venture or other
entity 50 percent or more of whose total equity interest, is directly or
indirectly owned by Laidlaw Environmental, LES Acquisition or the Company, as
the case may be. The words "Significant Subsidiaries" shall have the meaning
ascribed to it under Rule 1-02 of Regulation S-X of the SEC. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule
12b-2 under the Exchange Act. As used in this Agreement, "Company Material
Adverse Effect" means any change(s) or effect(s) that, individually, or in the
aggregate, are materially adverse to the financial condition, properties,
business of the Company and its subsidiaries, taken as a whole, or that would
prevent or materially delay the Company from performing its obligations under
this Agreement. As used in this Agreement, "Laidlaw Environmental Material
Adverse Effect" means any change(s) or effect(s) that, individually, or in the
aggregate, are materially adverse to the financial condition, properties,
business of Laidlaw Environmental and its subsidiaries, taken as a whole, or
that would prevent or materially delay Laidlaw Environmental from performing its
obligations under this Agreement. Whenever this Agreement requires LES
Acquisition to take any action, such requirement shall be deemed to include an
undertaking on the part of Laidlaw Environmental to cause LES Acquisition to
take such performance and a guarantee of the performance thereof.
9.5. Entire Agreement. This Agreement (including the Disclosure Schedule
and the exhibits hereto) and the Confidentiality Agreement contain the entire
agreement between the parties with respect to the transactions contemplated
hereby, and supersedes all written or oral negotiations, representations,
warranties, commitments, offers, bids, bid solicitations, and other
understandings prior to the date hereof, except to the extent expressly
confirmed or provided herein.
9.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.7. Severability. If any provision hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect of any other provision hereof.
9.8. Captions. The captions of the various Articles and Sections of this
Agreement have been inserted only for convenience of reference and shall not be
deemed to modify, explain, enlarge or restrict any provision of this Agreement
or affect the construction hereof.
9.9. Amendment. Subject to the applicable provisions of the WBCL, this
Agreement may be amended by the parties hereto, at any time before or after any
required approval of matters presented in connection with the Merger by the
shareholders of the Company; provided, however, that after any such approval,
there shall be made no amendment that by law requires further approval by such
shareholders without the further approval of such shareholders. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
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<PAGE> 100
9.10. Waiver. Subject to the applicable provisions of the WBCL, at any
time prior to the Effective Time, any party hereto may (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, or (b) subject to the proviso of Section 9.9, waive compliance with any
of the agreements or conditions contained herein. In addition to the provisions
contained in Section 6.5 hereof, at any time prior to consummation of the Merger
any party hereto may waive any inaccuracies in the representations and
warranties contained herein or in any documents delivered pursuant hereto. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by such party.
9.11. No Third-Party Beneficiaries; Assignability. Except for Sections
2.2, 2.3, 6.6 and 6.9 (which are intended for the benefit of, and may be
enforced by, the persons or entities specified therein), this Agreement is not
intended to confer or impose upon any person not a party hereto any rights,
remedies, obligations or liabilities hereunder. This Agreement shall not be
assigned by any party hereto, by operation of law or otherwise. Subject to the
preceding two sentences, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
9.12. Best Knowledge. When used with respect to the Company in this
Agreement, the term "best knowledge" shall mean to the best actual knowledge of
any of the Company's Chairman of the Board, President and chief financial
officer.
9.13. Governing Law. (a) The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of the State of Wisconsin,
without giving effect to the principles of conflict of laws thereof.
(b) Each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Illinois or
any Illinois state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (iii) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated hereby in any
court other than a federal or state court sitting in the State of Illinois.
[remainder of page intentionally left blank]
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<PAGE> 101
IN WITNESS WHEREOF, Laidlaw Environmental, LES Acquisition and the Company
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunder duly authorized.
Safety-Kleen Corp.
By: /s/ DONALD W. BRINCKMAN
------------------------------------
Donald W. Brinckman
Chairman and Chief
Executive Officer
Laidlaw Environmental Services, Inc.
By: /s/ KENNETH W. WINGER
------------------------------------
Kenneth W. Winger
President and Chief Executive
Officer
LES Acquisition Inc.
By: /s/ KENNETH W. WINGER
------------------------------------
Kenneth W. Winger
President
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<PAGE> 102
ANNEX B
DIRECTORS AND EXECUTIVE OFFICERS OF LAIDLAW ENVIRONMENTAL
Directors and Executive Officers of Laidlaw Environmental. The name,
business address, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of Laidlaw
Environmental are set forth below. Unless otherwise indicated, each occupation
set forth opposite an individual's name refers to employment with Laidlaw
Environmental. Unless otherwise indicated, each director and executive officer
listed below is a citizen of the United States.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE LAST FIVE YEARS,
NAME AND BUSINESS ADDRESS AGE DIRECTORSHIPS OF PUBLIC COMPANIES
- ------------------------- --- --------------------------------------------------------------
<S> <C> <C>
Kenneth W. Winger..................... 59 President, Chief Executive Officer and Director of
President, Chief Executive Officer Laidlaw Environmental since May 15, 1997;
and Director of Laidlaw President, Chief Operating Officer and sole
Environmental since May 1997 director of Laidlaw Environmental Services (US),
Laidlaw Environmental Services, Inc. Inc. from July 1995 until May 1997; Executive
1301 Gervais Street, Suite 300 Vice President for Business Development of
Columbia, S.C. 29201 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. Mr. Winger also is a
director of ViroGroup, Inc. Non-U.S. citizen.
James R. Bullock...................... 53 President and Chief Executive Officer of Laidlaw Inc.
Director of Laidlaw Environmental since October 1993; for more than a year prior
and Chairman of the Board thereto, President and Chief Executive Officer
since May 1997 of Cadillac Fairview Corporation Limited.
Laidlaw Inc. Mr. Bullock also is a director of Laidlaw Inc.
3221 North Service Road Non-U.S. citizen.
Burlington, Ontario L7R 3Y8
John R. Grainger...................... 48 Executive Vice President and Chief Operating Officer of
Director of Laidlaw Environmental Laidlaw Inc. since September 1997; President and
since 1997 Chief Operating Officer of Laidlaw Transit, Inc. since
Laidlaw Inc. May 1992. Mr. Grainger currently serves as Chairman
3221 North Service Road of the Human Resources and Compensation
Burlington, Ontario L7R 3Y8 Committee. Non-U.S. citizen.
Leslie W. Haworth..................... 54 Senior Vice President and Chief Financial Officer of
Director of Laidlaw Environmental Laidlaw Inc. for more than five years. Mr. Haworth
since May 1997 currently serves as Chairman of the Audit Committee.
Laidlaw Inc. Non-U.S. citizen.
3221 North Service Road
Burlington, Ontario L7R 3Y8
John W. Rollins, Sr................... 81 Chairman of the Board and Chief Executive Officer
Director of Rollins since 1982 of Rollins Truck Leasing Corp. for more than five
Rollins Truck Leasing Corp. years. Mr. Rollins was Chairman of the Board and
2200 Concord Pike Chief Executive Officer of Rollins from 1988 until
One Rollins Plaza May 15, 1997. Mr. Rollins also is a director of
Wilmington, DE 19803 Matlack Systems, Inc., Rollins, Inc., RPC, Inc. and Dover
Downs Entertainment, Inc. Mr. Rollins is the father of John
W. Rollins, Jr.
</TABLE>
B-1
<PAGE> 103
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE LAST FIVE YEARS,
NAME AND BUSINESS ADDRESS AGE DIRECTORSHIPS OF PUBLIC COMPANIES
- ------------------------- --- --------------------------------------------------------------
<S> <C> <C>
John W. Rollins, Jr................... 55 President and Chief Operating Officer and a director of
Director of Rollins since 1982 Rollins Truck Leasing Corp. for more than five years;
Rollins Truck Leasing Corp. Chairman of the Board of Matlack Systems, Inc.
2200 Concord Pike for more than five years. Mr. Rollins was Senior
One Rollins Plaza Vice Chairman of the Board of Rollins from 1988
Wilmington, DE 19803 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.
David E. Thomas, Jr................... 40 Senior Managing Director and the Head of the
Director of Laidlaw Environmental Investment Banking Group of Raymond James since
since June 1997 July 1996; from 1991 until July 1996, Managing
Raymond James & Associates, Inc. Director of Raymond James. Mr. Thomas also is a
880 Carillon Parkway director of Reynolds, Smith and Hills, Inc.
St. Petersburg, FL 33716 Mr. Thomas is a member of the Human Resources and Compensation
Committee.
Henry B. Tippie....................... 70 For more than five years, Chairman of the Board and
Director of Rollins since 1982 President of Tippie Services; for more than five years,
Tippie Service, Inc. Chairman of the Executive Committee and Vice
3420 Executive Center Drive, NW Chairman of the Board of Rollins Truck Leasing
Suite 163 Corp. Mr. Tippie was Chairman of the Executive
Austin, TX 78731 Committee of Rollins from 1988 until May 15, 1997. 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.
James L. Wareham...................... 58 President of AK Steel Corporation since March 1997;
Director of Laidlaw Environmental until 1996, Chief Executive Officer of from 1992
since June 1997 Wheeling-Pittsburgh Steel Corporation.
AK Steel Corporation Mr. Wareham is a member of the Audit
703 Curtis Street Committee.
Middleton, OH 45043
Grover C. Wrenn....................... 54 Chairman and Chief Executive Officer of Better Health
Director of Laidlaw Environmental Network, Inc. since June 1996; Chief Executive
since July 1997 Officer of EnSys Environmental Products, Inc. from
4 Wolfe Street April 1995 through December 1996; and President and
Alexandria, VA 22314 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.
</TABLE>
B-2
<PAGE> 104
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE LAST FIVE YEARS,
NAME AND BUSINESS ADDRESS AGE DIRECTORSHIPS OF PUBLIC COMPANIES
- ------------------------- --- --------------------------------------------------------------
<S> <C> <C>
Michael J. Bragagnolo................. 51 Executive Vice President and Chief Operating Officer of
Executive Vice President and Chief Laidlaw Environmental Services, Inc. since May 15,
Operating Officer of Laidlaw 1997; Executive Vice President and Chief Operating
Environmental since May 1997 Officer of Laidlaw Environmental Services (US), Inc.
Laidlaw Environmental Services, Inc. from January 1997 until May 1997; Executive Vice
1301 Gervais Street, Suite 300 President of United States Operations of Laidlaw
Columbia, SC 29201 Waste Systems, Inc. from September 1993 until January 1997;
Vice President of Strategic Analysis and Planning of Laidlaw
Waste Systems, Inc. from December 1991 until September 1993.
Non-U.S. citizen.
Henry H. Taylor....................... 53 Vice President, General Counsel and Secretary of
Vice President, General Counsel and Laidlaw Environmental Services, Inc. since May 15,
Secretary of Laidlaw Environmental 1997; Vice President of Legal and Regulatory Affairs
since May 1997. and Secretary of Laidlaw Environmental Services
Laidlaw Environmental Services, Inc. (US), Inc. September 1995 until May 1997; Vice
1301 Gervais Street, Suite 300 President of Legal Affairs of Laidlaw Environmental
Columbia, SC 29201 Services (US), Inc. May 1990 until January 1995.
Paul R. Humphreys..................... 38 Senior Vice President of Finance and Chief Financial
Senior Vice President, Finance and Officer of Laidlaw Environmental Services, Inc.
Chief Financial Officer of Laidlaw since May 15, 1997; Vice President of Finance for
Environmental since May 1997 Laidlaw Environmental Services (US) Inc.
Laidlaw Environmental Services, Inc. January 1995 until May 1997; Manager of Finance for
1301 Gervais Street, Suite 300 Laidlaw Inc. from 1988 until January 1995.
Columbia, SC 29201 Non-U.S. citizen.
</TABLE>
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ANNEX C
[WILLIAM BLAIR LETTERHEAD]
March 15, 1998
Board of Directors
Safety-Kleen Corp.
One Brinckman Way
Elgin, IL 60123-7857
Dear Directors:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders (the "Shareholders") of Safety-Kleen Corp. (the
"Company") of the consideration to be received pursuant to the terms of the
draft Agreement and Plan of Merger dated as of March 16, 1998 (the "Merger
Agreement") by and among the Company, Laidlaw Environmental Services, Inc.,
("Laidlaw Environmental") and LES Acquisition Inc. ("LES Acquisition"), a
wholly-owned subsidiary of Laidlaw Environmental.
Pursuant to the terms of, and subject to the conditions of, the Merger
Agreement, Laidlaw Environmental will make a tender offer for the common stock
of the Company at a per share price of $18.30 in cash and 2.8 shares of Laidlaw
Environmental common stock. Following the consummation of the tender offer, LES
Acquisition will be merged into the Company in a merger in which each of the
outstanding shares of common stock of the Company will be converted into a right
for the Shareholders to receive $18.30 in cash and 2.8 shares of Laidlaw
Environmental common stock per each share of common stock of the Company (the
transactions pursuant to the Merger Agreement are collectively, the
"Transaction").
We have acted as financial advisor to the Company in connection with the
Transaction. In connection with our review of the Transaction and the
preparation of our opinion herein, we have: (a) reviewed the terms and
conditions of the Merger Agreement and the financial terms of the Transaction as
set forth in the Merger Agreement; (b) analyzed the historical revenue,
operating earnings, net income, dividend capacity and capitalization, of both
the Company and certain other publicly held companies in businesses we believe
to be comparable to the Company; (c) analyzed certain financial and other
information relating to the prospects of the Company provided to us by the
Company's management, including financial projections; (d) discussed the past
and current operations and financial condition and prospects of the Company with
senior executives of the Company; (e) reviewed the historical market prices and
trading volume of the common stock of the Company; (f) reviewed the financial
terms, to the extent publicly available, of selected actual business'-
Combinations we believe to be relevant; (g) compared the historical revenue,
operating earnings, net income, dividend capacity and capitalization of both
Laidlaw Environmental and certain other publicly traded companies in businesses
we believe to be comparable to Laidlaw Environmental; (h) analyzed certain
publicly available financial information relating to Laidlaw Environmental and
the unaudited pro forma combined financial information contained in the Amended
Prospectus dated January 28, 1998 of Laidlaw Environmental, and performed a
sensitivity analysis on such pro forma financial information based upon variable
synergy assumptions; (i) reviewed the historical market prices and trading
volume of the Laidlaw Environmental common stock as well as its stock ownership
and analyzed factors which could influence the trading price of the Laidlaw
Environmental common stock on the anticipated closing date of the Transaction;
and (j) performed such other analyses as William Blair deemed appropriate. We
have not had access to and have not analyzed financial and other information
relating to the prospects of Laidlaw Environmental, including projections.
We have assumed the accuracy and completeness of all such information and
have not attempted to verify independently any of such information, nor have we
made or obtained an independent valuation or appraisal of any of the assets or
liabilities of the Company. With respect to financial information, we have
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assumed that it has been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the Company's management, as to
the future financial performance of the Company. We assume no responsibility
for, and express no view as to, such forecasts or the assumptions on which they
are based. With your consent we have, in the rendering of this opinion, applied
certain assumptions as to synergy realization, which assumptions have been
disclosed to you in detail. Our opinion relates to financial fairness only as of
the opinion date, and we express no opinion as to the soundness of the financial
condition of Laidlaw Environmental subsequent to the consummation of the Merger.
We understand that other professionals who are expert in those areas will be
providing advice on those subjects. Our opinion is necessarily based solely upon
information available to us and business, market, economic and other conditions
as they exist on, and can be evaluated as of, the date hereof. William Blair's
opinion with respect to the Transaction reflects only limited access to Laidlaw
Environmental management and no access to internal Laidlaw Environmental
projections.
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Merger Agreement, without any waiver
of any material terms or conditions by the Company and that obtaining the
necessary regulatory approvals for the Transaction will not have a material
adverse effect on the Company.
William Blair & Company has been engaged in the investment banking business
since 1935. We undertake the valuation of investment securities in connection
with public offerings, private placements, business combinations, estate and
gift tax valuations and similar transactions. For our services, including the
rendering of this opinion, the Company will pay us a fee, a significant portion
of which is contingent upon consummation of the Transaction, and indemnify us
against certain liabilities. William Blair & Company has provided investment
banking and financial advisory services to the Company in the past for which we
have received customary compensation. Edgar D. Jannotta, Sr., Senior Director of
William Blair & Company, serves as a member of the Board of Directors of the
Company.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors. It is understood that this letter may not be
disclosed or otherwise referred to without our prior written consent, except
that this opinion may be included in a Schedule 14D-9 and a proxy statement
mailed to Shareholders of the Company and filed with the Securities and Exchange
Commission with respect to the Transaction.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of March 15, 1998, the consideration to be paid to the
Shareholders of the Company in the Transaction pursuant to the Merger Agreement
is fair, from a financial point of view, to such Shareholders.
Very truly yours,
WILLIAM BLAIR & COMPANY, L.L.C.
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ANNEX D
WISCONSIN BUSINESS CORPORATION LAW
180.1301. DEFINITIONS.
In ss. 180.1301 to 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner of
shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in s. 180.1130(3).
(2) "Corporation" means the issuer corporation or, if the corporate action
giving rise to dissenters' rights under s. 180.1302 is a merger or share
exchange that has been effectuated, the surviving domestic corporation or
foreign corporation of the merger or the acquiring domestic corporation or
foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is
entitled to dissent from corporate action under s. 180.1302 and who exercises
that right when and in the manner required by ss. 180.1320 to 180.1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. "Fair value", with respect to a dissenter's
shares in a business combination, means market value, as defined in s.
180.1130(9)(a) 1 to 4.
(5) "Interest" means interest from the effectuation date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all of the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the issuer of
the shares held by a dissenter before the corporate action.
180.1302. RIGHT TO DISSENT.
(1) Except as provided in sub. (4) and s. 180.1008(3), a shareholder or
beneficial shareholder may dissent from, and obtain payment of the fair value of
his or her shares in the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the issuer corporation
is a party if any of the following applies:
1. Shareholder approval is required for the merger by s. 180.1103
or by the articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its
parent under s. 180.1104.
(b) Consummation of a plan of share exchange if the issuer
corporation's shares will be acquired, and the shareholder or the
shareholder holding shares on behalf of the beneficial shareholder is
entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the issuer corporation other than in the usual and
regular course of business, including a sale in dissolution, but not
including any of the following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale.
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(d) Except as provided in sub. (2), any other corporate action taken
pursuant to a shareholder vote to the extent that the articles of
incorporation, bylaws or a resolution of the board of directors provides
that the voting or nonvoting shareholder or beneficial shareholder may
dissent and obtain payment for his or her shares.
(2) Except as provided in sub. (4) and s. 180.1008(3), the articles of
incorporation may allow a shareholder or beneficial shareholder to dissent from
an amendment of the articles of incorporation and obtain payment of the fair
value of his or her shares if the amendment materially and adversely affects
rights in respect of a dissenter's shares because it does any of the following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(c) Alters or abolishes a preemptive right of the holder of shares to
acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or
beneficial shareholder to a fraction of a share if the fractional share so
created is to be acquired for cash under s. 180.0604.
(3) Notwithstanding sub. (1)(a) to (c), if the issuer corporation is a
statutory close corporation under ss. 180.1801 to 180.1837, a shareholder of the
statutory close corporation may dissent from a corporate action and obtain
payment of the fair value of his or her shares, to the extent permitted under
sub. (1)(d) or (2) or s. 180.1803, 180.1813(1)(d) or (2)(b), 180.1815(3) or
180.1829(1)(c).
(4) Except in a business combination or unless the articles of
incorporation provide otherwise, subs. (1) and (2) do not apply to the holders
of shares of any class or series if the shares of the class or series are
registered on a national securities exchange or quoted on the national
association of securities dealers, inc., automated quotations system on the
record date fixed to determine the shareholders entitled to notice of a
shareholders meeting at which shareholders are to vote on the proposed corporate
action.
(5) Except as provided in s. 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
ss. 180.1301 to 180.1331 may not challenge the corporate action creating his or
her entitlement unless the action is unlawful or fraudulent with respect to the
shareholder, beneficial shareholder or issuer corporation.
180.1303. DISSENT BY SHAREHOLDERS AND BENEFICIAL SHAREHOLDERS.
(1) A shareholder may assert dissenters' rights as to fewer than all of the
shares registered in his or her name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf he
or she asserts dissenters' rights. The rights of a shareholder who under this
subsection asserts dissenters' rights as to fewer than all of the shares
registered in his or her name are determined as if the shares as to which he or
she dissents and his or her other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if the beneficial shareholder does all of the
following:
(a) Submits to the corporation the shareholder's written consent to
the dissent not later than the time that the beneficial shareholder asserts
dissenters' rights.
(b) Submits the consent under par. (a) with respect to all shares of
which he or she is the beneficial shareholder.
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180.1320. NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under
s. 180.1302 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders and beneficial shareholders are or may be
entitled to assert dissenters' rights under ss. 180.1301 to 180.1331 and shall
be accompanied by a copy of those sections.
(2) If corporate action creating dissenters' rights under s. 180.1302 is
authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with s. 180.0141, all shareholders entitled to assert
dissenters' rights that the action was authorized and send them the dissenters'
notice described in s. 180.1322.
180.1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under
s. 180.1302 is submitted to a vote at a shareholders' meeting, a shareholder or
beneficial shareholder who wishes to assert dissenters' rights shall do all of
the following:
(a) Deliver to the issuer corporation before the vote is taken written
notice that complies with s. 180.0141 of the shareholder's or beneficial
shareholder's intent to demand payment for his or her shares if the
proposed action is effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub. (1)
is not entitled to payment for his or her shares under ss. 180.1301 to 180.1331.
180.1322. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under
s. 180.1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders and beneficial
shareholders who satisfied s. 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action is authorized at a shareholders' meeting or without a vote of
shareholders, whichever is applicable. The dissenters' notice shall comply with
s. 180.0141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial
shareholder must send the payment demand and where and when certificates
for certificated shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent
to which transfer of the shares will be restricted after the payment demand
is received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the shareholder or beneficial
shareholder asserting dissenters' rights to certify whether he or she
acquired beneficial ownership of the shares before that date.
(d) A date by which the corporation must receive the payment demand,
which may not be fewer than 30 days nor more than 60 days after the date on
which the dissenters' notice is delivered.
(e) A copy of ss. 180.1301 to 180.1331.
180.1323. DUTY TO DEMAND PAYMENT.
(1) A shareholder or beneficial shareholder who is sent a dissenters'
notice described in s. 180.1322, or a beneficial shareholder whose shares are
held by a nominee who is sent a dissenters' notice described in s. 180.1322,
must demand payment in writing and certify whether he or she acquired beneficial
ownership of the shares before the date specified in the dissenters' notice
under s. 180.1322(2)(c). A shareholder or
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beneficial shareholder with certificated shares must also deposit his or her
certificates in accordance with the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares who
demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and by
the date set in the dissenters' notice, is not entitled to payment for his or
her shares under ss. 180.1301 to 180.1331.
180.1324. RESTRICTIONS ON UNCERTIFICATED SHARES.
(1) The issuer corporation may restrict the transfer of uncertificated
shares from the date that the demand for payment for those shares is received
until the corporate action is effectuated or the restrictions released under
s. 180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenters'
rights as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub. (1), until these
rights are canceled or modified by the effectuation of the corporate action.
180.1325. PAYMENT.
(1) Except as provided in s. 180.1327, as soon as the corporate action is
effectuated or upon receipt of a payment demand, whichever is later, the
corporation shall pay each shareholder or beneficial shareholder who has
complied with s. 180.1323 the amount that the corporation estimates to be the
fair value of his or her shares, plus accrued interest.
(2) The payment shall be accompanied by all of the following:
(a) The corporation's latest available financial statements, audited
and including footnote disclosure if available, but including not less than
a balance sheet as of the end of a fiscal year ending not more than 16
months before the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year and the latest
available interim financial statements, if any.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under
s. 180.1328 if the dissenter is dissatisfied with the payment.
(e) A copy of ss. 180.1301 to 180.1331.
180.1326. FAILURE TO TAKE ACTION.
(1) If an issuer corporation does not effectuate the corporate action
within 60 days after the date set under s. 180.1322 for demanding payment, the
issuer corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under s. 180.1322 and repeat
the payment demand procedure.
180.1327. AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by s. 180.1325
from a dissenter unless the dissenter was the beneficial owner of the shares
before the date specified in the dissenters' notice under
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s. 180.1322(2)(c) as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under
sub. (1) after effectuating the corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this amount to each
dissenter who agrees to accept it in full satisfaction of his or her demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under s. 180.1328 if the
dissenter is dissatisfied with the offer.
180.1328. PROCEDURE IF DISSENTER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may, in the manner provided in sub. (2), notify the
corporation of the dissenter's estimate of the fair value of his or her shares
and amount of interest due, and demand payment of his or her estimate, less any
payment received under s. 180.1325, or reject the offer under s. 180.1327 and
demand payment of the fair value of his or her shares and interest due, if any
of the following applies:
(a) The dissenter believes that the amount paid under s. 180.1325 or
offered under s. 180.1327 is less than the fair value of his or her shares
or that the interest due is incorrectly calculated.
(b) The corporation fails to make payment under s. 180.1325 within 60
days after the date set under s. 180.1322 for demanding payment.
(c) The issuer corporation, having failed to effectuate the corporate
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the date
set under s. 180.1322 for demanding payment.
(2) A dissenter waives his or her right to demand payment under this
section unless the dissenter notifies the corporation of his or her demand under
sub. (1) in writing within 30 days after the corporation made or offered payment
for his or her shares. The notice shall comply with s. 180.0141.
180.1330. COURT ACTION.
(1) If a demand for payment under s. 180.1328 remains unsettled, the
corporation shall bring a special proceeding within 60 days after receiving the
payment demand under s. 180.1328 and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not bring the
special proceeding within the 60-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall bring the special proceeding in the circuit court
for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special proceeding
in the county in this state in which was located the registered office of the
issuer corporation that merged with or whose shares were acquired by the foreign
corporation.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the special proceeding.
Each party to the special proceeding shall be served with a copy of the petition
as provided in s. 801.14.
(4) The jurisdiction of the court in which the special proceeding is
brought under sub. (2) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. An appraiser has the power described in the order
appointing him or her or in any amendment to the order. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
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(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) The amount, if any, by which the court finds the fair value of his
or her shares, plus interest, exceeds the amount paid by the corporation.
(b) The fair value, plus accrued interest, of his or her shares
acquired on or after the date specified in the dissenter's notice under
s. 180.1322(2)(c), for which the corporation elected to withhold payment
under s. 180.1327.
180.1331. COURT COSTS AND COUNSEL FEES.
(1)(a) Notwithstanding ss. 814.01 to 814.04, the court in a special
proceeding brought under s. 180.1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court and shall assess the costs against the corporation,
except as provided in par. (b).
(b) Notwithstanding ss. 814.01 and 814.04, the court may assess costs
against all or some of the dissenters, in amounts that the court finds to
be equitable, to the extent that the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment under
s. 180.1328.
(2) The parties shall bear their own expenses of the proceeding, except
that, notwithstanding ss. 814.01 to 814.04, the court may also assess the fees
and expenses of counsel and experts for the respective parties, in amounts that
the court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court
finds that the corporation did not substantially comply with ss. 180.1320
to 180.1328.
(b) Against the corporation or against a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by this chapter.
(3) Notwithstanding ss. 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
180.1130. DEFINITIONS APPLICABLE TO SS. 180.1130 TO 180.1134
In ss. 180.1130 to 180.1134:
(1) "Associate" of a person means any of the following:
(a) An organization, other than the issuing public corporation or a
subsidiary of the issuing public corporation, of which the person is an
officer, director, manager or partner or is, directly or indirectly, the
beneficial owner of 10% or more of a class of voting securities.
(b) A trust or estate in which the person has a substantial beneficial
interest or as to which the person serves as trustee or in a similar
fiduciary capacity.
(c) A relative or spouse of the person, or a relative of the spouse,
who has the same principal residence as the person who is a director or
officer of the issuing public corporation or of an affiliate of the issuing
public corporation.
(2) "Beneficial owner" has the meaning prescribed in rule 13d-3 under the
securities exchange act of 1934. A person is not a "beneficial owner" solely
because of any of the following:
(a) The existence of an agreement by or on behalf of the person and by
or on behalf of a record or beneficial owner of securities under which the
owner agrees to vote the securities in favor of a proposed merger, share
exchange or sale, lease, exchange or other disposition of assets.
(b) The existence of an option from, or other arrangement with, an
issuing public corporation to acquire securities of the issuing public
corporation.
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(3) "Business combination" means any of the following:
(a) Unless the merger or share exchange is subject to s. 180.1104,
does not alter the contract rights of the shares as set forth in the
articles of incorporation or does not change or convert in whole or in part
the outstanding shares of the issuing public corporation, a merger or share
exchange of the issuing public corporation or a subsidiary of the issuing
public corporation with any of the following:
1. A significant shareholder.
2. Any other corporation, whether or not itself a significant
shareholder, which is, or after the merger or share exchange would be,
an affiliate of a significant shareholder that was a significant
shareholder before the transaction.
(b) A sale, lease, exchange or other disposition, other than a
mortgage or pledge if not made to avoid the requirements of ss. 180.1130 to
180.1134, to a significant shareholder, other than the issuing public
corporation or a subsidiary of the issuing public corporation, or to an
affiliate of the significant shareholder, of all or substantially all of
the property and assets, with or without goodwill, of an issuing public
corporation, if not made in the usual and regular course of its business.
(4) "Commencement of a tender offer" has the meaning prescribed in rule
14d-2 under the securities exchange act of 1934.
(5) "Common shares" means shares other than preferred or preference shares.
(6) "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting shares, by contract or otherwise.
(7) "Determination date" means the date on which a significant shareholder
first becomes a significant shareholder.
(8) "Issuing public corporation" means a domestic corporation, other than
an investment company registered under the investment company act of 1940, that
has all of the following:
(a) Total assets exceeding $1,000,000 and a class of equity securities
held of record by 500 or more persons.
(b) At least 100 shareholders of record who have unlimited voting
rights and who are residents of this state.
(9) "Market value" means the following:
(a) In the case of shares:
1. If the shares are listed on a national securities exchange
registered under the securities exchange act of 1934 [FN1] or are quoted
on any national market system, the highest closing sales price per share
reported on the exchange or quoted on the system during the valuation
period.
2. If bids for the shares are quoted on the national association of
securities dealers automated quotations system, or any successor system
operated by the association, the highest closing bid per share quoted on
the system during the valuation period.
3. If the shares are listed on an exchange or are quoted on a
system under subd. 1 but no transactions are reported during the
valuation period or if the shares are neither listed on an exchange or
system under subd. 1 nor quoted on a system under subd. 2, and if at
least 3 members of the national association of securities dealers are
market makers for the securities, the highest closing bid per share
obtained from the association during the valuation period.
4. If no report or quote is available under subd. 1, 2 or 3, the
fair market value as determined in good faith by the board of directors
of the issuing public corporation.
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(b) In the case of property other than cash or shares, the fair market
value of the property on the date in question as determined in good faith
by the board of directors of the corporation.
(10) "Organization" means a person other than an individual.
(11) "Significant shareholder", with respect to an issuing public
corporation, means a person that is the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the outstanding voting shares
of the issuing public corporation; or is an affiliate of the issuing public
corporation and within the 2-year period immediately before the date in question
was the beneficial owner, directly or indirectly, of 10% or more of the voting
power of the then outstanding voting shares of the issuing public corporation.
For the purpose of determining whether a person is a significant shareholder,
the number of voting shares considered to be outstanding includes shares
considered to be owned by the person as the beneficial owner but does not
include any other voting shares which may be issuable under an agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise. In this paragraph, "person" includes 2 or more
individuals or persons acting as a group for the purpose of acquiring, holding
or voting securities of an issuing public corporation.
(12) "Subsidiary" means a corporation of which voting shares having a
majority of the votes entitled to be cast are owned, directly or indirectly, by
one other corporation.
(13) "Take-over offer" means the offer to acquire or the acquisition of any
equity security, as defined in s. 552.01(2), of an issuing public corporation,
pursuant to a tender offer or request or invitation for tenders, if after the
acquisition thereof the offeror, as defined in s. 552.01(3), would be directly
or indirectly a beneficial owner of more than 5% of any class of the outstanding
equity securities of the issuer. "Take-over offer" does not include an offer or
acquisition of any equity security of an issuing public corporation pursuant to:
(a) Brokers' transactions effected by or through a broker-dealer in
the ordinary course of its business.
(b) An exchange offer for securities of another issuer, if the offer
is exempted from registration under ch. 551 and does not involve any public
offering under the securities act of 1933.
(c) An offer made to not more than 10 persons in this state during any
period of 12 consecutive months.
(d) An offer made to all the shareholders of the issuing public
corporation, if the number of its shareholders does not exceed 100 at the
time of the offer.
(e) An offer if the acquisition of any equity security pursuant
thereto, together with all other acquisitions by the offeror of securities
of the same class during the preceding 12 months, would not exceed 2% of
that class of the outstanding equity securities of the issuer.
(f) An offer by the issuing public corporation to acquire its own
equity securities.
(14) "Valuation date" means the later of the day before the date of the
shareholders' vote under s. 180.1131 or the day 20 days before the consummation
of the business combination.
(15) "Valuation period" means the 30-day period preceding the date on which
the market value is to be determined.
(16) "Voting shares" means capital shares of a corporation entitled to vote
generally in the election of directors.
[FN1] 15 U.S.C.A. sec. 78a et seq.
D-8
<PAGE> 115
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Laidlaw Environmental is incorporated under the laws of the State of
Delaware. Section 145 of the DGCL, inter alia ("Section 145") provides that a
Delaware corporation may indemnify any person who were, are or are threatened to
be made, parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, were or are threatened
to be made, a party to any threatened, pending or completed action or suit by or
in the right of the corporation by reason of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests, provided that no indemnification is
permitted without judicial approval if the officer, director, employee or agent
is adjudged to be liable to the corporation. Where an officer, director,
employee or agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director has actually and reasonably incurred.
The Laidlaw Environmental Certificate of Incorporation provides that, to
the fullest extent permitted by the DGCL as the same exists or may hereafter be
amended, a director of Laidlaw Environmental shall not be liable to Laidlaw
Environmental or its stockholders for monetary damages for a breach of fiduciary
duty as a director.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
All of the Laidlaw Environmental directors and officers are covered by
insurance policies maintained and held in effect by Laidlaw Inc. against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
(2) -- Agreement and Plan of Merger dated as of March 16, 1998, by
and among the Registrant, LES Acquisition Inc. and
Safety-Kleen Corp., filed as Annex A included herewith.
(3)(a) -- Restated Certificate of Incorporation of the Registrant
dated May 13, 1997, and Amendment to Certificate of
Incorporation dated May 15, 1997, filed as Exhibit 3(a) to
the Registrant's Form 10-Q for the Quarter ended May 31,
1997, and incorporated herein by reference.
</TABLE>
II-1
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
(3)(a)(1) -- Certificate of Correction Filed to Correct a Certain Error
in the Restated and Amended Certificate of Incorporation of
the Registrant dated October 15, 1997, filed as Exhibit
3(a)(i) to the Registrant's Form 10-K for the Fiscal Year
ended August 31, 1997, and incorporated herein by reference.
(3)(b) -- Bylaws of the Registrant filed as Exhibit 4(ii) to the
Registrant's Current Report on Form 8-K dated July 29, 1997,
and incorporated herein by reference.
(4)(a) -- Rights Agreement dated as of June 14, 1989 between the
Registrant and First Chicago Trust Company as successor to
Registrar and Transfer Company, as Rights Agent filed as an
Exhibit to the Registrant's Form 8-K filed on June 13, 1995
and incorporated herein by reference.
(4)(b) -- Amendment No. 1 dated as of March 31, 1995 to the Rights
Agreement between the Registrant and First Chicago Trust
Company as successor to Registrar and Transfer Company, as
Rights Agent filed as an Exhibit to the Registrant's Form
8-K filed on June 13, 1995 and incorporated herein by
reference.
(4)(c) -- Credit Agreement among Laidlaw Chem-Waste, Inc., Laidlaw
Environmental Services (Canada) Ltd., Toronto Dominion
(Texas) Inc., The Toronto-Dominion Bank, TD Securities (USA)
Inc., the Bank or Nova Scotia, NationsBank, N.A. and The
First National Bank of Chicago and NationsBank, N.A. as
Syndication Agent dated as of May 9, 1997, filed as Exhibit
4(c) to the Registrant's Form 10-Q for the Quarter ended
March 31, 1997, and incorporated herein by reference.
(4)(d) -- $350,000,000 5% Subordinated Convertible Pay-In-Kind
Debenture due 2009 issued by Registrant on May 15, 1997 to
Laidlaw Inc. the form of which was included as an appendix
to the Registrant's Definitive Proxy Statement on Form DEF
14A, filed on May 1, 1997 and incorporated herein by
reference.
(4)(e) -- Registration Rights Agreement dated May 15, 1997 between
Registrant, Laidlaw Transportation, Inc. and Laidlaw Inc.
included as appendix to the Registrant's Definitive Proxy
Statement on Form DEF 14A, the form of which was filed on
May 1, 1997 and incorporated herein by reference.
(4)(f) -- Indenture dated as of May 1, 1993 between the Industrial
Development Board of the Metropolitan Government of
Nashville and Davidson County (Tennessee) and NationsBank of
Tennessee, N.A., filed as Exhibit 4(f) to the Registrant's
Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(g) -- Indenture of Trust dated as of February 1, 1995 between
Carbon County, Utah and West One Bank, Utah, now known as
U.S. Bank, as Trustee, filed as Exhibit 4(g) to the
Registrant's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(4)(h) -- Indenture of Trust dated as of August, 1995 between Tooele
County, Utah and West One Bank, Utah, now known as U.S.
Bank, as Trustee, filed as Exhibit 4(h) to the Registrant's
Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(i) -- Indenture of Trust dated as of July 1, 1997 between Carbon
County, Utah and U.S. Bank, a national banking association,
as Trustee, filed as Exhibit 4(i) to the Registrant's Form
10-Q for the Quarter ended May 31, 1997, and incorporated
herein by reference.
(4)(j) -- Indenture of Trust dated as of July 1, 1997 between Tooele
County, Utah and U.S. Bank, a national banking association,
as Trustee, filed as Exhibit 4(j) to the Registrant's Form
10-Q for the Quarter ended May 31, 1997, and incorporated
herein by reference.
(4)(k) -- Indenture of Trust dated as of July 1, 1997 between
California Pollution Control Financing Authority and U.S.
Bank, a national banking association, as Trustee, filed as
Exhibit 4(k) to the Registrant's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
</TABLE>
II-2
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
(4)(l) -- Stock Purchase Agreement between Westinghouse Electric
Corporation (Seller) and Rollins Environmental Services,
Inc. (Buyer) for National Electric, Inc. dated March 7,
1995, filed as an Exhibit to the Registrant's Form 8-K filed
on June 13, 1995, and incorporated herein by reference.
(4)(m) -- Second Amendment to Stock Purchase Agreement (as referenced
in Exhibit (4)(1) above, dated May 15, 1997, among
Westinghouse Electric Corporation, Rollins Environmental
Services, Inc. and Laidlaw Inc., filed as Exhibit 4(m) to
the Registrant's Form 10-Q for the Quarter ended May 31,
1997, and incorporated herein by reference.
(4)(n) -- Promissory Note dated May 15, 1997 for $60,000,000 from
Registrant to Westinghouse Electric Corporation, filed as
Exhibit 4(n) to the Registrant's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
(4)(o) -- Guaranty Agreement dated May 15, 1997 by Laidlaw Inc. to
Westinghouse Electric Corporation guaranteeing Promissory
Note dated May 15, 1997 (as referenced in Exhibit (4)(n))
from Registrant to Westinghouse Electric Corporation, filed
as Exhibit 4(o) to the Registrant's Form 10-Q for the
Quarter ended May 31, 1997, and incorporated herein by
reference.
(4)(p) -- Commitment letter of January 20, 1998 between the
Toronto-Dominion Bank, TD Securities Inc. and Registrant,
filed as Exhibit (4) to the Registrant's Registration
Statement No. 333-40185 on Form S-4, filed on November 13,
1997, as amended, and incorporated herein by reference.
(4)(q) -- Credit Agreement among LES, Inc., Laidlaw Environmental
Services (Canada) Ltd., Toronto Dominion (Texas) Inc., The
Toronto-Dominion Bank, TD Securities (USA) Inc., The Bank of
Nova Scotia, NationsBank, N.A., The First National Bank of
Chicago and Wachovia Bank, N.A. and NationsBank, N.A. as
Syndication Agent dated as of April 3, 1998.
(4)(r) -- Amendment No. 2, dated as of April 30, 1997, to the Rights
Agreement between the Registrant and First Chicago Trust
Company as successor to Registrar and Transfer Company, as
rights agent, filed as Exhibit 4(c) to the Registrant's Form
10-Q for the Quarter ended November 30, 1997, and
incorporated herein by reference.
(5) -- Opinion of Katten Muchin & Zavis as to the legality of the
shares of common stock being offered.
(10)(a) -- Rollins Environmental Services, Inc. 1982 Incentive Stock
Option Plan, filed with Amendment No. 1 to the Registrant's
Registration Statement No. 2-84139 on Form S-1 dated June
24, 1983 and incorporated herein by reference.
(10)(b) -- Rollins Environmental Services, Inc. 1993 Stock Option Plan,
filed with the Company's Proxy Statement for the Annual
Meeting of Stockholders held January 28, 1994 and
incorporated herein by reference.
(10)(c) -- Stock Purchase Agreement dated February 6, 1997, among the
Registrant, Laidlaw Inc., and Laidlaw Transportation, Inc.
included as an appendix to the Registrant's Definitive Proxy
Statement on Form DEF 14A, filed on May 1, 1997, and
incorporated herein by reference.
(10)(e) -- Management Incentive Plan for fiscal year 1996, filed as
Exhibit 10(e) to the Registrant's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
(11) -- Statement regarding computation of earnings per share, filed
as Exhibit (11) to the Registrant's Form 10-K for the year
ended August 31, 1997, and incorporated herein by reference.
(12) -- Computation of ratio of earnings to fixed charges, filed as
Exhibit (12) to the Registrant's Form 10-K for the year
ended August 31, 1997, and incorporated herein by reference.
</TABLE>
II-3
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
(21) -- Subsidiaries of the Registrant, filed as Exhibit (21) to the
Registrant's Registration Statement No. 333-40185 on Form
S-4, filed on November 13, 1997, as amended, and
incorporated herein by reference.
(23)(a) -- Consent of Coopers & Lybrand, independent accountants.*
(23)(b) -- Consent of Katten Muchin & Zavis (included in Exhibit (5)).
(23)(c) -- Consent of KPMG Peat Marwick LLP.*
(23)(d) -- Consent of Arthur Andersen LLP.*
(24) -- Power of Attorney (included on the signature page of this
Registration Statement).
(99.1) -- Safety Kleen Proxy Card
</TABLE>
- ---------------
* To be filed by amendment.
II-4
<PAGE> 119
SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbia, and State of South Carolina on the 10th day
of April, 1998.
LAIDLAW ENVIRONMENTAL SERVICES, INC.
By: /s/ KENNETH W. WINGER
-------------------------------------
Kenneth W. Winger
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
James R. Bullock, Kenneth W. Winger, Ivan R. Cairns, Henry H. Taylor and Herbert
S. Wander and, each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and revocation, to sign on his behalf,
individually and in each capacity stated below, this Registration Statement and
all amendments to this Registration Statement and to file the same, with all
exhibits thereto and any other documents in connection therewith, with the
Securities and Exchange Commission under the Securities Act of 1933, granting
unto each such attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming each act that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on April 10, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JAMES R. BULLOCK Chairman of the Board and Director
- -----------------------------------------------------
James R. Bullock
/s/ KENNETH W. WINGER President, Chief Executive Officer and
- ----------------------------------------------------- Director
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President, Finance and Chief
- ----------------------------------------------------- Financial Officer
Paul R. Humphreys
/s/ JOHN R. GRAINGER Director
- -----------------------------------------------------
John R. Grainger
/s/ LESLIE W. HAWORTH Director
- -----------------------------------------------------
Leslie W. Haworth
/s/ JOHN W. ROLLINS, SR. Director
- -----------------------------------------------------
John W. Rollins, Sr.
/s/ JOHN W. ROLLINS, JR. Director
- -----------------------------------------------------
John W. Rollins, Jr.
</TABLE>
II-5
<PAGE> 120
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ DAVID E. THOMAS, JR. Director
- -----------------------------------------------------
David E. Thomas, Jr.
/s/ HENRY B. TIPPIE Director
- -----------------------------------------------------
Henry B. Tippie
/s/ JAMES L. WAREHAM Director
- -----------------------------------------------------
James L. Wareham
/s/ GROVER C. WRENN Director
- -----------------------------------------------------
Grover C. Wrenn
</TABLE>
II-6
<PAGE> 121
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
(4)(q) -- Credit Agreement among LES, Inc., Laidlaw Environmental
Services (Canada) Ltd., Toronto Dominion (Texas) Inc., The
Toronto-Dominion Bank, TD Securities (USA) Inc., The Bank of
Nova Scotia, NationsBank, N.A., The First National Bank of
Chicago and Wachovia Bank, N.A. and NationsBank, N.A. as
Syndication Agent dated as of April 3, 1998.
(5) -- Opinion of Katten Muchin & Zavis as to the legality of the
shares of common stock being offered.
(23)(a) -- Consent of Coopers & Lybrand, independent accountants.*
(23)(b) -- Consent of Katten Muchin & Zavis (included in Exhibit (5)).
(23)(c) -- Consent of KPMG Peat Marwick LLP.*
(23)(d) -- Consent of Arthur Andersen LLP.*
(24) -- Power of Attorney (included on the signature page of this
Registration Statement).
(99.1) -- Safety Kleen Proxy Card
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT (4)(q)
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
LES, INC.,
LAIDLAW ENVIRONMENTAL SERVICES (CANADA) LTD.,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
TORONTO DOMINION (TEXAS), INC.,
AS GENERAL ADMINISTRATIVE AGENT,
THE TORONTO-DOMINION BANK,
AS CANADIAN ADMINISTRATIVE AGENT,
TD SECURITIES (USA) INC.,
AS ARRANGER,
THE BANK OF NOVA SCOTIA,
NATIONSBANK, N.A.,
THE FIRST NATIONAL BANK OF CHICAGO,
AND
WACHOVIA BANK, N.A.,
AS MANAGING AGENTS,
THE BANK OF NOVA SCOTIA
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS CO-DOCUMENTATION AGENTS,
AND
NATIONSBANK, N.A.,
AS SYNDICATION AGENT
DATED AS OF APRIL 3, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS......................................................................................... 2
1.1 Defined Terms.................................................................................... 2
1.2 Other Definitional Provisions.................................................................... 33
SECTION 2. AMOUNT AND TERMS OF U.S. COMMITMENTS................................................................ 33
2.1 U.S. Term Loan Commitments....................................................................... 33
2.2 Procedure for U.S. Term Loan Borrowing........................................................... 34
2.3 Repayment of U.S. Term Loans..................................................................... 35
2.4 Revolving Credit Commitments..................................................................... 38
2.5 Procedure for Revolving Credit Borrowing......................................................... 39
2.6 Termination or Reduction of Revolving Credit Commitments......................................... 39
2.7 Evidence of Debt................................................................................. 40
SECTION 3. LETTERS OF CREDIT................................................................................... 40
3.1 L/C Commitment................................................................................... 40
3.2 Procedure for Issuance of Letter of Credit....................................................... 41
3.3 Commissions, Fees and Other Charges.............................................................. 41
3.4 L/C Participations............................................................................... 42
3.5 Reimbursement Obligation of the Company.......................................................... 43
3.6 Obligations Absolute............................................................................. 43
3.7 Letter of Credit Payments........................................................................ 44
3.8 Applications..................................................................................... 44
SECTION 4. AMOUNT AND TERMS OF THE CANADIAN TERM LOAN
COMMITMENTS......................................................................................... 44
4.1 Canadian Term Loan Commitments................................................................... 44
4.2 Procedure for Canadian Term Loan Borrowing....................................................... 45
4.3 Reduction of Canadian Facility; Repayment of Canadian Term Loans................................. 45
4.4 Evidence of Debt................................................................................ 47
SECTION 5. AMOUNT AND TERMS OF THE ACCEPTANCES ................................................................ 48
5.1 Acceptance Commitments........................................................................... 48
5.2 Creation of Acceptances.......................................................................... 48
5.3 Purchase of Acceptances.......................................................................... 49
5.4 Stamping Fees.................................................................................... 50
5.5 Acceptance Reimbursement Obligations............................................................. 50
5.6 Acceptances to be Allocated in order to be Created Ratably....................................... 52
5.7 Special Provisions Relating to Acceptance Notes.................................................. 52
SECTION 6. GENERAL PROVISIONS APPLICABLE TO LOANS AND
LETTERS OF CREDIT................................................................................... 53
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
6.1 Commitment Fees, etc. ........................................................................... 53
6.2 Optional Prepayments............................................................................. 53
6.3 Mandatory Prepayments and Commitment Reductions.................................................. 55
6.4 Conversion and Continuation Options.............................................................. 58
6.5 Minimum Amounts of Tranches...................................................................... 59
6.6 Interest Rates and Payment Dates................................................................. 59
6.7 Computation of Interest and Fees................................................................. 60
6.8 Inability to Determine Interest Rate............................................................. 61
6.9 Pro Rata Treatment and Payments.................................................................. 61
6.10 Illegality...................................................................................... 64
6.11 Requirements of Law............................................................................. 64
6.12 Taxes........................................................................................... 65
6.13 Indemnity....................................................................................... 68
6.14 Change of Lending Office........................................................................ 68
SECTION 7. REPRESENTATIONS AND WARRANTIES...................................................................... 68
7.1 Financial Condition.............................................................................. 69
7.2 No Change........................................................................................ 70
7.3 Corporate Existence; Compliance with Law......................................................... 70
7.4 Corporate Power; Authorization; Enforceable Obligations.......................................... 70
7.5 No Legal Bar..................................................................................... 70
7.6 No Material Litigation........................................................................... 71
7.7 No Default....................................................................................... 71
7.8 Ownership of Property; Liens..................................................................... 71
7.9 Intellectual Property............................................................................ 71
7.10 No Burdensome Restrictions...................................................................... 72
7.11 Taxes........................................................................................... 72
7.12 Federal Regulations............................................................................. 72
7.13 ERISA........................................................................................... 72
7.14 Canadian Benefit and Pension Plans.............................................................. 72
7.15 Investment Company Act; Other Regulations....................................................... 73
7.16 Subsidiaries.................................................................................... 73
7.17 Purpose of Loans................................................................................ 73
7.18 Environmental Matters........................................................................... 73
7.19 Accuracy of Information, etc.................................................................... 74
7.20 Security Documents.............................................................................. 75
7.21 Solvency........................................................................................ 76
7.22 Regulation H.................................................................................... 76
7.23 Corsan Trucking, Inc............................................................................ 76
SECTION 8. CONDITIONS PRECEDENT................................................................................ 76
8.1 Conditions to Initial Extensions of Credit....................................................... 76
8.2 Conditions to Extensions of Credit made on the Merger Date....................................... 82
8.3 Conditions to Extension of Credit................................................................ 83
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
SECTION 9. AFFIRMATIVE COVENANTS............................................................................... 79
9.1 Financial Statements................................................................ 79
9.2 Certificates; Other Information.................................................................. 80
9.3 Payment of Obligations........................................................................... 81
9.4 Conduct of Business and Maintenance of Existence................................................. 81
9.5 Maintenance of Property; Insurance............................................................... 81
9.6 Inspection of Property; Books and Records; Discussions........................................... 81
9.7 Notices.......................................................................................... 82
9.8 Environmental Laws............................................................................... 82
9.9 Further Assurances............................................................................... 83
9.10 Additional Collateral........................................................................... 84
9.11 Canadian Benefit and Pension Plans.............................................................. 85
9.12 Interest Rate Protection........................................................................ 86
9.13 Consummation of Merger.......................................................................... 86
9.14 Pledge Agreement Supplement..................................................................... 86
SECTION 10. NEGATIVE COVENANTS................................................................................. 86
10.1 Financial Condition Covenants................................................................... 86
10.2 Limitation on Indebtedness...................................................................... 88
10.3 Limitation on Liens............................................................................. 88
10.4 Limitation on Guarantee Obligations............................................................. 90
10.5 Limitation on Fundamental Changes............................................................... 90
10.6 Limitation on Disposition of Assets............................................................. 91
10.7 Limitation on Dividends......................................................................... 91
10.8 Limitation on Investments, Loans and Advances................................................... 92
10.9 Limitation on Optional Payments and Modifications of Debt Instruments........................... 93
10.10 Limitation on Transactions with Affiliates..................................................... 93
10.11 Limitation on Sales and Leasebacks............................................................. 93
10.12 Limitation on Changes in Fiscal Year........................................................... 94
10.13 Limitation on Negative Pledge Clauses.......................................................... 94
10.14 Limitation on Lines of Business................................................................ 94
10.15 Canadian Benefit and Pension Plans............................................................. 94
10.16 Hedging Agreements............................................................................. 94
SECTION 11. EVENTS OF DEFAULT.................................................................................. 95
SECTION 12. THE ADMINISTRATIVE AGENT........................................................................... 98
12.1 Appointment..................................................................................... 98
12.2 Delegation of Duties............................................................................ 99
12.3 Exculpatory Provisions.......................................................................... 99
12.4 Reliance by Administrative Agents............................................................... 99
12.5 Notice of Default...............................................................................100
12.6 Non-Reliance on Administrative Agents and Other Lenders.........................................100
12.7 Indemnification.................................................................................101
12.8 Agent in Its Individual Capacity................................................................101
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C>
12.9 Successor Agent.................................................................................101
12.10 Others.........................................................................................102
SECTION 13. GUARANTEE..........................................................................................102
13.1 Guarantee.......................................................................................102
13.2 No Subrogation, Contribution, Reimbursement or Indemnity........................................103
13.3 Amendments, etc. with respect to the Canadian Borrower Obligations..............................103
13.4 Guarantee Absolute and Unconditional............................................................104
13.5 Reinstatement...................................................................................105
13.6 Payments........................................................................................105
SECTION 14. MISCELLANEOUS......................................................................................105
14.1 Amendments and Waivers..........................................................................105
14.2 Notices.........................................................................................106
14.3 No Waiver; Cumulative Remedies..................................................................107
14.4 Survival of Representations and Warranties......................................................107
14.5 Payment of Expenses and Taxes...................................................................107
14.6 Successors and Assigns; Participations and Assignments..........................................108
14.7 Adjustments; Set-off............................................................................111
14.8 Counterparts....................................................................................112
14.9 Severability....................................................................................112
14.10 Integration....................................................................................112
14.11 GOVERNING LAW..................................................................................112
14.12 Submission To Jurisdiction; Waivers............................................................112
14.13 Acknowledgments................................................................................113
14.14 WAIVERS OF JURY TRIAL..........................................................................113
14.15 Judgment.......................................................................................113
14.16 Confidentiality................................................................................114
</TABLE>
- iv -
<PAGE> 6
SCHEDULES
1.1A Commitments of U.S. Lenders
1.1B Commitments of Canadian Lenders
1.1C Existing Letters of Credit
1.1D Existing Acceptances
1.1E Specified Acceptance
1.1F Addresses for Notices
2 Properties Covered by Existing Mortgages
3 Mortgage Recording Jurisdictions
4 Initial Canadian Collateral Documents
7.6 Litigation
7.9 Intellectual Property Matters
7.16 Subsidiaries
7.20 Canadian Collateral Perfection Procedures
8.2(g) Safety-Kleen Outstanding Debt
10.2(f) Existing Indebtedness
10.3(f) Existing Liens
10.4 Existing Guarantee Obligations
10.8 Existing Loans to Officers
EXHIBITS
A-1 Form of Draft
A-2 Form of Request for Acceptances
B-1 Form of Guarantee and Collateral Agreement
B-2 Form of Acquisition Corp. Pledge Agreement
C Form of Revolving Credit Note
D Form of U.S. Term Note
E Form of Canadian Term Note
F [Reserved]
G Form of Acceptance Note
H Form of Prepayment Option Notice
I Form of Closing Certificate
J [Reserved]
K [Reserved]
L Form of Assignment and Acceptance
M Form of Mortgage Amendment
N Form of Mortgage
O Form of Intercreditor Agreement
P Form of Exchange Agent Agency Agreement
- v -
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 3,
1998, among LES, INC., a Delaware corporation (the "Company"), LAIDLAW
ENVIRONMENTAL SERVICES (CANADA) LTD., a Canadian corporation and a wholly owned
Subsidiary of the Company (the "Canadian Borrower"; together with the Company,
the "Borrowers"), the several banks and other financial institutions or entities
from time to time parties to this Agreement (the "Lenders"), TORONTO DOMINION
(TEXAS), INC., as general administrative agent (as hereinafter defined, the
"General Administrative Agent"), THE TORONTO-DOMINION BANK, as Canadian
administrative agent (as hereinafter defined, the "Canadian Administrative
Agent"), TD SECURITIES (USA) INC., as advisor to the Borrowers and arranger of
the commitments described herein (in such capacities, the "Arranger"), and THE
BANK OF NOVA SCOTIA, NATIONSBANK, N.A., THE FIRST NATIONAL BANK OF CHICAGO and
WACHOVIA BANK, N.A., as managing agents (each, in such capacity, a "Managing
Agent"), THE BANK OF NOVA SCOTIA and THE FIRST NATIONAL BANK OF CHICAGO, as
co-documentation agent (each, in such capacity, a "Co-Documentation Agent"), and
NATIONSBANK, N.A., as syndication agent (in such capacity, the "Syndication
Agent").
W I T N E S S E T H
WHEREAS, the Borrowers are parties to the Credit Agreement,
dated as of May 9, 1997 (as heretofore amended or otherwise modified, the
"Existing Credit Agreement"), with the lenders from time to time parties
thereto, Toronto Dominion (Texas), Inc., as general administrative agent, The
Toronto-Dominion Bank, as Canadian administrative agent, TD Securities (USA)
Inc., as arranger, The Bank of Nova Scotia, NationsBank, N.A. and The First
National Bank of Chicago, as managing agents, and NationsBank, N.A., as
syndication agent;
WHEREAS, pursuant to the Existing Credit Agreement, the
lenders parties thereto have agreed to make and have made certain loans and
other extensions of credit to or for the account of the Borrowers;
WHEREAS, Laidlaw Environmental Services, Inc., a Delaware
corporation and the parent of the Company ("Holdings"), and LES Acquisition,
Inc., a Delaware corporation and a wholly owned subsidiary of the Company
("Acquisition Corp."), have made an exchange offer (as amended prior to the date
hereof and as hereafter amended in accordance with this Agreement, the "Exchange
Offer") pursuant to the Offer to Exchange, as finally amended on March 18, 1998
(such Offer to Exchange, together with the associated documents filed by
Holdings and Acquisition Corp. with the Securities and Exchange Commission in
connection with the Exchange Offer, as amended prior to the date hereof and as
hereafter amended in accordance with this Agreement, collectively, the "Exchange
Offer Documents");
WHEREAS, pursuant to the Exchange Offer, shareholders of
Safety-Kleen Corp., a Wisconsin corporation ("Safety-Kleen"), are invited to
exchange shares of common
<PAGE> 8
2
stock ("Target Shares"), together with associated share purchase rights ("Target
Rights"), for consideration equal to $18.30 in cash plus 2.8 shares of common
stock of Holdings;
WHEREAS, pursuant to the Agreement and Plan of Merger, dated
as of March 16, 1998 (the "Merger Agreement"), among Holdings, Acquisition Corp.
and Safety-Kleen, as promptly as practicable after the consummation of the
Exchange Offer, Acquisition Corp. and Safety-Kleen will merge (the "Merger"),
with Safety-Kleen being the surviving corporation of the Merger (such survivor,
the "Surviving Corporation");
WHEREAS, in order to provide for financing of the Exchange
Offer and the Merger and related costs and expenses, and for the refinancing of
certain existing indebtedness of Safety-Kleen, the Borrowers have requested that
the Existing Credit Agreement be amended and restated as provided herein; and
WHEREAS, the Lenders and the other parties hereto wish to
amend and restate the Existing Credit Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereby agree that on the
Closing Date the Existing Credit Agreement shall be amended and restated in its
entirety as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Acceptance": a Draft drawn by the Canadian Borrower and
accepted by a Canadian Lender which is (a) denominated in Canadian
Dollars, (b) for a term of not less than one month nor more than six
months and which matures prior to the Canadian Facility Termination
Date and (c) issuable and payable only in Canada; provided that to the
extent the context shall require, each Acceptance Note shall be deemed
to be an Acceptance.
"Acceptance Note": as defined in Section 5.7(b).
"Acceptance Purchase Price": in respect of an Acceptance of a
specified maturity, the result (rounded to the nearest whole cent, and
with one-half cent being rounded up) obtained by dividing the face
amount of such Acceptance by the sum of (a) one and (b) the product of
(i) the Reference Discount Rate for Acceptances of the same maturity
expressed as a decimal and (ii) a fraction, the numerator of which is
the term to maturity of such Acceptance and the denominator of which is
equal to 365.
<PAGE> 9
3
"Acceptance Reimbursement Obligations": the obligation of the
Canadian Borrower to the Canadian Lenders (a) to reimburse the Canadian
Lenders for maturing Acceptances pursuant to Section 5.5 and (b) to
make payments in respect of the Acceptance Notes in accordance with the
terms thereof.
"Acceptance Tranches": the collective reference to Acceptances
all of which were created on the same date and have the same maturity
date.
"Acquisition Closing Date": the closing date of the Existing
Credit Agreement and the Rollins Acquisition, which date was May 15,
1997.
"Acquisition Corp.": as defined in the Recitals to this
Agreement.
"Acquisition Corp. Pledge Agreement": the Pledge Agreement to
be executed and delivered by Acquisition Corp., substantially in the
form of Exhibit B-2, as the same may be amended, supplemented or
otherwise modified from time to time.
"Adjustment Date": as defined in the Pricing Grid.
"Administrative Agents": the collective reference to the
General Administrative Agent and the Canadian Administrative Agent.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For
purposes of this definition, "control" of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Aggregate Canadian Term Loan Outstandings": as at any date of
determination with respect to any Canadian Lender, an amount in
Canadian Dollars equal to the sum of the following, without
duplication: (a) the aggregate unpaid principal amount of such Canadian
Lender's Canadian Term Loans on such date, (b) the aggregate
undiscounted face amount of all outstanding Acceptances (other than
Existing Acceptances) of such Canadian Lender on such date, (c) such
Lender's Canadian Term Loan Commitment Percentage of the aggregate
undiscounted face amount of all outstanding Existing Acceptances on
such date and (d) the aggregate undiscounted face amount of such
Canadian Lender's Acceptance Notes on such date.
"Aggregate Commitment Percentage": as to any Lender, the
percentage which such Lender's Aggregate Exposure constitutes of the
Aggregate Exposure of all Lenders.
<PAGE> 10
4
"Aggregate Exposure": as to any Lender, the sum of such
Lender's Revolving Credit Commitment (or, after termination of the
Revolving Credit Commitments, such Lender's Revolving Extensions of
Credit) and U.S. Term Loans and the U.S. Dollar Equivalent of such
Lender's Aggregate Canadian Term Loan Outstandings.
"Agreement": this Amended and Restated Credit Agreement, as
amended, supplemented or otherwise modified from time to time.
"Agreement Currency": as defined in Section 14.15(b).
"Applicable Margin": (a) on any day, for each Type of
Revolving Credit Loan, Tranche A Term Loan and Canadian Term Loan, the
rate per annum determined pursuant to the Pricing Grid; and
(b) for each Type of Tranche B Term Loan and Tranche C Term
Loan, the rate per annum set forth under the relevant column heading
below:
<TABLE>
<CAPTION>
Base Rate Loans LIBOR Rate Loans
--------------- ----------------
<S> <C> <C>
Tranche B Term Loans 1.75% 2.75%
Tranche C Term Loans 2.00% 3.00%
</TABLE>
; provided, that in the event that the Consolidated Total Leverage
Ratio (the determination and effectiveness of which shall be made and
established, respectively, on an Adjustment Date in accordance with the
provisions of the Pricing Grid) is reduced to less than 3.00 to 1.00,
the Applicable Margins set forth above for Tranche B Term Loans and
Tranche C Term Loans shall be permanently reduced by 37.50 basis
points; provided further that no such reduction in Applicable Margin
shall occur prior to the Adjustment Date occurring after completion of
the first four full consecutive fiscal quarters of the Company ending
after the Closing Date.
"Application": an application, in such form as the relevant
Issuing Lender may specify from time to time, requesting such Issuing
Lender to issue a Letter of Credit.
"Approved Fund": with respect to any Lender that is a fund
that invests in bank loans, any other fund that invests in bank loans
and is advised or managed by the same investment advisor as such Lender
or by an Affiliate of such investment advisor.
"Arranger": as defined in the Preamble to this Agreement.
"Asset Sale": any Disposition of assets or series of related
Dispositions of assets, excluding any Disposition of assets permitted
by clause (a), (c), (d), (e), (f) or (g) of Section 10.6; provided,
that asset Dispositions permitted by clauses (e) and (f) of Section
10.6 shall not be excluded from the definition of "Asset Sale" to the
extent that the Net Cash Proceeds therefrom exceed $225,000,000 in the
aggregate.
<PAGE> 11
5
"Assignee": as defined in Section 14.6(c).
"Available Revolving Credit Commitment": as to any U.S. Lender
at any time, an amount equal to the excess, if any, of (a) such
Lender's Revolving Credit Commitment over (b) such Lender's Revolving
Extensions of Credit.
"Bank Act (Canada)": the Bank Act (Canada), as amended from
time to time.
"Base Rate": a rate per annum determined by the General
Administrative Agent on a daily basis, equal to the higher of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus one half of one percent (.50 of 1%) per
annum.
"Base Rate Loan": any Loan the rate of interest applicable to
which is based upon the Base Rate.
"Board": the Board of Governors of the Federal Reserve
System.
"Borrowers": as defined in the Preamble to this Agreement.
"Borrowing Date": any Business Day specified in a notice
pursuant to Section 2.2, 2.5., 4.2 or 5.2 as a date on which a Borrower
requests the Lenders to make Loans, create Acceptances, convert
Acceptances into Canadian Term Loans or convert Canadian Term Loans
into Acceptances, as the case may be.
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City or Houston, Texas are
authorized or required by law to close; provided that (a) when such
term is used in respect of a day on which a Loan in Canadian Dollars is
to be made or an Acceptance is to be created, a payment is to be made
in respect of such Loan or Acceptance, an Exchange Rate is to be set in
respect of Canadian Dollars or any other dealing in Canadian Dollars is
to be carried out pursuant to this Agreement, such term shall mean a
day other than a Saturday, Sunday or other day on which commercial
banks in Toronto, Ontario are authorized or required by law to close
and (b) when such term is used with respect to notices and
determinations in connection with, and payments of principal of, and
interest on, LIBOR Loans, any day which is a Business Day in New York
City and which is also a day on which trading by and between banks in
Dollar deposits may be carried out in the London interbank eurodollar
market.
"Canadian Administrative Agent": The Toronto-Dominion Bank,
together with its affiliates, as the Canadian Administrative Agent for
the Canadian Lenders under this Agreement and the other Loan Documents,
and any successor thereto pursuant to Section 12.9.
<PAGE> 12
6
"Canadian Benefit Plans": all material employee benefit plans
maintained or contributed to by the Canadian Borrower or a Subsidiary
thereof that are not Canadian Pension Plans including, without
limitation, all profit sharing, savings, supplemental retirement,
retiring allowance, severance, deferred compensation, welfare, bonus,
supplementary unemployment benefit plans or arrangements and all life,
health, dental and disability plans and arrangements in which the
employees or former employees of the Canadian Borrower or a Subsidiary
thereof employed in Canada participate or are eligible to participate.
"Canadian Borrower": as defined in the Preamble to this
Agreement.
"Canadian Borrower Obligations": the unpaid principal of and
interest on (including, without limitation, interest accruing after the
maturity of the Loans and Acceptance Reimbursement Obligations and
interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to the Canadian Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding)
the Loans and Acceptance Reimbursement Obligations and all other
obligations and liabilities of the Canadian Borrower to the
Administrative Agents or to any Lender (or, in the case of any Hedging
Agreements, any affiliate of any Lender), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any other Loan Document, any Hedging Agreement
entered into with any Lender or any affiliate of any Lender or any
other document made, delivered or given in connection herewith or
therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees, charges and disbursements of counsel to the
Administrative Agents or to any Lender that are required to be paid by
the Canadian Borrower pursuant hereto) or otherwise.
"Canadian Collateral Documents": the collective reference to
the agreements, instruments and documents delivered from time to time
(both before and after the date of this Agreement) to the General
Administrative Agent, the Canadian Administrative Agent or the Lenders
by the Canadian Borrower or any of its Subsidiaries for the purpose of
establishing, perfecting, reserving or protecting the security of the
Lenders in respect hereof and in respect of amounts owing by the
Canadian Borrower hereunder (including, without limitation, guarantees,
debentures, Bank Act (Canada) assignments, general security agreements,
general assignments of receivables and share pledge agreements, each as
amended, restated, supplemented or replaced from time to time). The
Canadian Collateral Documents executed and delivered in connection with
the Acquisition Closing Date are listed on Schedule 4. On the Closing
Date, the parties to the Canadian Collateral Documents shall execute
and deliver one or more Affirmations of Security Agreements in form and
substance satisfactory to the General Administrative Agent and the
Canadian Administrative Agent, which shall affirm the
<PAGE> 13
7
continuing existence and validity of the Canadian Collateral Documents
as security for the obligations of the Canadian Borrower hereunder.
"Canadian Dollar Prime Rate": on any day, the higher of (a)
the rate per annum designated by the Canadian Administrative Agent from
time to time (and in effect on such day) as its reference rate for
Canadian Dollar commercial loans made in Canada and (b) the rate per
annum which is .75% above the one month acceptance rate quoted by The
Toronto-Dominion Bank at 10:00 A.M., Toronto time, that appears on the
Reuter's Screen CDOR page on such day as its rate for acceptances in
Canada. The Canadian Dollar Prime Rate is not intended to be the lowest
rate of interest charged by The Toronto-Dominion Bank in connection
with extensions of credit in Canadian Dollars to debtors.
"Canadian Dollars" and "C$": dollars in the lawful currency of
Canada.
"Canadian Facility Amortization Date": as defined in Section
4.3.
"Canadian Facility Commitment Period": the period from and
including the Closing Date to the Canadian Facility Termination Date.
"Canadian Facility Maximum Amount": on any date, the maximum
Aggregate Canadian Term Loan Outstandings permitted on such date after
giving effect to payments required to be made pursuant to Section 4.3
or reductions required to be made pursuant to Section 6.3(g), as the
case may be.
"Canadian Facility Termination Date": April 3, 2004.
"Canadian Lenders": each Lender listed on Schedule 1.1B.
"Canadian Operating Facility": the C$35,000,000 credit
facility made available pursuant to the letter agreement, dated as of
the date hereof, between the Canadian Borrower, as borrower, and The
Toronto-Dominion Bank, as lender, as the same may be amended, modified
or otherwise supplemented from time to time.
"Canadian Operating Facility Lender": The Toronto-Dominion
Bank in its capacity as lender under the Canadian Operating Facility.
"Canadian Operating Facility Obligations": all of the
obligations, liabilities and indebtedness of the Canadian Borrower to
the Canadian Operating Facility Lender from time to time, whether
present or future, absolute or contingent, liquidated or unliquidated,
as principal or as surety, alone or with others, of whatsoever nature
or kind, in any currency, under or in respect of agreements or dealings
between the Canadian Borrower and the Canadian Operating Facility
Lender or agreements or dealings between the Canadian Borrower and any
Person by which such lender may be
<PAGE> 14
8
or become in any manner whatsoever a creditor of the Canadian Borrower,
including without limitation under the Canadian Operating Facility
(including, without limitation, all fees and disbursements of the
Canadian Operating Facility Lender or its counsel or agents incurred in
the enforcement of the Canadian Operating Facility); the amount of the
Canadian Operating Facility Obligations will be determined without
regard to any right of set-off or counterclaim by the Canadian Borrower
against the Canadian Operating Facility Lender.
"Canadian Pension Plan": any plan, program, arrangement or
understanding that is a pension plan for the purposes of any applicable
pension benefit or tax laws of Canada or a province or territory
thereof (whether or not registered under any such laws) which is
maintained, administered or contributed to by (or to which there is or
may be an obligation to contribute by) the Canadian Borrower or a
Subsidiary thereof in respect to any person's past, present or future
employment in Canada or a province or territory thereof with the
Canadian Borrower or a Subsidiary thereof, all related funding
arrangements and all related agreements, arrangements and
understandings in respect of, or related to, any benefits to be
provided thereunder or the effect thereof on any other compensation or
remuneration of any employee.
"Canadian Reference Lenders": the collective reference to the
Schedule 1 Canadian Reference Lenders and the Schedule 2 Canadian
Reference Lenders.
"Canadian Term Loan": as defined in Section 4.1.
"Canadian Term Loan Commitment": as to any Canadian Lender,
the obligation of such Lender to make Canadian Term Loans to, and/or
create and discount Acceptances on behalf of (or, in lieu thereof, to
make loans pursuant to the Acceptance Notes to), the Canadian Borrower,
in an amount not to exceed the amount set forth opposite such Canadian
Lender's name on Schedule 1.1B under the heading "Canadian Term Loan
Commitment". The original aggregate amount of the Canadian Term Loan
Commitments is the equivalent in Canadian Dollars (determined in
accordance with Section 4.3(b)) of US$70,000,000.
"Canadian Term Loan Commitment Percentage": as to any Canadian
Lender at any time, the percentage which such Canadian Lender's
Canadian Term Loan Commitment then constitutes of the aggregate
Canadian Term Loan Commitments (or, at any time after the Closing Date,
the percentage which the aggregate amount of such Canadian Lender's
Aggregate Canadian Term Loan Outstandings then outstanding constitutes
of the Total Aggregate Canadian Term Loan Outstandings then
outstanding).
"Canadian Term Loan Note": as defined in Section 4.4(d).
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all
<PAGE> 15
9
equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"Cash Equivalents": (a) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b)
certificates of deposit and eurodollar time deposits with maturities of
one year or less from the date of acquisition and overnight bank
deposits of any Lender or of any commercial bank having capital and
surplus in excess of $500,000,000, (c) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the
United States Government, (d) commercial paper of a domestic issuer
rated at least A-2 by Standard and Poor's Rating Group ("S&P") or P-2
by Moody's Investors Service, Inc. ("Moody's"), (e) securities with
maturities of one year or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may
be) are rated at least A by S&P or A by Moody's, (f) securities with
maturities of one year or less from the date of acquisition backed by
standby letters of credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this definition or (g)
shares of money market mutual or similar funds which invest exclusively
in assets satisfying the requirements of clauses (a) through (f) of
this definition.
"Change of Control": a Change of Control shall be deemed to
occur (a) if at any time Laidlaw shall cease to be a primary
shareholder of Holdings, (b) if at any time when the Consolidated Total
Leverage Ratio is greater than 2.50 to 1.00, Laidlaw shall not own,
directly or indirectly, at least 20% of the outstanding voting stock of
Holdings, (c) if at any time Holdings shall cease to own 100% of the
outstanding voting stock of the Company, (d) if at any time the Company
shall cease to own 100% of the outstanding voting stock of the Canadian
Borrower or (e) if at any time there shall cease to be at least one
member of the Board of Directors of Holdings who is a designee of
Laidlaw.
"Closing Date": the date on which the conditions precedent set
forth in Section 8.1 shall be satisfied, which date shall not be later
than April 8, 1998.
"Co-Documentation Agent": as defined in the Preamble to this
Agreement.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": all assets of the Loan Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by
any Security Document.
<PAGE> 16
10
"Commitment": as to any Lender, the sum of the Tranche A Term
Loan Commitment, the Tranche B Term Loan Commitment, the Tranche C Term
Loan Commitment, the Revolving Credit Commitment and the Canadian Term
Loan Commitment of such Lender.
"Commitment Fee Rate": on any day, the rate per annum
determined pursuant to the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes
the Company and which is treated as a single employer under Section 414
of the Code.
"Company": as defined in the Preamble to this Agreement.
"Consolidated Capital Expenditures": for any fiscal period,
the aggregate of all expenditures by Holdings and its Subsidiaries for
the acquisition or leasing (pursuant to a Financing Lease) of fixed or
capital assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period, but excluding
investments made pursuant to Section 10.8(c)) which should be
capitalized under GAAP on a consolidated balance sheet of Holdings and
its Subsidiaries; provided that for any calculation of Consolidated
Capital Expenditures for any fiscal period ending November 30, 1998,
February 28, 1999 or May 31, 1999, Consolidated Capital Expenditures
shall be deemed to be Consolidated Capital Expenditures from September
1, 1998 to the last day of such period multiplied by 4, 2 and 4/3,
respectively.
"Consolidated Contingent Obligations": at any date (a) all
obligations of Holdings and its Subsidiaries in respect of performance
bonds, letters of credit in the nature of performance bonds and similar
obligations, and (b) all Guarantee Obligations of Holdings and it
Subsidiaries in respect of obligations of the kind referred to in the
foregoing clause (a).
"Consolidated Debt Service": for any fiscal period, the sum,
for Holdings and its Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of (a) all regularly
scheduled payments of principal of Indebtedness during such period,
including all scheduled payments in respect of the Loans, and, without
duplication, all scheduled reductions in the Canadian Facility Maximum
Amount, during such period plus (b) Consolidated Projected Cash
Interest Expense for such period.
"Consolidated Fixed Charges": for any fiscal period, the sum
for such period of (i) Consolidated Debt Service and (ii) Consolidated
Projected Operating Lease Expense.
<PAGE> 17
11
"Consolidated Historical Cash Interest Expense": for any
fiscal period, the aggregate amount of interest in respect of
Consolidated Total Funded Debt and in respect of the Seller Note paid
in cash during such period as determined on a consolidated basis in
accordance with GAAP; provided that for any calculation of Consolidated
Historical Cash Interest Expense for any fiscal period ending November
30, 1998, February 28, 1999 or May 31, 1999, Consolidated Historical
Cash Interest Expense shall be deemed to be Consolidated Historical
Cash Interest Expense from September 1, 1998 to the last day of such
period multiplied by 4, 2 and 4/3, respectively.
"Consolidated Historical Operating Lease Expense": for any
fiscal period, the aggregate lease obligations of Holdings and its
Subsidiaries for which Holdings or any of its Subsidiaries is
contractually committed having a remaining term in excess of twelve
months determined on a consolidated basis payable in respect of such
period under leases of real and/or personal property (net of income
from sub-leases thereof and excluding lease payments on operating
leases which carry a termination payment of less than twelve months of
lease payments, but including taxes, insurance, maintenance and similar
expenses which the lessee is obligated to pay under the terms of said
leases), whether or not such obligations are reflected as liabilities
or commitments on a consolidated balance sheet of Holdings and its
Subsidiaries or in the notes thereto, excluding, however, obligations
under Financing Leases; provided that for any calculation of
Consolidated Historical Operating Lease Expense for any fiscal period
ending November 30, 1998, February 28, 1999 or May 31, 1999,
Consolidated Historical Operating Lease Expense shall be deemed to be
Consolidated Historical Operating Lease Expense from September 1, 1998
to the last day of such period multiplied by 4, 2 and 4/3,
respectively.
"Consolidated Net Income": of any Person for any fiscal
period, net income of such Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that for any
calculation of Consolidated Net Income for any fiscal period ending
November 30, 1998, February 28, 1999 or May 31, 1999, Consolidated Net
Income shall be deemed to be Consolidated Net Income from September 1,
1998 to the last day of such period multiplied by 4, 2 and 4/3,
respectively.
"Consolidated Operating Cash Flow": for any fiscal period,
Consolidated Net Income of Holdings and its Subsidiaries (excluding
without duplication, (w) extraordinary gains and losses in accordance
with GAAP, (x) gains and losses in connection with asset dispositions
whether or not constituting extraordinary gains and losses and (y)
gains or losses on discontinued operations and (z) non-cash investment
income) for such period, plus (i) to the extent deducted in determining
such Consolidated Net Income, interest expense and other financing
costs and expenses (cash and non-cash) for such period, plus (ii) to
the extent deducted in computing such Consolidated Net Income, the sum
of income taxes (whether or not deferred), depreciation and
amortization, and all other non-cash expenses; provided that for any
<PAGE> 18
12
calculation of Consolidated Operating Cash Flow for any fiscal period
ending November 30, 1998, February 28, 1999 or May 31, 1999,
Consolidated Operating Cash Flow shall be deemed to be Consolidated
Operating Cash Flow from September 1, 1998 to the last day of such
period multiplied by 4, 2 and 4/3, respectively.
"Consolidated Projected Cash Interest Expense": for any fiscal
period, the aggregate amount of interest in respect of Consolidated
Total Funded Debt and in respect of the Seller Note projected to be
payable in cash during such period as determined on a consolidated
basis in accordance with GAAP (such interest expense being calculated
based upon the assumption that interest rates in effect on the date of
calculation will remain in effect for such future fiscal period).
"Consolidated Projected Operating Lease Expense": for any
fiscal period, the aggregate lease obligations of Holdings and its
Subsidiaries for which Holdings or any of its Subsidiaries is
contractually committed having a remaining term in excess of twelve
months determined on a consolidated basis projected to be payable in
respect of such period under leases of real and/or personal property
(net of income from sub-leases thereof and excluding lease payments on
operating leases which carry a termination payment of less than twelve
months of lease payments, but including taxes, insurance, maintenance
and similar expenses which the lessee is obligated to pay under the
terms of said leases), whether or not such obligations would be
reflected as liabilities or commitments on a consolidated balance sheet
of Holdings and its Subsidiaries or in the notes thereto, excluding,
however, obligations under Financing Leases.
"Consolidated Total Funded Debt": at any date, all
Indebtedness of Holdings and its Subsidiaries outstanding on such date
for borrowed money or the deferred purchase price of property and all
Guarantee Obligations of the Company and its Subsidiaries in respect of
Indebtedness for borrowed money or the deferred purchase price of
property, in each case determined on a consolidated basis in accordance
with GAAP, including, without limitation, Indebtedness in respect of
Financing Leases, but excluding Indebtedness in respect of the Seller
Note.
"Consolidated Total Leverage Ratio" as at any date of
determination, the ratio of (i) Consolidated Total Funded Debt as at
such date to (ii) Consolidated Operating Cash Flow for the four fiscal
quarters ended on or most recently prior to such date of determination.
"Consolidated Working Capital": of any Person at any date, the
excess of (a) the sum of all amounts (other than cash and cash
equivalents) that would, in accordance with GAAP, be set forth opposite
the caption "total current assets" (or any like caption) on a
consolidated balance sheet of such Person and its Subsidiaries at such
date over (b) all amounts that would, in accordance with GAAP, be set
forth opposite the caption "total current liabilities" (or any like
caption) on a consolidated balance sheet of such
<PAGE> 19
13
Person and its Subsidiaries on such date (excluding, to the extent it
would otherwise be included under current liabilities, the current
portion of any Consolidated Total Funded Debt).
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any
of its property is bound.
"CPCFA Debt": the Indebtedness incurred by Holdings pursuant
to a credit agreement, dated as of July 1, 1997, between Holdings and
the California Pollution Control Financing Authority in connection with
the issuance by such Authority of Pollution Control Revenue Bonds, due
July 1, 2007, in the aggregate principal amount of $19,500,000.
"Default": any of the events specified in Section 11, whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Disposition": with respect to any asset, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other
disposition thereof; and the terms "Dispose" and "Disposed of" shall
have correlative meanings.
"Domestic Subsidiary": any Subsidiary of the Company organized
under the laws of any jurisdiction within the United States.
"Draft": a draft substantially in the form of Exhibit A-1 or
in such other form as the Canadian Administrative Agent may from time
to time reasonably request (or to the extent the context shall require,
an Acceptance Note, delivered in lieu of a draft), as the same may be
amended, supplemented or otherwise modified from time to time.
"Environmental Laws": any and all laws (including, without
limitation, all common and civil law), rules, orders, regulations,
statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirement of any foreign government, the United States,
Canada, or any state, provincial, local, municipal or other
governmental authority, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment or of
human health, or employee health and safety, as has been, is now, or
may at any time hereafter be, in effect.
"Environmental Permits": any and all permits, licenses,
registrations, approvals, notifications, exemptions and any other
authorization required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
<PAGE> 20
14
"Eurocurrency Reserve Requirements": for any day as applied to
a LIBOR Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by
a member bank of such System.
"Eurodollar Business Day": any day on which banks are open for
dealings in dollar deposits in the London interbank market.
"Event of Default": any of the events specified in Section 11,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Excess Cash Flow": with respect to any Person for any fiscal
year, the excess of (a) the sum, without duplication, of (i)
Consolidated Net Income of such Person and its Subsidiaries for such
fiscal year, (ii) the net decrease, if any, in Consolidated Working
Capital of such Person and its Subsidiaries during such fiscal year,
(iii) to the extent deducted in computing such Consolidated Net Income,
non-cash interest expense and other financing costs and expenses,
depreciation and amortization for such fiscal year, (iv) extraordinary
non-cash losses during such fiscal year subtracted in the determination
of such Consolidated Net Income, (v) deferred income tax expense of
such Person and its Subsidiaries for such fiscal year, (vi) non-cash
losses of such Person and its Subsidiaries for such fiscal year in
connection with asset dispositions whether or not constituting
extraordinary losses, and (vii) non-cash ordinary losses of such Person
and its Subsidiaries for such fiscal year over (b) the sum, without
duplication, of (i) the aggregate amount of permitted cash capital
expenditures made by such Person and its Subsidiaries during such
fiscal year, (ii) the net increase, if any, in Consolidated Working
Capital of such Person and its Subsidiaries during such fiscal year,
(iii) the aggregate amount of (A) scheduled payments of principal in
respect of any Indebtedness of such Person and its Subsidiaries during
such fiscal year, (B) optional prepayments of principal in respect of
any Indebtedness of such Person and its Subsidiaries during such fiscal
year (other than, with respect to Holdings, prepayments in respect of
the Revolving Credit Loan not accompanied by a reduction in Revolving
Credit Commitments), (C) with respect to Holdings for fiscal year 1997
only, repayments of existing Indebtedness required to be repaid in
connection with the Acquisition Closing Date, (iv) deferred income tax
credit of such Person and its Subsidiaries for such fiscal year, (v)
extraordinary non-cash gains during such fiscal year added in the
determination of Consolidated Net Income of such Person and its
Subsidiaries for such fiscal year, (vi) non-cash gains of such Person
and its Subsidiaries during such fiscal year in connection with asset
dispositions whether or not constituting extraordinary gains, (vii)
non-cash ordinary gains of such Person and its Subsidiaries
<PAGE> 21
15
during such fiscal year and (viii) cash expenditures of such Person and
its Subsidiaries during such fiscal year on deferred (including the
current portion thereof) long term liabilities (net of related cash
taxes), (ix) to the extent not deducted in determining Consolidated Net
Income of such Person and its Subsidiaries for such fiscal year, cash
expenditures made or committed during such fiscal year in respect of
site closure, related severance costs, financing fees and other costs
incurred in connection with the Rollins Acquisition and the
Safety-Kleen Acquisition (provided that amounts deducted in any fiscal
year for expenditures committed, but not made, during such fiscal year
shall not be deducted in the fiscal year in which such expenditures are
actually made) and (x) non-cash investment income of such Person and
its Subsidiaries during such fiscal year.
"Exchange Agent": IBJ Schroder Bank & Trust Company, as
exchange agent under the Exchange Agent Agency Agreement, and any
successor thereto pursuant to the terms of such agreement.
"Exchange Agent Agency Agreement": the Exchange Agent Agency
Agreement to be executed and delivered by the Exchange Agent, the
General Administrative Agent and Acquisition Corp., substantially in
the form of Exhibit P, as the same may be amended, supplemented or
otherwise modified from time to time.
"Exchange Offer": as defined in the Recitals to this
Agreement.
"Exchange Offer Documents": as defined in the Recitals to this
Agreement.
"Exchange Rate": with respect to Canadian Dollars on any date,
the Bank of Canada noon spot rate on such date for the exchange of
Canadian Dollars into U.S. Dollars.
"Existing Acceptances": as defined in Section 5.1(a).
"Existing Acceptance Lenders": as defined in Section 5.1(a).
"Existing Credit Agreement": as defined in the Recitals to
this Agreement.
"Existing Letters of Credit": as defined in Section 3.1(c).
"Existing Mortgages": the collective reference to (i) the Deed
of Trust, Assignment of Rents and Leases and Security Agreement, dated
as of May 15, 1997, from Rollins Environmental, Inc., as Grantor, to
First American Title Insurance Company, as trustee for the use and
benefit of Toronto Dominion (Texas), Inc., as beneficiary, and (ii) the
Mortgage, dated as of May 15, 1997, from Rollins Environmental, Inc.,
as mortgagor, to Toronto Dominion (Texas), Inc., as general
<PAGE> 22
16
administrative agent, in each case encumbering the properties described
in Schedule 2 and recorded in the recording office described in
Schedule 3.
"Extension of Credit": as to any Lender, the making of a Loan
by such Lender, the issuance (or acquisition of a participating
interest in) any Letter of Credit or the creation of an Acceptance or
Acceptance Note by such Lender. It is expressly understood and agreed
that the following do not constitute Extensions of Credit for purposes
of this Agreement: (a) the conversions and continuations of U.S. Loans
as or to LIBOR Loans or Base Rate Loans pursuant to Section 6.4, (b)
the substitution of maturing Acceptances with new Acceptances, (c) the
conversion of Acceptances to Canadian Term Loans and (d) the conversion
of Canadian Term Loans to Acceptances.
"Facility": each of (a) the Tranche A Term Loan Commitments
and the Tranche A Term Loans made thereunder (the "Tranche A Term Loan
Facility"), (b) the Tranche B Term Loan Commitments and the Tranche B
Term Loans made thereunder (the "Tranche B Term Loan Facility"), (c)
the Tranche C Term Loan Commitments and the Tranche C Term Loans made
thereunder (the "Tranche C Term Loan Facility"), (d) the Revolving
Credit Commitments and the Revolving Extensions of Credit (the
"Revolving Credit Facility") and (e) the Canadian Term Loan Commitments
and the Canadian Term Loans made, and the Acceptances issued,
thereunder (the "Canadian Term Loan Facility").
"Federal Funds Effective Rate": for any day, the weighted
average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers
as published for such day (or, if such day is not a Business Day, for
the next preceding Business Day) by the Federal Reserve Bank of New
York or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the General Administrative Agent from three
federal funds brokers of recognized standing selected by it.
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"Fixed Charge Coverage Ratio": as at the last day of any
fiscal quarter, the ratio of (i) the sum of Consolidated Operating Cash
Flow and Consolidated Historical Operating Lease Expense for the four
consecutive fiscal quarters ended on such last day to (ii) Consolidated
Fixed Charges for the next succeeding four consecutive fiscal quarters.
<PAGE> 23
17
"Foreign Currency Protection Agreements": as to any Person,
all foreign exchange contracts, currency swap agreements or other
similar agreements or arrangements entered into by such Person to
protect such Person against fluctuations in currency values.
"Foreign Subsidiary": any Subsidiary of the Company organized
under the laws of any jurisdiction outside the United States of
America.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"General Administrative Agent": Toronto Dominion (Texas) Inc.,
together with its affiliates, as arranger of the Commitments and as
administrative agent for the U.S. Lenders under this Agreement and the
other Loan Documents, and any successor thereto pursuant to Section
12.9.
"Governmental Authority": any nation or government, any state,
provincial or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantee and Collateral Agreement": the Amended and Restated
Guarantee and Collateral Agreement to be executed and delivered by the
Company and each Guarantor, substantially in the form of Exhibit B-1,
as the same may be amended, supplemented or otherwise modified from
time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which obligation the guaranteeing
person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary
obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation,
any obligation of the guaranteeing person, whether or not contingent,
(i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall
not include endorsements of instruments for deposit or collection in
the ordinary course of business. The amount of any Guarantee Obligation
of any guaranteeing person shall be
<PAGE> 24
18
deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
determined by the Company in good faith. For avoidance of doubt,
Guarantee Obligations will not include obligations of Holdings and its
Subsidiaries incurred in the ordinary course of business to indemnify
customers in connection with business services provided by Holdings or
its Subsidiaries.
"Guarantor": each party to the Guarantee and Collateral
Agreement other than the Company, which shall include Holdings and all
wholly owned Domestic Subsidiaries of the Company.
"Hedging Agreement": any Foreign Currency Protection Agreement
or Interest Rate Protection Agreement.
"High Yield Notes": up to $400,000,000 of subordinated notes
of the Company maturing no earlier than the Revolving Credit
Termination Date and having subordination and other terms reasonably
acceptable to the Company and the General Administrative Agent.
"High Yield Offering": the contemplated offering by the
Company of the High Yield Notes.
"Holdings": as defined in the Recitals to this Agreement.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person, contingent or otherwise, as an
account party under acceptance, letter of credit or similar facilities
(other than obligations in respect of performance bonds and letters of
credit in the nature of performance bonds), (e) all obligations of such
Person, contingent or otherwise, to purchase, redeem, retire or
otherwise acquire for value any Capital Stock (other than common stock)
of such Person, (f) all Guarantee Obligations of such Person in respect
of obligations of the kind referred to in clauses (a) through (e)
above, (g) all obligations of the kind referred to in clauses (a)
through (f) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be
secured by) any Lien on property (including, without limitation,
accounts and contract
<PAGE> 25
19
rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation and (h) for the
purposes of Section 11(e) only, all obligations of such Person in
respect of Hedging Agreements.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intercreditor Agreement": the Amended and Restated
Intercreditor Agreement, substantially in the form of Exhibit O, to be
entered into by the Administrative Agents and The Toronto-Dominion
Bank, as Canadian Operating Facility Agent (as defined therein), and
NationsBank, N.A., in its capacity as a lender providing the
NationsBank Line of Credit.
"Interest Coverage Ratio": for any period, the ratio of (i)
Consolidated Operating Cash Flow less Consolidated Capital Expenditures
for such period to (ii) Consolidated Historical Cash Interest Expense
for such period.
"Interest Determination Date": with respect to any Interest
Period for LIBOR Loans, the date which is two Eurodollar Business Days
prior to the first day of such LIBOR Interest Period.
"Interest Payment Date": (a) as to any Base Rate Loan and any
Canadian Term Loan, the last Business Day of each February, May, August
and November, and, in the case of any Canadian Term Loan converted to
an Acceptance pursuant to Section 5.1(b), the Borrowing Date on which
such conversion occurs, (b) as to any LIBOR Loan having an Interest
Period of three months or less, the last day of such Interest Period,
and (c) as to any LIBOR Loan having an Interest Period longer than
three months, each day which is three months, or a whole multiple
thereof, after the first day of such Interest Period and the last day
of such Interest Period.
"Interest Period": with respect to any LIBOR Loan:
(a) initially, the period commencing on the
Borrowing Date or conversion date, as the case may be, with
respect to such LIBOR Loan and ending one, two, three or six
months or (if available to all Lenders under the relevant
Facility) nine or twelve months thereafter, as selected by the
Company in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
(b) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to
such LIBOR Loan and ending one, two, three or six months or
(if available to all Lenders under the relevant Facility)
<PAGE> 26
20
nine or twelve months thereafter, as selected by the Company
by irrevocable notice to the General Administrative Agent not
less than three Business Days prior to the last day of the
then current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(2) any Interest Period in respect of Revolving
Credit Loans, Tranche A Term Loans, Tranche B Term Loans or
Tranche C Term Loans, as the case may be, that would otherwise
extend beyond the Revolving Credit Termination Date or beyond
the date final payment is due on the Tranche A Term Loans, the
Tranche B Term Loans or the Tranche C Term Loans, as the case
may be, shall end on the Revolving Credit Termination Date or
such due date, as applicable;
(3) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
(4) the Company shall select Interest Periods so as
not to require a payment or prepayment of any LIBOR Loan
during an Interest Period for such Loan.
"Interest Rate Protection Agreements": as to any Person, all
interest rate swaps, caps or collar agreements or similar arrangements
entered into by such Person providing for protection against
fluctuations in interest rates or the exchange of nominal interest
obligations, either generally or under specific contingencies.
"Issuance Date": any Business Day specified in a notice
pursuant to Section 3.2 as a date on which an Issuing Lender is
requested to issue a Letter of Credit hereunder.
"Issuing Lender": any of The Toronto-Dominion Bank or any
Managing Agent or any Affiliates thereof, as selected by the Company.
"ITA": the Income Tax Act (Canada) and the regulations
promulgated thereunder, as amended or re-enacted from time to time.
"Laidlaw": Laidlaw Inc., a Canadian corporation.
<PAGE> 27
21
"L/C Commitment": at any time, the lesser of (a) $200,000,000
and (b) the aggregate Revolving Credit Commitments then in effect.
"L/C Fee Payment Date": the last day of each February, May,
August and November and the last day of the Revolving Credit Commitment
Period.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
Section 3.5.
"L/C Participants": with respect to any Letter of Credit, the
collective reference to all the Revolving Credit Lenders other than the
relevant Issuing Lender.
"Letters of Credit": as defined in Section 3.1(a).
"LIBOR Loan": any Loan the rate of interest applicable to
which is based upon the LIBOR Rate.
"LIBOR Rate": with respect to a LIBOR Loan for the relevant
Interest Period, the rate per annum determined by the General
Administrative Agent as follows:
(a) on the Interest Determination Date relating to
such Interest Period, the General Administrative Agent shall
obtain the offered quotation(s) for U.S. Dollar deposits for a
period comparable to such Interest Period that appear on the
Reuter's Screen as of 11:00 a.m., London time. If at least two
such offered quotations appear on the Reuter's Screen, the
LIBOR Rate shall be the arithmetic average (rounded up to the
nearest 1/16th of 1%) of such offered quotations, as
determined by the General Administrative Agent;
(b) if the Reuter's Screen is not available or has
been discontinued, the LIBOR Rate shall be the rate per annum
that the General Administrative Agent determines to be the
arithmetic average (rounded as aforesaid) of the per annum
rates of interest reported to the General Administrative Agent
by each LIBOR Reference Bank (or, if any LIBOR Reference Bank
fails to provide such quotation, on the basis of the rates
reported to the General Administrative Agent by the remaining
LIBOR Reference Banks) as the rate at which deposits in U.S.
Dollars are offered to such Reference Banks in the London
interbank market at 11:00 a.m., London time, on the Interest
Determination Date in the approximate amount of such LIBOR
Reference Bank's relevant LIBOR Loan and having a maturity
approximately equal to the relevant LIBOR Interest Period; and
<PAGE> 28
22
(c) if the General Administrative Agent is not able
to obtain quotations for the determination of the LIBOR Rate
pursuant to subsection (a) or (b) above, the LIBOR Rate shall
be the rate per annum which the General Administrative Agent
in good faith determines to be the arithmetic average (rounded
as aforesaid) of the offered quotations for U.S. Dollar
deposits in an amount comparable to the General Administrative
Agent's share of the relevant amount in respect of which the
LIBOR Rate is being determined for a period comparable to the
relevant LIBOR Interest Period that leading banks in New York
City selected by the General Administrative Agent are quoting
at 11:00 a.m., New York City time, on the Interest
Determination Date in the New York interbank market to major
international banks.
"LIBOR Reference Banks": The Toronto-Dominion Bank, The Bank
of Nova Scotia, NationsBank, N.A. and The First National Bank of
Chicago.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this
Agreement.
"Loan Documents": the collective reference to this Agreement,
any Notes, the Applications, the Syndication Letter Agreement, the
Drafts, the Acceptances, the Acceptance Notes and the Security
Documents.
"Loan Parties": the collective reference to Holdings, the
Borrowers and each Subsidiary of the Company which is a party to a Loan
Document.
"Majority Facility Lenders": with respect to any Facility, the
holders of more than 66-2/3% of the aggregate unpaid principal amount
of the U.S. Term Loans (and related undrawn U.S. Term Loan
Commitments), the Total Revolving Extensions of Credit or the Aggregate
Canadian Term Loan Outstandings, as the case may be, outstanding under
such Facility (or, in the case of the Revolving Credit Facility, prior
to any termination of the Revolving Credit Commitments, the holders of
more than 66- 2/3% of the aggregate Revolving Credit Commitments).
"Material Adverse Effect": a material adverse effect on (a)
the Safety-Kleen Acquisition, (b) the business, operations, property,
condition (financial or otherwise) or prospects of the Company and its
Subsidiaries taken as a whole or (c) the validity or enforceability of
this or any of the other Loan Documents or the rights or remedies of
the Administrative Agents or the Lenders hereunder or thereunder.
<PAGE> 29
23
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, pollutants, contaminants, radioactivity, and any other
substances or forces of any kind, whether or not any such substance or
force is defined as hazardous or toxic under any Environmental Law,
that is regulated pursuant to or could give rise to liability under any
Environmental Law.
"Merger": as defined in the Recitals to this Agreement.
"Merger Agreement: as defined in the Recitals to this
Agreement.
"Merger Date": the date on which the Merger is consummated.
"Mortgage Amendment": each Mortgage Amendment, substantially
in the form of Exhibit M, to be entered into on the Closing Date to
amend each Existing Mortgage.
"Mortgages": the collective reference to the Existing
Mortgages, as amended by the Mortgage Amendments, and the Mortgages,
substantially in the form of Exhibit N, to be executed and delivered in
respect of the properties to be mortgaged pursuant to Section 9.10(d),
as the same may be amended, supplemented or otherwise modified from
time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NationsBank Line of Credit": the working capital credit
facility in an amount not exceeding $25,000,000 made available pursuant
to a letter agreement, dated March 31, 1998 between NationsBank of
Texas, N.A., as lender, and the Company, as borrower, as the same may
be amended, modified or otherwise supplemented from time to time.
"Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and cash
equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, investment banking fees, amounts required to be
applied to the repayment of Indebtedness secured by a Lien expressly
permitted hereunder on any asset which is the subject of such Asset
Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to
be payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements) and (b) in
connection with any issuance or sale of equity securities or debt
securities or instruments or the incurrence of loans,
<PAGE> 30
24
the cash proceeds received from such issuance or incurrence, net of
attorneys' fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees and
expenses actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 6.12.
"Notes": the collective reference to the Revolving Credit
Notes, the U.S. Term Notes and the Canadian Term Notes.
"Participant": as defined in Section 14.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Employee Stock Issuances": the issuance by Holdings
of its common stock to employees or directors of Holdings and its
Subsidiaries for aggregate proceeds not exceeding $5,000,000 per fiscal
year during fiscal year 1997, 1998 and 1999 and $10,000,000 per fiscal
year thereafter.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Prepayment Option Notice": as defined in Section 6.3(i).
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Prime Rate": the prime commercial lending rate of The
Toronto-Dominion Bank as in effect from time to time in New York City
for loans in U.S. Dollars, such rate to be adjusted on and as of the
effective date of any change in the Prime Rate. The Prime Rate is only
one of the bases for computing interest on loans made by the Lenders,
and by basing interest on the unpaid principal amount of the Loans on
the Prime Rate, the Lenders have not committed to charge, and the
Company has not in any way bargained for, interest based on a lower or
the lowest rate at which the Lenders may now or in the future make
loans to other borrowers.
"Pro Forma Balance Sheet": as defined in Section 7.1(a).
"Proposed Prepayment Date": as defined in Section 6.3(i).
<PAGE> 31
25
"Recovery Event": any settlement of or payment in respect of
any property or casualty insurance claim or any condemnation proceeding
relating to any asset of the Company or any of its Subsidiaries.
"Reference Discount Rate": on any date with respect to each
Draft requested to be accepted by a Canadian Lender, (a) if such
Canadian Lender is a Schedule 1 Canadian Lender, the arithmetic average
of the discount rates (expressed as a percentage calculated on the
basis of a year of 365 days) quoted by the Toronto offices of each of
the Schedule 1 Canadian Reference Lenders, at 10:00 a.m. (Toronto time)
on the Borrowing Date on which such Draft is to be accepted as the
discount rate at which each such Schedule 1 Canadian Reference Lender
would, in the normal course of its business, purchase on such date
Acceptances having an aggregate face amount and term to maturity as
designated by the Canadian Borrower pursuant to Section 5.2 and (b) if
such Canadian Lender is a Schedule 2 Canadian Lender, the arithmetic
average of the discount rates (expressed as a percentage calculated on
the basis of a year of 365 days) quoted by the Toronto offices of each
of the Schedule 2 Canadian Reference Lenders, at 10:00 a.m. (Toronto
time) on the Borrowing Date on which such Draft is to be accepted as
the discount rate at which each such Schedule 2 Canadian Reference
Lender would, in the normal course of its business, purchase on such
date Acceptances having an aggregate face amount and term to maturity
as designated by the Canadian Borrower pursuant to Section 5.2. The
Canadian Administrative Agent shall advise the Canadian Borrower and
the Canadian Lenders, either in writing or verbally, by 11:00 a.m.
(Toronto time) on each Borrowing Date in respect of Acceptances as to
the applicable Reference Discount Rate and corresponding Acceptance
Purchase Price in respect of Acceptances having the maturities selected
by the Canadian Borrower for such Borrowing Date.
"Register": as defined in Section 14.6(d).
"Regulation U": Regulation U of the Board as in effect from
time to time.
"Reimbursement Obligation": the obligation of the Company to
reimburse the Issuing Lenders pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
"Reinvestment Deferred Amount": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received by a
Borrower or any of its Subsidiaries in connection therewith which are
not applied to prepayments or reductions pursuant to Section 6.3(c) as
a result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Recovery Event or Asset Sale in
respect of which the relevant Borrower has delivered a Reinvestment
Notice.
"Reinvestment Notice": a written notice executed by a
Responsible Officer to the General Administrative Agent within 30 days
of the Reinvestment Event to which it
<PAGE> 32
26
relates stating that no Event of Default has occurred and is continuing
and that the relevant Borrower (directly or indirectly through a
Subsidiary), in good faith, intends and expects to use all or a
specified portion of the Net Cash Proceeds of a Recovery Event or an
Asset Sale to restore or replace the assets in respect of which such
Recovery Event or Asset Sale occurred or to purchase other assets used
in the existing business of the Company and its Subsidiaries within
twelve months from the date of receipt of such Net Cash Proceeds
(provided that if the affected assets constituted Collateral, such
restored, replacement or other purchased assets shall also constitute
Collateral).
"Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating thereto
less any amount which, prior to the relevant Reinvestment Prepayment
Date, the relevant Borrower or the relevant Subsidiary has spent or has
agreed, pursuant to a binding written contract (under which performance
is in progress) to spend, to restore or replace the assets in respect
of which a Recovery Event or an Asset Sale has occurred or to purchase
other assets used in the existing business of such Borrower or such
Subsidiary.
"Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earliest of (a) the first date occurring after
such Reinvestment Event on which an Event of Default shall have
occurred, (b) the date occurring twelve months after such Reinvestment
Event and (c) the date on which the relevant Borrower shall have
determined not to, or shall have otherwise ceased to, restore or
replace the assets in respect of which a Recovery Event or an Asset
Sale has occurred or to purchase other assets used in the existing
business of such Borrower or such Subsidiary.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty-day
notice period is waived under subsections .27, .28, .29, .30, .31, .32,
.34 or .35 of PBGC Reg. ss. 4043.
"Request for Acceptances": as defined in Section 5.2(a).
"Required Lenders": the holders of more than 66-2/3% of (a)
until the Closing Date, the Tranche A Term Loan Commitments, the
Tranche B Term Loan Commitments, the Tranche C Term Loan Commitments,
the Revolving Credit Commitments and the U.S. Dollar Equivalent of the
Canadian Term Loan Commitments and (b) thereafter, the sum of (i) the
aggregate unpaid principal amount of the U.S. Term Loans and the
aggregate undrawn amount of the U.S. Term Loan Commitments, (ii) the
U.S. Dollar Equivalent of the Aggregate Canadian Facility Term Loan
Outstandings of all Lenders and (iii) the aggregate Revolving Credit
<PAGE> 33
27
Commitments of all Lenders or, if the Revolving Credit Commitments have
been terminated, the Total Revolving Extensions of Credit.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": the chief executive officer and the
president of the Company or Holdings, as the case may be, or, with
respect to financial matters, the chief financial officer of the
Company or Holdings, as the case may be.
"Reuter's Screen": the display designated at page "LIBO" on
the Reuter Monitor System or such other display on the Reuter Monitor
System as may replace such page displaying the London interbank bid or
offered rates.
"Revolving Credit Commitment": as to any U.S. Lender, the
obligation of such Lender, if any, to make Revolving Credit Loans and
participate in Letters of Credit, in an aggregate principal and/or face
amount not to exceed the amount set forth under the heading "Revolving
Credit Commitment" opposite such Lender's name on Schedule 1.1A, as the
same may be changed from time to time pursuant to the terms hereof. The
original aggregate amount of the Revolving Credit Commitments is
$450,000,000; provided that at no time shall the aggregate principal
amount of all Revolving Credit Loans exceed $300,000,000.
"Revolving Credit Commitment Period": the period from and
including the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Lender": each U.S. Lender which has a
Revolving Credit Commitment or which has made Revolving Extensions of
Credit.
"Revolving Credit Loans": as defined in Section 2.4.
"Revolving Credit Note": as defined in Section 2.7.
"Revolving Credit Percentage": as to any Revolving Credit
Lender at any time, the percentage which such Lender's Revolving Credit
Commitment then constitutes of the aggregate Revolving Credit
Commitments (or, at any time after the Revolving Credit Commitments
shall have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Revolving Extensions of Credit then
outstanding constitutes of the Total Revolving Extensions of Credit
then outstanding).
<PAGE> 34
28
"Revolving Credit Termination Date": the earlier of (a) April
3, 2004 and (b) the date on which the Revolving Credit Commitments are
terminated pursuant to Section 11.
"Revolving Extensions of Credit": as to any Revolving Credit
Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Lender then
outstanding and (b) such Lender's Revolving Credit Percentage of the
L/C Obligations then outstanding.
"Rollins Acquisition": the acquisition by Holdings of the
common stock of the Company, which was financed, in part, with proceeds
of loans under the Existing Credit Agreement.
"Safety-Kleen": as defined in the Recitals to this Agreement.
"Safety-Kleen Acquisition": the acquisition by Acquisition
Corp. of the common stock of Safety-Kleen pursuant to the Exchange
Offer and the Merger, financed, in part, with proceeds of Loans made
hereunder.
"Schedule 1 Canadian Lender": each Canadian Lender listed on
Schedule 1 to the Bank Act (Canada).
"Schedule 1 Canadian Reference Lenders": initially, The
Toronto-Dominion Bank; and after completion of syndication of the
Facilities, The Toronto-Dominion Bank and one other Schedule 1 Canadian
Lender selected by the Canadian Administrative Agent and the Canadian
Borrower.
"Schedule 2 Canadian Lender": each Canadian Lender which is
not a Schedule 1 Canadian Lender.
"Schedule 2 Canadian Reference Lenders": two Schedule 2
Canadian Lenders to be selected by the Canadian Administrative Agent
and the Canadian Borrower after completion of syndication of the
Facilities.
"Security Documents": the collective reference to the
Guarantee and Collateral Agreement, the Acquisition Corp. Pledge
Agreement, the Mortgages, the Canadian Collateral Documents and all
other security documents hereafter delivered to the General
Administrative Agent or the Canadian Administrative Agent granting a
Lien on any property of any Person to secure the obligations and
liabilities of any Loan Party under any Loan Document.
Seller Note": the 5% Convertible Subordinated Debenture due
2009 in a principal amount of $350,000,000 issued by Holdings to
Laidlaw Transportation, Inc.
<PAGE> 35
29
on the Acquisition Closing Date as a portion of the consideration for
the Rollins Acquisition.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the "present fair
saleable value" of the assets of such Person will, as of such date,
exceed the amount of all "liabilities of such Person, contingent or
otherwise", as of such date, as such quoted terms are determined in
accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be
greater than the amount that will be required to pay the liability of
such Person on its debts as such debts become absolute and matured, (c)
such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business, and (d) such
Person will be able to pay its debts as they mature. For purposes of
this definition, (i) "debt" means liability on a "claim", and (ii)
"claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured or (y) right to an equitable remedy for breach of performance
if such breach gives rise to a right to payment, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent,
matured or unmatured, disputed, undisputed, secured or unsecured.
"Specified Acceptances": as defined in Section 5.1(a).
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Company.
"Surviving Corporation": as defined in the Recitals to this
Agreement.
"Syndication Agent": as defined in the Preamble to this
Agreement.
"Syndication Letter Agreement": the Letter Agreement dated as
of April 3, 1998 among Holdings, the Borrowers and the Arranger
pertaining to the completion of the syndication of the Facilities after
the Closing Date.
<PAGE> 36
30
"Target Rights": as defined in the Recitals to this Agreement.
"Target Shares": as defined in the Recitals to this Agreement.
"Tax Act": the Income Tax Act (Canada), as amended from time
to time.
"Term Loans": the collective references to the Canadian Term
Loans and the U.S. Term Loans.
"Tooele County Debt": the Indebtedness incurred by Holdings
pursuant to a credit agreement, dated as of July 1, 1997, between
Holdings and Tooele County, Utah, in connection with the issuance by
Tooele County, Utah, of Hazardous Waste Treatment Revenue Bonds, due
July 1, 2027, in the aggregate principal amount of $45,700,000.
"Total Aggregate Canadian Term Loan Outstandings": at any
time, the aggregate amount of the Aggregate Canadian Term Loan
Outstandings of the Canadian Lenders at such time.
"Total Revolving Extensions of Credit": at any time, the
aggregate amount of the Revolving Extensions of Credit of the Revolving
Credit Lenders at such time.
"Tranche": the collective reference to LIBOR Loans under the
same Facility the then current Interest Periods with respect to all of
which begin on the same date and end on the same later date (whether or
not such Loans shall originally have been made on the same day).
"Tranche A Term Loan": as defined in Section 2.1.
"Tranche A Term Loan Commitment": as to any U.S. Lender, the
obligation of such Lender, if any, to make a Tranche A Term Loan to the
Company hereunder in a principal amount not to exceed the amount set
forth under the heading "Tranche A Term Loan Commitment" opposite such
Lender's name on Schedule 1.1A. The original aggregate amount of the
Tranche A Term Loan Commitments is $480,000,000.
"Tranche A Term Loan Lender": each U.S. Lender which has a
Tranche A Term Loan Commitment or which has made a Tranche A Term Loan.
"Tranche A Term Loan Maturity Date": April 3, 2004.
"Tranche A Term Loan Percentage": as to any Tranche A Term
Loan Lender at any time, the percentage which such Lender's Tranche A
Term Loan Commitment then constitutes of the aggregate Tranche A Term
Loan Commitments (or, at any time
<PAGE> 37
31
after the Closing Date, the percentage which the aggregate principal
amount of such Lender's Tranche A Term Loans then outstanding
constitutes of the aggregate principal amount of the Tranche A Term
Loans then outstanding).
"Tranche B Term Loan": as defined in Section 2.1.
"Tranche B Term Loan Commitment": as to any U.S. Lender, the
obligation of such Lender, if any, to make a Tranche B Term Loan to the
Company hereunder in a principal amount not to exceed the amount set
forth under the heading "Tranche B Term Loan Commitment" opposite such
Lender's name on Schedule 1.1A. The original aggregate amount of the
Tranche B Term Loan Commitments is $550,000,000. The Tranche B-1 Term
Loan Commitments are a subset of the Tranche B Term Loan Commitments.
"Tranche B Term Loan Lender": each U.S. Lender which has a
Tranche B Term Loan Commitment or which has made a Tranche B Term Loan.
"Tranche B Term Loan Maturity Date": April 3, 2005.
"Tranche B Term Loan Percentage": as to any Tranche B Term
Loan Lender at any time, the percentage which such Lender's Tranche B
Term Loan Commitment then constitutes of the aggregate Tranche B Term
Loan Commitments (or, at any time after the Closing Date, the
percentage which the aggregate principal amount of such Lender's
Tranche B Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche B Term Loans then outstanding).
"Tranche B-1 Term Loan Commitments": as defined in Section
2.1(b).
"Tranche B-1 Term Loans": as defined in Section 2.1(b).
"Tranche C Term Loan": as defined in Section 2.1.
"Tranche C Term Loan Commitment": as to any U.S. Lender, the
obligation of such Lender, if any, to make a Tranche C Term Loan to the
Company hereunder in a principal amount not to exceed the amount set
forth under the heading "Tranche C Term Loan Commitment" opposite such
Lender's name on Schedule 1.1A. The original aggregate amount of the
Tranche C Term Loan Commitments is $550,000,000. The Tranche C-1 Term
Loan Commitments are a subset of the Tranche C Term Loan Commitments.
"Tranche C Term Loan Lender": each U.S. Lender which has a
Tranche C Term Loan Commitment or which has made a Tranche C Term Loan.
"Tranche C Term Loan Maturity Date": April 3, 2006.
<PAGE> 38
32
"Tranche C Term Loan Percentage": as to any Tranche C Term
Loan Lender at any time, the percentage which such Lender's Tranche C
Term Loan Commitment then constitutes of the aggregate Tranche C Term
Loan Commitments (or, at any time after the Closing Date, the
percentage which the aggregate principal amount of such Lender's
Tranche C Term Loans then outstanding constitutes of the aggregate
principal amount of the Tranche C Term Loans then outstanding).
"Tranche C-1 Term Loan Commitments": as defined in Section
2.1(b).
"Tranche C-1 Term Loans": as defined in Section 2.1(b).
"Transferee": as defined in Section 14.6(f).
"Type": as to any Loan, its nature as a Base Rate Loan or a
LIBOR Loan.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"U.S. Dollar Equivalent": with respect to an amount
denominated in Canadian Dollars, the equivalent in U.S. Dollars of such
amount determined at the Exchange Rate on the Business Day immediately
preceding the date of determination of such equivalent.
"U.S Dollars" and "$": dollars in the lawful currency of the
United States of America.
"U.S. Lenders": the collective reference to the U.S. Term Loan
Lenders and the Revolving Credit Lenders.
"U.S. Loans": the collective reference to the U.S. Term Loans
and the Revolving Credit Loans.
"U.S. Term Loan Commitments": the collective reference to the
Tranche A Term Loan Commitments, the Tranche B Term Loan Commitments
and the Tranche C Term Loans Commitments.
"U.S. Term Loan Commitment Period": the period from the
Closing Date to the Merger Date.
"U.S. Term Loan Lenders": the collective reference to the
Tranche A Term Loan Lenders, the Tranche B Term Loan Lenders and the
Tranche C Term Loan Lenders.
<PAGE> 39
33
"U.S. Term Loans": the collective reference to the Tranche A
Term Loans, Tranche B Term Loans and Tranche C Term Loans.
"U.S. Term Notes": as defined in Section 2.7.
"Westinghouse Debt": unsecured subordinated indebtedness of
Holdings in the initial principal amount of $60,000,000 evidenced by a
promissory note of Holdings, dated May 15, 1997, initially payable to
Westinghouse Electric Corporation and its assignees, and guaranteed by
Laidlaw.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in any Notes, and any certificate or
other document made or delivered pursuant hereto, accounting terms relating to
the Company and its Subsidiaries not defined in Section 1.1 and accounting terms
partly defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP; provided that, if the Company
notifies the General Administrative Agent that the Company requests an amendment
to any provision hereof to eliminate the effect of any change occurring after
the date hereof in GAAP or in the application thereof on the operation of such
provision (or if the General Administrative Agent notifies the Company that the
Required Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then, pending execution and delivery of such
an amendment, such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF U.S. COMMITMENTS
2.1 U.S. Term Loan Commitments. (a) Subject to the terms and
conditions hereof, (i) each Tranche A Term Loan Lender severally agrees to make
term loans (each, a "Tranche A Term Loan") denominated in U.S. Dollars to the
Company during the U.S. Term Loan Commitment Period in an aggregate principal
amount not to exceed the amount of the
<PAGE> 40
34
Tranche A Term Loan Commitment of such Lender, (ii) each Tranche B Term Loan
Lender severally agrees to make term loans (each, a "Tranche B Term Loan")
denominated in U.S. Dollars to the Company during the U.S. Term Loan Commitment
Period in an aggregate principal amount not to exceed the amount of the Tranche
B Term Loan Commitment of such Lender and (iii) each Tranche C Term Loan Lender
severally agrees to make term loans (each, a "Tranche C Term Loan") denominated
in U.S. Dollars to the Company during the U.S. Term Loan Commitment Period in an
aggregate principal amount not to exceed the amount of the Tranche C Term Loan
Commitment of such Lender. The U.S. Term Loans may from time to time be LIBOR
Loans or Base Rate Loans, as determined by the Company and notified to the
General Administrative Agent in accordance with Sections 2.2 and 6.4; provided
that the U.S. Term Loans made on the Closing Date shall initially be made as
Base Rate Loans.
(b) $150,000,000 of the Tranche B Term Loan Commitments shall
be designated as the "Tranche B-1 Term Loan Commitments", and $150,000,000 of
the Tranche C Term Loan Commitments shall be designated as the "Tranche C-1 Term
Loan Commitments". Schedule 1.1A sets forth the amount of the Tranche B-1 Term
Loan Commitments and the Tranche C-1 Term Loan Commitments held by each of the
U.S. Term Loan Lenders. Each borrowing of Tranche B Term Loans and Tranche C
Term Loans shall be deemed to utilize first the portions of the U.S. Term Loan
Commitments other than the Tranche B-1 Term Loan Commitments or the Tranche C-1
Term Loan Commitments, as the case may be, before utilizing the Tranche B-1 Term
Loan Commitment and the Tranche C-1 Term Loan Commitments. The portions of the
U.S. Term Loans attributable to the Tranche B-1 Term Loan Commitments and the
Tranche C-1 Term Loan Commitments shall be designated as the "Tranche B-1 Term
Loans" and the "Tranche C-1 Term Loans", respectively.
2.2 Procedure for U.S. Term Loan Borrowing. The Company may
borrow under the U.S. Term Loan Commitments during the U.S. Term Loan Commitment
Period on any Business Day in accordance with this Section 2.2, provided that
the Company shall give the General Administrative Agent irrevocable written
notice (which notice must be received by the General Administrative Agent prior
to 12:00 Noon, New York City time, (a) three Business Days prior to the
requested Borrowing Date, in the case of LIBOR Loans, or (b) one Business Day
prior to the requested Borrowing Date, in the case of Base Rate Loans),
specifying (i) the amount and Type of U.S. Term Loans to be borrowed, (ii) the
requested Borrowing Date and (iii) in the case of LIBOR Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Periods therefor. The U.S. Term Loans made on the Closing Date shall be
in an aggregate principal amount not exceeding the sum of (i) the cash amount
payable in connection with the Exchange Offer on the Closing Date, (ii) the
aggregate principal amount of the U.S. Term Loans and Revolving Credit Loans
outstanding under (and as defined in) the Existing Credit Agreement and (iii)
costs and expenses relating to the Exchange Offer and the financing thereof.
After the Closing Date and prior to the Merger Date, the Company may make one
additional borrowing of U.S. Term Loans in an aggregate principal amount not
exceeding the cash portion of the consideration payable in connection with
delayed delivery of Target Shares pursuant to the Exchange Offer
<PAGE> 41
35
or in connection with Target Shares for which payment cannot be made on the
Closing Date because of inability of the Exchange Agent to complete the
verification process in respect of such Target Shares. On the Merger Date, the
Company may make an additional borrowing of U.S. Term Loans in an aggregate
principal amount not exceeding the cash portion of the consideration payable in
connection with the Merger, and costs and expenses related thereto, less the
amount, if any, of Net Cash Proceeds received by the Company from the High Yield
Offering, if it has been consummated, to the extent such Net Cash Proceeds have
not been applied to prepay the Term Loans or reduce the Term Loan Commitments
pursuant to Section 6.3(b) and (e). In addition, on the Merger Date the Company
may borrow U.S. Term Loans in an amount sufficient to repay existing
indebtedness of Safety-Kleen required to be repaid in connection with the
Merger. Each borrowing under the U.S. Term Loan Commitments shall be in an
amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a multiple of
$500,000 in excess thereof and (y) in the case of LIBOR Loans, $5,000,000 or a
whole multiple of $1,000,000 in excess thereof. Upon receipt of any such notice
from the Company, the General Administrative Agent shall promptly notify each
U.S. Term Loan Lender thereof. Each U.S. Term Loan Lender will make the amount
of its pro rata share of each borrowing available to the General Administrative
Agent for the account of the Company at the office of the General Administrative
Agent specified in Section 14.2 prior to 12:00 Noon, New York City time, on the
Borrowing Date requested by the Company in funds immediately available to the
General Administrative Agent. Such borrowing will then be made available to the
Company by the General Administrative Agent crediting the account of the Company
at the office of The Toronto-Dominion Bank at 909 Fannin Street, Suite 1700,
Houston, TX 77010 with the aggregate of the amounts made available to the
General Administrative Agent by the U.S. Term Loan Lenders and in like funds as
received by the General Administrative Agent.
2.3 Repayment of U.S. Term Loans. (a) The Tranche A Term Loan
of each Tranche A Lender shall mature, and the Company unconditionally promises
to pay such Tranche A Term Loan to the General Administrative Agent for the
account of such Tranche A Lender, in 24 consecutive quarterly installments,
commencing on August 31, 1998, each of which shall be in an amount equal to such
Lender's Tranche A Term Loan Percentage multiplied by the amount set forth below
opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------------
<S> <C>
August 31, 1998 US$16,000,000
November 30, 1998 16,000,000
February 28, 1999 16,000,000
May 31, 1999 16,000,000
August 31, 1999 16,000,000
November 30, 1999 16,000,000
February 28, 2000 16,000,000
May 31, 2000 16,000,000
August 31, 2000 22,000,000
November 30, 2000 22,000,000
February 28, 2001 22,000,000
</TABLE>
<PAGE> 42
36
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
May 31, 2001 22,000,000
August 31, 2001 22,000,000
November 30, 2001 22,000,000
February 28, 2002 22,000,000
May 31, 2002 22,000,000
August 31, 2002 22,000,000
November 30, 2002 22,000,000
February 28, 2003 22,000,000
May 31, 2003 22,000,000
August 31, 2003 22,000,000
November 30, 2003 22,000,000
February 28, 2004 22,000,000
Tranche A Term
Loan Maturity Date 22,000,000
</TABLE>
(b) The Tranche B Term Loan of each Tranche B Lender shall
mature, and the Company unconditionally promises to pay such Tranche B Term Loan
to the General Administrative Agent for the account of such Tranche B Lender, in
28 consecutive quarterly installments, commencing on August 31, 1998, each of
which shall be in an amount equal to such Lender's Tranche B Term Loan
Percentage multiplied by the amount set forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
August 31, 1998 US$1,375,000
November 30, 1998 1,375,000
February 28, 1999 1,375,000
May 31, 1999 1,375,000
August 31, 1999 1,375,000
November 30, 1999 1,375,000
February 28, 2000 1,375,000
May 31, 2000 1,375,000
August 31, 2000 1,375,000
November 30, 2000 1,375,000
February 28, 2001 1,375,000
May 31, 2001 1,375,000
August 31, 2001 1,375,000
November 30, 2001 1,375,000
February 28, 2002 1,375,000
May 31, 2002 1,375,000
August 31, 2002 1,375,000
November 30, 2002 1,375,000
February 28, 2003 1,375,000
May 31, 2003 1,375,000
</TABLE>
<PAGE> 43
37
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
August 31, 2003 1,375,000
November 30, 2003 1,375,000
February 28, 2004 1,375,000
May 31, 2004 1,375,000
August 31, 2004 129,250,000
November 30, 2004 129,250,000
February 28, 2005 129,250,000
Tranche B Term Loan Maturity Date 129,250,000
</TABLE>
(c) The Tranche C Term Loan of each Tranche C Lender shall
mature, and the Company unconditionally promises to pay such Tranche C Term Loan
to the General Administrative Agent for the account of such Tranche C Lender, in
32 consecutive quarterly installments, commencing on August 31, 1998, each of
which shall be in an amount equal to such Lender's Tranche C Term Loan
Percentage multiplied by the amount set forth below opposite such installment:
<PAGE> 44
38
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
August 31, 1998 US$1,375,000
November 30, 1998 1,375,000
February 28, 1999 1,375,000
May 31, 1999 1,375,000
August 31, 1999 1,375,000
November 30, 1999 1,375,000
February 28, 2000 1,375,000
May 31, 2000 1,375,000
August 31, 2000 1,375,000
November 30, 2000 1,375,000
February 28, 2001 1,375,000
May 31, 2001 1,375,000
August 31, 2001 1,375,000
November 30, 2001 1,375,000
February 28, 2002 1,375,000
May 31, 2002 1,375,000
August 31, 2002 1,375,000
November 30, 2002 1,375,000
February 28, 2003 1,375,000
May 31, 2003 1,375,000
August 31, 2003 1,375,000
November 30, 2003 1,375,000
February 28, 2004 1,375,000
May 31, 2004 1,375,000
August 31, 2004 1,375,000
November 30, 2004 1,375,000
February 28, 2005 1,375,000
May 31, 2005 1,375,000
August 31, 2005 127,875,000
November 30, 2005 127,875,000
February 28, 2006 127,875,000
Tranche C Term
Loan Maturity Date 127,875,000
</TABLE>
2.4 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Company from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount such that, after giving effect thereto, the aggregate outstanding
principal amount of such Lender's Revolving Credit Loans will not exceed the
lesser of (i) such Lender's Revolving Credit Commitment less such Lender's
Revolving Credit Percentage of the L/C Obligations then outstanding, and (ii)
such Lender's Revolving Credit Percentage of $300,000,000. During the Revolving
Credit Commitment Period the Company may use the Revolving Credit Commitments by
borrowing, prepaying the
<PAGE> 45
39
Revolving Credit Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof. The Revolving Credit Loans may from time
to time be LIBOR Loans or Base Rate Loans, as determined by the Company and
notified to the General Administrative Agent in accordance with Sections 2.5 and
6.4, provided that no Revolving Credit Loan shall be made as a LIBOR Loan after
the day that is one month prior to the Revolving Credit Termination Date.
(b) The Company unconditionally promises to pay to the General
Administrative Agent for the account of the Revolving Credit Lenders all
outstanding Revolving Credit Loans on the Revolving Credit Termination Date.
2.5 Procedure for Revolving Credit Borrowing. The Company may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Company shall give the
General Administrative Agent irrevocable written notice (which notice must be
received by the General Administrative Agent prior to 12:00 Noon, New York City
time, (a) three Business Days prior to the requested Borrowing Date, in the case
of LIBOR Loans, or (b) one Business Day prior to the requested Borrowing Date,
in the case of Base Rate Loans), specifying (i) the amount and Type of Revolving
Credit Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the
case of LIBOR Loans, the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Periods therefor. Each borrowing
under the Revolving Credit Commitments shall be in an amount equal to (x) in the
case of Base Rate Loans, $1,000,000 or a multiple of $500,000 in excess thereof
(or, if the then aggregate Available Revolving Credit Commitments are less than
$1,000,000, such lesser amount) and (y) in the case of LIBOR Loans, $5,000,000
or a whole multiple of $1,000,000 in excess thereof. Upon receipt of any such
notice from the Company, the General Administrative Agent shall promptly notify
each Revolving Credit Lender thereof. Each Revolving Credit Lender will make the
amount of its pro rata share of each borrowing available to the General
Administrative Agent for the account of the Company at the office of the General
Administrative Agent specified in Section 14.2 prior to 12:00 Noon, New York
City time, on the Borrowing Date requested by the Company in funds immediately
available to the General Administrative Agent. Such borrowing will then be made
available to the Company by the General Administrative Agent crediting the
account of the Company at the office of The Toronto-Dominion Bank at 909 Fannin
Street, Suite 1700, Houston, TX 77010 with the aggregate of the amounts made
available to the General Administrative Agent by the Revolving Credit Lenders
and in like funds as received by the General Administrative Agent.
2.6 Termination or Reduction of Revolving Credit Commitments.
The Company shall have the right, upon not less than three Business Days'
irrevocable written notice to the General Administrative Agent, to terminate the
Revolving Credit Commitments or, from time to time, to reduce the amount of the
Revolving Credit Commitments without premium or penalty; provided that no such
termination or reduction of Revolving Credit Commitments shall be permitted if,
after giving effect thereto and to any prepayments of the Revolving Credit Loans
made on the effective date thereof, the Total Revolving Extensions of
<PAGE> 46
40
Credit would exceed the Revolving Credit Commitments then in effect. Any such
reduction shall be in an amount equal to $5,000,000, or a whole multiple of
$1,000,000 in excess thereof, and shall reduce permanently the Revolving Credit
Commitments then in effect.
2.7 Evidence of Debt. (a) Each U.S. Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of the Company to such Lender resulting from each U.S. Loan of such
Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time under this Agreement.
(b) The General Administrative Agent shall maintain the
Register pursuant to Section 14.6(d), and a subaccount therein for each U.S.
Lender, in which shall be recorded (i) the amount of each Revolving Credit Loan
and U.S. Term Loan made hereunder, the Type thereof and each Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Company to each U.S. Lender hereunder and
(iii) both the amount of any sum received by the General Administrative Agent
hereunder from the Company and each Lender's share thereof.
(c) The entries made in the Register and the accounts of each
U.S. Lender maintained pursuant to Section 2.7(a) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Company therein recorded; provided, however, that the failure
of any Lender or the General Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Company to repay (with applicable interest) the U.S. Loans
made to the Company by such U.S. Lender in accordance with the terms of this
Agreement.
(d) The Company agrees that, upon the request to the General
Administrative Agent by any U.S. Lender, the Company will execute and deliver to
such Lender (i) a promissory note of the Company evidencing the Revolving Credit
Loans of such Lender, substantially in the form of Exhibit C with appropriate
insertions as to date and principal amount (a "Revolving Credit Note"), and/or
(ii) a promissory note of the Company evidencing the Tranche A Term Loans,
Tranche B Term Loan or Tranche C Term Loan, as the case may be, of such Lender,
substantially in the form of Exhibit D with appropriate insertions as to date
and principal amount (a "U.S. Term Note").
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Pursuant to the Existing Credit
Agreement, the Issuing Lenders specified on Schedule 1.1C have issued the
letters of credit described on Schedule 1.1C (the "Existing Letters of Credit"),
which from and after the Closing Date shall continue to be "Letters of Credit"
hereunder. Subject to the terms and conditions hereof, each Issuing Lender, in
reliance on the agreements of the other Revolving Credit Lenders set forth in
Section 3.4(a), agrees to issue letters of credit (together with the Existing
Letters of Credit,
<PAGE> 47
41
the "Letters of Credit") for the account of the Company on any Business Day
during the Revolving Credit Commitment Period in such form as may be approved
from time to time by such Issuing Lender; provided that (i) no Issuing Lender
shall issue any Letter of Credit if, after giving effect to such issuance, the
L/C Obligations would exceed the L/C Commitment or the Total Revolving
Extensions of Credit would exceed the Revolving Credit Commitments of all
Lenders and (ii) no Issuing Lender shall issue any Letter of Credit unless it
shall have received notice from the General Administrative Agent that the
issuance of such Letter of Credit will not violate the foregoing clause (i) of
this proviso. Each Letter of Credit shall (i) be denominated in U.S. Dollars and
(ii) expire no later than the earlier of (x) the first anniversary of its date
of issuance and (y) the date which is five Business Days prior to the Revolving
Credit Termination Date, provided that any Letter of Credit with a one-year term
may provide for the renewal thereof for additional one-year periods (which shall
in no event extend beyond the date referred to in the foregoing clause (y) of
this proviso).
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
3.2 Procedure for Issuance of Letter of Credit. The Company
may from time to time request that an Issuing Lender issue a Letter of Credit by
delivering to such Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of such Issuing Lender, and
such other certificates, documents and other papers and information as such
Issuing Lender may request. Upon receipt of any Application, each Issuing Lender
agrees to process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall promptly issue the Letter of Credit
requested thereby (but in no event shall such Issuing Lender be required to
issue any Letter of Credit earlier than three Business Days after its receipt of
the Application therefor and all such other certificates, documents and other
papers and information relating thereto) by issuing the original of such Letter
of Credit to the beneficiary thereof or as otherwise may be agreed to by such
Issuing Lender and the Company. Each Issuing Lender shall furnish a copy of each
Letter of Credit by it hereunder to the Company promptly following the issuance
thereof. Each Issuing Lender shall promptly furnish to the General
Administrative Agent, which shall in turn promptly furnish to the Revolving
Credit Lenders, notice of the issuance of each Letter of Credit (including the
amount thereof).
3.3 Commissions, Fees and Other Charges. (a) The Company shall
pay to the General Administrative Agent, for the account of the Revolving Credit
Lenders, a letter of credit commission with respect to each Letter of Credit
outstanding under this Agreement for the period from the Issuance Date of such
Letter of Credit (or, in the case of the Existing Letters of Credit, from the
Closing Date) to the expiration or termination of such Letter of Credit,
computed at a per annum rate equal to (i) the Applicable Margin then in effect
with respect to LIBOR Loans under the Revolving Credit Facility less (ii) 1/4 of
1% (the fronting fee referred to in paragraph (b) below) on the average
aggregate amount available to be drawn under such Letter of Credit during the
period for which such fee is calculated. Such
<PAGE> 48
42
commission shall be shared ratably among the Revolving Credit Lenders and
payable quarterly in arrears on each L/C Fee Payment Date to occur after the
respective Issuance Date (or the Closing Date, as the case may be) and on the
Revolving Credit Termination Date and shall be nonrefundable.
(b) The Company shall pay to the relevant Issuing Lender with
respect to each Letter of Credit issued by such Issuing Lender under this
Agreement, for its own account, a fronting fee with respect to the period from
the Issuance Date of such Letter of Credit to the expiration or termination date
of such Letter of Credit, computed at a rate of 1/4 of 1% per annum on the
average aggregate amount available to be drawn under such Letter of Credit
during the period for which such fee is calculated. Such fronting fee shall be
payable in arrears on each L/C Fee Payment Date to occur after the Issuance Date
(or the Closing Date, as the case may be) and on the Revolving Credit
Termination Date and shall be nonrefundable.
(c) In addition to the foregoing fees and commissions, the
Company shall pay or reimburse each Issuing Lender for such normal and customary
costs and expenses as are incurred or charged by such Issuing Lender in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
3.4 L/C Participations. (a) Effective on the Closing Date, in
respect of each Existing Letter of Credit, and effective on the Issuance Date,
in respect of each Letter of Credit issued after the Closing Date, each Issuing
Lender irrevocably agrees to grant and hereby grants to each L/C Participant
(other than such Issuing Lender), and, to induce such Issuing Lender to issue
Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept
and purchase and hereby accepts and purchases from such Issuing Lender, on the
terms and conditions hereinafter stated, for such L/C Participant's own account
an undivided interest equal to such L/C Participant's Revolving Credit
Percentage in such Issuing Lender's obligations and rights under each Letter of
Credit issued hereunder and the amount of each draft paid by such Issuing Lender
thereunder. Each L/C Participant unconditionally and irrevocably agrees with
each Issuing Lender that, if a draft is paid under any Letter of Credit for
which such Issuing Lender is not reimbursed in full by the Company in accordance
with the terms of this Agreement, such L/C Participant shall pay to such Issuing
Lender upon demand at such Issuing Lender's address for notices specified herein
an amount equal to such L/C Participant's Revolving Credit Percentage of the
amount of such draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to any Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed
portion of any payment made by such Issuing Lender under any Letter of Credit
issued by such Issuing Lender is not paid when due but is paid within three
Business Days after the date such payment is due, such L/C Participant shall pay
to such Issuing Lender on demand an amount equal to the product of (i) such
amount, times (ii) the daily average Federal Funds Effective Rate during the
period from and including the date such payment is required to the date on which
such payment is immediately available to such Issuing Lender, times (iii) a
fraction the numerator of which is
<PAGE> 49
43
the number of days that elapse during such period and the denominator of which
is 360. If any such amount required to be paid by any L/C Participant pursuant
to Section 3.4(a) is not made available to any Issuing Lender by such L/C
Participant within three Business Days after the date such payment is due, such
Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to Base Rate Loans under the Revolving Credit
Facility. A certificate of any Issuing Lender submitted to any L/C Participant
with respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error.
(c) Whenever, at any time after any Issuing Lender has made
payment under any Letter of Credit issued by such Issuing Lender and has
received from any L/C Participant its pro rata share of such payment in
accordance with Section 3.4(a), such Issuing Lender receives any payment related
to such Letter of Credit (whether directly from the Company or otherwise,
including proceeds of collateral applied thereto by such Issuing Lender, but
excluding payments from L/C Participants), or any payment of interest on account
thereof, such Issuing Lender will distribute to such L/C Participant its pro
rata share thereof; provided, however, that in the event that any such payment
received by such Issuing Lender shall be required to be returned by such Issuing
Lender, such L/C Participant shall return to such Issuing Lender the portion
thereof previously distributed by such Issuing Lender to it.
3.5 Reimbursement Obligation of the Company. If any draft
shall be presented for payment under any Letter of Credit issued by any Issuing
Lender, such Issuing Lender shall promptly notify the Company of the date and
amount thereof. If any Issuing Lender notifies the Company prior to 10:00 a.m.,
New York City time, on any Business Day, of any drawing under any Letter of
Credit issued by it, the Company shall reimburse such Issuing Lender with
respect to such drawing on the next succeeding Business Day. If any Issuing
Lender notifies the Company after 10:00 a.m., New York City time, on any
Business Day of any drawing under any Letter of Credit issued by it, the Company
shall reimburse such Issuing Lender with respect to such drawing on the second
succeeding Business Day. Interest shall be payable on any and all amounts drawn
under Letters of Credit from the date of such drawing until the date on which
reimbursement of such amount is due pursuant to the two immediately preceding
sentences at the interest rate then applicable to Base Rate Loans made under the
Revolving Credit Facility. In addition, the Company agrees to reimburse each
Issuing Lender for any taxes, fees, charges or other costs or expenses incurred
by such Issuing Lender in connection with any payment under any Letter of Credit
issued by such Issuing Lender. Each payment by the Company pursuant to this
Section 3.5 shall be made to the relevant Issuing Lender at its address for
notices specified herein in U.S. Dollars and in immediately available funds.
3.6 Obligations Absolute. The Company's obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Company may have or have had against any Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Company also agrees with each Issuing
Lender that such Issuing Lender shall not be responsible for, and
<PAGE> 50
44
the Company's Reimbursement Obligations under Section 3.5 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Company and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Company against any
beneficiary of such Letter of Credit or any such transferee. No Issuing Lender
shall be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors or omissions found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Issuing Lender.
The Company agrees that any action taken or omitted by any Issuing Lender under
or in connection with any Letter of Credit or the related drafts or documents,
if done in the absence of gross negligence or willful misconduct and in
accordance with the standards of care specified in the Uniform Commercial Code
of the State of New York, shall be binding on the Company and shall not result
in any liability of such Issuing Lender to the Company.
3.7 Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit issued by any Issuing Lender, such
Issuing Lender shall promptly notify the Company of the date and amount thereof.
The responsibility of each Issuing Lender to the Company in connection with any
draft presented for payment under any Letter of Credit shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are substantially in
conformity with such Letter of Credit.
3.8 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3 or any other provision of this Agreement, the provisions of
this Section 3 or such other provisions of this Agreement shall apply.
SECTION 4. AMOUNT AND TERMS OF THE CANADIAN TERM LOAN
COMMITMENTS
4.1 Canadian Term Loan Commitments. (a) Subject to the terms
and conditions hereof, each Canadian Lender severally agrees to make term loans
(each, a "Canadian Term Loan") in Canadian Dollars to the Canadian Borrower on
the Closing Date in an aggregate principal amount not exceeding the Canadian
Term Loan Commitment of such Canadian Lender; provided, that after giving effect
to such Canadian Term Loans, the Total Aggregate Canadian Term Loan Outstandings
shall not exceed the Canadian Facility Maximum Amount.
<PAGE> 51
45
(b) Subject to the terms and conditions hereof, each Canadian
Lender severally agrees from time to time during the Canadian Facility
Commitment Period to convert maturing Acceptances created by it into Canadian
Term Loans in a principal amount not to exceed the face amount of such maturing
Acceptances; provided, that no such conversion shall occur if, after giving
effect thereto, the Total Aggregate Canadian Term Loan Outstandings would exceed
the Canadian Facility Maximum Amount at such time.
4.2 Procedure for Canadian Term Loan Borrowing. The Canadian
Borrower shall give the Canadian Administrative Agent irrevocable written notice
(which notice must be received by the Canadian Administrative Agent prior to
10:00 a.m., Toronto time, at least two Business Days prior to the requested
Borrowing Date) requesting that the Canadian Term Loan Lenders make Canadian
Term Loans (or convert Acceptances into Canadian Term Loans) on a specified
Borrowing Date and specifying the amount to be borrowed or converted. Upon
receipt of such notice, the Canadian Administrative Agent shall promptly notify
each Canadian Lender thereof. In the case of any Canadian Term Loans other than
Canadian Term Loans resulting from the conversion of Acceptances pursuant to
Section 4.1(b), not later than 11:00 a.m., Toronto time, on the Borrowing Date
therefor, each Canadian Term Loan Lender shall make available to the Canadian
Administrative Agent at its office specified in Section 14.2 an amount in
Canadian Dollars in immediately available funds equal to the Canadian Term Loan
to be made by such Canadian Lender on such Borrowing Date. The Canadian
Administrative Agent shall on such date credit the account of the Canadian
Borrower at the office of The Toronto-Dominion Bank at Toronto Dominion Centre
Branch, 55 King Street West and Bay Street, Toronto, Ontario M5K 1A2 with the
aggregate of the amounts made available to the Canadian Administrative Agent by
the Canadian Lenders in like funds as received by the Canadian Administrative
Agent. In the case of any Canadian Term Loans resulting from the conversion of
Acceptances pursuant to Section 4.1(b), the proceeds of such Canadian Term Loans
made by each Canadian Lender, together with such additional funds of the
Canadian Borrower as may be necessary, shall be applied by it to repay the
maturing Acceptance being converted into such Canadian Term Loans.
4.3 Reduction of Canadian Facility; Repayment of Canadian Term
Loans. (a) The amount available under the Canadian Term Loans and the
Acceptances and Acceptance Notes shall be permanently reduced in 24 consecutive
quarterly installments, commencing on August 31, 1998, each of which shall be in
an amount equal to the equivalent in Canadian Dollars (determined in accordance
with Section 4.3(b)) of the amount set forth below opposite such installment
date (each, a "Canadian Facility Amortization Date"):
<PAGE> 52
46
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
August 31, 1998 US$2,750,000
November 30, 1998 2,750,000
February 28, 1999 2,750,000
May 31, 1999 2,750,000
August 31, 1999 2,750,000
November 30, 1999 2,750,000
February 28, 2000 2,750,000
May 31, 2000 2,750,000
August 31, 2000 3,000,000
November 30, 2000 3,000,000
February 28, 2001 3,000,000
May 31, 2001 3,000,000
August 31, 2001 3,000,000
November 30, 2001 3,000,000
February 28, 2002 3,000,000
May 31, 2002 3,000,000
August 31, 2002 3,000,000
November 30, 2002 3,000,000
February 28, 2003 3,000,000
May 31, 2003 3,000,000
August 31, 2003 3,000,000
November 30, 2003 3,000,000
February 28, 2004 3,000,000
Canadian Facility
Termination Date 3,000,000
</TABLE>
Accordingly, on each Canadian Facility Amortization Date, the
Canadian Borrower unconditionally agrees to pay to the Canadian Administrative
Agent, for the account of each Canadian Lender, a principal amount of the
Canadian Term Loans of such Canadian Lender, which, together with the face
amount of Acceptances created by such Canadian Lender that mature and are being
repaid on such date (and not replaced with other Acceptances or converted into
Canadian Term Loans), is equal to such Canadian Lender's Canadian Term Loan
Commitment Percentage of the amount set forth opposite such Canadian Facility
Amortization Date above.
<PAGE> 53
47
(b) Not later than three Business Days prior to the Closing
Date, the Canadian Administrative Agent and the Canadian Borrower will
determine, based on then-prevailing market conditions, the exchange rate for
conversion into Canadian Dollars of the U.S. Dollar amount of the Canadian Term
Loan Commitments and the U.S. Dollar amount of each installment set forth in
Section 4.3(a), which determination shall be conclusive and binding on all
parties hereto. The Canadian Administrative Agent will advise the Canadian
Lenders of the results of such determination, and specify the amount in Canadian
Dollars of each Canadian Lender's Canadian Term Loan Commitment, prior to or
concurrently with the notice of borrowing given to the Canadian Lenders pursuant
to Section 4.2.
4.4 Evidence of Debt. (a) Each Canadian Lender shall maintain
in accordance with its usual practice an account or accounts evidencing
indebtedness of the Canadian Borrower to such Canadian Lender resulting from the
Canadian Term Loans of such Canadian Lender, including the amounts of principal
and interest payable thereon and paid to such Canadian Lender from time to time
under this Agreement.
(b) The Canadian Administrative Agent (and the General
Administrative Agent) shall maintain the Register pursuant to Section 14.6(d),
and a subaccount therein for each Canadian Lender, in which shall be recorded
(i) the amount of each Canadian Term Loan made hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Canadian Borrower to each Canadian Lender hereunder in respect of the Canadian
Term Loans and (iii) both the amount of any sum received by the Canadian
Administrative Agent hereunder from the Canadian Borrower in respect of the
Canadian Term Loans and each Canadian Lender's share thereof.
(c) The entries made in the Register and the accounts of each
Canadian Lender maintained pursuant to Section 4.4(a) shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Canadian Borrower therein recorded; provided,
however, that the failure of any Canadian Lender or the Canadian Administrative
Agent to maintain the Register or any such account, or any error therein, shall
not in any manner affect the obligation of the Canadian Borrower to repay (with
applicable interest) the Canadian Term Loans made to the Canadian Borrower by
such Canadian Lender in accordance with the terms of this Agreement.
(d) The Canadian Borrower agrees that, upon request to the
Canadian Administrative Agent by any Canadian Lender, it will execute and
deliver to such Canadian Lender a promissory note of the Canadian Borrower
evidencing the Canadian Term Loans of such Canadian Lender, substantially in the
form of Exhibit E with appropriate insertions as to date and principal amount
(each, a "Canadian Term Loan Note").
<PAGE> 54
48
SECTION 5. AMOUNT AND TERMS OF THE ACCEPTANCES
5.1 Acceptance Commitments. (a) Pursuant to the Existing
Credit Agreement, the Canadian Lenders (as defined under the Existing Credit
Agreement, the "Existing Acceptance Lenders") have created (i) the Acceptances
described on Schedule 1.1D (the "Existing Acceptances"), which from and after
the Closing Date shall continue to be "Acceptances" hereunder and (ii) the
Acceptances described on Schedule 1.1E (the "Specified Acceptances"), which will
be repaid in full on the Closing Date . As of the Closing Date, The
Toronto-Dominion Bank, as a Canadian Lender, shall have entered into an
indemnity agreement with the Existing Acceptance Lenders with respect to amounts
to be paid to the Existing Acceptance Lenders in respect of the Existing
Acceptances and, as of the Closing Date, The Toronto-Dominion Bank shall be
deemed to have created all of the Existing Acceptances. In the event that any
Acceptances are outstanding on the date on which any Canadian Lender other than
The Toronto-Dominion Bank becomes a party to this Agreement, such Canadian
Lender shall enter into an indemnity agreement with The Toronto-Dominion Bank
with respect to such Existing Acceptances, in form and substance satisfactory to
such Canadian Lender and The Toronto-Dominion Bank.
(b) Subject to the terms and conditions hereof, each Canadian
Lender severally agrees during the Canadian Facility Commitment Period to
convert Canadian Term Loans made by such Canadian Lender to Acceptances in an
aggregate face amount not to exceed the aggregate principal amount of such
Canadian Term Loans; provided, that no such conversion shall occur if, (i) after
giving effect to such conversion and to the repayment of any portion of maturing
Acceptances not being so converted, the Total Aggregate Canadian Term Loan
Outstandings would exceed the Canadian Facility Maximum Amount at such time or
(ii) prior to the maturity of such Acceptances a Canadian Facility Amortization
Date will occur and, after giving effect to the reduction in the Canadian
Facility Maximum Amount on such date, the Total Aggregate Canadian Term Loan
Outstandings will exceed the Canadian Facility Maximum Amount. Notwithstanding
the foregoing, during the period prior to completion of the Syndication of the
Facilities, the Canadian Borrower will consult with the Canadian Administrative
Agent with respect to any request for Acceptances, and during such period no
Acceptance will be created having a maturity later than the date on which the
syndication of the Facilities is expected to be completed.
5.2 Creation of Acceptances. (a) The Canadian Borrower may
request the creation of Acceptances hereunder by submitting to the Canadian
Administrative Agent at its office in Canada specified in Section 14.2 prior to
11:00 a.m., Toronto time, two Business Days prior to the requested Borrowing
Date, (i) a request for acceptances, substantially in the form of Exhibit A-2
(each, a "Request for Acceptances") completed in a manner and in form and
substance reasonably satisfactory to the Canadian Administrative Agent and
specifying, among other things, the Borrowing Date, term in months and amount of
the Drafts to be accepted and discounted, and (ii) such other certificates,
documents and other papers and information as the Canadian Administrative Agent
may reasonably request. Upon receipt of any such Request for Acceptances, the
Canadian Administrative Agent shall promptly notify
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49
each Canadian Lender of details thereof, including each Canadian Lender's share
of the amount of Drafts to be accepted and discounted.
(b) The Canadian Borrower hereby irrevocably authorizes each
Canadian Lender to draw Drafts on such Canadian Lender, in the name of and on
behalf of the Canadian Borrower, and to complete such Drafts in accordance with
the Requests for Acceptances submitted from time to time pursuant to Section
5.2(a). Drafts so completed and signed on behalf of the Canadian Borrower by any
Canadian Lender shall bind the Canadian Borrower as fully and effectively as if
so performed by an authorized officer of the Canadian Borrower. Any executed
Drafts which are held by any Canadian Lender need only be held in safekeeping
with the same degree of care as if they were such Canadian Lender's own property
and such Canadian Lender was keeping them at the place at which they are to be
held. The Canadian Borrower shall, by written notice to the Canadian
Administrative Agent, designate the persons authorized to sign Requests for
Acceptance. Neither the Canadian Administrative Agent nor any Canadian Lender
nor any of their respective directors, officers, employees or representatives
shall be liable for any action taken or omitted to be taken by any of them under
this Section 5 except for its own gross negligence or willful misconduct.
(c) Each Request for Acceptances made by or on behalf of the
Canadian Borrower hereunder shall contain a request for Acceptances denominated
in Canadian Dollars and having an aggregate undiscounted face amount equal to
C$5,000,000 or a whole multiple of C$1,000,000 in excess thereof. Each
Acceptance shall be dated the Borrowing Date specified in the Request for
Acceptances with respect thereto and shall be stated to mature on a Business Day
which is not less than one month and not more than six months after the date
thereof; provided, that no Acceptance shall mature after the Canadian Facility
Termination Date.
(d) Not later than 12:00 noon, Toronto time, on the Borrowing
Date specified in the relevant Request for Acceptances, each Canadian Lender
will, in accordance with such Request for Acceptances, (i) sign each Draft on
behalf of the Canadian Borrower pursuant to Section 5.3(b), (ii) complete the
date, amount and maturity of each Draft to be accepted, (iii) accept such Drafts
and give notice to the Canadian Administrative Agent of such acceptance and (iv)
upon such acceptance, purchase such Acceptances to the extent contemplated by
Section 5.3.
5.3 Purchase of Acceptances. (a) Each Canadian Lender hereby
agrees, on the terms and subject to the conditions set forth in this Agreement,
to purchase Acceptances created by it on the Borrowing Date with respect thereto
for the applicable Acceptance Purchase Price and to notify the Canadian
Administrative Agent that such Draft has been accepted and purchased by such
accepting Canadian Lender.
(b) In the event that the Canadian Administrative Agent
receives a Request for Acceptances to be created upon conversion of Canadian
Term Loans pursuant to Section 5.1, then the Canadian Borrower shall pay on the
requested Borrowing Date to the Canadian
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50
Administrative Agent, for the account of the Canadian Lenders, the principal
amount of the then outstanding Canadian Term Loans being so converted, and each
Canadian Lender shall accept and purchase the Canadian Borrower's Drafts having
an aggregate face amount not greater than the principal amount of the Canadian
Term Loans of such Canadian Lender which are then being converted (it being
understood and agreed that for the purposes of this Section 5.3(b), such payment
by the Canadian Borrower of such outstanding Canadian Term Loans may be in part
from the Acceptance Purchase Price of such Drafts); provided that, following the
occurrence and during the continuance of a Default or an Event of Default, no
Acceptances may be created.
(c) Acceptances purchased by any Canadian Lender may be held
by it for its own account until maturity or sold by it at any time prior thereto
in the relevant market therefor in Canada in such Canadian Lender's sole
discretion.
5.4 Stamping Fees. On the Borrowing Date with respect to each
Acceptance, the Canadian Borrower shall pay to the Canadian Administrative
Agent, for the account of the Canadian Lenders, a stamping fee on the
undiscounted face amount of such Acceptance, computed at the rate per annum in
effect on such Borrowing Date (determined in accordance with the Pricing Grid)
for the period from and including the Borrowing Date with respect to such
Acceptance to but not including the maturity of such Acceptance. On the Closing
Date, in consideration of the obligations undertaken by The Toronto-Dominion
Bank pursuant to the indemnity agreement entered into pursuant to the second
sentence of Section 5.1(a), the Canadian Borrower agrees to pay to The
Toronto-Dominion Bank an amount in respect of each Existing Acceptance equal to
(i) the amount of stamping fee that would have been payable under this Section
in respect of such Existing Acceptance if such Existing Acceptance had been
created on the Closing Date with the maturity date set forth in such Existing
Acceptance less (ii) the amount received or to be received by The
Toronto-Dominion Bank from the relevant Existing Acceptance Lender in respect of
such Existing Acceptance pursuant to the provisions of such indemnity agreement.
5.5 Acceptance Reimbursement Obligations. (a) The Canadian
Borrower hereby unconditionally agrees to pay to the Canadian Administrative
Agent for the account of each Canadian Lender, on the maturity date (whether at
stated maturity, by acceleration or otherwise) for each Acceptance created by
such Canadian Lender, the aggregate undiscounted face amount of each such
then-maturing Acceptance. Without limiting the generality of the foregoing, the
Canadian Borrower hereby unconditionally agrees to pay to the Canadian
Administrative Agent for the account of The Toronto-Dominion Bank (and each
other Canadian Lender which has an interest therein pursuant to an indemnity
agreement entered into pursuant to the last sentence of Section 5.1(a)) on the
maturity date (whether at stated maturity, by acceleration or otherwise) for
each Existing Acceptance, the aggregate undiscounted face amount of each such
then-maturing Existing Acceptance.
(b) The obligation of the Canadian Borrower to reimburse the
Canadian Lenders for then-maturing Acceptances may be satisfied by the Canadian
Borrower by:
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(i) paying to the Canadian Administrative Agent, for the
account of the Canadian Lenders, an amount in Canadian Dollars and in
immediately available funds equal to the aggregate undiscounted face
amount of all Acceptances which are then maturing by 12:00 noon,
Toronto time, on such maturity date; provided that the Canadian
Borrower shall have given not less than two Business Days' prior notice
to the Canadian Administrative Agent (which shall promptly notify each
Canadian Lender thereof) of its intent to reimburse the Canadian
Lenders in the manner contemplated by this clause (i); or
(ii) having new Drafts accepted and purchased by the
Canadian Lenders in the manner contemplated by Sections 5.2 and 5.3 in
substitution for the then-maturing Acceptances; provided that (A) the
Canadian Borrower shall have delivered to the Canadian Administrative
Agent (which shall promptly provide a copy thereof to each Canadian
Lender) a duly completed Request for Acceptances not later than 11:00
a.m., Toronto time, two Business Days prior to such maturity date,
together with the documents, instruments, certificates and other papers
and information contemplated by Sections 5.2(a)(ii) and 5.2(a)(iii),
(B) each Canadian Lender shall retain the Acceptance Purchase Price for
the Acceptance created by it and apply such Acceptance Purchase Price
to the Acceptance Reimbursement Obligations of the Canadian Borrower in
respect of the maturing Acceptance created by such Canadian Lender, (C)
when the Acceptance Purchase Price so retained by such Canadian Lender
is less than the undiscounted face amount of the then-maturing
Acceptance, the Canadian Borrower shall have made arrangements
reasonably satisfactory to such Canadian Lender for payment of such
deficiency, (D) if any Default or Event of Default has occurred and is
then continuing, the Request for Acceptances shall be deemed to be a
request to convert such then-maturing Acceptances into Canadian Term
Loans in an aggregate amount equal to the undiscounted face amount of
the Acceptances requested, (E) no such Acceptance shall be created if,
after giving effect thereto, the Aggregate Canadian Term Loan
Outstandings would exceed the Canadian Facility Maximum Amount and (F)
the Canadian Borrower shall request Acceptances in amounts and with
maturity dates such that the Aggregate Canadian Term Loan Outstandings
can be reduced to an amount not greater than the Canadian Facility
Maximum Amount on each Canadian Facility Amortization Date; or
(iii) to the extent that the Canadian Borrower has not
given to the Canadian Administrative Agent a notice contemplated by
clause (i) or (ii) above, then the Canadian Borrower shall be deemed to
have requested a conversion pursuant to Section 4.1(b) of such
then-maturing Acceptances into Canadian Term Loans in an aggregate
principal amount equal to the undiscounted face amount of such
then-maturing Acceptances. The Borrowing Date with respect to such
conversion shall be the maturity date for such Acceptances. Except to
the extent that any of the events contemplated by clause (i) or (ii) of
paragraph (f) of Section 11 with respect to the Canadian Borrower has
occurred and is then continuing (in which case the Canadian Borrower
shall be obligated to pay to each Canadian Lender the undiscounted face
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52
amount of the Acceptances created by such Canadian Lender which are
then maturing), each Canadian Lender shall convert the then-maturing
Acceptances into Canadian Term Loans as contemplated by this Section
5.5(b)(iii) regardless of whether the conditions precedent to borrowing
set forth in this Agreement are then satisfied. The proceeds of any
Canadian Term Loans made pursuant to this Section 5.5(b)(iii) shall be
retained by the Canadian Lenders and applied by them to the Acceptance
Reimbursement Obligations of the Canadian Borrower in respect of the
then-maturing Acceptances.
(c) In no event shall the Canadian Borrower claim from any
Canadian Lender any grace period with respect to the payment at maturity of any
Acceptances created by such Canadian Lender pursuant to this Agreement.
5.6 Acceptances to be Allocated in order to be Created
Ratably. The Canadian Borrower hereby agrees that each Request for Acceptances,
reimbursement of Acceptances and conversion of Canadian Term Loans to
Acceptances shall be made in a manner so that any such Request for Acceptances,
reimbursement or conversion shall apply ratably to all Canadian Lenders in
accordance with their respective Canadian Term Loan Commitment Percentages. In
the event that the aggregate undiscounted face amount of Acceptances requested
by the Canadian Borrower to be created by all Canadian Lenders hereunder
pursuant to any Request for Acceptances is an amount which, if divided ratably
among the Canadian Lenders in accordance with their respective Canadian Term
Loan Commitment Percentages, would not result in each Canadian Lender accepting
a Draft which has an undiscounted face amount equal to C$100,000 or a whole
multiple of C$100,000 in excess thereof, then the Canadian Administrative Agent
is authorized by the Canadian Borrower and the Canadian Lenders to allocate
among the Canadian Lenders the Acceptances to be issued in such manner and
amounts as the Canadian Administrative Agent may, in its sole discretion, acting
reasonably, consider necessary, rounding up or down, so as to ensure that no
Canadian Lender is required to accept a Draft for a fraction of $100,000 and, in
such event, the Canadian Lenders' ratable share with respect to such Acceptances
shall be adjusted accordingly.
5.7 Special Provisions Relating to Acceptance Notes. (a) The
Canadian Borrower and each Canadian Lender hereby acknowledge and agree that
from time to time certain Canadian Lenders may not be authorized to or may, as a
matter of market availability, elect not to accept Drafts, and the Canadian
Borrower and each Canadian Lender agree that any such Canadian Lender may
purchase Acceptance Notes of the Canadian Borrower in accordance with the
provisions of Section 5.7(b) in lieu of creating Acceptances for its account.
(b) In the event that any Canadian Lender described in Section
5.7(a) above is unable to, or elects as a matter of market availability not to,
create Acceptances hereunder, such Canadian Lender shall not create Acceptances
hereunder, but rather, if the Canadian Borrower requests the creation of such
Acceptances, the Canadian Borrower shall deliver to such Canadian Lender
non-interest bearing promissory notes (each, an "Acceptance Note") of the
Canadian Borrower, substantially in the form of Exhibit G, having the same
maturity as
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53
the Acceptances to be created and in an aggregate principal amount equal to the
undiscounted face amount of such Acceptances. Each such Canadian Lender hereby
agrees to purchase Acceptance Notes from the Canadian Borrower at a purchase
price equal to the Acceptance Purchase Price which would have been applicable if
a Draft in the same aggregate face amount as the principal amount of its
Acceptance Notes had been accepted by it (less any stamping fee which would have
been paid pursuant to Section 5.4 if such Lender had created an Acceptance) and
such Acceptance Notes shall be governed by the provisions of this Section 5 as
if they were Acceptances.
SECTION 6. GENERAL PROVISIONS APPLICABLE TO LOANS AND
LETTERS OF CREDIT
6.1 Commitment Fees, etc. (a) The Company agrees to pay to the
General Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the Closing Date to the last
day of the Revolving Credit Commitment Period, computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment of
such Lender during the period for which payment is made, payable quarterly in
arrears on the last day of each February, May, August and November and on the
Revolving Credit Termination Date, commencing on the first of such dates to
occur after the date hereof.
(b) The Company agrees to pay to the General Administrative
Agent for the account of each of the U.S. Term Loan Lenders a commitment fee for
the period from and including the Closing Date to the last day of U.S. Term Loan
Commitment Period, computed at the Commitment Fee Rate on the average daily
amount of the unutilized U.S. Term Loan Commitments of such Lender during such
period, payable quarterly in arrears on the last day of each February, May,
August and November and on the last day of the U.S. Term Loan Commitment Period,
commencing on the first of such dates to occur after the date hereof.
(c) The Company agrees to pay to the General Administrative
Agent and the Arranger the fees in the amounts and on the dates previously
agreed to in writing by the Company and the General Administrative Agent and the
Arranger.
6.2 Optional Prepayments. (a) Subject to the provisions of
Section 6.3(i), the Company may at any time and from time to time prepay the
U.S. Loans, in whole or in part, without premium or penalty, upon at least three
Business Days' irrevocable notice to the General Administrative Agent,
specifying the date and amount of prepayment and whether the prepayment is of
LIBOR Loans or Base Rate Loans, provided, that if a LIBOR Loan is prepaid on any
day other than the last day of the Interest Period applicable thereto, the
Company shall also pay any amounts owing pursuant to Section 6.13. Upon receipt
of any such notice, the General Administrative Agent shall promptly notify each
relevant U.S. Lender thereof. If any such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein, together
with any amounts payable pursuant to Section 6.13 and, except in
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54
the case of Revolving Credit Loans that are Base Rate Loans, accrued interest to
such date on the amount prepaid. Amounts prepaid on account of the U.S. Term
Loans may not be reborrowed. Partial prepayments of U.S. Loans shall be in an
aggregate principal amount of not less than $5,000,000 and whole multiples of
$1,000,000 in excess thereof.
(b) Subject to Section 6.3(i), the amount of each optional
prepayment of the U.S. Term Loans under any Facility shall be applied to reduce
the then remaining installments of the U.S. Term Loans under such Facility, pro
rata based upon the then remaining number of installments thereof, after giving
effect to all prior reductions thereto (i.e., each then remaining installment of
the Tranche A Term Loans, Tranche B Term Loans or Tranche C Term Loans, as the
case may be, shall be reduced by an amount equal to the aggregate amount to be
applied to the Tranche A Term Loans, Tranche B Term Loans or Tranche C Term
Loans, as the case may be, divided by the number of the then remaining
installments for such Tranche A Term Loans, Tranche B Term Loans or Tranche C
Term Loans); provided, that if the amount to be so applied to any installment
would exceed the then remaining amount of such installment, then an amount equal
to such excess shall be applied to the next succeeding installment after giving
effect to all prior reductions thereto (including the amount of prepayments
theretofore allocated pursuant to the preceding portion of this sentence).
(c) The Canadian Borrower may at any time and from time to
time prepay the Canadian Term Loans, in whole or in part, without premium or
penalty, upon at least four Business Days' irrevocable notice to the Canadian
Administrative Agent, specifying the date and amount of prepayment. Upon receipt
of any such notice, the Canadian Administrative Agent shall promptly notify the
General Administrative Agent and each Canadian Lender thereof. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with accrued interest to such date on the
amount prepaid. Amounts prepaid on account of the Canadian Term Loans may not be
reborrowed except as provided in Section 5. Partial prepayments of Canadian Term
Loans shall be in an aggregate principal amount of not less than C$5,000,000 and
whole multiples of C$1,000,000 in excess thereof.
(d) The amount of each optional prepayment of the Canadian
Term Loans shall be applied to reduce the then remaining installments of the
Canadian Term Loans pro rata based upon the then remaining number of
installments thereof, after giving effect to all prior reductions thereto (i.e.,
each then remaining installment of the Canadian Term Loans shall be reduced by
an amount equal to the aggregate amount to be applied to the Canadian Term Loans
divided by the number of the then remaining installments for such Canadian Term
Loans); provided, that if the amount to be so applied to any installment would
exceed the then remaining amount of such installment, then an amount equal to
such excess shall be applied to the next succeeding installment after giving
effect to all prior reductions thereto (including the amount of prepayments
theretofore allocated pursuant to the preceding portion of this sentence).
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6.3 Mandatory Prepayments and Commitment Reductions. (a) If
after the Closing Date any Capital Stock shall be sold or issued by Holdings,
the Company or any of its Subsidiaries (including, without limitation, any sales
pursuant to the exercise of warrants, but excluding (i) any issuance of common
stock in payment of interest under the Seller Note, (ii) any Permitted Employee
Stock Issuances, to the extent the proceeds of such Permitted Employee Stock
Issuances are contributed by Holdings to the Company and (iii) the issuance of
common stock of Holdings as a part of the consideration for the Exchange Offer
and the Merger), an amount equal to 50% of the Net Cash Proceeds thereof shall
be applied within three Business Days after the date of receipt of such Net Cash
Proceeds toward the prepayment of the Term Loans and Acceptances and the
reduction of the Revolving Credit Commitments as set forth in Section 6.3(e).
(b) If after the Closing Date any Indebtedness shall be issued
or incurred by Holdings, the Company or any of its Subsidiaries (excluding any
Indebtedness (other than Indebtedness evidenced by High Yield Notes) incurred in
accordance with Section 10.2 as in effect on the date of this Agreement), an
amount equal to 100% of the Net Cash Proceeds thereof shall be applied within
three Business Days after the date of such issuance or incurrence toward the
prepayment of the Term Loans and the Acceptances and the reduction of the
Revolving Credit Commitments (or, if required by Section 6.3(e), reduction of
the Tranche B-1 Term Loan Commitments and the Tranche C-1 Term Loan Commitments)
as set forth in Section 6.3(e).
(c) If after the Closing Date the Company or any of its
Subsidiaries (other than the Canadian Borrower or any of its Subsidiaries) shall
receive Net Cash Proceeds from any Asset Sale (including, without limitation,
any Net Cash Proceeds from any Dispositions permitted by clauses (e) and (f) of
Section 10.6 to the extent such proceeds exceed $225,000,000 in the aggregate)
or Recovery Event, an amount equal to 100% of such Net Cash Proceeds shall be
applied on such date toward the prepayment of the U.S. Term Loans and the
reduction of the Revolving Credit Commitments as set forth in Section 6.3(f). If
after the Closing Date the Canadian Borrower or any of its Subsidiaries shall
receive Net Cash Proceeds from any Asset Sale or Recovery Event, an amount equal
to 100% of such Net Cash Proceeds shall be applied on such date toward the
prepayment of the Total Aggregate Canadian Term Loan Outstandings and the
permanent reduction of the Canadian Facility Maximum Amount as set forth in
Section 6.3(g). Notwithstanding the foregoing, (i) no such prepayment or
reduction shall be required in respect of Asset Sales for which the Net Cash
Proceeds in any fiscal year aggregate up to (but do not exceed) $5,000,000 (in
the aggregate for the Company and its Subsidiaries, including the Canadian
Borrower and its Subsidiaries) and (ii) no such prepayment or reduction shall be
required in respect of any Asset Sales or any Recovery Event if the Company
delivers a Reinvestment Notice in respect of each such Asset Sale and Recovery
Event; provided, that, on each Reinvestment Prepayment Date, an amount equal to
the Reinvestment Prepayment Amount with respect to the relevant Reinvestment
Event shall be applied toward the prepayments and reductions required by Section
6.3(f) or 6.3(g), as applicable; and provided, further, that no Reinvestment
Notice shall be required in respect of
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Asset Sales for which no prepayment is required pursuant to the foregoing clause
(i) of this sentence.
(d) If, for any fiscal year of Holdings commencing with the
fiscal year ending August 31, 1999, Holdings shall have Excess Cash Flow
(calculated without taking into account the Canadian Borrower and its
Subsidiaries), the Company shall, on the relevant Excess Cash Flow Application
Date, apply 75% of such Excess Cash Flow toward the prepayment of the Term Loans
and the reduction of the Revolving Credit Commitments as set forth in Section
6.3(f). If, for any fiscal year of the Canadian Borrower commencing with the
fiscal year ending August 31, 1999, the Canadian Borrower shall have Excess Cash
Flow, the Canadian Borrower shall, on the relevant Excess Cash Flow Application
Date, apply 75% of such Excess Cash Flow toward the prepayment of the Total
Aggregate Canadian Term Loan Outstandings and the permanent reduction of the
Canadian Facility Maximum Amount as set forth in Section 6.3(g). Each such
prepayment and reduction shall be made on a date (an "Excess Cash Flow
Application Date") no later than five days after the earlier of (i) the date on
which the financial statements of Holdings referred to in Section 9.1(a), for
the fiscal year with respect to which such prepayment is made, are required to
be delivered to the Lenders and (ii) the date such financial statements are
actually delivered. Notwithstanding the foregoing, if for any fiscal year the
Excess Cash Flow of one of the Canadian Borrower or Holdings (calculated without
taking into account the Canadian Borrower and its Subsidiaries), as the case may
be, is a negative number, and the Excess Cash Flow of the other such Person is a
positive number, the amount of the prepayment and reduction required by this
Section 6.3(d) in respect of the Company (if Holdings is the Person having
positive Excess Cash Flow) or the Canadian Borrower (if the Canadian Borrower is
the Person having positive Excess Cash Flow) for such fiscal year shall be
reduced by the amount of the negative Excess Cash Flow of the other such Person
for such fiscal year.
(e) Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to Section 6.3(a) or 6.3(b) shall be
applied, first, to the prepayment of the U.S. Term Loans and Total Aggregate
Canadian Term Loan Outstandings, ratably in accordance with the outstanding
amount of each Facility and, second, to reduce permanently the Revolving Credit
Commitments. Notwithstanding the preceding sentence, any prepayment made
pursuant to Section 6.3(b) with the Net Cash Proceeds of the High Yield Offering
shall be applied, first, to prepay the Tranche B-1 Term Loans and the Tranche
C-1 Term Loans, ratably in accordance with the outstanding amounts thereof (or,
if the High Yield Offering is consummated prior to the Merger Date, such amount
shall be applied to permanently reduce the Tranche B-1 Term Loan Commitments and
the Tranche C-1 Term Loan Commitments) and, second, in accordance with the
preceding sentence. Any such reduction of the Revolving Credit Commitments shall
be accompanied by prepayment of the Revolving Credit Loans to the extent, if
any, that the Total Revolving Extensions of Credit exceed the amount of the
aggregate Revolving Credit Commitments as so reduced, provided that if the
aggregate principal amount of Revolving Credit Loans then outstanding is less
than the amount of such excess (because L/C Obligations constitute a portion
thereof), the Company shall not be required to reduce any outstanding Letters of
Credit. The application of any such prepayment
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of U.S. Term Loans shall be made first to Base Rate Loans and second to LIBOR
Loans. The application of any such prepayment to Total Aggregate Canadian Term
Loan Outstandings shall be made first to Canadian Term Loans and second (but
only on the maturity date thereof) to Acceptances. Each such prepayment of the
Loans (except in the case of Revolving Credit Loans that are Base Rate Loans)
shall be accompanied by accrued interest to the date of such prepayment on the
amount prepaid.
(f) Amounts to be applied in connection with prepayments and
reductions made pursuant to Section 6.2(c), the first sentence of Section 6.3(c)
or the first sentence of Section 6.3(d) shall be applied, first, to the
prepayment of the U.S. Term Loans, ratably in accordance with the respective
outstanding amounts of the Facilities, and, second, to reduce permanently the
Revolving Credit Commitments. Any such reduction of the Revolving Credit
Commitments shall be accompanied by prepayment of the Revolving Credit Loans to
the extent, if any, that the Total Revolving Extensions of Credit exceed the
amount of the aggregate Revolving Credit Commitments as so reduced, provided
that if the aggregate principal amount of Revolving Credit Loans then
outstanding is less than the amount of such excess (because L/C Obligations
constitute a portion thereof), the Company shall not be required to reduce any
outstanding Letters of Credit. The application of any such prepayment of U.S.
Term Loans shall be made first to Base Rate Loans and second to LIBOR Loans.
Each such prepayment of the Loans (except in the case of Revolving Credit Loans
that are Base Rate Loans) shall be accompanied by accrued interest to the date
of such prepayment on the amount prepaid.
(g) Amounts to be applied in connection with prepayments and
reductions made pursuant to Section 6.2(c), the second sentence of Section
6.3(c) or the second sentence of Section 6.3(d) shall be applied to the
reduction of the Total Aggregate Canadian Term Loan Outstandings and the
simultaneous and automatic reduction in an equal amount of the Canadian Facility
Maximum Amount. The application of any such prepayment to Total Aggregate
Canadian Term Loan Outstandings shall be made first to Canadian Term Loans and
second (but only on the maturity date thereof) to Acceptances. Each such
prepayment of the Canadian Term Loans shall be accompanied by accrued interest
to the date of such prepayment on the amount prepaid.
(h) The amount of each prepayment of the Tranche A Term Loans,
Tranche B Term Loans, Tranche C Term Loans or Canadian Term Loans, as the case
may be, required pursuant to this Section 6.3 shall be applied to reduce the
then remaining installments of the Term Loans under the relevant Facility, pro
rata based upon the then remaining outstanding principal amount of such
installments.
(i) Notwithstanding anything in Section 6.2(a), Section 6.3(e)
or Section 6.3(f) to the contrary and provided that there are Tranche A Term
Loans and/or Total Aggregate Canadian Term Loan Outstandings then outstanding,
with respect to the amount of any optional prepayment described in Section
6.2(a) or mandatory prepayment described in Section 6.3 that is allocated to the
Tranche B Term Loans or Tranche C Term Loans (such amounts,
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the "Tranche B Prepayment Amount" and the "Tranche C Prepayment Amount",
respectively), the Company will, in lieu of applying such amount to the
prepayment of Tranche B Term Loans and Tranche C Term Loans, respectively, as
provided in Section 6.2(a) or Section 6.3(e) or (f), as the case may be, on the
date specified in Section 6.2(a) or Section 6.3, as the case may be, for such
prepayment, give the General Administrative Agent telephonic notice (promptly
confirmed in writing) requesting that the General Administrative Agent prepare
and provide to each Tranche B Lender and Tranche C Lender a notice (each, a
"Prepayment Option Notice") as described below. As promptly as practicable after
receiving such notice from the Company, the General Administrative Agent will
send to each Tranche B Lender and Tranche C Lender a notice (a "Prepayment
Option Notice"), which shall be in the form of Exhibit H, and shall include an
offer by the Company to prepay on the date (each a "Proposed Prepayment Date")
that is 15 days after the date of the Prepayment Option Notice, the Tranche B
Term Loans or Tranche C Term Loans, as the case may be, of such Lender by an
amount equal to the portion of the Tranche B Prepayment Amount or Tranche C
Prepayment Amount indicated in such Lender's Prepayment Option Notice as being
applicable to such Lender's Tranche B Term Loans or Tranche C Term Loans, as the
case may be. On the Proposed Prepayment Date, (A) the Company shall pay to the
General Administrative Agent the aggregate amount necessary to prepay that
portion of the outstanding Tranche B Term Loans or Tranche C Term Loans, as the
case may be, in respect of which Tranche B Lenders and Tranche C Lenders have
accepted prepayment as described above (such Lenders, the "Accepting Lenders"),
and such amount shall be applied to reduce the Tranche B Prepayment Amount and
Tranche C Prepayment Amount, as applicable, with respect to each Accepting
Lender and (B) the Company shall pay to the General Administrative Agent an
amount equal to 100% of the portion of the Tranche B Prepayment Amount and
Tranche C Prepayment Amount not accepted by the Accepting Lenders, and such
amount shall be applied (i) in the case of optional prepayments pursuant to
Section 6.2, to prepay the Tranche A Term Loans and (ii) in the case of
mandatory prepayments, to the other Facilities required to be prepaid pursuant
to Section 6.3(e) or Section 6.3(f), as the case may be, ratably in accordance
with the outstanding amounts thereof.
6.4 Conversion and Continuation Options. (a) The Company may
elect from time to time to convert LIBOR Loans to Base Rate Loans, by giving the
General Administrative Agent at least two Business Days' prior irrevocable
notice of such election; provided that any such conversion of LIBOR Loans may
only be made on the last day of an Interest Period with respect thereto. The
Company may elect from time to time to convert Base Rate Loans to LIBOR Loans by
giving the General Administrative Agent at least three Business Days' prior
irrevocable notice of such election. Any such notice of conversion to LIBOR
Loans shall specify the length of the initial Interest Period or Interest
Periods therefor. Upon receipt of any such notice the General Administrative
Agent shall promptly notify each affected Lender thereof. All or any part of
outstanding LIBOR Loans and Base Rate Loans may be converted as provided herein,
provided that (i) no Base Rate Loan under a particular Facility may be converted
into a LIBOR Loan when any Event of Default has occurred and is continuing and
the General Administrative Agent has or the Majority Facility Lenders in respect
of such Facility have determined in its or their sole discretion that such a
conversion is
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not appropriate and (ii) no Loan may be converted into a LIBOR Loan after the
date that is one month prior to the final maturity date of such Facility.
(b) Any LIBOR Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Company giving notice to the General Administrative Agent, in accordance with
the applicable provisions of the term "Interest Period" set forth in Section
1.1, of the length of the next Interest Period to be applicable to such Loans,
provided that no LIBOR Loan under a particular Facility may be continued as such
(i) when any Event of Default has occurred and is continuing and the General
Administrative Agent has or the Majority Facility Lenders in respect of such
Facility have determined in its or their sole discretion that such a
continuation is not appropriate or (ii) after the date that is one month prior
to the final maturity date of such Facility and provided, further, that if the
Company shall fail to give such notice or if such continuation is not permitted
such Loans shall be automatically converted to Base Rate Loans on the last day
of such then expiring Interest Period. Upon receipt of any such notice the
General Administrative Agent shall promptly notify each relevant Lender thereof.
6.5 Minimum Amounts of Tranches. Notwithstanding anything to
the contrary in this Agreement, all borrowings, conversions and continuations of
LIBOR Loans hereunder and all selections of Interest Periods hereunder shall be
in such amounts and be made pursuant to such elections so that, after giving
effect thereto, the aggregate principal amount of the LIBOR Loans comprising
each Tranche shall be equal to $5,000,000 or a whole multiple of $1,000,000 in
excess thereof.
6.6 Interest Rates and Payment Dates. (a) Each LIBOR Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the LIBOR Rate determined for such day plus
the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per
annum equal to the Base Rate plus the Applicable Margin.
(c) Each Canadian Term Loan shall bear interest at a rate per
annum equal to the Canadian Dollar Prime Rate plus the Applicable Margin.
(d) If all or a portion of (i) any principal of any Loan, (ii)
any interest payable thereon, (iii) any commitment fee or (iv) any Reimbursement
Obligation or Acceptance Reimbursement Obligation or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), the principal of the Loans, the Reimbursement
Obligations or Acceptance Reimbursement Obligation and any such overdue
interest, commitment fee or other amount shall bear interest at a rate per annum
which is (w) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection plus
2% or, if higher, (x) in the case of Reimbursement Obligations, the rate
applicable to Base Rate Loans under the Revolving Credit Facility plus 2%, (y)
in the case of Acceptance Reimbursement Obligations, the rate applicable to
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Revolving Credit Loans that are LIBOR Loans plus 2% or (z) in the case of any
such overdue interest, commitment fee or other amount, the rate described in
paragraph (b) of this subsection (paragraph (c) in the case of interest on
Canadian Term Loans) plus 2%, in each case from the date of such non-payment
until such overdue principal, interest, commitment fee or other amount is paid
in full (as well after as before judgment).
(e) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (d) of this
Section 6.6 shall be payable from time to time on demand.
6.7 Computation of Interest and Fees. (a) Commitment fees,
Acceptance stamping fees and, whenever it is calculated on the basis of the
Prime Rate or the Canadian Dollar Prime Rate, interest shall be calculated on
the basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed; and, otherwise, interest and letter of credit commissions and fronting
fees shall be calculated on the basis of a 360-day year for the actual days
elapsed. The General Administrative Agent shall as soon as practicable notify
the Company and the U.S. Lenders of each determination of a LIBOR Rate. Any
change in the interest rate on a Loan resulting from a change in the Base Rate,
the Canadian Dollar Prime Rate or the Eurocurrency Reserve Requirements shall
become effective as of the opening of business on the day on which such change
becomes effective. The General Administrative Agent shall as soon as practicable
notify the Company and the U.S. Lenders of the effective date and the amount of
each such change in the Base Rate. For purposes of the Interest Act (Canada),
whenever any interest under this Agreement is calculated using an annual rate
based on a period which is less than the actual number of days in a year (the
"Lesser Period"), such rate determined pursuant to such calculation, when
expressed as an annual rate, is equivalent to (i) the applicable rate based on
such Lesser Period, (ii) multiplied by the actual number of days in the calendar
year in which the period for which such interest is payable ends, and (iii)
divided by the number of days in such Lesser Period. The rates of interest
specified in this Agreement are nominal rates and all interest payments and
computations are to be made without allowance or deduction for deemed
reinvestment of interest.
(b) Each determination of an interest rate by the General
Administrative Agent or the Canadian Administrative Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrowers and
the Lenders in the absence of manifest error.
(c) If any Canadian Reference Lender shall for any reason no
longer have a Canadian Loan Commitment or any Canadian Term Loans, such Canadian
Reference Lender shall thereupon cease to be a Canadian Reference Lender, and
if, as a result, there shall only be one Schedule 1 Canadian Reference Lender or
Schedule 2 Canadian Reference Lender (as the case may be) remaining, the
Canadian Administrative Agent (after consultation with the Canadian Borrower and
the Schedule 1 Canadian Lender or the Schedule 2 Canadian Lender, as applicable)
shall, by notice to the Canadian Borrower and the Canadian Lenders, designate
another Schedule 1 Canadian Lender or Schedule 2 Canadian Lender, as applicable,
as a Schedule 1 Canadian Reference Lender or a Schedule 2 Canadian Reference
Lender, as
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61
applicable, so that there shall at all times be at least two Schedule 1 Canadian
Reference Lenders and two Schedule 2 Canadian Reference Lenders.
(d) Each Canadian Reference Lender shall use its best efforts
to furnish quotations of rates to the Canadian Administrative Agent as
contemplated hereby. If any of the Canadian Reference Lenders shall be unable or
shall otherwise fail to supply such rates to the Canadian Administrative Agent
upon its request, the rate of interest shall, subject to the provisions of
Section 6.8, be determined on the basis of the quotations of the remaining
Canadian Reference Lenders or Reference Lender.
6.8 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the General Administrative Agent shall have determined
(which determination shall be conclusive and binding upon the Company)
that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the LIBOR
Rate for such Interest Period, or
(b) the General Administrative Agent shall have received
notice from the Majority Facility Lenders in respect of the relevant
Facility that the LIBOR Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Loans during such Interest Period,
the General Administrative Agent shall give telecopy or telephonic notice
thereof to the Company and the relevant U.S. Lenders as soon as practicable
thereafter. If such notice is given (x) any LIBOR Loans under the relevant
Facility requested to be made on the first day of such Interest Period shall be
made as Base Rate Loans, (y) any Loans under the relevant Facility that were to
have been converted on the first day of such Interest Period to LIBOR Loans
shall be continued as Base Rate Loans and (z) any outstanding LIBOR Loans under
the relevant Facility shall be converted, on the first day of such Interest
Period, to Base Rate Loans. Until such notice has been withdrawn by the General
Administrative Agent, no further LIBOR Loans under the relevant Facility shall
be made or continued as such, nor shall the Company have the right to convert
Loans under the relevant Facility to LIBOR Loans.
6.9 Pro Rata Treatment and Payments. (a) Each borrowing by the
Company from the Lenders hereunder shall be made pro rata according to the
respective Tranche A Term Loan Percentages, Tranche B Term Loan Percentages,
Tranche C Term Loan Percentages, Canadian Term Loan Commitment Percentages or
Revolving Credit Percentages, as the case may be, of the relevant Lenders;
provided, that, pursuant to the second sentence of Section 5.6, Acceptances may
be created in non-pro rata amounts if required to permit rounding to whole
multiples of C$100,000. Each borrowing of the U.S. Term Loans shall be made
first under the Tranche B Term Loan Commitments and the Tranche C Term Loan
Commitments, pro rata in accordance with the aggregate amounts of the Tranche B
Term Loan
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Commitments and Tranche C Term Loan Commitments of the respective Lenders
(provided, that until all Tranche B Term Loan Commitments and Tranche C Term
Loan Commitments other than the Tranche B-1 Term Loan Commitments and the
Tranche C-1 Term Loan Commitments have been fully drawn, such pro rata
calculations shall be made without regard to the Tranche B-1 Term Loan
Commitments and Tranche C-1 Term Loan Commitments of the Lenders) and, second,
after the Tranche B Term Loan Commitments and the Tranche C Term Loan Commitment
have been utilized in full, under the Tranche A Term Loan Commitments pro rata
in accordance with the amounts of the Tranche A Term Loan Commitments of the
respective Lenders. Each payment by the Company on account of any commitment fee
and letter of credit commission and any reduction of the Revolving Credit
Commitments shall be made pro rata according to the respective Revolving Credit
Percentages of the Lenders. Each payment (other than any prepayment pursuant to
Section 6.2 or 6.3) shall be applied to the Facilities ratably in accordance
with the respective amounts due and owing under the Facilities.
(b) Each payment (including each prepayment) by the Company on
account of principal of and interest on the U.S. Term Loans under any Facility
shall be made pro rata according to the respective outstanding principal amounts
of the U.S. Term Loans under such Facility then held by the U.S. Term Loan
Lenders.
(c) Each payment (including each prepayment) by the Canadian
Borrower on account of principal of and interest on the Canadian Term Loans
shall be made pro rata according to the respective outstanding principal amounts
of the Canadian Term Loans then held by the Canadian Lenders. Each payment in
respect of Acceptance Reimbursement Obligations shall be made pro rata according
to the respective amounts of Acceptance Reimbursement Obligations then due and
owing to the Canadian Lenders.
(d) Each payment (including each prepayment) by the Company on
account of principal of and interest on the Revolving Credit Loans shall be made
pro rata according to the respective outstanding principal amounts of the
Revolving Credit Loans then held by the Revolving Credit Lenders.
(e) All payments (including prepayments) to be made by the
Company hereunder, whether on account of principal, interest, fees or otherwise
(other than payments under Section 13 in respect of the Canadian Borrower
Obligations and the Canadian Operating Facility Obligations), shall be made
without setoff or counterclaim and shall be made prior to 12:00 Noon, New York
City time, on the due date thereof to the General Administrative Agent, for the
account of the Lenders, at the General Administrative Agent's office specified
in Section 14.2, in Dollars and in immediately available funds. The General
Administrative Agent shall distribute such payments to the Lenders promptly upon
receipt in like funds as received. If any payment by the Company hereunder
(other than payments on the LIBOR Loans) becomes due and payable on a day other
than a Business Day, such payment shall be extended to the next succeeding
Business Day. If any payment on a LIBOR Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the
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63
next succeeding Business Day unless the result of such extension would be to
extend such payment into another calendar month, in which event such payment
shall be made on the immediately preceding Business Day. In the case of any
extension of any payment of principal pursuant to the preceding two sentences,
interest thereon shall be payable at the then applicable rate during such
extension.
(f) All payments (including prepayments) to be made by the
Canadian Borrower hereunder (or by the Company under Section 13 in respect of
the Canadian Borrower Obligations and the Canadian Operating Facility
Obligations), whether on account of principal, interest, fees or otherwise,
shall be made without setoff or counterclaim and shall be made prior to 12:00
Noon, Toronto time, on the due date thereof to the Canadian Administrative
Agent, for the account of the Lenders, at the Canadian Administrative Agent's
office specified in Section 14.2, in Canadian Dollars and in immediately
available funds. The Canadian Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment by the Canadian Borrower hereunder becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next succeeding
Business Day. In the case of any extension of any payment of principal pursuant
to the preceding sentence, interest thereon shall be payable at the then
applicable rate during such extension.
(g) Unless the applicable Administrative Agent shall have been
notified in writing by any Lender prior to a Borrowing Date that such Lender
will not make available to such Administrative Agent the amount that would
constitute its share of the Loans or Acceptance Purchase Price to be disbursed
to a Borrower on such Borrowing Date, such Administrative Agent may assume that
such Lender is making such amount available to such Administrative Agent, and
such Administrative Agent may, in reliance upon such assumption, make available
to the applicable Borrower a corresponding amount. If such amount is not made
available to such Administrative Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to such Administrative Agent, on demand,
such amount with interest thereon at a rate equal to (i) in the case of amounts
to be made available in U.S. Dollars, the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the General Administrative Agent and (ii) in the case of amounts to be made
available in Canadian Dollars, the Canadian Administrative Agent's reasonable
estimate of its average daily cost of funds. A certificate of the General
Administrative Agent or the Canadian Administrative Agent, as the case may be,
submitted to any Lender with respect to any amounts owing under this Section
6.9(g) shall be conclusive in the absence of manifest error. If such Lender's
share of such amount is not made available to such Administrative Agent by such
Lender within three Business Days of such Borrowing Date, such Administrative
Agent shall also be entitled to recover such amount from the relevant Borrower
on demand with interest thereon at the rate per annum applicable to Base Rate
Loans under the relevant Facility (in the case of amounts to be made available
in U.S. Dollars), or Canadian Term Loans (in the case of amounts to be made
available in Canadian Dollars).
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6.10 Illegality. (a) Notwithstanding any other provision
herein, if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain LIBOR Loans as contemplated by this Agreement, (i) the
commitment of such U.S. Lender hereunder to make LIBOR Loans, continue LIBOR
Loans as such and convert Base Rate Loans to LIBOR Loans shall forthwith be
cancelled and (ii) such U.S. Lender's Loans then outstanding as LIBOR Loans, if
any, shall be converted automatically to Base Rate Loans on the respective last
days of the then current Interest Periods with respect to such Loans or within
such earlier period as required by law. If any such conversion of a LIBOR Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Company shall pay to such Lender such amounts, if any,
as may be required pursuant to Section 6.13.
(b) Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Canadian Lender to create or
maintain Acceptances as contemplated by this Agreement, (i) the commitment of
such Canadian Lender hereunder to accept Drafts, purchase Acceptances, continue
Acceptances as such and convert Canadian Term Loans to Acceptances shall
forthwith be cancelled until such time as it shall no longer be unlawful for
such Canadian Lender to create or maintain Acceptances and (ii) such Canadian
Lender's then outstanding Acceptances, if any, shall be converted automatically
to Canadian Term Loans on the respective maturities thereof or within such
earlier period as may be required by law.
6.11 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law, but with which similarly-situated entities generally comply)
from any central bank or other Governmental Authority made subsequent to the
date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit or any
LIBOR Loan made by it, or change the basis of taxation of payments to
such Lender in respect thereof (except for Non-Excluded Taxes covered
by Section 6.12 and changes in the rate of tax on the overall net
income of such Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the LIBOR Rate; or
(iii) shall impose on such Lender any other condition,
the cost of which is not otherwise included in the determination of the
LIBOR Rate;
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and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining LIBOR Loans or Acceptances or issuing or participating
in Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the applicable Borrower shall promptly pay such
Lender such additional amount or amounts as will compensate such Lender on an
after-tax basis for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law, but with which
similarly-situated entities generally comply) from any Governmental Authority
made subsequent to the date hereof shall have the effect of reducing the rate of
return on such Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, the applicable Borrower shall promptly pay to such
Lender such additional amount or amounts as will compensate such Lender on an
after-tax basis for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this Section, it shall promptly notify the applicable
Borrower (with a copy to the General Administrative Agent and, if applicable,
the Canadian Administrative Agent) of the event by reason of which it has become
so entitled. A certificate as to any additional amounts payable pursuant to this
Section submitted by such Lender to such Borrower (with a copy to the General
Administrative Agent and, if applicable, the Canadian Administrative Agent)
shall be conclusive in the absence of manifest error. The agreements in this
Section shall survive the termination of this Agreement and the payment of the
Loans, the Acceptance Reimbursement Obligations, the Acceptance Notes and all
other amounts payable hereunder.
6.12 Taxes. (a) All payments made by the Borrowers under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on either Administrative Agent or any
Lender as a result of a present or former connection between such Administrative
Agent or such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from such Administrative Agent or
such Lender having executed, delivered or performed its obligations or received
a payment under, or enforced, this Agreement or any other Loan Document). If any
such non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any
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amounts payable to such Administrative Agent, or any Lender hereunder or under
any Note, the amounts so payable to such Administrative Agent or such Lender
shall be increased to the extent necessary to yield to such Administrative Agent
or such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Company shall not be required to increase
any such amounts payable to any U.S. Lender if such U.S. Lender fails to comply
with the requirements of paragraph (b) of this Section. Whenever any
Non-Excluded Taxes are payable by a Borrower, as promptly as possible thereafter
such Borrower shall send to the applicable Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by such Borrower showing payment
thereof. If a Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the applicable Administrative
Agent the required receipts or other required documentary evidence, such
Borrower shall indemnify such Administrative Agent and the Lenders for any
incremental taxes, interest or penalties that may become payable by either
Administrative Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans, the Acceptance Reimbursement Obligations, the
Acceptance Notes and all other amounts payable hereunder.
(b) Each U.S. Lender that is not incorporated under the laws
of the United States of America or a state thereof shall:
(i) in the case of a Lender other than a Lender described in
subsection 6.12(b)(ii);
(A) deliver to the Company and the General
Administrative Agent (A) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be;
(B) deliver to the Company and the General
Administrative Agent two further copies of any such form or
certification on or before the date that any such form or
certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent
form previously delivered by it to the Company; and
(C) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Company or the General Administrative Agent;
and
(D) file amendments to such forms as and when required;
and
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(ii) in the case of a Lender that is not a "bank" under
Section 881(c)(3)(A) of the Code and that is legally unable to comply
with the requirements of subsection 6.11(b)(i);
(A) at least five Business Days before the date of
the initial payment to be made by the Company under this
Agreement to such Lender, deliver to the Company and the
General Administrative Agent (I) a statement that such Lender
(x) is not a "bank" under Section 881(c)(3)(A) of the Code, is
not subject to regulatory or other legal requirements as a
bank in any jurisdiction, and has not been treated as a bank
for purposes of any tax, securities law or other filing or
submission made to any Governmental Authority, any application
made to a rating agency or qualification for any exemption
from tax, securities law or other legal requirements, (y) is
not a 10-percent shareholder within the meaning of Section
881(c)(3)(B) of the Code and (z) is not a controlled foreign
corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(C) of the Code and (II) a
properly completed and duly executed Internal Revenue Service
Form W-8 or applicable successor form; and
(B) deliver to the Company and the General
Administrative Agent two further properly completed and duly
executed copies of said Form W-8, or any successor applicable
form at least five Business Days on or before the date that
any such Form W-8 expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent
form previously delivered by it to the Company or upon the
request of the Company or the General Administrative Agent;
and
(C) obtain such extensions of time for filing and
completing such forms or certifications as may be reasonably
requested by the Company and the General Administrative Agent;
and
(D) file amendments to such forms as and when
required;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Company and the General
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to Section 14.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection, provided that in the case of a Participant
such
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Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
6.13 Indemnity. Each Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by such Borrower in making a
borrowing of, conversion into or continuation of LIBOR Loans after such Borrower
has given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by such Borrower in making any prepayment after such
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of LIBOR Loans on a day which is not
the last day of an Interest Period with respect thereto. Such indemnification
may include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, converted
or continued, for the period from the date of such prepayment or of such failure
to borrow, convert or continue to the last day of such Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such U.S. Lender) which would have accrued to such
Lender on such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank eurodollar market. This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
6.14 Change of Lending Office. Each Lender agrees that if it
makes any demand for payment under Section 6.11 or 6.12(a), or if any adoption
or change of the type described in Section 6.10 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrowers to make payments under Section 6.11 or
6.12(a), or would eliminate or reduce the effect of any adoption or change
described in Section 6.10; provided, that such designation is made on terms
that, in the sole judgment of such Lender, cause such Lender and its lending
office(s) to suffer no economic, legal or regulatory disadvantage, and provided,
further, that nothing in this Section 6.14 shall affect or postpone any of the
obligations of any Borrower or the rights of any Lender pursuant to Section 6.11
or 6.12(a).
SECTION 7. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agents and the Lenders to enter
into this Agreement and to make the Loans and the other extensions of credit
hereunder, each of the Company and the Canadian Borrower (to the extent
applicable to the Canadian Borrower) hereby represents and warrants to each
Administrative Agent and each Lender that:
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7.1 Financial Condition. (a) The unaudited pro forma combined
balance sheet of Holdings and its consolidated Subsidiaries as at November 30,
1997 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies of
which have heretofore been furnished to each Lender, has been prepared giving
effect (as if such events had occurred on such date) to (i) the consummation of
the Exchange Offer and the Merger, (ii) the Loans to be made on or prior to the
Merger Date and the use of proceeds thereof and (iii) the payment of fees and
expenses in connection with the Exchange Offer and Merger. The Pro Forma Balance
Sheet has been prepared based on the best information available to the Company
as of the date of delivery thereof, and presents fairly on a pro forma basis the
estimated combined financial position of Holdings and its consolidated
Subsidiaries as at the Closing Date, assuming that the events specified in the
preceding sentence had actually occurred at such date.
(b) To the best of the Company's knowledge, the audited
consolidated balance sheet of Safety-Kleen as of December 31, 1996 and the
related consolidated statements of income and of cash flows for the fiscal year
ended on such date, reported on by and accompanied by an unqualified report from
Arthur Andersen, present fairly the consolidated financial condition of
Safety-Kleen as at such date, and the consolidated results of its operations and
its consolidated cash flows for the fiscal year then ended. To the best of the
Company's knowledge, all such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the relevant
firm of accountants and disclosed therein). To the best of the Company's
knowledge, the balance sheet referred to above reflects any material Guarantee
Obligations, contingent liabilities and liabilities for taxes, and any long-term
leases and unusual forward or long-term commitments, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other obligation in respect of derivatives, in each case as of the date of
such balance sheets. During the period from December 31, 1996 to and including
the date hereof there has been no Disposition by Safety-Kleen or any of its
Subsidiaries of any material part of its business or property.
(c) The audited consolidated balance sheet of Holdings as at
August 31, 1997, and the related consolidated statements of income and of cash
flows for the fiscal year ended on such date, reported on by and accompanied by
an unqualified report from Coopers & Lybrand, present fairly the consolidated
financial condition of Holdings as at such date, and the consolidated results of
its operations and its consolidated cash flows for the respective fiscal year
then ended. All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the relevant firm of
accountants and disclosed therein). The balance sheet referred to above reflects
any material Guarantee Obligations, contingent liabilities and liabilities for
taxes, and any long-term leases and unusual forward or long-term commitments,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, in each case
as of the date of such balance sheets. During the period from August 31, 1997 to
and including the date hereof there has been no Disposition by Holdings or any
of its Subsidiaries of any
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material part of its business or property other than the sale by the Company of
ECDC Environmental, L.C.
7.2 No Change. Since August 31, 1997 there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect. Without limiting the representation in the preceding
sentence, since December 31, 1996 there has been no development or event which,
to the best knowledge of the Company, has had or could reasonably be expected to
have a material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of Safety-Kleen and its Subsidiaries taken
as a whole.
7.3 Corporate Existence; Compliance with Law. Each of the
Company and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and, in the
case of each Borrower, to borrow hereunder and has taken all necessary corporate
action to authorize the borrowings on the terms and conditions of this Agreement
and any Notes and to authorize the execution, delivery and performance of the
Loan Documents to which it is a party. No consent or authorization of, filing
with, notice to or other act by or in respect of, any Governmental Authority or
any other Person is required in connection with (i) the borrowings hereunder or
with the execution, delivery, performance, validity or enforceability of the
Loan Documents or (ii) the consummation of the Exchange Offer or the Merger,
except approval of the Merger by the Safety-Kleen shareholders. This Agreement
has been, and each other Loan Document to which it is a party will be, duly
executed and delivered on behalf of each Loan Party which is a party thereto.
This Agreement constitutes, and each other Loan Document to which it is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of the Loan Party which is a party thereto enforceable against such
Loan Party in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
7.5 No Legal Bar. The execution, delivery and performance of
the Loan Documents, the issuance of Letters of Credit, the borrowings hereunder
and the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of the
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Company or of any of its Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of its or their respective properties
or revenues pursuant to any such Requirement of Law or Contractual Obligation
(other than the Liens created by the Security Documents).
7.6 No Material Litigation. (a) No litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is pending
or, to the knowledge of the Company, threatened by or against the Company or any
of its Subsidiaries or against any of its or their respective properties or
revenues (i) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby (other than as set forth on Schedule
7.6 relating to the Exchange Offer, none of which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect), or
(ii) which could reasonably be expected to have a Material Adverse Effect.
(b) Without limiting the representation made in paragraph (a)
of this Section 7.6, to the best knowledge of the Company, except as described
in the Exchange Offer Documents, no litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or threatened
against Safety-Kleen or any of its Subsidiaries or against any of its or their
respective properties or revenues which could reasonably be expected to have a
material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of Safety-Kleen and its Subsidiaries taken
as a whole.
7.7 No Default. Neither the Company nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
7.8 Ownership of Property; Liens. Each of the Company and its
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, and none of such property is
subject to any Lien except as permitted by Section 10.3.
7.9 Intellectual Property. Each of the Company and its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted (the "Intellectual Property"). Except as set
forth in Schedule 7.9, no claim has been asserted and is pending by any Person
challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor does the
Company know of any valid basis for any such claim. The use of such Intellectual
Property by the Company and its Subsidiaries does not infringe on the rights of
any Person, except for such claims and infringements that, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect. An adverse
determination of any or all of the matters set forth on Schedule 7.9 could not
reasonably be expected to have a Material Adverse Effect.
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7.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Company or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
7.11 Taxes. Each of the Company and its Subsidiaries has filed
or caused to be filed all tax returns which, to the knowledge of the Company,
are required to be filed and has paid all taxes shown to be due and payable on
said returns or on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than any taxes, fees or other charges, the
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Company or its Subsidiaries, as the
case may be); no tax Lien has been filed, and, to the knowledge of the Company,
no claim is being asserted, with respect to any such tax, fee or other charge.
7.12 Federal Regulations. No part of the proceeds of any Loans
will be used in violation of Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect.
7.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits. Neither Borrower nor any Commonly Controlled Entity has
had a complete or partial withdrawal from any Multiemployer Plan, and neither of
the Borrowers nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Borrowers or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. The
present value (determined using actuarial and other assumptions which are
reasonable in respect of the benefits provided and the employees participating)
of the liability of the Borrowers and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, in the aggregate, exceed the assets under all such Plans allocable to such
benefits by an amount in excess of $2,000,000.
7.14 Canadian Benefit and Pension Plans. The Canadian Pension
Plans are duly registered under the provisions of the ITA and any other
Requirements of Law and no
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event has occurred which is reasonably likely to cause the loss of such
registered status. The Canadian Pension Plans and the Canadian Benefits Plans
have been administered in accordance with the ITA and all other Requirements of
Law. All material obligations of each of the Canadian Borrower or any Subsidiary
thereof (including fiduciary and funding obligations) required to be performed
in connection with the Canadian Pension Plans have been performed. No promises
of benefit improvements under the Canadian Pension Plans or the Canadian Benefit
Plans have been made except where such improvement could not have a Material
Adverse Effect. There have been no improper withdrawals or applications of the
assets of the Canadian Pension Plans or the Canadian Benefit Plans. As of the
most current evaluation date, each of the Canadian Pension Plans and the
Canadian Benefit Plans is fully funded and there exist no going concern unfunded
actuarial liabilities or solvency deficiencies in respect of such plans.
7.15 Investment Company Act; Other Regulations. No Loan Party
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No Loan Party is subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
7.16 Subsidiaries. Schedule 7.16 sets forth a complete list of
all the Subsidiaries of the Company on the Closing Date after giving effect to
the consummation of the Exchange Offer.
7.17 Purpose of Loans. The proceeds of the Loans and
Acceptances shall be used (i) to finance a portion of the Safety-Kleen
Acquisition and the fees and expenses associated therewith, (ii) to purchase
stock appreciation rights from employees and directors of Safety-Kleen pursuant
to Safety-Kleen's existing stock option/purchase plans in an amount not to
exceed $46,000,000, (iii) to repay certain Indebtedness of the Borrowers
outstanding on the Closing Date, including all amounts outstanding under the
Existing Credit Agreement and (iv) on the Merger Date, to repay certain
Indebtedness of Safety-Kleen required to be repaid in connection with the
Merger. The proceeds of the Loans and Acceptances also shall be used to finance
the ongoing working capital needs of the Borrowers and their Subsidiaries in the
ordinary course of business, capital expenditures and acquisitions permitted by
Section 10.8.
7.18 Environmental Matters.
Other than exceptions to any of the following that could not,
individually or in the aggregate, reasonably be expected to give rise to a
Material Adverse Effect:
(a) The Company and each of its Subsidiaries: (i) are, and
within the period of all applicable statutes of limitation have been,
in compliance with all applicable Environmental Laws; (ii) hold all
Environmental Permits (each of which is in full force and effect)
required for any of their current or intended operations or for any
property
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owned, leased, or otherwise operated by any of them; (iii) are, and
within the period of all applicable statutes of limitation have been,
in compliance with all of their Environmental Permits; and (iv)
reasonably believe that: each of their Environmental Permits will be
timely renewed and complied with, without material expense; any
additional Environmental Permits that may be required of any of them
will be timely obtained and complied with, without material expense;
and compliance with any Environmental Law that is or is expected to
become applicable to it will be timely attained and maintained, without
material expense.
(b) Materials of Environmental Concern have not been
transported, disposed of, emitted, discharged, or otherwise released or
threatened to be released, to or at any real property now or formerly
owned, leased or operated by the Company or any of its Subsidiaries or
at any other location, which could reasonably be expected to (i) give
rise to liability of the Company or any of its Subsidiaries under any
applicable Environmental Law, (ii) interfere with the continued
operations of the Company or any of its Subsidiaries, or (iii) impair
the fair saleable value of any real property owned or leased by the
Company or any of its Subsidiaries.
(c) There is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation)
under or relating to any Environmental Law to which the Company or any
of its Subsidiaries is, or to the knowledge of the Company or any of
its Subsidiaries will be, named as a party that is pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened.
(d) Neither the Company nor any of its Subsidiaries has
received any written request for information, or been notified that it
is a potentially responsible party under or relating to the
Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. ss.ss. 9601 et seq., or any similar Environmental Law, or
with respect to any Materials of Environmental Concern.
(e) Neither the Company nor any of its Subsidiaries has
entered into or agreed to any consent decree, order, or settlement or
other agreement, nor is subject to any judgment, decree, or order or
other agreement, in any judicial, administrative, arbitral, or other
forum, relating to compliance with or liability under any Environmental
Law.
(f) Neither the Company nor any of its Subsidiaries has
assumed or retained, by contract or operation of law, any liabilities
of any kind, fixed or contingent, known or unknown, under any
Environmental Law or with respect to any Materials of Environmental
Concern.
7.19 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document or any other document,
certificate or statement furnished to the Administrative Agents or the Lenders
or any of them, by or on behalf of any Loan Party for use in connection with the
transactions contemplated by this Agreement or the
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other Loan Documents, contained as of the date such statement, information,
document or certificate was so furnished, any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements contained herein or therein not misleading. The projections and pro
forma financial information contained in the materials referenced above are
based upon good faith estimates and assumptions believed by management of such
Loan Party to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount. The Company has provided to the General
Administrative Agent a true and complete copy of the Exchange Offer Documents
and the Merger Agreement (including all exhibits and schedules thereto and
financial statements referred to therein). As of the date hereof, the
representations and warranties contained in the Merger Agreement are true and
correct in all material respects. There is no fact known to any Loan Party that
could reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Administrative Agents
and the Lenders for use in connection with the transactions contemplated hereby
and by the other Loan Documents.
7.20 Security Documents. (a) The Guarantee and Collateral
Agreement is effective to create in favor of the General Administrative Agent,
for the benefit of the Lenders, a legal, valid and enforceable security interest
in the Collateral described therein and proceeds thereof. In the case of the
Pledged Stock described in the Guarantee and Collateral Agreement, when stock
certificates representing such Pledged Stock are delivered to the General
Administrative Agent, and in the case of the other Collateral described in the
Guarantee and Collateral Agreement, when financing statements in appropriate
form are filed in the offices specified on Schedule 3 to the Guarantee and
Collateral Agreement, the Guarantee and Collateral Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Loan Parties in such Collateral and the proceeds thereof, as security for
the Obligations (as defined in the Guarantee and Collateral Agreement), in each
case prior and superior in right to any other Person other than as permitted by
the Guarantee and Collateral Agreement.
(b) The Acquisition Corp. Pledge Agreement is effective to
create in favor of the General Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. When the actions described in Section
3(a) or 3(b), as the case may be, of the Acquisition Corp. Pledge Agreement have
been taken, the Acquisition Corp. Pledge Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Collateral and the proceeds thereof, as security for
the Obligations (as defined in the Acquisition Corp. Pledge Agreement), in each
case prior and superior in right to any other Person other than as permitted by
the Acquisition Corp. Pledge Agreement.
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(c) Each of the Canadian Collateral Documents is effective to
create in favor of the Canadian Administrative Agent, for the benefit of the
Canadian Lenders, a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. Upon completion of the
actions set forth on Schedule 7.20, the Canadian Collateral Documents shall
constitute fully perfected Liens on, and security interests in, all right, title
and interest of the Loan Parties in such Collateral and the proceeds thereof, as
security for the Canadian Borrower Obligations, in each case prior and superior
in right to any other Person other than as permitted by the Canadian Collateral
Documents.
(d) Each of the Mortgages is effective to create in favor of
the General Administrative Agent, for the benefit of the Lenders, a legal, valid
and enforceable Lien on the mortgaged properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
3, each such Mortgage shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such mortgaged
properties and the proceeds thereof, as security for the Obligations (as defined
in the relevant Mortgage), in each case prior and superior in right to any other
Person.
7.21 Solvency. Each Loan Party is, and after giving effect to
the Safety-Kleen Acquisition and the incurrence of all Indebtedness and
obligations being incurred in connection herewith and therewith will be and will
continue to be, Solvent.
7.22 Regulation H. No Mortgage encumbers improved real
property which is located in an area that has been identified by the Secretary
of Housing and Urban Development as an area having special flood hazards and in
which flood insurance has been made available under the National Flood Insurance
Act of 1968.
7.23 Corsan Trucking, Inc.. As of the date hereof, Corsan
Trucking, Inc., a wholly owned Subsidiary of the Company, does not have any
assets and does not conduct any operations.
SECTION 8. CONDITIONS PRECEDENT
8.1 Conditions to Initial Extensions of Credit. The agreement
of each Lender to make the initial Extension of Credit requested to be made by
it is subject to the satisfaction, immediately prior to or concurrently with the
making of such Extension of Credit on the Closing Date, of the following
conditions precedent:
(a) Loan Documents. The General Administrative Agent shall
have received (i) this Agreement, executed and delivered by a duly
authorized officer of each Borrower, with a counterpart for each
Lender, (ii) the Guarantee and Collateral Agreement, executed and
delivered by a duly authorized officer of the parties thereto, with a
counterpart or a conformed copy for each Lender, (iii) the Acquisition
Corp. Pledge Agreement and the Exchange Agent Agency Agreement, each
executed and
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delivered by a duly authorized officer of the parties thereto, with a
counterpart or a conformed copy for each Lender, (iv) each of the
Mortgage Amendments, each executed and delivered by a duly authorized
officer of the party thereto, with a counterpart or a conformed copy
for each Lender, (v) each Canadian Collateral Document listed on
Schedule 4, executed and delivered by a duly authorized officer of the
parties thereto, with a counterpart or a conformed copy for each Lender
and (vi) the Intercreditor Agreement, executed and delivered by a duly
authorized officer of the parties thereto.
(b) Payment of Indebtedness under Existing Credit Agreement
and Termination of Commitments. The Commitments (as defined in the
Existing Credit Agreement) under the Existing Credit Agreement shall
have been terminated and all Indebtedness of the Borrowers thereunder,
including all principal, interest and fees accrued to the Closing Date
(including, but not limited to, any prepayment premium payable in
connection with the prepayment of the Tranche B Term Loans and Tranche
C Term Loans (each as defined in the Existing Credit Agreement)), but
excluding reimbursement obligations in respect of the Existing
Acceptances and the Existing Letter of Credit, shall have been repaid
in full. The indemnity agreement described in the second sentence of
Section 5.1(a) shall have been executed and delivered by The
Toronto-Dominion Bank and the Existing Acceptance Lenders. All
reimbursement obligations in respect of the Specified Acceptances shall
have been paid in full and the Specified Acceptances shall have been
cancelled.
(c) Exchange Offer, Merger, etc. The following transactions
shall have been consummated (and the General Administrative Agent shall
have received a certificate of the Company to such effect, accompanied
by copies of any documentary evidence thereof reasonably requested by
the General Administrative Agent):
(i) all conditions precedent to the consummation of
the Exchange Offer set forth in the Exchange Offer Documents
shall have been satisfied or waived with the Required Lenders'
consent and the number of Target Shares being validly tendered
for exchange in the Exchange Offer and not properly withdrawn
prior to the expiration of the Exchange Offer, together with
the Target Shares owned by Holdings and its Subsidiaries,
shall represent no less than the minimum number of Target
Shares (the "Minimum Number of Shares"), determined on a fully
diluted basis after giving effect to the exercise of any
uncancelled warrants, rights, options, conversion privileges
or similar rights (other than the Target Rights), necessary
under Wisconsin law and the articles of incorporation and
bylaws of Safety-Kleen to have sufficient voting power in
Safety-Kleen to approve the Merger independently of the votes
of any other Safety-Kleen shareholders;
(ii) since the date of this Agreement, the terms of
the Exchange Offer shall not have been amended, waived or
modified as to price, consideration,
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conditions, termination or expiration or in any other material
respect without the prior approval of the General
Administrative Agent;
(iii) there shall be no legal impediments to the
Merger that are not within the control of Holdings to
overcome;
(iv) all actions shall have been taken so that the
provisions of Section 180.1141 of the Wisconsin Business
Corporation Law shall be inapplicable to the Exchange Offer
and the Merger, and no other "fair price", "moratorium",
"business combination", "control share acquisition" or other
form of anti-takeover statute, regulation, charter or by-law
provision, is or shall become applicable which would cause or
could reasonably be expected to cause any material adverse
consequences to Acquisition Corp., Holdings, the Borrowers,
Safety-Kleen or the Exchange Offer or Merger;
(v) Safety-Kleen and its Board of Directors shall
have taken all necessary action to amend the Rights Agreement,
dated as of November 9, 1988 (as amended, the "Rights
Agreement") to provide for the redemption or annulment or
inapplicability (without any substantial cost) of all
interests outstanding under or issued pursuant to the Rights
Agreement and to otherwise avoid the occurrence of any
material adverse consequences to Acquisition Corp. or
Safety-Kleen as a consequence of the Exchange Offer or the
Merger;
(vi) Holdings, Acquisition Corp. and Safety-Kleen
shall have entered into a definitive Merger Agreement and
related documentation providing for the Merger in form and
substance satisfactory to the General Administrative Agent;
(vii) all regulatory approvals (including, without
limitation, all such approvals with respect to antitrust
matters) necessary to consummate the Exchange Offer shall have
been obtained, all applicable waiting periods shall have
expired and the General Administrative Agent shall be
satisfied that all material regulatory approvals necessary to
consummate the Merger have been obtained or can be timely
obtained;
(viii) there shall be no order, injunction or
restraining order in effect or known by the Company to be
threatened which would prevent or delay the consummation of,
or impose material adverse conditions on, the Exchange Offer
or the Merger. There shall not exist any pending or threatened
litigation which, in the good faith judgment of the General
Administrative Agent, could reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the
ability of Holdings or Acquisition Corp. to consummate the
Exchange Offer or on the ability of Holdings or Acquisition
Corp. to consummate the Merger or to perform any material
obligation contemplated
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hereby or thereby or on the General Administrative Agent's and
Lenders' rights and remedies;
(ix) neither Safety-Kleen nor any of its subsidiaries
shall have taken, or be taking, any action (including any
reorganization, recapitalization, asset sale, stock purchase
or distribution to its stockholders) that, in the good faith
judgment of the General Administrative Agent, could reasonably
be expected to have a material adverse effect on the condition
(financial or otherwise), business, operations, assets or
prospects of Safety-Kleen or its subsidiaries or on the
consummation of the Exchange Offer or the Merger. In the good
faith judgment of the General Administrative Agent, no
material adverse change shall have otherwise occurred in the
condition (financial or otherwise), business, operations,
assets or prospects of (A) Holdings and its Subsidiaries since
the date of the audited financial statements of Holdings dated
August 31, 1997 or (B) Safety-Kleen and its Subsidiaries since
the date of the audited financial statements of Safety-Kleen
dated December 31, 1996; and
(x) the capital and legal structure of each Loan
Party after the Safety-Kleen Acquisition as proposed to be
consummated pursuant to the Exchange Offer Documentation and
the Merger Agreement shall be satisfactory in all respects;
and
(xi) all actions required under Safety-Kleen's
existing credit facility shall have been taken such that the
consummation of the Exchange Offer does not constitute a
default, or an event of mandatory prepayment, thereunder.
(d) Regulations of Board; Forms G-3 and U-1. The Lenders shall
be satisfied that the Exchange Offer and the financing thereof comply
with Regulation T, U and X of the Board. Each Lender shall have
received a duly completed and executed Form FR G-3 or Form FR U-1, as
applicable, of the Board, demonstrating such compliance.
(e) Pledged Stock; Stock Powers. The General Administrative
Agent or the Exchange Agent shall have received the certificates
representing the Target Shares pledged pursuant to the Acquisition
Corp. Pledge Agreement (other than such Shares constituting Book-Entry
Shares (as defined in the Acquisition Corp. Pledge Agreement)),
together with an undated stock power for each such certificate executed
in blank by a duly authorized officer of Acquisition Corp., and with
respect to Target Shares consisting of Book-Entry Shares, evidence that
all actions described in Section 3(b) of the Acquisition Corp. Pledge
Agreement which are necessary to create and perfect the security
interests pursuant to the Acquisition Corp. Pledge Agreement in
accordance with Article 8 of the Uniform Commercial Code of the State
of New York have been taken. The shares pledged on the Closing Date
pursuant to the Acquisition
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Corp. Pledge Agreement shall constitute all Shares owned by Acquisition
Corp. or any of its affiliates, whether acquired in the Exchange Offer
or otherwise.
(f) Exchange Offer Documents; Merger Agreement. The General
Administrative Agent shall have received certified true copies of the
Exchange Offer Documents and the Merger Agreement, in each case as in
effect on the Closing Date.
(g) Pro Forma Balance Sheet; Financial Statements. The Lenders
shall have received (i) the Pro Forma Balance Sheet, (ii) the audited
consolidated financial statements described in Section 7.1 and (iii)
unaudited interim consolidated financial statements of Holdings for the
most recent fiscal quarterly period ended subsequent to the date of the
latest applicable financial statement delivered pursuant to clause (ii)
of this paragraph as to which such financial statements have been made
publicly available.
(h) Business Plan. The Lenders shall have received a business
plan for the Company and its Subsidiaries (including Safety-Kleen) for
the 1998 fiscal year and a written analysis of the business and
prospects of the Company and its Subsidiaries for the period from the
Closing Date through the final maturity of the Term Loans, in each case
as set forth in the Confidential Information Memorandum dated February
1998.
(i) Environmental Reports. The General Administrative Agent
shall have received reports prepared by Dames & Moore with respect to
environmental matters relating to Safety-Kleen, in form and substance
satisfactory to the Lenders.
(j) Closing Certificate. The Administrative Agents shall have
received, with a counterpart for each Lender, a certificate of each
Loan Party, dated the Closing Date, substantially in the form of
Exhibit I, with appropriate insertions and attachments, satisfactory in
form and substance to the Administrative Agents, executed by the
President or any Vice President and the Secretary or any Assistant
Secretary of such party.
(k) Fees. The Administrative Agents and the Arranger shall
have received the fees to be received on the Closing Date referred to
in Sections 3.3 and 6.1.
(l) Legal Opinions. The Administrative Agents shall have
received, with a counterpart for each Lender, the following executed
legal opinions:
(i) the executed legal opinion of Katten,
Muchin & Zavis, U.S. counsel to the Company and the other Loan
Parties, in form and substance reasonably satisfactory to the
General Administrative Agent;
(ii) the executed legal opinion of Ivan R.
Cairns, general counsel to Laidlaw, the Canadian Borrower and
its Subsidiaries, in form and substance reasonably
satisfactory to the General Administrative Agent;
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(iii) the executed legal opinion of Tory Tory
DesLauriers & Binnington, Canadian counsel to the Lenders, in
form and substance reasonably satisfactory to the General
Administrative Agent; and
(iv) the executed legal opinion of South Carolina
counsel to the Company and the other Loan Parties, in form and
substance reasonably satisfactory to the General
Administrative Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative
Agents may reasonably require.
(m) Validity of Liens. The Security Documents shall be
effective to create in favor of the General Administrative Agent or
Canadian Administrative Agent, as the case may be, a legal, valid and
enforceable first (except for prior Liens not prohibited by Section
10.3) security interest in and lien upon the Collateral. The General
Administrative Agent shall have received evidence in form and substance
satisfactory to it that all filings, recordings, registrations and
other actions, including, without limitation, the filing of duly
executed financing statements on form UCC-1, necessary or, in the
opinion of the General Administrative Agent, desirable to perfect the
Liens created by the Security Documents shall have been completed.
(n) Title Insurance Policy. The General Administrative Agent
shall have received in respect of each parcel covered by each Existing
Mortgage a mortgagee's title policy (or policies) or marked up
unconditional binder for such insurance dated the Closing Date. Each
such policy shall (i) be in an amount satisfactory to the General
Administrative Agent; (ii) be issued at ordinary rates; (iii) insure
that the Mortgage insured thereby creates a valid first Lien on such
parcel free and clear of all defects and encumbrances, except such as
may be approved by the General Administrative Agent; (iv) name the
General Administrative Agent for the benefit of the Lenders as the
insured thereunder; (v) be in the form of ALTA Loan Policy - 1970
(Amended 10/17/70); (vi) contain such endorsements and affirmative
coverage as the General Administrative Agent may request and (vii) be
issued by title companies satisfactory to the General Administrative
Agent (including any such title companies acting as co-insurers or
reinsurers, at the option of the General Administrative Agent). The
General Administrative Agent shall have received evidence satisfactory
to it that all premiums in respect of each such policy, and all charges
for mortgage recording tax, if any, have been paid.
(o) Copies of Documents. The General Administrative Agent
shall have received a copy of all recorded documents referred to, or
listed as exceptions to title in, the title policy or policies referred
to in Section 8.1(n) and a copy, certified by such parties as the
General Administrative Agent may deem appropriate, of all other
documents affecting the property covered by each Mortgage.
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(p) Lien Searches. The General Administrative Agent shall have
received the results of a recent search by a Person satisfactory to the
General Administrative Agent, of the Uniform Commercial Code, judgement
and tax lien filings which may have been filed with respect to personal
property of the Loan Parties, and the results of such search shall be
satisfactory to the General Administrative Agent.
(q) Insurance. The General Administrative Agent shall have
received evidence in form and substance satisfactory to it that all of
the requirements of Section 9.5 of this Agreement and Section 5.3 of
the Guarantee and Collateral Agreement shall have been satisfied.
8.2 Conditions to Extensions of Credit made on the Merger
Date. The agreement of each Lender to make Extensions of Credit on the Merger
Date requested to be made by it is subject to the satisfaction, immediately
prior to or concurrently with the making of such Extension of Credit on the
Merger Date, of the following conditions precedent:
(a) Merger Agreement. (i) The terms and conditions of
the Merger Agreement shall not have been amended, waived or
modified as to price, consideration, conditions, termination
or expiration or in any other material respect without the
prior approval of the General Administrative Agent and the
Required Lenders;
(ii) the Merger shall have been consummated in
accordance with the Merger Agreement and applicable law; and
(iii) all conditions precedent to the
consummation of the Merger shall have been satisfied or waived
with the Required Lenders' consent.
(b) Solvency Certificate. The General Administrative
Agent shall have received a solvency certificate of the
Company, in form, scope and substance satisfactory to the
General Administrative Agent and its legal counsel.
(c) Collateral. All actions required by Section 9.10
in respect of all Subsidiaries and assets acquired on the
Merger Date (including delivery of legal opinions with respect
thereto as provided in Section 9.10) shall have been taken so
that on the Merger Date the General Administrative Agent shall
have a duly perfected first priority security interest in all
such assets.
(d) Legal Opinions. The Administrative Agents shall
have received, with a counterpart for each Lender, the
executed legal opinion of Katten, Muchin & Zavis, U.S. counsel
to the Company and the other Loan Parties, in form and
substance reasonably satisfactory to the General
Administrative Agent. Such legal opinion shall cover such
other matters incident to the transactions
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contemplated by this Agreement as the Administrative Agents
may reasonably require.
(e) Lien Searches. The General Administrative Agent
shall have received the results of a recent search by a Person
satisfactory to the General Administrative Agent, of the
Uniform Commercial Code, judgement and tax lien filings which
may have been filed with respect to personal property of
Safety-Kleen and its Subsidiaries, and the results of such
search shall be satisfactory to the General Administrative
Agent.
(f) Insurance. The General Administrative Agent shall
have received evidence in form and substance satisfactory to
it that all of the requirements of Section 9.5 of this
Agreement and Section 5.3 of the Guarantee and Collateral
Agreement shall have been satisfied with respect to the
Surviving Corporation and its Subsidiaries.
(g) all outstanding indebtedness of Safety-Kleen and
its subsidiaries (other than the indebtedness set forth on
Schedule 8.2(g) hereto) shall have been repaid in full.
8.3 Conditions to Extension of Credit. The agreement of each
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, its initial Extension of Credit) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party in or pursuant to
the Loan Documents shall be true and correct in all material respects
on and as of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
(c) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement, the other Loan
Documents and the Merger Agreement shall be satisfactory in form and
substance to the General Administrative Agent, and the General
Administrative Agent shall have received such other documents and legal
opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
Each request by a Borrower for an Extension of Credit hereunder shall constitute
a representation and warranty by each Borrower as of the date thereof that the
conditions contained in this subsection have been satisfied.
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SECTION 9. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments
remain in effect, any Loan, Reimbursement Obligation, Acceptance Reimbursement
Obligation, Acceptance Note or Letter of Credit remains outstanding or any
amount is owing to any Lender, the General Administrative Agent or the Canadian
Administrative Agent hereunder or under any other Loan Document, the Company
shall and (except in the case of delivery of financial information, reports and
notices) shall cause each of its Subsidiaries to:
9.1 Financial Statements. Furnish to the General
Administrative Agent, the Canadian Administrative Agent and each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of Holdings, a copy of the
consolidated and consolidating balance sheets of Holdings and its
consolidated Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income and retained
earnings and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on (in the
case of such consolidated statements and balance sheet) without a
"going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by Coopers & Lybrand or other
independent certified public accountants of nationally recognized
standing, and certified (in the case of such consolidating statements
and balance sheet) by a Responsible Officer as being fairly stated in
all material respects; and
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of Holdings, the unaudited consolidated and consolidating
balance sheets of Holdings and its consolidated Subsidiaries as at the
end of such quarter and the related unaudited consolidated and
consolidating statements of income and retained earnings and of cash
flows of Holdings and its consolidated Subsidiaries for such quarter
and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
9.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 9.1(a), a certificate of the independent
certified public accountants reporting on
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such financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or Event of
Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 9.1(a) and (b), (i) a certificate of a
Responsible Officer stating that, to the best of such Responsible
Officer's knowledge, during such period the Company has observed or
performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate and (ii) a
compliance certificate of a Responsible Officer containing all
information necessary, or reasonably requested by the General
Administrative Agent, for determining compliance by the Company and its
Subsidiaries with the provisions of Section 10 of this Agreement as of
the last day of the fiscal quarter or fiscal year of the Company, as
the case may be;
(c) prior to the end of each fiscal year of the Company, a
copy of the projections by the Company of the operating budget and cash
flow budget of the Company and its Subsidiaries for the succeeding
fiscal year, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice and that
such Responsible Officer has no reason to believe they are incorrect or
misleading in any material respect;
(d) within five days after the same are sent, copies of all
financial statements and reports which the Company or Holdings sends to
its stockholders, and within five days after the same are filed, copies
of all financial statements and reports which the Company or Holdings
may make to, or file with, the Securities and Exchange Commission or
any successor or analogous Governmental Authority (including, but not
limited to, each Exchange Offer Document); and
(e) promptly, such additional financial and other information
as any Lender may from time to time reasonably request.
9.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Company or its Subsidiaries, as the case may be.
9.4 Conduct of Business and Maintenance of Existence. Continue
to engage in business of the same general type as now conducted by it and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights,
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privileges and franchises necessary or desirable in the normal conduct of its
business except as otherwise permitted pursuant to Section 10.5; comply with all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, have a Material Adverse
Effect.
9.5 Maintenance of Property; Insurance. Keep all property
useful and necessary in its business in good working order and condition;
maintain with financially sound and reputable insurance companies insurance on
all its property in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies engaged in the
same or a similar business (including, but not limited to, general liability
insurance in an amount of at least $100,000,000 and a deductible of not more
than $5,000,000 per occurrence).
9.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and permit
representatives of the Administrative Agents (or, with the coordination of the
Administrative Agents, the Lenders) to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Company and its Subsidiaries with officers and employees of the Company and its
Subsidiaries and with its independent certified public accountants.
9.7 Notices. Promptly give notice to the Administrative Agents
and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Company or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Company or any
of its Subsidiaries in which the amount involved is $5,000,000 or more
and not covered by insurance or in which injunctive or similar relief
is sought;
(d) the following events, as soon as possible and in any event
within 30 days after the Company knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or
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Insolvency of, any Multiemployer Plan or (ii) the institution of
proceedings or the taking of any other action by the PBGC or the
Company or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the terminating, Reorganization
or Insolvency of, any Plan;
(e) the occurrence or expected occurrence of any event that is
reasonably likely to result in the Company or any of its Subsidiaries
being unable to obtain, renew, or comply with any Environmental Permit
the absence of which could have a Material Adverse Effect, or being
unable to comply with any Environmental Law in a manner that could have
a Material Adverse Effect; and
(f) any material adverse change in the business, operations,
property, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries taken as a whole.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto.
9.8 Environmental Laws. (a) (i) Comply with all Environmental
Laws applicable to it, and obtain, comply with and maintain any and all
Environmental Permits necessary for its operations as conducted and as planned;
and (ii) take all reasonable efforts to ensure that all of its tenants,
subtenants, contractors, subcontractors, and invitees comply with all
Environmental Laws, and obtain, comply with and maintain any and all
Environmental Permits, applicable to any of them insofar as any failure to so
comply, obtain or maintain reasonably could adversely affect the Company or any
Subsidiary. For purposes of this Section 9.8(a), noncompliance by the Company
and any of its Subsidiaries with any applicable Environmental Law or
Environmental Permit shall be deemed not to constitute a breach of this
covenant; provided that, upon learning of any actual or suspected noncompliance,
the Company and its Subsidiaries shall promptly undertake all reasonable efforts
to achieve compliance; and provided further that, in any case, such
non-compliance, and any other noncompliance with any Environmental Law,
individually or in the aggregate, could not reasonably be expected to give rise
to a Material Adverse Effect.
(b) Promptly comply with all orders and directives of all
Governmental Authorities regarding Environmental Laws, other than such orders
and directives as to which an appeal has been timely and properly taken in good
faith and provided that the pendency of any and all such appeals does not give
rise to a Material Adverse Effect.
(c) Prior to acquiring any ownership or leasehold interest in
real property for which a permit would be required for operation as a hazardous
waste facility, or any other real property or other interest in any real
property that could reasonably be expected to give rise to the Company or any of
its Subsidiaries being found to be subject to potential liability under any
Environmental Law: (i) obtain a written report by a reputable environmental
consultant of
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the environmental consultant's assessment of the presence or potential presence
of significant levels of any Materials of Environmental Concern on, under, in,
or about the property, or of other conditions or operations that could give rise
to potentially significant liability under or violations of Environmental Law
relating to such acquisition; and (ii) inform the General Administrative Agent
of its plans to acquire such interest in real property and, upon the General
Administrative Agent's request, afford the General Administrative Agent a
reasonable opportunity to review and discuss the contents of such report with
the environmental consultant who prepared it and a knowledgeable representative
of the Company.
(d) Promptly upon the General Administrative Agent's request
if there has been an Event of Default which has not been fully and timely cured,
permit an environmental consultant whom the General Administrative Agent in its
discretion designates to perform an environmental assessment (including, without
limitation: reviewing documents; interviewing knowledgeable persons; and
sampling and analyzing soil, air, surface water, groundwater, building
materials, and/or other media or substances) in or about property owned or
leased by the Company or any of its Subsidiaries, or on which operations of the
Company or any of its Subsidiaries otherwise take place. Such environmental
assessment shall be in form, scope, and substance satisfactory to the General
Administrative Agent. The Company and its Subsidiaries shall cooperate fully in
the conduct of such environmental assessment, and shall pay the costs of such
environmental assessment immediately upon written demand by the General
Administrative Agent. Pursuant to this Section 9.8(d), the General
Administrative Agent shall have the right, but shall not have any duty, to
request and/or obtain any such environmental assessment.
9.9 Further Assurances. Upon the request of the General
Administrative Agent, promptly perform or cause to be performed any and all acts
and execute or cause to be executed any and all documents (including, without
limitation, financing statements and continuation statements) for filing under
the provisions of the Uniform Commercial Code or any other Requirement of Law
which are necessary or advisable to maintain in favor of the General
Administrative Agent or the Canadian Administrative Agent, as the case may be,
for the benefit of the Lenders, Liens on the Collateral that are duly perfected
in accordance with all applicable Requirements of Law.
9.10 Additional Collateral. (a) With respect to any assets
acquired after the Closing Date by the Company or any of its Subsidiaries (other
than each of ECDC East, L.C., ECDC Services, L.C., Osco Treatment Systems of
Mississippi, Inc., USPCI of Mississippi, Inc., so long as such entity is not,
directly or indirectly, a wholly-owned subsidiary of the Company) that are
intended to be subject to the Lien created by any of the Security Documents but
which are not so subject (other than any assets described in paragraph (b) or
(c) of this Section), promptly (and in any event within 30 days after the
acquisition thereof): (i) execute and deliver to the General Administrative
Agent or the Canadian Administrative Agent, as the case may be, such amendments
to the relevant Security Documents or such other documents as the General
Administrative Agent shall deem necessary or advisable to grant to the General
Administrative Agent or the Canadian Administrative Agent, as the case may be,
for the
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benefit of the Lenders, a Lien on such assets, (ii) take all actions necessary
or advisable to cause such Lien to be duly perfected in accordance with all
applicable Requirements of Law, including, without limitation, the filing of
financing statements in such jurisdictions as may be requested by the General
Administrative Agent or the Canadian Administrative Agent, as the case may be,
and (iii) if requested by the General Administrative Agent, deliver to the
General Administrative Agent legal opinions relating to the matters described in
clauses (i) and (ii) immediately preceding, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the General
Administrative Agent.
(b) With respect to any Person (other than a Subsidiary of the
Canadian Borrower) that, subsequent to the Closing Date, becomes a Subsidiary,
including, without limitation on the Merger Date, Safety-Kleen and its
Subsidiaries, promptly upon the request of the General Administrative Agent: (i)
execute and deliver to the General Administrative Agent, for the benefit of the
Lenders, a new pledge agreement or such amendments to the Guarantee and
Collateral Agreement as the General Administrative Agent shall deem necessary or
advisable to grant to the General Administrative Agent, for the benefit of the
Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by the
Company or any of its Subsidiaries, (ii) deliver to the General Administrative
Agent the certificates representing such Capital Stock, together with undated
stock powers executed and delivered in blank by a duly authorized officer of the
Company or such Subsidiary, as the case may be, (iii) cause such new Subsidiary
(A) to become a party to the Guarantee and Collateral Agreement, and (B) to take
all actions necessary or advisable to cause the Lien created by the Guarantee
and Collateral Agreement to be duly perfected in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
statements in such jurisdictions as may be requested by the General
Administrative Agent and (iv) if requested by the General Administrative Agent,
deliver to the General Administrative Agent legal opinions relating to the
matters described in clauses (i), (ii) and (iii) immediately preceding, which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the General Administrative Agent.
(c) With respect to any Person that, subsequent to the Closing
Date, becomes a Subsidiary of the Canadian Borrower, promptly upon the request
of the General Administrative Agent: (i) execute and deliver to the Canadian
Administrative Agent a new pledge agreement or such amendments to the Canadian
Collateral Documents as the General Administrative Agent shall deem necessary or
advisable to grant to the Canadian Administrative Agent, for the benefit of the
Canadian Lenders, a Lien on the Capital Stock of such Subsidiary which is owned
by the Canadian Borrower or any of its Subsidiaries, (ii) deliver to the
Canadian Administrative Agent any certificates representing such Capital Stock,
together with undated stock powers executed and delivered in blank by a duly
authorized officer of the Canadian Borrower or such Subsidiary, as the case may
be, and take or cause to be taken all such other actions under the law of the
jurisdiction of organization of such Subsidiary as may be necessary or advisable
to perfect such Lien on such Capital Stock, (iii) cause such Subsidiary to
become a guarantor under the Canadian Collateral Documents and to grant security
interests in its personal property assets and (iv) if requested by the General
Administrative Agent,
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deliver to the General Administrative Agent legal opinions relating to the
matters described in clauses (i), (ii) and (iii) immediately preceding, which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the General Administrative Agent.
(d) With respect to any parcel of real property having a book
value in excess of $1,000,000 acquired by the Company or any of its Subsidiaries
after the Closing Date (including any such real property owned by any Person
when it becomes a Subsidiary), if requested by the General Administrative Agent,
promptly provide to the General Administrative Agent a mortgage on such
property, together with such title insurance policies, surveys and legal
opinions related thereto as shall be reasonably requested by the General
Administrative Agent.
9.11 Canadian Benefit and Pension Plans. (a) For each existing
Canadian Pension Plan and Canadian Benefit Plan and for any Canadian Pension
Plan or Canadian Benefit Plan hereafter adopted, the Canadian Borrower and its
Subsidiaries shall in a timely fashion perform all obligations (including
fiduciary, funding, investment and administration obligations) required to be
performed in connection with such plan and the funding media therefor in
accordance with the terms of such plan and all Requirements of Law.
(b) Each of the Canadian Borrower and its Subsidiaries shall
deliver to the General Administrative Agent (A) if requested by the Canadian
Administrative Agent, acting reasonably, promptly after the filing thereof by
the Canadian Borrower or such Subsidiary with any applicable Governmental
Authority, copies of each annual and other return, report or valuation with
respect to each Canadian Pension Plan, copies of any actuarial report with
respect to each Canadian Pension Plan (whether or not required by any
Governmental Authority) and (B) promptly after receipt thereof, a copy of any
direction, notice or other communication (i) in respect of any breach of
Applicable Law, (ii) which would have the effect of increasing the funding
obligation in respect of each such plan, or (iii) which could result in the
imposition of any Lien on any of the properties or assets of the Canadian
Borrower or such Subsidiary, and any order or ruling that the Canadian Borrower
or such Subsidiary may receive from any applicable Governmental Authority with
respect to any Canadian Pension Plan.
9.12 Interest Rate Protection. Within 90 days after the
Closing Date, obtain interest rate protection for a period through March 31,
2000 for a notional amount at least equal to 40% of Consolidated Total Funded
Debt that bears interest at a floating rate on terms and conditions satisfactory
to the General Administrative Agent.
9.13 Consummation of Merger. As promptly as practicable, but
in any event within 60 days after the Closing Date, consummate the Merger in
accordance with the terms of the Merger Agreement.
9.14 Pledge Agreement Supplement. The Company shall cause
Acquisition Corp. to deliver to the General Administrative Agent on the date of
purchase an executed
<PAGE> 97
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Pledge Agreement Supplement, substantially in the form of Exhibit A to the
Acquisition Corp. Pledge Agreement (a "Pledge Agreement Supplement"), covering
any Additional Pledged Stock (as defined in the Acquisition Corp. Pledge
Agreement) purchased by Acquisition Corp., together with the stock certificates
representing such Additional Pledged Stock and appropriate undated stock powers
duly executed in blank for each such stock certificate.
SECTION 10. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments
remain in effect, any Loan, Reimbursement Obligation, Acceptance Reimbursement
Obligation, Acceptance Note or Letter of Credit remains outstanding or any
amount is owing to any Lender or either Administrative Agent hereunder or under
any other Loan Document, the Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly:
10.1 Financial Condition Covenants.
(a) Consolidated Total Leverage Ratio. Permit the Consolidated
Total Leverage Ratio as at the last day of any fiscal quarter of the Company
ending during any fiscal year set forth below, commencing with the fiscal
quarter ending November 30, 1998, to exceed the ratio set forth below opposite
such fiscal year:
<TABLE>
<CAPTION>
Consolidated Total
Fiscal Year Leverage Ratio
----------- --------------
<S> <C>
1999 4.50:1.00
2000 3.75:1.00
2001 3.25:1.00
2002 2.75:1.00
2003 2.50:1.00
2004 and thereafter 2.00:1.00
</TABLE>
(b) Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio as at the last day of any fiscal quarter ending during any fiscal
year set forth below, commencing with the fiscal quarter ending November 30,
1998, to be less than the ratio set forth below opposite such fiscal year:
<TABLE>
<CAPTION>
Fixed
Fiscal Year Charge Coverage Ratio
----------- ---------------------
<S> <C>
1999 1.25:1.00
2000 1.25:1.00
2001 and thereafter 1.50:1.00
</TABLE>
(c) Interest Coverage Ratio. Permit the Interest Coverage
Ratio for any period of four consecutive fiscal quarters of the Company (or, if
less, the number of full fiscal
<PAGE> 98
92
quarters ending subsequent to the Closing Date) ending with any fiscal quarter
ending during any fiscal year set forth below, commencing with the fiscal
quarter ending November 30, 1998, to be less than the ratio set forth below
opposite such fiscal year:
<TABLE>
<CAPTION>
Interest
Fiscal Year Coverage Ratio
----------- --------------
<S> <C>
1999 2.00:1.00
2000 2.25:1.00
2001 2.50:1.00
2002 2.75:1.00
2003 and thereafter 3.00:1.00
</TABLE>
(d) Maximum Ratio of Contingent Obligations to Operating Cash
Flow. Permit the ratio of (i) Consolidated Contingent Obligations on the last
day of any fiscal quarter ending during any fiscal year, commencing with the
fiscal quarter ending November 30, 1998, to (ii) Consolidated Operating Cash
Flow for the period of four consecutive fiscal quarters ending on such last day
to be greater than 1.00 to 1.00.
For purposes of calculating the foregoing covenants of this Section 10.1 for any
period of four full fiscal quarters, the applicable income statement items for
any Person acquired by the Company or its Subsidiaries during such period shall
be included on a pro forma basis for such period of four full fiscal quarters
(assuming the consummation of each such acquisition and the incurrence or
assumption of any Indebtedness in connection therewith occurred on the first day
of such period of four full fiscal quarters and assuming only such cost
reductions as are related to such acquisition and are immediately realizable as
of the date of such acquisition) if (i) the consolidated balance sheet of such
acquired Person and its consolidated Subsidiaries as at the end of the period
preceding the acquisition of such Person and the related consolidated statements
of income and stockholders' equity and of cash flows for such period have been
reported on without a qualification arising out of the scope of the audit (other
than a "going concern" or like qualification or exception) by independent
certified public accountants of nationally recognized standing and (ii) such
audited consolidated financial statements have been previously provided to the
General Administrative Agent and the Lenders.
10.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness of the Borrowers under this Agreement;
(b) Indebtedness of the Company to any Subsidiary and, to the
extent permitted by Section 10.8, of any Subsidiary to the Company or
any other Subsidiary;
(c) Indebtedness of the Company and any of its Subsidiaries
incurred to finance the acquisition of fixed or capital assets (whether
pursuant to a loan, a Financing Lease
<PAGE> 99
93
or otherwise) in an aggregate principal amount not exceeding as to the
Company and its Subsidiaries $40,000,000 at any one time outstanding;
(d) Indebtedness of the Canadian Borrower under the Canadian
Operating Facility incurred for working capital purposes in an
aggregate principal amount not exceeding C$35,000,000 at any one time
outstanding;
(e) Indebtedness of the Company under the NationsBank Line of
Credit incurred for working capital purposes in an aggregate principal
amount not exceeding $25,000,000 at any one time outstanding;
(f) Indebtedness outstanding on the date hereof and listed on
Schedule 10.2(f) and any refinancings, refundings, renewals or
extensions thereof (excluding any Indebtedness required to be repaid
pursuant to Section 8.2(g));
(g) Indebtedness of a corporation which becomes a Subsidiary
after the date hereof, provided that (i) such indebtedness existed at
the time such corporation became a Subsidiary and was not created in
anticipation thereof and (ii) immediately after giving effect to the
acquisition of such corporation by the Company no Default or Event of
Default shall have occurred and be continuing;
(h) Indebtedness of the Company of up to $400,000,000 under
the High Yield Notes, provided that the Borrowers and the General
Administrative Agent shall have entered into a written supplement to
this Agreement whereby the Company agrees to maintain a senior leverage
ratio of not greater than certain levels to be agreed by the Company
and the General Administrative Agent;
(i) Indebtedness in the form of Guarantee Obligations
permitted by Section 10.4; and
(j) additional Indebtedness of the Company not exceeding
$50,000,000 in aggregate principal amount at any one time outstanding.
10.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the
Company or its Subsidiaries, as the case may be, in conformity with
GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a
<PAGE> 100
94
period of more than 60 days or which are being contested in good faith
by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company or such Subsidiary;
(f) Liens in existence on the date hereof listed on Schedule
10.3(f), securing Indebtedness permitted by Section 10.2(f), provided
that no such Lien is spread to cover any additional property after the
Closing Date and that the amount of Indebtedness secured thereby is not
increased;
(g) Liens securing Indebtedness of the Company and its
Subsidiaries permitted by Section 10.2(c) incurred to finance the
acquisition of fixed or capital assets, provided that (i) such Liens
shall be created substantially simultaneously with the acquisition of
such fixed or capital assets, (ii) such Liens do not at any time
encumber any property other than the property financed by such
Indebtedness, (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the principal amount of Indebtedness secured by any
such Lien shall at no time exceed 90% of the original purchase price of
such property at the time it was acquired;
(h) Liens on assets of any Foreign Subsidiary securing
Indebtedness of such Foreign Subsidiary permitted by Section 10.2(f);
(i) Liens on the property or assets of a corporation which
becomes a Subsidiary after the date hereof securing Indebtedness
permitted by Section 10.2(g), provided that (i) such Liens existed at
the time such corporation became a Subsidiary and were not created in
anticipation thereof, (ii) any such Lien is not spread to cover any
property or assets of such corporation after the time such corporation
becomes a Subsidiary, and (iii) the amount of Indebtedness secured
thereby is not increased;
(j) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to the Company and all Subsidiaries)
$5,000,000 in aggregate amount at any time outstanding; and
<PAGE> 101
95
(k) Liens created pursuant to the Security Documents.
10.4 Limitation on Guarantee Obligations. Create, incur,
assume or suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date hereof and
listed on Schedule 10.4;
(b) Guarantee Obligations of the Company or any of its
Subsidiaries in respect of Indebtedness and other obligations of
Subsidiaries which are permitted to be incurred by such Subsidiaries
hereunder, provided that such Guarantee Obligations shall be deemed
"investments" and must be permitted under Section 10.8;
(c) Guarantee Obligations in respect of, or in the nature of,
performance bonds or performance letters of credit or similar
obligations incurred in the ordinary course of business;
(d) Guarantee Obligations incurred after the date hereof in an
aggregate amount not to exceed (i) $75,000,000 at any one time
outstanding for the Company and its Domestic Subsidiaries and (ii)
$25,000,000 at any one time outstanding for the Company's Foreign
Subsidiaries;
(e) the Guarantee Obligations of Subsidiaries in respect of
the High Yield Notes, provided that such Guarantee Obligations are
subordinated to the obligations of the Subsidiaries under the Loan
Documents to the same extent as the Company's obligations under the
High Yield Notes are subordinated to the Company's obligations under
the Loan Documents; and
(f) the Guarantee Obligations under this Agreement or any
Security Document.
10.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Company (other than the Canadian
Borrower) may be merged or consolidated with or into the Company
(provided that the Company shall be the continuing or surviving
corporation) or with or into any one or more wholly owned Subsidiaries
of the Company (provided that the wholly owned Subsidiary or
Subsidiaries shall be the continuing or surviving corporation);
(b) any wholly owned Subsidiary (other than the Canadian
Borrower) may sell, lease, transfer or otherwise dispose of any or all
of its assets (upon voluntary
<PAGE> 102
96
liquidation or otherwise) to the Company or any other wholly owned
Subsidiary of the Company;
(c) the Merger may be consummated in accordance with the terms
of the Merger Agreement; and
(d) the dissolution of Corsan Trucking, Inc.
10.6 Limitation on Disposition of Assets. Dispose of any of
its property, business or assets (including, without limitation, receivables and
leasehold interests), whether now owned or hereafter acquired, or, in the case
of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock
to any Person other than the Company or any wholly owned Subsidiary, except:
(a) the sale or other Disposition of obsolete or worn out
property in the ordinary course of business;
(b) the sale or other Disposition of any property (other than
inventory), provided that the aggregate book value of all assets so
sold or disposed of in any period of twelve consecutive months shall
not exceed 5% of consolidated total assets of the Company and its
Subsidiaries as at the beginning of such twelve-month period;
(c) the sale of inventory in the ordinary course of business;
(d) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection
with the compromise or collection thereof;
(e) after the consummation of the Merger, the sale of
Safety-Kleen's European operations for fair market value;
(f) after the consummation of the Merger, the sale of
Safety-Kleen's oil recovery services business for fair market value;
and
(g) as permitted by Section 10.5(b).
10.7 Limitation on Dividends. Declare or pay any dividend
(other than dividends payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Company or any of its Subsidiaries or any warrants or options to purchase
any such Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Company or any Subsidiary (such
declarations, payments, setting apart, purchases, redemptions, defeasances,
retirements, acquisitions and distributions being herein called
<PAGE> 103
97
"Restricted Payments"), except that any Subsidiary may make Restricted Payments
to the Company or any wholly owned Subsidiary of the Company and so long as, on
the date of such Restricted Payment, both before and after giving effect
thereto, no Default or Event of Default shall have occurred and be continuing
(a) the Company may make Restricted Payments to Holdings to service the Seller
Note, the Westinghouse Debt, the CPCFA Debt and the Tooele County Debt, provided
that (i) each such Restricted Payment shall be made on the date on which a cash
payment of interest under the Seller Note or of principal or interest under the
Westinghouse Debt, the CPCFA Debt or the Tooele County Debt, as the case may be,
is due and shall be in an amount not greater than the amount of such cash
payment, and such cash payment in respect of such Indebtedness shall be made by
Holdings on such date and (b) the Company may make Restricted Payments to
Holdings to provide for payment in the ordinary course of business of taxes,
directors' fees, stock exchange fees, and other costs and expenses of its
operations as a public company permitted by the Guarantee and Collateral
Agreement.
10.8 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person,
except :
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) acquisitions of interests in any Persons (other than
Safety-Kleen) engaged in the hazardous and industrial waste management
services industry, provided that (i) the aggregate amount of cash
expended and Indebtedness assumed in connection with all such
investments does not exceed $100,000,000 in the aggregate during the
twelve month period following the Closing Date or $200,000,000 in the
aggregate during the term of this Agreement and (ii) after giving pro
forma effect to any such investment, no Default or Event of Default
shall have occurred and be continuing (including, without limitation,
pursuant to Section 10.1, with compliance with Section 10.1 being
determined on a pro forma basis as determined in the manner described
in the last paragraph of Section 10.1);
(d) loans to officers of the Company listed on Schedule 10.8
in aggregate principal amounts outstanding not to exceed the respective
amounts set forth for such officers on said Schedule;
(e) loans and advances to employees of the Company or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount for the Company and
its Subsidiaries not to exceed $1,000,000 at any one time outstanding;
<PAGE> 104
97
(f) investments by the Company and its Subsidiaries in the
Subsidiaries of the Company that are parties to the Guarantee and
Collateral Agreement;
(g) investments by the Company and its Domestic Subsidiaries
in the Canadian Borrower, the proceeds of which are used solely to
repay the Canadian Borrower Obligations, and additional investments by
the Company and its Domestic Subsidiaries in the Canadian Borrower in
an amount not exceeding $15,000,000 in the aggregate during the term of
this Agreement;
(h) investments by the Canadian Borrower in any of its
Subsidiaries that have guaranteed the Canadian Borrower Obligations;
(i) loans by the Company to its employees in connection with
management incentive plans in an aggregate amount not to exceed
$1,000,000;
(j) acquisitions of interests in Safety-Kleen pursuant to the
Exchange Offer and the Merger; and
(k) the loan made by the Company on the date hereof to
Safety-Kleen in the principal amount of $46,000,000.
10.9 Limitation on Optional Payments and Modifications of
Debt Instruments and other Instruments. (a) Make any optional payment or
prepayment on or redemption or purchase of any Indebtedness (other than
Indebtedness under this Agreement), (b) amend, modify or change, or consent or
agree to any amendment, modification or change to any of the terms relating to
the payment or prepayment or principal of or interest on any such Indebtedness
(other than any such amendment, modification or change which would extend the
maturity or reduce the amount of any payment of principal thereof or which would
reduce the rate or extend the date for payment of interest thereon), (c) amend
the subordination provisions of the Seller Note or the High Yield Notes, if any,
or (d) amend, modify or change in any material respect the terms of the Exchange
Offer or the Merger Agreement.
10.10 Limitation on Transactions with Affiliates. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of the Company's or such Subsidiary's business and (c) upon fair
and reasonable terms no less favorable to the Company or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate.
10.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by the Company or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Company or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such
<PAGE> 105
99
Person on the security of such property or rental obligations of the Company or
such Subsidiary, except for any such arrangements with respect to real or
personal property with respect to which the aggregate sales price shall not
exceed $25,000,000.
10.12 Limitation on Changes in Fiscal Year. Permit the fiscal
year of the Company to end on a day other than August 31, unless the Company
shall have provided to the General Administrative Agent evidence satisfactory to
it that such change will have no effect on the calculation of, or compliance by
the Company with, the covenants set forth in Section 10.1; or permit the fiscal
years of the Company and Holdings to end on different days.
10.13 Limitation on Negative Pledge Clauses. Enter into with
any Person any agreement, other than (a) this Agreement and (b) any industrial
revenue bonds, purchase money mortgages or Financing Leases permitted by this
Agreement (in which cases, any prohibition or limitation shall only be effective
against the assets financed thereby), which prohibits or limits the ability of
the Company or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired.
10.14 Limitation on Lines of Business. Enter into any
business, either directly or through any Subsidiary, except for those businesses
in which the Company and its Subsidiaries, and Safety-Kleen and its
Subsidiaries, are engaged on the date of this Agreement or which are directly
related thereto.
10.15 Canadian Benefit and Pension Plans. Permit the Canadian
Borrower or any of its Subsidiaries to directly, or indirectly, (a) terminate or
cause to terminate, in whole or in part, or initiate the termination of, in
whole or in part, any Canadian Pension Plan so as to result in any liability to
any of them which could have a Material Adverse Effect, (b) permit to exist any
event or condition in respect of any Canadian Pension Plan which presents the
risk of liability of the Canadian Borrower or any of its Subsidiaries which
could have a Material Adverse Effect, (c) enter into any new Canadian Pension
Plan or Canadian Benefit Plan or modify any such existing plans so as to
increase its obligations thereunder which could result in any liability to any
of them and which could have a Material Adverse Effect; (d) permit the greater
of the going concern unfunded liability or the solvency deficiency under
Canadian Pension Plans, but only to the extent they are permitted to remain
unfunded under Requirements of Law, to exceed (in the aggregate, taking into
account all Canadian Pension Plans of the Canadian Borrower and its
Subsidiaries) C$5,000,000, (e) fail to make minimum required contributions to
amortize any funding deficiencies under a Canadian Pension Plan within the time
period set out in any Requirements of Law, (f) fail to make a required
contribution under any Canadian Pension Plan or Canadian Benefit Plan which
could result in the imposition of a Lien upon the assets of any of the Canadian
Borrower or any of its Subsidiaries within 30 days after the date such payment
becomes due, unless such payment is being contested pursuant to Section 9.3; (g)
make any improper withdrawals or applications of assets of a Canadian Pension
Plan or Canadian Benefit Plan or (h) accept payment of any amount from any
Canadian Pension Plan.
<PAGE> 106
100
10.16 Hedging Agreements. Enter into any Hedging Agreement
outside the ordinary course of business or for speculative purposes.
SECTION 11. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Either Borrower shall fail to pay any principal of any
Loan when due in accordance with the terms thereof or hereof; or either
Borrower shall fail to pay any interest on any Loan, or any other
amount payable hereunder, within five days after any such interest or
other amount becomes due in accordance with the terms thereof or
hereof; or
(b) Any representation or warranty made or deemed made by
either Borrower or any other Loan Party herein or in any other Loan
Document or which is contained in any certificate, document or
financial or other statement furnished by it at any time under or in
connection with this Agreement or any such other Loan Document shall
prove to have been incorrect in any material respect on or as of the
date made or deemed made; or
(c) The Company or any other Loan Party shall default in the
observance or performance of any agreement contained in Section 10 of
this Agreement or Section 5 of the Guarantee and Collateral Agreement,
or Acquisition Corp. shall default in the observance or performance of
any agreement contained in the Acquisition Corp. Pledge Agreement; or
(d) The Company or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall
continue unremedied for a period of 30 days; or
(e) Holdings, the Company or any of its Subsidiaries shall (i)
default in any payment of principal of or interest of any Indebtedness
(other than the Loans) or in the payment of any Guarantee Obligation,
beyond the period of grace (not to exceed 30 days), if any, provided in
the instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its
<PAGE> 107
101
stated maturity or such Guarantee Obligation to become payable;
provided, however, that no Default or Event of Default shall exist
under this paragraph unless the aggregate amount of Indebtedness and/or
Guarantee Obligations in respect of which any default or other event or
condition referred to in this paragraph shall have occurred shall be
equal to at least $15,000,000; or
(f) (i) Holdings, the Company or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or Holdings, the Company or any of its Subsidiaries shall make
a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against Holdings, the Company or any of its
Subsidiaries any case, proceeding or other action of a nature referred
to in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against Holdings, the Company or any of its
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) Holdings, the Company or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) Holdings, the Company or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Company or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Company or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a
withdrawal from,
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102
or the Insolvency or Reorganization of, a Multiemployer Plan or (vi)
any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any,
could have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Company or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $15,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the
entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any
reason, to be in full force and effect, or either Borrower or any other
Loan Party which is a party to any of the Security Documents shall so
assert or (ii) the Lien created by any of the Security Documents shall
cease to be enforceable and of the same effect and priority purported
to be created thereby; or
(j) The Guarantee and Collateral Agreement shall cease, for
any reason, to be in full force and effect or any Guarantor shall so
assert; or
(k) A Change of Control shall occur;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Company or the Canadian Borrower, automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement (including, without limitation,
all Acceptance Reimbursement Obligations, regardless of whether or not such
Acceptance Reimbursement Obligations are then due and payable) and the other
Loan Documents (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) shall immediately become due
and payable, and (B) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) with the consent of the Majority
Facility Lenders under the Revolving Credit Facility, the General Administrative
Agent may, or upon the request of the Majority Facility Lenders under the
Revolving Credit Facility, the General Administrative Agent shall, by notice to
the Company declare the Revolving Credit Commitments to be terminated forthwith,
whereupon such commitments shall immediately terminate; and (ii) with the
consent of the Required Lenders, the General Administrative Agent may, or upon
the request of the Required Lenders, the General Administrative Agent shall, by
notice to the Borrowers, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder, and all Acceptance Reimbursement Obligations, regardless of
whether or not such Acceptance
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Reimbursement Obligations are then due and payable) and the other Loan Documents
to be due and payable forthwith, whereupon the same shall immediately become due
and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Company shall at such time deposit in a
cash collateral account opened by the General Administrative Agent an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit. Amounts held in such cash collateral account shall be applied by the
General Administrative Agent to the payment of drafts drawn under such Letters
of Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Company hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Company hereunder and under the other Loan Documents shall have been paid in
full, the balance, if any, in such cash collateral account shall be returned to
the Company (or such other Person as may be lawfully entitled thereto).
With respect to all outstanding Acceptance Reimbursement
Obligations in respect of Acceptances which have not matured at the time of an
acceleration pursuant to the paragraph above, the Canadian Borrower shall at
such time deposit in a cash collateral account opened by and maintained by the
Canadian Administrative Agent an amount equal to the aggregate undiscounted face
amount of all such unmatured Acceptances. Amounts held in such cash collateral
account shall be applied by the Canadian Administrative Agent to the payment of
maturing Acceptances, and any balance in such account shall be applied to repay
other obligations of the Canadian Borrower hereunder and under any Notes. After
all Acceptance Reimbursement Obligations shall have been satisfied and all other
obligations of the Canadian Borrower hereunder and under any Notes shall have
been paid in full, the balance, if any, in such cash collateral account shall be
returned to the Canadian Borrower.
Except as otherwise expressly provided above in this Section
11, the Borrowers waive presentment, demand, protest or other notice of any
kind.
SECTION 12. THE ADMINISTRATIVE AGENTS; OTHERS
12.1 Appointment. Each Lender hereby irrevocably designates
and appoints Toronto Dominion (Texas), Inc. as the General Administrative Agent
and The Toronto-Dominion Bank as the Canadian Administrative Agent of such
Lender under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes the General Administrative Agent and the Canadian
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the General Administrative
Agent and the Canadian Administrative Agent, respectively, by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental
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thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agents shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against either
Administrative Agent.
Each Issuing Lender shall act on behalf of the Lenders with
respect to Letters of Credit issued by it under this Agreement and the documents
associated therewith. It is understood and agreed that each Issuing Lender (a)
shall have all of the benefits and immunities (i) provided to an Administrative
Agent in this Section 12 with respect to acts taken or omissions suffered by
such Issuing Lender in connection with Letters of Credit issued by it under this
Agreement and the documents associated therewith as fully as if the term
"General Administrative Agent", "Canadian Administrative Agent" or
"Administrative Agent", as used in this Section 12, included such Issuing Lender
with respect to such acts or omissions and (ii) as additionally provided in this
Agreement and (b) shall have all of the benefits of the provisions of Section
12.7 as fully as if the term "General Administrative Agent", "Canadian
Administrative Agent" or "Administrative Agent", as used in Section 12.7,
included such Issuing Lender.
Each Lender authorizes and directs the Administrative Agents
to execute and deliver the Intercreditor Agreement.
12.2 Delegation of Duties. Each Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Neither Administrative
Agent shall be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
12.3 Exculpatory Provisions. Neither Administrative Agent nor
any of its respective officers, directors, employees, agents, attorneys-in-fact
or Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrowers or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by such Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Company to perform its obligations hereunder
or thereunder. Neither Administrative Agent shall be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of either Borrower.
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12.4 Reliance by Administrative Agents. Each Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrowers),
independent accountants and other experts selected by such Administrative Agent.
Each Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with such Administrative Agent. Each
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders or Majority Facility
Lenders, as applicable, as it deems appropriate or it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. Each Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, in any case
where this Agreement specifically requires the consent of the Majority Facility
Lenders under any Facility, such Majority Facility Lenders), and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.
12.5 Notice of Default. Neither Administrative Agent shall be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless such Administrative Agent has received notice from a
Lender or the Company referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that an Administrative Agent receives such a notice, such Administrative
Agent shall give notice thereof to the Lenders. Each Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders or Majority Facility Lenders, as
applicable; provided that unless and until the Administrative Agents shall have
received such directions, the Administrative Agents may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
12.6 Non-Reliance on Administrative Agents and Other Lenders.
(a) Each Lender expressly acknowledges that neither Administrative Agent nor any
of its respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act by
either Administrative Agent hereinafter taken, including any review of the
affairs of the Company or the Canadian Borrower, shall be deemed to constitute
any representation or warranty by such Administrative Agent to any Lender. Each
Lender represents to each Administrative Agent that it has, independently and
without reliance upon such Administrative Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and
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creditworthiness of the Company and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon either Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Company. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by such
Administrative Agent hereunder, each Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Company or the Canadian
Borrower which may come into the possession of such Administrative Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
(b) For purposes of determining compliance with the conditions
specified in Section 8.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by either Administrative Agent or the
Company to such Lender prior to the Closing Date, or required thereunder to be
consented to or approved by or acceptable or satisfactory to such Lender.
12.7 Indemnification. The Lenders agree to indemnify each
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably according to their respective Aggregate Commitment Percentages in effect
on the date on which indemnification is sought, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by such Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from such
Administrative Agent's gross negligence or willful misconduct. The agreements in
this Section shall survive the payment of the Loans and all other amounts
payable hereunder.
12.8 Agent in Its Individual Capacity. Each Administrative
Agent and its respective Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrowers as though such
Administrative Agent were not an Administrative Agent hereunder and under the
other Loan Documents. With respect to the Loans made by it and with respect to
any Letter of Credit issued or participated in by it, each
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Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not an Administrative Agent, and the terms "Lender" and "Lenders" shall
include such Administrative Agent in its individual capacity.
12.9 Successor Agent. Either Administrative Agent may resign
as Administrative Agent upon 10 days' notice to the Lenders. If either
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent (provided
that it shall have been approved by the Company), shall succeed to the rights,
powers and duties of such Administrative Agent hereunder. Effective upon such
appointment and approval, the term "General Administrative Agent" or "Canadian
Administrative Agent", as the case may be, shall mean such successor agent, and
such former Administrative Agent's rights, powers and duties as General
Administrative Agent or Canadian Administrative Agent, as the case may be, shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
an Administrative Agent, the provisions of this Section 12 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
12.10 Others. Neither the Arranger, the Syndication Agent nor
any Managing Agent, in such respective capacities, shall have any duties or
responsibilities, or incur any liabilities, under this Agreement or the other
Loan Documents.
SECTION 13. GUARANTEE
13.1 Guarantee. In order to induce the Administrative Agents
and the Lenders to execute and deliver this Agreement and to make or maintain
Extensions of Credit to the Canadian Borrower hereunder, and to induce the
Canadian Operating Facility Lender to enter into the Canadian Operating Facility
and to make loans to the Canadian Borrower thereunder, and in consideration
thereof, the Company hereby unconditionally and irrevocably guarantees to the
Administrative Agents, for the ratable benefit of the Lenders to which Canadian
Borrower Obligations are owed and to the Canadian Operating Facility Lender, the
prompt and complete payment and performance by the Canadian Borrower when due
(whether at stated maturity, by acceleration or otherwise) of the Canadian
Borrower Obligations and the Canadian Operating Facility Obligations,
respectively, and the Company further agrees to pay any and all expenses
(including, without limitation, all reasonable fees, charges and disbursements
of counsel) which may be paid or incurred by either Administrative Agent, the
Lenders or the Canadian Operating Facility Lender in enforcing, or obtaining
advice of counsel in respect of, any of their rights under the guarantee
contained in this Section 13. The guarantee contained in this Section 13,
subject to Section 13.5, shall remain in full force and effect until the
Canadian Borrower Obligations and the Canadian Operating Facility
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Obligations are paid in full, the Commitments are terminated, no Extensions of
Credit are outstanding and the Canadian Operating Facility is terminated,
notwithstanding that from time to time prior thereto the Canadian Borrower may
be free from any obligations or liabilities under this Agreement or the Canadian
Operating Facility.
The Company agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agents, any Lender or the
Canadian Operating Facility Lender on account of its liability under this
Section 13, it will notify the Administrative Agents and such lender in writing
that such payment is made under the guarantee contained in this Section 13 for
such purpose. No payment or payments made by the Canadian Borrower or any other
Person or received or collected by either Administrative Agent, any Lender or
the Canadian Operating Facility Lender from the Canadian Borrower or any other
Person by virtue of any action or proceeding or any setoff or appropriation or
application, at any time or from time to time, in reduction of or in payment of
the Canadian Borrower Obligations or the Canadian Operating Facility Obligations
shall be deemed to modify, reduce, release or otherwise affect the liability of
the Company under this Section 13 which, notwithstanding any such payment or
payments, shall remain liable for the Canadian Borrower Obligations or the
Canadian Operating Facility Obligations, as the case may be, until, subject to
Section 13.5, the Canadian Borrower Obligations are paid in full, the Canadian
Term Loan Commitments are terminated and no Letters of Credit are outstanding,
the Canadian Operating Facility Obligations are paid in full and the Canadian
Operating Facility is terminated.
13.2 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Section 13, the Company hereby
irrevocably waives all rights which may have arisen in connection with the
guarantee contained in this Section 13 to be subrogated to any of the rights
(whether contractual, under the United States Bankruptcy Code (or similar action
under any successor law or under any comparable law), including Section 509
thereof, under common law or otherwise) of the Administrative Agents, any Lender
or the Canadian Operating Facility Lender against the Canadian Borrower or
against either Administrative Agent or any such lender for the payment of the
Canadian Borrower Obligations or the Canadian Operating Facility Obligations,
until all the Canadian Borrower Obligations and Canadian Operating Facility
Obligations shall have been paid in full and each of the Canadian Term Loan
Commitments and the Canadian Operating Facility shall have been terminated. The
Company hereby further irrevocably waives all contractual, common law, statutory
and other rights of reimbursement, contribution, exoneration or indemnity (or
any similar right) from or against the Canadian Borrower or any other Person
which may have arisen in connection with the guarantee contained in this Section
13, until the Canadian Borrower Obligations and the Canadian Operating Facility
Obligations shall have been paid in full and the Canadian Term Loan Commitments
and the Canadian Operating Facility shall have been terminated. So long as the
Canadian Borrower Obligations or the Canadian Operating Facility Obligations
remain outstanding, if any amount shall be paid by or on behalf of the Canadian
Borrower to the Company on account of any of the rights waived in this Section
13.2, such amount shall be held by the Company in trust, segregated from other
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funds of the Company, and shall, forthwith upon receipt by the Company, be
turned over to the Canadian Administrative Agent in the exact form received by
the Company (duly indorsed by the Company to the Canadian Administrative Agent,
if required), to be applied against the Canadian Borrower Obligations and the
Canadian Operating Facility Obligations, whether matured or unmatured, in such
order as the Canadian Administrative Agent may determine. The provisions of this
Section 13.2 shall survive the term of the guarantee contained in this Section
13 and the payment in full of the Canadian Borrower Obligations and the Canadian
Operating Facility Obligations and the termination of the Canadian Term Loan
Commitments and the Canadian Operating Facility.
13.3 Amendments, etc. with respect to the Canadian Borrower
Obligations. The Company shall remain obligated under this Section 13
notwithstanding that, without any reservation of rights against the Company, and
without notice to or further assent by the Company, any demand for payment of or
reduction in the principal amount of any of the Canadian Borrower Obligations or
the Canadian Operating Facility Obligations made by either Administrative Agent,
any Lender or the Canadian Operating Facility Lender may be rescinded by such
Administrative Agent or such lender, and any of the Canadian Borrower
Obligations or the Canadian Operating Facility Obligations, as the case may be,
continued, and the Canadian Borrower Obligations or the Canadian Operating
Facility Obligations, as the case may be, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by such Administrative Agent, any Lender or the Canadian
Operating Facility Lender, and this Agreement, any other Loan Document, and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Lenders (or
the Required Lenders, as the case may be) may deem advisable (or in the case of
the Canadian Operating Facility Obligations, as the Canadian Operating Facility
Lender may deem advisable) from time to time, and any collateral security,
guarantee or right of offset at any time held by either Administrative Agent,
any Lender or the Canadian Operating Facility for the payment of the Canadian
Borrower Obligations or the Canadian Operating Facility may be sold, exchanged,
waived, surrendered or released. Neither Administrative Agents nor any Lender or
the Canadian Operating Facility Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Canadian Borrower Obligations, the Canadian Operating Facility Obligations or
for the guarantee contained in this Section 13 or any property subject thereto.
13.4 Guarantee Absolute and Unconditional. The Company waives
any and all notice of the creation, renewal, extension or accrual of any of the
Canadian Borrower Obligations or the Canadian Operating Facility Obligations and
notice of or proof of reliance by either Administrative Agent, any Lender or the
Canadian Operating Facility Lender upon the guarantee contained in this Section
13 or acceptance of the guarantee contained in this Section 13; the Canadian
Borrower Obligations and the Canadian Operating Facility Obligations, and any of
them, shall conclusively be deemed to have been created, contracted
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or incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 13; and all dealings between the Canadian
Borrower or the Company, on the one hand, and either Administrative Agent, the
Lenders and/or the Canadian Operating Facility Lender, on the other, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon the guarantee contained in this Section 13. The Company waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Canadian Borrower or the Company with respect to the Canadian
Borrower Obligations and the Canadian Operating Facility Obligations. The
guarantee contained in this Section 13 shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity or enforceability of this Agreement or any other Loan Document or the
Canadian Operating Facility, any of the Canadian Borrower Obligations or the
Canadian Operating Facility Obligations or any collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by either Administrative Agent, any Lender or the Canadian Operating
Facility Lender, (b) any defense, setoff or counterclaim (other than a defense
of payment or performance) which may at any time be available to or be asserted
by the Borrowers against either Administrative Agent, any Lender or the Canadian
Operating Facility Lender, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of the Canadian Borrower or the Company) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Canadian Borrower for the Canadian Borrower Obligations or the
Canadian Operating Facility Obligations, or of the Company under the guarantee
contained in this Section 13, in bankruptcy or in any other instance. When
either Administrative Agent, any Lender or the Canadian Operating Facility
Lender is pursuing its rights and remedies under this Section 13 against the
Company, such Administrative Agent or any such lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Canadian Borrower or any other Person or against any collateral security or
guarantee for the Canadian Borrower Obligations or the Canadian Operating
Facility Obligations or any right of offset with respect thereto, and any
failure by such Administrative Agent or any such lender to pursue such other
rights or remedies or to collect any payments from the Canadian Borrower or any
such other Person or to realize upon any such collateral security or guarantee
or to exercise any such right of offset, or any release of the Canadian Borrower
or any such other Person or of any such collateral security, guarantee or right
of offset, shall not relieve the Company of any liability under this Section 13,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Administrative Agents, the Lenders and
the Canadian Operating Facility Lender against the Company.
13.5 Reinstatement. The guarantee contained in this Section 13
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Canadian Borrower Obligations
or the Canadian Operating Facility Obligations is rescinded or must otherwise be
restored or returned by either Administrative Agent, any Lender or the Canadian
Operating Facility Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Canadian Borrower or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar
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officer for, the Canadian Borrower or any substantial part of its property, or
otherwise, all as though such payments had not been made.
13.6 Payments. The Company hereby agrees that any payments in
respect of the Canadian Borrower Obligations and the Canadian Operating Facility
Obligations pursuant to this Section 13 will be paid to the Canadian
Administrative Agent without setoff or counterclaim in Canadian Dollars, at the
office of the Canadian Administrative Agent specified in Section 14.2.
SECTION 14. MISCELLANEOUS
14.1 Amendments and Waivers. Neither this Agreement, the
Intercreditor Agreement nor any other Loan Document, nor any terms hereof or
thereof may be amended, supplemented or modified except as set forth in Section
10.2(h) or in accordance with the provisions of this Section. The Required
Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agents may, from time to time, (a) enter into with the Borrowers
written amendments, supplements or modifications hereto and to the other Loan
Documents or the Intercreditor Agreement for the purpose of adding any
provisions to this Agreement, the other Loan Documents or the Intercreditor
Agreement or changing in any manner the rights of the Lenders or of the
Borrowers hereunder or thereunder or (b) waive, on such terms and conditions as
the Required Lenders or the Administrative Agents, as the case may be, may
specify in such instrument, any of the requirements of this Agreement or the
other Loan Documents or the Intercreditor Agreement or any Default or Event of
Default and its consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (i) reduce the amount or extend the
scheduled date of maturity of any Loan or of any installment thereof, or reduce
the stated rate of any interest or fee payable hereunder or extend the scheduled
date of any payment thereof or increase the amount or extend the expiration date
of any Lender's Commitments or extend the expiry date of any Letter of Credit
beyond the date referred to in Section 3.1(a), or modify the provisions of
Section 6.9, in each case without the consent of each Lender affected thereby,
or (ii) amend, modify or waive any provision of this Section or reduce the
percentage specified in the definition of Required Lenders or Majority Facility
Lenders, or consent to the assignment or transfer by either Borrower of any of
its rights and obligations under this Agreement and the other Loan Documents or
release all or substantially all of the Collateral or release all or
substantially all of the Guarantors from their obligations under the Guarantee
and Collateral Agreement, in each case without the written consent of all the
Lenders, (iii) amend, modify or waive any provision of Section 4 or 5 without
the consent of the Majority Facility Lenders under the Canadian Term Loan
Facility, (iv) amend, modify or waive any provision of Section 12 without the
written consent of the Administrative Agents, (v) amend, modify or waive any
provision of Section 3 without the written consent of each Issuing Lender, (vi)
amend, modify or waive any provision of Section 13 without the consent of all
the Canadian Lenders or (vii) amend, modify or waive any provision of Section
6.3 without the consent of the Majority Facility Lenders under each Facility.
Any such waiver and any such amendment, supplement
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or modification shall apply equally to each of the Lenders and shall be binding
upon the Borrowers, the Lenders, the Agents and all future holders of the Loans.
In the case of any waiver, the Borrowers, the Lenders and the Agents shall be
restored to their former positions and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
14.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows in the case of the Borrowers, the General Administrative Agent and the
Canadian Administrative Agent, and as set forth in Schedule 1.1F in the case of
the other parties hereto, or to such other address as may be hereafter notified
by the respective parties hereto:
The Company: LES, Inc.
1301 Gervais Street, 3rd Floor
Columbia, South Carolina 29201
Attention: Paul Humphreys
Fax: (803) 933-4346
The Canadian Borrower: Laidlaw Environmental (Canada) Ltd.
c/o LES, Inc.
1301 Gervais Street, 3rd Floor
Columbia, South Carolina 29201
Attention: Paul Humphreys
Fax: (803) 933-4346
The General Administrative Agent: Toronto Dominion (Texas), Inc.
909 Fannin Street, Suite 1700
Houston, Texas 77010
Attention: Jano Mott
Fax: (703) 951-9921
The Canadian Administrative Agent: The Toronto-Dominion Bank
9th Floor, Toronto Dominion Bank Tower
Toronto Dominion Centre
55 King Street West
Toronto, Ontario M5K 1A2
Attention: Manager Agency
Fax: (416) 982-5535
<PAGE> 119
113
provided that any notice, request or demand to or upon the General
Administrative Agent, the Canadian Administrative Agent or the Lenders pursuant
to Section 2.2, 2.4, 2.6, 4.2, 5.2, 5.5, 6.2, 6.3 and 6.4 shall not be effective
until received.
14.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of either Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
14.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
14.5 Payment of Expenses and Taxes. The Company agrees (a) to
pay or reimburse each Administrative Agent for all its out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to such Administrative Agent (b) to pay or
reimburse each Lender, the General Administrative Agent and the Canadian
Administrative Agent for all its costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including, without limitation, the
fees and disbursements of counsel to each Lender and of counsel to such
Administrative Agent, (c) to pay, indemnify, and hold each Lender and each
Administrative Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold each Lender and each Administrative Agent harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Company or any of its
Subsidiaries or any of the facilities or properties owned, leased or operated by
the Company or any of its Subsidiaries (all the foregoing in this clause (d),
<PAGE> 120
114
collectively, the "indemnified liabilities"), provided that the Borrowers shall
have no obligation hereunder to any person seeking indemnification with respect
to indemnified liabilities arising from the gross negligence or willful
misconduct of such person. Without limiting the foregoing, and to the extent
permitted by applicable law, the Company agrees, and shall cause each of its
Subsidiaries to agree, not to assert, and hereby waives and agrees to cause each
of its Subsidiaries to waive, all rights for contribution or any other rights of
recovery with respect to all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
whatever kind or nature whatsoever, under or related to Environmental Laws, that
any of them might have by statute or otherwise against each Lender and each
Administrative Agent. The agreements in this Section shall survive repayment of
the Loans and all other amounts payable hereunder.
14.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Lenders, the Administrative Agents, all future holders of the
Loans, the Reimbursement Obligations and the Acceptance Reimbursement
Obligations and their respective successors and assigns, except that no Borrower
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking or institutional financial business and in accordance with applicable
law, at any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents; provided that, in the case of participations in any Canadian Term
Loan granted by a Canadian Lender, such Participant must be a resident of Canada
for purposes of the Tax Act unless such participation is granted pursuant to
Section 14.7. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan or other interest for all purposes under this Agreement
and the other Loan Documents, and the Borrowers and the Administrative Agents
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Loan
Documents. No Lender shall be entitled to create in favor of any Participant, in
the participation agreement pursuant to which such Participant's participating
interest shall be created or otherwise, any right to vote on, consent to or
approve any matter relating to this Agreement or any other Loan Document except
for those specified in clauses (i) and (ii) of the proviso to Section 14.1. Each
of the Borrowers agrees that if amounts outstanding under this Agreement are due
or unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, provided that, in purchasing
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof
<PAGE> 121
115
as provided in Section 14.7(a) as fully as if it were a Lender hereunder. Each
of the Borrowers also agrees that each Participant shall be entitled to the
benefits of Sections 6.11, 6.12 and 6.13 with respect to its participation in
the Commitments and the Loans and other amounts outstanding from time to time as
if it was a Lender; provided that, in the case of Section 6.12, such Participant
shall have complied with the requirements of said Section and provided, further,
that no Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking or institutional financial business and in accordance with applicable
law, at any time and from time to time assign to any Lender, an Approved Fund of
any Lender, or any affiliate thereof or, with the consent of the Company and the
General Administrative Agent (which in each case shall not be unreasonably
withheld or delayed), to an additional bank, financial institution or fund (an
"Assignee") all or any part of its rights and obligations under this Agreement
and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit L, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender, an
Approved Fund of any Lender, or an affiliate thereof, by the Company and the
General Administrative Agent) and delivered to the appropriate Administrative
Agent for its acceptance and recording in the Register, provided that no such
assignment to an Assignee (other than any Lender, any Approved Fund of any
Lender, or any affiliate thereof) shall be in an aggregate principal amount of
less than $5,000,000 (other than in the case of an assignment of all of a
Lender's interests under this Agreement), unless otherwise agreed by the Company
and the General Administrative Agent. Any such assignment need not be ratable as
among the Facilities. Upon such execution, delivery, acceptance and recording,
from and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto). Notwithstanding any
provision of this paragraph (c) and paragraph (e) of this Section, the consent
of the Company shall not be required, and, unless requested by the Assignee
and/or the assigning Lender, new Notes shall not be required to be executed and
delivered by any Borrower, for any assignment which occurs at any time when any
Event of Default shall have occurred and be continuing.
(d) The General Administrative Agent, on behalf of the
Borrowers, shall maintain at the address of the General Administrative Agent
referred to in Section 14.2 a copy of each Assignment and Acceptance delivered
to it and a register (the "Register") for the recordation of the names and
addresses of the Lenders and the Commitments of, and principal amounts of the
Loans owing to, each Lender from time to time. The entries in the Register
<PAGE> 122
116
shall be conclusive, in the absence of manifest error, and the Borrowers, the
Administrative Agents and the Lenders may (and, in the case of any Loan or other
obligation hereunder not evidenced by a Note, shall) treat each Person whose
name is recorded in the Register as the owner of a Loan or other obligation
hereunder as the owner thereof for all purposes of this Agreement and the other
Loan Documents, notwithstanding any notice to the contrary. Any assignment of
any Loan or other obligation hereunder not evidenced by a Note shall be
effective only upon appropriate entries with respect thereto being made in the
Register.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender, an Approved Fund of any Lender, or an affiliate thereof, by
the Company and the General Administrative Agent) together with payment to the
General Administrative Agent (or, in the case of an Assignment of a portion of
the Canadian Term Loans only, to the Canadian Administrative Agent) of a
registration and processing fee of $3,500, the General Administrative Agent (or
the Canadian Administrative Agent, as appropriate) shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the relevant
Borrower.
(f) Each Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
subject to the provisions of Section 14.16, any and all financial information in
such Lender's possession concerning the Borrowers and their Affiliates which has
been delivered to such Lender by or on behalf of the Borrowers pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrowers in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
14.7 Adjustments; Set-off. (a) If any Lender (a "benefitted
Lender") (i) shall at any time prior to any date on which the Commitments are
terminated and the Loans become due and payable pursuant to Section 11 (an
"Acceleration") receive any payment of all or part of its Extensions of Credit
made by it to any Borrower, or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off or otherwise),
in a greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender's Extensions of Credit
made by it to such Borrower, or interest thereon (in each case except to the
extent that this Agreement provides for payments to be allocated to the Lenders
under a particular Facility) or (ii) shall at any time after an Acceleration
receive any payment of all or part of the aggregate amount of the Extensions of
Credit made by such benefitted Lender to all Borrowers, or interest thereon, or
receive any
<PAGE> 123
117
collateral in respect thereof (whether voluntarily, by set-off, pursuant to
events or proceedings of the nature referred to in Section 11(f), or otherwise),
in a greater proportion than any such payment or collateral received by any
other Lender, if any, in respect by the aggregate amount of the Extensions of
Credit made by such Lender to all Borrowers, or interest thereon, then, in each
case described in the foregoing clauses (i) and (ii), such benefitted Lender
shall purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Extensions of Credit, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders (to the extent required by the foregoing clause (i) or (ii), as
applicable); provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrowers, any such notice being expressly waived by the Borrowers to the extent
permitted by applicable law, upon any amount becoming due and payable by a
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch, agency or
Affiliate thereof to or for the credit or the account of the Borrower. Each
Lender agrees promptly to notify the Borrowers and the Administrative Agents
after any such set-off and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application.
(c) Notwithstanding the foregoing, no Lender shall institute
or commence any proceeding to collect any amounts owed to it hereunder or shall
otherwise exercise any remedies (including setoff) with respect to the amounts
owed to it unless such Lender shall provide at least five Business Days' (or
such shorter period as may be consented to by the General Administrative Agent)
prior written notice thereof to the General Administrative Agent.
14.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Company and each Administrative Agent.
14.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and
<PAGE> 124
118
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
14.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrowers, the Administrative Agents, and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agents or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
14.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
14.12 Submission To Jurisdiction; Waivers. (a) Each Borrower
hereby irrevocably and unconditionally:
(i) submits for itself and its property in any
legal action or proceeding relating to this Agreement and the other
Loan Documents to which it is a party, or for recognition and
enforcement of any judgement in respect thereof, to the non-exclusive
general jurisdiction of the courts of the State of New York, the courts
of the United States of America for the Southern District of New York,
and appellate courts from any thereof;
(ii) consents that any such action or proceeding may
be brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such Borrower at its address set forth in
Section 14.2 or at such other address of which each Administrative
Agent shall have been notified pursuant thereto;
(iv) agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
<PAGE> 125
119
(b) The Canadian Borrower hereby irrevocably appoints the
Company as its agent for service of process in any proceeding referred to in
Section 14.2(a) and agrees that service of process in any such proceeding may be
made by mailing or delivering a copy thereof to it care of the Company at its
address for notice set forth in Section 14.2(a).
14.13 Acknowledgments. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither Administrative Agent nor any Lender has any
fiduciary relationship with or duty to such Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agents and Lenders, on one
hand, and such Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among such Borrower and the
Lenders.
14.14 WAIVERS OF JURY TRIAL. EACH OF THE BORROWERS, THE
ADMINISTRATIVE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
14.15 Judgment. (a) If for the purpose of obtaining judgment
in any court it is necessary to convert a sum due hereunder in one currency into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the General Administrative Agent could
purchase the first currency with such other currency in the city in which it
normally conducts its foreign exchange operation for the first currency on the
Business Day preceding the day on which final judgment is given.
(b) The obligation of each Borrower in respect of any sum due
from it to any Lender hereunder shall, notwithstanding any judgment in a
currency (the "Judgment Currency") other than that in which such sum is
denominated in accordance with the applicable provisions of this Agreement (the
"Agreement Currency"), be discharged only to the extent that on the Business Day
following receipt by such Lender of any sum adjudged to be so due in the
Judgment Currency such Lender may in accordance with normal banking procedures
purchase the Agreement Currency with the Judgment Currency; if the amount of
Agreement Currency so purchased is less than the sum originally due to such
Lender in the Agreement Currency, such Borrower agrees notwithstanding any such
judgment to indemnify such Lender
<PAGE> 126
120
against such loss, and if the amount of the Agreement Currency so purchased
exceeds the sum originally due to any Lender, such Lender agrees to remit to
such Borrower such excess.
14.16 Confidentiality. Each Lender agrees to keep confidential
all non-public information provided to it by the Company pursuant to this
Agreement that is designated by the Company in writing as confidential; provided
that nothing herein shall prevent any Lender from disclosing any such
information (i) to its affiliates, the Administrative Agents or any other
Lender, (ii) to any Transferee which agrees to comply with the provisions of
this subsection, (iii) to its employees, directors, agents, attorneys,
accountants and other professional advisors, or to direct or indirect
contractual counterparts in swap agreements relating to swaps with a Borrower or
such contractual counterparties' professional advisors provided that any such
contractual counterparty or its professional advisors shall agree to keep such
confidential information confidential, (iv) upon the request or demand of any
Governmental Authority having jurisdiction over such Lender, (v) in response to
any order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Requirement of Law, (vi) which has been publicly
disclosed other than in breach of this Agreement, or is currently publicly
available or is in the possession of a Lender on a nonconfidential basis or is
disclosed to a Lender on a nonconfidential basis by a person who in so doing has
not violated a duty of confidentiality owing to the Company (vii) to the
National Association of Insurance Commissioners or any similar organization or
any nationally recognized rating agency that requires access to information
about a Lender's investment portfolio in connection with ratings issued with
respect to such Lender or (viii) in connection with the exercise of any remedy
hereunder.
14.17 Effect of Amendment and Restatement. On the Closing
Date, the Existing Credit Agreement and the Guarantee and Collateral Agreement
(as defined in the Existing Credit Agreement) shall be amended, restated and
superseded in their entirety, and the Mortgages and Canadian Collateral
Documents (as such terms are defined in the Existing Credit Agreement) are being
amended and/or affirmed as provided herein. The parties hereto acknowledge and
agree that (a) this Agreement and the other Loan Documents, whether executed and
delivered in connection herewith or otherwise, do not constitute a novation or
termination of the obligations of the Loan Parties (as defined in the Existing
Credit Agreement) under the Existing Credit Agreement as in effect prior to the
Closing Date; (b) such obligations are in all respects continuing (as amended
and restated hereby) with only the terms thereof being modified as provided in
this Agreement; (c) the Liens, guarantees and security interests as granted
under the Security Documents (as defined in this Agreement) securing payment of
such obligations are in all respects continuing and in full force and effect and
secure the payment of the obligations of the Loan Parties under (and as defined)
in this Agreement; and (d) upon the effectiveness of this Agreement, all loans
outstanding under the Existing Credit Agreement immediately before the
effectiveness of this Agreement will be continued as Loans hereunder or will be
repaid in accordance with the Existing Credit Agreement on the Closing Date and
reborrowed hereunder as provided herein, and, except as provided herein with
respect to the Specified Acceptances, all outstanding letters of credit and
bankers' acceptances under the Existing Credit Agreement will be continued as
Letters of
<PAGE> 127
121
Credit and Acceptances, respectively, hereunder, in each case on the terms and
conditions set forth in this Agreement.
<PAGE> 128
122
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
LES, INC.
By:
-----------------------------------------
Title:
LAIDLAW ENVIRONMENTAL SERVICES
(CANADA) LTD.
By:
-----------------------------------------
Title:
TORONTO DOMINION (TEXAS), INC.,
as General Administrative Agent and Lender
By:
-----------------------------------------
Title:
THE TORONTO-DOMINION BANK,
as Canadian Administrative Agent
By:
-----------------------------------------
Title:
TD SECURITIES (USA) INC.,
as Arranger
By:
-----------------------------------------
Title:
<PAGE> 129
123
THE TORONTO-DOMINION BANK,
as a Lender
By:
-----------------------------------------
Title:
By:
-----------------------------------------
Title:
THE BANK OF NOVA SCOTIA,
as Managing Agent, Co-Documentation Agent
and Lender
By:
-----------------------------------------
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Managing Agent, Co-Documentation Agent
and Lender
By:
-----------------------------------------
Title:
NATIONSBANK, N.A.,
as Syndication Agent, Managing Agent and
Lender
By:
-----------------------------------------
Title:
WACHOVIA BANK, N.A.,
as Managing Agent and Lender
By:
-----------------------------------------
Title:
<PAGE> 130
124
VAN KAMPEN MERRITT AMERICAN
CAPITAL PRIME RATE INCOME TRUST
By:
-----------------------------------------
Title:
OAK HILL SECURITIES FUND, L.P.
BY: OAK HILL SECURITIES GENPAR, L.P., its
General Partner
BY: OAK HILL SECURITIES MGP, INC., its
General Partner
By:
----------------------------------
Title: Vice President
PILGRIM AMERICA PRIME RATE TRUST
By:
-----------------------------------------
Title:
KZH HOLDING CORPORATION III
By:
-----------------------------------------
Title:
<PAGE> 131
125
JACKSON NATIONAL LIFE INSURANCE
COMPANY
BY: PPM AMERICA, INC., as attorney in fact,
on behalf of Jackson National Life
Insurance Company
By:
-------------------------------------
Title:
AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
By:
-----------------------------------------
Title:
METROPOLITAN LIFE INSURANCE
COMPANY
By:
-----------------------------------------
Title:
KZH-CRESCENT CORPORATION
By:
-----------------------------------------
Title:
KZH-CRESCENT 2 CORPORATION
By:
-----------------------------------------
Title:
<PAGE> 132
126
CRESCENT/MACH I PARTNERS, L.P.
BY: TCW ASSET MANAGEMENT COMPANY,
as its Investment Manager
By:
------------------------------------
Title:
ARCHIMEDES FUNDING LLC
BY: ING CAPITAL ADVISORS, INC., as
Collateral Manager
By:
------------------------------------
Title:
CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
AS: Attorney-in-Fact and on behalf of FIRST
ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY as Portfolio
By:
------------------------------------
Title:
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC
BY: ING CAPITAL ADVISORS, INC., as
Investment Advisor
By:
------------------------------------
Title: Vice President &
Portfolio Manager
<PAGE> 133
127
KZH-ING-1-CORPORATION
By:
-----------------------------------------
Title:
INDOSUEZ CAPITAL FUNDING III, LIMITED
BY: INDOSUEZ CAPITAL LUXEMBOURG, as
Collateral Manager
By:
------------------------------------
Title:
KZH-ING-2-CORPORATION
By:
-----------------------------------------
Title:
KZH SOLEIL CORPORATION
By:
-----------------------------------------
Title:
DELANO COMPANY
BY: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By:
------------------------------------
Title:
<PAGE> 134
128
CONTINENTAL ASSURANCE COMPANY
SEPARATE ACCOUNT (E)
BY: TCW ASSET MANAGEMENT COMPANY,
as Attorney-in-Fact
By:
------------------------------------
Title:
ROYALTON COMPANY
BY: PACIFIC INVESTMENT MANAGMENT
COMPANY, as its Investment Advisor
By:
------------------------------------
Title:
DEEPROCK & COMPANY
BY: EATON VANCE MANAGEMENT, as
Investment Advisor
By:
------------------------------------
Title:
<PAGE> 1
EXHIBIT (5)
April 10, 1998
Laidlaw Environmental Services, Inc.
1301 Gervais Street, Suite 300
Columbia, South Carolina 29201
RE: REGISTRATION STATEMENT ON FORM S-4
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Ladies and Gentlemen:
We have acted as counsel for Laidlaw Environmental Services, Inc., a
Delaware corporation (the "Company"), in connection with the preparation and
filing of a registration statement on Form S-4 (the "Registration Statement")
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended. The Registration Statement relates to the exchange of 2.80 shares of
the Company's Common Stock, $1.00 par value per share (the "Shares"), for each
outstanding Common Share, par value $0.10 per share of Safety-Kleen Corp., a
Wisconsin corporation (the "SK Shares"), pursuant to the Merger (as defined
below).
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and
upon affidavits, certificates and written statements of directors, officers and
also examined originals or copies, certified or otherwise identified to our
satisfaction, of such instruments, documents and records as we have deemed
relevant and necessary to examine for the purpose of this opinion, including
(a) the Registration Statement, (b) the Certificate of Incorporation of the
Company, (c) the By-Laws of the Company, and (d) resolutions adopted by the
Board of Directors of the Company.
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the genuineness
of all signatures, the authenticity of the documents submitted to us as
originals and the conformity to authentic original documents of all documents
submitted to us as certified, conformed or reproduced copies. We have further
assumed that all natural persons involved in the Merger (the "Merger") and the
other transactions contemplated by the Agreement and Plan of Merger, dated as of
March 16, 1998 (the "Merger Agreement"), among the Company, LES Acquisition,
Inc. and Safety-Kleen described in the Registration Statement have sufficient
legal capacity to enter into and perform their respective obligations under the
Merger Agreement.
Based upon the foregoing, it is our opinion that upon the issuance and
delivery of the Shares in exchange for the SK Shares in the manner contemplated
in the Merger Agreement as described in the Registration Statement, such Shares
will be validly issued, fully paid and non-assessable.
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We hereby consent to use of our name under the heading "Validity of
Laidlaw Environmental Common Stock" in the Prospectus forming a part of the
Registration Statement and to use of this opinion for filing as Exhibit 5 to the
Registration Statement.
Very truly yours,
KATTEN MUCHIN & ZAVIS
<PAGE> 1
(SAFETY KLEEN CORP. LOGO)
ONE BRINCKMAN WAY, ELGIN, ILLINOIS 60123-1499
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[Kenneth W. Winger, Paul R. Humphreys and Scott Krill], and any of them are
appointed Proxies, with power of substitution, to vote all stock of the
undersigned at the Special Meeting of shareholders to be held May , 1998 at in
the , Illinois and at any adjournment or postponement thereof, upon the
matter mentioned hereafter, and in their discretion upon such other matters as
may properly come before said meeting. Receipt of Notice, dated April , 1998
of Special Meeting and accompanying Proxy Statement/Prospectus is acknowledged,
and any Proxy previously given is revoked.
COMMENTS: (change of address)
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(If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX
(SEE REVERSE SIDE). YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATION. THE PROXY COMMITTEE CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
(Continued on reverse side)
[X] Please mark your votes as in this example.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER MARKED HEREIN
BY THE UNDERSIGNED. IF NO MARKING IS MADE AS TO PROPOSAL 1, THIS PROXY WILL BE
VOTED "FOR" PROPOSAL 1.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Approve the Agreement and Plan of Merger dated as of March 16, 1998, which
provides for the merger of LES Acquisition, LES Acquisition, Inc., an
indirect wholly-owned subsidiary of Laidlaw Environmental Services, Inc.,
with and into Safety-Kleen.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, give full title as such. If a corporation, sign in full
corporate name by President or other authorized officer. If a partnership, sign
in partnership name by authorized person.
Dated: , 1998
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Signature
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Signature if held jointly
