SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
SAFETY-KLEEN CORP.
1301 Gervais Street, Suite 300
Columbia, South Carolina 29201
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1999 Annual Meeting of Stockholders of SAFETY-KLEEN CORP., a
Delaware corporation, will be held at the Adam's Mark Hotel, 1200 Hampton
Street, Columbia, South Carolina on Tuesday, November 30, 1999, at 9:30 a.m.
(Eastern Standard Time), for the following purposes:
1. to elect three directors to serve until the 2002 Annual Meeting;
2. to increase the aggregate number of shares which may be issued under
options granted pursuant to the provisions of the Company's 1997 Stock
Option Plan;
3. to adopt an Executive Bonus Plan for senior management; and
4. to transact such other business as may properly come before the meeting
or any adjournment thereof.
The Proxy Statement dated October 25, 1999 is attached.
The Board of Directors has fixed the close of business on October 18,
1999, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting.
You are cordially invited to attend the Annual Meeting. If you cannot
be present in person, please sign and date the enclosed proxy and promptly mail
it in the enclosed return postage paid envelope. Any stockholder giving a proxy
has the right to revoke it any time before such proxy is voted.
Your vote is important. You are urged to date and sign the enclosed
proxy and return it in the enclosed postage paid envelope as soon as possible.
You may revoke the proxy at any time prior to its use by delivering to the
Company a written notice of revocation or a duly executed proxy bearing a later
date. Any stockholder who has executed a proxy but is present at the Annual
Meeting and who wishes to vote in person may do so by revoking his, her or its
proxy as described in the preceding sentence.
By Order of the Board of Directors
Henry H. Taylor, Secretary
Dated: Columbia, South Carolina
October 25, 1999
<PAGE>
SAFETY-KLEEN CORP.
1301 Gervais Street, Suite 300
Columbia, South Carolina 29201
--------------
PROXY STATEMENT
--------------
October 25, 1999
The accompanying proxy is solicited by the Board of Directors for use
at the annual meeting of stockholders (the "Annual Meeting") of Safety-Kleen
Corp. (the "Company") to be held at the Adam's Mark Hotel, 1200 Hampton Street,
Columbia, South Carolina on Tuesday, November 30, 1999, at 9:30 a.m. (Eastern
Standard Time) and at any adjournment or adjournments thereof.
This proxy statement and the form of proxy are first being mailed to
the Company's stockholders on or about October 29, 1999.
PROXIES
The accompanying form of proxy is for use at the Annual Meeting. A
stockholder may use this proxy if he or she is unable to attend the meeting in
person or if he or she wishes to have his or her shares voted by proxy even if
he or she attends the meeting. The proxy may be revoked in writing by the person
giving it any time before the proxy is exercised by giving notice to the
Company's Secretary, or by submitting a proxy having a later date, or by such
person appearing at the meeting and electing to vote in person. All shares
represented by valid proxies received pursuant to this solicitation, and not
revoked prior to their exercise, will be voted in the manner specified therein.
If no specification is made in the proxy, the proxy will be voted "FOR" the
election of the nominees for directors listed herein; "FOR" approval of an
increase in the aggregate number of shares which may be issued under options
granted pursuant to the provisions of the Company's 1997 Stock Option Plan (the
"Employee Option Increase"); and "FOR" approval of the Safety-Kleen Corp.
Executive Bonus Plan (the "Executive Bonus Plan"). The Board of Directors is not
aware of any other matters which may be presented for action at the meeting, but
if other matters do come properly before the meeting it is intended that shares
represented by proxies in the accompanying form will be voted by the persons
named in the proxy in accordance with their best judgment.
COSTS OF SOLICITATION
The Company will bear the costs of solicitation of proxies from its
stockholders. Solicitation of proxies may be made in person, by mail or by
telephone by officers, directors and regular employees of the Company who will
not be specially compensated in such regard. Nominees, fiduciaries and other
custodians will be requested to forward solicitation materials to the beneficial
owners and secure their voting instructions and will be reimbursed for the
reasonable expenses incurred in sending proxy materials to the beneficial
owners. In addition, the Company has engaged the services of ChaseMellon
Shareholder Services to solicit proxies and will pay such proxy soliciting agent
$5,000 plus expenses in connection therewith. Solicitation by such firm may be
by mail, personal interview, telephone, fax or telegraph. Arrangements also will
be made with brokerage firms and other custodians, nominees and fiduciaries to
forward proxy solicitation material to the beneficial owners of Common Stock
held of record by such persons, and the Company will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
<PAGE>
RECORD DATE AND VOTING RIGHTS
The Board of Directors of the Company has fixed the close of business
on October 18, 1999, as the record date for the determination of stockholders
entitled to receive notice of and to vote at the Annual Meeting. As of October
18, 1999, there were a total of 100,637,975 shares of the Common Stock
outstanding and entitled to vote at the Annual Meeting. Each stockholder is
entitled to one vote on each matter to come before the meeting for each share of
Common Stock held of record by such stockholder. Directors are elected by a
plurality of the votes cast by the holders of shares of Common Stock at a
meeting at which a quorum is present. "Plurality" means that the individuals who
receive the largest number of votes cast are elected as directors up to the
maximum number of directors to be chosen at the meeting. A vote indicated as
withheld from a nominee will not be cast for such nominee but will be counted in
determining the presence of a quorum. Consequently, the withholding of a vote
for a nominee will have no impact in the election of directors except to the
extent that failure to vote for an individual results in another individual
receiving a larger number of votes. Approval of the Employee Option Increase and
the Executive Bonus Plan will require the affirmative vote of a majority of the
shares present in person or by proxy at the meeting; provided a quorum is
present. Abstentions and broker nonvotes will be counted in determining the
presence of a quorum at the meeting.
BENEFICIAL OWNERSHIP
Beneficial Owners Of Five Percent Or More Of The Common Stock
The following table sets forth the only stockholders which, to the
knowledge of management of the Company, were beneficial owners of five percent
or more of the outstanding shares of Common Stock as of October 18, 1999. The
shareholdings of Laidlaw Inc. reported are based on information provided by the
stockholder. The shareholdings of Mellon Bank Corporation are based solely on a
Schedule 13G Report filed with the Securities and Exchange Commission by Mellon
Bank Corporation in February 1999.
Amount and Nature of
Name Beneficial Ownership Percent of Class
Laidlaw Inc. (1) 43,846,287 43.6%
3221 North Service Road
Burlington, Ontario
CANADA L7R3Y8
Mellon Bank Corporation (2) 5,504,040 5.5%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
(1) The shares of Common Stock shown as owned by Laidlaw Inc. are held of record
by Laidlaw Finance (Barbados) Ltd.
(2) The shares shown as owned by Mellon Bank Corporation include shares owned by
it and its affiliates in the aggregate. Such persons hold sole voting power with
respect to 4,366,550 shares, shared voting power with respect to 238,750 shares,
sole depositive power with respect to 4,871,445 and shared dispositive power
with respect to 614,675 shares.
-2-
<PAGE>
Stock Ownership Of The Company's Directors, Nominees And Executive Officers
The following table sets forth as of October 18, 1999, the number of
shares of Common Stock beneficially owned by (i) each of the Company's
directors, (ii) each nominee for election as a director of the Company, (iii)
each of the Company's executive officers named on the Summary Compensation Table
herein (the "Named Executive Officers") and (iv) all directors and executive
officers of the Company as a group.
Amount and Nature of Percent of Class
Name Ownership Beneficially Owned
James R. Bullock (1), (2), (3)............... 9,020 *
Leslie W. Haworth (1), (2), (4).............. 3,937 *
Robert W. Luba (11).......................... 5,000 *
John W. Rollins, Jr. (1), (5), (6)........... 90,704 *
John W. Rollins, Sr. (1), (6), (7)........... 958,289 *
David E. Thomas, Jr. (1), (6)................ 2,645 *
Henry B. Tippie (1), (6), (8)................ 576,317 *
James L. Wareham (1), (6).................... 2,895 *
Grover C. Wrenn (1), (6)..................... 6,395 *
Kenneth W. Winger (9), (10).................. 42,326 *
Michael J. Bragagnolo (9).................... 22,500 *
Paul R. Humphreys (9)........................ 9,000 *
Henry H. Taylor (9), (10).................... 3,598 *
All directors and
executive officers as a group
(13 persons).................................1,732,626 1.7%
- ------------------------
* Signifies less than 1%
(1) Includes 2,000 shares subject to presently exercisable options. Does not
include 13,000 shares which are subject to vesting requirements pursuant to the
Directors Stock Option Plan. Under such plan, options become exercisable at the
rate of 20% per year, on or about one year after the date of grant, with all
options becoming fully vested on or about five years after the date of grant.
(2) Messrs. Bullock and Haworth are officers of Laidlaw Inc. See "Beneficial
Owners of Five Percent or More of the Common Stock" above for information
regarding the beneficial ownership of the Common Stock by Laidlaw Inc.
(3) Includes 770 shares of restricted stock granted on January 5, 1999, in
accordance with the Nonemployee Director Stock Plan. The shares do not fully
vest until January 5, 2000. Also includes 6,250 shares owned by Mr.
Bullock's spouse.
(4) Includes 687 shares of restricted stock granted on January 5, 1999, in
accordance with the Nonemployee Director Stock Plan. The shares do not fully
vest until January 5, 2000.
(5) Includes 46,528 shares held by Mr. Rollins as co-trustee. Does not include
1,547 shares owned by Mr. Rollins' wife, as to which shares Mr. Rollins
disclaims any beneficial ownership.
(6) Includes 645 shares of restricted stock granted on January 5, 1999, in
accordance with the Nonemployee Director Stock Plan. The shares do not fully
vest until January 5, 2000.
(7) Does not include 58,937 shares owned by Mr. Rollins' wife and 30,717 shares
held by his wife as custodian for his minor children, as to which shares Mr.
Rollins disclaims any beneficial ownership.
-3-
<PAGE>
(8) Includes 242,172 shares held by Mr. Tippie as co-trustee; 6,500 shares held
by him as trustee; and 7,500 shares in which a wholly owned corporation over
which he has sole voting power has a beneficial partnership interest of 75
shares and voting rights on 7,500 shares. Does not include 5,750 shares owned by
Mr. Tippie's wife, as to which shares Mr. Tippie disclaims any beneficial
ownership.
(9) Includes shares subject to presently exercisable options. Does not include
remaining shares which are subject to vesting requirements pursuant to the 1997
Stock Option Plan. Options become exercisable at the rate of 20% per year, on or
about one year after the date of grant, with all options becoming fully vested
on or about five years after the date of grant.
(10) Includes holdings of Common Stock held through the Company's 401(k) plan as
of August 31, 1999.
(11) Does not include 7,500 shares which are subject to vesting requirements
pursuant to the Directors Stock Option Plan. Under such plan, options become
exercisable at the rate of 20% per year, on or about one year after the date of
grant, with all options becoming fully vested on or about five years after the
date of grant. Mr. Luba became a director on March 30, 1999.
COMMON STOCK Performance Graph
The following line graph compares the cumulative total stockholder
return of the Company with that of the S&P MidCap 400 Index and a Peer Group
Index. The comparison is for the five year period beginning August 31, 1994 and
ending August 31, 1999 and assumes $100 invested on August 31, 1994 in the
Company's Common Stock, the S&P MidCap 400 Index and the Peer Group Index and
the reinvestment of dividends. The Peer Group Index selected by the Company
consists of Clean Harbors, Inc., EnviroSource, Inc., International Technology
Corporation, Philip Services Corp. and U.S. Liquids Inc.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG SAFETY-KLEEN CORP, THE S&P MIDCAP 400 INDEX
AND A PEER GROUP INDEX
-g r a p h -
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------------------------------------
31-Aug-94 31-Aug-95 31-Aug-96 31-Aug-97 31-Aug-98 31-Aug-99
<S> <C> <C> <C> <C> <C> <C>
SAFETY-KLEEN CORP. 100.00 75.51 51.02 75.51 47.96 52.04
PEER GROUP INDEX 100.00 105.09 122.57 282.92 56.84 70.16
S & P MIDCAP 400 INDEX 100.00 120.50 134.82 185.08 161.13 228.12
</TABLE>
-4-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation of Executive Officers
The following table sets forth the compensation paid to the Named Executive
Officers for services rendered to the Company during the fiscal years ended
August 31, 1997, 1998 and 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------
(a) (b) (c) (d) (g) (i)
Securities Underlying All Other
Name and Principal Position FY Salary($) Bonus($) Options/SARs (#) Compensation($)(1)
-- --------- -------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Kenneth W. Winger 1999 $504,180(2) $293,033 62,500 $24,041
President, Chief Executive
Officer and Director (3) 1998 $441,667 $325,000 62,500 $17,943
1997 $120,167 $100,000 62,500 $11,060
Michael J. Bragagnolo, 1999 $302,590 $150,835 37,500 $22,132
Executive Vice President and
Chief Operating Officer (3) 1998 $273,750 $168,356 37,500 $16,848
1997 $78,861 $46,670 37,500 $3,121
Paul R. Humphreys (3) 1999 $252,500 $100,880 30,000 $20,714
Senior Vice President of
Finance and Chief Financial 1998 $220,333 $108,404 15,000 $14,602
Officer
1997 $68,333 $35,618 15,000 $4,837
Henry H. Taylor (3) 1999 $191,654 $66,882 10,000 $19,277
Vice President and General
Counsel and Secretary 1998 $173,750 $74,799 5,000 $14,558
1997 $56,938 $30,862 5,000 $4,769
</TABLE>
(1) Amounts shown for 1999 consist of (i) for Mr. Winger: premiums on life
insurance policies of $1,935, Company contribution to and other
allocations under the Safety-Kleen Corp. 401(k) Savings Plan (the
"401(k) Plan") of $10,644 and an $11,462 automobile allowance; (ii) for
Mr. Bragagnolo: premiums on life insurance policies of $1,179, Company
contributions to and other allocations under the 401(k) Plan of $11,039
and a $9,914 automobile allowance; (iii) for Mr. Humphreys: premiums on
life insurance policies of $984, Company contributions to and other
allocations under the 401(k) Plan of $11,134 and an $8,596 automobile
allowance; and (iv) for Mr. Taylor: premiums on life insurance policies
of $747, Company contributions to and other allocations under the
401(k) Plan of $9,934 and an $8,596 automobile allowance.
-5-
<PAGE>
(2) The salary described in the Report on Executive Compensation did not
become effective until April 1, 1999.
(3) As each of the Company's Named Executive Officers became an employee of
the Company on May 15, 1997, their fiscal 1997 compensation is for the
period May 15, 1997 through August 31, 1997.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
- ---------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($)(1) 10% ($)(1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. Winger 62,500 13.27% $13.25 04/15/09 $520,625 $1,320,000
Michael J. Bragagnolo 37,500 7.96% $13.25 04/15/09 $312,375 $792,000
Paul R. Humphreys 30,000 6.37% $13.25 04/15/09 $249,900 $633,600
Henry H. Taylor 10,000 2.12% $13.25 04/15/09 $83,300 $211,200
</TABLE>
(1) These amounts, based on assumed appreciation rates of 5% and 10% as
prescribed by the Securities and Exchange Commission rules, are not
intended to forecast possible future appreciation, if any, of the Common
Stock price. These numbers do not take into account certain provisions of
the options providing for termination of the option following termination
of employment, nontransferability or phased-in vesting. The Company did
not use an alternative formula for a grant date valuation as it is not
aware of any formula that will determine with reasonable accuracy a
present value based on future unknown or volatile factors. Future
compensation resulting from option grants is based solely on the
performance of the Common Stock.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
(a) (d) (e)
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at FY-End (#) Options/SARs at FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
------------------------ -------------------------
<S> <C> <C>
Kenneth W. Winger 37,500/150,000 0/0
Michael J. Bragagnolo 22,500/90,000 0/0
Paul R. Humphreys 9,000/51,000 0/0
Henry H. Taylor 3,000/17,000 0/0
</TABLE>
-6-
<PAGE>
Defined Benefit Plans
Effective as of October 14, 1997, the Company adopted a Supplemental
Executive Retirement Plan (the "SERP") for certain eligible employees. A SERP is
an unfunded plan which provides for benefit payments in addition to those
payable under a qualified retirement plan.
The following table shows the estimated annual benefits payable upon
retirement at normal retirement date under the SERP.
Supplemental Executive Retirement Plan Table
Final Average Pay Service Years
----------------- -------------
15 20 25 30 35
$ 350,000 66,750 89,000 111,250 133,500 155,750
400,000 78,000 104,000 130,000 156,000 182,000
450,000 89,250 119,000 148,750 178,500 208,250
500,000 100,500 134,000 167,500 201,000 235,500
550,000 111,750 149,000 186,250 223,500 260,750
600,000 123,000 164,000 205,000 246,000 287,000
650,000 134,250 179,000 223,750 268,500 313,250
700,000 145,500 194,000 242,500 291,000 339,500
750,000 156,750 209,000 261,250 313,500 365,750
800,000 168,000 224,000 280,000 336,000 392,000
850,000 179,250 239,000 298,750 358,500 418,250
900,000 190,500 254,000 317,500 381,000 445,500
950,000 201,750 269,000 336,250 403,500 470,750
1,000,000 213,000 284,000 355,000 426,000 497,000
1,050,000 224,250 299,000 373,750 448,500 523,750
1,100,000 235,500 314,000 392,500 471,000 549,250
For the Company's current executive officers, the compensation shown in
the columns labeled "Salary" and "Bonus" of the Summary Compensation Table is
covered by the SERP. As of August 31, 1999, Mr. Winger had credited service
under the SERP of eight years and each of Messrs. Bragagnolo, Humphreys and
Taylor had credited service under the SERP of four years. Benefits under the
SERP are computed based on a straight-life annuity. The amounts in this table
are subject to deduction for a portion of Social Security benefits.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
The Company has Termination of Employment and Change in Control
Agreements with each of the Named Executive Officers. The agreements provide
that if the officer's employment is terminated as a result of a change in
control, he will receive a lump sum payment equal to (i) three times his highest
annual salary and bonus during the previous three fiscal years plus (ii) three
times the cash equivalent value of the perquisites in effect as of the date of
the change in control. In addition, each employee would receive three years
continuation of disability, life and health insurance. All of the agreements
provide that for purposes of determining the pension entitlement under the SERP
each plan participant would fully vest with three additional years. The
agreements further provide that all stock options granted to such persons would
fully vest and lapse if not exercised within 90 days following the employment
termination date.
-7-
<PAGE>
Compensation of Directors
Currently, each director who is not an employee of the Company is paid
an annual retainer of $20,000 (the "Annual Retainer") plus $750 for each Board
of Directors and committee meeting attended plus expense reimbursement. The
Chairman of the Board is paid an additional $12,000 annually and Committee
Chairmen are paid an additional $4,000 annually. Pursuant to the Company's
Nonemployee Director Stock Plan, 50% of the Annual Retainer for each nonemployee
director as well as 50% of the additional annual amount paid to the Chairman of
the Board and Committee Chairmen is to be paid in shares of Common Stock. Each
quarter the smallest number of whole shares of Common Stock which when
multiplied by the fair market value of such shares would equal no more than 50%
of the nonemployee director's retainer fee payable for such quarter is
calculated, and the dollar amount equivalent thereto is withheld from the
director's quarterly retainer check. A certificate in the participant's name
evidencing the number of shares of Common Stock so determined for each of the
fiscal quarters of the prior calendar year is issued at the time of the first
Board of Directors meeting held during each calendar year. The certificate is
delivered to the Secretary of the Company to be held for the benefit of the
Participant until the stock becomes vested at which time the legend is removed
and a certificate evidencing the shares is delivered to the participant. The
first shares under this plan were issued to the directors in January 1999 and
will vest in January 2000. Additionally, during fiscal 1999 each director was
granted options to purchase 7,500 shares of Common Stock at an exercise price of
$13.25 per share under the Directors Stock Option Plan. Twenty percent of the
options become exercisable on April 15, 2000 and an additional 20% of the
options become exercisable on April 15 of each year thereafter until all of the
options become exercisable.
Directors who are also employees of the Company receive no separate
compensation for serving as directors.
REPORT ON EXECUTIVE COMPENSATION
The Human Resources and Compensation Committee reviews and approves
annual salaries, evaluates performance and reviews and approves pay increases
for the Company's executive officers and senior management. The Committee also
approves executive incentive plans and awards under those plans and recommends
salary and bonus plans and awards for the Chief Executive Officer. The full
Board of Directors evaluates and approves the Chief Executive Officer's salary
and the awards of stock options to executive officers. The Committee
periodically reports to the Board of Directors on its activities.
Compensation Philosophy
The Committee bases its decisions on a compensation philosophy designed
to reward achievement based on corporate performance against measurable goals.
The Committee communicates performance standards and assures that the total
compensation package provides an earnings opportunity that is competitive for
the industry. Generally, salary and incentive programs are positioned to be
aligned with or near the median of the range of compensation levels for other
major national "for profit," "non-utility" companies adjusted for revenue size.
Since total compensation directly impacts the ability to attract and
retain qualified individuals in key positions, several sources are researched
for salary data comparisons to assure the comparability of the Company's
salaries to those of other companies in the comparison group. When developing
policies and practices designed to attract and retain qualified individuals, the
Company also considers the compensation-related policies and practices of
companies in the comparison group.
Executive Compensation
Compensation for executive officers consists of salary and short-term
and long-term incentive compensation. In determining whether to adjust the
salary of an executive officer, the Committee takes into account individual
performance, performance of the operations directed by the executive officer and
the executive officer's salary in relation to the established salary range. In
evaluating whether an executive officer's total compensation package (base
salary plus incentive compensation) should be adjusted, the Committee also takes
into account the Company's objective of being at or near the median of the range
for total compensation for comparison companies.
-8-
<PAGE>
Management Incentive Plan
In addition to receiving salary, executive officers are eligible to
receive additional cash compensation under an annual incentive plan. Under the
Management Incentive Plan ("MIP"), awards are made based on the Company's
performance during the last fiscal year, the achievement of each individual's
own financial goals for his or her business unit during such period and other
individual objectives. At the conclusion of each plan year, the Committee
compares the Company's overall performance and the performance of individual
business units to established objectives. The Committee assesses performance
through an evaluation of quantitative and qualitative measures. The quantitative
measure, which is earnings per share, accounts for 70% of each individual's
target award. The qualitative measure is comprised of preset goals and accounts
for the remaining 30% of each individual's performance award.
Stock Options
Stock options are designed to provide an incentive for those primarily
responsible for the growth and success of the Company. Stock option grants also
are intended to encourage stock ownership and thereby further associate the
interests of stockholders and those managing the Company. Stock option targets
have been established for each participating level of responsibility within the
Company.
Stock options are typically granted annually. Individual grants vary
based on the target for each level of responsibility. All grants are at market
price at the close of business on the day prior to the date of grant and, after
they become exercisable, have value only if the price of the Company's stock has
increased in value.
Compensation for the Chief Executive Officer
The Committee has tied the pay for the Chief Executive Officer to
benchmark comparison companies in the Watson Wyatt Executive survey, the Mercer
Accounting survey, the Hewitt Executive survey and a special survey performed by
Hewitt Associates, LLC. Some or all of these surveys may include companies which
are included in the Company's Peer Group Index; however, the companies included
in the surveys were not chosen for the same purpose as the Peer Group Index, and
any such overlap is purely coincidental. The objective of total compensation for
the Chief Executive Officer is the median of the market range for chief
executive officers within the "for profit," "non-utility" comparison group of
companies.
Based on these surveys, Mr. Winger's salary for fiscal 1999 was
established at $518,000 per year, effective April 1, 1999. His MIP award target
for fiscal 1999 was $310,800. Mr. Winger's MIP actual award for the 1999 fiscal
year was $293,033 based on actual results achieved. Mr. Winger also was granted,
in fiscal year 1999, options to purchase 62,500 shares of Common Stock under the
Company's 1997 Stock Option Plan.
The Committee believes the executive compensation program and practices
described above are competitive. They are designed to provide increased
compensation with improved financial results and an opportunity for capital
accumulation if stockholder value is increased.
Human Resources and Compensation Committee Board of Directors
- ------------------------------------------ ------------------
John W. Rollins, Jr. James R. Bullock
David E. Thomas, Jr. Leslie W. Haworth
Robert W. Luba
John W. Rollins, Sr.
John W. Rollins, Jr.
David E. Thomas, Jr.
Henry B. Tippie
James L. Wareham
Kenneth W. Winger
Grover C. Wrenn
-9-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Committee Members
During the fiscal year ended August 31, 1999, the Human Resources and
Compensation Committee held primary responsibility for determining executive
compensation levels. John W. Rollins, Jr. and David E. Thomas, Jr. are the
members of the Human Resources and Compensation Committee. In addition, as noted
in "Report on Executive Compensation" above, certain matters relating to
executive compensation are determined by the Board of Directors as a whole.
Laidlaw Inc. Relationships
General. Messrs. Bullock and Haworth are executive officers of Laidlaw
Inc. Pursuant to the terms of a Stock Purchase Agreement dated February 6, 1997,
between Rollins Environmental Services, Inc. and Laidlaw Inc. (the "Stock
Purchase Agreement"), Laidlaw Inc. acquired approximately 67% of the Common
Stock. Laidlaw Inc. now beneficially owns approximately 43.6% of the Common
Stock. In the ordinary course of business, the Company or its affiliates and
Laidlaw Inc. or affiliates of Laidlaw Inc. have entered from time to time into
various business transactions and agreements. The following is a summary of the
material agreements, arrangements and transactions between the Company or its
affiliates and Laidlaw Inc. or its affiliates since September 1, 1998.
Laidlaw Inc. Indemnities. Pursuant to the terms of the Stock Purchase
Agreement, Laidlaw Inc. and Laidlaw Transportation, Inc. ("LTI"), a subsidiary
of Laidlaw Inc., agreed to jointly and severally indemnify and hold harmless,
subject to certain limitations, the Company and its affiliates from and against
any and all Damages (as defined in the Stock Purchase Agreement) suffered by the
Company resulting from or in respect of (i) various tax obligations and
liabilities, (ii) pre-closing insurance claims, (iii) any breach or default in
the performance by Laidlaw Inc. or LTI of (a) their covenants and agreements in
the Stock Purchase Agreement to be performed on or after May 15, 1997 (the
"Closing") or (b) any representation or warranty which survives the Closing (to
the extent that damages therefrom exceed $2,000,000) and (iv) any environmental
liability or environmental claim arising as a result of any act or omission by
Laidlaw Inc. or LTI, including any release, occurring prior to the Closing, but
only to the extent such liability or claim (a) was known to Laidlaw Inc. or
certain of its affiliates and not disclosed in writing to the Company or (b)
relates to the Marine Shale Processors or Mercier, Quebec facilities and exceeds
(x) an aggregate of $1,000,000 in a particular year and (y) an aggregate since
the Closing of $1,000,000 times the number of years elapsed since the Closing,
but only to the extent of cash expenditures incurred within six years after the
date of the Closing.
Laidlaw Inc. Guaranties. Prior to the Closing, Laidlaw Inc. entered
into on behalf of the Company certain guaranties, performance guaranties, bonds,
performance bonds, suretyship arrangements, surety bonds, credits, letters of
credit, reimbursement agreements and other undertakings, deposit commitments or
arrangements by which Laidlaw Inc. may be primarily, secondarily, contingently
or conditionally liable for or in respect of (or which create, constitute or
evidence a lien or encumbrance on any of the assets or properties of Laidlaw
Inc. which secures the payment or performance of) a present or future liability
or obligation of the Company (each a "Laidlaw Guaranty" and collectively the
"Laidlaw Guaranties"). Pursuant to the terms of the Stock Purchase Agreement,
the Company agreed to use its best efforts to cause Laidlaw Inc. to be fully and
finally released and discharged from all further liability or obligation in
respect of all Laidlaw Guaranties within six months following the date of the
Closing. As of August 31, 1999 Laidlaw Inc. had been discharged from most of
such obligations.
Financial assurance is required for the cost of clean-up or
environmental impairment restoration, if any should be incurred, following
closure of the hazardous waste management facility operated by the Company in
Pinewood, South Carolina. Prior to the Closing, Laidlaw Inc. provided its
corporate guaranty to satisfy, in part, this financial assurance. Insurance
coverage has been substituted for the Laidlaw Inc. corporate guaranty under the
present financial assurance submittal.
-10-
<PAGE>
Laidlaw Inc. PIK Debenture. At the Closing, the Company issued a 5%
convertible Pay-In-Kind Debenture to LTI in the original principal amount of
$350,000,000 (the "PIK Debenture"). The Company repurchased the PIK on August
27, 1999 in consideration of the payment of 11,320,755 shares of Common Stock
and $200,000,000 in cash. The Company also paid 376,858 shares of Common Stock
in consideration of interest accrued on the PIK through the repurchase date. In
addition, during fiscal 1999 prior to the repurchase date the Company issued
1,168,541 shares of Common Stock on account of accrued interest on the PIK.
The issuance of the shares in connection with the repurchase of the PIK
was approved by the shareholders of the Company at a special meeting held on
August 27, 1999. As a result of the repurchase Laidlaw Inc. now beneficially
owns approximately 43.6% of the outstanding Common Stock.
Laidlaw Service Arrangements. Laidlaw Inc. and its affiliates have
provided certain financial and management services to the Company and its
subsidiaries. Such services have included providing general liability and
workers' compensation insurance and income tax management. Each of the service
arrangements has been on arms-length terms comparable to those available in
transactions with unaffiliated parties. During the fiscal year ended August 31,
1999, the Company paid Laidlaw Inc. $21.5 million on account of such services.
Raymond James & Associates, Inc.
Mr. Thomas is Senior Managing Director and Head of the Investment
Banking Group of Raymond James & Associates, Inc. During fiscal 1999, Raymond
James & Associates, Inc. has acted as financial advisor and in other capacities
to the Company for various matters, including acquisitions, divestitures and
security offerings, and it is expected to continue to act in such capacity in
the future.
Rollins Truck Leasing Corp.
Mr. Rollins, Sr. is Chairman of the Board and Chief Executive Officer
of Rollins Truck Leasing Corp. Mr. Tippie is Vice Chairman and Chairman of the
Executive Committee of Rollins Truck Leasing Corp. and Mr. Rollins, Jr. is
President and Chief Operating Officer of Rollins Truck Leasing Corp. During
fiscal 1999, the Company paid Rollins Truck Leasing Corp. $1.7 million on
account of truck rentals. Mr. Rollins, Sr. and Mr. Tippie are directors and
shareholders of Matlack Systems, Inc. and Mr. Rollins, Jr. is Chairman of the
Board and a shareholder of Matlack Systems, Inc. During fiscal 1999, the Company
paid Matlack Systems, Inc. $97,000 on account of transportation services. It is
expected that the Company will continue to lease trucks from Rollins Truck
Leasing Corp. and obtain transportation services from Matlack Systems, Inc. in
the future.
INFORMATION AS TO THE BOARD OF DIRECTORS
General
During the fiscal year ended August 31, 1999, the Company's Board of
Directors held a total of nine regular and special meetings. The Board of
Directors currently has two committees: the Audit Committee (which held two
meetings between September 1, 1998 and August 31, 1999) and the Human Resources
and Compensation Committee (which held two meetings between September 1, 1998
and August 31, 1999). Each incumbent director attended at least 75% of the
meetings of the Board of Directors and the meetings of committees on which he
served held during the period for which he was a director except Mr. Rollins,
Sr. The Company does not have a nominating committee, rather the Board of
Directors as a whole performs those functions.
Committees of the Board of Directors
Audit Committee. The Audit Committee is responsible for the oversight
of the Company's financial reporting process and internal controls. Its duties
include reviewing results of external audits, management's responses to external
audit recommendations, internal audit reports and management's response to those
reports; reviewing annual financial statements and any significant disputes
between management and external auditors in
-11-
<PAGE>
connection with those financial statements; considering major changes and major
questions of choice regarding appropriate auditing and accounting principles and
practices to be followed when preparing corporate financial statements;
reviewing corporate procedures used in preparing public financial statements and
related management commentaries; meeting periodically with management to review
the Company's major financial risk exposures; and considering indemnification
issues.
Human Resources and Compensation Committee. The Human Resources and
Compensation Committee is responsible for reviewing and recommending to the
Board of Directors of the Company annual salary, bonus, stock options and other
benefits, direct and indirect, of officers; reviewing new executive compensation
programs; periodically reviewing the coordination of the Company's executive
compensation programs; reviewing and recommending to the Board of Directors of
the Company compensation for directors; and establishing and periodically
reviewing policies in the area of management perquisites.
PROPOSAL 1: ELECTION OF DIRECTORS
General Information
The Company's Restated Certificate of Incorporation divides the Board
of Directors into three classes, the members of one class to be elected each
year for a three year term. The terms of the Class III directors will expire at
the Annual Meeting.
Vacancies on the Board of Directors may be filled by the remaining
directors at any regular or special meeting thereof. Individuals selected to
fill such vacancies will serve until the expiration of the terms of office of
the directors in the class to which such director is appointed.
Nominees
The following information is furnished with respect to the Board of
Directors' nominees for election as directors. The Board of Directors recommends
a vote "FOR" all the nominees. All of the nominees for election as directors are
currently serving as directors of the Company. Should any nominee for the office
of director become unable to serve, which is not anticipated, it is the
intention of the persons named in the proxy, unless otherwise specifically
instructed therein, to vote for the election in his stead of such other person
as the Board of Directors may recommend.
CLASS III NOMINEES - TERMS TO EXPIRE AT THE 2002 ANNUAL MEETING.
<TABLE>
<CAPTION>
Name, Present Position(s) and Age Principal Occupation or Employment During the Last
Term With the Company Five Years, Directorships of Public Companies
- ----------------------------------------------------------- ------ -----------------------------------------------------
<S> <C> <C>
John W. Rollins, Sr. 83 Chairman of the Board and Chief Executive Officer
Director of the Company since 1982 of Rollins Truck Leasing Corp., a truck leasing
company, for more than five years. Mr. Rollins was
Chairman of the Board and Chief Executive Officer
of the Company from 1988 until May 15, 1997. Mr.
Rollins also is a director of Matlack Systems,
Inc., Rollins, Inc., RPC, Inc. and Dover Downs
Entertainment, Inc. Mr. Rollins is the father of
John W. Rollins, Jr.
James R. Bullock 55 President and Chief Executive Officer of Laidlaw
Director of the Company and Chairman of the Board Inc., a transportation company, since October
since May 1997 1993. Mr. Bullock also is a director of Laidlaw
Inc. and Imasco Inc.
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
David E. Thomas, Jr. 42 Senior Managing Director and the Head of the
Director of the Company since June 1997 Investment Banking Group of Raymond James &
Associates, Inc., an investment banking firm, since
July 1996; from 1991 until July 1996, he was a
Managing Director of Raymond James. Mr. Thomas also
is a director of Reynolds, Smith and Hills, Inc.
Mr. Thomas is a member of the Human Resources and
Compensation Committee.
</TABLE>
The Board of Directors recommends that stockholders vote "FOR" all of
the Class III nominees.
Continuing Directors
2. CLASS I DIRECTORS - TERMS TO EXPIRE AT THE 2000 ANNUAL MEETING.
<TABLE>
<CAPTION>
Name, Present Position(s) and Age Principal Occupation or Employment During the Last
Term With the Company Five Years, Directorships of Public Companies
- ----------------------------------------------------------- ------ -----------------------------------------------------
<S> <C> <C>
Kenneth W. Winger 61 President, Chief Executive Officer and Director of
President, Chief Executive Officer and Director of the the Company since May 1997. President, Chief
Company since May 15, 1997 Operating Officer and sole director of Laidlaw
Environmental Services (US), Inc., now merged into a
subsidiary of the Company, from July 1995 until May
1997; Executive Vice President for Business Develop-
ment of Laidlaw Waste Systems, Ltd. from January 1995
until July 1995; from May 1991 until December 1994,
Senior Vice President for Corporate Development of
Laidlaw Inc.
Leslie W. Haworth 56 Senior Vice President and Chief Financial Officer
Director of the Company since May 1997 of Laidlaw Inc., a transportation company, for more
than five years.
Henry B. Tippie 72 For more than five years, Chairman of the Board and
Director of the Company since 1982 President of Tippie Services, a management services
company; for more than five years, Chairman of the
Executive Committee and Vice Chairman of the Board
of Rollins Truck Leasing Corp. Mr. Tippie also is a
director of Matlack Systems, Inc., Dover Downs
Entertainment, Inc., RPC, Inc. and Rollins Inc. Mr.
Tippie currently serves as Chairman of the Audit
Committee.
James L. Wareham 60 President of AK Steel Corporation, a steel
Director of the Company since June 1997 manufacturing company, since March 1997; from 1993
until 1996, President of Wheeling-Pittsburgh Steel
Corporation. Mr. Wareham is a member of the Audit
Committee.
</TABLE>
-13-
<PAGE>
3. CLASS II DIRECTORS - TERMS TO EXPIRE AT THE 2001 ANNUAL MEETING.
<TABLE>
<CAPTION>
Name, Present Position(s) and Age Principal Occupation or Employment During the Last
Term With the Company Five Years, Directorships of Public Companies
- ----------------------------------------------------------- ------ -----------------------------------------------------
<S> <C> <C>
John W. Rollins, Jr. 57 President and Chief Operating Officer and a
Director of the Company since 1982 director of Rollins Truck Leasing Corp., a truck
leasing company, for more than five years; Chairman
of the Board of Matlack Systems, Inc. for more than
five years. Mr. Rollins was Senior Vice Chairman
of the Board of the Company from 1988 until May 15,
1997. Mr. Rollins also is a director of Dover
Downs Entertainment, Inc. Mr. Rollins is a member
of the Human Resources and Compensation Committee.
Mr. Rollins is the son of John W. Rollins, Sr.
Robert W. Luba 57 President of Luba Financial Inc., an investment
Director of the Company since March 1999 banking company for more than five years. Mr. Luba
is also a Director of Luba Financial Inc., ATS
Automation Tooling Systems, Inc., Franco-Nevada
Mining Corporation, AIM Canada Group of Mutual
Funds, Greenfield B.V., MDS Inc., Raymond Steel
Ltd., Vincor International Inc., and Working
Ventures Canadian Fund Inc. Mr. Luba is a member of
the Audit Committee
Grover C. Wrenn 56 President and Chief Executive Officer of Accent
Director of the Company since July 1997 Health, Inc., an educational media company, since
June 1996; Chief Executive Officer of EnSys
Environmental Products, Inc. from April 1995
through December 1996; and President and Chief
Executive Officer of Applied Bioscience
International from 1991 through March 1995. Mr.
Wrenn also is a director of Strategic Diagnostics,
Inc. and Pharmakinetics Labs, Inc.
</TABLE>
PROPOSAL 2: EMPLOYEE OPTION INCREASE
General
The 1997 Stock Option Plan (the "Employee Plan") was approved by the
stockholders at the Company's 1997 Annual Meeting. The Plan as approved provides
that the Human Resources and Compensation Committee (the "HRC Committee") may
grant options to purchase up to 1,500,000 shares of Common Stock ("Shares"), in
the aggregate. The Board of Directors of the Company must approve any option
grant to a person who is an officer of the Company for purposes of Section 16 of
the Securities Exchange Act of 1934, as amended ("Officer"). The plan also
provides that while the HRC Committee may modify, revise or terminate the plan
at any time and from time to time, the Board of Directors may not increase the
aggregate number of Shares which may be issued under options
-14-
<PAGE>
pursuant to the provisions of the plan without the approval of the holders of a
majority of the Shares present, in person or by proxy, at a meeting of the
stockholders at which a quorum is present and no amendment may affect any
outstanding option.
The Employee Plan is intended to advance the interests of the Company
and its subsidiaries by encouraging stock ownership by key employees of the
Company and its subsidiaries and as a means to attract, motivate and retain such
employees.
The only persons who are eligible to receive awards under the Employee
Plan are persons who are key employees of the Company or of any corporation in
which the Company owns, directly or indirectly, not less than 50% of the
outstanding voting shares and who are in a position, in the opinion of the HRC
Committee, to make significant contributions to the growth, management and
success of the Company and its subsidiaries and who do not own more than 10% of
the stock of the Company at the time an option is granted.
During the fiscal year ended August 31, 1999, the Company granted
options to acquire 471,125 shares to a total of 180 persons under the Employee
Plan. The following table sets forth the number of Shares underlying such
options and the dollar value such options would have had on August 31, 1999 (the
difference between the closing price of the Common Stock on such date and the
exercise price times the number of options) if such options had been exercisable
as of such date:
The Plan
--------
Name and Position Dollar Value No. of Options
- ----------------- ------------ --------------
Kenneth W. Winger 0 62,500
Michael J. Bragagnolo 0 37,500
Paul R. Humphreys 0 30,000
Henry H. Taylor 0 10,000
Executive Group 0 140,000
Non-Executive Director Group 0 0
Non-Executive Officer Employee Group 0 331,125
At the time the plan was originally approved by the Stockholders there
were 72 persons who were eligible to receive awards under the plan. Since that
time, the number has increased to 180. The number of Shares still available
under the plan is 402,937. Options may be granted under the plan until 2007;
however, in order for the Company to continue to grant options at the current
level in fiscal 2000 and beyond, the number of shares available must be
increased. Therefore, on October 5, 1999, the Board of Directors approved
increasing the number of Shares available by 1,000,000, subject to stockholder
approval. If the stockholders do not approve the increase the plan as currently
in effect will continue in accordance with its current terms.
The proceeds received by the Company from the sale of Common Stock upon
the exercise of options granted under the plan are used for general corporate
purposes. All expenses of administering the Employee Plan are borne by the
Company. If any option awarded under the plan lapses or is otherwise terminated
then the underlying shares of Common Stock not acquired will be available again
for issuance under the plan.
The HRC Committee, or the Board of Directors with respect to Officers,
will have the authority to grant options under the Employee Plan for such number
of Shares as it may determine and on such terms, conditions and restrictions as
it may deem appropriate. The HRC Committee, or the Board of Directors with
respect to Officers, will determine the period for which each option is granted
and the terms on which it may be exercised. The exercise price of an option may
not be less than fair market value on the date the option is granted. The
Employee Plan defines "fair market value" to mean the closing price of a Share
on the New York Stock Exchange as reported in the Wall Street Journal for the
trading day immediately prior to the day on which the option is granted, or if
the option is not granted on a trading day, then the last trading day before the
option is granted.
-15-
<PAGE>
Options granted under the Employee Plan may be (a) incentive stock
options ("ISOs"), (b) nonqualified stock options ("NQSOs") or (c) a combination
of both types of options. ISOs and NQSOs will be designated as such at the time
of the grant. In the case of ISOs, the terms and conditions of such grants will
be subject to and comply with such rules as may be described in Section 422 of
the Code, and any regulations implementing such statute. The aggregate fair
market value (as determined pursuant to the plan) of the Shares with respect to
which ISOs are granted which are exercisable for the first time by an employee
during any calendar year (under all stock option plans maintained by the Company
and its subsidiaries), valued as of the date of grant, may not exceed $100,000.
Upon the exercise of an option, the option exercise price will be
payable in cash, certified check, bank draft, note, money order or such other
method as determined by the HRC Committee.
The HRC Committee, or the Board of Directors with respect to Officers,
will determine the period during which each option may be exercised. All options
will expire if not exercised by the end of the specified term, and no option
will be exercisable after the expiration of ten years from the date it is
granted. Each option granted under the Employee Plan may be exercised, so long
as it is valid and outstanding, from time to time in part or as a whole, subject
to any limitations with respect to the number of shares of Common Stock for
which the option may be exercised at a particular time and to such other
conditions as the HRC Committee, or the Board of Directors in the case of grants
to Officers, in its discretion may specify upon granting the option. Options are
not transferable otherwise than by will or the laws of descent and distribution
and are exercisable during the optionee's lifetime only by the optionee. After
the death of an optionee, his executor, administrator or any person or persons
to whom his option may be transferred by will or by the laws of descent and
distribution, will have the right, at any time prior to the earlier of the date
of expiration of the option or one year following the date of such death, to
exercise the option, in whole or in part.
The existence of outstanding options will not affect in any way, the
right or power of the Company or its stockholders to make or authorize any
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business or any merger or consolidation of
the Company or any issue of securities or any sale or transfer of all or any
part of its assets or business or any other corporate act or proceeding whether
of a similar character or otherwise.
If the Company effects a subdivision or consolidation of its Common
Stock or other capital readjustment, the payment of a stock dividend or other
increase or reduction of the number of shares of Common Stock outstanding
without receiving compensation therefor in money, services or property, then (a)
the number, class and per share price of shares subject to outstanding options
under the Employee Plan will be appropriately adjusted in such manner as to
entitle the optionee to receive upon exercise of an option for the same
aggregate cash consideration the same total number and class of shares as he
would have received had he exercised his options in full immediately prior to
the event requiring the adjustment; and (b) the number and class of shares then
reserved for issuance under the Employee Plan will be adjusted by substituting
for the reserved number and class that number and class of shares that would
have been received by the owner of an equal number of outstanding shares of each
class as the result of the event requiring the adjustment.
After a merger of one or more corporations into the Company, or after a
consolidation of the Company and one or more corporations in which the Company
is the surviving corporation, each holder of an outstanding option will, at no
additional cost, be entitled upon exercise of such option to receive (subject to
any required action by stockholders) in lieu of the number and class of shares
as to which such option would have been so exercisable in the absence of such
event, the number and class of shares to which such holder would have been
entitled pursuant to the terms of the agreement of merger or consolidation, if
immediately prior to such merger or consolidation, such holder had been the
holder of record of the number and class of shares equal to the number and class
of shares as to which such option shall be so exercisable.
If the Company is merged or consolidated under circumstances where the
Company is not the surviving corporation or if the Company is liquidated or
sells or otherwise disposes of substantially all of its assets to another
corporation while unexercised options remain outstanding under the Employee
Plan: (i) subject to the provisions of clause (iii) below, after the effective
date of such merger, consolidation or sale, as the case may be, each holder of
-16-
<PAGE>
an outstanding option will be entitled, upon exercise of such option, to
receive, in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of the merger, consolidation or sale, (ii) the HRC Committee may waive any
limitations set forth in or imposed pursuant to the Employee Plan so that all
options, from and after a date prior to the effective date of such merger,
consolidation, liquidation or sale, as the case may be, specified by the HRC
Committee, will be exercisable in full; and (iii) all outstanding options may be
canceled by the HRC Committee as of the effective date of any such merger,
consolidation, liquidation or sale, provided that (x) notice of such
cancellation is given to each holder of an option and (y) each holder of an
option has the right to exercise such option in full during a thirty day period
preceding the effective date of such merger, consolidation, liquidation or sale.
Except as provided above, the issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, for
cash or property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, will not affect, and no adjustment by reason thereof will be made
with respect to, the number, class or price of shares then subject to
outstanding options.
No optionee will have rights as a stockholder with respect to shares
covered by his option until the date of issuance of a stock certificate for such
shares; and except as provided above, no adjustment for dividends, or otherwise,
will be made if the record date thereof is prior to the date of issuance of such
certificate.
Certain Federal Income Tax Consequences
Incentive Stock Options. With respect to an ISO, an employee does not
recognize income for federal tax purposes at the time the ISO is granted or when
the ISO is exercised. However, for purposes of computing the employee's
alternative minimum taxable income, the difference between the option price and
the fair market value of the Common Stock on the exercise date may be an income
adjustment item in the year the ISO is exercised. In the case of a disposition
of Common Stock acquired pursuant to an ISO, other than in a "disqualifying
disposition," an employee will recognize a long-term capital gain or long-term
capital loss equal to the difference between the option price of the ISO and the
amount received for the Common Stock.
A "disqualifying disposition" occurs when Common Stock acquired through
the exercise of an ISO is disposed of prior to either (1) two years from the
grant date of the ISO or (2) one year from the date that the Common Stock is
transferred to an employee upon the exercise of the ISO. In the case of a
"disqualifying disposition" of Common Stock acquired pursuant to an ISO, the
employee will recognize ordinary income in the amount of the lesser of (1) the
fair market value of the Common Stock on the exercise date minus the option
price or (2) the amount realized on the sale or exchange of the Common Stock
minus the option price; and the employee will recognize a long-term or
short-term capital gain (depending on the holding period of the Common Stock) in
the amount of the excess, if any, of the amount realized on the disposition
minus the fair market value of the Common Stock on the exercise date. In the
case of a "disqualifying disposition" whereby an employee exchanges the Common
Stock for less than the option price (in a transaction not subject to Section
267 of the Code relating to the disallowance of losses in transactions between
related taxpayers), the employee is allowed a long-term or short-term capital
loss (depending on the holding period of the Common Stock) equal to the amount
realized on the sale or exchange of the Common Stock minus the option price.
In the event of a "disqualifying disposition," the Company will be
entitled to an income tax deduction in the year of such disposition equal to the
amount of ordinary income recognized by the employee.
Non-Qualified Stock Options. With respect to a NQSO, an employee does
not recognize income for federal tax purposes at the time a NQSO is granted
unless the option has a readily ascertainable fair market value. If the NQSO
does not have a readily ascertainable fair market value, the employee will
recognize income with respect to he option when the option is exercised. Upon
exercise of a NQSO, an employee will recognize ordinary income equal to the
excess of the fair market value of the Common Stock on the exercise date over
the option price paid by the employee.
-17-
<PAGE>
If the Company complies with the applicable reporting requirements, the
Company will be entitled to an income tax deduction equal to the amount of
income includible in the employee's income upon the exercise of the option.
Upon the sale or exchange of Common Stock acquired through the exercise
of a NQSO, an employee will recognize a capital gain or capital loss equal to
the difference between the amount received upon the sale or exchange of the
Common Stock and the employee's basis in the Common Stock (generally the sum of
the ordinary income recognized by the employee upon the exercise of the NQSO
plus the amount paid by the employee to exercise the NQSO). Depending on the
holding period of the Common Stock any capital gain or capital loss recognized
on the disposition will be either short-term or long-term.
Limits on Deduction. Under Section 162(m) of the Code, the amount of
compensation paid to the Named Executive Officers of the Company in the year for
which a deduction is claimed by the Company (including its subsidiaries) is
limited to $1,000,000 per person, except that compensation which is
performance-based will be excluded for purposes of calculating the amount of
compensation subject to this $1,000,000 limitation. The ability of the Company
to claim a deduction for compensation paid to any other executive officer or
employee of the Company (including its subsidiaries) is not affected by this
provision. Because the grant of options is not deemed to be performance-based
under Section 162(m) of the Code, amounts for which the Company may claim a
deduction upon the exercise of any option will be subject to the limitations on
deductibility set forth in Section 162(m).
The Board of Directors recommends that stockholders vote "FOR" approval
of the Employee Option Increase.
PROPOSAL 3: EXECUTIVE BONUS PLAN
General
The Board of Directors of the Company has adopted, and in this proposal
is requesting stockholder approval of the material terms of, the Executive Bonus
Plan.
The Board of Directors believes it is in the best interests of the
Company and its stockholders to adopt a bonus plan that allows the Company to
attract, retain and provide appropriate performance incentives for designated
executive officers and key employees of the Company while also permitting the
Company to continue to obtain tax deductions for compensation paid or awarded to
them.
Section 162(m) of the Code generally does not allow publicly held
companies to obtain tax deductions for compensation of more than $1 million paid
in any year to their chief executive officer, or to any of their other four most
highly compensated executive officers, unless such payments are
"performance-based" in accordance with conditions specified under Section 162(m)
and the related Treasury Regulations. One of those conditions requires the
Company to obtain stockholder approval of the material terms of the performance
goals set by a committee of outside directors. Therefore, the Board of Directors
is recommending that the stockholders approve the material terms of the
Executive Bonus Plan as described below.
Subject to such approval, and if the applicable performance goals are
satisfied, this proposal would enable the Company to pay performance-based
compensation to executive officers of the Company and to obtain tax deductions
for such payments, without regard to the limitations of Section 162(m). The
Executive Bonus Plan is not intended to be subject to the Employee Retirement
Income Security Act of 1974, as amended.
In addition, the Board of Directors has established executive stock
ownership guidelines which require senior executives of the Company to acquire
and hold designated amounts of the Company's Common Stock. To assist these
executives in complying with the stock ownership guidelines, the Board of
Directors has determined to allow participants in the Executive Bonus Plan to
elect to defer the receipt of all or a portion of their annual bonus awards, and
to be paid the deferred portion in the form of shares of Common Stock, all as
described below.
-18-
<PAGE>
Summary of the Executive Bonus Plan
The following description of the Executive Bonus Plan is merely a
summary of certain provisions thereof and is qualified in its entirety by the
full text of the Executive Bonus Plan, a copy of which has been filed with the
Securities and Exchange Commission.
Purpose. The purpose of the Executive Bonus Plan is to provide a way
(i) for the Company to award bonuses to designated executive officers and key
employees of the Company and its subsidiaries that are directly related to the
performance of the Company, and which are exempt from the application of Section
162(m) of the Code and (ii) for participants in the Executive Bonus Plan to
defer all or a portion of their bonuses and ultimately be paid such deferred
portion in shares of Common Stock.
Administration. The Executive Bonus Plan is administered by a committee
(the "Committee") that is selected by the Board and is composed of two or more
members of the Board, each of whom is required to be an "outside director"
(within the meaning of Section 162(m) of the Code). It is currently intended
that the Committee will be the HRC Committee, and will continue to be the HRC
Committee for so long as it meets the preceding requirements.
In addition to the authority of the Committee described below, the
Committee has the authority to make all determinations with regard to the
operation of the Executive Bonus Plan, and may make such rules and regulations
for the administration of the Executive Bonus Plan as it deems desirable.
Eligibility. The Committee will determine the employees who are
eligible to participate in the Executive Bonus Plan for each Plan Year (the
"Participants"). The Plan Year is the Company's fiscal year (currently the 12
month period beginning on each September 1st), and the first Plan Year is the
fiscal year beginning on September 1, 1999.
Bonus Awards. The amount of the bonus payable to any Participant for
any particular Plan Year will be determined under an objective,
performance-based formula established by the Committee for such Participant. The
formula for each Participant for any Plan Year will be based on one or more of
the following criteria, on either a Company-wide or business unit basis:
(1) earnings per share
(2) net income
(3) stock price
(4) operating profit
(5) earnings before interest, taxes, depreciation and
amortization expense ("EBITDA")
(6) return on assets
(7) total shareholder return
(8) level of fixed or variable costs
(9) quantity of waste managed
The Committee will establish each Participant's bonus formula no later
than 90 days after the commencement of the Plan Year (the "Formula Date"). The
Committee may, at any time prior to the Formula Date with respect to any Plan
Year, or, subject to the following paragraph, at any time thereafter in its sole
and absolute discretion, adjust or modify the bonus formula for any one or more
Participants for such Plan Year in order to prevent the dilution or enlargement
of the rights of such Participants (i) in the event, or in anticipation, of any
unusual or extraordinary corporate item, transaction, event or development, (ii)
in recognition, or in anticipation, of any other unusual or nonrecurring events
affecting the Company or the financial statements of the Company, or in response
to, or in anticipation of, changes in applicable laws, regulations, accounting
principles or business conditions, and (iii) in view of the Committee's
assessment of the business strategy of the Company, performance of comparable
organizations, economic and business conditions and any other circumstances
deemed relevant.
-19-
<PAGE>
The Committee may exercise such discretion set forth in the preceding
paragraph on or after the Formula Date only if it reasonably determines that
such exercise would not cause the payment of a bonus award to fail to qualify as
"performance-based compensation" under Section 162(m) of the Code.
Notwithstanding any provision to the contrary, in no event shall any
bonus award in respect of any Plan Year exceed $2.5 million to any single
Participant.
Right to Defer Bonus Award. Each Participant may defer up to 100% of
such person's bonus under the Executive Bonus Plan for each Plan Year. Deferral
elections for any Plan Year must be made before the earlier of (i) 10 days after
the day the Participant is notified of such person's bonus formula for such Plan
Year or (ii) 100 days after the first day of such Plan Year. Deferral elections
are irrevocable, once made.
Each deferral election must specify both the percentage of the bonus
for such Plan Year to be deferred and when the deferred bonus will be paid. The
election must specify a payment date no earlier than the third anniversary of
the first day of the Plan Year for which the bonus is earned (e.g., no earlier
than September 1, 2002, for bonuses earned for the first Plan Year).
Payment of Award if Deferral Election is Not Made. As soon as
practicable following the end of each Plan Year, the Committee will determine
the amount (if any) of the bonus award with respect to each Participant for such
Plan Year based on the attainment of the Participant's objective bonus formula.
Any part of such bonus award for which a timely deferral election is not made by
such Participant shall be paid in a lump sum cash payment, as soon as
practicable after the amount of the bonus award has been determined by the
Committee. Provided that the Committee has made its determination, bonuses are
payable no later than the 45th day following the end of the Plan Year.
Payment of Award if Deferral Election is Made. Any part of a bonus
award for which a timely deferral election is made shall not be paid in a lump
sum cash payment. Instead, as of the 45th day following the end of a Plan Year,
the Participant is credited on a bookkeeping account of the Company (a "Deferral
Account") with a number of "Stock Units" (each representing one share of Stock),
equal to the cash amount of the deferred bonus in respect of such Plan Year
divided by the closing price of the Stock on the 45th day following the end of
the Plan Year (or, if such day is not a trading day, on the trading day
immediately preceding such day). A deferred bonus award will not be taxable to a
Participant at the time that the Deferral Account is established. A separate
Deferral Account will be maintained for each Participant for each Plan Year for
which a timely deferral election is made.
Stock Units will be credited with dividend equivalents at the time
dividends are paid on shares of Common Stock, equal to the amount of dividends
actually paid on the number of shares of Common Stock equal to the number of
Stock Units. As of the date credited to a Deferral Account, these dividend
equivalents will be converted into additional Stock Units, based on the closing
price of the Common Stock on the immediately preceding trading day, rounded up
to the nearest whole share.
A Participant's Deferral Accounts will be paid out on the earliest of
(i) the date specified in such Participant's deferral elections, (ii) such
person's termination of employment for any reason or (iii) a "Change of Control"
of the Company (as defined in the Executive Bonus Plan). Payments will also be
allowed at the Participant's request upon a showing of "financial hardship" (as
defined under the Executive Bonus Plan).
All payments will be in a single lump sum, in the form of shares of
Common Stock in an amount equal to the number of Stock Units being paid out of
the Participant's Deferral Account.
Shares Available. No more than 800,000 shares of Common Stock may be
issued under the Executive Bonus Plan, and the Company has reserved that number
of shares of Common Stock for that purpose.
Amendment to Plan. The Committee may amend, suspend or terminate the
Executive Bonus Plan or any portion thereof at any time; provided that no such
action may impair the rights of any Participant without the Participant's
consent. No amendment will be made that shall cause the compensation payable
under the Executive Bonus Plan in respect of any bonus award previously granted
or pending to fail to satisfy the requirements of the
-20-
<PAGE>
"performance-based compensation" exception of Section 162(m) of the Code. No
amendment will be made without stockholder approval to the extent stockholder
approval is necessary to cause any bonus award previously granted or pending to
satisfy the "performance-based compensation" exception of Section 162(m) of the
Code.
New Plan Benefits. Because amounts payable under the Executive Bonus
Plan are based on individual Participant bonus formulas for each Plan Year, it
cannot be determined at this time what amounts, if any, will be awarded to any
Participants with respect to any Plan Year. It is also not possible to determine
what portion of any Participant's bonuses awards will in fact be deferred by
such person.
The Board of Directors recommends that stockholders vote "FOR" approval
of the Executive Bonus Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16 of the Securities Exchange Act of 1934,
directors and executive officers of the Company and beneficial owners of 10% or
more of the Common Stock are required to file reports with the Securities and
Exchange Commission indicating their holdings of and transactions in the Common
Stock. To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all such persons have complied with all such filing
requirements with respect to the fiscal year ended August 31, 1999.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Representatives of PricewaterhouseCoopers LLP, which audited the
financial statements of the Company for the most recently completed fiscal year
and which has been selected to audit such statements for the current fiscal
year, are expected to be present at the Annual Meeting and will have an
opportunity to make such statements as they may desire. Such representatives are
expected to be available to respond to appropriate questions from stockholders.
PROPOSALS FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
Stockholders who intend to present proposals for consideration at next
year's annual meeting are advised that any such proposal must be received by the
secretary of the Company no later than the close of business on July 1, 2000, if
such proposal is to be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
If any Stockholder's proposal, other than a nomination for director, is
received after September 14, 2000, the Company's proxies for the 2000 Annual
Meeting may exercise discretionary authority with respect to such proposal at
the 2000 Annual Meeting without any reference to such proposal being made in the
proxy statement for such meeting.
Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of directors.
Such nominations by stockholders shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the secretary
of the Company not less than 14 days nor more than 50 days prior to any meeting
of the stockholders called for the election of directors; provided, however,
that if less than 21 days' notice of the meeting is given to stockholders, such
written notice shall be delivered or mailed, as prescribed, to the secretary of
the Company not later than the close of business on the seventh day following
the day on which notice of the meeting was mailed to stockholders.
Each such notice shall set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in such notice, (ii)
the principal occupation or employment of each such nominee and (iii) the number
of shares of stock of the Company which are beneficially owned by each such
nominee.
-21-
<PAGE>
APPENDIX A
FORM OF PROXY
SAFETY-KLEEN CORP.
1301 Gervais Street
Columbia, South Carolina 29201
This Proxy Is Solicited On Behalf Of The Board Of Directors
The undersigned hereby appoints James R. Bullock and Kenneth W. Winger, or
either of them, the attorney or attorneys and proxy or proxies of the
undersigned with full power of substitution to attend the 1999 Annual Meeting of
Stockholders of Safety-Kleen Corp. (the "Company") to be held at the Adam's Mark
Hotel, 1200 Hampton Street, Columbia, South Carolina, at 9:30 a.m., E.S.T. on
November 30, 1999, and at any adjournment thereof, to vote all shares of stock
of the Company that the undersigned shall be entitled to vote. Said proxies are
instructed to vote on the matters set forth in the proxy statement as specified
on the reverse side. The Board of Directors recommends a vote "FOR" all nominees
listed on the reverse side; "FOR" approval of the Employee Option Increase and
"FOR" approval of the Executive Bonus Plan.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
ALL SHAREHOLDERS ARE URGED TO VOTE THEIR PROXY AS EARLY AS
POSSIBLE.
PARTICIPANTS HOLDING SHARES THROUGH THE COMPANY'S 401(K)
PLAN ARE URGED TO VOTE THEIR SHARES NO LATER THAN FRIDAY,
NOVEMBER 26, 1999 IN ORDER TO ENSURE COMPLETE VOTING BY THE
PLAN TRUSTEE.
PLEASE SEE REVERSE SIDE FOR INFORMATION ON VOTING YOUR
PROXY BY TELEPHONE OR INTERNET
- --------------------------------------------------------------------------------
----- Please Mark your
X votes as in this
----- example
This proxy when properly signed and dated will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted for all nominees listed and for approval of the Employee Option
Increase and the Executive Bonus Plan.
1. Election of Directors.
Class III - Terms to Expire at 2002 Annual Meeting. Nominees:
John W. Rollins, Sr. James R. Bullock David E. Thomas, Jr.
FOR WITHHELD
---- ----
---- ----
(Instructions: to withhold authority for any individual nominee, write that
nominee's name in the blank space below.)
---------------------------------------------------------------------
2. Approval of the Employee Option Increase.
For ---- Against ---- Abstain ----
3. Approval of the Executive Bonus Plan.
For ---- Against ---- Abstain ----
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Receipt of Notice of Annual Meeting of Stockholders
and the related Proxy Statement are hereby
acknowledged.
Please sign exactly as name appears to the left. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title. If a
corporation, please sign in full corporate name by
authorized officer. If a partnership, sign in
partnership name by authorized person. If more than
one trustee, all should sign. This proxy may be
revoked any time prior to its exercise.
-----------------------------
-----------------------------
Please sign, date and return this proxy promptly. SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
------------------------
XXXXXXXXXXXXX
------------------------
SAFETY-KLEEN CORP.
Dear Stockholder:
We encourage you to take advantage of two new and convenient ways by
which you can grant a proxy to vote your shares. You can grant a proxy to vote
your shares electronically by telephone or via the Internet, which eliminates
the need to return the proxy card.
Vote by Telephone: To grant a proxy to vote your shares by telephone,
use a touch-tone telephone and call the following toll-free number:
1-877-PRX-VOTE, 24 hours a day, 7 days a week. Insert the Control Number printed
in the box above, just below the perforation. Follow the simple recorded
instructions.
Vote by Internet: To grant a proxy to vote your shares via the
Internet, go to website www.eproxyvote.com/sk. Insert the Control Number printed
in the box above, just below the perforation and then follow the simple
instructions. Please be aware that if you grant a proxy to vote your shares over
the Internet, you may incur costs such as telecommunication and Internet access
charges for which you will be responsible.
The Internet and telephone facilities will be available until midnight
on November 29, 1999, the day before the Annual Meeting of Stockholders.
Do Not Return Proxy If You Are Submitting Your Proxy By Telephone
or The Internet
<PAGE>
APPENDIX B
SAFETY-KLEEN CORP.
EFFECTIVE DATE JULY 9, 1997
1. PURPOSE
The 1997 Stock Option Plan ("Plan") of Safety-Kleen Corp. ("SK") is
intended to advance the interests of SK and its subsidiaries by encouraging
stock ownership by key employees of SK and its subsidiaries as a means to
attract, motivate and retain such employees.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Human Resources and Compensation
Committee of the Board of Directors of SK ("HRCC"). The HRCC shall have the
power to modify the provisions of the Plan to conform with law and to meet
special circumstances not anticipated or covered in the Plan, to make any
interpretations of the provisions of the Plan, to adopt rules and regulations
and prescribed forms for carrying out the purposes and provisions of the Plan
and to amend the Plan except with respect to options that have been granted. Any
interpretation, decision or determination made by the HRCC shall be final,
binding and conclusive on all parties.
3. SHARES SUBJECT TO THE PLAN
The HRCC may grant options ("Options") to purchase not more than
6,000,000 Common Shares ("Shares"), $1.00 par value, of SK in the aggregate
subject to adjustments as provided in Section 5 hereof; provided, however, that
each grant of an option hereunder to any person who is an officer of SK for
purposes of Section 16 of the Securities Exchange Act of 1934, as amended (an
'Officer"), shall be approved by the Board of Directors of SK. If any Option
granted to a person eligible to be granted Options under the Plan
("Participant") lapses or is otherwise terminated, such Shares shall then be
again available for the grant of Options hereunder. Such Shares may be treasury
Shares or authorized but unissued Shares.
4. TERMINATION OF PLAN
The Plan (and any Options granted pursuant to the Plan) shall terminate
on April 30, 1998, unless prior to that time the Plan has been approved by the
vote of the holders of a majority of the shares present, in person or by proxy,
at a meeting of the shareholders at which such approval is sought. If such
approval is given, the Plan shall terminate on July 8, 2007; provided, however,
that the HRCC of SK within its absolute discretion may terminate the Plan at any
time. No such termination, other than as provided for in Section 5 hereof, shall
in any way affect any Option then outstanding.
5. CHANGES IN SK'S CAPITAL STRUCTURE
The existing outstanding Options shall not affect in any way, the right
or power of SK or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganization or other changes in SK's capital structure or
its business or any merger or consolidation of SK or any issue of securities or
any sale or transfer of a ' 11 or any part of its assets or business or any
other corporate act or proceeding whether of a similar character or otherwise.
If SK shall effect a subdivision or consolidation of Shares or other
capital readjustment, the payment of a stock dividend or other increase or
reduction of the number of Shares outstanding without receiving compensation
therefor in money, services or property, then:
Page 1
<PAGE>
(a) The number, class and per share price of Shares subject to
outstanding Options hereunder shall be appropriately adjusted
in such manner as to entitle the Participant to receive upon
exercise of an Option for the same aggregate cash
consideration the same total number and class of Shares as he
would have received had he exercised his Options in full
immediately prior to the event requiring the adjustment; and
(b) The number and class of Shares then reserved for issuance
under the Plan shall be adjusted by substituting for the total
number and class of Shares then reserved that number and class
of Shares that would have been received by the owner of an
equal number of outstanding Shares of each class as the result
of the event requiring the adjustment.
After a merger of one or more corporations into SK, or after a
consolidation of SK and one or more corporations in which SK shall be the
surviving corporation, each holder of an outstanding Option shall, at no
additional cost, be entitled upon exercise of such Option to receive (subject to
any required action by shareholders) in lieu of the number and class of Shares
as to which such Option would have been so exercisable in the absence of such
event, the number and class of Shares to which such holder would have been
entitled pursuant to the terms of the agreement of merger or consolidation, if
immediately prior to such merger or consolidation, such holder had been the
holder of record of the number and class of Shares equal to the number and class
of Shares as to which such Option shall be so exercised.
If SK is merged into or consolidated with another corporation under
circumstances where SK is not the surviving corporation, or if SK is liquidated,
or sells or otherwise disposes of substantially all of its assets to another
corporation while unexercised Options remain outstanding under the Plan: (i)
subject to the provisions of clause (iii) below, after the effective date of
such merger, consolidation or sale, as the case may be, each holder of an
outstanding Option shall be entitled, upon exercise of such Option, to receive,
in lieu of Shares, shares of such stock or other securities as the holders of
Shares of such class of stock received pursuant to the terms of the merger,
consolidation or sale; (ii) the HRCC may waive any limitations set forth in or
imposed pursuant to Section 8.d. hereof so that all Options, from and after a
date prior to the effective date of such merger, consolidation, liquidation or
sale, as the case may be, specified by the HRCC, shall be exercisable in full;
and (iii) all outstanding Options may be canceled by the HRCC as of the
effective date of any such merger, consolidation, liquidation or sale provided
that (x) notice of such cancellation shall be given to each holder of an Option
and (y) each holder of an Option shall have the right to exercise such Option in
full (without regard to any limitations set forth in or imposed pursuant to
Section 8.d. hereof) during a thirty (30) day period preceding the effective
date of such merger, consolidation, liquidation or sale.
Except as hereinbefore expressly provided, the issue by SK of shares of
stock of any class, or securities convertible into shares of stock of any class,
for cash or property, or for labor or services, either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of SK convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number, class or price of Shares then subject to outstanding Options.
6. ELIGIBILITY
The persons who shall be eligible to participate in the Plan and be
granted Options shall be those persons who are key employees of SK or of any
corporation in which SK owns directly or indirectly not less than fifty percent
(50%) of the outstanding voting shares of such corporation and who are in a
position in the opinion of the HRCC to make significant contributions to the
growth, management and success of SK and its subsidiaries and who do not own
more than ten percent (10%) of the stock of SK at the time an Option is granted.
The HRCC shall from time to time in its sole discretion select those persons who
are to be granted Options and establish the terms and conditions with respect
thereto; provided, however, the Board of Directors of SK shall approve the terms
and conditions of each grant of an option to any person who is an Officer.
Page 2
<PAGE>
7. AUTHORITY TO GRANT OPTIONS
Options granted hereunder may be:
(a) Incentive Stock Options, which shall mean a right to purchase
Shares from SK that is granted pursuant to this Section 7 and
that is intended to meet the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended from time to
time ("Section 422 of the Code"), or any successor provision
thereto;
(b) Non-Qualified Stock Options, which shall mean the right to
purchase Shares from SK granted pursuant to this Section 7 and
that is not intended to be an Incentive Stock Option; or
(c) both types of Options.
Incentive Stock Options shall be designated as such, and Non-Qualified
Stock Options shall be designated as such.
In the case of Incentive Stock Options, the terms and conditions of such
grants shall be subject to and comply with such rules as may be subscribed by
Section 422 of the Code, and any regulations implementing such statute. The
aggregate fair market value (determined as provided in Section 8(a) of the Plan)
of @the stock with respect to which incentive stock options are granted
hereunder which are exercisable for the first time by such employee during any
calendar year (under all the stock option plans maintained by SK and subsidiary
corporations), valued as of the date of grant, shall not exceed $100,000 in
accordance with Section 422 of the Code. No Option shall be granted under the
Plan after ten (10) years from the date the Plan is adopted.
8. OPTION PROVISIONS
(a) The HRCC, or the Board of Directors with respect to Officers,
shall have authority to grant Options under the Plan to a
Participant for such number of Shares as it may determine and on
such terms, conditions and restrictions as it may deem appropriate
(the "Terms, Conditions and Restrictions"). The grant and exercise
of Options hereunder shall be subject to all applicable federal,
provincial, state and local laws, rules and regulations and to
such approvals by any government or regulatory agency as may be
required. The HRCC, or the Board of Directors with respect to
Officers, shall determine the period for which each Option is
granted and the terms on which it may be exercised. The price per
share at which Shares may be acquired upon exercise of an Option
shall be not less than the fair market value on the date the
Option is granted. The fair market value of the Shares shall be
the closing price of the stock on the New York Stock Exchange as
reported in the Wall Street Journal for the trading day
immediately prior to the day on which the Option is granted, or if
the Option is not granted on a trading day, then such fair market
value shall be determined on the last trading day before the
Option is granted.
(b) The HRCC, or the Board of Directors with respect to Officers,
shall determine the period during which each Option may be
exercised. All Options shall expire if not exercised by the end of
the specified term. No Option shall be exercisable after the
expiration of ten (10) years from the date such Option is granted.
(c) Options shall be exercised by the delivery of written notice to SK
setting forth the number of Shares with respect to which the
Options are to be exercised and specifying whether the Options
being exercised are Incentive Stock Options or Non-Qualified Stock
Options. The purchase price of Shares as to which an Option shall
be exercised shall be paid to SK at the time of exercise in cash,
certified check, bank draft, money order, note or such other
method as determined by the HRCC whereupon certificates for the
Shares will be issued and delivered. Such certificates shall
specify whether the Shares were issued pursuant to Incentive Stock
Options or Non-Qualified Stock Options.
Page 3
<PAGE>
(d) Each Option may be exercised, so long as it is valid and
outstanding, from time to time in part or as a whole, subject to
any limitations with respect to the number of Shares for which the
Option may be exercised at a particular time and to such other
conditions as the HRCC, or the Board of Directors in the case of
grants to Officers, in its discretion may specify upon granting
the Option.
(e) Options are not transferable otherwise than by will or the laws of
descent and distribution and are exercisable during the
Participant's lifetime only by the Participant.
(f) The Plan and any Option granted under the Plan shall not confer
upon any Participant any right with respect to continuance of
employment by SK or any direct or indirect subsidiary nor shall
they interfere in any way with the right of SK or any direct or
indirect subsidiary to terminate a Participant's employment at any
time.
(g) Except as may be otherwise expressly provided herein, Options
shall terminate on such date as shall be selected by the HRCC, or
the Board of Directors in the case of grants to Officers, in its
discretion and specified in the Terms, Conditions and
Restrictions. Whether authorized leave of absence, or absence on
military or government service, shall constitute severance of the
employment relationship between SK or its subsidiary corporation
and the Participant shall be determined by the HRCC, or the Board
of Directors in the case of grants to Officers, at the time
thereof. After the death of the Participant, his executor,
administrator, or any person or persons to whom his Option may be
transferred by will or by the laws of descent and distribution,
shall have the right, at any time prior to the earlier of the date
of expiration or one year following the date of such death, to
exercise the Option, in whole or in part (without regard to any
limitations set forth in or imposed pursuant to Section 8.d.
hereof).
9. REQUIREMENTS OF LAW
SK shall not be required to sell or issue any Shares under an Option if
the issuance of such Shares would constitute a violation by the Participant or
SK of any provisions of any law or regulation of any governmental authority. In
addition, in connection with the Securities Act of 1933 (as now in effect or
hereafter amended), upon exercise of any Option, SK shall not be required to
issue such Shares unless the HRCC has received evidence satisfactory to it to
the effect that the holder of such Option will not transfer such Shares except
pursuant to a registration statement in effect under such Act or unless an
opinion of counsel to SK has been received by SK to the effect that such
registration is not required. Any determination in this connection by the HRCC
shall be final, binding and conclusive. In the event the Shares issuable on
exercise of an Option are not registered under the Securities Act of 1933, SK
may imprint the following legend or any other legend which counsel for SK
considers necessary or advisable to comply with the Securities Act of 1933:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of any
State and may not be sold or transferred except upon such registration or upon
receipt by SK of an opinion of counsel satisfactory to SK, in form and substance
satisfactory to SK, that registration is not required for such sale or
transfer."
SK may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act of 1933 (as now in effect or as
hereafter amended); and in the event any Shares are so registered SK may remove
any legend on certificates representing such Shares. SK shall not be obligated
to take any other affirmative action in order to cause the exercise of an Option
or the issuance of shares pursuant thereto to comply with any law or regulation
of any governmental authority.
Page 4
<PAGE>
10. NO RIGHTS AS SHAREHOLDER
No Participant shall have rights as a shareholder with respect to Shares
covered by his Option until the date of issuance of a stock certificate for such
Shares; and except as otherwise provided in Section 5 hereof, no adjustment for
dividends, or otherwise, shall be made if the record date thereof is prior to
the date of issuance of such certificate.
11. AMENDMENT OR TERMINATION OF PLAN
The HRCC may modify, revise or terminate this Plan at any time and from
time to time; provided, however, that without the further approval of the
holders of a majority of the shares present, in person or by proxy, at a meeting
of the shareholders at which such approval is sought, the Board may not increase
the aggregate number of shares which may be issued under Options pursuant to the
provisions of this Plan and that any amendment, modification, revision or
termination shall not affect any outstanding Options.
12. EFFECTIVE DATE OF PLAN.
The Plan shall be become effective and shall be deemed to have been
adopted on July 9, 1997.
Page 5
<PAGE>
AMENDMENT TO 1997 STOCK OPTION PLAN ADOPTED BY THE BOARD OF DIRECTORS ON OCTOBER
5, 1999
RESOLVED, that the Corporation's 1997 Stock Option Plan (the "Employee
Option Plan") shall be, and hereby is, amended (the "Increase Amendment") by
increasing the number of shares of the Corporation's common stock, par value
$1.00 per share (the "Common Stock"), which may be issued thereunder by
1,000,000 (the "Additional Employee Shares"); and
RESOLVED, FURTHER, that the Increase Amendment be presented for
approval by the shareholders at the Corporation's annual meeting to be held on
November 30, 1999 (the "Annual Meeting"); and
RESOLVED, FURTHER, that if the Increase Amendment is approved by the
Shareholders at the Annual Meeting the Corporation shall reserve from the
authorized and unissued capital stock of the Corporation for issuance under the
Employee Option Plan 1,000,000 additional shares of Common Stock.
<PAGE>
APPENDIX C
SAFETY-KLEEN CORP.
EXECUTIVE BONUS PLAN
SECTION 1. PURPOSE
The purpose of this Plan is to provide a vehicle through which (i) the
Company can award bonuses which are exempt from the application of Section
162(m) of the Code and (ii) senior management may elect to defer a portion of
their bonuses and ultimately be paid such portion in the form of Company Stock.
SECTION 2. DEFINITIONS
As used in this Plan, the following capitalized terms shall have the
following meanings:
"Award" means the award, as determined by the Committee, to be granted
to a Participant based on the level of attainment of the Performance Goals in
accordance with Section 5.
"Board" means the Board of Directors of the Company.
"Bonus" means the amount of an Award payable to a Participant based on
the level of attainment of the Performance Goals in accordance with Section 5.
"Change of Control" means, except as otherwise provided below, the
occurrence of any of the following:
a. (X) any person (as such term is used in Rule 13(d)-5 of the SEC
under the 1934 Act) or group (as such term is defined in Section 13(d)
of the 1934 Act), other than a subsidiary of the Company or any
employee benefit plan (or related trust) of the Company or a
subsidiary, becomes the beneficial owner of 15% or more of the common
stock of the Company or of voting securities representing 15% or more
of the combined voting power of all voting securities of the Company,
(Y) Laidlaw Inc. ceases to be the beneficial owner, directly or
indirectly, of 43.6% or more of the voting securities of the Company
and (Z) another person or group becomes the beneficial owner of voting
securities of the Company which represent a larger number of voting
securities than those held by Laidlaw Inc.
b. within a period of 24 months or less, the individuals who, as of any
date, constitute the Board (the "Incumbent Directors") cease for any
reason to constitute at least a majority of the Board unless at the end
of such period, the majority of individuals then constituting the Board
were nominated upon the recommendation of a majority of the Incumbent
Directors.
1
<PAGE>
c. the sale or other disposition of all or substantially all of the
assets of the Company or Safety-Kleen Services, Inc. ("Services").
d. the sale or other disposition by the Company of 50% or more of the
voting securities of Services or any other transaction which results in
any person, other than the Company or a subsidiary or any employee
benefit plan of the Company, becoming the beneficial owner of 50% or
more of the voting securities of Services.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a committee selected by the Board to administer the
Plan and composed of not less than two directors, each of whom must be an
"outside director" (within the meaning of Section 162(m) of the Code) and a
"non-employee director" for purposes of Rule 16b-3 under the Exchange Act. The
Committee shall be the Compensation Committee of the Board of Directors, as long
as it meets the preceding requirements.
"Company" means Safety-Kleen Corp., a Delaware corporation, or
any successor corporation.
"Company Stock" means common stock of the Company, par value
$1.00 per share.
"Covered Employee" means a Participant who is a "covered employee"
within the meaning of Section 162(m) of the Code.
"Designated Beneficiary" means the beneficiary or beneficiaries
designated in accordance with Section 8.5 hereof to receive the amount, if any,
payable under the Plan upon the Participant's death.
"Elected Date" means the date the Participant elects to have the
amounts in his or her Stock Unit Account paid in accordance with Section 6.4(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Hardship" means severe financial hardship caused by
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant, as determined by the Committee in its
sole and absolute discretion.
"Participant" means each person designated to participate in the Plan
pursuant to Section 3 hereof.
"Performance Goals" has the meaning ascribed to such term in Section
5.1.
"Performance Goals Date" means the date on which the Committee
establishes the Performance Goals for a Plan Year in accordance with Section 5.
The Performance Goals Date for any Plan Year shall be no later than the 90th day
of such Plan Year, or such earlier
2
<PAGE>
date as may be required in order for Awards in respect of such Plan Year to
qualify as "performance-based compensation" for purposes of Section 162(m) of
the Code.
"Plan" means the Safety-Kleen Corp. Executive Bonus Plan.
"Plan Year" means the accounting fiscal year of the Company.
SECTION 3. ELIGIBILITY AND PARTICIPATION
3.1 Designation. The Committee shall, in its sole discretion,
designate for each Plan Year which executive officers and key employees of the
Company and its subsidiaries, if any, will participate in the Plan for such Plan
Year. Each Participant will be notified of the selection as soon after approval
as is practicable.
3.2 No Right to Participate. No person has or at any time will have
any right to be selected for current or future participation in the Plan.
SECTION 4. ADMINISTRATION
4.1 Authority of the Committee. The Committee has and will have all
the authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Plan. Without limiting the generality of
the foregoing, and in addition to any authority or responsibility specifically
granted to the Committee elsewhere in the Plan, the Committee has the exclusive
right to (a) interpret the Plan, (b) determine eligibility for participation in
the Plan, (c) decide all questions concerning eligibility for and the amount of
Awards payable under the Plan, (d) establish and administer the Performance
Goals and certify whether, and to what extent, they are attained, (e) construe
any ambiguous provision of the Plan, (f) correct any default, (g) supply any
omission, (h) reconcile any inconsistency, (i) issue administrative guidelines
as an aid to administer the Plan, (j) make regulations for carrying out the Plan
and to make changes in such regulations as they from time to time deem proper,
and (k) decide any and all questions arising in the administration,
interpretation and application of the Plan.
4.2 Discretionary Authority. The Committee shall have full
discretionary authority in all matters related to the discharge of its
responsibilities and the exercise of its authority under the Plan including,
without limitation, its construction of the terms of the Plan and its
determination of eligibility for participation and Awards under the Plan. It is
the intent of the Company in establishing the Plan that the decisions of the
Committee and its action with respect to the Plan will be final, binding and
conclusive upon all persons having or claiming to have any right or interest in
or under the Plan.
4.3 Section 162(m) of the Code. With regard to all Covered Employees,
the Plan shall for all purposes be interpreted and construed in accordance with
Section 162(m) of the Code.
4.4 Delegation of Authority. Only the Committee may select and grant
Awards to Participants who are Covered Employees. Except for such limitation and
to the extent otherwise prohibited by law or to the extent such delegation would
cause any Award to fail to
3
<PAGE>
satisfy the requirements of Section 162(m), the Committee may delegate some or
all of its authority under the Plan to any person or persons provided that any
such delegation be in writing.
SECTION 5. BONUSES
5.1 Definition of Performance Goals. The performance criteria for a
Plan Year (the "Performance Goals") will be based on objective, quantifiable
measures for the Company as a whole, or the operating units of the Company, with
respect to such Plan Year and may include, and will be limited to one or more of
the following:
(a) earnings per share;
(b) operating profit;
(c) net income;
(d) return on assets;
(e) total shareholder return;
(f) level of fixed or variable costs;
(g) stock price;
(h) EBITDA; and
(i) quantity of waste managed
5.2 Establishment of Performance Goals. For each Plan Year, the
Committee will, on or before the Performance Goals Date, establish as to each
Participant (a) the Performance Goals and (b) if more than one Performance Goal
is established, the weighting of the Performance Goals.
5.3 Adjustments to Performance Goals. The Committee may at any time
prior to the Performance Goals Date for a Plan Year, or, subject to the second
paragraph of this Section 5.3, at any time thereafter in its sole and absolute
discretion, adjust or modify the calculation of a Performance Goal for such Plan
Year in order to prevent the dilution or enlargement of the rights of
Participants (a) in the event or in anticipation of any unusual or extraordinary
corporate item, transaction, event or development; (b) in recognition or in
anticipation of any other unusual or nonrecurring events affecting the Company,
or the financial statements of the Company, or in response to or in anticipation
of changes in applicable laws, regulations, accounting principles or business
conditions; and (c) in view of the Committee's assessment of the business
strategy of the Company, performance of comparable organizations, economic and
business conditions, and any other circumstances deemed relevant.
The Committee may exercise such discretion set forth in the
preceding paragraph after the Performance Goals Date to the extent the exercise
of such authority would not cause the Awards granted to the Covered Employees
for the Plan Year to fail to qualify as "performance-based compensation" under
Section 162(m) of the Code. If such discretion would cause the Awards to fail to
qualify as performance-based compensation, then such authority shall only be
exercised with respect to those Participants who are not Covered Employees.
4
<PAGE>
5.4 Establishment of Amount and Communication to Participants. On or
before the Performance Goals Date as to each Plan Year, the Committee shall
establish a written schedule of the amount of an Award that will be payable to
each Participant under the Plan if the Performance Goals are satisfied (the
"Bonus"). The Committee will communicate such schedule to each Participant no
later than the earlier of: (i) 30 days following establishment of such schedule,
or (ii) the 95th day of such Plan Year.
5.5 Calculation and Approval. As soon as practicable following the end
of the applicable Plan Year and the delivery of the audited consolidated
financial statements of the Company with respect to such Plan Year, the
Committee will certify in writing the attainment of the Performance Goals
established for the Plan Year and will calculate the Award, if any, payable to
each Participant under the schedule established pursuant to subsection 5.4
above. If an Award is expressed as a percentage of a Participant's base salary,
such Award shall be based on the salary on the last day of the Plan Year.
5.6 Payment. The portion of a Participant's Bonus as to which the
Participant does not make a Deferred Payment Election in accordance with Section
6 below shall be paid in a lump sum cash payment no later than the later of (i)
45 days following the end of the Plan Year, or (ii) [10] days after the amount
thereof has been determined by the Committee and certified in accordance with
Section 5.4 above.
5.7 Limitations. Notwithstanding any provision herein to the contrary:
(a) no Award will be paid for a Plan Year in which performance
fails to attain or exceed the minimum level for any of the Performance Goals;
and
(b) no Award to any Participant in respect of any Plan Year shall
exceed $2.5 million.
5.8 Negative Discretion. Notwithstanding anything to the contrary
set forth herein, the Committee may reduce an Award to an amount less than the
amount determined under Section 5.4 above or pay no Award at all even if certain
Performance Goals have been satisfied if it, in its sole discretion, determines.
SECTION 6. DEFERRED BONUSES
6.1 In General. Subject to the timing requirements set forth below,
each Participant may elect to defer payment of his or her Bonus in respect of
each Plan Year into a Stock Unit Account (as defined in Section 6.3(b)) in
accordance with the provisions of Section 6.2 (a "Deferred Payment Election").
In the absence of a Deferred Payment Election made pursuant to Section 6.2 below
in respect of a Bonus, such Bonuses shall be paid in accordance with Section 5.
(a) Elective Deferrals. A Participant may elect to defer the
payment of all or part of a Bonus with respect to a fiscal year into a Stock
Unit Account (as described in Section 6.3 below) by submitting an election form
(a "Deferred Payment Election Form") to the Company no later than the earlier of
(i) 10 days following the date the Committee
5
<PAGE>
communicates to the Participant his Bonus schedule in accordance with Section
5.4, and (ii) 100 days after the first day of the Plan Year. The Deferred
Payment Election Form shall indicate: (i) the Elected Date, and (ii) the
percentage of the Bonus to be deferred. All deferral elections shall be
irrevocable once made. A Participant may designate, in a Deferred Payment
Election Form, one or more beneficiaries to receive any distributions under the
Plan upon the death of the Participant in accordance with Section 8.5 hereof.
(b) Notwithstanding any other provision of the Plan, at any time
prior to the last day of a fiscal year the Compensation Committee may, in its
sole discretion, elect to decline to implement the deferral elections made under
the Plan with respect to Bonuses payable in respect of such fiscal year;
provided that any such election shall apply uniformly to all Participants
participating in the Plan.
6.3 Company Stock, Stock Unit Account and Dividend Equivalents.
(a) Company Stock. Subject to the following sentence, the
aggregate number of shares of Company Stock reserved for issuance under the Plan
shall be 800,000. In the event of any merger, reorganization, recapitalization,
consolidation, sale or other distribution of all or substantially all of the
assets of the Company, any stock dividend, split, spin-off, split-up, split-off,
distribution of securities or other property by the Company, or other change in
the Company's corporate structure affecting the shares of Company Stock, the
number of shares reserved under the Plan and the number of Stock Units then
credited pursuant to Section 5.3 shall be appropriately adjusted as determined
by the Committee in its sole discretion in a manner intended to prevent dilution
or enlargement of the intended benefits to Participants under the Plan an in a
manner that complies with Section 162(m).
(b) Stock Unit Account. Each Bonus deferred by a Participant
pursuant to a properly completed Deferred Payment Election Form under Section
6.2 (the "Deferred Amount") shall be credited to a separate account (a "Stock
Unit Account") in units which are equivalent in value to shares of Company Stock
("Stock Units"). The Deferred Amount allocated to the Stock Unit Account shall
be fully vested at all times and shall be credited to the Stock Unit Account as
of the 45th day following the end of the Plan Year to which the Bonus relates.
The number of Stock Units credited to such Stock Unit Account shall be an amount
equal to the value of the Deferred Amount divided by the closing price per share
of the Company Stock on the 45th day following the end of the Plan Year (or if
such day is not a trading day on the trading day immediately preceding such
day).
(c) Dividend Equivalents. If Stock Units exist in a Participant's
Stock Unit Account on a dividend record date for the Company Stock, the Stock
Unit Account shall be credited, on the dividend payment date, with an additional
number of Stock Units equal in value to (i) the cash value of the dividend paid
on one Share, times (ii) the number of Stock Units in the Stock Unit Account on
the dividend record date, divided by (iii) the closing price of the Company
Stock on the trading day immediately preceding the dividend payment date.
6
<PAGE>
6.4 Distributions.
(a) Distribution Date. Each Participant shall designate on a
Deferred Payment Election Form a date on which he or she elects to have the
amounts credited to the Participant's Stock Unit Account distributed provided
that such date is no earlier than three (3) years [and no later than ten (10)
years] following the first day of the Plan Year in which the Bonus is earned
(the "Elected Date"). The amounts in the Participant's Stock Unit Account will
be distributed on the earlier of (i) the Elected Date, (ii) the Participant's
termination of employment for any reason, or (iii) immediately prior to a Change
of Control (the "Distribution Date"). Notwithstanding the foregoing, the
Committee may permit earlier distribution of all or a part of a Participant's
Stock Unit Account if it determines, in its sole discretion, that the
Participant (or his estate or beneficiary) is experiencing a Financial Hardship.
(b) Distribution Method. Payment of the amounts credited to the
Participant's Stock Unit Account which have become payable pursuant to Section
6.4 above will be paid on the Distribution Date in shares of Company Stock equal
to the number of Stock Units credited to the Participant's Stock Unit Account.
SECTION 7. TERMINATION OR AMENDMENT OF THE PLAN
The Committee may amend, suspend or terminate the Plan at any
time, but no amendment or alteration shall be made that shall impair the rights
of any Participant hereunder without the Participant's consent. Unless
specifically determined otherwise by the Committee, no amendment will be made
that shall cause the compensation payable under the Plan to fail to satisfy the
requirements of the performance-based compensation exception of Section 162(m)
of the Code. Unless specifically determined otherwise by the Committee, no
amendment will be made without shareholder approval to the extent shareholder
approval is necessary to satisfy the performance-based compensation exception of
Section 162(m).
SECTION 8. MISCELLANEOUS
8.1 Reorganization or Discontinuance
The obligations of the Company under the Plan shall be binding
upon any successor corporation or organization resulting from merger,
consolidation or other reorganization of the Company, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Company. The Company will make appropriate provision for the
preservation of Participants' rights under the Plan in any agreement or plan
which it may enter into or adopt to effect any such merger, consolidation,
reorganization or transfer of assets.
7
<PAGE>
8.2 Non-Alienation of Benefits
A Participant may not assign, sell, encumber, transfer or
otherwise dispose of any rights or interests under the Plan except by will or
the laws of descent and distribution. Any attempted disposition in contravention
of the preceding sentence shall be null and void.
8.3 No Claim or Right to Plan Participation
No employee or other person shall have any claim or right to be
selected as a Participant under the Plan. Neither the Plan nor any action taken
pursuant to the Plan shall be construed as giving any employee any right to be
retained in the employ of the Company or any subsidiary.
8.4 Taxes
The Company shall deduct from all amounts paid under the Plan all
federal, state, local and other taxes required by law to be withheld with
respect to such payments.
8.5 Designation and Change of Beneficiary
Each Participant may indicate on the Deferred Payment Election
Form or, if no election is made, upon notice to him or her by the Committee of
his or her right to receive an Award, a designation of one or more persons as
the Designated Beneficiary who shall be entitled to receive the amount, if any,
payable under the Plan upon the death of the Participant. Such designation shall
be in writing to the Committee. A Participant may, from time to time, revoke or
change his or her Designated Beneficiary without the consent of any prior
Designated Beneficiary by filing a written designation with the Committee. The
last such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death, and
in no event shall it be effective as of a date prior to such receipt.
8.6 Payments to Persons Other Than the Participant
If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to care for his or her affairs because of
illness or accident, or is a minor, or has died, then any payment due to such
person or his or her estate (unless a prior claim therefor has been made by a
duly appointed legal representative) may, if the Committee so directs, be paid
to his or her spouse, a child, a relative, an institution maintaining or having
custody of such person, or any other person deemed by the Committee, in its sole
discretion, to be a proper recipient on behalf of such person otherwise entitled
to payment. Any such payment shall be a complete discharge of the liability of
the Company therefor.
8
<PAGE>
8.7 No Liability of Committee Members
No member of the Committee shall be personally liable by reason
of any contract or other instrument related to the Plan executed by such member
or on his or her behalf in his or her capacity as a member of the Committee, nor
for any mistake of judgment made in good faith, and the Company shall indemnify
and hold harmless each employee, officer, or director of the Company to whom any
duty or power relating to the administration or interpretation of the Plan may
be allocated or delegated, against any cost or expense (including legal fees,
disbursements and other related charges) or liability (including any sum paid in
settlement of a claim with the approval of the Board of Directors) arising out
of any act or omission to act in connection with the Plan unless arising out of
such person's own fraud or bad faith.
8.8 Compliance With Section 162(m)
Unless otherwise specifically determined by the Committee, if any
provision of the Plan would cause the Awards granted to a Covered Employee not
to constitute qualified "performance-based compensation" under Section 162(m) of
the Code, that provision, insofar as it pertains to the Covered Employee, shall
be severed from, and shall be deemed not to be a part of this Plan, but the
other provisions hereof shall remain in full force and effect.
8.9 Unfunded Plan
Participants shall have no right, title, or interest whatsoever
in or to any investments which the Company may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and any Participant,
beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company under the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company. All payments to be made hereunder shall be paid from the general
funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth in the Plan.
The Plan is not intended to be subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
8.10 Rights as a Shareholder.
No Participant shall have any rights as a shareholder of the
Company with respect to any Stock Units credited to his Stock Unit Account.
9
<PAGE>
8.11 Governing Law
This Plan shall be governed by and construed in accordance with
laws of the State of Delaware applicable to agreements made and to be performed
entirely within such state (without regard to any conflict of law provisions
that might indicate the applicability of any other laws).
8.12 Effective Date
This Plan shall become effective as September 1, 1999, subject to
approval by the stockholders of the Company in a manner which complies with the
requirements of Section 162(m) of the Code.
10
