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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1999
REGISTRATION NO. -
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SAFETY-KLEEN CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 4953 51-0228924
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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SUITE 300, 1301 GERVAIS STREET
COLUMBIA, SOUTH CAROLINA 29201
(803) 933-4200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HENRY H. TAYLOR, ESQ.
SAFETY-KLEEN CORP.
SUITE 300, 1301 GERVAIS STREET
COLUMBIA, SOUTH CAROLINA 29201
(803) 933-4200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JOHN C. KENNEDY, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
212-373-3000
APPROXIMATE DATE OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFER PRICE PROPOSED MAXIMUM
OF SECURITIES TO BE REGISTERED REGISTERED PER SECURITY AGGREGATE OFFERING PRICE
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9 1/4% Exchange Senior Notes $225,000,000 100% $225,000,000(1)
Due 2009.....................
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TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE(2)
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9 1/4% Exchange Senior Notes $62,550
Due 2009.....................
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) of the Securities Act of 1933.
(2) The registration fee has been calculated pursuant to Rule 457(f)(2) under
the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 12, 1999
PRELIMINARY PROSPECTUS
SAFETY-KLEEN CORP.
EXCHANGE OFFER FOR $225,000,000 OF ITS
9 1/4% SENIOR NOTES DUE 2009
Terms of the exchange offer
- It expires at 5:00 p.m., New York City time, on , 1999,
unless extended.
- All initial notes that are validly tendered and not withdrawn will be
exchanged.
- Tenders of initial notes may be withdrawn at any time before the
expiration of the exchange offer.
- The terms of the exchange notes we will issue in the exchange offer are
substantially identical to those of the initial notes, except that
transfer restrictions and registration rights relating to the initial
notes will not apply to the exchange notes.
- The exchange notes are new securities and there is currently no
established market for them.
BEFORE PARTICIPATING IN THIS EXCHANGE OFFER PLEASE REFER TO THE SECTION IN
THIS PROSPECTUS ENTITLED "RISK FACTORS" COMMENCING ON PAGE 15.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE COMMISSION HAS
APPROVED THE NOTES TO BE DISTRIBUTED IN THE EXCHANGE OFFER, NOR HAVE ANY OF
THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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PAGE NO.
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Prospectus Summary.......................................... 1
Risk Factors................................................ 15
Use of Proceeds............................................. 24
Capitalization.............................................. 25
Unaudited Pro Forma Combined Financial Information.......... 27
Selected Consolidated Financial Data........................ 34
Management's Discussion and Analysis of Financial Condition
and Results of Operation.................................. 37
Business.................................................... 52
Management.................................................. 70
Certain Relationships and Related Transactions.............. 78
Principal Stockholders...................................... 78
Description of Other Indebtedness........................... 80
The Exchange Offer.......................................... 85
Description of the Notes.................................... 97
Certain Federal Income Tax Considerations................... 140
Plan of Distribution........................................ 144
Legal Matters............................................... 144
Independent Accountants..................................... 145
Available Information....................................... 145
Incorporation by Reference.................................. 145
Disclosure Regarding Forward Looking Statements............. 147
Index to Financial Statements............................... F-1
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PROSPECTUS SUMMARY
The following summary contains basic information about this exchange offer.
Because this is a summary, it does not contain all the information you should
consider before participating in the exchange offer. For a more complete
understanding of this exchange offer, we encourage you to read the entire
document. Unless the context requires otherwise, references to (i) the
"Company," "Safety-Kleen," "we," "us" or "our" are to Safety-Kleen Corp. (the
issuer of the initial notes and the exchange notes) and its subsidiaries, (ii)
"Safety-Kleen Services" are to Safety-Kleen Services, Inc. (formerly known as
LES, Inc.) and its subsidiaries, (iii) "Old Safety-Kleen" are to Safety-Kleen
Systems, Inc. (formerly known as Safety-Kleen Corp.), the acquisition of which
we completed in May 1998 and (iv) "Old LESI" are to certain of the hazardous and
industrial waste operations of Laidlaw Inc. ("Laidlaw") prior to May 15, 1997.
We were formerly known as Laidlaw Environmental Services, Inc. On November 25,
1998, following our acquisition of Old Safety-Kleen, we changed our name to
Safety-Kleen Corp. Any reference to a "fiscal" year refers to our fiscal year
ended or ending on August 31 in such year. All information in this prospectus
has been adjusted to reflect the one for four reverse stock split of our common
stock, which was effected at the close of business on November 30, 1998. Certain
statements in this prospectus constitute forward-looking statements. See
"Disclosure Regarding Forward-Looking Statements."
THE COMPANY
We are a vertically integrated hazardous and industrial waste management
company. Our services include collecting, processing, recycling, treating and
disposing of a broad range of hazardous and industrial waste streams. The
breadth and quality of our service offerings, combined with the geographic scope
of our facilities, have provided us with a leading market position in our
industry. To better service our customers and to try to become their single
source service provider, we will continue to sell existing services and leverage
our existing service network and facility infrastructure to provide new services
to our customer base. We currently offer services to over 400,000 customers
throughout North America through an extensive network of 195 collection
locations (which includes 21 service centers), 16 accumulation centers, 11
landfills, six incinerators and 10 recycling facilities located in 45 states and
seven Canadian provinces. In addition, we own 44% of Safety-Kleen Europe Limited
("Safety-Kleen Europe"), which operates 59 collection locations and three
reclamation facilities throughout Western Europe. For the twelve months ended
February 28, 1999, our pro forma revenues and Adjusted EBITDA (as defined) were
$1.8 billion and $485.2 million, respectively.
Since 1997, we have completed two major acquisitions (Old Safety-Kleen and
Rollins Environmental Services, Inc. ("Rollins")), which not only increased the
breadth of our service offerings and scale of our operations, but we also
believe it resulted in significant synergies. In May 1998, we completed the
acquisition of Old Safety-Kleen for total consideration of approximately $2.2
billion, including debt assumed and estimated transaction costs, which included
$1.5 billion of cash and the issuance of 41.6 million shares of our common
stock. The acquisition of Old Safety-Kleen provided us with the opportunity to:
- enhance our vertical integration through the addition of Old
Safety-Kleen's collection locations;
- provide additional market coverage in key geographic regions; and
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- significantly expand our service offerings.
At the time of the acquisition of Old Safety-Kleen, we had anticipated
achieving $103.5 million to $165.0 million in annual cash cost savings due to
synergies from facility consolidation, increased waste internalization and
selling, general and administrative cost savings. We currently expect to realize
approximately $165 million of annual cash cost savings as a result of this
acquisition. As of February 28, 1999, we believe we have realized approximately
$130 million in annualized cash cost savings through the closure of redundant
facilities, personnel reductions, the elimination of duplicative administrative
costs and the internalization of waste disposal activities.
In May 1997, Rollins and Laidlaw entered into a transaction whereby Old
LESI (our predecessor business) acquired Rollins through a reverse acquisition.
The acquisition of Rollins combined Old LESI's full-service collection and
treatment network with Rollins' expertise in solids incineration technology and
provided significant cash cost savings from facility and administrative
rationalizations. As of February 28, 1999, we believe we have achieved
approximately $75 million of annual cash cost savings relating to the
acquisition of Rollins.
OPERATIONS
We serve a broadly diversified North American marketplace consisting of
commercial/institutional businesses and industrial businesses. We offer a
completely integrated network of hazardous and industrial waste services for our
customers and we believe we provide technically sound and economically feasible
methods for the collection, processing, recycling and disposition of waste
streams. Our operations encompass two primary business segments: (i) collection
and recovery services; and (ii) treatment and disposal services.
COLLECTION AND RECOVERY SERVICES. Our collection and recovery services in
North America are conducted through a network of 195 collection locations and 16
accumulation centers. Our collection and recovery network services two distinct
customer groups, industrial and commercial/institutional.
Our industrial customers consist primarily of manufacturing or processing
businesses which generate waste streams in the development of their products or
services. For our industrial customers, we provide two primary services: parts
cleaning and industrial waste collection. In our parts cleaner service, we
provide our customers with parts cleaner equipment and solvent or aqueous-based
cleaning solutions, and make periodic service calls to clean and maintain the
equipment and replace dirty solution with fresh solution. Our industrial waste
collection service consists primarily of the collection of a wide variety of
liquid and solid waste, hazardous and non-hazardous, typically in drum
containers from a customer's location. Waste streams, which are collected from
our parts cleaner service and industrial waste service, are typically routed to
one of our service centers or accumulation centers where it is temporarily
stored or consolidated with compatible waste streams for more efficient
transportation to final treatment or disposal destinations. For the six months
ended February 28, 1999, we believe we directed approximately 80% of our waste
streams to Company-operated disposal locations.
Our commercial/institutional customers consist of small to medium sized
businesses, such as service stations, car and truck dealers, small engine repair
shops, fleet maintenance shops and other automotive and retail repair customers.
The primary service that we offer to commercial/institutional customers is our
parts cleaner service. In addition, we also
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provide paint refinishing services, imaging services, dry cleaner services,
vacuum services, integrated customer compliance services and used oil collection
and re-refining services.
TREATMENT AND DISPOSAL SERVICES. Our treatment and disposal services are
designed to properly manage hazardous and non-hazardous wastes which cannot be
otherwise economically recycled or reused. We currently operate six incineration
facilities with combined annual capacity of over 400,000 tons. Our incinerators
dispose of wastes that cannot be practically treated and reused, and our
incineration technologies allow safe, efficient destruction of a wide range of
organic wastes. We also operate 11 landfills located throughout the United
States and Canada with over 68 million cubic yards of remaining permitted
capacity (which represents in excess of 65 years of hazardous waste capacity and
35 years of non-hazardous waste capacity). We operate eight of the 23 permitted
hazardous waste landfills in North America. In addition to incineration
facilities and landfills, our treatment and disposal services also include PCB
management services, wastewater treatment, harbor and channel dredging,
consulting and analytical services, and transportation services.
BUSINESS STRATEGY
Our strategy is to continue to vertically integrate our operations and
enhance our profitability by further rationalizing operations, internalizing
waste streams and expanding the services we provide to our customer base. Key
elements of our strategy include:
- completing our cost savings program relating to the acquisition of Old
Safety-Kleen;
- evaluating additional acquisitions that may complement our existing
service network and infrastructure;
- increasing waste internalization rates;
- increasing revenues by cross selling the combined Company's services to
our expanded customer base; and
- expanding the number of services we offer our customers by leveraging our
expertise and customer relationships to provide cost effective and
comprehensive solutions for all of their environmental needs.
COMPETITIVE STRENGTHS
LOW-COST SERVICE PROVIDER. With over-expansion in the hazardous and
industrial waste management industry during the 1980s and the early 1990s, it
has become critical for successful waste management companies to maintain high
capacity utilization of a well-managed fixed asset base. We have created a cost
structure that we believe is the lowest in the industry.
VERTICALLY INTEGRATED APPROACH. From collection through treatment and
disposal, we deliver a closed-loop solution for any type of waste stream. We
believe that we offer a broader array of services from more locations than any
other waste services provider. Accordingly, we believe we can provide our
customers with a single source for their hazardous and industrial waste needs
while decreasing costs by maintaining a high rate of waste stream
internalization.
INDUSTRY LEADER. We are the leading hazardous and industrial waste
management company in North America (based on fiscal 1998 revenues and
facilities). Our industry
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leadership stems from the large geographic scope of our operations and the wide
breadth of services that we offer. In addition, we are at the forefront of
technological innovation in hazardous and industrial waste management.
DIVERSE CUSTOMER BASE. We have over 400,000 customers representing diverse
industries. In fiscal 1998, no one customer represented greater than 5.0% of our
revenues. In addition, a significant amount of our revenue is derived from the
collection, treatment and disposal of non-hazardous industrial waste.
RECENT DEVELOPMENTS
On December 23, 1998, we completed the recapitalization of our European
operations and the formation of a new entity, Safety-Kleen Europe. Safety-Kleen
Europe operates 59 collection locations and three reclamation facilities
throughout Western Europe and has annual revenues of approximately $120 million.
The recapitalization, which was based on a total enterprise value of $190
million, included investments in Safety-Kleen Europe by Electra Fleming Limited
("Electra Fleming"), a U.K. based international investment management company,
and the senior management group of Safety-Kleen Europe. In exchange for our
contribution of the European operations of Old Safety-Kleen, we received a 44%
equity interest in Safety-Kleen Europe and will receive $154 million in gross
cash proceeds (of which $138.7 million has been received as of February 28,
1999). Electra Fleming purchased a 44% equity interest, while the senior
management group acquired a 12% equity interest (on a fully-diluted basis). We
used the cash proceeds from the recapitalization of our European operations to
repay indebtedness under our Revolver (as defined).
REPURCHASE OF PIK DEBENTURE
In connection with the acquisition of Rollins, we issued a $350 million pay
in kind convertible subordinated debenture (the "PIK Debenture") to Laidlaw. We
intend to repurchase the PIK Debenture from Laidlaw pursuant to a purchase
agreement among us, Laidlaw and a subsidiary of Laidlaw. The aggregate purchase
price will consist of (i) $200 million in cash, (ii) 11,320,755 shares of our
common stock and (iii) cash or shares of our common stock in an amount equal to
any accrued and unpaid interest on the PIK Debenture to the date of repurchase.
The purchase agreement contains certain representations, warranties and
covenants relating to the repurchase. Under the agreement, our board is
required, subject to its fiduciary duties, to call a special meeting of
stockholders and recommend approval of the issuance of shares of common stock to
Laidlaw in connection with this repurchase. The repurchase is conditioned upon,
among other things, stockholder approval of the issuance of shares of our common
stock to Laidlaw in connection with the repurchase. The net proceeds from the
offering of the initial notes will be used to finance the cash portion of the
purchase price for the repurchase of the PIK Debenture, for expenses relating to
the repurchase of the PIK Debenture and for general corporate purposes. Until
the closing of the repurchase, the net proceeds of the offering are being held
in escrow. If the repurchase is not completed by September 30, 1999, we are
required to redeem the notes. See "Use of Proceeds" and "Description of the
notes -- Escrow of Proceeds; Special Mandatory Redemption."
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PRO FORMA CORPORATE STRUCTURE
Pro Forma Corp. Structure Flow Chart
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(1) Except for our ownership of the capital stock of Safety-Kleen Services, we
have no independent business operations.
(2) The wholly-owned domestic subsidiaries of Safety-Kleen Services have
guaranteed the senior credit facility (the "Senior Credit Facility") of
Safety-Kleen Services and the 9 1/4% senior subordinated notes due 2008 (the
"Safety-Kleen Services Notes") issued by Safety-Kleen Services. See
"Description of Other Indebtedness -- The Company's Subsidiaries."
The principal executive offices of the Company are located at 1301 Gervais
Street, Suite 300, Columbia, South Carolina 29201.
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SUMMARY OF THE EXCHANGE OFFER
We are offering to exchange $225,000,000 aggregate principal amount of our
exchange notes for a like aggregate principal amount of our initial notes. In
order to exchange your initial notes, you must properly tender them and we must
accept your tender. We will exchange all outstanding initial notes that are
validly tendered and not validly withdrawn.
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time, on,
, 1999, unless we decide to extend it.
CONDITIONS TO THE EXCHANGE OFFER
The exchange offer is subject to the following customary conditions:
- there is no change in the laws and regulations which would impair our
ability to proceed with the exchange offer,
- there is no change in the current interpretation of the staff of the
Securities and Exchange Commission which permits resales of the exchange
notes,
- there is no stop order issued by the staff of the Securities and Exchange
Commission which would suspend the effectiveness of the registration
statement of which this prospectus is a part,
- there is no litigation which would impair our ability to proceed with the
exchange offer,
- we obtain all the governmental approvals we deem necessary for the
exchange offer, and
- there is no change or development involving a prospective change in our
business or financial affairs which might materially impair our ability
to proceed with the exchange offer.
Please refer to the section in this prospectus entitled "The Exchange
Offer -- Terms of the Exchange Offer -- Conditions."
PROCEDURES FOR TENDERING INITIAL NOTES
To participate in the exchange offer, you must complete, sign and date the
letter of transmittal, or a facsimile of the letter of transmittal, and transmit
it together with all other documents required by the letter of transmittal,
including the initial notes to be exchanged, to The Bank of Nova Scotia Trust
Company of New York, as exchange agent, at the address indicated on the cover
page of the letter of transmittal. In the alternative, you can tender your
initial notes by following the procedures for book-entry transfer described in
this prospectus. If your initial notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee, we urge you to contact
that person promptly to tender your initial notes in the exchange offer. For
more information on tendering your initial notes, please refer to the sections
in this prospectus entitled "The Exchange Offer -- Terms of the Exchange
Offer -- Procedures for Tendering" and "-- Book Entry Transfer."
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GUARANTEED DELIVERY PROCEDURES
If you wish to tender your initial notes and you cannot get your required
documents to the exchange agent on time, you may tender your initial notes
according to the guaranteed delivery procedures described under the section of
this prospectus entitled "The Exchange Offer -- Terms of the Exchange
Offer -- Guaranteed Delivery Procedure."
WITHDRAWAL RIGHTS
You may withdraw the tender of your initial notes at any time before 5:00
p.m., New York City time, on the expiration date of the exchange offer. To
withdraw, you must send a written or facsimile transmission notice of withdrawal
to the exchange agent at its address indicated under the "The Exchange
Offer -- Terms of the Exchange Offer -- Exchange Agent" before 5:00 p.m., New
York City time, on the expiration date of the exchange offer.
ACCEPTANCE OF INITIAL NOTES AND DELIVERY OF EXCHANGE NOTES
If all conditions required for proper acceptance of initial notes are
fulfilled, we will accept any and all initial notes that are properly tendered
in the exchange offer on or before 5:00 p.m., New York City time, on the
expiration date. We will return any initial note that we do not accept for
exchange to you without expense as promptly as practicable after the expiration
date. We will deliver the exchange notes as promptly as practicable after the
expiration date and acceptance of the initial notes for exchange. Please refer
to the section in this prospectus entitled "The Exchange Offer -- Terms of the
Exchange Offer."
FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE EXCHANGE OFFER
Exchanging your initial notes for exchange notes will not be a taxable
event to you for United States federal income tax purposes. Please refer to the
section of this prospectus entitled "Certain Federal Tax Considerations."
EXCHANGE AGENT
The Bank of Nova Scotia Trust Company of New York is serving as exchange
agent in the exchange offer.
FEES AND EXPENSES
We will bear all expenses related to the exchange offer. Please refer to
the section in this prospectus entitled "The Exchange Offer -- Terms of the
Exchange Offer -- Fees and Expenses."
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the exchange notes.
We are making this exchange offer solely to satisfy our obligations under our
registration rights agreement. Please refer to the sections entitled "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Conditions and
Results of Operations -- Liquidity and Capital Resources" for a discussion of
our use of the proceeds from the issuance of the initial notes.
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CONSEQUENCES OF FAILURE TO EXCHANGE INITIAL NOTES
If you do not exchange your initial notes in this exchange offer, you will
no longer be able to obligate us to register the initial notes under the
Securities Act except in the limited circumstances provided under our
registration rights agreement. In addition, you will not be able to resell,
offer to resell or otherwise transfer the initial notes unless they are
registered under the Securities Act, or unless you resell, offer to resell or
otherwise transfer them under an exemption from the registration requirements
of, or in a transaction not subject to, the Securities Act. Please refer to the
section in this prospectus entitled "Risk Factors -- Failure to Participate in
Exchange Offer"
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The summary below describes the principal terms of the exchange notes.
Certain of the terms and conditions described below are subject to important
limitations and exceptions. The "Description of the Notes" section of this
prospectus contains a more detailed description of the terms and conditions of
the exchange notes. References in this section to "we" or "our" refer to
Safety-Kleen Corp. and do not include its subsidiaries.
ISSUER
Safety-Kleen Corp.
NOTES OFFERED
$225,000,000 aggregate principal amount of our 9 1/4% series B senior notes
due 2009. The form and terms of the exchange notes are the same as the form and
terms of the initial notes except that the exchange notes will be registered
under the Securities Act, will not bear legends restricting their transfer and
will not be entitled to registration rights under our registration rights
agreement. The exchange notes will evidence the same debt as the initial notes
and both the initial notes and the exchange notes will be governed by the same
indenture.
MATURITY
May 15, 2009.
INTEREST PAYMENT DATES
May 15 and November 15, beginning on November 15, 1999.
RANKING
The exchange notes will rank equally with all of our existing and future
senior indebtedness and senior to our existing and future subordinated
indebtedness. The exchange notes will not be guaranteed by any of our
subsidiaries. We are a holding company, and we conduct all of our operations
through our subsidiaries. As a result, the exchange notes will be effectively
subordinated to all existing and future indebtedness and other liabilities
(including trade payables) of our subsidiaries. As of February 28, 1999, after
giving effect to the initial offering and the repurchase of the PIK Debenture,
we would have had $350.2 million of indebtedness and our subsidiaries would have
had $2.8 billion of indebtedness and other liabilities (including trade
payables).
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SPECIAL MANDATORY REDEMPTION
We are required to redeem the exchange notes for 101% of the principal
amount plus accrued and unpaid interest, if any, to the mandatory redemption
date if we have not repurchased the PIK Debenture by September 30, 1999. Our
repurchase of the PIK Debenture is subject to, among other things, stockholder
approval of the issuance of shares of our common stock to Laidlaw in connection
with the repurchase.
INITIAL ESCROW OF PROCEEDS
The net proceeds of the initial offering are being held in escrow pending
the satisfaction of the funding conditions relating to the special mandatory
redemption discussed above. The funds held in the escrow account are invested in
cash equivalents and U.S. government obligations. The trustee has a lien on the
proceeds of the escrow account. See "Description of the Notes -- Escrow of
Proceeds; Special Mandatory Redemption."
MAKE-WHOLE REDEMPTION
We may, at our option, redeem some or all of the exchange notes at any time
prior to May 15, 2004 by paying the greater of (1) 100% of the principal amount
of the exchange notes and (2) the sum of the present values of 104.625% of the
principal amount of the exchange notes plus the scheduled interest payments on
such exchange notes through and including May 15, 2004, discounted to such
redemption date on a semi-annual basis at the adjusted treasury rate plus 50
basis points, plus accrued and unpaid interest, if any, to the redemption date.
See "Description of the Notes -- Make-Whole Redemption."
OPTIONAL REDEMPTION
We may, at our option, redeem some or all of the exchange notes at any time
on or after May 15, 2004 at the redemption prices listed under the heading
"Description of the Notes -- Optional Redemption," plus accrued and unpaid
interest, if any, to the redemption date.
OPTIONAL REDEMPTION AFTER PUBLIC EQUITY OFFERINGS
At any time (which may be more than once) prior to May 15, 2002, we may, at
our option, redeem up to 35% of the outstanding exchange notes with funds that
we raise in one or more public equity offerings, as long as:
- we pay 109.25% of the principal amount of the exchange notes, plus
accrued and unpaid interest, if any, to the redemption date.
- we redeem the exchange notes within 90 days of completing the public
equity offering; and
- at least $146.25 million aggregate principal amount of exchange notes
remains outstanding.
CHANGE OF CONTROL OFFER
If a change in control of the Company occurs, we must give holders of the
exchange notes the opportunity to sell us their exchange notes at 101% of their
face amount, plus
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accrued interest, if any. We might not be able to pay you the required price for
notes you present to us at the time of a change of control because:
- we might not have enough funds at that time; or
- the terms of our senior indebtedness or the indebtedness of our
subsidiaries may prevent us from paying.
ASSET SALE PROCEEDS
If we or our restricted subsidiaries engage in asset sales, we generally
must either invest the net cash proceeds from such sales in our business within
a period of time, prepay indebtedness or make an offer to purchase a principal
amount of the exchange notes equal to the excess net cash proceeds. The purchase
price of the exchange notes will be 100% of their principal amount, plus accrued
and unpaid interest, if any, to the date of repurchase.
CERTAIN INDENTURE PROVISIONS
The indenture governing the exchange notes will contain covenants limiting
our ability and the ability of our restricted subsidiaries to:
- incur additional debt;
- incur certain contingent obligations;
- pay dividends or distributions on our capital stock or repurchase our
capital stock;
- issue or sell stock of restricted subsidiaries;
- make certain investments;
- create liens on our assets to secure debt;
- enter into transactions with affiliates; and
- merge, consolidate or sell substantially all of our assets.
These covenants are subject to a number of important limitations and
exceptions.
FALL-AWAY COVENANTS
Upon the exchange notes being rated investment grade, and during the period
when the exchange notes are rated investment grade, provided that no default or
event of default has occurred under the indenture, upon our request most of the
covenants described under "Description of the Notes -- Certain Covenants" will
not apply to us and our restricted subsidiaries.
ABSENCE OF A PUBLIC MARKET FOR THE EXCHANGE NOTES
The exchange notes are new securities and there is currently no established
market for them. We cannot assure you that a market for the exchange notes will
develop or be liquid. The initial notes are currently eligible for trading in
the Private Offerings, Resales and Trading through Automated Linkages market.
Following commencement of the exchange offer, you may continue to trade the
initial notes in the Private Offerings, Resales, and Trading through Automated
Linkages market. The exchange notes will not be eligible for trading in this
market.
10
<PAGE> 14
FORM OF EXCHANGE NOTES
The exchange notes will be represented by one or more permanent global
securities in bearer form deposited on behalf of the Depository Trust Company
with The Bank of Nova Scotia Trust Company of New York, as custodian. You will
not receive exchange notes in registered form unless one of the events described
in the section of this prospectus entitled "Description of the
Notes -- Book-Entry, Delivery and Form" occurs. Instead, beneficial interests in
the exchange notes will be shown on, and transfers of these interests will be
effected only through, records maintained in book-entry form by The Depository
Trust Company with respect to its participants.
RISK FACTORS
You should consider carefully the information provided in the section in
this prospectus entitled "Risk Factors" beginning on page 15 and all other
information provided to you in this prospectus in deciding whether to tender
your initial notes in the exchange offer.
11
<PAGE> 15
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain of our historical and pro forma
combined financial data for the periods indicated. The historical financial data
set forth below has been derived from our consolidated financial statements. Our
results of operations for the six months ended February 28, 1999 are not
necessarily indicative of results that may be expected for the full year. The
unaudited pro forma combined statement of income data for fiscal 1998 and the
twelve months ended February 28, 1999 give effect to the acquisition of Old
Safety-Kleen and certain related transactions as if they occurred on September
1, 1997. The pro forma information is not necessarily indicative of the actual
results of operations that would have occurred had the acquisition of Old
Safety-Kleen occurred on this date or of expected future results. You should
read our consolidated financial statements included elsewhere in this prospectus
and "Unaudited Pro Forma Combined Financial Information."
<TABLE>
<CAPTION>
ACTUAL PRO FORMA (1)
------------------------------------------ ---------------------------
FISCAL YEAR SIX MONTHS TWELVE MONTHS FISCAL YEAR TWELVE MONTHS
ENDED ENDED ENDED ENDED ENDED
AUGUST 31, FEBRUARY 28, FEBRUARY 28, AUGUST 31, FEBRUARY 28,
1998 1999 1999 1998 1999
----------- ------------ ------------- ----------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT RATIOS AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................ $1,185,473 $869,154 $1,669,860 $1,754,981 $1,750,425
Expenses:
Operating........................ 797,382 566,899 1,095,176 1,179,445 1,150,494
Depreciation and amortization.... 93,051 70,973 139,205 158,922 148,555
Selling, general and
administrative................. 108,817 67,240 136,821 181,546 148,779
Restructuring and other
charges(2)..................... 65,831 -- 65,831 65,831 65,831
---------- -------- ---------- ---------- ----------
Total expenses...................... 1,065,081 705,112 1,437,033 1,585,744 1,513,659
Operating income.................... 120,392 164,042 232,827 169,237 236,766
Income (loss) from operations....... 11,488 46,017 43,805 (16,423) 33,148
Net income (loss)................... 205 46,017 32,522 (27,706) 21,865
PER SHARE DATA:
Basic income (loss) per share:
Income (loss) from operations....... $ 0.18 $ 0.53 $ 0.52 $ (0.19) $ 0.38
Net income (loss)................... -- 0.53 0.39 (0.32) 0.25
Weighted average common stock
outstanding (000s)............... 62,322 88,120 83,578 87,255 87,817
Diluted income (loss) per share(3):
Income (loss) from operations....... (3) 0.46 (3) (3) (3)
Net income (loss)................... (3) 0.46 (3) (3) (3)
Weighted average common stock
outstanding and assumed
conversions (000s)............... (3) 111,502 (3) (3) (3)
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
ACTUAL PRO FORMA (1)
------------------------------------------ ---------------------------
FISCAL YEAR SIX MONTHS TWELVE MONTHS FISCAL YEAR TWELVE MONTHS
ENDED ENDED ENDED ENDED ENDED
AUGUST 31, FEBRUARY 28, FEBRUARY 28, AUGUST 31, FEBRUARY 28,
1998 1999 1999 1998 1999
----------- ------------ ------------- ----------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT RATIOS AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
OTHER DATA(4):
EBITDA(5)........................... $ 279,274 $235,015 $ 437,863 $ 393,990 $ 451,152
Cash interest expense............... 90,197 81,027 150,413 191,733 183,819
Ratio of earnings to fixed
charges(6)....................... 1.16x 1.80x 1.40x (6) 1.29x
</TABLE>
<TABLE>
<CAPTION>
AS OF FEBRUARY 28, 1999
----------------------------
ACTUAL AS ADJUSTED(4)
---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Assets:
Total current assets...................................... $ 543,399 $ 558,399
Property, plant and equipment, net........................ 2,551,533 2,551,533
Total assets...................................... 4,312,393 4,312,393(7)
Liabilities:
The Company's subsidiaries(8):
Total current liabilities(9)........................... 340,569 340,569
Senior Credit Facility(10)............................. 1,322,715 1,322,715
9 1/4% Senior Subordinated Notes due 2008.............. 325,000 325,000
Other long-term debt................................... 15,820 15,820
Deferred financing costs............................... (40,453) (40,453)
Other liabilities...................................... 797,165 797,165
Total subsidiary liabilities...................... 2,760,816 2,760,816
The Company (holding company only):
Total current liabilities.............................. 6,875 6,875
9 1/4% Senior Notes due 2009........................... -- 225,000
Other long-term debt(11)............................... 125,200 125,200
PIK Debenture.......................................... 350,000 --
Deferred financing costs............................... -- (10,000)
Total Company liabilities......................... 482,075 347,075
Total liabilities........................................... 3,242,891 3,107,891
Stockholders' equity........................................ 1,069,502 1,204,502(7)
</TABLE>
- -------------------------
(1) The pro forma statement of income data (i) for fiscal 1998 includes our
results for the twelve months ended August 31, 1998 and Old Safety-Kleen's
results for the 29 weeks ended March 28, 1998 and (ii) for the twelve
months ended February 28, 1999, includes our results for the twelve months
ended February 28, 1999 and Old Safety-Kleen's results for the four weeks
ended March 28,
13
<PAGE> 17
1998. Our operations include the combined operations of us and Old
Safety-Kleen subsequent to April 1, 1998.
(2) Reflects a non-recurring restructuring charge of $65.8 million ($39.5
million after tax, or $0.63 per share) for the costs associated with the
closing and remediation of certain facilities and other exit activities as
a result of the acquisition of Old Safety-Kleen.
(3) Diluted earnings per share amounts, which reflect the assumption that
holders of options and the PIK Debenture exercise all of their options to
acquire our common stock or convert the PIK Debenture, have not been
included for fiscal 1998 and the twelve months ended February 28, 1999 as
the effect of such inclusion would be anti-dilutive.
(4) As adjusted for the issuance of the initial notes, the repurchase of the
PIK Debenture and the issuance of our common stock to Laidlaw as partial
payment for the repurchase of the PIK Debenture.
(5) EBITDA represents operating income plus (i) depreciation and amortization
and (ii) for fiscal 1998 and the twelve months ended February 28, 1999, the
$65.8 million non-recurring restructuring charge incurred in connection
with the acquisition of Old Safety-Kleen. EBITDA is presented because it
provides useful information regarding our ability to service debt. EBITDA
should not be considered as an alternative measure of operating results or
cash flow from operations (as determined in accordance with generally
accepted accounting principles). EBITDA as presented by us may not be
comparable to other similarly titled measures used by other companies.
Adjusted EBITDA on a pro forma basis was $493.2 million for fiscal 1998 and
$485.2 million for the twelve months ended February 28, 1999. Adjusted
EBITDA represents EBITDA plus potential cash cost savings of $99.2 million
in fiscal 1998 and $34.0 million in the twelve months ended February 28,
1999 not yet realized in connection with the acquisition of Old
Safety-Kleen. No assurance can be given that such cost savings will be
realized. To date, we believe we have realized approximately $130 million
in annualized cash cost savings in connection with the acquisition of Old
Safety-Kleen based on estimated realized cash cost savings of $30.8 million
in fiscal 1998 and $96.0 million in the twelve months ended February 28,
1999. Adjusted EBITDA should not be considered as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles). See "Risk
Factors -- Uncertainties in Integrating Operations and Achieving Cost
Savings" and "Disclosure Regarding Forward-Looking Statements."
(6) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of debt issuance costs and the
portion of rental expense that represents the interest factor. On a pro
forma basis in fiscal 1998, fixed charges exceeded earnings by $19.8
million.
(7) Reflects a $15.0 million extraordinary loss expected to be incurred in
connection with the write-off of a deferred tax asset which will no longer
be realizable due to the repurchase of the PIK Debenture.
(8) We and all of our wholly-owned domestic subsidiaries (other then
Safety-Kleen Services) have guaranteed the Senior Credit Facility and the
Safety-Kleen Services Notes. Our obligations under our guarantee of the
Senior Credit Facility rank equally with the notes, and our obligations
under our guarantee of the Safety-Kleen Services Notes are subordinated to
the notes.
(9) Excludes current portion of our Senior Credit Facility of $77.3 million.
(10) Includes current portion, which aggregated $77.3 million at February 28,
1999.
(11) Includes $65.2 million of industrial revenue bonds and a $60.0 million
promissory note.
14
<PAGE> 18
RISK FACTORS
Before you tender the initial notes in the exchange offer, you should
carefully consider these risk factors, as well as the other information
contained in this prospectus, in evaluating an investment in our securities. The
risks described below are not the only ones facing our Company. Additional risks
not presently known to us or that we currently deem immaterial may also impair
our business operations. Certain statements in this prospectus (including
certain of the following factors) constitute forward-looking statements. See
"Disclosure Regarding Forward-Looking Statements." Also, in this section
"initial notes" and "exchange notes" are collectively referred to as the
"notes."
RISK FACTORS RELATING TO THE NOTES
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT
OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE
NOTES.
We have substantial debt and debt service obligations. As of February 28,
1999, we had $2.1 billion of consolidated indebtedness outstanding (including
$350 million outstanding under the PIK Debenture) and $1.1 billion of
stockholders' equity. After giving effect to the initial offering and the
repurchase of the PIK Debenture as if they had occurred on February 28, 1999, we
would have had $2.0 billion of indebtedness outstanding and $1.2 billion of
stockholders' equity.
Our substantial amount of debt could have important consequences for you.
For example, it could:
- make it more difficult for us to satisfy our obligations with respect to
these notes;
- limit our ability to obtain additional financing, if we need it, for
working capital, capital expenditures, acquisitions, debt service
requirements or other purposes;
- increase our vulnerability to adverse economic and industry conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing funds available for
operations, future business opportunities or other purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
- place us at a competitive disadvantage compared to our competitors that
have less debt.
ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
Our ability to pay the principal of and interest on or to refinance our
indebtedness (including the notes) will depend on our future operating
performance and financial results and will be subject in part to factors beyond
our control, including general economic, competitive and regulatory conditions.
If we are unable to generate earnings sufficient to cover our debt service
obligations or to borrow funds, we may be required to obtain additional equity
capital, to refinance or restructure all or a portion of our existing debt
(including the notes) or to sell all or a portion of our assets. We cannot
assure you that a refinancing or sale of assets would be possible. In addition,
the terms of the Senior Credit Facility, the indenture relating to the notes and
certain of our other debt instruments restrict our ability to sell assets and
use of the proceeds from a sale.
15
<PAGE> 19
If, for any reason, including a shortfall in anticipated cash flow, we were
unable to meet our debt service obligations, we would be in default under our
existing debt agreements, including the Senior Credit Facility. If a default
occurs, the lenders under the Senior Credit Facility could elect to declare all
of the indebtedness outstanding under the Senior Credit Facility immediately due
and payable, including accrued and unpaid interest, and to terminate their
commitments to fund under the Senior Credit Facility. Any default with respect
to the Senior Credit Facility could result in a default under our other
indebtedness or result in our bankruptcy. In addition, defaults could delay or
preclude our paying principal or interest on the notes. See "Description of
Other Indebtedness -- Company's Subsidiaries -- Senior Credit Facility."
RANKING -- BECAUSE WE ARE A HOLDING COMPANY, YOUR RIGHT TO RECEIVE PAYMENTS
ON THE NOTES IS EFFECTIVELY JUNIOR TO OUR SUBSIDIARIES' EXISTING INDEBTEDNESS
AND POSSIBLY TO ALL OF OUR FUTURE BORROWINGS.
We are a holding company and we conduct our operations entirely through our
subsidiaries. Our only material asset is our ownership of 100% of the capital
stock of Safety-Kleen Services, which in turn owns directly or indirectly the
capital stock of our operating subsidiaries. Consequently, we are dependent upon
dividends or other intercompany transfers of funds from our subsidiaries to meet
our debt service obligations. Our subsidiaries are not obligated to make funds
available to us, and creditors of our subsidiaries will have a superior claim to
our subsidiaries' assets. In addition, our subsidiaries' ability to make any
payments to us will depend on their earnings, the terms of their indebtedness,
including the Senior Credit Facility, business and tax considerations and legal
restrictions.
Our subsidiaries are parties to various agreements that restrict their
ability to pay dividends, make advances or otherwise distribute funds to us.
Specifically, under the indenture governing the Safety-Kleen Services Notes,
subject to certain limited exceptions, Safety-Kleen Services and its
subsidiaries generally may pay dividends and make other advances to us only if
the payment, together with all of restricted payments made by Safety-Kleen
Services under such indenture, would not exceed an amount generally equal to 50%
of its consolidated net income since the date of such indenture. In addition,
under such indenture and the Senior Credit Facility, no dividends or other
advances may be made to us during a default or event of default under such
agreements. We cannot assure you that our subsidiaries will be able to pay
dividends or otherwise distribute funds to us in an amount sufficient to pay the
principal of or interest on the notes.
The notes are our unsecured, general obligations which rank equally with
our senior indebtedness and senior to our subordinated indebtedness. As of
February 28, 1999, after giving effect to the initial offering and the
repurchase of the PIK Debenture, we would have had approximately $125.2 million
of indebtedness outstanding ranking equally with the notes. We have guaranteed
the Senior Credit Facility and our obligations under the guarantee rank equally
with the notes. However, the Senior Credit Facility is secured by a security
interest in all of our domestic assets and a pledge of the stock of all of
Safety-Kleen Services' wholly-owned domestic subsidiaries. As of February 28,
1999, approximately $1.3 billion was outstanding under the Senior Credit
Facility. Because we are a holding company, the notes will be effectively
subordinated to all indebtedness and other liabilities (including trade
payables) of our subsidiaries. As of February 28, 1999, our subsidiaries had
approximately $2.8 billion of outstanding indebtedness and other liabilities
outstanding. For more information on the ranking of such indebtedness, see
"Description of Other Indebtedness."
16
<PAGE> 20
RESTRICTIVE DEBT COVENANTS -- THE TERMS OF THE SENIOR CREDIT FACILITY, THE
SAFETY-KLEEN SERVICES NOTES AND THE INDENTURE GOVERNING THE NOTES IMPOSE
SIGNIFICANT RESTRICTIONS ON THE ABILITY OF THE COMPANY AND OUR SUBSIDIARIES TO
TAKE CERTAIN ACTIONS, WHICH MAY HAVE AN IMPACT ON OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
The Senior Credit Facility, to which Safety-Kleen Services, our wholly
owned subsidiary, is a party, the indenture governing the Safety-Kleen Services
Notes and the indenture governing the notes contain a number of significant
covenants that, among other things, restrict our ability and the ability of our
subsidiaries to:
- pay dividends,
- dispose of assets,
- incur additional indebtedness,
- incur liens on property or assets,
- repay other indebtedness,
- enter into certain investments or transactions,
- repurchase or redeem capital stock,
- engage in mergers or consolidations, or
- engage in certain transactions with subsidiaries and affiliates and
otherwise restrict corporate activities.
We cannot assure you that such restrictions will not adversely affect our
ability to finance future operations or capital needs or engage in other
business activities that may be in our best interest.
The Senior Credit Facility also requires Safety-Kleen Services to comply
with certain financial ratios. The ability of Safety-Kleen Services to comply
with such ratios may be affected by events beyond our control. We have
guaranteed Safety-Kleen Services' obligations under the Senior Credit Facility,
and the Senior Credit Facility is secured by a security interest in all of our
domestic assets and a pledge of the stock of all of Safety-Kleen Services'
wholly-owned domestic subsidiaries. A breach of any of these covenants or the
inability of Safety-Kleen Services to comply with the required financial ratios
could result in a default under the Senior Credit Facility.
In the event of a default under the Senior Credit Facility, the lenders
could foreclose upon the assets pledged to them by us and Safety-Kleen Services.
In addition, the lenders could compel Safety-Kleen Services to apply all of its
available cash to repay borrowings and prevent it from advancing funds to us to
make debt service payments on the notes. Further, the lenders under the Senior
Credit Facility could declare all borrowings outstanding to be immediately due
and payable. If the amounts outstanding under the Senior Credit Facility or the
Safety-Kleen Services Notes were to be accelerated, we cannot assure you that
our assets would be sufficient to repay in full the money owed to the lenders or
to our other debtholders, including you as a noteholder. See "Description of
Other Indebtedness -- The Company's Subsidiaries -- Senior Credit Facility."
NO PRIOR MARKET FOR THE EXCHANGE NOTES -- AN ACTIVE TRADING MARKET MAY NOT
DEVELOP FOR THE EXCHANGE NOTES.
The exchange notes will be registered under the Securities Act but will not
be eligible for trading on the Private Offerings, Resales and Trading through
Automated Linkages
17
<PAGE> 21
market. The exchange notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to:
- the development of any market for the exchange notes,
- the liquidity of any market for the exchange notes that may develop,
- your ability to sell your exchange notes, or
- the price at which you would be able to sell your exchange notes.
We have been advised by the initial purchasers for the initial notes that
they presently intend to make a market in the exchange notes. However, they are
not obligated to do so and may discontinue any market-making activity with
respect to the exchange notes at any time without notice. If a market for the
exchange notes were to exist, the exchange notes could trade at prices that may
be higher or lower than their principal amount or purchase price, depending on
many factors, including prevailing interest rates, the market for similar
debentures and the financial performance of Safety-Kleen Corp. Historically, the
market for non-investment grade debt has been subject to disruptions that have
caused substantial volatility in the prices of securities similar to the
exchange notes. We cannot assure you that the market for the exchange notes, if
any, will not be subject to similar disruptions. Any disruption may adversely
affect you as a holder of the exchange notes.
ISSUANCE OF THE EXCHANGE NOTES -- THE ISSUANCE OF THE EXCHANGE NOTES MAY
ADVERSELY AFFECT THE MARKET FOR THE INITIAL NOTES.
Following commencement of the exchange offer, you may continue to trade the
initial notes in the Private Offerings, Resales and Trading through Automated
Linkages market. If initial notes are tendered for exchange and accepted in the
exchange offer, the trading market for the untendered and tendered but
unaccepted initial notes could be adversely affected.
FAILURE TO PARTICIPATE IN THE EXCHANGE OFFER -- YOUR FAILURE TO PARTICIPATE
IN THE EXCHANGE OFFER WILL HAVE ADVERSE CONSEQUENCES.
The initial notes were not registered under the Securities Act or under the
securities laws of any state and you may not resell them, offer them for resale
or otherwise transfer them unless they are subsequently registered or resold
under an exemption from the registration requirements of the Securities Act and
applicable state securities laws. If you do not exchange your initial notes for
exchange notes pursuant to the exchange offer, or if you do not properly tender
your initial notes in the exchange offer, you will not be able to resell, offer
to resell or otherwise transfer the initial notes unless they are registered
under the Securities Act or unless you resell them, offer to resell or otherwise
transfer them under an exemption from the registration requirements of, or in a
transaction not subject to, the Securities Act. In addition, you will no longer
be able to obligate us to register the initial notes under the Securities Act
except in the limited circumstances provided under our registration rights
agreement.
DELIVERY OF A PROSPECTUS -- CERTAIN PERSONS WHO PARTICIPATE IN THE EXCHANGE
OFFER MUST DELIVER A PROSPECTUS IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES.
Based on certain no-action letters issued by the staff of the Securities
and Exchange Commission, we believe that you may offer for resale, resell or
otherwise transfer the exchange notes without compliance with the registration
and prospectus delivery
18
<PAGE> 22
requirements of the Securities Act. However, in some instances described in this
prospectus under "The Exchange Offer," you will remain obligated to comply with
the registration and prospectus delivery requirements of the Securities Act to
transfer your exchange notes. In these cases, if you transfer an exchange note
without delivering a prospectus meeting the requirements of the Securities Act
or without an exemption from registration of your exchange notes under this Act,
you may incur liability under the Securities Act. We do not and will not assume
or indemnify you against this liability.
ESCROW OF PROCEEDS AND SPECIAL MANDATORY REDEMPTION -- WE HAVE ESCROWED THE
NET PROCEEDS OF THE INITIAL OFFERING PENDING THE REPURCHASE OF THE PIK DEBENTURE
AND, IF SUCH REPURCHASE DOES NOT OCCUR BY SEPTEMBER 30, 1999 WE ARE REQUIRED TO
REDEEM THE NOTES.
The proceeds from the initial offering will be used to finance the cash
portion of the purchase price for the repurchase of the PIK Debenture, for
expenses relating to the repurchase of the PIK Debenture and for general
corporate purposes. However, the issuance of shares of our common stock to
Laidlaw in connection with the repurchase of the PIK Debenture is subject to the
approval of our stockholders and the satisfaction of other conditions. Under an
escrow agreement between the trustee for the notes and us, the proceeds of the
initial offering were placed in escrow pending the repurchase of the PIK
Debenture. We are required to redeem the notes (including the exchange notes)
for 101% of the principal amount plus accrued and unpaid interest, if any, to
the mandatory redemption date if we have not repurchased the PIK Debenture by
September 30, 1999. If we redeem the notes, then purchasers will not realize the
anticipated benefits of purchasing the notes.
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE
THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.
The indenture requires us, in the event of a change of control, to make an
offer to purchase all outstanding notes at a price equal to 101% of the
principal amount of the notes, plus accrued and unpaid interest to the date of
repurchase. In such event, Safety-Kleen Services would also be required to make
an offer to purchase the Safety-Kleen Services Notes. In addition, certain
events involving a change of control may be an event of default under the Senior
Credit Facility or our other indebtedness or our subsidiaries' indebtedness.
Accordingly, your right to require us to repurchase the notes may be of limited
value if we cannot obtain the required approval under our other indebtedness,
including the Senior Credit Facility, to do so. Even if the necessary approvals
were obtained, we may not have sufficient funds at the time of the change of
control to purchase the notes. Failure to offer to repurchase the notes under
such circumstances, however, would constitute an event of default under the
indenture. See "Description of the Notes -- Change of Control."
RISK FACTORS RELATING TO THE INDUSTRY
ENVIRONMENTAL REGULATIONS -- WE MAY BE LIABLE FOR PENALTIES UNDER A VARIETY
OF ENVIRONMENTAL LAWS AND REGULATIONS. CHANGES IN ENVIRONMENTAL REGULATIONS
COULD ADVERSELY AFFECT OUR BUSINESS.
Our operations are subject to certain federal, state, territorial,
provincial and local requirements which regulate health, safety, environment,
zoning and land-use. Operating and other permits are generally required for
incinerators, landfills, transfer and storage facilities, certain collection
vehicles, storage tanks and other facilities owned or operated by us, and these
permits are subject to revocation, modification and renewal. Although we believe
that our facilities meet federal, state and local requirements in all material
respects,
19
<PAGE> 23
we may be required to expend considerable time, effort and money to keep our
existing or acquired facilities in compliance with applicable regulatory
requirements, including new regulations, and to maintain existing permits and
approvals and to obtain the permits and approvals necessary to increase our
capacity. In addition, environmental regulatory changes could cause us to spend
additional funds (over reserved amounts) in connection with monitoring closure
and post-closure of our sites and corrective action for past and current
operations at our facilities. These factors could increase substantially our
operating costs and impair our investment in our facilities. These regulations
are administered by the United States Environmental Protection Agency (the
"EPA") and various other federal, state and local environmental and health and
safety agencies and authorities, including the Occupational Safety and Health
Administration of the United States Department of Labor and by the provincial
environmental ministries in Canada. The requirements are enforceable by
injunctions and fines or penalties, including criminal penalties.
The United States Resource and Conservation Recovery Act ("RCRA") provides
for the establishment of a national hazardous waste management program through a
comprehensive regulatory system. Among other things, it defines hazardous wastes
and provides standards for generators, transporters and disposers of hazardous
wastes, and for the issuance of permits for sites where material is treated,
stored and disposed. These regulations also require our facilities to
demonstrate financial assurance for sudden and accidental and, in the case of
land based treatment facilities, non-sudden and gradual pollution occurrences.
Financial assurance for future closure and post-closure expenses and corrective
actions must also be maintained. We believe that each of our facilities has all
necessary operating permits and that each permit will be renewed at the end of
its existing term. However, the issuance or renewal of any permit could include
conditions requiring further capital expenditures or corrective actions.
Although we also believe that each of our operating facilities complies in all
material respects with the applicable requirements of RCRA and Canadian law for
our Canadian facilities, it may be necessary to expend considerable time, effort
and money to keep existing or acquired facilities in compliance with applicable
requirements, including new regulations, to maintain existing permits and
approvals and to obtain the permits and approvals necessary to increase their
capacity.
The United States Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") imposes liability for natural resources damages
and the cleanup of sites from which there is a release or threatened release of
a hazardous substance into the environment on, among others, the current and
former owners and operators of such sites. Hundreds of substances are defined as
"hazardous" under CERCLA and the release to the environment of these substances,
even in minute amounts, can result in substantial liability. The statute
provides for the remediation of contaminated facilities and imposes costs on the
responsible parties. The expense of conducting this kind of cleanup can be
significant. Even with our efforts to comply with applicable regulations and to
avoid any unregulated release of hazardous substances to the environment,
releases of these substances may occur as a result of our operations or those of
our predecessors. Given the substantial costs involved in a CERCLA cleanup and
the difficulty of obtaining insurance for environmental impairment liability,
this liability could have a material impact on our business, financial condition
and future prospects. See "Business -- Environmental Regulations and Liability."
With respect to various operating facilities, we are required by law to
provide certain financial assurances with respect to certain statutorily
required closure, post-closure and corrective obligations. These financial
assurances may take the form of insurance, guarantees, bonds, letters of credit,
deposits of cash or demonstration of net worth of the
20
<PAGE> 24
responsible party, to the extent acceptable to the United States, Canadian or
other foreign, state, territorial, federal, provincial or local courts,
executive offices, legislatures, governmental agencies or ministries,
commissions, or administrative, regulatory or self-regulatory authorities or
instrumentalities requiring such assurances. We cannot assure you that we will
be able to provide the required financial assurances without increased cost
which could be material to our business. The indenture for the notes also will
restrict the amount of certain financial assurance obligations we can incur. See
"Description of the Notes -- Certain Covenants -- Incurrence of Contingent
Obligations."
Our anticipated payments of remedial and closure costs (corrective action
costs, closure and post-closure costs for our landfills and other facilities,
and CERCLA-type liabilities) for each of the next five years and thereafter are
as follows (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
----------- (DOLLARS IN THOUSANDS)
<S> <C>
1999................................ $ 45,434
2000................................ 40,269
2001................................ 29,382
2002................................ 16,668
2003................................ 12,811
Thereafter.......................... 180,539
--------
Total.......................... $325,103
========
</TABLE>
We continue to be subject to legislation and regulations adopted by
federal, state and local authorities which may impose stricter operating and
performance standards and increased taxes, assessments and fees upon emission
sources and the generators, transporters and handlers of hazardous and
nonhazardous waste. We may not be able to pass on the costs associated with such
legislation and regulations to our customers through price increases. See
"Business -- Operations," "-- Regulations" and "-- Legal Proceedings."
COMPETITION AND TECHNOLOGICAL ADVANCES -- OUR BUSINESS IS VERY COMPETITIVE
AND INCREASED COMPETITION COULD ADVERSELY AFFECT US. OUR INABILITY TO INTRODUCE
NEW PRODUCTS COULD ADVERSELY AFFECT US, AND NEW TECHNOLOGIES COULD REDUCE THE
DEMAND FOR OUR SERVICES.
The hazardous and industrial waste industry is highly competitive. We
compete with local, regional and national companies of varying sizes, as well as
counties and municipalities that maintain their own waste collection and
disposal operations. The key competitive factors within the hazardous and
industrial waste industry include:
- the breadth of services offered;
- the price, quality and reliability of service; and
- the technical proficiency in handling hazardous waste properly.
Knowledgeable customers are sensitive to the reputation and financial
strength of the companies they use to collect, treat, recycle and dispose of
their hazardous and industrial waste primarily because customers, as the
original generator of the waste, remain liable under federal and state
environmental laws for improper disposal of waste. We cannot
21
<PAGE> 25
predict whether future competitive conditions will have a material effect on our
business, financial condition or future prospects.
In addition, technological advances in the treatment and disposal of
hazardous waste can significantly alter competition in the hazardous waste
business. In particular, patent or proprietary processes developed by or held by
competitors may adversely affect our competitive position in the industry. See
"Business -- Competition."
CYCLICAL AND SEASONAL INDUSTRY -- DOWNTURNS IN THE BUSINESS CYCLE COULD
ADVERSELY AFFECT US.
The hazardous and industrial waste industry is cyclical because it is
dependent upon a stream of waste from industries which are cyclical. If those
cyclical industries slow significantly, the business that we receive from those
industries is likely to slow and our business would slow as a result. Also, our
business is somewhat seasonal because less waste is received in winter months
due to difficult working conditions.
OVER-CAPACITY -- OUR BUSINESS MAY BE ADVERSELY AFFECTED BY OVER-CAPACITY IN
THE HAZARDOUS AND INDUSTRIAL WASTE INDUSTRY.
Since the 1980s, the hazardous and industrial waste industry has been
adversely affected by over-capacity. Although recently there has been a decrease
in capacity, we cannot assure you that this trend will continue. Industry
over-capacity may adversely affect our ability to operate our facilities at
efficient capacity levels and/or affect the prices that we can charge for
treatment and disposal services.
RISK FACTORS RELATING TO THE COMPANY
UNCERTAINTIES IN INTEGRATING OPERATIONS AND ACHIEVING COST SAVINGS -- WE
HAVE ACQUIRED NEW BUSINESSES AND WE INTEND TO PURSUE FUTURE ACQUISITIONS WHICH
MAY ADVERSELY AFFECT OUR BUSINESS IF WE CANNOT EFFECTIVELY INTEGRATE THESE NEW
OPERATIONS.
The acquisition of Old Safety-Kleen was significantly larger than any of
our previous acquisitions (including the acquisition of Rollins) and represents
a substantial increase in the scope of our business. Successful integration of
Old Safety-Kleen's operations will depend primarily on our ability to
consolidate operations, systems and procedures and to eliminate redundancies and
excess costs. We are not able to assure you that we will be able to successfully
integrate the operations of Old Safety-Kleen into our operations. In particular,
we may experience (i) difficulty in assimilating the operations and personnel of
Old Safety-Kleen, (ii) disruption of our ongoing business, (iii) difficulty in
the maintenance of uniform standards, controls, procedures and policies and (iv)
the impairment of relationships with employees and customers. We cannot assure
you that we will achieve the expected operating efficiencies and cost savings.
At the time of the acquisition of Old Safety-Kleen, we had anticipated
achieving a $103.5 million to $165.0 million in annual cash cost savings due to
synergies from facility consolidation, increased waste internalization and
selling, general and administrative cost savings. We believe we have realized
and will continue to realize certain operating efficiencies and cost savings as
a result of this acquisition. The realization and timing of such operating
efficiencies and cost savings could be affected by a number of factors beyond
our control, such as general economic conditions, increased operating costs, the
response of competitor or customers and regulatory developments.
22
<PAGE> 26
PENDING AND FUTURE LEGAL PROCEEDINGS -- LIABILITY ARISING FROM OUR PENDING
AND FUTURE LEGAL PROCEEDINGS COULD ADVERSELY AFFECT US.
We, like other hazardous waste management companies, are involved in legal
proceedings in the ordinary course of business. Any alleged failure by us to
comply with laws and regulations may lead to fines or the denial, revocation or
delay of the renewal of permits and licenses. In addition, governmental entities
as well as surrounding landowners may claim that we are liable for environmental
damages. Citizens groups have become increasingly active in challenging the
grant or renewal of permits and licenses for hazardous waste facilities.
Responding to these has increased costs to establish new facilities or expand
current facilities. See "Business -- Legal Proceedings." The following
situations could have material adverse consequences to us:
- a significant judgment against us;
- the loss of a significant permit or license; or
- the imposition of a significant fine.
DEPENDENCE ON SENIOR MANAGEMENT -- IF WE LOSE OUR SENIOR MANAGEMENT TEAM,
OUR BUSINESS MAY BE ADVERSELY AFFECTED.
We rely significantly on the services of our senior management team. Our
business and financial results could be adversely affected if any member of the
senior management team was unwilling or unable to continue in his present
position. See "Management."
CONCENTRATION OF OWNERSHIP -- LAIDLAW IS A SIGNIFICANT STOCKHOLDER WHOSE
INTERESTS MAY NOT BE ALIGNED WITH YOURS.
As of May 20, 1999, Laidlaw beneficially owned 36.15% of our outstanding
common stock and will own approximately 43.4% if the PIK Debenture is
repurchased (assuming we pay cash in an amount equal to any accrued and unpaid
interest on the PIK Debenture to an assumed date of repurchase of August 15,
1999). As a result, Laidlaw has, and will continue to have, significant
influence with respect to all matters submitted to a vote of our stockholders.
Under the Senior Credit Facility, an event of default will occur if:
- Laidlaw ceases to be a primary stockholder;
- the Consolidated Total Leverage Ratio (as defined in the Senior Credit
Facility) is greater than 2.50 to 1.00;
- Laidlaw ceases to own at least 20% of our outstanding common stock; or
- there ceases to be at least one member of our board of directors who is a
designee of Laidlaw.
Laidlaw is not contractually required to maintain its ownership in us at any
level. If an event of default were to occur, we may not be able to obtain a
waiver or, if necessary, refinance or repay the indebtedness outstanding under
the Senior Credit Facility.
POTENTIAL UNDISCLOSED LIABILITIES ASSOCIATED WITH ACQUISITIONS -- WE MAY BE
SUBJECT TO CERTAIN LIABILITIES ASSUMED IN CONNECTION WITH OUR ACQUISITIONS THAT
COULD ADVERSELY AFFECT OUR BUSINESS.
We generally conduct due diligence in connection with each of our
acquisitions. In connection with the acquisition of Old Safety-Kleen, the
acquisition of Rollins or any other
23
<PAGE> 27
acquisition made by us, there may be liabilities that we do not, or are unable
to, discover in our due diligence before we complete the acquisition. In
particular, we, as a successor owner, may be financially responsible for
violations of environmental laws by previous owners of acquired businesses. The
discovery of any material liabilities could have a material adverse effect on
our business, financial condition or future prospects. See "-- Environmental
Regulations" and "Business -- Regulations."
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the exchange notes.
We are making this exchange offer solely to satisfy our obligations under our
registration rights agreement.
The net proceeds from the initial offering were approximately $218.5
million. We intend to use a portion of the net proceeds to pay the cash portion
of the purchase price for the PIK debenture. The aggregate purchase price for
the PIK Debenture will consist of (i) $200 million in cash, (ii) 11,320,755
shares of our common stock and (iii) cash or shares of our common stock in an
amount equal to any accrued and unpaid interest on the PIK Debenture to the date
of repurchase. The remainder of the net proceeds from the initial offering will
be used for expenses relating to the repurchase of the PIK Debenture and for
general corporate purposes. We issued the PIK Debenture to Laidlaw in connection
with the acquisition of Rollins. Interest accrues under the PIK Debenture at a
rate of 5% per annum, which is paid in shares of our common stock until April 8,
2000. The PIK Debenture matures on May 15, 2009. For a description of the other
terms of the PIK Debenture, see "Description of Other Indebtedness -- The
Company -- PIK Debenture."
The net proceeds of the initial offering are being held in escrow to fund,
if necessary, the special mandatory redemption. The funds held in the escrow
account are invested in cash equivalents and U.S. government obligations. The
trustee will have a lien on the proceeds of the escrow account. See "Description
of the Exchange Notes -- Escrow of Proceeds; Special Mandatory Redemption."
24
<PAGE> 28
CAPITALIZATION
The following table sets forth our consolidated debt and capitalization on
an actual basis as of February 28, 1999 and as adjusted to give effect to the
initial offering, the repurchase of the PIK Debenture and the issuance of common
stock to Laidlaw as partial payment for the repurchase of the PIK Debenture.
This table should be read in conjunction with "Use of Proceeds" and our
consolidated financial statements and notes thereto appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF FEBRUARY 28, 1999
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................. $ 10,949 $ 25,949
========== ==========
Current portion of Senior Credit Facility............. $ 77,327 $ 77,327
========== ==========
Long-term debt:
The Company's subsidiaries:
Senior Credit Facility(1)(2):
Term Loans, net of current portion............. $1,185,388 $1,185,388
Revolver....................................... 60,000 60,000
9 1/4% Senior Subordinated Notes due 2008(2)..... 325,000 325,000
Other long-term debt............................. 15,820 15,820
---------- ----------
Total long-term debt of subsidiaries(3)........ 1,586,208 1,586,208
---------- ----------
The Company (holding company only):
Company IRBs(4).................................. 65,200 65,200
Company Promissory Note(5)....................... 60,000 60,000
PIK Debenture.................................... 350,000 --
9 1/4% Senior Notes due 2009..................... -- 225,000(6)
---------- ----------
Total long-term debt of Company............. 475,200 350,200
---------- ----------
Total long-term debt.................................. 2,061,408 1,936,408
Stockholders' equity.................................. 1,069,502 1,204,502(7)
---------- ----------
Total capitalization............................. $3,130,910 $3,140,910
========== ==========
</TABLE>
- -------------------------
(1) The Senior Credit Facility includes a $1.3 billion term loan facility (the
"Term Loans") and a $550.0 million revolving credit facility, which includes
a $200.0 million and $400.0 million sublimit for letters of credit and
loans, respectively (the "Revolver"). See "Description of Other
Indebtedness -- The Company's Subsidiaries -- Senior Credit Facility." The
notes are effectively subordinated to all indebtedness and other liabilities
of our subsidiaries, including Safety-Kleen Services.
(2) We and our wholly-owned domestic subsidiaries (other than Safety-Kleen
Services) have guaranteed the Senior Credit Facility and the Safety-Kleen
Services Notes. See "Description of Other Indebtedness -- The Company's
Subsidiaries -- Senior Credit Facility" and "-- Safety-Kleen Services
Notes." Our obligations under our guarantee
25
<PAGE> 29
of the Senior Credit Facility rank equally with the notes and our
obligations under our guarantee of the Safety-Kleen Services Notes are
subordinated to the notes.
(3) Excludes approximately $40.5 million in deferred financing costs which have
been deducted from long-term debt shown in the balance sheet as of February
28, 1999.
(4) We have two outstanding series of industrial revenue bonds (the "Company
IRBs") issued in connection with the operation of certain of our facilities.
See "Description of Other Indebtedness -- The Company -- Company IRBs."
(5) On May 15, 1997, we issued a $60.0 million promissory note in connection
with our acquisition of Rollins (the "Company Promissory Note"), which
matures on May 15, 2003. See "Description of Other Indebtedness -- The
Company -- Company Promissory Note."
(6) Excludes approximately $10.0 million of deferred financing costs (including
approximately $3.5 million in connection with amendment of the Senior Credit
Facility) which we expect to incur in connection with the initial offering.
(7) Reflects a $15.0 million extraordinary loss expected to be incurred in
connection with the write-off of a deferred tax asset which will no longer
be realizable due to the repurchase of the PIK Debenture.
26
<PAGE> 30
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The accompanying unaudited pro forma combined statements of income for
fiscal 1998 and the twelve months ended February 28, 1999 give effect to the
acquisition of Old Safety-Kleen and certain related transactions as if they
occurred on September 1, 1997. Since the acquisition of Old Safety-Kleen
occurred prior to February 28, 1999 and is reflected in the consolidated balance
sheet as of that date, we have not presented pro forma combined balance sheet
information.
At the time of the acquisition of Old Safety-Kleen, we believed that
selling, general and administrative cost consolidation, the consolidation of
collection and processing facilities, the increased utilization of remaining
facilities and the internalization of various waste streams resulting from the
acquisition of Old Safety-Kleen would generate annual cash cost savings of
approximately $103.5 million to $165 million. As of February 28, 1999, we
believe we have realized approximately $130 million of annualized cash cost
savings. The unaudited pro forma combined financial information has not been
adjusted for the potential cost savings yet to be realized.
The unaudited pro forma combined financial statements do not purport to
represent what our results of operations would have been had the acquisition of
Old Safety-Kleen occurred on the date indicated or to predict our results of
operations in the future. The unaudited pro forma combined financial statements
should be read in conjunction with our consolidated financial statements
appearing elsewhere in this prospectus.
We announced a one-for-four reverse stock split effective at the close of
business on November 30, 1998. All per share data included in the unaudited pro
forma combined financial information reflects the reverse split.
27
<PAGE> 31
SAFETY-KLEEN CORP.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED AUGUST 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL OLD PRO FORMA PRO FORMA
COMPANY SAFETY-KLEEN ADJUSTMENTS COMBINED
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Revenues.................. $1,185,473 $569,508 $ -- $1,754,981
---------- -------- -------- ----------
Expenses:
Operating............... 797,382 382,063 -- 1,179,445
Depreciation and
amortization......... 93,051 45,297 20,574(D1) 158,922
Selling, general and
administrative....... 108,817 72,729 -- 181,546
Restructuring and other
charges.............. 65,831 -- -- 65,831
---------- -------- -------- ----------
Total expenses....... 1,065,081 500,089 20,574 1,585,744
---------- -------- -------- ----------
Operating income (loss)... 120,392 69,419 (20,574) 169,237
Interest expense.......... 107,697 9,358 71,365(D2) 188,420
Other income (expense).... 7,657 (8,235) -- (578)
---------- -------- -------- ----------
Income (loss) from
continuing operations
before income tax....... 20,352 51,826 (91,939) (19,761)
Income tax expense
(benefit)............... 9,133 18,996 (31,198)(D3) (3,069)
---------- -------- -------- ----------
Income (loss) from
continuing operations
before minority
interest................ 11,219 32,830 (60,741) (16,692)
Minority interest (net of
tax).................... 269 -- -- 269
---------- -------- -------- ----------
Net income (loss) from
continuing operations... $ 11,488 $ 32,830 $(60,741) $ (16,423)
========== ======== ======== ==========
Basic loss per
share(D5)............... $ (0.19)(D4)
Weighted average common
stock outstanding
(000's)................. 87,255(D4)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
28
<PAGE> 32
SAFETY-KLEEN CORP.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL OLD PRO FORMA PRO FORMA
COMPANY SAFETY-KLEEN ADJUSTMENTS COMBINED
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Revenues.................. $1,669,860 $80,565 $ -- $1,750,425
---------- ------- -------- ----------
Expenses:
Operating............... 1,095,176 55,318 -- 1,150,494
Depreciation and
amortization......... 139,205 6,349 3,001(D1) 148,555
Selling, general and
administrative....... 136,821 11,958 -- 148,779
Restructuring and other
charges.............. 65,831 -- -- 65,831
---------- ------- -------- ----------
Total expenses....... 1,437,033 73,625 3,001 1,513,659
---------- ------- -------- ----------
Operating income (loss)... 232,827 6,940 (3,001) 236,766
Interest expense.......... 164,891 1,213 14,402(D2) 180,506
Other income (expense).... 7,516 (4,813) -- 2,703
---------- ------- -------- ----------
Income (loss) from
continuing operations
before income tax....... 75,452 914 (17,403) 58,963
Income tax expense
(benefit)............... 33,233 332 (6,164)(D3) 27,401
---------- ------- -------- ----------
Income (loss) from
continuing operations
before minority
interest................ 42,219 582 (11,239) 31,562
Minority interest (net of
tax).................... 1,586 -- -- 1,586
---------- ------- -------- ----------
Net income (loss) from
continuing operations... $ 43,805 $ 582 $(11,239) $ 33,148
========== ======= ======== ==========
Basic income per
share(D5)............... $ 0.38(D4)
Weighted average common
stock outstanding
(000's)................. 87,817(D4)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
29
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
A. SUMMARY OF TRANSACTIONS
In May 1998, we completed the acquisition of Old Safety-Kleen in which we
exchanged $18.30 and 0.7 shares of our common stock for each outstanding share
of common stock of Old Safety-Kleen. The total consideration of approximately
$2.2 billion, including debt assumed and transaction costs, was comprised of
approximately $1.5 billion in cash and 41.6 million shares of our common stock.
In connection with the acquisition of Old Safety-Kleen, Safety-Kleen
Services established the Senior Credit Facility through an affiliate of TD
Securities (USA) Inc. The Senior Credit Facility is secured by all of our
domestic tangible assets and the tangible assets of certain of our subsidiaries.
In addition, all of the capital stock of our wholly-owned domestic subsidiaries
has been pledged as part of such security for the Senior Credit Facility, and
such subsidiaries have guaranteed Safety-Kleen Services' obligations.
On May 29, 1998, Safety-Kleen Services issued the Safety-Kleen Services
Notes in a private offering under Rule 144A under the Securities Act. The net
proceeds from the sale of the Safety-Kleen Services Notes were approximately
$316 million. The net proceeds were used to repay a portion of the borrowings
outstanding under the Senior Credit Facility. The payment of the Safety-Kleen
Services Notes is guaranteed on a senior subordinated basis by us and is jointly
and severally guaranteed on a senior subordinated basis by our wholly-owned
domestic subsidiaries (other than Safety-Kleen Services). No foreign direct or
indirect subsidiary or non-wholly-owned domestic subsidiary is an obligor with
respect to the Safety-Kleen Services Notes.
B. ACCOUNTING TREATMENT (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The acquisition of Old Safety-Kleen was accounted for using the purchase
method of accounting applied in accordance with generally accepted accounting
principles. Accordingly, the assets and liabilities of Old Safety-Kleen have
been recorded at their estimated fair value, with any difference between the
amount of such fair value and the purchase price being recorded as goodwill. Our
operating results include the results of operations of Old Safety-Kleen from and
after the date of the acquisition.
30
<PAGE> 34
The aggregate purchase price totaled $2,015,243 and was comprised as
follows:
<TABLE>
<S> <C> <C>
Old Safety-Kleen common stock outstanding at March
28, 1998......................................... 60,052,141
Common stock acquired by us prior to the
acquisition...................................... (601,100)
----------
Common stock acquired by us in the acquisition..... 59,451,041
==========
Cash cost at $18.30 per share of common stock
acquired, including cost of fractional shares.... $1,087,963
Cost of additional shares of our common stock
issued:
Number of shares of our common stock issued at
Exchange Ratio of 0.7......................... 41,615,088
Price per share.................................. $ 16.50
Total cost.................................... 686,649
----------
1,774,612
Cost of Old Safety-Kleen common stock acquired by
us prior to the acquisition...................... 13,000
Transaction costs, including stock options and
severance........................................ 152,631
Termination fees associated with prior merger
agreement........................................ 75,000
----------
Total purchase price.......................... $2,015,243
==========
</TABLE>
The price per share of our common stock issued at $16.50 was the average of
the closing New York Stock Exchange market price for the three trading days
prior to and the three trading days immediately following and including March
16, 1998, the date of the merger agreement.
The purchase price has been allocated to the assets acquired and
liabilities assumed based on estimated fair values at the date of acquisition as
follows:
<TABLE>
<S> <C>
Current assets..................................... $ 231,351
Property, plant and equipment...................... 1,712,314
Goodwill........................................... 1,048,618
Other assets....................................... 14,680
Current liabilities................................ (127,092)
Deferred income taxes.............................. (438,449)
Other deferred items............................... (208,321)
Long-term debt..................................... (217,858)
----------
Total purchase price.......................... $2,015,243
==========
</TABLE>
C. BASIS OF PRESENTATION
The unaudited pro forma combined statements of income for fiscal 1998 and
the twelve months ended February 28, 1999 has been adjusted for the acquisition
of Old Safety-Kleen and certain related transactions as if they had occurred as
of September 1, 1997.
31
<PAGE> 35
Since the acquisition of Old Safety Kleen occurred prior to February 28,
1999 and is reflected in the consolidated balance sheet as of that date, we have
not presented pro forma combined balance sheet information. The unaudited pro
forma combined statement of income for fiscal 1998 includes our results (which
include Old Safety-Kleen since April 1, 1998) for the twelve months ended August
31, 1998 and the results of Old Safety-Kleen for the aggregate of the 17 weeks
ended January 3, 1998 and the twelve weeks ended March 28, 1998. The unaudited
pro forma combined statement of income for the twelve months ended February 28,
1999 includes our results (which include Old Safety-Kleen since April 1, 1998)
for the twelve months ended February 28, 1999 and the results of Old
Safety-Kleen for the four weeks ended March 28, 1998.
The acquisition has been presented using the purchase method of accounting.
Accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based upon management's best estimate of the fair values at
the time of the acquisition. Areas of particular complexity include valuation of
long-lived assets, environmental liabilities, pre-acquisition contingencies and
the related deferred tax consequences. As of February 28, 1999, the
determination of the fair value of these items has been substantially completed.
The goodwill acquired is being amortized over 40 years on a straight-line basis.
The unaudited pro forma combined financial information does not purport to
be indicative of our combined results of operations had the acquisition of Old
Safety-Kleen occurred on the date specified, nor are they indicative of our
future results of operations. As of February 28, 1999, we believe we have
realized approximately $130 million of annualized cash cost savings. The
unaudited pro forma combined financial information has not been adjusted for the
potential cost savings yet to be realized.
D. PRO FORMA ADJUSTMENTS (DOLLARS AND SHARES IN THOUSANDS)
The following adjustments and elimination entries have been made to the
unaudited pro forma combined statement of income to reflect the acquisition of
Old Safety-Kleen using the purchase method of accounting:
1. To adjust depreciation and amortization expense to reflect the fair
value adjustment of property, plant and equipment and the effect of the
acquisition on goodwill amortization, as follows:
<TABLE>
<CAPTION>
YEAR ENDED TWELVE MONTHS ENDED
AUGUST 31, 1998 FEBRUARY 28, 1999
--------------- -------------------
<S> <C> <C>
To eliminate Old Safety-
Kleen's estimated
historical intangible and
other asset amortization
expense................... $(11,579) $(1,593)
To record amortization
expense related to
goodwill as a result of
the acquisition........... 15,292 2,185
To record depreciation
expense related to the
write-up of property,
plant and equipment
(primarily buildings and
land improvements) to
estimated fair value...... 16,861 2,409
-------- -------
Total adjustment....... $ 20,574 $ 3,001
======== =======
</TABLE>
32
<PAGE> 36
2. To adjust interest expense for the impact of the additional long-term
debt associated with the acquisition, as follows:
<TABLE>
<CAPTION>
YEAR ENDED TWELVE MONTHS ENDED
AUGUST 31, 1998 FEBRUARY 28, 1999
--------------- -------------------
<S> <C> <C>
To eliminate Old
Safety-Kleen historical
interest expense.......... $ (9,358) $(1,213)
To eliminate interest
expense on refinanced debt
of the Company............ (17,491) (2,499)
To record interest expense
on $1,531,048 of
borrowings at 8.5% under
the Senior Credit
Facility(1)............... 75,914 10,845
To record interest expense
on the Safety-Kleen
Services Notes issued May
29, 1998.................. 22,300 7,269
-------- -------
Total adjustment....... $ 71,365 $14,402
======== =======
</TABLE>
- -------------------------
(1) Calculated based on current rates pursuant to the terms of the
Senior Credit Facility, other costs and the effect of interest rate
swap agreements. See "Description of Other Indebtedness -- The
Company's Subsidiaries -- Senior Credit Facility."
3. To adjust income taxes (benefits) to record the pro forma income taxes
(benefits) as computed under SFAS 109 on pro forma pre-tax income
(loss).
4. Pro forma weighted average common stock outstanding comprises:
<TABLE>
<CAPTION>
YEAR ENDED TWELVE MONTHS ENDED
AUGUST 31, 1998 FEBRUARY 28, 1999
--------------- -------------------
<S> <C> <C>
Shares of common stock
outstanding............... 87,745 88,387
Historical weighted average
shares outstanding........ 62,321 83,578
Adjustment for
acquisition............... 24,934 4,239
Pro forma weighted average
total..................... 87,255 87,817
======= =======
Basic pro forma income
(loss) per share.......... $(0.19) $0.38
======= =======
</TABLE>
5. Diluted earnings per share amounts, which reflect the assumption that
holders of options and the PIK Debenture exercise all of their options
to acquire our common stock or convert the PIK Debenture, have not been
included for the year ended August 31, 1998 or the twelve months ended
February 28, 1999 as the effect of such inclusion would be
anti-dilutive.
33
<PAGE> 37
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for, and as of the
end of, each of the years in the three-year period ended August 31, 1998 are
derived from our consolidated financial statements, which have been audited by
PricewaterhouseCoopers LLP, independent auditors. The selected consolidated
financial data set forth below for, and as of the end of, each of the years in
the two-year period ended August 31, 1995 are derived from the financial
statements of Laidlaw. The selected consolidated financial data set forth below
for, and as of the end of, the six months ended February 28, 1998 and 1999 are
derived from our unaudited interim financial statements. In the opinion of
management, such unaudited interim statements include all adjustments
(consisting of only normal recurring accruals) necessary for a fair presentation
of our financial position and results of operations for such periods. Our
results of operations for the six months ended February 28, 1999 are not
necessarily indicative of the results that may be expected for the full year.
You should read the selected consolidated financial data below in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and notes thereto
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR FEBRUARY 28,
------------------------------------------------------------ -----------------------
1994 1995 1996 1997 1998 1998 1999
-------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................... $517,804 $ 599,241 $ 652,973 $ 678,619 $1,185,473 $ 384,767 $ 869,154
Expenses:
Operating................ 354,499 428,932 473,563 485,062 797,382 269,105 566,899
Depreciation and
amortization........... 48,356 48,386 48,291 53,506 93,051 24,819 70,973
Selling, general and
administrative......... 69,401 62,064 73,800 73,068 108,817 39,236 67,240
Restructuring and other
charges(1)............. -- -- -- 331,697 65,831 -- --
-------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss).... 45,548 59,859 57,319 (264,714) 120,392 51,607 164,042
Allocated interest
expense.................. 30,961 36,846 41,506 24,030 -- -- --
Interest expense........... 3,039 4,296 5,344 20,243 107,697 29,489 89,705
Other income............... 14,183 2,967 1,391 2,865 7,657 1,243 3,022
Equity in earnings of
associated company....... -- -- -- -- -- -- 1,102
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before income tax........ 25,731 21,684 11,860 (306,122) 20,352 23,361 78,461
Income tax expense
(benefit)................ 3,200 4,769 2,500 (122,789) 9,133 9,555 33,655
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before minority
interest................. 22,531 16,915 9,360 (183,333) 11,219 13,806 44,806
Minority interest (net of
tax)..................... -- (150) (2,646) (119) 269 (106) 1,211
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
continuing operations.... 22,531 16,765 6,714 (183,452) 11,488 13,700 46,017
Income from discontinued
operations (net of
tax)..................... -- 819 1,496 20 -- -- --
-------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
34
<PAGE> 38
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR FEBRUARY 28,
------------------------------------------------------------ -----------------------
1994 1995 1996 1997 1998 1998 1999
-------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary item....... 22,531 17,584 8,210 (183,432) 11,488 13,700 46,017
Extraordinary item, net of
tax(2)................... -- -- -- -- (11,283) -- --
-------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss).......... $ 22,531 $ 17,584 $ 8,210 $ (183,432) $ 205 $ 13,700 $ 46,017
======== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Basic income per share:
Income (loss) from
continuing
operations............. $ 0.75 $ 0.56 $ 0.22 $ (5.32) $ 0.18 $ 0.30 $ 0.53
Income from discontinued
operations............. -- 0.03 0.05 -- -- -- --
Extraordinary item....... -- -- -- -- (0.18) -- --
Net income (loss)........ 0.75 0.59 0.27 (5.32) -- 0.30 0.53
Diluted income per share
(3):
Income (loss) from
continuing
operations............. 0.75 0.56 0.22 (5.32) 0.18 0.28 0.46
Income (loss) from
discontinued
operations............. -- 0.03 0.05 -- -- -- --
Extraordinary item....... -- -- -- -- (0.18) -- --
Net income (loss)........ 0.75 0.59 0.27 (5.32) -- 0.28 0.46
Cash dividends per share... -- -- -- -- -- -- --
OTHER DATA:
EBITDA(4).................. $ 93,904 $ 108,245 $ 105,610 $ 120,489 $ 279,274 $ 76,426 $ 235,015
Cash interest expense(5)... 34,000 41,142 46,850 39,095 90,197 20,811 81,027
Ratio of earnings to fixed
charges(6)............... 1.60x 1.41x 1.20x (5) 1.16x 1.67x 1.80x
BALANCE SHEET DATA (AT
PERIOD END):
Working capital............ $ 90,831 $ 56,022 $ 40,677 $ 76,095 $ 117,418 $ 73,911 $ 118,628
Total assets............... 974,053 1,421,033 1,491,294 1,610,878 4,468,895 1,528,662 4,312,393
Long-term debt............. 18,454 55,149 48,556 528,010 1,853,164 444,014 1,670,955
Stockholders' equity(7).... 798,597 1,056,266 1,094,777 327,965 1,014,706 349,728 1,069,502
Weighted average common
stock outstanding........ 30,000 30,000 30,000 34,508 62,322 45,381 88,120
Weighted average common
stock outstanding and
assumed conversions...... 30,000 30,000 30,000 41,360 85,742 68,827 111,502
</TABLE>
35
<PAGE> 39
- -------------------------
(1) For fiscal 1997, reflects a non-recurring restructuring charge of $331.7
million ($200.0 million after tax, or $5.80 per share) incurred in
connection with the closing of certain of the operating facilities that had
become redundant, and an impairment in the carrying value of certain
operating facilities due to lower than expected future cash flows, as a
result of the acquisition of Rollins. For fiscal 1998, reflects a
non-recurring restructuring charge of $65.8 million ($39.5 million after tax
or $0.63 per share) for the costs associated with the closing and
remediation of certain facilities and other exit activities as a result of
the acquisition of Old Safety-Kleen.
(2) Related to an extraordinary charge of approximately $18.8 million ($11.3
million after tax, or $0.18 per share) related to the write-off of
previously deferred debt issuance costs and prepayment penalties.
(3) Diluted earnings per share amounts, which reflect the assumption that
holders of options and the PIK Debenture exercise all of their options to
acquire our common stock or convert the PIK Debenture, have not been
included for fiscal 1998 and fiscal 1997 as the effect of such inclusion
would be anti-dilutive. No dilutive component existed prior to 1997.
(4) EBITDA represents operating income plus (i) depreciation and amortization,
(ii) in the case of fiscal 1997 only, the $331.7 million non-recurring
restructuring charge incurred in connection with the acquisition of Rollins
and (iii) in the case of fiscal 1998 only, the $65.8 million non-recurring
restructuring charge incurred in connection with the acquisition of Old
Safety-Kleen. EBITDA is presented because it provides useful information
regarding our ability to service debt. EBITDA should not be considered as an
alternative measure of operating results or cash flow from operations (as
determined in accordance with generally accepted accounting principles).
EBITDA as presented by us may not be comparable to other similarly titled
measures used by other companies.
(5) Cash interest expense reflects interest expense minus non-cash interest
expense attributable to the PIK Debenture. Such amounts were $5.2 million in
fiscal 1997, $17.5 million in fiscal 1998 and $8.7 million in each of the
six months ended February 28, 1999 and 1998.
(6) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest, amortization of debt issuance costs and the portion of
rental expense that represents the interest factor. In fiscal 1997, earnings
were insufficient to cover fixed charges by $249.8 million.
(7) For fiscal years 1994 to 1996 inclusive, stockholders' equity represents the
net investment of Laidlaw in us.
36
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis represents our financial condition
and results of operations and that of our consolidated subsidiaries. You should
read our consolidated financial statements, upon which this is based, included
elsewhere in this prospectus. We are a holding company only and have no
independent business operations, and all of our business operations are
conducted through our subsidiaries. Our consolidated financial statements do not
give effect to the acquisition of Old Safety-Kleen for any period prior to April
1, 1998 and the acquisition of Rollins for any period prior to May 15, 1997.
Certain statements in the following discussion and analysis are "forward-looking
statements." See "Disclosure Regarding Forward-Looking Statements."
OVERVIEW
Our historical results of operations represent, for any period prior to May
15, 1997, certain of the hazardous and industrial waste operations of Laidlaw.
As a division of Laidlaw, Old LESI greatly expanded its operations when it
acquired United States Pollution Control, Inc. ("USPCI"), Union Pacific
Corporation's hazardous waste management business, in December 1994. The
acquisition of USPCI greatly enhanced Old LESI's service breadth and depth as
well as its customer base, both by size and geographically. The acquisition
provided over $200.0 million in annualized revenue to Old LESI. Through the
USPCI transaction, Old LESI acquired substantial hazardous and non-hazardous
landfill capacity and an expanded rail transport capability.
In May 1997, Rollins and Laidlaw entered into a transaction whereby Old
LESI acquired Rollins, the largest commercial hazardous waste incineration
company in North America. Upon consummation of the acquisition of Rollins, which
was accounted for as a reverse acquisition, we changed our name to Laidlaw
Environmental Services, Inc. Our results of operations for periods beginning on
May 15, 1997 include the acquired operations of Rollins. In connection with the
acquisition of Rollins, we (i) issued 30 million shares of our common stock,
(ii) issued the $350.0 million PIK Debenture and (iii) paid $349.1 million in
cash to Laidlaw.
In May 1998, we consummated the acquisition of Old Safety-Kleen for
aggregate consideration of approximately $2.2 billion, including debt assumed
and estimated transaction costs, which was comprised of $1.5 billion in cash and
the issuance of 41.6 million shares of common stock. On November 25, 1998, we
changed our name to Safety-Kleen Corp. In connection with the acquisition and
the refinancing of certain outstanding debt, we borrowed $1.8 billion under the
Senior Credit Facility. The acquisition of Old Safety-Kleen has been accounted
for using the purchase method of accounting. Our results of operations for
periods beginning on April 1, 1998 include the acquired operations of Old
Safety-Kleen.
The acquisition of Old Safety-Kleen substantially increased the scope of
our business. Pro forma for the acquisition of Old Safety-Kleen, our revenues
and operating income (exclusive of the restructuring charge) for fiscal 1998
would have been $1.8 billion and $235.1 million, respectively, compared to $1.2
billion and $186.2 million, respectively, on an actual basis. As a result of the
acquisition of Old Safety-Kleen, we believe that our historical results of
operations prior to the six months ended February 28, 1999 (which do not give
effect to the acquisition of Old Safety-Kleen for any period prior to April 1,
1998
37
<PAGE> 41
or the acquisition of Rollins, for any period prior to May 15, 1997) do not
reflect our current operations.
On December 23, 1998, we completed the recapitalization of our European
operations and the formation of a new entity, Safety-Kleen Europe. Safety-Kleen
Europe operates 59 collection locations and three reclamation facilities
throughout Western Europe and has annual revenues of approximately $120 million.
The recapitalization, which was based on a total enterprise value of $190
million, included investments in Safety-Kleen Europe by Electra Fleming and the
senior management group of Safety-Kleen Europe. In exchange for our contribution
of the European operations of Old Safety-Kleen, we received a 44% equity
interest in Safety-Kleen Europe and will receive $154 million in gross cash
proceeds (of which $138.7 million has been received as of February 28, 1999).
Electra Fleming purchased a 44% equity interest, while the senior management
group acquired a 12% equity interest (on a fully-diluted basis). We used the
cash proceeds from the recapitalization of our European operations to repay
indebtedness under our Revolver. In connection with the recapitalization, there
may be contingent liabilities that we failed or were unable to discover prior to
the completion of the recapitalization. In particular, to the extent that any of
our European operations failed to comply with or otherwise violated
environmental laws, we may be financially responsible for these violations.
RESULTS OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1998 COMPARED WITH SIX MONTHS ENDED FEBRUARY 28,
1999
The following table sets forth, for each line item presented, for the
periods indicated, the amount of such line item and such percentage of the
Company's revenue for such period:
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28,
------------------------------------------------
1998 1999
---------------------- ----------------------
(IN MILLIONS) (IN MILLIONS)
------------- -------------
<S> <C> <C> <C> <C>
Revenues............................ $384.8 100.0% $869.2 100.0%
Operating expense................... 269.1 69.9 566.9 65.2
Depreciation and amortization....... 24.8 6.5 71.0 8.2
Selling, general and
administrative.................... 39.3 10.2 67.3 7.7
------ ----- ------ -----
Operating income.................... $ 51.6 13.4% $164.0 18.9%
====== ===== ====== =====
</TABLE>
38
<PAGE> 42
Revenues
The following table sets forth, for the periods indicated, the revenues
attributable to each line of business of the Company and such revenues as a
percentage of the Company's revenues for such period:
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28,
------------------------------------------------
1998 1999
---------------------- ----------------------
(IN MILLIONS) (IN MILLIONS)
------------- -------------
<S> <C> <C> <C> <C>
Collection and Recovery Services:
Industrial Services............... $215.8 56% $ 399.8 46%
Commercial and Institutional
Services....................... 0.0 0 266.9 31
Total Collection and Recovery
Services..................... 215.8 56 666.7 77
Treatment and Disposal Services..... 169.0 44 170.8 20
European Operations................. 0.0 0 31.7 3
------ ----- ------- -----
Total Revenue.................. $384.8 100% $ 869.2 100%
====== ===== ======= =====
</TABLE>
Revenues increased $484.4 million, or 126%, to $869.2 million during the
six months ended February 28, 1999, compared to the six months ended February
28, 1998. Revenue from collection and recovery services to industrial customers
increased $184.0 million, or 85%. Collection and recovery services to commercial
and institutional customers generated an additional $266.9 million. Increased
revenue from collection and recovery services reflected the inclusion of the
acquired operations of Old Safety-Kleen. Revenue from treatment and disposal
services increased $1.8 million, or 1%. The acquired European operations of Old
Safety-Kleen, of which a 56% interest was divested in December 1998 in
connection with the recapitalization of the European operations, were
consolidated through the period ended November 30, 1998 and provided an
additional $31.7 million in revenue.
We eliminate intercompany revenues in presenting consolidated financial
results. The majority of such eliminations occur at our disposal facilities
which receive waste streams from our collection and recovery services network.
Our estimate of the components of the changes in our consolidated revenue
is as follows:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE (DECREASE)
SIX MONTHS ENDED FEBRUARY 28,
------------------------------
1997 TO 1998 1998 TO 1999
------------ ------------
<S> <C> <C>
Expansion of customer base by acquisition.......... 24.2% 126.0%
Other, primarily through volume and price
changes.......................................... 7.6 3.7
Divestitures and closures.......................... (8.2) (2.3)
Foreign exchange rate.............................. (0.7) (1.5)
----- -----
Total......................................... 22.9% 125.9%
===== =====
</TABLE>
The comparative increase in revenue for the six months ended February 28,
1999 was primarily due to the inclusion of the acquired operations of Old
Safety-Kleen. Revenues
39
<PAGE> 43
from existing operations grew primarily as a result of increased throughput at
our treatment and disposal facilities. Revenues during the six months ended
February 28, 1998 included contributions from an industrial and solid waste
landfill which was sold on December 18, 1997 and from a thermal treatment
facility which was closed on August 31, 1998. A reduction in revenues due to
foreign exchange rate changes resulted from a relative decline in the Canadian
dollar translation rate.
Operating Expenses
Operating expenses increased $297.8 million, or 111%, to $566.9 million
during the six months ended February 28, 1999 compared to the six months ended
February 28, 1998. The increase was primarily attributable to increased expenses
as a result of the acquisition of Old Safety-Kleen. As a percentage of revenues,
operating expense decreased to 65.2% in the six months ended February 28, 1999
from 69.9% in the six months ended February 28, 1998, primarily due to the
increased utilization of existing facilities and acquisition related cost
reduction measures.
We estimate that as of February 28, 1999 we had realized annualized cash
cost savings of approximately $130 million in connection with the acquisition of
Old Safety-Kleen. We believe we can realize annualized cash cost savings of
approximately $165 million by the end of fiscal 1999.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $46.2 million, or 186%, to
$71.0 million during the six months ended February 28, 1999 compared to the
prior year period. The increase related to the acquisition of Old Safety-Kleen
and Rollins. As a percentage of revenue, depreciation and amortization expense
was 8.2%, compared to 6.5% in the prior year period. The increase as a
percentage of revenue is primarily attributable to the amortization of the
excess purchase price relating to the acquisition of Old Safety-Kleen.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $28.0 million, or
71%, to $67.3 million during the six months ended February 28, 1999 versus the
prior year period. As a percentage of revenue, selling, general and
administrative expenses decreased to 7.7% from 10.2% in the six months ended
February 28, 1998 due to cost reduction measures and economies of scale gained
through the acquisition of Old Safety-Kleen.
Interest Expense
Interest expense increased $60.2 million, or 204%, to $89.7 million, during
the six months ended February 28, 1999 over the prior year period as a result of
the additional long-term debt incurred to finance the acquisition of Old
Safety-Kleen.
Equity in Earnings of Associated Companies
During the six months ended February 28, 1999, we recapitalized our
European operations. In exchange for our contribution of the European operations
of Old Safety-Kleen, we received a 44% equity interest in Safety-Kleen Europe
and will receive
40
<PAGE> 44
$154 million in gross cash proceeds (of which $138.7 million has been received
as of February 28, 1999). This transaction resulted in no gain or loss.
Effective December 1, 1998, we account for our remaining interest in the
European operations on an equity basis. The earnings recorded in the six months
ended February 28, 1999 represent 100% of the European operations through
December 1, 1998, and a 44% equity interest in Safety-Kleen Europe thereafter.
Thus, the European operations' results have been excluded from revenue and
expenses effective December 1, 1998.
Income Tax Expense
Income tax expense increased $24.1 million, or 252%, to $33.7 million
during the six months ended February 28, 1999 over the prior year period due to
an increase in taxable income attributable to the acquisition of Old
Safety-Kleen. The effective tax rate of 44% has increased due primarily to the
recapitalization of our European operations. The European operations had an
effective tax rate below our overall average. We expect that the effective tax
rate will also be higher in subsequent quarters due to the impact of the
recapitalization of our European operations.
FISCAL 1997 COMPARED WITH FISCAL 1998
The following table sets forth (prior to any restructuring and other
charges for the periods indicated below), for each line item presented, for the
periods indicated, the amount of such line item and such amount as a percentage
of the Company's revenue for such period:
<TABLE>
<CAPTION>
FISCAL
------------------------------------------------
1997 1998
---------------------- ----------------------
(IN MILLIONS) (IN MILLIONS)
------------- -------------
<S> <C> <C> <C> <C>
Revenues............................ $678.6 100.0% $1,185.5 100.0%
Operating expense................... 485.1 71.5 797.4 67.3
Depreciation and amortization....... 53.5 7.9 93.1 7.8
Selling, general and
administrative.................... 73.1 10.7 108.8 9.2
------ ----- -------- -----
Operating income.................... $ 66.9 9.9% $ 186.2 15.7%
====== ===== ======== =====
</TABLE>
41
<PAGE> 45
Revenues
The following table sets forth, for the periods indicated, the revenue
attributable to each line of business of the Company and such revenue as a
percentage of the Company's revenue for such period:
<TABLE>
<CAPTION>
FISCAL
------------------------------------------------
1997 1998
---------------------- ----------------------
(IN MILLIONS) (IN MILLIONS)
------------- -------------
<S> <C> <C> <C> <C>
Collection and Recovery Services:
Industrial Services............... $394.1 58% $ 585.3 50%
Commercial and Institutional
Services....................... 0.0 0 227.7 19
Total Collection and Recovery
Services..................... 394.1 58 813.0 69
Treatment and Disposal Services..... 284.5 42 324.6 27
European Operations................. 0.0 0 47.9 4
------ ----- -------- -----
Total revenues................. $678.6 100% $1,185.5 100%
====== ===== ======== =====
</TABLE>
Revenues increased $506.9 million, or 74.7%, to $1,185.5 million during
fiscal 1998 compared to fiscal 1997. Revenue from collection and recovery
services to industrial customers increased $191.2 million, or 48.5%. Collection
and recovery services to commercial and institutional customers generated an
additional $227.7 million. Increased revenue from industrial services reflected
the inclusion of the acquired Old Safety-Kleen and Rollins businesses while
revenues from commercial and institutional services reflected business acquired
from Old Safety-Kleen exclusively. Revenue from treatment and disposal services
increased $40.1 million, or 14.1%, to $324.6 million in fiscal 1998 compared to
fiscal 1997 primarily due to the acquisition of Rollins as well as increased
harbor related dredging, treatment and disposal activities. Landfill disposal
revenue declined in fiscal 1998 due to a shortfall in remedial and other project
work providing volumes destined for hazardous waste landfill sites and due to
the sale of an industrial and solid waste landfill on December 18, 1997. The
acquired European operations of Old Safety-Kleen, which provided collection and
recovery services, generated an additional $47.9 million in revenue in fiscal
1998.
We eliminate intercompany revenues in presenting consolidated financial
results. The majority of such eliminations occur at our disposal facilities
which receive waste streams from our collection and recovery services network.
For comparison purposes, we believe our operations, excluding the
operations of Old Safety-Kleen, directed 76% of waste streams to internal
disposal locations during fiscal 1998, an increase from 68% in fiscal 1997.
42
<PAGE> 46
Our estimate of the components of the changes in our consolidated revenue
are as follows:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
(DECREASE)
-------------------
<S> <C>
Expansion of customer base by acquisition............. 80.4%
Other, primarily through volume and price changes..... 3.0
Divestitures and closures............................. (7.9)
Foreign exchange rate changes......................... (0.8)
----
Total............................................ 74.7%
====
</TABLE>
The comparative increase in revenue for fiscal 1998 was primarily due to
the inclusion of the acquired operations of Old Safety-Kleen from April 1, 1998
and the acquired operations of Rollins for the full fiscal year (compared to its
inclusion as of May 15, 1997 in the prior year). Fiscal 1998 revenues from
existing operations grew as a result of increased activity at our harbor-related
dredging, treatment and placement operations but were partially offset by
reduced volumes at certain hazardous waste landfills. Fiscal 1997 revenues
included contributions from an industrial and municipal solid waste landfill
which was divested on December 18, 1997. A reduction in fiscal 1998 revenues due
to foreign exchange rate changes resulted from a relative decline in the
Canadian dollar translation rate.
Operating Expenses
Operating expenses increased $312.3 million, or 64.4%, to $797.4 million
during fiscal 1998 compared to fiscal 1997. The increase was primarily
attributable to additional business obtained as part of the acquisitions of Old
Safety-Kleen and Rollins. As a percentage of revenue, operating expense
decreased to 67.3% in fiscal 1998 from 71.5% in fiscal 1997, primarily due to
stabilized pricing, the increased utilization of existing facilities and
acquisition related cost reduction measures.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $39.6 million, or 74.0%, to
$93.1 million during fiscal 1998, compared to fiscal 1997. The increase related
to the acquired operations of Old Safety-Kleen and Rollins. As a percentage of
revenue, depreciation and amortization expense was relatively unchanged at 7.8%
in fiscal 1998, compared to 7.9% in fiscal 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $35.7 million, or
48.8%, to $108.8 million during fiscal 1998 compared to fiscal 1997. As a
percentage of revenue, selling, general and administrative expenses decreased to
9.2% in fiscal 1998 from 10.7% in fiscal 1997 due to cost reduction measures and
economies of scale gained through the acquisitions of Old Safety-Kleen and
Rollins.
43
<PAGE> 47
Restructuring and Other Charges
A one-time restructuring charge of $65.8 million ($39.5 million after tax)
impacted fiscal 1998 earnings. The charge included the costs associated with the
closing and remediation of certain of our existing operating facilities that had
become redundant and other exit activities as a result of the acquisition of Old
Safety-Kleen. $31.8 million of the charge related to the non-cash write-off of
existing facility carrying values, and $34.0 million represented cash costs to
be expended during subsequent periods.
In fiscal 1997, we recorded a restructuring charge of $331.7 million
($200.0 million after tax) related to the acquisition of Rollins, of which the
expected cash costs were $25 million. As of August 31, 1998, we have charged
cash expenditures of $14.4 million against the 1997 Rollins restructuring
reserve, leaving a balance of $10.6 million for which cash expenditures related
primarily to environmental accruals will be expended in subsequent periods. See
"-- Liquidity and Capital Resources" for a discussion of the cash expenditures
expected to be incurred in fiscal 1999 related to both the acquisitions of
Rollins and Old Safety-Kleen.
Interest Expense
Interest expense increased $63.4 million, or 143.3%, to $107.7 million
during fiscal 1998 compared to fiscal 1997, primarily as a result of the
recapitalization related to the acquisition of Old Safety-Kleen. Prior to May
15, 1997, interest expense was allocated to the Company from Laidlaw.
Our average interest rate was approximately 8.0% in fiscal 1998 of which
56% was fixed at August 31, 1998. We capitalized $4.1 million of interest costs
during fiscal 1998.
Other Income
Other income increased by $4.8 million, or 167%, to $7.7 million in fiscal
1998 from fiscal 1997, due primarily to an increase in funds available for short
term investment, as a result of the recapitalizations related to the
acquisitions of Rollins and Old Safety-Kleen. Interest income earned in fiscal
1998 on a promissory note received from the sale of a Utah landfill also
contributed to the increase in fiscal 1998 from fiscal 1997.
Income Tax Expense
Prior to May 15, 1997, Old LESI filed consolidated tax returns with Laidlaw
and income tax expense was allocated from Laidlaw using applicable income tax
rates for tax purposes on a separate return basis. Effective May 15, 1997, we
began filing federal and state income tax returns separately, and, accordingly,
income taxes have been calculated at applicable income tax rates.
Extraordinary Loss
In April 1998, we replaced our existing bank credit facility with the
Senior Credit Facility and recognized an extraordinary charge of $18.8 million
($11.3 million after tax) related to the write-off of previously deferred debt
issuance costs and repayment penalties.
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<PAGE> 48
FISCAL 1996 COMPARED WITH FISCAL 1997
The following table sets forth for each line item presented, for the
periods indicated, the amount of such line item and such amount as a percentage
of the Company's revenue for such period:
<TABLE>
<CAPTION>
FISCAL
------------------------------------------------
1996 1997
---------------------- ----------------------
(IN MILLIONS) (IN MILLIONS)
------------- -------------
<S> <C> <C> <C> <C>
Revenue............................. $653.0 100.0% $678.6 100.0%
Operating expense................... 473.6 72.5 485.1 71.5
Depreciation and amortization....... 48.3 7.4 53.5 7.9
Selling, general and
administrative.................... 73.8 11.3 73.1 10.7
------ ----- ------ -----
Operating income.................... $ 57.3 8.8% $ 66.9 9.9%
====== ===== ====== =====
</TABLE>
Revenues
The following table sets forth, for the periods indicated, the revenue
attributable to each line of business of the Company and such revenue as a
percentage of the Company's revenue for such period:
<TABLE>
<CAPTION>
FISCAL
--------------------------------------------
1996 1997
-------------------- --------------------
(IN MILLIONS) (IN MILLIONS)
------------- -------------
<S> <C> <C> <C> <C>
Collection and Recovery Services:
Industrial Services.................. $375.5 58% $394.1 58%
Commercial and Institutional
Services.......................... 0.0 0 0.0 0
Total Collection and Recovery
Services........................ 375.5 58 394.1 58
Treatment and Disposal Services........ 277.5 42 284.5 42
------ --- ------ ---
Total revenues.................... $653.0 100% $678.6 100%
====== === ====== ===
</TABLE>
Revenues increased by $25.6 million, or 3.9%, to $678.6 million during
fiscal 1997, compared to fiscal 1996, supported primarily by increases in the
industrial services and thermal treatment lines of business. Revenue for
industrial services increased 5.0% in fiscal 1997 from fiscal 1996 reflecting
the inclusion of the acquired Rollins' facilities effective May 15, 1997.
Thermal treatment revenue increased 146.8% in fiscal 1997 over fiscal 1996, also
reflecting the acquisition of Rollins. Landfill revenue decreased 18.8% in
fiscal 1997 primarily due to nonrecurring event projects performed in fiscal
1996 by our industrial landfill in Utah. Specialty services revenue increased
9.5% in fiscal 1997 from fiscal 1996 primarily due to increased harbor related
dredging, treatment and placement activity.
We eliminate intercompany revenues in presenting consolidated financial
results. The majority of such eliminations occur at our disposal facilities
which receive waste streams from collection and recovery services network.
In fiscal 1997, we believe we directed 68% of our waste streams to internal
locations, up from 60% in fiscal 1996.
45
<PAGE> 49
Our estimate of the components of changes in our consolidated revenue are
as follows:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
(DECREASE)
-------------------
<S> <C>
Expansion of customer base by acquisition..... 6.7%
Other, primarily through volume and price
changes..................................... (1.60)
Divestitures and closures..................... (1.10)
Foreign exchange rate changes................. (0.10)
-----
Total.................................... 3.9%
=====
</TABLE>
The comparative increase in revenue for fiscal 1997 was primarily due to
the inclusion of acquired operations, the majority of which related to the
acquisition of Rollins. The increase was partially offset by lower pricing and
volumes received in the early portion of fiscal 1997. Lower volumes were
primarily related to dredging activities performed throughout fiscal 1996 by our
industrial waste landfill in Utah. Revenue also decreased due to pricing and
volume reductions at our government services locations, the closure of a
wastewater facility in May 1997 and the planned downsizing of our Gulf Coast
remedial operations. The negative effect of these reductions were diminished in
the aggregate by improvements related to increased activity at certain of our
landfills and PCB management operations. Additional harbor dredging project work
begun in the fourth quarter of fiscal 1997 was also a positive factor.
Operating Expenses
Operating expenses for fiscal 1997 increased $11.5 million, or 2.4%, to
$485.1 million compared to fiscal 1996. The increase was mainly due to the
acquisition of Rollins. Operating expense, as a percentage of revenue, decreased
to 71.5% in fiscal 1997 from 72.5% in fiscal 1996 due to economies of scale
gained through the acquisition of Rollins and ongoing cost reduction
initiatives.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $5.2 million, or 10.8%, to
$53.5 million during fiscal 1997 compared to fiscal 1996. The increase was
associated with increased hazardous landfill cell consumption and related
amortization; the inclusion of the Clive, Utah incineration facility's
depreciation expense as of September 1, 1996; and inclusion of depreciation and
amortization related to the acquisition of Rollins as of May 15, 1997. As a
percentage of revenue, depreciation and amortization expense increased to 7.9%
during fiscal 1997 from 7.4% during fiscal 1996 due in part to the higher
hazardous landfill disposal as a proportion of total revenue and the inclusion
of the Clive facility.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $0.7 million, or
1.0%, to $73.1 million during fiscal 1997 versus fiscal 1996. The decrease was
attributable to a number of cost reduction initiatives implemented and completed
during fiscal 1997. As a percentage of revenue, selling, general and
administrative expenses decreased to 10.7% in fiscal 1997
46
<PAGE> 50
from 11.3% in fiscal 1996, due to the cost reduction measures and economies of
scale gained through the acquisition of Rollins.
Restructuring Charge
A one-time restructuring charge of $331.7 million ($200.0 million after
tax) impacted fiscal 1997 earnings. The charge reflected the closing of certain
of our operating facilities that had become redundant, and an impairment in the
carrying value of certain operating facilities due to lower than expected future
cash flows as a result of the acquisition of Rollins.
Allocated Interest Expense
Allocated interest expense decreased $17.5 million during fiscal 1997 from
fiscal 1996 primarily as a result of the recapitalization related to the
acquisition of Rollins. Prior to May 15, 1997, interest expense was allocated to
us from Laidlaw.
Interest Expense
Interest expense increased by $14.9 million during fiscal 1997 from fiscal
1996 primarily as a result of a recapitalization related to the acquisition of
Rollins. Effective May 15, 1997, interest expense includes financing costs
associated with our bank credit facility, other long-term debt and the PIK
Debenture.
Other Income
Other income increased by $1.5 million in fiscal 1997 from fiscal 1996
primarily as a result of a recapitalization related to the acquisition of
Rollins and a resultant increase in funds available for short-term investment.
Income Tax Expense (Benefit)
Prior to May 15, 1997, Old LESI filed consolidated tax returns with Laidlaw
and income tax expense was allocated from Laidlaw using applicable income tax
rates for tax purposes on a separate return basis. Effective May 15, 1997, we
began filing federal and state income taxes separately, and, accordingly, income
taxes have been calculated at applicable income tax rates.
CAPITALIZATION
On April 1, 1998, we announced that Old Safety-Kleen stockholders had
accepted our exchange offer relating to our acquisition of Old Safety-Kleen.
Under the terms of the offer, we exchanged $18.30 in cash and 0.7 shares of
common stock for each Old Safety-Kleen share tendered. In May 1998, we completed
the acquisition of Old Safety-Kleen through a merger, approved by the Old
Safety-Kleen stockholders on May 18, 1998. The total consideration for the
acquisition of Old Safety-Kleen was approximately $2.2 billion, including debt
assumed and estimated transaction costs, which was comprised of $1.5 billion in
cash and 41.6 million shares of our common stock. The cash consideration and the
refinancing of certain existing indebtedness was financed from the proceeds of
the Senior Credit Facility.
47
<PAGE> 51
On May 29, 1998, Safety-Kleen Services issued the Safety-Kleen Services
Notes in a private offering under Rule 144A under the Securities Act. The
Safety-Kleen Services Notes are guaranteed by us and our wholly-owned domestic
subsidiaries (other than Safety-Kleen Services). Net proceeds from the sale of
the Safety-Kleen Services Notes were approximately $316 million. The net
proceeds were used to repay a portion of the borrowings outstanding under the
Senior Credit Facility.
On November 15, 1998, we issued 635,208 shares of our common stock to pay
interest due on the PIK Debenture.
On November 24, 1998, our stockholders approved a one-for-four reverse
stock split which became effective at the close of business on November 30,
1998. As a result, stockholders received one share of common stock for each four
shares previously held.
On December 23, 1998, we completed the recapitalization of our European
operations and the formation of a new entity, Safety-Kleen Europe. Safety-Kleen
Europe operates 59 collection locations and three reclamation facilities
throughout Western Europe and has annual revenues of approximately $120 million.
The recapitalization, which was based on a total enterprise value of $190
million, included investments in Safety-Kleen Europe by Electra Fleming, a U.K.
based international investment management company, and the senior management
group of Safety-Kleen Europe. In exchange for our contribution of the European
operations of Old Safety-Kleen, we received a 44% equity interest in Safety-
Kleen Europe and will receive $154 million in gross cash proceeds (of which
$138.7 million has been received as of February 28, 1999). Electra Fleming
purchased a 44% equity interest, while the senior management group acquired a
12% equity interest (on a fully-diluted basis). We used the cash proceeds to
repay indebtedness under our Revolver.
Subject to stockholder approval of the issuance of shares of common stock
to Laidlaw in connection with the repurchase of the PIK Debenture, we intend to
repurchase the PIK Debenture from Laidlaw during fiscal 1999. The aggregate
purchase price will consist of (i) $200 million in cash, (ii) 11,320,755 shares
of our common stock and (iii) cash or shares of our common stock in an amount
equal to any accrued and unpaid interest on the PIK Debenture to the date of
repurchase. On May 17, 1999, we issued (i) $225,000,000 of initial notes and
(ii) 533,333 shares of our common stock to Laidlaw to pay accrued interest due
on the PIK Debenture. The net cash proceeds from the initial offering will be
used to fund the cash payment for the repurchase of the PIK Debenture, for
expenses relating to the repurchase of the PIK Debenture and for general
corporate purposes.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. Total cash provided by operations during the six months
ended February 28, 1999 was $81.7 million. This was comprised of $143.3 million
from operations before financing working capital requirements of $13.8 million
and $48.8 million related to spending on acquisition liabilities. The cash
provided by continuing operations during fiscal 1998, 1997 and 1996 was $87.6
million, $37.0 million and $21.9 million, respectively. In fiscal 1998, cash
from operations was comprised of $192.0 million from operations before financing
working capital requirements of $47.1 million and $57.3 million related to
spending on acquisition liabilities.
As a result of the personnel reductions and facility closures related to
the acquisitions of Old Safety-Kleen and Rollins, we plan to incur salary and
benefit related costs and closure costs in fiscal 1999 of approximately $75
million. A significant portion of these
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<PAGE> 52
cash costs is expected to be offset by the anticipated proceeds from the sale of
Old Safety-Kleen facilities during fiscal 1999.
We believe that our existing level of working capital is adequate for
normal growth and operating needs. Trade and other accounts receivable continue
to represent the largest portion of current assets, totaling $320.0 million at
August 31, 1998. The average days sales outstanding was reduced to 66 days, from
93 days at August 31, 1997 primarily as a result of the lower average days
outstanding of the Old Safety-Kleen operations. Our primary sources of liquidity
are cash flows from operations, existing cash and short-term investments of
$10.9 million as of February 28, 1999, and available borrowings under bank lines
and the Revolver of the Senior Credit Facility.
CAPITAL EXPENDITURES AND CAPITAL RESOURCES. Investing activities for the
six months ended February 28, 1999, generated cash of $105.1 million. Investing
activities from continuing operations used cash of $1,293.3 million, $21.9
million and $114.9 million in fiscal years 1998, 1997 and 1996, respectively. In
fiscal 1998, $1,281.5 million was incurred in connection with the acquisition of
Old Safety-Kleen. Net expenditures for the purchase of fixed assets for normal
replacement requirements and increases in services were $29.7 million and net
proceeds from the recapitalization of the European operations were $138.7
million during the six months ended February 28, 1999. Net expenditures for the
purchase of fixed assets for normal replacement requirements and increases in
services were $50.8 million, $36.1 million and $104.3 million in fiscal 1998,
1997 and 1996, respectively. Our projected capital expenditures for fiscal 1999
are approximately $80.0 million.
Upon repurchase of the PIK Debenture, we (together with our subsidiaries)
will have an aggregate of $2.0 billion of indebtedness outstanding, including
$1.3 billion under the Senior Credit Facility. During the balance of fiscal
1999, scheduled principal payments on our indebtedness will total $39.0 million.
As of February 28, 1999, there was $340 million of borrowing availability under
the Revolver of the Senior Credit Facility. The Senior Credit Facility contains
customary negative, affirmative, and financial covenants, including covenants
limiting annual capital expenditures, restricting debt, guaranties, liens,
mergers and consolidations, sales of assets and payment of dividends. See
"Description of Other Indebtedness -- The Company's Subsidiaries -- Senior
Credit Facility."
We believe that our existing working capital (consisting of cash and
short-term investments), together with borrowings under the Senior Credit
Facility, and anticipated cash flow from operating activities will be sufficient
to meet our debt service and expected operating and capital spending
requirements and environmental liability requirements for the next twelve
months. To the extent that any additional capital is required for any purpose
(including potential acquisitions), we believe that we will be able to raise
such capital in the public or private debt or equity markets.
INFLATION
During the periods presented, our business was not significantly affected
by inflation. We expect that this will continue in the near future.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 ("Y2K") issue is the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
programs will be unable to interpret dates beyond the year 1999, which could
cause a system failure or
49
<PAGE> 53
other computer errors, leading to disruptions in operations. We developed a
three-phase program for Y2K systems compliance. Phase I identified those systems
with respect to which we have exposure to Y2K issues. Phase II was the
development and implementation of action plans for Y2K compliance. Phase III, to
be completed by mid-calendar year 1999, is the final testing of the appropriate
major areas of exposure to ensure compliance.
Phase I was completed early in fiscal 1998 and identified three major areas
of Y2K non-compliance:
(1) certain modules of our financial and operational systems,
(2) incinerator distributed control systems, and
(3) third-party vendor relationships.
The Phase II action plans have been developed, and we are currently
implementing those remedial plans. Our plan to bring deficient financial systems
into compliance through the previously scheduled purchase of software upgrades
has been accomplished, and these upgrades have tested satisfactorily.
Remediation of the operational systems is being accomplished through a
combination of hardware and software upgrades and program changes. We expect
this process to be completed by mid-calendar year 1999. The deficiencies in the
incinerator distributed control systems will be remedied by the installation,
during the second calendar quarter of 1999, of upgrades purchased from the
systems vendors. With respect to the third-party vendors, we have contacted most
of our major suppliers and have received indications that they are either
compliant or intend to be compliant by mid-calendar year 1999.
We believe we will spend approximately $10.0 million for Y2K compliance and
will require 20,000 programming man days to bring our computer systems into
compliance. As of February 28, 1999, we have completed approximately 17,500
programming days towards this effort. We incurred costs of $1.4 million in
fiscal 1998 and expect the balance to be incurred in fiscal 1999.
We believe that the action plans that have been developed and the
implementation time frames that have been established adequately allow for
unexpected issues that could arise; therefore, contingency plans have not been
prepared. We review the need to prepare contingency plans on a monthly basis. As
all Phase II action plans are scheduled to be completed by June 30, 1999, we
will be in a position to determine the need for contingency plans over the next
few months. To the extent we experience material Y2K problems and do not have
any contingency plan in effect for remedying such problems, such Y2K problems
could have a material adverse effect on our results of operations, financial
conditions and cash flow.
While we believe the occurrence of such a scenario is unlikely, a possible
worst case scenario might include (a) delays, inaccuracies or other difficulties
with respect to billing customers or the loss of customer records, (b) our
inability to run one or more of our incinerators or recycling facilities and (c)
our key vendors not being able to supply goods and services on a timely basis.
The financial impact of any or all of the above worst case scenarios has not
been and cannot be estimated by management due to the numerous uncertainties and
variables associated with such scenarios.
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<PAGE> 54
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, FASB issued Statement No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS 131"), effective for periods
beginning after December 15, 1997. SFAS 131, which will be adopted as of August
31, 1999, establishes standards for reporting by public business enterprises of
information about operating segments in interim and annual financial statements.
We are currently evaluating the impact, if any, the implementation of this
standard will have on the disclosures in our consolidated financial statements.
In June 1998, FASB issued Statement No. 133, "Accounting of Derivative
Instruments and Hedging Activities" ("SFAS 133"), effective for periods
beginning after June 15, 1999. SFAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in the fair value
of the derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction, and if it is, the type of hedge transaction. We anticipate
that the adoption of this standard will not have a significant effect on our
results of operations or financial position.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for Costs of
Computer Software Obtained for Internal Use," effective for periods beginning
after December 31, 1998. SOP 98-1 provides guidance on defining internal use
software and the accounting for the costs thereof. We anticipate that the
adoption of this statement will not have a significant effect on our results of
operations or financial position.
51
<PAGE> 55
BUSINESS
THE COMPANY
We are a vertically integrated hazardous and industrial waste management
company. Our services include collecting, transporting, treating, recycling and
disposing of a broad range of hazardous and industrial waste streams. We are a
leading hazardous and industrial waste management company in North America
(based on fiscal 1998 revenues and facilities) with operations in the United
States and Canada. The breadth and quality of our service offerings, combined
with the geographic scope of our facilities, have provided us with a leading
market position in our industry. To better service our customers and to try to
become their single source service provider, we will continue to sell existing
services and leverage our existing service network and facility infrastructure
to provide new services to our customers. We currently offer services to over
400,000 customers throughout North America through an extensive network of 195
collection facilities (which includes 21 service centers), 16 accumulation
centers, 11 landfills, six incinerators and 10 recycling facilities located in
45 states and seven Canadian provinces. In addition, we own 44% of Safety-Kleen
Europe, which operates 59 collection locations and three reclamation facilities
throughout Western Europe. For the twelve months ended February 28, 1999, our
pro forma revenues and Adjusted EBITDA were $1.8 billion and $485.2 million,
respectively.
INDUSTRY OVERVIEW
We categorize our services into two primary components:
- collection and recovery services; and
- treatment and disposal services.
The market for our collection and recovery services can be further divided
into two markets, defined by the type of customer served: industrial and
commercial/institutional.
Industrial services are typically provided to manufacturing or processing
businesses which generate waste streams in the development of their products or
services. Companies may range in size from small machine shops to large
manufacturers. We believe that a total market of 400,000 manufacturing and
processing businesses in North America generate waste streams which may be
serviced by us.
Our commercial/institutional services are typically provided to smaller,
consumer-oriented businesses and institutions. We believe there are
approximately 800,000 businesses which are potential customers for our
commercial/institutional services. Over 400,000 of these businesses are
automotive repair facilities and an additional 325,000 are in the
photoprocessing and healthcare industries. Dry cleaners represent another 30,000
potential customers.
Our commercial/institutional services also include the collection of used
oil. This market may be best quantified in terms of used oil available for
collection, as certain industry participants do not charge collection fees. We
believe that approximately 1.3 billion gallons of used oil are available for
collection annually. Of this amount, we believe approximately 800 million
gallons are currently collected.
Treatment and disposal services provide for handling of hazardous and
industrial wastes, either collected by facilities such as those included in our
collection and recovery segment, or sent directly to treatment and disposal
facilities. Waste streams managed in
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<PAGE> 56
this segment may be derived from recurring processes or from one-time events.
Treatment and disposal of such wastes is typically accomplished through one or
more of the following technologies:
- land disposal;
- thermal treatment (including the use of incinerators and kilns, boilers
and furnaces);
- resource recovery; and
- wastewater treatment (including underground injection systems).
Not all companies participating in the treatment or disposal of hazardous
and/or industrial waste are involved in all of the above service segments, and
several operators have operations that are not easily classified. Hazardous and
industrial waste management does not include the handling, treatment or disposal
of high level radioactive or nuclear waste.
INDUSTRY TRENDS
GENERAL. The current hazardous waste industry was created, to a large
extent, in 1976 with the passage of RCRA. The new regulatory environment
contributed to rapid growth in the hazardous waste industry, primarily in the
treatment and disposal of hazardous waste, in the 1980s as high profit margins
attracted new entrants to the industry. The number of new entrants created an
overcapacity which coincided with the waste minimization efforts of large waste
generators that resulted in a decline in prices and operating margins. Although
the business fundamentals for each segment of the industry vary, in general,
operating margins and profits have now stabilized.
RATIONALIZATION. In the last four years, the hazardous and industrial
waste industry has experienced a restructuring which has included the exit from
the industry of such participants as Westinghouse Electric Corp., Union Pacific
Corp., Amoco Corp., Burlington Resources Inc. and Consolidated Rail Corp.
Acquirors are now turning their focus away from consolidation and towards
rationalization through closing of facilities and reduction of excess capacity.
WASTE MINIMIZATION. During the early 1990s, many large generators of
hazardous and industrial waste materials made economic decisions to reduce their
waste outputs or to bring in-house some of the capabilities needed to dispose of
such waste by-products of their manufacturing processes. During the last two
years, much of the economic incentive for continuing or expanding such programs
has eased as corporations realized that they had already taken advantage of
readily available waste reduction initiatives. Given the achievement of these
efficiencies, it is expected that hazardous and industrial waste generation will
more closely parallel industrial output going forward.
OUTSOURCING. Companies increasingly outsource waste management and other
environmental compliance tasks to waste management companies. Waste generators
cite the complexities of environmental regulation and reporting, rising costs
and the trend towards limiting the number of vendors with which a company
contracts as important reasons to move towards outsourcing. The greatest factor,
however, appears to be waste generators' desire to focus on their core business
or businesses. Vertical integration and bringing services in-house are now being
replaced by a movement towards cost-cutting through outsourcing activities that
are better and more efficiently performed by specialists.
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<PAGE> 57
BUSINESS STRATEGY
Our strategy is to continue to vertically integrate our operations and
enhance our profitability by further rationalizing operations, internalizing
waste streams and expanding the services we provide to our customer base. Key
elements of our strategy include:
- completing our cost savings program relating to the acquisition of Old
Safety-Kleen;
- evaluating additional acquisitions that may complement our existing
service network and infrastructure;
- increasing waste internalization rates;
- increasing revenues by cross selling the combined Company's services to
our expanded customer base; and
- expanding the number of services we offer our customers by leveraging our
expertise and customer relationships to provide cost effective and
comprehensive solutions for all of their environmental needs.
COMPETITIVE STRENGTHS
LOW-COST SERVICE PROVIDER. With over-expansion in the hazardous and
industrial waste industry during the 1980s and the early 1990s, it has become
critical for successful waste management companies to maintain high capacity
utilization of a well-managed fixed asset base. We have created a cost structure
which we believe is the lowest in the industry.
VERTICALLY INTEGRATED APPROACH. From collection through treatment and
disposal, we deliver a closed-loop solution for any type of waste stream. We
believe that we offer a broader array of services from more locations than any
other waste services provider. Accordingly, we believe we can provide our
customers with a single source for their hazardous and industrial waste needs
while decreasing costs by maintaining a high rate of waste stream
internalization.
INDUSTRY LEADER. We are the leading hazardous and industrial waste
management company in North America (based on fiscal 1998 revenues and
facilities). Our industry leadership stems from the large geographic scope of
our operations and the wide breadth of services that we offer. In addition, we
believe we are at the forefront of technological innovation in hazardous and
industrial waste management.
DIVERSE CUSTOMER BASE. We have over 400,000 customers representing diverse
industries. In fiscal 1998, no one customer represented greater than 5.0% of our
revenues. In addition, a significant amount of our revenue is derived from the
collection, treatment and disposal of non-hazardous industrial waste.
OPERATIONS
In providing industrial waste services, we are engaged in two primary lines
of business: (i) collection and recovery services and (ii) treatment and
disposal services. The collection and recovery component is further defined by
the markets for which it provides services: industrial services and commercial
and institutional services. Treatment and disposal services are further defined
by the technologies employed: thermal treatment, landfill and specialty
services. The following table sets forth the allocation of our gross revenues
54
<PAGE> 58
(before intercompany eliminations) contributed by our primary business
components and their respective sub-components:
<TABLE>
<CAPTION>
FISCAL SIX MONTHS ENDING
---------------------- FEBRUARY 28,
1996 1997 1998 1999
---- ------ ---- -----------------
<S> <C> <C> <C> <C>
COLLECTION AND RECOVERY SERVICES:
Industrial Services............ 58% 58% 50% 46%
Commercial and Institutional
Services.................... 0 0 19 31
--- --- --- ---
Total Collection and
Recovery Services......... 58 58 69 77
TREATMENT AND DISPOSAL
SERVICES....................... 42 42 27 20
EUROPEAN OPERATIONS.............. 0 0 4 3
--- --- --- ---
Total Revenues.............. 100% 100% 100% 100%
=== === === ===
</TABLE>
COLLECTION AND RECOVERY SERVICES
We provide collection and recovery services in North America primarily
through a network of 195 collection locations. Collection and recovery services
are differentiated by those services provided to industrial customers and those
provided to commercial and institutional customers.
Industrial Services
We market two major categories of service to our industrial services
customers: parts cleaner services and industrial waste services.
PARTS CLEANER SERVICE. As a result of the acquisition of Old Safety-Kleen,
we are the leading parts cleaner service provider in the U.S. industrial market.
Our services involve placing cleaner equipment and solvent or aqueous-based
cleaning solutions with a customer and making periodic service calls to clean
and maintain the equipment and to remove the dirty solvent and replace it with
fresh solution. The majority of the dirty solvent is recycled for reuse. We
provide a choice of several models of parts cleaners to customers and also
provide service to customers who own their own parts cleaner equipment. As an
alternative to solvent-based systems, we also offer a line of water-based
cleaning systems through our parts cleaner service, the solutions for which are
provided by our ArmaKleen joint venture with Church Dwight Co., Inc., the
manufacturers of Arm & Hammer products.
INDUSTRIAL WASTE SERVICES. Our industrial waste collection services
consist primarily of the collection of a wide variety of waste solvents and
other liquid and solid containerized wastes generated by industrial customers in
relatively small quantities, averaging a few 55-gallon drums per pickup.
Depending upon the content, the material we collect is generally recycled into
usable solvent, processed into a waste-derived fuel for use in the cement
manufacturing industry or disposed of through incineration or landfill methods.
Wastewater that is collected as part of the fluid recovery service is treated
and processed until it can be discharged into publicly owned treatment works in
compliance with applicable laws and regulations.
Our industrial waste services also include comprehensive environmental and
technical assistance to customers nationwide. Technical field services consist
of lab pack services
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<PAGE> 59
(the collection of small quantities of laboratory chemicals) and in-plant
services. Lab pack services involve the collection and proper management of
miscellaneous, and often unidentified, chemicals stored in small containers.
Since the list of lab pack chemicals removed from a particular site can be
extensive and vary widely in characteristics and quantities, the knowledge and
abilities of our field chemists are often required. In-plant services encompass
a variety of services provided by our personnel at the generator's location.
In-plant services are customized to the specific needs of the customer. With
technical field services, we often prepare the paperwork and package the waste
for shipment and provide for the transportation and disposal management.
Waste streams collected through one or more of our industrial services
offerings may be routed to one of our service centers or accumulation centers
where they may be temporarily stored or consolidated with compatible waste
streams for more efficient transportation to final treatment or disposal
destinations. All of our service centers in the United States have Part B
permits under RCRA that, among other things, allow us to store waste for up to
one year for bulking or transfer purposes. Service centers are the largest
source of waste streams for our treatment and disposal facilities.
Commercial and Institutional Services
We provide several specialized services to commercial and institutional
customers. The largest component of our commercial and institutional services is
our parts cleaner service. Other commercial and institutional service offerings
include paint refinishing services, imaging services, dry cleaner services,
vacuum services, integrated customer compliance services and used oil collection
and re-refining services. These additional offerings utilize the same facility
network and many of the same customer relationships as have been developed for
the traditional parts cleaner service.
PARTS CLEANER SERVICE. We furnish service stations, car and truck dealers,
small engine repair shops, fleet maintenance shops and other automotive/retail
repair customers with the same high quality parts cleaner service that we
provide to our industrial services customers. We supply on-site automotive parts
cleaning equipment and cleaning fluid and remove waste for recycling. We provide
the parts cleaner machine, fresh cleaning solutions and the removal of dirty
cleaning solutions for recycling by way of regularly scheduled service calls.
PAINT REFINISHING SERVICES. Our paint refinishing services are supplied to
new and used car dealers, auto body repair and paint shops and fiberglass
product manufacturers. Our representatives place a machine, specially designed
to clean paint spray guns, and solvent with each customer, maintain the machine
and regularly remove the contaminated solvent and replace it with clean solvent.
We either recycle the contaminated solvent into clean solvent for reuse or blend
it into fuel used by cement kilns or incinerators. Waste paint and paint booth
filters are also collected from these customers and blended into fuel for cement
kilns or incinerators. Our representatives also provide clean buffing pads and
remove used pads during regularly scheduled service calls. The used pads are
washed, dried, inspected and returned to our distribution system.
IMAGING SERVICES. Our imaging services provide health care, printing,
photo processing and other businesses and industries with on-site recycling of
photochemical solutions, as well as film, plate and silver recovery services.
Imaging services recover the silver contained in the spent photochemical
solutions collected from customers. These solutions are then further treated and
processed until they can be discharged as wastewater
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into publicly owned treatment works in compliance with applicable laws and
regulations. Silver is also recovered from photographic film by outside
processors.
DRY CLEANER SERVICES. Dry cleaner services collect and recycle
contaminated dry cleaning wastes consisting of used filter cartridges and sludge
containing perchloroethylene and mineral spirits.
VACUUM SERVICES. Our vacuum services involve using specialized vacuum
trucks that remove residual oil and sludge from underground oil/water separators
found at many automotive repair and small industrial locations. We provide
vacuum trucks to customers who use in-ground pits to treat waste water before
discharge to sewers. The vacuum trucks clean out all waste, including oil, water
and sludge, that accumulates in the in-ground pits. Collected oil is recycled or
reused as a fuel source.
COMPLIANCE SERVICES. We provide integrated customer compliance services to
our customers. Service offerings in this area include Material Safety Data
Sheets ("MSDS") Fax on Demand, an electronic MSDS management program; Department
of Transportation shipping paper services, which provide appropriate shipping
papers for hazardous waste shipments; regulatory training; spill and poison
control hotlines; and on-site facility assessments. We offer single services and
bundled full service compliance programs in accordance with customer requests.
USED OIL COLLECTION AND RE-REFINING SERVICES. We also provide used oil
collection and re-refining services. We collect used lubricating oils from
automobile and truck dealers, automotive garages, oil change outlets, service
stations, industrial plants and other businesses. The used oil is then
transferred to a re-refining plant where most of the product is converted into
high-quality base lubricating oil that can be sold at significantly higher
prices than industrial fuels. Our extensive network of collection locations
enables us to collect waste oil in sufficient volume to support our oil
re-refining operations. We operate oil re-refining plants in Breslau, Ontario
and East Chicago, Indiana. The plants in Breslau and East Chicago have annual
re-refining capacities of 40 and 92 million gallons of used oil per year,
respectively. Used oil collected in excess of the capacity of our re-refining
facilities is either processed into industrial fuels or sold unprocessed for
direct use as a fuel in certain industrial applications.
TREATMENT AND DISPOSAL SERVICES
We provide final treatment and disposal services designed to properly
manage hazardous and non-hazardous wastes which cannot be otherwise economically
recycled or reused. Thermal treatment and landfill facilities provide such
solutions for the majority of industrial waste streams. Our specialty services
provide a compliment of other technologies for more specialized or economical
handling of certain waste streams.
THERMAL TREATMENT. We offer a wide range of technological capabilities and
multiple locations to customers through our collection of incineration
facilities. Incineration is the preferred method for the treatment of organic
hazardous and industrial waste, because it effectively destroys the contaminants
at temperatures in excess of 2,000 degrees Fahrenheit. High temperature
incineration effectively eliminates organic wastes such as herbicides, plastics,
halogenated solvents, pesticides, pharmaceutical and refinery wastes, regardless
of whether they are gases, liquids, sludges or solids. Federal and state
incineration regulations require a destruction and removal efficiency of 99.99%
for most organic wastes and 99.9999% for PCBs and dioxins.
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We operate four solids and liquids capable incinerators with a combined
annual practical capacity of 283,000 tons, two hazardous waste liquid injection
incinerators in Canada and two lower volume specialty incineration facilities in
the United States. Our incineration facilities in Bridgeport, New Jersey; Deer
Park, Texas; Aragonite, Utah; and Coffeyville, Kansas are designed to process
liquid organic wastes, sludges, solids, soil and debris. Our Deer Park facility
has two kilns and a rotary reactor. Additionally, our Deer Park facility has an
on-site landfill for the disposal of ash and other waste material produced as a
result of the incineration process. The landfill is built and permitted to RCRA
hazardous waste standards. Our incineration facilities in Mercier, Quebec, and
Sarnia, Ontario are liquid injection incinerators, designed primarily for the
destruction of liquid organic waste. Our Mercier facility also has a system to
blend and destroy pumpable sludges. Typical waste streams include wastewater
containing concentrated organic levels not amenable to conventional
physical/chemical waste treatment, pesticide and herbicide waste, waste with
high chlorinated organic concentrations and flammable materials.
All of our United States incineration facilities have received Part B
permits under RCRA. Part B permits are generally issued for periods of five or
ten years, after which the permit must be reviewed by state and/or federal
regulators before the permit can be renewed for additional terms. Our two
Canadian facilities have operating permits issued by provincial regulatory
authorities. We are not aware of any issues at any of our sites that would
preclude the renewal of any of our Part B permits. Before a permit can be
issued, the applicant must provide detailed waste analysis, spill prevention and
control counter-measure plans, detailed design specifications, groundwater
monitoring, employee training and geologic and hydrogeologic investigations.
Furthermore, the applicant must post financial assurance instruments for
landfill cell and site closure and post-closure costs.
The following table sets forth the annual capacity of our solids and liquid
capable incinerators and our liquid injection incinerators:
<TABLE>
<CAPTION>
ANNUAL PRACTICAL
CAPACITY(1)
----------------
(TONS)
<S> <C>
SOLIDS AND LIQUIDS CAPABLE INCINERATORS
Aragonite, Utah....................................... 60,000
Bridgeport, New Jersey................................ 45,000
Coffeyville, Kansas................................... 33,000
Deer Park, Texas...................................... 145,000
-------
Subtotal........................................... 283,000
-------
LIQUID INJECTION INCINERATORS
Mercier, Quebec....................................... 60,500
Sarnia, Ontario....................................... 66,000
-------
Subtotal........................................... 126,500
-------
Total......................................... 409,500
=======
</TABLE>
- -------------------------
(1) The table does not reflect the annual capacity of our two lower volume
specialty incinerators located in the United States.
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During fiscal 1997, we stopped accepting waste at our incinerators at Baton
Rouge, Louisiana, and Clive, Utah, reducing utilization of less efficient and
redundant facilities. During fiscal 1998, we stopped accepting waste at our
incinerator at Roebuck, South Carolina, further reducing excess capacity. These
three closures have eliminated approximately 215,000 tons of practical capacity
from the off-site commercial incineration market. In the second quarter of 1998,
we announced that we would stop accepting waste at our incinerator at
Coffeyville, Kansas; however, as a result of our customers' demands and
requirements, the facility has remained open. The industry's total off-site
commercial incinerator practical capacity was estimated at 1.0 million tons in
1997, according to EI Digest.
LANDFILLS. We operate 11 landfills located throughout the United States
and Canada. Eight of our landfills are designed and permitted for the disposal
of hazardous wastes. Three of our landfills are operated for non-hazardous
industrial waste disposal, and to a lesser extent, municipal solid waste.
Landfill technology is a proven and environmentally sound disposal mechanism for
certain wastes that cannot effectively be destroyed or treated through
alternative methods.
We operate eight of the 23 permitted hazardous waste landfills in North
America, with approximately 61 million cubic yards of remaining permitted
capacity (which at current fill rates represents in excess of 65 years of
capacity). Of these facilities, six are located in the United States and two are
located in Canada.
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The following table sets forth the permitted available capacity of our
industrial and hazardous waste landfills:
<TABLE>
<CAPTION>
PERMITTED AVAILABLE
CAPACITY AT
AUGUST 31, 1998
-------------------
(CUBIC YARDS)
<S> <C>
INDUSTRIAL WASTE LANDFILLS
Altair, Texas............................................. 350,000
Sawyer, North Dakota...................................... 1,000,000
Rosemont, Minnesota....................................... 5,800,000
----------
Total.................................................. 7,150,000
==========
HAZARDOUS WASTE LANDFILLS
Pinewood, South Carolina.................................. 3,600,000
Westmorland, California................................... 11,900,000
Buttonwillow, California.................................. 13,100,000
Sarnia, Ontario........................................... 5,300,000
Tooele County, Utah....................................... 14,800,000
Waynoka, Oklahoma......................................... 10,600,000
Ryley, Alberta............................................ 1,800,000
Deer Trail, Colorado (1).................................. 50,000
----------
Total.................................................. 61,150,000
==========
</TABLE>
- -------------------------
(1) Capacity shown for Deer Trail, Colorado represents constructed capacity. We
plan to discontinue use of this site upon utilization of the constructed
capacity.
Our six hazardous waste landfills in the United States all possess
operating permits issued pursuant to RCRA Subtitle C. The EPA's permitting
process for RCRA Subtitle C landfills is very rigorous. Before a permit can be
issued, the applicant must provide detailed waste analysis, spill prevention and
control counter-measure plans, detailed design specifications (which include
liner design, leak detection systems and rainwater removal systems), groundwater
monitoring, employee training and geologic and hydrogeologic investigations.
Furthermore, the applicant must post financial assurance instruments for
landfill cell and site closure and post-closure costs.
In addition to meeting or exceeding RCRA Subtitle C requirements, all six
of our United States hazardous waste landfills have received Part B landfill
permits. These permits are generally issued for periods of five or ten years,
after which the permit must be reviewed by state and/or federal regulators
before the permit can be renewed for additional terms. We are not aware of any
issues at any of our sites that would preclude the renewal of our Part B
landfill permits. Our Canadian hazardous waste landfills have provincial permits
authorizing their operation. We are not aware of any issue that would preclude
renewal of these permits. During fiscal 1998, approximately 0.9 million cubic
yards of hazardous wastes were disposed of in these landfills.
We also operate three non-hazardous industrial landfills with significant
remaining permitted capacity. All three landfill facilities have received
permits authorizing the
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acceptance of commercial industrial waste, including wastes from foundries,
demolition and construction, machine shops, automobile manufacturing, printing,
metal fabrications and recycling. We are not aware of any issues at any of these
landfills that would preclude renewal of these permits. During fiscal 1998, 0.2
million cubic yards of non-hazardous wastes were disposed of in these landfills.
On December 18, 1997, we sold our industrial and solid waste landfill in
Carbon County, Utah.
SPECIALTY SERVICES. We also provide a number of specialty treatment and
disposal services including PCB management services, wastewater treatment,
harbor and channel dredging, consulting and analytical services, and
transportation services.
- PCB MANAGEMENT. In connection with our PCB management services, we
recycle PCB contaminated oils and reclaim metals from PCB contaminated
equipment. We accomplish this recycling and reclamation through a
de-chlorination process operated from our facilities located mainly in
the eastern United States and Canada.
- WASTEWATER TREATMENT. Wastewater treatment is provided at four
facilities and consists of four basic business lines: hazardous
wastewater treatment, mobile treatment, sludge dewatering/drying and
non-hazardous wastewater treatment. These services include the reduction,
treatment and disposal of both hazardous and non-hazardous wastewater,
sludges and solids for both bulk and drummed waste. We remove hazardous
components from hazardous industrial liquids and/or chemically/physically
make hazardous industrial liquids non-hazardous through blending and
treatment technology. Specialized techniques reduce residues by
recycling/reusing spent products. Batch treatment technologies also
enable us to handle hard-to-treat wastewater streams.
- HARBOR AND CHANNEL DREDGING. We provide harbor and channel sediment
dredging, treatment and placement services. We contract with federal,
state and local agencies and port authorities for the cleanup of
sediments resulting from downstream accumulation and waterway widening
and deepening projects. These services are provided as an environmentally
sound alternative to historical sea dumping methods.
- CONSULTING AND ANALYTICAL SERVICES. We also provide a variety of
consulting and analytical services which utilize our laboratories,
specialized equipment and personnel. These services are typically
customized for the customer's specific project or requirements. These
activities range from typical environmental remediation and construction
to specialized services.
- TRANSPORTATION. Our transportation operations facilitate the movement of
materials between locations, which is key to the operation of our network
of hazardous and industrial waste treatment and disposal facilities.
Transportation may be accomplished by truck, rail, or other mode, with
our assets or in conjunction with third party transportation specialists.
Specially designed containment systems, vehicles and other equipment
permitted for hazardous waste transport, along with drivers trained in
transportation skills and hazardous waste procedures, provide for the
movement of customer waste streams.
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EUROPEAN OPERATIONS
We have a 44% equity interest in Safety-Kleen Europe. Safety-Kleen Europe
provides automotive/retail repair and paint refinishing services, identical to
those provided by us in North America, to customers in the United Kingdom, the
Republic of Ireland, Belgium, France, Italy, Spain and Germany. It also provides
selected industrial services in Germany and the United Kingdom. Safety-Kleen
Europe has a total of 59 collection locations and three reclamation facilities
throughout Western Europe.
SALES AND MARKETING
Our sales and marketing staff is deployed throughout North America to
service more than 400,000 customers. Approximately 4,000 of our employees are
involved in sales and service activities relating to our collection locations.
Our customers represent diverse industries, including automotive manufacturers
and suppliers, chemical and petrochemical, computer and micro-processor
manufacturers, primary metals, paper, furniture, aerospace and pharmaceutical
industries, and are located throughout the United States and Canada.
The sales and marketing group for our technical field services and direct
incineration and landfill services is structured around three separate groups of
sales professionals, which together total approximately 200 individuals.
Approximately 25 of these professionals manage large corporate accounts on an
ongoing basis, consisting of approximately 250 major corporations which,
collectively, generated over $300.0 million in revenues in fiscal 1998.
Approximately 150 of these professionals serve as technical sales
representatives who are located throughout North America based upon geographic
coverage needs and the future waste generating potential of a particular region.
Furthermore, approximately 25 of these professionals serve as facility sales
managers and are on-site at our facilities. Facility service managers are
responsible for generating revenues at each of these profit centers in addition
to supporting technical sales representatives in the field who have specific
client-driven technical needs.
Sales and marketing for our collection and recovery services is conducted
through our 195 collection locations. We believe this unique network offers a
local presence and flexibility in scheduling that is unmatched in the industry,
and offers us a significant competitive advantage.
COMPETITION
We operate in a highly competitive industry. We compete with local,
regional and national companies of varying sizes, as well as counties and
municipalities that maintain their own waste collection to disposal operations.
The key competitive factors within the hazardous and industrial waste management
industry include the breadth of services offered, price, quality and reliability
of service rendered and technical proficiency in handling hazardous and
industrial waste properly.
In the U.S., original generators of hazardous waste remain liable under
federal and state environmental laws for improper disposal of such waste, even
if they employ companies that have proper permits and licenses. Accordingly,
knowledgeable customers are sensitive to the reputation and financial strength
of the companies they use to collect, treat, recycle and dispose of their
hazardous and industrial waste. We believe that our technical proficiency and
reputation of financial strength are important considerations to our customers
in selecting and continuing to use our services.
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We believe we are the market leader in the United States in our parts
cleaner, paint refinishing and dry cleaner services. In these services, we
compete with local or smaller regional companies. In our industrial waste
services, we compete with many firms engaged in the transportation, brokerage
and disposal of hazardous wastes through recycling, fuels programs, thermal
treatment or landfilling.
We believe we are the market leader in North America in our used oil
collection and re-refining services. The price at which we sell our re-refined
lubricating oil is primarily dictated by a market dominated by large
multinational oil companies and has been positively correlated to crude oil
prices over the long-term. The selling price of re-refined lubricating oil is
also affected by lubricating oil refinery capacity changes in North America,
which do not necessarily bear a relationship to the movement of crude oil price
changes.
Competitors operate large-scale incinerators at eight locations throughout
North America. Other companies have applied for or received permits to construct
and operate hazardous waste incinerators. Competition is also encountered from
certain cement kilns, which use hazardous waste-derived fuel as a supplemental
fuel source. Generator-owned thermal treatment operations and mobile thermal
treatment units also compete with our fixed-location facilities.
Ten of the 15 U.S. hazardous waste landfills not operated by us are
operated by three competitors with landfill facilities spread throughout the
United States. Significant competition exists for waste volumes generated by
remedial cleanups and other project-based events. See "Risk
Factors -- Competition and Technological Advances."
PROPERTIES
We operate in 45 states and seven Canadian provinces. We provide our
services from 195 collection locations (more than half of which are owned), 11
landfills, six incinerators, 16 accumulation centers, 10 recycling facilities,
two fuel blending facilities and two oil re-refineries.
We lease space for our executive offices at 1301 Gervais Street, Suite 300,
Columbia, South Carolina 29201.
EMPLOYEES
As of April 23, 1999, the Company employed 10,398 people of which
approximately 8% were represented by various collective bargaining groups. We
believe that our relations with our employees are good.
REGULATIONS
The collection and disposal of solid and hazardous wastes are subject to
the laws and regulations promulgated by United States, Canadian and other
foreign, state, territorial, federal, provincial or local courts, executive
offices, legislatures, governmental agencies or ministries, commissions or
administrative, regulatory or self-regulatory authorities or instrumentalities
which regulate health, safety, the environment, zoning and land-use.
Environmental laws and regulations require hazardous waste disposal facilities
to obtain permits, which generally outline the procedures under which the
facilities must be operated. Governmental authorities have the power to enforce
compliance with these regulations, and violations of permit conditions or of the
regulations, even if unintentional, may result in substantial fines, shutdowns,
remedial work or revocation of the permit.
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Regulations vary but generally govern collection, storage and disposal
activities and the location and use of facilities and impose restrictions to
prohibit or minimize air and water pollution and require corrective action for
release of regulated substances.
Our business is significantly affected by federal, state, provincial and
local environmental law, including RCRA, the Toxic Substances Control Act,
CERCLA, the Clean Water Act and the Clean Air Act, and corresponding state laws
and related regulations and enforcement practices. Safety standards under the
Occupational Safety and Health Act are also applicable to our business. See
"Risk Factors -- Environmental Regulation and Liabilities."
RCRA provides for the establishment of a national hazardous waste
management program through a comprehensive regulatory system. Among other
things, it defines hazardous wastes and provides standards for generators,
transporters and disposers of hazardous wastes, and for the issuance of permits
for sites where such material is treated, stored and disposed. These regulations
also require our facilities to demonstrate financial assurance for sudden and
accidental and, in the case of land based treatment facilities, non-sudden and
gradual pollution occurrences. Financial assurance for future closure and
post-closure expenses must also be maintained. We believe that each of our
facilities has all necessary operating permits and that each permit will be
renewed at the end of its existing term. However, any such issuance or renewal
could include conditions requiring further capital expenditures or corrective
actions. Although we also believe that each of our operating facilities complies
in all material respects with the applicable requirements of RCRA and Canadian
law for the Canadian facilities, it may be necessary to expend considerable
time, effort and money to keep our existing or acquired facilities in compliance
with applicable requirements, including new regulations, to maintain existing
permits and approvals and to obtain the permits and approvals necessary to
increase their capacity.
CERCLA imposes liability for natural resource damages and the cleanup of
sites from which there is a release or threatened release of hazardous
substances into the environment on, among others, the current and former owners
and operators of such sites. Hundreds of substances are defined as "hazardous"
under CERCLA and the release to the environment of such substances, even in
minute amounts, can result in substantial liability. The statute provides for
the remediation of contaminated facilities and imposes costs on the responsible
parties. The expense of conducting such a cleanup can be significant.
Notwithstanding our efforts to comply with applicable regulations and to avoid
any unregulated release of hazardous substances into the environment, releases
of such substances may occur as a result of our operations. Given the
substantial costs involved in a CERCLA cleanup and the difficulty of obtaining
insurance for environmental impairment liability, such liability could have a
material impact on our business, financial condition and future prospects.
The Clean Water Act regulates the discharge of pollutants into surface
waters and sewers from a variety of sources, including disposal sites and
treatment facilities. We are required to obtain discharge permits and conduct
sampling and monitoring programs. The Clean Air Act regulates the emissions of
pollutants into the atmosphere. These regulations also impact our operations. We
believe each of our operating facilities complies in all material respects with
the applicable requirements.
The South Coast Air Quality Management District ("SCAQMD"), the air
district for the greater Los Angeles, California area, recently implemented a
new rule setting the allowable volatile organic compound ("VOC") content of
materials used for remote reservoir repair and maintenance cleaning. The amended
rule, which became effective on
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January 1, 1999, bans remote reservoir parts cleaning with solutions containing
VOCs in excess of fifty grams per liter, except in certain applications. Prior
to January 1, 1999, substantially all of our parts cleaners placed with SCAQMD
customers utilized solvents containing VOCs in excess of fifty grams per liter.
These parts cleaners have now been replaced or modified. We offer aqueous parts
cleaning systems which meet the SCAQMD requirements and we have worked with our
SCAQMD customers to assist them in converting their solvent parts cleaners to an
alternative cleaning solvent or solution. In addition, we will continue to
actively work with the SCAQMD to identify appropriate exemptions and develop
alternatives to the VOC limits for materials used for remote reservoir parts
cleaning. We expect other Clean Air Act non-attainment municipalities to
consider adopting similar rules.
We continue to be subject to legislation and regulations adopted by
federal, state and local authorities which may impose stricter operating and
performance standards and increased taxes, assessments and fees upon emission
sources and the generators, transporters and handlers of hazardous and
non-hazardous waste. We may not be able to pass on the costs associated with
such legislation and regulations to our customers through price increases.
ENVIRONMENTAL LIABILITIES AND RELATED EXPENDITURES
We estimate capital spending of approximately $3.6 million in fiscal 1999
and $9.5 million in the aggregate for fiscal years 2000 through 2002 to achieve
and maintain compliance with RCRA, the Clean Air Act and other environmental
laws and regulations affecting our operations.
In addition to these capital expenditures, we will incur costs in
connection with closure activities at certain of our sites. When we discontinue
using or change the use of a hazardous waste management unit, formal closure
procedures must be followed, and such procedures must be approved by federal or
state environmental authorities. In some cases, costs are incurred to fulfill
closure, post-closure and corrective obligations work at the site. In addition,
at certain of our other operating sites, remedial cleanup work is required as
part of the RCRA Corrective Action Program or other state and federal programs.
We have recorded liabilities of $266.1 million as of August 31, 1998, for
remedial cleanup work, Superfund site liability, closure, post-closure and
corrective obligations and certain other environmental expenses related to our
operating facilities and previously closed sites.
With respect to various operating facilities (including our Canadian
operating facilities), we are required to provide financial assurance with
respect to certain statutorily required closure, post-closure and corrective
action obligations totaling $560.0 million at August 31, 1998. We intend to
provide the required financial assurance through a combination of insurance
policies and performance bonds, as allowed by the applicable regulatory
authorities. The cost to us of providing such financial assurance is generally
1% to 2% per year of our closure, post-closure and corrective obligations.
LEGAL PROCEEDINGS
Overview
Our business is regulated by federal, state, provincial and local
provisions that have been enacted or adopted, regulating the discharge of
materials into the environment or primarily for the purpose of protecting the
environment. The nature of our business results in our frequently becoming a
party to judicial or administrative proceedings involving all levels of
governmental authorities and other interested parties. See "Risk Factors -- Risk
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of Pending and Future Legal Proceedings." The issues that are involved generally
relate to applications for permits and licenses by us and their conformity with
legal requirements and alleged technical violations of existing permits and
licenses. We do not believe that these issues will be material to our operations
or financial condition. As of May 4, 1999, our subsidiaries were involved in
five proceedings in which sanctions were sought for alleged violations of
environmental laws, in which sanctions may exceed $100,000. Based upon presently
available information, we do not believe that liabilities arising from our
involvement in these matters will in the aggregate be material to our operations
or financial condition.
We frequently become a party to legal proceedings wherein persons claim
injury resulting from the use of our parts cleaner equipment and/or cleaning
products. A number of legal proceedings of this nature are currently pending in
various courts and jurisdictions throughout North America. We believe that the
ultimate disposition of these legal proceedings will not have a material adverse
effect upon our operations or financial condition.
In the United States, CERCLA imposes financial liability on persons who are
responsible for the release of hazardous substances into the environment.
Present and past owners and operators of sites which release hazardous
substances, as well as generators and transporters of the waste material, are
jointly and severally liable for remediation costs and environmental damage. As
of May 31, 1999, we had been notified that we were a potentially responsible
party in connection with approximately 51 locations at which hazardous
substances may have been released as a result of our operations. We continually
review our status with respect to each location and the extent of our alleged
contribution to the volume of waste at the location, the available evidence
connecting us to that location and the numbers and financial soundness of other
potentially responsible parties at the location. Based upon presently available
information, we do not believe that potential liabilities arising from our
involvement with these locations will individually or in the aggregate be
material to our operations or financial condition.
VILLE MERCIER FACILITY. On May 10, 1991, representatives of the Ministry
of the Environment of the Province of Quebec conducted a search on the property
of our subsidiary in Ville Mercier pursuant to a search warrant issued on the
basis of allegations that the subsidiary, prior to its acquisition, had during
the years 1973, 1974 and 1975, illegally buried between 500 and 600 barrels of
industrial waste in the ground on the site. As a result of that search and the
finding of barrels of industrial waste, the subsidiary immediately undertook an
investigation and submitted a restoration plan to the Ministry of the
Environment and in fact, commenced the restoration activity. On May 24, 1991,
the Minister of the Environment issued an order under the provisions of the
Environment Quality Act, ordering the subsidiary to collect all the contaminants
dumped, emitted, issued or discharged into the environment. This order was
issued without notice to the subsidiary at a time when the subsidiary was
already carrying out its restoration plan. The subsidiary has filed a motion in
the Superior Court in the Province of Quebec and the District of Montreal
seeking an order to, among other things, cancel and annul the order on the basis
that the burial of the barrels between 1973 and 1975 did not constitute an
actual and current discharge, emission or deposit of contaminants into the
environment justifying the 1991 order under the law and that the order did not
identify the contaminants that the subsidiary was required to remove, their
location or a time frame in which this should be accomplished. We believe that
the restoration plan submitted by the subsidiary as amended after consultation
with the Ministry of the Environment has been
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implemented and that any contamination resulting from the barrels of industrial
waste has been remediated.
By letter dated June 19, 1992, and unrelated to the barrels of industrial
waste referred to above, the Quebec Ministry of the Environment requested the
subsidiary to advise the Ministry, within 30 days of receipt of the request, of
its intentions concerning the carrying out of certain characterization studies
of soil and water and restoration work with respect to certain areas of the
Ville Mercier property. In 1968, the Quebec government issued two permits to an
unrelated company to dump organic liquids into lagoons on the Ville Mercier
property. By 1971, groundwater contamination had been identified. In 1972, the
Quebec government provided an alternate water supply to Ville Mercier. In the
same year, the permit authorizing the dumping of liquids was terminated and a
permit to operate an organic liquids incinerator on the property was granted to
an entity which we indirectly acquired in 1989. In 1973, the Quebec government
contracted with the incinerator operator to incinerate the pumpable liquids in
the lagoons. In 1980, the incinerator operator removed, solidified and disposed
of the non-pumpable material from the lagoons in a secure cell and completed the
closure of the lagoons at its own expense. In 1983, the Quebec government
constructed, and continues to operate, a groundwater pumping and treatment
facility near the lagoons. We believe that our subsidiary is not the party
responsible for the lagoon and groundwater contamination. By letter dated July
17, 1992, the subsidiary responded by first denying any responsibility for the
decontamination and restoration of its site and secondly by proposing that the
Quebec Ministry of the Environment and the subsidiary form a working group to
find the most appropriate technical solution to the contamination problem. On
November 16 and 25, 1992, the Minister of the Environment, pursuant to the
provisions of the Environment Quality Act, served the subsidiary with two
Notices alleging that the subsidiary was responsible for the presence of
contaminants on its property and that of its neighbor and ordering the
subsidiary to take all the necessary measures to excavate, eliminate or treat
all of the contaminated soils and residues located within the areas defined in
the Notices and to recover and treat all of the contaminated waters resulting
from the aforementioned measures. The Notices further provided that failing the
receipt by the Department of Environment, within ten days of the date of service
of the Notices, of an undertaking by the subsidiary to carry out the
aforementioned measures, the Minister of the Environment would proceed to do the
work and would claim from the subsidiary the direct and indirect costs relating
to such work. By letter dated November 25, 1992, the subsidiary responded by
reiterating its position that it had no responsibility for the contamination
associated with the discharges of wastes into the former Mercier Lagoons between
1968 and 1972 and proposing to submit the question of responsibility to the
Courts for determination as expeditiously as possible through the cooperation of
the parties' respective attorneys. Concurrently, the subsidiary undertook to
prepare and submit to the Department of the Environment a technical plan to
address the contamination on the site identified in the notices. This plan was
developed with the assistance of highly qualified experts from Quebec and
elsewhere in North America drawing upon all available information and was
submitted to the Minister of the Environment. By letter dated December 7, 1992,
the subsidiary submitted to the Minister of the Environment a document entitled
"Detailed Scope of Work for the Groundwater Contamination Panel Ville Mercier,
Quebec." This proposal by the subsidiary was refused by the Minister of the
Environment by letter dated December 22, 1992 on the grounds that it did not
meet the terms of the above mentioned Notices issued against the subsidiary. The
Minister published a request for tenders for the preparation of plans and
specifications with respect to the excavation and storage of the contaminated
soils. The Minister also retained six independent experts to review the
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<PAGE> 71
subsidiary's technical plan. This panel of experts subsequently submitted to the
Minister of the Environment its recommended methodology to address the
contamination on the site.
The Minister of the Environment convened a public hearing which reviewed
the report submitted to the Minister by the experts he retained and recommended
to the Minister what remedial plan should be instituted to address the
contamination on the site.
Our subsidiary filed legal proceedings seeking a court determination of the
liability associated with the contamination of the former Mercier lagoons. The
subsidiary asserted that it has no responsibility for the contamination on the
site. The Minister claimed that the subsidiary is responsible for the
contamination and should reimburse the Province of Quebec for costs incurred to
the present in the amount of $17.4 million Canadian and should be responsible
for future remediation costs.
On or about February 9 and March 12, 1999, Ville Mercier and three
neighboring municipalities filed separate legal proceedings against our
subsidiary and certain related companies together with certain former officers
and directors, as well as against the Government of Quebec. The lawsuits assert
that the defendants are jointly and severally responsible for the contamination
of groundwater in the region, which plaintiffs claim was caused by contamination
from the former Ville Mercier lagoons, and which they claim caused each
municipality to incur additional costs to supply drinking water for their
citizens since the 1970's and early 1980's. The four municipalities claim a
total of Cdn.$1,595,000 as damages for additional costs to obtain drinking water
supplies and seek an injunctive order to obligate the defendants to remediate
the groundwater in the region.
Laidlaw and Laidlaw Transportation, Inc. ("LTI"), an indirect wholly-owned
subsidiary of Laidlaw, have contractually agreed to indemnify us and our
subsidiaries and hold us and our subsidiaries harmless for any damages resulting
from the remediation of contaminated soils and water arising from the former
lagoon sites and operation of the incinerator at Mercier, Quebec but only to the
extent that the aggregate cash expenditure with respect to such damages exceeds
in the aggregate (i) $1.0 million during such year and (ii) an amount equal to
the product of $1.0 million times the number of years that have elapsed since
May 1997; however, we are not entitled to indemnification for any cash
expenditures incurred more than six years after May 1997.
FINANCIAL ASSURANCE. One of our subsidiaries (the "SC Subsidiary") owns
and operates a hazardous waste landfill near the Town of Pinewood in Sumter
County, South Carolina. South Carolina law requires that hazardous waste
facilities provide evidence of financial assurance for potential environmental
cleanup and restoration in form and amount to be determined by the South
Carolina Department of Health and Environmental Control ("DHEC").
In its order dated May 19, 1994, the Board of DHEC (the "Board") decided
that over a ten year period SC Subsidiary must establish a cash funded trust in
the amount of $133.0 million adjusted for inflation as financial assurance for
potential environmental cleanup and restoration. In August 1994, the SC
Subsidiary paid approximately $14.0 million of cash into the trust fund as a
first installment. The cash funded trust now stands at approximately $18.3
million. The SC Subsidiary appealed to the South Carolina Circuit Court
contesting the legality of the Board's determination.
In June 1995, DHEC promulgated, and the South Carolina legislature
approved, regulations governing financial assurance for environmental cleanup
and restoration giving owner/operators of hazardous waste facilities the right
to choose from among six options
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<PAGE> 72
for providing financial assurance. The options include insurance, a bond, a
letter of credit, a cash trust fund and a corporate guaranty with a financial
test.
In June 1995, under authority of the new regulations, the SC Subsidiary
submitted financial assurance for potential environmental cleanup and
restoration composed of a combination of the existing State Permitted Sites Fund
(this is a state of South Carolina fund created by statute and funded by
hazardous waste disposal taxes) in the amount of approximately $8.0 million and
the balance of a total package of $135.0 million by way of a corporate guaranty
by Laidlaw in the amount of approximately $127.0 million. The SC Subsidiary also
left in place the existing cash trust fund in the amount of approximately $17.0
million. DHEC accepted the SC Subsidiary's financial submittal. On September 15,
1995, DHEC issued a declaratory ruling finding the new regulations applicable to
financial assurance requirements for the SC Subsidiary. A group of parties
opposed to the ruling appealed the declaratory ruling to the South Carolina
Circuit Court. The opposing parties include Citizens Asking for a Safe
Environment, Energy Research Foundation, County of Sumter, Sierra Club, County
of Clarendon, The Sumter County Legislative Delegation, the South Carolina
Department of Natural Resources and the South Carolina Public Service Authority.
In June 1996, the SC Subsidiary submitted and DHEC accepted a similar financial
assurance package for the state fiscal year ended June 30, 1997. In June 1997
and in June 1998, the SC Subsidiary submitted a financial assurance package
consisting of the State Permitted Sites Fund (approximately $11.0 million), the
cash trust fund in the amount of approximately $18.0 million and the balance of
a total package of approximately $140.0 million in insurance coverage. These
submittals have been accepted by DHEC.
The SC Subsidiary's appeal of the May 19, 1994 DHEC order and the opposing
parties' appeal of the September 15, 1995 DHEC declaratory ruling were
consolidated in the South Carolina Circuit Court in the case captioned Laidlaw
Environmental Services of South Carolina, Inc. et al., Petitioners vs. South
Carolina Department of Health and Environmental Control and South Carolina Board
of Health and Environmental Control, Respondents -- Energy Research Foundation,
et al., Intervenors, Docket Numbers C/A 94-CP-43-175, 94-CP-43-178,
94-CP-40-1412 and 94-CP-40-1859. A decision was issued by the Circuit Court on
August 19, 1997 finding the regulation legally valid and applicable to financial
assurance requirements of the Pinewood landfill. Opposing parties have appealed
the decision to the South Carolina Court of Appeals. A decision adverse to us
could result in the reinstatement of the May 19, 1994 DHEC order. We believe
that the regulations promulgated in June 1995 are legally valid and applicable
to financial assurance requirements for the Pinewood landfill.
EAST CHICAGO FEED TANK. In September 1997, Old Safety-Kleen discovered
that its East Chicago, Indiana main feed tank had become contaminated with PCBs
resulting in approximately 4 million gallons of contaminated oil. Old
Safety-Kleen immediately notified the EPA and the Indiana Department of
Environmental management ("IDEM") of the problem. We have entered into a
settlement with the EPA pursuant to which we will pay a penalty of $141,500 and
undertake a supplemental environmental project which will cost approximately
$667,000. We have not yet entered into a settlement with the IDEM. If the IDEM
determines that off-site treatment is required, the cost of such treatment could
be material to the results of operations in that period.
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MANAGEMENT
The following sets forth certain information with respect to our directors
and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
Kenneth W. Winger.................... 60 President, Chief Executive Officer and
Director
James R. Bullock..................... 54 Chairman of the Board and Director
Leslie W. Haworth.................... 56 Director
Robert W. Luba....................... 57 Director
John W. Rollins, Sr.................. 82 Director
John W. Rollins, Jr. ................ 57 Director
David E. Thomas, Jr. ................ 42 Director
Henry B. Tippie...................... 72 Director
James L. Wareham..................... 60 Director
Grover C. Wrenn...................... 56 Director
Michael J. Bragagnolo................ 53 Executive Vice President and Chief Operating
Officer
Henry H. Taylor...................... 55 Vice President, General Counsel and
Secretary
Paul R. Humphreys.................... 40 Senior Vice President of Finance and Chief
Financial Officer
</TABLE>
KENNETH W. WINGER became President and Chief Executive Officer and a
Director of the Company on May 15, 1997. Mr. Winger served as President and
Chief Operating Officer of Safety-Kleen (US), Inc. from July 1995 until May
1997. He served as Executive Vice President for Business Development of
Safety-Kleen (US), Inc., a former subsidiary of the Company, from January 1995
until July 1995. Prior to that, Mr. Winger served as Senior Vice President for
Corporate Development with Laidlaw from May 1991 to January 1995.
JAMES R. BULLOCK became Chairman of the Board and a Director of the Company
on May 15, 1997. Mr. Bullock has been President and Chief Executive Officer of
Laidlaw since October 1993 and for more than a year prior thereto, President and
Chief Executive Officer of Cadillac Fairview Corporation Limited. Mr. Bullock
also is a director of Laidlaw.
LESLIE W. HAWORTH became a Director on May 15, 1997. Mr. Haworth has been
Senior Vice President and Chief Financial Officer of Laidlaw for more than five
years. Mr. Haworth served as Chairman of the Audit Committee until March 23,
1999.
ROBERT W. LUBA was appointed a Director by the Board of Directors on March
30, 1999. For more than five years, Mr. Luba has served as President of Luba
Financial Inc. Mr. Luba is also a director of ATS Automation Tooling Systems
Inc., Franco-Nevada Mining Corporation, AIM Canada Group of Mutual Funds,
Greenfield B.V., MDS Health Group Limited, Raymond Steel Ltd., Vincor
International Inc. and Working Ventures Canadian Fund.
JOHN W. ROLLINS, SR. became a Director on May 15, 1997. Mr. Rollins has
been Chairman of the Board and Chief Executive Officer of Rollins Truck Leasing
Corp. for more than five years. Mr. Rollins was Chairman of the Board and Chief
Executive Officer
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of Rollins 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' son is John W. Rollins, Jr.
JOHN W. ROLLINS, JR. became a Director on May 15, 1997. Mr. Rollins has
been President and Chief Operating Officer and a director of Rollins Truck
Leasing Corp. for more than five years and Chairman of the Board of Matlack
Systems, Inc. for more than five years. Mr. Rollins was Senior Vice Chairman of
the Board of Rollins 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' father is John W. Rollins,
Sr.
DAVID E. THOMAS, JR. has been a Director since June 1997. Mr. Thomas has
been Senior Managing Director and the Head of the Investment Banking Group of
Raymond James & Associates, Inc. since July 1996 and from 1991 until July 1996
was Managing Director of Raymond James & Associates, Inc. Mr. Thomas also is a
director of Reynolds, Smith and Hills, Inc. Mr. Thomas is a member of the Human
Resources and Compensation Committee.
HENRY B. TIPPIE has been a Director since May 15, 1997. For more than five
years, he has served as Chairman of the Board and President of Tippie Services,
Chairman of the Executive Committee and Vice Chairman of the Board of Rollins
Truck Leasing Corp. Mr. Tippie was Chairman of the Executive Committee of
Rollins from 1988 until May 15, 1997. Mr. Tippie also is a director of Matlack
Systems, Inc., Dover Downs Entertainment, Inc., RPC, Inc. and Rollins Inc. Mr.
Tippie currently serves as Chairman of the Audit Committee.
JAMES L. WAREHAM has been a Director since June 1997. Mr. Wareham has been
President of AK Steel Corporation since March 1997 and from 1992 until 1996,
Chief Executive Officer of Wheeling-Pittsburgh Steel Corporation. Mr. Wareham is
a member of the Audit Committee.
GROVER C. WRENN has been a Director since July 1997. Mr. Wrenn has been
Chairman and Chief Executive Officer of Accent Health since June 1996; Chief
Executive Officer of EnSys Environmental Products, Inc. from April 1995 through
December 1996; and President and Chief Executive Officer of Applied Bioscience
International from 1991 through March 1995. Mr. Wrenn also is a director of
Strategic Diagnostics, Inc. and Pharmakinetics Laboratories, Inc.
MICHAEL J. BRAGAGNOLO became Executive Vice President and Chief Operating
Officer on May 15, 1997. He joined Safety-Kleen (US), Inc. (a former subsidiary
of the Company) in January 1997 as Executive Vice President after serving as
Executive Vice President of U.S. Operations for Laidlaw Waste Systems, Inc.
since 1992.
HENRY H. TAYLOR became Vice President, General Counsel and Secretary on May
15, 1997. He previously served as Vice President of Legal and Regulatory Affairs
and Secretary of Safety-Kleen (US), Inc. (a former subsidiary of the Company)
since September 1995. Mr. Taylor joined Safety-Kleen (US), Inc. in May 1990 as
Vice President of Legal Affairs.
PAUL R. HUMPHREYS became Senior Vice President, Finance and Chief Financial
Officer on May 15, 1997. He joined Safety-Kleen (US), Inc. (a former subsidiary
of the Company) in January 1995 as Vice President of Finance. He had previously
served as Manager of Finance for Laidlaw for more than five years.
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<PAGE> 75
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
COMMITTEES. Our Board of Directors has established two committees: the
Human Resources and Compensation Committee and the Audit Committee. During
fiscal 1998, the Human Resources and Compensation Committee held primary
responsibility for determining executive compensation levels. John W. Rollins,
Jr. and David E. Thomas, Jr. are members of the Human Resources and Compensation
Committee.
Mr. Bullock and Mr. Haworth also are executive officers of Laidlaw, which
indirectly owns approximately 36.15% of our common stock (prior to the
repurchase of the PIK Debenture). In the ordinary course of business, we or our
affiliates and Laidlaw or affiliates of Laidlaw have entered into various
business transactions and agreements. The following is a summary of the material
agreements, arrangements and transactions between us or our affiliates and
Laidlaw or its affiliates since September 1, 1997.
STOCK PURCHASE AGREEMENT. On May 15, 1997, pursuant to the terms of the
Stock Purchase Agreement, we acquired certain subsidiaries of Laidlaw for
consideration of (i) $400,000,000 in cash (less certain assumed bond
indebtedness described in the Stock Purchase Agreement, a portion of which was
paid at the closing of the transactions), consisting of a payment of
$225,000,000, less the amount of bond indebtedness we assumed, from us to LTI
and a repayment of $175,000,000 owed to Laidlaw by one of our Canadian
subsidiaries with funds contributed by us, (ii) 30,000,000 shares of our common
stock issued to LTI and (iii) the PIK Debenture. The terms and conditions of the
acquisition of such subsidiaries of Laidlaw are set forth in the Stock Purchase
Agreement and certain exhibits and schedules to the Stock Purchase Agreement.
As a result of this acquisition, Laidlaw became our majority stockholder
and substantially all of our management consisted of former officers and
directors of the subsidiaries we acquired from Laidlaw. Due to these factors,
the subsidiaries we acquired were treated as the acquiror for accounting
purposes and this acquisition was recorded as a reverse acquisition.
LAIDLAW INDEMNITIES. Pursuant to the terms of the Stock Purchase
Agreement, Laidlaw and LTI agreed to jointly and severally indemnify and hold
harmless, subject to certain limitations, us and our affiliates from and against
any and all damages (as defined in the Stock Purchase Agreement) suffered by us
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 or LTI of (a) their covenants and agreements in the Stock
Purchase Agreement to be performed on or after the date of the closing of the
transaction or (b) any representation or warranty which survives the closing of
the transaction (to the extent that damages exceed $2,000,000) and (iv) any
environmental liability or environmental claim arising as a result of any act or
omission by Laidlaw or LTI, including any release, occurring prior to the
closing of the transaction, but only to the extent such liability or claim (a)
was known to Laidlaw or certain of its affiliates and not disclosed in writing
to us or (b) relates to the Marine Shale Processors or Mercier, Quebec
facilities and exceeds (x) an aggregate of $1,000,000 in the particular year and
(y) an aggregate since the closing of the transaction of $1,000,000 times the
number of years elapsed since the closing of the transaction, but only to the
extent of cash expenditures incurred within six years after the date of the
closing of the transaction. As of August 31, 1998, Laidlaw had been discharged
from most of these obligations.
THE PIK DEBENTURE. On May 15, 1997, in connection with our acquisition of
Rollins, we issued the PIK Debenture to Laidlaw. Subject to shareholder approval
of the issuance
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of shares of common stock to Laidlaw in connection with our repurchase of the
PIK Debenture by September 30, 1999, we intend to repurchase the PIK Debenture
from Laidlaw. The aggregate purchase price will consist of (i) $200 million in
cash, (ii) 11,320,755 shares of our common stock and (iii) cash or shares of our
common stock in an amount equal to any accrued and unpaid interest on the PIK
Debenture to the date of repurchase. See "Description of Other
Indebtedness -- The Company -- PIK Debenture." If we do not repurchase the PIK
Debenture by September 30, 1999, we are required to redeem the notes. See
"Description of the Notes -- Escrow of Proceeds; Special Mandatory Redemption."
SERVICE ARRANGEMENTS. Laidlaw and its affiliates have provided certain
financial and management services to us and our subsidiaries. These services
have included providing general liability and workers' compensation insurance,
income tax management and treasury services. Each of the service arrangements
has been on arms-length terms comparable to those available in transactions with
unaffiliated parties. During fiscal 1998, we paid Laidlaw $11.3 million on
account of such services.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid to our Chief Executive
Officer and each of the three other most highly compensated executive officers
(the "Named Executive Officers") for services rendered to us during fiscal 1997
and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- -----------------------------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTION/SARS(#) COMPENSATION($)(2)
- --------------------------- ------ ------------ -------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Kenneth W. Winger(3)....... 1998 $441,667 $325,000 62,500 $17,889
President, Chief
Executive 1997 120,167 100,000 62,500 11,060
Officer and Director
Michael J. Bragagnolo(3)... 1998 273,750 168,356 37,500 16,855
Executive Vice President 1997 78,861 46,670 37,500 3,121
and Chief Operating
Officer
Paul R. Humphreys(3)....... 1998 220,333 108,404 15,000 14,570
Senior Vice 1997 68,333 35,618 15,000 4,837
President -- Finance and
Chief Financial Officer
Henry H. Taylor(3)......... 1998 173,750 74,799 5,000 14,292
Vice President, General 1997 56,938 30,862 5,000 4,769
Counsel and Secretary
</TABLE>
- -------------------------
(1) The salary described in the Summary Compensation Table for fiscal 1998 did
not become effective until April 1, 1998.
(2) Amounts shown for fiscal 1998 consist of (i) for Mr. Winger: premiums on
life insurance policies of $1,968, matching contributions under the
Safety-Kleen Corp. 401(k) Savings Plan (the "401(k) Plan") of $3,921 and a
$12,000 automobile allowance; (ii) for Mr. Bragagnolo: premiums on life
insurance policies of $1,060, matching contributions under the 401(k) Plan
of $5,415 and a $10,380 automobile allowance; (iii) for Mr. Humphreys:
premiums on life insurance policies of $854, matching contributions under
the 401(k) Plan of $4,716 and a $9,000 automobile allowance; and (iv) for
Mr. Taylor: premiums on life insurance policies of $673, matching
contributions under the 401(k) Plan of $4,619 and a $9,000 automobile
allowance.
(3) Each of the Named Executive Officers became an employee of the Company on
May 15, 1997.
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The following table sets forth certain information regarding options
granted during fiscal 1998 to each of the Named Executive Officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
----------------------------------------- ----------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($)(1) 10%($)(1)
- ---- ------------ ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. Winger.... 62,500 17.8% $15.25 04/01/08 $599,415 $1,519,036
Michael J.
Bragagnolo......... 37,500 10.7 15.25 04/01/08 359,649 911,421
Paul R. Humphreys.... 15,000 4.3 15.25 04/01/08 143,860 364,569
Henry H. Taylor...... 5,000 1.4 15.25 04/01/08 47,953 121,523
</TABLE>
- -------------------------
(1) These amounts, based on assumed appreciation rates of 5% and 10% as
prescribed by the SEC's rules, are not intended to forecast possible future
appreciation, if any, of the price of our common stock. These numbers do not
take into account certain provisions of the options providing for
termination of the option following termination of employment,
nontransferability or phased-in vesting. We did not use an alternative
formula for a grant date valuation as we are not aware of any formula which
will determine with reasonable accuracy a present value based on future
unknown or volatile factors. Future compensation resulting from option
grants is based solely on the performance of our common stock.
The following table sets forth certain information with respect to options
held at the end of fiscal 1998 for each of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END(#) OPTIONS/SARS AT FY-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
<S> <C> <C>
Kenneth W. Winger........... 12,500/112,500 0/0
Michael J. Bragagnolo....... 7,500/67,500 0/0
Paul R. Humphreys........... 3,000/27,000 0/0
Henry H. Taylor............. 1,000/9,000 0/0
</TABLE>
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DEFINED BENEFIT PLANS
Effective as of October 14, 1997, we adopted a Supplemental Executive
Retirement Plan (the "SERP") for certain eligible employees. The 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 dates under the SERP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE
<TABLE>
<CAPTION>
SERVICE YEARS
FINAL -----------------------------------------------
AVERAGE PAY 15 20 25 30 35
- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
250,000 45,000 60,000 75,000 90,000 105,000
300,000 56,250 75,000 93,750 112,500 131,250
350,000 67,500 90,000 112,500 135,000 157,500
400,000 78,750 105,000 131,250 157,500 183,750
450,000 90,000 120,000 150,000 180,000 210,000
500,000 101,250 135,000 168,750 202,500 236,250
550,000 112,500 150,000 187,500 225,000 262,500
600,000 123,750 165,000 206,250 247,500 288,750
650,000 135,000 180,000 225,000 270,000 315,000
</TABLE>
For our current executive officers, the compensation shown in the column
labeled "Salary" and "Bonus" of the Summary Compensation Table is covered by the
SERP. As of August 31, 1998, Messrs. Winger had credited service under the SERP
of seven years and Messrs. Bragagnolo, Humphreys and Taylor had credited service
under the SERP of three years each. Benefits under the SERP are computed based
on a straight-life annuity. The amounts in this table are subject to deduction
for a portion of Social Security benefits.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Pursuant to the approval of the Human Resources and Compensation Committee
of the board of directors at its meeting on October 24, 1997, we entered into
Termination of Employment and Change in Control Agreements (each, a "Change of
Control Agreement") with each of the Named Executive Officers.
Mr. Winger's Change of Control Agreement provides that if his employment is
terminated as a result of a change in control, he will receive a lump sum
payment equal to 36 times his average aggregate monthly salary, bonus, cash
value of benefits and perquisites during the previous two fiscal years. The
Change of Control Agreements with Messrs. Bragagnolo, Humphreys and Taylor
provide that if any one of their employment is terminated as a result of a
change in control (as defined in such agreement), he would receive a lump sum
payment equal to 18 times his average aggregate monthly salary, bonus, cash
value of benefits and perquisites during the previous two fiscal years. All of
the Change of Control Agreements provide that for purposes of determining the
pension entitlement under the SERP, the years vested in the SERP would be
extended for three years in the case of Mr. Winger and one and a half years in
the case of each of the other
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Named Executive Officers. The Change of Control Agreements further provide that
all stock options granted to such persons would fully vest and lapse if not
exercised within 90 days following the employment termination date.
COMPENSATION OF DIRECTORS
Each of our directors who is not one of our employees is paid an annual
retainer of $20,000 (the "Annual Retainer") plus $750 for each board and
committee meeting attended plus expense reimbursement. Effective September 1,
1998 the Chairman of the Board is paid additional annual remuneration of $12,000
to be paid quarterly and the Committee Chairmen are each paid an additional
annual remuneration of $4,000 to be paid quarterly. During fiscal year 1998 the
directors were also paid a fee of $750 for attending our 1997 annual meeting of
stockholders. Pursuant to our Non-employee Director Stock Plan, 50% of the
Annual Retainer for each non-employee director is paid in shares of our common
stock. Each quarter the smallest number of whole shares of our common stock
which when multiplied by the fair market value of such shares would equal no
more than 50% of the non-employee director's retainer fee payable for such
quarter is calculated, and the dollar amount equivalent thereto is withheld from
the director's quarterly retainer check. A certificate evidencing the number of
shares of our common stock so determined for each of the fiscal quarters
beginning in the prior calendar year is delivered to the Secretary of the
Company at the first Board of Directors meeting held during each calendar year
and will be delivered to such director at the beginning of the next calendar
year. Each non-employee director becomes vested in our common stock so awarded
(i) at the end of the vesting period applicable to the award if the non-employee
director continues to be a member of the Board through the vesting period or
(ii) upon his death, disability or retirement or (iii) if the non-employee
director ceases to be a director as a result of a change in control. Each such
award is subject to a separate vesting period, and all awards become
nonforfeitable and transferable on the first anniversary of the award. We began
issuing shares to non-employee directors pursuant to this plan in January 1999.
Additionally, during fiscal 1998 each director who served during fiscal
1998 was granted options to purchase 5,000 shares of common stock at an exercise
price of $15.25 per share under the 1997 Directors Stock Option Plan. These
options vest in 20% increments on April 15 of each year, beginning April 15,
1999, until all of the options become exercisable. Each director was granted
options to purchase an additional 7,500 shares of common stock at an exercise
price of $13.25 per share in fiscal 1999. These options vest in 20% increments
on April 15 of each year, beginning April 15, 2000, until all of the options
become exercisable.
Directors who are also our employees receive no separate compensation for
serving as directors.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RAYMOND JAMES & ASSOCIATES, INC. Since September 1, 1997, Raymond James &
Associates, Inc. ("Raymond James") has acted as financial advisor to us for
various transactions, including the merger with Old Safety-Kleen, and may act in
this capacity in the future. In addition, Raymond James acted as an initial
purchaser in connection with the initial offering. David E. Thomas, Jr., one of
our directors, is the Senior Managing Director and Head of the Investment
Banking Group of Raymond James.
For a discussion of certain related party transactions, see "Management --
Compensation Committee Interlocks and Insider Participation."
PRINCIPAL STOCKHOLDERS
The following table sets forth as of May 20, 1999, the number of shares of
our common stock beneficially owned by each of our 5% stockholders, each of our
directors, each of our Named Executive Officers and all of our directors and
executive officers as a group.
<TABLE>
<CAPTION>
SHARES
NAME BENEFICIALLY OWNED PERCENT OF CLASS
- ---- ------------------ ----------------
<S> <C> <C>
Laidlaw(1)...................................... 32,148,674 36.15%
Mellon Bank Corporation(2)...................... 5,504,040 6.23
James R. Bullock(3),(4),(5)..................... 9,020 *
Leslie W. Haworth(3),(4),(6).................... 3,937 *
John W. Rollins Jr.(3),(7),(8).................. 92,110 *
John W. Rollins, Sr.(3),(8),(9)................. 958,289 1
David E. Thomas, Jr.(3),(8)..................... 2,645 *
Henry B. Tippie(3),(8),(10)..................... 576,962 *
James L. Wareham(3),(8)......................... 2,895 *
Grover C. Wrenn(3),(8).......................... 6,395 *
Kenneth W. Winger(11),(12)...................... 42,036 *
Michael J. Bragagnolo(11)....................... 22,500 *
Paul R. Humphreys(11)........................... 9,000 *
Henry H. Taylor(11),(12)........................ 3,934 *
Robert W. Luba(13).............................. 5,000 *
All directors and current executive officers as
a group (13 persons).......................... 1,734,723 1.96%
</TABLE>
- -------------------------
* Signifies less than 1%
(1) Shares of common stock shown as held of record by Laidlaw, except for 31
shares, are held of record by Laidlaw Finance (Barbados) Ltd., a wholly
owned subsidiary of Laidlaw.
(2) The shareholdings of Mellon Bank Corporation are based solely on a
Schedule 13G Report filed with the SEC by Mellon Bank Corporation in
January 1999.
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(3) Includes 2,000 shares subject to presently exercisable options. Does not
include 13,000 shares which are subject to vesting requirements pursuant
to our Director 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.
(4) Messrs. Bullock and Haworth are officers of Laidlaw.
(5) Includes 770 shares of restricted stock granted on January 5, 1999 in
accordance with our Non-employee Director Stock Plan. The shares do not
fully vest until January 5, 2000. Includes 6,250 shares owned by Mr.
Bullock's spouse. Does not include 12,500 shares indirectly owned by
Midcorp (J.P.C.) Limited, as to which shares Mr. Bullock disclaims any
beneficial ownership.
(6) Includes 687 shares of restricted stock granted on January 5, 1999 in
accordance with our Non-employee Director Stock Plan. The shares do not
fully vest until January 5, 2000.
(7) Includes 47,934 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.
(8) Includes 645 shares of restricted stock granted on January 5, 1999 in
accordance with the Non-employee Director Stock Plan. The shares do not
fully vest until January 5, 2000.
(9) Does not include 58,937 shares owned by Mr. Rollins' wife and 28,217
shares held by his wife as custodian for his minor children, as to which
shares Mr. Rollins disclaims any beneficial ownership.
(10) 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 right for 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.
(11) 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.
(12) Includes holdings of our common stock held through our 401(k) plan.
(13) 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 following the resignation of Mr. Grainger.
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DESCRIPTION OF OTHER INDEBTEDNESS
THE COMPANY
PIK DEBENTURE
On May 15, 1997, we issued the PIK Debenture. The principal of the PIK
Debenture is payable on May 15, 2009, subject to earlier mandatory or optional
prepayment and acceleration of its maturity date upon default.
The PIK Debenture bears interest at the fixed rate of 5% per annum. Until
April 8, 2000 (the "Mandatory PIK Interest Payment Period"), interest on the
outstanding principal balance of the PIK Debenture is payable in shares of our
common stock. After the Mandatory PIK Interest Payment Period, at our election
any payment due under the PIK Debenture (except upon an optional early
redemption), including any accrued interest or principal, may be paid in shares
of our common stock. The number of shares of our common stock for each payment
shall be equal to the dollar amount in accrued interest or principal due divided
by the average of the daily closing prices of a share of common stock on the
NYSE Composite Transactions for the ten consecutive trading days selected by us
commencing not more than 20 trading days before, and ending not later than, the
date the payment is due. Interest on the outstanding principal balance of the
PIK Debenture is payable semiannually on November 15 and May 15, until the
payment in full of the PIK Debenture.
Beginning on May 15, 2002, and continuing until the business day prior to
the repayment of the PIK Debenture, the PIK Debenture is convertible, in whole
or in part, at the option of the holder, into shares of our common stock. The
conversion will be at a price equal to the conversion price (the "Conversion
Price") of $15.00 per share, subject to adjustment under certain circumstances.
During the period commencing on May 15, 2002, and continuing until
maturity, we have the option to prepay the PIK Debenture, in whole or in part,
only in cash, at the face amount of the PIK Debenture if the last reported sales
price of a share of our common stock, as reported by the New York Stock
Exchange, equals or exceeds 120% of the Conversion Price for a period of at
least ten consecutive trading days prior to the date of such proposed payment.
As described in "Offering Memorandum Summary -- Repurchase of PIK
Debenture", upon receipt of stockholder approval of the issuance of shares of
common stock to Laidlaw in connection with this repurchase, we expect to
repurchase the PIK Debenture for (i) $200 million in cash, (ii) 11,320,755
shares of our common stock and (iii) cash or shares of our common stock (valued
based on market prices) in an amount equal to any accrued and unpaid interest on
the PIK Debenture to the date of repurchase.
COMPANY IRBS
We have two outstanding series of industrial revenue bonds (the "Company
IRBs") issued in connection with certain of our facilities.
THE TOOELE COUNTY, UTAH POLLUTION CONTROL REFUNDING REVENUE BONDS 1997
SERIES A, PAR AMOUNT $45.7 MILLION. These bonds have an interest rate of 7.55%
and a maturity date of July 1, 2027. The interest payment dates for the bonds
are July 1 and January 1. The terms of the bonds provide for an optional
prepayment at our option, subject to prepayment penalties. As of February 28,
1999, we had utilized the full amount of these bonds.
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THE CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY 6.7% POLLUTION CONTROL
REFUNDING REVENUE BONDS 1997 SERIES A, PAR AMOUNT $19.5 MILLION. These bonds
have an interest rate of 6.7% and a maturity date of July 1, 2007. The interest
payment dates are July 1 and January 1. The terms of the bonds provide for an
optional redemption which is triggered by an extraordinary event. As of February
28, 1999, we had utilized the full amount of these bonds.
COMPANY PROMISSORY NOTE
On May 15, 1997, as part of our acquisition of Rollins, we issued a $60
million note (the "Company Promissory Note"). The Company Promissory Note
matures on May 15, 2003. Interest is payable at a fluctuating rate of six month
London Interbank Offered Rate ("LIBOR") (the "Contract Rate"), as calculated in
accordance with the terms of the Company Promissory Note. From and after the
maturity date, the Company Promissory Note will bear interest at a rate per
annum equal to the Contract Rate plus five percent. Interest is due and payable
on May 30 and November 30 of each year. A late charge of 2% of the amount of the
payment will be charged on any payment not received within fifteen days after it
is due. We are required to make a $10.0 million principal reduction on each of
May 15, 2001 and May 15, 2002.
We will be in default on the Company Promissory Note upon the occurrence of
any of the following events of default:
- We fail to make any payment under the Company Promissory Note when due;
- Laidlaw fails to maintain an investment grade rating by both Standard &
Poor's, Inc. and Moody's Institutional Services, Inc.;
- We and Laidlaw fail to comply with certain obligations under the Stock
Purchase Agreement;
- Default under any credit agreement or refinancing, entered into in
connection with our acquisition of Rollins;
- Default under any indentures secured by indebtedness of us or Laidlaw
having an aggregate principal amount of at least Cdn. $10 million;
- Involuntary bankruptcy of us or Laidlaw; or
- Voluntary bankruptcy, insolvency, reorganization or other similar
proceeding in respect of us or Laidlaw.
The Company Promissory Note has priority in payment over any of our
indebtedness to Laidlaw and any affiliated entities. The holder of the Company
Promissory Note has agreed that the Company Promissory Note is subordinate to
the guarantee of the Senior Credit Facility. The Company Promissory Note ranks
equally with the notes.
THE COMPANY'S SUBSIDIARIES
SENIOR CREDIT FACILITY
In connection with our acquisition of Old Safety-Kleen, Safety-Kleen
Services consummated the Senior Credit Facility pursuant to a credit agreement
dated April 3, 1998 as amended on May 15, 1998, June 3, 1998, November 20, 1998
and May 6, 1999 (the "Loan Agreement") among Safety-Kleen Services, as borrower,
Safety-Kleen (Canada) Ltd. and The Toronto-Dominion Bank ("TD"), as
administrative agent, and a syndicate of banks and other financial institutions
(the "Lenders") pursuant to which the
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Lenders agreed, subject to certain conditions, to provide aggregate borrowing
and letters of credit availability of $1.88 billion to Safety-Kleen Services to,
among other things:
- finance our acquisition of Old Safety-Kleen;
- refinance our and Safety-Kleen Services' existing indebtedness;
- fund certain capital expenditures, working capital and permitted
acquisitions, as well as transaction fees and expenses associated with
our acquisition of Old Safety-Kleen; and
- provide for up to $200 million of letters of credit.
We and all of Safety-Kleen Services' wholly-owned domestic subsidiaries
have unconditionally guaranteed the repayment of the Senior Credit Facility. At
February 28, 1999, there was an aggregate of $1.26 billion of Term Loans
outstanding and $60 million of borrowings outstanding under the Revolver. At
February 28, 1999, Safety-Kleen Services had $340 million of additional
borrowing availability (excluding letters of credit) under the Revolver.
TERMS OF THE SENIOR CREDIT FACILITY. The Senior Credit Facility consists
of the following:
- a $550,000,000 six-year Senior Secured Revolving Credit Facility with a
$200,000,000 letter of credit sublimit and $400,000,000 sublimit for
loans (the "Revolver" or "Facility A");
- a $455,000,000 six-year Senior Secured Amortizing Term Loan ("Facility
B");
- a $70,000,000 six-year Senior Secured Amortizing Term Loan to
Safety-Kleen Services (Canada) Ltd. ("Facility C");
- a $400,000,000 Minimally Amortizing seven-year Senior Secured Term
Facility ("Facility D"); and
- a $400,000,000 Minimally Amortizing eight-year Senior Secured Term Loan
("Facility E") (Facility B, Facility C, Facility D and Facility E,
collectively, the "Term Loans").
SECURED SENIOR CREDIT FACILITY. The Senior Credit Facility is secured by
all of our tangible assets and a pledge of the capital stock of Safety-Kleen
Services' wholly-owned domestic subsidiaries.
MATURITY AND AMORTIZATION. Facility A has no scheduled amortization. The
Term Loans require aggregate principal repayments of $78.0 million in each of
years one and two, $104.3 million in each of years three, four, five and six,
$380.0 million in year seven and $372.0 million in year eight of the Senior
Credit Facility.
INTEREST. Borrowings under the Senior Credit Facility bear interest at a
floating rate based upon, at the option of Safety-Kleen Services:
- the higher of the TD prime rate and the federal funds rate plus 0.50% per
annum; or
- LIBOR as determined by TD for the respective interest period, in each
case plus a margin based upon the total leverage ratio of Safety-Kleen
Services.
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Safety-Kleen Services also pays administration fees, commitment fees and
certain expenses and provide certain indemnities, all of which Safety-Kleen
Services believes to be customary for commitments of this type.
COVENANTS. The Senior Credit Facility contains conditions precedent,
representations and warranties, negative, affirmative and financial covenants
(including financial covenants, restricting debt, guaranties, liens, mergers and
consolidations, sales of assets and payment of dividends, and establishing a
total leverage ratio test, a fixed charge coverage test, an interest coverage
ratio test and a maximum contingent obligation to operating cash flow ratio
test), events of default and other provisions customary for such financings.
EVENTS OF DEFAULT. The Senior Credit Facility contains customary events of
default including, without limitation, nonpayment of principal, interest or
other fees when due, breach of representations, warranties or covenants, breach
of other material agreements, material undischarged judgments or fines, any
prohibited transaction under ERISA, bankruptcy or insolvency, change of control,
and cross default to other indebtedness of Safety-Kleen Services and any of its
subsidiaries. If (a) at any time Laidlaw ceases to be a primary stockholder, (b)
at any time when the Consolidated Total Leverage Ratio (as defined in the Senior
Credit Facility) is greater than 2.50 to 1.00, (c) Laidlaw ceases to own at
least 20% of our outstanding common stock, (d) at any time we cease to own 100%
of the outstanding common stock of Safety-Kleen Services, (e) at any time
Safety-Kleen Services ceases to own 100% of the outstanding common stock of
Safety-Kleen Services (Canada) Ltd., or (f) at any time there ceases to be at
least one member of our Board of Directors who is a designee of Laidlaw, an
event of default shall occur.
CONDITIONS. Under the Senior Credit Facility, Safety-Kleen Services is
required to obtain interest rate protection satisfactory to TD in respect of at
least 40% of its floating rate debt for a period of at least two years.
SAFETY-KLEEN SERVICES NOTES
On May 29, 1998, Safety-Kleen Services issued $325 million of Safety-Kleen
Services Notes in a Rule 144A offering pursuant to an indenture dated May 29,
1998 (the "Subsidiary Indenture"). Net proceeds from the sale of the
Safety-Kleen Services Notes were approximately $316 million. The net proceeds
were used to repay a portion of the borrowings outstanding under the Senior
Credit Facility.
The Safety-Kleen Services Notes mature on June 1, 2008. Interest on the
Safety-Kleen Services Notes is payable on June 1 and December 1 of each year.
The Safety-Kleen Services Notes are redeemable, in whole or in part, at the
option of the Company, at any time prior to June 1, 2003 at a redemption price
equal to the greater of (i) 100% of the principal amount of such Safety-Kleen
Services Notes or (ii) the sum of the present values of 104.625% of the
principal amount of such Safety-Kleen Services Notes and the scheduled payments
of interest thereon through and including June 1, 2003, discounted to such
redemption date on a semi-annual basis at the Adjusted Treasury Rate (as defined
in the Subsidiary Indenture) plus 50 basis points, together with accrued and
unpaid interest, if any. The Safety-Kleen Services Notes are redeemable, in
whole or in part, at the option of Safety-Kleen Services at any time on or after
June 1, 2003 at 104.625% of the principal amount declining ratably in annual
increments to par on or after June 1, 2006. In addition, prior to June 1, 2001,
Safety-Kleen Services may redeem up to 35% of the original aggregate principal
amount of the Safety-Kleen Services Notes with the net proceeds of one or more
public equity offerings at a redemption price equal to 109.25% of the principal
amount thereof, plus accrued and unpaid interest. Upon a change in control of
Safety-
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Kleen Services, each holder of the Safety-Kleen Services Notes may require
Safety-Kleen Services to repurchase all or a portion of such holder's
Safety-Kleen Services Notes at 101% of the principal amount thereof, plus
accrued interest.
The Safety-Kleen Services Notes are general unsecured obligations of
Safety-Kleen Services, subordinated in right of payment to all existing and
future senior indebtedness of Safety-Kleen Services. The Safety-Kleen Services
Notes rank senior in right of payment to all existing and future subordinated
indebtedness of Safety-Kleen Services, if any. The payment of the Safety-Kleen
Services Notes is guaranteed on a senior subordinated basis by us and
Safety-Kleen Services' wholly-owned domestic subsidiaries. No foreign direct or
indirect subsidiary or non-wholly-owned domestic subsidiary is an obligor or
guarantor of the Safety-Kleen Services Notes.
The Safety-Kleen Services Notes contain certain affirmative and negative
covenants which are substantially the same as the notes. See "Description of the
Notes." Safety-Kleen Services was in compliance with the covenants at February
28, 1999.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
Our registration rights agreement requires us to file not later than July
16, 1999, which is 60 days following the date of original issuance of the
initial notes, the registration statement of which this prospectus is a part for
a registered exchange offer with respect to an issue of new notes in exchange
for our initial notes. The exchange notes will be substantially identical in all
material respects to the initial notes except that the exchange notes will be
registered under the Securities Act, will not bear legends restricting their
transfer and will not be entitled to registration rights under our registration
rights agreement. This summary of the registration rights agreement does not
contain all the information that you should consider and we refer you to the
provisions of the registration rights agreement, which has been filed as an
exhibit to the registration statement of which this prospectus is a part and a
copy of which is available as indicated under the heading "Available
Information."
We are required to:
- use our best efforts to cause the registration statement to be declared
effective no later than October 14, 1999, which is 150 days after the
date of issuance of the initial notes,
- keep the exchange offer effective for not less than 30 business days, or
longer if required by applicable law, after the date that notice of the
exchange offer is mailed to holders of the initial notes.
The exchange offer being made here, if commenced and consummated within the
time periods described in this paragraph, will satisfy those requirements under
the registration rights agreement.
The prospectus, together with the letter of transmittal, is being sent to
all record holders of initial notes as of , 1999.
Based on interpretations by the staff of the Securities and Exchange
Commission in no-action letters issued to third parties, we believe that the
exchange notes issued pursuant to the exchange offer may be offered for resale,
resold or otherwise transferred by each holder of exchange notes other than (1)
a broker-dealer who acquires the initial notes directly from Safety-Kleen for
resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act, and (2) any holder that directly or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, Safety-Kleen, without compliance with the
registration and prospectus delivery provisions of the Securities Act, so long
as this holder:
- is acquiring the exchange notes in the ordinary course of its business,
- is not participating in, and does not intend to participate in, a
distribution of the exchange notes within the meaning of the Securities
Act and has no arrangement or understanding with any person to
participate in a distribution of the exchange notes within the meaning of
the Securities Act, and
- is not a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with, Safety-Kleen.
By tendering the initial notes in exchange for exchange notes, each holder,
other than a broker-dealer, will be required to make representations to that
effect. If a holder of initial
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notes is participating in or intends to participate in, a distribution of the
exchange notes, or has any arrangement or understanding with any person to
participate in a distribution of the exchange notes to be acquired in this
exchange offer, this holder may be deemed to have received restricted securities
and may not rely on the applicable interpretations of the staff of the
Securities and Exchange Commission. Any such holder will have to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
Each broker-dealer that receives exchange notes for its own account in
exchange for initial notes may be deemed to be an underwriter within the meaning
of the Securities Act and must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
these exchange notes. The letter of transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an underwriter within the meaning of the Securities Act. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with offers to resell, resales and other transfers
of exchange notes received in exchange for initial notes which were acquired by
such broker-dealer as a result of market making or other trading activities. We
have agreed that we will make this prospectus available to any broker-dealer for
a period of time not to exceed 90 days after the consummation of the exchange
offer to use in connection with any such offer to resell, resale or other
transfer. Please refer to the section in this prospectus entitled "Plan of
Distribution."
SHELF REGISTRATION STATEMENT
In the event that:
(1) because of any change in law or applicable interpretations thereof by
the staff of the Securities and Exchange Commission, we are not
permitted
to effect the exchange offer, or
(2) for any other reason, the exchange offer is not declared effective
within 150 days from the date of issuance of the initial notes,
then in the case of clauses (1) through (2) of this sentence, we will be
obligated, at our sole expense, to
- as promptly as practicable file with the Securities and Exchange
Commission a shelf registration statement covering resales of the initial
notes,
- use our best efforts to cause the shelf registration statement to be
declared effective under the Securities Act within 180 days after the
date of issuance of the initial notes, and
- use our best efforts to keep the shelf registration statement
continuously effective, until 2 years after the date of issuance of the
initial notes.
We will, in the event that a shelf registration statement is filed, provide
to each holder of the initial notes being registered copies of the prospectus
that is a part of the shelf registration statement. We will also notify each of
these holders when the shelf registration statement has become effective and
take certain other actions as are required to permit unrestricted resales of the
initial notes being registered. A holder that sells initial notes pursuant to
the shelf registration statement will be required to be named as a selling
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security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement that are applicable to such a
holder, including indemnification rights and obligations.
LIQUIDATED DAMAGES
In the event that:
(1) the registration statement is not declared effective on or before
October 14, 1999,
(2) the exchange offer is not consummated or the shelf registration
statement is not declared effective on or prior to November 15, 1999,
or
(3) any registration statement required by the registration rights
agreement is filed and declared effective but thereafter ceases to be
effective (except as specifically permitted herein) without being
succeeded immediately by an additional registration statement filed and
declared effective, each such event in clauses (1) through (3) being
called a registration default,
then we will be obligated to pay to each holder of transfer restricted
securities liquidated damages, as described below. Transfer restricted
securities means each initial note until:
(1) the date on which that initial note has been exchanged by a person
other than a broker-dealer for an exchange note in the registered
exchange offer,
(2) following the exchange by a broker-dealer in the registered exchange
offer of an initial note for an exchange note, the date on which this
exchange note is sold to a purchaser who receives from his
broker-dealer on or before the date of the sale a copy of the
prospectus contained in the exchange offer registration statement,
(3) the date on which the initial note has been effectively registered
under the Securities Act and disposed of in accordance with the shelf
registration statement,
(4) the date on which the initial note is distributed to the public under
Rule 144 promulgated under the Securities Act, or
(5) the date on which the initial note is eligible for resale pursuant to
Rule 144 without volume restrictions.
Liquidated damages will accrue and be payable semi-annually on the initial
notes and the exchange notes, in addition to the stated interest on the initial
notes and the exchange notes in an amount equal to 0.25% per year during the
first 90-day period, which will increase by 0.25% per year for each subsequent
90-day period. In no event will this rate exceed 1.50% per year in the
aggregate, regardless of the number of registration defaults. Liquidated damages
will accrue from the date a registration default occurs until the date on which:
- the registration statement is declared effective,
- the exchange offer is consummated or shelf registration statement is
declared effective, or
- any registration statement required by the registration rights agreement
again becomes effective or made usable, as the case may be.
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Following the cure of all registration defaults, the accrual of liquidated
damages will cease and the interest rate borne by the notes will be reduced to
the original interest rate.
Upon completion of the exchange offer, holders of initial notes who do not
exchange their initial notes for exchange notes in the exchange offer will
generally no longer be entitled to registration rights and will not be able to
offer or sell their initial notes, unless such initial notes are subsequently
registered under the Securities Act, which, subject to certain limited
exceptions, we will have no obligation to do, or pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and applicable state
securities laws. Please refer to the section in this prospectus entitled "Risk
Factors -- Failure to Participate in the Exchange Offer."
TERMS OF THE EXCHANGE OFFER
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The exchange offer will expire at 5:00 p.m., New York City time, on
, 1999, unless we extend it in our reasonable discretion. The
expiration date of the exchange offer will be at least 30 business days after
the commencement of the exchange offer in accordance with Rule 14e-1(a) under
the Securities Exchange Act of 1934 and our registration rights agreement.
To extend the expiration date, we will need to notify the exchange agent of
any extension by oral, promptly confirmed in writing, or written notice. We will
also need to notify the holders of the initial notes by mailing an announcement
or by means of a press release or other public announcement communicated, unless
otherwise required by applicable law or regulation, before 9:00 A.M., New York
City time, on the next business day after the previously scheduled expiration
date.
We expressly reserve the right:
- to delay acceptance of any initial notes, to extend the exchange offer or
to terminate the exchange offer and not permit acceptance of initial
notes not previously accepted if any of the conditions described below
under "-- Conditions" have occurred and have not been waived by us, if
permitted to be waived, by giving oral or written notice of this delay,
extension or termination to the exchange agent, or
- to amend the terms of the exchange offer in any manner.
If we amend the exchange offer in a manner determined by us to constitute a
material change, we will promptly disclose this amendment in a manner reasonably
calculated to inform the holders of the initial notes of this amendment
including providing public announcement, or giving oral or written notice to the
holders of the initial notes. A material change in the terms of the exchange
offer could include, among other things, a change in the timing of the exchange
offer, a change in the exchange agent, and other similar changes in the terms of
the exchange offer. If any material change is made to terms of the exchange
offer, we will disclose this change by means of a post-effective amendment to
the registration statement of which this prospectus is a part and will
distribute an amended or supplemented prospectus to each registered holder of
initial notes. In addition, we will also extend the exchange offer for an
additional five to ten business days as required by the Securities Exchange Act
of 1934, depending on the significance of the amendment, if the exchange offer
would otherwise expire during this period. Any such delay in acceptance,
extension, termination or amendment will be
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followed as promptly as practicable by oral, promptly confirmed in writing, or
written notice thereof to the exchange agent.
PROCEDURES FOR TENDERING
To tender your initial notes in the exchange offer, you must complete, sign
and date the letter of transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the letter of transmittal, and mail or
otherwise deliver the letter of transmittal or the facsimile, or an agent's
message, together with the certificates representing the initial notes being
tendered and any other required documents, to the exchange agent on or before
5:00 p.m, New York City time, on the expiration date. Alternatively, you may
either:
- send a timely confirmation of a book-entry transfer of the initial notes,
if this procedure is available, into the exchange agent's account at The
Depository Trust Company pursuant to the procedure for book-entry
transfer described below, on or before 5:00 p.m. on the expiration date,
or
- comply with the guaranteed delivery procedures described below.
The term agent's message means a message, transmitted by The Depository
Trust Company to, and received by, the exchange agent and forming a part of a
book-entry confirmation, which states that The Depository Trust Company has
received an express acknowledgment from its participant tendering initial notes
which are the subject of this book-entry confirmation that this participant has
received and agrees to be bound by the terms of the letter of transmittal, and
that we may enforce this agreement against this participant.
THE METHOD OF DELIVERY OF THE INITIAL NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT YOUR ELECTION AND RISK. INSTEAD OF DELIVERY
BY MAIL, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND-DELIVERY SERVICE. IF YOU
CHOOSE TO THE MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ASSURE TIMELY DELIVERY. YOU SHOULD NOT SEND ANY LETTERS OF TRANSMITTAL OR
INITIAL NOTES TO US. You must deliver all documents to the exchange agent at its
address provided below. You may also request your respective brokers, dealers,
commercial banks, trust companies or nominees to tender your initial notes on
your behalf.
Your tender of initial notes will constitute an agreement between you and
us in accordance with the terms and subject to the conditions provided in this
prospectus and in the letter of transmittal.
Only a holder of initial notes may tender these initial notes in the
exchange offer. A holder, with respect to the exchange offer, is any person in
whose name initial notes are registered on our books or any other person who has
obtained a properly completed bond power from the registered holder.
If you are the beneficial owner of initial notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
you wish to tender your initial notes, you should contact this registered holder
promptly and instruct this registered holder to tender on your behalf. If you
wish to tender on your own behalf, you must, before completing and executing the
letter of transmittal and delivering your initial notes, either make appropriate
arrangements to register ownership of the initial notes in your name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
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Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, each referred to as an
eligible institution unless the initial notes are tendered:
- by a registered holder or by a participant in The Depository Trust
Company whose name appears on a security position listing as the owner,
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the letter of transmittal if the
exchange notes are being issued directly to this registered holder or
deposited in the participant's account at The Depository Trust Company or
- for the account of an eligible institution.
If the letter of transmittal is signed by the recordholder(s) of the
initial notes tendered, the signature must correspond with the name(s) written
on the face of the initial notes without alteration, enlargement or any change
whatsoever. If the letter of transmittal is signed by a participant in The
Depository Trust Company, the signature must correspond with the name as it
appears on the security position listing as the holder of the initial notes.
If the letter of transmittal is signed by a person other than the
registered holder of any initial notes listed, such initial notes must be
endorsed or accompanied by bond powers and a proxy that authorize such person to
tender the initial notes on behalf of the registered holder in satisfactory form
to us as determined in our sole discretion, in each case as the name of the
registered holder or holders appears on the initial notes.
If the letter of transmittal or any initial notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporation or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing. Unless waived by us, evidence
satisfactory to us of their authority to so act must also be submitted with the
letter of transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed letter of transmittal accompanied by the initial
notes tendered, or a timely confirmation received of a book-entry transfer of
initial notes into the exchange agent's account at The Depository Trust Company
with an agent's message, or a notice of guaranteed delivery from an eligible
institution is received by the exchange agent. Issuance of exchange notes in
exchange for initial notes tendered pursuant to a notice of guaranteed delivery
by an eligible institution will be made only against delivery of the letter of
transmittal, and any other required documents, and the tendered initial notes,
or a timely confirmation received of a book-entry transfer of initial notes into
the exchange agent's account at The Depository Trust Company with an agent's
message with the exchange agent.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of withdrawal of the tendered initial notes will be
determined by us in our sole discretion. Our determination will be final and
binding. We reserve the absolute right to reject any and all initial notes not
properly tendered or any initial notes which, if accepted, would, in our opinion
or our counsel's opinion, be unlawful. We also reserve the absolute right to
waive any conditions of the exchange offer or irregularities or defects in
tender as to particular initial notes. Our interpretation of the terms and
conditions of the exchange
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offer, including the instruction in the letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of initial notes must be cured within such time as we
shall determine. We, the exchange agent or any other person will be under no
duty to give notification of defects or irregularities with respect to tenders
of initial notes. None of us or the exchange agent will incur any liability for
failure to give such notification. Tenders of initial notes will not be deemed
to have been made until such irregularities have been cured or waived. Any
initial notes received by the exchange agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned without cost by the exchange agent to the tendering holders of such
initial notes, unless otherwise provided in the letter of transmittal, as
promptly as practicable following the expiration date.
In addition, we reserve the right in our sole direction, subject to the
provisions of the indenture for the initial and exchange notes, to:
- purchase or make offers for any initial notes that remain outstanding
subsequent to the expiration date, or, as described under "-- Expiration
Date; Extensions; Amendments; Termination," to terminate the exchange
offer in accordance with the terms of our registration rights agreement,
and
- to the extent permitted by applicable law, purchase initial notes in the
open market, in privately negotiated transactions or otherwise. The terms
of these purchases or offers could differ from the terms of the exchange
offer.
ACCEPTANCE OF INITIAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept all initial notes properly tendered, promptly after the
expiration date, and will issue the exchange notes promptly after the expiration
date and acceptance of the initial notes. Please refer to the section of this
prospectus entitled "-- Conditions" below. For purposes of the exchange offer,
initial notes will be deemed to have been accepted as validly tendered for
exchange when, as and if we had given oral or written notice to the exchange
agent.
In all cases, issuance of exchange notes for initial notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of certificates for such initial notes or a
timely book-entry confirmation of such initial notes into the exchange agent's
account at the book-entry transfer facility, a properly completed and duly
executed letter of transmittal or any agent's message and all other required
documents, in each case, in form satisfactory to us and the exchange agent. If
any tendered initial notes are not accepted for any reason set forth in the
terms and conditions of the exchange offer or if initial notes are submitted for
a greater principal amount than the holder desires to exchange, such unaccepted
or non-exchanged initial notes will be returned without expense to the tendering
holder thereof, or, in the case of initial notes tendered by book-entry transfer
procedures described below, the non-exchanged initial notes will be credited to
an account maintained with the book-entry transfer facility, as promptly as
practicable after withdrawal, rejection of tender, the expiration date or
earlier termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the initial notes at The Depository Trust Company for purposes of the
exchange offer within two business days after the date of the prospectus. Any
financial institution that is a
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participant in The Depository Trust Company's systems may make book-entry
delivery of initial notes by causing The Depository Trust Company to transfer
such initial notes into the exchange agent's account at The Depository Trust
Company in accordance with The Depository Trust Company's procedures for
transfer.
However, although delivery of initial notes may be effected through
book-entry transfer into the exchange agent's account at The Depository Trust
Company, an agent's message or the letter of transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the exchange agent at the address
indicated below under "-- Exchange Agent" on or before the expiration date or
the guaranteed delivery procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT. All reference in the prospectus to deposit of
initial notes will be deemed to include The Depository Trust Company's
book-entry delivery method.
GUARANTEED DELIVERY PROCEDURE
If you are a registered holder of initial notes and desire to tender such
initial notes, and (1) the initial notes are not immediately available, or (2)
time will not permit your initial notes or other required documents to reach the
exchange agent before the expiration date, or (3) the procedures for book-entry
transfer cannot be completed on a timely basis and an agent's message delivered,
you may still tender in the exchange offer if:
- you tender through an eligible institution,
- prior to the expiration date, the exchange agent receives from this
eligible institution a properly completed and duly executed letter of
transmittal, or facsimile thereof, and notice of guaranteed delivery,
substantially in the form provided by us, by facsimile transmission, mail
or hand delivery, setting forth your name and address as holder of the
initial notes and the amount of initial notes tendered, stating that the
tender is being made thereby and guaranteeing that within three business
days after the expiration date the certificates for all tendered initial
notes, in proper form for transfer, or a book-entry confirmation with an
agent's message, as the case may be, and any other documents required by
the letter of transmittal will be deposited by the eligible institution
with the exchange agent, and
- the certificates for all tendered initial notes, in proper form for
transfer, or a book-entry confirmation as the case may be, and all other
document required by the letter of transmittal are received by the
exchange agent within three business days after the expiration date.
WITHDRAWAL OF TENDERS
Except as otherwise provided in the prospectus, you may withdraw tenders of
initial notes at any time before 5:00 p.m., New York City time, on the
expiration date.
For a withdrawal to be effective, you must send a written or facsimile
transmission notice of withdrawal to the exchange agent before 5:00 p.m., New
York City time, on the
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expiration date at the address provided below under "-- Exchange Agent" and
before acceptance of the notes for exchange by us. Any notice of withdrawal
must:
- specify the name of the person having tendered the initial notes to be
withdrawn,
- identify the initial notes to be withdrawn, including, if applicable, the
registration number or numbers and total principal amount of these
initial notes,
- be signed by the person having tendered the initial notes to be withdrawn
in the same manner as the original signature on the letter of transmittal
by which these initial notes were tendered, including any required
signature guarantees, or be accompanied by documents of transfer
sufficient to permit the trustee with respect to the initial notes to
register the transfer of these initial notes into the name of the person
having made the original tender and withdrawing the tender,
- specify the name in which these initial notes are to be registered, if
different from that of the person having tendered the initial notes to be
withdrawn, and
- if applicable because the initial notes have been tendered pursuant to
the book-entry procedures, specify the name and number of the
participant's account at The Depository Trust Company to be credited, if
different than that of the person having tendered the initial notes to be
withdrawn.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of notice of withdrawal and our determination will be
final and binding on all parties. Any initial notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the exchange
offer. Any initial notes which have been tendered for exchange which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder. In the case of initial notes tendered by book-entry transfer into
the exchange agent's account at The Depository Trust Company pursuant to the
book-entry transfer procedures described above, these initial notes will be
credited to an account maintained with The Depository Trust Company for the
initial notes, as promptly as practicable after withdrawal, rejection of tender,
expiration date or earlier termination of the exchange offer. Properly withdrawn
initial notes may be retendered by following one of the procedures described
under "-- Procedures for Tendering" and "-- Book-Entry Transfer" above at any
time on or before the expiration date.
CONDITIONS
Notwithstanding any other terms of the exchange offer, we will not be
required to accept initial notes for exchange, or issue exchange notes in
exchange for any initial notes, and we may terminate or amend the exchange offer
as provided in this prospectus before the acceptance of these initial notes, if:
- an action or proceeding has been instituted or threatened in any court or
before any governmental agency or body that in our judgement would
reasonable be expected to prohibit, prevent or otherwise impair our
ability to proceed with the exchange offer;
- a change in the current interpretation of the staff of the Securities and
Exchange Commission has occurred which current interpretation permits the
exchange notes issued pursuant to the exchange offer in exchange for the
initial notes to be offered for resale, resold or otherwise transferred
by their holders, other than in certain circumstances;
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- a law, statute, rule or regulation has been adopted or enacted which, in
our judgement, would reasonably be expected to impair our ability to
proceed with the exchange offer;
- a stop order has been issued by the Securities and Exchange Commission or
any state securities authority suspending the effectiveness of the
registration statement of which this prospectus is a part or the
qualification of the indenture for the notes under the Trust Indenture
Act of 1939 or proceedings shall have been initiated or, to our
knowledge, threatened for that purpose;
- a governmental approval has not been obtained, which approval we deem in
our sole discretion, necessary for the consummation of the exchange
offer; or
- a change, or a development involving a prospective change, in our
business or financial affairs has occurred which, in our sole judgement,
might materially impair our ability to proceed with the exchange offer.
These conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us, in whole or in part, at any time and from time to time, if we
determine in our reasonable discretion that any of the foregoing events or
conditions has occurred or exists or has not been satisfied, subject to
applicable law. Our failure at any time to exercise any of these rights will not
be deemed a waiver of any of these rights and each of these rights will be
deemed an ongoing right which we may assert at any time and from time to time.
If we determine that we may terminate the exchange offer, as provide above,
we may:
- refuse to accept any initial notes and return any initial notes that have
been tendered to their holders,
- extend the exchange offer and retain all initial notes tendered before
the expiration date, subject to the rights of such holders of tendered
initial notes to withdraw their tendered initial notes, or
- waive the termination event with respect to the exchange offer and accept
all properly tendered initial notes that have not been withdrawn or
otherwise amend the terms of the exchange offer in any respect as
provided under the section in this prospectus entitled "-- Expiration
Date; Extensions; Amendments; Termination."
The exchange offer is not conditioned upon any minimum principal amount of
initial notes being tendered for exchange.
We have no obligation to, and will not knowingly, accept tenders of initial
notes from our affiliates, within the meaning of Rule 405 under the Securities
Act, or from any other holder or holders who are not eligible to participate in
the exchange offer under applicable law or its interpretation by the Securities
and Exchange Commission, or if the exchange notes to be received by the holder
or holders of initial notes in the exchange offer, upon receipt, will not be
tradable by this holder without restriction under the Securities Act and the
Securities Exchange Act of 1934 and without material restrictions under the blue
sky or securities laws of substantially all of the states of the United States.
ACCOUNTING TREATMENT
We will record the exchange notes at the same carrying value as the initial
notes, as reflected in our accounting records on the date of the exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes. We
will amortize the costs of the
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exchange offer and the unamortized expenses related to the issuance of the
exchange notes over the term of the exchange notes.
EXCHANGE AGENT
We have appointed The Bank of Nova Scotia Trust Company of New York as
exchange agent for the exchange offer. You should direct all questions and
request for assistance or additional copies of this prospectus or the letter of
transmittal to the exchange agent as follows:
By Mail, Overnight Courier or Hand:
The Bank of Nova Scotia Trust Company of New York
One Liberty Plaza, 23rd Floor
New York, New York 10006
Attention: Pat Keane
Facsimile Transmission: (212) 225-5436
Confirm by Telephone: (212) 225-5427
FEES AND EXPENSES
We will bear the expenses of soliciting tenders pursuant to the exchange
offer. The principal solicitation for tenders pursuant to the exchange offer is
being made by mail; however, our offices and regular employees may make
additional solicitations by telegraph, telephone, telecopy or in person.
We will not make any payments to brokers, dealers or other persons
soliciting acceptance of the exchange offer. However, we will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with the
exchange offer. We may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of the prospectus, letter of transmittal and related documents
to the beneficial owners of the initial notes, and in handling or forwarding
tenders for exchange.
We will pay the expenses incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting,
legal, printing and related fees and expenses.
We will pay all transfer taxes, if any, applicable to the exchange of
initial notes pursuant to the exchange offer. However, tendering holders will
pay the amount of any such transfer taxes, whether imposed on the registered
holder or any other persons, if:
- certificate representing exchange notes or initial notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered holder of the initial notes tendered, or
- tendered initial notes are registered in the name of any person other
than the person signing the letter of transmittal, or
- a transfer tax is imposed for any reason other than the exchange of
initial notes pursuant to the exchange offer.
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If satisfactory evidence of payment of such taxes or exemption therefrom is
not submitted with the letter of transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
YOUR FAILURE TO PARTICIPATE IN THE EXCHANGE OFFER WILL HAVE ADVERSE
CONSEQUENCES
If you do not exchange your initial notes for exchange notes pursuant to
the exchange offer or if you do not properly tender your initial notes in the
exchange offer, you will not be able to resell, offer to resell or otherwise
transfer the initial notes unless they are registered under the Securities Act
or unless you resell them, offer to resell or otherwise transfer them under an
exemption from the registration requirements of, or in a transaction not subject
to, the Securities Act. In addition, you will no longer be able to obligate us
to register the initial notes under the Securities Act except in the limited
circumstances provided under our registration rights agreement. The restrictions
on transfer of your initial notes arise because we issued the initial notes
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
addition, if you want to exchange your initial notes in the exchange offer for
the purpose of participating in a distribution of the exchange notes, you may be
deemed to have received restricted securities, and, if so, will be required to
comply with the registration and prospectus delivery requirement of the
Securities Act in connection with any resale transaction. To the extent the
initial notes are tendered and accepted in the exchange offer, the trading
market, if any, for the initial notes would be adversely affected. Please refer
to the section in this prospectus entitled "Risk Factors."
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DESCRIPTION OF THE NOTES
GENERAL
The form and terms of the exchange notes are the same as the form and terms
of the initial notes, except that the exchange notes have been registered under
the Securities Act, will not bear legends restricting the transfer thereof and
will not be entitled to registration rights under our registration rights
agreement. We issued the initial notes and will issue the exchange notes under
an indenture dated as of May 17, 1999 between us and The Bank of Nova Scotia
Trust Company of New York, as trustee. The following is a summary of the
material provisions of the indenture. It does not include all of the provisions
of the indenture. We urge you to read the indenture because it defines your
rights. The terms of the exchange notes include those stated in the indenture
and those made part of the indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon the issuance of the exchange
notes or the effectiveness of the shelf registration statement, as the case may
be, the indenture will be subject to and governed by the Trust Indenture Act.
You may obtain a copy of the indenture from us. You can find definitions of
certain capitalized terms used in this description under "-- Certain
Definitions." For purposes of this section, references to the "Company" mean
Safety-Kleen Corp. and not its Subsidiaries. Also, in this description "initial
notes" and "exchange notes" are collectively referred to as the "notes."
PRINCIPAL, MATURITY AND INTEREST
The notes are senior unsecured obligations of the Company, limited
initially in aggregate principal amount to $225,000,000. The Company issued the
notes in denominations of $1,000 and integral multiples of $1,000. The notes
will mature on May 15, 2009.
Interest on the notes will accrue at the rate of 9 1/4% per annum and will
be payable semiannually on each May 15 and November 15, commencing November 15,
1999, to the persons who are registered holders at the close of business on the
May 1 and November 1 immediately preceding the applicable interest payment date.
Interest on the notes will accrue from the date of issuance or, if interest has
already been paid, from the date it was most recently paid. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Company may issue up to $100,000,000 aggregate principal amount of
additional notes having terms and conditions identical to the notes offered
hereby (the "additional notes") from time to time subject to compliance with the
covenants contained in the indenture. Any additional notes will be part of the
same issue as the notes offered hereby and will vote on all matters with the
notes offered hereby. Unless otherwise indicated, references herein to the notes
does not include the additional notes. No offering of any such additional notes
is being or shall be deemed to be made by this prospectus. In addition, there
can be no assurance as to when or whether the Company will issue any such
additional notes or as to the aggregate principal amount of such additional
notes.
Any notes that remain outstanding after the consummation of the exchange
offer together with the exchange notes issued in connection with the exchange
offer and any additional notes will be treated as a single class of securities
under the indenture.
The notes are not entitled to the benefit of any sinking fund.
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RANKING
The notes are senior unsecured obligations of the Company, rank pari passu
in right of payment with all existing and future senior Indebtedness of the
Company and are senior in right of payment to all existing and future
Subordinated Indebtedness of the Company. The Company's obligations under its
guarantee of the Senior Credit Facility rank pari passu with the notes, and the
Company's obligations under its guarantee of the Safety Kleen Services Notes are
subordinated to the notes. The notes are not guaranteed by any of the Company's
Subsidiaries.
The Company is a holding company that conducts substantially all of its
business through its Subsidiaries. The notes are the obligations of the Company
only, and the Company's Subsidiaries do not have any obligation to pay the
amounts due under the notes. Therefore, the notes are effectively subordinated
to all existing and future indebtedness and other liabilities (including trade
payables) of the Company's Subsidiaries. As of February 28, 1999, after giving
effect to the initial offering and the repurchase of the PIK Debenture, (i) the
Company would have had approximately $350 million of indebtedness outstanding
(excluding indebtedness and other liabilities of its Subsidiaries) other than
the notes and (ii) the Company's Subsidiaries would have had approximately $2.8
billion of indebtedness and other liabilities (including trade payables)
outstanding, all of which would have been effectively senior to the notes.
As of the Closing Date, all of the Company's Subsidiaries are "Restricted
Subsidiaries." However, under certain circumstances described herein, the
Company may designate current and future Subsidiaries as "Unrestricted
Subsidiaries." Unrestricted Subsidiaries will not be subject to any of the
restrictive covenants set forth in the indenture.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
The principal of and premium, if any, and interest on the notes is payable,
and the notes are exchangeable and transferable, at the office or agency of the
Company in the City of New York maintained for such purposes (which initially
will be the office of the trustee located at One Liberty Plaza, 23rd Floor, New
York, NY 10006). At the Company's option, interest may be paid by check mailed
to the registered address of the holder. There will be no service charge for any
registration of transfer or exchange or redemption of notes, provided, however,
the Company may require in certain circumstances that you pay a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Bank of Nova Scotia Trust Company of New York, the trustee under the
indenture is the initial paying agent and registrar for the notes. The Company
may change the paying agent and registrar without prior notice to the holders of
the notes, and the Company or any of its Subsidiaries may act as paying agent or
registrar. The trustee also acts as trustee under the indenture governing the
Safety Kleen Services Notes.
INVESTMENT GRADE RATING -- FALL-AWAY COVENANTS
Upon the notes being rated Investment Grade, and only during the period
when the notes are rated Investment Grade, and provided no Default or Event of
Default has occurred and is continuing, upon the request of the Company, all of
the covenants described under "-- Certain Covenants" (with limited exceptions)
will no longer apply to
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the Company and its Subsidiaries. Accordingly, during any period when the notes
are rated Investment Grade, the holders thereof will be entitled to
substantially no covenant protection. If the notes are rated Investment Grade
and then subsequently cease to be rated Investment Grade, all of the covenants
described under "-- Certain Covenants" will once again apply to the Company and
its Restricted Subsidiaries.
ESCROW OF PROCEEDS; SPECIAL MANDATORY REDEMPTION
The net proceeds of the initial offering are being held in escrow pending
the satisfaction of the Funding Conditions. In the event the Funding Conditions
have not been satisfied on or prior to September 30, 1999, then the Company will
redeem all of the notes (the "Special Mandatory Redemption") at a redemption
price in cash equal to 101% of the aggregate principal amount of the notes plus
accrued and unpaid interest, if any, to the Mandatory Redemption Date. For
purposes hereof, "Mandatory Redemption Date" means October 15, 1999, in the
event the Funding Conditions are not satisfied by September 30, 1999.
As used herein, "Funding Conditions" means the occurrence of the following
events:
(1) the stockholders of the Company shall have approved the issuance of
shares of the Company's common stock in connection with the repurchase
of the PIK Debenture in accordance with the rules of The New York Stock
Exchange; and
(2) the conditions set forth in Article IV of the securities purchase
agreement dated as of April 19, 1999 among the Company, Laidlaw and a
subsidiary of Laidlaw (the "PIK Purchase Agreement") shall have been
satisfied or waived.
The Company, the trustee and the Bank of Nova Scotia Trust Company of New
York, as escrow agent, have entered into an escrow agreement (the "Escrow
Agreement"). Pursuant to the Escrow Agreement, the "Escrowed Funds" consist of
the net proceeds of the initial offering. The Escrowed Funds are held by the
escrow agent in an escrow account and are required to be invested in Cash
Equivalents (as defined in the Escrow Agreement).
The escrow agent will release the Escrowed Funds on such date (the "Funding
Date") and as directed by the Company upon the satisfaction of certain
conditions, including the presentation of an officer's certificate certifying
that the Funding Conditions have been satisfied, a portion of the Escrowed Funds
will be used to finance the cash portion of the purchase price for the
repurchase of the PIK Debenture. The balance of the Escrowed Funds will be used
for expenses relating to the repurchase of the PIK Debenture and for general
corporate purposes.
If the escrow agent receives a notice of Special Mandatory Redemption
pursuant to the terms of the notes, the escrow agent will arrange for the
liquidation of all Escrowed Funds to the extent invested then held by it so as
to release to the paying agent for the notes immediately available funds on the
Mandatory Redemption Date to pay the redemption price for the notes.
Concurrently with such release to the paying agent, the escrow agent will
release any excess of Escrowed Funds over the redemption price to the Company
which, in turn, will be permitted to use such funds in its discretion.
The provisions relating to the Company's obligation to redeem the notes in
the Special Mandatory Redemption described above may not be waived or modified
without the written consent of the holders of all of the notes outstanding.
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MAKE-WHOLE REDEMPTION
At any time prior to May 15, 2004, the Company may, at its option, redeem
the notes in whole or part on not less than 30 nor more than 60 days' prior
notice to the holders. The redemption price for the notes will be equal to the
greater of the following, together, in each case, with accrued and unpaid
interest, if any, to the redemption date:
- 100% of the principal amount of such notes, or
- the sum of the present values of 104.625% of the principal amount of such
notes and the scheduled payments of interest thereon through and
including May 15, 2004 discounted to such redemption date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate plus 50 basis points.
If the Company is redeeming less than all the notes, the trustee will
select the particular notes to be redeemed not more than 60 days prior to the
redemption date by lot or such other method as the trustee deems fair and
appropriate.
OPTIONAL REDEMPTION
OPTIONAL REDEMPTION. On or after May 15, 2004, the Company at its option
may redeem all or part of the notes on not less than 30 nor more than 60 days'
prior notice to the holders at the following redemption prices (expressed as
percentages of principal amount) plus accrued and unpaid interest, if any, to
the redemption date if redeemed during the 12-month period beginning on May 15,
of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2004................................................ 104.625%
2005................................................ 103.083
2006................................................ 101.542
2007 and thereafter................................. 100.000
</TABLE>
If the Company is redeeming less than all the notes, the trustee will
select the particular notes to be redeemed not more than 60 days prior to the
redemption date by lot or such other method as the trustee deems fair and
appropriate.
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. In addition, at any time
or from time to time prior to May 15, 2002, the Company may use the proceeds
from one or more Public Equity Offerings to redeem up to 35% of the aggregate
principal amount of the notes issued under the indenture at a redemption price
equal to 109.25% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date; provided that, immediately after
giving effect to such redemption:
- at least $146.25 million aggregate principal amount of the notes remains
outstanding, and
- that such redemptions occur within 90 days of the date of closing of the
related Public Equity Offering.
If the Company redeems less than all the notes, the trustee will select the
particular notes to be redeemed not more than 60 days prior to the redemption
date by lot or such other method as the trustee deems fair and appropriate.
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REPURCHASE AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
If a Change of Control occurs at any time, then each holder will have the
right to require that the Company purchase all or any part (equal to $1,000 or
integral multiples thereof) of such holder's notes pursuant to the offer
described below (the "Change of Control Offer") and the other procedures set
forth in the indenture. The Company will comply with any applicable tender offer
rules, including Rule l4e-l under the Exchange Act, and any other applicable
securities laws and regulations in connection with the repurchase of notes as a
result of a Change of Control Offer.
In the Change of Control Offer, the Company will offer to repurchase notes
at a purchase price in cash equal to 101% of the aggregate principal amount of
the notes repurchased plus accrued and unpaid interest thereon, if any, to the
date of purchase. Within 30 days following any Change of Control, the Company
will mail a notice to each holder, with a copy to the trustee, which notice
shall govern the Change of Control Offer. Such notice shall state, among other
things,
- the purchase price and the purchase date, which will be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed other than as required by law;
- that any note not tendered will continue to accrue interest;
- that, unless the Company defaults in the payment of the purchase price,
any note accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest after the Change of Control purchase date;
and
- certain other procedures that a holder must follow to accept a Change of
Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have sufficient funds to purchase all of the notes tendered by
holders seeking to accept the Change of Control Offer. The Senior Credit
Facility currently restricts such a purchase of notes by the Company prior to
repayment in full of Indebtedness outstanding under the Senior Credit Facility.
Accordingly, any Change of Control Offer would require the approval of the
lenders thereunder. In addition, a Change of Control may be an event of default
under the Senior Credit Facility or other indebtedness of the Company that may
be incurred in the future. Accordingly, the right of the holders of the notes to
require the Company to repurchase the notes may be of limited value if the
Company cannot obtain the required approval under the Senior Credit Facility.
There can be no assurance that in the event of a Change in Control the Company
will be able to obtain the necessary consents to consummate a Change of Control
Offer. The failure of the Company to make or consummate the Change of Control
Offer or pay the applicable Change of Control purchase price when due would
result in an Event of Default and would give the trustee and the holders of the
notes and additional notes, if any, the rights described under "-- Events of
Default and Remedies."
The holders' rights to require the Company to purchase notes upon a Change
of Control may deter a third party from acquiring the Company in a transaction
that constitutes a Change of Control.
The definition of "Change of Control" in the indenture is limited in scope.
The provisions of the indenture may not afford holders of the notes the right to
require the Company to repurchase such notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization,
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restructuring, merger or similar transaction involving the Company (including,
in certain circumstances, an acquisition of the Company by management or its
affiliates) that may adversely affect holders of the notes, if such transaction
is not a transaction defined as a Change of Control. See "-- Certain
Definitions" below for the definition of "Change of Control."
CERTAIN COVENANTS
The indenture contains covenants including, among other things, the
following:
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK. The Company
will not, and will not permit any Restricted Subsidiary to, create, issue,
assume, guarantee or in any manner become directly or indirectly liable for the
payment of, or otherwise incur (collectively, "incur") any Indebtedness
(including Acquired Indebtedness), other than Permitted Indebtedness, or issue
any Disqualified Stock, except that the Company or a Restricted Subsidiary may
incur Indebtedness or issue Disqualified Stock if, at the time of such
incurrence or issuance, the Fixed Charge Coverage Ratio of the Company and its
Restricted Subsidiaries for the four full fiscal quarters (taken as one
accounting period) immediately preceding the incurrence of such Indebtedness or
the issuance of such Disqualified Stock for which internal financial statements
are available would have been equal to at least 2.0 to 1.0.
For so long as the Safety-Kleen Services Indenture is in effect, the
Company will not permit Safety Kleen Services or any Restricted Subsidiary of
Safety Kleen Services to, create, issue, assume, guarantee or in any manner
become directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur") any Indebtedness (including Acquired Indebtedness),
other than Permitted Indebtedness, or issue any Disqualified Stock, except that
Safety-Kleen Services or any such Restricted Subsidiary may incur Indebtedness
or issue Disqualified Stock if, at the time of such incurrence or issuance, the
Safety-Kleen Services Fixed Charge Coverage Ratio for the four full fiscal
quarters (taken as one accounting period) immediately preceding the incurrence
of such Indebtedness or the issuance of such Disqualified Stock for which
internal financial statements are available would have been equal to at least
2.0 to 1.0 if such incurrence is on or prior to May 29, 2000 and 2.25 to 1.0 if
thereafter.
In making the foregoing calculations for any four-quarter period which
includes the Closing Date, pro forma effect will be given to the initial
offering and the application of the net proceeds therefrom as if such
transactions had occurred at the beginning of such four-quarter period. In
addition (but without duplication), in making the foregoing calculation, pro
forma effect will be given to:
- the incurrence of such Indebtedness and (if applicable) the application
of the net proceeds therefrom, including to refinance other Indebtedness,
as if such Indebtedness was incurred and the application of such proceeds
occurred at the beginning of such four-quarter period,
- the incurrence, repayment or retirement of any other Indebtedness by the
Company or its Restricted Subsidiaries, or Safety Kleen Services or its
Restricted Subsidiaries, as the case may be, since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period, or
- the acquisition (whether by purchase, merger or otherwise) or disposition
(whether by sale, merger or otherwise) of any other company, entity or
business acquired or
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disposed of by the Company or any Restricted Subsidiary, as the case may
be, since the first day of such four-quarter period, as if such
acquisition or disposition occurred at the beginning of such four-quarter
period.
In making a computation under the first and second clauses above:
- interest on Indebtedness bearing a floating interest rate will be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness if such Hedging Obligations
have a remaining term at the date of determination in excess of 12
months),
- if such Indebtedness bears, at the option of the Company or Safety-Kleen
Services, as the case may be, a fixed or floating rate of interest,
interest thereon will be computed by applying, at the option of the
Company, either the fixed or floating rate and
- the amount of Indebtedness under a revolving credit facility will be
computed based upon the average daily balance of such Indebtedness during
such four-quarter period.
INCURRENCE OF CONTINGENT OBLIGATIONS. The Company will not, and will not
permit any Restricted Subsidiaries to, create, issue, assume, guarantee or in
any manner become directly or indirectly liable for the payment of, or otherwise
incur, any Contingent Obligations if, at the time of such incurrence, all
Contingent Obligations outstanding at the date of such incurrence in the
aggregate equal or exceed an amount equal to 17% of the total assets of the
Company and its Restricted Subsidiaries (on a consolidated basis determined in
accordance with GAAP).
RESTRICTED PAYMENTS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, make any Restricted Payment
unless at the time of, and immediately after giving effect to, the proposed
Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing,
(2) the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the first paragraph of
the covenant described under "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Disqualified Stock," and
(3) the aggregate amount of all Restricted Payments declared or made after
the Closing Date does not exceed the sum of:
- 50% of the Consolidated Net Income of the Company accrued on a
cumulative basis during the period (taken as one accounting period)
beginning on the first day of the Company's fiscal quarter during
which the Closing Date occurs and ending on the last day of the
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such proposed
Restricted Payment (or, if such aggregate cumulative Consolidated Net
Income is a loss, minus 100% of such amount), plus
- the aggregate net cash proceeds received by the Company after the
Closing Date from the issuance or sale (other than to a Subsidiary)
of, or as a capital contribution in respect of, Qualified Equity
Interests of the Company, plus
- the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors,
whose good faith
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determination will be conclusive), received by the Company after the
Closing Date from the issuance or sale (other than to a Subsidiary) of
debt securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, plus the aggregate net
cash proceeds received by the Company at the time of such conversion
or exchange, plus
- the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by
a Subsidiary of the Company) subsequent to the Closing Date of any
Indebtedness of the Company for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash, or the fair value
of any other property, distributed by the Company upon such conversion
or exchange); plus
- the amount of any dividends, distributions, loans, advances,
intercompany transfers or principal payments actually paid by
Safety-Kleen Services or any of its Restricted Subsidiaries to the
Company to the extent such amount was excluded from the calculation of
the amount set forth in the first bullet under this clause (3),
provided that the amount of such dividend, distribution, loan,
advance, intercompany transfer or principal payment shall not be so
included pursuant to this bullet to the extent such amount is used by
the Company to pay principal or interest on the notes, the Company
IRBs, the Company Promissory Note, the PIK Debenture (other than in
connection with its repurchase pursuant to clause (9) below) or any
other Indebtedness of the Company; plus
- $30.0 million.
Notwithstanding the preceding paragraph, the Company and its Restricted
Subsidiaries may take any of the following actions so long as, with respect to
clauses (2), (5), (6) and (7), no Default or Event of Default has occurred and
is continuing or would occur:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not
have been prohibited by the foregoing provision;
(2) the repurchase, redemption or other acquisition or retirement for value
of any shares of Capital Stock of the Company, in exchange for, or out
of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company;
(3) the purchase, redemption, defeasance or other acquisition or retirement
for value of any Subordinated Indebtedness in exchange for, or out of
the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Subsidiary), of Qualified Equity Interests of the
Company;
(4) the purchase, redemption, defeasance or other acquisition or retirement
for value of Subordinated Indebtedness in exchange for, or out of the
net cash proceeds of a substantially concurrent issuance or sale (other
than to a Subsidiary) of, new Subordinated Indebtedness, so long as the
Company or a Restricted Subsidiary would be permitted to refinance such
original Subordinated Indebtedness with such new Subordinated
Indebtedness pursuant to clause (12) of the definition of Permitted
Indebtedness;
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(5) the repurchase of any Subordinated Indebtedness at a purchase price not
greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a "change of control" in accordance with
provisions similar to the "Change of Control" covenant; provided that,
prior to or simultaneously with such repurchase, the Company has made
the Change of Control Offer as provided in such covenant with respect
to the notes and has repurchased all notes validly tendered for payment
in connection with such Change of Control Offer;
(6) the purchase, redemption, defeasance or other acquisition or retirement
for value of, the 9 1/4% Senior Subordinated Notes due 2008 of
Safety-Kleen Services, Inc.;
(7) the purchase, redemption, defeasance or other acquisition or retirement
for value of Subordinated Indebtedness owed by the Company to any
Wholly-Owned Foreign Restricted Subsidiary;
(8) Safety-Kleen Services and its Restricted Subsidiaries may make any
Investment permitted pursuant to Section 1011 of the Safety-Kleen
Services Indenture, as in effect on the date of the indenture; and
(9) the repurchase of the PIK Debenture pursuant to the PIK Purchase
Agreement provided that the cash portion of the purchase price does not
exceed $200 million plus an amount equal to accrued and unpaid
interest.
The payments described in clauses (2), (3) and (5) of this paragraph will be
Restricted Payments that can be made but will reduce the amount that would
otherwise be available for Restricted Payments under the clause (3) of the
preceding paragraph of this covenant. The payments described in clauses (1),
(4), (6), (7), (8) and (9) of this paragraph will be Restricted Payments that
can be made but will not reduce the amount that would otherwise be available for
Restricted Payments under clause (3) of the preceding paragraph of this
covenant.
For the purpose of making any calculations under the indenture:
- if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the
Company will be deemed to have made an Investment in amount equal to the
greater of fair market value or net book value of the net assets of such
Restricted Subsidiary at the time of such designation as determined by
the Board of Directors of the Company, whose good faith determination
will be conclusive,
- any property transferred to or from an Unrestricted Subsidiary will be
valued at fair market value at the time of such transfer, as determined
by the Board of Directors of the Company, whose good faith determination
will be conclusive and
- subject to the foregoing, the amount of any Restricted Payment, if other
than cash, will be determined by the Board of Directors of the Company,
whose good faith determination will be conclusive.
If the aggregate amount of all Restricted Payments calculated under the
first paragraph of this covenant includes an Investment in an Unrestricted
Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, the
aggregate amount of all Restricted Payments calculated under the first paragraph
of this covenant will be reduced by the lesser of (1) the net asset value of
such Subsidiary at the time it becomes a Restricted Subsidiary and (2) the
initial amount of such Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under this covenant will
be reduced by the
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amount of any net reduction in such Investment (resulting from the payment of
interest or dividends, loan repayment, transfer of assets or otherwise), to the
extent such net reduction is not included in the Company's Consolidated Net
Income; provided that the total amount by which the aggregate amount of all
Restricted Payments may be reduced may not exceed the lesser of (1) the cash
proceeds received by the Company and its Restricted Subsidiaries in connection
with such net reduction and (2) the initial amount of such Investment.
ASSET SALES. The Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless:
- the Company or such Restricted Subsidiary receives consideration for such
Asset Sale at least equal to the fair market value of the assets sold (as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive and evidenced by a resolution of the
Board of Directors), and
- at least 75% of the consideration received by the Company or the relevant
Restricted Subsidiary in respect of such Asset Sale is cash or Cash
Equivalents.
For purposes of the preceding paragraph, the following shall be deemed to
be cash or Cash Equivalents:
- any liabilities (as shown on the most recent balance sheet of the Company
or such Restricted Subsidiary) of the Company or any of its Restricted
Subsidiaries (other than liabilities that are by their terms subordinated
to the notes or any guarantee thereof) that are assumed by the transferee
of any such assets pursuant to a customary novation agreement that
releases the Company or such Restricted Subsidiary from further
liability, and
- any securities, notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash or Cash
Equivalents (to the extent of the cash or Cash Equivalents received).
Within 360 days after such Asset Sale, the Company may, at its option:
- apply all or a portion of the Net Cash Proceeds to permanently reduce the
amounts outstanding under the Senior Credit Facility or repay
Indebtedness of any Restricted Subsidiary, or
- invest (or enter into a legally binding agreement to invest) all or a
portion of such Net Cash Proceeds in properties and assets to replace the
properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in businesses of the Company or
its Restricted Subsidiaries, as the case may be, as such businesses are
conducted prior to such Asset Sale or in businesses reasonably related or
ancillary thereto (in any such case as determined by the Board of
Directors in good faith).
If any such legally binding agreement to invest such Net Cash Proceeds is
terminated, the Company may, within 90 days of such termination or within 360
days of such Asset Sale, whichever is later, invest such Net Cash Proceeds as
provided above (without regard to the parenthetical contained in the second
clause of this paragraph). Notwithstanding the foregoing, if the Company or any
Restricted Subsidiary engages in an Asset Sale of Designated Assets (x) the
Company may, at its option, within 360 days after such Asset Sale of Designated
Assets, (1) apply all or a portion of the Net Cash Proceeds to reduce the
amounts outstanding under the Senior Credit Facility or repay other Indebtedness
of
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any Restricted Subsidiary or (2) invest (or enter into a legally binding
agreement to invest) all or a portion of such Net Cash Proceeds as set forth in
the second bullet above and (y) the Company or the relevant Restricted
Subsidiary shall not be required to receive, as set forth above, 75% of the
consideration in respect of such Asset Sale of Designated Assets in the form of
cash or Cash Equivalents. The amount of such Net Cash Proceeds that are not
applied or invested as provided in the preceding paragraph will constitute
"Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $15.0 million, the
Company will, within 30 days thereafter, make an offer to purchase from all
holders of notes, on a pro rata basis, the maximum principal amount (expressed
as a multiple of $1,000) of the notes that may be purchased with the Excess
Proceeds (an "Asset Sale Offer"). The offer price as to each note will be
payable in cash in an amount equal to 100% of the principal amount of such note
plus accrued and unpaid interest, if any, to the date of repurchase. If any
Excess Proceeds remain after consummation of the Asset Sale Offer, the Company
may use the portion of such Excess Proceeds for general corporate purposes. If
the aggregate principal amount of notes validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, the trustee shall select the notes
to be purchased on a pro rata basis (based upon the principal amount of notes).
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds will be
reset to zero.
LIENS. The Company will not create, incur, affirm or suffer to exist any
Lien of any kind, other than Permitted Liens and Liens arising under the Escrow
Agreement, securing any Indebtedness upon any property or assets (including any
intercompany notes) of the Company now owned or acquired after the Closing Date,
or any income or profits therefrom, unless the notes are directly secured
equally and ratably with (or prior to in the case of Subordinated Indebtedness)
the obligation or liability secured by such Lien, and except for any Lien
securing Acquired Indebtedness created prior to the incurrence of such
Indebtedness by the Company, provided that any such Lien only extends to the
assets that were subject to such Lien securing such Acquired Indebtedness prior
to the related acquisition by the Company.
DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to:
- pay dividends, in cash or otherwise, or make any other distributions on
or in respect of its Capital Stock,
- pay any Indebtedness owed to the Company or any other Restricted
Subsidiary,
- make loans or advances to the Company or any other Restricted Subsidiary,
or
- transfer any of its properties or assets to the Company or any other
Restricted Subsidiary.
The preceding restrictions will not apply to encumbrances or restrictions
existing under or by reason of:
(1) the indenture, the Senior Credit Facility, as in effect on the date of
the indenture, and any other agreement in effect on the Closing Date to
the extent listed on a schedule attached to the indenture,
(2) applicable law,
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(3) customary non-assignment provisions of any lease governing a leasehold
interest of the Company or any Restricted Subsidiary,
(4) any agreement or other instrument of a Person acquired by the Company
or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired,
(5) any encumbrance or restriction contained in contracts for sales of
assets (including the Capital Stock of any Restricted Subsidiary)
permitted by the covenant described under "-- Certain
Covenants -- Asset Sales" with respect to the assets to be sold
pursuant to such contract,
(6) any encumbrance or restriction existing under any agreement that
extends, renews, refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clauses (1) and (4);
provided that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the holders of notes
than those under or pursuant to the agreement so extended, renewed,
refinanced or replaced, and
(7) any encumbrance or restriction under any agreement relating to
Indebtedness permitted to be incurred under the covenant described
under "Incurrence of Indebtedness and Issuance of Disqualified Stock";
provided, that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the holders of the
notes than those in the agreements referred to in clause (1) above
(including the Safety-Kleen Services Indenture as in effect on May 29,
1998).
CONSOLIDATION, MERGER AND SALE OF ASSETS. The Company may not, directly or
indirectly, consolidate with or merge with or into any other Person (whether or
not the Company is the surviving Person) or sell, assign, convey, transfer,
lease or otherwise dispose of all or substantially all of its properties or
assets (determined on a consolidated basis for the Company and its Subsidiaries
taken as a whole) to any other Person or Persons, in one transaction or a series
of related transactions, unless:
(1) either (A) the Company is the surviving corporation or (B) the Person
(if other than the Company) formed by such consolidation or into which
the Company is merged or the Person that acquires by sale, assignment,
conveyance, transfer, lease or other disposition all or substantially
all of the properties and assets of the Company and its Restricted
Subsidiaries on a consolidated basis (the "Surviving Entity"):
- is a corporation, partnership limited liability company or trust duly
organized and validly existing under the laws of the United States,
any state thereof or the District of Columbia, and
- expressly assumes, by a supplemental indenture in form reasonably
satisfactory to the trustee, all of the Company's obligations under
the indenture and the notes.
(2) Immediately after giving effect to such transaction or series of
transactions on a pro forma basis, no Default or Event of Default has
occurred and is continuing.
(3) Immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Consolidated Net Worth of the
Company (or of the
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Surviving Entity if the Company is not the continuing obligor under the
indenture) is equal to or greater than the Consolidate Net Worth of the
Company immediately prior to such transaction or series of
transactions.
(4) Immediately after giving effect to such transaction or series of
transactions on a pro forma basis (on the assumption that the
transaction or series of transactions occurred at the beginning of the
most recently ended four full fiscal quarter period for which internal
financial statements are available), the Company (or the Surviving
Entity if the Company is not the continuing obligor under the
indenture) could incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the first paragraph of the
covenant described under "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Disqualified Stock."
(5) The Company delivers, or causes to be delivered, to the trustee, in
form and substance reasonably satisfactory to the trustee, an officers'
certificate and an opinion of counsel, each stating that such
transaction complies with the requirements of the indenture.
In the event of a merger of a Wholly Owned Restricted Subsidiary into the
Company, the Company need not comply with clauses (3) and (4) above. In the
event of a merger of the Company into Safety-Kleen Services, the Company need
not comply with clause (4) above.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries that constitutes all or substantially all of the properties and
assets of the Company on a consolidated basis, will be deemed to be the transfer
of all or substantially all of the properties and assets of the Company.
In the event of any transaction or series of related transactions described
in and complying with the conditions listed in the first paragraph of this
covenant in which the Company is not the continuing obligor under the indenture,
the Surviving Entity will succeed to, and be substituted for, and may exercise
every right and power of, the Company under the indenture, and thereafter the
Company will, except in the case of a lease, be discharged from all its
obligations and covenants under the indenture and notes.
TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions with, or for the benefit
of, any Affiliate of the Company or any of its Restricted Subsidiaries, unless:
(1) such transaction or series of related transactions is on terms that are
no less favorable to the Company or such Restricted Subsidiary, as the
case may be, than those that could have been obtained in an arm's
length transaction with third parties who are not Affiliates, and
(2) the Company delivers to the trustee:
(A) with respect to any transaction or series of related transactions
involving aggregate payments in excess of $5.0 million, but less
than $10.0 million, a resolution of the Board of Directors of the
Company set forth in an officers' certificate certifying that such
transaction or series of related transactions comply with clause (1)
above and that such transaction or transactions have
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been approved by the Board of Directors (including a majority of the
Disinterested Directors) of the Company, or
(B) with respect to a transaction or series of related transactions
involving aggregate payments equal to or greater than $10.0 million:
- an officers' certificate to the trustee certifying that such
transaction or series of related transactions have been approved
by the Board of Directors (including a majority of the
Disinterested Directors) of the Company, and
- a written opinion from a nationally recognized accounting or
investment banking firm to the effect that such transaction or
series of related transactions are fair to the Company or such
Restricted Subsidiary from a financial point of view.
The foregoing covenant will not restrict any of the following:
- Transactions among the Company and/or its Restricted Subsidiaries;
- The Company from paying reasonable and customary regular compensation or
fees to, or entering into customary expense reimbursement,
indemnification or similar arrangements with, directors of the Company or
any Restricted Subsidiary who are not employees of the Company or any
Restricted Subsidiary;
- Transactions permitted by the provisions of the covenant described
"-- Certain Covenants -- Restricted Payments;"
- Transactions among the Company, Safety-Kleen Services, Inc. and Laidlaw
pursuant to the Stock Purchase Agreement;
- Transactions among the Company, Laidlaw and/or Laidlaw International
Finance Corporation pursuant to the PIK Purchase Agreement;
- Any payments made by the Company or a Restricted Subsidiary to Laidlaw or
transactions entered into among the Company, any Restricted Subsidiary
and/or Laidlaw pursuant to customary financial and management service
arrangements (including, without limitation, general liability and
workers' compensation insurance, income tax management and treasury
services); provided, however, that each such payment or transaction is:
- in the ordinary course of business consistent with past practice prior
to the date of the indenture, and
- upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than could have been
obtained in a comparable arm's length transaction with a Person that
is not an Affiliate of the Company or such Restricted Subsidiary;
- Investments by the Company and its Restricted Subsidiaries in
Safety-Kleen Europe Limited; provided, however, that each such Investment
is:
- being made substantially concurrently with Investments by other
Persons (other than management or former management of Safety-Kleen
Europe Limited) owning equity interests in Safety-Kleen Europe Limited
at the date of such Investment;
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- made on substantially the same terms and conditions as such
Investments being made concurrently by other Persons (other than
management or former management of Safety-Kleen Europe Limited) owning
equity interests in Safety-Kleen Europe Limited at such date; and
- upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiaries, as the case may be, than could have been
obtained in a comparable arm's length transaction with a Person that
is not an Affiliate of the Company or such Restricted Subsidiaries.
- Transactions among the Company and its Restricted Subsidiaries and (1)
Church Dwight Co., Inc. pursuant to the Partnership Agreement, and (2)
the Partnership pursuant to the Sales Agreement; provided, however, that:
- each such transaction is in the ordinary course of business, and
- each such transaction is upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary, as the case
may be, than could have been obtained in a comparable arm's length
transaction with a Person that is not an Affiliate of the Company or
such Restricted Subsidiary.
- if any transaction or series of related transactions involving
aggregate payments in excess of $5.0 million is entered into pursuant
to the Partnership Agreement and/or the Sales Agreement and such
agreement has been amended or replaced since the date of the
indenture, the Company shall deliver to the trustee a resolution of
the Board of Directors of the Company set forth in an officers'
certificate certifying that such transaction or series of related
transactions comply with clause (1) in the first paragraph above and
that such transaction or series of related transactions have been
approved by the Board of Directors (including a majority of the
Disinterested Directors) of the Company.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue, convey, sell, assign, transfer,
lease or otherwise dispose of any shares of Capital Stock of a Restricted
Subsidiary (including options, warrants or other rights to purchase shares of
such Capital Stock) except:
- to the Company or a Wholly Owned Restricted Subsidiary,
- in a transaction or series of related transactions consisting of a sale
provided that immediately after giving effect to such sale, neither the
Company nor any of its Subsidiaries owns any shares of Capital Stock of
such Restricted Subsidiary (including options, warrants or other rights
to purchase shares of such Capital Stock) and such sale complies with the
covenant described under "-- Asset Sales,"
- in a transaction or series of related transactions consisting of a sale
(or an issuance for value) provided that immediately after giving effect
to such sale, such Restricted Subsidiary is no longer a Subsidiary of the
Company and such sale complies with the covenants described under
"-- Restricted Payments" and "-- Asset Sales," or
- that Safety Kleen Services may issue or sell shares of its Preferred
Stock provided that, immediately after giving effect to such issuance or
sale, Safety Kleen Services could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the second
paragraph of the covenant described under "-- Incurrence of Indebtedness
and Issuance of Disqualified Stock."
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PAYMENTS FOR CONSENT. Neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the indenture or the notes unless such consideration is offered to
be paid or is paid to all holders that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES. The Company will
not permit any Restricted Subsidiary, directly or indirectly, to guarantee,
assume or in any other manner become liable for the payment of any Indebtedness
of the Company (except for Indebtedness of the Company consisting of a guarantee
of Indebtedness of a Restricted Subsidiary), unless:
- such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture providing for a guarantee of payment of the notes
by such Restricted Subsidiary, and
- with respect to any guarantee of Subordinated Indebtedness by a
Restricted Subsidiary, any such guarantee is subordinated to such
Restricted Subsidiary's guarantee with respect to the notes at least to
the same extent as such Subordinated Indebtedness is subordinated to the
notes, provided that the foregoing provision will not be applicable to
any guarantee by any Restricted Subsidiary that existed at the time such
Person became a Restricted Subsidiary and was not incurred in connection
with, or in contemplation of, such Person becoming a Restricted
Subsidiary.
Any guarantee by a Restricted Subsidiary of the notes pursuant to the
preceding paragraph may provide by its terms that it will be automatically and
unconditionally released and discharged upon:
- any sale, exchange or transfer to any Person of all of the Company's and
the Restricted Subsidiaries' Capital Stock in, or all or substantially
all the assets of, such Restricted Subsidiary (which sale, exchange or
transfer is not prohibited by the indenture),
- the release or discharge of the guarantee that resulted in the creation
of such guarantee of the notes, except a discharge or release by or as a
result of payment under such guarantee, or
- the designation of such Restricted Subsidiary as an Unrestricted
Subsidiary in accordance with the terms of the indenture.
UNRESTRICTED SUBSIDIARIES. The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as:
- neither the Company nor any Restricted Subsidiary is directly or
indirectly liable for any Indebtedness of such Subsidiary,
- no default with respect to any Indebtedness of such Subsidiary would
permit (upon notice, lapse of time or otherwise) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity,
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- any Investment in such Subsidiary made as a result of designating such
Subsidiary an Unrestricted Subsidiary will not violate the provisions of
the covenant described under "-- Certain Covenants -- Restricted
Payments,"
- neither the Company nor any Restricted Subsidiary has a contract,
agreement, arrangement, understanding or obligation of any kind, whether
written or oral, with such Subsidiary other than those that might be
obtained at the time from Persons who are not Affiliates of the Company,
and
- neither the Company nor any Restricted Subsidiary has any obligation to
subscribe for additional shares of Capital Stock or other equity interest
in such Subsidiary, or to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels
of operating results.
The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that:
- no Default or Event of Default has occurred and is continuing following
such designation, and
- the Company could incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the first paragraph of the
covenant described under "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Disqualified Stock" (treating any
Indebtedness of such Unrestricted Subsidiary as the incurrence of
Indebtedness by a Restricted Subsidiary).
LIMITATION ON CONDUCT OF BUSINESS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, conduct any business other than
the business the Company and its Restricted Subsidiaries was conducting on the
Closing Date or businesses reasonably related or ancillary thereto, except to
such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
REPORTS. Whether or not the Company is then required to file reports with
the Commission, the Company will file on a timely basis with the Commission the
annual reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15(d) of the Exchange Act.
The Company will also be required to supply to the trustee and each holder of
notes, or supply to the trustee for forwarding to each such holder, without cost
to such holder, copies of such reports and documents within 15 days after the
date on which the Company files (or would otherwise have been required to file)
such reports and documents with the Commission. If filing such reports and
documents with the Commission is not accepted by the Commission or is prohibited
under the Exchange Act, the Company will supply at the Company's cost copies of
such reports and documents to any prospective holder of notes promptly upon
written request. In addition, the Company has agreed that, for so long as any
notes remain outstanding, it will furnish to the holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
CERTAIN INVESTMENT GRADE COVENANTS
In the event the notes are rated Investment Grade, and only during the
period when the notes are rated Investment Grade, provided no Default or Event
of Default has occurred and is continuing, the Company may elect that each of
the covenants described above under "-- Certain Covenants" (other than
"-- Consolidation, Merger and Sale of Assets" (except paragraphs (3) and (4)
thereof) "-- Reports") shall cease to apply to the
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Company and, if applicable, the Restricted Subsidiaries. In addition, the
indenture contains, among other things, the following covenants, each of which
will apply to the Company and the Restricted Subsidiaries during the period when
the notes are rated Investment Grade. If the notes are rated Investment Grade
and then subsequently cease to be rated Investment Grade, all of the covenants
described under "-- Certain Covenants" will once again apply to the Company and
its Restricted Subsidiaries.
LIMITATION ON LIENS SECURING INDEBTEDNESS. The Company shall not, and
shall not permit any Restricted Subsidiary to, create, incur or assume any Lien
(other than any Permitted Lien) on any properties or assets of the Company or
any Restricted Subsidiary to secure the payment of Indebtedness of the Company
or any Subsidiary if immediately after the creation, incurrence or assumption of
such Lien, the aggregate outstanding principal amount of all Indebtedness of the
Company and the Subsidiaries that is secured by Liens (other than Permitted
Liens) on any properties or assets of the Company and any Restricted
Subsidiaries (other than (x) Indebtedness that is so secured equally and ratably
with (or on a basis subordinated to) the notes and (y) the notes), plus the
aggregate amount of all Attributable Debt of the Company and the Restricted
Subsidiaries with respect to all Sale and Leaseback Transactions outstanding at
such time (other than Sale and Leaseback Transactions permitted by the second
paragraph under "-- Limitation on Sale and Leaseback Transactions"), would
exceed 10% of Consolidated Net Tangible Assets, unless the Company secures the
outstanding notes equally and ratably with (or prior to) all Indebtedness
secured by such Lien, so long as such Indebtedness shall be so secured.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company shall not, and
shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction involving any properties or assets of the Company or any Restricted
Subsidiary, as the case may be, unless, after giving effect to such Sale and
Leaseback Transaction, the aggregate amount of all Attributable Debt of the
Company and the Restricted Subsidiaries with respect to all Sale and Leaseback
Transactions outstanding at such time (other than Sale and Leaseback
Transactions permitted by the next paragraph), plus the aggregate principal
amount of all Indebtedness of the Company and the Subsidiaries that is secured
by Liens (other than Permitted Liens) on properties or assets of the Company or
any Restricted Subsidiary, as the case may be, (other than (x) Indebtedness that
is so secured equally and ratably with (or on a basis subordinated to) the notes
and (y) the notes), would not exceed 10% of Consolidated Net Tangible Assets.
The restriction in the foregoing paragraph shall not apply to any Sale and
Leaseback Transaction if:
(1) the lease is for a period of not in excess of three years, including
renewal of rights,
(2) the lease secures or relates to industrial revenue or similar
financing,
(3) the transaction is solely between the Company and a Restricted
Subsidiary or between or among Restricted Subsidiaries, or
(4) the Company or such Restricted Subsidiary, within 270 days after the
sale is completed, applies an amount equal to or greater of:
(A) the Net Cash Proceeds of the sale of the properties or assets of the
Company or any Restricted Subsidiary, as the case may be, which are
the subject of the Sale and Leaseback Transaction, or
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(B) the fair market value of the properties or assets of the Company or
any Restricted Subsidiary, as the case may be, which are the subject
of the Sale and Leaseback Transaction (as determined in good faith
by the Board of Directors of the Company) either to:
- the retirement (or open market purchase) of notes, other
long-term Indebtedness of the Company ranking on a parity with
the notes or long-term Indebtedness of a Restricted Subsidiary,
or
- the purchase by the Company or any Restricted Subsidiary of other
properties and assets that will be used in the business of the
Company or its Restricted Subsidiaries (or businesses reasonably
related or ancillary thereto) having a value at least equal to
the value of the properties or assets of the Company or the
Restricted Subsidiary, as the case may be, which are the subject
of the Sale and Leaseback Transaction.
EVENTS OF DEFAULT AND REMEDIES
Each of the following will be "Events of Default" under the indenture:
(1) Default for 30 days in the payment of any interest on any note when it
becomes due and payable.
(2) Default when due in the payment of the principal of or premium, if any,
on any note.
(3) Failure by the Company or any of its Restricted Subsidiaries to perform
or comply with the provisions of the covenant described under
"-- Certain Covenants -- Consolidation, Merger and Sale of Assets" or
to make or consummate a Change of Control Offer or Asset Sale Offer in
accordance with provisions of the covenants described under
"-- Repurchase at the Option of the Holders Upon Change of Control" and
"-- Certain Covenants -- Asset Sales", respectively.
(4) Default in the performance, or breach, of any covenant or agreement of
the Company contained in the indenture (other than as contemplated by
clauses (1), (2) and (3) above) and continuance of such default or
breach for a period of 60 days after written notice has been given (i)
to the Company by the trustee or (ii) to the Company and the trustee by
the holders of at least 25% in aggregate principal amount of the notes
then outstanding.
(5) The occurrence of an event of default under any mortgage, bond,
indenture, loan agreement or other document evidencing Indebtedness of
the Company or any Restricted Subsidiary, which Indebtedness has an
aggregate outstanding principal amount of $25.0 million or more, and
such default (i) results in the acceleration of such Indebtedness prior
to its Stated Maturity or (ii) constitutes a failure to make any
payment of principal with respect to any such Indebtedness when due and
payable after the expiration of any applicable grace period.
(6) Failure by the Company or any of its Restricted Subsidiaries to pay one
or more final judgments the uninsured portion of which exceeds in the
aggregate $25.0 million, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days.
(7) The occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant
Subsidiary.
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If an Event of Default (other than as specified in clause (7) above) occurs
and is continuing, the trustee or the holders of not less than 25% in aggregate
principal amount of the notes then outstanding may, and the trustee at the
request of such holders will, declare the principal of and premium, if any, and
accrued and unpaid interest on all of the outstanding notes immediately due and
payable and, upon any such declaration, all such amounts will become due and
payable immediately. If an Event of Default specified in clause (7) above occurs
and is continuing, then the principal and premium, if any, and accrued and
unpaid interest on all the outstanding notes will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the trustee or any holder of notes.
At any time after a declaration of acceleration under the indenture, but
before a judgment or decree for payment of the money due has been obtained by
the trustee, the holders of a majority in aggregate principal amount of the
outstanding notes, by written notice to the Company and the trustee, may rescind
such declaration and its consequences if:
(1) the Company has paid or deposited with the trustee a sum sufficient to
pay
- all overdue interest on all notes,
- all unpaid principal of (and premium, if any, on) any outstanding
notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the notes,
- to the extent that payment of such interest is lawful, interest upon
overdue interest and overdue principal at the rate borne by the notes
and
- all sums paid or advanced by the trustee under the indenture and the
reasonable compensation, expenses, disbursements and advances of the
trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on the notes that
have become due solely by such declaration of acceleration, have been
cured or waived. No such rescission will affect any subsequent default
or impair any right consequent thereon.
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the notes because an Event of Default specified in
clause (5) of this covenant shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the trustee by the Company and countersigned by
the holders of such Indebtedness or a trustee, fiduciary or agent for such
holders, within 30 days after such declaration of acceleration in respect of the
notes, and no other Event of Default has occurred during such 30-day period
which has not been cured or waived during such period.
No holder has any right to institute any proceeding with respect to the
indenture or any remedy thereunder, unless the holders of at least 25% in
aggregate principal amount of the outstanding notes have made written request
and offered reasonable indemnity to the trustee to institute such proceeding,
the trustee does not comply with such request within 60 days after receipt of
such notice and the trustee, within such 60-day period, has not received
directions inconsistent with such written request by holders of a majority in
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aggregate principal amount of the outstanding notes. Such limitations do not
apply, however, to a suit instituted by a holder for the enforcement of the
payment of the principal of, premium, if any, or interest on such note on or
after the respective due dates expressed in such note.
The holders of not less than a majority in aggregate principal amount of
the outstanding notes may, on behalf of the holders of all of the notes, waive
any past defaults under the indenture, except a default in the payment of the
principal of, premium, if any, or interest on any note, or in respect of a
covenant or provision that under the indenture cannot be modified or amended
without the consent of the holder of each note outstanding.
If a Default or an Event of Default occurs and is continuing and is known
to the trustee, the trustee will mail to each holder of the notes notice of the
Default or Event of Default within 90 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of and
premium, if any, or interest on any notes, the trustee may withhold the notice
to the holders of the notes if a committee of its trust officers in good faith
determines that withholding such notice is in the interests of the holders of
the notes.
The Company is required to furnish to the trustee annual statements as to
the performance by the Company of its obligations under the indenture and as to
any default in such performance. The Company is also required to notify the
trustee within five days of any Default.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes ("defeasance")
except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of and premium, if any, and interest on such
notes when such payments are due,
(2) the Company's obligations to issue temporary notes, register the
transfer or exchange of any notes, replace mutilated, destroyed, lost
or stolen notes, maintain an office or agency for payments in respect
of the notes and segregate and hold such payments in trust,
(3) the rights, powers, trusts, duties and immunities of the trustee, and
(4) the defeasance provisions of the indenture.
In addition, the Company may, at its option and at any time, elect to have
its obligations released with respect to certain covenants set forth in the
indenture and described under "-- Certain Covenants" above, and any omission to
comply with such obligations would not constitute a Default or an Event of
Default with respect to the notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance:
(1) the Company must irrevocably deposit or cause to be deposited with the
trustee, as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the holders of the notes, money
in an amount, or U.S. Government Obligations (as defined in the
indenture) that through the scheduled payment of principal and interest
thereon will provide money in an amount, or a combination
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thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of
(and premium, if any, on) and interest on the outstanding notes at
maturity (or upon redemption, if applicable) of such principal or
installment of interest;
(2) no Default or Event of Default has occurred and is continuing on the
date of such deposit or, insofar as an event of bankruptcy under clause
(7) of "Events of Default" above is concerned, at any time during the
period ending on the 91st day after the date of such deposit;
(3) such defeasance or covenant defeasance may not result in a breach or
violation of, or constitute a default under, the indenture or any
material agreement or instrument to which the Company is a party or by
which it is bound;
(4) in the case of defeasance, the Company must deliver to the trustee an
opinion of counsel stating that the Company has received from, or there
has been published by, the Internal Revenue Service a ruling, or since
the date hereof there has been a change in applicable federal income
tax law, to the effect, and based thereon such opinion must confirm
that, the holders of the outstanding notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred;
(5) in the case of covenant defeasance, the Company must have delivered to
the trustee an opinion of counsel to the effect that the holders of the
notes outstanding will not recognize income, gain or loss for federal
income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(6) the Company must have delivered to the trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
Upon the request of the Company, the indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the notes, as expressly provided for in the indenture) and the trustee, at the
expense of the Company, will execute proper instruments acknowledging
satisfaction and discharge of the indenture when:
(1) either
- all the notes theretofore authenticated and delivered (other than
destroyed, lost or stolen notes that have been replaced or paid and
notes that have been subject to defeasance under "-- Legal Defeasance
and Covenant Defeasance") have been delivered to the trustee for
cancellation or
- all notes not theretofore delivered to the trustee for cancellation
have become due and payable, will become due and payable at maturity
within one year or are to be called for redemption within one year
under arrangements reasonably satisfactory to the trustee for the
giving of notice of redemption by the trustee
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in the name, and at the expense, of the Company, and the Company has
irrevocably deposited or caused to be deposited with the trustee funds
in trust for the purpose in an amount sufficient to pay and discharge
the entire indebtedness on such notes not theretofore delivered to the
trustee for cancellation, for principal and premium, if any, and
interest on the notes to the date of such deposit (in the case of
notes that have become due and payable) or to the Stated Maturity or
redemption date, as the case may be;
(2) the Company has paid or caused to be paid all sums payable under the
indenture by the Company; and
(3) the Company has delivered to the trustee an officers' certificate and
an opinion of counsel, each stating that all conditions precedent
provided in the indenture relating to the satisfaction and discharge of
the indenture have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Modifications and amendments of the indenture may be made by the Company
and the trustee with the consent of the holders of a majority in aggregate
outstanding principal amount of the notes. Without the consent of each holder
affected, an amendment or waiver may not:
- change the Stated Maturity of the principal of, or any installment of
interest on, any note, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof,
or change the place of payment where, or the coin or currency in which
any note or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date); or
- reduce the percentage in aggregate principal amount of outstanding notes
required to consent to any amendment of, or waiver of compliance with,
any provision of or defaults under the indenture; or
- waive a Default or Event or Default in the payment of principal of or
premium, if any, or interest on the notes (except a rescission of
acceleration of notes by the holders of at least a majority in aggregate
principal amount of the then outstanding notes (including additional
notes issued under the indenture, if any)); or
- amend, change or modify the obligation of the Company to make and
consummate a Change of Control Offer or Asset Sale Offer in accordance
with the provisions of the covenant described under "-- Repurchase at the
Option of the holders Upon Change of Control" and "-- Certain
Covenants -- Asset Sales", respectively, or
- amend, change or modify any of the foregoing modification and amendment
provisions.
The holders of a majority in aggregate principal amount of the notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the indenture.
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Notwithstanding the foregoing, without the consent of any holders, the
Company and the trustee, at any time and from time to time, may amend or
supplement the indenture:
- to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company in the
indenture and in the notes; or
- to add to the covenants of the Company for the benefit of the holders, or
to surrender any right or power herein conferred upon the Company; or
- to add additional Events of Default; or
- to provide for uncertificated notes in addition to or in place of the
certificated notes; or
- to evidence and provide for the acceptance of appointment under the
indenture by a successor trustee; or
- to secure or guarantee the notes; or
- to cure any ambiguity, to correct or supplement any provision in the
indenture that may be defective or inconsistent with any other provision
in the indenture, or to make any other provisions with respect to matters
or questions arising under the indenture, provided that such actions
pursuant to this clause do not adversely affect the interests of the
holders; or
- to comply with any requirements of the Commission in order to effect and
maintain the qualification of the indenture under the Trust Indenture
Act.
CONCERNING THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. The holders of a majority in outstanding principal amount of
the notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. If an Event of Default has occurred and is continuing, the
trustee will be required in the exercise of its powers, to use the degree of
care of a prudent Person in the conduct of such Person's own affairs.
If the trustee becomes a creditor of the Company, the indenture limits its
rights to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claims, as security or otherwise.
The trustee is permitted to engage in other transactions; provided, however,
that, if it acquires any conflicting interest (as defined), it must eliminate
such conflict upon the occurrence of an Event of Default or else resign.
An affiliate of the trustee is acting as managing agent and as
co-documentation agent under the Senior Credit Facility.
GOVERNING LAW
The indenture and the notes are governed by, and construed in accordance
with, the laws of the State of New York.
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BOOK-ENTRY, DELIVERY AND FORM
Except as described below, we will initially issue the exchange notes in
the form of one or more registered exchange notes in global form without
coupons. We will deposit each global note on the date of the closing of this
exchange offer with, or on behalf of, The Depository Trust Company in New York,
New York, and register the exchange notes in the name of The Depository Trust
Company or its nominee, or will leave these notes in the custody of the trustee.
THE DEPOSITORY TRUST COMPANY'S PROCEDURES
For your convenience, we are providing you with a description of the
operations and procedures of The Depository Trust Company. The operations and
procedures of The Depository Trust Company are solely within the control of its
settlement system however and may change from time to time. We are not
responsible for these operations and procedures and urge you to contact The
Depository Trust Company or its participants directly to discuss these matters.
The Depository Trust Company has advised us that it is a limited-purpose
trust company created to hold securities for its participating organizations and
to facilitate the clearance and settlement of transactions in those securities
between its participants through electronic book entry changes in the accounts
of these participants. These direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and other organizations.
Access to The Depository Trust Company's system is also indirectly available to
other entities that clear through or maintain a direct or indirect, custodial
relationship with a direct participant. The Depository Trust Company may hold
securities beneficially owned by other persons only through its participants and
the ownership interests and transfers of ownership interests of these other
persons will be recorded only on the records of the participants and not on the
records of The Depository Trust Company.
The Depository Trust Company has also advised us that, in accordance with
its procedures, (1) upon deposit of the global notes, it will credit the
accounts of the direct participants with an interest in the global notes, and
(2) it will maintain records of the ownership interests of these direct
participants in the global notes and the transfer of ownership interests by and
between direct participants. The Depository Trust Company will not maintain
records of the ownership interests of, or the transfer of ownership interests by
and between, indirect participants or other owners of beneficial interests in
the global notes. Both direct and indirect participants must maintain their own
records of ownership interests of, and the transfer of ownership interests by
and between, indirect participants and other owners of beneficial interests in
the global notes.
Investors in the global notes may hold their interests in the notes
directly through The Depository Trust Company if they are direct participants in
The Depository Trust Company or indirectly through organizations that are direct
participants in The Depository Trust Company. All interests in a global note may
be subject to the procedures and requirements of The Depository Trust Company.
The laws of some states require that some persons take physical delivery in
definitive certificated form of the securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a global note to these
persons. Because The Depository Trust Company can act only on behalf of direct
participants, which in turn act on behalf of indirect participants and others,
the ability of a person having a beneficial interest in a
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global note to pledge its interest to persons or entities that are not direct
participants in The Depository Trust Company or to otherwise take actions in
respect of its interest, may be affected by the lack of physical certificates
evidencing the interests.
Except as described below, owners of interests in the global notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders of these notes under the indenture for any purpose.
Payments with respect to the principal of and interest on any notes
represented by a global note registered in the name of The Depository Trust
Company or its nominee on the applicable record date will be payable by the
trustee to or at the direction of The Depository Trust Company or its nominee in
its capacity as the registered holder of the global note representing these
notes under the indenture. Under the terms of the indenture, we and the trustee
will treat the person in whose names the notes are registered, including notes
represented by global notes, as the owners of the notes for the purpose of
receiving payments and for any and all other purposes whatsoever. Payments in
respect of the principal and interest on global notes registered in the name of
The Depository Trust Company or its nominee will be payable by the trustee to
The Depository Trust Company or its nominee as the registered holder under the
indenture. Consequently, none of Safety-Kleen Corp., the trustee or any of our
agents, or the trustee's agents has or will have any responsibility or liability
for (1) any aspect of The Depository Trust Company's records or any direct or
indirect participant's records relating to, or payments made on account of,
beneficial ownership interests in the global notes or for maintaining,
supervising or reviewing any of The Depository Trust Company's records or any
direct or indirect participant's records relating to the beneficial ownership
interests in any global note or (2) any other matter relating to the actions and
practices of The Depository Trust Company or any of its direct or indirect
participants.
The Depository Trust Company has advised us that its current practice, upon
receipt of any payment in respect of securities such as the notes, including
principal and interest, is to credit the accounts of the relevant participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interest in the
security as shown on its records, unless it has reasons to believe that it will
not receive payment on the payment date. Payments by the direct and indirect
participants to the beneficial owners of interests in the global note will be
governed by standing instructions and customary practice and will be the
responsibility of the direct or indirect participants and will not be the
responsibility of The Depository Trust Company, the trustee or us.
Neither Safety-Kleen Corp. nor the trustee will be liable for any delay by
The Depository Trust Company or any direct or indirect participant in
identifying the beneficial owners of the notes and Safety-Kleen Corp. and the
trustee may conclusively rely on, and will be protected in relying on,
instructions from The Depository Trust Company for all purposes, including with
respect to the registration and delivery, and the respective principal amounts,
of the notes.
Transfers between participants in The Depository Trust Company will be
effected in accordance with The Depository Trust Company's procedures, and will
be settled in same day funds.
The Depository Trust Company has advised us that it will take any action
permitted to be taken by a holder of notes only at the direction of one or more
participants to whose
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account The Depository Trust Company has credited the interests in the global
notes and only in respect of the portion of the aggregate principal amount of
the notes as to which the participant or participants has or have given that
direction. However, if there is an event of default with respect to the notes,
The Depository Trust Company reserves the right to exchange the global notes for
legended notes in certificated form and to distribute them to its participants.
Although The Depository Trust Company has agreed to these procedures to
facilitate transfers of interests in the global notes among participants in The
Depository Trust Company, it is under no obligation to perform or to continue to
perform these procedures and may discontinue them at any time. None of
Safety-Kleen Corp., the trustee or any of our or the trustee's respective agents
will have any responsibility for the performance by The Depository Trust Company
and its direct or indirect participants of their respective obligations under
the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A global note will be exchangeable for definitive notes in registered
certificated form if:
(1) The Depository Trust Company notifies us that it is unwilling or unable
to continue as depository for the global notes,
(2) The Depository Trust Company ceases to be a clearing agency registered
under the Exchange Act,
(3) The Depository Trust Company announces an intention permanently to
cease business or does in fact do so, or
(4) a default or event of default under the indenture for the notes has
occurred and is continuing.
In all cases, certificated notes delivered in exchange for any global note
or beneficial interests in a global note will be registered in the name, and
issued in any approved denominations, requested by or on behalf of The
Depository Trust Company, in accordance with its customary procedures.
SAME DAY SETTLEMENT
We expect that the interests in the global notes will be eligible to trade
in The Depository Trust Company's Same-Day Funds Settlement System. As a result,
secondary market trading activity in these interests will settle in immediately
available funds, subject in all cases to the rules and procedures of The
Depository Trust Company and its participants. We expect that secondary trading
in any certificated notes will also be settled in immediately available funds.
PAYMENT
The indenture requires that payments in respect of the notes represented by
global notes, including principal and interest, be made by wire transfer of
immediately available funds to the accounts specified by the holder of the
global notes.
YEAR 2000
The Depository Trust Company has advised us that its management is aware
that some computer applications, systems, and the like for processing data that
are dependent
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upon calendar dates, including dates before, on and after January 1, 2000, may
encounter year 2000 problems. The Depository Trust Company has informed its
participants and other members of the financial community that it has developed
and is implementing a program so that its systems, as the same relate to the
timely payment of distributions, including principal and interest payments, to
security holders, book-entry deliveries and settlement of trades within The
Depository Trust Company, continue to function appropriately. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, The Depository Trust Company's plan includes a testing
phase, which is expected to be completed within the appropriate time frame.
However, The Depository Trust Company's ability to perform its services properly
is also dependent upon other parties, including issuers and their agents, as
well as third party vendors from whom The Depository Trust Company licenses
software and hardware, and third party vendors on whom The Depository Trust
Company relies for information or the provision of services, including
telecommunication and electrical utility service providers, among others. The
Depository Trust Company has informed its participants and other members of the
financial community that it is contacting and will continue to contact third
party vendors from whom The Depository Trust Company acquires services to:
- impress upon them the importance of these services being year 2000
compliant, and
- determine the extent of their efforts for year 2000 remediation and, as
appropriate, testing of their services.
In addition, The Depository Trust Company is in the process of developing
contingency plans as it deems appropriate. According to The Depository Trust
Company, the above information with respect to The Depository Trust Company has
been provided to its participants and other members of the financial community
for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person is merged with or into the Company or becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person; provided that any Indebtedness of such Person that is redeemed,
defeased, retired or otherwise repaid at the time of or immediately upon
consummation of the transaction by which such Person is merged with or into the
Company, becomes a Restricted Subsidiary or such assets are acquired from such
Person will not be Acquired Indebtedness.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or any other Person that owns,
directly or indirectly, 10% or more of such specified Person's Capital Stock.
For the purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
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"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer") by the Company or a
Restricted Subsidiary, directly or indirectly, in one transaction or a series of
related transactions, of:
(1) any Capital Stock of any Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary);
(2) all or substantially all of the properties and assets of the Company
and its Restricted Subsidiaries representing a division or line of
business; or
(3) any other properties or assets of the Company or any Restricted
Subsidiary, other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" does not include
any transfer of properties or assets:
- that is governed by the provisions of the indenture described under
"-- Certain Covenants -- Consolidation, Merger and Sale of Assets,"
- between or among the Company and its Restricted Subsidiaries pursuant to
transactions that do not violate any other provision of the indenture,
- to any Person to the extent it constitutes a Restricted Payment that is
permitted under the covenant described under "-- Certain
Covenants -- Restricted Payments,"
- consisting of inventory or wornout, obsolete or permanently retired
equipment and facilities,
- the gross proceeds of which (exclusive of indemnities) do not exceed $5.0
million in connection with any transfer, or
- that constitutes a Permitted Investment.
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof (excluding any subsequent
renewal or other extension options held by the lessee), discounted from the
respective due dates thereof to such date of determination at the rate of
interest per annum implicit in the terms of such lease, as determined in good
faith by the Company, compounded annually. The net amount of rent required to be
paid under any such lease for any such period shall be the amount of the rent
payable by the lessee with respect to such period, after excluding amounts
required to be paid on account of maintenance and repairs, reconstruction,
insurance, taxes, assessments, water rates and similar charges and contingent
rents (such as those based on sales). In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Senior Credit Facility.
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"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" of any Person means any and all shares, partnership
interests, participations, rights in or other equivalents of, or interests in,
the equity of such Person, but excluding any debt securities convertible into
such equity.
"Cash Equivalents" means
(1) any evidence of Indebtedness with a maturity of one year or less issued
or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in
support thereof);
(2) certificates of deposit or acceptances or Eurodollar time deposits with
a maturity of one year or less of, and overnight bank deposits with,
any financial institution that is a member of the Federal Reserve
System having combined capital and surplus and undivided profits of not
less than $500 million;
(3) commercial paper with a maturity of one year or less issued by a Person
rated at least A-1 by S&P or at least P-1 by Moody's;
(4) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) entered into
with a bank meeting the qualifications described in clause (2) above;
(5) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing
authority or any such state, commonwealth or territory or by any
foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by
Moody's;
(6) securities with maturities of one year or less from the date of
acquisition backed by standby letters of credit issued by any financial
institution satisfying the requirements of clause (2) of this
definition and
(7) funds which invest in any of the foregoing.
"Change of Control" means the occurrence of any of the following events:
(1) Any Person or "group" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person will be deemed to have
"beneficial ownership" of all securities that such Person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the
voting power of all classes of Voting Stock of the Company;
(2) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the
Company (together with any new
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directors whose election to such Board of Directors, or whose
nomination for election by the stockholders of the Company, was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the
Company then in office; or
(3) The Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution, other than a transaction that complies with the
provisions of the covenant described under "-- Certain
Covenants -- Consolidation, Merger and Sales of Assets."
"Closing Date" means the date on which the notes were originally issued
under the indenture.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes (as if the final maturity of the notes was May
15, 2004) to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of such notes.
"Independent Investment Banker" means TD Securities (USA) Inc. or, if such firm
is unwilling or unable to select the Comparable Treasury Issue, another
independent banking institution of national standing selected by the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for Government
Securities" or (ii) if such release (or any successor release) is not published
or does not contain such prices on such Business Day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations or (B) if the
trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Net Income for such period, plus (or, in the case of
clause (4) below, plus or minus) the following items to the extent included in
computing Consolidated Net Income for such period:
(1) Fixed Charges for such period, plus
(2) the federal, state, local and foreign income tax expense of the Company
and its Restricted Subsidiaries for such period, plus
(3) the depreciation and amortization expense of the Company and its
Restricted Subsidiaries for such period, plus
(4) any other non-cash charges for such period and minus non-cash credits
for such period, other than non-cash charges or credits resulting from
changes in prepaid assets or accrued liabilities in the ordinary course
of business;
provided that income tax expense, depreciation and amortization expense and
non-cash charges and credits of a Restricted Subsidiary will be included in
Consolidated EBITDA
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only to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income for
such period.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding:
(1) any net after-tax extraordinary gains or losses (less all fees and
expenses relating thereto),
(2) any net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to Asset Sales,
(3) the net income (but not the net loss) of any Person (other than the
Company or a Restricted Subsidiary), in which the Company or any
Restricted Subsidiary has an equity interest, except that the aggregate
amount of dividends or other distributions actually paid to the Company
or any Restricted Subsidiary in cash during such period will be
included in such Consolidated Net Income,
(4) the net income (or loss) of any Person acquired by the Company or any
Restricted Subsidiary in a "pooling of interests" transaction
attributable to any period prior to the date of such acquisition, and
(5) for purposes of the covenant described under "-- Restricted Payments"
only, the net income (but not the net loss) of any Restricted
Subsidiary to the extent that the declaration or payment of dividends
or similar distributions by such Restricted Subsidiary of such net
income is at the date of determination restricted, directly or
indirectly, except that the aggregate amount of net income actually
paid to the Company or a Restricted Subsidiary thereof by loans,
advances, intercompany transfers, principal payments or otherwise will
be included in such Consolidated Net Income.
"Consolidated Net Tangible Assets" means, with respect to any Company, at
any date of determination, the aggregate amount of assets (less applicable
reserves and other properly deductible items) after deducting therefrom:
(1) all current liabilities (excluding current maturities of long-term debt
and Capital Lease Obligations) and
(2) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, all as set forth on
the most recent quarterly balance sheet of the Company and its
consolidated Restricted Subsidiaries and computed in accordance with
GAAP.
"Consolidated Net Worth" means, at any date of determination, the
stockholders' equity of the Company and its Restricted Subsidiaries as set forth
on the most recently available quarterly or annual consolidated balance sheet of
the Company and its Restricted Subsidiaries, less any amounts attributable to
Disqualified Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the Company or
any of its Restricted Subsidiaries and less, to the extent included in
calculating such stockholders' equity of the Company and its Restricted
Subsidiaries, the stockholders' equity attributable to Unrestricted
Subsidiaries, each item to be determined in conformity with GAAP (excluding the
effects of foreign currency adjustments under
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Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 52).
"Contingent Obligations" means, at any date of determination:
(1) all obligations of the Company and its Restricted Subsidiaries (and any
Unrestricted Subsidiaries for which the Company provides credit support
or other similar arrangements) in respect of performance bonds and
letters of credit in the nature of performance bonds and similar
obligations and
(2) all guarantees of the Company and its Restricted Subsidiaries (and any
Unrestricted Subsidiaries for which the Company provides credit support
or other similar arrangements) of the obligations referred to in clause
(1).
"Currency Agreements" means, with respect to any Person, any spot or
forward foreign exchange agreements and currency swap, currency option or other
similar financial agreements or arrangements entered into by such Person or any
of its Restricted Subsidiaries in the ordinary course of business and designed
to protect against or manage exposure to fluctuations in foreign currency
exchange rates.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Assets" means the assets and properties acquired by the Company
in the acquisition of Old Safety-Kleen relating to the European operations of
Old Safety-Kleen referred to in footnote 4 to the audited consolidated financial
statements of Old Safety-Kleen incorporated by reference into Old Safety-Kleen's
Annual Report on Form 10-K for the year ended January 3, 1998 (including,
without limitation, the Company's equity interest in Safety-Kleen Europe
Limited).
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors, to make a finding or otherwise
take action under the indenture, a member of the Board of Directors who does not
have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms, or by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise:
(1) is, or upon the happening of an event or passage of time would be,
required to be redeemed prior to one year after the final Stated
Maturity of the notes,
(2) is redeemable at the option of the holder thereof at any time prior to
one year after such final Stated Maturity or
(3) at the option of the holder thereof, is convertible into or
exchangeable for debt securities at any time prior to one year after
such final Stated Maturity;
provided that any Capital Stock that would not constitute Disqualified Stock but
for provisions therein giving holders thereof the right to cause the issuer
thereof to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the Stated Maturity of
the notes will not constitute Disqualified Stock if the "asset sale" or "change
of control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions contained in the covenants
described under "-- Certain Covenants -- Asset Sales" and "Repurchase at the
Option of Holders Upon Change of Control" and such Capital Stock specifically
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provides that the issuer will not repurchase or redeem any of such stock
pursuant to such provision prior to the Company's repurchase of such of the
notes as are required to be repurchased pursuant to the covenants described
under "-- Certain Covenants -- Asset Sales" and "Repurchase at the Option of
Holders Upon Change of Control."
"Domestic Subsidiary" means any Subsidiary whose jurisdiction of
incorporation, organization or formation is the United States, any state thereof
or the District of Columbia.
"Escrow Agreement" means the escrow agreement dated May 17, 1999, between
the Company, the trustee and The Bank of Nova Scotia Trust Company of New York,
as escrow agent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations thereunder.
"Fixed Charges" means, for any period, without duplication, the sum of:
(1) the amount that, in conformity with GAAP, would be set forth opposite
the caption "interest expense" (or any like caption) on a consolidated
statement of operations of the Company and its Restricted Subsidiaries
for such period, including, without limitation:
- amortization of debt discount,
- the net payments (if any) pursuant to Interest Rate Agreements
(including amortization of discounts),
- the interest portion of any deferred payment obligation,
- amortization of debt issuance costs, and
- the interest component of Capitalized Lease Obligations, plus
(2) cash dividends paid on Preferred Stock and Disqualified Stock by the
Company and any Restricted Subsidiary (to any Person other than the
Company and its Restricted Subsidiaries), plus
(3) all interest on any Indebtedness of any Person guaranteed by the
Company or any of its Restricted Subsidiaries.
Fixed Charges will not include:
(1) any gain or loss from extinguishment of debt, including the write-off
of debt issuance costs and
(2) the fixed charges of a Restricted Subsidiary to the extent (and in the
same proportion) that the net income of such Subsidiary was excluded in
calculating Consolidated Net Income pursuant to clause (e) of the
definition thereof for such period.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Fixed Charges for such period.
"Foreign Subsidiary" means any Subsidiary other than a Domestic Subsidiary.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the date of the indenture.
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"guarantee" means, as applied to any obligation,
(1) a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in
any manner, of all or any part of such obligation and
(2) an agreement, direct or indirect, contingent or otherwise, the
practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of
all or any part of such obligation, including, without limitation, the
payment of amounts drawn down under letters of credit.
"Hedging Obligations" means the obligations of any Person under (a)
Interest Rate Agreements and (b) Currency Agreements.
"Holder" means the Person in whose name a note is, at the time of
determination, registered on the Registrar's books.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent:
(1) every obligation of such Person for money borrowed,
(2) every obligation of such Person evidenced by bonds, debentures, notes
or other similar instruments,
(3) every reimbursement obligation of such Person with respect to letters
of credit, bankers' acceptances or similar facilities issued for the
account of such Person (other than obligations in respect of
performance bonds and letters of credit in the nature of performance
bonds),
(4) every obligation of such Person issued or assumed as the deferred
purchase price of property or services,
(5) every Capitalized Lease Obligation of such Person,
(6) all Disqualified Stock of such Person valued at its maximum fixed
repurchase price (including, without duplication, accrued and unpaid
dividends),
(7) all obligations of such Person under or in respect of Hedging
Obligations, and
(8) every obligation of the type referred to in clauses (1) through (7) of
another Person and all dividends of another Person the payment of
which, in either case, such Person has guaranteed.
For purposes of this definition, the "maximum fixed repurchase price" of any
Disqualified Stock that does not have a fixed repurchase price will be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were repurchased on any date on which Indebtedness is
required to be determined pursuant to the indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified Stock, such
fair market value will be determined in good faith by the board of directors of
the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade
accounts payable and accrued liabilities arising in the ordinary course of
business and any liability for federal, state or local taxes or other taxes owed
by such Person will not be considered Indebtedness for purposes of this
definition.
"Interest Rate Agreements" means any interest rate protection agreements
and other types of interest rate hedging agreements (including, without
limitation, interest rate swaps,
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caps, floors, collars and similar agreements) and other related agreements and
designed to protect against or manage exposure to fluctuations in interest rates
and either (a) entered into in the ordinary course of business or (b) relating
to Indebtedness permitted under the indenture.
"Investment" in any Person means:
(1) any direct or indirect advance, loan or other extension of credit or
capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the
account or use of others) to, or any purchase, acquisition or ownership
of any Capital Stock, Indebtedness or other securities issued by such
Person, the acquisition (by purchase or otherwise) of all or
substantially all of the business or assets of such Person, or the
making of any investment of cash or other property in such Person,
(2) the designation of any Restricted Subsidiary as an Unrestricted
Subsidiary,
(3) the transfer of any assets or properties from the Company or a
Restricted Subsidiary to an Unrestricted Subsidiary, other than the
transfer of assets or properties made in the ordinary course of
business, and
(4) the fair market value of the Capital Stock (or any other Investment),
held by the Company or any of its Restricted Subsidiaries, of (or in)
any Person that has ceased to be a Restricted Subsidiary.
Investments exclude extensions of trade credit on commercially reasonable terms
in accordance with normal trade practices.
"Investment Grade" means a rating of the notes by both S&P and Moody's,
each such rating being in one of such agency's four highest generic rating
categories that signifies investment grade (i.e. BBB- (or the equivalent) or
higher by S&P and Baa3 (or the equivalent) or higher by Moody's); provided, in
each case, such ratings are publicly available; provided further that in the
event Moody's or S&P is no longer in existence, for purposes of determining
whether the notes are rated "Investment Grade," such organization may be
replaced by a nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) designated by the Company, notice of which
designation shall be given to the trustee.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Moody's" means Moody's Investor Service, Inc. and its successors.
"NationsBank Facility" means either the working capital facility made
available pursuant to the letter agreement dated March 31, 1998 between
NationsBank of Texas, N.A., as lender, and Safety-Kleen Services, Inc. as
borrower or any other agreement or agreements between the Company or any
Restricted Subsidiary and a financial institution or institutions providing for
the making of loans or advances on a revolving basis and/or the issuance of
letters of credit and/or the creation of bankers' acceptances to fund the
Company's general corporate requirements.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations, but only as and when received, in the form of,
or stock or other assets when
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disposed of for, cash or Cash Equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary), net of:
(1) brokerage commissions and other fees and expenses (including fees and
expenses of legal counsel, accountants and investment banks) related to
such Asset Sale,
(2) provisions for all taxes payable or required to be accrued in
accordance with GAAP as a result of such Asset Sale,
(3) payments made to retire Indebtedness where payment of such Indebtedness
is secured by a Lien on the assets that are the subject of such Asset
Sale,
(4) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in the assets
that are subject to the Asset Sale, and
(5) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance
with GAAP against any liabilities associated with such Asset Sale and
retained by the seller after such Asset Sale, including pension and
other postemployment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, and
(6) all distributions and other payments made to minority interest holders
in Restricted Subsidiaries or joint ventures as a result of such Asset
Sale.
"Pari Passu Indebtedness" means any Indebtedness of the Company, whether
outstanding at the date of the indenture or incurred thereafter, that ranks pari
passu in right of payment with the notes.
"Partnership" means The ArmaKleen Company, a Delaware partnership formed
pursuant to the Partnership Agreement.
"Partnership Agreement" means the partnership agreement dated January 1,
1999 between Safety-Kleen Services and Church Dwight Co., Inc., as amended or
replaced from time to time.
"Permitted Holder" means Laidlaw Inc., any successor thereto, and any of
their Affiliates.
"Permitted Indebtedness" means:
(1) Indebtedness of the Company or any Restricted Subsidiary under the
Senior Credit Facility in an aggregate principal amount at any one
time outstanding not to exceed $1.717 billion, less
- any amounts applied to the permanent reduction of any term loans
under the Senior Credit Facility, and
- any amounts applied to the permanent reduction of the Senior Credit
Facility pursuant to the covenant described under "-- Certain
Covenants -- Asset Sales";
(2) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the Closing Date, other than Indebtedness described under clause
(1) above;
(3) Indebtedness owed by the Company to any Wholly Owned Restricted
Subsidiary or owed by any Restricted Subsidiary to the Company or a
Wholly Owned Restricted Subsidiary (provided that such Indebtedness is
held by the
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Company or such Wholly Owned Restricted Subsidiary); provided,
however, that if the Company is the obligor on such Indebtedness, such
Indebtedness is unsecured and subordinated in all respects to the
Company's obligations under the notes and provided, further, however,
that if any such Wholly Owned Restricted Subsidiary ceases to be (for
any reason) a Wholly Owned Restricted Subsidiary, then this clause (3)
shall no longer be applicable to Indebtedness owed by the Company or
any Restricted Subsidiary to such Restricted Subsidiary that was
formerly a Wholly Owned Restricted Subsidiary;
(4) Indebtedness represented by the notes (other than the additional
notes);
(5) Indebtedness of the Company or any Restricted Subsidiary in respect of
Hedging Obligations incurred in the ordinary course of business;
(6) Capital Lease Obligations of the Company or any Restricted Subsidiary,
provided that the aggregate amount of Indebtedness under this clause
(6) does not exceed $15.0 million at any one time outstanding;
(7) Indebtedness of the Company or any Restricted Subsidiary under
purchase money mortgages or secured by purchase money security
interests so long as (i) such Indebtedness is not secured by any
property or assets of the Company or any Restricted Subsidiary other
than the property and assets so acquired and (ii) such Indebtedness is
created within 90 days of the acquisition of the related property;
provided that the aggregate amount of Indebtedness under this clause
(7) does not exceed $15.0 million at any one time outstanding;
(8) Guarantees by the Company or any Restricted Subsidiary of Indebtedness
that was permitted to be incurred by the provisions of the covenant
described under "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Disqualified Stock";
(9) Indebtedness of the Company or any Restricted Subsidiary, not
otherwise permitted by the first paragraph under the covenant
described under "-- Incurrence of Indebtedness and Issuance of
Disqualified Stock" and any other clause of this definition, in an
aggregate principal amount not to exceed an amount equal to 5% of the
total assets of the Company and its Restricted Subsidiaries (on a
consolidated basis determined in accordance with GAAP);
(10) Indebtedness of one or more Foreign Subsidiaries under one or more
credit facilities in an aggregate principal amount at any one time
outstanding not to exceed $50 million;
(11) Indebtedness of the Company or any Restricted Subsidiary under the
NationsBank Facility in an aggregate principal amount at any one time
outstanding not to exceed $25.0 million; and
(12) Any renewals, extensions, substitutions, refinancings or replacements
(each, for purposes of this clause, a "refinancing") of any
outstanding Indebtedness incurred pursuant to clause (2) and (4)
above, including any successive refinancings thereof, so long as:
- any such new Indebtedness is in a principal amount that does not
exceed the principal amount so refinanced, plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of
any premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus
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the amount of the expenses of the Company reasonably estimated to be
incurred in connection with such refinancing,
- in the case of any refinancing of Subordinated Indebtedness of the
Company, such new Indebtedness is subordinated to the notes at least
to the same extent as the Indebtedness being refinanced, and
- such refinancing Indebtedness has a Weighted Average Life equal to or
greater than the Weighted Average Life of the Indebtedness being
refinanced and has a final Stated Maturity no earlier than the final
Stated Maturity of the Indebtedness being refinanced.
"Permitted Investments" means any of the following:
(1) Investments in Cash Equivalents;
(2) Investments by the Company or any Restricted Subsidiary in another
Person, if as a result of such Investment such other Person becomes a
Restricted Subsidiary or is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the
Company or a Restricted Subsidiary;
(3) Investments by the Company or any of the Restricted Subsidiaries in any
one of the other of them;
(4) Investments existing on the Closing Date;
(5) Investments made as a result of the receipt of non-cash consideration
in an Asset Sale permitted under the covenant described under
"-- Certain Covenants -- Asset Sales";
(6) Investments consisting of loans and advances to officers and employees
of the Company or any of its Restricted Subsidiaries for reasonable
travel, relocation and business expenses in the ordinary course of
business;
(7) Investments the payment for which consists exclusively of Capital Stock
(exclusive of Disqualified Stock) of the Company; and
(8) Other Investments that do not exceed in the aggregate at any one time
outstanding the greater of (i) $50.0 million or (ii) an amount equal to
1% of the total assets of the Company and its Restricted Subsidiaries
(on a consolidated basis determined in accordance with GAAP).
"Permitted Liens" means:
(1) Liens in existence on any date on which the notes achieve an Investment
Grade rating;
(2) any Lien on any properties or assets of the Company or any Restricted
Subsidiary acquired (including by way of merger or consolidation) by
the Company or any Restricted Subsidiary after the date on which the
notes achieve an Investment Grade rating, which Lien is created,
incurred or assumed contemporaneously with such acquisition, or within
270 days thereafter, to secure or provide for the payment or financing
of any part of the purchase price thereof, or any Lien upon any
properties or assets of the Company or any Restricted Subsidiary
acquired after the date of the indenture existing at the time of such
acquisition (whether or not assumed by the Company or any Restricted
Subsidiary), provided that every such Lien referred to in this clause
(b) shall attach only to the properties or assets of the Company or any
Restricted Subsidiary so acquired;
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(3) any Lien or any properties or assets of the Company or any Restricted
Subsidiary in favor of the Company or any Restricted Subsidiary;
(4) any Lien on properties or assets of the Company or any Restricted
Subsidiary incurred in connection with the issuance of tax-exempt
governmental obligations (including, without limitation, industrial
revenue bonds and similar financings);
(5) any Lien granted by any Restricted Subsidiary on its properties or
assets to the extent such Lien is not prohibited by any agreement to
which such Restricted Subsidiary is subject as of the date of the
indenture;
(6) any Lien securing Indebtedness under the Senior Credit Facility, the
NationsBank Facility, the C$35,000,000 credit facility made available
pursuant to the letter agreement, dated as of April 3, 1998, between
Safety-Kleen Services (Canada), Ltd., as borrower, and Toronto-Dominion
Bank, as lender, as such agreement may be amended, modified or
supplemented from time to time and Hedging Obligations entered into in
connection with the Senior Credit Facility; and
(7) any renewal or substitution for any Lien permitted by any of the
preceding clauses (1) through (6), including any Lien securing
reborrowing of amounts previously secured within 270 days of the
repayment thereof, provided that no such renewal or substitution shall
extend to any properties or assets of the Company or any Restricted
Subsidiary other than the properties or assets of the Company or any
Restricted Subsidiary covered by the Lien being renewed or substituted.
"Person" means any individual, corporation, limited or general partnership,
limited liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding or issued after
the Closing Date, and including, without limitation, all classes and series of
preferred or preference stock of such Person.
"Public Equity Offering" means an offer and sale of common stock (which is
Qualified Stock) of the Company or Safety-Kleen Services, Inc. pursuant to a
registration statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities issuable under any employee benefit
plan of the Company or Safety-Kleen Services, Inc.)
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any Person means any and all Capital Stock of such
Person, other than Disqualified Stock.
"Reference Treasury Dealer" means TD Securities (USA) Inc., NationsBanc
Montgomery Securities LLC and Raymond James & Associates, Inc. and their
respective successors; provided, however, that if the foregoing shall cease to
be a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), the Company shall substitute another Primary Treasury Dealer.
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"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the trustee by such
Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such
redemption date.
"Restricted Payment" means any of the following:
(1) the declaration or payment of any dividend on, or the making of any
distribution to holders of, any shares of the Capital Stock of the
Company or any Restricted Subsidiary other than:
- dividends or distributions payable solely in Qualified Equity
Interests, or
- dividends or distributions by a Restricted Subsidiary payable to the
Company or another Restricted Subsidiary, or
- pro rata dividends or distributions on common stock of a Restricted
Subsidiary held by minority stockholders, provided that such dividends
do not in the aggregate exceed the minority stockholders' pro rata
share of such Restricted Subsidiary's net income from the first day of
the Company's fiscal quarter during which the Closing Date occurs;
(2) the purchase, redemption or other acquisition or retirement for value,
directly or indirectly of any shares of Capital Stock (or any options,
warrants or other rights to acquire shares of Capital Stock) of:
- the Company or any Unrestricted Subsidiary, or
- any Restricted Subsidiary held by any Affiliate of the Company (other
than, in either case, any such Capital Stock owned by the Company or
any of its Restricted Subsidiaries);
(3) the making of any principal payment on, or the repurchase, redemption,
defeasance or other acquisition or retirement for value, prior to any
scheduled principal payment, sinking fund payment or maturity, of any
Subordinated Indebtedness; or
(4) the making of any Investment (other than a Permitted Investment) in any
Person.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Safety-Kleen Services Fixed Charge Coverage Ratio" means the Fixed Charge
Coverage Ratio of Safety-Kleen Services and its Restricted Subsidiaries as
defined in, and calculated in accordance with, the Safety-Kleen Services
Indenture.
"Safety-Kleen Services Indenture" means the indenture dated May 29, 1998
among Safety-Kleen Services, the Company, as guarantor, the Subsidiary
Guarantors named therein and The Bank of Nova Scotia Trust Company of New York,
as trustee, as in effect on the date of the indenture.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of any
properties or assets of the Company and/or such Restricted Subsidiary (except
for temporary leases for a term, including any renewal thereof, of not more than
three years and except for leases between the Company and any Restricted
Subsidiary, between any Restricted Subsidiary and the Company or between
Restricted Subsidiaries), which properties or assets have
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been or are to be sold or transferred by the Company or such Restricted
Subsidiary to such Person with the intention of taking back a lease of such
properties or assets.
"Sales Agreement" means the sales agreement dated January 26, 1999 between
Safety-Kleen Services and the Partnership, as amended or replaced from time to
time.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Senior Credit Facility" means the credit agreement dated as of April 3,
1998 among Safety-Kleen Services, Inc., Safety-Kleen Services (Canada) Ltd., the
Banks and Toronto Dominion Bank, as agent, as such agreement may be amended,
renewed, extended, substituted, replaced, restated, refinanced, restructured,
supplemented or otherwise modified from time to time (including, without
limitation, any successive amendments, renewals, extensions, substitutions,
replacements, restatements, refinancings, restructuring, supplements or other
modifications of the foregoing); provided that with respect to any agreements
providing for the refinancing of Indebtedness under the Senior Credit Facility,
such agreements shall be the Senior Credit Facility for the purposes of this
definition only if a notice to that effect is delivered by the Company to the
trustee.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that would be a "Significant Subsidiary" of the Company within the meaning of
Rule 1-02 under Regulation S-K promulgated by the Commission as such Rule is in
effect on the date of the Indenture.
"Stated Maturity" means, when used with respect to any note or any
installment of interest thereon, the date specified in such note as the fixed
date on which the principal of such note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon is due and payable, and will not, in either case, include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment to the notes.
"Subsidiary" means, with respect to any Person, any other Person a majority
of the equity ownership or Voting Stock of which is at the time owned, directly
or indirectly, by such Person and/or one or more Subsidiaries of such Person.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary in accordance with the
covenant described under "-- Certain Covenants -- Unrestricted Subsidiaries" and
(b) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means securities that are
(1) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged, or
(2) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2)
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of the Securities Act), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life" means, as of the date of determination with respect
to any Indebtedness or Disqualified Stock, the quotient obtained by dividing:
(1) the sum of the products of (A) the number of years from the date of
determination to the date or dates of each successive scheduled
principal or liquidation value payment of such Indebtedness or
Disqualified Stock, respectively, multiplied by (B) the amount of each
such principal or liquidation value payment, by
(2) the sum of all such principal or liquidation value payments.
"Wholly-Owned Foreign Restricted Subsidiary" means any Foreign Subsidiary
that is a Restricted Subsidiary, all of the outstanding Capital Stock (other
than directors' qualifying shares of such Foreign Subsidiary required to be
owned by foreign nationals pursuant to applicable law) of which is owned,
directly or indirectly, by the Company.
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding Capital Stock (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which is owned, directly or indirectly,
by the Company.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following general discussion summarizes certain of the material U.S.
federal income and estate tax aspects of the exchange of the initial notes for
the exchange notes and the ownership and disposition of the exchange notes. This
discussion is a summary for general information only and is limited in the
following ways:
- The discussion only covers holders who acquire exchange notes in exchange
for initial notes that were purchased at their original issuance.
- The discussion only covers holders of exchange notes that hold the
exchange notes as "capital assets" (that is, for investment purposes).
- The discussion covers only the general tax consequences to holders of the
exchange notes. It does not cover tax consequences that depend upon a
holder's individual tax circumstances. It also does not apply to holders
that are subject to special rules (such as banks and other financial
institutions, real estate investment trusts, regulated investment
companies, insurance companies, tax-exempt organizations, dealers in
securities, persons who own notes through partnerships or other pass-
through entities, persons who hold notes as part of a straddle, hedge,
conversion transaction or other integrated investment, or persons whose
functional currency is not the U.S. dollar).
- The discussion is based on current law. Changes in the law may change the
tax treatment of the exchange notes on a prospective or retroactive
basis.
- The discussion does not cover state, local or foreign law.
- The discussion does not apply to holders owning 10% or more of the voting
stock of the Company, or corporate holders that are controlled foreign
corporations with respect to the Company.
We have not sought and will not seek any rulings or opinions from the
Internal Revenue Service or counsel with respect to the matters discussed below.
There can be no assurance that the Internal Revenue Service will not take
positions about the tax treatment of the exchange notes which are different from
those that we discuss.
PROSPECTIVE HOLDERS OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH REGARD TO THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO
THEIR PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL,
FOREIGN OR OTHER TAX LAWS, INCLUDING GIFT AND ESTATE TAX LAWS.
The tax consequences depend upon whether you are a U.S. holder or a
non-U.S. holder. A U.S. holder is:
- a citizen or resident of the United States;
- a corporation or other entity taxable as a corporation created or
organized under U.S. law (federal or state);
- an estate the income of which is subject to U.S. federal income taxation
regardless of its sources;
- a trust if a U.S. court is able to exercise primary supervision over
administration of the trust and one or more U.S. persons have authority
to control all substantial decisions of the trust; or
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- any other person whose worldwide income and gain is otherwise subject to
U.S. federal income taxation on a net basis.
A non-U.S. holder is a holder that is not a U.S. holder.
EXCHANGE OF INITIAL NOTES FOR EXCHANGE NOTES
The exchange of an initial note for an exchange note pursuant to the
exchange offer will not constitute a taxable exchange, and thus a holder will
not recognize gain or loss upon receipt of an exchange note. As a result, a
holder will have the same adjusted tax basis and holding period in the exchange
note as it did in the initial note immediately before the exchange.
TAX CONSEQUENCES TO U.S. HOLDERS
INTEREST
- If you are a cash method taxpayer (including most individual holders),
you must report the interest in your income when it is received by you.
- If you are an accrual method taxpayer, you must report the interest in
your income as it accrues.
SALE, EXCHANGE OR REDEMPTION OF THE EXCHANGE NOTES
On a sale, exchange, retirement or other disposition of an exchange note:
- You will have taxable gain or loss equal to the difference between the
tax basis of the exchange note and the amount received on the sale,
exchange, retirement or other disposition.
- Any gain or loss will generally be capital gain or loss, and will be long
term capital gain or loss if the exchange note was held for more than one
year.
- If you sell the exchange note between interest payment dates, a portion
of the amount you receive reflects interest that has accrued on the
exchange note but has not yet been paid by the sale date. That amount is
treated as ordinary interest income and not as sale proceeds.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under the tax rules concerning information reporting to the Internal
Revenue Service:
- We are required to provide information to the Internal Revenue Service
concerning interest and redemption proceeds we pay to you on exchange
notes held by you, unless an exemption applies.
- Similarly, unless an exemption applies, you are required to provide us
with a correct taxpayer identification number for our use in reporting
information to the Internal Revenue Service. If you are an individual,
this is your social security number. You are also required to comply with
other Internal Revenue Service requirements concerning information
reporting.
- If you are subject to these requirements but do not comply, we are
required to withhold 31% of all amounts payable to you on the exchange
notes (including principal payments). If we do withhold part of a
payment, you may use the withheld amount as a credit against your federal
income tax liability.
141
<PAGE> 145
- All U.S. holders that are individuals are subject to these requirements.
Certain U.S. holders, including all corporations, tax-exempt
organizations and individual retirement accounts, are exempt from these
requirements.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
WITHHOLDING TAXES
If you are a non-U.S. holder, payments of principal and interest on the
exchange notes generally will not be subject to U.S. withholding taxes. However,
in order for the exemption from withholding taxes to apply, you must meet the
following requirements:
- As the beneficial owner of an exchange note, you must provide a statement
to the effect that you are not a U.S. holder. This statement is generally
made on Internal Revenue Service Form W-8. You should consult your own
tax advisor about the specific method to satisfy this requirement. The
procedures for satisfying this requirement will change on January 1,
2000.
- You must not be a bank that is making a loan in the ordinary course of
its business.
Non-U.S. holders that do not qualify for exemption from withholding
generally will be subject to withholding of U.S. federal income tax at a rate of
30%, or a lower applicable treaty rate.
SALE, EXCHANGE OR REDEMPTION OF EXCHANGE NOTES
If you sell an exchange note or it is redeemed, you will not be subject to
U.S. federal income tax on any gain unless either of the following applies:
- The gain is connected with a trade or business that you conduct in the
U.S.
- You are an individual and are present in the U.S. for at least 183 days
during the year in which you dispose of the exchange note, and certain
other conditions are satisfied.
U.S. TRADE OR BUSINESS
If you hold an exchange note in connection with a trade or business that
you are conducting in the U.S.:
- Any interest on the exchange note, and any gain from disposing of the
exchange note, generally will be subject to income tax as if you were a
U.S. holder.
- Any interest and gain will be exempt from U.S. withholding tax as
discussed above as long as you submit to us a proper form, generally
Internal Revenue Service Form 4224, that includes certain required
information. You should consult your own tax advisor about how to satisfy
this requirement. The procedures for satisfying this requirement will
change on January 1, 2000.
- If you are a corporation, you may be subject to a branch profits tax on
your earnings that are connected with your U.S. trade or business,
including earnings from the exchange note. This tax is 30%, but may be
reduced or eliminated by an applicable income tax treaty.
142
<PAGE> 146
ESTATE TAXES
If you are an individual non-U.S. holder, the exchange note will not be
subject to U.S. estate tax when you die. However, this rule only applies if, at
the time of your death, payments on the exchange note would not have been
connected to a trade or business that you were conducting in the U.S.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. rules concerning information reporting and backup withholding are
described above. You automatically avoid these requirements when you provide the
tax certifications needed to avoid withholding tax on interest, as described
above (unless we know, or an intermediate entity knows, that the certification
is false). See "Withholding Taxes" above.
Similarly, if you dispose of an exchange note through a broker:
- You must provide the broker appropriate certification of your non-U.S.
status to avoid information reporting and backup withholding.
- If you do not provide such certification, and you use the U.S. office of
a broker, you may be subject to information reporting and backup
withholding.
- If you do not provide such certification, and you use the non-U.S. office
of a broker, you will not be subject to backup withholding. However, you
may be subject to information reporting depending on whether the broker
has certain connections to the U.S.
You should consult your tax advisor about the tax rules concerning
information reporting requirements and backup withholding.
143
<PAGE> 147
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer in exchange for initial notes acquired by it as a
result of market making or other trading activities may be deemed to be an
underwriter within the meaning of the Securities Act and, therefore, must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales, offers to resell or other transfers of the exchange
notes received by it in the exchange offer. Accordingly, each such broker-dealer
must acknowledge that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of these exchange notes. The
letter of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker dealer will not be deemed to admit that it is
an underwriter within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of exchange notes received in exchange for initial
notes where these initial notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, starting on the
consummation of the exchange offer, and ending on the close of business 90 days
after the completion of the exchange offer, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of these methods
of resale, at market prices prevailing at the time of resale, at prices related
to these prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of these exchange notes may be deemed to be an
underwriter within the meaning of the Securities Act and any profit of any such
resale of exchange notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the Securities Act.
For a period of 90 days after the completion of the exchange offer, we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests these documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer other than commissions or concessions of any brokers or dealers
and will indemnify the holders of the notes against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the exchange notes offered by this prospectus will be
passed upon for us by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New
York.
144
<PAGE> 148
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Safety-Kleen Corp. (formerly known
as Laidlaw Environmental Services, Inc.) as of August 31, 1998, 1997 and 1996,
and for each of the three years in the period ended August 31, 1998, included in
this prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their report appearing herein.
The consolidated financial statements of Safety-Kleen Corp. and
Subsidiaries as of January 3, 1998 and December 28, 1997, and for each of the
three years in the period ended January 3, 1998, included in this prospectus
have been audited by Arthur Andersen LLP, independent accountants, as stated in
their report appearing herein.
AVAILABLE INFORMATION
We are currently subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934. In addition, the indenture
requires that we file reports under the Securities Exchange Act of 1934 with the
SEC and provide, upon request, those reports to the trustee and holders of the
Notes. You can inspect and copy at prescribed rates the reports and other
information that we file with the SEC at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also at the regional offices of the SEC located at 7
World Trade Center, Suite 1300, New York, New York 10048 and the Citicorp Center
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may
obtain information on the operation of the public reference facilities by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet web site
at http://www.sec.gov that contains reports, proxy and information statements
and other information. You can also obtain copies of such materials from us upon
request.
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" in this prospectus
other information we file with them, which means that we can disclose important
information to you by referring you to those documents. This prospectus
incorporates important business and financial information about us that is not
included in or delivered with this prospectus. The information that we file
later with the SEC will automatically update and supersede the information
included in and incorporated by reference in this prospectus. We incorporate by
reference the documents listed below and any future filings made with the
Commission under Section 13(a), 13(c), 14, or 15(d) of the Exchange Act until
the expiration of this exchange offer.
(1) Annual report on Form 10-K of the Company for its fiscal year ended
August 31, 1998.
(2) Quarterly report on Form 10-Q of the Company for its quarter ended
November 30, 1998.
(3) Quarterly report on Form 10-Q of the Company for its quarter ended
February 28, 1999.
(4) Current reports on Form 8-K of the Company dated November 24, 1998,
December 28, 1998, April 20, 1999, May 5, 1999, May 10, 1999, May 17,
1999 and May 27, 1999.
145
<PAGE> 149
We have filed each of these documents with the Commission and they are
available from the Commission's Internet site and public reference rooms
described under "Available Information" above. You may also request a copy of
these filings, at no cost, by writing us at the following address:
Safety-Kleen Corp.
Suite 300
1301 Gervais Street
Columbia, South Carolina 29201
Attention: Investor Relations
146
<PAGE> 150
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us, including, among other things:
- our ability to achieve targeted cost savings levels;
- achievement of synergy objectives;
- the attainment of revenue growth targets;
- fluctuations in operating results because of acquisitions;
- changes in applicable government regulations (environmental and other);
- the impact of litigation;
- changes in demand for our services;
- competition;
- changes in prices for petroleum-based products; and
- our ability to integrate our newly acquired businesses.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur. Important factors that
could cause actual results to differ materially from such expectations are
disclosed above and in the Risk Factors section.
147
<PAGE> 151
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF SAFETY-KLEEN CORP.
(formerly LAIDLAW ENVIRONMENTAL SERVICES, INC.)
Report of Independent Accountants........................... F-2
Consolidated Statements of Income for the Years Ended August
31, 1998, 1997 and 1996................................... F-3
Consolidated Statements of Comprehensive Income for the
Years Ended August 31, 1998, 1997, and 1996............... F-4
Consolidated Balance Sheets for the Years Ended August 31,
1998 and 1997............................................. F-5
Consolidated Statements of Cash Flows for the Years Ended
August 31, 1998, 1997 and 1996............................ F-6
Consolidated Statements of Stockholders' Equity for the
Years Ended August 31, 1998, 1997, 1996 and 1995.......... F-8
Notes to Consolidated Financial Statements.................. F-9
Consolidated Statements of Income for the Six Month Periods
Ended February 28, 1999 and 1998 (unaudited).............. F-37
Consolidated Statements of Comprehensive Income for the Six
Month Periods Ended February 28, 1999 and 1998
(unaudited)............................................... F-38
Consolidated Balance Sheet as of February 28, 1999
(unaudited)............................................... F-39
Consolidated Statements of Cash Flows for the Six Month
Periods Ended February 28, 1999 and 1998 (unaudited)...... F-40
Notes to Consolidated Financial Statements (unaudited)...... F-41
CONSOLIDATED FINANCIAL STATEMENTS OF OLD SAFETY-KLEEN
(SAFETY-KLEEN CORP. AND SUBSIDIARIES)
Independent Auditors' Report................................ F-50
Consolidated Statement of Operations for Fiscal Years 1997,
1996 and 1995............................................. F-51
Consolidated Balance Sheets as of January 3, 1998 and
December 28, 1996......................................... F-52
Consolidated Statements of Shareholders' Equity for Fiscal
Years 1997, 1996 and 1995................................. F-54
Consolidated Statements of Cash Flows for Fiscal Years 1997,
1996 and 1995............................................. F-55
Notes to Consolidated Financial Statements.................. F-56
Consolidated Balance Sheets as of March 28, 1998 and January
3, 1998 (unaudited)....................................... F-80
Consolidated Statements of Earnings for the Twelve Weeks
Ended March 28, 1998 and March 22, 1997 (unaudited)....... F-81
Consolidated Statements of Comprehensive Income for the
Twelve Weeks ended March 28, 1998 and March 22, 1997
(unaudited)............................................... F-82
Consolidated Statements of Cash Flows for the Twelve Weeks
Ended March 28, 1998 and March 22, 1997 (unaudited)....... F-86
Notes to Consolidated Financial Statements (unaudited)...... F-93
</TABLE>
F-1
<PAGE> 152
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of Safety-Kleen Corp.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, comprehensive income, cash flows, and
changes in stockholders' equity present fairly, in all material respects, the
financial position of Safety-Kleen Corp. and its subsidiaries at August 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended August 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
October 6, 1998
F-2
<PAGE> 153
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------------------------------
1998 1997 1996
------------- ------------ -----------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues................................... $1,185,473 $ 678,619 $652,973
---------- --------- --------
Expenses:
Operating................................ 797,382 485,062 473,563
Depreciation and amortization............ 93,051 53,506 48,291
Selling, general and administrative...... 108,817 73,068 73,800
Restructuring and other charges.......... 65,831 331,697 --
---------- --------- --------
Total expenses................... 1,065,081 943,333 595,654
---------- --------- --------
Operating income (loss).................... 120,392 (264,714) 57,319
Allocated interest expense................. -- 24,030 41,506
Interest expense........................... 107,697 20,243 5,344
Other income............................... 7,657 2,865 1,391
---------- --------- --------
Income (loss) from continuing operations
before income tax........................ 20,352 (306,122) 11,860
Income tax expense (benefit)............... 9,133 (122,789) 2,500
---------- --------- --------
Income (loss) from continuing operations
before minority interest................. 11,219 (183,333) 9,360
Minority interest, net of tax.............. 269 (119) (2,646)
---------- --------- --------
Income (loss) from continuing operations... 11,488 (183,452) 6,714
Income from discontinued operations, net of
tax...................................... -- 20 1,496
---------- --------- --------
Income (loss) before extraordinary items... 11,488 (183,432) 8,210
Extraordinary loss, net of tax of $7,494... (11,283) -- --
---------- --------- --------
Net income (loss)........................ $ 205 $(183,432) $ 8,210
========== ========= ========
Basic and diluted income (loss) per share:
Income (loss) from continuing
operations............................ $ 0.05 $ (1.33) $ 0.06
Income from discontinued operations...... -- -- 0.01
Extraordinary loss, net of tax........... (0.05) -- --
---------- --------- --------
Net income (loss)........................ $ -- $ (1.33) $ 0.07
========== ========= ========
Weighted average common stock outstanding
(000's).................................. 249,287 138,033 120,000
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 154
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------------------------
1998 1997 1996
---- ---- ----
($ IN THOUSANDS)
<S> <C> <C> <C>
Net income (loss)......................... $ 205 $ (183,432) $ 8,210
Unrealized foreign currency translation
adjustments............................. (18,122) (706) --
--------------- ----------------- ---------------
Comprehensive income...................... $ (17,917) $ (184,138) $ 8,210
=============== ================= ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 155
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
------------------------
1998 1997
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................... $ 16,333 $ 11,160
Trade and other accounts receivable (net of allowance
for doubtful accounts of $10,816 in 1998; $7,236 in
1997)................................................ 320,048 210,914
Inventories and supplies................................ 53,759 7,927
Income taxes recoverable................................ 37,495 --
Deferred income taxes................................... 69,426 13,027
Other current assets.................................... 45,273 8,512
---------- ----------
Total current assets............................ 542,334 251,540
---------- ----------
Long-term investments..................................... 35,926 51,909
---------- ----------
Land, landfill sites and improvements..................... 504,308 499,326
Buildings................................................. 1,115,137 412,070
Machinery and equipment................................... 1,495,643 607,296
Leasehold improvements.................................... 32,815 7,709
Construction in process................................... 14,965 15,608
---------- ----------
Property, plant and equipment........................... 3,162,868 1,542,009
Less: Accumulated depreciation and amortization...... (312,366) (305,440)
---------- ----------
Net property, plant and equipment......................... 2,850,502 1,236,569
---------- ----------
Goodwill, at cost (net of accumulated amortization of
$23,345 in 1998; $11,669 in 1997)....................... 1,023,154 70,527
Other assets.............................................. 16,979 333
---------- ----------
Total assets.................................... $4,468,895 $1,610,878
========== ==========
LIABILITIES
Current liabilities
Accounts payable........................................ $ 128,560 $ 48,148
Accrued liabilities..................................... 219,352 115,211
Current portion of long-term debt....................... 77,004 12,086
---------- ----------
Total current liabilities....................... 424,916 175,445
Environmental and other long-term liabilities............. 259,459 179,668
Long-term debt............................................ 1,853,164 528,010
Subordinated convertible debenture........................ 350,000 350,000
Deferred income taxes..................................... 566,650 49,790
---------- ----------
Total liabilities............................... 3,454,189 1,282,913
---------- ----------
Commitments and contingencies............................. -- --
STOCKHOLDERS' EQUITY
Common stock, par value $1.00 per share; authorized
750,000,000, issued and outstanding 350,984,971 in 1998,
180,435,311 in 1997..................................... 350,985 180,435
Additional paid-in capital................................ 919,308 385,200
Cumulative foreign currency translation adjustment........ (18,828) (706)
Accumulated deficit....................................... (236,759) (236,964)
---------- ----------
Total stockholders' equity...................... 1,014,706 327,965
---------- ----------
Total liabilities and stockholders' equity...... $4,468,895 $1,610,878
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 156
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
-------------------------------------
1998 1997 1996
----------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $ 205 $(183,432) $ 8,210
Adjustments to reconcile net income (loss)
to net cash provided by continuing
operations:
Income from discontinued operations......... -- (20) (1,496)
Extraordinary loss, net of applicable income
tax...................................... 11,283 -- --
Restructuring charge, net of applicable
income taxes............................. 39,499 200,000 --
Depreciation and amortization............... 93,051 53,506 48,291
Deferred income taxes....................... 21,681 37,507 783
Change in accounts receivable............... 7,902 (8,151) (1,719)
Change in accounts payable and accrued and
long-term liabilities.................... (18,617) (52,632) (30,692)
Decrease in liabilities assumed upon
acquisition.............................. (40,922) (17,945) --
Restructuring and other charge payments..... (16,338) -- --
Change in other, net........................ (10,117) 8,126 (1,428)
----------- --------- ---------
Net cash provided by continuing operations.... 87,627 36,959 21,949
Net cash provided by discontinued
operations.................................. -- 425 3,199
----------- --------- ---------
Net cash provided by operating
activities............................. 87,627 37,384 25,148
----------- --------- ---------
Cash flows from investing activities:
Cash acquired (expended) on acquisition of
business................................. (1,281,495) 15,451 (8,000)
Purchase of property, plant and equipment... (50,754) (36,097) (104,284)
Increase in long-term investments........... (2,478) (2,837) --
Proceeds from sales of property, plant and
equipment................................ 13,433 1,596 3,319
Proceeds from sale of business.............. 33,675 -- --
Change in other, net........................ (5,716) -- (5,984)
----------- --------- ---------
Net cash used in continuing operations........ (1,293,335) (21,887) (114,949)
Net cash used in discontinued operations...... -- (1,887) (5,026)
----------- --------- ---------
Net cash used in investing activities.... (1,293,335) (23,774) (119,975)
----------- --------- ---------
Cash flows from financing activities:
Issuance of common stock on exercise of
stock options............................ 509 -- --
Borrowings of long-term debt................ 1,856,814 451,622 --
</TABLE>
F-6
<PAGE> 157
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
-------------------------------------
1998 1997 1996
----------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
Bank financing fees and expenses............ (50,538) (18,788) --
Bank overdraft.............................. 12,992 (32,188) 21,880
Repayment of long-term debt................. (604,684) (61,542) (7,548)
Payment to Laidlaw Inc...................... -- (349,116) --
Advances from Laidlaw Inc................... -- 7,562 82,913
----------- --------- ---------
Net cash provided by (used in) continuing
operations.................................. 1,215,093 (2,450) 97,245
Net cash used in discontinued operations...... -- -- (2,418)
----------- --------- ---------
Net cash provided by (used in) financing
activities............................. 1,215,093 (2,450) 94,827
----------- --------- ---------
Effect of exchange rate changes on cash....... (4,212) -- --
----------- --------- ---------
Net increase in cash and cash equivalents..... 5,173 11,160 --
Cash and cash equivalents at:
Beginning of period......................... 11,160 -- --
----------- --------- ---------
End of period............................... $ 16,333 $ 11,160 $ --
----------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest.................................... $ 78,008 $ 26,660 $ 34,050
----------- --------- ---------
Income taxes................................ $ 1,253 $ -- $ --
----------- --------- ---------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Business combinations
Fair value of assets acquired............... $ 2,949,100 $ 495,168 $ --
Fair value of liabilities assumed........... 968,498 329,134 --
Less, cash paid............................. (1,295,953) -- --
----------- --------- ---------
Fair value of stock issued on acquisition... $ 686,649 $ 166,034 $ --
----------- --------- ---------
Issuance of subordinated convertible debenture
to Laidlaw Inc.............................. $ -- $ 350,000 $ --
----------- --------- ---------
Issuance of common stock to satisfy interest
payment due on subordinated convertible
debenture................................... $ 17,500 $ -- $ --
----------- --------- ---------
Accounts payable related to fixed assets...... $ -- $ -- $ 8,992
----------- --------- ---------
Non-cash transactions arising from sale of
business:
Promissory note receivable.................. $ 8,000 $ -- $ --
Reduction of debt........................... 40,814 -- --
----------- --------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-7
<PAGE> 158
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON PAID-IN TRANSLATION ACCUMULATED STOCKHOLDERS'
AUGUST 31 STOCK CAPITAL ADJUSTMENT DEFICIT EQUITY
- --------- -------- ---------- ----------- ----------- -------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at September 1, 1995..... $120,000 $ 998,008 $ -- $ (61,742) $1,056,266
Net income....................... -- -- -- 8,210 8,210
Net additional investment by
Laidlaw Inc.................... -- 30,301 -- -- 30,301
-------- ---------- -------- --------- ----------
Balance at August 31, 1996....... 120,000 1,028,309 -- (53,532) 1,094,777
Net loss......................... -- -- -- (183,432) (183,432)
Net additional investment by
Laidlaw Inc.................... -- 7,562 -- -- 7,562
Issuance of subordinated
convertible debenture to
Laidlaw Inc.................... -- (350,000) -- -- (350,000)
Cash paid to Laidlaw Inc......... -- (349,116) -- -- (349,116)
Issuance of additional shares on
acquisition.................... 60,376 105,658 -- -- 166,034
Exercise of stock options........ 59 96 -- -- 155
Transfer of subsidiary (See Note
12) to Laidlaw Inc............. -- (57,309) -- -- (57,309)
Cumulative foreign currency
translation adjustment......... -- -- (706) -- (706)
-------- ---------- -------- --------- ----------
Balance at August 31, 1997....... 180,435 385,200 (706) (236,964) 327,965
Net income....................... -- -- -- 205 205
Issuance of additional shares on
acquisition.................... 166,460 520,189 -- -- 686,649
Exercise of stock options........ 169 340 -- -- 509
Issuance of shares in payment for
interest on subordinated
convertible debenture.......... 3,921 13,579 -- -- 17,500
Cumulative foreign currency
translation adjustment......... -- -- (18,122) -- (18,122)
-------- ---------- -------- --------- ----------
Balance at August 31, 1998....... $350,985 $ 919,308 $(18,828) $(236,759) $1,014,706
======== ========== ======== ========= ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-8
<PAGE> 159
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NAME CHANGE
Effective July 1, 1998, Laidlaw Environmental Services, Inc. (the
"Company") began doing business as Safety-Kleen Corp. and its stock began
trading on the New York Stock Exchange under the name Safety-Kleen Corp. and the
ticker symbol NYSE:SK. The formal name change requires shareholder approval
which the Company will seek at its annual meeting in November 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies followed in the
preparation of these consolidated financial statements is as follows:
CONSOLIDATION The consolidated financial statements include the accounts
of the Company and all of its subsidiary companies. All significant intercompany
balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on
deposit and term deposits in investments with maturities of three months or
less.
INVENTORIES Inventories consist primarily of solvent, oil and supplies and
are valued at the lower of cost or market, determined on a first-in, first-out
basis.
LONG-TERM INVESTMENTS Long-term investments, which have been classified as
held to maturity, are carried at cost, which approximates fair market value, and
consist primarily of long-term trust fund deposits with government authorities
to support closure and post-closure activities at several of the Company's
facilities.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is recorded at
cost. Expenditures for major renewals and improvements are capitalized. Items of
an ordinary repair or maintenance nature are charged directly to operating
expense.
Machinery and equipment includes the cost of equipment at customer
locations having a net book value of $103.3 million at August 31, 1998.
Depreciation commences when the units are placed in service at the customer.
Landfill sites, preparation costs and improvements are recorded at cost,
which includes capitalized interest on landfill capacity under development, and
amortized on the basis of landfill capacity utilized during the year. Landfill
capacity represents total permitted airspace which is measured in the form of
cubic yards.
During the construction and development period of an asset, the costs
incurred, including applicable interest costs, are classified as construction in
process. Once an asset has been completed and put into use, it is transferred to
the appropriate category and depreciation commences.
During fiscal years 1998, 1997, and 1996, the Company capitalized interest
of $4.1 million, $6.7 million, and $12.8 million, respectively.
The cost of permits directly related to property, plant and equipment is
capitalized with the related asset and depreciated over the expected permit
life. Leasehold improvements are capitalized and amortized over the shorter of
the improvement life or the remaining term of the lease. Depreciation and
amortization of other property, plant and
F-9
<PAGE> 160
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
equipment is provided substantially on a straight-line basis over their
estimated useful lives which are as follows:
Buildings -- 20 to 40 years
Machinery and equipment -- 5 to 30 years.
Depreciation expense was $78.1 million, $50.9 million, and $45.9 million in
fiscal 1998, 1997 and 1996, respectively.
GOODWILL Goodwill consists primarily of the cost of acquired businesses in
excess of market value of net assets acquired. Goodwill is amortized on a
straight-line basis over forty years.
IMPAIRMENT The Company periodically reviews the carrying values of its
property, plant and equipment and goodwill to determine whether such values are
recoverable. Accordingly, when indicators of impairment are present, the Company
evaluates the carrying value of property, plant and equipment and goodwill in
relation to the operating performance and the estimated future undiscounted cash
flows of the underlying business. The Company adjusts the book value of the
underlying asset if the sum of expected future cash flows is less than book
value. Any resulting write downs are charged to depreciation and amortization
expense.
DEFERRED FINANCING COSTS Deferred financing costs are amortized over the
life of the related debt instrument and included in long-term debt.
ENVIRONMENTAL LIABILITIES Environmental liabilities include accruals for
the estimated costs associated with closure and post-closure monitoring and
maintenance of the Company's landfills, remediation at certain of the Company's
facilities and corrective actions at Superfund sites. The Company accrues for
estimated closure and post-closure costs over the life of the landfill site as
capacity is consumed. The Company accrues for costs associated with
environmental remediation obligations when such costs are probable and
reasonably estimable. Accruals for estimated costs of environmental remediation
obligations generally are recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further information develops or
circumstances change. Changes in estimated closure and post-closure costs are
recognized over the asset life. Costs of future expenditures for environmental
remediation obligations are discounted if the amount and timing of the cash
payments are fixed or reliably determinable.
FINANCIAL INSTRUMENTS The Company's cash and cash equivalents, accounts
receivable, certain long-term investments, accounts payable, long-term debt, and
the subordinated convertible debenture constitute financial instruments.
Concentration of credit risks in accounts receivable are limited due to the
large number of customers comprising the Company's customer base throughout
North America and Europe. The Company performs ongoing credit evaluations of its
customers, but does not require collateral to support customer accounts
receivable. The Company establishes an allowance for doubtful accounts based on
the credit risk applicable to particular customers, historical trends and other
relevant information.
DERIVATIVE FINANCIAL INSTRUMENTS The Company uses interest rate swap
agreements to minimize the impact of interest rate fluctuations on floating
interest rate long-term borrowings. The differential paid or received on
interest rate swap agreements is recognized
F-10
<PAGE> 161
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
as an adjustment to interest expense. See Note 5 for fair value information
pertaining to long-term debt and derivative financial instruments.
REVENUE RECOGNITION Revenues, along with the related costs of treatment,
disposal and transportation, are recorded at the time of performance of
services, shipment of products, or acceptance of waste at the Company's service
centers. Revenues from the Company's treatment and disposal operations,
primarily landfill and incineration facilities, are recognized when the waste
material is disposed of, whether burned, landfilled, or treated. Pursuant to
contracts with its customers, the Company accepts title to waste material at
such time and provides contractual indemnification to its customers against
future liability with respect to the waste materials.
INCOME TAXES Deferred income taxes reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts. Future tax benefits, such as net operating loss
carryforwards, are recognized to the extent that realization of such benefits
are more likely than not. Prior to May 15, 1997, the Company filed consolidated
tax returns with Laidlaw Inc., the former parent company. Income taxes for
periods prior to May 15, 1997 have been calculated using applicable income tax
rates on income for tax purposes on a separate return basis.
FOREIGN CURRENCY TRANSLATION The Company's foreign operations are all of a
self-sustaining nature. The functional currency of the Company's foreign
subsidiaries is its respective local currency. Assets and liabilities are
translated to U.S. Dollars at the exchange rate in effect at the balance sheet
date and revenue and expenses at weighted monthly average exchange rates for the
year. Gains and losses from the translation of the financial statements of the
foreign subsidiaries are included in stockholders' equity.
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS Certain prior year amounts have been reclassified to be
consistent with current year presentation.
3. BUSINESS COMBINATIONS
ROLLINS ENVIRONMENTAL On May 15, 1997, pursuant to a February 6, 1997
stock purchase agreement (the "Stock Purchase Agreement") between Rollins
Environmental Services, Inc. ("Rollins") and Laidlaw Inc. and its subsidiaries
("Laidlaw"), Rollins acquired the hazardous and industrial waste operations of
Laidlaw ("Old LESI" or the "Accounting Acquirer"). The business combination was
accounted for as a reverse acquisition using the purchase method of accounting.
Rollins issued 120 million common shares and a $350 million 5% subordinated
convertible debenture, and paid $349.1 million in cash ($400 million, less debt
of $50.9 million assumed), to Laidlaw. Coincident with the closing of the
acquisition, the continuing legal entity changed its name from Rollins
Environmental Services, Inc. to Laidlaw Environmental Services, Inc. (the
"Company"). This acquisition decreased Laidlaw's ownership to 67% of the issued
common shares of the
F-11
<PAGE> 162
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company. Accordingly, the Company adopted the Accounting Acquirer's fiscal
year-end of August 31.
As a result of the acquisition, the historical financial information
included in these consolidated financial statements is that of the Accounting
Acquirer. The results of operations of Rollins have been included from the date
of acquisition.
SAFETY-KLEEN CORP. The Company announced on April 1, 1998 that 93% of
Safety-Kleen Corp. ("Safety-Kleen") shareholders had accepted its exchange
offer, as amended on March 16, 1998, relating to the acquisition of Safety-Kleen
by the Company. Under the terms of the offer, the Company exchanged $18.30 and
2.8 common shares of Company stock for each Safety-Kleen share tendered. In May
1998, the Company completed the acquisition of Safety-Kleen through a back-end
merger, approved by the Safety-Kleen shareholders on May 18, 1998. The total
consideration of approximately $2.2 billion, including debt assumed and
estimated transaction costs, was comprised of approximately $1.5 billion cash
and 166.5 million shares of Common stock. The fair value per share of the common
stock of $4.125 is the average of the closing New York Stock Exchange market
price for the three trading days prior to and the three trading days immediately
following and including March 16, 1998, the date of the merger agreement. The
cash consideration and the refinancing of certain existing indebtedness was
financed from the proceeds of a $2.2 billion Senior Credit Facility (See Note
5).
The acquisition of Safety-Kleen has been accounted for under the purchase
method and accordingly, the financial statements include the results of
operations of the acquired business from the date of acquisition. The purchase
price has been allocated to the assets acquired and liabilities assumed based
upon management's best estimate of their fair values. Given the size and
complexity of the acquired operations, as well as the short time period that has
elapsed since acquisition, the cost, and the allocation thereof, of the
acquisition is subject to change based upon the final resolution of those
estimates. However, management believes that the final resolution of the
estimates will not have a material impact on the financial position or results
of operations of the Company. The areas of particular complexity include
valuation of long-lived assets, environmental liabilities, pre-acquisition
contingencies and the related deferred tax consequences. The excess of the
estimated purchase price over the assets acquired of approximately $948.9
million is being amortized over forty years.
As a direct result of the personnel reductions and facility closures
related to the Rollins and Safety-Kleen acquisitions, the Company plans to incur
salary and benefit related costs and closure costs in fiscal 1999 of
approximately $60.0 million.
The unaudited pro forma consolidated data set forth below presents the
results of operations of the Company as if both acquisitions had occurred as of
September 1, 1996. This data does not purport to be indicative of the results of
operations that might have occurred nor which might occur in the future. In
addition, the information does not reflect
F-12
<PAGE> 163
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
synergies yet to be realized from the integration of the Company and the
acquired businesses ($ in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenue....................................... $1,754,981 $1,802,627
Loss from continuing operations............... (15,753) (256,410)
Per share data:
Loss from continuing operations............... $ (0.05) $ (0.74)
Weighted average common stock outstanding
(000's)..................................... 349,025 346,836
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following ($ in thousands):
<TABLE>
<CAPTION>
AUGUST 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Current portion of environmental liabilities..... $ 45,434 $ 27,376
Interest payable................................. 28,914 12,643
Accrued salaries and benefits.................... 70,577 25,018
Accrued disposal costs........................... 6,605 10,039
Other............................................ 67,822 40,135
-------- --------
Total.................................. $219,352 $115,211
======== ========
</TABLE>
5. LONG-TERM DEBT
SENIOR CREDIT FACILITY In April 1998, the Company repaid its existing Bank
Credit Facility and established a $2.2 billion Senior Credit Facility (the
"Senior Credit Facility") pursuant to a credit agreement between the Company and
a syndicate of banks and other financial institutions. The Senior Credit
Facility, the availability of which was permanently reduced by $325 million to
$1.875 billion by the subsequent issuance of the Senior Subordinated Notes
described below, consists of five parts: (i) a $550 million six-year Senior
Secured Revolving Credit Facility (interest rates at August 31, 1998 of 8.06% to
8.13%) with a $200 million letter of credit sublimit and $400 million sublimit
for loans (the "Revolver"), (ii) a $455 million six-year Senior Secured
Amortizing Term Loan (interest rates at August 31, 1998 of 8.06% to 8.13%),
(iii) a $70 million six-year Senior Secured Amortizing Term Loan (interest rates
at August 31, 1998 of 7.31% to 7.65%), (iv) a $400 million minimally amortizing
seven-year Senior Secured Term Loan (interest rates at August 31, 1998 of 8.44%
to 8.50%) and (v) a $400 million minimally amortizing eight-year Senior Secured
Term Loan (interest rates at August 31, 1998 of 8.69% to 8.75%). The term loans
referred to in clauses (ii), (iii), (iv) and (v) are collectively referred to
herein as the "Term Loans".
In connection with the repayment of its existing Bank Credit Facility, the
Company recognized an extraordinary charge of approximately $18.8 million ($11.3
million after tax,
F-13
<PAGE> 164
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
or $0.05 per share) related to the write-off of previous deferred debt issuance
costs and repayment penalties.
As of August 31, 1998, the Term Loans have been drawn in full and
borrowings outstanding under the Revolver total $208 million. The Company has
$192 million of additional borrowing availability under the Revolver. In
addition, there were $76 million of letters of credit issued under the terms of
the Revolver, with additional availability of $124 million.
The Senior Credit Facility contains negative, affirmative and financial
covenants customarily found in credit agreements for similar financings,
including covenants restricting debt, guarantees, liens, mergers and
consolidations, sales of assets and payment of dividends and establishing a
total leverage ratio test, a fixed charge coverage test, and interest coverage
ratio test and a maximum contingent obligation to operating cash flow ratio
test. The Company was in compliance with the covenants at August 31, 1998.
The Senior Credit Facility is collateralized by all of the tangible assets
of the Company. All of the capital stock of the Company and its subsidiaries,
including the acquired Safety-Kleen subsidiaries, are pledged to the lenders,
and such subsidiaries guaranty the obligations of the Company to the lenders.
Interest costs on the Senior Credit Facility are reset periodically, at
least annually, and vary depending on the particular facility and whether the
Company chooses to borrow under Eurodollar or non-Eurodollar loans. Interest
costs on the promissory note are based on U.S. Dollar London Interbank Offered
Rate ("LIBOR"), determined on a semi-annual basis.
SENIOR SUBORDINATED NOTES On May 29, 1998, Safety-Kleen Services, Inc.
(formerly known as LES, Inc.), a wholly-owned subsidiary of the Company, issued
$325 million 9.25% Senior Subordinated Notes due 2008 (the "Notes") in a Rule
144A offering. Net proceeds from the sale of the Notes, after the underwriting
discount and other expenses, were approximately $316 million. The proceeds were
used to repay a portion of the borrowings outstanding under the Senior Credit
Facility.
The Notes mature on June 1, 2008. Interest on the Notes will be payable
semiannually, commencing December 1, 1998. The Notes will be redeemable, in
whole or in part, at the option of the Company, at any time prior to June 1,
2003 at a redemption price equal to the greater of (i) 100% of the principal
amount of such Notes or (ii) the sum of the present values of 104.625% of the
principal amount of such Notes and the scheduled payments of interest thereon
through and including June 1, 2003, discounted to such redemption date on a
semi-annual basis at the Adjusted Treasury Rate, as defined, plus 50 basis
points, together with accrued and unpaid interest, if any. The Notes will be
redeemable, in whole or in part, at the option of the Company at any time on or
after June 1, 2003 at 104.625% of the principal amount declining ratably in
annual increments to par on or after June 1, 2006. In addition, prior to June 1,
2001, the Company may redeem up to 35% of the original aggregate principal
amount of the Notes with the net proceeds of one or more public equity offerings
at a redemption price equal to 109.25% of the principal amount thereof, plus
accrued and unpaid interest. Upon a change in control of the Company, each
holder of the Notes may require the Company to repurchase all or a
F-14
<PAGE> 165
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
portion of such holder's Notes at 101% of the principal amount thereof, plus
accrued interest.
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future senior indebtedness, as defined, of
the Company. The Notes will rank senior in right of payment to all existing and
future subordinated indebtedness of the Company, if any. The payment of the
Notes are guaranteed on a senior subordinated basis by Laidlaw Environmental
Services, Inc. and are jointly and severally guaranteed on a senior subordinated
basis by the Company's wholly-owned domestic subsidiaries. No foreign direct or
indirect subsidiary or non-wholly-owned domestic subsidiary is an obligor or
guarantor on the financing.
The Notes contain certain affirmative and negative covenants which, in
certain instances and subject to certain limitations and qualifications,
restrict, among other things, the incurrence of additional debt, restricted
payments, assets sales, transactions with affiliates, dividend and other
payments, the issuance of stock of subsidiaries to third parties, certain liens,
and certain consolidations, mergers of sales of assets. The Company was in
compliance with the covenants at August 31, 1998.
In accordance with an Exchange and Registration Rights Agreement entered at
the time of the issuance of the Notes, the Company filed a registration
statement with the Securities and Exchange Commission on June 24, 1998, pursuant
to which the Company proposes to exchange the Notes for notes of the Company
with terms identical to the Notes.
SAFETY-KLEEN NOTES In connection with the acquisition of Safety-Kleen and
in accordance with the terms of the notes due to the change of control of the
issuer, the Company repurchased substantially all of the outstanding 9.25% $100
million Notes due September 15, 1999 pursuant to a tender offer to the note
holders at a price of approximately 105%.
F-15
<PAGE> 166
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term debt consists of the following ($ in thousands):
<TABLE>
<CAPTION>
AUGUST 31
----------------------
1998 1997
---------- --------
<S> <C> <C>
Senior Credit Facility:
Terms loans, U.S...................................... $1,238,250 $315,000
Term loans, Canadian.................................. 60,500 60,000
Revolver.............................................. 208,000 --
Senior Subordinated Notes, due June 1, 2008, with an
interest rate of 9.25%................................ 325,000 --
Promissory note, due May 2003, with an interest rate of
5.91%................................................. 60,000 60,000
Industrial Revenue Bonds, due 2003-2027, with fixed
interest rates from 6.0% to 9.0%...................... 80,891 123,314
Other................................................... 1,410 948
---------- --------
1,974,051 559,262
Less: current portion................................... 77,004 12,086
Less: unamortized deferred financing costs.............. 43,883 19,166
---------- --------
Total......................................... $1,853,164 $528,010
========== ========
</TABLE>
The aggregate amount of minimum payments required on long-term debt in each
of the years indicated is as follows ($ in thousands):
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31
- ---------------------
<S> <C>
1999........................................... $ 77,004
2000........................................... 86,385
2001........................................... 113,476
2002........................................... 113,400
2003........................................... 150,441
Thereafter..................................... 1,433,345
----------
Total minimum payments due............. $1,974,051
==========
</TABLE>
In management's view, due to the long-term debt being primarily based on
floating rates, the carrying amounts approximate fair value.
The promissory note and $15.7 million of the Industrial Revenue Bonds are
guaranteed by Laidlaw.
The Company has entered into interest rate swap agreements to alter
interest rate exposures. These agreements, with a principal notional amount of
$710 million, expire in periods ranging from 0.5 to 30 years, with a weighted
average of approximately 7 years. The Company pays fixed rates ranging from
5.16% to 6.17%, and receives floating rates based on U.S. Dollar LIBOR,
determined on a quarterly basis of 5.6875% as of August 31, 1998.
F-16
<PAGE> 167
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Credit risk arises from the possible inability of counterparties to meet
the terms of their contracts on a net basis. All of the Company's interest rate
swap agreements have been entered into with major financial institutions which
are expected to fully perform under the terms of the agreements. The Company's
credit exposure on swaps is related not to the notional balances of the interest
rate swaps, but to the current and potential replacement costs of all profitable
contracts at year end. At August 31, 1998 this credit exposure is immaterial.
Credit exposure will increase along with the market value of the swaps, if
interest rates increase, and decrease if interest rates decline.
Derivative financial instrument fair values represent an approximation of
amounts the Company would have paid to or received from counterparties to
terminate its positions prior to maturity, and are based on capital market rates
prevailing at August 31, 1998. The Company's fair value cost for all interest
rate derivative contracts as of August 31, 1998, was approximately $11.1
million. At August 31, 1998, the Company had no plans to terminate these
positions prior to maturity.
6. SUBORDINATED CONVERTIBLE DEBENTURE
Pursuant to the Rollins acquisition described in Note 3, the Company issued
a $350 million 5% subordinated convertible, pay-in-kind debenture ("PIK") due
May 15, 2009 to Laidlaw.
Interest on the PIK is payable semiannually, on November 15 and May 15
until maturity. Beginning on May 15, 2002, and continuing until maturity, the
PIK is convertible, at the option of the holder into common shares of the
Company based on a conversion price per share of $3.75 (the "Conversion Price").
Beginning on May 15, 2002, and continuing until maturity, the Company has the
option to redeem the PIK in cash if the common shares are trading at a market
price greater than or equal to 120% of the Conversion Price. The PIK ranks
junior in right of payment (principal and interest) to all other long-term debt.
The estimated fair value of the PIK is based on quoted market prices, where
available, along with present value calculations which are calculated using
current rates for similar debt with the same remaining maturity. The Company
estimates that the fair value of the PIK at August 31, 1998 was $350.5 million
($493.6 million -- 1997).
Interest payments due during the first two years after the acquisition of
Safety-Kleen are required to be satisfied by the issuance of the Company's
common shares, based on the market price of the common shares at the time the
interest payments are due. At the Company's option, any other interest or
principal payments, other than optional early redemption, may be satisfied by
issuing common shares, based on the market price at the time such payments are
due. During the year ended August 31, 1998, the Company issued 3,920,410 shares
to Laidlaw in satisfaction of interest payments due.
7. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS: Rental expense incurred under operating leases was
$50.5 million, $36.1 million, and $35.9 million in 1998, 1997, and 1996,
respectively. Minimum future rental amounts required under operating leases for
premises and equipment having
F-17
<PAGE> 168
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
non-cancelable terms in excess of one year as of August 31, 1998, are as follows
($ in thousands):
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31
---------------------
<S> <C>
1999.............................................. $28,845
2000.............................................. 21,583
2001.............................................. 11,708
2002.............................................. 8,637
2003.............................................. 6,498
Thereafter........................................ 19,444
-------
Total..................................... $96,715
=======
</TABLE>
CLOSURE, POST-CLOSURE AND ENVIRONMENTAL LIABILITIES: The Company has
recorded liabilities for closure and post-closure monitoring and environmental
remediation costs as follows ($ in thousands):
<TABLE>
<CAPTION>
AUGUST 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Current portion, included in accrued
liabilities.................................... $ 45,434 $ 27,376
Non-current portion, included in environmental
and other long-term liabilities................ 220,669 155,685
-------- --------
Total.................................. $266,103 $183,061
======== ========
</TABLE>
The business of the Company's hazardous and industrial waste services is
continuously regulated by federal, state, provincial and local provisions that
have been enacted or adopted, regulating the discharge of materials into the
environment or primarily for the purpose of protecting the environment. The
nature of the Company's businesses results in its frequently becoming a party to
judicial or administrative proceedings involving all levels of governmental
authorities and other interested parties. The issues that are involved generally
relate to applications for permits and licenses by the Company and their
conformity with legal requirements and alleged technical violations of existing
permits and licenses. The Company does not believe that these matters will be
material to its operations or financial condition.
The Company, in the normal course of its business, expends funds for
environmental protection and remediation, but does not expect these expenditures
to have a materially adverse effect on its financial condition or results of
operations, since its business is based upon compliance with environmental laws
and regulations.
Closure and post-closure monitoring and maintenance costs for U.S.
landfills are estimated based on the technical requirements of Subtitle C and D
Regulations of the U.S. Environmental Protection Agency or the applicable state
requirements, whichever is stricter, and the air emissions standards under the
Clean Air Act. The costs include such items as final capping of the site,
methane gas and leachate management, groundwater monitoring and operation and
maintenance costs to be incurred during the period after the
F-18
<PAGE> 169
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
facility closes and ceases to accept waste. Closure and post-closure costs for
the Company's landfills in Canada are based upon the local landfill regulations
governing the facility.
The Company has also established procedures to routinely evaluate potential
remedial liabilities at sites which it owns or operates, or to which it
transports waste, including 44 sites listed on the Superfund National Priority
List ("NPL"). In the majority of situations, the Company's connection with NPL
sites relates to allegations that its subsidiaries, or their predecessors,
transported waste to the facilities in question, often prior to the acquisition
of such subsidiaries by the Company. The Company routinely reviews and evaluates
sites requiring remediation, including NPL sites, giving consideration to the
nature (i.e., owner, operator, transporter or generator), and the extent (i.e.,
amount and nature of waste hauled to the location, number of years of site
operations or other relevant factors), of the Company's alleged connection with
the site, the accuracy and strength of evidence connecting the Company to the
location, the number, connection and financial ability of other named and
unnamed potentially responsible parties and the nature and estimated cost of the
likely remedy. Where the Company concludes that it is probable that a liability
has been incurred, provision is made in the financial statements, based upon
management's judgment and prior experience, for the Company's best estimate of
the liability. If no amount within the range appears to be a better estimate
than any other amount, then the Company provides for the minimum amount within
the range in accordance with SFAS No. 5, "Accounting for Contingencies". Such
estimates are subsequently revised as deemed necessary as additional information
becomes available. The Company believes that it is more than remotely possible
but less than likely, that its potential liability could be at the high end of
such ranges, which would be approximately $35.0 million higher in the aggregate
than the estimate that has been recorded in the financial statements as of
August 31, 1998.
Estimates of the extent of the Company's degree of responsibility for
remediation of a particular site and the method and ultimate cost of remediation
require a number of assumptions and are inherently difficult to evaluate, such
that the ultimate outcome may differ from current estimates. However, the
Company believes that its extensive experience in the environmental services
business, as well as its involvement with a large number of sites, provides a
reasonable basis for estimating its aggregate liability. As additional
information becomes available, estimates are adjusted as necessary. While the
Company does not anticipate that any such adjustment would be material to its
financial statements, it is reasonably possible that technological, regulatory
or enforcement developments, the results of environmental studies or other
factors could necessitate the recording of additional liabilities which could be
material. The impact of such future events cannot be estimated at the current
time.
Where the Company believes that both the amount of a particular
environmental liability and the timing of the payments are fixed or reliably
determinable, the cost in current dollars is discounted to present value
assuming inflation of 3.6% and a risk free discount rate of 8.5%. Had the
Company not discounted any portion of its liability, the amount recorded would
have been increased by approximately $7.0 million at August 31, 1998 (1997 -- $9
million).
F-19
<PAGE> 170
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The majority of the Company's active landfill sites have estimated
remaining lives ranging from two, to more than 100 years, based upon current
site plans and anticipated annual volumes of waste. As of August 31, 1998, the
Company estimates that during this remaining site life, it will provide for an
additional $59.0 million (1997 -- $97 million) of closure and post-closure
costs, including accretion for the discount recognized to date.
Anticipated payments of undiscounted environmental liabilities for each of
the next five years and thereafter are as follows ($ in thousands):
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31
---------------------
<S> <C>
1999............................................... $ 45,434
2000............................................... 40,269
2001............................................... 29,382
2002............................................... 16,668
2003............................................... 12,811
Thereafter......................................... 180,539
--------
Total...................................... $325,103
========
</TABLE>
In conjunction with the acquisitions of certain facilities, the Company has
obtained varying amounts and types of indemnification from potential
environmental liabilities existing at the time of acquisition. Such indemnities
typically cover all or a portion of the costs associated with the remediation of
such pre-existing environmental liabilities, and may be available for a limited
period of time. The Company periodically evaluates the ability of the sellers to
perform under the indemnification agreements and will record a receivable if
collection is probable.
FINANCIAL ASSURANCE OBLIGATIONS: As of August 31, 1998, the Company
provided financial assurances, primarily by insurance policies, performance
bonds and letters of credit, to the applicable regulatory authorities, totaling
approximately $560 million, in connection with the closure and post-closure
requirements of certain facility operating permits.
LEGAL PROCEEDINGS: Laidlaw's United States subsidiaries petitioned the
United States Tax Court (captioned as Laidlaw Transportation, Inc. and
Subsidiaries et al v. Commissioner of Internal Revenue, Docket Nos. 9361-94 and
9362-94) with respect to their consolidated federal income tax returns (which
until May 15, 1997 included certain of the Company's United States subsidiaries)
for the fiscal years ended August 31, 1986, 1987, and 1988. The principal issue
involved related to the timing and deductibility for tax purposes of interest
attributable to loans owing to related foreign persons. The court issued an
opinion on June 30, 1998 concluding that advances from the Laidlaw's related
foreign entity were equity rather than debt and that interest deductions claimed
were disallowed. Based on this opinion, taxes of $46.2 million (plus interest of
approximately $88.8 million as of August 31, 1998) would be payable. This
opinion has been deferred to allow for negotiations to resolve all issues.
Should negotiations prove unsuccessful, the Company expects Laidlaw to appeal
this opinion.
F-20
<PAGE> 171
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Similar claims have been asserted with respect to the consolidated federal
income tax returns for the fiscal years ended August 31, 1989, 1990, and 1991. A
petition has been filed with the United States Tax Court with respect to these
years (captioned as Laidlaw Transportation, Inc. and Subsidiaries v.
Commissioner of Internal Revenue, Docket No. 329-98). The income taxes at issue
for these years is approximately $143.5 million (plus interest of approximately
$156.7 million as of August 31, 1998). In August 1998, Laidlaw received a notice
of proposed adjustment proposing that the subsidiaries pay additional taxes of
approximately $96.0 million (plus interest of approximately $51.2 million as of
August 31, 1998) relating to disallowed deductions in federal income tax returns
for the fiscal years ended August 31, 1992, 1993, and 1994, based on the same
issues. Should Laidlaw's United States subsidiaries ultimately be required to
pay all claims on these issues, both presently asserted and expected to be
asserted, for the fiscal years 1986 through 1994, the cost (including interest
as of August 31, 1998) would be approximately $500.0 million. Laidlaw is
reviewing all of the above issues with counsel and the Company expects that
Laidlaw will vigorously contest the claimed deficiencies.
Pursuant to the Stock Purchase Agreement referred to in Note 3, Laidlaw and
Laidlaw Transportation, Inc. agreed to be responsible for any tax liabilities,
including the costs to defend the subsidiaries, resulting from these matters.
The Company believes that the ultimate disposition of these issues will not have
a materially adverse effect upon the Company's consolidated financial position
or results of operations.
8. STOCKHOLDERS' EQUITY
AUTHORIZED AND ISSUED CAPITAL STOCK: The Company is authorized to issue
750 million shares of its $1 par value common stock and one million shares of
its $1 par value preferred stock. The terms and conditions of each issue of
preferred stock are determined by the Board of Directors. No preferred stock has
been issued.
Each share of common stock outstanding includes one common stock purchase
right (a "Right") which is non-detachable and non-exercisable until certain
defined events occur, including certain tender offers or the acquisition by a
person or group of affiliated or associated persons of 15% of the Company's
common stock. Upon the occurrence of certain defined events, the Right entitles
the holder to purchase additional stock of the Company or stock of an acquiring
company at a 50% discount. The Right expires on June 30, 1999, unless earlier
redeemed by the Company at a price of $.01 per Right.
9. STOCK OPTION PLANS
The Company has the following stock option plans:
1. The 1982 Stock Option Plan of the former Rollins Environmental
Services, Inc.
2. The 1993 Stock Option Plan of the former Rollins Environmental
Services, Inc.
3. The 1997 Directors Stock Option Plan
4. The 1997 Stock Option Plan
F-21
<PAGE> 172
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
All outstanding employee stock options granted by the former Rollins were
fully vested on May 15, 1997, in accordance with the terms of the Stock Purchase
Agreement referred to in Note 3.
Option activity is as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of
year...................... 2,040,045 $3.994 -- --
Vested upon change in
control................... -- -- 1,106,555 $5.047
Granted..................... 1,586,250 $3.838 1,187,500 $3.188
Exercised................... (168,900) $3.014 (59,500) $2.612
Expired or canceled......... (336,996) $6.187 (194,510) $5.488
--------- ------ --------- ------
Outstanding at end of
year...................... 3,120,399 $3.731 2,040,045 $3.994
========= ====== ========= ======
Options available for
grant..................... 3,766,250 5,352,500
Options exercisable......... 584,149 852,545
</TABLE>
<TABLE>
<CAPTION>
1998 1997
----------------------------------------------- -----------------------------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE WEIGHTED
RANGE OF EXERCISE OPTIONS REMAINING AVERAGE OPTIONS REMAINING AVERAGE
PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
- ----------------- ----------- ---------------- -------------- ----------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 2.625 - $ 2.875.... 82,000 2.85 years $ 2.790 239,500 2.62 years $ 2.846
$ 3.188 - $ 3.938.... 2,773,750 9.43 years $ 3.560 1,212,700 9.69 years $ 3.202
$ 4.125 - $ 5.750.... 180,600 3.00 years $ 4.761 353,400 2.41 years $ 4.814
$ 7.500 - $ 8.875.... 79,549 0.37 years $ 7.846 225,445 0.94 years $ 7.878
$11.125 - $12.250.... 4,500 1.47 years $12.250 9,000 1.59 years $11.688
--------- ---------- ------- --------- ---------- -------
$ 2.625 - $12.250.... 3,120,399 8.64 years $ 3.731 2,040,045 6.60 years $ 3.994
========= ========== ======= ========= ========== =======
</TABLE>
Effective July 9, 1997, the directors of the Company set aside six million
shares of its $1 par value common stock for issuance under a 1997 stock option
plan. All options under this plan are for a term of ten years from the date of
grant and become exercisable with respect to 20% of the total number of shares
subject to the option, one year after the date of grant, and with respect to an
additional 20% at the end of each 12 month period thereafter on a cumulative
basis during the succeeding four years. The plan provides for the granting of
stock options to certain senior employees and officers of the Company at the
discretion of the Board of Directors. All options are subject to certain
conditions of service. Options for 1,097,500 shares were granted during fiscal
1997 at an exercise price of $3.188. Options for 1,406,250 shares were granted
during fiscal 1998 at exercise prices ranging from $3.8125 to $3.9375.
Effective July 9, 1997, the directors of the Company set aside 540,000
shares of its $1 par value common stock for issuance under a 1997 directors
stock option plan. All options under this plan are for a term of ten years from
the date of grant and become exercisable with respect to 20% of the total number
of shares subject to the option, one year after the date of grant, and with
respect to an additional 20% at the end of each 12 month period
F-22
<PAGE> 173
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
thereafter on a cumulative basis during the succeeding four years. All options
are subject to certain conditions of service. Options for 90,000 shares were
granted during fiscal 1997 at an exercise price of $3.188. Options for 180,000
shares were granted during fiscal 1998 at an exercise price $3.8125.
The Company applies Accounting Principles Board ("APB") 25 in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized because the option exercise price is equal to the market price of the
underlying stock on the date of the grant. Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," defines a
fair value method of accounting for stock options and other equity instruments.
Under the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service period,
which is usually the vesting, or exercise period. Had compensation cost for
these plans been determined based on the Black Scholes value at the grant dates
for awards as prescribed by SFAS No. 123, pro forma net income and earnings per
share would have been as follows ($ in thousands, except per share data):
<TABLE>
<CAPTION>
AUGUST 31
------------------
1998 1997
----- ---------
<S> <C> <C>
Pro forma net income............................... $(260) $(183,727)
Pro forma earnings per share....................... $ -- $ (1.33)
</TABLE>
There were no stock option plans prior to fiscal year 1997, therefore no
pro forma disclosure is required for fiscal year ended August 31, 1996.
The weighted average Black Scholes value of options granted under the stock
option plans during 1998 and 1997 was $1.07 and $2.48, respectively. The value
was estimated using an expected life of 8.7 years, no dividends, a volatility
factor of 28.6% and 19.4% and risk free interest rates of 4.5% in 1998 and 1997,
respectively.
10. RESTRUCTURING AND OTHER CHARGES
The integration related to the acquisitions described in Note 3 have, or
will result in, the closing and remediation of certain of the existing operating
facilities that have become redundant and the incurrence of other exit
activities related to the acquisitions. Such actions are expected to produce
substantial cost savings.
With respect to the Old LESI operations, the Company recorded a one-time
charge of $331.7 million ($200 million after tax, or $1.52 per share) against
income in the quarter ended May 31, 1997, to reflect the closing of certain of
the operating facilities that had become redundant, and an impairment in the
carrying value of certain operating facilities due to lower expected future cash
flows as a result of the Rollins acquisition. The expected cash costs were $25.0
million, of which $14.4 million has been incurred to date, resulting in a
remaining balance of $10.6 million.
During the third quarter of fiscal 1998, with respect to the existing
operations, the Company recorded a one-time charge of $65.8 million ($39.5
million after tax or $0.16 per share) against earnings to reflect the costs
associated with the closing and remediation of certain facilities and other exit
activities as a result of the acquisition of Safety-Kleen.
F-23
<PAGE> 174
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$31.8 million of the charges relates to the non-cash write-off of existing
facility carrying values and $34.0 million represents cash costs to be incurred
during subsequent periods.
11. INCOME TAXES
Prior to May 15, 1997, the Company filed consolidated tax returns with
Laidlaw Inc. (See Note 2). The income tax expense (benefit) for periods ending
after May 15, 1997 are comprised as follows ($ in thousands):
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------
1998 1997
------- ---------
<S> <C> <C>
Current:
Federal........................................ $ -- $ (30,236)
State.......................................... 810 1,000
Foreign........................................ 5,480 (2,064)
Deferred:
Federal........................................ 1,827 (87,086)
State.......................................... (7,477) (12,440)
Foreign........................................ 999 8,037
------- ---------
Income tax expense (benefit)..................... $ 1,639 $(122,789)
======= =========
</TABLE>
Income tax expense (benefit) is included in the financial statements as
follows ($ in thousands):
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------
1998 1997
------- ---------
<S> <C> <C>
Continuing operations............................ $ 9,133 $(122,789)
Extraordinary loss............................... (7,494) --
------- ---------
Income tax expense (benefit)..................... $ 1,639 $(122,789)
======= =========
</TABLE>
A reconciliation of the income tax calculated by applying the domestic
statutory federal income tax rate to the income (loss) before income taxes is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------
1998 1997
------ ------
<S> <C> <C>
Federal income tax expense (benefit) at statutory
rate............................................. 35.0% (35.0)%
State income tax benefit........................... (14.6)% (5.2)%
Foreign country rate differential.................. 2.2% --%
Goodwill........................................... 18.6% --%
Other.............................................. 3.7% 0.1%
----- -----
Income tax expense (benefit)....................... 44.9% (40.1)%
===== =====
</TABLE>
F-24
<PAGE> 175
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities consisted of the following ($ in
thousands):
<TABLE>
<CAPTION>
AUGUST 31
--------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities............................ $128,175 $122,051
Tax attribute carryovers....................... 117,478 62,865
Interest....................................... 14,155 15,358
Other.......................................... 11,882 7,016
-------- --------
Total gross deferred tax assets........ 271,690 207,290
Less: valuation allowance.............. 30,994 14,066
-------- --------
Net deferred tax assets.......................... 240,696 193,224
-------- --------
Deferred tax liabilities:
Excess of tax over book depreciation........... 710,286 223,732
Other.......................................... 27,634 6,255
-------- --------
Total gross deferred tax liabilities... 737,920 229,987
-------- --------
Net deferred tax liabilities..................... $497,224 $ 36,763
======== ========
</TABLE>
The Company has net operating loss carryforwards for federal income taxes
expiring in the years 2009 to 2113 of $197.0 million. A valuation allowance of
$14.1 million has been recorded against $46.9 million of the loss carryforwards
which are subject to limitations of both Treasury Regulation 1.1502-21 and
Internal Revenue Code ("IRC") Section 382. Foreign net operating losses expiring
in the years 1999 to 2004 are $35.9 million against which a valuation allowance
of $16.9 million has been recorded. Interest carryovers of $27.1 million limited
by IRC Section 163(j) are available against federal tax without expiration.
12. DISCONTINUED OPERATIONS
On May 1, 1997, in contemplation of the Rollins acquisition described in
Note 3, the Company transferred, in a non-cash transaction, JTM Industries,
Inc., its coal combustion by-products management operations to Laidlaw.
Accordingly, no gain or loss was recognized on this transfer. These operations
were retained by Laidlaw and are not part of the Company's ongoing operations.
Accordingly, the Company has classified these operations as discontinued.
Historically, these operations have been included in Laidlaw's Hazardous Waste
Services segment for financial reporting purposes. Revenue for the discontinued
operations for 1997 and 1996 was $41.5 million, and $62.9 million, respectively.
13. EARNINGS PER SHARE
During the year ended August 31, 1998, the Company adopted Statement of
Financial Accounting Standard No. 128 (SFAS 128) "Earnings Per Share". This
statement requires the presentation of basic and diluted earnings per share.
Basic EPS excludes dilution and
F-25
<PAGE> 176
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS gives
effect to all dilutive potential common shares that were outstanding during the
period. The adoption of this standard did not have an impact on the prior period
earnings per share data.
The following table represents a reconciliation of the shares used to
calculate basic and diluted earnings per share for each of the three years ended
August 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
--------------------------------
1998 1997 1996
------- --------- --------
<S> <C> <C> <C>
Numerator ($ in thousands):
Net income (loss) -- basic.................. $ 205 $(183,432) $ 8,210
Add interest, net of tax, on subordinated
convertible debenture.................... 10,500 3,063 --
------- --------- --------
Total -- diluted.................... $10,705 $(180,369) $ 8,210
======= ========= ========
Denominator (000's):
Weighted average shares
outstanding -- basic..................... 249,287 138,033 120,000
Effect of dilutive securities:
Employee stock options................... 349 15 --
Subordinated convertible debenture....... 93,333 27,391 --
------- --------- --------
Weighted average shares
outstanding -- diluted................... 342,969 165,439 120,000
======= ========= ========
Basic earnings per share.................... $-- $(1.33) $0.07
Diluted earnings per share.................. $-- $(1.33) $0.07
</TABLE>
14. RELATED PARTY TRANSACTIONS
Included in selling, general and administrative expenses are management
fees paid to Laidlaw in the amounts of $2.6 million and $4.6 million during 1997
and 1996, respectively.
Management fees have been allocated to the Company, prior to May 15, 1997,
based upon the Company's share of Laidlaw's consolidated revenue. Management
fees are charged by Laidlaw to each of its operating groups in order to recover
its general and administrative costs. The services provided by Laidlaw include
treasury, taxation and insurance.
Related party insurance transactions totaled $11.3 million, $7.2 million,
and $7.2 million in 1998, 1997, and 1996, respectively. Rates paid under
insurance contracts are determined on a similar basis as those charged under
similar contracts with third party insurers.
Certain directors and officers of the Company are also directors and
officers of Laidlaw.
F-26
<PAGE> 177
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company's revenues and income are derived from one industry segment
which includes the collection, transportation, processing, recovery and disposal
of hazardous and industrial wastes. The segment renders services to a variety of
commercial, industrial, governmental and residential customers.
16. RECENT ACCOUNTING DEVELOPMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, "Reporting Comprehensive Income," ("SFAS 130"), effective for
periods beginning after December 15, 1997. SFAS 130, which will be adopted in
the first quarter of the year ending August 31, 1999, establishes standards for
reporting and displaying comprehensive income and its components. Comprehensive
income is defined as the change in equity during a period from transactions and
other events and circumstances from non-owner sources and includes all changes
in equity during a period except those resulting from investments by and
distributions to owners. Adoption of this standard will only require additional
financial statement disclosures.
In June 1997, FASB issued Statement No. 131, "Disclosures About Segments of
an Enterprise and Related Information," ("SFAS 131"), effective for periods
beginning after December 15, 1997. SFAS 131, which will be adopted in the first
quarter of the year ending August 31, 1999, establishes standards for the
reporting by public business enterprises of information about operating segments
in interim and annual financial statements. The Company is currently evaluating
the impact, if any, the implementation of this standard will have on the
disclosures in the consolidated financial statements.
In June, 1998, FASB issued Statement No. 133, "Accounting of Derivative
Instruments and Hedging Activities," ("SFAS 133"), effective for periods
beginning after June 15, 1999. SFAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in the fair value
of the derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction, and if it is, the type of hedge transaction. The Company
anticipates that the adoption of this standard will not have a significant
effect on the Company's results of operations or its financial position.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1 ("SOP 98-1"), effective for periods
beginning after December 15, 1998. SOP 98-1 provides guidance on defining
internal use software and the accounting for the costs thereof. The Company
anticipates that the adoption of this statement will not have a significant
effect on the Company's results of operations or its financial position.
F-27
<PAGE> 178
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. QUARTERLY FINANCIAL DATA -- UNAUDITED
<TABLE>
<CAPTION>
AUGUST 31 FIRST SECOND THIRD* FOURTH TOTAL*
- --------- -------- -------- --------- -------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1998
Revenues............. $211,552 $173,215 $ 365,705 $435,001 $1,185,473
Income (loss) from
operations......... 31,931 19,676 (10,304) 79,089 120,392
Extraordinary loss,
net of applicable
tax................ -- -- (11,283) -- (11,283)
Net income (loss).... 10,144 3,556 (35,319) 21,824 205
Earnings per share:
Income (loss) from
operations......... $ 0.06 $ 0.02 $ (0.09) $ 0.06 $ 0.05
Extraordinary loss,
net of applicable
tax................ -- -- (0.04) -- (0.05)
Net income (loss) per
share.............. $ 0.06 $ 0.02 $ (0.13) $ 0.06 $ --
1997
Revenues............. $172,565 $140,627 $ 155,330 $210,097 $ 678,619
Income (loss) from
operations......... 14,899 9,169 (316,760) 27,978 (264,714)
Income (loss) from
continuing
operations......... 3,588 1,750 (197,155) 8,365 (183,452)
Income (loss) from
discontinued
operations......... 703 (917) 234 -- 20
Net income (loss).... 4,291 833 (196,921) 8,365 (183,432)
Earnings per share:
Income (loss) from
operations......... $ 0.03 $ 0.02 $ (1.50) $ 0.05 $ (1.33)
Discontinued
operations......... 0.01 (0.01) -- -- --
Net income (loss) per
share.............. $ 0.04 $ 0.01 $ (1.50) $ 0.05 $ (1.33)
</TABLE>
- ------------------------
* 1998 includes restructuring charge of $65.8 million ($39.5 million net of
tax); 1997 includes restructuring charge of $331.7 million ($200 million net
of tax).
Results for the quarters include the results of operations of acquired
companies for the periods in which they were owned by the Company.
F-28
<PAGE> 179
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. SUMMARIZED FINANCIAL INFORMATION
In connection with the Safety-Kleen acquisition, Safety-Kleen Services,
Inc. (formerly known as LES, Inc.), a wholly-owned subsidiary of the Company,
issued 9.25% Senior Subordinated Notes (See Note 4). The Notes are jointly and
severally guaranteed by the Company and all wholly-owned domestic subsidiaries
of the Company, including the wholly-owned domestic subsidiaries of Safety-Kleen
Corp., on a full and unconditional basis. No foreign direct or indirect
subsidiary or non wholly-owned domestic subsidiary is an obligor or guarantor on
the financing. Separate financial statements and other disclosures concerning
each of Safety-Kleen Services, Inc. and the subsidiary guarantors are not
presented because management believes they are not material to investors.
Summarized financial information for the Company and its subsidiaries on a
combined basis is set forth below.
F-29
<PAGE> 180
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
AUGUST 31, 1998 CORP. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
- --------------- ------------ -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets................ $ -- $ -- $ 431,274 $111,060 $ -- $ 542,334
Property, plant and equipment,
net......................... -- -- 2,454,211 396,331 (40) 2,850,502
Investment in Subsidiaries.... 1,496,759 2,776,635 1,322,059 166 (5,595,619) --
Goodwill...................... -- -- 951,655 71,499 -- 1,023,154
Other non-current assets...... -- -- 52,134 771 -- 52,905
---------- ---------- ---------- -------- ----------- ----------
Total assets......... $1,496,759 $2,776,635 $5,211,333 $579,827 $(5,595,659) $4,468,895
========== ========== ========== ======== =========== ==========
LIABILITIES
Current liabilities........... $ 6,853 $ 88,089 $ 246,359 $ 83,617 $ (2) $ 424,916
Non-current liabilities....... -- -- 714,145 111,964 -- 826,109
Long-term debt................ 125,200 1,661,989 16,334 49,641 -- 1,853,164
Subordinated convertible
debenture................... 350,000 -- -- -- 350,000
---------- ---------- ---------- -------- ----------- ----------
Total liabilities.... 482,053 1,750,078 976,838 245,222 (2) 3,454,189
STOCKHOLDERS' EQUITY
Stockholders' equity.......... 1,014,706 1,026,557 4,234,495 334,605 (5,595,657) 1,014,706
---------- ---------- ---------- -------- ----------- ----------
Total liabilities and
stockholders' equity........ $1,496,759 $2,776,635 $5,211,333 $579,827 $(5,595,659) $4,468,895
========== ========== ========== ======== =========== ==========
</TABLE>
CONSOLIDATING CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SAFETY-KLEEN CONSOLIDATING
SAFETY-KLEEN SERVICES, SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
YEAR ENDED AUGUST 31, 1998 CORP. INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
- -------------------------- ------------ ------------ ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues................... $ -- $ -- $947,774 $250,814 $(13,115) $1,185,473
Operating expenses............... -- -- 796,955 215,370 (13,075) 999,250
Restructuring charge............. -- -- 60,081 5,750 -- 65,831
-------- -------- -------- -------- -------- ----------
Operating income................. -- -- 90,738 29,694 (40) 120,392
Interest income (expense), net... (25,747) (79,464) 12,790 (7,619) -- (100,040)
Undistributed earnings of
subsidiaries................... 14,366 68,147 -- -- (82,513) --
-------- -------- -------- -------- -------- ----------
Income (loss) from continuing
operations before income tax... (11,381) (11,317) 103,528 22,075 (82,553) 20,352
Income tax expense (benefit)..... (11,586) (35,759) 46,164 10,314 -- 9,133
-------- -------- -------- -------- -------- ----------
Income (loss) from continuing
operations before minority
interest....................... 205 24,442 57,364 11,761 (82,553) 11,219
Minority interest................ -- -- 589 (320) -- 269
-------- -------- -------- -------- -------- ----------
Income (loss) from continuing
operations..................... 205 24,442 57,953 11,441 (82,553) 11,488
Extraordinary loss, net of tax... -- (10,076) -- (1,207) -- (11,283)
-------- -------- -------- -------- -------- ----------
Net income....................... $ 205 $ 14,366 $ 57,953 $ 10,234 $(82,553) $ 205
======== ======== ======== ======== ======== ==========
</TABLE>
F-30
<PAGE> 181
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SAFETY-KLEEN CONSOLIDATING
YEAR ENDED AUGUST 31, SAFETY-KLEEN SERVICES, SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
1998 CORP. INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
- --------------------- ------------- ------------ ----------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used
in) operating activities... $ 3,612 $ (12,888) $ 76,353 $ 20,550 $-- $ 87,627
------- ----------- ----------- -------- -- -----------
Cash flows from investing
activities:
Cash acquired on
acquisition of
business................. -- -- (1,272,639) (8,856) -- (1,281,495)
Purchase of plant, property
and equipment............ -- -- (39,327) (11,427) -- (50,754)
Proceeds from sale of
property, plant and
equipment................ -- -- 13,256 177 -- 13,433
Proceeds from sale of
business................. -- -- 33,675 -- -- 33,675
Other, net................. -- -- 13,046 (21,240) -- (8,194)
------- ----------- ----------- -------- -- -----------
Net cash used in investing
activities................. -- -- (1,251,989) (41,346) -- (1,293,335)
------- ----------- ----------- -------- -- -----------
Cash flows from financing
activities:
Exercise of stock
options.................. 509 -- -- -- -- 509
Bank financing fees and
expenses................. -- (48,513) -- (2,025) -- (50,538)
Bank overdraft............. -- -- 10,975 2,017 -- 12,992
Borrowings of long-term
debt..................... -- 1,788,000 -- 68,814 -- 1,856,814
Repayment of long-term
debt..................... -- (331,750) (212,953) (59,981) -- (604,684)
Intercompany payable
(receivable)............. (4,121) (1,394,849) 1,357,187 41,783 -- --
------- ----------- ----------- -------- -- -----------
Net cash provided by (used
in) financing activities... (3,612) 12,888 1,155,209 50,608 -- 1,215,093
------- ----------- ----------- -------- -- -----------
Effect of exchange rate
changes on cash............ -- -- -- (4,212) -- (4,212)
------- ----------- ----------- -------- -- -----------
Net increase (decrease) in
cash and cash
equivalents................ -- -- (20,427) 25,600 -- 5,173
Cash and cash equivalents at:
Beginning of period........ -- -- 24,770 (13,610) -- 11,160
------- ----------- ----------- -------- -- -----------
End of period.............. $ -- $ -- $ 4,343 $ 11,990 $-- $ 16,333
======= =========== =========== ======== == ===========
</TABLE>
F-31
<PAGE> 182
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
AUGUST 31, 1997 CORP. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
- --------------- ------------ -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets................. $ -- $ -- $ 213,139 $ 38,401 $ -- $ 251,540
Property, plant and equipment,
net.......................... -- -- 1,043,874 192,695 -- 1,236,569
Investment in Subsidiaries..... 809,745 633,669 88,000 -- (1,531,414) --
Other non-current assets....... -- -- 93,346 48,847 (19,424) 122,769
-------- -------- ---------- -------- ----------- ----------
Total assets................... $809,745 $633,669 $1,438,359 $279,943 $(1,550,838) $1,610,878
======== ======== ========== ======== =========== ==========
LIABILITIES
Current Liabilities............ $ 6,580 $ 1,952 $ 116,679 $ 50,454 $ (220) $ 175,445
Non-current liabilities........ -- -- 241,335 7,547 (19,424) 229,458
Long-term debt................. 125,200 299,717 7,863 95,230 -- 528,010
Subordinated convertible
debenture.................... 350,000 -- -- -- -- 350,000
-------- -------- ---------- -------- ----------- ----------
Total liabilities.............. 481,780 301,669 365,877 153,231 (19,644) 1,282,913
STOCKHOLDERS' EQUITY
Stockholders' equity........... 327,965 332,000 1,072,482 126,712 (1,531,194) 327,965
-------- -------- ---------- -------- ----------- ----------
Total liabilities and
stockholders' equity......... $809,745 $633,669 $1,438,359 $279,943 $(1,550,838) $1,610,878
======== ======== ========== ======== =========== ==========
</TABLE>
F-32
<PAGE> 183
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
YEAR ENDED AUGUST 31, 1997 CORP. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
- -------------------------- ------------ -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues................ $ -- $ -- $ 510,563 $168,056 $ -- $ 678,619
Operating expenses............ -- -- 472,254 139,382 -- 611,636
Restructuring charge.......... -- -- 325,070 6,627 -- 331,697
--------- --------- --------- -------- -------- ---------
Operating income (loss)....... -- -- (286,761) 22,047 -- (264,714)
Interest expense, net......... 6,580 8,010 22,530 4,288 -- 41,408
Undistributed losses of
subsidiaries................ (179,397) (174,485) -- -- 353,882 --
--------- --------- --------- -------- -------- ---------
Income (loss) from continuing
operations before income
tax......................... (185,977) (182,495) (309,291) 17,759 353,882 (306,122)
Income tax expense
(benefit)................... (2,545) (3,098) (118,579) 1,433 -- (122,789)
--------- --------- --------- -------- -------- ---------
Income (loss) from continuing
operations before minority
interest.................... (183,432) (179,397) (190,712) 16,326 353,882 (183,333)
Minority interest............. -- -- (72) (47) -- (119)
--------- --------- --------- -------- -------- ---------
Income (loss) from continuing
operations.................. (183,432) (179,397) (190,784) 16,279 353,882 (183,452)
Income from discontinued
operations.................. -- -- 20 -- -- 20
--------- --------- --------- -------- -------- ---------
Net income (loss)............. $(183,432) $(179,397) $(190,764) $ 16,279 $353,882 $(183,432)
========= ========= ========= ======== ======== =========
</TABLE>
F-33
<PAGE> 184
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
YEAR ENDED AUGUST 31, 1997 CORP. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
- -------------------------- ------------ -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in)
continuing operations.............. $ 2,545 $ 3,098 $ 38,964 $ (7,428) $(220) $ 36,959
Net cash provided by discontinued
operations......................... -- -- 425 -- -- 425
-------- --------- --------- -------- ----- ---------
Net cash provided by (used in)
operating activities............... 2,545 3,098 39,389 (7,428) (220) 37,384
-------- --------- --------- -------- ----- ---------
Cash flows from investing activities:
Purchase of plant, property and
equipment........................ -- -- (16,154) (19,943) -- (36,097)
Other investing activities,
net.............................. -- -- 15,648 (1,438) -- 14,210
-------- --------- --------- -------- ----- ---------
Net cash used in continuing
operations......................... -- -- (506) (21,381) -- (21,887)
Net cash used in discontinued
operations......................... -- -- (1,887) -- -- (1,887)
-------- --------- --------- -------- ----- ---------
Net cash used in investing
activities......................... -- -- (2,393) (21,381) -- (23,774)
-------- --------- --------- -------- ----- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt............................. 65,200 315,000 -- 71,422 -- 451,622
Debt financing fees and expenses... -- (16,448) -- (2,340) -- (18,788)
Bank overdraft..................... -- -- (28,829) (3,359) -- (32,188)
Repayment of long-term debt........ -- -- (55,700) (5,842) -- (61,542)
Intercompany payable
(receivable)..................... (67,745) (301,650) 369,175 -- 220 --
Net payments to Laidlaw, Inc....... -- -- (296,872) (44,682) -- (341,554)
-------- --------- --------- -------- ----- ---------
Net cash provided by (used in)
financing activities............... (2,545) (3,098) (12,226) 15,199 220 (2,450)
-------- --------- --------- -------- ----- ---------
Net increase (decrease) in cash and
cash equivalents................... -- -- 24,770 (13,610) -- 11,160
Cash and cash equivalents at:
Beginning of period................ -- -- -- -- -- --
-------- --------- --------- -------- ----- ---------
End of period...................... $ -- $ -- $ 24,770 $(13,610) $ -- $ 11,160
======== ========= ========= ======== ===== =========
</TABLE>
F-34
<PAGE> 185
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
YEAR ENDED AUGUST 31, 1996 CORP. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------------------- ------------ -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues................. $-- $ -- $474,410 $178,563 $ -- $652,973
Operating expenses............. -- -- 443,093 152,561 -- 595,654
--- ------ -------- -------- ------- --------
Operating income............... -- -- 31,317 26,002 -- 57,319
Interest expense, net.......... -- -- 33,067 12,392 -- 45,459
Undistributed earnings of
subsidiaries................. -- 8,210 -- -- (8,210) --
--- ------ -------- -------- ------- --------
Income (loss) from continuing
operations before income
tax.......................... -- 8,210 (1,750) 13,610 (8,210) 11,860
Income tax expense (benefit)... -- -- (369) 2,869 -- 2,500
--- ------ -------- -------- ------- --------
Income (loss) from continuing
operations before minority
interest..................... -- 8,210 (1,381) 10,741 (8,210) 9,360
Minority interest.............. -- -- -- (2,646) -- (2,646)
--- ------ -------- -------- ------- --------
Income (loss) from continuing
operations................... -- 8,210 (1,381) 8,095 (8,210) 6,714
Income from discontinued
operations................... -- -- 1,496 -- -- 1,496
--- ------ -------- -------- ------- --------
Net income..................... $-- $8,210 $ 115 $ 8,095 $(8,210) $ 8,210
=== ====== ======== ======== ======= ========
</TABLE>
F-35
<PAGE> 186
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY SUBSIDIARY ELIMINATING CONSOLIDATED
YEAR ENDED AUGUST 31, 1996 CORP. SERVICES, INC. GUARANTORS NON-GUARANTORS ENTRIES TOTAL
-------------------------- ------------ -------------- ---------- -------------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by continuing
operations......................... $-- $-- $ 18,061 $ 3,888 $-- $ 21,949
Net cash provided by discontinued
operations......................... -- -- 3,199 -- -- 3,199
--- --- --------- -------- --- ---------
Net cash provided by operating
activities......................... -- -- 21,260 3,888 -- 25,148
--- --- --------- -------- --- ---------
Cash flows from investing activities:
Purchase of plant, property and
equipment........................ -- -- (91,313) (12,971) -- (104,284)
Other investing activities, net.... -- -- (9,754) (911) -- (10,665)
--- --- --------- -------- --- ---------
Net cash used in continuing
operations......................... -- -- (101,067) (13,882) -- (114,949)
Net cash used in discontinued
operations......................... -- -- (5,026) -- -- (5,026)
--- --- --------- -------- --- ---------
Net cash used in investing
activities......................... -- -- (106,093) (13,882) -- (119,975)
--- --- --------- -------- --- ---------
Cash flows from financing activities:
Bank overdraft..................... -- -- 19,503 2,377 -- 21,880
Changes in long-term debt.......... -- -- (3,967) (3,581) -- (7,548)
Advance from (payments to) Laidlaw
Inc.............................. -- -- 71,715 11,198 -- 82,913
--- --- --------- -------- --- ---------
Net cash provided by continuing
operations......................... -- -- 87,251 9,994 -- 97,245
Net used in discontinued
operations......................... -- -- (2,418) -- -- (2,418)
--- --- --------- -------- --- ---------
Net cash provided by financing
activities......................... -- -- 84,833 9,994 -- 94,827
--- --- --------- -------- --- ---------
Net increase in cash and cash
equivalents
Cash and cash equivalents at:
Beginning of period................ -- -- -- -- -- --
--- --- --------- -------- --- ---------
End of period...................... $-- $-- $ -- $ -- $-- $ --
=== === ========= ======== === =========
</TABLE>
F-36
<PAGE> 187
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF INCOME
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28
--------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues................................................. $869,154 $384,767
Expenses:
Operating.............................................. 566,899 269,105
Depreciation and amortization.......................... 70,973 24,819
Selling, general and administrative.................... 67,240 39,236
-------- --------
Total expenses................................. 705,112 333,160
-------- --------
Operating income......................................... 164,042 51,607
Interest expense, net.................................... 86,683 28,246
Equity in earnings of associated company................. 1,102 --
-------- --------
Income before income tax expense......................... 78,461 23,361
Income tax expense....................................... 33,655 9,555
-------- --------
Income from continuing operations before minority
interest............................................... 44,806 13,806
Minority Interest........................................ 1,211 (106)
-------- --------
Net income............................................... $ 46,017 $ 13,700
======== ========
Basic income per share:
Net income............................................... $ 0.53 $ 0.30
======== ========
Weighted average common stock outstanding (000s)......... 88,120 45,381
======== ========
Diluted income per share:
Net income............................................... $ 0.46 $ 0.28
======== ========
Weighted average common stock outstanding and assumed
conversions (000s)..................................... 111,502 68,827
======== ========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
F-37
<PAGE> 188
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28
------------------
1999 1998
------- -------
<S> <C> <C>
Net income................................................. $46,017 $13,700
------- -------
Other comprehensive income, net of tax:
Unrealized foreign currency translation adjustments...... (64) (2,265)
Unrealized gain on securities available for sale, net of
tax of $1,247......................................... -- 1,870
------- -------
Other comprehensive income................................. (64) (395)
------- -------
Comprehensive income....................................... $45,953 $13,305
======= =======
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
F-38
<PAGE> 189
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FEBRUARY 28, 1999
-----------------
<S> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 10,949
Trade and other accounts receivable....................... 357,327
Inventories and supplies.................................. 55,435
Deferred income taxes..................................... 66,965
Income taxes recoverable.................................. --
Other current assets...................................... 52,723
----------
Total current assets.............................. 543,399
Long-term investments....................................... 75,671
Property, plant and equipment, net.......................... 2,551,533
Goodwill, net............................................... 1,124,928
Other assets................................................ 16,862
----------
Total assets...................................... $4,312,393
==========
LIABILITIES
Current liabilities
Accounts payable.......................................... $ 158,687
Accrued liabilities....................................... 188,643
Current portion of long-term debt......................... 77,441
----------
Total current liabilities......................... 424,771
Environmental and other long-term liabilities............... 339,445
Long-term debt.............................................. 1,670,955
Subordinated convertible debenture.......................... 350,000
Deferred income taxes....................................... 457,720
----------
Total liabilities................................. 3,242,891
----------
Commitments and contingencies............................... --
STOCKHOLDERS' EQUITY
Common stock, par value $1.00 per share; authorized
250,000,000; issued and outstanding 88,387,466 -- February
28, 1999; 87,746,243 -- August 31, 1998................... 88,387
Additional paid-in capital.................................. 1,190,749
Accumulated other comprehensive income...................... (18,892)
Accumulated deficit......................................... (190,742)
----------
Total stockholders' equity........................ 1,069,502
----------
Total liabilities and stockholders' equity........ $4,312,393
==========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
F-39
<PAGE> 190
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28
---------------------
1999 1998
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 46,017 $ 13,700
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization...................... 70,973 24,819
Deferred income taxes.............................. 27,217 5,986
Change in working capital.......................... (13,687) 8,080
Decrease in liabilities assumed upon acquisition... (48,772) (20,237)
--------- --------
Net cash provided by operating activities............... 81,748 32,348
--------- --------
Cash flows from investing activities:
Cash expended on acquisition of business.............. (4,394) --
Proceeds from sale of business........................ 138,714 33,675
Purchase of property, plant and equipment............. (29,682) (16,431)
Change in other, net.................................. 488 (14,579)
--------- --------
Net cash provided by investing activities............... 105,126 2,665
--------- --------
Cash flows from financing activities:
Issuance of common stock on exercise of stock
options............................................ -- 414
Net repayments of long-term debt...................... (186,706) (34,640)
Change in other, net.................................. (270) --
--------- --------
Net cash used in financing activities................... (186,976) (34,226)
--------- --------
Effect of exchange rate changes on cash................. (5,282) (181)
--------- --------
Net increase (decrease) in cash and cash equivalents.... (5,384) 606
Cash and cash equivalents at:
Beginning of period................................... 16,333 11,160
--------- --------
End of period......................................... $ 10,949 $ 11,766
========= ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock to satisfy interest payment
due on subordinated convertible debenture.......... $ 8,750 $ 8,750
Issuance of common stock for payment of directors'
fees............................................... $ 93 $ --
Net unrealized gain on securities available for
sale............................................... $ -- $ 1,870
Noncash transactions arising from sale of business:
Promissory note receivable......................... $ -- $ 8,000
Reduction of debt.................................. $ -- $ 40,814
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
F-40
<PAGE> 191
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X and, therefore, do not include all of the disclosures required by
generally accepted accounting principles for annual financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the interim period results have been included; all such
adjustments are of a normal recurring nature. Operating results for the six
months ended February 28, 1999 are not necessarily indicative of the results
that may be expected for the full fiscal year ending August 31, 1999. These
statements should be read in conjunction with the consolidated financial
statements and the notes thereto, including the accounting policies, and notes
thereto included in the Registrant's Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on October 29, 1998.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130"). This standard
was adopted by the Company for the fiscal year beginning September 1, 1998. SFAS
130 establishes standards for reporting and displaying comprehensive income and
its components. Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances from non-owner
sources and includes all changes in equity during a period except those
resulting from investments by and distributions to owners. All prior periods
presented have been restated.
NOTE 2 -- SHAREHOLDER MATTERS
At the annual meeting of shareholders held on November 24, 1998,
shareholders approved the change in the Company's name from Laidlaw
Environmental Services, Inc. to Safety-Kleen Corp.
In addition, the shareholders approved a one-for-four reverse stock split
which became effective at the close of business on November 30, 1998. For each
four shares of Safety-Kleen common stock, one share of new Safety-Kleen common
stock will be issued. In connection with the reverse stock split, the number of
common shares available for issuance was reduced from 750 million to 250
million. As a result, prior period shares issued and outstanding, weighted
average common stock outstanding and basic and diluted income per share have
been restated to reflect the reverse split.
NOTE 3 -- COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS:
TAX MATTERS: On March 1, 1999, Laidlaw Inc. ("Laidlaw") announced a
settlement of a dispute between Laidlaw's United States subsidiaries and the
Commissioner of Internal Revenue relating to the timing and deductibility for
tax purposes of interest attributable to loans owing to related foreign persons
during the years from 1986 to 1994.
F-41
<PAGE> 192
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The total net after tax cash cost to Laidlaw will be approximately $226
million. The payment includes approximately $121 million in taxes together with
interest of approximately $161 million ($105 million after tax).
This settlement resolves matters in the United States Tax Court (captioned
as Laidlaw Transportation, Inc. and Subsidiaries et. al v. Commissioner of
Internal Revenue, Docket Nos. 9361-94 and 9362-94) relating to the 1986 to 1991
fiscal years as well as claims raised in a thirty day letter relating to the
1992 to 1994 fiscal years. The Commissioner of Internal Revenue had asserted
claims totaling approximately $500 million.
Pursuant to the agreement dated February 6, 1997 among the Company, Laidlaw
and Laidlaw Transportation, Inc. ("LTI"), Laidlaw and LTI are responsible for
any tax liabilities resulting from these matters. Based upon discussions with
Laidlaw, the Company's income tax provision determined on a separate return
basis during the period audited by the Internal Revenue Service was sufficient
and no additional taxes or interest are due to or from Laidlaw as a result of
the settlement.
NOTE 4 -- EUROPEAN OPERATIONS
On December 23, 1998, the Company announced the recapitalization of its
European operations resulting in the sale of 56% of the Company's equity
interest in those operations. As a result of the recapitalization, the Company
will receive gross proceeds totaling $154.0 million, which will be used to pay
down borrowings under the revolver tranche of the Senior Credit Facility. The
transaction resulted in no gain or loss.
Effective December 1, 1998, the Company ceased to consolidate the results
of the European operations and began to account for the investment by the equity
method.
NOTE 5 -- PURCHASE PRICE ALLOCATION
The acquisition of the former Safety-Kleen Corp. in fiscal year 1998 was
accounted for under the purchase method. The purchase price was allocated to the
assets acquired and liabilities assumed based upon management's best estimate of
their fair value at the time of the acquisition. The areas of particular
complexity included the valuation of long-lived assets, environmental
liabilities, pre-acquisition contingencies and the related deferred tax
consequences. The determination of the fair value of these items has been
substantially completed and, as a result, the purchase price has been increased
by approximately $100 million due principally to fixed asset fair value
adjustments and the recording of certain pre-acquisition contingencies evaluated
by the Company subsequent to the acquisition.
F-42
<PAGE> 193
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- STOCKHOLDERS' EQUITY
Changes in the components of stockholders' equity, restated for the effect
of the one-for-four reverse stock split, since September 1, 1998 are as follows
($ in thousands):
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL INCOME DEFICIT EQUITY
------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at September
1, 1998............. $87,746 $1,182,547 $(18,828) $(236,759) $1,014,706
Net income for
period.............. -- -- -- 46,017 46,017
Issuance of shares
(Note A)............ 641 8,202 -- -- 8,843
Cumulative foreign
currency translation
adjustment.......... -- -- (64) -- (64)
------- ---------- -------- --------- ----------
Balance at February
28, 1999............ $88,387 $1,190,749 $(18,892) $(190,742) $1,069,502
======= ========== ======== ========= ==========
</TABLE>
- -------------------------
Note A: Includes 635,208 shares issued to satisfy November 15, 1998 interest
payment on subordinated convertible debenture.
NOTE 7 -- SUMMARIZED FINANCIAL INFORMATION
The Senior Subordinated Notes (the "Notes") issued by Safety-Kleen
Services, Inc., a consolidated subsidiary of the Company, are jointly and
severally guaranteed by Safety-Kleen Corp. and all wholly-owned domestic
subsidiaries of the Company on a full and unconditional basis. The Notes contain
certain covenants, which, among other things, restrict the payment of dividends
from Safety-Kleen Services, Inc. and its subsidiary guarantors to Safety-Kleen
Corp. Summarized financial information for each of Safety-Kleen Corp.,
Safety-Kleen Services, Inc., the subsidiary guarantors, and the subsidiary
non-guarantors on a consolidating basis are presented below. Separate financial
statements and other disclosures concerning the subsidiary guarantors are not
included because management believes that they are not material to investors.
F-43
<PAGE> 194
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
FEBRUARY 28, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SUBSIDIARY CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
CORP. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
------------ -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets............ $ -- $ -- $ 445,506 $ 97,893 $ -- $ 543,399
Property, plant and
equipment, net.......... -- -- 2,358,324 193,209 -- 2,551,533
Investment in
Subsidiaries............ 1,551,577 2,651,371 1,681,569 5,507 (5,890,024) --
Goodwill.................. -- -- 1,045,086 79,842 -- 1,124,928
Other non-current
assets.................. -- -- 91,188 1,345 -- 92,533
---------- ---------- ---------- -------- ----------- ----------
Total assets.............. $1,551,577 $2,651,371 $5,621,673 $377,796 $(5,890,024) $4,312,393
========== ========== ========== ======== =========== ==========
LIABILITIES
Current liabilities....... $ 6,875 $ 78,891 $ 235,890 $103,115 $ -- $ 424,771
Non-current liabilities... -- -- 798,101 (936) -- 797,165
Long-term debt............ 125,200 1,483,720 15,791 46,244 -- 1,670,955
Subordinated convertible
debenture............... 350,000 -- -- -- -- 350,000
---------- ---------- ---------- -------- ----------- ----------
Total liabilities......... 482,075 1,562,611 1,049,782 148,423 -- 3,242,891
STOCKHOLDERS' EQUITY...... 1,069,502 1,088,760 4,571,891 229,373 (5,890,024) 1,069,502
---------- ---------- ---------- -------- ----------- ----------
Total liabilities and
stockholders equity..... $1,551,577 $2,651,371 $5,621,673 $377,796 $(5,890,024) $4,312,393
========== ========== ========== ======== =========== ==========
</TABLE>
F-44
<PAGE> 195
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED FEBRUARY 28, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SUBSIDIARY CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
CORP. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
------------ -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues........... $ -- $ -- $713,698 $164,161 $ (8,705) $869,154
Operating expenses....... -- -- 595,259 118,558 (8,705) 705,112
------- -------- -------- -------- --------- --------
Operating income......... -- -- 118,439 45,603 -- 164,042
Interest expense
(income), net.......... 12,827 70,219 3,422 (996) -- 85,472
Undistributed earnings of
subsidiaries........... 53,424 93,970 1,102 -- (147,394) 1,102
------- -------- -------- -------- --------- --------
Income before income tax
expense................ 40,597 23,751 116,119 46,599 (147,394) 79,672
Income tax expense
(benefit).............. (5,420) (29,673) 49,081 19,667 -- 33,655
------- -------- -------- -------- --------- --------
Net income............... $46,017 $ 53,424 $ 67,038 $ 26,932 $(147,394) $ 46,017
======= ======== ======== ======== ========= ========
</TABLE>
F-45
<PAGE> 196
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED FEBRUARY 28, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SUBSIDIARY CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
CORP. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
------------ -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used
in) operating
activities.............. $(4,055) $ (75,916) $ 159,543 $ 2,176 $-- $ 81,748
------- --------- --------- -------- -- ---------
Cash flows from investing
activities:
Cash expended on
acquisition of
business................ -- -- (4,394) -- -- (4,394)
Proceeds from sale of
business................ -- -- 138,714 -- -- 138,714
Purchase of property,
plant and equipment..... -- -- (23,730) (5,952) -- (29,682)
Change in other, net...... -- -- 357 131 -- 488
------- --------- --------- -------- -- ---------
Net cash provided by (used
in) investing
activities.............. -- -- 110,947 (5,821) -- 105,126
------- --------- --------- -------- -- ---------
Cash flows from financing
activities:
Net repayment of long-term
debt.................... -- (181,500) (43) (5,163) -- (186,706)
Intercompany payable
(receivable)............ 4,055 257,686 (264,586) 2,845 -- --
Changes in other, net..... -- (270) -- -- -- (270)
------- --------- --------- -------- -- ---------
Net cash provided by (used
in) financing
activities.............. 4,055 75,916 (264,629) (2,318) -- (186,976)
------- --------- --------- -------- -- ---------
Effect of exchange rate
changes on cash......... -- -- -- (5,282) -- (5,282)
------- --------- --------- -------- -- ---------
Net increase (decrease) in
cash and cash
equivalents............. -- -- 5,861 (11,245) -- (5,384)
Cash and cash equivalents
at:
Beginning of period..... -- -- 4,343 11,990 -- 16,333
------- --------- --------- -------- -- ---------
End of period........... $ -- $ -- $ 10,204 $ 745 $-- $ 10,949
======= ========= ========= ======== == =========
</TABLE>
F-46
<PAGE> 197
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
AUGUST 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SUBSIDIARY CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
CORP. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
------------ -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets.......... $ -- $ -- $ 439,751 $111,060 $ -- $ 550,811
Property, plant and
equipment, net........ -- -- 2,454,211 396,331 (40) 2,850,502
Investment in
Subsidiaries.......... 1,496,759 2,776,635 1,322,059 166 (5,595,619) --
Goodwill................ -- -- 951,655 71,499 -- 1,023,154
Other non-current
assets................ -- -- 52,134 771 -- 52,905
---------- ---------- ---------- -------- ----------- ----------
Total assets............ $1,496,759 $2,776,635 $5,219,810 $579,827 $(5,595,659) $4,477,372
========== ========== ========== ======== =========== ==========
LIABILITIES
Current liabilities..... $ 6,853 $ 88,089 $ 246,359 $ 83,617 $ (2) $ 424,916
Non-current
liabilities........... -- -- 722,622 111,964 -- 834,586
Long-term debt.......... 125,200 1,661,989 16,334 49,641 -- 1,853,164
Subordinated convertible
debenture............. 350,000 -- -- -- -- 350,000
---------- ---------- ---------- -------- ----------- ----------
Total liabilities....... 482,053 1,750,078 985,315 245,222 (2) 3,462,666
STOCKHOLDERS' EQUITY.... 1,014,706 1,026,557 4,234,495 334,605 (5,595,657) 1,014,706
---------- ---------- ---------- -------- ----------- ----------
Total liabilities and
stockholders equity... $1,496,759 $2,776,635 $5,219,810 $579,827 $(5,595,659) $4,477,372
========== ========== ========== ======== =========== ==========
</TABLE>
F-47
<PAGE> 198
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED FEBRUARY 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SUBSIDIARY CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
CORP. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
------------ -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues........... $ -- $ -- $305,202 $79,565 $ -- $384,767
Operating expenses....... -- -- 269,925 63,235 -- 333,160
------- ------- -------- ------- -------- --------
Operating income......... -- -- 35,277 16,330 -- 51,607
Interest expense
(income), net.......... 12,760 12,561 (157) 3,188 -- 28,352
Undistributed earnings of
subsidiaries........... 21,518 29,214 -- -- (50,732) --
------- ------- -------- ------- -------- --------
Income before income tax
expense................ 8,758 16,653 35,434 13,142 (50,732) 23,255
Income tax expense
(benefit).............. (4,942) (4,865) 14,787 4,575 -- 9,555
------- ------- -------- ------- -------- --------
Net income............... $13,700 $21,518 $ 20,647 $ 8,567 $(50,732) $ 13,700
======= ======= ======== ======= ======== ========
</TABLE>
F-48
<PAGE> 199
SAFETY-KLEEN CORP. (FORMERLY LAIDLAW ENVIRONMENTAL SERVICES, INC.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED FEBRUARY 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SUBSIDIARY CONSOLIDATING
SAFETY-KLEEN SAFETY-KLEEN SUBSIDIARY NON- ELIMINATING CONSOLIDATED
CORP. SERVICES, INC. GUARANTORS GUARANTORS ENTRIES TOTAL
------------ -------------- ---------- ---------- ------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by operating
activities.................... $ 1,372 $ 1,469 $ 1,900 $ 27,607 $-- $ 32,348
------- -------- -------- -------- -- --------
Cash flows from investing
activities:
Purchase of plant, property and
equipment..................... -- -- (12,384) (4,047) -- (16,431)
Proceeds from sale of property,
plant and equipment........... -- -- 7,921 15 -- 7,936
Net increase in long-term
investments................... -- -- (12,853) (189) -- (13,042)
Proceeds from sale of
business...................... -- -- 33,675 -- -- 33,675
Change in other, net............ -- -- (9,448) (25) -- (9,473)
------- -------- -------- -------- -- --------
Net cash provided by (used in)
investing activities.......... -- -- 6,911 (4,246) -- 2,665
------- -------- -------- -------- -- --------
Cash flows from financing
activities:
Issuance of common stock on
exercise of stock options..... 414 -- -- -- -- 414
Repayment of long-term debt..... -- (33,113) (265) (1,262) -- (34,640)
Intercompany payable
(receivable).................. (1,786) 31,644 (27,915) (1,943) -- --
------- -------- -------- -------- -- --------
Net cash used in financing
activities.................... (1,372) (1,469) (28,180) (3,205) -- (34,226)
------- -------- -------- -------- -- --------
Effect of exchange rate changes
on cash....................... -- -- -- (181) -- (181)
------- -------- -------- -------- -- --------
Net increase (decrease) in cash
and cash equivalents.......... -- -- (19,369) 19,975 -- 606
Cash and cash equivalents at:... -- -- --
Beginning of period........... -- -- 24,770 (13,610) -- 11,160
------- -------- -------- -------- -- --------
End of period................. $ -- $ -- $ 5,401 $ 6,365 $-- $ 11,766
======= ======== ======== ======== == ========
</TABLE>
F-49
<PAGE> 200
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Safety-Kleen Corp.:
We have audited the accompanying consolidated balance sheets of
Safety-Kleen Corp. (a Wisconsin corporation) and Subsidiaries as of January 3,
1998 and December 28, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three fiscal
years in the period ended January 3, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Safety-Kleen Corp. and
Subsidiaries as of January 3, 1998 and December 28, 1996, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 3, 1998, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Chicago, Illinois
February 12, 1998, except with respect to the matters
discussed in Note 12 as to which the date is April 1, 1998.
F-50
<PAGE> 201
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996, AND DECEMBER 30,
1995
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
---------- -------- --------
(EXPRESSED IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUE..................................... $1,007,903 $923,126 $859,251
Operating costs and expenses.............. 748,986 671,971 628,469
---------- -------- --------
GROSS PROFIT................................ 258,917 251,155 230,782
Selling and administrative expenses....... 138,492 131,665 122,319
Restructuring (credit).................... -- -- (15,217)
Special charge for environmental
remediation costs...................... -- -- 11,956
---------- -------- --------
OPERATING INCOME............................ 120,425 119,490 111,724
Interest income........................... (1,414) (1,398) (974)
Interest expense.......................... 18,108 19,240 20,230
Merger related costs...................... 3,231 -- --
---------- -------- --------
EARNINGS BEFORE INCOME TAXES................ 100,500 101,648 92,468
Income taxes.............................. 37,330 40,539 39,165
---------- -------- --------
NET EARNINGS................................ $ 63,170 $ 61,109 $ 53,303
========== ======== ========
EARNINGS PER SHARE:
Basic..................................... $ 1.08 $ 1.05 $ 0.92
Diluted................................... $ 1.07 $ 1.05 $ 0.92
========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE> 202
SAFETY-KLEEN CORP. AND SUBSIDIARIES
AS OF JANUARY 3, 1998 AND DECEMBER 28, 1996
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(EXPRESSED IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 11,202 $ 10,648
Trade accounts receivable, less allowances of $7,634 and
$8,416, respectively................................... 131,092 132,436
Inventories............................................... 51,339 49,971
Deferred tax assets....................................... 10,694 11,973
Prepaid expenses and other................................ 20,099 25,105
---------- ----------
224,426 230,133
---------- ----------
EQUIPMENT AT CUSTOMERS AND COMPONENTS, AT COST LESS
accumulated depreciation of $44,928 and $45,811,
respectively.............................................. 127,631 124,491
---------- ----------
PROPERTY, AT COST
Land...................................................... 50,130 49,340
Buildings and improvements................................ 243,619 238,296
Leasehold improvements.................................... 35,894 34,168
Machinery and equipment................................... 431,890 421,134
Autos and trucks.......................................... 124,999 129,319
---------- ----------
886,532 872,257
Less accumulated depreciation............................. 384,422 349,921
---------- ----------
502,110 522,336
---------- ----------
INTANGIBLE ASSETS, AT COST
Goodwill.................................................. 91,219 92,112
Other..................................................... 148,885 122,203
---------- ----------
240,104 214,315
Less accumulated amortization............................. 95,568 77,106
---------- ----------
144,536 137,209
---------- ----------
OTHER ASSETS
Deferred tax assets....................................... 20,607 24,135
Other..................................................... 15,396 6,519
---------- ----------
36,003 30,654
---------- ----------
$1,034,706 $1,044,823
========== ==========
</TABLE>
F-52
<PAGE> 203
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(EXPRESSED IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt...................... $ 37 $ --
Trade accounts payable.................................... 75,284 69,684
Accrued salaries, wages and employee benefits............. 29,769 25,510
Other accrued expenses.................................... 28,343 29,237
Insurance reserves........................................ 12,614 13,621
Accrued environmental liabilities......................... 8,382 8,941
Income taxes payable...................................... 1,014 10,800
---------- ----------
155,443 157,793
---------- ----------
LONG-TERM DEBT, LESS CURRENT PORTION........................ 214,234 276,954
---------- ----------
DEFERRED TAX LIABILITIES.................................... 65,607 49,849
---------- ----------
ACCRUED ENVIRONMENTAL LIABILITIES........................... 32,888 40,260
---------- ----------
OTHER LIABILITIES........................................... 37,067 39,677
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 10)
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock ($.10 par value; authorized 1,000,000
shares; none issued)................................... -- --
Common stock ($.10 par value; authorized 300,000,000
shares; issued and outstanding 59,191,462 shares and
58,246,939 shares, respectively)....................... 5,919 5,825
Additional paid-in capital................................ 212,504 192,755
Retained earnings......................................... 338,318 296,225
Cumulative translation adjustments........................ (27,274) (14,515)
---------- ----------
529,467 480,290
---------- ----------
$1,034,706 $1,044,823
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE> 204
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30,
1995
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
MINIMUM
TOTAL COMMON ADDITIONAL PENSION CUMULATIVE
SHAREHOLDERS' STOCK $.10 PAID-IN RETAINED LIABILITY TRANSLATION
EQUITY PAR VALUE CAPITAL EARNINGS ADJ. ADJUSTMENTS
------------- ---------- ---------- -------- --------- -----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.... $396,336 $5,775 $184,789 $223,569 $ -- $(17,797)
Net earnings.................... 53,303 -- -- 53,303 -- --
Cash dividends.................. (20,820) -- -- (20,820) -- --
Stock options exercised and
related tax benefits.......... 1,588 12 1,576 -- -- --
Minimum pension liability
adjustment.................... (1,226) -- -- -- (1,226) --
Change in cumulative translation
adjustment.................... 4,254 -- -- -- -- 4,254
-------- ------ -------- -------- ------- --------
Balance at December 30, 1995.... $433,435 $5,787 $186,365 $256,052 $(1,226) $(13,543)
Net earnings.................... 61,109 -- -- 61,109 -- --
Cash dividends.................. (20,936) -- -- (20,936) -- --
Stock issued for business
acquired...................... 4,847 27 4,820 -- -- --
Stock options exercised and
related tax benefits.......... 1,581 11 1,570 -- -- --
Minimum pension liability
adjustment.................... 1,226 -- -- -- 1,226 --
Change in cumulative translation
adjustments................... (972) -- -- -- -- (972)
-------- ------ -------- -------- ------- --------
Balance at December 28, 1996.... $480,290 $5,825 $192,755 $296,225 $ -- $(14,515)
Net earnings.................... 63,170 -- -- 63,170 -- --
Cash dividends.................. (21,077) -- -- (21,077) -- --
Stock options exercised and
related tax benefits.......... 19,843 94 19,749 -- -- --
Change in cumulative translation
adjustments................... (12,759) -- -- -- -- (12,759)
-------- ------ -------- -------- ------- --------
Balance at January 3, 1998...... $529,467 $5,919 $212,504 $338,318 $ -- $(27,274)
======== ====== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE> 205
SAFETY-KLEEN CORP. AND SUBSIDIARIES
FOR THE FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND
DECEMBER 30, 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ---------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 63,170 $ 61,109 $ 53,303
-------- --------- ---------
Adjustments to reconcile net earnings to net cash provided
by operating activities
Depreciation of equipment at customers and property.... 60,815 60,830 61,681
Amortization of intangible and other assets............ 20,195 16,911 16,120
Provisions for doubtful accounts receivable............ 4,228 4,556 4,225
Change in deferred income tax assets and liabilities,
net................................................... 13,680 15,297 26,504
Other.................................................. 9,492 9,461 2,584
(Increase) decrease in assets, net of effects from
business acquisitions:
Trade accounts receivable.............................. (2,050) (25,251) (8,433)
Inventories............................................ (1,368) (13,499) (1,088)
Prepaid expenses and other............................. 2,219 (5,152) (2,001)
Increase (decrease) in liabilities, net of effects from
business acquisitions:
Trade accounts payable and accrued expenses............ 4,188 1,990 703
Environmental liabilities.............................. (7,931) (5,073) 4,459
Restructure and other liabilities...................... (2,624) (5,234) (33,115)
-------- --------- ---------
Total adjustments......................................... 100,844 54,836 71,639
-------- --------- ---------
Net cash provided by operating activities................... 164,014 115,945 124,942
-------- --------- ---------
Cash flows used in investing activities:
Equipment at customers additions.......................... (20,869) (23,854) (34,874)
Property additions........................................ (35,162) (37,670) (43,235)
Payment for business acquisitions, net of cash acquired... (13,458) (26,651) (12,682)
Other assets additions, net............................... (26,962) (13,158) (12,671)
-------- --------- ---------
Net cash used in investing activities....................... (96,451) (101,333) (103,462)
Cash flows from (used in) financing activities:
Net borrowings (payments) under line-of-credit
agreements............................................. (62,684) (6,760) (51,565)
Proceeds from issuance of senior notes.................... -- -- 50,000
Proceeds from stock option exercises...................... 16,940 1,576 1,930
Cash dividends paid....................................... (21,077) (20,936) (20,820)
-------- --------- ---------
Net cash from (used in) financing activities................ (66,821) (26,120) (20,455)
-------- --------- ---------
Effect of exchange rate changes on cash..................... (188) (82) 198
-------- --------- ---------
Increase (decrease) in cash and cash equivalents............ 554 (11,590) 1,223
Cash and cash equivalents at beginning of year.............. 10,648 22,238 21,015
-------- --------- ---------
Cash and cash equivalents at end of year.................... $ 11,202 $ 10,648 $ 22,238
======== ========= =========
Supplemental Information:
Cash paid during the year for:
Interest (net of amount capitalized)................... $ 18,957 $ 19,607 $ 18,997
Income taxes (net of refunds received)................. 23,955 27,547 11,231
Consideration given up and liabilities assumed in business
acquisitions........................................... 16,706 30,858 17,268
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
<PAGE> 206
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
The Company is a leading provider of services to generators of spent
solvents and other contaminated waste streams as well as the leading provider of
parts cleaner services and one of the world's largest collectors and re-refiners
of used lube oil. The Company serves hundreds of thousands of customers in North
America and Europe, through a network of 230 branch facilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries after elimination of all significant intercompany balances
and transactions. The Company's fiscal year ends on the Saturday closest to
December 31. Fiscal year 1997 has fifty-three weeks while fiscal years 1996 and
1995 have fifty-two weeks.
EQUIPMENT AT CUSTOMERS AND RELATED DEPRECIATION
Equipment at customers is capitalized at manufactured or purchased cost.
Depreciation is computed using the straight-line method over a period of 3 to 13
years, commencing when the units are placed in service.
PROPERTY AND RELATED DEPRECIATION
Land, buildings and improvements, leasehold improvements, machinery and
equipment, and autos and trucks are capitalized at cost. Items of an ordinary
repair or maintenance nature are charged directly to operating expense.
Improvement costs are capitalized and charged to operations over the shorter of
the improvement life or the related asset life. Depreciation is computed
principally using the straight-line method over the estimated useful lives as
follows: buildings and improvements 5 to 40 years; machinery and equipment 2 to
20 years; autos and trucks 4 to 10 years; and leasehold improvements over the
shorter of 5 to 10 years, or the remaining term of the lease.
INTANGIBLE ASSETS AND RELATED AMORTIZATION
Goodwill consists primarily of the cost of acquired businesses in excess of
market value of net assets acquired. Goodwill is being amortized on a
straight-line basis over forty years or less. Subsequent to its acquisition, the
Company continually evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the related undiscounted
operating income over the remaining life of the goodwill in measuring whether
the goodwill is recoverable.
Other intangible assets consist primarily of costs to obtain customers and
computer software. Amortization of other intangible assets is computed using the
straight-line method over the expected life of the intangible asset, which
principally ranges from 2 years
F-56
<PAGE> 207
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to 10 years. The Company continually evaluates whether later events and
circumstances have occurred that indicate that the remaining useful life of any
of the other intangible assets may warrant revision or that the remaining
balance might not be recoverable. When factors indicate that other intangible
assets should be evaluated for possible impairment, the Company uses an estimate
of the related undiscounted cash flows, over the remaining lives of the
intangibles in measuring whether such intangibles are recoverable.
ENVIRONMENTAL REMEDIATION COSTS AND LIABILITIES
The Company has recorded estimates for remediation costs relating to all
operating and previously closed sites prior to conducting detailed individual
site investigations to ascertain the existence and extent of contamination. Such
estimates are based on the Company's past experience in remediating such sites.
The Company reviews the adequacy of its liability for environmental remediation
on a periodic basis and records adjustments to the costs and liabilities
accordingly. In 1995, the Company recorded a $12 million pre-tax charge to
refine its estimates of environmental liabilities based on its ongoing review of
spending patterns.
EARNINGS PER SHARE (EPS)
Effective December 15, 1997, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 128 on "Earnings Per Share", which requires the
presentation of basic and diluted earnings per common share for all periods
presented.
Basic EPS amounts are based on the weighted average number of shares of
common stock outstanding of 58,414,996, 58,088,894 and 57,813,488 for fiscal
years 1997, 1996 and 1995, respectively, while diluted EPS amounts are based on
the weighted average number of shares of common stock during the year and the
effect of dilutive stock options and warrants. For fiscal years 1997, 1996 and
1995, the effect of potentially dilutive stock options and warrants were
510,685; 63,461 and 43,456 shares, respectively. The Company had additional
stock options of 1,388,504; 3,454,836 and 3,498,286 at January 3, 1998, December
28, 1996 and December 30, 1995, respectively, which were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common share.
STATEMENT OF CASH FLOWS
Short-term investments with original maturities of 90 days or less are
considered to be cash equivalents for purposes of the Consolidated Statements of
Cash Flows and Consolidated Balance Sheets. Cash flows associated with items
intended as hedges of identifiable transactions are classified in the same
categories as the cash flows of the items being hedged. Refer to Note 6 for
further information regarding the Company's hedging agreements.
F-57
<PAGE> 208
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries outside the United States are
generally measured using the local currency as the functional currency. Assets,
including goodwill, and liabilities of the subsidiaries are translated at the
rates of exchange at the balance sheet date. The resultant translation
adjustments are included in cumulative translation adjustments, a separate
component of shareholders' equity. Income and expense items are translated at
average period rates of exchange. Gains and losses from foreign currency
transactions of these subsidiaries are included in net earnings in the period in
which they occur and are not material.
REVENUE RECOGNITION
Revenues are recorded at the time of performance of services or shipment of
products. Revenue includes sales of oil related products totaling, $105.9,
$103.5 and $91.4 million for fiscal years 1997, 1996 and 1995, respectively.
Other sales of products were not material to the Consolidated Financial
Statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to be consistent with
current year presentation.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130 on "Reporting Comprehensive Income," and SFAS No. 131 on "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 130
establishes standards for reporting comprehensive income in financial statements
and SFAS No. 131 expands certain reporting and disclosure requirements for
segments from current standards. The Company is not required to adopt these
statements until 1998 and is currently reviewing the impact of these new
standards.
3. ACQUISITIONS
All acquisitions made during the three fiscal years ended January 3, 1998
were accounted for using the purchase method and, accordingly, their operating
results have been included in the Company's Consolidated Statements of
Operations only since the
F-58
<PAGE> 209
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
respective dates of acquisition. The acquisitions were not material either
individually or in the aggregate.
4. SEGMENT INFORMATION
The Company and its subsidiaries operate in the United States, the
Commonwealth of Puerto Rico, Canada, the United Kingdom, the Republic of
Ireland, France, Belgium, Italy, Germany, and Spain. A summary of certain data
with respect to these operations for the fiscal years ended January 3, 1998,
December 28, 1996 and December 30, 1995 is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
REVENUE
United States and Puerto Rico.... $ 834,680 $ 754,271 $ 698,792
Canada........................... 63,345 62,529 61,286
Europe........................... 109,878 106,326 99,173
---------- ---------- ----------
Consolidated........... $1,007,903 $ 923,126 $ 859,251
========== ========== ==========
TOTAL ASSETS
United States and Puerto Rico.... $ 802,602 $ 788,521 $ 766,276
Canada........................... 73,265 75,750 68,482
Europe........................... 158,839 180,552 174,292
---------- ---------- ----------
Consolidated........... $1,034,706 $1,044,823 $1,009,050
========== ========== ==========
NET EARNINGS
United States and Puerto Rico.... $ 54,178 $ 56,092 $ 44,446
Canada........................... 656 1,614 3,751
Europe........................... 8,336 3,403 5,106
---------- ---------- ----------
Consolidated........... $ 63,170 $ 61,109 $ 53,303
========== ========== ==========
</TABLE>
In 1997, based on the Company's ongoing review of its accrued environmental
liabilities, approximately $2.0 million of excess reserves in Europe were
reversed and a $2.0 million charge was recorded in the United States to cover
estimated remediation costs. This transfer only impacted net earnings by segment
and had no impact on consolidated net earnings.
In 1995, the Company recorded a $15.2 million pre-tax credit to income for
the writedown of restructuring reserves previously established in 1993 and the
$12 million pre-tax charge for the refinement of the Company's environmental
remediation reserves at its facilities in North America.
F-59
<PAGE> 210
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net earnings, by segment, excluding the 1997 transfer of environmental
reserves and the 1995 adjustments to restructuring and accrued environmental
liabilities, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
United States and Puerto Rico............ $55,378 $56,092 $49,383
Canada................................... 656 1,614 1,856
Europe................................... 7,136 3,403 2,064
------- ------- -------
Total.......................... $63,170 $61,109 $53,303
======= ======= =======
</TABLE>
The Company operates primarily in one business segment -- providing
businesses with environmentally safe and convenient solutions for managing fluid
waste and other recoverable resources.
5. INVENTORIES
The Company's inventories consist primarily of solvent, oil and supplies.
LIFO inventories at January 3, 1998 and December 28, 1996 were $5.5 million and
$4.8 million, respectively. Under the FIFO method of accounting (which
approximates current or replacement cost) inventories would have been $0.4 and
$0.3 million higher at January 3, 1998 and December 28, 1996, respectively. The
Company's inventories consist of the following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Oil............................................ $12,759 $14,997
Solvent, Drums and Other....................... 38,580 34,974
------- -------
Total................................ $51,339 $49,971
======= =======
</TABLE>
F-60
<PAGE> 211
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. FINANCIAL ARRANGEMENTS AND LONG-TERM DEBT
Long-term debt at January 3, 1998 and December 28, 1996 consisted of the
following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
9.25% Senior Notes due in 1999................. $100,000 $100,000
8.05% Senior Notes due in 1998................. 50,000 50,000
Unsecured notes payable to banks under
financing agreements:
Revolving lines of credit.................... 47,000 67,990
Uncommitted lines of credit.................. 11,192 52,897
Other.......................................... 6,079 6,067
-------- --------
214,271 276,954
Less-current portion........................... 37 0
-------- --------
Total long-term debt................. $214,234 $276,954
======== ========
</TABLE>
The long-term debt as of January 3, 1998 is due as follows:
<TABLE>
<CAPTION>
(EXPRESSED IN THOUSANDS)
------------------------
<S> <C>
1999................................... $100,091
2000................................... 108,653
2001................................... 5,190
2002................................... 60
2003 and thereafter.................... 240
</TABLE>
The $100 million of 9.25% Senior Notes ("the Notes") due September 1999
specify that, upon the occurrence of a credit agency rating decline below
investment grade, either in conjunction with a change in control or as a result
of other events as defined in the Notes, each holder of the Notes has the option
to require the Company to purchase all or any part of such holder's Notes at a
price equal to 100% of the principal amount plus accrued interest.
In May 1992, the Company executed interest rate swap agreements that
effectively convert $100 million of its fixed-rate borrowings into variable rate
obligations. These swap agreements expire in September 1999. In April 1993, the
Company executed an interest rate swap agreement that converted these $100
million variable rate obligations to a fixed rate. This agreement expired in
September 1996. The effect of these swaps reduced the interest rate on the Notes
from 9.25% to 7.08% through September 1996. Effective September 1996, the
interest rate reverted back to a variable rate. The variable rate is based on
the U.S. Dollar London Interbank Offered Rate (LIBOR) determined at 6-
F-61
<PAGE> 212
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
month intervals. At January 3, 1998, the effective variable rate of interest on
these borrowings was 7.9%.
In May 1992, at the same time the Company entered into the $100 million
interest rate swap agreement, the Company entered into an interest rate cap
agreement, which protects the Company from rising interest rates. The cap has a
notional amount of $100 million, and expires on September 12, 1999. The cap
effectively limits the Company's interest rate exposure to 13.92% if LIBOR
exceeds 12%. The premium paid on the cap is being amortized to interest expense
over the term of the cap.
The Company has a U.S. revolving credit agreement totaling $160 million,
which expires in March 2000. The agreement provides for interest rates to be
determined at the time of the borrowing based on a choice of formulas as
specified in the agreement. The Company currently benefits from a competitive
bid option under the agreement which ensures that favorable market rates of
interest are secured. A facility fee based on the Company's credit ratings is
paid on the total amount of the line of credit. At January 3, 1998, $47 million
of borrowings were outstanding at an average interest rate of 6.2%.
At January 3, 1998, the Company had uncommitted lines of credit totaling
$82 million. Borrowings under these lines were approximately $11 million at an
average interest rate of 6.1%.
The Company has the ability to convert other bank borrowings to its
revolving credit facilities. Since the committed facilities extend beyond 1998
and the Company intends to renew these obligations, $63 million of the loans
payable to banks have been classified as long-term debt.
The Company's German subsidiary had a revolving credit agreement totaling
76 million Deutschmarks (DM) (U.S. $42 million) that extended credit until
December 1997. The interest rate determined at the time of each borrowing was
6-month LIBOR plus 0.5%. A commitment fee of 0.125% per annum was paid quarterly
on the unused portion of the facility. On December 15, 1997, Safety-Kleen
Corp.'s USA parent company purchased the outstanding credit facility of the
German subsidiary totaling approximately DM 71 million (U.S. $40 million) from
Deutsche Bank for approximately $40 million. This note was purchased through the
use of additional U.S. borrowings through its revolving credit facility.
In May 1992, the Company's German subsidiary executed an interest rate swap
agreement which expired in May 1997. The interest rate on DM 70 million (U.S.
$39 million) was swapped from rates based on 6-month DM LIBOR to rates based on
6-month U.S. Dollar LIBOR.
At January 3, 1998, the Company's other subsidiary operations have
miscellaneous line of credit agreements totaling $9 million (U.S.). At January
3, 1998, there were no borrowings under these lines of credit.
The Company's remaining interest rate swap agreement has been entered into
with major financial institutions which are expected to fully perform under the
terms of the agreements. The Company monitors the credit ratings of these
counterparties and considers the risk of default to be remote.
F-62
<PAGE> 213
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest expense excludes $2.1 million of interest capitalized for each of
the three fiscal years 1997, 1996 and 1995.
The fair value of the interest rate swap agreements and the interest cap
agreement noted above was approximately $1.8 and $2.1 million greater than the
Company's carrying value at January 3, 1998 and December 28, 1996, respectively.
This fair value is determined by obtaining quotes from brokers who regularly
deal in these types of financial instruments. These interest rate swaps have
resulted in a net savings of $0.7, $0.1, and $0.6 million in 1997, 1996, and
1995, respectively.
In January 1995, the Company entered into a note purchase agreement with
two insurance companies, under which the Company borrowed $50 million at a fixed
interest rate of 8.05% for 3 years expiring in January, 1998. Proceeds from the
note were used to repay existing bank borrowings. At the end of fiscal year
1997, the Company classified the $50 million in debt as non-current as it was
the Company's intention to repay the notes through the use of additional bank
borrowings under its revolving credit facilities. This action was consummated at
the end of January 1998.
The Company's credit agreements include provisions, among others, relative
to maintenance of minimum shareholders' equity and certain financial ratios. At
January 3, 1998, the Company's required minimum shareholders' equity was $465
million and the Company was in compliance with its loan provisions.
7. CAPITAL STOCK
PREFERRED STOCK
The Board of Directors has the authority to issue up to 1,000,000 shares of
preferred stock, par value $.10 per share, at such time or times, in such
series, and with such designations and features thereof as it may determine,
including rate of dividend, redemption provisions and prices, conversion
conditions and prices and voting rights. No shares of preferred stock have been
issued.
STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
The Company has the following stock option and employee stock purchase
plans:
1. The 1985 and 1993 Stock Option Plans (The "Option Plans")
2. The 1988 Non-Qualified Stock Option Plan for Outside Directors (The
"Directors' Plan")
3. The Employee Stock Purchase Plan (the "ESPP")
F-63
<PAGE> 214
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company accounts for these plans under Accounting Principles Board
(APB) Opinion No. 25 under which no compensation has been recognized at the date
of grant. Had compensation costs for these plans been determined based on the
fair value at the date of grant consistent with SFAS No. 123, on "Accounting for
Stock-Based Compensation," the Company's net income and earnings per share
("EPS") for fiscal years 1997, 1996 and 1995 would have been reduced to the
following pro-forma amounts:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(EXPRESSED IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
NET INCOME:
As Reported............................ $63,170 $61,109 $53,303
Pro Forma.............................. $60,134 $59,398 $52,235
BASIC EPS:
As Reported............................ $ 1.08 $ 1.05 $ 0.92
Pro Forma.............................. $ 1.03 $ 1.02 $ 0.90
DILUTED EPS:
As Reported............................ $ 1.07 $ 1.05 $ 0.92
Pro Forma.............................. $ 1.02 $ 1.02 $ 0.90
</TABLE>
The fair value of each option granted under the Option Plans is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants in 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Expected Lives (Years)............................... 5.45 6.00 6.00
Dividend Yield....................................... 1.99% 1.68% 1.46%
Expected Volatility.................................. 27.23% 30.74% 30.50%
Risk Free Interest Rate.............................. 6.13% 5.41% 7.44%
</TABLE>
The weighted average fair value of the shares granted under the Option
Plans in fiscal years 1997, 1996 and 1995 would be $5.17, $5.09 and $6.24,
respectively. No grants were made in 1997, 1996 and 1995 under the Directors'
Plan. The cost per ESPP share granted in 1997, 1996 and 1995 would be $3.46,
$3.30 and $3.49, respectively, based on a 10% discount on share price and a
Black-Scholes value of a 13-month option with a 2.08%, 2.23% and 2.23% dividend
yield rate in 1997, 1996 and 1995, respectively.
Because the SFAS No. 123 method of fair-value accounting has not been
applied to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
At the Annual Meeting of Shareholders held in May 1996, the shareholders
approved an increase in the number of shares available for grant under the
Option Plans by 2,500,000 shares to a total of 8,437,500 shares. Under the
Option Plans, shares of the
F-64
<PAGE> 215
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's common stock may be granted to officers and other key employees at a
price of 100% of the quoted market price at date of grant. Options granted under
the Plan may be either Incentive Stock Options or Non-Qualified Stock Options.
Stock Appreciation Rights (SARs) may be granted in conjunction with
Non-Qualified Stock Options whereby the grantee may surrender exercisable
Non-Qualified Options and receive a cash payment equal to the difference between
the option price and the market value of the common stock on the exercise date.
The exercise of Incentive Options, Non-Qualified Options and SARs are subject to
conditions as determined at the time of grant by the Compensation Committee of
the Board of Directors. All options granted since May 1990 have been for a
10-year life with 25% vesting per year beginning one year from the date of
grant. In November 1994, the Board extended the expiration date on all stock
options granted from February 1987 through May 1990 from their original
expiration date to November 30, 2004.
Under the Directors' Plan, options to purchase up to 300,000 shares of the
Company's common stock may be granted to outside Directors at a price of 100% of
the quoted market price at the date of grant. Under the terms of the Directors'
Plan, each outside Director was granted an option to purchase 15,000 shares at
the time the plan was adopted. Any new outside Director elected or appointed
after the date the plan was adopted would also be granted an option to purchase
15,000 shares of the Company's common stock upon taking office. The Directors'
Plan also provides that a second option to purchase 15,000 shares be granted to
each outside Director on the fifth anniversary of their initial grant of options
if such Director is still serving on the Board at that time. Options vest 25%
annually, on a cumulative basis, starting one year from date of grant and
terminate ten years after the grant date.
The Option Plans and the Directors' Plan include a change of control
provision that results in all shares granted under these plans becoming 100%
vested should a change of control take place.
Under the ESPP, a total of 1,500,000 shares of the Company's common stock
may be purchased by employees of the Company and designated subsidiaries,
through payroll deductions, at 90% of the lower of the quoted closing market
price on the date of grant or the quoted closing market price on June 30 in the
year following the date of grant. Under the plan, all full-time employees
(except officers of the Corporation) of the Company and designated subsidiaries
on the grant date who were continuously employed since January 1 of the year in
which the grant date occurs (subject to certain restrictions on percentage of
ownership outlined in the ESPP) are eligible to participate. The Company had an
employee stock purchase plan ("Old ESPP") which was in effect from 1990 through
1994. Under terms of the Old ESPP, no further grants to purchase shares could be
made after December 31, 1994. Therefore, 66,188 shares granted under the Old
ESPP in 1994 that were canceled in 1995 have expired.
F-65
<PAGE> 216
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the Company's stock option plans and the
employee stock purchase plans for the three fiscal years ended January 3, 1998
is presented below:
<TABLE>
<CAPTION>
WEIGHTED AVAILABLE FOR
SHARES PRICE RANGE AVG. EX. PRICE EXERCISABLE FUTURE GRANTS
--------- --------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Outstanding Options @
12/31/94............. 3,239,275 $13.50 - $32.25 $20.54 1,829,500 2,365,479
1995 ACTIVITY:
Expired................ (66,188)
Authorized............. 1,500,000
Granted................ 1,228,846 15.41 - 16.88 16.15
Exercised.............. (133,992) 13.50 - 15.63 14.40
Canceled............... (233,762) 13.50 - 32.25 19.05
- --------------------------------------------------------------------------------------------------
Outstanding Options @
12/30/95............. 4,100,367 13.50 - 32.25 19.51 2,142,623 2,804,207
1996 ACTIVITY:
Authorized............. 2,500,000
Granted................ 977,759 14.25 - 17.50 15.13
Exercised.............. (102,536) 13.50 - 16.25 15.37
Canceled............... (115,789) 13.50 - 32.25 16.99
- --------------------------------------------------------------------------------------------------
Outstanding Options @
12/28/96............. 4,859,801 13.50 - 32.25 18.78 2,718,193 4,442,237
1997 ACTIVITY:
Granted................ 1,218,393 14.17 - 17.13 16.78
Exercised.............. (944,523) 13.50 - 26.75 17.93
Canceled............... (214,815) 13.50 - 32.25 17.21
- --------------------------------------------------------------------------------------------------
Outstanding Options @
1/3/98............... 4,918,856 $13.50 - $32.25 $18.51 2,517,985 3,438,659
- --------------------------------------------------------------------------------------------------
</TABLE>
STOCK WARRANTS
The Company, on January 27, 1995 issued 200,000 stock warrants in
conjunction with an acquisition. These warrants give the owner of stock warrants
the right to purchase up to 200,000 shares of the Company's common stock at a
price of $17.79 per share and expire on January 27, 2000.
F-66
<PAGE> 217
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about the Company's stock option
plans, employee stock purchase plan and stock warrants outstanding at January 3,
1998.
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE OPTIONS/WARRANTS OPTIONS/WARRANTS EXERCISABLE
REMAINING ------------------------------------------------ ------------------------------
CONTRACTUAL LIFE NUMBER RANGE OF WEIGHTED-AVERAGE NUMBER WEIGHTED AVERAGE
(YEARS) OUTSTANDING EXERCISE PRICES EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------------- ----------- --------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
1 252,935 $13.50 - $19.46 $16.84 132,839 $19.22
1 56,325 24.00 - 32.00 29.01 56,325 29.01
2 216,650 13.50 - 19.33 17.62 214,287 17.65
2 30,100 24.00 - 32.00 28.45 30,100 28.45
3 2,063 13.50 - 16.25 15.88 1,225 15.68
3 245,875 24.00 - 32.25 31.96 245,875 31.96
4 10,101 13.50 - 19.42 16.10 6,201 16.36
4 190,725 24.00 - 32.25 27.12 190,725 27.12
5 34,050 13.50 - 21.75 18.72 24,637 19.67
5 332,100 24.00 - 24.00 24.00 332,100 24.00
6 434,887 13.50 - 17.37 15.05 332,792 14.69
7 1,504,003 15.88 - 23.92 17.44 1,002,967 17.93
8 741,792 14.25 - 15.13 15.12 147,912 $14.64
9 1,067,250 15.63 - 17.50 17.08 -- --
--------- --------------- ------ --------- ------
TOTAL 5,118,856 $13.50 - $32.25 $18.48 2,717,985 $20.41
========= =============== ====== ========= ======
</TABLE>
SHAREHOLDERS' RIGHTS PLAN
Pursuant to a plan adopted by the Company in December 1988 and amended in
1991, each share of the Company's common stock carries the right to buy one
share of the Company's common stock at a price of $73.33 per share. The rights
will expire on November 21, 1998, unless earlier redeemed by the Company. The
rights will become exercisable if a person becomes an "acquiring person" by
acquiring 20% of the Company's common stock or announces a tender offer that
would result in such person owning 20% or more of the Company's common stock. If
someone becomes an acquiring person, the holder of each right (other than rights
owned by the acquiring person) will be entitled to purchase common stock of the
Company having a market value of twice the exercise price of the right. In
addition, if the Company is acquired in a merger or other business combination
transaction in which the Company's common stock is exchanged for cash or
securities, or 50% or more of its consolidated assets or earning power are sold,
each holder (other than the acquiring person) will have the right to purchase
common stock of the acquiring company having a market value of twice the
exercise price. The rights may be redeemed by the Company, at a price of 0.67
cent per right, at any time prior to anyone becoming an acquiring person. See
Note 12 to the Consolidated Financial Statements for a discussion regarding
subsequent events.
F-67
<PAGE> 218
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. PENSION AND EMPLOYEE BENEFIT PLANS
The Company has four noncontributory pension plans covering substantially
all full time employees in the United States. These four domestic pension plans
consist of three qualified plans and one unfunded non-qualified plan. The
qualified plans are funded in compliance with ERISA requirements as employees
become eligible to participate, generally, after completing one year of service.
The Company's consolidated pension costs for fiscal years 1997, 1996 and
1995 were $6.0 million, $6.0 million, and $4.9 million, respectively.
The following table sets forth the domestic plans' combined funded status
at January 3, 1998 and December 28, 1996:
<TABLE>
<CAPTION>
JANUARY 3, 1998 DECEMBER 28, 1996
----------------------------- -----------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefits.................. $57,034 $ 2,558 $44,213 $ 2,395
Nonvested benefits............... 4,869 323 4,427 141
------- ------- ------- -------
Accumulated benefit obligation..... 61,903 2,881 48,640 2,536
Effect of projected compensation
levels........................... 20,082 1,394 16,169 584
------- ------- ------- -------
Projected benefit obligation....... 81,985 4,275 64,809 3,120
Plan assets at fair value.......... 77,858 -- 64,204 --
------- ------- ------- -------
Projected benefit obligation
(greater) than plan assets....... (4,127) (4,275) (605) (3,120)
Unrecognized net loss (gain)....... 3,065 259 1,476 (629)
Unrecognized net assets to be
amortized over 16-20 years....... (498) 432 (568) 494
Unrecognized prior service cost.... 315 105 355 114
------- ------- ------- -------
Unfunded prepaid (accrued) pension
cost recognized in the
Consolidated Balance Sheets...... $(1,245) $(3,479) $ 658 $(3,141)
======= ======= ======= =======
</TABLE>
The Plans' assets consist of cash, cash equivalents, equity funds, pooled
funds of real estate and common stock of the Company.
F-68
<PAGE> 219
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension cost for the Company's domestic plans for fiscal years
1997, 1996 and 1995 includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the year... $ 4,898 $ 4,521 $ 3,451
Interest on projected benefit obligation....... 5,897 4,981 4,274
Return on plan assets.......................... (13,461) (9,422) (10,405)
Net amortization and deferral.................. 7,092 4,593 6,493
-------- ------- --------
Net periodic pension cost...................... $ 4,426 $ 4,673 $ 3,813
======== ======= ========
</TABLE>
Actuarial assumptions used to determine the projected benefit obligation
and the expected net periodic pension costs were:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Projected Benefit Obligation Assumptions:
Discount Rates........................................ 7.3% 7.8% 7.3%
Rates of increase in compensation levels.............. 4.0% 4.5% 4.0%
Net Periodic Cost Assumption:
Expected long-term rate of return on assets........... 10.0% 10.0% 10.0%
</TABLE>
The Company also has pension plans covering employees of its Canadian and
British subsidiaries. Those plans are funded by purchase of insurance contracts
and units in a managed fund invested in stocks, fixed income securities and real
estate. Vested benefits are fully funded. The Company's foreign subsidiaries are
not required to report under ERISA and do not otherwise determine the actuarial
value of accumulated plan benefits as disclosed above for the Company's domestic
pension plans. These plans do not have a material effect on the Company's
financial condition or results of operations.
The Safety-Kleen Corp. Savings and Investment Plan allows eligible
employees to make contributions, up to a certain limit, to the Plan on a
tax-deferred basis under Section 401(k) of the Internal Revenue Code of 1986.
The Company may, at its discretion, make matching contributions out of its
profits for the year. The Company's expense for contributions was $2.4 million
in 1997, $3.2 million in 1996 and $1.9 million in 1995.
The Company offers a post-retirement medical insurance plan to its domestic
employees retiring prior to the normal retirement age of 65. Retirees are
eligible to continue this medical coverage until age 65. The plan is currently
unfunded and retirees electing this coverage are required to pay a premium for
the insurance.
F-69
<PAGE> 220
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the funded status of the plan to the accrued
post-retirement benefit cost recognized in the Consolidated Balance Sheets at
January 3, 1998 and December 28, 1996:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation (APBO):
Retirees, beneficiaries and dependents............... $ 864 $ 1,310
Active employees..................................... 5,793 5,074
------- -------
6,657 6,384
------- -------
Plan assets at fair value.............................. -- --
------- -------
APBO greater than plan assets.......................... (6,657) (6,384)
------- -------
Unrecognized net loss (gain)........................... (2,885) (2,502)
------- -------
Accrued post-retirement benefit cost................... $(9,542) $(8,886)
======= =======
APBO discount rate assumption.......................... 7.3% 7.8%
------- -------
</TABLE>
Net periodic post-retirement benefit costs recognized for fiscal years
1997, 1996, and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ------ ----
(EXPRESSED IN
THOUSANDS)
<S> <C> <C> <C>
Service costs -- benefits earned during the year...... $ 578 $ 683 $511
Interest costs on APBO................................ 453 478 436
Other................................................. (121) (57) (87)
----- ------ ----
Net periodic post-retirement benefit cost............. $ 910 $1,104 $860
===== ====== ====
</TABLE>
The health care cost trend was assumed to be 9% for 1995, 7% for 1996 and
5% for 1997 decreasing to an ultimate trend of 4.5% in 1998 and beyond.
If the health care cost trend rate increases one percent for all future
years, the accumulated post-retirement benefit obligation as of January 3, 1998
would have increased 14%. The effect of this change on the aggregate of the
service and interest cost for 1997 would be an increase of 21%.
At the end of 1994, the Company established a non-qualified Deferred
Compensation Plan. This plan allows corporate officers and other key management
personnel to defer a portion of their current compensation up to a certain
limit, as defined by the Plan. Distributions under the plan are made in
accordance with deferral elections as described in the plan. All expenses
associated with the Deferred Compensation Plan are recognized in the period in
which they are incurred. The Company has liabilities of approximately $1.6
F-70
<PAGE> 221
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and $0.8 million recorded at January 3, 1998 and December 28, 1996,
respectively, associated with the Deferred Compensation Plan.
In 1997, the Company invested $5.0 million in an irrevocable Rabbi Trust
that will provide the resources necessary to pay any liabilities currently
accrued for under the Deferred Compensation Plan and the unfunded non-qualified
domestic pension plan. The investment in the trust is included in "Other Assets"
on the Company's Consolidated Balance Sheets.
9. INCOME TAXES
The components of earnings before income taxes consisted of the following
for each of the last three fiscal years:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Domestic.............................. $ 94,044 $ 93,986 $ 74,492
Foreign............................... 6,456 7,662 17,976
-------- -------- --------
$100,500 $101,648 $ 92,468
======== ======== ========
</TABLE>
Under SFAS No. 109 on Accounting for Income Taxes, deferred tax assets and
liabilities are calculated based on the difference between the financial
statement and income tax bases of assets and liabilities using the enacted tax
rates.
The provisions (benefits) for income taxes include the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
CURRENT
Federal.................................. $16,020 $19,979 $16,505
State.................................... 4,484 5,956 5,087
Commonwealth of Puerto Rico.............. 458 159 (376)
Foreign.................................. 2,066 704 662
DEFERRED
Federal.................................. 7,307 6,863 7,247
Foreign.................................. 1,916 4,105 2,087
PREPAID
Federal.................................. 5,706 5,077 1,949
Foreign.................................. (627) (2,304) 6,004
------- ------- -------
TOTAL PROVISION.......................... $37,330 $40,539 $39,165
======= ======= =======
</TABLE>
F-71
<PAGE> 222
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the statutory U.S. Federal income tax rate
to the Company's consolidated effective tax rate:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal tax rate................... 35.0% 35.0% 35.0%
Increase(decrease) resulting from:
Provision for state income tax (net of federal
benefit)..................................... 2.7 2.1 3.6
Difference in foreign statutory rates............. 0.2 1.6 2.2
Other............................................. (0.8) 1.2 1.6
---- ---- ----
Effective tax rate................................ 37.1% 39.9% 42.4%
==== ==== ====
</TABLE>
F-72
<PAGE> 223
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Temporary differences and carry forwards which give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
---------- ------------ ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Deferred Tax Assets -- Current
Environmental reserves............. $ 3,080 $ 2,395 $ 2,625
Insurance reserves................. 4,444 4,415 5,908
Bad debt reserve................... -- 1,800 1,800
Restructure and Other.............. 3,170 3,363 7,651
-------- -------- --------
Total deferred tax
assets -- current.................. $ 10,694 $ 11,973 $ 17,984
======== ======== ========
Deferred Tax Assets -- Non-Current
Restructure charges not currently
deductible...................... $ 11,872 $ 11,440 $ 17,494
Net operating loss (NOL) carry
forwards of subsidiaries........ 18,279 20,616 20,149
Insurance reserves................. 8,351 7,798 4,822
Environmental reserves............. 12,828 16,325 14,382
Other.............................. 5,294 5,458 3,273
Valuation allowance................ (2,879) (3,340) (3,676)
-------- -------- --------
Total deferred tax
assets -- non-current.............. 53,745 58,297 56,444
-------- -------- --------
Total Deferred Tax Assets............ $ 64,439 $ 70,270 $ 74,428
======== ======== ========
Deferred Tax Liabilities
Restructuring and Special
Charges......................... $ (1,750) $ -- $ 13,820
Depreciation....................... (87,659) (76,115) (80,250)
Tax lease agreements............... (6,234) (6,852) (7,253)
Other.............................. (3,102) (1,044) (915)
-------- -------- --------
Total Deferred Tax Liabilities....... $(98,745) $(84,011) $(74,598)
======== ======== ========
</TABLE>
As of January 3, 1998, the Company has undistributed earnings of foreign
consolidated subsidiaries of approximately $30.1 million. The Company does not
provide for deferred taxes on possible future remittances of these earnings
since U. S. income taxes, under current law, on such remittances would not be
material.
F-73
<PAGE> 224
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of January 3, 1998, the tax assets derived from Net Operating Loss carry
forwards (NOLs) consist of NOL tax assets with expiration dates as follows:
<TABLE>
<CAPTION>
(EXPRESSED IN THOUSANDS)
------------------------
<S> <C>
1998................................... $ 558
1999................................... 1,539
2000................................... 369
2001................................... 395
2002................................... 360
No Expiration.......................... 15,058
</TABLE>
The Company has recorded a valuation allowance of approximately $2.9
million for unrealized NOL tax assets that may expire before the Company is able
to utilize such NOLs.
The valuation allowance account balance of $2.9 million represents
approximately 89% of the NOL tax assets that are due to expire as it is more
likely than not that some portion of the deferred tax assets will not be
realized. The valuation account activity is summarized in the table below:
<TABLE>
<CAPTION>
1997
------------------------
(EXPRESSED IN THOUSANDS)
<S> <C>
Balance -- beginning of year..................... $3,340
Adjust valuation balances........................ 19
Cumulative translation adjustment................ (480)
------
Balance -- end of year........................... $2,879
======
</TABLE>
10. SPECIAL CHARGE FOR ENVIRONMENTAL REMEDIATION COSTS, OTHER ACCRUED
EXPENSES AND LIABILITIES, COMMITMENTS AND CONTINGENT LIABILITIES
The Company operates a large number of hazardous waste facilities for the
collection and processing of hazardous and non-hazardous wastes and is subject
to extensive and expansive regulation by federal, state and local authorities.
In the ordinary course of conducting its business activities, the Company
becomes involved in judicial and administrative proceedings in which
governmental authorities seek remedial actions and/or fines and penalties. The
Company also has been notified by the EPA that it may be a responsible party at
several National Priority List ("NPL") sites. Generally, these proceedings by
federal and state regulatory agencies have been resolved by negotiation and
settlement. The Company does not anticipate that the amount of fines and
penalties will have a material adverse impact on its financial condition. It
should be noted, however, that many environmental laws are written and enforced
in a way in which the potential liability can be large and it is possible that
the Company's actual liability in any particular case or claim will prove to be
larger than anticipated and accrued for by the
F-74
<PAGE> 225
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company. It is also possible that expenses incurred in any particular reporting
period for remediation costs or for fines, penalties or judgments could have a
material impact on the Company's results of operations for that period.
Under various federal, state and local regulations, the Company can be
required to conduct an environmental investigation of any of its operating or
closed facilities to determine the possible existence and extent of
environmental contamination. In the event that contamination is found, the
Company may be required to perform a remedial cleanup of the site. The Company
is currently engaged in investigation and cleanup work at many of its sites.
In 1993, the Company recorded a $50 million pre-tax special charge ($30
million after-tax or $.52 per share) for a change in estimate for remediation
costs relating to all operating and previously closed sites prior to conducting
detailed individual site investigations to ascertain the existence and extent of
contamination. This change results in earlier recognition of environmental
remediation costs and liabilities as compared with the Company's previous
practice which was to accrue the estimated cost of remedial cleanup work at the
time the need for such work was specifically identified based on site
investigation. In 1995, the Company recorded a $12 million pre-tax charge to
increase its reserves for environmental remediation based on a refinement of the
estimate for such liabilities and its ongoing review of spending patterns. The
Company intends to continue to operate at its active sites indefinitely.
Accordingly, the accrued environmental liabilities do not include estimates for
costs associated with the physical closure of such sites.
Federal environmental regulations require that the Company demonstrate
financial responsibility for sudden and non-sudden releases, as well as closure
and post-closure liabilities. One manner by which to make this demonstration is
through Environmental Impairment Liability (EIL) insurance coverage. The Company
has not been able to purchase large amounts of risk-transfer EIL insurance
coverage. The Company has EIL insurance coverage which it believes complies with
the Federal regulatory requirements. However, the Company must reimburse the
insurance carrier for all losses and expenses incurred by it under the policy.
The Company's income could be adversely affected in the future if it is unable
to obtain risk-transfer EIL insurance coverage and uninsured losses were to be
incurred.
In September 1997, the Company discovered that its East Chicago, Indiana
main feed tank had become contaminated with polychlorinated biphenyls ("PCBs")
resulting in approximately 4 million gallons of contaminated oil. The Company
immediately notified the EPA and the Indiana Department of Environmental
Management ("IDEM") of the problem. The Company believes that the IDEM and EPA
will allow it to treat this contaminated material on-site. If the IDEM or EPA
determine that off-site treatment is required, the cost of such treatment could
be material to the results of operations in that period.
The Company leases many of its branches, vehicles and other equipment.
These leases are accounted for as operating leases. Related rental expenses were
$40.4 million in 1997, $31.5 million in 1996 and $24.8 million in 1995.
F-75
<PAGE> 226
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate minimum future rentals are payable as follows:
<TABLE>
<CAPTION>
PERIODS (EXPRESSED IN MILLIONS)
- ------- -----------------------
<S> <C>
1998.................................... $ 32.6
1999.................................... 25.9
2000.................................... 16.3
2001.................................... 8.6
2002.................................... 5.8
Future Years............................ 18.2
------
Total......................... $107.4
======
</TABLE>
11. RESTRUCTURING CHARGES
In 1993, the Company adopted a restructuring plan based on conversion of
its core parts cleaner service to new technology and other strategic actions. In
conjunction with the adoption of this plan, the Company recorded a special
charge of $179 million ($106 million after tax or $1.84 per share). The pre-tax
restructuring charge included $93 million of asset write downs and $86 million
of other restructuring charges. In 1995, the Company recorded a pre-tax credit
to income of $15.2 million to adjust the restructuring reserves to their
expected required levels.
In 1996, the Company substantially completed all of its restructuring
activities and reclassified the remaining restructure liabilities (which are
primarily associated with the European operations) to other accrued expenses in
current liabilities and other liabilities in non-current liabilities. At January
3, 1998 and December 28, 1996, other accrued expenses include $1.7 and $3.6
million, respectively, and other liabilities include $2.3 and $7.9 million,
respectively.
12. POTENTIAL SALE OF THE COMPANY
On August 8, 1997, the Company issued a press release stating that it had
initiated a process to explore strategic alternatives for enhancing shareholder
value and had engaged William Blair and Company, L.L.C. ("William Blair") to act
as its financial advisor in connection therewith. As part of the process, 50
potential buyers executed confidentiality and standstill agreements (which were
designed to encourage participation by creating a level playing field for all
interested parties and to protect Safety-Kleen's interests). On November 20,
1997, the Company's Board of Director's ("Board") voted unanimously to approve a
merger agreement with SK Parent Corp., a Delaware corporation owned equally by
Phillip Services Corp., affiliates of Apollo Management, L.P. and affiliates of
Blackstone Partners III, L.L.C. (the "SK Parent Merger Agreement").
Laidlaw Environmental Services, Inc. ("Laidlaw Environmental") also
contacted William Blair but repeatedly refused to execute a confidentiality and
standstill agreement and participate in the process like other potential buyers.
Laidlaw Environmental made an initial unsolicited exchange offer and two
subsequent revised exchange offers in an attempt
F-76
<PAGE> 227
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to purchase Safety-Kleen. After carefully reviewing the unsolicited offers from
Laidlaw Environmental, the Board continued to recommend the SK Parent Merger
Agreement.
On March 9, 1998, the Company held a special meeting of shareholders for
the sole purpose of voting on the SK Parent Merger Agreement. It was announced
at the meeting, based on the advice of the Company's proxy solicitors, that the
Company would not achieve the affirmative vote of two-thirds of all outstanding
shares needed to approve the SK Parent Merger Agreement. The Board then
terminated the SK Parent Merger Agreement. The Board also announced that it
would begin negotiations with Laidlaw Environmental and would also continue to
explore other strategic alternatives for enhancing shareholder value including,
but not limited to, considering any new offers for the Company from any other
interested parties.
On March 16, 1998, the Company issued a press release stating the Board
unanimously approved a definitive merger agreement ("Merger Agreement") with
Laidlaw Environmental, providing for an exchange offer ("Exchange Offer")
followed by a back-end merger ("Merger"; together with the Exchange Offer, the
"Transaction"); the Merger Agreement provides for consideration per Safety-Kleen
share of $18.30 plus 2.8 shares of Laidlaw Environmental Common Stock in both
the Exchange Offer and the Merger. The Board also amended the Shareholders'
Rights Plan to exempt the Merger Agreement and the transactions pursuant
thereto.
On April 1, 1998, Laidlaw Environmental accepted for exchange 56,138,238
shares, constituting approximately 94% of the outstanding shares of Safety-Kleen
and announced it expected to pay for such shares on April 3, 1998 and to
consummate the Merger approximately 6 weeks thereafter. Also on April 1, 1998,
the Inspectors of Election issued their Final Report of the vote on the SK
Parent Merger Agreement, certifying that it received 21,256,083 votes for
approval out of 59,209,387 shares outstanding and entitled to vote (i.e., 36% of
the outstanding shares were voted in favor). The acceptance and exchange of
tendered shares triggers the change of control provision included in the
Company's 1985 and 1993 Stock Option Plans and the 1988 Non-Qualified Stock
Option Plan for Outside Directors which results in all granted options becoming
100% vested. Consistent with the Merger Agreement, each holder of stock options
will receive a cash-out amount, with respect to each of his/her option shares,
equal to the Exchange Offer consideration (valued for this purpose at $30.30)
reduced by the option exercise price, provided that such holder agrees to the
cancellation of all of his/her outstanding options. Also consistent with the
Merger Agreement, each participant in the Employee Stock Purchase Plan will
receive a cash-out payment equal to his/her contributions plus an amount equal
to the number of shares subscribed for by the participant multiplied by the
difference between such Exchange Offer consideration and the market price of the
stock at the date of grant.
The Company incurred $3.2 million in costs through January 3, 1998 in
conjunction with the process described above. During 1998, the Company
anticipates incurring approximately $140-160 million of additional costs related
to the process consisting primarily of the $75 million of termination costs
associated with the SK Parent Merger Agreement, compensation expense associated
principally with the cash-out of the stock option plans and Employee Stock
Purchase Plan described above and investment banking
F-77
<PAGE> 228
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and legal fees associated with the process. These estimated costs do not include
any severance related costs incurred as a result of the integration of the
Company and Laidlaw Environmental.
13. INTERIM RESULTS OF OPERATIONS (UNAUDITED)
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
BASIC DILUTED
EARNINGS EARNINGS
REVENUE GROSS PROFIT NET EARNINGS PER SHARE PER SHARE
--------------------- ------------------- ----------------- ------------- -------------
INTERIM PERIOD 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- -------------- ---------- -------- -------- -------- ------- ------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First (12 Weeks)..... $ 220,230 $201,723 $ 56,146 $ 55,900 $11,838 $13,077 $0.20 $0.23 $0.20 $0.23
Second (12 Weeks).... 229,928 211,355 58,221 56,567 13,341 13,604 0.23 0.23 0.23 0.23
Third (12 Weeks)..... 230,014 213,098 58,662 57,824 15,118(1) 14,004 0.26 0.24 0.26 0.24
Fourth (17 and 16
Weeks).............. 327,731 296,950 85,888 80,864 22,873(2) 20,424 0.39 0.35 0.38 0.35
---------- -------- -------- -------- ------- ------- ----- ----- ----- -----
Total................ $1,007,903 $923,126 $258,917 $251,155 $63,170(2) $61,109 $1.08 $1.05 $1.07 $1.05
========== ======== ======== ======== ======= ======= ===== ===== ===== =====
</TABLE>
- -------------------------
(1) Includes $2.6 million of pre-tax severance related costs incurred during the
period that were offset by a reduction of other pre-established reserves.
(2) Includes $3.2 million pre-tax charge for merger related costs.
F-78
<PAGE> 229
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT -- UNAUDITED
In connection with the Merger Agreement with Laidlaw Environmental (see
Note 12), LES, Inc., a wholly-owned subsidiary of Laidlaw Environmental
Services, Inc. intends to issue 9.25% Senior Subordinated Notes to finance the
acquisition. The Company's wholly-owned domestic subsidiaries will guarantee
such notes. No foreign direct or indirect or non-wholly-owned subsidiary of the
Company is an obligor or guarantor on the financing. For summarized financial
information concerning such subsidiary guarantors and subsidiary non-guarantors,
see Note 15.
F-79
<PAGE> 230
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUMMARIZED FINANCIAL INFORMATION
Summarized financial information on a combined basis as of and for the year
ended January 3, 1998 is as follows:
CONSOLIDATING CONDENSED BALANCE SHEET
AS OF JANUARY 3, 1998
<TABLE>
<CAPTION>
UNITED STATES CONSOLIDATING
AND EUROPE, CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- -------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Current assets............. $170,287 $ 54,139 $ -- $ 224,426
Equipment at customers,
net..................... 108,085 19,546 -- 127,631
Property, plant and
equipment, net.......... 413,051 89,059 -- 502,110
Intangible assets.......... 88,381 56,361 (206) 144,536
Investment in
Subsidiaries............ 168,673 -- (168,673) --
Non-current prepaid
taxes................... 32,643 21,102 (33,138) 20,607
Other non-current assets... 14,347 1,049 -- 15,396
-------- -------- --------- ----------
Total assets............... $995,467 $241,256 $(202,017) $1,034,706
======== ======== ========= ==========
Liabilities:
Current liabilities........ $125,546 $ 29,899 $ (2) $ 155,443
Long-term debt............. 213,716 518 -- 214,234
Deferred income taxes...... 84,045 14,700 (33,138) 65,607
Intercompany payable
(receivable)............ (42,062) 42,062 -- --
Other non-current
liabilities............. 61,208 8,747 -- 69,955
-------- -------- --------- ----------
Total liabilities.......... 442,453 95,926 (33,140) 505,239
Stockholders' equity......... 553,014 145,330 (168,877) 529,467
-------- -------- --------- ----------
Total liabilities and
stockholders' equity....... $995,467 $241,256 $(202,017) $1,034,706
======== ======== ========= ==========
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-80
<PAGE> 231
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 3, 1998
<TABLE>
<CAPTION>
UNITED STATES EUROPE, CONSOLIDATING
AND CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- ------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues.............. $839,191 $175,076 $(6,364) $1,007,903
Operating costs and
expenses.................. 613,490 136,116 (620) 748,986
-------- -------- ------- ----------
Gross profit................ 225,701 38,960 (5,744) 258,917
Selling and administrative
expenses.................. 114,573 29,663 (5,744) 138,492
-------- -------- ------- ----------
Operating income............ 111,128 9,297 -- 120,425
Interest expense, net....... 13,693 3,001 -- 16,694
Merger related costs........ 3,231 -- -- 3,231
-------- -------- ------- ----------
Earnings before taxes....... 94,204 6,296 -- 100,500
Income taxes................ 36,095 1,235 -- 37,330
-------- -------- ------- ----------
Net earnings................ $ 58,109 $ 5,061 $ -- $ 63,170
======== ======== ======= ==========
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-81
<PAGE> 232
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JANUARY 3, 1998
<TABLE>
<CAPTION>
UNITED STATES EUROPE, CONSOLIDATING
AND CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- ------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings.............. $ 58,109 $ 5,061 $-- $ 63,170
Depreciation and
amortization........... 66,520 14,490 -- 81,010
All other operating
activities (net)....... 15,996 3,838 -- 19,834
-------- -------- --- --------
Net cash provided by
operating activities...... 140,625 23,389 -- 164,014
-------- -------- --- --------
Cash flows used in investing
activities:
Equipment at customers
additions.............. (16,850) (4,019) -- (20,869)
Property additions........ (28,612) (6,550) -- (35,162)
Business acquisitions and
other.................. (34,057) (6,363) -- (40,420)
-------- -------- --- --------
Net cash used in investing
activities................ (79,519) (16,932) -- (96,451)
-------- -------- --- --------
Cash flows used in financing
activities:
Net payments.............. (14,840) (47,844) -- (62,684)
Intercompany receivable
(payable).............. (40,037) 40,037 -- --
Proceeds from stock option
exercises.............. 16,940 -- -- 16,940
Cash dividends paid....... (21,077) -- -- (21,077)
-------- -------- --- --------
Net cash used in financing
activities................ (59,014) (7,807) -- (66,821)
-------- -------- --- --------
Effect of exchange rates
changes on cash........... -- (188) -- (188)
-------- -------- --- --------
</TABLE>
F-82
<PAGE> 233
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
UNITED STATES EUROPE, CONSOLIDATING
AND CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- ------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Net increase (decrease) in
cash and cash
equivalents............... 2,092 (1,538) -- 554
Cash and cash equivalents at
beginning of year......... 1,459 9,189 -- 10,648
-------- -------- --- --------
Cash and cash equivalents at
end of year............... $ 3,551 $ 7,651 $-- $ 11,202
======== ======== === ========
Supplemental Information:
Cash paid during the year
for:
Interest (net of amounts
capitalized)........... $ 15,074 $ 3,883 $-- $ 18,957
Income taxes paid (net of
refunds received....... 22,075 1,880 -- 23,955
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-83
<PAGE> 234
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED BALANCE SHEET
AS OF DECEMBER 28, 1996
<TABLE>
<CAPTION>
UNITED STATES EUROPE, CONSOLIDATING
AND CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- ------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Current assets............ $174,904 $ 55,229 $ -- $ 230,133
Equipment of customers,
net.................... 104,519 19,972 -- 124,491
Property, plant and
equipment, net......... 423,613 98,723 -- 522,336
Intangible assets......... 78,660 58,755 (206) 137,209
Investment in
Subsidiaries........... 163,688 -- (163,688) --
Non-current prepaid
taxes.................. 34,398 23,716 (33,979) 24,135
Other non-current
assets................. 6,328 191 -- 6,519
-------- -------- --------- ----------
Total assets.............. $986,110 $256,586 $(197,873) $1,044,823
======== ======== ========= ==========
Liabilities:
Current liabilities....... $122,858 $ 34,937 $ (2) $ 157,793
Long-term debt............ 228,351 48,603 -- 276,954
Deferred income taxes..... 74,711 9,117 (33,979) 49,849
Intercompany payable
(receivable)........... (2,024) 2,024 -- --
Other non-current
liabilities............ 66,073 13,864 -- 79,937
-------- -------- --------- ----------
Total liabilities......... 489,969 108,545 (33,981) 564,533
Stockholders' Equity........ 496,141 148,041 (163,892) 480,290
-------- -------- --------- ----------
Total liabilities and
stockholders' equity... $986,110 $256,586 $(197,873) $1,044,823
======== ======== ========= ==========
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-84
<PAGE> 235
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
<TABLE>
<CAPTION>
UNITED STATES EUROPE, CONSOLIDATING
AND CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- ------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues.............. $757,309 $169,057 $(3,240) $923,126
Operating costs and
expenses.................. 539,803 132,934 (766) 671,971
-------- -------- ------- --------
Gross profit................ 217,506 36,123 (2,474) 251,155
Selling and administrative
expenses.................. 107,024 27,115 (2,474) 131,665
-------- -------- ------- --------
Operating income............ 110,482 9,008 -- 119,490
Interest expense, net....... 14,344 3,498 -- 17,842
-------- -------- ------- --------
Earnings before income
taxes..................... 96,138 5,510 -- 101,648
Income taxes................ 38,739 1,800 -- 40,539
-------- -------- ------- --------
Net earnings................ $ 57,399 $ 3,710 $ -- $ 61,109
======== ======== ======= ========
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-85
<PAGE> 236
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
<TABLE>
<CAPTION>
UNITED STATES CONSOLIDATING
AND EUROPE, CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- -------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from (used in) operating
activities:
Net earnings........................... $ 57,399 $ 3,710 $ -- $ 61,109
Depreciation and amortization.......... 62,497 15,244 -- 77,741
All other operating activities (net)... (23,957) 1,052 -- (22,905)
-------- -------- ------- ---------
Net cash provided by operating
activities............................. 95,939 20,006 -- 115,945
-------- -------- ------- ---------
Cash flows from (used in) investing
activities:
Equipment at customers additions....... (18,902) (4,952) -- (23,854)
Property additions..................... (25,867) (11,803) -- (37,670)
Business acquisitions and other........ (36,132) (3,677) -- (39,809)
-------- -------- ------- ---------
Net cash used in investing activities.... (80,901) (20,432) -- (101,333)
-------- -------- ------- ---------
Cash flows from (used in) financing
activities:
Net payments........................... (4,057) (2,703) -- (6,760)
Intercompany receivable (payable)...... (4,436) 4,436 -- --
Proceeds from stock option exercises... 1,576 -- -- 1,576
Cash dividends paid.................... (20,936) -- -- (20,936)
-------- -------- ------- ---------
Net cash provided by (used in) financing
activities............................. (27,853) 1,733 -- (26,120)
-------- -------- ------- ---------
Effect of exchange rates changes on
cash................................... -- (82) -- (82)
-------- -------- ------- ---------
Net increase (decrease) in cash and cash
equivalents............................ (12,815) 1,225 -- (11,590)
Cash and cash equivalents at beginning of
reporting period....................... 14,273 7,965 -- 22,238
-------- -------- ------- ---------
Cash and cash equivalents at end of
reporting period....................... $ 1,458 $ 9,190 $ -- $ 10,648
======== ======== ======= =========
Supplemental disclosures of cash paid
during the reporting period:
Interest (net of amounts
capitalized)........................ $ 15,624 $ 3,983 $ -- $ 19,607
Income taxes paid (net of refunds
received)........................... 27,919 (372) -- 27,547
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-86
<PAGE> 237
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
UNITED STATES CONSOLIDATING
AND EUROPE, CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- -------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues....... $700,694 $160,636 $(2,079) $859,251
Operating costs and
expenses........... 503,550 125,548 (629) 628,469
-------- -------- ------- --------
Gross profit......... 197,144 35,088 (1,450) 230,782
Selling and
administrative
expenses........... 97,895 25,874 (1,450) 122,319
Restructuring charge
(credit)........... (6,920) (8,297) -- (15,217)
Remediation charge
(credit)........... 15,131 (3,175) -- 11,956
-------- -------- ------- --------
Operating income..... 91,038 20,686 -- 111,724
Interest expense,
net................ 15,379 3,877 -- 19,256
-------- -------- ------- --------
Earnings before
income taxes....... 75,659 16,809 -- 92,468
Income taxes......... 30,771 8,394 -- 39,165
-------- -------- ------- --------
Net earnings......... $ 44,888 $ 8,415 $ -- $ 53,303
======== ======== ======= ========
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-87
<PAGE> 238
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
UNITED STATES CONSOLIDATING
AND EUROPE, CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- -------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from (used in) operating
activities:
Net earnings........................... $ 44,888 $ 8,415 $-- $ 53,303
Depreciation and amortization.......... 62,780 15,021 -- 77,801
All other operating activities (net)... 8,812 (14,974) -- (6,162)
-------- -------- --- --------
Net cash provided by operating
activities............................. 116,480 8,462 -- 124,942
-------- -------- --- --------
Cash flows from (used in) investing
activities:
Equipment as customers additions....... (29,050) (5,824) -- (34,874)
Property additions..................... (29,537) (13,698) -- (43,235)
Business acquisitions and other........ (24,764) (589) -- (25,353)
-------- -------- --- --------
Net cash used in investing activities.... (83,351) (20,111) -- (103,462)
-------- -------- --- --------
Cash flows from (used in) financing
activities:
Net borrowings (payments).............. (4,873) 3,308 -- (1,565)
Intercompany receivable (payable)...... (6,912) 6,912 -- --
Proceeds from stock option exercises... 1,930 -- -- 1,930
Cash dividends paid.................... (20,820) -- -- (20,820)
-------- -------- --- --------
Net cash provided by (used in) financing
activities............................. (30,675) 10,220 -- (20,455)
-------- -------- --- --------
Effect of exchange rates changes on
cash................................... -- 198 -- 198
-------- -------- --- --------
Net increase in cash and cash
equivalents............................ 2,454 (1,231) -- 1,223
Cash and cash equivalents at beginning of
reporting period....................... 11,819 9,196 -- 21,015
-------- -------- --- --------
Cash and cash equivalents at end of
reporting period....................... $ 14,273 $ 7,965 $-- $ 22,238
======== ======== === ========
Supplemental disclosures of cash paid
during the reporting period:
Interest (net of amounts
capitalized)........................ $ 14,218 $ 4,779 $-- $ 18,997
Income taxes paid (net of refunds
received)........................... 10,260 971 -- 11,231
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-88
<PAGE> 239
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 28, JANUARY 3,
1998 1998
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 30,458 $ 11,202
Trade accounts receivable, less allowances of $7,977
and $7,634, respectively.......................... 134,183 131,092
Inventories.......................................... 51,849 51,339
Deferred tax assets.................................. 10,177 10,694
Prepaid expenses and other........................... 20,662 20,099
---------- ----------
Total current assets......................... 247,329 224,426
---------- ----------
Equipment at customers and components, at cost, less
accumulated depreciation of $44,853 and $44,928,
respectively......................................... 130,569 127,631
Property, plant and equipment, at cost, less
accumulated depreciation of $393,379 and $384,422,
respectively......................................... 497,128 502,110
Intangible assets, at cost, less accumulated
amortization of $73,524 and $95,568, respectively.... 143,017 144,536
Other assets........................................... 37,092 36,003
---------- ----------
$1,055,135 $1,034,706
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term debt...................................... $ 213,000 $ 37
Trade accounts payable............................... 78,053 75,284
Accrued salaries, wages and employee benefits........ 28,096 29,769
Other accrued expenses............................... 24,343 28,343
Insurance reserves................................... 12,855 12,614
Accrued environmental liabilities.................... 8,376 8,382
Income taxes payable................................. 1,049 1,014
---------- ----------
Total current liabilities.................... 365,772 155,443
---------- ----------
Long-term debt......................................... -- 214,234
---------- ----------
Deferred tax liabilities............................... 67,259 65,607
---------- ----------
Accrued environmental liabilities...................... 31,436 32,888
---------- ----------
Other liabilities...................................... 37,760 37,067
---------- ----------
Shareholders' equity:
Preferred stock ($.10 par value; authorized 1,000,000
shares, none issued).............................. -- --
Common stock ($.10 par value; authorized 300,000,000
shares; issued and outstanding 60,101,962 and
59,191,462 shares, respectively).................. 6,010 5,919
Additional paid-in capital........................... 231,175 212,504
Retained earnings.................................... 342,868 338,318
Cumulative translation adjustments................... (27,145) (27,274)
---------- ----------
552,908 529,467
---------- ----------
$1,055,135 $1,034,706
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-89
<PAGE> 240
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(EXPRESSED IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
-------------------------------
MARCH 28, 1998 MARCH 22, 1997
-------------- --------------
<S> <C> <C>
Revenue............................................ $241,777 $220,230
Operating costs and expenses..................... 181,781 164,084
Selling and administrative expenses.............. 34,552 32,575
-------- --------
Operating income................................... 25,444 23,571
Interest income.................................. (408) (227)
Interest expense................................. 3,612 4,361
Merger related costs............................. 5,997 --
-------- --------
Earnings before income taxes....................... 16,243 19,437
Income taxes....................................... 6,286 7,599
-------- --------
Net earnings....................................... $ 9,957 $ 11,838
======== ========
Earnings per common share:
Basic............................................ $ 0.17 $ 0.20
Diluted.......................................... $ 0.16 $ 0.20
======== ========
Cash dividends per common share.................... $ 0.09 $ 0.09
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-90
<PAGE> 241
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(EXPRESSED IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
-------------------------------
MARCH 28, 1998 MARCH 22, 1997
-------------- --------------
<S> <C> <C>
Net earnings....................................... $ 9,957 $11,838
Unrealized foreign currency translation
adjustments...................................... 129 (7,197)
------- -------
Comprehensive income............................... $10,086 $ 4,641
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-91
<PAGE> 242
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
-------------------------------
MARCH 28, 1998 MARCH 22, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings..................................... $ 9,957 $ 11,838
Depreciation and amortization.................... 19,046 17,658
All other operating activities (net)............. 1,534 (10,856)
-------- --------
Net cash provided by operating
activities............................ $ 30,537 $ 18,640
-------- --------
Cash flows used in investing activities:
Equipment at customers and component additions... (8,709) (4,857)
Property, plant and equipment additions.......... (5,686) (6,992)
Business acquisitions and other.................. (5,963) (8,399)
-------- --------
Net cash used in investing activities.... (20,358) (20,248)
-------- --------
Cash flows from (used in) financing activities:
Net borrowings (payments)........................ (1,271) 9,387
Proceeds from stock option exercises............. 15,763 362
Cash dividends paid.............................. (5,406) --
-------- --------
Net cash from (used in) financing
activities............................ 9,086 9,749
-------- --------
Effect of exchange rate changes on cash............ (9) (164)
-------- --------
Net increase in cash and cash equivalents.......... 19,256 7,977
Cash and cash equivalents at beginning of year..... 11,202 10,648
-------- --------
Cash and cash equivalents at end of the reporting
period........................................... $ 30,458 $ 18,625
======== ========
Supplemental disclosures of cash paid during the
reporting period:
Interest (net of amount capitalized)............. $ 7,491 $ 7,298
======== ========
Income taxes paid (net of refunds received)...... $ 119 $ 774
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-92
<PAGE> 243
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. MERGER RELATED COSTS
On August 8, 1997, the Company's Board of Directors ("Board") initiated a
process to review strategic alternatives including the sale of all or a part of
the Company. On November 20, 1997, the Board approved a merger agreement with SK
Parent Corp. (a Delaware corporation owned equally by Phillips Services Corp.,
affiliates of Apollo Management, L.P. and affiliates of Blackstone Partners III,
L.L.C.) but subsequently was unable to gain the necessary shareholder approval
for the agreement. The Board then terminated the merger agreement with SK Parent
and began negotiations with Laidlaw Environmental.
On March 15, 1998, the Board unanimously approved a definitive merger
agreement ("Merger Agreement") with Laidlaw Environmental which provides for an
exchange offer followed by a back-end merger. By April 7, 1998, Laidlaw
Environmental had acquired a total of 55,751,582 shares which were validly
tendered under the Exchange Offer and constituted approximately 93% of the
outstanding shares of Safety-Kleen. A special shareholder meeting has been
scheduled for May 18, 1998 to vote on approval of the merger.
During the first twelve weeks of 1998, the Company incurred $6.0 million of
costs in conjunction with this process.
2. EARNINGS PER SHARE
The weighted average number of common shares outstanding for the twelve
weeks ended March 28, 1998 and March 22, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Weighted average number of shares
outstanding -- basic............................... 59,652 58,258
Dilutive effect of stock options and warrants........ 1,479 162
------ ------
Weighted average number of common shares
outstanding -- diluted............................. 61,131 58,420
====== ======
</TABLE>
The Company had additional stock options of 309,525 and 2,370,103 shares at
March 28, 1998 and March 22, 1997, respectively, which were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common share.
3. COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 130 on "Reporting Comprehensive Income" which requires companies to
report all changes in equity during a period, except those resulting from
investment by owners and distribution to owners in a financial statement for the
period in which they are recognized. The Company has selected to present
separate Consolidated Statements of Comprehensive Income following the
Consolidated Statements of Earnings. The prior year has been restated to conform
to the SFAS No. 130 requirements.
F-93
<PAGE> 244
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVENTORIES
The Companies inventories consist of the following (expressed in
thousands):
<TABLE>
<CAPTION>
MARCH 28, 1998 JANUARY 3, 1998
-------------- ---------------
<S> <C> <C>
Oil...................................... $12,878 $12,759
Solvent, Drums and Other................. 38,971 38,580
------- -------
Total.......................... $51,849 $51,339
======= =======
</TABLE>
LIFO inventories at March 28, 1998 and January 3, 1998 were $5.9 and $5.5
million, respectively. Under the FIFO method of accounting (which approximates
current or replacement cost), inventories would have been $0.4 million higher at
March 28, 1998 and January 3, 1998.
5. DEBT
The Company reclassified all outstanding long-term debt to short term as
all debt will be paid off in 1998 as a consequence of change of control
provisions included in the Company's credit agreements. These provisions were
triggered by the acquisition of 93% of the Company's outstanding common stock,
in April of 1998 by Laidlaw Environmental.
6. INTERIM REPORTING PERIODS
The Company's interim reporting periods are twelve weeks each for the first
three reporting periods of the year, and sixteen and seventeen weeks for the
fourth reporting period of 1998 and 1997, respectively.
F-94
<PAGE> 245
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SUMMARIZED FINANCIAL INFORMATION
In connection with the Merger Agreement with Laidlaw Environmental (see
Note 1), LES, Inc., a wholly-owned subsidiary of Laidlaw Environmental Services,
Inc. intends to issue 9.25% Senior Subordinated Notes to finance the
acquisition. The Company's wholly-owned domestic subsidiaries will guarantee
such notes. No foreign direct or indirect or non-wholly-owned subsidiary of the
Company is an obligor or guarantor on the financing. Summarized financial
information on a combined basis as of and for the twelve weeks ended March 28,
1998 is as follows:
CONSOLIDATING CONDENSED BALANCE SHEET
AS OF MARCH 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES EUROPE, CONSOLIDATING
AND CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- ------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Current assets...... $ 188,940 $ 58,389 $ -- $ 247,329
Equipment at
customers, net... 110,158 20,411 -- 130,569
Property, plant and
equipment, net... 409,156 87,972 -- 497,128
Intangible assets... 87,728 55,495 (206) 143,017
Investment in
Subsidiaries..... 168,626 -- (168,626) --
Non-current prepaid
taxes............ 31,396 20,898 (33,138) 19,156
Other non-current
assets........... 17,070 866 -- 17,936
---------- -------- --------- ----------
Total assets........ $1,013,074 $244,031 $(201,970) $1,055,135
========== ======== ========= ==========
Liabilities:
Current
liabilities...... $ 334,267 $ 31,507 $ (2) $ 365,772
Deferred income
taxes............ 85,415 14,982 (33,138) 67,259
Intercompany payable
(receivable)..... (40,665) 40,665 -- --
Other non-current
liabilities...... 60,533 8,663 -- 69,196
---------- -------- --------- ----------
Total liabilities... 439,550 95,817 (33,140) 502,227
Stockholders'
Equity.............. 573,524 148,214 (168,830) 552,908
---------- -------- --------- ----------
Total liabilities and
stockholders'
equity.............. $1,013,074 $244,031 $(201,970) $1,055,135
========== ======== ========= ==========
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-95
<PAGE> 246
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE WEEKS ENDED MARCH 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES EUROPE, CONSOLIDATING
AND CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- ------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues........ $ 200,476 $ 42,140 $ (839) $ 241,777
Operating costs and
expenses............ 149,337 32,731 (287) 181,781
---------- -------- --------- ----------
Gross profit.......... 51,139 9,409 (552) 59,996
Selling and
administrative
expenses............ 28,170 6,934 (552) 34,552
---------- -------- --------- ----------
Operating income...... 22,969 2,475 -- 25,444
Interest expense,
net................. 2,942 262 -- 3,204
Merger related
costs............... 5,997 -- -- 5,997
---------- -------- --------- ----------
Earnings before income
taxes............... 14,030 2,213 -- 16,243
Income taxes.......... 5,568 718 -- 6,286
---------- -------- --------- ----------
Net earnings.......... $ 8,462 $ 1,495 $ -- $ 9,957
========== ======== ========= ==========
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-96
<PAGE> 247
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
TWELVE WEEKS ENDED MARCH 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES EUROPE, CONSOLIDATING
AND CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- ------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from (used in) operating
activities:
Net earnings........................ $ 8,462 $ 1,495 $-- $ 9,957
Depreciation and amortization....... 15,525 3,521 -- 19,046
All other operating activities
(net)............................ (717) 2,251 -- 1,534
-------- ------- --- -------
Net cash provided by operating
activities.......................... 23,270 7,267 -- 30,537
-------- ------- --- -------
Cash flows from (used in) investing
activities:
Equipment at customers additions.... (7,151) (1,558) -- (8,709)
Property additions.................. (5,135) (551) -- (5,686)
Business acquisitions and other..... (5,914) (49) -- (5,963)
-------- ------- --- -------
Net cash used in investing
activities.......................... (18,200) (2,158) -- (20,358)
Cash flows from (used in) financing
activities:
Net payments........................ (973) (298) -- (1,271)
Intercompany receivable (payable)... 1,397 (1,397) -- --
Proceeds from stock option
exercises........................ 15,763 -- -- 15,763
Cash dividends paid................. (5,406) -- -- (5,406)
-------- ------- --- -------
Net cash provided by (used in)
financing activities................ 10,781 (1,695) -- 9,086
-------- ------- --- -------
Effect of exchange rates changes on
cash................................ -- (9) -- (9)
-------- ------- --- -------
Net increase in cash and cash
equivalents......................... 15,851 3,405 -- 19,256
Cash and cash equivalents at beginning
of reporting period................. 3,550 7,652 -- 11,202
-------- ------- --- -------
Cash and cash equivalents at end of
reporting period.................... $ 19,401 $11,057 $-- $30,458
======== ======= === =======
Supplemental disclosures of cash paid
during the reporting period:
Interest (net of amounts
capitalized)................... $ 6,195 $ 1,296 $-- $ 7,491
Income taxes paid (net of refunds
received)...................... 119 -- -- 119
======== ======= === =======
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-97
<PAGE> 248
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING, CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE WEEKS ENDED MARCH 22, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES CONSOLIDATING
AND EUROPE, CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- -------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues................... $181,830 $39,095 $(695) $220,230
Operating costs and expenses..... 133,498 30,694 (108) 164,084
-------- ------- ----- --------
Gross profit..................... 48,332 8,401 (587) 56,146
Selling and administrative
expenses....................... 26,561 6,601 (587) 32,573
-------- ------- ----- --------
Operating income................. 21,771 1,800 -- 23,571
Interest expense, net............ 3,333 801 -- 4,134
-------- ------- ----- --------
Earnings before income taxes..... 18,438 999 -- 19,437
Income taxes..................... 7,329 270 -- 7,599
-------- ------- ----- --------
Net earnings..................... $ 11,109 $ 729 $ -- $ 11,838
======== ======= ===== ========
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-98
<PAGE> 249
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FOR THE TWELVE WEEKS ENDED MARCH 22, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
UNITED STATES CONSOLIDATING
AND EUROPE, CANADA ELIMINATING CONSOLIDATED
PUERTO RICO(1) AND OTHERS(2) ENTRIES TOTAL
-------------- -------------- ------------- ------------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from (used in) operating
activities:
Net earnings.......................... $ 11,109 $ 729 $-- $ 11,838
Depreciation and amortization......... 14,278 3,380 -- 17,658
All other operating activities
(net).............................. (15,642) 4,786 -- (10,856)
-------- ------- -- --------
Net cash provided by operating
activities............................ 9,745 8,895 -- 18,640
-------- ------- -- --------
Cash flows from (used in) investing
activities:
Equipment at customers additions...... (4,015) (842) -- (4,857)
Property additions.................... (6,115) (877) -- (6,992)
Business acquisitions and other....... (8,317) (82) -- (8,399)
-------- ------- -- --------
Net cash used in investing activities... (18,447) (1,801) -- (20,248)
-------- ------- -- --------
Cash flows from (used in) financing
activities:
Net borrowings (payments)............. 13,393 (4,006) -- 9,387
Intercompany receivable (payable)..... 267 (267) -- --
Proceeds from stock option
exercises.......................... 362 -- -- 362
Cash dividends paid................... -- -- -- --
-------- ------- -- --------
Net cash provided by (used in) financing
activities............................ 14,022 (4,273) -- 9,749
-------- ------- -- --------
Effect of exchange rates changes on
cash.................................. -- (164) -- (164)
-------- ------- -- --------
Net increase in cash and cash
equivalents........................... 5,320 2,657 -- 7,977
Cash and cash equivalents at beginning
of reporting period................... 1,458 9,190 -- 10,648
-------- ------- -- --------
Cash and cash equivalents at end of
reporting period...................... $ 6,778 $11,847 $-- $ 18,625
======== ======= == ========
Supplemental disclosures of cash paid
during the reporting period:
Interest (net of amounts
capitalized)....................... $ 6,753 $ 545 $-- $ 7,298
Income taxes paid (net of refunds
received).......................... 774 -- -- 774
</TABLE>
- -------------------------
(1) Excludes a non-wholly-owned U.S. subsidiary.
(2) Includes a non-wholly-owned U.S. subsidiary.
F-99
<PAGE> 250
SAFETY-KLEEN CORP.
EXCHANGE OFFER FOR $225,000,000
OF ITS 9 1/4% SENIOR NOTES DUE 2009
-------------------------
PROSPECTUS
, 1999
-------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of Safety-Kleen Corp. since the date hereof or that the information
contained herein is correct as of any time subsequent to its date.
<PAGE> 251
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Safety-Kleen Corp. is incorporated under the laws of the State of Delaware.
Section 145 of the DGCL, inter alia ("Section 145") provides that a Delaware
corporation may indemnify any person who were, are or are threatened to be made,
parties to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
is or was an officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided such person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the corporation's
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was illegal. A Delaware corporation
may indemnify any persons who are, were or are threatened to be made, a party to
any threatened, pending or completed action or suit by or in the right of the
corporation by reason of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests, provided that no indemnification is
permitted without judicial approval if the officer, director, employee or agent
is adjudged to be liable to the corporation. Where an officer, director,
employee or agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director has actually and reasonably incurred.
The Certificate of Incorporation of Safety-Kleen Corp. provides that, to
the fullest extent permitted by the DGCL as the same exists or may hereafter be
amended, a director of Safety-Kleen Corp. shall not be liable to Safety-Kleen
Corp. or its stockholders for monetary damages for a breach of fiduciary duty as
a director.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
All of Safety-Kleen Corp.'s directors and officers are covered by insurance
policies maintained and held in effect by Safety-Kleen Corp. against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
II-1
<PAGE> 252
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
(3)(a) -- Restated Certificate of Incorporation of the Company dated
May 13, 1997, and Amendment to Certificate of Incorporation
dated May 15, 1997, filed as Exhibit 3(a) to the Company's
Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(3)(b) -- Certificate of Correction Filed to Correct a Certain Error
in the Restated and Amended Certificate of Incorporation of
the Company dated October 15, 1997, filed as Exhibit 3(a)(i)
to the Company's Form 10-K for the Fiscal Year ended August
31, 1997, and incorporated herein by reference.
(3)(c) -- Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated November 25, 1998 filed
as Exhibit (3)(a)(iii) to the Company's Form 10-Q for the
quarter ended November 30, 1998 and incorporated herein by
reference.
(3)(d) -- Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated November 30, 1998 filed
as Exhibit (3)(a)(iv) to the Company's Form 10-Q for the
quarter ended November 30, 1998 and incorporated herein by
reference.
(3)(e) -- Amended and Restated Bylaws of the Company filed as Exhibit
4(ii) to the Company's Current Report on Form 8-K dated July
29, 1997 and incorporated herein by reference.
(4)(a) -- Registration Rights Agreement dated as of May 17, 1999 among
the Company, TD Securities (USA) Inc., NationsBanc
Montgomery Securities LLC and Raymond James & Associates,
Inc.
(4)(b) -- Indenture dated as of May 17, 1999 between the Company and
The Bank of Nova Scotia Trust Company of New York, as
trustee.
(4)(c) -- Escrow Agreement dated as of May 17, 1999 between the
Company and The Bank of Nova Scotia Trust Company of New
York, as trustee.
(4)(d) -- Collateral Account Pledge and Security Agreement dated as of
May 17, 1999 among the Company, The Bank of Nova Scotia
Trust Company of New York, as Escrow Agent and The Bank of
Nova Scotia Trust Company of New York, as Trustee.
(4)(e) -- Indenture dated as of May 29, 1998 between Safety-Kleen
Services, Inc. (a subsidiary of the Company), the Company,
the subsidiary guarantors of the Company and The Bank of
Nova Scotia Trust Company of New York, as trustee filed as
Exhibit (4)(b) to the Company's Form S-4 Registration
Statement (No. 333-57587) and incorporated herein by
reference.
(4)(f) -- First Supplemental Indenture effective as of November 15,
1998 among Safety-Kleen Services, Inc., the Company, SK
Europe, Inc. and The Bank of Nova Scotia Trust Company of
New York, as trustee.
</TABLE>
II-2
<PAGE> 253
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
(4)(g) -- Amended and Restated Credit Agreement among Laidlaw
Chem-Waste, Inc., Laidlaw Environmental Services (Canada)
Ltd., Toronto Dominion (Texas) Inc., The Toronto-Dominion
Bank, TD Securities (USA) Inc., The Bank of Nova Scotia,
NationsBank, N.A. and The First National Bank of Chicago and
NationsBank, N.A. as Syndication Agent dated as of April 3,
1998 filed as Exhibit 4(f) to the Company's Form 10-Q for
the Quarter ended February 28, 1999 and incorporated herein
by reference.
(4)(h) -- Supplement to the Amended and Restated Credit Agreement
among Laidlaw Chem-Waste, Inc., Laidlaw Environmental
Services (Canada) Ltd., Toronto Dominion (Texas) Inc., The
Toronto-Dominion Bank, TD Securities (USA) Inc., The Bank of
Nova Scotia, NationsBank, N.A. and The First National Bank
of Chicago and NationsBank, N.A. as Syndication Agent dated
as of April 3, 1998, filed as Exhibit 4(e) to a subsidiary
of the Company's Form S-4 Registration Statement No.
333-57587 filed June 24, 1998 and incorporated herein by
reference.
(4)(i) -- Waiver and First Amendment to the Amended and Restated
Credit Agreement dated as of May 15, 1998 among LES, Inc.,
Laidlaw Environmental Services (Canada) Ltd., the Lenders,
Toronto Dominion (Texas) Inc., The Toronto-Dominion Bank, TD
Securities (USA) Inc., The Bank of Nova Scotia, NationsBank,
N.A., The First National Bank of Chicago and Wachovia Bank
filed as Exhibit 4(f) to a subsidiary of the Company's Form
S-4 Registration Statement No. 333-57587 filed on June 24,
1998 and incorporated herein by reference.
(4)(j) -- Commitment to Increase Supplement to the Amended and
Restated Credit Agreement dated as of June 3, 1998 among
LES, Inc., Laidlaw Environmental Services (Canada) Ltd., the
Lenders, Toronto Dominion (Texas) Inc., The Toronto-Dominion
Bank, TD Securities (USA) Inc., The Bank of Nova Scotia,
NationsBank, N.A., The First National Bank of Chicago and
Wachovia Bank filed as Exhibit 4(g) to a subsidiary of the
Company's Form S-4 Registration Statement No. 333-57587
filed June 24, 1998 and incorporated herein by reference.
(4)(k) -- Second Amendment to the Amended and Restated Credit
Agreement dated as of November 20, 1998 among Safety-Kleen
Services, Inc. (formerly known as LES, Inc.), Safety-Kleen
Services (Canada) Ltd. (formerly known as Laidlaw
Environmental Services (Canada) Ltd.), the Lenders, Toronto
Dominion (Texas), Inc., The Toronto Dominion Bank, TD
Securities (USA) Inc., The Bank of Nova Scotia, NationsBank,
N.A., The First National Bank of Chicago and Wachovia Bank
filed as Exhibit 4(j) to the Company's Form 10-Q for the
Quarter ended February 28, 1999 and incorporated herein by
reference.
</TABLE>
II-3
<PAGE> 254
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
(4)(l) -- Waiver and Third Amendment to the Amended and Restated
Credit Agreement dated as of May 6, 1999 among Safety-Kleen
Services, Inc. (formerly known as LES, Inc.), Safety-Kleen
Services (Canada) Ltd. (formerly known as Laidlaw
Environmental Services (Canada) Ltd.), the lenders, Toronto
Dominion (Texas), Inc., The Toronto Dominion Bank, TD
Securities (USA), Inc., The Bank of Nova Scotia,
NationsBank, N.A., The First National Bank of Chicago and
Wachovia Bank.
(4)(m) -- $350,000,000 5% Subordinated Convertible Pay-In-Kind
Debenture due 2009 issued by the Company on May 15, 1997 to
Laidlaw Transportation, Inc. the form of which was included
as an appendix to the Company's Definitive Proxy Statement
on Form DEF 14A, filed on May 1, 1997, and incorporated
herein by reference.
(4)(n) -- Registration Rights Agreement dated May 15, 1997 between the
Company, Laidlaw Transportation, Inc. and Laidlaw Inc. the
form of which was included as an appendix to the Company's
Definitive Proxy Statement on Form DEF 14A, filed on May 1,
1997 and incorporated herein by reference.
(4)(o) -- Indenture dated as of May 1, 1993 between the Industrial
Development Board of the Metropolitan Government of
Nashville and Davidson County (Tennessee) and NationsBanc of
Tennessee, N.A., filed as Exhibit 4(f) to the Company's Form
10-Q for the Quarter ended May 31, 1997, and incorporated
herein by reference.
(4)(p) -- Indenture of Trust dated as of August 1, 1995 between Tooele
County, Utah and West One Bank, Utah, now known as U.S.
Bank, as Trustee, filed as Exhibit 4(h) to the Company's
Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(q) -- Indenture of Trust dated as of July 1, 1997 between Carbon
County, Utah and U.S. Bank, a national banking association,
as Trustee, filed as Exhibit 4(i) to the Company's Form 10-Q
for the Quarter ended May 31, 1997, and incorporated herein
by reference.
(4)(r) -- Indenture of Trust dated as of July 1, 1997 between Tooele
County, Utah and U.S. Bank, a national banking association,
as Trustee, filed as Exhibit 4(j) to the Company's Form 10-Q
for the Quarter ended May 31, 1997, and incorporated herein
by reference.
(4)(s) -- Indenture of Trust dated as of July 1, 1997 between
California Pollution Control Financing Authority and U.S.
Bank, a national banking association, as Trustee, filed as
Exhibit 4(k) to the Company's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
(4)(t) -- Promissory Note dated May 15, 1997 for $60,000,000 from the
Company to Westinghouse Electric Corporation, filed as
Exhibit 4(n) to the Company's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
</TABLE>
II-4
<PAGE> 255
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
(4)(u) -- Letter dated May 7, 1999 from Toronto-Dominion (Texas) Inc.
(as assignee of Westinghouse Electric Corporation) and
agreed to by the Company and Laidlaw Inc. amending the terms
of the Promissory Note dated May 15, 1997 (as referenced in
Exhibit (4)(t)).
(4)(v) -- Guaranty Agreement dated May 15, 1997 by Laidlaw Inc. to
Westinghouse Electric Corporation guaranteeing Promissory
Note dated May 15, 1997 (as referenced in Exhibit (4)(t))
from the Company to Westinghouse Electric Corporation),
filed as Exhibit 4(o) to the Company's Form 10-Q for the
Quarter ended May 31, 1997, and incorporated herein by
reference.
(4)(w) -- Other instruments defining the rights of holders of
nonregistered debt of the Company have been omitted from
this exhibit list because the amount of debt authorized
under any such instrument does not exceed 10% of the total
assets of the Company and its subsidiaries. The Company
agrees to furnish a copy of any such instrument to the
Commission upon request.
(5) -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
the legality of the securities being offered.
(8) -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
certain tax matters.
(10)(a) -- Agreement and Plan of Merger dated as of March 16, 1998 by
and among the Company, LES Acquisition, Inc., and
Safety-Kleen Corp. included as Annex A of Safety-Kleen's
Revised Amended Prospectus on Form 14D-9 filed as Exhibit 62
to Safety-Kleen's Amendment No. 28 to Schedule 14-9A on
March 17, 1998, and incorporated herein by reference.
(10)(b) -- Stock Purchase Agreement between Westinghouse Electric
Corporation (Seller) and Rollins Environmental Services,
Inc. (Buyer) for National Electric, Inc. dated March 7, 1995
filed as Exhibit 2 to the Company's Current Report on Form
8-K filed on June 13, 1995 and incorporated herein by
reference.
(10)(c) -- Second Amendment to Stock Purchase Agreement (as referenced
in Exhibit (10)(b) above), dated May 15, 1997 among
Westinghouse Electric Corporation, Rollins Environmental
Services, Inc. and Laidlaw Inc., filed as Exhibit 4(m) to
the Company's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(10)(d) -- Rollins Environmental Services, Inc. 1982 Incentive Stock
Option Plan filed with Amendment No. 1 to the Company's
Registration Statement No. 2-84139 on Form S-1 dated June
24, 1983 and incorporated herein by reference.
(10)(e) -- Rollins Environmental Services, Inc. 1993 Stock Option Plan
filed with the Company's Proxy Statement for the Annual
Meeting of Shareholders held January 28, 1994 and
incorporated herein by reference.
(10)(f) -- The Company's 1997 Stock Option Plan, filed as Exhibit 4.4
to the Company's Registration Statement No. 333-41859 on
Form S-8 dated December 10, 1997 and incorporated herein by
reference.
</TABLE>
II-5
<PAGE> 256
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
(10)(g) -- The Company's Director's Stock Option Plan, filed as Exhibit
4.5 to the Company's Registration Statement No. 333-41859 on
Form S-8 dated December 10, 1997 and incorporated herein by
reference.
(10)(h) -- Stock Purchase Agreement dated February 6, 1997 among the
Company, Laidlaw Inc., and Laidlaw Transportation, Inc.
included as an appendix to the Definitive Proxy Statement on
Form DEF 14A filed on May 1, 1997 and incorporated herein by
reference.
(10)(i) -- Corporate Incentive Plan for fiscal year 1999, filed as
Exhibit (10(i) to the Company's Form 10-Q for the quarter
ended November 30, 1998 and incorporated herein by
reference.
(10)(j) -- Operations Management Incentive Plan for fiscal year 1999
filed as Exhibit (10)(j) to the Company's Form 10-Q for the
quarter ended November 30, 1998 and incorporated herein by
reference.
(10)(k) -- The Company's U.S. Supplemental Executive Retirement Plan
filed as Exhibit 10(g) to the Company's 10-Q for the quarter
ended November 30, 1997, and incorporated herein by
reference.
(10)(l) -- Form of Change of Control Agreement LES-A1, filed as Exhibit
10(k) to the Company's 10-K for the year ended August 31,
1998, and incorporated herein by reference.
(10)(m) -- Form of Change of Control Agreement LES-B-1, filed as
Exhibit 10(l) to the Company's 10-K for the year ended
August 31, 1998, and incorporated herein by reference.
(10)(n) -- Form of Change of Control Agreement LES-C1, filed as Exhibit
10(m) to the Company's 10-K for the year ended August 31,
1998, and incorporated herein by reference.
(10)(o) -- Securities Purchase Agreement dated as of April 19, 1999
among the Company, Laidlaw Inc. and Laidlaw Transportation,
Inc.
(12) -- Computation of ratio earnings to fixed charges.
(21) -- Subsidiaries of the Company.
(23)(a) -- Consent of PricewaterhouseCoopers, LLP, independent
accountants.*
(23)(b) -- Consent of Arthur Andersen, LLP, independent accountants.*
(23)(c) -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison
(included in Exhibits (5) and (8)).
(24) -- Powers of Attorney (included on the signature pages of this
Registration Statement).
(25) -- Statement of Eligibility of Trustee.
(99)(a) -- Letter of Transmittal.*
(99)(b) -- Notice of Guaranteed Delivery.*
</TABLE>
- -------------------------
* To be filed by amendment.
II-6
<PAGE> 257
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 20, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
II-7
<PAGE> 258
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows:
(a) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(b) Every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-8
<PAGE> 259
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Safety-Kleen Corp. has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on July 12, 1999.
SAFETY-KLEEN CORP.
By: /s/ KENNETH W. WINGER
-----------------------------------
Name: Kenneth W. Winger
Title: President, Chief Executive
Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Paul R. Humphreys and Henry H.
Taylor and each of them, his or her true and lawful agent, proxy and
attorney-in-fact, each acting alone, with full power and substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities to (i) act on, sign and file with the Securities and Exchange
Commission any and all amendments (including post-effective amendments) to this
registration statement together with all schedules and exhibits thereto, (ii)
act on, sign and file such certificates, instruments, agreements and other
documents as may be necessary or appropriate in connection therewith, (iii) act
on and file any supplement to any prospectus included in this registration
statement or any such amendment or any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv)
take any and all actions which may be necessary or appropriate in connection
therewith, granting unto such agents, proxies and attorneys-in-fact, and each of
them, full power and authority to do and perform each and every act and thing
necessary or appropriate to be done, as fully for all intents and purposes as he
or she might or could do in person, hereby approving, ratifying and confirming
all that such agents, proxies and attorneys-in-fact, any of them or any of his
or her or their substitutes may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated below and on July 12, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JAMES R. BULLOCK Chairman of the Board and Director
- ---------------------------------------------------
James R. Bullock
/s/ KENNETH W. WINGER President, Chief Executive Officer
- --------------------------------------------------- and Director
Kenneth W. Winger
/s/ PAUL R. HUMPHREYS Senior Vice President of Finance and
- --------------------------------------------------- Chief Financial Officer
Paul R. Humphreys
</TABLE>
II-9
<PAGE> 260
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ LESLIE W. HAWORTH Director
- ---------------------------------------------------
Leslie W. Haworth
/s/ ROBERT W. LUBA Director
- ---------------------------------------------------
Robert W. Luba
/s/ JOHN W. ROLLINS, SR. Director
- ---------------------------------------------------
John W. Rollins, Sr.
/s/ JOHN W. ROLLINS, JR. Director
- ---------------------------------------------------
John W. Rollins, Jr.
/s/ DAVID E. THOMAS, JR. Director
- ---------------------------------------------------
David E. Thomas, Jr.
/s/ HENRY B. TIPPIE Director
- ---------------------------------------------------
Henry B. Tippie
/s/ JAMES L. WAREHAM Director
- ---------------------------------------------------
James L. Wareham
/s/ GROVER C. WRENN Director
- ---------------------------------------------------
Grover C. Wrenn
</TABLE>
II-10
<PAGE> 261
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
(3)(a) -- Restated Certificate of Incorporation of the Company dated
May 13, 1997, and Amendment to Certificate of Incorporation
dated May 15, 1997, filed as Exhibit 3(a) to the Company's
Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(3)(b) -- Certificate of Correction Filed to Correct a Certain Error
in the Restated and Amended Certificate of Incorporation of
the Company dated October 15, 1997, filed as Exhibit 3(a)(i)
to the Company's Form 10-K for the Fiscal Year ended August
31, 1997, and incorporated herein by reference.
(3)(c) -- Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated November 25, 1998 filed
as Exhibit (3)(a)(iii) to the Company's Form 10-Q for the
quarter ended November 30, 1998 and incorporated herein by
reference.
(3)(d) -- Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated November 30, 1998 filed
as Exhibit (3)(a)(iv) to the Company's Form 10-Q for the
quarter ended November 30, 1998 and incorporated herein by
reference.
(3)(e) -- Amended and Restated Bylaws of the Company filed as Exhibit
4(ii) to the Company's Current Report on Form 8-K dated July
29, 1997 and incorporated herein by reference.
(4)(a) -- Registration Rights Agreement dated as of May 17, 1999 among
the Company, TD Securities (USA) Inc., NationsBanc
Montgomery Securities LLC and Raymond James & Associates,
Inc.
(4)(b) -- Indenture dated as of May 17, 1999 between the Company and
The Bank of Nova Scotia Trust Company of New York, as
trustee.
(4)(c) -- Escrow Agreement dated as of May 17, 1999 between the
Company and The Bank of Nova Scotia Trust Company of New
York, as trustee.
(4)(d) -- Collateral Account Pledge and Security Agreement dated as of
May 17, 1999 among the Company, The Bank of Nova Scotia
Trust Company of New York, as Escrow Agent and The Bank of
Nova Scotia Trust Company of New York, as trustee.
(4)(e) -- Indenture dated as of May 29, 1998 between Safety-Kleen
Services, Inc. (a subsidiary of the Company), the Company,
the subsidiary guarantors of the Company and The Bank of
Nova Scotia Trust Company of New York, as trustee filed as
Exhibit (4)(b) to the Company's Form S-4 Registration
Statement (No. 333-57587) and incorporated herein by
reference.
(4)(f) -- First Supplemental Indenture effective as of November 15,
1998 among Safety-Kleen Services, Inc., the Company, SK
Europe, Inc. and The Bank of Nova Scotia Trust Company of
New York, as trustee.
</TABLE>
<PAGE> 262
<TABLE>
<S> <C> <C>
(4)(g) -- Amended and Restated Credit Agreement among Laidlaw
Chem-Waste, Inc., Laidlaw Environmental Services (Canada)
Ltd., Toronto Dominion (Texas) Inc., The Toronto-Dominion
Bank, TD Securities (USA) Inc., The Bank of Nova Scotia,
NationsBank, N.A. and The First National Bank of Chicago and
NationsBank, N.A. as Syndication Agent dated as of April 3,
1998 filed as Exhibit 4(f) to the Company's Form 10-Q for
the Quarter ended February 28, 1999 and incorporated herein
by reference.
(4)(h) -- Supplement to the Amended and Restated Credit Agreement
among Laidlaw Chem-Waste, Inc., Laidlaw Environmental
Services (Canada) Ltd., Toronto Dominion (Texas) Inc., The
Toronto-Dominion Bank, TD Securities (USA) Inc., The Bank of
Nova Scotia, NationsBank, N.A. and The First National Bank
of Chicago and NationsBank, N.A. as Syndication Agent dated
as of April 3, 1998, filed as Exhibit 4(e) to a subsidiary
of the Company's Form S-4 Registration Statement No.
333-57587 filed June 24, 1998 and incorporated herein by
reference.
(4)(i) -- Waiver and First Amendment to the Amended and Restated
Credit Agreement dated as of May 15, 1998 among LES, Inc.,
Laidlaw Environmental Services (Canada) Ltd., the Lenders,
Toronto Dominion (Texas) Inc., The Toronto-Dominion Bank, TD
Securities (USA) Inc., The Bank of Nova Scotia, NationsBank,
N.A., The First National Bank of Chicago and Wachovia Bank
filed as Exhibit 4(f) to a subsidiary of the Company's Form
S-4 Registration Statement No. 333-57587 filed on June 24,
1998 and incorporated herein by reference.
(4)(j) -- Commitment to Increase Supplement to the Amended and
Restated Credit Agreement dated as of June 3, 1998 among
LES, Inc., Laidlaw Environmental Services (Canada) Ltd., the
Lenders, Toronto Dominion (Texas) Inc., The Toronto-Dominion
Bank, TD Securities (USA) Inc., The Bank of Nova Scotia,
NationsBank, N.A., The First National Bank of Chicago and
Wachovia Bank filed as Exhibit 4(g) to a subsidiary of the
Company's Form S-4 Registration Statement No. 333-57587
filed June 24, 1998 and incorporated herein by reference.
(4)(k) -- Second Amendment to the Amended and Restated Credit
Agreement dated as of November 20, 1998 among Safety-Kleen
Services, Inc. (formerly known as LES, Inc.), Safety-Kleen
Services (Canada) Ltd. (formerly known as Laidlaw
Environmental Services (Canada) Ltd.), the Lenders, Toronto
Dominion (Texas), Inc., The Toronto Dominion Bank, TD
Securities (USA) Inc., The Bank of Nova Scotia, NationsBank,
N.A., The First National Bank of Chicago and Wachovia Bank
filed as Exhibit 4(j) to the Company's Form 10-Q for the
Quarter ended February 28, 1999 and incorporated herein by
reference.
(4)(l) -- Waiver and Third Amendment to the Amended and Restated
Credit Agreement dated as of May 6, 1999 among Safety-Kleen
Services, Inc. (formerly known as LES, Inc.), Safety-Kleen
Services (Canada) Ltd. (formerly known as Laidlaw
Environmental Services (Canada) Ltd.), the lenders, Toronto
Dominion (Texas), Inc., The Toronto Dominion Bank, TD
Securities (USA), Inc., The Bank of Nova Scotia,
NationsBank, N.A., The First National Bank of Chicago and
Wachovia Bank.
</TABLE>
<PAGE> 263
<TABLE>
<S> <C> <C>
(4)(m) -- $350,000,000 5% Subordinated Convertible Pay-In-Kind Debenture due 2009 issued by
the Company on May 15, 1997 to Laidlaw Transportation, Inc. the form of which was
included as an appendix to the Company's Definitive Proxy Statement on Form DEF
14A, filed on May 1, 1997, and incorporated herein by reference.
(4)(n) -- Registration Rights Agreement dated May 15, 1997 between the Company, Laidlaw
Transportation, Inc. and Laidlaw Inc. the form of which was included as an appendix
to the Company's Definitive Proxy Statement on Form DEF 14A, filed on May 1, 1997
and incorporated herein by reference.
(4)(o) -- Indenture dated as of May 1, 1993 between the Industrial Development Board of the
Metropolitan Government of Nashville and Davidson County (Tennessee) and
NationsBanc of Tennessee, N.A., filed as Exhibit 4(f) to the Company's Form 10-Q
for the Quarter ended May 31, 1997, and incorporated herein by reference.
(4)(p) -- Indenture of Trust dated as of August 1, 1995 between Tooele County, Utah and West
One Bank, Utah, now known as U.S. Bank, as Trustee, filed as Exhibit 4(h) to the
Company's Form 10-Q for the Quarter ended May 31, 1997, and incorporated herein by
reference.
(4)(q) -- Indenture of Trust dated as of July 1, 1997 between Carbon County, Utah and U.S.
Bank, a national banking association, as Trustee, filed as Exhibit 4(i) to the
Company's Form 10-Q for the Quarter ended May 31, 1997, and incorporated herein by
reference.
(4)(r) -- Indenture of Trust dated as of July 1, 1997 between Tooele County, Utah and U.S.
Bank, a national banking association, as Trustee, filed as Exhibit 4(j) to the
Company's Form 10-Q for the Quarter ended May 31, 1997, and incorporated herein by
reference.
(4)(s) -- Indenture of Trust dated as of July 1, 1997 between California Pollution Control
Financing Authority and U.S. Bank, a national banking association, as Trustee,
filed as Exhibit 4(k) to the Company's Form 10-Q for the Quarter ended May 31,
1997, and incorporated herein by reference.
(4)(t) -- Promissory Note dated May 15, 1997 for $60,000,000 from the Company to Westinghouse
Electric Corporation, filed as Exhibit 4(n) to the Company's Form 10-Q for the
Quarter ended May 31, 1997, and incorporated herein by reference.
(4)(u) -- Letter dated May 7, 1999 from Toronto-Dominion (Texas) Inc. (as assignee of
Westinghouse Electric Corporation) and agreed to by the Company and Laidlaw Inc.
amending the terms of the Promissory Note dated May 15, 1997 (as referenced in
Exhibit (4)(t)).
(4)(v) -- Guaranty Agreement dated May 15, 1997 by Laidlaw Inc. to Westinghouse Electric
Corporation guaranteeing Promissory Note dated May 15, 1997 (as referenced in
Exhibit (4)(t)) from the Company to Westinghouse Electric Corporation), filed as
Exhibit 4(o) to the Company's Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
</TABLE>
<PAGE> 264
<TABLE>
<S> <C> <C>
(4)(w) -- Other instruments defining the rights of holders of
nonregistered debt of the Company have been omitted from
this exhibit list because the amount of debt authorized
under any such instrument does not exceed 10% of the total
assets of the Company and its subsidiaries. The Company
agrees to furnish a copy of any such instrument to the
Commission upon request.
(5) -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
the legality of the securities being offered.
(8) -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to
certain tax matters.
(10)(a) -- Agreement and Plan of Merger dated as of March 16, 1998 by
and among the Company, LES Acquisition, Inc., and
Safety-Kleen Corp. included as Annex A of Safety-Kleen's
Revised Amended Prospectus on Form 14D-9 filed as Exhibit 62
to Safety-Kleen's Amendment No. 28 to Schedule 14-9A on
March 17, 1998, and incorporated herein by reference.
(10)(b) -- Stock Purchase Agreement between Westinghouse Electric
Corporation (Seller) and Rollins Environmental Services,
Inc. (Buyer) for National Electric, Inc. dated March 7, 1995
filed as Exhibit 2 to the Company's Current Report on Form
8-K filed on June 13, 1995 and incorporated herein by
reference.
(10)(c) -- Second Amendment to Stock Purchase Agreement (as referenced
in Exhibit (10)(b) above), dated May 15, 1997 among
Westinghouse Electric Corporation, Rollins Environmental
Services, Inc. and Laidlaw Inc., filed as Exhibit 4(m) to
the Company's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(10)(d) -- Rollins Environmental Services, Inc. 1982 Incentive Stock
Option Plan filed with Amendment No. 1 to the Company's
Registration Statement No. 2-84139 on Form S-1 dated June
24, 1983 and incorporated herein by reference.
(10)(e) -- Rollins Environmental Services, Inc. 1993 Stock Option Plan
filed with the Company's Proxy Statement for the Annual
Meeting of Shareholders held January 28, 1994 and
incorporated herein by reference.
(10)(f) -- The Company's 1997 Stock Option Plan, filed as Exhibit 4.4
to the Company's Registration Statement No. 333-41859 on
Form S-8 dated December 10, 1997 and incorporated herein by
reference.
(10)(g) -- The Company's Director's Stock Option Plan, filed as Exhibit
4.5 to the Company's Registration Statement No. 333-41859 on
Form S-8 dated December 10, 1997 and incorporated herein by
reference.
(10)(h) -- Stock Purchase Agreement dated February 6, 1997 among the
Company, Laidlaw Inc., and Laidlaw Transportation, Inc.
included as an appendix to the Definitive Proxy Statement on
Form DEF 14A filed on May 1, 1997 and incorporated herein by
reference.
(10)(i) -- Corporate Incentive Plan for fiscal year 1999, filed as
Exhibit (10(i) to the Company's Form 10-Q for the quarter
ended November 30, 1998 and incorporated herein by
reference.
</TABLE>
<PAGE> 265
<TABLE>
<S> <C> <C>
(10)(j) -- Operations Management Incentive Plan for fiscal year 1999 filed as Exhibit (10)(j)
to the Company's Form 10-Q for the quarter ended November 30, 1998 and incorporated
herein by reference.
(10)(k) -- The Company's U.S. Supplemental Executive Retirement Plan filed as Exhibit 10(g) to
the Company's 10-Q for the quarter ended November 30, 1997, and incorporated herein
by reference.
(10)(l) -- Form of Change of Control Agreement LES-A1, filed as Exhibit 10(k) to the Company's
10-K for the year ended August 31, 1998, and incorporated herein by reference.
(10)(m) -- Form of Change of Control Agreement LES-B-1, filed as Exhibit 10(l) to the
Company's 10-K for the year ended August 31, 1998, and incorporated herein by
reference.
(10)(n) -- Form of Change of Control Agreement LES-C1, filed as Exhibit 10(m) to the Company's
10-K for the year ended August 31, 1998, and incorporated herein by reference.
(10)(o) -- Securities Purchase Agreement dated as of April 19, 1999 among the Company, Laidlaw
Inc. and Laidlaw Transportation, Inc.
(12) -- Computation of ratio earnings to fixed charges.
(21) -- Subsidiaries of the Company.
(23)(a) -- Consent of PricewaterhouseCoopers, LLP, independent accountants.*
(23)(b) -- Consent of Arthur Andersen, LLP, independent accountants.*
(23)(c) -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibits (5) and
(8)).
(24) -- Powers of Attorney (included on the signature pages of this Registration
Statement).
(25) -- Statement of Eligibility of Trustee.
(99)(a) -- Letter of Transmittal.*
(99)(b) -- Notice of Guaranteed Delivery.*
</TABLE>
- -------------------------
* To be filed by amendment.
<PAGE> 1
Exhibit (4)(a)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 17,
1999, among Safety-Kleen Corp. (formerly known as Laidlaw Environmental
Services, Inc.), a Delaware corporation (the "Company"), and TD Securities (USA)
Inc. ("TD Securities"), NationsBanc Montgomery Securities LLC ("NationsBanc")
and Raymond James & Associates, Inc. ("Raymond James", and together with TD
Securities and NationsBanc, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated May 10,
1999 between the Company and the Initial Purchasers (the "Purchase Agreement"),
which provides for the sale by the Company to the Initial Purchasers of an
aggregate of $225,000,000 principal amount of the Company's 9 1/4% Senior Notes
due 2009 (the "Initial Notes"). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Company has agreed to provide to the
Initial Purchasers and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
1. Definitions. For purposes of this Agreement, the following terms shall
have the following respective meanings:
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing" shall mean the date of the closing of the issuance and
sale of the Initial Notes pursuant to the Purchase Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Company" shall have the meaning set forth in the preamble of this
Agreement and also includes the Company's successors.
"Effective Time," in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
<PAGE> 2
"Electing Holder" shall mean any holder of Registrable Notes that
has returned a completed and signed Notice and Questionnaire to the
Company in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(c) hereof.
"Exchange Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Exchange Notes" shall have the meaning assigned thereto in Section
2(a) hereof.
The term "holder" shall mean each of the Initial Purchasers and
other persons who acquire Registrable Notes from time to time (including
any successors or assigns), in each case for so long as such person owns
any Registrable Notes.
"Indenture" shall mean the Indenture, dated as of May 17, 1999,
between the Company and The Bank of Nova Scotia Trust Company of New York,
as trustee, as the same shall be amended from time to time.
"Initial Notes" shall have the meaning set forth in the preamble to
this Agreement.
"NationsBanc" shall have the meaning set forth in the preamble to
this Agreement.
"Purchase Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
The term "person" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.
2
<PAGE> 3
"Raymond James" shall have the meaning set forth in the preamble to
this Agreement.
"Registrable Notes" shall mean the Initial Notes; provided, however,
that an Initial Note shall cease to be a Registrable Note when (i) in the
circumstances contemplated by Section 2(a) hereof, the Initial Note has
been exchanged for an Exchange Note in an Exchange Offer as contemplated
in Section 2(a) hereof (provided that any Exchange Note received by a
broker-dealer in an Exchange Offer in exchange for a Registrable Note that
was not acquired by the broker-dealer directly from the Company will also
be a Registrable Note through and including the earlier of the 90th day
after the Exchange Offer is completed or such time as such broker-dealer
no longer owns such Initial Note); (ii) in the circumstances contemplated
by Section 2(b) hereof, a Shelf Registration Statement registering such
Initial Note under the Securities Act has been declared or becomes
effective and such Initial Note has been sold or otherwise transferred by
the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Initial Note is sold
pursuant to Rule 144 under circumstances in which any legend borne by such
Initial Note relating to restrictions on transferability thereof, under
the Securities Act or otherwise, is removed by the Company or pursuant to
the Indenture; (iv) such Initial Note is eligible to be sold pursuant to
paragraph (k) of Rule 144; or (v) such Initial Note shall cease to be
outstanding.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Notes outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Notes and (iv) a holder that is a broker-dealer, but only with respect to
Exchange Notes received by such broker-dealer pursuant to an Exchange
Offer in exchange for Registrable Notes acquired by the broker-dealer
directly from the Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
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<PAGE> 4
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned
thereto in Section 2(b) hereof.
"TD Securities" shall have the meaning set forth in the preamble to
this Agreement.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, all as the same shall be amended from time to time.
2. Registration Under the Securities Act. (a) Except as set forth in
Section 2(b) below, the Company agrees to file under the Securities Act, as soon
as practicable, but no later than 60 days after the Closing, a registration
statement relating to an offer to exchange (such registration statement, the
"Exchange Registration Statement," and such offer, the "Exchange Offer") any and
all of the Initial Notes for a like aggregate principal amount at maturity of
debt securities issued by the Company, which debt securities are substantially
identical to the Initial Notes (and are entitled to the benefits of the
Indenture, which has been qualified under the Trust Indenture Act), except that
they have been registered pursuant to an effective registration statement under
the Securities Act and do not contain provisions for the additional interest
contemplated in Section 2(c) below (such new debt securities hereinafter called
"Exchange Notes"). The Company agrees to use its best efforts to cause the
Exchange Registration Statement to become effective under the Securities Act as
soon as practicable, but no later than 150 days after the Closing. The Exchange
Offer will be registered under the Securities Act on the appropriate form and
will comply with all applicable tender offer rules and regulations under the
Exchange Act. The Company further agrees to use its best efforts to commence and
complete the Exchange Offer promptly, but no later than 45 days after such
registration statement has become effective, hold the Exchange Offer open for at
least 30 days and issue Exchange Notes for all Registrable Notes that have been
properly tendered and not withdrawn on or prior to the expiration of the
Exchange Offer. The Exchange Offer will be deemed to have been "completed" only
if the debt securities received by holders other than Restricted Holders in the
Exchange Offer for Registrable Notes are, upon receipt, transferable by each
such holder without need for further compliance with Section 5 of the Securities
Act and the Exchange Act (except for the requirement to deliver a prospectus
included in the Exchange Registration Statement applicable to resales by any
broker-dealer of Exchange Securities received by such broker-dealer pursuant to
an Exchange Offer in exchange for Registrable Notes other than those acquired by
the broker-dealer directly from the Company), and without material restrictions
under the blue sky or securities laws of a substantial majority of the States of
the United States of America. The Exchange Offer shall be deemed to have been
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<PAGE> 5
completed upon the earlier to occur of (i) the Company having exchanged the
Exchange Notes for all outstanding Registrable Notes pursuant to the Exchange
Offer and (ii) the Company having exchanged, pursuant to the Exchange Offer,
Exchange Notes for all Registrable Notes that have been properly tendered and
not withdrawn before the expiration of the Exchange Offer, which shall be on a
date that is at least 30 days following the commencement of the Exchange Offer.
The Company agrees (x) to include in the Exchange Registration Statement a
prospectus for use in connection with any resales of Exchange Notes by a
broker-dealer, other than resales of Exchange Notes received by a broker-dealer
pursuant to an Exchange Offer in exchange for Registrable Notes acquired by the
broker-dealer directly from the Company, and (y) to keep such Exchange
Registration Statement effective for a period (the "Resale Period") beginning
when Exchange Notes are first issued in the Exchange Offer and ending upon the
earlier of the expiration of the 90th day after the Exchange Offer has been
completed or such time as such broker-dealers no longer own any Registrable
Notes. With respect to such Exchange Registration Statement, each broker-dealer
that holds Exchange Notes received in an Exchange Offer in exchange for
Registrable Notes not acquired by it directly from the Company shall have the
benefit of the rights of indemnification and contribution set forth in Sections
6 hereof.
(b) If prior to the time the Exchange Offer is completed existing
Commission interpretations are changed such that the Initial Notes received by
holders other than Restricted Holders in the Exchange Offer for Registrable
Notes are not or would not be, upon receipt, transferable by each such holder
without need for further compliance with Section 5 of the Securities Act (except
for the requirement to deliver a prospectus included in the Exchange
Registration Statement applicable to resales by broker-dealers of Exchange
Securities received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Notes other than those acquired by the broker-dealer
directly from the Company), in lieu of conducting the Exchange Offer
contemplated by Section 2(a) the Company shall file under the Securities Act as
soon as practicable, but no later than the later of 30 days after the time such
obligation to file arises and 60 days after the Closing, a "shelf" registration
statement providing for the registration of, and the sale on a continuous or
delayed basis by the holders of, all of the Registrable Notes, pursuant to Rule
415 or any similar rule that may be adopted by the Commission (such filing, the
"Shelf Registration" and such registration statement, the "Shelf Registration
Statement"). In addition, in the event that the Initial Purchasers shall not
have resold all of the Initial Notes initially purchased by them from the
Company pursuant to the Purchase Agreement prior to the consummation of the
Exchange Offer, the Company shall file under the Securities Act as soon as
practicable a Shelf Registration Statement. The Company agrees to use its best
efforts (i) to cause the Shelf Registration Statement to become or be declared
effective no later than 180 days after Closing and to keep such Shelf
Registration Statement continuously effective in order to permit the prospectus
forming a part thereof to be usable by holders for resales of Registrable Notes
for a period ending on the earlier of the second anniversary of the Closing (or
the first anniversary if the Shelf Registration is filed because the Initial
Purchasers have not resold all of the Initial Notes) or such time as there are
no longer any Registrable Notes outstanding, provided, however, that no holder
shall be entitled to be named as a selling securityholder in the Shelf
Registration
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<PAGE> 6
Statement or to use the prospectus forming a part thereof for resales of
Registrable Notes unless such holder is an Electing Holder, and (ii) after the
Effective Time of the Shelf Registration Statement, promptly upon the request of
any holder of Registrable Notes that is not then an Electing Holder, to take any
action reasonably necessary to enable such holder to use the prospectus forming
a part thereof for resales of Registrable Notes, including, without limitation,
any action necessary to identify such holder as a selling securityholder in the
Shelf Registration Statement, provided, however, that nothing in this clause
(ii) shall relieve any such holder of the obligation to return a completed and
signed Notice and Questionnaire to the Company in accordance with Section
3(d)(iii) hereof. The Company further agrees to supplement or make amendments to
the Shelf Registration Statement, as and when required by the rules, regulations
or instructions applicable to the registration form used by the Company for such
Shelf Registration Statement or by the Securities Act or rules and regulations
thereunder for shelf registration, and the Company agrees to furnish to each
Electing Holder copies of any such supplement or amendment prior to its being
used or promptly following its filing with the Commission.
(c) In the event that (i) the Company has not filed the Exchange
Registration Statement on or prior to the 60th day after the Closing, or (ii)
such Exchange Registration Statement has not become effective or been declared
effective by the Commission on or before the 150th day after the Closing, or
(iii) the Exchange Offer is not consummated or a Shelf Registration Statement is
not declared effective on or prior to the 180th day after the Closing, or (iv)
any Exchange Registration Statement or Shelf Registration Statement required by
Section 2(a) or 2(b) hereof is filed and declared effective but shall thereafter
either be withdrawn by the Company or shall become subject to an effective stop
order issued pursuant to Section 8(d) of the Securities Act suspending the
effectiveness of such registration statement (except as specifically permitted
herein) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default", then, as liquidated damages for each
such Registration Default, subject to the provisions of Section 9(b), the
interest rate borne by the Registrable Notes shall be increased by 0.25% per
annum following such 60-day period in the case of clause (i) above, following
such 150-day period in the case of clause (ii) above, following such 180-day
period in the case of clause (iii) above and following the date on which such
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, ceases to become effective in the case of clause (iv) above.
The amount of such additional interest will increase by an additional 0.25% for
each subsequent 90-day period until such Registration Default has been cured;
provided that the aggregate amount of such increase in the original interest
rate will in no event exceed 1.50% per annum. Upon (w) the filing of the
Exchange Offer Registration Statement after the 60-day period described in
clause (i) above, (x) the effectiveness of the Exchange Offer Registration
Statement after the 150-day period described in clause (ii) above, (y) the
consummation of the Exchange Offer or the effectiveness of the Shelf
Registration Statement, as the case may be, after the 180-day period described
in clause (iii) above or (z) the effectiveness of a succeeding registration
statement after the date in clause (iv) above, the interest rate borne by the
Registrable Notes from the date of filing, effectiveness or consummation, as the
case may be, will be reduced to the original interest rate.
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<PAGE> 7
(d) The Company shall take all reasonable actions necessary or advisable
to be taken by it to ensure that the transactions contemplated herein are
effected as so contemplated.
(e) Any reference herein to a registration statement as of any time shall
be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time and any reference herein to any
post-effective amendment to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures. If the Company files a registration statement
pursuant to Section 2(a) or Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act.
(b) In the event that such qualification would require the appointment of
a new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
no later than 60 days after the Closing, an Exchange Registration
Statement on any form which may be utilized by the Company and which shall
permit the Exchange Offer and resales of Exchange Notes by broker-dealers
during the Resale Period to be effected as contemplated by Section 2(a),
and use its best efforts to cause such Exchange Registration Statement to
become effective as soon as practicable thereafter, but no later than 150
days after the Closing;
(ii) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Exchange Registration Statement
and the prospectus included therein as may be necessary to effect and
maintain the effectiveness of such Exchange Registration Statement for the
periods and purposes contemplated in Section 2(a) hereof and as may be
required by the applicable rules and regulations of the Commission and the
instructions applicable to the form of such Exchange Registration
Statement, and promptly provide each broker-dealer holding Exchange Notes
with such number of copies of the prospectus included therein (as then
amended or supplemented), in conformity in all material respects with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, as such broker-dealer
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<PAGE> 8
reasonably may request prior to the expiration of the Resale Period, for
use in connection with resales of Exchange Notes;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration statement,
and confirm such advice in writing, (A) when such Exchange Registration
Statement or the prospectus included therein or any prospectus amendment
or supplement or post-effective amendment has been filed, and, with
respect to such Exchange Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any comments by the
Commission and by the blue sky or securities commissioner or regulator of
any state with respect thereto or any request by the Commission for
amendments or supplements to such Exchange Registration Statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such Exchange
Registration Statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time the representations and warranties of
the Company contemplated by Section 5 cease to be true and correct in all
material respects, (E) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Exchange Notes
for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose or (F) at any time during the Resale Period
when a prospectus is required to be delivered under the Securities Act,
that such Exchange Registration Statement, prospectus, prospectus
amendment or supplement or post-effective amendment does not conform in
all material respects to the applicable requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the
Commission thereunder or contains an untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(iv) in the event that the Company would be required, pursuant to
Section 3(c)(iii)(F) above, to notify any broker-dealers holding Exchange
Notes, without unreasonable delay prepare and furnish to each such holder
a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of such Exchange Notes during
the Resale Period, such prospectus shall conform in all material respects
to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder
and shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing;
(v) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such Exchange Registration Statement
or any post-effective amendment thereto at the earliest practicable date;
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<PAGE> 9
(vi) use its reasonable best efforts to (A) register or qualify the
Exchange Notes under the securities laws or blue sky laws of such
jurisdictions as are contemplated by Section 2(a), if such registration or
qualification is required by such laws, no later than the commencement of
the Exchange Offer, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions until the
expiration of the Resale Period and (C) take any and all other actions as
may be reasonably necessary or advisable to enable each broker-dealer
holding Exchange Notes to consummate the disposition thereof in such
jurisdictions; provided, however, that the Company shall not be required
for any such purpose to (1) qualify as a foreign corporation in any
jurisdiction wherein it would not otherwise be required to qualify but for
the requirements of this Section 3(c)(vi), (2) consent to general service
of process in any such jurisdiction or (3) make any changes to its
certificate of incorporation or bylaws or any agreement between it and its
shareholders;
(vii) use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state
or local, which may be required to effect the Exchange Registration, the
Exchange Offer and the offering and sale of Exchange Notes by
broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Notes, not later than
the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Registration Statement, an earning statement of the Company
and its subsidiaries complying with Section 11(a) of the Securities Act
(including, at the option of the Company, Rule 158 thereunder).
(d) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall, as soon as practicable (or as
otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
in any case within the time periods specified in Section 2(b), a Shelf
Registration Statement on any form which may be utilized by the Company
and which shall register all of the Registrable Notes for resale by the
holders thereof in accordance with such method or methods of disposition
as may be specified by such of the holders as, from time to time, may be
Electing Holders and use their respective reasonable best efforts to cause
such Shelf Registration Statement to become effective as soon as
practicable but in any case within the time periods specified in Section
2(b);
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<PAGE> 10
(ii) not less than 30 calendar days prior to the Effective Time of
the Shelf Registration Statement, mail the Notice and Questionnaire to the
holders of Registrable Notes; no holder shall be entitled to be named as a
selling securityholder in the Shelf Registration Statement as of the
Effective Time, and no holder shall be entitled to use the prospectus
forming a part thereof for resales of Registrable Notes at any time,
unless such holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth
therein; provided, however, holders of Registrable Notes shall have at
least 28 calendar days from the date on which the Notice and Questionnaire
is first mailed to such holders to return a completed and signed Notice
and Questionnaire to the Company;
(iii) after the Effective Time of the Shelf Registration Statement,
upon the request of any holder of Registrable Notes that is not then an
Electing Holder, promptly send a Notice and Questionnaire to such holder;
provided that the Company shall not be required to take any action to name
such holder as a selling securityholder in the Shelf Registration
Statement or to enable such holder to use the prospectus forming a part
thereof for resales of Registrable Notes until such holder has returned a
completed and signed Notice and Questionnaire to the Company;
(iv) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Shelf Registration Statement and
the prospectus included therein as may be necessary to effect and maintain
the effectiveness of such Shelf Registration Statement for the period
specified in Section 2(b) hereof and as may be required by the applicable
rules and regulations of the Commission and the instructions applicable to
the form of such Shelf Registration Statement, and furnish to the Electing
Holders copies of any such supplement or amendment simultaneously with or
prior to its being used or filed with the Commission;
(v) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Notes covered by such Shelf
Registration Statement in accordance with the intended methods of
disposition by the Electing Holders provided for in such Shelf
Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters (which
term, for purposes of this Registration Rights Agreement, shall include a
person deemed to be an underwriter within the meaning of Section 2(11) of
the Securities Act), if any, thereof, (C) any sales or placement agent
therefor, (D) counsel for any such underwriter or agent and (E) not more
than one counsel for all the Electing Holders the opportunity to
participate in the preparation of such Shelf Registration Statement, each
prospectus included therein or filed with the Commission and each
amendment or supplement thereto;
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<PAGE> 11
(vii) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal place
of business or such other reasonable place for inspection by the persons
referred to in Section 3(d)(vi) who shall certify to the Company that they
have a current intention to sell the Registrable Notes pursuant to the
Shelf Registration such financial and other information and books and
records of the Company, and cause the officers, employees, counsel and
independent certified public accountants of the Company to respond to such
inquiries, as shall be reasonably necessary, in the judgment of the
respective counsel referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company as being confidential, until
such time as (A) such information becomes a matter of public record
(whether by virtue of its inclusion in such registration statement or
otherwise), (B) such person shall be required so to disclose such
information pursuant to a subpoena or order of any court or other
governmental agency or body having jurisdiction over the matter (subject
to the requirements of such order, and only after such person shall have
given the Company prompt prior written notice of such requirement) or (C)
such information is required to be set forth in such Shelf Registration
Statement or the prospectus included therein or in an amendment to such
Shelf Registration Statement or an amendment or supplement to such
prospectus in order that such Shelf Registration Statement, prospectus,
amendment or supplement, as the case may be, complies with applicable
requirements of the federal securities laws and the rules and regulations
of the Commission and does not contain an untrue statement of a material
fact or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(viii) promptly notify each of the Electing Holders, any sales or
placement agent therefor and any underwriter thereof (which notification
may be made through any managing underwriter that is a representative of
such underwriter for such purpose) and confirm such advice in writing, (A)
when such Shelf Registration Statement or the prospectus included therein
or any prospectus amendment or supplement or post-effective amendment has
been filed and, with respect to such Shelf Registration Statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission and by the blue sky or securities commissioner
or regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of such
Shelf Registration Statement or the initiation or threatening of any
proceedings for that purpose, (D) if at any time the representations and
warranties of the Company contemplated by Section 3(d)(xvii) cease to be
true and correct in all material respects, (E) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of
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<PAGE> 12
the Registrable Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose or (F) if at any time when
a prospectus is required to be delivered under the Securities Act, such
Shelf Registration Statement, prospectus, prospectus amendment or
supplement or post-effective amendment does not conform in all material
respects to the applicable requirements of the Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder or contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing;
(ix) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(x) if requested by any managing underwriter or underwriters, any
placement or sales agent or any Electing Holder, promptly incorporate in a
prospectus supplement or post-effective amendment such information as is
required by the applicable rules and regulations of the Commission and as
such managing underwriter or underwriters, such agent or such Electing
Holder specifies should be included therein relating to the terms of the
sale of such Registrable Notes, including information with respect to the
principal amount at maturity of Registrable Notes being sold by such
Electing Holder or agent or to any underwriters, the name and description
of such Electing Holder, agent or underwriter, the offering price of such
Registrable Notes and any discount, commission or other compensation
payable in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of the
Registrable Notes to be sold by such Electing Holder or agent or to such
underwriters; and make all required filings of such prospectus supplement
or post-effective amendment promptly after notification of the matters to
be incorporated in such prospectus supplement or post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales agent,
if any, therefor, each underwriter, if any, thereof and the respective
counsel referred to in Section 3(d)(vi) an executed copy (or, in the case
of an Electing Holder, a conformed copy) of such Shelf Registration
Statement, each such amendment and supplement thereto (in each case
including all exhibits thereto (in the case of an Electing Holder of
Registrable Notes, upon request) and documents incorporated by reference
therein) and such number of copies of such Shelf Registration Statement
(excluding exhibits thereto and documents incorporated by reference
therein) and of the prospectus included in such Shelf Registration
Statement (including each preliminary prospectus and any summary
prospectus), in conformity in all material respects with the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, and to permit such
Electing Holder, agent and underwriter to satisfy the
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<PAGE> 13
prospectus delivery requirements of the Securities Act; and the Company
hereby consents to the use of such prospectus (including such preliminary
and summary prospectus) and any amendment or supplement thereto by each
such Electing Holder and by any such agent and underwriter, in each case
in the form most recently provided to such person by the Company, in
connection with the offering and sale of the Registrable Notes covered by
the prospectus (including such preliminary and summary prospectus) or any
supplement or amendment thereto;
(xii) use its reasonable best efforts to (A) register or qualify the
Registrable Notes to be included in such Shelf Registration Statement
under such securities laws or blue sky laws of such jurisdictions as any
Electing Holder and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to
remain effective under Section 2(b) above and (C) take any and all other
actions as may be reasonably necessary or advisable to enable each such
Electing Holder, agent, if any, and underwriter, if any, to consummate the
disposition in such jurisdictions of such Registrable Notes; provided,
however, that the Company shall not be required for any such purpose to
(1) qualify as a foreign corporation in any jurisdiction wherein it would
not otherwise be required to qualify but for the requirements of this
Section 3(d)(xii), (2) consent to general service of process in any such
jurisdiction or (3) make any changes to their respective certificates of
incorporation or bylaws or any agreement between it and its shareholders;
(xiii) use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state
or local, which may be required to effect the Shelf Registration or the
offering or sale in connection therewith or to enable the selling holder
or holders to offer, or to consummate the disposition of, their
Registrable Notes;
(xiv) cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Notes to be sold, which certificates
shall be printed, lithographed or engraved, or produced by any combination
of such methods, and which shall not bear any restrictive legends; and, in
the case of an underwritten offering, enable such Registrable Notes to be
in such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale of
the Registrable Notes;
(xv) provide a CUSIP number for all Registrable Notes, not later
than the applicable Effective Time;
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<PAGE> 14
(xvi) enter into customary agreements (including, if requested, an
underwriting agreement in customary form) and take such other actions in
connection therewith as any Electing Holders aggregating at least a
majority in aggregate principal amount at maturity of the Registrable
Notes at the time outstanding shall reasonably request in order to
expedite or facilitate the disposition of such Registrable Notes;
(xvii) whether or not an agreement of the type referred to in
Section 3(d)(xvi) hereof is entered into and whether or not any portion of
the offering contemplated by the Shelf Registration is an underwritten
offering or is made through a placement or sales agent or any other
entity, (A) make such representations and warranties to the Electing
Holders and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof in form, substance and scope as are
customarily made in connection with an offering of debt securities
pursuant to any appropriate agreement or to a registration statement filed
on the form applicable to the Shelf Registration; (B) obtain an opinion of
counsel to the Company in customary form and covering such matters, of the
type customarily covered by such an opinion, as the managing underwriters,
if any, or as any Electing Holders of at least a majority in aggregate
principal amount at maturity of the Registrable Notes at the time
outstanding may reasonably request, addressed to such Electing Holder or
Electing Holders and the placement or sales agent, if any, therefor and
the underwriters, if any, thereof and dated the effective date of such
Shelf Registration Statement (and if such Shelf Registration Statement
contemplates an underwritten offering of a part or all of the Registrable
Notes, dated the date of the closing under the underwriting agreement
relating thereto); (C) obtain a comfort letter or letters from the
independent certified public accountants of the Company addressed to the
selling Electing Holders, the placement or sales agent, if any, therefor
or the underwriters, if any, thereof, dated (i) the effective date of such
Shelf Registration Statement and (ii) the effective date of any prospectus
supplement to the prospectus included in such Shelf Registration Statement
or post-effective amendment to such Shelf Registration Statement which
includes unaudited or audited financial statements as of a date or for a
period subsequent to that of the latest such statements included in such
prospectus (and, if such Shelf Registration Statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such Shelf Registration Statement or post-effective
amendment to such Shelf Registration Statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus, dated the
date of the closing under the underwriting agreement relating thereto),
such letter or letters to be in customary form and covering such matters
of the type customarily covered by letters of such type; (D) deliver such
customary documents and certificates, including officers' certificates, as
may be reasonably requested by any Electing Holders of at least a majority
in aggregate principal amount at maturity of the Registrable Notes at the
time outstanding or the placement or sales agent, if any, therefor and the
managing underwriters, if any, thereof to evidence the accuracy of the
representations and warranties made pursuant to clause (A) hereof and the
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<PAGE> 15
compliance with or satisfaction of any agreements or conditions contained
in the underwriting agreement or other agreement entered into by the
Company; and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in Section
5 hereof;
(xviii) notify in writing each holder of Registrable Notes of any
proposal by the Company to amend or waive any provision of this Agreement
pursuant to Section 8(c) hereof and of any amendment or waiver effected
pursuant thereto, each of which notices shall contain the text of the
amendment or waiver proposed or effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Notes or participate as a
member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD")
or any successor thereto, as amended from time to time) thereof, whether
as a holder of such Registrable Notes or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Rules and
By-Laws, including by (A) if such Rules or By-Laws shall so require,
engaging a "qualified independent underwriter" (as defined in such
Schedule (or any successor thereto)) to participate in the preparation of
the Shelf Registration Statement relating to such Registrable Notes, to
exercise usual standards of due diligence in respect thereto and, if any
portion of the offering contemplated by such Shelf Registration Statement
is an underwritten offering or is made through a placement or sales agent,
to recommend the yield of such Registrable Notes, (B) indemnifying any
such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 6 hereof (or to such
other customary extent as may be requested by such underwriter) and (C)
providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Rules
of Fair Practice of the NASD; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but in any event not later than eighteen months after the
effective date of such Shelf Registration Statement, an earning statement
of the Company and its subsidiaries complying with Section 11(a) of the
Securities Act (including, at the option of the Company, Rule 158
thereunder).
(e) In the event that the Company would be required, pursuant to Section
3(d)(viii)(F) above, to notify the Electing Holders, the placement or sales
agent, if any, therefor and the managing underwriters, if any, thereof, the
Company shall without delay prepare and furnish to each of the Electing Holders,
to each placement or sales agent, if any, and to each such underwriter, if any,
a reasonable number of copies of a prospectus supplemented or amended so
15
<PAGE> 16
that, as thereafter delivered to purchasers of Registrable Notes, such
prospectus shall conform in all material respects to the applicable requirements
of the Securities Act and the Trust Indenture Act and the rules and regulations
of the Commission thereunder and shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. Each Electing Holder agrees that upon receipt of
any notice from the Company pursuant to Section 3(d)(viii)(F) hereof, such
Electing Holder shall forthwith discontinue the disposition of Registrable Notes
pursuant to the Shelf Registration Statement applicable to such Registrable
Notes until such Electing Holder shall have received copies of such amended or
supplemented prospectus, and if so directed by the Company, such Electing Holder
shall deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Electing Holder's possession of the
prospectus covering such Registrable Notes at the time of receipt of such
notice.
(f) In the event of a Shelf Registration, in addition to the information
required to be provided by each Electing Holder in its Notice and Questionnaire,
the Company may require such Electing Holder to furnish to the Company such
additional information regarding such Electing Holder and such Electing Holder's
intended method of distribution of Registrable Notes as may be required in order
to comply with the Securities Act. Each such Electing Holder agrees to notify
the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Electing Holder to the Company or of
the occurrence of any event in either case as a result of which any prospectus
relating to such Shelf Registration contains or would contain an untrue
statement of a material fact regarding such Electing Holder or such Electing
Holder's intended method of disposition of such Registrable Notes or omits to
state any material fact regarding such Electing Holder or such Electing Holder's
intended method of disposition of such Registrable Notes required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such Electing Holder or the disposition of such Registrable Notes, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(g) Until the expiration of two years after the Closing, the Company will
not, and will not permit any of its "affiliates" (as defined in Rule 144) to,
resell any of the Initial Notes that have been reacquired by any of them except
pursuant to an effective registration statement under the Securities Act.
4. Registration Expenses. The Company agrees to bear and to pay or cause
to be paid promptly all expenses incident to the Company's performance of or
compliance with this Agreement, including (a) all Commission and any NASD
registration, filing and review fees and expenses (including reasonable fees and
disbursements of counsel for the placement or sales agent
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<PAGE> 17
or underwriters in connection with such registration, filing and review with the
NASD), (b) all fees and expenses in connection with the qualification of the
Initial Notes for offering and sale under the State securities and blue sky laws
referred to in Section 3(d)(xii) hereof and determination of their eligibility
for investment under the laws of such jurisdictions as any managing underwriters
or the Electing Holders may reasonably designate (including any fees and
disbursements of counsel for the Electing Holders subject to the limitations of
clause (h) below) or underwriters in connection with such qualification and
determination, (c) all expenses relating to the preparation, printing,
production, distribution and reproduction of each registration statement
required to be filed hereunder, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
expenses of preparing the Initial Notes for delivery and the expenses of
printing any underwriting agreements, agreements among underwriters, selling
agreements and blue sky or legal investment memoranda and all other documents in
connection with the offering, sale or delivery of Initial Notes to be disposed
of (including certificates representing the Initial Notes), (d) fees and
expenses of the Trustee under the Indenture, any agent of the Trustee and any
counsel for the Trustee and of any collateral agent or custodian, (e) internal
expenses (including all salaries and expenses of the Company's officers and
employees performing legal or accounting duties), (f) fees, disbursements and
expenses of counsel and independent certified public accountants of the Company
(including the expenses of any opinions or "cold comfort" letters required by or
incident to such performance and compliance), (g) reasonable fees, disbursements
and expenses of any "qualified independent underwriter" engaged pursuant to
Section 3(d)(xix) hereof, (h) fees, disbursements and expenses of one counsel
for the Electing Holders retained in connection with a Shelf Registration, as
selected by the Electing Holders of at least a majority in aggregate principal
amount at maturity of the Registrable Notes held by Electing Holders (which
counsel shall be reasonably satisfactory to the Company), (i) any fees charged
by securities rating services for rating the Initial Notes, and (j) fees,
expenses and disbursements of any other persons, including special experts,
retained by the Company in connection with such registration (collectively, the
"Registration Expenses"). To the extent that any Registration Expenses are
incurred, assumed or paid by any holder of Registrable Notes or any placement or
sales agent therefor or underwriter thereof, the Company shall reimburse such
person for the full amount of the Registration Expenses so incurred, assumed or
paid promptly after receipt of a request therefor. Notwithstanding the
foregoing, the holders of the Registrable Notes being registered shall pay all
agency fees and commissions and underwriting discounts and commissions
attributable to the sale of such Registrable Notes and the fees and
disbursements of any counsel or other advisors or experts retained by such
holders (severally or jointly), other than the counsel and experts specifically
referred to above.
5. Indemnification. (a) The Company shall indemnify and hold harmless each
holder, including the Initial Purchasers, each underwriter who participates in
an offering of Registrable Notes, their respective affiliates, and their
respective directors, officers, employees and agents, and each person, if any,
who controls any of such parties within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act as follows:
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<PAGE> 18
(i) against any and all losses, liabilities, claims, damages and
expenses whatsoever, as incurred, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Exchange Notes or Registrable Notes were registered under the Securities
Act, including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading
or arising out of any untrue statement or alleged untrue statement of a
material fact contained in any prospectus included in any such
Registration Statement (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all losses, liabilities, claims, damages and
expenses whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
5(c) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any litigation,
or investigation or proceeding by any court or governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a):
provided, however, that (i) this indemnity shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Initial Purchasers, any holder or any underwriter expressly for use in the
Registration Statement (or any amendment thereto) or any preliminary prospectus
or the prospectus included in such Registration Statement (or any amendment or
supplement thereto) and (ii) the Company shall not be liable to any indemnified
party under this indemnity agreement with respect to the Registration Statement
or prospectus to the extent that any such loss, claim, damage or liability of
such indemnified party results solely from an untrue statement of a material
fact contained in, or the omission of a material fact from, the Registration
Statement or prospectus which untrue statement or omission was corrected in an
amended or supplemented Registration Statement or prospectus, if the person
alleging such loss, claim, damage or liability was not sent or given, at or
prior to the written confirmation of such sale, a copy of the amended or
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<PAGE> 19
supplemented Registration Statement or prospectus if the Company had previously
furnished copies thereof to such indemnified party and if delivery of a
prospectus is required by the Securities Act and was not so made. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
(b) In the case of a Shelf Registration, each holder agrees, severally and
not jointly, to indemnify and hold harmless the Company, the Initial Purchasers,
each underwriter who participates in an offering of Registrable Notes and the
other selling holders and each of their respective directors and officers
(including each officer of each of the Company who signed the Registration
Statement) and each person, if any, who controls the Company, each Initial
Purchaser, any underwriter or any other selling holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
and all losses, liabilities, claims, damages and expenses described in the
indemnity contained in Section 5(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto) or the prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such holder, as the case may be,
expressly for use in the Registration Statement (or any amendment thereto), or
the prospectus (or any amendment or supplement thereto); provided, however, that
no such holder shall be liable for any claims hereunder in excess of the amount
of net proceeds received by such holder from the sale of Registrable Notes
pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give notice in writing as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party); provided, however, that if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it and/or other indemnified parties that
are different from or additional to those available to the indemnifying party,
or (iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on
19
<PAGE> 20
behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 5 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the immediately
preceding sentence (it being understood, however, that in connection with such
action the indemnifying party shall not be liable for the reasonable fees and
expenses of more than one separate counsel (in addition to any local counsel) in
any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchasers in the case of paragraph (a) of this
Section 5 or the Company in the case of paragraph (b) of this Section 5,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 5 (whether or
not the indemnified parties are actual or potential parties thereof), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel and the indemnifying party is obligated to reimburse the
indemnified party under the foregoing provisions of this Section 5, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 5(a)(ii) hereof effected without its written
consent if (i) such settlement is entered into more than 20 business days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least five business days prior to such settlement being entered into and (iii)
such indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) If the indemnification provided for in any of the indemnity provisions
set forth in this Section 5 is for any reason unavailable to or insufficient to
hold harmless an indemnified party in respect of any losses, liabilities,
claims, damages or expenses referred to therein, then each indemnifying party
shall contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, (i) in
such proportion as
20
<PAGE> 21
is appropriate to reflect the relative benefits received by the Company, the
Initial Purchasers and the holders, from the offering of the Exchange Notes or
Registrable Notes included in such offering or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, the Initial Purchasers, and
the holders, in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations. The relative fault of the Company, the
Initial Purchasers, and the holders shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company, the Initial Purchasers or the holders and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, the Initial
Purchasers and the holders of the Registrable Notes agree that it would not be
just and equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation (even if the Initial Purchasers were treated as one entity,
and the holders were treated as one entity, for such purpose) or by another
method of allocation which does not take account of the equitable considerations
referred to above in this Section 5. The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Section 5 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5, each person, if any, who
controls an Initial Purchaser or holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Initial Purchaser or holder, and each director of the
Company and each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company. The parties hereto agree that any
underwriting discount or commission or reimbursement of fees paid to any Initial
Purchaser pursuant to the Purchase Agreement shall not be deemed to be a benefit
received by any Initial Purchaser in connection with the offering of the
Exchange Notes or Registrable Notes in such offering.
6. Underwritten Offerings. (a) Selection of Underwriters. If any of the
Registrable Notes covered by the Shelf Registration are to be sold pursuant to
an underwritten offering, the managing underwriter or underwriters thereof shall
be designated by Electing Holders holding at least a majority in aggregate
principal amount at maturity of the Registrable Notes to be included in such
offering, provided that such designated managing underwriter or underwriters is
or are reasonably acceptable to the Company.
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<PAGE> 22
(b) Participation by Holders. Each holder of Registrable Notes hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
7. Rules 144 and 144A. The Company covenants to the holders of Registrable
Notes that to the extent the Company shall be required to do so under the
Exchange Act, the Company shall use its reasonable best efforts to timely file
the reports required to be filed by it under the Exchange Act or the Securities
Act and the rules and regulations adopted by the Commission thereunder, and
shall take such further action as any holder of Registrable Notes may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Notes without registration under the Securities Act within the
limitations of the exemption provided by Rules 144 and 144A under the Securities
Act, as such Rule may be amended from time to time, or any similar or successor
rule or regulation hereafter adopted by the Commission. Upon the request of any
holder of Registrable Notes in connection with that holder's sale pursuant to
Rule 144 or 144A, the Company shall deliver to such holder a written statement
as to whether it has complied with such requirements.
8. Miscellaneous. (a) No Inconsistent Agreements. The Company has not, as
of the date hereof, entered into nor will the Company on or after the date of
this Agreement enter into any agreement which is inconsistent with the rights
granted to the holders of Registrable Notes in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if the Company fails to perform any of its
obligations hereunder and that the Initial Purchasers and the holders from time
to time of the Registrable Notes may be irreparably harmed by any such failure,
and accordingly agree that the Initial Purchasers and such holders, in addition
to any other remedy to which they may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of the Company under
this Agreement in accordance with the terms and conditions of this Agreement, in
any court of the United States or any State thereof having jurisdiction.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of holders of at least
a majority in aggregate principal amount of the
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<PAGE> 23
outstanding Registrable Notes affected by such amendment, modification,
supplement, waiver or departure; provided, however, that no amendment,
modification, supplement or waiver or consent to any departure from the
provisions of Section 5 hereof shall be effective as against any holder of
Registrable Notes unless consented to in writing by such holder.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a holder, at the most current address given by such holder to
the Company by means of a notice given in accordance with the provisions of this
Section 8(d), which address initially is, with respect to an Initial Purchaser,
the address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 8(d).
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; when receipt is
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment subsequent holders; provided, however, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. The holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Initial Purchasers, and the Initial Purchasers shall have the right to enforce
such agreements directly to the extent they deem such enforcement necessary or
advisable to protect their rights hereunder.
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<PAGE> 24
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
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<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SAFETY-KLEEN CORP.
(formerly known as Laidlaw
Environmental Services, Inc.)
By:
---------------------------------------
Name:
Title:
Confirmed and accepted as
of the date first above written:
TD SECURITIES (USA) INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
RAYMOND JAMES & ASSOCIATES, INC.
By: TD SECURITIES (USA) INC.
By: /s/ Thomas W. Regan
---------------------------------------
Name: Thomas W. Regan
Title: Managing Director
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<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SAFETY-KLEEN CORP.
(formerly known as Laidlaw
Environmental Services, Inc.)
By: /s/ Paul R. Humphreys
---------------------------------------
Name: Paul R. Humphreys
Title: Senior Vice President of Finance
and Chief Financial Officer
Confirmed and accepted as
of the date first above written:
TD SECURITIES (USA) INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
RAYMOND JAMES & ASSOCIATES, INC.
By: TD SECURITIES (USA) INC.
By:
---------------------------------------
Name:
Title:
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<PAGE> 27
Exhibit A
SAFETY-KLEEN CORP.
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE](1)
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in Safety-Kleen Corp. (the
"Company") 9 1/4% Senior Notes due 2009 (the "Notes") are held.
The Company is in the process of registering the Notes under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Notes included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.
It is important that beneficial owners of the Notes receive a copy of the
enclosed materials as soon as possible as their rights to have the Notes
included in the registration statement depend upon their returning the Notice
and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy of the
enclosed documents to each beneficial owner that holds interests in the Notes
through you. If you require more copies of the enclosed materials or have any
questions pertaining to this matter, please contact Safety-Kleen Corp., 1301
Gervais Street, Suite 300, Columbia, South Carolina 29201, Attention: General
Counsel.
- --------
(1) Not less than 28 calendar days from date of mailing.
A-1
<PAGE> 28
SAFETY-KLEEN CORP.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Registration Rights Agreement (the
"Registration Rights Agreement") among Safety-Kleen Corp. (the "Company") and
the Initial Purchasers named therein. Pursuant to the Registration Rights
Agreement, the Company has filed with the United States Securities and Exchange
Commission (the "Commission") a registration statement on Form [___] (the "Shelf
Registration Statement") for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the "Securities Act"), of the Company's
9 1/4% Senior Notes due 2009 (the "Notes"). A copy of the Registration Rights
Agreement is attached hereto. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights Agreement.
Each beneficial owner of Registrable Notes (as defined below) is entitled
to have the Registrable Notes beneficially owned by it included in the Shelf
Registration Statement. In order to have Registrable Notes included in the Shelf
Registration Statement, this Notice of Registration Statement and Selling
Securityholder Questionnaire ("Notice and Questionnaire") must be completed,
executed and delivered to the Company's counsel at the address set forth herein
for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Beneficial owners of
Registrable Notes who do not complete, execute and return this Notice and
Questionnaire by such date (i) will not be named as selling securityholders in
the Shelf Registration Statement and (ii) may not use the Prospectus forming a
part thereof for resales of Registrable Notes.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Notes are advised to
consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.
A-2
<PAGE> 29
The term "Registrable Notes" is defined in the Registration Rights
Agreement.
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Notes
hereby elects to include in the Shelf Registration Statement the Registrable
Notes beneficially owned by it and listed below in Item (3). The undersigned, by
signing and returning this Notice and Questionnaire, agrees to be bound with
respect to such Registrable Notes by the terms and conditions of this Notice and
Questionnaire and the Registration Rights Agreement, including, without
limitation, Section 6 of the Registration Rights Agreement, as if the
undersigned Selling Securityholder were an original party thereto.
Upon any sale of Registrable Notes pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to
the Company and represents and warrants that such information is accurate and
complete:
A-3
<PAGE> 30
QUESTIONNAIRE
(i) (A) Full Legal Name of Selling Securityholder:
____________________________________________________________________
(B) Full Legal Name of Registered Holder (if not the same as in (a)
above) of Registrable Notes Listed in Item (3) below:
____________________________________________________________________
(C) Full Legal Name of DTC Participant (if applicable and if not the
same as (b) above) Through Which Registrable Notes Listed in Item
(3) below are Held:
____________________________________________________________________
(ii) Address for Notices to Selling Securityholder:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Telephone: _________________________
Fax: _________________________
Contact Person: _________________________
(iii) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(A) Principal amount at maturity of Registrable Notes beneficially
owned:_________
CUSIP No(s). of such Registrable Notes:_____________________________
(B) Principal amount at maturity of Securities other than Registrable
Notes beneficially owned:___________________________________________
CUSIP No(s). of such other Securities:______________________________
A-4
<PAGE> 31
(C) Principal amount at maturity of Registrable Notes which the
undersigned wishes to be included in the Shelf Registration
Statement:__________________________________________________________
CUSIP No(s). of such Registrable Notes to be included in the Shelf
Registration Statement:_____________________________________________
(iv) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other securities
of the Company, other than the Securities listed above in Item (3).
State any exceptions here:
(v) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or more) has
held any position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(vi) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder intends
to distribute the Registrable Notes listed above in Item (3) only as follows (if
at all): Such Registrable Notes may be sold from time to time directly by the
undersigned Selling Securityholder or, alternatively, through underwriters,
broker-dealers or agents. Such Registrable Notes may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale, or at negotiated prices. Such
sales may be effected in transactions (which may involve crosses or block
transactions) (i) on any national securities exchange or quotation service on
which the Registered Securities may be listed or quoted at the time of sale,
(ii) in the over-the-counter market, (iii) in transactions otherwise than on
such exchanges or services or in the over-the-counter market, or (iv) through
the writing of options. In connection with sales of the Registrable Notes or
otherwise, the Selling
A-5
<PAGE> 32
Securityholder may enter into hedging transactions with broker-dealers, which
may in turn engage in short sales of the Registrable Notes in the course of
hedging the positions they assume. The Selling Securityholder may also sell
Registrable Notes short and deliver Registrable Notes to close out such short
positions, or loan or pledge Registrable Notes to broker-dealers that in turn
may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M (which governs manipulation, stabilization and trading
activity during a distribution of securities).
In the event that the Selling Securityholder transfers all or any portion
of the Registrable Notes listed in Item (3) above after the date on which such
information is provided to the Company, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Registration Rights
Agreement.
By signing below, the Selling Securityholder consents to the disclosure of
the information contained herein in its answers to Items (1) through (6) above
and the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Company, and any underwriters in an underwritten
offering of such Selling Securityholder's Registrable Notes listed in Item(3)
above, in connection with the preparation of the Shelf Registration Statement
and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section
3(d) of the Registration Rights Agreement to provide such information as may be
required by law for inclusion in the Shelf Registration Statement, the Selling
Securityholder agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Registration Rights Agreement
A-6
<PAGE> 33
shall be made in writing, by hand-delivery, first-class mail, or air courier
guaranteeing overnight delivery as follows:
(i) To the Company:
Safety-Kleen Corp.
1301 Gervais Street
Suite 300
Columbia, South Carolina 29201
Attention: General Counsel
Telephone: (803) 933-4200
(ii) With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: John C. Kennedy
Telephone: (212) 373-3000
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable Notes
beneficially owned by such Selling Securityholder and listed in Item (3) above.
This Agreement shall be governed in all respects by the laws of the State of New
York.
A-7
<PAGE> 34
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: ________________
__________________________________________
Selling Securityholder
(Print/type full legal name of beneficial
owner of Registrable Notes)
By:_______________________________________
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: John C. Kennedy
Telephone: (212) 373-3000
A-8
<PAGE> 35
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
[Name]
[Address]
Attention: Trust Officer
Re: Safety-Kleen Corp. (the "Company")
9 1/4% Senior Notes due 2009
Dear Sirs:
Please be advised that _____________________ has transferred
$___________ aggregate principal amount at maturity of the above-referenced
Notes pursuant to an effective Registration Statement on Form [___] (File No.
333-____) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any,
of the Securities Act of 1933, as amended, have been satisfied and that the
above-named beneficial owner of the Notes is named as a "Selling Holder" in the
Prospectus dated ___________, 199_ or in supplements thereto, and that the
aggregate principal amount at maturity of the Notes transferred are the Notes
listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
_______________________________
(Name)
By:____________________________
(Authorized Signature)
B-1
<PAGE> 1
Exhibit (4)(b)
================================================================================
--------------------
Indenture
Dated as of May 17, 1999
---------------------
$225,000,000
9 1/4% Senior Notes due 2009
--------------------
SAFETY-KLEEN CORP.,
Issuer
and
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK,
Trustee
================================================================================
<PAGE> 2
SAFETY-KLEEN CORP.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of May 17, 1999
Trust Indenture
Act Section Indenture Section
ss. 310(a)(1) .......................................... 607
(a)(2) .......................................... 607
(b) .......................................... 608
ss. 312(c) .......................................... 701
ss. 314(a) .......................................... 703
(a)(4) .......................................... 1008(a)
(c)(1) .......................................... 102
(c)(2) .......................................... 102
(e) .......................................... 102
ss. 315(b) .......................................... 601
ss. 316(a)(last
sentence) .......................................... 101 ("Outstanding")
(a)(1)(A) .......................................... 502, 512
(a)(1)(B) .......................................... 513
(b) .......................................... 508
(c) .......................................... 105(d)
ss. 317(a)(1) .......................................... 503
(a)(2) .......................................... 504
(b) .......................................... 1003
ss. 318(a) .......................................... 111
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION ...........................2
SECTION 101. Definitions......................................................2
SECTION 102. Compliance Certificates and Opinions............................24
SECTION 103. Form of Documents Delivered to Trustee..........................25
SECTION 104. Acts of Holders.................................................26
SECTION 105. Notices, etc., to Trustee or Company............................27
SECTION 106. Notice to Holders; Waiver.......................................27
SECTION 107. Conflict of any Provision of Indenture with Trust
Indenture Act.................................................28
SECTION 108. Effect of Headings and Table of Contents........................28
SECTION 109. Successors and Assigns..........................................28
SECTION 110. Separability Clause.............................................28
SECTION 111. Benefits of Indenture...........................................28
SECTION 112. Governing Law...................................................29
SECTION 113. Legal Holidays..................................................29
ARTICLE II
SECURITY FORMS...............................29
SECTION 201. Forms Generally.................................................29
SECTION 202. Restrictive Legends.............................................31
ARTICLE III
THE SECURITIES...............................32
SECTION 301. Title and Terms.................................................32
SECTION 302. Denominations...................................................33
SECTION 303. Execution, Authentication, Delivery and Dating..................33
SECTION 304. Temporary Securities............................................35
SECTION 305. Registration, Registration of Transfer and Exchange.............35
SECTION 306. Book-Entry Provisions for Restricted Global Security............36
SECTION 307. Special Transfer Provisions.....................................38
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities................41
SECTION 309. Payment of Interest; Interest Rights Preserved..................42
SECTION 310. Persons Deemed Owners...........................................43
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE> 4
Page
SECTION 311. Cancellation....................................................43
SECTION 312. Issuance of Additional Securities...............................44
SECTION 313. CUSIP and CINS Numbers..........................................44
SECTION 314. Computation of Interest.........................................44
ARTICLE IV
SATISFACTION AND DISCHARGE.........................44
SECTION 401. Satisfaction and Discharge of Indenture.........................44
SECTION 402. Application of Trust Money......................................45
ARTICLE V
REMEDIES..................................46
SECTION 501. Events of Default...............................................46
SECTION 502. Acceleration of Maturity; Rescission and Annulment..............47
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee....................................................48
SECTION 504. Trustee May File Proofs of Claim................................49
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.....50
SECTION 506. Application of Money Collected..................................50
SECTION 507. Limitation on Suits.............................................51
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest..................................................51
SECTION 509. Restoration of Rights and Remedies..............................52
SECTION 510. Rights and Remedies Cumulative..................................52
SECTION 511. Delay or Omission Not Waiver....................................52
SECTION 512. Control by Holders..............................................52
SECTION 513. Waiver of Past Defaults.........................................53
SECTION 514. Waiver of Stay or Extension Laws................................53
SECTION 515. Undertaking for Costs...........................................53
SECTION 516. No Personal Liability of Directors, Officers, Employees and
Stockholders..................................................54
ARTICLE VI
THE TRUSTEE................................54
SECTION 601. Notice of Defaults..............................................54
SECTION 602. Certain Rights of Trustee.......................................54
SECTION 603. Trustee Not Responsible for Recitals or Issuance
of Securities.................................................56
SECTION 604. May Hold Securities.............................................56
ii
<PAGE> 5
Page
SECTION 605. Money Held in Trust.............................................56
SECTION 606. Compensation and Reimbursement..................................56
SECTION 607. Corporate Trustee Required; Eligibility.........................57
SECTION 608. Resignation and Removal; Appointment of Successor...............57
SECTION 609. Acceptance of Appointment by Successor..........................59
SECTION 610. Merger, Conversion, Consolidation or Succession to Business.....59
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE...................60
SECTION 701. Disclosure of Names and Addresses of Holders....................60
SECTION 702. Reports by Trustee..............................................60
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE.............................60
SECTION 801. Company May Consolidate, etc., Only on Certain Terms............60
SECTION 802. Successor Substituted...........................................62
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS TO INDENTURE..................62
SECTION 901. Without Consent of Holders......................................62
SECTION 902. With Consent of Holders.........................................63
SECTION 903. Execution of Supplemental Indentures............................64
SECTION 904. Effect of Supplemental Indentures...............................64
SECTION 905. Conformity with Trust Indenture Act.............................64
SECTION 906. Reference in Securities to Supplemental Indentures..............64
SECTION 907. Notice of Supplemental Indentures...............................65
ARTICLE X
COVENANTS.................................65
SECTION 1001. Payment of Principal, Premium, If Any, and Interest............65
SECTION 1002. Maintenance of Office or Agency................................65
SECTION 1003. Money for Security Payments to Be Held in Trust................66
SECTION 1004. Corporate Existence............................................67
SECTION 1005. Payment of Taxes and Other Claims..............................67
SECTION 1006. Maintenance of Properties......................................68
iii
<PAGE> 6
Page
SECTION 1007. Insurance......................................................68
SECTION 1008. Statement by Officers As to Default............................68
SECTION 1009. Provision of Reports and Financial Statements..................69
SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock...........................................69
SECTION 1011. Limitation on Restricted Payments..............................70
SECTION 1012. Purchase of Securities upon a Change of Control................74
SECTION 1013. Limitation on Certain Asset Sales..............................75
SECTION 1014. Limitation on Transactions with Affiliates.....................77
SECTION 1015. Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries......................................79
SECTION 1016. Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries.................................................80
SECTION 1017. Limitation on Liens............................................80
SECTION 1018. Unrestricted Subsidiaries......................................80
SECTION 1019. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries.................................................81
SECTION 1020. Limitation on Conduct of Business..............................82
SECTION 1021. Limitation on Incurrence of Contingent Obligations.............82
SECTION 1022. Payments for Consent...........................................82
SECTION 1023. Limitation on Liens Securing Indebtedness......................82
SECTION 1024. Limitation on Sale and Leaseback Transactions..................83
SECTION 1025. Waiver of Certain Covenants....................................83
SECTION 1026. Fall-Away of Certain Covenants.................................84
ARTICLE XI
REDEMPTION OF SECURITIES..........................84
SECTION 1101. Right of Redemption............................................84
SECTION 1102. Applicability of Article.......................................85
SECTION 1103. Election to Redeem; Notice to Trustee..........................85
SECTION 1104. Selection by Trustee of Securities to Be Redeemed..............85
SECTION 1105. Notice of Redemption...........................................86
SECTION 1106. Deposit of Redemption Price....................................87
SECTION 1107. Securities Payable on Redemption Date..........................87
SECTION 1108. Securities Redeemed in Part....................................87
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE.....................88
SECTION 1201. Company Option to Effect Defeasance or Covenant Defeasance.....88
iv
<PAGE> 7
SECTION 1202. Defeasance and Discharge.......................................88
SECTION 1203. Covenant Defeasance............................................88
SECTION 1204. Conditions to Defeasance or Covenant Defeasance................89
SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions........................91
SECTION 1206. Reinstatement..................................................91
SCHEDULES
SCHEDULE I - Agreements Pursuant to Section 1015
EXHIBITS
Exhibit A - Form of Security
Exhibit B - Form of Certificate for Exchange or Registration of Transfer from
Restricted Global Security to Regulation S Global Security
Exhibit C - Form of Certificate for Exchange or Registration of Transfer from
Regulation S Global Security to Restricted Global Security
Exhibit D - Form of Certificate for Transfer of U.S. Physical Securities to
Regulation S Global Security or Restricted Global Security
Exhibit E - Form of Certificate for Transfer or Exchange after Two Years
v
<PAGE> 8
INDENTURE, dated as of May 17, 1999 between Safety-Kleen Corp. (formerly
known as Laidlaw Environmental Services, Inc.), a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company"),
and The Bank of Nova Scotia Trust Company of New York, a trust company duly
organized and existing under the laws of New York, trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issue of 9 1/4% Senior
Notes due 2009 (herein called the "Initial Securities"), and 9 1/4% Exchange
Senior Notes due 2009 (the "Exchange Securities" and, together with the Initial
Securities, the "Securities") to be issued in exchange for the Initial
Securities of substantially the tenor and amount hereinafter set forth, and to
provide therefor the Company has duly authorized the execution and delivery of
this Indenture.
Upon the issuance of the Exchange Securities, if any, or the effectiveness
of the Exchange Offer Registration Statement (as defined herein) or, under
certain circumstances, the effectiveness of the Shelf Registration Statement (as
defined herein), this Indenture will be subject to the provisions of the Trust
Indenture Act of 1939, as amended, that are required to be part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
The Company has also duly authorized the creation of up to $100,000,000
aggregate principal amount of additional Securities (including additional
Exchange Securities to be issued in exchange for such securities) to be issued
from time to time having identical terms and conditions to the Initial
Securities offered hereby.
All things necessary have been done to make the Securities, when executed
by the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company and to make this Indenture a valid
agreement of the Company, each in accordance with their respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
<PAGE> 9
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under the
Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person is merged with or into the Company or becomes a Restricted
Subsidiary or (b) assumed in connection with the acquisition of assets from such
Person; provided that any Indebtedness of such Person that is redeemed,
defeased, retired or otherwise repaid at the time of or immediately upon
consummation of the transaction by which such Person is merged with or into the
Company, becomes a Restricted Subsidiary or such assets are acquired from such
Person shall not be Acquired Indebtedness.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Additional Securities" has the meaning set forth in Section 301.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
2
<PAGE> 10
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person that
owns, directly or indirectly, 10% or more of such specified Person's Capital
Stock. For the purposes of this definition, "control", when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means applicable procedures of the Depositary,
Euroclear System or Cedel Bank S.A., as the case may be.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer") by
the Company or a Restricted Subsidiary, directly or indirectly, in one
transaction or a series of related transactions, of (a) any Capital Stock of any
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (b) all or substantially all of the properties and
assets of the Company and its Restricted Subsidiaries representing a division or
line of business or (c) any other properties or assets of the Company or any
Restricted Subsidiary, other than in the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties or assets (i) that is governed by the provisions of
Article VIII, (ii) between or among the Company and its Restricted Subsidiaries
pursuant to transactions that do not violate any other provision of this
Indenture, (iii) to any Person to the extent it constitutes a Restricted Payment
that is permitted under Section 1011, (iv) consisting of inventory or wornout,
obsolete or permanently retired equipment and facilities, (v) the gross proceeds
of which (exclusive of indemnities) do not exceed $5.0 million in connection
with any transfer or (vi) that constitutes a Permitted Investment.
"Asset Sale Offer" has the meaning set forth in Section 1013.
"Asset Sale Purchase Date" has the meaning set forth in Section 1013.
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof (excluding any subsequent
renewal or other extension options held by the lessee), discounted from the
respective due dates thereof to such date of determination at the rate of
interest per annum implicit in the terms of such lease, as determined in good
faith by the Company, compounded annually. The net amount of rent required to be
paid under any such
3
<PAGE> 11
lease for any such period shall be the amount of the rent payable by the lessee
with respect to such period, after excluding amounts required to be paid on
account of maintenance and repairs, reconstruction, insurance, taxes,
assessments, water rates and similar charges and contingent rents (such as those
based on sales). In the case of any lease which is terminable by the lessee upon
the payment of a penalty, such net amount shall also include the amount of such
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Senior Credit Facility.
"Board of Directors" means the board of directors of the Company or any
duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" of any Person means any and all shares, partnership
interests, participations, rights in or other equivalents of, or interests in,
the equity of such Person, but excluding any debt securities convertible into
such equity.
"Cash Equivalents" means (a) any evidence of Indebtedness with a maturity
of one year or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (b) certificates of deposit or acceptances or Eurodollar time deposits
with a maturity of one year or less of, and overnight bank deposits with, any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $500
million; (c) commercial paper with a maturity of one year or less issued by a
Person rated at least A-1 by S&P or at least P-1 by Moody's; (d) repurchase
obligations with a term of no more than 30 days for underlying securities of the
types described in clause (a) entered into with a bank meeting the
qualifications described in clause (b) above; (e) securities with maturities of
one year or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political
subdivision or taxing
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<PAGE> 12
authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's; (f) securities with maturities of one
year or less from the date of acquisition backed by standby letters of credit
issued by any financial institution satisfying the requirements of clause (b) of
this definition; and (g) funds which invest in any of the foregoing.
"CEDEL" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Change of Control" means the occurrence of any of the following events:
(a) Any Person or "group" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person will be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the voting
power of all classes of Voting Stock of the Company;
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to the Board of Directors,
or whose nomination for election by the stockholders of the Company, was
approved by a vote of 662/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors of the Company then in
office; or
(c) The Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than a transaction that complies with
the provisions of Article VIII.
"Change of Control Offer" has the meaning set forth in Section 1012.
"Change of Control Payment Date" has the meaning set forth in Section
1012.
"Closing Date" means the date on which the Initial Securities are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
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<PAGE> 13
"Company" means the Person named as the "Company" in the first paragraph
of this Indenture, until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Securities (as if the final maturity of the Securities
was May 15, 2004) to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any Redemption Date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for Government
Securities" or (ii) if such release (or any successor release) is not published
or does not contain such prices on such Business Day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations or (B) if the
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Company IRBs" means the (i) Tooele County, Utah Pollution Control
Refunding Revenue Bonds 1997 Series A, par amount $45.7 million, which bear
interest at a rate equal to 7.55% per annum and mature on July 1, 2027 and (ii)
California Pollution Control Financing Authority 6.7% Pollution Control
Refunding Revenue Bonds 1997 Series A, par amount $19.5 million which bear
interest at a rate equal to 6.7% per annum and mature on July 1, 2007.
"Company Promissory Note" means the $60 million promissory note of the
Company issued to Westinghouse Electric Corporation on May 15, 1997, which is
due and payable on May 15, 2003.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Net Income for such period, plus (or, in the case of
clause (d) below, plus or minus) the following items to the extent included in
computing Consolidated Net Income for such period (a) Fixed Charges for such
period, plus (b) the federal, state, local and foreign income tax expense of the
Company and its Restricted Subsidiaries for such period, plus (c) the
depreciation and amortization expense of the Company and its Restricted
Subsidiaries for such period, plus (d) any other non-cash charges for such
period and minus non-cash
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<PAGE> 14
credits for such period, other than non-cash charges or credits resulting from
changes in prepaid assets or accrued liabilities in the ordinary course of
business; provided that income tax expense, depreciation and amortization
expense and non-cash charges and credits of a Restricted Subsidiary shall be
included in Consolidated EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income for such period.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the net income (but not the
net loss) of any Person (other than the Company or a Restricted Subsidiary), in
which the Company or any Restricted Subsidiary has an equity interest, except
that the aggregate amount of dividends or other distributions actually paid to
the Company or any Restricted Subsidiary in cash during such period will be
included in such Consolidated Net Income, (d) the net income (or loss) of any
Person acquired by the Company or any Restricted Subsidiary in a "pooling of
interests" transaction attributable to any period prior to the date of such
acquisition, and (e) for purposes of Section 1011 only, the net income (but not
the net loss) of any Restricted Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Restricted Subsidiary of
such net income is at the date of determination restricted, directly or
indirectly, except that the aggregate amount of net income actually paid to the
Company or a Restricted Subsidiary thereof by loans, advances, intercompany
transfers, principal payments or otherwise will be included in such Consolidated
Net Income.
"Consolidated Net Tangible Assets" means, with respect to the Company, at
any date of determination, the aggregate amount of assets (less applicable
reserves and other properly deductible items) after deducting therefrom (a) all
current liabilities (excluding current maturities of long-term debt and Capital
Lease Obligations) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent quarterly balance sheet of the Company and its
consolidated Restricted Subsidiaries and computed in accordance with GAAP.
"Consolidated Net Worth" means, at any date of determination, the
stockholders' equity of the Company and its Restricted Subsidiaries as set forth
on the most recently available quarterly or annual consolidated balance sheet of
the Company and its Restricted Subsidiaries, less any amounts attributable to
Disqualified Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the Company or
any of its Restricted Subsidiaries and less, to the extent included in
calculating such stockholders' equity of the Company and its Restricted
Subsidiaries, the stockholders' equity attributable to Unrestricted
Subsidiaries, each item to be determined in conformity with GAAP
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<PAGE> 15
(excluding the effects of foreign currency adjustments under Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 52).
"Contingent Obligations" means, at any date of determination, (a) all
obligations of the Company and its Restricted Subsidiaries (and any Unrestricted
Subsidiaries for which the Company provides credit support or other similar
arrangements) in respect of performance bonds and letters of credit in the
nature of performance bonds and similar obligations and (b) all guarantees of
the Company and its Restricted Subsidiaries (and any Unrestricted Subsidiaries
for which the Company provides credit support or other similar arrangements) or
the obligations referred to in clause (a).
"Corporate Trust Office" means the principal corporate trust office of the
Trustee, at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is located
at One Liberty Plaza, 23rd Floor, New York, New York 10006.
"Currency Agreements" means, with respect to any Person, any spot or
forward foreign exchange agreements and currency swap, currency option or other
similar financial agreements or arrangements entered into by such Person or any
of its Restricted Subsidiaries in the ordinary course of business and designed
to protect against or manage exposure to fluctuations in foreign currency
exchange rates.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Designated Assets" means the assets and properties acquired by the
Company in the acquisition of Safety-Kleen Systems relating to the European
operations of Safety-Kleen Systems referred to in footnote 4 to the audited
consolidated financial statements of Safety-Kleen Systems incorporated by
reference into Safety-Kleen Systems' Annual Report on Form 10-K for the year
ended January 3, 1998 (including, without limitation, the Company's equity
interest in Safety-Kleen Europe Limited).
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors, to make a finding or otherwise
take action under the Indenture, a member of the Board of Directors who does not
have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
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<PAGE> 16
"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms, or by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (a) is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to one year after the final Stated Maturity of the Securities, (b) is redeemable
at the option of the holder thereof at any time prior to one year after such
final Stated Maturity or (c) at the option of the holder thereof, is convertible
into or exchangeable for debt securities at any time prior to one year after
such final Stated Maturity; provided that any Capital Stock that would not
constitute Disqualified Stock but for provisions therein giving holders thereof
the right to cause the issuer thereof to repurchase or redeem such Capital Stock
upon the occurrence of an "asset sale" or "change of control" occurring prior to
the Stated Maturity of the Securities will not constitute Disqualified Stock if
the "asset sale" or "change of control" provisions applicable to such Capital
Stock are no more favorable to the holders of such Capital Stock than the
provisions contained in Sections 1012 and 1013 and such Capital Stock
specifically provides that the issuer will not repurchase or redeem any of such
stock pursuant to such provision prior to the Company's repurchase of such of
the Securities as are required to be repurchased pursuant to Sections 1012 and
1013.
"Domestic Subsidiary" means any Subsidiary whose jurisdiction of
incorporation, organization or formation is the United States, any state thereof
or the District of Columbia.
"Escrow Agreement" means the escrow agreement dated May 17, 1999, among
the Company, the Trustee and The Bank of Nova Scotia Trust Company of New York,
as escrow agent.
"Euroclear" means the Euroclear Clearance System, or any successor
securities clearing agency.
"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" has the meaning set forth in Section 1013.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended
from time to time, and the rules and regulations thereunder.
"Exchange Offer" means any exchange offer that may be effected pursuant to
the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first recital of this
Indenture and refers to any Exchange Securities containing terms substantially
identical to the Initial Securities (except that such Exchange Securities shall
not contain terms with respect to the
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<PAGE> 17
interest rate step-up provisions in Section 309 of the Initial Securities and
transfer restrictions in Section 307 of the Initial Securities) that are issued
and exchanged for the Initial Securities pursuant to the Registration Rights
Agreement and this Indenture.
"Fair market value" means, with respect to any asset, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between an informed and willing seller and an informed and willing buyer,
neither of which is under pressure or compulsion to complete the transaction.
"Fall-away Event" shall have the meaning specified in Section 1026.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the
United States Code, as amended from time to time.
"Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
payments (if any) pursuant to Interest Rate Agreements (including amortization
of discounts), (iii) the interest portion of any deferred payment obligation,
(iv) amortization of debt issuance costs and (v) the interest component of
Capital Lease Obligations, plus (b) cash dividends paid on Preferred Stock and
Disqualified Stock by the Company and any Restricted Subsidiary (to any Person
other than the Company and its Restricted Subsidiaries), plus (c) all interest
on any Indebtedness of any Person guaranteed by the Company or any of its
Restricted Subsidiaries; provided, however, that Fixed Charges shall not include
(i) any gain or loss from extinguishment of debt, including the write-off of
debt issuance costs and (ii) the fixed charges of a Restricted Subsidiary to the
extent (and in the same proportion) that the net income of such Subsidiary was
excluded in calculating Consolidated Net Income pursuant to clause (e) of the
definition thereof for such period.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
Consolidated EBITDA for such period to (b) Fixed Charges for such period.
"Foreign Subsidiary" means any Subsidiary other than a Domestic
Subsidiary.
"Funding Conditions" means the occurrence of the following events:
(1) the stockholders of the Company shall have approved the issuance
of shares of the Company's common stock in connection with the repurchase
of the PIK Debenture in accordance with the rules of The New York Stock
Exchange; and
(2) the conditions set forth in Article IV of the PIK Purchase
Agreement shall have been satisfied or waived.
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<PAGE> 18
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the date of Indenture.
"Global Security" shall have the meaning specified in Section 201.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of all or any part of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limitation, the payment of
amounts drawn down under letters of credit.
"Hedging Obligations" means the obligations of any Person under (a)
Interest Rate Agreements and (b) Currency Agreements.
"Holder" means the Person in whose name a Security is, at the time of
determination, registered on the Security Register.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed, (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person (other than obligations in respect to performance
bonds and letters of credit in the nature of performance bonds), (d) every
obligation of such Person issued or assumed as the deferred purchase price of
property or services, (e) every Capitalized Lease Obligation of such Person, (f)
all Disqualified Stock of such Person valued at its maximum fixed repurchase
price (including, without duplication, accrued and unpaid dividends), (g) all
obligations of such Person under or in respect of Hedging Obligations and (h)
every obligation of the type referred to in clauses (a) through (g) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has guaranteed. For purposes of this definition, the "maximum fixed
repurchase price" of any Disqualified Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were repurchased on any date on
which Indebtedness is required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Stock, such fair market value shall be determined in good faith by
the board of directors of the issuer of such Disqualified Stock. Notwithstanding
the foregoing, trade accounts payable and accrued liabilities arising in the
ordinary course of business and any
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<PAGE> 19
liability for federal, state or local taxes or other taxes owed by such Person
shall not be considered Indebtedness for purposes of this definition.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company and any other
obligor hereunder or under the Securities to pay principal of and premium, if
any, and interest on the Securities when due and payable at Maturity, and all
other amounts due or to become due under or in connection with this Indenture,
the Securities and the performance of all other obligations to the Trustee
(including all amounts due to the Trustee under Section 606 hereof) and the
Holders under this Indenture and the Securities, according to the terms hereof
and thereof.
"Independent Investment Banker" means TD Securities (USA) Inc. or, if such
firm is unwilling or unable to select the Comparable Treasury Issue, another
independent banking institution of national standing selected by the Company.
"Initial Securities" has the meaning stated in the first recital of this
Indenture.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreements" means any interest rate protection agreements
and other types of interest rate hedging agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements)
and other related agreements designed to protect against or manage exposure to
fluctuations in interest rates and either (a) entered into in the ordinary
course of business or (b) relating to the Indebtedness permitted under the
Indenture.
"Investment" in any Person means (a) any direct or indirect advance, loan
or other extension of credit or capital contribution (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others) to, or any purchase, acquisition or ownership of,
Capital Stock, Indebtedness or other securities issued by such Person, the
acquisition (by purchase or otherwise) of all or substantially all of the
business or assets of such Person, or the making of any investment of cash or
other property in such Person, (b) the designation of any Restricted Subsidiary
as an Unrestricted Subsidiary, (c) the transfer of any assets or properties from
the Company or a Restricted Subsidiary to an Unrestricted Subsidiary, other than
the transfer of assets or properties made in the ordinary course of business and
(d) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary. Investments exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices.
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<PAGE> 20
"Investment Grade" means a rating of the Securities by both S&P and
Moody's, each such rating being in one of such agency's four highest generic
rating categories that signifies investment grade (i.e. BBB- (or the equivalent)
or higher by S&P and Baa3 (or the equivalent) or higher by Moody's); provided,
in each case, such ratings are publicly available; provided further that in the
event Moody's or S&P is no longer in existence, for purposes of determining
whether the Securities are rated "Investment Grade," such organization may be
replaced by a nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) designated by the Company, notice of which
designation shall be given to the Trustee.
"Laidlaw" means Laidlaw Inc., a corporation organized under the laws of
Canada.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Mandatory Redemption Date" means October 15, 1999, in the event the
Funding Conditions are not satisfied by September 30, 1999.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"NationsBank Facility" means either (a) the working capital facility made
available pursuant to the letter agreement dated March 31, 1998 between
NationsBank of Texas, N.A., as lender, and Safety-Kleen Services, Inc., as
borrower or (b) any other agreement or agreements between the Company or any
Restricted Subsidiary and a financial institution or institutions providing for
the making of loans or advances on a revolving basis and/or the issuance of
letters of credit and/or the creation of bankers' acceptances to fund the
Company's general corporate requirements.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations, but only as and when received, in the form of,
or stock or other assets when disposed of for, cash or Cash Equivalents (except
to the extent that such obligations are financed or sold with recourse to the
Company or any Restricted Subsidiary), net of (a) brokerage commissions and
other fees and expenses (including fees and expenses of legal counsel,
accountants and investment banks) related to such Asset Sale, (b) provisions for
all taxes payable or required to be accrued in accordance with GAAP as a result
of such Asset Sale, (c) payments made to retire Indebtedness where payment of
such Indebtedness is secured
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<PAGE> 21
by a Lien on the assets that are the subject of such Asset Sale, (d) amounts
required to be paid to any Person (other than the Company or any Restricted
Subsidiary) owning a beneficial interest in the assets that are subject to the
Asset Sale, (e) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP against any liabilities associated with such Asset Sale and retained
by the seller after such Asset Sale, including pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale and (f) all distributions and other payments made to minority interest
holders in Restricted Subsidiaries or joint ventures as a result of such Asset
Sale.
"Offering" means the offering of 9 1/4% Senior Notes Due 2009 by the
Company.
"Officers' Certificate" means a certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, including an employee of the Company, and who shall be
reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment, redemption
or purchase money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Securities; provided
that, if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(c) Securities, except to the extent provided in Sections 1202 and
1203, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article XII; and
(d) Securities which have been paid pursuant to Section 308 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have
14
<PAGE> 22
been presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands the Securities
are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor.
"Pari Passu Indebtedness" means any Indebtedness of the Company, whether
outstanding at the date of this Indenture or incurred thereafter, that ranks
pari passu in right of payment with the Securities.
"Partnership" means The ArmaKleen Company, a Delaware partnership formed
pursuant to the Partnership Agreement.
"Partnership Agreement" means the partnership agreement dated January 1,
1999 between Safety-Kleen Services and Church Dwight Co., Inc., as amended or
replaced from time to time.
"Paying Agent" means The Bank of Nova Scotia Trust Company of New York and
any successor (including the Company acting as Paying Agent) authorized by the
Company to pay the principal of and premium, if any, or interest on any
Securities on behalf of the Company.
"Permitted Holder" means Laidlaw, any successor thereto, and any of their
Affiliates.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary under
the Senior Credit Facility in an aggregate principal amount at any one
time outstanding not to exceed $1,717,000,000 less (x) any amounts applied
to the permanent reduction of any term loans under the Senior Credit
Facility and (y) any amounts applied to the permanent reduction of the
Senior Credit Facility pursuant to Section 1013;
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<PAGE> 23
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Closing Date, other than Indebtedness described under
clause (i) above;
(iii) Indebtedness owed by the Company to any Wholly-Owned
Restricted Subsidiary or owed by any Restricted Subsidiary to the Company
or a Wholly-Owned Restricted Subsidiary (provided that such Indebtedness
is held by the Company or such Wholly-Owned Restricted Subsidiary);
provided, however, that if the Company is the obligor on such
Indebtedness, such Indebtedness is unsecured and subordinated in all
respects to the Company's obligations under the Notes and provided,
further, however, that if any such Wholly-Owned Restricted Subsidiary
ceases to be (for any reason) a Wholly-Owned Restricted Subsidiary, then
this clause (iii) shall no longer be applicable to Indebtedness owed by
the Company or any Restricted Subsidiary to such Restricted Subsidiary
that was formerly a Wholly-Owned Restricted Subsidiary;
(iv) Indebtedness represented by the Securities (other than the
Additional Securities);
(v) Indebtedness of the Company or any Restricted Subsidiary in
respect of Hedging Obligations incurred in the ordinary course of
business;
(vi) Capital Lease Obligations of the Company or any Restricted
Subsidiary, provided that the aggregate amount of Indebtedness under this
clause (vi) does not exceed $15,000,000 at any one time outstanding;
(vii) Indebtedness of the Company or any Restricted Subsidiary under
purchase money mortgages or secured by purchase money security interests
so long as (x) such Indebtedness is not secured by any property or assets
of the Company or any Restricted Subsidiary other than the property and
assets so acquired and (y) such Indebtedness is created within 90 days of
the acquisition of the related property; provided that the aggregate
amount of Indebtedness under this clause (vii) does not exceed $15,000,000
at any one time outstanding;
(viii) guarantees by the Company or any Restricted Subsidiary of
Indebtedness that was permitted to be incurred by the provisions of
Section 1010;
(ix) Indebtedness of the Company or any Restricted Subsidiary, not
otherwise permitted by the first paragraph under Section 1010 and any
other clause of this definition, in an aggregate principal amount not to
exceed an amount equal to 5% of the total assets of the Company and its
Restricted Subsidiaries (on a consolidated basis determined in accordance
with GAAP);
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(x) Indebtedness of one or more Foreign Subsidiaries under one or
more credit facilities in an aggregate principal amount at any one time
outstanding not to exceed $50,000,000;
(xi) Indebtedness of the Company or any Restricted Subsidiary under
the NationsBank Facility in an aggregate principal amount at any one time
outstanding not to exceed $25,000,000; and
(xii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Indebtedness incurred pursuant to clause (ii) and (iv) above,
including any successive refinancings thereof, so long as (A) any such new
Indebtedness is in a principal amount that does not exceed the principal
amount so refinanced, plus the amount of any premium required to be paid
in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by the Company as necessary to accomplish such refinancing, plus the
amount of the expenses of the Company reasonably estimated to be incurred
in connection with such refinancing, (B) in the case of any refinancing of
Subordinated Indebtedness of the Company, such new Indebtedness is
subordinated to the Notes at least to the same extent as the Indebtedness
being refinanced and (C) such refinancing Indebtedness has a Weighted
Average Life equal to or greater than the Weighted Average Life of the
Indebtedness being refinanced and has a final Stated Maturity no earlier
than the final Stated Maturity of the Indebtedness being refinanced.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents.
(b) Investments by the Company or any Restricted Subsidiary in
another Person, if as a result of such Investment such other Person (i)
becomes a Restricted Subsidiary or (ii) is merged or consolidated with or
into, or transfers or conveys all or substantially all of its assets to,
the Company or a Restricted Subsidiary.
(c) Investments by the Company or any of the Restricted Subsidiaries
in any one of the other of them.
(d) Investments existing on the Closing Date.
(e) Investments made as a result of the receipt of non-cash
consideration in an Asset Sale permitted under Section 1013.
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(f) Investments consisting of loans and advances to officers and
employees of the Company or any of its Restricted Subsidiaries for
reasonable travel, relocation and business expenses in the ordinary course
of business.
(g) Investments the payment for which consists exclusively of
Capital Stock (exclusive of Disqualified Stock) of the Company.
(h) Other Investments that do not exceed in the aggregate at any one
time outstanding the greater of (i) $50,000,000 or (ii) an amount equal to
1% of the total assets of the Company and its Restricted Subsidiaries (on
a consolidated basis determined in accordance with GAAP).
"Permitted Liens" means (a) Liens in existence on any date on which the
Securities achieve an Investment Grade rating; (b) any Lien on any properties or
assets of the Company or any Restricted Subsidiary acquired (including by way of
merger or consolidation) by the Company or any Restricted Subsidiary after the
date on which the Securities achieve an Investment Grade rating, which Lien is
created, incurred or assumed contemporaneously with such acquisition, or within
270 days thereafter, to secure or provide for the payment or financing of any
part of the purchase price thereof, or any Lien upon any properties or assets of
the Company or any Restricted Subsidiary acquired after the date of this
Indenture existing at the time of such acquisition (whether or not assumed by
the Company or any Restricted Subsidiary), provided that every such Lien
referred to in this clause (b) shall attach only to the properties or assets of
the Company or any Restricted Subsidiary so acquired; (c) any Lien on any
properties or assets of the Company or any Restricted Subsidiary in favor of the
Company or any Restricted Subsidiary; (d) any Lien on properties or assets of
the Company or any Restricted Subsidiary incurred in connection with the
issuance of tax-exempt governmental obligations (including, without limitation,
industrial revenue bonds and similar financings); (e) any Lien granted by any
Restricted Subsidiary on its properties or assets to the extent such Lien is not
prohibited by any agreement to which such Restricted Subsidiary is subject as of
the date of the Indenture; (f) any Lien securing Indebtedness under the Senior
Credit Facility, the NationsBank Facility, the C$35,000,000 credit facility made
available pursuant to the letter agreement, dated as of April 3, 1998, between
Safety-Kleen Services (Canada) Ltd., as borrower and Toronto-Dominion Bank, as
lender, as such agreement may be amended, modified or supplemented from time to
time, and Hedging Obligations entered into in connection with the Senior Credit
Facility; and (g) any renewal or substitution for any Lien permitted by any of
the preceding clauses (a) through (f), including any Lien securing reborrowing
of amounts previously secured within 270 days of the repayment thereof, provided
that no such renewal or substitution shall extend to any properties or assets of
the Company or any Restricted Subsidiary other than the properties or assets of
the Company or any Restricted Subsidiary covered by the Lien being renewed or
substituted.
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"Person" means any individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PIK Debenture" means the Company's $350 million 5% subordinated
convertible pay-in-kind debenture, which is due and payable on May 15, 2009.
"PIK Purchase Agreement" means the Securities Purchase Agreement dated as
of April 19, 1999 among the Company, Laidlaw and Laidlaw International Finance
Corporation.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 308 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, partnership interests, participations, or other equivalents (however
designated) of such Person's preferred or preference stock, whether now
outstanding or issued after the Closing Date, and including, without limitation,
all classes and series of preferred or preference stock of such Person.
"Private Placement Legend" has the meaning specified in Section 202.
"Public Equity Offering" means an offer and sale of common stock (which is
Qualified Stock) of the Company or Safety-Kleen Services pursuant to a
registration statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities issuable under any employee benefit
plan of the Company or Safety-Kleen Services).
"Purchase Agreement" means the Purchase Agreement, dated as of May 10,
1999, between the Company and the Initial Purchasers named therein.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any Person means any and all Capital Stock of such
Person, other than Disqualified Stock.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
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"Redemption Date", when used with respect to any Security to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Reference Treasury Dealer" means TD Securities (USA) Inc., NationsBanc
Montgomery Securities LLC and Raymond James & Associates, Inc. and their
respective successors; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer in New York City (a
"Primary Treasury Dealer"), the Company shall substitute another Primary
Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average of the bid and
asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such
redemption date.
"Registrar" means The Bank of Nova Scotia Trust Company of New York and
any successor authorized by the Company to act as Registrar.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Initial Purchasers named therein, dated as of May
17, 1999 relating to the Securities or any similar registration rights agreement
relating to the Additional Notes.
"Registration Statement" means any Registration Statement as defined in
the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the May 1 or November 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" has the meaning specified in Section 201.
"Restricted Global Security" has the meaning specified in Section 201.
"Restricted Payment" means any of the following:
(a) the declaration or payment of any dividend on, or the making of
any distribution to holders of, any shares of the Capital Stock of the
Company or any Restricted Subsidiary other than (i) dividends or
distributions payable solely in
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Qualified Equity Interests or (ii) dividends or distributions by a
Restricted Subsidiary payable to the Company or another Restricted
Subsidiary or (iii) pro rata dividends or distributions on common stock of
a Restricted Subsidiary held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro
rata share of such Restricted Subsidiary's net income from the first day
of the Company's fiscal quarter during which the Closing Date occurs;
(b) the purchase, redemption or other acquisition or retirement for
value, directly or indirectly of any shares of Capital Stock (or any
options, warrants or other rights to acquire shares of Capital Stock) of
(i) the Company or any Unrestricted Subsidiary or (ii) any Restricted
Subsidiary held by any Affiliate of the Company (other than, in either
case, any such Capital Stock owned by the Company or any of its Restricted
Subsidiaries);
(c) the making of any principal payment on, or the repurchase,
redemption, defeasance or other acquisition or retirement for value, prior
to any scheduled principal payment, sinking fund payment or maturity, of
any Subordinated Indebtedness; or
(d) the making of any Investment (other than a Permitted Investment)
in any Person.
"Restricted Period" has the meaning set forth in Section 306.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Safety-Kleen Services" means Safety-Kleen Services, Inc., a Delaware
corporation.
"Safety-Kleen Services Fixed Charge Coverage Ratio" means the Fixed Charge
Coverage Ratio of Safety-Kleen Services and its Restricted Subsidiaries as
defined in, and calculated in accordance with, the Safety-Kleen Services
Indenture.
"Safety-Kleen Services Indenture" means the indenture dated May 29, 1998
among Safety-Kleen Services, the Company, as guarantor, the Subsidiary
Guarantors named therein and The Bank of Nova Scotia Trust Company of New York,
as Trustee, as in effect on the date of the Indenture.
"Safety-Kleen Systems" means Safety-Kleen Systems, Inc., formerly known as
Safety- Kleen Corp., a Delaware corporation.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of any
properties or assets of the
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Company and/or such Restricted Subsidiary (except for temporary leases for a
term, including any renewal thereof, of not more than three years and except for
leases between the Company and any Restricted Subsidiary, between any Restricted
Subsidiary and the Company or between Restricted Subsidiaries), which properties
or assets have been or are to be sold or transferred by the Company or such
Restricted Subsidiary to such Person with the intention of taking back a lease
of such properties or assets.
"Sales Agreement" means the sales agreement dated January 26, 1999 between
Safety-Kleen Services and the Partnership, as amended or replaced from time to
time.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Securities" shall
include any Exchange Securities to be issued and exchanged for any Initial
Securities in accordance with the Exchange Offer as provided for in the
Registration Rights Agreement and this Indenture. From and after the issuance of
any Additional Securities pursuant to Section 312 (but, not for purposes of
determining whether such issuance is permitted hereunder), "Securities" shall
include such Additional Securities for purposes of this Indenture, and all
Initial Securities, Exchange Securities and Additional Securities shall vote
together as one series of Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations thereunder.
"Security Register" has the meaning set forth in Section 305.
"Senior Credit Facility" means the credit agreement dated as of April 3,
1998 among Safety-Kleen Services, Inc., Safety-Kleen Services (Canada) Ltd., the
Banks and Toronto Dominion Bank, as agent, as such agreement may be amended,
renewed, extended, substituted, replaced, restated, refinanced, restructured,
supplemented or otherwise modified from time to time (including, without
limitation, any successive amendments, renewals, extensions, substitutions,
replacements, restatements, refinancings, restructuring, supplements or other
modifications of the foregoing); provided that with respect to any agreements
providing for the refinancing of Indebtedness under the Senior Credit Facility,
such agreements shall be the Senior Credit Facility for the purposes of this
definition only if a notice to that effect is delivered by the Company to the
Trustee.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that would be a "Significant Subsidiary" of the Company within the meaning of
Rule 1-02 under
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Regulation S-K promulgated by the Commission as such Rule is in effect on the
date of the Indenture.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, and its successors.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable and, when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness or
any installment of interest thereon is due and payable, and will not, in either
case, include any contingent obligations to repay, redeem or repurchase any such
interest or principal prior to the date originally scheduled for the payment
thereof.
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as of
February 6, 1997 among Rollins Environmental Services, Inc., Laidlaw and Laidlaw
Transportation, Inc.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, any other Person a
majority of the equity ownership or Voting Stock of which is at the time owned,
directly or indirectly, by such Person and/or one or more Subsidiaries of such
Person.
"Surviving Entity" has the meaning set forth in Section 801.
"Suspended Covenants" has the meaning set forth in Section 1026.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this Indenture was executed, except
as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
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"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary in accordance with Section
1018 and (b) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" has the meaning set forth in Section 1204.
"U.S. Physical Securities" has the meaning set forth in Section 201.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life" means, as of the date of determination with
respect to any Indebtedness or Disqualified Stock, the quotient obtained by
dividing (a) the sum of the products of (i) the number of years from the date of
determination to the date or dates of each successive scheduled principal or
liquidation value payment of such Indebtedness or Disqualified Stock,
respectively, multiplied by (ii) the amount of each such principal or
liquidation value payment by (b) the sum of all such principal or liquidation
value payments.
"Wholly-Owned Foreign Restricted Subsidiary" means any Foreign Subsidiary
that is a Restricted Subsidiary, all of the outstanding Capital Stock (other
than directors' qualifying shares of such Foreign Subsidiary required to be
owned by foreign nationals pursuant to applicable law) of which is owned,
directly or indirectly, by the Company.
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding Capital Stock (other than directors' qualifying shares or
shares of Foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which is owned, directly or indirectly,
by the Company.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture (including any covenant compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
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Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Section
1008(a)) shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in Person or by agents duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
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(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
(f) For all purposes of this Indenture, all Initial Securities and
Exchange Securities shall vote together as one series of Securities under this
Indenture.
SECTION 105. Notices, etc., to Trustee or Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing or
mailed, first-class postage prepaid, to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Finance Department, or sent
by facsimile to the Trustee at (212) 225-5436 (with receipt confirmed by
telephone at (212) 225-5422); or
(b) the Company by the Trustee or any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed
to it at 1301 Gervais Street, Columbia, South Carolina 29201, Attention:
Henry Taylor, Esq., or sent by facsimile to the Company at (803) 933-4340
(with receipt confirmed by telephone at (803) 933-4219), or at any other
address or facsimile number previously furnished in writing to the Trustee
by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by the
Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or
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after the event, and such waiver shall be the equivalent of such notice. Waivers
of notice by Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.
In case by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 107. Conflict of any Provision of Indenture with Trust Indenture
Act.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 318,
inclusive, of the Trust Indenture Act, or conflicts with any provision (an
"incorporated provision") required by or deemed to be included in this Indenture
by operation of such Trust Indenture Act sections, such imposed duties or
incorporated provision shall control.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder, and the Holders, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
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SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York. Upon the issuance of the
Exchange Securities, if any, or the effectiveness of the Exchange Offer
Registration Statement or, under certain circumstances, the effectiveness of the
Shelf Registration Statement, this Indenture shall be subject to the provisions
of the Trust Indenture Act that are required to be part of this Indenture and
shall, to the extent applicable, be governed by such provisions.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Mandatory Redemption Date,
Redemption Date, date established for payment of Defaulted Interest pursuant to
Section 309, Stated Maturity or Maturity, Change of Control Payment Date or
Asset Sale Purchase Date with respect to any Security or other day on which
principal, premium or interest in respect or the Securities is due, shall not be
a Business Day, then (notwithstanding any other provision of this Indenture or
of the Securities) payment of principal (or premium, if any) or interest need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date,
Redemption Date, date established for payment of Defaulted Interest pursuant to
Section 309, Stated Maturity or Maturity, Change of Control Purchase Date or
Asset Sale Purchase Date; provided that no interest shall accrue for the period
from and after such Interest Payment Date or other such day, Redemption Date,
date established for payment of Defaulted Interest pursuant to Section 309,
Stated Maturity or Maturity, Change in Control Payment Date or Asset Sale
Purchase Date, as the case may be, to the next succeeding Business Day.
ARTICLE II
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities and the Trustee's certificate of authentication shall be in
substantially the form annexed hereto as Exhibit A, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
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The definitive Securities shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers of the Company executing such Securities, as evidenced by their
execution of such Securities.
The terms and provisions contained in the form of the Securities annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Securities without
interest coupons substantially in the form set forth in Exhibit A (collectively,
the "Restricted Global Security") deposited with, or on behalf of, the
Depositary or with the Trustee, as custodian for the Depositary, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Restricted Global Security may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Initial Securities offered and sold in reliance on Regulation S shall be
issued initially in the form of one or more global Securities in fully
registered form without interest coupons substantially in the form set forth in
Exhibit A (collectively, the "Regulation S Global Security" and, together with
the Restricted Global Security, the "Global Securities" or each individually, a
"Global Security"). The Regulation S Global Securities will be registered in the
name of a nominee of DTC and deposited with the Trustee on behalf of the
Purchasers, for the accounts of Euroclear and CEDEL. The aggregate principal
amount of the Regulation S Global Security may from time to time be increased or
decreased by adjustments made on the records of the Depositary or its nominee,
or of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided. Until and including the 40th day after the date of this
Indenture, beneficial interests in the Regulation S Global Security may be held
only through Euroclear or CEDEL, unless delivery is made through the Restricted
Global Security in accordance with the certification requirements provided in
this Indenture.
If DTC is at any time unwilling or unable to continue as a depositary, or
if, in the case of the Regulation S Global Security held for an account of
Euroclear or CEDEL, Euroclear or CEDEL, as the case may be, is closed for
business for 14 continuous days or announces an intention to cease or
permanently ceases business, the Company will issue certificates for the
Securities in definitive, fully registered, non-global form without interest
coupons in exchange for the Regulation S Global Security or Restricted Global
Security, as the case may be. In all cases, certificates for Securities
delivered in exchange for any Global Security or beneficial interests therein
will be registered in the names, and issued in any approved denominations,
requested by DTC.
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In the case of certificates for Securities in non-global form issued in
exchange for the Regulation S Global Security or Restricted Global Security,
such certificates will bear the first legend appearing under Section 202 of this
Indenture (unless the Company determines otherwise in accordance with applicable
law). The holder of a Security in non-global form may transfer such Security,
subject to compliance with the provisions of such legend, by surrendering it at
the office or agency maintained by the Company for such purpose in the Borough
of Manhattan, The City of New York, which initially will be the office of the
Trustee.
Initial Securities offered and sold other than as global securities shall
be issued in the form of permanent certificated Securities in registered form in
substantially the form set forth in Exhibit A (the "U.S. Physical Securities").
SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, each certificate representing a
Security shall contain a legend substantially to the following effect (the
"Private Placement Legend") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE REOFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHOM
THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) TO AN INSTITUTION THAT IS AN ACCREDITED INVESTOR
WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED STATES.
Each Global Security, whether or not an Initial Security, shall also bear
the following legend on the face thereof:
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UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC, (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
ARTICLE III
THE SECURITIES
SECTION 301. Title and Terms.
The initial aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $225,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 307, 308, 906, 1012, 1013 or 1108, pursuant to an Exchange Offer or
pursuant to Section 312. The Company may also issue up to $100,000,000 aggregate
principal amount of additional Securities having identical terms and conditions
to the Initial Securities, subject to compliance with the covenants contained
herein (the "Additional Securities").
The Initial Securities shall be known and designated as the "9 1/4% Senior
Notes due 2009" and the Exchange Securities shall be known and designated as the
"9 1/4% Exchange Senior Notes due 2009." Their Stated Maturity shall be May 15,
2009, and they shall bear interest at the rate of 9 1/4% per annum from May 17,
1999, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, payable semiannually in
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arrears on May 15 and November 15 in each year, commencing November 15, 1999,
until the principal thereof is paid or duly provided for, to the Person in whose
name the Security (or any predecessor Security) is registered at the close of
business on the May 1 or November 1 next preceding such Interest Payment Date.
The principal of and premium, if any, and interest on the Securities shall
be payable, and the Securities shall be exchangeable and transferable, at the
office or agency of the Company in The City of New York maintained for such
purposes, (which initially shall be the office of the Trustee located at One
Liberty Plaza, 23rd Floor, New York, New York 10006) or, at the option of the
Company, interest may be paid by check mailed to the address of the Person
entitled thereto as such address shall appear on the Security Register;
provided, however, that all payments with respect to the U.S. Global Securities,
as well as Physical Securities the Holders of which have given wire transfer
instructions to the Trustee (or other Paying Agent) by the Regular Record Date
for such payment, will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof.
Initial Securities that remain outstanding after the consummation of the
Exchange Offer and Exchange Securities issued in connection with the Exchange
Offer will be treated as a single class of securities under this Indenture.
The Securities shall be redeemable as provided in Article XI.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman,
its President or a Vice President. The signature of any of these officers on the
Securities may be manual or facsimile signatures of the present or any future
such authorized officer and may be imprinted or otherwise reproduced on the
Securities.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities directing the Trustee to authenticate the
Securities and certifying that all conditions
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precedent to the issuance of Securities contained herein have been fully
complied with, and the Trustee in accordance with such Company Order shall
authenticate and deliver such Securities. On Company Order, the Trustee shall
authenticate for original issue Exchange Securities in an aggregate principal
amount not to exceed $225,000,000 plus the aggregate principal amount of any
Additional Securities issued; provided that such Exchange Securities shall be
issuable only upon the valid surrender for cancellation of Securities of a like
aggregate principal amount in accordance with an Exchange Offer pursuant to the
Registration Rights Agreement and a Company Order for the authentication of such
securities certifying that all conditions precedent to the issuance have been
complied with (including the effectiveness of a registration statement related
thereto). In each case, the Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of the Company that it may reasonably
request in connection with such authentication of Securities. Such order shall
specify the amount of Securities to be authenticated and the date on which the
original issue of Initial Securities or Exchange Securities is to be
authenticated.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized officer, and
such certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article VIII, shall be consolidated or
merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or the
Person which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article VIII, any of the Securities authenticated
or delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Request of
the successor Person, shall authenticate and deliver Securities as specified in
such request for the purpose of such exchange. If Securities shall at any time
be authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such new name.
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SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as conclusively evidenced by
their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as "Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at the office
or agency of the Company designated pursuant to Section 1002, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange (including an
exchange of Initial Securities for Exchange Securities), the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
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the Holder making the exchange is entitled to receive; provided that no exchange
of Initial Securities for Exchange Securities shall occur until an Exchange
Offer Registration Statement, Shelf Registration Statement or other registration
statement with respect to such Exchange Security shall have been declared
effective by the Commission and that the Initial Securities to be exchanged for
the Exchange Securities shall be canceled by the Trustee.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906, 1012, 1013 or 1108 not involving
any transfer.
The Company shall not be required (i) to issue, register the transfer of
or exchange any Security during a period beginning at the opening of 15 Business
Days before the selection of Securities to be redeemed under Section 1104 and
ending at the close of business on the day of such mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
Notwithstanding anything to the contrary contained herein, the Trustee
shall have no duty whatsoever to monitor Federal or State securities laws other
than to collect the certificates required herein.
SECTION 306. Book-Entry Provisions for Restricted Global Security.
(a) The Global Security initially shall (i) be registered in the name of
Cede & Co., as nominee of the Depositary, (ii) be deposited with, or on behalf
of, the Depositary or with the Trustee, as custodian for such Depositary, and
(iii) bear legends as set forth in Section 202.
Beneficial interests in any Restricted Global Security may be transferred
to Persons who take delivery thereof in the form of a beneficial interest in the
same Restricted Global Security in accordance with the transfer restrictions set
forth in the legends as set forth in
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Section 202; provided, however, that prior to the expiration of the Restricted
Period, beneficial interests in the Regulation S Global Security may only be
held through Euroclear or CEDEL or indirectly through organizations which are
participants in such systems. After the expiration of the Restricted Period (but
not earlier), investors in the Regulation S Global Security may also hold such
interests through organizations other than Euroclear or CEDEL that are
participants in the Depositary's system. All interests in a Global Security,
including those held through Euroclear or CEDEL, may be subject to the
procedures and requirements of the Depositary. Those interests held through
Euroclear and CEDEL will be subject to the procedures and requirements of such
system. As used herein, the term "Restricted Period" means the period of 40
consecutive days beginning on and including the first day after the later of (i)
the day that TD Securities (USA) Inc. (or, with respect to any Additional
Securities, the applicable lead initial purchaser or underwriter) advises the
Company and the Trustee of the day on which the Initial Securities or Additional
Securities, as the case may be, are first offered to persons other than
distributors (as defined in Regulation S) and (ii) the original issue date of
the Initial Securities or Additional Securities, as the case may be.
(b) Transfers of any Global Security shall be limited to transfers of such
Global Security in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in any Global Security
may be transferred in accordance with the rules and procedures of the Depositary
and the provisions of Section 307.
Unless (i) the Depositary notifies the Company that it is unwilling or
unable to continue as depositary for a Global Security or ceases to be a
"Clearing Agency" registered under the Exchange Act or announces an intention
permanently to cease business or does in fact do so and a successor Depositary
is not appointed by the Company within 90 days of such notice, (ii) an Event of
Default has occurred and is continuing with respect to a Global Security or
(iii) in the case of a Global Security held for the account of Euroclear or
CEDEL, Euroclear or CEDEL, as the case may be, is closed for business for 14
continuous Business Days or announces an intention to cease or permanently
ceases business, owners of beneficial interests in a Global Security shall not
be entitled to have any portions of such Global Security registered in their
names, shall not receive or be entitled to receive physical delivery of
Securities in definitive form and shall not be considered the owners or holders
of the Global Security.
(c) Securities issued in exchange for a Global Security or any portion
thereof pursuant to the last sentence of subsection (b) of this Section shall be
issued in definitive, fully registered form, without interest coupons, shall
have an aggregate principal amount equal to that of such Global Security or
portion thereof to be so exchanged, shall be registered in such names and be in
such authorized denominations as the Depositary shall designate and shall bear
any legends required hereunder. Any Global Security to be exchanged in whole
shall be surrendered by the Depositary to the Trustee, as Registrar. With regard
to any Global Security to be exchanged in part, either such Global Security
shall be so surrendered for exchange or, if the Trustee is acting as custodian
for the Depositary or its nominee with
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respect to such Global Security, the principal amount thereof shall be reduced,
by an amount equal to the portion thereof to be so exchanged, by means of an
appropriate adjustment made on the records of the Trustee. Upon any such
surrender or adjustment, the Trustee shall authenticate and make available for
delivery the Security issuable on such exchange to or upon the order of the
Depositary or an authorized representative thereof. In the event of the
occurrence of any of the events specified in the last sentence of subsection (b)
of this Section 306, the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive form.
(d) Except as otherwise set forth in this Indenture or a Global Security,
owners of beneficial interests in the Securities evidenced by a Global Security
will not be entitled to any rights under this Indenture with respect to such
Global Security, and the Depositary or its nominee may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner
and Holder of such Global Security for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any such
agent from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or its nominee or impair, as between
the Depositary or its nominee and such owners of beneficial interests, the
operation of customary practices governing the exercise of the rights of the
Depositary or its nominee as Holder of any Security.
SECTION 307. Special Transfer Provisions.
Unless and until (i) an Initial Security is sold under an effective
Registration Statement, or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement the following
provisions shall apply:
(a) Restricted Global Security to Regulation S Global Security. If, at any
time, an owner of a beneficial interest in a Restricted Global Security
deposited with the Depositary (or the Trustee as custodian for the Depositary)
wishes to transfer its interest in such Restricted Global Security to a Person
who is required or permitted to take delivery thereof in the form of an interest
in a Regulation S Global Security, such owner shall, subject to the Applicable
Procedures, exchange or cause the exchange of such interest for an equivalent
beneficial interest in a Regulation S Global Security as provided in this
Section 307(a). Upon receipt by the Trustee of (1) instructions given in
accordance with the Applicable Procedures from an Agent Member directing the
Trustee to credit or cause to be credited a beneficial interest in the
Regulation S Global Security in an amount equal to the beneficial interest in
the applicable Restricted Global
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Security to be exchanged, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the participant account
of the Depositary and the Euroclear or CEDEL account (if applicable) to be
credited with such increase, and (3) a certificate substantially in the form of
Exhibit B hereto given by the owner of such beneficial interest, the Trustee, as
Registrar, shall instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount of the applicable Restricted Global Security and to
increase or cause to be increased the aggregate principal amount of the
applicable Regulation S Global Security by the principal amount of the
beneficial interest in the Restricted Global Security to be exchanged, to credit
or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Regulation S Global Security equal to
the reduction in the aggregate principal amount of the applicable Restricted
Global Security, and to debit, or cause to be debited, from the account of the
Person making such exchange or transfer the beneficial interest in the
Restricted Global Security that is being exchanged or transferred.
(b) Regulation S Global Security to Restricted Global Security. If, at any
time, an owner of a beneficial interest in a Regulation S Global Security
deposited with the Depositary or with the Trustee as custodian for the
Depositary wishes to transfer its interest in such Regulation S Global Security
to a Person who is required or permitted to take delivery thereof in the form of
an interest in a Restricted Global Security, such owner shall, subject to the
Applicable Procedures, exchange or cause the exchange of such interest for an
equivalent beneficial interest in a Restricted Global Security, as provided in
this Section 307(b). Upon receipt by the Trustee of (1) instructions given in
accordance with the Applicable Procedures from an Agent Member, directing the
Trustee, as Registrar, to credit or cause to be credited a beneficial interest
in the Restricted Global Security equal to the beneficial interest in the
Regulation S Global Security to be exchanged, (2) a written order given in
accordance with the Applicable Procedures containing information regarding the
participant account of the Depositary to be credited with such increase and (3)
if such transfer is requested prior to the expiration of the Restricted Period,
a certificate in the form of Exhibit C attached hereto given by the owner of
such beneficial interest, the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the aggregate principal amount of
such Regulation S Global Security and to increase or cause to be increased the
aggregate principal amount of the applicable Restricted Global Security by the
principal amount of the beneficial interest in the Regulation S Global Security
to be exchanged, and the Trustee, as Registrar,
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shall instruct the Depositary, concurrently with such reduction, to credit or
cause to be credited to the account of the Person specified in such instructions
a beneficial interest in the applicable Restricted Global Security equal to the
reduction in the aggregate principal amount of such Regulation S Global Security
and to debit or cause to be debited from the account of the Person making such
transfer the beneficial interest in the Regulation S Global Security that is
being transferred. After the expiration of the Restricted Period, the
certificate described in clause (3) above shall no longer be required to effect
transfers pursuant to this Section 307(b).
(c) Transfers of U.S. Physical Securities for Restricted Global Security
or Regulation S Global Security. If the holder of a U.S. Physical Security
wishes at any time to transfer such holder's U.S. Physical Security to a Person
who wishes to take delivery thereof in the form of a beneficial interest in the
Regulation S Global Security or the Restricted Global Security, such transfer
may be effected, subject to the Applicable Procedures, only in accordance with
the provisions of this Section 307(c). Upon receipt by the Trustee of (1)
instructions given in accordance with the Applicable Procedures from an Agent
Member directing the Trustee to credit or cause to be credited a beneficial
interest in the Regulation S Global Security or Restricted Global Security, as
the case may be, in a principal amount equal to that of the U.S. Physical
Securities to be so transferred, (2) a written order given in accordance with
the Applicable Procedures containing information regarding the participant
account of the Depositary (and the Euroclear or CEDEL account, as applicable) to
be credited with such beneficial interest and (3) a certificate in substantially
the form set forth in Exhibit D, given by the holder of such U.S. Physical
Security, the Trustee, as Security Registrar, shall instruct the Depositary to
increase the principal amount of the Regulation S Global Security or the
Restricted Global Security, as the case may be, by the principal amount of the
U.S. Physical Security to be so transferred, and to cancel or cause to be
canceled such U.S. Physical Security.
(d) Restricted Global Security or U.S. Physical Security to Regulation S
Global Security After Two Years. If the holder of a beneficial interest in a
Restricted Global Security or U.S. Physical Security wishes at any time after
the second anniversary of the date of original issuance of the Securities to (A)
transfer such interest to a Person who wishes to take delivery thereof in the
form of a beneficial interest in the Regulation S Global Security or (B) to
exchange such interest for a beneficial interest in a Regulation S Global
Security, such transfer or exchange may be effected, subject to the Applicable
Procedures, only in accordance with this Section 307(d). Upon receipt by the
Trustee of (1) in the case of a transfer or exchange of an interest in the
Restricted Global Security or a U.S. Physical Security, instructions given in
accordance with the Applicable Procedures from an Agent Member directing the
Trustee to credit or cause to be credited to a beneficial interest in the
Regulation S Global Security in an amount equal to that the beneficial interest
in the Restricted Global Security to be so transferred or exchanged, (2) a
written order given in accordance with the Applicable Procedures containing
information regarding the participant account of the Depositary (and, if
applicable, the Euroclear or CEDEL account, as the case may be) to be credited
with such beneficial interest and (3) a certificate substantially in the
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form of Exhibit E hereto given by the holder of such beneficial interest, the
Trustee, as Registrar, shall (i) in the case of a transfer or exchange of an
interest in the Restricted Global Security, instruct the Depositary to reduce
the principal amount of the Restricted Global Security, and to increase the
principal amount of the Regulation S Global Security, by the principal amount of
the beneficial interest in the Restricted Global Security to be so transferred
or exchanged, and to credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Regulation S Global
Security having a principal amount equal to the amount by which the principal
amount of the Restricted Global Security was reduced upon such transfer or
exchange or (ii) in the case of a transfer or exchange of a U.S. Physical
Security, cancel such U.S. Physical Security and increase the principal amount
of the Regulation S Global Security accordingly.
(e) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain as required by law copies of all letters,
notices and other written communications received pursuant to Section 306 or
this Section 307. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or the
Registrar, or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver, in exchange for any such mutilated Security or
in lieu of any such destroyed, lost or stolen Security, a new Security of like
tenor and principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
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Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 309. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially shall be the office of the Trustee located at One Liberty
Plaza, 23rd Floor, New York, New York 10006) pursuant to Section 1002 or, at the
option of the Company, interest may be paid by check mailed to the address of
the Person entitled thereto pursuant to 310 as such address appears in the
Security Register; provided that all payments with respect to Global Securities
and Physical Securities the Holders of which have given wire transfer
instructions to the Trustee (or other Paying Agent) by the Regular Record Date
shall be required to be made by wire transfer of immediately available funds to
the accounts specified by the holders thereof.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the Regular Record Date by virtue of having been such
Holder, and such defaulted interest and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Securities (such defaulted interest
and interest thereon herein collectively called "Defaulted Interest") may be
paid by the Company, at its election in each case, as provided in clause (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date, and in the
name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be given in the manner provided for in Section 106, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
given, such Defaulted Interest shall be
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paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
If the Company shall be required to pay any additional interest pursuant
to the terms of the Registration Rights Agreement, it shall deliver an Officers'
Certificate to the Trustee setting forth the new interest rate and the period
for which such rate is applicable.
SECTION 310. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and premium, if
any, and (subject to Sections 305 and 309) interest on such Security and for all
other purposes whatsoever, whether or not such Security be overdue, and none of
the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 311. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for
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any Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee shall
be disposed of by the Trustee in accordance with its customary procedures and
certification of their disposal delivered to the Company unless by Company Order
the Company shall direct that cancelled Securities be returned to it.
SECTION 312. Issuance of Additional Securities. The Company may, subject
to Article X of this Indenture, issue up to $100,000,000 aggregate principal
amount of Additional Securities. Any Additional Securities (and Exchange
Securities, if any, issued in exchange therefor) will be part of the same issue
as the Securities offered hereby and will vote on all matters with the
Securities offered hereby.
SECTION 313. CUSIP and CINS Numbers. The Company in issuing the Securities
may use "CUSIP" and "CINS" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" and "CINS" numbers in notices of redemption as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
SECTION 314. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Securities, as expressly provided for herein or pursuant hereto) and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when
(a) either
(i) all the Securities theretofore authenticated and delivered
(other than mutilated, destroyed, lost or stolen Securities that
have been replaced or paid as provided in Section 308 and Securities
that have been subject to
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defeasance under Article XII) have been delivered to the Trustee for
cancellation; or
(ii) all Securities not theretofore delivered to the Trustee
for cancellation
(A) have become due and payable,
(B) will become due and payable at Stated Maturity within one
year, or
(C) are to be called for redemption within one year under
arrangements reasonably satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (A), (B) or (C) above, has irrevocably deposited
or caused to be deposited with the Trustee funds in trust for the purpose in an
amount sufficient to pay and discharge the entire Indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any, on) and interest on the Securities to the date
of such deposit (in the case of Securities that have become due and payable) or
to the Stated Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (ii) of clause (a) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
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ARTICLE V
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest on any Security when it
becomes due and payable, and continuance of such default for a period of
30 days;
(b) default in the payment of the principal of or premium, if any,
on any Security when due;
(c) failure to perform or comply with the provisions described in
Article VIII or to make or consummate a Change of Control Offer or an
Asset Sale Offer in accordance with the provision of Section 1012 and
Section 1013, respectively;
(d) default in the performance, or breach, of any covenant or
agreement of the Company contained in this Indenture (other than as
contemplated by clauses (a), (b) and (c) above) and continuance of such
default or breach for a period of 60 days after written notice has been
given (x) to the Company by the Trustee or (y) to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of
the Securities then Outstanding;
(e) the occurrence of an event of default under any mortgage, bond,
indenture, loan agreement or other document evidencing Indebtedness of the
Company or any Restricted Subsidiary, which Indebtedness has an aggregate
outstanding principal amount of $25,000,000 or more, and such default (i)
results in the acceleration of such Indebtedness prior to its Stated
Maturity or (ii) constitutes a failure to make any payment of principal
with respect to any such Indebtedness when due and payable after
expiration of any applicable grace period;
(f) failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments the uninsured portion of which exceeds in
the aggregate $25,000,000, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days;
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(g) entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustments or composition of or in respect
of the Company or any Significant Subsidiary under the Federal Bankruptcy
Code or any other applicable federal or state law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days; or
(h) the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by
it to the institution of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
applicable federal or state law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or any
Significant Subsidiary or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than as specified in Section 501(g) or (h)
occurs and is continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Securities then Outstanding may, and the
Trustee at the request of such Holders shall, declare the principal of and
premium, if any, and accrued and unpaid interest on, all of the Outstanding
Securities immediately due and payable and, upon any such declaration, all such
amounts will become due and payable immediately. If an Event of Default
specified in Section 501(g) or (h) above occurs and is continuing, then the
principal and premium, if any, and accrued and unpaid interest on all of the
Securities Outstanding will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder of
Securities. The Company shall deliver to the Trustee, within 10 days after the
occurrence thereof, notice of any default or acceleration referred to the
Section 501(e).
At any time after a declaration of acceleration, but before a judgment or
decree for payment of the money due has been obtained by the Trustee, the
Holders of a majority in aggregate principal amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may rescind such
declaration and its consequences if
(i) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
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(A) all overdue interest on all Securities,
(B) all unpaid principal of and premium, if any, on any
Outstanding Securities that has become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne
by the Securities,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest and overdue principal at the rate borne
by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(ii) all Events of Default, other than the non-payment of amounts of
principal of or premium, if any, on or interest on the Securities that
have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the Securities because an Event of Default specified
in Section 501(e) shall have occurred and be continuing, such declaration of
acceleration shall be automatically annulled if the Indebtedness that is the
subject of such Event of Default has been discharged or the holders thereof have
rescinded their declaration of acceleration in respect of such Indebtedness, and
written notice of such discharge or rescission, as the case may be, shall have
been given to the Trustee by the Company and countersigned by the holders of
such Indebtedness or a trustee, fiduciary or agent for such holders, within 30
days after such declaration of acceleration in respect of the Securities, and no
other Event of Default has occurred during such 30-day period which has not been
cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of or premium,
if any, on any Security at the Maturity thereof,
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the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other securities or
property payable or deliverable upon the conversion or exchange of such
securities or upon any such claims and to distribute the same;
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and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name and
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or premium, if
any or interest, upon presentation of the Securities and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
606;
SECOND: To the payment of the amounts then due and unpaid for
principal of and premium, if any, and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal (and
premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Company.
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SECTION 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities (including fees and
expenses of its agents and counsel) to be incurred in compliance with such
request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article XII) and in such
Security of the principal of and premium, if any, and (subject to Section 309)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
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SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
308, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
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(c) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may, on behalf of the Holders of all of the Securities,
waive any past defaults hereunder, except a default
(a) in the payment of the principal of or premium, if any or
interest on any Security, or
(b) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Security Outstanding.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 515. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorney's fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
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the aggregate more than 10% in principal amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal (or premium, if any ) or interest on any Security on or after the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
SECTION 516. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No officer, employee, incorporator or stockholder of the Company, as such,
shall have the liability for any obligations of the Company under the Securities
or this Indenture, as applicable, for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder by accepting a
Security waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Securities.
ARTICLE VI
THE TRUSTEE
SECTION 601. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each Holder of the Securities in the
manner and to the extent provided in TIA Section 313(c) notice of the Default or
Event of Default within 90 days after the occurrence thereof; provided, however,
that, except in the case of a Default or an Event of Default in the payment of
principal of and premium, if any, on or interest on any Securities, the Trustee
may withhold the notice to the Holders of the Securities if a committee of its
trust officers in good faith determines that withholding such notice is in the
interests of the Holders of the Securities.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through 315(d):
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting, pursuant to the terms of this Indenture
or otherwise, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper Person or Persons;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order with
sufficient detail
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as may be requested by the Trustee and any resolution of the Board of
Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate or an Opinion of
Counsel;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities (including fees and expenses
of its agents and counsel) which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into,
and may conclusively rely upon, the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture; and
(i) except during the continuance of an Event of Default, the
Trustee need perform only those duties as are specifically set forth in
this Indenture.
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The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or the Securities. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Registrar or any other agent of the
Company or of the Trustee, in its individual or any other capacity, may become
the owner or pledgee of Securities and, subject to TIA Sections 310(b) and 311,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Paying Agent, Registrar or such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee (in its capacity as Trustee, Paying Agent
and Registrar) from time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
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(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
enforcing this Indenture against the Company (including this Section 606)
and of defending itself against any claim (whether asserted by any Holder
or the Company) or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture and any termination under any bankruptcy law. As
security for the performance of such obligations of the Company, the Trustee
shall have a claim prior to the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the payment of
principal of and premium, if any, or interest on particular Securities.
When the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(g) or (h) , the expenses (including
the reasonable charges and expenses of its counsel) of and the compensation for
such services are intended to constitute expenses of administration under any
applicable bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be eligible to
act as Trustee under TIA Section 310(a)(1). The Trustee together with its parent
on a consolidated basis shall have a combined capital and surplus of at least
$50,000,000 and each successor Trustee shall have a combined capital and surplus
of at least $50,000,000. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of Federal, State,
territorial or District of Columbia supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
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(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 609 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of not
less than a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, except when the Trustee's duty to resign is stayed in accordance
with the provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided subject to TIA Section 315(e),
any Holder
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who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to the Holders of
Securities in the manner provided for in Section 106. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder subject to the retiring Trustee's rights as provided under the
last sentence of Section 606. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities. In
case at that time any of the Securities shall not have been authenticated, any
successor Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor Trustee. In all such cases
such certificates shall have the full force and effect which this Indenture
provides that the certificate of authentication
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of the Trustee shall have; provided, however, that the right to adopt the
certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same, agrees with
the Company and the Trustee that none of the Company or the Trustee or any agent
of either of them shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Holders in accordance with
TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first May 15
after the first issuance of Securities, the Trustee shall transmit to the
Holders, in the manner and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate or merge with or into any other Person
(whether or not the Company is the surviving Person), or directly or indirectly
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) to any Person or
Persons, in one transaction or a series of related transactions, unless each of
the following conditions is satisfied:
(a) either (i) the Company is the surviving corporation or (ii) the
Person (if other than the Company) formed by such consolidation or into
which the Company is
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merged or the Person that acquires by sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis (the "Surviving Entity") (A) is a corporation,
partnership, limited liability company or trust duly organized and validly
existing under the laws of the United States, any state thereof or the
District of Columbia and (B) expressly assumes, by a supplemental
indenture in form reasonably satisfactory to the Trustee, all the
obligations of the Company under this Indenture and the Securities;
(b) immediately after giving effect to such transaction or series of
transactions on a pro forma basis, no Default or Event of Default has
occurred and is continuing;
(c) immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Consolidated Net Worth of the
Company (or of the Surviving Entity if the Company is not the continuing
obligor under this Indenture) is equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction or series
of transactions;
(d) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (on the assumption that the transaction
or series of transactions occurred at the beginning of the most recently
ended four full fiscal quarter period for which internal financial
statements are available), the Company (or the Surviving Entity if the
Company is not the continuing obligor under this Indenture) could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the first paragraph of Section 1010; and
(e) the Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such transaction
complies with the requirements of this Indenture.
In the event of a merger of a Wholly-Owned Restricted Subsidiary into the
Company, the Company need not comply with subparagraphs (c) and (d) above. In
the event of a merger of the Company into Safety-Kleen Services, the Company
need not comply with subparagraph (d) above.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries that constitutes all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
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SECTION 802. Successor Substituted.
In the event of any transaction or series of related transactions
described in and complying with the conditions listed in Section 801 in which
the Company is not the continuing obligor under this Indenture, the Surviving
Entity shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
Surviving Entity had been named as the Company herein, and thereafter the
Company shall, except in the case of a lease, be discharged of all its
obligations and covenants under this Indenture and the Securities.
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
SECTION 901. Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, for any of the following
purposes:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
contained herein and in the Securities; or
(b) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(c) to add any additional Events of Default; or
(d) to provide for uncertificated Securities in addition to or in
place of the certificated Securities; or
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
609; or
(f) to secure or guarantee the Securities; or
(g) to cure any ambiguity, to correct or supplement any provision in
this Indenture which may be defective or inconsistent with any other
provision herein, or to make any other provision in this Indenture, or to
make any other provisions with
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respect to matters or questions arising under this Indenture, provided
that such action shall not adversely affect the interests of the Holders;
or
(h) to qualify, or maintain the qualification of, this Indenture
under the Trust Indenture Act.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture or
Security, and upon receipt by the Trustee of the documents described in Section
903 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 902. With Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into one or more indentures supplemental
hereto for the purpose of modifying in any manner this Indenture; provided,
however, that no such indenture supplemental may, without the consent of the
Holder of each Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date); or
(b) reduce the percentage in aggregate principal amount of the
Outstanding Securities required to consent to any amendment of, or waiver
of compliance with, any provision of or defaults under this Indenture; or
(c) waive a Default or Event of Default in the payment of principal
of, or premium, if any, or interest on the Securities (except a rescission
of acceleration of Securities by the Holders of at least a majority in
aggregate principal amount of the then Outstanding Securities (including
Additional Securities issued under this Indenture, if any)); or
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(d) amend, change or modify the obligation of the Company to make
and consummate a Change of Control Offer or Asset Sale Offer in accordance
with the provisions of Section 1012 on Section 1013, respectively;
(e) modify any mandatory redemption provisions of the Securities; or
(f) amend, change or modify any of the provisions in this Section
902.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture and that such supplemental indenture constitutes the legal, valid and
binding obligation of the Company subject to the customary exceptions. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustees own rights, duties or immunities under this
Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed
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by the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Security affected,
in the manner provided for in Section 106, setting forth in general terms the
substance of such supplemental indenture.
ARTICLE X
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and Interest.
The Company covenants and agrees for the benefit of the Holders that it
will duly and punctually pay the principal of and premium, if any and interest
on the Securities in accordance with the terms of the Securities and this
Indenture. Principal and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal and interest then due and the
Trustee or the Paying Agent, as the case may be, is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Corporate Trust Office located at One Liberty
Plaza, 23rd Floor, New York, New York 10006 of the Trustee shall be such office
or agency of the Company, unless the Company shall designate and maintain some
other office or agency for one or more of such purposes. The Company will give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee and
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the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies (in or outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind any such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and any change in the location of any such other office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of or premium, if any, or interest on
any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal of or premium, if
any, or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before each due date of the principal of or premium,
if any, or interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay the principal (and premium, if any) or interest so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of such action or any
failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of and
premium, if any, or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
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The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or premium, if any, or
interest on any Security and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article VIII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and corporate power of the Company and each Subsidiary; provided,
however, that the Company shall not be required to preserve any such corporate
existence and corporate power if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries taken as a whole and that the loss
thereof is not materially adverse to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
lawful claims for labor, materials and supplies, which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim (i) whose
amount, applicability
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or validity is being contested in good faith by appropriate proceedings or (ii)
where the failure to pay is not materially adverse to the Holders.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and is not materially
adverse to the Holders.
SECTION 1007. Insurance.
The Company will at all times keep all of its and its Restricted
Subsidiaries' material properties which are of an insurable nature insured with
insurers, believed by the Company to be responsible, against loss or damage to
the extent that property of similar character is usually so insured by
corporations similarly situated and owning like properties.
SECTION 1008. Statement by Officers As to Default.
(a) The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, a brief certificate from the principal executive officer,
principal financial officer or principal accounting officer as to his or her
knowledge of compliance by the Company and the Restricted Subsidiaries with all
conditions and covenants under this Indenture. For purposes of this Section
1008(a), such compliance shall be determined without regard to any period of
grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this Indenture,
or if the trustee for or the holder of any other evidence of Indebtedness of the
Company or any Restricted Subsidiary gives any notice or takes any other action
with respect to a claimed default, the Company shall deliver to the Trustee by
registered or certified mail or by telegram, telex or facsimile transmission an
officers certificate specifying such event, notice or other action within five
Business Days of its occurrence.
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SECTION 1009. Provision of Reports and Financial Statements.
The Company shall be required to file on a timely basis with the
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that the
Company would be required to file if it were subject to Section 13 or 15(d) of
the Exchange Act. The Company shall also be required (x) to supply to the
Trustee and each Holder, or supply to the Trustee for forwarding to each such
Holder, without cost to such Holder, copies of such reports and documents within
15 days after the date on which the Company files such reports and documents
with the Commission or the date on which the Company would be required to file
such reports and documents if the Company were so required and (y) if filing
such reports and documents with the Commission is not accepted by the Commission
or is prohibited under the Exchange Act, to supply at the Company's cost copies
of such reports and documents to any prospective Holder of Securities promptly
upon written request. In addition, the Company shall furnish, for so long as any
Securities remain outstanding, to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock.
The Company shall not, and shall not permit any Restricted Subsidiary to,
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur (collectively, "incur"), any
Indebtedness (including Acquired Indebtedness), other than Permitted
Indebtedness, or issue any Disqualified Stock, except that the Company or a
Restricted Subsidiary may incur Indebtedness or issue Disqualified Stock if, at
the time of such incurrence or issuance, the Fixed Charge Coverage Ratio of the
Company and its Restricted Subsidiaries for the four full fiscal quarters (taken
as one accounting period) immediately preceding the incurrence of such
Indebtedness or the issuance of such Disqualified Stock for which internal
financial statements are available would have been equal to at least 2.0 to 1.0.
For so long as the Safety-Kleen Services Indenture is in effect, the
Company will not permit Safety Kleen Services or any Restricted Subsidiary of
Safety Kleen Services to incur any Indebtedness (including Acquired
Indebtedness), other than Permitted Indebtedness, or issue any Disqualified
Stock, except that Safety-Kleen Services or any such Restricted Subsidiary may
incur Indebtedness or issue Disqualified Stock if, at the time of such
incurrence or issuance, the Safety-Kleen Services Fixed Charge Coverage Ratio
for the four full fiscal quarters (taken as one accounting period) immediately
preceding the incurrence of such Indebtedness or the issuance of such
Disqualified Stock for which internal financial statements are available would
have been equal to at least 2.0 to 1.0 if such incurrence is on or prior to May
29, 2000 and 2.25 to 1.0 if thereafter.
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In making the foregoing calculations for any four-quarter period which
includes the Closing Date, pro forma effect shall be given to the Offering and
the application of the net proceeds therefrom, as if such transactions had
occurred at the beginning of such four-quarter period. In addition (but without
duplication), in making the foregoing calculation, pro forma effect will be
given to: (i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred and the application of such
proceeds occurred at the beginning of such four-quarter period, (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company or
its Restricted Subsidiaries, or Safety-Kleen Services or its Restricted
Subsidiaries, as the case may be, since the first day of such four-quarter
period as if such Indebtedness was incurred, repaid or retired at the beginning
of such four-quarter period, or (iii) the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any other company, entity or business acquired or disposed of by the Company or
any Restricted Subsidiary, as the case may be, since the first day of such
four-quarter period, as if such acquisition or disposition occurred at the
beginning of such four-quarter period. In making a computation under the
foregoing clause (i) or (ii), (A) interest on Indebtedness bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period (taking into
account any Hedging Obligations applicable to such Indebtedness if such Hedging
Obligations have a remaining term at the date of determination in excess of 12
months), (B) if such Indebtedness bears, at the option of the Company or
Safety-Kleen Services, as the case may be, a fixed or floating rate of interest,
interest thereon will be computed by applying, at the option of the Company,
either the fixed or floating rate and (C) the amount of any Indebtedness under a
revolving credit facility will be computed based on the average daily balance of
such Indebtedness during such four-quarter period.
SECTION 1011. Limitation on Restricted Payments. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
make any Restricted Payment unless at the time of, and immediately after giving
effect to, the proposed Restricted Payment: (i) no Default or Event of Default
has occurred and is continuing, (ii) the Company could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of Section 1010 and (iii) the aggregate amount of all Restricted
Payments declared or made after the Closing Date does not exceed the sum of:
(A) 50% of the Consolidated Net Income of the Company accrued on a
cumulative basis during the period (taken as one accounting period)
beginning on the first day of the Company's fiscal quarter during which
the Closing Date occurs and ending on the last day of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income is a loss, minus 100% of such
amount), plus
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(B) the aggregate net cash proceeds received by the Company after
the Closing Date from the issuance or sale (other than to a Subsidiary)
of, or as a capital contribution in respect of, Qualified Equity Interests
of the Company, plus
(C) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination will be conclusive), received by the Company
after the Closing Date from the issuance or sale (other than to a
Subsidiary) of debt securities or Disqualified Stock that have been
converted into or exchanged for Qualified Stock of the Company, plus the
aggregate net cash proceeds received by the Company at the time of such
conversion or exchange, plus
(D) the amount by which Indebtedness of the Company is reduced on
the Company's balance sheet upon the conversion or exchange (other than by
a Subsidiary of the Company) subsequent to the Closing Date of any
Indebtedness of the Company for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash, or the fair value of
any other property, distributed by the Company upon such conversion or
exchange); plus
(E) the amount of any dividends, distributions, loans, advances,
intercompany transfers or principal payments actually paid by Safety-Kleen
Services or any of its Restricted Subsidiaries to the Company to the
extent such amount was excluded from the calculation of the amount set
forth in subparagraph (A) of this paragraph; provided, that the amount of
such dividend, distribution, loan, advance, intercompany transfer or
principal payment shall not be so included pursuant to this subparagraph
(E) to the extent such amount is used by the Company to pay principal or
interest on the Securities, the Company IRBs, the Company Promissory Note,
the PIK Debenture (other than in connection with its repurchase pursuant
to clause (b)(ix) below) or any other Indebtedness of the Company; plus
(F) $30,000,000.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take any of the following actions, so long as, with respect to
clauses (ii), (v), (vi) and (vii), no Default or Event of Default has occurred
and is continuing or would occur:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not
have been prohibited by the foregoing provision;
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(ii) the repurchase, redemption or other acquisition or retirement
for value of any shares of Capital Stock of the Company, in exchange for,
or out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary), of Qualified Equity Interests of the
Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary), of Qualified Equity Interests of the
Company;
(iv) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out
of the net cash proceeds of a substantially concurrent issuance or sale
(other than to a Subsidiary) of, Subordinated Indebtedness, so long as the
Company or a Restricted Subsidiary would be permitted to refinance such
original Subordinated Indebtedness with such new Subordinated Indebtedness
pursuant to clause (xii) of the definition of Permitted Indebtedness;
(v) the repurchase of any Subordinated Indebtedness at a purchase
price not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a "change of control" in accordance with
provisions similar to the provisions of Section 1013; provided that, prior
to or simultaneously with such repurchase, the Company has made the Change
of Control Offer as provided in such covenant with respect to the
Securities and has repurchased all Securities validly tendered for payment
in connection with such Change of Control Offer;
(vi) the purchase, redemption, defeasance or other acquisition or
retirement for value of, the 9 1/4% Senior Subordinated Notes due 2008 of
Safety-Kleen Services;
(vii) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness owed by the Company to
any Wholly-Owned Foreign Restricted Subsidiary;
(viii) Safety-Kleen Services and its Restricted Subsidiaries may
make any Investment permitted pursuant to Section 1011 of the Safety-Kleen
Services Indenture, as in effect on the date of this Indenture; and
(ix) the repurchase of the PIK Debenture pursuant to the PIK
Purchase Agreement; provided that the cash portion of the purchase price
does not exceed $200 million plus an amount equal to accrued and unpaid
interest.
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The payments described in clauses (ii), (iii) and (v) of this paragraph shall be
Restricted Payments that shall be permitted to be taken in accordance with this
paragraph (b) but shall reduce the amount that would otherwise be available for
Restricted Payments under clause (iii) of paragraph (a) of this Section 1011 and
the payments described in clauses (i), (iv), (vi), (vii), (viii) and (ix) of
this paragraph (b) shall be Restricted Payments that shall be permitted to be
taken in accordance with this paragraph (b) and shall not reduce the amount that
would otherwise be available for Restricted Payments under clause (iii) of
paragraph (a) of this Section 1011.
(c) For the purpose of making any calculations under this Indenture (i) if
a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company
shall be deemed to have made an Investment in an amount equal to the greater of
fair market value or net book value of the net assets of such Restricted
Subsidiary at the time of such designation as determined by the Board of
Directors of the Company, whose good faith determination will be conclusive,
(ii) any property transferred to or from an Unrestricted Subsidiary will be
valued at fair market value at the time of such transfer, as determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive and (iii) subject to the foregoing, the amount of any Restricted
Payment, if other than cash, will be determined by the Board of Directors of the
Company, whose good faith determination will be conclusive.
If the aggregate amount of all Restricted Payments calculated under
paragraph (a) of this Section 1011 includes an Investment in an Unrestricted
Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, the
aggregate amount of all Restricted Payments calculated under the first paragraph
of this Section 1011 shall be reduced by the lesser of (x) the net asset value
of such Subsidiary at the time it becomes a Restricted Subsidiary and (y) the
initial amount of such Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under this Section 1011
shall be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Net Income; provided that the total amount by which the
aggregate amount of all Restricted Payments may be reduced shall not exceed the
lesser of (x) the cash proceeds received by the Company and its Restricted
Subsidiaries in connection with such net reduction and (y) the initial amount of
such Investment.
In computing the Consolidated Net Income of the Company for purposes of
clause (iii)(A) of paragraph (a) of this Section 1011, (i) the Company may use
audited financial statements for the portions of the relevant period for which
audited financial statements are available on the date of determination and
unaudited financial statements and other current financial data based on the
books and records of the Company for the remaining portion of such period and
(ii) the Company will be permitted to rely in good faith on the financial
statements and other financial data derived from the books and records of the
Company that
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are available on the date of determination. If the Company makes a Restricted
Payment that, at the time of the making of such Restricted Payment, would in the
good faith determination of the Company be permitted under the requirements of
this Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company's financial statements affecting Consolidated Net
Income of the Company for any period.
SECTION 1012. Purchase of Securities upon a Change of Control.
If a Change of Control occurs at any time, then each Holder shall have the
right to require that the Company purchase such Holder's Securities, in whole or
in part, at a purchase price in cash equal to 101% of the principal amount of
such Securities, if any, plus accrued and unpaid interest, if any, to the date
of purchase, pursuant to the offer described below (the "Change of Control
Offer") and the other procedures set forth in this Indenture.
Within 30 days following any Change of Control, the Company shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Securities by first-class mail, postage prepaid, at its address
appearing in the Security Register, stating, among other things, (i) the
purchase price and the purchase date, which will be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is mailed or such
later date as is necessary to comply with requirements under the Exchange Act
(the "Change of Control Payment Date"); (ii) that any Security or Additional
Security not tendered will continue to accrue interest; (iii) that, unless the
Company defaults in the payment of the purchase price, any Securities or
Additional Securities accepted for payment pursuant to the Change of Control
Offer will cease to accrue interest after the Change of Control Payment Date;
(iv) that Holders electing to have any Securities and Additional Securities
purchased pursuant to a Change of Control Offer shall be required to surrender
the Securities, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Securities completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (v) that Holders shall be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Securities delivered for
purchase, and a statement that such Holder is withdrawing his election to have
such Securities purchased; (vi) that Holders whose Securities are being
purchased only in part shall be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an integral multiple
thereof; and (vii) the instructions that the Holders of Securities must follow
in order to tender their Securities.
The Company shall comply with any applicable tender offer rules including
Rule 14e- 1 under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.
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SECTION 1013. Limitation on Certain Asset Sales.
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any Asset Sale unless (i) the consideration received by the
Company or such Restricted Subsidiary for such Asset Sale is not less than the
fair market value of the assets sold (as determined by the Board of Directors of
the Company, whose good faith determination will be conclusive, and evidenced by
a resolution of the Board of Directors) and (ii) the consideration received by
the Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents; provided that the amount of
(x) any liabilities (as shown on the most recent balance sheet of the Company or
such Restricted Subsidiary) of the Company or any of its Restricted Subsidiaries
(other than liabilities that are by their terms subordinated to the Securities
or any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash
Equivalents received), shall be deemed to be cash or Cash Equivalents, as the
case may be, for purposes of this provision.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may, at its option, within 360 days after such Asset Sale, (i) apply
all or a portion of the Net Cash Proceeds to the permanent reduction of amounts
outstanding under the Senior Credit Facility or repay Indebtedness of any
Restricted Subsidiary, or (ii) invest (or enter into a legally binding agreement
to invest) all or a portion of such Net Cash Proceeds in properties and assets
to replace the properties and assets that were the subject of the Asset Sale or
in properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, as such businesses are conducted
prior to such Asset Sale or in businesses reasonably related or ancillary
thereto (in any such case as determined by the Board of Directors in good
faith). If any such legally binding agreement to invest such Net Cash Proceeds
is terminated, the Company may, within 90 days of such termination or within 360
days of such Asset Sale, whichever is later, invest such Net Cash Proceeds as
provided in clause (i) or (ii) above (without regard to the parenthetical
contained in such clause (ii)) above. Notwithstanding the foregoing, if the
Company or any Restricted Subsidiary engages in an Asset Sale of Designated
Assets (x) the Company may, at its option, within 360 days after such Asset Sale
of Designated Assets, (1) apply all or a portion of the Net Cash Proceeds to
reduce the amounts outstanding under the Senior Credit Facility or repay other
Indebtedness of any Restricted Subsidiary or (2) invest (or enter into a legally
binding agreement to invest) all or a portion of such Net Cash Proceeds as set
forth in clause (ii) above and (y) the Company or the relevant Restricted
Subsidiary shall not be required to receive, as set forth in clause (ii) of
paragraph (a) of this Section 1013, 75% of the consideration in respect of such
Asset Sale
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of Designated Assets in the form of cash or Cash Equivalents. The amount of such
Net Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $15,000,000, the
Company shall, within 30 days thereafter, make an offer to purchase (an "Asset
Sale Offer") from all Holders of Securities on a pro rata basis, in accordance
with the procedures set forth in paragraph (d) below, the maximum principal
amount (expressed as a multiple of $1,000) of Securities that may be purchased
with the Excess Proceeds. The offer price as to each Security will be payable in
cash in an amount equal to 100% of the principal amount of such Security plus in
each case accrued and unpaid interest, if any, to the date of repurchase. To the
extent that the aggregate principal amount of Securities tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use the
portion of the Excess Proceeds not required to be used to repurchase the
Securities for general corporate purposes. If the aggregate principal amount of
Securities validly tendered and not withdrawn by holders thereof exceeds the
Excess Proceeds, the Securities to be purchased will be selected on a pro rata
basis (based upon the principal amount of Securities). Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds will be reset to zero.
(d) Within the time period described in paragraph (c) above for making an
Asset Sale Offer, the Company shall mail a notice to each Holder in the manner
provided in Section 106 stating: (1) that the Asset Sale Offer is being made
pursuant to the provisions of Section 1013 of this Indenture and that all
Securities and Additional Securities, if any, duly and timely tendered shall be
accepted for payment (except, as provided above, if the aggregate principal
amount as the case may be, of the Securities and Additional Securities exceeds
the amount of Excess Proceeds); (2) the purchase price and the purchase date
which will be a Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed (the "Asset Sale Purchase Date"); (3) that any
Security not tendered will continue to accrue interest; (4) that, unless the
Company defaults in the payment of the purchase price, any Securities accepted
for payment pursuant to the Asset Sale Offer will cease to accrue interest after
the Asset Sale Purchase Date; (5) that Holders electing to have any Securities
purchased pursuant to an Asset Sale Offer shall be required to surrender the
Securities, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Securities completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Asset Sale Purchase Date; (6) that Holders shall be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Asset Sale Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Securities delivered for purchase, and a
statement that such Holder is withdrawing his election to have such Securities
purchased; (7) that Holders whose Securities are being purchased only in part
shall be issued new Securities equal in principal amount of the unpurchased
portion of the Securities surrendered, which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof; and (8) the
instructions that the Holders of Securities must follow in order to tender their
Securities.
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SECTION 1014. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction or series
of transactions with, or for the benefit of, any Affiliate of the Company or any
of its Restricted Subsidiaries unless (a) such transaction or series of
transactions is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that could have been
obtained in an arm's length transaction with third parties who are not
Affiliates and (b) either (i) with respect to any transaction or series of
related transactions involving aggregate payments in excess of $5,000,000, but
less than $10,000,000, the Company delivers a resolution of the Board of
Directors of the Company set forth in an Officers' Certificate to the Trustee
certifying that such transaction or series of related transactions comply with
clause (a) above and that such transaction or transactions have been approved by
the Board of Directors (including a majority of the Disinterested Directors) of
the Company or (ii) with respect to a transaction or series of related
transactions involving aggregate payments equal to or greater than $10,000,000,
the Company delivers to the Trustee (x) an Officers' Certificate certifying that
such transaction or series of related transactions have been approved by the
Board of Directors (including a majority of the Disinterested Directors) of the
Company and (y) a written opinion from a nationally recognized accounting or
investment banking firm to the effect that such transaction or series of related
transactions are fair to the Company or such Restricted Subsidiary from a
financial point of view.
The foregoing covenant shall not restrict any of the following:
(A) transactions among the Company and/or its Restricted
Subsidiaries;
(B) the Company from paying reasonable and customary regular
compensation or fees to, or entering into customary expense reimbursement,
indemnification or similar arrangements with, directors of the Company or
any Restricted Subsidiary who are not employees of the Company or any
Restricted Subsidiary;
(C) transactions permitted by the provisions of Section 1011;
(D) transactions among the Company, Safety-Kleen Services and
Laidlaw pursuant to the Stock Purchase Agreement;
(E) transactions among the Company, Laidlaw and/or Laidlaw
International Finance Corporation pursuant to the PIK Purchase Agreement;
(F) any payments made by the Company or a Restricted Subsidiary to
Laidlaw or transactions entered into among the Company, any Restricted
Subsidiary
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and/or Laidlaw pursuant to customary financial and management service
arrangements (including, without limitation, general liability and
workers' compensation insurance, income tax management and treasury
services); provided, however, that each such payment or transaction is (1)
in the ordinary course of business consistent with past practice prior to
the date of the Indenture and (2) upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary, as the case may
be, than could have been obtained in a comparable arm's length transaction
with a Person that is not an Affiliate of the Company or such Restricted
Subsidiary;
(G) Investments by the Company and its Restricted Subsidiaries in
Safety-Kleen Europe Limited; provided, however, that each such Investment
is (1) being made substantially concurrently with Investments by other
Persons (other than management or former management of Safety-Kleen Europe
Limited) owning equity interests in Safety-Kleen Europe Limited at the
date of such Investment; (2) made on substantially the same terms and
conditions as such Investments being made concurrently by other Persons
(other than management or former management of Safety-Kleen Europe
Limited) owning equity interests in Safety-Kleen Europe Limited at such
date; and (3) upon fair and reasonable terms no less favorable to the
Company or such Restricted Subsidiaries, as the case may be, than could
have been obtained in a comparable arm's length transaction with a person
that is not an Affiliate of the Company or such Restricted Subsidiaries;
and
(H) transactions among the Company and its Restricted Subsidiaries
and (1) Church Dwight Co., Inc. pursuant to the Partnership Agreement, and
(2) the Partnership pursuant to the Sales Agreement; provided, however,
that (a) each such transaction is in the ordinary course of business; (b)
each such transaction is upon fair and reasonable terms no less favorable
to the Company or such Restricted Subsidiaries, as the case may be, than
could have been obtained in a comparable arm's length transaction with a
Person that is not an Affiliate of the Company or such Restricted
Subsidiary; and (c) if any transaction or series of related transactions
involving aggregate payments in excess of $5,000,000 is entered into
pursuant to the Partnership Agreement and/or the Sales Agreement and such
agreement has been amended or replaced since the date of the Indenture,
the Company shall deliver to the Trustee a resolution of the Board of
Directors of the Company set forth in an Officers' Certificate certifying
that such transaction or series of related transactions comply with
subparagraph (a) of the first paragraph in this Section 1014 and that such
transaction or series of related transactions have been approved by the
Board of Directors (including a majority of the Disinterested Directors)
of the Company.
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SECTION 1015. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any
other distributions on or in respect of its Capital Stock, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make
loans or advances to the Company or any other Restricted Subsidiary, or (d)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of any of the following:
(i) this Indenture, the Senior Credit Facility, as in effect on the
date of this Indenture, and any other agreement in effect on the Closing
Date to the extent listed on Schedule I hereto;
(ii) applicable law;
(iii) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary;
(iv) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of
the Person, so acquired;
(v) any encumbrance or restriction contained in contracts for sales
of assets, including the Capital Stock of any Restricted Subsidiary
permitted by Section 1013 with respect to assets to be sold pursuant to
such contract;
(vi) any encumbrance or restriction existing under any agreement
that extends, renews, refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clauses (i) and (iv);
provided that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the Holders of
Securities than those under or pursuant to the agreement so extended,
renewed, refinanced or replaced; and
(vii) any encumbrance or restriction under any agreement relating to
Indebtedness permitted to be incurred under Section 1010; provided, that
the terms and conditions of any such encumbrances or restrictions are not
materially less favorable to the Holders of the Notes than those in the
agreements referred to in clause (i) of this
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Section 1015 (including the Safety-Kleen Services Indenture as in effect
on May 29, 1998).
SECTION 1016. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to issue, convey, sell, assign, transfer, lease or
otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary
(including options, warrants or other rights to purchase shares of such Capital
Stock) except (a) to the Company or a Wholly-Owned Restricted Subsidiary, (b) in
a transaction or series of related transactions consisting of a sale, provided
that immediately after giving effect to such issuance or sale neither the
Company nor any of its Subsidiaries owns any shares of Capital Stock of such
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) and such sale complies with the provisions of
Section 1013, (c) in a transaction or series of related transactions consisting
of a sale (or an issuance for value) provided that immediately after giving
effect to such sale, such Restricted Subsidiary is no longer a Subsidiary of the
Company and such sale complies with Sections 1011 and 1013 or (d) that Safety
Kleen Services may issue or sell shares of its Preferred Stock provided that,
immediately after giving effect to such issuance or sale, Safety Kleen Services
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the second paragraph of Section 1010.
SECTION 1017. Limitation on Liens.
The Company shall not create, incur, affirm or suffer to exist any Lien of
any kind (other than Permitted Liens and Liens arising under the Escrow
Agreement) securing any Indebtedness upon any property or assets (including any
intercompany notes) of the Company now owned or acquired after the Closing Date,
or any income or profits therefrom, unless the Securities are directly secured
equally and ratably with (or prior to in the case of Subordinated Indebtedness)
the obligation or liability secured by such Lien, and except for any Lien
securing Acquired Indebtedness created prior to the incurrence of such
Indebtedness by the Company, provided that any such Lien only extends to the
assets that were subject to such Lien securing such Acquired Indebtedness prior
to the related acquisition by the Company.
SECTION 1018. Unrestricted Subsidiaries.
(a) The Board of Directors of the Company may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary so long as (i) neither the Company nor any Restricted Subsidiary is
directly or indirectly liable for any Indebtedness of such Subsidiary, (ii) no
default with respect to any Indebtedness of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated
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Maturity, (iii) any Investment in such Subsidiary made as a result of
designating such Subsidiary an Unrestricted Subsidiary will not violate the
provisions of Section 1011, (iv) neither the Company nor any Restricted
Subsidiary has a contract, agreement, arrangement, understanding or obligation
of any kind, whether written or oral, with such Subsidiary other than those that
might be obtained at the time from Persons who are not Affiliates of the Company
and (v) neither the Company nor any Restricted Subsidiary has any obligation to
subscribe for additional shares of Capital Stock or other equity interest
in such Subsidiary, or to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided, that (i) no Default or Event of
Default has occurred and is continuing following such designation and (ii) the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of Section 1010
(treating any Indebtedness of such Unrestricted Subsidiary as the incurrence of
Indebtedness by a Restricted Subsidiary).
SECTION 1019. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable for the
payment of any Indebtedness of the Company (except for such Indebtedness of the
Company consisting of a guarantee of Indebtedness of a Restricted Subsidiary),
unless (a) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture providing for a guarantee of payment of the Securities by
such Restricted Subsidiary; and (b) with respect to any guarantee of
Subordinated Indebtedness by a Restricted Subsidiary, any such guarantee is
subordinated to such Restricted Subsidiary's guarantee with respect to the
Securities at least to the same extent as such Subordinated Indebtedness is
subordinated to the Securities, provided that the foregoing provision shall not
be applicable to any guarantee by any Restricted Subsidiary that existed at the
time such Person became a Restricted Subsidiary and was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary.
Any guarantee by a Restricted Subsidiary of the Securities pursuant to the
preceding paragraph may provide by its terms that it shall be automatically and
unconditionally released and discharged upon: (a) any sale, exchange or transfer
to any Person of all of the Company's and the Restricted Subsidiaries' Capital
Stock in, or all or substantially all the assets of, such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by this Indenture); (b) the
release or discharge of the guarantee that resulted in the creation of such
guarantee of the Securities, except a discharge or release by or as a result of
payment under such guarantee; or (c) the designation of such Restricted
Subsidiary as an Unrestricted Subsidiary in accordance with the terms of this
Indenture.
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SECTION 1020. Limitation on Conduct of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, conduct any business other than the business the Company and
its Restricted Subsidiaries were conducting on the Closing Date or businesses
reasonably related or ancillary thereto, except to such extent as would not be
material to the Company and its Restricted Subsidiaries taken as a whole.
SECTION 1021. Limitation on Incurrence of Contingent Obligations.
The Company shall not, and shall not permit any Restricted Subsidiary to,
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur, any Contingent Obligations if, at
the time of such incurrence, all Contingent Obligations outstanding at the date
of such incurrence in the aggregate equal or exceed an amount equal to 17% of
the total assets of the Company and its Restricted Subsidiaries (on a
consolidated basis determined in accordance with GAAP).
SECTION 1022. Payments for Consent.
Neither the Company nor any of its Restricted Subsidiaries shall, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid or is paid to
all Holders that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
SECTION 1023. Limitation on Liens Securing Indebtedness.
After the occurrence of a Fall-away Event, the Company shall not, and
shall not permit any Restricted Subsidiary to, create, incur or assume any Lien
(other than any Permitted Lien) on any properties or assets of the Company or
any Restricted Subsidiary to secure the payment of Indebtedness of the Company
or any Subsidiary if immediately after the creation, incurrence or assumption of
such Lien, the aggregate outstanding principal amount of all Indebtedness of the
Company and the Subsidiaries that is secured by Liens (other than Permitted
Liens) on any properties or assets of the Company and any Restricted
Subsidiaries (other than (x) Indebtedness that is so secured equally and ratably
with (or on a basis subordinated to) the Securities and (y) the Securities) plus
the aggregate amount of all Attributable Debt of the Company and the Restricted
Subsidiaries with respect to all Sale and Leaseback Transactions outstanding at
such time (other than Sale and Leaseback Transactions permitted by the second
paragraph under Section 1024) would exceed 10% of the Consolidated Net Tangible
Assets unless the Company secures the outstanding Securities equally and ratably
with (or prior to) all Indebtedness secured by such Lien, so long as such
Indebtedness shall be so secured.
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SECTION 1024. Limitation on Sale and Leaseback Transactions.
After the occurrence of a Fall-away Event, the Company shall not, and
shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction involving any properties or assets of the Company or any Restricted
Subsidiary, as the case may be, unless, after giving effect to such Sale and
Leaseback Transaction, the aggregate amount of all Attributable Debt of the
Company and the Restricted Subsidiaries with respect to all Sale and Leaseback
Transactions outstanding at such time (other than Sale and Leaseback
Transactions permitted by the next paragraph), plus the aggregate principal
amount of all Indebtedness of the Company and the Subsidiaries that is secured
by Liens (other than Permitted Liens) on properties or assets of the Company or
any Restricted Subsidiary, as the case may be, (other than (x) Indebtedness that
is so secured equally and ratably with (or on a basis subordinated to) the
Securities and (y) the Securities) would not exceed 10% of Consolidated Net
Tangible Assets.
The restriction in the foregoing paragraph shall not apply to any Sale and
Leaseback Transaction if (a) the lease is for a period of not in excess of three
years, including renewal of rights, (b) the lease secures or relates to
industrial revenue or similar financing, (c) the transaction is solely between
the Company and a Restricted Subsidiary or between or among Restricted
Subsidiaries or (d) the Company or such Restricted Subsidiary, within 270 days
after the sale is completed, applies an amount equal to or greater of (i) the
Net Cash Proceeds of the sale of the properties or assets of the Company or any
Restricted Subsidiary, as the case may be, which are the subject of the Sale and
Leaseback Transaction or (ii) the fair market value of the properties or assets
of the Company or any Restricted Subsidiary, as the case may be, which are the
subject of the Sale and Leaseback Transaction (as determined in good faith by
the Board of Directors of the Company) either to (A) the retirement (or open
market purchase) of Notes, other long-term Indebtedness of the Company ranking
on a parity with the Notes or long-term Indebtedness of a Restricted Subsidiary
or (B) the purchase by the Company or any Restricted Subsidiary of other
properties and assets that will be used in the business of the Company or its
Restricted Subsidiaries (or businesses reasonably related or ancillary thereto)
having a value at least equal to the value of the properties or assets of the
Company or the Restricted Subsidiary, as the case may be, which are the subject
of the Sale and Leaseback Transaction.
SECTION 1025. Waiver of Certain Covenants.
The Company or any Restricted Subsidiary may omit in any particular
instance to comply with any term, provision or condition set forth in Sections
1006 through 1024, inclusive, if before or after the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities, by Act of such Holders, waive such compliance in such instance with
such term, provision or condition, but no such waiver shall extend to or affect
such term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of
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the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
SECTION 1026. Fall-Away of Certain Covenants.
In the event that the Securities achieve an Investment Grade rating, and
only during the period when the Securities are rated Investment Grade, and
provided no Default or Event of Default shall have occurred and be continuing,
upon the request of the Company, the covenants described under Sections 801(c)
and (d) and 1009 to 1022 (the "Suspended Covenants") will no longer be
applicable to the Company and, if applicable, its Restricted Subsidiaries;
provided that the Company delivers to the Trustee (i) an Officers' Certificate
certifying that the Fall-away Event shall have occurred and (ii) a letter from
Moody's and S&P, dated not more than three days prior to the date of such
Officers' Certificate, verifying the Investment Grade rating of the Securities
(the occurrence of the events (including the delivery to the Trustee of the
documents referred to in clauses (i) and (ii)) are referred to herein as a
"Fall-away Event"). In the event that the Company and the Restricted
Subsidiaries are not subject to the Suspended Covenants for any period of time
as a result of the preceding sentence and, subsequently, either or both of
Moodys or S&P withdraws its ratings or downgrades the ratings assigned to the
Securities below Investment Grade or a Default or Event of Default occurs and is
continuing, then the Company and the Restricted Subsidiaries will thereafter be
subject to the Suspended Covenants and compliance with the Suspended Covenants
with respect to Restricted Payments made after the time of such withdrawal,
downgrade, Default or Event of Default will be calculated in accordance with the
terms of Section 1011 as though Section 1011 had been in effect during the
entire period from the date of issuance of the Securities.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
(a) The Securities may be redeemed at the option of the Company, as a
whole or from time to time in part, at any time prior to May 15, 2004, subject
to the conditions and at the Redemption Price specified in the form of Security
attached hereto as Exhibit A, together with accrued and unpaid interest, if any,
to the Redemption Date.
(b) The Securities may be redeemed at the option of the Company, as a
whole or from time to time in part, at any time on or after May 15, 2004,
subject to the conditions and at the Redemption Prices specified in the form of
Security attached hereto as Exhibit A, together with accrued and unpaid
interest, if any, to the Redemption Date.
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(c) In addition, at any time or from time to time prior to May 15, 2002,
the Company may redeem, on one or more occasions, up to 35% of the sum of (i)
the initial aggregate principal amount of the Securities and (ii) the initial
aggregate principal amount of any Additional Securities with the net proceeds of
one or more Public Equity Offerings at a redemption price equal to 109.25% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on the relevant Interest Payment
Date); provided that, immediately after giving effect to any such redemption, at
least $146,250,000 aggregate principal amount of the Securities (including any
Additional Securities) remains outstanding; provided further that such
redemptions occur within 90 days of the date of closing of the related Public
Equity Offering.
(d) Notwithstanding the foregoing, in the event that the Funding
Conditions are not satisfied on or prior to September 30, 1999, on the Mandatory
Redemption Date, the Company shall redeem all of the Securities at a redemption
price in cash equal to 101% of the principal amount of the Securities plus
accrued and unpaid interest, if any, to the Mandatory Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to Section
1101(a), (b) or (c) shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company pursuant to Section 1101(a), (b) or
(c), the Company shall, at least 60 days prior to the Redemption Date fixed by
the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities to be redeemed and shall deliver to the Trustee such documentation
and records as shall enable the Trustee to select the Securities to be redeemed
pursuant to Section 1104. In the case of a mandatory redemption pursuant to
Section 1101(d), the Company shall give the Trustee notice of such mandatory
redemption by no later than the Business Day immediately following September 30,
1999.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot or such method as the Trustee shall deem fair and
appropriate and which may provide for the selection
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for redemption of portions of the principal of Securities; provided, however,
that no such partial redemption shall reduce the portion of the principal amount
of a Security not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption pursuant to Section 1101(a), (b) or (c) shall be
given in the manner provided for in Section 106 not less than 30 nor more than
60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed. Notice of redemption pursuant to Section 1101(d) shall be given in the
manner provided for in Section 106 not less than 10 days prior to the Mandatory
Redemption Date to each Holder of Securities.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the holder will receive,
without charge, a new Security or Securities of authorized denominations
for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) will become due and payable upon each such Security, or the portion
thereof, to be redeemed, and that interest thereon will cease to accrue on
and after said date,
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(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any, and
(7) the CUSIP or CINS number, as the case may be.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
On or prior to 10:00 a.m. (New York City time) on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Redemption
Price of, and accrued interest on, all the Securities which are to be redeemed
on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest, if any, to the
Redemption Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 309.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Securities.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at
the office or agency of the Company maintained for such purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a
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new Security or Securities, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Defeasance or Covenant Defeasance.
The Company may, at its option by Board Resolution at any time, with
respect to the Securities, elect to have either Section 1202 or Section 1203 be
applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article XII.
SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option applicable to
this Section 1202, the Company shall be deemed to have been discharged from its
obligations with respect to all Outstanding Securities on the date the
conditions set forth in Section 1204 are satisfied (hereinafter, "defeasance").
For this purpose, such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the Outstanding
Securities, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 1205 and the other Sections of this Indenture referred to in
(A) and (B) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Outstanding Securities to receive payments in respect of the principal of and
premium, if any, on and interest on such Securities when such payments are due,
(B) the Company's obligations with respect to such Securities under Sections
304, 305, 308, 1002 and 1003, and with respect to the Trustee under Section 606,
(C) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and (D) this Article XII. Subject to compliance with this Article XII, the
Company may exercise its option under this Section 1202 notwithstanding the
prior exercise of its option under Section 1203 with respect to the Securities.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option applicable to
this Section 1203, each of the Company and the Restricted Subsidiaries shall be
released from its obligations under Sections 801(c) and 801(d), the covenants
contained in Sections 1004 through 1026 (other than Section 1008) with respect
to the Outstanding Securities on and after the date the conditions set forth
below are satisfied (hereinafter, "covenant defeasance"), and the Events of
Default under Sections 501(c), 501(d) and 501(e) and the Securities shall
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thereafter be deemed not to be "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Outstanding Securities, the Company
and any Restricted Subsidiary may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Sections
501(c), 501(d), 501(e) and 501(f) but, except as specified above, the remainder
of this Indenture and such Securities shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 607 who shall agree to comply with the provisions of this
Article XII applicable to it) as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations (as defined herein) that through the scheduled payment of
principal and interest thereon will provide money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay and discharge the principal
of and premium, if any, on and interest on the Outstanding Securities on
the Stated Maturity (or upon Redemption Date, if applicable) of such
principal (and premium, if any) or installment of interest; provided that
the Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to said payments with
respect to the Securities. Before such a deposit, the Company may give to
the Trustee, in accordance with Section 1103 hereof, a notice of its
election to redeem all of the Outstanding Securities at a future date in
accordance with Article XI hereof, which notice shall be irrevocable. Such
irrevocable redemption notice, if given, shall be given effect in applying
the foregoing. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of America
for the timely payment of which its full faith and credit is pledged or
(y) obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation or a specific
89
<PAGE> 97
payment of principal of or interest on any such U.S. Government Obligation
held by such custodian for the account of the holder of such depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of
principal of or interest on the U.S. Government Obligation evidenced by
such depository receipt.
(2) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or,
insofar as paragraph (g) or (h) of Section 501 hereof are concerned, at
any time during the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company is a party
or by which it is bound.
(4) In the case of an election under Section 1202, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the Closing Date, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred.
(5) In the case of an election under Section 1203, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Securities Outstanding will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section
1202 or the covenant defeasance under Section 1203, as the case may be,
have been complied with.
90
<PAGE> 98
SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "Trustee") pursuant to Section 1204 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Governmental Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article XII to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1204
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent defeasance or covenant defeasance, as
applicable, in accordance with this Article.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1205 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1202 or 1203, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1205; provided, however, that if the Company makes any payment of
principal of or premium, if any, or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
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<PAGE> 99
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
SAFETY-KLEEN CORP.
By /s/ Paul R. Humphreys
---------------------------------------
Name: Paul R. Humphreys
Title: Senior Vice President of Finance
and Chief Financial Officer
THE BANK OF NOVA SCOTIA TRUST
COMPANY OF NEW YORK COMPANY
By /s/ George E. Timmes
---------------------------------------
Name: George E. Timmes
Title: Vice President
<PAGE> 100
Schedule 1015 to Indenture
The Phoenix Project Joint Venture (this is an oral agreement);
ArmaKleen Partnership Agreement;
3E Company Environmental, Ecological and Engineering Shareholder's Agreement and
any amendments;
OSCO Treatment Systems of Mississippi, Inc. Shareholder Agreement and any
amendments; and
USPCI of Mississippi Shareholder Agreement and any amendments.
<PAGE> 101
Exhibit A
[FACE OF SECURITY]
SAFETY-KLEEN CORP.
9 1/4% [Exchange]** Senior Note due 2009
CUSIP ______________
No. _______ $_________________
SAFETY-KLEEN CORP., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to ___________, or its registered assigns, the
principal sum of ____________________________________ ($___________), on May 15,
2009.
[Initial Interest Rate: 9 1/4% per annum.]*
[Interest Rate: 9 1/4% per annum.]**
Interest Payment Dates: May 15 and November 15 of each year
commencing November 15, 1999.
Regular Record Dates: May 1 and November 1 of each year.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
Date:___________________ SAFETY-KLEEN CORP.
By: __________________________
Title:
<PAGE> 102
(Form of Trustee's Certificate of Authentication)
This is one of the 9 1/4% [Exchange]** Senior Notes due 2009 described in the
within-mentioned Indenture.
THE BANK OF NOVA SCOTIA TRUST
COMPANY OF NEW YORK, as Trustee
By: _____________________________
Authorized Signatory
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<PAGE> 103
[REVERSE SIDE OF SECURITY]
SAFETY-KLEEN CORP.
9 1/4% Senior Note due 2009
1. Principal and Interest.
The Company will pay the principal of this Security set forth on the face
of this Security (or such other amount that may from time to time be indicated
on the records of DTC or its nominee or on the records of the Trustee as
custodian for DTC or its nominee as the result of increases or decreases by
adjustments made on the records of DTC or its nominee or on the records of the
Trustee, as custodian for DTC, in accordance with the rules and procedures of
DTC; provided, however, such amounts may not exceed $325,000,000) on May 15,
2009.
The Company promises to pay interest on the principal amount of this
Security on each Interest Payment Date, as set forth below, at the rate of [9
1/4% per annum (subject to adjustment as provided below)]* [9 1/4% per annum,
except that interest accrued on this Security pursuant to the penultimate
paragraph of this Section 1 for periods prior to the applicable Exchange Date
(as such term is defined in the Registration Rights Agreement referred to below)
will accrue at the rate or rates borne by the Securities from time to time
during such periods].**
Interest will be payable semiannually (to the holders of record of the
Securities (or any predecessor Securities) at the close of business on the May 1
or November 1 immediately preceding the Interest Payment Date) on each Interest
Payment Date, commencing November 15, 1999.
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated _______________, among the Company and the
Initial Purchasers named therein (the "Registration Rights Agreement"). In the
event that either (a) the Exchange Offer Registration Statement (as such term is
defined in the Registration Rights Agreement) is not filed with the Securities
and Exchange Commission on or prior to the 60th calendar day following the date
of original issue of the Securities, (b) the Exchange Offer Registration
Statement is not declared effective on or prior to the 150th calendar day
following the date of original issue of the Securities, (c) the Exchange Offer
(as such term is defined in the
- --------
* Include only for Initial Securities.
** Include only for Exchange Securities.
A-3
<PAGE> 104
Registration Rights Agreement) is not consummated or a Shelf Registration
Statement (as such term is defined in the Registration Rights Agreement) is not
declared effective on or prior to the 180th calendar day following the date of
original issue of the Securities, or (d) any registration statement required by
the Registration Rights Agreement is filed and declared effective but shall
thereafter cease to be effective (except as specifically provided in the
Registration Rights Agreement) without being succeeded immediately by an
additional registration statement filed and declared effective, the interest
rate borne by this Security shall be increased by 0.25% per annum for the first
90 days following the 60-day period referred to in clause (a) above, following
the 150-day period referred to in clause (b) above or following the 180-day
period referred to in clause (c) above or following the date on which the
relevant registration statement ceases to be effective in the case of clause (d)
above. Such interest will be increased by an additional 0.25% per annum for each
subsequent 90-day period in the case of clause (a), clause (b), clause (c) or
clause (d) above until such registration default has been cured; provided,
however, that in no event will the interest rate borne by the Securities be
increased by more than 1.50% per annum. Upon the filing of the Exchange Offer
Registration Statement, the effectiveness of the Exchange Offer Registration
Statement, the consummation of the Exchange Offer, the effectiveness of a Shelf
Registration Statement, or the effectiveness of a succeeding registration
statement, as the case may be, the interest rate borne by this Security from the
date of such filing, consummation or effectiveness, as the case may be, will be
reduced to the original interest rate set forth above; provided, however, that,
if after such reduction in interest rate, a different event specified in clause
(a), (b), (c) or (d) above occurs, the interest rate may again be increased
pursuant to the foregoing provisions.]*
Interest on this Security will accrue from the most recent date to which
interest has been paid [on this Security or the Security surrendered in exchange
herefor]** or, if no interest has been paid, from May 17, 1999; provided that,
if there is no existing default in the payment of interest and if this Security
is authenticated between a Regular Record Date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
Interest Payment Date. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum equal to the rate of interest applicable to the Securities.
- --------
* Include only for Initial Securities.
** Include only for Exchange Securities
A-4
<PAGE> 105
2. Method of Payment.
The Company will pay interest (except defaulted interest) on the principal
amount of the Securities on each May 15 and November 15 to the persons who are
Holders (as reflected in the Security Register at the close of business on the
May 1 and November 1 immediately preceding the Interest Payment Date), in each
case, even if the Security is canceled on registration of transfer or
registration of exchange after such record date; provided that, with respect to
the payment of principal, the Company will make payment to the Holder that
surrenders this Security to any Paying Agent on or after May 15, 2009.
The Company will pay principal, premium, if any, and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts. [Payment of the principal of and premium, if any, and
interest on the Securities will be made at the office or agency of the Company
maintained for that purpose in The City of New York (which shall be the
Corporate Finance Department of the Trustee, unless the Company shall designate
and maintain some other office or agency for such purpose), or at such other
office or agency of the Company as may be maintained for such purpose, in lawful
money of the United States of America, or payment of interest may be made at the
option of the Company by check mailed to the address of the Person entitled
thereto as such address shall appear on the Security Register; provided,
however, that all payments to Holders who have given wire transfer instructions
to the Company will be made by wire transfer of immediately available funds to
the accounts specified by such Holder.]* [All payments will be made by wire
transfer of immediately available funds to the accounts specified by the
Holder.]** If a payment date is a date other than a Business Day at a place of
payment, payment may be made at that place on the next succeeding day that is a
Business Day and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar upon written notice thereto. The
Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent,
Registrar or co-registrar.
4. Indenture; Limitations.
The Company issued the Securities under an Indenture dated as of May 17,
1999 (the "Indenture"), between the Company and The Bank of Nova Scotia Trust
Company of New York, as trustee (the "Trustee"). Capitalized terms herein are
used as defined in the Indenture unless otherwise indicated. The terms of the
Securities include those stated in the Indenture
- --------
* Include for Physical Securities only.
** Include for Restricted Global Security only.
A-5
<PAGE> 106
and those made part of the Indenture by reference to the Trust Indenture Act.
The Securities are subject to all such terms, and Holders are referred to the
Indenture and the Trust Indenture Act for a statement of all such terms. To the
extent permitted by applicable law, in the event of any inconsistency between
the terms of this Security and the terms of the Indenture, the terms of the
Indenture shall control.
The Securities are general unsecured obligations of the Company.
5. Redemption.
(a) Make-Whole Redemption. The Securities may be redeemed at the option of
the Company in whole or in part, at any time and from time to time, prior to May
15, 2004, at a Redemption Price equal to the greater of (i) 100% of the
principal amount of such Securities or (ii) the sum of the present values of
104.625% of the principal amount of such Securities and the scheduled payments
of interest thereon through and including May 15, 2004 discounted to such
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate plus 50 basis points,
together with accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
(b) Optional Redemption. The Securities may be redeemed at the option of
the Company, in whole or in part, at any time and from time to time on or after
May 15, 2004, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date), if redeemed during the 12-month period beginning May 15,
of each of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2004................................... 104.625%
2005................................... 103.083%
2006................................... 101.542%
2007 and thereafter ................... 100.000%
</TABLE>
In addition, at any time or from time to time prior to May 15, 2002, the
Company may redeem up to 35% of the sum of (i) the initial aggregate principal
amount of the Securities and (ii) the initial aggregate principal amount of any
Additional Securities with the net proceeds of one or more Public Equity
Offerings at a redemption price equal to 109.25% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on the relevant Interest Payment Date); provided, that,
immediately after giving effect to such
A-6
<PAGE> 107
redemption, at least $146,250,000 aggregate principal amount of the Securities
(including any Additional Securities) remains outstanding; provided, further,
that such redemptions occur within 90 days of the date of closing of the related
Public Equity Offering.
(c) Mandatory Redemption. Notwithstanding the foregoing, in the event that
the Funding Conditions are not satisfied on or prior to September 30, 1999, on
the Mandatory Redemption Date the Company shall redeem all of the Securities at
a redemption price in cash equal to 101% of the principal amount of the
Securities plus accrued and unpaid interest, if any, to the Mandatory Redemption
Date.
The "Mandatory Redemption Date" means October 15, 1999, in the event the
Funding Conditions are not satisfied on or prior to September 30, 1999.
The "Funding Conditions" means the occurrence of the following events:
(1) the stockholders of the Company shall have approved the issuance
of shares of the Company's common stock in connection with the repurchase
of the PIK Debenture in accordance with the rules of The New York Stock
Exchange; and
(2) the conditions set forth in Article IV of the Securities
Purchase Agreement.
Notice of a redemption pursuant to paragraphs 5(a) or 5(b) will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's last address as it appears
in the Security Register. Notice of a mandatory redemption pursuant to paragraph
5(c) will be mailed promptly after the occurrence of the event triggering such
redemption but in no event less than ten days prior to the Mandatory Redemption
Date to each Holder of Securities to be redeemed at such Holders last address as
it appears in the Security Register.* Securities in original denominations
larger than $1,000 may be redeemed in part in integral multiples of $1,000. On
and after the Redemption Date, interest ceases to accrue on Securities or
portions of Securities called for redemption, unless the Company defaults in the
payment of the Redemption Price.
6. Repurchase upon a Change in Control and Asset Sales.
(a) Upon the occurrence of a Change of Control, the Company is obligated
to make an offer to purchase all outstanding Securities at a redemption price of
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase and (b) upon Asset Sales, the Company may be obligated
to make offers to purchase Securities with a portion of the Net Cash Proceeds of
such Asset Sales at a redemption price of 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase.
A-7
<PAGE> 108
7. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons, in denominations of
$1,000 and multiples of $1,000 in excess thereof. A Holder may register the
transfer or exchange of Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Securities selected for redemption (except the unredeemed
portion of any Security being redeemed in part). Also, it need not register the
transfer or exchange of any Securities for a period of 15 days before a
selection of Securities to be redeemed is made.
8. Persons Deemed Owners.
A Holder may be treated as the owner of a Security for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits, or causes to be deposited, with the
Trustee money or U.S. Government Obligations sufficient to pay the then
outstanding principal of and premium, if any, and accrued interest on the
Securities to redemption or maturity, the Company will be discharged from the
Indenture and the Securities, except in certain circumstances for certain
sections thereof.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Securities then Outstanding, and any
existing default or compliance with any provision may be waived with the consent
of the Holders of a majority in aggregate principal amount of the Securities
then Outstanding. Without notice to or the consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Securities to, among other
things, cure any ambiguity, defect or inconsistency and make any change that
does not adversely affect the rights of any Holder.
A-8
<PAGE> 109
12. Restrictive Covenants.
The Indenture contains certain covenants, including, without limitation,
covenants with respect to the following matters: (i) Indebtedness; (ii)
Restricted Payments; (iii) certain Asset Sales; (iv) transactions with
Affiliates; (v) dividends and other payment restrictions affecting Restricted
Subsidiaries; (vi) issuances and sale of Capital Stock of Restricted
Subsidiaries; (vii) designation of Unrestricted Subsidiaries; (viii) Liens; (ix)
merger and certain transfers of assets; and (x) Contingent Obligations. Within
120 days after the end of each fiscal year, the Company must report to the
Trustee on compliance with such limitations.
13. Fall-away Event.
In the event the Securities receive an Investment Grade rating, and only
during the period when the Securities are rated Investment Grade, and provided
no Event of Default or Default shall have occurred and be continuing, upon the
request of the Company, the covenants described in the immediately preceding
paragraph generally will no longer be applicable to the Company and, if
applicable, its Restricted Subsidiaries. Upon the Securities receiving an
Investment Grade rating, covenants relating to (i) Liens securing Indebtedness
and (ii) Sale and Leaseback Transactions will apply to the Company, and if
applicable, the Restricted Subsidiaries.
14. Successor Persons.
When a successor person or other entity assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor person will
be released from those obligations.
15. Remedies for Events of Default.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Securities then Outstanding may declare all the Securities to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any of its Significant Subsidiaries occurs and is continuing,
the Securities automatically become immediately due and payable. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of at least
a majority in principal amount of the Securities then Outstanding may direct the
Trustee in its exercise of any trust or power.
A-9
<PAGE> 110
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may make loans to, accept
deposits from, perform services for, and otherwise deal with, the Company and
its Affiliates as if it were not the Trustee.
17. Authentication.
This Security shall not be valid until the Trustee signs the certificate
of authentication on the other side of this Security.
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN EMPLOYMENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to SAFETY-KLEEN CORP., 1301
Gervais Street, Suite 300, Columbia, South Carolina 29201, Attention: Henry H.
Taylor, Esq.
A-10
<PAGE> 111
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES EXCEPT
PERMANENT OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of this Security occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
May 17, 2001 the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions
of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
A-11
<PAGE> 112
Date: ____________________ _____________________________
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of the
within-mentioned instrument
in every particular, without
alteration or any change
whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: ___________________ ______________________________
NOTICE: To be executed by an executive
officer, general partner,
trustee or similar
representative.
A-12
<PAGE> 113
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 1012 or Section 1013 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 1012 or Section 1013 of the Indenture, state the amount (in
original principal amount) below:
$_____________________.
Date:
Your Signature: ___________________________________________________________
(Sign exactly as your name appears on the other side of
this Security)
Signature Guarantee:_________________________________________________________
(Signature must be guaranteed by a member of the New York
Stock Exchange or a commercial bank or trust company)
A-13
<PAGE> 114
EXHIBIT B
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM RESTRICTED GLOBAL SECURITY TO
REGULATION S GLOBAL SECURITY
The Bank of Nova Scotia
Trust Company of New York
One Liberty Plaza, 23rd Floor
New York, New York 10006
Re: 9 1/4% Senior Notes due 2009 of Safety-Kleen Corp.
Reference is hereby made to the Indenture, dated as of May 17, 1999 (the
"Indenture"), between Safety-Kleen Corp., as issuer (the "Company") and The Bank
of Nova Scotia, Trust Company of New York, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $_________ principal amount of Securities which are
evidenced by the Restricted Global Security (CUSIP No._________) and held with
the Depositary in the name of Cede & Co. (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the Securities to a Person
who will take delivery thereof in the form of an equal principal amount of
Securities evidenced by the Regulation S Global Security (CUSIP No. ________).
In connection with such request and in respect of such Securities, the
Transferor hereby certifies that such transfer has been effected in compliance
with the transfer restrictions applicable to the Global Securities and pursuant
to and in accordance with Rule 903, Rule 904 or Rule 144 under the United States
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor hereby further certifies that:
(A) if the transfer has been effected pursuant to Rule 903 or Rule 904:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either:
(a) at the time the buy order was originated, the transferee
was outside the United States or the Transferor and any person
acting on its behalf reasonably believed and believes that the
transferee was outside the United States; or
(b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither
the Transferor nor any person
<PAGE> 115
acting on its behalf knows that the transaction was prearranged with
a buyer in the United States;
(3) no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as
applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) if the transfer is being requested prior to June 26, 1999, upon
completion of the transaction, the beneficial interest being transferred
as described above is to be held with the Depositary through Euroclear or
Cedel Bank or both (Common Code ____________); and
(B) If the transfer has been effected pursuant to Rule 144, the Securities
have been transferred in a transaction permitted by Rule 144 under the
Securities Act.
Upon giving effect to this request to exchange a beneficial interest in
such Restricted Global Security for a beneficial interest in a Regulation S
Global Security, the resulting beneficial interest shall be subject to the
restrictions on transfer applicable to Regulation S Global Security pursuant to
the Indenture and the Securities.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
[Insert Name of Transferor]
By:_____________________________________
Name:
Title:
Dated: ____________, ____ Signature Guarantee
______________________________________
B-2
<PAGE> 116
EXHIBIT C
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF
TRANSFER FROM REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
The Bank of Nova Scotia
Trust Company of New York
One Liberty Plaza, 23rd Floor
New York, New York 10006
Re: 9 1/4% Senior Notes due 2009 of Safety-Kleen Corp.
Reference is hereby made to the Indenture, dated as of May 17, 1999 (the
"Indenture"), between Safety-Kleen Corp., as issuer (the "Company") and The Bank
of Nova Scotia, Trust Company of New York, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $____________ principal amount of the Securities
which are evidenced by the Regulation S Global Security (CUSIP No. _________)
and held with the Depositary in the name of Cede & Co. (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the
Securities to a Person who will take delivery thereof in the form of an equal
principal amount of Securities evidenced by the Restricted Global Security
(CUSIP No. __________), to be held with the Depositary.
In connection with such request and in respect of such Securities, the
Transferor hereby certifies that such transfer is being effected pursuant to and
in accordance with Rule 144A under the United States Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, the Transferor hereby further
certifies that the Securities are being transferred to a Person that the
Transferor reasonably believes is purchasing the Securities for its own account,
or for one or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A and such Securities are being transferred in
compliance with any applicable blue sky securities laws of any state of the
United States.
Upon giving effect to this request to exchange a beneficial interest in
Regulation S Global Securities for a beneficial interest in the Restricted
Global Security, the resulting beneficial interest shall be subject to the
restrictions on transfer applicable to the U.S. Global Securities pursuant to
the Indenture and the Securities Act.
<PAGE> 117
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
[Insert Name of Transferor]
By:_____________________________________
Name:
Title:
Dated: ____________, ____ Signature Guarantee
______________________________________
C-2
<PAGE> 118
EXHIBIT D
FORM OF CERTIFICATE FOR TRANSFER OF U.S. PHYSICAL SECURITIES TO REGULATION S
GLOBAL SECURITY OR RESTRICTED GLOBAL SECURITY
The Bank of Nova Scotia
Trust Company of New York
One Liberty Plaza, 23rd Floor
New York, New York 10006
Re: 9 1/4% Senior Subordinated Notes due 2009 of Safety-Kleen Corp.
Reference is hereby made to the Indenture, dated as of May 17, 1999 (the
"Indenture"), between Safety-Kleen Corp., as issuer (the "Company") and The Bank
of Nova Scotia, Trust Company of New York, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $___________ principal amount of Securities which
are evidenced by a definitive Physical Security (Certificate No. __________,
CUSIP No. __________, in the name of _________________) (the "Transferor"). The
Transferor has requested a transfer of such interest in the Securities to a
Person that will take delivery thereof in the form of an equal principal amount
of Securities evidenced by the [Restricted Global Security CUSIP No.
____________] [Regulation S Global Security (CUSIP No. ____________)].
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that: [if such request is made for transfer to
the Regulation S Global Security: such transfer has been effected pursuant to
and in accordance with Rule 903, Rule 904 or Rule 144 under the United States
Securities Act of 1933, as amended (the "Securities Act") and accordingly the
Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or Rule
904:
(A) the offer of the Securities was not made to a person in
the United States;
(B) either:
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
<PAGE> 119
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf
knows that the transaction was prearranged with a buyer in the
United States;
(C) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; [and]
(D) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; [and
(E) if the transfer is being requested prior to June 26, 1999:
Upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary
through Euroclear or Cedel Bank or both (Common Code __________);]
or
(2) if the transfer has been effected pursuant to Rule 144, the
Securities have been transferred in a transaction permitted by Rule 144.]
(3) if such request is made for transfer to the Restricted Global
Security: Such transfer is being effected pursuant to and in accordance
with Rule 144A under the Securities Act, and, accordingly, the Transferor
hereby further certifies that the Securities are being transferred to a
person that the Transferor reasonably believes is purchasing the
Securities for its own account, or for one or more accounts with respect
to which such person exercises sole investment discretion, and such person
and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
D-2
<PAGE> 120
Upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary through
Euroclear or Cedel Bank or both (Common Code_____).
[Insert Name of Transferor]
By:_____________________________________
Name:
Title:
Dated: ____________, ____ Signature Guarantee
______________________________________
D-3
<PAGE> 121
EXHIBIT E
FORM OF CERTIFICATE FOR TRANSFER OR EXCHANGE AFTER TWO YEARS
The Bank of Nova Scotia
Trust Company of New York
One Liberty Plaza, 23rd Floor
New York, New York 10006
Re: 9 1/4% Senior Notes due 2009 of Safety-Kleen Corp.
Reference is hereby made to the Indenture, dated as of May 17, 1999 (the
"Indenture"), between Safety-Kleen Corp., as issuer (the "Company") and The Bank
of Nova Scotia, Trust Company of New York, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
[For transfers: This letter relates to $__________ principal amount of
Securities which are evidenced by a [Restricted Global Security (CUSIP No.
_________) and held with the Depositary in the name of Cede & Co.] [a U.S.
Physical Security (CUSIP No. ________________) registered in the name of
_________________] [and held for the benefit of _________________] (the
"Beneficial Owner"). The Beneficial Owner has requested that its beneficial
interest in such Securities be transferred to a Person that will take delivery
thereof in the form of an equal principal amount of Securities evidenced by the
Regulation S Global Security (CUSIP No. _________).
In connection with such request and in respect of such Securities, the
Beneficial Owner does hereby certify that upon such transfer, (a) a period of at
least two years will have elapsed since May __, 1998, (b) the Beneficial Owner
during the three months preceding the date of such transfer was not an
"affiliate" of the Company (as defined in Rule 144 under the Securities Act),
and it was not acting on behalf of such an affiliate and (c) such Person to whom
such transfer is being made is not an "affiliate" of the Company.]
[For exchanges: This letter relates to $__________ principal amount of
Securities that are evidenced by a [Restricted Global Security (CUSIP No.
__________) and held with the Depositary in the name of [_________] [and held
for the benefit of ]____________] (the "Beneficial Owner"). The Beneficial Owner
has requested that its beneficial interest in such Securities be exchanged for a
beneficial interest in an equal principal amount of Securities evidenced by the
Regulation S Global Security (CUSIP No. __________).
In connection with such request and in respect of such Securities, the
Beneficial Owner does hereby certify that [it is located and acquired such
securities outside the United States (if the Restricted Period has ended) and
that such transfer is being made in accordance with Rule
<PAGE> 122
903 or 904 of Regulation S promulgated under the U.S. Securities Act of 1933][,
upon such exchange, (a) it will be the beneficial owner of such Securities, (b)
a period of at least two years will have elapsed since May 17, 1999 and (c) the
Beneficial Owner will not be, and during the three months preceding the date of
such exchange will not have been, an "affiliate" of the Company (as defined in
Rule 144 under the Securities Act), and it is not acting on behalf of such an
affiliate.]
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated: [Insert Name of Beneficial Owner]
By: __________________________
Name:
Title:
E-2
<PAGE> 1
Exhibit (4)(c)
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of May 17, 1999 (this "Agreement"), among
Safety-Kleen Corp. (formerly known as Laidlaw Environmental Services, Inc.), a
Delaware corporation (the "Company"), the Bank of Nova Scotia Trust Company of
New York, a trust company organized under the laws of New York, as trustee under
the Indenture referred to below (the "Trustee"), and The Bank of Nova Scotia
Trust Company of New York, a trust company organized under the laws of New York,
as escrow agent (the "Escrow Agent").
WHEREAS, this Agreement is being entered into in connection with the
Purchase Agreement (the "Purchase Agreement"), dated as of May 10, 1999, among
the Company and TD Securities (USA) Inc., NationsBanc Montgomery Securities LLC
and Raymond James & Associates, Inc. (collectively, the "Initial Purchasers"),
and the Indenture (the "Indenture"), dated of even date herewith between the
Company and the Trustee;
WHEREAS, pursuant to the Purchase Agreement, the Company has agreed to
issue and sell to the Initial Purchasers, for resale by the Initial Purchasers
under Rule 144A and Regulation S under the Securities Act of 1933, as amended
(the "Securities Act") (the "Offering"), $225 million aggregate principal amount
of its 9 1/4% Senior Notes due 2009 (the "Notes").
WHEREAS, concurrently with and as a condition to the closing of the
Offering, the Company will deposit, or cause to be deposited, the Initial
Deposit (as hereinafter defined) with the Escrow Agent;
WHEREAS, in the event that the Funding Conditions (as hereinafter
defined) are not satisfied on or prior to the close of business on September 30,
1999, subject to the terms and conditions set forth herein, the Escrow Agent
shall transfer on October 15, 1999 the Escrowed Funds to pay all (or such
portion as is equal to the full amount of the Escrowed Funds) of the Mandatory
Redemption Price for the Special Mandatory Redemption (as defined in the
Indenture);
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions.
"Cash Equivalents" means (a) any evidence of indebtedness with a
maturity of one year or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (b) certificates of deposit or acceptances or
Eurodollar time deposits with a maturity of one year or less of, and overnight
bank deposits with, any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500 million; (c) commercial paper with a maturity
<PAGE> 2
of one year or less issued by a person rated at least A-1 by Standard & Poor's
Rating Services, a division of the McGraw Hill Company, or at least P-1 by
Moody's Investors Service, Inc.; (d) repurchase obligations with a term of no
more than 30 days for underlying securities of the types described in clause (a)
entered into with a bank meeting the qualifications described in clause (b)
above; (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least
"A" by Standard & Poor's Rating Services, a division of the McGraw Hill
Companies, or "A" by Moody's Investors Service, Inc.; (f) securities with
maturities of one year or less from the date of acquisition backed by standby
letters of credit issued by any financial institution satisfying the
requirements of clause (b) of this definition; (g) bond and note obligations
issued or unconditionally guaranteed by corporations or limited liability
companies organized under the laws of the United States with maturities of one
year or less from the date of acquisition which are rated at least "A" by
Standard & Poor's Rating Services, a division of the McGraw Hill Companies, or
"A" by Moody's Investors Services, Inc.; and (h) funds which invest in any of
the foregoing.
"Escrowed Funds" shall have the meaning set forth in Section 2(e).
"Funding Conditions" means the occurrence of the following events:
(i) the stockholders of the Company shall have approved the
issuance of shares of the Company's common stock in connection with the
Company's repurchase of the PIK Debenture in accordance with the rules
of The New York Stock Exchange; and
(ii) the conditions set forth in Article IV of the securities
purchase agreement dated as of April 19, 1999 among the Company,
Laidlaw Inc. and Laidlaw International Finance Corporation have been
satisfied or waived.
"Initial Deposit" means cash in an amount equal to the net proceeds of
the Offering.
"Mandatory Redemption Price" means, as of any date, an amount in cash
equal to 101% of the aggregate principal amount of the Notes.
"Permitted Investments" means (i) Cash Equivalents or (ii) money market
funds at least 95% of the assets of which are invested in investments described
in subparagraph (a) of the definition of Cash Equivalents or repurchase
agreements the payment of which are secured by investments described in such
subparagraph (a).
"PIK Debenture" means the 5% Subordinated Convertible Pay-In-Kind
Debenture due 2009 dated May 15, 1997 issued by the Company to Laidlaw
Transportation, Inc.
2
<PAGE> 3
Other capitalized terms used but not defined herein have the meanings
given to such terms in the Indenture.
SECTION 2. Delivery, Acceptance and Investment of Escrowed Funds. (a)
Concurrently with the execution and delivery hereof, the Company shall deposit
the Initial Deposit with the Escrow Agent. Upon receipt of the Initial Deposit,
the Escrow Agent shall, upon the written request of the Company from time to
time invest all or a portion of the Initial Deposit and the proceeds therefrom
in Permitted Investments.
(b) If the Notes become subject to Special Mandatory Redemption
pursuant to the terms of the Notes and Article XI of the Indenture, the Company
shall provide written notice thereof (a "Redemption Notice") to the Escrow Agent
and the Trustee in accordance with Section 1103 of the Indenture together with a
certificate of a nationally recognized firm of independent accountants setting
forth a calculation of the amount of cash that will be available to the Escrow
Agent, based on the Escrowed Funds then held with the Escrow Agent, without any
reinvestment thereof or sale prior to maturity, on the third Business Day prior
to the date fixed for such Special Mandatory Redemption; provided, however, that
no such certificate shall be required if the Escrowed Funds consist exclusively
of cash. In connection with any Redemption Notice received from the Company
relating to a date fixed for Special Mandatory Redemption, the Escrow Agent is
hereby authorized and directed to promptly liquidate any Permitted Investments
that will not mature on or prior to the third Business Day prior to the date
fixed for Special Mandatory Redemption to the extent necessary to fund the
Mandatory Redemption Price; provided that the Escrow Agent shall reinvest any
portion of the proceeds so realized by the Escrow Agent in Permitted Investments
as directed by the Company that shall mature on or prior to the date fixed for
Special Mandatory Redemption. In no event shall the Escrow Agent have any
liability for any shortfall in funds available to pay the aggregate Mandatory
Redemption Price.
(c) If at any time the aggregate amount of cash and Permitted
Investments held by the Escrow Agent hereunder, without the reinvestment thereof
or sale prior to maturity, exceeds the Mandatory Redemption Price, the Company
shall be entitled to request in writing the prompt release of, and the Escrow
Agent shall, subject to Section 2(d), promptly release to the Company all such
amounts in excess of the Mandatory Redemption Price.
(d) As a condition to any release requested by the Company under
Section 2(c), the Escrow Agent shall have received a written statement,
certified as to its mathematical accuracy by a nationally recognized firm of
independent accountants selected by the Company, setting forth a calculation
showing that the amount of cash that would be available to the Escrow Agent
based on the Escrowed Funds that would be held by the Escrow Agent (after giving
effect to any such release) without any reinvestment thereof or sale prior to
maturity together with any other funds or Permitted Investments held by the
Escrow Agent hereunder, taking into account scheduled maturities of and
scheduled payments of interest on the Permitted Investments included in the
Escrowed Funds, would be at least equal to the Mandatory Redemption Price. The
Escrow Agent shall be under no obligation to and shall not independently confirm
the calculations contained in,
3
<PAGE> 4
or the conclusions reached by, such statement. In addition, the Company shall
deliver in writing to the Escrow Agent, in conjunction with and as a condition
to any release requested by the Company hereunder, wire instructions for the
delivery of any funds subject to such release.
(e) The Escrow Agent shall accept the Initial Deposit and shall hold
such funds and the proceeds thereof in one or more separate identifiable
accounts for disbursement in accordance with the provisions hereof. The Trustee
shall be granted a first priority security interest in all such accounts and the
Company, and the Company shall execute all financing statements and take all
other steps necessary or as may be reasonably requested by the Trustee or
Initial Purchasers in connection with the perfection of such first priority
security interest. The Initial Deposit and the proceeds therefrom, including
without limitation, the proceeds of any Permitted Investments, less any amounts
released pursuant to the terms of this Agreement, shall constitute the "Escrowed
Funds." The Escrow Agent further agrees to invest any portion of the Escrowed
Funds that is comprised of cash in Permitted Investments as may be directed by
the Company in writing from time to time. Except as otherwise agreed to by the
Company and the Escrow Agent, temporarily uninvested funds shall not earn or
accrue interest.
(f) The obligation and liability of the Escrow Agent to make the
payments and transfers required by this Escrow Agreement shall be limited to the
Escrowed Funds. The Escrow Agent shall not be liable for any loss resulting from
any investment made pursuant to this Agreement in compliance with the provisions
hereof.
SECTION 3. Disbursement of Escrowed Funds. (a) If the Escrow Agent
receives written notice from the Company that the Funding Conditions have been
satisfied together with an officer's certificate, substantially in the form of
Exhibit A hereto, signed by any of the Chief Executive Officer, President, Chief
Financial Officer or Vice President of the Company, certifying to the Escrow
Agent as to the matters specified in Exhibit A hereto, then the Escrow Agent
will promptly (i) release all Escrowed Funds then held by it to the Company or
(ii) at the request of the Company, liquidate all or a portion of the Permitted
Investments and, upon such liquidation, promptly release all Escrowed Funds then
held by it to the Company.
(b) If the Escrow Agent receives a written notice from the Company that
a Special Mandatory Redemption pursuant to the terms of the Notes and Article XI
of the Indenture will occur, then the Escrow Agent will liquidate all Permitted
Investments in accordance with Section 2(b) and will, on the Business Day fixed
for such Special Mandatory Redemption, release to the Paying Agent an amount of
Escrowed Funds in cash equal to the Mandatory Redemption Price or, if the total
amount of the Escrowed Funds is less than the Mandatory Redemption Price, all of
the Escrowed Funds. Concurrently with such release to the Paying Agent, the
Escrow Agent shall release any excess of Escrowed Funds over the Mandatory
Redemption Price to the Company.
(c) Notwithstanding paragraphs 3(a) and (b) above, if the Escrow Agent
receives a written notice from the Trustee or otherwise has actual knowledge
that a Default or Event of
4
<PAGE> 5
Default under the Indenture has occurred and is continuing, the Escrow Agent
will not release any Escrowed Funds to the Company unless and until the Escrow
Agent receives a written notice from the Trustee that such Default or Event of
Default is not continuing. Subject to Section 3(d) below, if the Escrow Agent
receives a written notice from the Trustee that (i) the principal amount of, and
accrued and unpaid interest on the Notes has become immediately due and payable
pursuant to Section 5.02 of the Indenture (an "Acceleration Event"), and (ii)
either (A) a court of competent jurisdiction by final and nonappealable judgment
has determined that the acceleration of the Notes was appropriate as a result of
a bona fide Event of Default under the Indenture or (B) such acceleration has
not been rescinded prior to September 30, 1999 (either such event, a "Remedies
Trigger Event"), the Escrow Agent will liquidate all Escrowed Funds then held by
it, in the case of clause (A) above, within one Business Day after the Escrow
Agent receives such written notice of such court determination or, in the case
of clause (B) above, on October 15, 1999, and, in each case, will release to the
Paying Agent for payment to the holders of the Notes in accordance with the
Indenture the amount of Escrowed Funds sufficient to pay such accelerated
principal and accrued and unpaid interest, if any, on the Notes (or if the total
amount of Escrowed Funds is less than such accelerated principal plus any
accrued and unpaid interest, all of the Escrowed Funds). The Escrow Agent will
release, subject to Section 2(d), all remaining Escrowed Funds to the Company.
The Trustee will provide written notice to the Escrow Agent upon
obtaining knowledge of the occurrence of a Default, Event of Default or a
Remedies Trigger Event. The Trustee shall be deemed to have knowledge of any
Default or Event of Default upon the earlier of (i) an officer in the corporate
trust department of the Trustee having actual knowledge thereof or (ii) the
Trustee receiving written or oral notice thereof in accordance with the
provisions of the Indenture, and the Trustee shall have no obligation to give
notice to the Escrow Agent of a Default or Event of Default in the absence of
such knowledge.
Notwithstanding the provisions of this Section 3(c), upon receipt of a
Redemption Notice by the Escrow Agent pursuant to Section 2(b), this Section
3(c) shall be of no further effect and all amounts then held by the Escrow Agent
shall be released in accordance with Section 3(b).
(d) In the event of (i) an Acceleration Event or (ii) a Change of
Control under the Indenture, in either case occurring prior to a Remedies
Trigger Event, (x) the Company may, at its sole option, direct the Escrow Agent
in writing to liquidate the Permitted Investments and release to the Paying
Agent Escrowed Funds in an amount sufficient for the payment of the purchase
price or accelerated principal, as applicable, and interest, as the case may be,
and (y) if the Paying Agent pays all amounts due in respect of the Notes
pursuant to such Acceleration Event or Change of Control, the Company may (A) in
the case of an Acceleration Event, request in writing the Escrow Agent to
release to the Company and the Escrow Agent shall promptly release to the
Company all remaining Escrowed Funds or (B) in the case of a Change of Control,
request the Escrow Agent to release to the Company and the Escrow Agent shall
promptly release to the Company the excess of the remaining Escrowed Funds over
the amount necessary to pay the remaining principal of, accrued and unpaid
interest on and premium, if any, with respect to
5
<PAGE> 6
any Notes (assuming such Notes mature on the Special Redemption Date) that
remain outstanding following the consummation of the repurchase of Notes in
accordance with Section 1012 of the Indenture in respect of such Change of
Control.
SECTION 4. Termination. Upon the release of any Escrowed Funds to the
Company pursuant to Section 2 or Section 3 hereof, such Escrowed Funds shall be
delivered to the Company, free and clear of any and all interests of the Escrow
Agent, the Trustee and the holders of the Notes. Upon the release of all
Escrowed Funds in accordance with Sections 2 and 3 hereof, this Agreement shall
terminate. In connection with such release, the Escrow Agent agrees to cooperate
with the Company to release any liens hereunder (including, without limitation,
delivering executed releases and financing termination statements) and will take
all action reasonably requested by the Company in connection therewith.
SECTION 5. Indemnity. The Company agrees to indemnify the Trustee and
the Escrow Agent, and any predecessor escrow agent or trustee, and their
respective officers, directors, employees and agents, for and to hold it and
each of them harmless against any loss, liability or reasonable expense arising
out of or in connection with this Agreement and carrying out their respective
duties hereunder, including the reasonable costs and expenses of defending
itself against any claim of liability; provided, however, that the Company will
not be liable for indemnification or otherwise for any loss, liability or
expense to the extent arising out of the gross negligence, willful misconduct or
bad faith of the Escrow Agent or the Trustee. Notwithstanding any other
provision in this Agreement, neither the Escrow Agent nor the Trustee shall be
liable for incidental or consequential damages. The provisions of this Section
shall survive termination of this Agreement.
SECTION 6. Modifications, Waivers and Amendments. No party shall be
bound by any modification, amendment, termination (except as provided in Section
4 hereof), cancellation or rescission or supersession of this Agreement unless
the same shall be in writing and signed by such party, and, if the Escrow
Agent's rights, duties, immunities or indemnities as Escrow Agent are affected
thereby, unless it shall have given its prior written consent thereto. This
Agreement may not be modified, amended, terminated (except as provided in
Section 4 hereof), canceled, rescinded or superseded without the written consent
of the Initial Purchasers.
SECTION 7. Concerning the Escrow Agent. (a) The Escrow Agent shall
receive a fee for acting hereunder as agreed to by the Escrow Agent and the
Company. The Company also agrees to pay on demand the reasonable out-of pocket
costs and expenses of the Escrow Agent, including the reasonable fees and
expenses of counsel selected by the Escrow Agent, incurred in connection with
its duties hereunder.
(b) The Escrow Agent shall exercise the same degree of care toward the
Escrowed Funds as it exercises toward its own similar property and shall not be
held to any higher standard of care under this Agreement, nor be deemed to owe
any fiduciary duty to the Company.
6
<PAGE> 7
(c) The Escrow Agent may act upon any instrument or other writing
believed by it in good faith to be genuine and to have been signed or presented
by the proper person, and subject to the foregoing, shall have no obligation to
determine the authenticity thereof or the correctness of any fact stated therein
or the propriety or validity of service thereof, and shall not be liable to any
party hereto in connection with the performance of its duties hereunder, except
for its own gross negligence, willful misconduct or bad faith. The duties of the
Escrow Agent shall be determined only with reference to this Escrow Agreement
and applicable laws and the Escrow Agent is not charged with any knowledge of or
any duties or responsibilities in connection with any other document or
agreement. If in doubt as to its duties and responsibilities hereunder, the
Escrow Agent may consult with counsel of its choice and shall be protected in
any action taken or omitted in good faith in reliance on the written advice or
opinion of such counsel.
(d) The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder either directly or by or through its
agents or attorneys, and the Escrow Agent shall not be responsible for the
misconduct or negligence of such agents or attorneys appointed with due care.
(e) Nothing in this Escrow Agreement shall be deemed to impose upon the
Escrow Agent any duty to qualify to do business or to act as agent or otherwise
in any jurisdiction other than the State of New York.
(f) The Escrow Agent shall not be responsible for and shall not be
under a duty to examine or pass upon the validity, binding effect, execution or
sufficiency of this Agreement, any agreement amendatory or supplemental hereto
or of any certificates delivered to it hereunder.
(g) The Escrow Agent makes no representation as to the validity, value,
genuineness or collectability of any security or other document or instrument
held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
(i) The Escrow Agent shall have the right at any time to resign
hereunder by giving written notice of its resignation to the Company and the
Trustee at their respective addresses set forth herein or at such other address
as the Company or the Trustee shall provide, at least 30 days prior to the date
specified for such resignation to take effect. Upon the effective date of such
resignation, all cash and other payments and all other property then held by the
Escrow Agent hereunder shall be delivered by it to a successor escrow agent, as
chosen by the Company after consultation with the Initial Purchasers. If no
successor escrow agent is appointed within 30 days of the Escrow Agent giving
written notice of its resignation to the Company and the Trustee, the Escrow
Agent may apply to a court of competent jurisdiction for such appointment and
the Escrow Agent's sole responsibility thereafter shall be to safekeep the
Escrowed Funds until receipt of written notice of the designation of a successor
escrow agent.
7
<PAGE> 8
(j) In the event that Escrow Agent should at any time be confronted
with inconsistent claims or demands to the Escrowed Funds, the Escrow Agent
shall have the right, but not the duty, (i) to interplead the parties in any
court of competent jurisdiction and request that such court determine the
respective rights of the parties with respect to the Escrowed Funds and (ii) to
retain in its possession without liability to anyone all the Escrowed Funds
until such dispute shall have been settled either by the mutual agreement of the
parties hereto or by a final, non-appealable order, decree or judgment of such
court. Any court order, decree or judgment shall be accompanied by a legal
opinion of counsel reasonably satisfactory to the Escrow Agent that such order,
decree or judgment is final and non-appealable. In the event the Escrow Agent no
longer holds any Escrowed Funds, it shall be released from any obligation or
liability as a consequence of any such claims or demands.
SECTION 8. Notices. All notices required to be given hereunder shall be
in writing and shall be deemed given when received at the following addresses
until such time as the parties hereto designate a different or additional
address or addresses:
To the Company:
Safety-Kleen Corp.
1301 Gervais Street, Suite 300
Columbia, South Carolina 29201
Attn: Henry H. Taylor
Telephone: (803) 933-4200
Facsimile: (803) 933-4340
To the Trustee:
The Bank of Nova Scotia
Trust Company of New York
One Liberty Plaza, 23rd Floor
New York, New York 10006
Attn: George Timmes
Telephone: (212) 225-5422
Facsimile: (212) 225-5436
To the Escrow Agent:
The Bank of Nova Scotia
Trust Company of New York
One Liberty Plaza, 23rd Floor
New York, New York 10006
Attn: George Timmes
Telephone: (212) 225-5422
8
<PAGE> 9
Facsimile: (212) 225-5436
SECTION 9. Tax Reporting Matters. All interest earned on Escrowed Funds
shall constitute the currently reportable income of the Company for federal
income tax purposes. The Company agrees to provide the Escrow Agent a certified
tax identification number for it by furnishing appropriate forms W-9 (or Forms
W-8, in the case of non-U.S. persons) and other forms and documents that the
Escrow Agent may reasonably request (collectively, "Tax Reporting
Documentation") to the Escrow Agent within 30 days after the date hereof. The
parties hereto understand that, if such Tax Reporting Documentation is not so
certified to the Escrow Agent, the Escrow Agent may be required by the Internal
Revenue Code, as it may be amended from time to time, to withhold a portion of
any interest or other income earned on the investment of monies or other
property held by the Escrow Agent pursuant to this Agreement. The Escrow Agent
need not make any distribution of all or any portion of the Escrowed Funds to
any person (other than to the Paying Agent for the purposes of the Special
Mandatory Redemption) until such person has furnished to the Escrow Agent such
Tax Reporting Documentation as the Escrow Agent may reasonably require.
SECTION 10. Miscellaneous. (a) This Agreement sets forth exclusively
the duties of the Escrow Agent with respect to any and all matters pertinent
hereto and no implied duties or obligations shall be read into this Agreement
against the Escrow Agent.
(b) This Agreement may be executed in any number of counterparts, each
of which shall be an original and all of which when taken together shall
constitute one agreement.
(c) This Agreement shall be governed by the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day first written above.
THE BANK OF NOVA SCOTIA
TRUST COMPANY OF NEW YORK,
as Escrow Agent
By /s/ George E. Timmes
Name: George E. Timmes
Title: Vice President
THE BANK OF NOVA SCOTIA
TRUST COMPANY OF NEW YORK,
as Trustee
By /s/ George E. Timmes
Name: George E. Timmes
Title: Vice President
SAFETY-KLEEN CORP.
By /s/ Paul R. Humphreys
Name: Paul R. Humphreys
Title: Senior Vice President of Finance
and Chief Financial Officer
10
<PAGE> 11
EXHIBIT A
FORM OF OFFICER'S CERTIFICATE
OF
SAFETY-KLEEN CORP.
This certificate is being delivered pursuant to Section 3(a) of the
Escrow Agreement dated as of May 17, 1999 (the "Escrow Agreement"), among
Safety-Kleen Corp. (the "Company"), The Bank of Nova Scotia Trust Company of New
York, a bank and trust company organized under the laws of New York, as Trustee
and The Bank of Nova Scotia Trust Company of New York, a bank and trust company
organized under the laws of New York, as Escrow Agent. Capitalized terms used
but not defined herein have the respective meanings specified in the Escrow
Agreement. The Company hereby certifies through the undersigned officer that:
1. As of the date hereof, the Funding Conditions have been
satisfied.
2. The Escrowed Funds (as defined in the Escrow Agreement),
upon release to the Company in accordance with the Escrow Agreement,
will be used as set forth under "Use of Proceeds" in the Offering
Memorandum dated May 10, 1999 relating to the Notes.
IN WITNESS WHEREOF, the undersigned has signed this Certificate this
___ day of __________, 1999,
SAFETY-KLEEN CORP.
By ___________________________________
Name:
Title:
11
<PAGE> 1
EXHIBIT 4(d)
COLLATERAL ACCOUNT PLEDGE AND SECURITY AGREEMENT
THIS COLLATERAL ACCOUNT PLEDGE AND SECURITY AGREEMENT, dated as of May
17, 1999 (this "Agreement"), among Safety-Kleen Corp., a Delaware corporation
(the "Pledgor"), The Bank of Nova Scotia Trust Company of New York, a trust
company organized under the laws of New York (the "Pledgee"), as trustee under
the Indenture dated as of May 17, 1999 between the Company and the Pledgee (the
"Indenture"), and The Bank of Nova Scotia Trust Company of New York, as escrow
agent (the "Escrow Agent") under the Escrow Agreement, dated as of May 17, 1999,
among the Pledgor, the Pledgee and the Escrow Agent (the "Escrow Agreement").
Capitalized terms used herein but not defined shall have the respective meanings
assigned to them in the Indenture or the Escrow Agreement, as the case may be.
PRELIMINARY STATEMENTS
WHEREAS, this Agreement is being entered into in connection with (i)
the Purchase Agreement (the "Purchase Agreement"), dated as of May 10, 1999,
among the Pledgor and TD Securities (USA) Inc., NationsBanc Montgomery
Securities LLC and Raymond James & Associates, Inc. (collectively, the "Initial
Purchasers"), (ii) the Indenture and (iii) the Escrow Agreement.
WHEREAS, pursuant to the Purchase Agreement, the Pledgor has issued and
sold to the Initial Purchasers $225 million aggregate principal amount of its 9
1/4% Senior Notes due 2009 (the "Offering").
WHEREAS, concurrently with the execution hereof, the Pledgor is
depositing $219,375,000 (the "Initial Deposit") in one or more special accounts
(the "Account") with the Escrow Agent pursuant to the Escrow Agreement in order
to secure certain of the obligations of the Pledgor under the Indenture.
NOW THEREFORE, in consideration of the premises contained and in order
to induce the Initial Purchasers to consummate the Offering, the Pledgor hereby
agrees as follows:
SECTION 1. Pledge and Assignment. The Pledgor hereby pledges and
assigns to the Pledgee, and grants to the Pledgee, for the benefit of the
Holders under the Indenture, a security interest in the following collateral
(the "Collateral"):
(i) the Account held by the Escrow Agent pursuant to Section
2(e) of the Escrow Agreement, all funds held therein and all
certificates and instruments, if any, from time to time representing or
evidencing the Account;
<PAGE> 2
(ii) all investments and Investment Property (as defined in
the Uniform Commercial Code) in which the Escrowed Funds or any portion
thereof is invested from time to time including, without limitation,
Permitted Investments, and all certificates and instruments, if any,
from time to time representing or evidencing such investments and
Investment Property;
(iii) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Escrow Agent for or on behalf of the
Pledgee in substitution for or in addition to any or all of the then
existing Collateral;
(iv) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Collateral; and
(v) all proceeds of any and all of the foregoing Collateral.
SECTION 2. Security for Obligations. This Agreement secures the payment
of (i) 101% of the principal amount of the Securities plus accrued and unpaid
interest thereon to the Mandatory Redemption Date now or hereafter existing
pursuant to Section 1101(d) of the Indenture and paragraph 5(c) of the
Securities, (ii) 101% of the principal amount of the Securities plus accrued and
unpaid interest thereon to the date of repurchase upon a Change of Control
solely under the circumstances provided in Section 3(d) of the Escrow Agreement
and (iii) 100% of the principal amount of the Securities plus accrued and unpaid
interest thereon and premium, if any, upon an Acceleration Event solely under
the circumstances described in Section 3(c) and (d) of the Escrow Agreement (all
such obligations of the Pledgor being the "Obligations"). Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by the Pledgor to the
Holders pursuant to the Indenture but for the fact that they are unenforceable
or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Pledgor.
SECTION 3. Delivery of Collateral. All certificates or instruments, if
any, representing or evidencing the Collateral have heretofore been delivered to
the Escrow Agent and are currently held by the Escrow Agent pursuant to and in
accordance with the Escrow Agreement.
SECTION 4. Investing of Amounts in the Account. The Collateral shall be
invested in accordance with the provisions of the Escrow Agreement and held by
the Escrow Agent subject to the lien and security interest created hereunder.
Interest and proceeds that are not invested or reinvested as provided in the
Escrow Agreement shall be deposited and held in the Account.
2
<PAGE> 3
SECTION 5. Release of Amounts. So long as the Securities have not
become subject to Special Mandatory Redemption or an Acceleration Event, a
Remedies Trigger Event or a Change of Control has not occurred, in each case as
contemplated by Section 3(b), (c) or (d) of the Escrow Agreement, the Pledgor
may request, and the Escrow Agent shall release free of the lien of this
Agreement, pursuant to Section 2(c) of the Escrow Agreement, Escrowed Funds, if
any, in amounts which exceed the Mandatory Redemption Price, provided, however,
that this Section 5 shall not be deemed to create any separate obligation on the
part of the Escrow Agent to release such funds other than as set forth in
Section 2(c) of the Escrow Agreement.
SECTION 6. Remedies. If the Securities become subject to a Special
Mandatory Redemption or there shall have occurred an Acceleration Event, a
Remedies Trigger Event or a Change of Control, the Collateral shall be disbursed
in accordance with Section 3(b), (c) and (d) of the Escrow Agreement, as the
case may be. Upon any such disbursement, the Escrowed Funds shall no longer be
subject to the lien and security interest created hereunder.
SECTION 7. Amendments, Etc. No amendment or waiver of any provision of
this Pledge Agreement, and no consent to any departure by the Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Pledgor, the Pledgee and the Escrow Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 8. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered to the parties hereto at the address specified in the Escrow
Agreement or at such other address as shall be designated by any party in a
written notice to the other parties. All such notices and other communications
shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective
when deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively.
SECTION 9. Continuing Security Interest. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the earlier of (x) the payment in full, termination
or expiration of the Obligations and (y) the expiration or termination of the
Escrow Agreement, (ii) be binding upon the Pledgor, its successors and assigns,
and (iii) inure to the benefit of, and be enforceable by, the Escrow Agent and
the Trustee and their successors and assigns. Upon the earlier of the payment in
full, termination or expiration of the Obligations and the expiration or
termination of the Escrow Agreement, the security interest granted hereby shall
terminate. Upon any such termination, any Collateral held by the Escrow Agent
shall be released and disbursed as provided for in the Escrow Agreement and the
Pledgee and the Escrow Agent will, at the Pledgor's expense, execute and
3
<PAGE> 4
deliver to the Pledgor such documents as the Pledgor shall reasonably request to
evidence such termination. In connection with any release of Collateral pursuant
to this Agreement, the Escrow Agent and the Pledgee agree to cooperate with the
Pledgor to release any liens hereunder (including, without limitation,
delivering executed releases and financing termination statements) and will take
all action reasonably requested by the Pledgor in connection therewith.
SECTION 10. Governing Law. This Pledge Agreement shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York.
SECTION 11. Further Assurances. The Pledgor agrees that, from time to
time, so long as this Agreement is in effect, at the Pledgor's expense, the
Pledgor will promptly execute and deliver all instruments and documents, and
take all further action, that may be necessary or that the Pledgee shall
reasonably request, to perfect and protect the lien granted hereby.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
SAFETY-KLEEN CORP.
By /s/ Henry H. Taylor
Name: Henry H. Taylor
Title: Secretary
S-1
<PAGE> 6
ACKNOWLEDGED AND AGREED:
THE BANK OF NOVA SCOTIA
TRUST COMPANY OF NEW YORK,
AS ESCROW AGENT
By: /s/ W.A. Goshine
Name: W.A. Goshine
Title: Secretary
THE BANK OF NOVA SCOTIA
TRUST COMPANY OF NEW YORK,
AS TRUSTEE
By: /s/ G.E. Timmes
Name: George E. Timmes
Title: Vice President
<PAGE> 1
Exhibit (4)(f)
THIS FIRST SUPPLEMENTAL INDENTURE, effective as of November 15,
1998, among Safety-Kleen Services, Inc. (formerly LES, Inc.), a Delaware
corporation (the "Company"), Safety-Kleen Corp. (formerly Laidlaw Environmental
Services, Inc.), a Delaware corporation (the "Parent Guarantor") and SK Europe,
Inc., a Nevada corporation ("SK Europe") and The Bank of Nova Scotia Trust
Company of New York, as trustee (the "Trustee").
WHEREAS, the Company, the Guarantors, and the Trustee entered into
an Indenture dated as of May 29, 1998 (the "Indenture") to provide for the
issuance of the Company's 9 1/4% Senior Subordinated Notes due 2008;
WHEREAS, the Company and certain of the Subsidiary Guarantors have
changed their names to eliminate the reference to Laidlaw Environmental or LES;
WHEREAS, on August 14, 1998, Corsan Trucking, Inc. ("Corsan"), a
Subsidiary Guarantor, was dissolved by the Company in accordance with the terms
of the Indenture;
WHEREAS, on August 28, 1998, East Carbon Development Financial
Partners, Inc. ("ECDF"), a Subsidiary Guarantor, was merged into Safety-Kleen
(US), Inc. ("SKUS"), another Subsidiary Guarantor, in accordance with the terms
of the Indenture;
WHEREAS, on September 1, 1998, SKUS was merged into the Company in
accordance with the terms of the Indenture;
WHEREAS, Safety-Kleen Systems, Inc., a wholly-owned subsidiary of
the Company, has formed SK Europe and acquired 100% of its capital stock;
WHEREAS, pursuant to Sections 1307 and 1308 of the Indenture, SK
Europe, as a new Subsidiary Guarantor, is required to enter into this
Supplemental Indenture (this "Supplemental Indenture");
WHEREAS, the Company, the Parent Guarantor, SK Europe and the
Trustee are authorized to enter into this Supplemental Indenture;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants contained in this Supplemental Indenture and for other good and
valuable consideration, the receipt and sufficiency of which are herein
acknowledged, the Company, the Parent Guarantor, SK Europe and the Trustee
hereby agree for the equal and the ratable benefit of all Holders of the
Securities as follows:
<PAGE> 2
2
ARTICLE ONE
Definitions
1.1 Definitions. For purposes of this Supplemental Indenture, the
terms defined in the recitals shall have the meanings therein specified; any
terms defined in the Indenture and not defined herein shall have the same
meanings herein as therein defined; and references to Articles or Sections
shall, unless the context indicates otherwise, be references to Articles or
Sections of the Indenture.
ARTICLE TWO
GUARANTEES OF SECURITIES AND OTHER PROVISIONS
2.1 SK Europe Guarantee.
(a) SK Europe hereby jointly and severally, fully, absolutely,
unconditionally and irrevocably guarantees to each Holder of a Security
authenticated and delivered by the Trustee, and to the Trustee for its benefit
and the benefit of each Holder, the punctual payment and performance when due of
all Indenture Obligations which, for purposes of its Securities Guarantee, shall
also be deemed to include all commissions, fees, charges, costs and other
expenses (including reasonable legal fees and disbursements of counsel) arising
out of or incurred by the Trustee or the Holders in connection with the
enforcement of any Securities Guarantee. Without limiting the generality of the
foregoing, SK Europe's liability shall extend to all amounts that constitute
part of the Indenture Obligations and would be owed by the Company to such
Holder or the Trustee under the Securities or the Indenture but for the fact
that they are unenforceable, reduced, limited, suspended or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Company.
(b) SK Europe and by its acceptance of a Security each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by SK Europe pursuant to its Securities Guarantee not constitute a fraudulent
transfer or conveyance for purposes of the Federal Bankruptcy Code, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act of any similar
federal or state law or the provisions of its local law relating to fraudulent
transfer or conveyance. To effectuate the foregoing intention, the Holders and
SK Europe hereby irrevocably agree that the obligations of such Guarantor under
its Securities Guarantee shall be limited to the maximum amount as shall after
giving effect to all other contingent and fixed liabilities of SK Europe and
after giving effect to any collections from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
its Securities Guarantee or pursuant to paragraph (c) of
<PAGE> 3
3
Section 1301 of the Indenture, result in the obligations of SK Europe under its
Securities Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law.
(c) SK Europe, the Trustee and each Holder by its acceptance
of a Security hereby agrees that the Securities Guarantee of SK Europe provided
hereunder shall be subject to all terms, provisions and conditions in the
Indenture that relate to a Securities Guarantee (including, without limitation,
Articles XIII and XIV of the Indenture). SK Europe further agrees to be bound
by, and to comply with, all provisions of the Indenture and Securities Guarantee
that are applicable to a Subsidiary Guarantor.
2.2 Execution and Delivery of Guarantee.
The delivery of any Security by the Trustee, after the
authentication thereof under the Indenture, shall constitute due delivery of the
Securities Guarantee on behalf of SK Europe.
2.3 Amendment of Schedule A.
In order to reflect the Securities Guarantee of SK Europe, the
dissolution of Corsan and the name changes of certain Subsidiary Guarantors,
Schedule A of the Indenture is hereby replaced by Schedule A attached to this
Supplemental Indenture.
2.4 No Personal Liability.
No stockholder, officer, director, employee or incorporator, past,
present or future, of SK Europe, as such, shall have any personal liability
under the Securities Guarantee by reason of his, her or its status as such
stockholder, officer, director, employee or incorporator.
ARTICLE THREE
Miscellaneous
3.1 Effect of the Supplemental Indenture. This Supplemental
Indenture supplements the Indenture and shall be a part and subject to all the
terms thereof. Except as supplemented hereby, the Indenture and the Securities
issued thereunder shall continue in full force and effect.
<PAGE> 4
4
3.2 Counterparts. This Supplemental Indenture may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
3.4 Recitals. The Trustee shall not be responsible for any recital
herein (other than the ninth recital as it applies to the Trustee) as such
recitals shall be taken as statements of the Company, or the validity of the
execution by SK Europe of this Supplemental Indenture. The Trustee makes no
representations as to the validity or sufficiency of this Supplemental
Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed on this 18th day of December 1998.
SAFETY-KLEEN SERVICES, INC.
By: /s/ Henry H. Taylor
--------------------------------
Name: Henry H. Taylor
Title: Secretary
SAFETY-KLEEN CORP.
By: /s/ Henry H. Taylor
--------------------------------
Name: Henry H. Taylor
Title: Secretary
SK EUROPE, INC.
By: /s/ Henry H. Taylor
--------------------------------
Name: Henry H. Taylor
Title: Secretary
THE BANK OF NOVA SCOTIA TRUST
COMPANY OF NEW YORK, as Trustee
By: /s/ George E. Timmes
--------------------------------
Name: George E. Timmes
Title: Vice President
<PAGE> 5
SCHEDULE A
SUBSIDIARY GUARANTORS
Safety-Kleen Systems, Inc.
Safety-Kleen (Altair), Inc.
Safety-Kleen (Aragonite), Inc.
Safety-Kleen (Bartow), Inc.
Safety-Kleen (Baton Rouge), Inc.
Safety-Kleen (BDT), Inc.
Safety-Kleen (Bridgeport), Inc.
Safety-Kleen (Buttonwillow), Inc.
Safety-Kleen (California), Inc.
Safety-Kleen (Chattanooga), Inc.
Safety-Kleen (Clive), Inc.
Safety-Kleen (Colfax), Inc.
Safety-Kleen (Crowley), Inc.
Safety-Kleen (Custom Transport), Inc.
Safety-Kleen (Deer Park), Inc.
Safety-Kleen (Deer Trail), Inc.
Safety-Kleen (Delaware), Inc.
Safety-Kleen (Encotec), Inc.
Safety-Kleen (FS), Inc.
Safety-Kleen (Gloucester), Inc.
Safety-Kleen (GS), Inc.
Safety-Kleen Holdings, Inc.
Safety-Kleen (La Porte), Inc.
Safety-Kleen (Lone and Grassy Mountain) Inc.
Safety-Kleen (Los Angeles), Inc.
Safety-Kleen (Minneapolis), Inc.
Safety-Kleen (Mt. Pleasant), Inc.
Safety-Kleen (Nashville), Inc.
Safety-Kleen (NE), Inc.
Safety- Kleen (Pecatonica), Inc.
Safety-Kleen (Pinewood), Inc.
Safety-Kleen (Plaquemine), Inc.
Safety-Kleen (PPM), Inc.
Safety-Kleen (Puerto Rico), Inc.
Safety-Kleen (Roebuck), Inc.
Safety-Kleen (Rosemount), Inc.
Safety-Kleen (San Antonio), Inc.
Safety-Kleen (Sawyer), Inc.
Safety-Kleen (TG), Inc.
Safety-Kleen (Tipton), Inc.
Safety-Kleen (TS), Inc.
Safety-Kleen (Tulsa), Inc.
<PAGE> 6
2
Safety-Kleen (San Jose), Inc.
Safety-Kleen (Sussex), Inc.
Safety-Kleen (White Castle), Inc.
Safety-Kleen (Wichita), Inc.
Safety-Kleen (Westmorland), Inc.
Safety-Kleen (WT), Inc.
Safety-Kleen OSCO Holdings, Inc.
Safety-Kleen Chemical Services, Inc.
SK Europe, Inc.
Ninth Street Properties, Inc.
Chemclear, Inc. of Los Angeles
USPCI, Inc. of Georgia
GSX Chemical Services of Ohio, Inc.
LEMC, Inc.
Dirt Magnet, Inc.
The Midway Gas & Oil Company
Elgint Corp.
Safety-Kleen Envirosystems Company
Safety-Kleen Envirosystems Company of Puerto Rico, Inc.
Petrocon, Inc.
Phillips Acquisition Corp.
EnviroGroup, Inc.
SK Europe, Inc.
SK Insurance Company
SK Real Estate, Inc.
Safety-Kleen International, Inc.
Safety-Kleen Oil Recovery Co.
Safety-Kleen Oil Services, Inc.
The Solvents Recovery Service of New Jersey, Inc.
<PAGE> 1
Exhibit (4)(l)
CONFORMED COPY
WAIVER AND THIRD AMENDMENT
WAIVER AND THIRD AMENDMENT (this "Waiver and Amendment"), dated as
of May 6, 1999, to (i) the Amended and Restated Credit Agreement, dated as of
April 3, 1998 (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among SAFETY-KLEEN SERVICES, INC. (formerly known as
LES, Inc.), a Delaware corporation (the "Company"), SAFETY-KLEEN (CANADA) LTD.
(formerly known as Laidlaw Environmental Services (Canada) Ltd.), a Canadian
corporation and a wholly owned subsidiary of the Company (together with the
Company, the "Borrowers"), the several banks and other financial institutions or
entities from time to time parties thereto (the "Lenders"), TORONTO DOMINION
(TEXAS), INC., as general administrative agent (in such capacity, the "General
Administrative Agent"), THE TORONTO-DOMINION BANK, as Canadian administrative
agent, TD SECURITIES (USA) INC., as advisor to the Borrowers and arranger of the
commitments described in the Credit Agreement, THE BANK OF NOVA SCOTIA,
NATIONSBANK, N.A., THE FIRST NATIONAL BANK OF CHICAGO and WACHOVIA BANK, N.A.,
as managing agents, THE BANK OF NOVA SCOTIA and THE FIRST NATIONAL BANK OF
CHICAGO, as co-documentation agent, and NATIONSBANK, N.A., as syndication agent,
and (ii) the Amended and Restated Guarantee and Collateral Agreement, dated as
of April 3, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Guarantee and Collateral Agreement"), made by the Company, Holdings
(as defined below) and each of the other signatories thereto (together with any
other entity that may become a party thereto, the "Grantors") in favor of the
General Administrative Agent for the Lenders.
W I T N E S S E T H :
WHEREAS, Safety-Kleen Corp. (formerly known as Laidlaw Environmental
Services, Inc.), a Delaware corporation and the parent of the Company
("Holdings"), is to issue up to $225,000,000 in aggregate principal amount of
unsecured senior notes, the proceeds of which will be used to repay, in part,
the Seller Note;
WHEREAS, the Company has requested, and, upon this Waiver and
Amendment becoming effective, the Lenders have agreed, that certain provisions
of the Credit Agreement and the Guarantee and Collateral Agreement be waived and
amended upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and in the Credit Agreement and the Guarantee and
Collateral Agreement, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, all capitalized
terms used herein shall have the meanings given to them in the Credit Agreement,
or, to the extent not defined therein, in the Guarantee and Collateral
Agreement.
2. Amendment of Section 1.1 of the Credit Agreement. Section 1.1 of
the Credit Agreement is hereby amended by:
<PAGE> 2
2
(a) adding the following defined terms in their appropriate alphabetical order:
"Escrow Account": the escrow account to be established pursuant to
the indenture under which the New Parent Notes will be issued or a related
escrow agreement, into which the proceeds of the New Parent Notes will be
deposited pending use thereof to repay the Seller Note.
"New Parent Notes": up to $225,000,000 aggregate principal amount of
senior unsecured notes of Holdings (including any unsecured notes of
Holdings with substantially similar terms issued in exchange for such
notes), bearing interest payable in cash and having a maturity no earlier
than the Revolving Credit Termination Date.
(b) adding the following sentence at the end of the definition of "Subsidiary":
(Safety-Kleen Europe Limited shall not be deemed to be a Subsidiary so
long as the Company owns, directly or indirectly, less than 50% of the
voting stock thereof).
(c) deleting clause (a) of the definition of "Applicable Margin" in its entirety
and substituting in lieu thereof the following:
(a) on any day, for each Type of Revolving Credit Loan, Tranche A Term
Loan and Canadian Term Loan, the rate per annum determined pursuant to the
Pricing Grid (provided, that in any event such Applicable Margin and
Stamping Fee Rate for any day during the period from June 1, 1999 through
November 30, 1999 shall be that set forth in the Pricing Grid opposite a
Consolidated Total Leverage Ratio of greater than or equal to 4.00:1.00);
and
3. Waiver of Section 6.3(b) of the Credit Agreement. The Lenders
hereby waive compliance with the provisions of subsection 6.3(b) of the Credit
Agreement to the extent applicable to the issuance of the New Parent Notes;
provided that Holdings shall apply the Net Cash Proceeds thereof to the
repayment or repurchase of the Seller Note and general corporate purposes (which
may include interest payments on the New Parent Notes and principal, interest
and premium payable on the New Parent Notes in the event such notes are redeemed
as a result of a failure to repurchase the Seller Note).
4. Amendment to Section 10.1 of the Credit Agreement. (a) Subsection
10.1(a) of the Credit Agreement is hereby amended by deleting such subsection in
its entirety and substituting in lieu thereof the following
(a) Consolidated Total Leverage Ratio. Permit the Consolidated Total
Leverage Ratio as at (i) the last day of any fiscal quarter of the Company
set forth below or (ii) the last day of any fiscal quarter of the Company
ending during any fiscal year set forth below to exceed the ratio set
forth below opposite such fiscal quarter or fiscal year:
<PAGE> 3
3
Consolidated Total
Fiscal Period Leverage Ratio
------------- --------------
1999 4.50:1.00
September 1 to November 30, 1999 4:25:1.00
December 1 to February 29, 2000 4.25:1.00
March 1 to May 31, 2000 4.00:1.00
June 1 to August 31, 2000 4.00:1.00
2001 3.50:1.00
2002 2.75:1.00
2003 2.50:1.00
2004 and thereafter 2.00:1.00
(b) Subsection 10.1(c) of the Credit Agreement is hereby amended by deleting
such subsection in its entirety and substituting in lieu thereof the following:
(c) Interest Coverage Ratio. Permit the Interest Coverage Ratio for any
period of four consecutive fiscal quarters of the Company (i) ending with
any fiscal quarter set forth below or (ii) ending during any fiscal year
set forth below to be less than the ratio set forth below opposite such
fiscal quarter or fiscal year:
Interest
Fiscal Period Coverage Ratio
------------- --------------
1999 2.00:1.00
September 1 to November 30, 1999 2.00:1.00
December 1 to February 29 2000 2.00:1.00
March 1 to May 31, 2000 2.25:1.00
June 1 to August 31, 2000 2.25:1.00
2001 2.50:1.00
2002 2.75:1.00
2003 and thereafter 3.00:1.00
(c) Notwithstanding the foregoing paragraphs (a) and (b) of this Section 4, if
the New Parent Notes are redeemed or repurchased because of the failure to
obtain the consent of the shareholders of Holdings required to authorize the
issuance of common stock of Holdings in connection with the repurchase or
redemption of the Seller Note, (i) the amendments effected by the foregoing
paragraphs (a) and (b) will become ineffective as of the date of such repurchase
or redemption of the New Parent Notes and (ii) for purposes of calculating the
Consolidated Total Leverage Ratio and the Interest Coverage Ratio for any period
that coincides with any period during which the New Parent Notes were
outstanding, the interest expense attributable to the New Parent Notes shall be
excluded from such calculations.
5. Amendment to Section 10.3 of the Credit Agreement. Subsection
10.3 of the Credit Agreement is hereby amended by adding at the end thereof the
following:
<PAGE> 4
4
(1) Liens on the Escrow Account (and any cash or other assets therein) to
secure the obligations of Holdings to redeem the New Parent Notes under
the conditions set forth in the indenture pursuant to which the New Parent
Notes are issued.
6. Amendment to Section 10.5(d) of the Credit Agreement. Subsection
10.5(d) of the Credit Agreement is hereby amended by inserting at the end
thereof the following:
, SK Insurance Company, Environment Services et Machinerie E.S.M. Inc. or
SK D'Incineration, Inc.
7. Amendment to Section 10.7 of the Credit Agreement. Subsection
10.7 of the Credit Agreement is hereby amended by deleting such subsection in
its entirety and substituting in lieu thereof the following:
10.7 Limitation on Dividends. Declare or pay any dividend (other
than dividends payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital
Stock of the Company or any of its Subsidiaries or any warrants or options
to purchase any such Stock, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Company or any
Subsidiary (such declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and distributions
being herein called "Restricted Payments"), except that (a) any Subsidiary
may make Restricted Payments to the Company or any wholly owned Subsidiary
of the Company, and (b) so long as, on the date of such Restricted
Payment, both before and after giving effect thereto, no Default or Event
of Default shall have occurred and be continuing (i) the Company may make
Restricted Payments to Holdings to service the Westinghouse Debt, the
CPCFA Debt and the Tooele County Debt, provided that each such Restricted
Payment shall be made on the date on which a cash payment of principal or
interest under the Westinghouse Debt, the CPCFA Debt or the Tooele County
Debt, as the case may be, is due and shall be in an amount not greater
than the amount of such cash payment, and such cash payment in respect of
such Indebtedness shall be made by Holdings on such date, (ii) the Company
may make Restricted Payments to Holdings to service the New Parent Notes,
provided that each such Restricted Payment shall be made on the date on
which a cash payment of principal or interest under the New Parent Notes
is due and shall be in an amount not greater than the amount of such cash
payment, and such cash payment in respect of the New Parent Notes shall be
made by Holdings on such date, (iii) in the event that either (a) the
consent of the shareholders of Holdings required for the issuance of
shares of common stock in connection with the repurchase or redemption of
the Seller Note is not obtained and, as a consequence thereof, the New
Parent Notes are required to be redeemed or repurchased by Holdings or (b)
Holdings is required to deposit additional cash or cash equivalents in the
Escrow Account at the closing of the issuance of the New Parent Notes to
fund any redemption or repurchase of the New Parent Notes specified in
clause (a) above, the Company may make a Restricted Payment to Holdings in
an amount not exceeding
<PAGE> 5
5
$15,000,000, the proceeds of which, together with amounts withdrawn from
the Escrow Account, shall be used to repurchase or redeem the New Parent
Notes, and (iv) the Company may make Restricted Payments to Holdings to
provide for payment in the ordinary course of business of taxes,
directors' fees, stock exchange fees, and other costs and expenses of its
operations as a public company permitted by the Guarantee and Collateral
Agreement.
8. Amendment to Section 5.12(c)(ii) of the Guarantee and Collateral
Agreement. Subsection 5.12(c)(ii) of the Guarantee and Collateral Agreement is
hereby amended by deleting such provision in its entirety and substituting in
lieu thereof the following:
the entry into, and exercise of rights and performance of obligations in
respect of, this Agreement, the Seller Note, the California Bonds, the
Utah Bonds, the Westinghouse Debt Agreement, the Stock Purchase Agreement,
the New Parent Notes (including any related registration rights agreement
or escrow agreement or securities purchase agreement with Laidlaw Inc
pursuant to which the Company has agreed to repurchase or redeem the
Seller Note), equity subscription agreements, registration rights
agreements, voting and other stockholder agreements, engagement letters,
underwriting agreements and other agreements in respect of its equity
securities or any offering, issuance or sale thereof,
9. Waiver of Pledge Requirement. Any provision of the Credit
Agreement or the Guarantee and Collateral Agreement to the contrary
notwithstanding, the Company shall not be required to pledge pursuant to the
Guarantee and Collateral Agreement Capital Stock acquired by the Company and its
Subsidiaries as investments in entities in which the Company and its
Subsidiaries hold a minority interest; provided that the aggregate market value
of such Capital Stock which is not pledged pursuant to the Guarantee and
Collateral Agreement shall not at any time exceed $5,000,000.
10. Conditions to Effectiveness. This Waiver and Amendment shall
become effective as of the date first above written when (i) each of the
Majority Facility Lenders under each Facility, the Required Lenders, the General
Administrative Agent and the Borrowers shall have executed and delivered this
Waiver and Amendment, (ii) each Guarantor shall have acknowledged and agreed to
this Waiver and Amendment, and (iii) the Company shall have paid the General
Administrative Agent on behalf of each Lender that executes and delivers this
Waiver and Amendment on or before May 6, 1999, an amendment fee in an amount
equal to 0.20% of the Aggregate Exposure of such Lender.
11. Continuing Effects. Except as expressly waived or amended
hereby, the Credit Agreement and the Guarantee and Collateral Agreement shall
continue to be and shall remain in full force and effect in accordance with
their respective terms.
12. Expenses. The Company agrees to pay and reimburse the General
Administrative Agent for all of its reasonable out-of-pocket costs and expenses
incurred in connection with the negotiation, preparation, execution, and
delivery of this Waiver and Amendment, including the reasonable fees and
expenses of counsel.
<PAGE> 6
6
13. Counterparts. This Waiver and Amendment may be executed on any
number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
14. GOVERNING LAW. THIS WAIVER AND AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
SAFETY-KLEEN SERVICES, INC. (formerly
known as LES, Inc.)
By: /s/ Paul Humphreys
----------------------------------------
Title: Senior Vice President and CFO
SAFETY-KLEEN (CANADA) LTD. (formerly
known as Laidlaw Environmental Services
(Candad) Ltd.)
By: /s/ Paul Humphreys
----------------------------------------
Title: Senior Vice President and CFO
TORONTO DOMINION (TEXAS), INC.,
as General Administrative Agent and Lender
By: /s/ Jane Mott
----------------------------------------
Title: Vice President
THE TORONTO-DOMINION BANK,
as Canadian Administrative Agent
By: /s/ Bruce Chambers
----------------------------------------
Title: Manager
<PAGE> 7
7
TD SECURITIES (USA) INC., as Arranger
By:
----------------------------------------
Title:
THE TORONTO-DOMINION BANK,
as a Lender
By:
----------------------------------------
Title:
THE BANK OF NOVA SCOTIA,
as Managing Agent, Co-Documentation Agent
and Lender
By: /s/ William E. Zarrett
----------------------------------------
Title: Senior Relationship Manager
THE FIRST NATIONAL BANK OF CHICAGO
as Managing Agent, Co-Documentation Agent
and Lender
By: /s/ James Gable
----------------------------------------
Title: Customer Service Officer
NATIONSBANK, N.A.,
as Syndication Agent, Managing Agent and
Lender
By: /s/ Adam Kaplan
----------------------------------------
Title: Authorized Signatory
<PAGE> 8
8
WACHOVIA BANK, N.A.,
as Managing Agent and Lender
By: /s/ Kathryn M. Mays
----------------------------------------
Title: Assistant Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Levi Schatz
----------------------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Robert M. Kadlick
----------------------------------------
Title: Duly Authorized Signatory
COMERICA BANK
By: /s/ Marian Enright
----------------------------------------
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Jeffrey Lynch
----------------------------------------
Title: Senior Vice President
ROYAL BANK OF CANADA
By: /s/ John Crawford
----------------------------------------
Title: Senior Manager
<PAGE> 9
9
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By: /s/ Sean Mounier
----------------------------------------
Title: First Vice President
By: /s/ Brian O'Leary
----------------------------------------
Title: Vice President
HSBC BANK USA (formerly Marine Midland
Bank)
By: /s/ Christopher F. French
----------------------------------------
Title: Authorized Signatory
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By: /s/ Rebecca J. Silbert
----------------------------------------
Title: Senior Vice President
MITSUBISHI TRUST AND BANKING CORPORATION
By: /s/ Beatrice Kossodo
----------------------------------------
Title: Senior Vice President
FLEET BUSINESS CREDIT CORPORATION,
formerly, SANWA BUSINESS CREDIT
CORPORATION
By: /s/ Cameron Terry
----------------------------------------
Title: Senior Vice President
<PAGE> 10
10
SOCIETE GENERALE
By: /s/ Christopher J. Speltz
----------------------------------------
Title: Director, Head of SG-Dallas
SOUTHERN PACIFIC BANK
By: /s/ Sean R. Walker
----------------------------------------
Title: Vice President
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ David M. Cawrse
----------------------------------------
Title: First Vice President & Manager
COOPERATIEVE CENTRALE RAIFEISEN-
BOERENLEENBANK B.A., "RABOBANK NEDERLAND"
NEW YORK BRANCH
By: /s/ Hans F. Bruekhoven
----------------------------------------
Title: Vice President
By: /s/ Ian Reece
----------------------------------------
Title: Senior Credit Officer
COMMERCIAL LOAN FUNDING TRUST I
By: Lehman Commercial Paper Inc., not in
its individual capacity but solely as
administrative agent
By: /s/ Michelle Swanson
----------------------------------------
Title: Authorized Signatory
CREDIT SUISSE FIRST BOSTON
By: /s/ Barry A. Zamore
----------------------------------------
Title: Vice President
By: /s/ Claire M. McCarthy
----------------------------------------
Title: Managing Director
<PAGE> 11
11
THE SAKURA BANK, LTD.
By:
----------------------------------------
Title:
STAR BANK, NATIONAL ASSOCIATION
By: /s/ Mark A. Whitson
----------------------------------------
Title: Vice President
BANK OF HAWAII
By: /s/ Brenda Testerman
----------------------------------------
Title: Vice President
CITIBANK, N.A.
By: /s/ Marjorie Futornick
----------------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Robert P. Gallagher, Jr.
----------------------------------------
Title: Vice President
SKANDINAVISKA ENSKILDA BANKEN AB
(PUBL.) NY BRANCH
By:
----------------------------------------
Title:
By:
----------------------------------------
Title:
<PAGE> 12
12
THE SUMITOMO BANK, LTD
By: /s/ Svresh S. Tata
----------------------------------------
Title: Senior Vice President
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By:
----------------------------------------
Title:
NATIONAL CITY BANK
By: /s/ Lisa B. Lisi
----------------------------------------
Title: Vice President
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Dan Dobrjanskyj
----------------------------------------
Title: Assistant Vice President
THE FUJI BANK, LIMITED
By: /s/ Teiji Teramoto
----------------------------------------
Title: Vice President and Manager
<PAGE> 13
13
CAISSE DE DEPOT ET PLACEMENT DU
QUEBEC
By: /s/ Louis Lausie
----------------------------------------
Title: Manger
By: /s/ Lucie Rousseau
----------------------------------------
Title: Vice President
KZH PONDVIEW LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
WEBSTER BANK
By: /s/ Juliana B. Dalton
----------------------------------------
Title: Vice President
BANQUE WORMS CAPITAL CORPORATION
By: /s/ Frederick Gamet
----------------------------------------
Title:
By: /s/ Constance De Klerk
----------------------------------------
Title: Senior Vice President
IMPERIAL BANK
By: /s/ Mark Campbell
----------------------------------------
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ B. Ross Smead
----------------------------------------
Title: Vice President
<PAGE> 14
14
GPSF SECURITIES, INC.
By:
----------------------------------------
Title:
KZH CNC LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
SUMMIT BANK
By: /s/ Seiji P. Nakamura
----------------------------------------
Title: Assistant Vice President
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James R. Dingler
----------------------------------------
Title: Director
FIRSTRUST BANK
By: /s/ Edward D'Ancona
----------------------------------------
Title: Vice President
BANCO ESPIRITO SANTO
By: /s/ Andrew M. Orsen
----------------------------------------
Title: Vice President
By: /s/ Terry R. Hull
----------------------------------------
Title: Senior Vice President
<PAGE> 15
15
THE CITY NATIONAL BANK
By:
----------------------------------------
Title:
VAN KAMPEN PRIME RATE INCOME TRUST
By:
----------------------------------------
Title:
OAK HILL SECURITIES FUND, L.P.
By: OAK HILL SECURITIES GENPAR, L.P.,
its General Partner
By: OAK HILL SECURITIES MGP, INC., its
General Partner
By: /s/ Scott D. Krase
----------------------------------------
Title: Vice President
SENIOR DEBT PORTFOLIO
By: BOSTON MANAGEMENT AND RESEARCH,
as Investment Advisor
By: /s/ Payson F. Swaffield
----------------------------------------
Title: Vice President
VAN KAMPEN CLO I, LIMITED
BY: VAN KAMPEN MANAGEMENT INC.,
as Collateral Manager
By:
----------------------------------------
Title:
<PAGE> 16
16
OCTAGON LOAN TRUST
By: OCTAGON CREDIT INVESTORS, as
Manager
By: /s/ Joyce C. Delucca
----------------------------------------
Title: Managing Director
FRANKLIN FLOATING RATE TRUST
By: /s/ Chauncey Lufkin
----------------------------------------
Title: Vice President
AG CAPITAL FUNDING PARTNERS, L.P.
By: ANGELO, GORDON & CO., L.P.,
as Investment Advisor
By: /s/ Jeffrey H.Aronson
----------------------------------------
Title: Managing Director
FIRST DOMINION FUNDING I
By: /s/ David Lerner
----------------------------------------
Title: Authorized Signatory
JACKSON NATIONAL LIFE INSURANCE
COMPANY
By: PPM AMERICA, INC., as attorney in fact
on behalf of Jackson National Life
Insurance Company
By: /s/ Mike King
----------------------------------------
Title: Vice President
<PAGE> 17
17
ELC (CAYMAN) LTD.
By: /s/ E. Kratzman
----------------------------------------
Title: Managing Director
AMERICAN GENERAL ANNUITY INSURANCE COMPANY,
formerly WESTERN NATIONAL LIFE INSURANCE
COMPANY
By: /s/ C. Scott Inglis
----------------------------------------
Title: Investment Officer
KZH CRESCENT LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
KZH CRESCENT-2 LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
CRESCENT/MACH I PARTNERS, L.P.
By: TCW ASSET MANAGEMENT COMPANY,
as its Investment Manager
By: /s/ Mark L. Gold
----------------------------------------
Title: Managing Director
<PAGE> 18
18
PAM CAPITAL FUNDING LP
By: HIGHLAND CAPITAL MANAGEMENT, L.P., as
Collateral Manager
By: /s/ Mark K. Okada CFA
----------------------------------------
Title: Executive Vice President
KZH CYPRESSTREE-1 LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
PAMCO CAYMAN LTD.
By: HIGHLAND CAPITAL MANAGEMENT,
L.P., as Collateral Manager
By: /s/ Mark K. Okada CFA
----------------------------------------
Title: Executive Vice President
ARCHIMEDES FUNDING, LLC
BY: ING CAPITAL ADVISORS, INC. as
Collateral Manager
By:
----------------------------------------
Title:
<PAGE> 19
19
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC
BY: ING CAPITAL ADVISORS, INC., as
Investment Advisor
By:
----------------------------------------
Title:
KZH SHOSHONE LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
KZH ING-1 LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
KZH PAMCO LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
PACIFICA PARTNERS I, L.P.
By: IMERIAL CREDIT ASSET MANAGEMENT, as
its Investment Manager
By: /s/ Michael J. Bacevich
----------------------------------------
Title: Senior Vice President
<PAGE> 20
20
KZH RIVERSIDE LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
PILGRIM AMERICAN HIGH INCOME
INVESTMENTS LTD.
By: PILGRIM INVESTMENTS, INC.,
as its Investment Manager
By: /s/ Michel Prince, CFA
----------------------------------------
Title: Vice President
KZH ING-2 LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
BY: INDOSUEZ CAPITAL LUXEMBOURG, as
Collateral Manager
By: /s/ Melissa Marano
----------------------------------------
Title: Vice President
<PAGE> 21
21
DELANO COMPANY
By: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By: PIMCO MANAGEMENT INC., a
General Partner
By: /s/ Mohan V. Phansalkar
----------------------------------
Title: Senior Vice President
KZH CRESCENT-3 LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
BALANCED HIGH-YIELD FUND I LTD.
By: BHF-BANK AKTIENGESELLSCHAFT
acting through its New York Branch,
as its attorney-in-fact
By: /s/ Dan Dobrjanskyj
----------------------------------------
Title: Assistant Vice President
STATE STREET BANK AND TRUST COMPANY, as
Trustee for GENERAL MOTORS EMPLOYEES GLOBAL
GROUP PENSION TRUST
By: /s/ Michael Connors
----------------------------------------
Title: Assistant Vice President
<PAGE> 22
22
INDOSUEZ CAPITAL FUNDING III, LIMITED
By: Indosuez Capital as Portfolio Advisor
By: /s/ Melissa Marano
-----------------------------------
Title: Vice President
KZH SOLEIL LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
ML CLO XII PILGRIM AMERICA (CAYMAN)
LTD.
By: PILGRIM INVESTMENTS, INC., as its
Investment Manager
By: /s/ Michel Prince, CFA
----------------------------------------
Title: Vice President
ML CLO XV PILGRIM AMERICA (CAYMAN)
LTD.
By: PILGRIM INVESTMENTS, INC., as its
Investment Manager
By: /s/ Michel Prince, CFA
----------------------------------------
Title: Vice President
MOUNTAIN CAPITAL CLO I LTD.
By: /s/ Darren P. Riley
----------------------------------------
Title: Director
<PAGE> 23
23
CERES FINANCE LTD.
By: /s/ David Egglishaw
----------------------------------------
Title: Director
OASIS COLLATERALIZED HIGH INCOME
PORTFOLIO I LTD
By: /s/ Ian Wignall
----------------------------------------
Title: Director
BALANCED HIGH-YIELD FUND II LTD.
By: BHF-BANK AKTIENGESELLSCHAFT
acting through its New York Branch,
as its attorney-in-fact
By: /s/ Dan Dobrjanskyj
----------------------------------------
Title: Assistant Vice President
CAPTIVA III FINANCE, LTD.
as advised by, PACIFIC INVESTMENT
MANGAGEMENT COMPANY
By: /s/ David Egglishaw
-------------------------------------
Title: Director
<PAGE> 24
24
EATON VANCE SENIOR INCOME TRUST
By: EATON VANCE MANAGEMENT, as
Investment Advisor
By: /s/ Payson F. Swaffield
-----------------------------------
Title: Vice President
BLACK DIAMOND CLO 1998-1 LTD
By: /s/ Jim Zinney
----------------------------------------
Title: President
KZH LANGDALE LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
ARCHIMEDES FUNDING II, LTD.
BY: ING CAPITAL ADVISORS, INC., as
Collateral Manager
By:
-------------------------------------
Title:
<PAGE> 25
25
ALLIANCE CAPITAL FUNDING, L.L.C.
By: ALLIANCE CAPTIAL MANAGEMENT
L.P., as Manager on behalf of ALLIANCE
CAPITAL FUNDING, L.L.L.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, General Partner of
Alliance Capial Management, L.P.
By: /s/ Kenneth G. Ostmann
-------------------------------------
Title: Vice President
BATTERSON PARK CBO
By:
----------------------------------------
Title:
ATHENA CDO, LTD.
By: Pacific Investment Management Company
as its investment advisor
By: PIMCO Management Inc., a general
partner
By: /s/ Mohan V. Phansalkar
-------------------------------------
Title: Senior Vice President
CAPTIVA II FINANCE LTD.
By: /s/ David Egglishaw
----------------------------------------
Title: Director
STRATA FUNDING LTD.
By: /s/ David Egglishaw
----------------------------------------
Title: Director
<PAGE> 26
26
ALLIANCE CAPITAL FUNDING, L.L.C.
By: ALLIANCE CAPTIAL MANAGEMENT
L.P., as Manager on behalf of ALLIANCE
CAPITAL FUNDING, L.L.L.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, General Partner of
Alliance Capial Management, L.P.
By: /s/ Kenneth G. Ostmann
-------------------------------------
Title: Vice President
VAN KAMPEN SENIOR FLOATING RATE FUND
By:
----------------------------------------
Title:
CONTINENTAL ASSURANCE COMPANY
SEPARATE ACCOUNT (E)
By: TCW ASSET MANAGMENT COMPANY,
as Attorney-in-Fact
By: /s/ Mark L. Gold
-------------------------------------
Title: Mangaing Director
By: /s/ Justin L. Driscoll
-------------------------------------
Title: Senior Vice President
AMARA 2 - FINANCE LTD
By: /s/ Andrew Ian Wignall
----------------------------------------
Title: Director
ROYALTON COMPANY
By: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By: PIMCO MANAGMENT INC.,
a General Partner
By: /s/ Mohan V. Phansalkar
----------------------------------
Title: Senior Vice President
<PAGE> 27
27
FLOATING RATE PORTFOLIO
By: INVESTCO SENIOR SECURED
MANAGEMENT INC., as attorney in fact
By: /s/ Joseph Rotondo
-------------------------------------
Title: Authorized Signatory
AMARA-1 FINANCE LTD.
By: /s/ Andrew Ian Wignall
----------------------------------------
Title: Director
KISLAK NATIONAL BANK
By: ING CAPITAL ADVISORS LLC., as
Investment Advisor
By: /s/ Michael J. Campbell
-------------------------------------
Title: Senior Vice President
STB DELAWARE FUNDING TRUST I
By: /s/ Donald C. Hargadon
-------------------------------------
Title: Assistant Vice President
STATE STREET BANK AND TRUST COMPANY, as
Trustee for GENERAL MOTORS WELFARE BENEFITS
TRUST
By: /s/ Michael Connors
-------------------------------------
Title: Assistant Vice President
<PAGE> 28
28
NORTH AMERICAN SENIOR FLOATING RATE FUND
By: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC., as
Portfolio Manager
By: /s/ Peter K. Merrill
-------------------------------------
Title: Managing Director
CYPRESSTREE INSTITUTIONAL FUND, LLC
By: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.,
its Managing Member
By: /s/ Peter K. Merrill
-------------------------------------
Title: Managing Director
CYPRESSTREE INVESTMENT PARTNERS II, LTD
By: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY,
INC., as Portfolio Manager
By: /s/ Peter K. Merrill
-------------------------------------
Title: Managing Director
KZH III LLC
By: /s/ Virginia Conway
---------------------------------------
Title: Authorized Agent
KZH HIGHLAND-2 LLC
By: /s/ Virginia Conway
---------------------------------------
Title: Authorized Agent
<PAGE> 29
29
KZH IV LLC
By: /s/ Virginia Conway
----------------------------------------
Title: Authorized Agent
FIRST UNION NATIONAL BANK
By: /s/ Michael Doherly
----------------------------------------
Title: Sentior Vice President
CYPRESSTREE INVESTMENT FUND, LLC
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.,
its Managing Member
By: /s/ Peter K. Merrill
---------------------------------------
Title: Managing Director
RABOBANK CANADA
By: /s/ Govert Verstralen
----------------------------------------
Title: Senior Vice President
CREDIT LYONNAIS CANADA
By: /s/ Helen A. Thomas
----------------------------------------
Title: Vice-President, Corporate Banking
By: /s/ David Farmer
----------------------------------------
Title: First Vice-President and Manager,
Central Region
FIRST DOMINION FUNDING II
By: /s/ David Lerner
----------------------------------------
Title: Authorized Signatory
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Michelle Swanson
----------------------------------------
Title: Authorized Signatory
<PAGE> 30
30
ACKNOWLEDGEMENT AND CONSENT
The undersigned does hereby acknowledge and consent to the foregoing
Waiver and Amendment. The undersigned does hereby confirm and agree that, after
giving effect to such Waiver and Amendment, the Guarantee and Collateral
Agreement is and shall continue to be in full force and effect and is hereby
confirmed and ratified in all respects.
SAFETY-KLEEN SERVICES, INC. (formerly
known as LES, Inc.)
SAFETY-KLEEN CORP. (formerly known as
Laidlaw Environmental Services, Inc.)
SAFETY-KLEEN (PECATONICA), INC.
(formerly known as Laidlaw Environmental
Services of Illinois, Inc.)
GSX CHEMICAL SERVICES OF OHIO, INC.
SAFETY-KLEEN (BDT), INC. (formerly known
as Laidlaw Environmental Services
(BDT), Inc.)
SAFETY-KLEEN (FS), INC. (formerly known as
Laidlaw Environmental Services (FS),
Inc.)
SAFETY-KLEEN (GS), INC. (formerly known as
Laidlaw Environmental Services (GS),
Inc.)
SAFETY-KLEEN (CHATTANOOGA), INC.
(formerly known as Laidlaw Environmental
Services of Chattanooga, Inc.)
SAFETY-KLEEN (WHITE CASTLE), INC.
(formerly known as Laidlaw Environmental
Services of White Castle, Inc.)
SAFETY-KLEEN (CROWLEY), INC. (formerly
known as Laidlaw Environmental Services
(Recovery), Inc.)
SAFETY-KLEEN (TS), INC. (formerly known as
Laidlaw Environmental Services (TS),
Inc.)
SAFETY-KLEEN (WESTMORLAND), INC.
(formerly known as Laidlaw Environmental
Services (Imperial Valley), Inc.)
SAFETY-KLEEN (BUTTONWILLOW), INC.
(formerly known as Laidlaw Environmental
Services (Lokern), Inc.)
SAFETY-KLEEN (CALIFORNIA), INC.
(formerly known as Laidlaw Environmental
of California, Inc.)
SAFETY-KLEEN (PINEWOOD), INC.(formerly
known as Laidlaw Environmental Services
of South Carolina, Inc.)
<PAGE> 31
31
SAFETY-KLEEN (NE), INC.(formerly known as
Laidlaw Environmental Services
(North East), Inc.)
SAFETY-KLEEN (LAPORTE), INC. (formerly
known as Laidlaw Environmental Services
(TES), Inc.)
SAFETY-KLEEN CHEMICAL SERVICES, INC.
(formerly known as Laidlaw Environmental
Services, Inc.)
SAFETY-KLEEN (ROEBUCK), INC.(formerly
known as Laidlaw Environmental Services
(TOC), Inc.)
SAFETY-KLEEN (TG), INC. (formerly known as
Laidlaw Environmental Services (TG),
Inc.)
SAFETY-KLEEN (ALTAIR), INC. (formerly
known as Laidlaw Environmental Services
(Altair), Inc.)
SAFETY-KLEEN (WT), INC. (formerly known as
Laidlaw Environmental Services (WT),
Inc.)
SAFETY-KLEEN (BARTOW), INC. (formerly
known as Laidlaw Environmental Services
of Bartow, Inc.)
SAFETY-KLEEN (COLFAX), INC. (formerly
known as Laidlaw Environmental Services
(Thermal Treatment), Inc.)
LEMC, INC.
SAFETY-KLEEN OSCO HOLDINGS, INC.
(formerly known as Laidlaw OSCO Holdings,
Inc.)
SAFETY-KLEEN (NASHVILLE), INC. (formerly
known as Laidlaw Environmental Services
of Nashville, Inc.)
SAFETY-KLEEN (CLIVE), INC. (formerly
known as Laidlaw Environmental Services
(Clive), Inc.)
SAFETY-KLEEN (LONE AND GRASSY
MOUNTAIN), INC. (formerly known as
Laidlaw Environmental Services
(Lone and Grassy Mountain), Inc.)
SAFETY-KLEEN (TULSA), INC. (formerly
known as Laidlaw Environmental Services
(Tulsa), Inc.)
SAFETY-KLEEN (SAN ANTONIO), INC.
(formerly known as Laidlaw Environmental
Services (San Antonio), Inc.)
SAFETY-KLEEN (WICHITA), INC. (formerly
<PAGE> 32
32
known as Laidlaw Environmental Services
(Wichita), Inc.)
SAFETY-KLEEN (DELAWARE), INC. (formerly
known as Laidlaw Environmental Services
of Delaware, Inc.)
USPCI, INC. OF GEORGIA
SAFETY-KLEEN (SAN JOSE), INC. (formerly
known as Laidlaw Environmental Services
(San Jose), Inc.)
SAFETY-KLEEN (SAWYER), INC. (formerly
known as Laidlaw Environmental Services
(Sawyer), Inc.)
CHEMCLEAR, INC. OF LOS ANGELES
SAFETY-KLEEN (ROSEMOUNT), INC.
(formerly known as Laidlaw Environmental
Services (Rosemount), Inc.)
SAFETY-KLEEN HOLDING'S, INC. (formerly
known as LES Holding's, Inc.)
SAFETY-KLEEN (PPM), INC. (formerly known
as Laidlaw Environmental Services
(Tucker), Inc.)
NINTH STREET PROPERTIES, INC.
SAFETY-KLEEN (MT. PLEASANT), INC.
(formerly known as Laidlaw Environmental
Services (Mt. Pleasant), Inc.)
SAFETY-KLEEN (DEER TRAIL), INC.
(formerly known as Laidlaw Environmental
Services (Deer Trail), Inc.)
SAFETY-KLEEN (MINNEAPOLIS), INC.
(formerly known as Laidlaw Environmental
Services (Minneapolis), Inc.)
SAFETY-KLEEN (LOS ANGELES), INC.
(formerly known as Laidlaw Environmental
Services (Los Angeles), Inc.)
SAFETY-KLEEN (BATON ROUGE), INC.
(formerly known as Laidlaw Environmental
Services (Baton Rouge), Inc.)
SAFETY-KLEEN (PLAQUEMINE), INC.
(formerly known as Laidlaw Environmental
Services (Plaquemine), Inc.)
SAFETY-KLEEN (BRIDGEPORT), INC.
(formerly known as Laidlaw Environmental
Services (Bridgeport), Inc.)
SAFETY-KLEEN (DEER PARK), INC. (formerly
known as Laidlaw Environmental Services
(Deer Park), Inc.)
<PAGE> 33
33
SAFETY-KLEEN (TIPTON), INC.
(formerly known as Laidlaw Environmental
Services (Tipton), Inc.)
SAFETY-KLEEN (ENCOTEC), INC. (formerly
known as Laidlaw Environmental, Inc.)
SAFETY-KLEEN (SUSSEX), INC. (formerly
known as Laidlaw Environmental Services
(Sussex), Inc.)
SAFETY-KLEEN (GLOUCESTER), INC.
(formerly known as Laidlaw Environmental
Services (Gloucester), Inc.)
SAFETY-KLEEN (CUSTOM TRANSPORT), INC.
(formerly known as Laidlaw Environmental
Services (Custom Transport), Inc.)
SAFETY-KLEEN (ARAGONITE), INC. (formerly
known as Laidlaw Environmental Services
(Aragonite), Inc.)
SAFETY-KLEEN (PUERTO RICO), INC.
(formerly known as Laidlaw Environmental
Services (Puerto Rico), Inc.)
SAFETY-KLEEN SYSTEMS, INC. (formerly
known as Safety-Kleen Corp.)
DIRT MAGNET, INC.
THE MIDWAY GAS & OIL CO.
ELGINT CORP.
SAFETY-KLEEN ENVIROSYSTEMS
COMPANY
SAFETY-KLEEN ENVIROSYSTEMS
COMPANY OF PUERTO RICO, INC.
PETROCON, INC.
PHILLIPS ACQUISITION CORP.
VIROGROUP, INC. (formerly known as Safety-
Kleen Aviation, Inc.)
SK REAL ESTATE, INC.
SAFETY-KLEEN INTERNATIONAL, INC.
SAFETY-KLEEN OIL RECOVERY CO.
SAFETY-KLEEN OIL SERVICES, INC.
<PAGE> 34
34
THE SOLVENTS RECOVERY SERVICE OF
NEW JERSEY, INC.
SK EUROPE, INC.
By: /s/ Paul R. Humphreys
---------------------------------------
Title: Senior Vice President Finance
3E COMPANY ENVIRONMENTAL,
ECOLOGICAL AND ENGINEERING
By: /s/ Paul R. Humphreys
---------------------------------------
Title: Assistant Treasurer
SK INSURANCE COMPANY
By: /s/ Paul R. Humphreys
---------------------------------------
Title: Treasurer
<PAGE> 35
35
SAFETY-KLEEN SERVICES, INC. (formerly
known as LES, Inc.)
By:
---------------------------------------
Title:
SAFETY-KLEEN (CANADA) LTD. (formerly
known as Laidlaw Environmental Services
(Canada) Ltd.)
By:
---------------------------------------
Title:
TORONTO DOMINION (TEXAS), INC.,
as General Administrative Agent and Lender
By:
---------------------------------------
Title:
THE TORONTO-DOMINION BANK,
as Canadian Administrative Agent
By:
---------------------------------------
Title:
<PAGE> 36
36
THE BANK OF NOVA SCOTIA,
as Managing Agent, Co-Documentation Agent
and Lender
By:
---------------------------------------
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Managing Agent, Co-Documentation Agent
and Lender
By:
---------------------------------------
Title:
NATIONSBANK, N.A.,
as Syndication Agent, Managing Agent and
Lender
By:
---------------------------------------
Title:
WACHOVIA BANK, N.A.,
as Managing Agent and Lender
By:
---------------------------------------
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
By:
---------------------------------------
Title:
<PAGE> 37
37
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
---------------------------------------
Title:
COMERICA BANK
By:
---------------------------------------
Title:
FLEET NATIONAL BANK
By:
---------------------------------------
Title:
ROYAL BANK OF CANADA
By:
---------------------------------------
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
<PAGE> 38
38
HSBC BANK USA (formerly Marine
Midland Bank)
By:
---------------------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By:
---------------------------------------
Title:
MITSUBISHI TRUST AND BANKING
CORPORATION
By:
---------------------------------------
Title:
SANWA BUSINESS CREDIT CORPORATION
By:
---------------------------------------
Title:
SOCIETE GENERALE
By:
---------------------------------------
Title:
<PAGE> 39
39
SOUTHERN PACIFIC BANK
By:
---------------------------------------
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By:
---------------------------------------
Title:
COOPERATIEVE CENTRALE RAIFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND" NEW YORK BRANCH
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
COMMERCIAL LOAN FUNDING TRUST I
By:
---------------------------------------
Title:
<PAGE> 40
40
CREDIT SUISSE FIRST BOSTON
By:
---------------------------------------
Title:
THE SAKURA BANK, LTD.
By:
---------------------------------------
Title:
STAR BANK, NATIONAL ASSOCIATION
By:
---------------------------------------
Title:
BANK OF HAWAII
By:
---------------------------------------
Title:
CITIBANK N.A.
By:
---------------------------------------
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By:
---------------------------------------
Title:
<PAGE> 41
41
SKANDINAVISKA ENSKILDA BANKEN AB
(PUBL.) NY BRANCH
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
THE SUMITOMO BANK, LIMITED
By:
---------------------------------------
Title:
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By:
---------------------------------------
Title:
NATIONAL CITY BANK
By:
---------------------------------------
Title:
BHF-BANK AKTIENGESELLSCHAFT
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
THE FUJI BANK, LTD., NEW YORK
BRANCH
By:
---------------------------------------
Title:
CAISSE DE DEPOT ET PLACEMENT DU
QUEBEC
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
<PAGE> 42
42
KZH PONDVIEW LLC
By:
---------------------------------------
Title:
WEBSTER BANK
By:
---------------------------------------
Title:
BANQUE WORMS CAPITAL CORPORATION
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
IMPERIAL BANK
By:
---------------------------------------
Title:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
---------------------------------------
Title:
<PAGE> 43
43
KZH CNC LLC
By:
---------------------------------------
Title:
SUMMIT BANK
By:
---------------------------------------
Title:
METROPOLITAN LIFE INSURANCE
COMPANY
By:
---------------------------------------
Title:
FIRSTRUST BANK
By:
---------------------------------------
Title:
BANCO ESPIRITO SANTO
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
CITY NATIONAL BANK
By:
---------------------------------------
Title:
VAN KAMPEN PRIME RATE INCOME TRUST
By:
---------------------------------------
Title:
OAK HILL SECURITIES FUND, L.P.
BY: OAK HILL SECURITIES GENPAR, L.P.,
its General Partner
BY: OAK HILL SECURITIES MGP, INC., its
General Partner
By:
---------------------------------------
Title:
<PAGE> 44
44
SENIOR DEBT PORTFOLIO
BY: BOSTON MANAGEMENT AND
RESEARCH, as Investment Advisor
By:
---------------------------------------
Title:
VAN KAMPEN CLO I, LIMITED
BY: VAN KAMPEN MANAGEMENT INC.,
as Collateral Manager
By:
---------------------------------------
Title:
OCTAGON LOAN TRUST
BY: OCTAGON CREDIT INVESTORS, as
Manager
By:
---------------------------------------
Title:
FRANKLIN FLOATING RATE TRUST
By:
---------------------------------------
Title:
AG CAPITAL FUNDING PARTNERS, L.P.
BY: ANGELO, GORDON & CO., L.P.,
as Investment Advisor
By:
---------------------------------------
Title:
FIRST DOMINION FUNDING I
By:
---------------------------------------
Title:
<PAGE> 45
45
JACKSON NATIONAL LIFE INSURANCE
COMPANY
BY: PPM AMERICA, INC., as attorney in fact
on behalf of Jackson National Life
Insurance Company
By:
---------------------------------------
Title:
ELC (CAYMAN) LTD.
By:
---------------------------------------
Title:
WESTERN NATIONAL LIFE INSURANCE
COMPANY
By:
---------------------------------------
Title:
KZH CRESCENT LLC
By:
---------------------------------------
Title:
KZH CRESCENT-2 LLC
By:
---------------------------------------
Title:
<PAGE> 46
46
CRESCENT/MACH I PARTNERS, L.P.
BY:TCW ASSET MANAGEMENT COMPANY,
as its Investment Manager
By:
---------------------------------------
Title:
PAM CAPITAL FUNDING LP
BY: HIGHLAND CAPITAL MANAGEMENT,
as Collateral Manager
By:
---------------------------------------
Title:
KZH CYPRESSTREE-1 LLC
By:
---------------------------------------
Title:
PAMCO CAYMAN LTD.
BY: HIGHLAND CAPITAL MANAGEMENT,
as Collateral Manager
By:
---------------------------------------
Title:
ARCHIMEDES FUNDING, LLC
BY: ING CAPITAL ADVISORS, INC. as
Collateral Manager
By:
---------------------------------------
Title:
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC
BY: ING CAPITAL ADVISORS, INC., as
Investment Advisor
By:
---------------------------------------
Title:
<PAGE> 47
47
KZH SHOSHONE LLC
By:
---------------------------------------
Title:
KZH ING-1 LLC
By:
---------------------------------------
Title:
KZH PAMCO LLC
By:
---------------------------------------
Title:
PACIFICA PARTNERS I, L.P.
BY: IMPERIAL CREDIT ASSET
MANAGEMENT, as its Investment Manager
By:
---------------------------------------
Title:
KZH RIVERSIDE LLC
By:
---------------------------------------
Title:
PILGRIM AMERICAN HIGH INCOME
INVESTMENTS LTD.
BY: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By:
---------------------------------------
Title:
<PAGE> 48
48
KZH ING-2 LLC
By:
---------------------------------------
Title:
METROPOLITAN LIFE INSURANCE
COMPANY
By:
---------------------------------------
Title:
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
BY: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By:
---------------------------------------
Title:
DELANO COMPANY
BY: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By: PIMCO MANAGEMENT INC., a
General Partner
By:
---------------------------------------
Title:
KZH CRESCENT-3 LLC
By:
---------------------------------------
Title:
<PAGE> 49
49
BALANCED HIGH-YIELD FUND I LTD.
BY: BHF-BANK AKTIENGESELLSCHAFT
acting through its New York Branch,
as its attorney-in-fact
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee for GENERAL
MOTORS EMPLOYEES GLOBAL GROUP
PENSION TRUST
By:
---------------------------------------
Title:
INDOSUEZ CAPITAL FUNDING III, LIMITED
BY: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By:
---------------------------------------
Title:
KZH SOLEIL LLC
By:
---------------------------------------
Title:
<PAGE> 50
50
ML CLO XII PILGRIM AMERICA (CAYMAN)
LTD.
BY: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By:
---------------------------------------
Title:
ML CLO XV PILGRIM AMERICA (CAYMAN)
LTD.
BY: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By:
---------------------------------------
Title:
MOUNTAIN CLO TRUST
By:
---------------------------------------
Title:
CERES FINANCE LTD.
By:
---------------------------------------
Title:
OASIS COLLATERALIZED HIGH INCOME
PORTFOLIO I LTD.
By:
---------------------------------------
Title:
<PAGE> 51
51
BALANCED HIGH-YIELD FUND II LTD.
BY: BHF-BANK AKTIENGESELLSCHAFT
acting through its New York Branch,
as its attorney-in-fact
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
CAPTIVA III FINANCE, LTD.
as advised by, PACIFIC INVESTMENT
MANAGEMENT COMPANY
By:
---------------------------------------
Title:
EATON VANCE SENIOR INCOME TRUST
BY: EATON VANCE MANAGEMENT, as
Investment Advisor
By:
---------------------------------------
Title:
VAN KAMPEN CLO II, LIMITED
BY: VAN KAMPEN MANAGEMENT INC.,
as Collateral Manager
By:
---------------------------------------
Title:
BLACK DIAMOND CLO 1998-1 LTD.
By:
---------------------------------------
Title:
<PAGE> 52
52
KZH LANGDALE LLC
By:
---------------------------------------
Title:
ARCHIMEDES FUNDING II, LTD.
BY: ING CAPITAL ADVISORS, INC., as
Collateral Manager
By:
---------------------------------------
Title:
ALLIANCE CAPITAL FUNDING, L.L.C.
BY: ALLIANCE CAPITAL MANAGEMENT
L.P., as Manager on behalf of
ALLIANCE CAPITAL FUNDING, L.L.C.
BY: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, General Partner of Alliance
Capital Management L.P.
By:
---------------------------------------
Title:
BATTERSON PARK CBO
By:
---------------------------------------
Title:
ATHENA CDO, LTD.
By:
---------------------------------------
Title:
CAPTIVA II FINANCE LTD.
By:
---------------------------------------
Title:
<PAGE> 53
53
STRATA FUNDING LTD.
By:
---------------------------------------
Title:
VAN KAMPEN SENIOR FLOATING
RATE FUND
By:
---------------------------------------
Title:
CONTINENTAL ASSURANCE COMPANY
SEPARATE ACCOUNT (E)
BY: TCW ASSET MANAGEMENT COMPANY,
as Attorney-in-Fact
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
AMARA-2 FINANCE LTD.
By:
---------------------------------------
Title:
<PAGE> 54
54
ROYALTON COMPANY
BY: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By: PIMCO MANAGEMENT INC.,
a General Partner
By:
---------------------------------------
Title:
FLOATING RATE PORTFOLIO
BY: INVESCO SENIOR SECURED
MANAGEMENT INC., as attorney in fact
By:
---------------------------------------
Title:
AMARA-1 FINANCE LTD.
By:
---------------------------------------
Title:
KISLAK NATIONAL BANK
BY: ING CAPITAL ADVISORS, INC., as
Investment Advisor
By:
---------------------------------------
Title:
<PAGE> 55
55
STB DELAWARE FUNDING TRUST I
By:
---------------------------------------
Title:
NORTH AMERICAN SENIOR. FLOATING
RATE FUND
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC., as
Portfolio Manager
By:
---------------------------------------
Title:
CYPRESSTREE INSTITUTIONAL FUND, LLC
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC., its
Managing Member
By:
---------------------------------------
Title:
CYPRESSTREE INVESTMENT PARTNERS II,
LTD.
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC., as
Portfolio Manager
By:
---------------------------------------
Title:
<PAGE> 56
56
STATE STREET BANK AND TRUST
COMPANY, as Trustee for GENERAL
MOTORS WELFARE BENEFITS TRUST
By:
---------------------------------------
Title:
CYPRESSTREE INVESTMENT FUND, LLC
BY: CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC., its
Managing Member
By:
---------------------------------------
Title:
KZH HOLDING CORPORATION III
(OPPENHEIMER FUND)
By:
---------------------------------------
Title:
KZH HIGHLAND - 2 LLC
By:
---------------------------------------
Title:
KZH IV LLC
By:
---------------------------------------
Title:
<PAGE> 57
57
FIRST UNION NATIONAL BANK
By:
---------------------------------------
Title:
RABOBANK CANADA
By:
---------------------------------------
Title:
CREDIT LYONNAIS CANADA
By:
---------------------------------------
Title:
FIRST DOMINION FUNDING II
By:
---------------------------------------
Title:
LEHMAN COMMERCIAL PAPER INC.
By:
---------------------------------------
Title:
<PAGE> 1
Exhibit (4)(u)
TORONTO DOMINION TEXAS, (INC.)
909 Fannin Street
Houston, Texas 77010
May 7, 1999
Safety-Kleen Corp.
1301 Gervais Street, Suite 300
Columbia, SC 29201
Attn: Paul Humphreys
Reference is made to the Promissory Note, dated May 15, 1997, (as
amended, supplemented or otherwise modified from time to time, the "Promissory
Note") made by Safety. Kleen Corp. (formerly known as Laidlaw Environmental
Services, Inc.) (the "Borrower") in favor of Toronto Dominion (Texas), Inc.
(assignee of Westinghouse Electric Corporation) ("TD"). Defined terms used
herein but not otherwise defined shall have the meanings set forth in the
Promissory Note.
This letter hereby waives compliance by the Borrower with the
provisions of Section 6.1 of the Promissory -Note to the extent necessary to
permit the Borrower to repurchase the 5% Convertible Subordinated Debenture due
in 2009 in a principal amount of $350,000,000 in accordance with the terms of
the Securities Purchase Agreement dated April 19, 1999 among the Borrower,
Laidlaw International Finance Corporation and Laidlaw Inc. The Borrower shall
finance the cash portion of the purchase price from the proceeds of the senior
unsecured notes to be issued by the Borrower in a principal amount of up to
$225,000,000, bearing interest payable in cash and having a maturity no earlier
than the earlier of (a) April 3, 2004 and (b) the date on which the revolving
credit commitments, under the Amended and Restated Credit Agreement, dated as of
April 3, 1998, among Safety-Kleen Services, Inc., Safety-Kleen (Canada) Ltd. and
the lenders from time to time parties thereto, are terminated according to the
terms therein.
<PAGE> 2
This letter shall constitute a waiver to Section 6.1 of the Promissory
Note, Except as expressly waived hereby, the Promissory Note is and shall remain
in full force and effect in accordance with its terms. TD hereby represents and
warrants to the Borrower that TD has the power and authority, and the legal
right, to make and deliver this letter.
Very truly yours,
TORONTO DOMINION (TEXAS), INC.
By: /s/ Robert g. Harris
Name: R. G. Harris
Title: VP & Director, TD Securities
on behalf of TD (Texas) Inc.
Accepted and Consented to:
SAFETY-KLEEN CORP.
By: /s/ Henry H. Taylor
Name: Henry H. Taylor
Title: Secretary
LAIDLAW, INC.
By: /s/ Ivan R. Cairns
Name: Ivan R. Cairns
Title: Snr. Vice-President
<PAGE> 1
EXHIBIT 5
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
July 12, 1999
Safety-Kleen Corp.
1301 Gervais Street
Suite 300
Columbia, SC 29201
Registration Statement on Form S-4
Ladies and Gentlemen:
In connection with the referenced Registration Statement on
Form S-4 (the "Registration Statement") filed today by Safety-Kleen Corp. (the
"Issuer"), a Delaware corporation, with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations under the Act, we have been requested to render our
opinion as to the legality of the securities being registered. The Registration
Statement registers under the Act the issuance of the Issuer's 9 1/4% Exchange
Senior Notes due 2009 (the "Exchange Notes"). The Exchange Notes are to be
offered in exchange for the Issuer's outstanding 9 1/4% Senior Notes due 2009
(the "Initial Notes"). The Exchange Notes will be issued by the Issuer under the
Indenture (the "Indenture"), dated as of May 17, 1999, between the Issuer and
The Bank of Nova Scotia Trust Company of New York, as trustee (the "Trustee").
Capitalized terms used and not
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Safety-Kleen Corp.
July 12, 1999
Page -2-
otherwise defined in this letter have the respective meanings given those terms
in the Registration Statement.
In connection with this opinion, we have examined originals,
conformed copies or photocopies, certified or otherwise identified to our
satisfaction, of the following documents (collectively, the "Documents"):
(i) the Registration Statement (including its exhibits);
(ii) the Indenture included as Exhibit 4(b) to the
Registration Statement;
(iii) the proposed form of the Exchange Notes included as
Exhibit A- 1 to the Indenture; and
(iv) the Registration Rights Agreement, dated as of May 17,
1999, among the Issuer, TD Securities (USA) Inc.,
NationsBanc Montgomery Securities LLC and Raymond James
& Associates, Inc. (the "Registration Rights
Agreement").
In addition, we have examined: (i) those corporate records of the Issuer as we
have considered appropriate; and (ii) those other certificates, agreements and
documents as we deemed relevant and necessary as a basis for the opinions
expressed below.
In our examination of the documents and in rendering the
opinions set forth below, we have assumed, without independent investigation,
(i) the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity of the original documents of all
documents submitted to us as certified, photostatic, reproduced or conformed
copies of validly existing agreements or other
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Safety-Kleen Corp.
July 12, 1999
Page -3-
documents, the authenticity of all the latter documents and the legal capacity
of all individuals who have executed any of the documents which we examined,
(ii) that the Exchange Notes will be issued as described in the Registration
Statement, (iii) that the Indenture was duly authorized, executed and delivered
by the Trustee and is a valid and binding agreement of the Trustee, (iv) that
the Registration Rights Agreement was duly authorized, executed and delivered by
the Initial Purchasers and is a valid and binding agreement of the Initial
Purchasers and (v) that the Exchange Notes will be in substantially the form
attached to the Indenture and that any information omitted from them will be
properly added. We have also relied upon certificates of public officials and
officers of the Issuer.
Based on the above, and subject to the stated assumptions,
exceptions and qualifications, we are of the opinion that, when the Exchange
Notes are duly issued, authenticated and delivered in accordance with the terms
of the Indenture and the Registration Rights Agreement, the Exchange Notes will
be legal, valid and binding obligations of the Issuer enforceable against it in
accordance with their terms.
Our opinion is subject to the qualification that the
enforceability of the Indenture and the Exchange Notes may be (i) subject to
bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization,
moratorium and other similar laws affecting creditors' rights generally and (ii)
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
Our opinion is limited to matters of New York law and the
Delaware General Corporation Law. Please be advised that no member of this firm
is admitted
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Safety-Kleen Corp.
July 12, 1999
Page -4-
to practice in the State of Delaware. Our opinion is rendered only with respect
to the laws, and the rules, regulations and orders under them, which are
currently in effect.
We hereby consent to the use of our name in the Registration
Statement and in the prospectus contained in the Registration Statement as it
appears in the caption "Legal Matters" and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not admit
that we come within the category of persons whose consent is required by the Act
or by the rules and regulations under the Act.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE> 1
EXHIBIT 8
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
July 12, 1999
Safety-Kleen Corp.
1301 Gervais Street
Suite 300
Columbia, SC 29201
Registration Statement on Form S-4
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed today by Safety-Kleen Corp. (the "Issuer"), a
Delaware corporation, with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations under the Act (the "Rules"), we have been requested to render this
opinion. Capitalized terms used and not otherwise defined shall have the
meanings given those terms in the Registration Statement.
In this regard, we have reviewed copies of the Registration
Statement (including its exhibits) with respect to the offer by the Issuer to
exchange up to $225,000,000 in aggregate principal amount of its outstanding
9 1/4% Senior Notes due 2009 (the "Initial Notes") for up to $225,000,000 in
aggregate principal amount of its 9 1/4% Exchange Senior Notes due 2009 (the
"Exchange Notes"). We have also made those other investigations of fact and law
and have examined the originals, or copies authenticated to our satisfaction, of
those other documents, record, certificates
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Safety-Kleen Corp.
July 12, 1999
Page -2-
or other instruments as in our judgment are necessary or appropriate to render
our opinion.
Our opinion is limited to the Internal Revenue Code of 1986,
as amended (the "Code"), administrative rulings, judicial decisions, Treasury
regulations and other applicable authorities, all as in effect today. The
statutory provisions, regulations, and interpretations upon which our opinion is
based are subject to change, and those changes could apply retroactively. Any
change could affect the continuing validity of our opinion. We assume no
responsibility to advise you of any subsequent changes in existing law or facts,
nor do we assume any responsibility to update this opinion with respect to any
matters expressly stated in this letter, and no opinions are to be implied or
may be inferred beyond the matters expressly so stated.
Based upon and subject to the foregoing, the legal matters and
conclusions stated in the Registration Statement under the heading "Certain
Federal Income Tax Considerations" constitute our opinion with respect to those
matters.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the heading
"Legal Matters" in the Prospectus included in the Registration Statement. In
giving this consent, we do not hereby agree that we come within the category of
persons whose consent is required by the Act or the Rules.
Very truly yours,
/s/ Paul, Weiss, Rifkind, Wharton & Garrison
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE> 1
Exhibit (10)(o)
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement dated April 19, 1999 (the
"Agreement") is made and entered into by and between Laidlaw Inc., a Canadian
corporation ("Laidlaw") and Laidlaw International Finance Corporation, an
Ireland corporation ("LIFC" and, together with Laidlaw, "Sellers")) and
Safety-Kleen Corp., a Delaware corporation (the "Company").
WHEREAS LIFC owns $350,000,000 aggregate principal amount of the 5% Subordinated
Convertible Pay in Kind Debentures due 2009 of the Company (the "Debentures").
WHEREAS LIFC desires to sell the Debentures and the Company desires to purchase
the Debentures on the terms and subject to the conditions set forth in this
Agreement.
NOW THEREFORE in consideration of the mutual convenants and agreements set forth
in this Agreement and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged the parties hereto agree as
follows:
ARTICLE I
Sale of Debentures and Closing
1.1 Purchase and Sale
At the Closing and on the terms and subject to the condition set forth in
this Agreement, LIFC agrees to sell to the Company all of the right, title and
interest of LIFC in and to the Debentures and the Company agrees to purchase
from LIFC all of the Debentures.
1.2 Purchase Price
The Purchase Price for the Debentures shall be $200 million payable in
immediately available United States funds at the Closing and 11,320,755 shares
of common stock of the Company, par value $1.00 per share (the "Common Stock"),
to be issued and delivered by the Company to LIFC at the Closing, together with
accrued and unpaid interest to (but not including) the date of Closing payable
in accordance with the provisions of the Debentures, it being understood that,
as provided in the Debentures, interest accruing until May 15, 1999 shall be
paid in Common Stock and interest accruing thereafter may, at the option of the
Company, be paid in cash or in Common Stock.
1.3 Closing
The Closing will take place at the head offices of the Company as promptly
as practicable after satisfaction or waiver of the conditions set forth in
Article IV hereof. At the Closing the Company will pay the cash purchase price
to LIFC by wire transfer of immediately available funds to such account or
accounts as LIFC may reasonably direct and deliver to LIFC certificates for the
shares of Common Stock of the Company and LIFC will assign and transfer to the
Company all of LIFC's right, title and interest in and to the Debentures by
delivering to the
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Company one or more certificates representing the Debentures in genuine and
unaltered form, duly endorsed in blank.
ARTICLE II
Representations and Warranties
2.1 Representations and Warranties of Sellers
Laidlaw and LIFC, jointly and severally, hereby represent and warrant to
the Company as follows:
(a) Organization. Each of Laidlaw and LIFC is a corporation duly
organized, validly existing and in good standing under the laws of Canada and
Ireland, respectively. Each of Laidlaw and LIFC has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby, including
without limitation to own, hold, sell and transfer (pursuant to this Agreement)
the Debentures owned by LIFC.
(b) Title to Debentures. LIFC has good and valid title to the Debentures,
free and clear of all liens and encumbrances and the delivery of one or more
certificates at the Closing representing the Debentures in the manner provided
in Section 1.3 will transfer to the Company good and valid title to the
Debentures, free and clear of all liens and encumbrances.
(c) Authority. The execution and delivery by each of Laidlaw and LIFC of
this Agreement and the performance by each of Laidlaw and LIFC of its
obligations hereunder have been duly and validly authorized, no other action on
the part of Laidlaw, LIFC or their stockholders being necessary. This Agreement
has been duly and validly executed and delivered by each of Laidlaw and LIFC and
constitutes a legal, valid and binding obligation of each of Laidlaw and LIFC
enforceable against each of Laidlaw and LIFC in accordance with its terms,
except to the extent such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting generally the enforcement of creditors' rights and (ii) the
availability of equitable remedies (whether in a proceeding in equity or at
law).
(d) No Conflicts. The execution and delivery by each of Laidlaw and LIFC
of this Agreement do not, and the performance by each of Laidlaw and LIFC of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby will not:
(i) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate or articles of incorporation or
by-laws (or other comparable charter documents) of Laidlaw or LIFC;
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(ii) conflict with or result in a violation or breach of any term or
provision of any law or order applicable to Laidlaw or LIFC or other Debenture;
or
(iii) (A) conflict with or result in a violation or breach of, (B)
constitute (with or without notice or lapse of time or both) a default under,
(C) require Laidlaw or LIFC to obtain any consent from any person as a result or
under the terms of, or (D) result in the creation or imposition of any lien
(other than such liens as may be created by this Agreement) upon the Debentures
or any other assets of Laidlaw or LIFC under, any contract to which Laidlaw or
LIFC is a party.
(e) Governmental Approvals and Filings. Other than the filing of a
Schedule 13D and applicable forms under Section 16 as required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), no consent,
approval or action of, filing with or notice to any governmental or regulatory
authority on the part of Laidlaw or LIFC is required in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
(f) Legal Proceedings. As of the date of this Agreement, there are no
actions or proceedings pending or, to the knowledge of Laidlaw or LIFC,
threatened against, relating to or affecting Laidlaw or LIFC (or, to the
knowledge of Laidlaw or LIFC, the Company) which could reasonably be expected to
result in the issuance of an order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement.
(g) The Sellers acknowledge that the sale of the Common Stock hereunder
has not been registered under the Securities Act of 1933, as amended (the "Act")
and is being made in reliance upon federal and state exemptions for transactions
not involving a public offering. The Sellers represent that each is an
"accredited investor" (as defined in Regulation D under the Act) and that they
are acquiring the shares of Common Stock for investment purposes only and not
with a view toward distribution of such shares. The Sellers have sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating an investment in the Common Stock.
(h) Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Laidlaw and LIFC
directly with the Company without the intervention of any person on behalf of
such Seller in such manner as to give rise to any valid claim by any person
against the Company for a finder's fee, brokerage commission or similar payment,
except TD Securities (USA) Inc., NationsBanc Montgomery Securities LLC and
Raymond James & Associates, Inc. whose fees with respect to the Financing (as
defined herein) shall be payable by the Company.
2.2 Representations and Warranties of the Company
The Company hereby represents and warrants to Sellers as follows:
(a) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to
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consummate the transactions contemplated hereby, including without limitation to
purchase (pursuant to this Agreement) the Debentures.
(b) Authority. The execution and delivery by the Company of this Agreement
and the performance by the Company of its obligations hereunder have been duly
and validly authorized and, except for approval by the Company's stockholders of
the issuance of the shares of Common Stock contemplated in this Agreement, no
other action on the part of the Company being necessary. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting generally the enforcement of creditors'
rights and (ii) the availability of equitable remedies (whether in a proceeding
in equity or at law).
(c) No Conflicts. Except for the consent of several banks and other
financial institutions or entities from time to time parties to the Company's
Amended and Restated Credit Agreement dated April 3, 1998 (as amended,
supplemented or otherwise modified from time to time) and the consent of the
holder(s) of the Promissory Note dated May 15, 1997, in the principal amount of
$60,000,000 (as amended, supplemented or otherwise modified from time to time)
made by the Company in favor of Westinghouse Electric Corporation, the execution
and delivery by the Company of this Agreement do not, and the performance by the
Company of its obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:
(i) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate or by-laws of the Company;
(ii) conflict with or result in a violation or breach of any term or
provision of any law or order applicable to the Company or the Debentures,
except as would not, in the aggregate, have a material adverse effect on the
business or condition of the Company or the consummation of the transactions
contemplated hereby;
(iii) (A) conflict with or result in a violation or breach of, (B)
constitute (with or without notice or lapse of time or both) a default under, or
(C) require the Company to obtain any consent from any person as a result or
under the terms of, any contract to which the Company is a party, except as
would not, in the aggregate, have a material adverse effect on the business or
condition of the Company or the consummation of the transactions contemplated
hereby.
(d) Status of Company Common Shares. Upon their issuance as provided in
Section 1.3, the Common Stock issued to LIFC will be duly authorized, validly
issued, fully paid and non-assessable.
(e) SEC Filings. The Company has filed all forms, reports and documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since September 1, 1998 and the Company has made available to the Seller true
and complete copies of (i) the Company's Annual Report on Form 10-K for the year
ended August 31, 1998 and (ii) all other reports, statements and registration
statements (including Current Reports on Form 8-K) filed by the Company with the
SEC since September 1, 1998 (collectively, the "Company SEC Filings"). The
<PAGE> 5
Company SEC Filings (including all financial statements or schedules included in
them) (i) were prepared in compliance in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time of filing (or if amended, supplemented or superseded by
a later filing, on the date of the later filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) Company Financial Statements. The consolidated balance sheets and
consolidated statements of income, stockholders' equity and cash flows of the
Company and its subsidiaries included in the Company SEC Filings fairly present
in all material respects the consolidated financial position of the Company and
its subsidiaries at their respective dates and the consolidated results of
operations of the Company and its subsidiaries for the respective periods then
ended, in accordance with U.S. GAAP.
(g) Governmental Approvals and Filings. Other than filings, notices and
approvals required under the rules of the New York Stock Exchange, the Pacific
Stock Exchange and the Exchange Act, no consent, approval or action of, filing
with or notice to any governmental or regulatory authority on the part of the
Company is required in connection with the execution, delivery and performance
of this Agreement.
(h) Legal Proceedings. As of the date of this Agreement, there are no
actions or proceedings pending or, to the knowledge of the Company, threatened
against, relating to or affecting the Company which could reasonably be expected
to result in the issuance of an order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement.
(i) Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Company directly
with Sellers without the intervention of any person on behalf of the Company in
such manner as to give rise to any valid claim by an person against Sellers or
the Company for a finder's fee, brokerage commission or similar payment, except
for TD Securities (USA) Inc., NationsBanc Montgomery Securities LLC and Raymond
James & Associates, Inc. whose fees with respect to the Financing shall be
payable by the Company.
ARTICLE III
Covenants
3.1 Covenants of Sellers
Each Seller, jointly and severally, covenants and agrees with the Company
that:
(a) Notice and Cure. Seller will notify the Company in writing of, and
contemporaneously will provide the Company with true and complete copies of any
and all information or documents
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relating to, and will use all commercially reasonable efforts to cure before the
Closing, any event, transaction or circumstance, as soon as practicable after it
becomes known to Seller, occurring after the date of this Agreement that causes
or will cause any covenant or agreement of Seller under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
Seller contained in this Agreement as if the same were made on or as of the date
of such event, transaction or circumstance.
3.2 Covenants of the Company
The Company covenants and agrees with Sellers that:
(a) Company Stockholders' Meeting. The Company shall call a special
meeting of the holders of Company common stock to be held to approve the
issuance of the Company common shares contemplated by this Agreement as soon as
practicable. Subject to fiduciary duties under applicable laws, the Company will
recommend to its stockholders approval of the matters referred to above and
agrees to use its reasonable best efforts to obtain a favorable vote thereon.
(b) NYSE. The Company will promptly take all reasonable actions to obtain
all approvals required under the rules and regulations of the New York Stock
Exchange in connection with the transactions contemplated by this Agreement.
(c) Notice and Cure. The Company will notify Sellers in writing of, and
contemporaneously will provide Sellers with true and complete copies of any and
all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes known to the Company,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of the Company under this Agreement to be breached or that
renders or will render untrue any representation or warranty of the Company
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein.
(d) Financing. The Company will use commercially reasonable efforts to
obtain the financing (the "Financing") and the Required Consents for the
Company's purchase of the Debentures from Sellers on such terms as are
satisfactory to the Company, and to obtain on the date of Closing the funds
contemplated to be raised by such Financing.
<PAGE> 7
ARTICLE IV
Conditions
4.1 Sellers' Conditions
The obligation of Sellers hereunder to sell the Debentures are subject to
the fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Sellers in their sole
discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in this Agreement shall be true and correct in
all material respects on and as of the Closing date as though such
representation or warranty was made on and as of the Closing date.
(b) Performance. The Company shall have performed and complied with, in
all material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Company at or before the
Closing.
(c) No Orders. There shall not be in effect on the Closing date any order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
(d) Purchase of Debentures. The Company shall have paid to Sellers the
cash purchase price for the Debentures and issued to Sellers the Common Stock
contemplated by this Agreement.
4.2 The Company's Conditions
The obligation of Company hereunder to purchase the Debentures is subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by the Company
in its sole discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by Sellers in this Agreement shall be true and correct in all
material respects on and as of the Closing date as though such representation or
warranty was made on and as of the Closing date.
(b) Performance. Sellers shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Sellers at or before the
Closing.
(c) Consents and Approvals. The matters submitted to the Company's
stockholders as set forth in Section 3.2(a) of this Agreement shall have been
approved by the requisite vote of the holders of the Common Stock and the New
York Stock Exchange shall have approved the listing of the shares of Common
Stock to be issued to LIFC pursuant to this Agreement.
<PAGE> 8
(d) No Orders. There shall not be in effect on the date of Closing any
order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
(e) Financing. The Company shall have consummated the Financing and shall
have obtained the Required Consents on terms and conditions satisfactory to the
Company.
(f) Delivery of Debentures. All of the Debentures, and not just a portion
thereof, shall have been delivered for sale by Sellers duly endorsed in blank
for transfer.
ARTICLE V
Termination
5.1 Termination
This Agreement may be terminated, and the transactions contemplated hereby
may be abandoned:
(a) at any time before the Closing, by mutual written agreement of Sellers
and the Company; or
(b) at any time after August 31, 1999, by Sellers or the Company, upon
notification to the non-terminating parties by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of its Agreement by the terminating party
(it being understood that the Company shall not be in breach of this Agreement
if it cannot obtain the Financing, the Required Consents or the required
stockholder approval if it has complied with its covenants under Section 3.2).
5.2 Effect of Termination
If this Agreement is validly terminated pursuant to Section 5.1, this
Agreement will forthwith become null and void, and there will be no liability or
obligation on the part of Sellers or the Company (or any of their respective
officers, directors, employees, agents or other representatives or affiliates),
except as provided in the next succeeding sentence. Notwithstanding any other
provision in this Agreement to the contrary, upon termination of this Agreement
pursuant to Section 5.1(b), each party will remain liable to the other parties
for any willful breach of this Agreement by such party existing at the time of
such termination, and such other parties may seek such remedies, including
damages and fees of attorneys, against the other with respect to any such breach
as are provided in this Agreement or as are otherwise available at law or in
equity.
<PAGE> 9
ARTICLE VI
Miscellaneous
6.1 Restrictive Legend
Sellers agree that the shares of Common Stock to be issued by the Company
to LIFC at the Closing will be inscribed with the following restrictive legend:
"The shares represented by this certificate have not been registered (or
qualified by prospectus) under the United States Securities Act of 1933, as
amended, or the securities laws of any state of the United States or any
province of Canada. Such shares may not be offered, sold, transferred, pledged,
hypothecated or otherwise disposed of in the absence of such a registration
thereunder other than pursuant to an exemption from such registration or
prospectus requirements and delivery to Safety-Kleen Corp. of an opinion of
counsel reasonably satisfactory to it to the effect that such transfer is exempt
from registration under those laws."
6.2 Stock Registration Agreement
Sellers and the Company agree that the provisions of the Stock
Registration Agreement dated May 15, 1997 between the Company and Laidlaw shall
apply to the shares of Common Stock to be issued to Sellers pursuant to the
provisions of this Agreement.
6.3 Further Assurances
The parties hereto will execute and deliver at or prior to the Closing
each agreement and other document that such party is required hereby to execute
and deliver as a condition to the Closing, and will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of such party contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the non-fulfillment of any such condition. At the Closing
and from time to time thereafter, the parties hereto shall execute and deliver
such other documents and instruments, provide such materials and information and
take such other actions as may be reasonably requested to cause such party to
fulfill its obligations under this Agreement.
6.4 Entire Agreement
This Agreement supersedes all prior discussions and agreements between the
parties with respect to the subject matter hereof and this Agreement contains
the sole and entire agreement between the parties hereto with respect to the
subject matter hereof.
6.5 Amendment
This Agreement may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each party hereto.
<PAGE> 10
6.6 Agreement to Perform
Laidlaw agrees to cause LIFC to perform all of its obligations under this
Agreement in a timely manner.
6.7 Remedies
No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
Notwithstanding the foregoing, the parties acknowledge that it will be
impossible to measure in money the damage caused by any failure of either party
to comply with its agreements set forth herein, that each such agreement is
material, and that in the event of any such failure, the other party will not
have an adequate remedy at law or in damages. Therefore, each party consents to
the issuance of an injunction or the enforcement of other equitable remedies
against such party at the suit of the other party, without bond or other
security, to compel performance of all of the terms hereof, and each party
hereby waives the defense of availability of relief in damages.
6.8 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to a contract executed and performed in
such State, without giving effect to the conflicts of laws principles thereof.
IN WITNESS WHEREOF this Agreement has been duly executed and delivered by
the duly authorized officers of each party hereto as of the date first above
written.
Laidlaw Inc.
By: /s/ James R. Bullock
-------------------------------------
Name: James R. Bullock
Title: President
Laidlaw International Finance Corporation
By: /s/ Fergus O'Donnell
-------------------------------------
Name: Fergus O'Donnell
Title: Secretary
By: /s/ David MacNeice
-------------------------------------
Name: David MacNeice
Title: Director
<PAGE> 11
Safety-Kleen Corp.
By: /s/ Kenneth W. Winger
-------------------------------------
Name: Kenneth W. Winger
Title: President
<PAGE> 1
Exhibit 12
SAFETY-KLEEN CORP.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months Ended
February 28,
Fiscal Year ------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from
continuing operations
before income tax $ 25,731 $ 21,684 $ 11,860 $(306,122) $ 20,352 $ 23,255 $ 79,672
Add:
Portion of rents
representative of the
interest factor 8,577 11,800 11,967 12,033 16,841 5,135 10,279
Interest on indebtedness,
including amortization of
financing charges 34,000 41,142 46,850 44,273 107,697 29,489 89,705
--------- --------- --------- --------- --------- --------- ---------
Income as adjusted 68,308 74,626 70,677 (249,816) 144,890 57,879 179,656
========= ========= ========= ========= ========= ========= =========
Fixed charges:
Portion of rents
representative of the
interest factor 8,577 11,800 11,967 12,033 16,841 5,135 10,279
Interest on indebtedness,
including amortization of
financing charges 34,000 41,142 46,850 44,273 107,697 29,489 89,705
--------- --------- --------- --------- --------- --------- ---------
Total fixed charges 42,577 52,942 58,817 56,306 124,538 34,624 99,984
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to fixed
charges 1.60x 1.41x 1.20x (4.44)x 1.16x 1.67x 1.80x
</TABLE>
<PAGE> 2
SAFETY-KLEEN CORP.
PRO FORMA COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
The following computation for fiscal 1998 and the twelve months ended February
28, 1999 reflect, on a pro forma basis, earnings available for fixed charges,
and the resultant ratios.
<TABLE>
<CAPTION>
Twelve Months
Fiscal Year Ended
1998 February 28, 1999
---- -----------------
<S> <C> <C>
Income (loss) from continuing operations before income tax $ (19,761) $ 58,963
Add:
Portion of rents representative of the interest factor 16,841 21,985
Interest on indebtedness, including amortization of financing charges 188,420 183,528
--------- ---------
Income as adjusted 185,500 264,476
========= =========
Fixed charges:
Portion of rents representative of the interest factor 16,841 21,985
Interest on indebtedness, including amortization of financing charges 188,420 183,528
--------- ---------
Total fixed charges 205,261 205,513
========= =========
Ratio of earnings to fixed charges 0.90x 1.29x
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF SAFETY-KLEEN CORP.
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF INCORPORATION
<S> <C>
Safety-Kleen Services, Inc. Delaware
Safety-Kleen Systems, Inc. Wisconsin
Safety-Kleen (Altair), Inc. Texas
Safety-Kleen (Aragonite), Inc. Delaware
Safety-Kleen (Bartow), Inc. Florida
Safety-Kleen (Baton Rouge), Inc. Delaware
Safety-Kleen (BDT), Inc. New York
Safety-Kleen (Bridgeport), Inc. Delaware
Safety-Kleen (Buttonwillow), Inc. California
Safety-Kleen (California), Inc. California
Safety-Kleen (Chattanooga), Inc. Tennessee
Safety-Kleen (Clive), Inc. Oklahoma
Safety-Kleen (Colfax), Inc. Delaware
Safety-Kleen (Crowley), Inc. Louisiana
Safety-Kleen (Custom Transport), Inc. Delaware
Safety-Kleen (Deer Park), Inc. Delaware
Safety-Kleen (Deer Trail), Inc. Colorado
Safety-Kleen (Delaware), Inc. Delaware
Safety-Kleen (Encotec), Inc. Delaware
Safety-Kleen (FS), Inc. Delaware
Safety-Kleen (Gloucester), Inc. Delaware
Safety-Kleen (GS), Inc. Tennessee
Safety-Kleen Holdings, Inc. Delaware
Safety-Kleen (La Porte), Inc. Texas
Safety-Kleen (Lone and Grassy Mountain) Inc. Oklahoma
Safety-Kleen (Los Angeles), Inc. California
Safety-Kleen (Minneapolis), Inc. Minnesota
Safety-Kleen (Mt. Pleasant), Inc. Tennessee
Safety-Kleen (Nashville), Inc. Tennessee
Safety-Kleen (NE), Inc. New Hampshire
Safety-Kleen (Pecatonica), Inc. Illinois
Safety-Kleen (Pinewood), Inc. South Carolina
Safety-Kleen (Plaquemine), Inc. Delaware
Safety-Kleen (PPM), Inc. Georgia
Safety-Kleen (Puerto Rico), Inc. Puerto Rico
Safety-Kleen (Roebuck), Inc. South Carolina
Safety-Kleen (Rosemount), Inc. Minnesota
Safety-Kleen (San Antonio), Inc. Texas
Safety-Kleen (Sawyer), Inc. Oklahoma
Safety-Kleen (TG), Inc. Delaware
Safety-Kleen (Tipton), Inc. Delaware
</TABLE>
<PAGE> 2
2
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF INCORPORATION
<S> <C>
Safety-Kleen (TS), Inc. Delaware
Safety-Kleen (Tulsa), Inc. Oklahoma
Safety-Kleen (San Jose), Inc. California
Safety-Kleen (Sussex), Inc. Delaware
Safety-Kleen (White Castle), Inc. Colorado
Safety-Kleen (Wichita), Inc. Kansas
Safety-Kleen (Westmorland), Inc. California
Safety-Kleen (WT), Inc. Ohio
Safety-Kleen OSCO Holdings, Inc. Delaware
Safety-Kleen Chemical Services, Inc. Massachusetts
Ninth Street Properties, Inc. Missouri
Chemclear, Inc. of Los Angeles Delaware
USPCI, Inc. of Georgia Delaware
GSX Chemical Services of Ohio, Inc. Ohio
LEMC, Inc. Delaware
Dirt Magnet, Inc. Colorado
The Midway Gas & Oil Company Colorado
Elgint Corp. Nevada
Safety-Kleen Envirosystems Company California
Safety-Kleen Envirosystems Company of Puerto Rico, Inc. Puerto Rico
Petrocon, Inc. Delaware
Phillips Acquisition Corp. Delaware
ViroGroup, Inc. Delaware
SK Europe, Inc. Nevada
SK Insurance Company Vermont
SK Real Estate, Inc. Illinois
Safety-Kleen International, Inc. Delaware
Safety-Kleen Oil Recovery Co. Delaware
Safety-Kleen Oil Services, Inc. Delaware
The Solvents Recovery Service of New Jersey, Inc. New Jersey
ArmaKleen Company (50% partnership interest) Delaware
Phoenix Project (80% joint venture)
USPCI of Mississippi (50%) Mississippi
SK Services (East), L.C. Utah
SK Services, L.C. Utah
Manquilla Waste Services (100% partnership) Texas
OSCO Treatment Systems of Mississippi, Inc. (50%) Tennessee
Safety-Kleen Canada Inc. Ontario
Environnement Services et Machinerie E.S.M. Inc. Quebec
3E Company Environmental, Ecological and Engineering (75.8%) California
Safety-Kleen Services (Canada) Ltd. Canada
</TABLE>
<PAGE> 3
3
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF INCORPORATION
<S> <C>
Safety-Kleen Ltd. Ontario
Safety-Kleen (BC) Ltd. Canada
1197296 Ontario Inc. Ontario
Safety-Kleen Services (Quebec) Ltd. Quebec
Safety-Kleen Services (Mercier) Ltd. Quebec
SK D'Incineration Inc. Quebec
Safety-Kleen (Ryley) Ltd. Alberta
Safety-Kleen (Atlantic) Ltd. Nova Scotia
Safety-Kleen (On-Site) Inc. Ontario
</TABLE>
<PAGE> 1
Exhibit (25)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (B) (2)
--------
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5691211
(State of Incorporation ( I.R.S. employer
If not a U.S. national bank) Identification number)
One Liberty Plaza
New York, N.Y. 10006
(Address of principal ( Zip code)
Executive office)
SAFETY-KLEEN CORP.
(Exact name of obligor as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
51-0228924
(I.R.S. employer identification no.)
Suite 300, 1301 Gervais Street
Columbia, South Carolina 29201
(Address of principal executive offices) (Postal Code)
-------------------------------------------------
SENIOR NOTES DUE 2009
(Title of the indenture securities)
<PAGE> 2
-2-
Item 1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York
33 Liberty Street
New York, N.Y. 10045
State of New York Banking Department
State House, Albany, N.Y.
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliation with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation. The obligor is not an affiliate of the Trustee.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
Exhibit 1 - Copy of the Organization Certificate of the Trustee as
now in effect.
(Exhibit 1 to T-1 to Registration Statement
No. 333-6688).
Exhibit 2 - Copy of the Certificate of Authority of the Trustee to
commerce business.
(Exhibit 2 to T-1 to Registration Statement
No. 333-6688).
Exhibit 3 - None; authorization to exercise corporate trust powers
is contained in the documents identified above as
Exhibit 1 and 2.
Exhibit 4 - Copy of the existing By-Laws of the Trustee.
(Exhibit 4 to T-1 to Registration Statement
No. 333-9732
Exhibit 5 - No Indenture referred to in Item 4.
Exhibit 6 - The consent of the Trustee required by Section 321 (b)
of the Trust Indenture Act of 1939.(Exhibit 6 to T-1 to
Registration Statement No. 333-27685).
Exhibit 7 - Copy of the latest Report of Condition of the Trustee
as of March 31, 1999.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, The Bank of Nova Scotia Trust Company of New York, a corporation
organized and existing under the laws of the State of New York, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 30th day of June 1999.
THE BANK OF NOVA SCOTIA TRUST
COMPANY OF NEW YORK
By: /S/ George E. Timmes
---------------------------------
George E. Timmes
Vice President
<PAGE> 4
FFIEC 034
Page RC-1
9
- ----- ----
| |
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
------------------------------------------------------
Legal Title of Bank
NEW YORK
------------------------------------------------------
City
NEW YORK 10006
------------------------------------------------------
State Zip Code
| |
- ----- ----
FDIC Certificate Number |____|____|____|____|____|
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1999
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
C100
-----------
Dollar Amounts in Thousands Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions:
RCON
a. Noninterest-bearing balances and currency and coin(1,2)............... 0081 1 212 1.a.
---- ---- ----
RCON
b. Interest-bearing balances(3).......................................... 0071 1 021 1.b.
---- ---- ----
2. Securities:
RCON
a. Held-to-maturity securities (from Schedule RC-B, column A)............ 1754 1 371 2.a.
---- ---- ----
RCON
b. Available-for-sale securities (from Schedule RC-B, column D).......... 1773 0 2.b.
---- ---- ----
RCON
3. Federal funds sold(4) and securities purchased under agreements to resell 1350 1 302 3.
---- ---- ----
4. Loans and lease financing receivables:
RCON
a. Loans and leases, net of unearned income (from Schedule RC-C).......... 2122 4.a.
----- ---- ---- ---- ---- ----
RCON
b. LESS: Allowance for loan and lease losses.............................. 3123 4.b.
----- ---- ---- ---- ---- ----
RCON
c. LESS: Allocated transfer risk service.................................. 3128 4.c.
----- ---- ---- ---- ---- ----
d. Loans and leases, net of unearned income, allowance, and reserve RCON
(item 4.a minus 4.b and 4.c).......................................... 2125 0 4.d.
---- ---- ----
RCON
5. Trading assets........................................................... 3545 0 5.
---- ---- ----
RCON
6. Premises and fixed assets (including capitalized leases)................. 2145 254 6.
---- ---- ----
RCON
7. Other real estate owned (from Schedule RC-M)............................. 2150 0 7.
---- ---- ----
8. Investments in unconsolidated subsidiaries and associated companies RCON
(from Schedule RC-M)..................................... 2130 0 8.
---- ---- ----
RCON
9. Customers' liability to this bank on acceptances outstanding............. 2155 0 9.
---- ---- ----
RCON
10. Intangible assets (from Schedule RC-M)................................... 2143 7 283 10.
---- ---- ----
RCON
11. Other assets (from Schedule RC-F)........................................ 2160 608 11.
---- ---- ----
RCON
12. Total assets (sum of items 1 through 11)................................. 2170 13 051 12.
---- ---- ----
</TABLE>
- -----------
(1) Includes cash items in process of collection and unposted debits.
(2) The amount reported in this item must be greater than or equal to the sum
of Schedule RC-M, items 3.a and 3.b.
(3) Includes time certificates of deposit not held for trading.
(4) Report "term federal funds sold" in Schedule RC, item 4.a., "Loans and
leases, net of unearned income," and in Schedule RC-C, part I.
<PAGE> 5
FFIEC 034
Page RC-2
10
Schedule RC--Continued
<TABLE>
<CAPTION>
C100
-----------
Dollar Amounts in Thousands Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
RCON
a. In domestic offices (sum of totals of columns A and C from Schedule 2200 700 13.a.
RC-E).................................................................. ---- ---- ----
RCON
(1) Noninterest-bearing(1)............................................. 6631 536 13.a.(1)
----- ---- ---- ---- ---- ----
RCON
(2) Interest-bearing................................................... 6636 164 13.a.(2)
----- ---- ---- ---- ---- ----
b. In foreign offices, Edge and Agreement subsidiaries, and IBF's........
(1) Noninterest-bearing...............................................
(2) Interest-bearing..................................................
RCON
14. Federal funds purchased(2) and securities sold under agreements to 2800 0 14.
repurchase............................................................... ---- ---- ----
RCON
15. a. Demand notes issued to the U.S. Treasury............................... 2840 0 15.a.
---- ---- ----
RCON
b. Trading liabilities.................................................... 3548 0 15.b.
---- ---- ----
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
RCON
a. With a remaining maturity of one year or less.......................... 2332 0 16.a.
---- ---- ----
RCON
b. With a remaining maturity of more than one year through three years.... A547 0 16.b.
---- ---- ----
RCON
c. With a remaining maturity of more than three years..................... A548 0 16.c.
---- ---- ----
17. Not applicable
RCON
18. Bank's liability on acceptances executed and outstanding.................. 2920 0 18.
---- ---- ----
RCON
19. Subordinated notes and debentures(3)...................................... 3200 0 19.
---- ---- ----
RCON
20. Other liabilities (from Schedule RC-G).................................... 2930 2 291 20.
---- ---- ----
RCON
21. Total liabilities (sum of items 13 through 20)............................ 2948 2 991 21.
---- ---- ----
22. Not applicable
EQUITY CAPITAL
RCON
23. Perpetual preferred stock and related surplus............................. 3838 . 0 23.
---- ---- ----
RCON
24. Common stock.............................................................. 3230 1 000 24.
---- ---- ----
RCON
25. Surplus (exclude all surplus related to preferred stock).................. 3839 8 200 25.
---- ---- ----
RCON
26. a. Undivided profits and capital reserves................................. 3632 860 26.a.
---- ---- ----
RCON
b. Net unrealized holding gains (losses) on available-for-sale securities. 8434 0 26.b.
---- ---- ----
RCON
c. ACCUMULATED NET GAINS (LOSSES) ON CASH FLOW HEDGES..................... 4336 0 26.c.
---- ---- ----
27. Cumulative foreign currency translation adjustments.......................
RCON
28. Total equity capital (sum of items 23 through 27)......................... 3210 10 060 28.
---- ---- ----
RCON
29. Total liabilities and equity capital (sum of items 21 and 28)............. 3300 13 051 29.
---- ---- ----
</TABLE>
Memorandum
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
<TABLE>
<CAPTION>
Number
<S> <C> <C> <C>
1. Indicate in the box at the right the number of the statement below that RCON
best describes the most comprehensive level of auditing work performed for 6724 1 M.1.
the bank by independent external auditors as of any date during 1998..... ---- -----------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- -----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Report "term federal funds purchased" in Schedule RC, item 16, "Other
borrowed money."
(3) Include limited-life preferred stock and related surplus.
