UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended November 30, 1998
Commission File Number 1-8368
SAFETY-KLEEN CORP.
(Exact name of registrant as specified in its charter)
Delaware 51-0228924
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 Gervais Street Columbia, Suite 300, South Carolina 29201
- ------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(803) 933-4200 (Registrant's telephone number, including area code)
--------------
LAIDLAW ENVIRONMENTAL SERVICES, INC.
------------------------------------
(Former name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
The number of shares of the issuer's common stock outstanding as of
January 11, 1999 was 88,387,466.
<PAGE>
SAFETY-KLEEN CORP.
<TABLE>
INDEX
<CAPTION>
PART 1 FINANCIAL INFORMATION
<S> <C>
Item 1 Financial Statements
Consolidated Statements of Income for the Three Month Periods Ended
November 30, 1998 and 1997 ............................................................ 3
Consolidated Statements of Comprehensive Income for the Three Months Ended
November 30, 1998 and 1997 ............................................................ 3
Consolidated Balance Sheets as of November 30, 1998 and August 31, 1998 .................. 4
Consolidated Statements of Cash Flows for the Three Month Periods Ended
November 30, 1998 and 1997 ............................................................ 5
Notes to Unaudited Consolidated Financial Statements ...................................... 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 13
PART II
Item 1 Legal Proceedings .......................................................................... 17
Item 2 Changes In Securities and Use Of Proceeds .................................................. 19
Item 4 Submission of Matters to a Vote of Security Holders ........................................ 19
Item 6 Exhibits and Reports on Form 8-K ........................................................... 20
Signatures .......................................................................................... 24
</TABLE>
2
<PAGE>
SAFETY-KLEEN CORP.
CONSOLIDATED STATEMENTS OF INCOME
($ in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
November 30,
-------------------
1998 1997
---- ----
Revenues ............................................ $467,019 $211,552
-------- --------
Expenses:
Operating ....................................... 305,048 145,325
Depreciation and amortization ................... 37,295 13,895
Selling, general and administrative ............. 34,500 20,401
-------- --------
Total expenses ............................. 376,843 179,621
-------- --------
Operating income .................................... 90,176 31,931
Interest expense, net ............................... 43,084 14,560
------- -------
Income before income tax expense .................... 47,092 17,371
Income tax expense .................................. 19,320 7,227
-------- --------
Net income ...................................... $ 27,772 $ 10,144
======== ========
Basic income per share:
Net income ..................................... $ 0.32 $ 0.22
Weighted average common stock outstanding (000s) ======== ========
87,844 45,193
======== ========
Diluted income per share ............................ $ 0.27 $ 0.19
======== ========
Weighted average common stock outstanding
and assumed conversions (000s) .................. 111,242 68,661
======== ========
See Accompanying Notes to Unaudited Consolidated Financial Statements
<TABLE>
<CAPTION>
SAFETY-KLEEN CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in Thousands)
(Unaudited)
Three Months Ended
November 30,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Net income $27,772 $10,144
Other comprehensive income, net of tax:
Unrealized foreign currency translation adjustments 1,492 (2,377)
Unrealized gain on securities available for sale, net of tax of $1,472 -- 2,209
------- ------
Other comprehensive income 1,492 (168)
------- ------
Comprehensive income $29,264 $9,976
======= ======
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
3
<PAGE>
4
<TABLE>
SAFETY-KLEEN CORP.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
November 30, 1998
(unaudited) August 31, 1998
----------------- ---------------
<S> <C> <C>
($ in Thousands)
ASSETS
Current assets
Cash and cash equivalents ........................................... $ 4,581 $ 16,333
Trade and other accounts receivable ................................. 374,291 320,048
Inventories.......................................................... 52,505 53,759
Deferred income taxes ................. ............................. 69,739 69,426
Income taxes recoverable ............................................ -- 37,495
Other current assets ................................................ 57,496 53,750
---------- -------
Total current assets ............................................... 558,612 550,811
Long-term investments .................................................. 36,326 35,926
Property, plant and equipment, net ..................................... 2,842,704 2,850,502
Goodwill ............................................................... 1,019,003 1,023,154
Other assets ........................................................... 16,921 16,979
---------- ----------
Total assets ........................................................ $4,473,566 $4,477,372
========== ==========
LIABILITIES
Current liabilities
Accounts payable .................................................... $ 125,282 $ 128,560
Accrued liabilities ................................................. 232,634 219,352
Current portion of long-term debt ................................... 77,316 77,004
---------- ----------
Total current liabilities .......................................... 435,232 424,916
Environmental and other long-term liabilities .......................... 240,267 259,459
Long-term debt ......................................................... 1,810,025 1,853,164
Subordinated convertible debenture ..................................... 350,000 350,000
Deferred income taxes .................................................. 585,322 575,127
---------- ----------
Total liabilities ................................................... 3,420,846 3,462,666
---------- ----------
Commitments and contingencies .......................................... -- --
STOCKHOLDERS' EQUITY
Common stock, par value $1.00 per share; authorized 250,000,000;
issued and outstanding 88,381,452 - November 30, 1998;
87,746,243 - August 31, 1998 ........................................ 88,381 87,746
Additional paid-in capital ............................................. 1,190,662 1,182,547
Accumulated other comprehensive income ................................. (17,336) (18,828)
Accumulated deficit .................................................... (208,987) (236,759)
---------- ----------
Total stockholders' equity .......................................... 1,052,720 1,014,706
---------- ----------
Total liabilities and stockholders' equity ........................... $4,473,566 $4,477,372
========== ==========
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SAFETY-KLEEN CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in Thousands)
(Unaudited)
Three Months Ended
November 30,
-----------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $27,772 $10,144
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization ........................................ 37,295 13,895
Deferred income taxes ................................................ 11,060 4,208
Decrease in working capital .......................................... 10,358 5,602
Decrease in liabilities assumed upon acquisition ..................... (30,282) (8,750)
-------- -------
Net cash used in operating activities ..................................... 56,203 25,099
-------- -------
Cash flows from investing activities:
Cash expended on acquisition of business ............................... (4,058) --
Purchase of property, plant and equipment .............................. (14,424) (8,490)
Proceeds from sales of property, plant and equipment ................... 1,090 1,875
Net increase in long-term investments .................................. (53) (12,811)
Change in other, net ................................................... -- (4,998)
------- -------
Net cash used in investing activities ..................................... (17,445) (24,424)
------- -------
Cash flows from financing activities:
Issuance of common stock on exercise of stock options .................. -- 528
Repayment of long-term debt ............................................ 45,307) (2,520)
-------- -------
Net cash used in financing activities ..................................... (45,307) (1,992)
-------- -------
Effect of exchange rate changes on cash .................................. (5,203) --
------- -------
Net decrease in cash and cash equivalents ................................. (11,752) (1,317)
Cash and cash equivalents at:
Beginning of period .................................................... 16,333 11,160
------- -------
End of period .......................................................... $ 4,581 $9,843
======= =======
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock to satisfy interest payment due on
subordinated convertible debenture ................................ $8,750 $8,750
Net unrealized gain on securities available for sale .................. $ -- $2,209
See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
5
<PAGE>
SAFETY-KLEEN CORP.
Notes to Unaudited Consolidated Financial Statements
For the Three Months Ended November 30, 1998
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 three
month period ended November 30, 1998 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, 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. Certain amounts as of August 31, 1998 have been
reclassified to conform to the current period's presentations.
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 also 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.
6
<PAGE>
NOTE 3 - COMMITMENTS AND CONTINGENCIES
Legal Proceedings:
TAX MATTERS. Laidlaw Inc.'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. Judge John O. Colvin
issued an opinion on June 30, 1998 concluding that advances from Laidlaw Inc.'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 $92.2 million as of November 30, 1998)
would be payable.
Similar claims have been asserted with respect to Laidlaw Inc.'s 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 $143.4 million (plus interest of approximately
$164.3 million as of November 30, 1998).
In September 1998, Laidlaw Inc.'s United States subsidiaries received a thirty
day letter proposing that the subsidiaries pay additional taxes of approximately
$96.0 million (plus interest of approximately $54.5 million as of November 30,
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.
Entry of the decision relating to the Tax Court opinion has been deferred to
allow Laidlaw Inc. and the Commissioner of Internal Revenue to engage in
discussions to resolve issues relating to all fiscal years from 1986 through
1994. Should these negotiations be unsuccessful, the Company expects Laidlaw to
appeal the opinion of the Tax Court and vigorously contest the claimed
deficiencies for subsequent fiscal years. Should Laidlaw Inc.'s United States
subsidiaries ultimately be required to pay all claims on these issues, the cost
(including interest as of November 30, 1998) could be approximately $500
million.
Pursuant to the Stock Purchase Agreement dated February 6, 1997 among the
Company, Laidlaw Inc. ("Laidlaw") and Laidlaw Transportation, Inc., ("LTI")
Laidlaw and LTI are responsible for any tax liabilities 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.
NOTE 4 - SUBSEQUENT EVENT
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 received
proceeds totaling $154.0 million which was used to pay down borrowings under the
revolver tranche of the Senior Credit Facility. The transaction resulted in no
gain or loss.
On a proforma basis, the Company's long term debt at November, 30, 1998 of
$1,810 million will be reduced to $1,663 million. As a result the proforma long
term debt to equity ratio will be reduced from 1.79 to 1.65.
7
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY
Changes in the components of stockholders' equity, restated for the effect of
the one-for-four reverse stock split, since September 1, 1998 are as follows ($
in thousands):
<TABLE>
<CAPTION>
Cumulative
Foreign
Additional Currency Total
Common Paid-in Translation Accumulated Stockholders'
Stock Capital Adjustment 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 -- -- -- 27,772 27,772
Issuance of shares (Note A) 635 8,115 -- -- 8,750
Cumulative foreign
currency translation
adjustment -- -- 1,492 -- 1,492
------- ---------- -------- ---------- ----------
Balance at November 30, 1998 $88,381 $1,190,662 $(17,336) (208,987) $1,052,720
======= ========== ======== ========== ==========
</TABLE>
Note A: To satisfy interest payments due on November 15, 1998 subordinated
convertible debenture.
NOTE 6 - SUMMARIZED FINANCIAL INFORMATION
The Senior Subordinated Notes (the "Notes") issued by Safety-Kleen Services,
Inc., a consolidated subsidiary of the Company, are jointly and severally
guaranteed by Safety-Kleen Corp. and all wholly-owned domestic subsidiaries of
the Company on a full and unconditional basis. The Notes contain certain
covenants which, among other things, restrict the payment of dividends from
Safety-Kleen Services, Inc. and its subsidiary guarantors to Safety-Kleen Corp.
Summarized financial information for each of Safety-Kleen Corp., Safety-Kleen
Services, Inc., the subsidiary guarantors, and the subsidiary non-guarantors on
a consolidating basis are presented below. Separate financial statements and
other disclosures concerning the subsidiary guarantors are not included because
management believes that they are not material to investors.
8
<PAGE>
Consolidating Condensed Balance Sheet
November 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Consolidating
Safety-Kleen Safety-Kleen Subsidiary Subsidiary Eliminating Consolidated
($ in Thousands) Corp. Services, Inc. Guarantors Non-Guarantors Entries Total
------------ -------------- ---------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets .............................. $ $ $ 394,604 $ 164,008 $ -- $ 558,612
Property, plant and equipment, net .......... -- -- 2,436,362 406,342 -- 2,842,704
Investment in Subsidiaries .................. 1,530,759 2,778,882 1,322,154 109 (5,631,904) --
Goodwill .................................... -- -- 940,362 78,641 -- 1,019,003
Other non-current assets .................... -- -- 52,467 780 -- 53,247
---------- ---------- ---------- ---------- ----------- ----------
Total assets ................................ $1,530,759 $2,778,882 $5,145,949 $ 649,880 $(5,631,904) $4,473,566
========== ========== ========== ========== =========== ==========
LIABILITIES
Current liabilities ......................... $ 2,839 $ 90,029 $ 207,772 $ 134,592 $ -- $ 435,232
Non-current liabilities ..................... -- -- 721,944 103,645 -- 825,589
Long-term debt .............................. 125,200 1,620,755 14,972 49,098 -- 1,810,025
Subordinated convertible debenture .......... 350,000 -- -- -- -- 350,000
---------- ---------- ---------- --------- ----------- ----------
Total liabilities ........................... 478,039 1,710,784 944,688 287,335 -- 3,420,846
STOCKHOLDERS' EQUITY ........................ 1,052,720 1,068,098 4,201,261 362,545 (5,631,904) 1,052,720
---------- ---------- ---------- ---------- ----------- ----------
Total liabilities and stockholder's equity .. $1,530,759 $2,778,882 $5,145,949 $ 649,880 $(5,631,904) $4,473,566
========== ========== ========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Consolidating Condensed Statement of Income
Three Months Ended November 30, 1998
(unaudited)
Consolidating
Safety-Kleen Safety-Kleen Subsidiary Subsidiary Eliminating Consolidated
($ in Thousands) Corp. Services, Inc. Guarantors Non-Guarantor Entries Total
<S> <C> <C> <C> <C> <C> <C>
Total revenues ................................ $ -- $ -- $ 354,362 $ 123,171 $ (10,514) $ 467,019
Operating expenses ............................ -- -- 300,382 86,975 (10,514) 376,843
--------- -------- --------- --------- --------- ---------
Operating income .............................. -- -- 53,980 36,196 -- 90,176
Interest expense (income) , net ............... 6,412 36,591 (7,400) 7,481 -- 43,084
Undistributed earnings (losses) of subsidiaries 31,299 51,424 -- -- (82,723) --
--------- -------- --------- --------- --------- ---------
Income (loss) from income tax ................. 24,887 14,833 61,380 28,715 (82,723) 47,092
expense
Income tax expense (benefit) .................. (2,885) (16,466) 34,995 3,676 -- 19,320
--------- -------- --------- --------- --------- ---------
Income tax ................................... $ 27,772 $ 31,299 $ 26,385 $ 25,039 $ (82,723) $ 27,772
========= ======== ========= ========= ========= =========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Consolidating Condensed Statement of Cash Flows
Three Months Ended November 30, 1998
(unaudited)
Consolidating
Safety-Kleen Safety-Kleen Subsidiary Subsidiary Eliminating Consolidated
($ in Thousands) Corp. Services, Inc. Guarantors Non-Guarantors Entries Total
----- ------------- ---------- -------------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities $(3,527) $(18,185) $107,126 $(29,211) $- $56,203
-------- --------- -------- --------- - -------
Cash flow from investing activities:
Cash acquired on acquisition of business - - (4,058) - - (4,058)
Purchase of plant, property and equipment - - (10,300) (4,124) - (14,424)
Proceeds from sale of property, plant
and equipment - - 693 397 - 1,090
Net increase in long-term investments - - (53) - - (53)
Net cash provided by (used in) investing
activities - - (13,718) (3,727) - (17,445)
----- ------- -------- ------- - --------
Cash flow from financing activities:
Repayment of long-term debt - (44,611) (696) - - (45,307)
Intercompany payable (receivable) 3,527 62,796 (96,624) 30,301 - -
----- ------ -------- ------ - -
Net cash provided by (used in) financing
activities 3,527 18,185 (97,320) 30,301 - (45,307)
----- ------ -------- ------ - --------
Effect of exchange rates changes on cash - - - (5,203) - (5,203)
----- ------ ------- ------- - -------
Net decrease in cash and cash equivalents - - (3,912) (7,840) - (11,752)
Cash and cash equivalents at:
Beginning of period - - 4,343 11,990 - 16,333
----- ------ -------- ------ - ------
End of period $ - $ - $ 431 $ 4,150 $- $ 4,581
===== ====== ======== ======= == =======
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Consolidating Condensed Balance Sheet
August 31, 1998
(unaudited)
Consolidating
Safety-Kleen Safety-Kleen Subsidiary Subsidiary Eliminating Consolidated
($ in Thousands) Corp. Services, Inc. Guarantors Non-Guarantors Entries Total
------------ -------------- ---------- -------------- ------------- -------------
<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 -- 2,850,502
Investment in Subsidiaries ................. 1,496,759 2,776,635 1,322,059 166 (5,595,659) --
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 (5,595,659) 1,014,706
---------- ---------- ---------- ----------- ----------- ----------
Total liabilities and stockholders equity .. $1,496,759 $2,776,635 $ 5,219,810 $ 579,827 $(5,595,659) $4,477,372
========== ========== =========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Consolidating Condensed Statement of Income
Three Months Ended November 30, 1997
(unaudited)
Consolidating
Safety-Kleen Safety-Kleen Subsidiary Subsidiary Eliminating Consolidated
($ in Thousands) Corp. Services, Inc. Guarantors Non-Guarantor Entries Total
------------ -------------- ---------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues ................................. $ -- $ -- $ 165,601 $ 45,951 $ -- $ 211,552
Operating expenses ............................. -- -- 144,889 34,732 -- 179,621
--------- --------- --------- --------- -------- ---------
Operating income ............................... -- -- 20,712 11,219 -- 31,931
Interest expense, net .......................... 6,370 6,597 (698) 2,291 -- 14,560
Undistributed earnings (losses) of subsidiaries 13,647 17,275 -- -- (30,922) --
--------- --------- --------- --------- -------- ---------
Income (loss) from income tax expense .......... 7,277 10,678 21,410 8,928 (30,922) 17,371
Income tax expense (benefit) ................... (2,867) (2,969) 9,808 3,255 -- 7,227
--------- --------- --------- --------- -------- ---------
Net income ..................................... $ 10,144 $ 13,647 $ 11,602 $ 5,673 $(30,922) $ 10,144
========= ========= ========= ========= ======== =========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Consolidating Condensed Statement of Cash Flows
Three Months Ended November 30, 1997
(unaudited)
Consolidating
Safety-Kleen Safety-Kleen Subsidiary Subsidiary Eliminating Consolidated
($ in Thousands) Corp. Services,Inc. Guarantors Non-Guarantors Entries Total
----- ------------- ---------- -------------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities $(3,503) $(2,011) $15,954 $14,659 $- $25,099
-------- -------- ------- ------- --- -------
Cash flow from investing activities:
Cash expended on acquisition of business - - - - - -
Purchase of plant, property and equipment - - (4,846) (3,644) - (8,490)
Net increase in long-term investments - - (12,811) - (12,811)
Other, net - - (3,126) 3 - (3,123)
-------- --------- ------- ------- --- -------
Net cash used in investing
activities - - (20,783) (3,641) - (24,424)
-------- --------- -------- ------- --- --------
Cash flow from financing activities:
Exercise of stock options 528 - - - - 528
Repayment of long-term debt - (1,650) (870) - - (2,520)
Intercompany payable (receivable) 2,975 3,661 24,072 (30,678) - -
----- ------- ------ -------- - ------
Net cash provided by (used in) financing
activities 3,503 2,011 23,202 (30,678) - (1,992)
----- ------- ------ -------- - -------
Effect of exchange rates changes on cash - - - (5,203) - -
------ ------- ------ -------- --- -------
Net increase (decrease) in cash and cash
equivalents 18,373 (24,863) - (1,317)
Cash and cash equivalents at:
Beginning of period - - 4,343 11,990 - 11,160
------- ------- ------- ------ -- ------
End of period $ - $ - $22,716 $(12,873) $- $9,873
======= ======= ======= ========= === ======
</TABLE>
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and related notes thereto
included elsewhere herein.
Results associated with the April 1, 1998 acquisition of Safety-Kleen Corp.
("Old Safety-Kleen") have been included in the Company's consolidated results as
of the date of the acquisition.
The following discussion and analysis includes statements that are
considered forward-looking based on the Company's expectations and, as such,
these statements are subject to uncertainty and risk. See "Factors That May
Affect Future Results" below.
RESULTS OF OPERATIONS:
Three Months Ended November 30, 1998 compared with Three Months Ended November
30, 1997
Operating results are as follows ($ in millions):
Three Months Ended November 30,
1998 1997
Revenues ................................. $467.0 100.0% $211.6 100.0%
Operating expense ........................ 305.0 65.3% 145.4 68.7%
Depreciation and amortization ............ 37.3 8.0% 13.9 6.6%
Selling, general and administrative ...... 34.5 7.4% 20.4 9.6%
------ ------ ------ -----
Operating income ......................... $ 90.2 19.3% $ 31.9 15.1%
====== ====== ====== =====
Revenues
Components of revenue ($ in millions): Three Months Ended November 30,
-------------------------------
1998 1997
------------------------------
Collection and Recovery Services
Industrial Services ........................ $206.2 44% 118.4 56%
Commercial and Institutional Services ...... 134.7 29% 0.0 0%
------ --- ----- ----
Total Collection and Recovery Services ......... 340.9 73% 118.4 56%
Treatment and Disposal Services ................ 94.4 20% 93.2 44%
European Operations ............................ 31.7 7% 0.0 0%
---- ----- ----
Total revenue ............................. $467.0 100% 211.6 100%
====== ==== ===== ====
Revenues increased $255.4 million, or 121%, during the three months ended
November 30, 1998 compared to the three months ended November 30, 1997. Revenue
from collection and recovery services to industrial customers increased $87.8
million, or 74%, while the addition of collection and recovery services to
commercial and institutional customers generated an additional $134.7 million.
Increased revenue from collection and recovery services reflects the inclusion
of the acquired Old Safety-Kleen business. Revenue from treatment and disposal
services increased $1.2 million, or 1%, primarily due to an increased revenues
related to the Company's harbor dredging, treatment and disposal activities.
Within the treatment and disposal component, revenues attributable to landfill
disposal were negatively effected due to the sale of an industrial and municipal
solid waste landfill on December 18, 1997. The acquired European operations of
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Safety-Kleen provided an additional $31.7 million in revenue. The European
operations component derives its revenue from collection and recovery services
activities.
The Company eliminates inter-company revenues in presenting consolidated
financial results. The majority of such eliminations occur at the Company's
disposal facilities which receive waste streams from the Company's collection
and recovery services network.
Management's estimate of the components of the changes in the Company's
consolidated revenue is as follows:
Percentage Increase (Decrease)
Three Months Ended November 30,
-------------------------------
1998 over 1997 1997 over 1996
-------------- --------------
Expansion of customer base by acquisition 122.4% 23.5%
Other, primarily through volume and price changes 3.7% 4.5%
Divestitures and closures (3.6%) (4.9%)
Foreign exchange rate changes (1.8%) (0.5%)
---- ------
Total 120.7% 22.6%
====== ======
The comparative increase in revenue for the three months ended November 30,
1998 was primarily due to the inclusion of the acquired operations of Old
Safety-Kleen. Current revenues from existing operations grew as a result of
increased revenue from the Company's harbor related dredging, treatment and
placement operations. Prior year revenues included contributions from an
industrial and municipal solid waste landfill which was divested on December 18,
1997. 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 $159.6 million, or 110%, during the three
months ended November 30, 1998, compared to the three months ended November 30,
1997. The increase was primarily attributable to additional business obtained as
part of the acquisition of Old Safety-Kleen. As a percentage of revenue,
operating expense decreased to 65.3% from 68.7% in the prior year, primarily due
to the increased utilization of existing facilities and acquisition related cost
reduction measures.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $23.4 million, or 168%,
during the three months ended November 30, 1998, compared to the prior year. The
increase related to the acquired operations of Old Safety-Kleen. As a percentage
or revenue, depreciation and amortization expense was 8.0%, compared to 6.6% in
the prior year. 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 $14.1 million, or
69% during the three months ended November 30, 1998, versus the prior year. As a
percentage of revenue, selling, general and administrative expenses decreased to
7.4% from 9.6% in the prior year due to cost reduction measures and economies of
scale gained through the acquisition of Old Safety-Kleen.
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Interest Expense
Interest expense increased $29.3 million, or 200%, during the three months
ended November 30, 1998, over the prior year as a result of the additional long
term debt incurred to finance the acquisition of Old Safety-Kleen.
Income Tax Expense
Income tax expense increased $12.1 million, or 67%, during the three months
ended November 30, 1998, over the prior year due to an increase in taxable
income attributable to the acquisition of Old Safety-Kleen. The average rate of
41.1% was consistent with the 41.6% recorded in the prior year.
FACTORS THAT MAY AFFECT FUTURE RESULTS
This report contains various forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including financial,
operating and other projections. These statements are based on current plans and
expectations of the Company and involve risks and uncertainties that could cause
actual future activities and results of operations to be materially different
from those set forth in the forward-looking statements.
Important factors that could cause actual results to differ include, among
others, risks associated with acquisitions and achieving the targeted cost
savings levels, fluctuations in operating results because of acquisitions,
changes in applicable government regulations (environmental and other), the
impact of litigation, competition, and risks associated with the operations and
growth of the newly acquired business of Old Safety-Kleen and other factors
described in Part I, Item 1 of the Company's report on Form 10-K for the twelve
months ended August 31, 1998. As a result of these factors, the Company's
revenue and income could vary significantly from quarter to quarter, and past
financial performance should not be considered a reliable indicator of future
performance.
CAPITALIZATION
On April 1, 1998, the Company announced that Old Safety-Kleen shareholders
had accepted its exchange offer, as amended on March 16, 1998, relating to the
acquisition of Old Safety-Kleen by the Company. Under the terms of the offer,
the Company exchanged $18.30 (pre reverse split) and 2.8 common shares (pre
reverse split) of Company stock for each Old Safety-Kleen share tendered. In May
1998, the Company completed the acquisition of Old Safety-Kleen (collectively,
the "Safety-Kleen Acquisition") through a back-end merger, approved by the Old
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 $1.5 billion cash and 166.5 million shares (pre reverse
split) of Company common stock. The cash consideration and the refinancing of
certain existing indebtedness was financed from the proceeds of a $2.2 billion
Senior Credit Facility (the "Senior Credit Facility").
On May 29, 1998, Safety-Kleen Services, 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.
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On November 24, 1998, the Company's shareholders approved a one-for-four
reverse stock split which became effective at the close of business November 30,
1998. As a result, shareholders received one share of new Safety-Kleen common
stock for each four shares previously held.
LIQUIDITY
Total cash provided by operations during the three months ended November
30, 1998 was $56.2 million. This was composed of $84.6 million from operations
before working capital sources of $3.7 million and $32.1 million related to
spending on acquisition liabilities.
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
received $154.0 million which was used to pay down borrowings under the revolver
tranche of the Senior Credit Facility. On a pro forma basis, the Company's long
term debt at November 30, 1998 of $1,810 million will be reduced to $1,663
million. As a result, the pro forma long term debt to equity ratio will be
reduced from 1.79 to 1.65.
The Company's primary sources of liquidity are cash flows from operations,
existing cash and short-term investments of $4.6 million, short-term unused
working capital bank lines of $7.4 million and the unused cash portion of the
Senior Credit Facility's revolver tranche of $218.0 million (prior to the
aforementioned European operations recapitalization and resulting debt
reduction).
The Company expects to fund capital expenditures, debt repayment and
environmental liability requirements from cash flows from operations.
CAPITAL EXPENDITURES AND CAPITAL RESOURCES
Investing activities for the three months ended November 30, 1998, used
cash of $18.2 million. Net expenditures for the purchase of fixed assets for
normal replacement requirements and increases in services were $18.3million. The
Company's projected capital expenditures for fiscal 1999 are approximately $80.0
million. The Company believes that it has adequate resources to finance these
expenditures.
The Company's Senior Credit Facility contains negative, affirmative and
financial covenants customarily found in credit agreements for financings
similar to the financing provided under the Senior Credit Facility, including
covenants limiting annual capital expenditures, restricting debt, guaranties,
liens, mergers and consolidations, sales of assets and payment of dividends. The
Company was in compliance with all of its covenants at November 30, 1998.
The long term debt agreements of Safety-Kleen Services, Inc. and its
subsidiaries contain certain covenants that restrict the payment of dividends to
Safety-Kleen Corp.
YEAR 2000 ISSUES
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 other computer errors, leading to disruptions in
operations. The Company developed a three-phase program for Y2K systems
compliance. Phase I identified those systems with respect to which the Company
has 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.
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Phase I was completed in early fiscal year 1998 and identified three major
areas of Y2K non-compliance:
(1) certain modules of the Company's financial and operational systems,
(2) incinerator distributed control systems, and
(3) third-party vendor relationships.
The Phase II action plans have been developed and the Company is currently
implementing those remedial plans. The Company's 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 will be accomplished
through a combination of hardware and software upgrades and program changes. The
Company expects this process to be completed by mid-calendar year 1999. The
deficiencies in the incinerator distributed control systems will be remedied by
the installation of upgrades purchased from the systems vendors. With respect to
the third-party vendors, the Company has contacted most of its major suppliers
and has received indications that they are either compliant or intend to be
compliant by mid-calendar year 1999.
The Company believes it will spend approximately $10.0 million for Y2K
compliance and will require 20,000 programming man days to bring the Company's
computer systems into compliance, including Old Safety-Kleen issues. To date,
the Company has completed approximately 15,000 programming man days towards this
effort. $1.4 million was incurred in fiscal year 1998, with the balance to be
incurred in fiscal year 1999.
The Company believes 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. The Company will monitor the remaining time to complete the
implementation and will review the requirement to prepare contingency plans on a
monthly basis.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
GENERAL
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 issues will be
material to the Company's operations or financial condition. At November 30,
1998, subsidiaries of the Company were involved in nine proceedings of the
latter type relating primarily to activities at waste treatment, storage and
disposal facilities where the Company believes sanctions involved in each
instance may exceed $100,000. 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.
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The Company frequently becomes a party to legal proceedings wherein persons
claim injury resulting from the use of Company's 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. The
Company believes that the ultimate disposition of these legal proceedings will
not have a materially adverse effect upon the Company's consolidated financial
position or results of operations.
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. At
November 30, 1998, the Company had been notified that it was a potentially
responsible party in connection with 45 locations in its hazardous waste
management and other businesses. The Company continually reviews its status with
respect to each location and the extent of its alleged contribution to the
volume of waste at the location, the available evidence connecting the Company
to that location, and the numbers and financial soundness of other potentially
responsible parties at the location. Based upon presently available information,
the Company does not believe that potential liabilities arising from its
involvement with these locations will be material to the Company's operations or
financial condition.
TAX MATTERS
Laidlaw Inc.'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. Judge John O. Colvin issued an opinion
on June 30, 1998 concluding that advances from Laidlaw Inc.'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 $92.2 million as of November 30, 1998) would be payable.
Similar claims have been asserted with respect to Laidlaw Inc.'s
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 $143.4 million (plus interest of
approximately $164.3 million as of November 30, 1998).
In September 1998, Laidlaw Inc.'s United States subsidiaries received a
thirty day letter proposing that the subsidiaries pay additional taxes of
approximately $96.0 million (plus interest of approximately $54.5 million as of
November 30, 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.
Entry of the decision relating to the Tax Court opinion has been
deferred to allow Laidlaw Inc. and the Commissioner of Internal Revenue to
engage in discussions to resolve issues relating to all fiscal years from 1986
through 1994. Should these negotiations be unsuccessful, the Company expects
Laidlaw to appeal the opinion of the Tax Court and vigorously contest the
claimed deficiencies for subsequent fiscal years. Should Laidlaw Inc.'s United
States subsidiaries ultimately be required to pay all claims on these issues,
the cost (including interest as of November 30, 1998) could be approximately
$500 million.
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<PAGE>
Pursuant to the Stock Purchase Agreement dated February 6, 1997 among the
company, Laidlaw Inc. ("Laidlaw") and Laidlaw Transportation, Inc. ("LTI"),
Laidlaw and LTI are responsible for any tax liabilities 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.
Other than as herein reported there have been no additional significant
legal proceedings nor any material changes in the legal proceedings reported in
Part II, Item 3 of the registrant's report on Form 10-K for the twelve months
ended August 31, 1998.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) On November 16, 1998, as required by the $350,000,000 5% Subordinated
Convertible Pay-In-Kind debenture (the "Debenture") beneficially issued to
Laidlaw on May 15, 1997, the Registrant issued 635,208 shares of its common
stock, par value $1.00 per share ("SK Stock") (as adjusted to reflect the one-
for-four stock split described in Item 2(b), effective the close of business on
November 30, 1998), beneficially to Laidlaw through Laidlaw's subsidiary, as
interest payment on the Debenture. The Company believes that the shares are
exempt from registration pursuant to Section (4)(2) of the Securities Act of
1933, as amended (the "Act"). In determining to issue the SK Stock without
registration under the Act management considered the fact that the offering was
being made to a single offeree in connection with the interest payment under the
Debenture and further, Laidlaw represented in writing to the Registrant that it
was acquiring the SK Stock for investment and not with a view to, or for resale
in connection with, any distribution of the SK Stock.
(b) At the close of business on November 30, 1998, the Company effected a
one-for-four stock split with no change in par value per share ($1.00). The
Company also decreased the number of shares of common stock it is
authorized to issue from 750,000,000 shares to 250,000,000 shares.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Shareholders was held on November 24, 1998.
At the meeting, the Company's Shareholders (i) elected the three individuals who
had been nominated to be members of the Board of Directors, (ii) approved the
amendment to the Company's Restated Certificate of Incorporation to change the
name of the Company to Safety-Kleen Corp. (the "Name Change"), (iii) approved
the amendment to the Company's Restated Certificate of Incorporation to effect a
one-for-four reverse stock split of the Company's Common Stock (the "Reverse
Split") and (iv) approved the amendment to the Company's Restated Certificate of
Incorporation to decrease the number of authorized shares of Common stock
available for issuance from 750,000,000 to 250,000,000 (the "Decrease"). The
following table sets forth the voting results:
For Against Withheld Abstentions
Election of Directors:
John W. Rollins, Jr. 289,544,507 N/A 13,179,435 N/A
John R. Grainger 289,635,483 N/A 13,088,459 N/A
Grover C. Wrenn 289,641,371 N/A 13,082,571 N/A
Name Change 302,324,851 287,090 N/A 112,001
Reverse Split 295,066,957 7,364,700 N/A 292,285
Decrease 300,148,538 2,184,853 N/A 390,551
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(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 Registrant's Form 10-Q for the Quarter ended May 31, 1997
and incorporated herein by reference.
(3)(a)(i) 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 Registrant's Form 10-K for the Year
ended August 31, 1997, and incorporated herein by reference.
(3)(a)(ii) Certificate of Amendment of Restated Certificate of Incorporation of
the Company dated February 19, 1998, filed as Exhibit (3)(a)(ii) to the
Registrant's Form 10-Q for the Quarter ended February 28, 1998 and incorporated
herein by reference.
(3)(a)(iii) Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated November 25, 1998.
(3)(a)(iv) Certificate of Amendment to the Restated Certificate of Incorporation
of the Company dated November 30, 1998.
(3)(b) Amended and Restated Bylaws of the Company filed as Exhibit 4(ii) to the
Registrant's Current Report on Form 8-K dated July 29, 1997 and incorporated
herein by reference.
(4)(a) Registration Rights Agreement dated as of May 29, 1998 between LES, Inc.
(a subsidiary of the Registrant), the Registrant, subsidiary guarantors of the
Registrant, TD Securities (USA) Inc. and NationsBanc Montgomery Securities LLC
filed as Exhibit 4(a) to the Registrant's Form S-4 Registration Statement No.
333-57587 filed June 24, 1998 and incorporated herein by reference.
(4)(b) Indenture dated as of May 29, 1998 between LES, Inc. (a subsidiary of the
Registrant), Registrant, subsidiary guarantors of the Registrant and The Bank of
Nova Scotia Trust Company of New York, as trustee filed as Exhibit 4(b) to the
Registrant's Form S-4 Registration Statement No. 333-57587 filed June 24, 1998
and incorporated herein by reference.
(4)(c) Rights Agreement dated as of June 14, 1989 between the Company and First
Chicago Trust Company as successor to Registrar and Transfer Company, as Rights
Agent filed as Exhibit 4(e) to the Registrant's Current Report on Form 8-K filed
on June 13, 1995 and incorporated herein by reference.
(4)(d) Amendment No. 1 dated as of March 31, 1995 to the Rights Agreement
between the Company and First Chicago Trust Company as successor to Registrar
and Transfer Company, as Rights Agent filed as Exhibit 4(f) to the Registrant's
Current Report on Form 8-K on June 13, 1995 and incorporated herein by
reference.
(4)(e) Amendment No. 2 dated as of April 30, 1997 to the Rights Agreement
between the Company and First Chicago Trust Company as successor to Registrar
and Transfer Company, as Rights Agent, filed as Exhibit 4(c) to the Registrant's
Form 10-Q for the quarter ended November 30, 1997, and incorporated herein by
reference.
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(4)(f) 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(q) to the
Registrant's Form S-4 Registration Statement No. 333-49929 filed April 10, 1998,
and incorporated herein by reference.
(4)(g) 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 Registrant's Form S-4 Registration Statement
No. 333-57587 filed June 24, 1998 and incorporated herein by reference.
(4)(h) 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 Registrant's Form S-4 Registration Statement No. 333-57587
filed June 24, 1998 and incorporated herein by reference.
(4)(i) 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 Registrant's Form S-4 Registration Statement No.
333-57587 filed June 24, 1998 and incorporated herein by reference.
(4)(j) 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.
(4)(k) $350,000,000 5% Subordinated Convertible Pay-In-Kind Debenture due 2009
issued by Registrant on May 15, 1997 to Laidlaw Transportation, Inc. the form of
which was included as an appendix to the Registrant's Definitive Proxy Statement
on Form DEF 14A, filed on May 1, 1997 and incorporated herein by reference.
(4)(l) Registration Rights Agreement dated May 15, 1997 between Registrant,
Laidlaw Transportation, Inc. and Laidlaw Inc. included as an appendix to the
Registrant's Definitive Proxy Statement on Form DEF 14A, the form of which was
filed on May 1, 1997 and incorporated herein by reference.
(4)(m) Indenture dated as of May 1, 1993 between the Industrial Development
Board of the Metropolitan Government of Nashville and Davidson County
(Tennessee) and NationsBank of Tennessee, N.A., filed as Exhibit 4(f) to the
Registrant's Form 10-Q for the Quarter ended May 31, 1997, and incorporated
herein by reference.
(4)(n) Indenture of Trust dated as of August 1995 between Tooele County, Utah
and West One Bank, Utah, now known as U.S. Bank, as Trustee, filed as Exhibit
4(h) to the Registrant's form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(o) Indenture of Trust dated as of July 1, 1997 between Carbon County, Utah
and U.S. Bank, a national banking association, as Trustee, filed as Exhibit 4(i)
to the Registrant's Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(p) Indenture of Trust dated as of July 1, 1997 between Tooele County, Utah
and U.S. Bank, a national banking association, as Trustee, filed as Exhibit 4(j)
to the Registrant's Form 10-Q for the Quarter ended May 31, 1997, and
incorporated herein by reference.
(4)(q) Indenture of Trust dated as of July 1, 1997 between California Pollution
Control Financing Authority and U.S. Bank, a national banking association, as
Trustee, filed as Exhibit 4(k) to the Registrant's Form 10-Q for the Quarter
ended May 31, 1997, and incorporated herein by reference.
(4)(r) Promissory Note dated May 15, 1997 for $60,000,000 from Laidlaw
Environmental Services, Inc. to Westinghouse Electric Corporation, filed as
Exhibit 4(n) to the Registrant's Form 10-Q for the Quarter ended May 31, 1997,
and incorporated herein by reference.
(4)(s) 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)(r)) from Laidlaw Environmental Services, Inc. to
Westinghouse Electric Corporation, filed as Exhibit 4(o) to the Registrant's
Form 10-Q for the Quarter ended May 31, 1997, and incorporated herein by
reference.
(4)(t) Other instruments defining the rights of holders of debt of the
Registrant 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 Registrant and its subsidiaries. The Registrant agrees to furnish a copy of
any such instrument to the Commission upon request.
(10)(a) Agreement and Plan of Merger dated as of March 16, 1998 by and among
Registrant, 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 Registrant'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
(4)(q) above), dated May 15, 1997 among Westinghouse Electric Corporation,
Rollins Environmental Services, Inc. and Laidlaw Inc., filed as Exhibit 4(m) to
the Registrant's Form 10-Q for the Quarter ended May 31, 1997, and incorporated
herein by reference.
(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.
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(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) Registrant'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.
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(10)(g) Registrant'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 Registrant,
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.
(10)(j) Operations Management Incentive Plan for fiscal year 1999.
(10)(k) Laidlaw Environmental Services, Inc. U.S. Supplemental Executive
Retirement Plan filed as Exhibit 10(g) to the Registrant'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 Registrant'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 Registrant's 10-K for the year ended August 31, 1998, and incorporated
herein by reference.
(10)(n) Change of Control Agreement LES-C1, filed as Exhibit 10(m) to the
Registrant's 10-K for the year ended August 31, 1998, and incorporated herein by
reference.
(11) Statement of Computation of Per Share Earnings
(12) Statement Re: Computation of Ratios.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K, dated November 24, 1998, which
contained Item 5 related to a press release publicizing the results of the
shareholder vote at the Company's annual meeting held on that same date.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: January 14, 1999 SAFETY-KLEEN CORP.
------------------
(Registrant)
/s/Kenneth W. Winger
---------------------------------
Kenneth W. Winger
President and Chief Executive Officer
/s/Paul R. Humphreys
---------------------------------
Paul R. Humphreys
Senior Vice President-Finance and
Chief Financial Officer
24
CERTIFICATE OF AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION,
OF LAIDLAW ENVIRONMENTAL SERVICES, INC.
Laidlaw Environmental Services, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "DGCL"), does hereby amend the Restated Certificate of
Incorporation of the Corporation.
The undersigned hereby certifies that this amendment to the Restated
Certificate of Incorporation of the Corporation has been duly adopted in
accordance with Section 242 of the DGCL.
FIRST: That the Restated Certificate of Incorporation of said corporation
be amended as follows:
"FIRST: The name of the Corporation is Safety-Kleen Corp."
SECOND: That such amendment has been duly adopted by the affirmative vote
of the holders of a majority of the stock entitled to vote in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
THIRD: That the effective time of this Certificate of Amendment to the
Restated Certificate of Incorporation shall be at the close of business on the
date filed with the Secretary of State of the State of Delaware.
THE UNDERSIGNED, being the President and Chief Executive Officer of the
Corporation, for the purpose of amending the Restated Certificate of
Incorporation of the Corporation pursuant to the DGCL, does make this amendment
to the Restated Certificate of Incorporation of the Corporation, hereby
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly I have hereunto set my hand as of this 25th day
of November, 1998.
LAIDLAW ENVIRONMENTAL SERVICES, INC.
By: /s/ Kenneth W. Winger
-------------------------------------
Kenneth W. Winger
President and Chief Executive Officer
ATTEST:
/s/ Henry H. Taylor
- -------------------
Henry H. Taylor
Secretary
1
CERTIFICATE OF AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION,
OF SAFETY-KLEEN CORP.
Safety-Kleen Corp. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby amend the Restated Certificate of
Incorporation of the Corporation.
The undersigned hereby certifies that this amendment to the Restated
Certificate of Incorporation of the Corporation has been duly adopted in
accordance with Section 242 of the DGCL.
FIRST: That the Restated Certificate of Incorporation of said corporation
be amended as follows:
FOURTH: The total number of shares of stock which the Corporation is
authorized to issue is two hundred fifty-one million (251,000,000) shares,
divided into two classes. The designation of each class, and the par value of
the shares of each class are as follows:
CLASS NO. OF SHARES PER SHARE PAR VALUE
Common 250,000,000 $1.00 per share
Preferred 1,000,000 $1.00 per share
All preferred stock authorized for issuance by the Corporation may be
issued in series or without series from time to time with the designations,
preferences, and relative, participating, optional or other special rights of
the class or series of the class fixed by resolution or resolutions of the Board
of Directors. Such resolutions may also provide for the convertibility of the
preferred stock or any series thereof into any other classes of stock of the
Corporation, including the common stock, upon such terms and rations as shall be
determined by the Board of Directors.
Article EIGHTH of the Restated Certificate of Incorporation of the
Corporation is hereby amended to include the following text after the last
paragraph thereof:
5. Reverse Split. Effective as of the close of
business on the date of filing this Amendment to the
Restated Certificate of Incorporation (the "Effective
Time"), the filing of this Amendment shall effect a
Reverse Split (the "Reverse Split") pursuant to which
each four shares of common stock, par value $1 per
share, of the Corporation issued and outstanding, shall
be combined into one validly issued, fully paid and
nonassessable share of common stock, par value $1 per
share, of the Corporation. The number of authorized
shares, the number of shares of treasury stock and the
1
<PAGE>
par value of the common stock shall not be affected by
the Reverse Split. Each stock certificate that prior to
the Effective Time represented shares of common stock
shall, following the Effective Time, represent the
number of shares into which the shares of common stock
represented by such certificate shall be combined. The
Corporation shall not issue fractional shares or scrip
as a result of the Reverse Split, but shall arrange for
the disposition of shares on behalf of those record
holders of common stock at the Effective Time who would
otherwise be entitled to fractional shares as a result
of the Reverse Split.
SECOND: That such amendments have been duly adopted by the affirmative vote
of the holders of a majority of the stock entitled to vote in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
THIRD: That the effective time of this Certificate of Amendment to the
Restated Certificate of Incorporation shall be at the close of business on the
date filed with the Secretary of State of the State of Delaware.
THE UNDERSIGNED, being the President and Chief Executive Officer of the
Corporation, for the purpose of amending the Restated Certificate of
Incorporation of the Corporation pursuant to the DGCL, does make this amendment
to the Restated Certificate of Incorporation of the Corporation, hereby
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly I have hereunto set my hand as of this 30th day
of November, 1998.
SAFETY-KLEEN CORP.
By: /s/ Kenneth W. Winger
-----------------------
Kenneth W. Winger
President and Chief Executive Officer
ATTEST:
/s/ Henry H. Taylor
- -------------------
Henry H. Taylor
Secretary
2
DRAFT OF 11/4/98
SECOND AMENDMENT
SECOND AMENDMENT (this "Amendment"), dated as of November 20, 1998,
to the Amended and Restated Credit Agreement, dated as of April 3, 1998
(as the same may be amended, supplemented or otherwise modified, 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 (the "CANADIAN BORROWER"; 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 (in such capacity, the "CANADIAN ADMINISTRATIVE
AGENT"; together with the General Administrative Agent, the "ADMINISTRATIVE
AGENTS"), 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 (each, in such capacity, a "MANAGING AGENT"), THE BANK OF
NOVA SCOTIA and THE FIRST NATIONAL BANK OF CHICAGO, as co-documentation agent
(each, in such capacity, a "CO-DOCUMENTATION AGENT"), and NATIONSBANK, N.A., as
syndication agent (in such capacity, the "SYNDICATION AGENT").
W I T N E S S E T H :
WHEREAS, the Borrowers have requested that the Administrative
Agents and the Lenders agree to amend certain provisions of the Credit Agreement
upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Administrative Agents and the Lenders have agreed to
such waivers and amendments only upon the terms and subject to the conditions
set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Terms defined in the Credit Agreement are used
in this Amendment with the meanings set forth in the Credit Agreement unless
otherwise defined herein.
2. AMENDMENT OF SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.1
of the Credit Agreement is hereby amended by:
(a) inserting the words "or Exhibit A-3" after the reference to
"Exhibit A-1" as it appears in the first line of the definition of
"Draft";
<PAGE>
2
(b) inserting at the end of the definition of "Reference Discount
Rate" the following sentence:
"With respect to any Canadian Lender that is not a Schedule 1
Canadian Lender or a Schedule 2 Canadian Lender on the date on
which a Draft is requested to be accepted by such Lender, the
"Reference Discount Rate" shall be deemed to be the rate
described in clause (b) above."
(c) inserting the following definition in correct alphabetical
order:
"ELGIN OFFICE BUILDING DISPOSITION": the sale by the
Company or its Subsidiary of the office building located at 1000
North Randall Road, Elgin, Illinois and the subsequent lease by
Company or its Subsidiary of all or a portion of such facility
from the purchaser thereof to meet the Company's local office
space requirements.
3. AMENDMENT OF SECTION 2.5 OF THE CREDIT AGREEMENT. Section 2.5
of the Credit Agreement is hereby amended by inserting before the period at the
end of the first sentence thereof the following: ", which notice shall be
accompanied by a certificate of the chief financial officer of the Company
certifying that such requested borrowings under the Revolving Credit
Commitments, at the time made, will not violate the provisions of the indenture
governing the High Yield Notes (including, without limitation, Section 10.10 of
such indenture)".
4. AMENDMENT OF SECTION 6 OF THE CREDIT AGREEMENT. (a) Section
6.3(f) of the Credit Agreement is hereby amended by deleting "Section
6.2(c)," as it appears in the second line of such section; and
(b) Section 6.12(b)(ii) of the Credit Agreement is hereby amended
by deleting "6.11(b)(i)" as it appears in the third line of such section
and inserting in lieu thereof "6.12(b)(i)".
5. AMENDMENT OF SECTION 10 OF THE CREDIT AGREEMENT. (a) Section
10.6 of the Credit Agreement is hereby amended by deleting clause (b) of such
section in its entirety and inserting in lieu thereof the following:
"(b) the sale or other Disposition of any property (other than
inventory), PROVIDED that the aggregate book value of all assets so sold
or disposed of (other than the Elgin Office Building Disposition) in any
period of twelve consecutive months shall not exceed 5% of consolidated
total assets of the Company and its Subsidiaries as at the beginning of
such twelve-month period;"
(b) Section 10.11 of the Credit Agreement is hereby amended by
deleting such section in its entirety and inserting in lieu thereof the
following:
<PAGE>
3
"10.11 LIMITATION ON SALES AND LEASEBACKS. Enter into any
arrangement with any Person providing for the leasing by the Company or
any Subsidiary of real or personal property which has been or is to be
sold or transferred by the Company or such Subsidiary to such Person or
to any other Person to whom funds have been or are to be advanced by
such Person on the security of such property or rental obligations of
the Company or such Subsidiary, except for any such arrangements with
respect to (i) the Elgin Office Building Disposition, (ii) the sale and
leaseback of any transportation equipment in the ordinary course of
business, provided that such sale and leaseback transactions occur
within six months of the purchase of such transportation equipment (or,
with respect to such transportation equipment purchased prior to
February 15, 1998, within six months of the date hereof) and, without
duplication, (iii) real or personal property with respect to which the
aggregate sales price shall not exceed $25,000,000."
6. NEW EXHIBIT TO THE CREDIT AGREEMENT. The Credit Agreement is
hereby amended by attaching thereto, in correct order, a new "Exhibit A-3" in
the form attached hereto as Annex A.
7. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective (the actual date of such effectiveness, the "AMENDMENT EFFECTIVE
DATE") as of the date first above written when counterparts hereof shall have
been duly executed and delivered by each of the Borrowers and the Required
Lenders and acknowledged by each of the Grantors (as defined in the Guarantee
and Collateral Agreement).
8. BORROWER REPRESENTATIONS. Each of the Borrowers represents and
warrants that:
(a) this Amendment has been duly authorized, executed and delivered by
each of the Borrowers;
(b) each of this Amendment, and the Credit Agreement as amended by this
Amendment, constitutes the legal, valid and binding obligation of each
of the Borrowers;
(c) each of the representations and warranties set forth in Section 7 of
the Credit Agreement are true and correct as of the Amendment Effective
Date; provided that references in the Credit Agreement to this
"Agreement" shall be deemed references to the Credit Agreement as
amended to date and by this Amendment; and
(d) after giving effect to this Amendment, there does not exist any
Default or Event of Default.
9. CONTINUING EFFECTS. Except as expressly amended hereby, the
Credit Agreement shall continue to be and shall remain in full force and effect
in accordance with its terms.
10. EXPENSES. The Company agrees to pay and reimburse the General
Administrative Agent for all of its out-of-pocket costs and expenses incurred in
<PAGE>
4
connection with the negotiation, preparation, execution, and delivery of this
Amendment, including the reasonable fees and expenses of counsel to such Agent.
11. COUNTERPARTS. This 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.
12. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have caused this 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 & CFO
SAFETY-KLEEN (CANADA) LTD. (formerly
known as Laidlaw Environmental Services
(Canada) Ltd.)
By: /S/ Paul Humphreys
---------------------------------------
Title: Senior Vice President & CFO
<PAGE>
6
TORONTO DOMINION (TEXAS), INC.,
as General Administrative Agent and Lender
By: /S/ Jano Mott
---------------------------------------
Title: Vice President
THE TORONTO-DOMINION BANK,
as Canadian Administrative Agent
By:
---------------------------------------
Title:
TD SECURITIES (USA) INC.,
as Arranger
By:
---------------------------------------
Title:
THE TORONTO-DOMINION BANK,
as a Lender
By:
---------------------------------------
Title:
By:
---------------------------------------
Title:
THE BANK OF NOVA SCOTIA,
as Managing Agent, Co-Documentation Agent
and Lender
By: /S/ William E. Zarrett
---------------------------------------
Title: Senior Relationship Manager
THE FIRST NATIONAL BANK OF CHICAGO,
as Managing Agent, Co-Documentation Agent
and Lender
By: /S/ Gaye C. Plunkett
---------------------------------------
Title: Vice President
NATIONSBANK, N.A.,
as Syndication Agent, Managing Agent and
Lender
By: /S/ David Sachsenmajer
---------------------------------------
Title: Vice President
WACHOVIA BANK, N.A.,
as Managing Agent and Lender
By: /S/ Donald E. Sellers
---------------------------------------
Title: Vice President
<PAGE>
7
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /S/ Dean Chakalos
---------------------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /S/ Janet K. Williams
---------------------------------------
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/ Michael Korine
---------------------------------------
Title: Senior Manager
<PAGE>
8
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By: /S/ Sean Mounier
---------------------------------------
Title: First Vice President
By:
---------------------------------------
Title:
MARINE MIDLAND BANK
By: /S/ Gina Sidorsky
---------------------------------------
Title: Authorized Signatory
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By: /S/ A. Haruyama
---------------------------------------
Title: Head of Southeast Region Atlanta CEO
MITSUBISHI TRUST AND BANKING
CORPORATION
By: /S/ Toshihiro Hayashi
---------------------------------------
Title: Senior Vice President
SANWA BUSINESS CREDIT CORPORATION
By: /S/ Stan Kaminski
---------------------------------------
Title: Vice President
<PAGE>
9
SOCIETE GENERALE
By: /S/ Ralph Saheb
---------------------------------------
Title: Vice President
SOUTHERN PACIFIC BANK
By: /S/ Cheryl A. Wasilewski
--------------------------------------
Title: Vice President
CREDIT LYONNAIS ATLANTA AGENCY
By: /S/ David M. Cawrse
---------------------------------------
Title: First Vice President
COOPERATIEVE CENTRALE RAIFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND" NEW YORK BRANCH
By: /S/ Ian Reece
---------------------------------------
Title: Senior Credit Officer
By: /S/ Alistair Turnbum
---------------------------------------
Title: Vice President
COMMERCIAL LOAN FUNDING TRUST I
By: /S/ Michele Swanson
---------------------------------------
Title: Authorized Signatory
FREMONT FINANCIAL CORPORATION
By: /S/ Maria Chachere
---------------------------------------
Title: Vice President
<PAGE>
10
THE SAKURA BANK, LTD.
By:
---------------------------------------
Title:
STAR BANK, NATIONAL ASSOCIATION
By: /S/ Mark A. Whitson
---------------------------------------
Title: Vice President
BANK OF HAWAII
By: /S/ Donna R. Parker
---------------------------------------
Title: Vice President
CITIBANK N.A.
By: /S/ David Harris
---------------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /S/ Robert Gallagher
---------------------------------------
Title: Vice President
SKANDINAVISKA ENSKILDA BANKEN AB
(PUBL.) NY BRANCH
By: /S/ Philip Montemurro
---------------------------------------
Title: Vice President
By: /S/ Sverker Johansson
---------------------------------------
Title: Vice President
<PAGE>
11
THE SUMITOMO BANK, LIMITED
By:
---------------------------------------
Title:
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By: /S/ Stephen Stratico
---------------------------------------
Title: Vice President
NATIONAL CITY BANK
By: /S/ Lisa B. Lisi
---------------------------------------
Title: Vice President
BHF-BANK AKTIENGESELLSCHAFT
By: /S/ Hans J. Scholz
---------------------------------------
Title: Assistant Vice President
By: /S/ Thomas Scifo
---------------------------------------
Title: Assistant Vice President
THE FUJI BANK, LTD., NEW YORK BRANCH
By:
---------------------------------------
Title:
<PAGE>
12
CAISSE DE DEPOT ET PLACEMENT DU
QUEBEC
By: /S/ Normand Provost
---------------------------------------
Title: Coordinating Vice President
By: /S/ Michel Nadeau
---------------------------------------
Title: Senior Vice President
KZH CORP III
By:
---------------------------------------
Title:
WEBSTER BANK
By: /S/ Juliana B. Dalton
---------------------------------------
Title: Vice President
BANQUE WORMS CAPITAL CORPORATION
By: /S/ Constace DeKlerck
---------------------------------------
Title: Vice President
By: /S/ Frederic Gamet
---------------------------------------
Title: Senior Vice President
IMPERIAL BANK
By: /S/ Mark Campbell
---------------------------------------
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /S/ Thomas J. Cecka
---------------------------------------
Title: Vice President
<PAGE>
13
GPSF SECURITIES, INC.
By:
---------------------------------------
Title:
KZH CNC LLC
By: /S/ Michael M. Wong
---------------------------------------
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/ Kent Nelson
---------------------------------------
Title: Vice President
BANCO ESPIRITO SANTO
By: /S/ Andrew M. Orsen
---------------------------------------
Title: Vice President
By: /S/ Terry R. Hull
---------------------------------------
Title: Senior Vice President
<PAGE>
14
CITY NATIONAL BANK
By: /S/ Scott Kelly
---------------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /S/ Jeffrey W. Maillet
---------------------------------------
Title: Senior Vice President & Director
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
<PAGE>
15
VAN KAMPEN CLO I, LIMITED
BY: VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT INC., as Collateral Manager
By: /S/ Jeffrey W. Maillet
-------------------------------------
Title: Senior Vice President & Director
OCTAGON LOAN TRUST
BY: OCTAGON CREDIT INVESTORS, as
Manager
By: /S/ Joyce C. Delucca
-------------------------------------
Title: Managing Director
THE CHASE MANHATTAN BANK
By:
---------------------------------------
Title:
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: -------------------------------------
Title:
<PAGE>
16
JACKSON NATIONAL LIFE INSURANCE
COMPANY
BY: PPM AMERICA, INC., as attorney in fact on
behalf of Jackson National Life Insurance
Company
By: /S/ Michael DiRe
-------------------------------------
Title: Managing Director
ML CBO IV (CAYMAN) LTD.
BY: HIGHLAND CAPITAL MANAGEMENT,
L.P.
COMPANY, as Collateral Manager
By: /S/ James Dondero, CFA, CP
---------------------------------------
Title: President
WESTERN NATIONAL LIFE INSURANCE
COMPANY
By:
---------------------------------------
Title:
KZH CRESCENT LLC
By:
---------------------------------------
Title:
KZH CRESCENT-2 LLC
By:
---------------------------------------
Title:
<PAGE>
17
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: /S/ James Dondero, CFA, CPA
-------------------------------------
Title: President
KZH CYPRESSTREE-1 LLC
By: /S/ Michael M. Wong
---------------------------------------
Title: Authorized Agent
PAMCO CAYMAN LTD.
BY: HIGHLAND CAPITAL MANAGEMENT,
as Collateral Manager
---------------------------------------
By: /S/ James Dondero, CFA, CPA
--------------------------------------
Title: President
ARCHIMEDES FUNDING, LLC
BY: ING CAPITAL ADVISORS, INC. as
Collateral Manager
By: /S/ Michael D. Hatley
--------------------------------------
Title: Senior Vice President
<PAGE>
18
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC
BY: ING CAPITAL ADVISORS, INC., as
Investment Advisor
By:-------------------------------------
Title: Vice President & Portfolio Manager
KZH III LLC
By: /S/ Michael M. Wong
---------------------------------------
Title: Authorized Agent
KZH ING-1 LLC
By: S/ Michael M. Wong
---------------------------------------
Title: Authorized Agent
KZH PAMCO LLC
By: /S/ Virginia Conway
---------------------------------------
Title: Authorized Agent
PACIFICA PARTNERS I, L.P.
BY: IMPERIAL CREDIT ASSET
MANAGEMENT, as its Investment Manager
By: /S/ Michael J. Bacevich
-------------------------------------
Title: Senior Vice President
<PAGE>
19
KZH RIVERSIDE LLC
By: /S/ Michael M. Wong
---------------------------------------
Title: Authorized Agent
PILGRIM AMERICAN HIGH INCOME
INVESTMENTS LTD.
BY: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By: /S/ Michel Prince, CFA
-------------------------------------
Title: Vice President
KZH ING-2 LLC
By: /S/ Michael Wong
---------------------------------------
Title: Authorized Agent
PILGRIM AMERICA PRIME RATE TRUST
BY: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By: /S/ Michel Prince, CFA
-------------------------------------
Title: Vice President
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
BY: INDOSUEZ CAPITAL LUXEMBOURG, as
Collateral Manager
By: /S/ Francoise Berthelot
-------------------------------------
Title: Authorized Signatory
<PAGE>
20
DELANO COMPANY
BY: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
---------------------------------------
By: PIMCO MANAGEMENT INC., a
General Partner
By: /S/ Bradley W. Paulson
-------------------------------------
Title: Vice President
KZH CRESCENT-3 LLC
By:
---------------------------------------
Title:
BALANCED HIGH-YIELD FUND I LTD.
BY: BHF-BANK AKTIENGESELLSCHAFT
acting through its New York Branch, as its
attorney-in-fact
By: /S/ Hans J. Scholz
-------------------------------------
Title: Assistant Vice President
By: /S/ Thomas Scifo
-------------------------------------
Title: Assistant Vice President
GENERAL MOTORS CASH MANAGEMENT
MASTER TRUST
By:
---------------------------------------
Title:
<PAGE>
21
INDOSUEZ CAPITAL FUNDING III, LIMITED
BY: INDOSUEZ CAPITAL LUXEMBOURG, as
Collateral Manager
By: /S/ Francoise Berthelot
-------------------------------------
Title: Authorized Signatory
KZH SOLEIL LLC
By:
---------------------------------------
Title:
ML CLO XII PILGRIM AMERICA (CAYMAN)
LTD.
BY: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By: /S/ Michel Prince, CFA
-------------------------------------
Title: Vice President
ML CLO XV PILGRIM AMERICA (CAYMAN)
LTD.
BY: PILGRIM AMERICA INVESTMENTS, INC.,
as its Investment Manager
By: /S/ Michel Prince, CFA
-------------------------------------
Title: Vice President
MOUNTAIN CLO TRUST
By:
---------------------------------------
Title:
<PAGE>
22
CERES FINANCE LTD.
By: /S/ David Egglishaw
---------------------------------------
Title: Director
GENERAL MOTORS BENEFITS TRUST
BY: STATE STREET BANK AND TRUST
COMPANY, as Trustee for General Motors
Benefits Trust
By:
-------------------------------------
Title:
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: /s/Jennifer Dilbert
---------------------------------------
Title: Director
<PAGE>
23
EATON VANCE SENIOR INCOME TRUST
BY: EATON VANCE MANAGEMENT, as
Investment Advisor
By: /S/ Payson F. Swaffield
-------------------------------------
Title: Vice President
VAN KAMPEN CLO II, LIMITED
BY: VAN KAMPEN AMERICAN CAPITAL
MANAGEMENT INC., as Collateral Manager
By: /S/ Jeffrey W. Maillet
-------------------------------------
Title: Senior Vice President & Director
CREDIT SUISSE FIRST BOSTON
By:
---------------------------------------
Title:
KZH LANGDALE LLC
By: /S/ Michael M. Wong
---------------------------------------
Title: Authorized Agent
CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC.
AS: Attorney-in Fact and on behalf of FIRST
ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY, as Portfolio
Manager
By: /S/ Timothy M. Barns
---------------------------------------
Title: Managing Director
<PAGE>
24
ARCHIMEDES FUNDING II, LTD.
BY: ING CAPITAL ADVISORS, INC., as
Collateral Manager
By: /S/ Michael D. Hatley
---------------------------------------
Title: Senior Vice President
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:
FIRST ALLAMERICA FINANCIAL LIFE
INSURANCE COMPANY
By:
---------------------------------------
Title:
MERRILL LYNCH, PIERCE FENNER & SMITH
INCORPORATED
By:
---------------------------------------
Title:
<PAGE>
25
CAPTIVA II FINANCE LTD.
By: /S/ David Egglishaw
---------------------------------------
Title: Director
STRATA FUNDING LTD.
By: /S/ David Egglishaw
---------------------------------------
Title: Director
VAN KAMPEN AMERICAN CAPITAL SENIOR
FLOATING RATE FUND
By: /S/ Jeffrey W. Maillet
---------------------------------------
Title: Senior Vice President & Director
CONTINENTAL ASSURANCE COMPANY
SEPARATE ACCOUNT (E)
BY: TCW ASSET MANAGEMENT COMPANY,
as Attorney-in-Fact
By:
-------------------------------------
Title:
By:
-------------------------------------
Title:
AMARA-2 FINANCE LTD.
By: /S/ Andrew Wignall
---------------------------------------
Title: Director
<PAGE>
26
ROYALTON COMPANY
BY: PACIFIC INVESTMENT MANAGEMENT
COMPANY, as its Investment Advisor
By: PIMCO MANAGEMENT INC.,
a General Partner
By: /S/ Bradley W. Paulson
-------------------------------------
Title: Vice President
FLOATING RATE PORTFOLIO
BY: INVESCO SENIOR SECURED
MANAGEMENT INC., as attorney in fact
By: /S/ Joseph Rotondo
-------------------------------------
Title: Authorized Signatory
AMARA-1 FINANCE LTD.
By: /S/ Andrew Wignall
---------------------------------------
Title: Director
KISLAK NATIONAL BANK
BY: ING CAPITAL ADVISORS, INC., as
Investment Advisor
By: /S/ Michael D. Hatley
-------------------------------------
Title: Senior Vice President
<PAGE>
27
DEEPROCK & COMPANY
BY: EATON VANCE MANAGEMENT, as
Investment Advisor
By: /S/ Payson F. Swaffield
-------------------------------------
Title: Vice President
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned does hereby acknowledge and consent to the
foregoing Amendment. The undersigned does hereby confirm and agree that, after
giving effect to such Amendment, the Guarantee and Collateral Agreement and
other Collateral Documents in favor of the General Administrative Agent or the
Canadian Administrative Agent, as the case may be, to which it is a party are
and shall continue to be in full force and effect and are hereby confirmed and
ratified in all respects.
SAFETY-KLEEN SERVICES, INC. (formerly
known as LES, Inc.)
LAIDLAW ENVIRONMENTAL SERVICES,
INC.
LES MERGER, 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.)
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.)
SAFETY-KLEEN (NE), INC.(formerly known as
Laidlaw Environmental Services
(North East), Inc.)
<PAGE>
2
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
known as Laidlaw Environmental Services
(Wichita), Inc.)
SAFETY-KLEEN (DELAWARE), INC. (formerly
<PAGE>
3
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.)
SAFETY-KLEEN (TIPTON), INC.
(formerly known as Laidlaw Environmental
Services (Tipton), Inc.)
<PAGE>
4
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.
SAFETY-KLEEN AVIATION, INC.
SK INSURANCE COMPANY
SK REAL ESTATE, INC.
SAFETY-KLEEN INTERNATIONAL, INC.
SAFETY-KLEEN OIL RECOVERY CO.
SAFETY-KLEEN OIL SERVICES, INC.
3E COMPANY ENVIRONMENTAL,
ECOLOGICAL AND ENGINEERING
THE SOLVENTS RECOVERY SERVICE OF
NEW JERSEY, INC.
SAFETY-KLEEN (EUROPE), INC.
By: /s/Henry H. Taylor
-------------------------------------
Name: Henry H. Taylor
Title: Secretary
<PAGE>
ANNEX A
EXHIBIT A-3
-----------------------
BANKERS' ACCEPTANCE No. BA
-----------------------
THIS IS A DEPOSITORY BILL SUBJECT TO THE DEPOSITORY BILLS AND NOTES ACT
To Due Date
--------------------------------- --------------------- -------------
BANK
- -------------------------------------
ADDRESS
ACCEPTED FOR VALUE RECEIVED PAY TO CDS & CO
SUM OF $
- ------------------------------------- -----------------------------------
PAYABLE AT
------------------------- Dollars $
THIS IS A DEPOSITORY BILL SUBJECT TO THE
DEPOSITORY BILLS AND NOTES ACT
VALUE RECEIVED, AND CHARGE TO
THE ACCOUNT OF
--------------------------------------
Per:
- ------------------------------------- --------------------------------
AUTHORIZED SIGNATURE
Per:
- ------------------------------------- --------------------------------
AUTHORIZED SIGNATURE
SAFETY-KLEEN
CORPORATE
INCENTIVE PLAN
Fiscal Year: 1999
Rev: August 31st, 1998
<PAGE>
TABLE OF CONTENTS
Page No.
I. Overview ......................................................... 1
II. PLAN OBJECTIVES .................................................. 1
III. ATTAINING GOALS .................................................. 2
IV. ELIGIBILITY FOR PLAN PARTICIPATION .............................. 3
V. PLAN STRUCTURE ................................................... 3
A. PERFORMANCE MEASURES AND TARGET BONUSES ...................... 3
1. EPS ................................................... 3
2. Individual Performance ............................... 4
Table 1: Performance Rating Qualitative Categories ... 4
B. PERFORMANCE AND AWARD CRITERIA ............................... 4
1. Target Bonus Levels ................................... 4
2. Units of Measure ...................................... 5
Table 2: Units of Measure and Payout as Percent
of Base Pay by Position ............................... 5
3. Payout Schedule ....................................... 5
Table 3: Payout Schedule as Percentage of Target
Percent for Annual Goals Achieved Against
Committed Targets ...................................... 6
VI. PAYMENT OF AWARDS ................................................ 7
VII. PLAN ADMINISTRATION .............................................. 7
VIII. SUMMARY AND CONCLUSION ........................................... 7
<PAGE>
I. OVERVIEW
The Corporate Incentive Plan (MIP) is a short-term cash incentive bonus plan
covering officers, Corporate Vice Presidents, Corporate Directors, key Corporate
managers, and other key Corporate staff. The plan allows selected employees to
share directly in the success of the Company through the payment of annual
incentive awards which are in turn based on the attainment of business unit
goals and individual performance objectives.
This Plan Document provides the Company with a mechanism to communicate its
expectations for Company performance while at the same time allowing the
management team the opportunity to earn a total compensation package that is
competitive for the industry.
II. PLAN OBJECTIVES
The purpose of a bonus compensation plan is to motivate key management
performance and to reward those individuals considered responsible for the
success of the business. Safety-Kleen Corporation has developed the Corporate
Incentive Plan for key managerial personnel which will provide a significant
economic opportunity based on their contribution to the Corporation and on their
own individual performance.
The following must occur for the Company to be successful:
o Waste streams must be kept within the SK structure.
o Inter-company competition must cease.
o Site-by-site parochialism must
be eliminated.
o Business managers must be free to spend more time on finding and
working on business synergies than detailed budges.
To accomplish these objectives, a certain percentage of a key manager's total
compensation package will be at risk. Therefore, plan participants must direct
their efforts and set goals which will maximize the success of the Company
through the individual success of their own department.
1
<PAGE>
III. ATTAINING GOALS
The success of the Corporate Incentive Plan will be measured by attaining preset
goals, and by showing a significant level of commitment and personal
contribution to the Company throughout the year. This can only be accomplished
by the combined support of the Company's management team.
Each participant should understand that their earnings opportunities are
dependent upon the attainment of these goals. To enhance this understanding,
each participant will be given an explanation of the Plan along with their
individual goals and bonus potentials. This will allow each participant to
clearly understand that effort that increases results will produce higher
rewards.
In implementing and maintaining this Plan, the following factors are of critical
importance:
o Measures of achievement will be quantitative and qualitative in nature.
The quantitative measures of achievement will be financial goals that
are tied to the Company's annual financial budget. The use of such
goals will help generate and reinforce a commitment to the overall
budgeting process. The qualitative measure of achievement will be based
on the participant's level of commitment to the Company and their
overall contribution to the Company's success.
o Incentive awards will be based upon the achievement of aggressive
objectives. These aggressive objectives will help assure that the Plan
pays for itself out of incremental additional profits; and that
stockholders receive an appropriate return of investment in the
incentive payments.
o The threshold of incentive awards will only be at a "competent" level
of performance but appreciable more award will result from extra
efforts and results achieved due to higher levels of performance.
2
<PAGE>
IV. ELIGIBILITY FOR PLAN PARTICIPATION
For fiscal year 1999, participation in the Corporate Incentive Plan will be
limited to:
Executive officers Key Corporate Managers
Corporate Vice Presidents Key Corporate Staff
Corporate Directors
A comprehensive list of participants is maintained by Corporate Human Resources.
These positions are targeted because of their direct accountability for the
operating results of a major business unit(s) and their accountability for
structuring a function under them.
To receive an annual incentive award, participants must occupy a bonus eligible
position in the Management Incentive Plan as of April 1, 1999, and be employed
by Safety-Kleen Corporation at the time incentive awards are paid. Participants
who have not occupied an incentive eligible position for the full fiscal year
will be prorated based on the number of full months of participation. Pre merger
Safety-Kleen employees who were part of the Safety-Kleen MIP FY1998 Plan and who
are eligible for the FY1999 Plan will become eligible for the FY1999 Plan from
1/1/99. These eligibility criteria apply to current employees promoted to
eligible positions, new hires hired into eligible positions, or employees in
positions subsequently selected to participate in the Plan.
V. PLAN STRUCTURE
A. PERFORMANCE MEASURES AND TARGET BONUSES
Participants will be judged against achieving a combination of various criteria
which will be set at the beginning of the year. These are Earnings Per Share
(EPS) (quantitative), and individual performance ("qualitative"). Each
participant should read this document carefully to attain a proper understanding
of the Plan and its dynamics.
1. EPS
Earnings per share is defined as fully diluted earnings per share as disclosed
on the income statement after adding back the after tax impact of the non-sales
incentive expense.
3
<PAGE>
2. Individual Performance
Individual performance will be judged against personal objectives set at the
beginning of the year. While the appropriate performance rating in this category
of payout is subjective, the definitions listed below and the rating schedule in
Table 1 have been established to facilitate the process of setting and
evaluating individual performance per the Qualitative Goals worksheet.
Definition:
Fully Met Objectives: Completed all tasks with distinguished results.
Met Most Objectives: Marked improvement and met nearly all objectives.
Met Over Half Objectives: Displayed good effort, achieving over half of all
objectives.
Met Under Half Objectives: Met fewer than half of all objectives set.
Unacceptable: Little attempt made, disappointing results.
TABLE 1
Performance Rating
------------------
Qualitative Categories
----------------------
Step Achievement Payout
5. Fully Met Objectives 100% of points assigned
4. Met Most Objectives 80% of points assigned
3. Met Over Half Objectives 40% of points assigned
2. Met Under Half Objectives 15% of points assigned
1. Unacceptable 0% of points assigned
B. Performance and Award Criteria
1. Target Bonus Levels
The target bonus payout is the monetary award that will be paid if all
quantitative and qualitative goals are achieved exactly as set. This will be
calculated as a percentage of base pay called the target bonus percent. For
example, a participant whose base pay is $50,000 and whose target bonus percent
is 30% will receive a $15,000 award if all the performance goals are met
exactly. This award can fluctuate if separate goals are missed or exceeded. The
base pay level used to calculate bonus awards will be the base annualized salary
paid as of August 31, 1999. Target bonus percents can be found in Table 2.
4
<PAGE>
2. Units of Measure
The performance criteria for each plan participant should focus upon the
appropriate areas in which the position has opportunity to impact. The
performance criteria is based upon a combination of quantitative and qualitative
goals. It should be noted that any unit of measure is not permanently fixed and
could vary from year to year.
The units of measure used and their associated contribution to the overall
payout are presented in Table 2:
TABLE 2
UNIT OF MEASURE AND PAYOUT AS
-----------------------------
PERCENT OF BASE PAY BY POSITION
-------------------------------
---------------------------------------------
Target Co
Position Payout EPS Qual.
=============================================
CEO 60% 70% 30%
COO 50% 70% 30%
Senior VP 40% 70% 30%
Vice President 35% 70% 30%
Director 25% 70% 30%
Director 20% 70% 30%
Key Manager 15% 70% 30%
Key Staff 10% 70% 30%
---------------------------------------------
3. Payout Schedule
The achievement level attained against each goal will determine how much
incentive award arising from each goal will be paid. The schedule in Table 3
presents the payout percentages for various achievement levels of the
quantitative measures. The qualitative column represents the total award
available depending upon the level of achievement obtained against personal
objectives. In order to be paid an award for any measure, the threshold level
must first be met.
5
<PAGE>
TABLE 3
Payout Schedule as Percentage of Target Percent
for Annual Goals Achieved Against Committed Targets
Potential
EPS Achieved Quantitative Qualitative
Incentive Against Committed Payout Payout
Step Targets Levels Levels
31 110% + 135.0% 100%
30 109% 131.5% 100%
29 108% 128.0% 100%
28 107% 124.5% 100%
27 106% 121.0% 100%
26 105% 117.5% 100%
25 104% 114.0% 100%
24 103% 110.5% 100%
23 102% 107.0% 100%
22 101% 103.5% 100%
21 100% 100.0% 100%
20 99% 99.0% 100%
19 98% 98.0% 100%
18 97% 97.0% 100%
17 96% 96.0% 100%
16 95% 95.0% 100%
15 94% 94.0% 100%
14 93% 93.0% 100%
13 92% 92.0% 100%
12 91% 91.0% 100%
11 90%* 90.0% 100%
10 89% 0.0% 100%
9 88% 0.0% 100%
8 87% 0.0% 100%
7 86% 0.0% 100%
6 85% 0.0% 100%
5 84% 0.0% 100%
4 83% 0.0% 100%
3 82% 0.0% 100%
2 81% 0.0% 100%
1 80% 0.0% 100%
0 <80% 0.0% 0%
* Equivalent of 95% EBITDA achievement at operations level
6
<PAGE>
An example of a bonus calculation follows:
Director
Annual Salary: $75,000
Target Bonus Percent: 20%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Unit Target Annual Goal
Goal Achievement Payout of Percent Salary Payout
Measure
<S> <C> <C> <C> <C> <C> <C>
==================================================================================================
Corp. EPS ................... 102% 107% x 70% x 20% x $75,000 = $10,500
Qualitative Goals ........... 80% 80% x 30% x 20% x $75,000 = $ 4,500
======================================================================
Total: $15,000
- --------------------------------------------------------------------------------------------------
</TABLE>
VI. PAYMENT OF AWARDS
Each incentive award will be reviewed and approved by the appropriate Senior
Vice President, the Chief Operating Officer, the Vice President -
Administration, and the Chief Executive Officer. Payments will be made no later
than November 15, 1999. PARTICIPANTS WHO VOLUNTARILY TERMINATE THEIR EMPLOYMENT
WITH SAFETY-KLEEN CORP. PRIOR TO AWARDS BEING ISSUED WILL FORFEIT THEIR RIGHT TO
RECEIVE ANY AWARD.
Any adjustment of bonus amounts or any consideration of special circumstances
must be approved by the Vice President - Administration, and the Chief Executive
Officer.
VII. PLAN ADMINISTRATION
The Chief Executive Officer of Safety-Kleen Corporation is the sole interpreter
and arbitrator of these provisions and has the right to amend, withdraw or
revoke the Plan or any of its provisions at any time.
VIII. SUMMARY AND CONCLUSION
The conceptual framework and guidelines covered in this Plan represent those
elements that necessarily must be examined to assure the value to the Company of
the short-term cash incentive compensation plan. Several steps must be taken to
ensure that those objectives which the plan is designed to meet can be
accomplished. These steps are described as follows:
7
<PAGE>
COMMUNICATION OF THE PLAN
It is important that the Plan be effectively communicated to all
participants. This would include individual discussions with each
participant. These discussions should include a review of the measures and
standards that should be developed to assess personal and/or business unit
performance, as well as a clarification of the details of the plan and
individual opportunities.
DEVELOPMENT OF PERFORMANCE MEASURES
Business unit(s) and any individual goals should be established and
communicated at the beginning of the fiscal year. Accepted standards are
those that are reasonable and realistic reflections of current opportunity,
as well as striving for improvement. Measurements of performance should use
relevant quantitative criteria.
8
SAFETY-KLEEN
OPERATIONS MANAGEMENT
INCENTIVE PLAN
Fiscal Year: 1999
Rev: September 30th, 1998
<PAGE>
TABLE OF CONTENTS
Page No.
I. Overview ......................................................... 1
II. Plan Objectives .................................................. 1
III. Attaining Goals .................................................. 2
IV. Eligibility for Plan Participation ............................... 3
V. Plan Structure ................................................... 3
A. Performance Measures and Target Bonuses ...................... 3
1. EBITDA ................................................ 3
2. Revenue ............................................. 4
3. Burn Plan ............................................. 4
4. Individual Performance ................................ 4
B. Performance and Award Criteria ............................... 4
1. Target Bonus Levels ................................... 4
2. Units of Measure ..................................... 4
Table 1: Units of Measure and Payout as Percent
of Base Pay by Position ............................... 5
3. Payout Schedule ....................................... 5
4. Bonus Cap ............................................. 5
Table 2: Payout Schedule as Percentage of Target
Percent for Annual Goals Achieved Against
Committed Targets ...................................... 6
VI. Payment of Awards ............................................... 7
VII. Plan Administration .............................................. 7
VIII. Summary and Conclusion ........................................... 7
<PAGE>
I. OVERVIEW
The Operations Management Incentive Plan (MIP) is a short-term cash incentive
bonus plan covering operations executives, Facility Managers, Operations
Managers, and other selected managers. The plan allows selected management
employees to share directly in the success of the Company through the payment of
annual incentive awards which are in turn based on the attainment of business
unit goals and individual performance objectives.
This Plan Document provides the Company with a mechanism to communicate its
expectations for Company performance while at the same time allowing the
management team the opportunity to earn a total compensation package that is
competitive for the industry.
In the past, the major components of the MIP have been facility-based and have
included such financial measures as ROA, EBIT, and revenue. The remainder has
traditionally been split between a regional, divisional, or Corporate measure
and individual performance.
In the new Company, these facility-based measures will not be adequate since for
fiscal 1999 reliable facility-based budgets will not be available in the first
quarter of the year.
II. PLAN OBJECTIVES
The purpose of a bonus compensation plan is to motivate key management
performance and to reward those individuals considered responsible for the
success of the business. Safety-Kleen has developed the Operations Management
Incentive Plan for key managerial personnel which will provide a significant
economic opportunity based on their contribution to the Corporation and on their
own individual performance.
The following must occur for the Company to be successful:
o Waste streams must be kept within the SK structure
o Inter-company competition must cease
o Site-by-site parochialism must be eliminated
o Business managers must be free to spend more time on finding and working
on business synergies than detailed budgets
To accomplish these objectives, a certain percentage of a key manager's
total compensation package will be at risk. Therefore, plan participants must
direct their efforts and set goals which will maximize the success of their
business unit as defined by the Plan.
In addition to the above, the following environmental factors must be
considered:
o Lack of reliability of budgets by the beginning of the fiscal year
o Revenue/EBIT will be transferred from site to site during the year
making budget tracking by site more complicated
o Expenses per site will change due to movement of revenues and
transportation costs
1
<PAGE>
III. ATTAINING GOALS
The success of the Management Incentive Plan will be measured by attaining
preset goals, and by showing a significant level of commitment and personal
contribution to the Company throughout the year. This can only be accomplished
by the combined support of the Company's management team.
Each participant should understand that their earnings opportunities are
dependent upon the attainment of these goals. To enhance this understanding,
each participant will be given an explanation of the Plan along with their
individual goals and bonus potentials. This will allow each participant to
clearly understand that effort that increases results will produce higher
rewards.
In implementing and maintaining this Plan, the following factors are of critical
importance:
o Measures of achievement will be quantitative and qualitative in nature.
The quantitative measures of achievement will be financial goals that
are tied to the Company's annual financial budget. The use of such goals
will help generate and reinforce a commitment to the overall budgeting
process. The qualitative measure of achievement will be based on the
participant's level of commitment to the Company and their overall
contribution to the Company's success.
o Incentive awards will be based upon the achievement of aggressive
objectives. These aggressive objectives will help assure that the Plan
pays for itself out of incremental additional profits; and that
stockholders receive an appropriate return of investment in the
incentive payments.
o The threshold of incentive awards will only be at a "competent" level of
performance but appreciable more award will result from extra efforts
and results achieved due to higher levels of performance.
2
<PAGE>
IV. ELIGIBILITY FOR PLAN PARTICIPATION
For fiscal year 1999, participation in the Operations Management Incentive
Plan will be limited to:
Executive Staff Operations Managers
Directors Key Managers
Facility Managers
A comprehensive list of participants is maintained by Corporate Human Resources.
These positions are targeted because of their direct accountability for the
operating results of a major business unit(s) and their accountability for
structuring a function under them.
To receive an annual incentive award, participants must occupy a bonus eligible
position in the Management Incentive Plan as of April 1, 1999, and be employed
by Safety-Kleen at the time incentive awards are paid. Participants who have not
occupied an incentive eligible position for the full fiscal year will be
prorated based on the number of full months of participation. Pre merger
Safety-Kleen employees who were part of the Safety-Kleen MIP FY1998 Plan and who
are eligible for the FY1999 Plan will become eligible for the FY1999 Plan from
1/1/99. These eligibility criteria apply to current employees promoted to
eligible positions, new hires hired into eligible positions, or employees in
positions subsequently selected to participate in the Plan.
V. PLAN STRUCTURE
A. PERFORMANCE MEASURES AND TARGET BONUSES
Participants will be judged against achieving a combination of various criteria
which will be set at the beginning of the year. These are EBITDA, revenue, the
burn plan ("quantitative"), and individual performance ("qualitative"). Each
participant should read this document carefully to attain a proper understanding
of the Plan and its dynamics.
1. EBITDA
EBITDA is defined as earnings before depreciation, amortization, interest
expense, other income, income taxes and non-sales incentive expense. EBITDA will
be derived from the final monthly Financial Results Report of the fiscal year
after appropriate adjustments. For FY1999, the EBITDA goal will be budgeted
EBITDA.
3
<PAGE>
2. REVENUE
Revenue includes outside and third-party revenue only and will be derived from
the final monthly Financial Results Report of the fiscal year after appropriate
adjustments. For FY99, the revenue goal will be rolled up budgeted accrued
revenue under each participant's direction.
3. BURN PLAN
Burn plan to be developed and sent to the appropriate participants.
4. Individual Performance
The Qualitative Assessment Summary Sheet (see attachments) is used to identify
specific goals and measures for performance of personal objectives. The overall
achievement level will determine the bonus earned for Qualitative Goals.
Specific goals are set in five different areas: Health and Safety, Employee
Turnover, Environmental Compliance, Financial Improvement, and Community
Relations. Each goal has a weight and a rating. The ratings earned and goal
weight are combined to determine the appropriate bonus payment percentage. This
method provides a more objective measure and a more goals driven means to focus
individual performance.
B. PERFORMANCE AND AWARD CRITERIA
1. TARGET BONUS LEVELS
The target bonus payout is the monetary award that will be paid if all
quantitative and qualitative goals are achieved exactly as set. This will be
calculated as a percentage of base pay called the target bonus percent. For
example, a participant whose base pay is $50,000 and whose target bonus percent
is 30% will receive a $15,000 award if all the performance goals are met
exactly. This award can fluctuate if separate goals are missed or exceeded. The
base pay level used to calculate bonus awards will be the base annualized salary
paid as of August 31, 1999. Target bonus percents can be found in Table 1.
2. UNITS OF MEASURE
The performance criteria for each plan participant should focus upon the
appropriate areas in which the position has opportunity to impact. The
performance criteria is based upon a combination of specific and divisional
goals. It should be noted that any unit of measure is not permanently fixed and
could vary from year to year.
The units of measure used and their associated contribution to the overall
payout are presented in Table 1:
4
<PAGE>
TABLE 1
Unit of Measure and Payout as
-----------------------------
Percent of Base Pay by Position
-------------------------------
- -------------------------------------------------------------------------
Target Co Div. Div. Burn
Position Payout EBITDA EBITDA Rev Plan Qual.
=========================================================================
Senior VP 40% 30% 30% 20% 20%
Regional VP 35% 40% 30% 30%
Incineration VP 35% 40% 20% 20% 20%
Staff Dir - Div 20% 40% 30% 30%
Staff Dir - Regional 20% 40% 30% 30%
Facility Manager 30% 40% 30% 30%
Operations Mgr. 15% 40% 30% 30%
Incineration Ops Mgr 15% 40% 20% 20% 20%
Key Manager 15% 40% 30% 30%
Key Staff 10% 40% 30% 30%
- ------------------------------------------------------------------------
3. PAYOUT SCHEDULE
The achievement level attained against each goal will determine how much
incentive award arising from each goal will be paid. The schedule in Table 2
presents the payout percentages for various achievement levels of the
quantitative measures. The qualitative column represents the total award
available depending upon the level of achievement obtained against personal
objectives. In order to be paid an award for any measure, the threshold level
must first be met.
4. BONUS CAP
Facility Management will be paid from a pool of funds limited to 5% of actual
EBITDA for that facility. Facility Managers and/or Operations Managers who are
responsible for more than one facility will be paid from a combined pool.
5
<PAGE>
TABLE 2
PAYOUT SCHEDULE AS PERCENTAGE OF TARGET PERCENT
-----------------------------------------------
FOR ANNUAL GOALS ACHIEVED AGAINST COMMITTED TARGETS
---------------------------------------------------
- -----------------------------------------------------------------------------
Quantitative/ Potential
Incentive EBITDA/Revenue/Burn Plan** Burn Plan Qualitative
Step Achieved Against Committed Payout Payout
Targets Levels Levels
- -----------------------------------------------------------------------------
31 110% + 135.0% 100%
30 109% 131.5% 100%
29 108% 128.0% 100%
28 107% 124.5% 100%
27 106% 121.0% 100%
26 105% 117.5% 100%
25 104% 114.0% 100%
24 103% 110.5% 100%
23 102% 107.0% 100%
22 101% 103.5% 100%
21 100% 100.0% 100%
20 99% 98.0% 100%
19 98% 96.0% 100%
18 97% 94.0% 100%
17 96% 92.0% 100%
16 95%* 90.0% 100%
15 94% 0.0% 100%
14 93% 0.0% 100%
13 92% 0.0% 100%
12 91% 0.0% 100%
11 90% 0.0% 100%
10 89% 0.0% 100%
9 88% 0.0% 100%
8 87% 0.0% 100%
7 86% 0.0% 100%
6 85% 0.0% 100%
5 84% 0.0% 100%
4 83% 0.0% 100%
3 82% 0.0% 100%
2 81% 0.0% 100%
1 80% 0.0% 100%
0 <80% 0.0% 0%
- -----------------------------------------------------------------------------
* Equivalent of 90% EPS achievement at Corporate level.
** EBITDA achievement of at least 80% is required to be eligible for a
qualitative award.
6
<PAGE>
An example of a bonus calculation follows:
Facility Manager
Annual Salary: $50,000
Target Bonus Percent: 30%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Unit Target Annual Goal
Goal Achievement Payout of Percent Salary Payout
Measure
<S> <C> <C> <C> <C> <C> <C>
==================================================================================================
division EBITDA ............. 95.6% 90% x 40% x 30% x $50,000 = $ 5,400
Division Revenue ............ 101.2% 103.5% x 30% x 30% x $50,000 = $ 4,658
Qualitative Goals ........... 450 Pts. 80% x 30% x 30% x $50,000 = $ 3,600
======================================================================
Total: $13,658
- --------------------------------------------------------------------------------------------------
</TABLE>
VI. PAYMENT OF AWARDS
Each incentive award will be reviewed and approved by the appropriate Senior
Vice President, the Chief Operating Officer, the Vice President -
Administration, and the Chief Executive Officer. Payments will be made no later
than November 15, 1999. Participants who voluntarily terminate their employment
with Safety-Kleen prior to awards being issued will forfeit their right to
receive any award.
Any adjustment of bonus amounts or any consideration of special circumstances
must be approved by the Vice President - Administration, and the Chief Executive
Officer.
VII. PLAN ADMINISTRATION
The Chief Executive Officer of Safety-Kleen Corporation is the sole interpreter
and
arbitrator of these provisions and has the right to amend, withdraw or revoke
the Plan or any of its provisions at any time.
VIII. SUMMARY AND CONCLUSION
The conceptual framework and guidelines covered in this Plan represent those
elements that necessarily must be examined to assure the value to the Company of
the short-term cash incentive compensation plan. Several steps must be taken to
ensure that those objectives which the plan is designed to meet can be
accomplished. These steps are described as follows:
7
<PAGE>
COMMUNICATION OF THE PLAN
It is important that the Plan be effectively communicated to all participants.
This would include individual discussions with each participant. These
discussions should include a review of the measures and standards that should be
developed to assess personal and/or business unit performance, as well as a
clarification of the details of the plan and individual opportunities.
DEVELOPMENT OF PERFORMANCE MEASURES
Business unit(s) and any individual goals should be established and communicated
at the beginning of the fiscal year. Accepted standards are those that are
reasonable and realistic reflections of current opportunity, as well as striving
for improvement. Measurements of performance should use relevant quantitative
criteria.
8
Safety-Kleen Corp.
Statement of Computation of Per Share Earnings
($ in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
November 30,
------------------
1998 1997
---- ----
Basic:
Income available to common stockholders .............. $ 27,772 $ 10,144
======== ========
Weighted average common stock outstanding (000s) .... 87,844 45,206
==== ======== ========
Income per share .................................... $ 0.32 $ 0.22
======== ========
Diluted:
Net income ............................................. $ 27,772 $ 10,144
Add back: interest expense on conversion
of subordinated convertible debenture ............... 2,625 2,625
-------- --------
Income available to common stockholders,
plus assumed conversions ............................ $ 30,397 $ 12,769
======== ========
Weighted average common stock outstanding (000s) ....... 87,844 45,193
Dilutive effect of stock options ....................... 65 135
Dilutive effect of conversion of $350,000,000
subordinated convertible debenture at $15.00 ........ 23,333 23,333
------ -------- --------
Diluted average shares outstanding ..................... 111,242 68,661
======== ========
Diluted income per share ............................... $ 0.27 $ 0.19
======== ========
All per share amounts have been restated to effect the one-for-four reverse
stack split in November, 1998.
Safety-Kleen Corp.
Ratio of Earnings to Fixed Charges
($ in Thousands)
(Unaudited)
Three Months Ended
November 30,
------------------
1998 1997
---- ----
Income from continuing operations before income taxes ...... $46,219 $17,371
Add:
Portion of rents representative of the interest factor .. 5,499 2,884
Interest on indebtedness, including amortization
of deferred financing charges ........................ 46,234 15,139
------- -------
Income as adjusted ......................................... $97,952 $35,394
======= =======
Fixed charges:
Portion of rents representative of the interest factor .. $ 5,499 $ 2,884
Interest on indebtedness, including amortization
of deferred financing charges ........................ 45,260 15,139
------- -------
Total fixed charges ..................................... $50,759 $18,023
======= =======
Ratio of earnings to fixed charges ......................... 1.93 1.96
======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 4581
<SECURITIES> 0
<RECEIVABLES> 384423
<ALLOWANCES> 10132
<INVENTORY> 52505
<CURRENT-ASSETS> 558612
<PP&E> 2842704
<DEPRECIATION> 349661
<TOTAL-ASSETS> 4473566
<CURRENT-LIABILITIES> 435232
<BONDS> 0
0
0
<COMMON> 88381
<OTHER-SE> 964339
<TOTAL-LIABILITY-AND-EQUITY> 4473566
<SALES> 467019
<TOTAL-REVENUES> 467019
<CGS> 0
<TOTAL-COSTS> 376843
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43084
<INCOME-PRETAX> 47092
<INCOME-TAX> 19320
<INCOME-CONTINUING> 27772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27772
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.27
</TABLE>
