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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the twelve and thirty-six weeks ended September 6, 1997.
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to
__________.
Commission File #1-8513
SAFETY-KLEEN CORP.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-6090019
- ------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or No.)
organization)
One Brinckman Way, Elgin, Illinois 60123-7857
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code 847/697-8460
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 __
Shares of common stock outstanding at September 6, 1997 were 58,400,729.
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
PART I. FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 28,
1996. In the opinion of management, these statements contain all adjustments,
consisting of only normal recurring adjustments, necessary to present fairly the
financial position as of September 6, 1997 and December 28, 1996, results of
operations for the twelve and thirty-six week periods ended September 6, 1997
and September 7, 1996 and cash flows for the thirty-six week periods ended
September 6, 1997 and September 7, 1996. The 1997 interim results reported
herein may not necessarily be indicative of the results of operations for the
full year 1997.
1
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts are in thousands except per share data)
ASSETS
SEPT. 6, 1997 DECEMBER 28, 1996
Current assets:
Cash and cash equivalents ............ $ 13,273 $ 10,648
Trade accounts receivable, less
allowances of $8,056 and $8,416,
respectively ......................... 141,597 132,436
Inventories .......................... 48,853 49,971
Deferred tax assets .................. 11,957 11,973
Prepaid expenses and other ........... 24,701 25,105
---------- ----------
Total current assets ............... 240,381 230,133
---------- ----------
Equipment at customers and
components, at cost, less
accumulated depreciation of
$44,991 and $45,811, respectively .... 124,127 124,491
Property, plant and equipment, at
cost, less accumulated
depreciation of $372,838 and
$349,921, respectively ............... 505,434 522,336
Intangible assets, at cost, less
accumulated amortization of
$88,531 and $77,106, respectively .... 136,479 137,209
Other assets ............................ 30,771 30,654
---------- ----------
$1,037,192 $1,044,823
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Dividends payable .................... $ 5,259 $ -
Trade accounts payable ............... 63,563 69,684
Accrued salaries, wages and
employee benefits .................... 27,054 25,510
Other accrued expenses ............... 30,395 29,237
Insurance reserves ................... 14,341 13,621
Accrued environmental liabilities .... 8,854 8,941
Income taxes payable ................. 16,120 10,800
----------- -----------
Total current liabilities ......... 165,586 157,793
----------- -----------
Long-term debt .......................... 246,080 276,954
----------- -----------
Deferred tax liability .................. 57,361 49,849
----------- -----------
Accrued environmental liabilities ....... 34,838 40,260
----------- -----------
Other liabilities ....................... 37,609 39,677
----------- -----------
Shareholders' equity:
Preferred stock ($.10 par value;
authorized 1,000,000 shares,
none issued) ...................... - -
Common stock ($.10 par value;
authorized 300,000,000 shares;
issued and outstanding 58,400,729
and 58,246,939 shares, respectively).. 5,839 5,825
Additional paid-in capital ........... 194,977 192,755
Retained earnings .................... 320,719 296,225
Cumulative translation adjustments ... (25,817) (14,515)
----------- -----------
495,718 480,290
----------- -----------
$ 1,037,192 $ 1,044,823
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollar amounts are in thousands except per share data)
Twelve Weeks Ended Thirty-six Weeks Ended
----------------------- -----------------------
Sept. 6, Sept. 7, Sept. 6, Sept. 7,
1997 1996 1997 1996
---------- ---------- ---------- ----------
Revenue ...................... $ 230,014 $ 213,098 $ 680,172 $ 626,176
--------- --------- --------- ---------
Costs and expenses:
Operating costs
expenses .................. 171,352 155,274 507,143 455,885
Selling and
administrative expenses ... 31,274 30,456 96,579 90,283
Interest income ........... (299) (208) (829) (640)
Interest expense .......... 3,707 4,388 12,362 13,098
--------- --------- --------- ---------
206,034 189,910 615,255 558,626
--------- --------- --------- ---------
Earnings before income taxes . 23,980 23,188 64,917 67,550
Income taxes ................. 8,862 9,184 24,620 26,865
--------- --------- --------- ---------
Net earnings ................. $ 15,118 $ 14,004 $ 40,297 $ 40,685
========= ========= ========= =========
Earnings per common and
common equivalent share: ... $ 0.26 $ 0.24 $ 0.69 $ 0.70
========= ========= ========= =========
Average number of common and
common equivalent shares
outstanding ................ 58,665 58,330 58,490 58,078
========= ========= ========= =========
Cash dividends per common
share ........................ $ 0.09 $ 0.09 $ 0.27 $ 0.27
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts are in thousands)
Thirty-six Weeks Ended
Sept. 6, Sept. 7,
1997 1996
-------- --------
Net cash provided by operating activities ............ $ 99,872 $ 70,984
-------- --------
Cash flows used in investing activities:
Equipment at customers and component
additions ......................................... (14,027) (17,470)
Property, plant and equipment additions ........... (21,578) (23,755)
Business acquisitions and other ................... (22,279) (32,889)
-------- --------
Net cash used in investing activities ............ (57,884) (74,114)
-------- --------
Cash flows from (used in) financing activities:
Net borrowings (payments) ......................... (30,874) 6,181
Dividends ......................................... (10,544) (10,446)
Other ............................................. 2,236 1,514
-------- --------
Net cash provided from (used in)
financing activities .......................... (39,182) (2,751)
-------- --------
Effect of exchange rate changes on cash .............. (181) (93)
-------- --------
Net increase (decrease) in cash and cash
equivalents ........................................ 2,625 (5,974)
Cash and cash equivalents at beginning of
year ................................................. 10,648 22,238
-------- --------
Cash and cash equivalents at end of the
reporting period ..................................... $ 13,273 $ 16,264
======== ========
Supplemental disclosures of cash paid during the reporting period:
Interest (net of amount capitalized) ............... $ 12,605 $ 11,719
======== ========
Income taxes paid (net of refunds received) ........ $ 11,332 $ 13,513
======== ========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SAFETY-KLEEN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES
The Company's inventories consist primarily of solvent, oil and supplies.
LIFO inventories at September 6, 1997 and December 28, 1996 were $5.1 and $4.8
million, respectively. Under the FIFO method of accounting (which approximates
current or replacement cost), inventories would have been $0.2 million higher
and $0.3 million higher at September 6, 1997 and December 28, 1996,
respectively.
2. ACQUISITIONS
During the first thirty-six weeks of 1997, the Company completed 3 minor
business acquisitions. These acquisitions were accounted for using the purchase
method and, accordingly, their operating results have been included in the
Company's Consolidated Statements of Earnings only since their date of
acquisition. These acquisitions either individually or in the aggregate were not
material.
3. INTERIM REPORTING PERIODS
The Company's interim reporting periods are twelve weeks each for the
first three reporting periods of the year, and seventeen and sixteen weeks for
the fourth reporting period of 1997 and 1996, respectively.
5
<PAGE>
Private Securities Litigation Reform Act Disclosure
This report contains various forward-looking statements, including
financial, operating and other projections. There are many factors that could
cause actual results to differ materially, such as: adoption of new
environmental laws and regulations and changes in the way such laws and
regulations are interpreted and enforced; general business conditions, such as
the level of competition, changes in demand for the Company's services and the
strength of the economy in general; and prices for petroleum based products.
These and other factors are discussed in this report, the Company's Annual
Report on Form 10-K and other documents the Company has filed with the
Securities and Exchange Commission.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's working capital increased from $72.3 million at December 28,
1996 to $74.8 million at September 6, 1997. Year-to-date capital spending for
equipment at customers and property, plant and equipment additions excluding
business acquisitions totaled $35.6 million. These expenditures were mainly
financed by internally generated cash. The Company's total long-term debt
decreased by $30.9 million during the first thirty-six weeks of 1997 to $246.1
million at September 6, 1997.
The Company's long-term debt to total capital ratio was 33.2% at September
6, 1997 and 36.6% at December 28, 1996. The Company expects its long-term debt
to total capital ratio to remain steady during the balance of 1997.
ACCOUNTING CHANGES
The Company is required to adopt Statement of Financial Accounting
Standards (SFAS) No. 128 on Earnings per Share and SFAS No. 129 on Capital
Structure for both interim and annual periods ending after December 15,
1997. Earlier adoption is prohibited. The impact of the adoption of these
standards will not be material.
6
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE TWELVE WEEK PERIODS ENDED
SEPTEMBER 6, 1997 AND SEPTEMBER 7, 1996
REVENUE
Revenue for the twelve weeks ended September 6, 1997 was $230 million, up
$17 million, or 8%, from the comparable period last year.
Revenue derived from the Company's North American and European operations
during the twelve weeks ended September 6, 1997 and September 7, 1996 was as
follows:
THOUSANDS OF DOLLARS
Percentage
SEPTEMBER 6, SEPTEMBER 7, Increase
1997 1996 (Decrease)
---- ---- ----------
North America
Industrial Services .................. $ 69,941 $ 62,807 11%
Automotive/Retail Repair Services .... 61,958 56,200 10%
Oil Recovery Services ................ 37,622 36,015 4%
Other Services ....................... 36,300 34,583 5%
-------- -------
Total North America .................... 205,821 189,605 9%
Europe ................................. 24,193 23,493 3%
-------- -------
Consolidated ........................... $230,014 $213,098 8%
======== ========
NORTH AMERICAN INDUSTRIAL SERVICES. The Company's North American Industrial
Services revenue for the current reporting period included $38.0 million from
the Fluid Recovery Service, which represented a $4.8 million, or 14%, increase
over the comparable period of 1996. Of this increase, approximately 12
percentage points resulted from the expansion of the Company's new lab-pack and
pass-by waste programs in 1997, and the remaining 2 percentage points were
primarily due to improved pricing.
The North American Industrial Parts Cleaner Service accounted for the
remaining $31.9 million of revenue, which represented an increase of $2.3
million, or 8%, from the comparable period of 1996. The 8% improvement in
revenue consisted of a 5% increase due to price and a 3% increase in volume.
7
<PAGE>
NORTH AMERICAN AUTOMOTIVE/RETAIL REPAIR SERVICES ("ARRS"). The Company's
ARRS revenue increased by $5.8 million, or 10%, from the comparable period of
1996. The Vacuum Service, which was introduced during the second half of 1996,
increased revenue by $4.2 million. Automotive Parts Cleaner Service revenue
increased $0.9 million, or 2%. This improvement in revenue reflected a 4%
increase due to price partially offset by a decline in volume of approximately
2%. The balance of the ARRS revenue increase was largely due to higher absorbent
sales.
NORTH AMERICAN OIL RECOVERY SERVICES. Revenue increased approximately $1.6
million, or 4%, from the third quarter of 1996. Had base oil pricing remained
consistent with year ago levels, revenues would have been approximately $1.9
million higher. This decline was more than offset by increased revenue from
higher lube oil volume. Three percentage points of the overall revenue increase
came from higher pricing in the automotive used oil collection business.
NORTH AMERICAN OTHER SERVICES. Revenue from Other Services during the
current reporting period increased $1.7 million, or 5%, from the comparable
period of 1996. Revenue from Imaging Services increased by approximately $0.5
million, or 10%, from the comparable period of 1996. The balance of the revenue
improvement was due to higher revenue from the Company's North American
Envirosystems and Paint Refinishing businesses.
EUROPE. European revenues of $24.2 million were up $0.7 million, or 3%,
from the comparable period of 1996. The impact of foreign currency exchange
rates reduced European revenue in the current quarter by approximately $2.4
million. Most major businesses showed increases in local currency revenue.
OPERATING COSTS AND EXPENSES
Operating costs and expenses as a percentage of revenue was 74.5% in the
current reporting period, compared to 72.9% for the third quarter of 1996. The
increase was caused by lower lube oil pricing, as discussed above, and the
impact of new business development. Although the new businesses contributed $7.0
million in revenue growth from the third quarter of 1996, they continued to
operate at essentially break-even on the gross margin line due to initial
rollout expenses.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses decreased from 14.3% of revenue in
1996 to 13.6% of revenue in 1997 due to lower employee related expenses and
improved revenue. Approximately $2.6 million of severance costs incurred in the
quarter were offset by adjustments to reserves of a similar amount.
8
<PAGE>
INTEREST EXPENSE
Interest expense decreased $0.7 million to $3.7 million during the current
reporting period due primarily to lower borrowings.
INCOME TAXES
The Company's effective income tax rate was 37.0% for the twelve weeks
ended September 6, 1997 and 39.6% for the comparable period of 1996. The
decrease in the effective tax rate reflected lower non-deductible expenses in
1997 and the timing of certain tax benefits received in 1997 that were not
received during the comparable period of 1996.
9
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF THE THIRTY-SIX WEEK PERIODS ENDED
SEPTEMBER 6, 1997 AND SEPTEMBER 7, 1996
REVENUE
Revenue for the thirty-six weeks ended September 6, 1997 was $680 million,
up $54 million, or 9%, from the comparable period last year.
Revenue derived from the Company's North American and European operations
during the thirty-six weeks ended September 6, 1997 and September 7, 1996 was as
follows:
THOUSANDS OF DOLLARS
Percentage
SEPTEMBER 6, SEPTEMBER 7, Increase
1997 1996 (Decrease)
---- ---- ----------
North America
Industrial Services ................. $205,810 $183,861 12%
Automotive/Retail Repair Services ... 181,834 165,307 10%
Oil Recovery Services ............... 106,136 102,488 4%
Other Services ...................... 111,757 102,595 9%
-------- --------
Total North America ................... 605,537 554,251 9%
Europe ................................ 74,635 71,925 4%
-------- --------
Consolidated .......................... $680,172 $626,176 9%
======== ========
NORTH AMERICAN INDUSTRIAL SERVICES. The Company's North American
Industrial Services revenue for the first thirty-six weeks of 1997 included
$111.1 million from the Fluid Recovery Service, which represented a $14.5
million, or 15%, increase over the comparable period of 1996. Approximately 10
percentage points of this revenue increase resulted from the expansion of the
Company's new lab-pack and pass-by waste service offerings. The balance of the
revenue increase reflected a 4 percentage point improvement due to price and
a one percentage point improvement due to volume.
The North American Industrial Parts Cleaner Service accounted for the
remaining $94.7 million of revenue, which represented an increase of $7.5
million, or 9%, from the comparable period of 1996. The 9% improvement in
revenue consisted of a 5% increase due to price and a 4% increase in volume.
10
<PAGE>
NORTH AMERICAN AUTOMOTIVE/RETAIL REPAIR SERVICES. The Company's ARRS
revenue during the first thirty-six weeks of 1997 increased by $16.5 million, or
10%, from the comparable period of 1996. The Vacuum Service program, introduced
during the second half of 1996, accounted for $10.6 million of the revenue
increase. Automotive Parts Cleaner Service revenue increased $3.0 million, or
2%, from the comparable period of 1996, reflecting an increase of 5% due to
price, which was partially offset by a 3% decline in volume. The balance of
the ARRS
revenue increase was largely due to higher absorbent sales.
NORTH AMERICAN OIL RECOVERY SERVICES. Revenue increased approximately $3.6
million, or 4%, due mainly to improved revenue from the automotive used oil
collection business, evenly split between pricing and volume. A
16% decline in the average price of base lube oil caused revenue to be $5.6
million lower than the comparable period of 1996. This decline in revenue was
primarily offset by increased volumes of lube oil and fuel oil sales.
NORTH AMERICAN OTHER SERVICES. Revenue from Other Services increased $9.2
million, or 9%, from the comparable period of 1996. Revenue from the Company's
Envirosystems business increased by approximately $5.0 million due mainly to
higher volume. Revenue from the Imaging Services business increased by
approximately $3.1 million, or 22%, during the first thirty-six weeks of 1997
from the comparable period of 1996. This revenue increase reflected higher
branch service volume. The remaining $1.1 million increase in revenue from Other
Services was primarily attributable to higher revenue from Paint Refinishing
Services.
EUROPE. European revenues for the first thirty-six weeks of 1997 were
$74.6 million, up $2.7 million, or 4%, from the comparable period of 1996.
Changes in foreign currency exchange rates reduced revenues by approximately
$4.0 million in 1997 from 1996. Most major businesses showed increases in local
currency revenue. These revenue increases were mainly attributable to higher
volume.
OPERATING COSTS AND EXPENSES
Operating costs and expenses as a percentage of revenue was 74.6% for the
first thirty-six weeks of 1997, compared to 72.8% for the comparable period of
1996. The increase was caused by lower lube oil pricing, as discussed above, and
higher new business development expenses.
11
<PAGE>
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses as a percent of revenue decreased from
14.4% for the first thirty-six weeks of 1996 to 14.2% for the comparable period
of 1997 due mainly to improved revenue and lower employee related costs
experienced in the third quarter of 1997. Severance costs incurred in the third
quarter were offset by adjustments to reserves of a similar amount.
INTEREST EXPENSE
Interest expense of $12.4 million for the first thirty-six weeks of 1997
was $0.7 million lower than the comparable period of 1996 due primarily to lower
borrowings.
INCOME TAXES
The Company's effective income tax rate was 37.9% for the thirty-six weeks
ended September 6, 1997 and 39.8% for the comparable period of 1996. The lower
tax rate was caused by lower non-deductible expenses and the timing of certain
tax benefits received in 1997 that were not received in 1996.
12
<PAGE>
PART II.
Item 1. LEGAL PROCEEDINGS
The Company's goal is to fully comply with all environmental regulations,
but the nature of the Company's business will likely cause it to incur
governmental fines and penalties from time to time as a consequence of its
business operations. In the majority of situations where proceedings are
commenced by governmental authorities, the matters involved relate to alleged
technical violations of permits or orders under which the Company operates, or
laws and regulations to which its operations are subject, and are often the
result of varying interpretations of the applicable requirements. Generally,
these proceedings result from routine inspections conducted by federal and state
regulatory agencies.
From time to time, the Company becomes subject to claims which allege more
than technical violations or in which the claimant seeks remedies which involve
potentially higher costs than routine technical violation claims. These claims
can be brought by either governmental authorities or private claimants. The
relief sought can involve remediation of the alleged environmental damage,
payment of damages, and in the case of claims brought by governmental
authorities, fines and penalties.
In some cases, governmental authorities may seek fines and/or penalties
from the Company which exceed $100,000 in each case. In these cases, the
governmental authorities may allege, among other things, that the Company is
responsible for releases or threatened releases of hazardous substances, that
the Company engaged in soil excavation or clean-up activities without obtaining
requisite advance approvals and/or that the Company committed certain
manifesting, storage or waste handling violations. Three such proceedings
against the Company were pending or known to be contemplated by governmental
authorities at September 6, 1997.
The Company's practice is to attempt to negotiate resolution of claims
against the Company and its facilities. The Company has to date been able to
resolve cases on generally satisfactory terms. The Company is, however, prepared
to contest claims or remedies which the Company believes to be inappropriate
unless and until satisfactory settlement terms can be agreed upon.
Based on its past experience and knowledge of pending cases, the Company
believes it is unlikely that its actual liability for cases now pending will be
materially adverse to the Company's financial condition. It should be noted,
however, that many environmental laws are written in a way in which the
Company's potential liability can be large, and it is always possible that the
Company's actual liability with respect to any particular environmental claim
will prove to be larger than anticipated and accrued for by the Company. It is
also possible that expenses incurred in any particular reporting period for
remediation costs or for fines, penalties, or judgments could have a material
impact on the Company's earnings for that period.
13
<PAGE>
On April 19, 1996, the U.S. Environmental Protection Agency ("EPA")
published its proposed Hazardous Waste Combuster Rule. This proposed rule will
set emissions standards for incinerators, cement kilns and lightweight aggregate
kilns that burn hazardous waste. As proposed, these standards will require
cement kilns, which are major outlets for the Company's waste-derived fuels, to
make capital improvements which would increase the cost of burning such fuels in
cement kilns. However, due to the complexity of the proposed rule, the lengthy
adoption process to which it is subject, and the likelihood that the rule will
undergo changes prior to its adoption, the effect of the final rule is unknown.
The South Coast Air Quality Management District ("SCAQMD"), the air
district for the greater Los Angeles, California area, has amended its rule
setting the allowable volatile organic compound ("VOC") content of materials
used for remote reservoir repair and maintenance cleaning. The amended rule
will, in effect, ban remote reservoir parts cleaning with solutions containing
VOCs in excess of fifty grams per liter as of January 1, 1999, except in certain
applications. Substantially all of the Company's parts cleaners currently placed
with SCAQMD customers utilize solvents containing VOCs in excess of fifty grams
per liter. The Company offers aqueous parts cleaning systems which meet the 1999
SCAQMD requirements and is working with its SCAQMD customers to identify which
customers will need to convert their solvent parts cleaners to an alternative
cleaning solvent or solution prior to January 1, 1999. In addition, the Company
will continue to actively work with the SCAQMD to identify appropriate
exemptions and develop alternatives to the 1999 VOC limits for materials used
for remote reservoir parts cleaning. Other Clean Air Act nonattainment
municipalities are considering adopting similar rules.
14
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NUMBER DESCRIPTION
10.1 Severance Agreement with John G. Johnson, Jr. dated
August 8, 1997
10.2 Form of Safety-Kleen Corp. Severance Agreement
10.2.1 Schedule of Participants to Safety-Kleen Corp.
Severance Agreement
10.3 Safety-Kleen 1997 Management Incentive Plan
10.4 Safety-Kleen 1998 Management Incentive Plan
21 Subsidiaries of the Registrant
27 Financial Data Schedule (EDGAR filing only).
99 Press release issued September 29, 1997 regarding the
Company's results of operations during the twelve weeks
ended September 6, 1997.
(b) Reports on Form 8-K
On August 8, 1997, the Company issued a press release reporting
the resignation of John G. Johnson, Jr. and the exploration of
strategic options for enhancing shareholder value. The press
release was filed on Form 8-K on August 11, 1997.
15
<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 on this 21st day of October, 1997.
SAFETY-KLEEN CORP.
/s/ ANDREW A. CAMPBELL
--------------------------------
Andrew A. Campbell
Sr. Vice President Finance - Chief
Financial Officer
/s/ CLIFFORD J. SCHULZ
--------------------------------
Clifford J. Schulz
Controller-Chief Accounting Officer
GENERAL RELEASE AND SEPARATION AGREEMENT
BY AND BETWEEN JOHN G. JOHNSON, JR. AND SAFETY-KLEEN CORP.
This General Release and Separation Agreement (hereinafter the
"Agreement") is dated as of August 8, 1997, by and between JOHN G. JOHNSON,
JR. (hereinafter "Johnson") and SAFETY-KLEEN CORP. (hereinafter the
"Company").
WHEREAS, Johnson is currently in the employ of the Company; and
WHEREAS, Johnson has resigned as a director of the Company and from all
offices, titles and positions he held with the Company and its affiliates,
effective August 8, 1997;
IT IS THEREFORE EXPRESSLY AGREED AS FOLLOWS:
1. RECITALS. The recitals set forth above are incorporated
into and made a part hereof.
2. RESIGNATION. Effective the date hereof, Johnson hereby resigns
his employment with the Company and its affiliates. For purposes of this
Agreement, "affiliates" shall have the meaning set forth in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended. Johnson
agrees, at the future request of the Company, to timely execute any additional
documents which may be required to effectuate such resignation. Johnson also
agrees, at the future request of the Company, to timely execute annual, regular,
or special meeting minutes, unanimous consents, and resolutions of corporate
directors and officers of the Company, its affiliates or subsidiaries which
accurately memorialize or give effect to such meetings as were held, actions as
were taken, and resolutions as were adopted, in which Johnson participated
during Johnson's tenure as an officer or director of the Company, its affiliates
or subsidiaries.
<PAGE>
3. PAYMENT. Within five days of the date hereof, the Company shall
pay $175,000 to Johnson and accrued vacation pay as of the date hereof. Except
as otherwise provided in this Agreement, the Company will also make payments to
Johnson in the amount of $28,205.15 each every two weeks, commencing with the
first regular payroll payment date following Johnson's execution and delivery of
this Agreement, until an aggregate of $1.1 million has been paid to Johnson
pursuant to this sentence of Section 3. Each of the payments pursuant to the
immediately preceding sentence shall be made on the Company's regular payroll
payment date for the period with respect to which the payment is being made. The
payments to Johnson pursuant to this Section 3 shall be allocated to the
following claims: (a) 45% to claims described in Section 7(a)(iii) and (iv)
hereof; (b) 15% to claims described in Section 7(a)(i) hereof; and (c) 40% to
the covenants described in Sections 8(a), (b) and (c) and Section 9 hereof.
Forty-five (45%) percent of such payments shall be subject to payroll and
withholding taxes and included on Johnson's Form W-2. Johnson acknowledges and
agrees that he will not receive any bonus (formula, discretionary or of any
other type) under the Company's Management Incentive Plan, or any other bonus
plan for 1997 or any future years, and Johnson waives and releases any claims to
any such bonuses. Notwithstanding the foregoing, (i) in the event of a Change of
Control (as defined in the 1993 Stock Option Plan), any remaining payments
pursuant to this Section 3 shall accelerate and be paid to Johnson in a lump sum
amount upon consummation of the Change of Control and (ii) in the event the
Company fails to make any payment pursuant to this Section 3 when due (provided
that the exercise by the Company of its right to withhold and/or setoff pursuant
to Section 8(e) of this Agreement shall not be considered such a failure), and
the
-2-
10056283.5
<PAGE>
Company fails to cure such default within 10 calendar days of notice of such
default from Johnson, then any remaining payments pursuant to this Section 3
shall accelerate and be paid to Johnson in a lump sum amount upon such failure
to cure.
4. MEDICAL AND DENTAL INSURANCE; OTHER BENEFITS. From the date
hereof until February 1, 1999, the Company agrees to pay the COBRA payments for
Johnson, his spouse and any other member of his family who is currently covered
with respect to the Company's normal employee medical and dental indemnity
plans. Notwithstanding the foregoing, if between the date hereof and February 1,
1999 Johnson secures alternative, full-time employment with an employer which
provides the same or substantially similar medical and dental coverage and
Johnson becomes a participant therein, he will immediately advise the Company's
General Counsel, in writing, of this fact, and the Company will cease providing
such insurance effective at the time Johnson so becomes a participant. Johnson
also will continue to be provided the use of the Company-leased vehicle until
the expiration of the existing lease on such vehicle and may retain and use
(with respect to such leased vehicle) the gas credit card received from the
Company until the expiration of the existing lease on such vehicle, in each case
subject to the same terms and conditions as he received as an executive officer
of the Company. Johnson shall have the right to purchase such vehicle in
accordance with the terms of the lease, and if Johnson does not exercise such
right, he shall return the vehicle upon expiration of the existing lease.
Johnson shall return the gas credit card upon the earlier of the expiration of
the existing lease or such purchase. The Company shall also pay for up to
$30,000 of outplacement services in Philadelphia for Johnson. Other than as
specifically set forth above, and with respect to options in Section 5
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below and the purchase of residence benefit in Section 6 below,
all other benefits to which Johnson was entitled as an officer and/or
employee of the Company immediately prior to the date hereof,
including, without limitation, further participation in any
future contributions in the Company's Savings and
Investment Plan (401K) and Deferred Compensation Plan, shall no longer be
applicable from and after the date hereof. Notwithstanding the foregoing and
subject to Sections 8 and 9 below, this Agreement is not intended to terminate
or otherwise affect any benefit vested to Johnson prior to the date hereof under
the terms of any Company employee benefit plan.
5. STOCK OPTIONS. Notwithstanding anything to the contrary which is
contained in the 1985 Stock Option Plan or the 1993 Stock Option Plan
(collectively, the "Option Plans"), the Options, SARs, and LSARs held by Johnson
under the Option Plans shall not terminate as a result of the termination of
Johnson's employment with the Company, but shall continue to be vested in
accordance with their terms at the times and in the numbers they would have
vested and shall continue to be exercisable, subject to the terms, provisions
and limitations of the Option Plans (as modified by Section 8 of this
Agreement), as if the termination of Johnson's employment had not occurred. The
Company represents that the Compensation Committee of the Board of Directors has
taken all actions required to give effect to the provisions of this Section 5.
Johnson acknowledges and agrees that he shall not be granted any additional
stock options after the date hereof.
6. PURCHASE OF RESIDENCE. The Company agrees to make available to
Johnson on or before June 30, 1998 the Company's currently existing executive
relocation policy as it specifically relates to the sale of Johnson's residence
located at 1293 Quail
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Hollow Lane, Palatine, Illinois (the "Illinois Residence"). The Company will pay
in accordance with its standard moving policy the costs of moving Johnson's
furniture and possessions located at the Illinois Residence to his home or other
designated location in Pennsylvania.
7. RELEASE.
(a) RELEASE BY JOHNSON. Johnson acknowledges and agrees that
the payments pursuant to Section 3 above, and the provision of other benefits,
as set forth in Sections 4 through 6 above, constitute payments which the
Company is not obligated to pay Johnson, and, as such constitute sufficient
consideration for the release of the Company by Johnson provided below. For the
consideration detailed above, which Johnson acknowledges as being sufficient to
support the release contained herein, and except for (i) any criminal act or act
of willful misconduct by the Company with respect to Johnson, (ii) the
obligations of the Company in this Agreement and the benefits preserved and/or
provided to Johnson in this Agreement and (iii) any obligation which the Company
has under and in accordance with its By-Laws as currently in effect (whether or
not covered by insurance) to indemnify Johnson in his capacity as an officer,
director or employee of the Company or of any of its subsidiaries or affiliates,
Johnson, on behalf of himself and his heirs, executors, administrators,
attorneys and assigns, hereby waives, generally releases and forever discharges
the Company, its subsidiaries, divisions and affiliates, whether direct or
indirect (including its and their respective directors, officers, employees,
partners and agents, past, present, and future), and each of its and their
respective successors and assigns (hereinafter collectively referred to as
"Company Releasees"), from any and all known or unknown
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<PAGE>
actions, causes of action, claims, damages, suits, obligations,
agreements, attorneys' fees or any other liabilities of any
kind whatsoever which have or could be asserted against
the Company Releasees arising out of or related to: his service as an officer,
director or employee of the Company and/or any of the other Company Releasees,
employment with and/or separation from employment with the Company and or any of
the other Company Releasees, and/or any other occurrence up to and including the
date of this Agreement, including but not limited to:
(i) any claim for defamation, intentional
infliction of emotional distress, tort, personal injury,
invasion of privacy, violation of public policy,
negligence and/or any other common law, statutory or
other claim; and/or
(ii) claims, actions, causes of action or
liabilities of every name, nature or description arising
under any federal, state, or local statute, law,
ordinance or regulation; and/or
(iii) claims, actions, causes of action or
liabilities arising under Title VII of the Civil Rights
Act of 1964, as amended, the Age Discrimination in
Employment Act, as amended ("ADEA"), the Employee
Retirement Income Security Act of 1974, as amended, the
Rehabilitation Act of 1973, as amended, the Americans
with Disabilities Act, as amended, the Illinois Human
Rights Act, as amended, and/or any other federal, state,
or municipal employment discrimination statutes
(including, but not limited to, claims based on age, sex
attainment of benefit plan rights, race, religion,
national origin, marital status, sexual
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<PAGE>
orientation, ancestry, harassment, parental status,
handicap, disability, retaliation, and veteran status);
and/or
(iv) any other claim whatsoever of every name, nature
or description, including, but not limited to, claims
for severance pay or severance benefits, claims based
upon breach of contract, wrongful termination,
retaliatory discharge.
Johnson agrees that he will not commence any action or proceeding of any nature
whatsoever, and that he will not seek or be entitled to any award of equitable
or monetary relief in any action or proceeding brought on his behalf, that
arises out of the matters released by Johnson under this Agreement.
(b) RELEASE BY THE COMPANY. Except for any criminal act or act of
willful misconduct by Johnson, the Company, on behalf of itself, its affiliates
and each of its and their respective attorneys and assigns, hereby waives,
generally releases and forever discharges Johnson and his successors and assigns
(hereinafter collectively referred to as "Johnson Releasees"), from any and all
known or unknown actions, causes of action, claims, damages, suits, obligations,
agreements, attorneys' fees or any other liabilities of any kind whatsoever
which have or could be asserted against the Johnson Releasees arising out of or
related to: Johnson's service as an officer, director or employee of the Company
and/or any of the other Company Releasees, employment with and/or separation
from employment with the Company and or any of the other Company Releasees,
and/or any other occurrence up to and including the date of this Agreement. The
Company agrees that it will not commence any action or proceeding of any nature
whatsoever, and that it will not seek or be entitled to
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any award of equitable or monetary relief in any action or proceeding brought
on its behalf, that arises out of the matters released by the Company under
this Agreement.
8. COVENANTS.
(a) NONDISCLOSURE. At all times hereafter, Johnson will
maintain the confidentiality of all information in whatever form concerning the
Company or any of its affiliates or subsidiaries relating to its or their
businesses, customers, finances, strategic or other plans, marketing, employees,
trade practices, trade secrets, know-how or other matters (other than
information which is generally known outside the Company or which becomes
generally known other than as a result of any improper act or omission by
Johnson), and Johnson will not, directly or indirectly, make any disclosure
thereof to anyone, or make any use thereof, on his own behalf or on behalf of
any third party, unless specifically requested by or agreed to in writing by an
executive officer of the Company. Johnson has returned or will immediately
return to the Company all reports, files, memoranda, records and software,
credit cards (other than the gas credit card which he received from the Company,
which shall be returned to the Company in accordance with Section 4 hereof),
cardkey passes, door and file keys, computer access codes or disks and
instructional manuals, lap top computer and other physical or personal property
which he received or prepared or helped prepare in connection with his
employment with the Company, its subsidiaries and affiliates, and Johnson has
not retained and will not retain any copies, duplicates, reproductions or
excerpts thereof; provided that, notwithstanding the foregoing, Johnson may
retain the two facsimile machines he received from the Company. Johnson agrees
to take all necessary actions, if required by and at the cost of the Company, to
vest such property rights in the Company.
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<PAGE>
(b) NON-COMPETITION. Johnson acknowledges that (i) the
business in which the Company is engaged is intensely competitive and that
Johnson's employment by the Company has required Johnson to have access to and
knowledge of highly confidential information of the Company including, but not
limited to, certain of the Company's confidential business plans, strategies and
objectives, which are of vital importance to the success of the Company's
business; (ii) the direct or indirect disclosure of any such confidential
information to existing or potential competitors of the Company would place the
Company at a competitive disadvantage and would do material damage, financial
and otherwise to the Company's business; and (iii) Johnson's services to the
Company have been special and unique.
Therefore, in consideration of the terms and conditions of
this Agreement, including the payments and other benefits to be paid hereunder,
Johnson agrees that from the date hereof until February 1, 1999, he will not,
directly or indirectly, either as principal, agent, stockholder, trustee,
partner, consultant, officer, director, joint venturer, employee or in any other
capacity, conduct, participate in or engage in any activity, or be employed by,
promote, assist or have an equity interest in, any business or other entity that
competes with the parts cleaning and used oil collecting, recovery and refining
businesses of the Company or any of its subsidiaries or affiliates or the
business of manufacturing, selling or servicing water treatment equipment (the
"Water Treatment Business") in any geographical area within or outside the
United States in which the Company or any of its subsidiaries or affiliates
engages in or solicits, or expects to engage in or solicit such businesses;
provided, however, that (i) with respect to the Water Treatment Business, the
geographical area in this
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<PAGE>
Section 8(c) shall be limited to the State of Illinois
and (ii) the prohibited activities in this Section 8(c) shall not include the
ownership of less than 1% of the voting securities of any publicly traded
corporation regardless of the business of such corporation.
(c) NON-INTERFERENCE; ETC. From the date hereof until February
1, 1999, Johnson agrees that he will not directly or indirectly interfere with
the Company's relationship with, or endeavor to entice away from the Company,
any person, firm, corporation, or other business organization who or which at
any time (whether before or during the period between the date hereof and
February 1, 1999) was a customer, officer, employee or supplier of, or
maintained a business or contractual relationship with, the Company or any of
its affiliates or their predecessors. Johnson further agrees that from the date
hereof until February 1, 1999, he will not, directly or indirectly, (i) solicit
or induce any officer or employee of the Company or any of its subsidiaries to
leave the employment of the Company or any of its subsidiaries, (ii) except as
requested by an executive officer of the Company, and without limiting the
generality of Section 8(a), engage in discussions with or provide any
information or data to any person or entity which he knows is considering a
potential acquisition of a substantial equity interest in, or a substantial
portion of the business or assets, of the Company or any of its subsidiaries, or
(iii) take any action which would interfere with contractual or other
relationships of the Company or any of its affiliates with customers, suppliers,
employees, governmental agencies, regulators, or others, any action which
disparages or diminishes the reputation of the Company or any of its affiliates,
or any action which diverts customers or potential customers of the Company or
any of its affiliates or otherwise adversely affects their business.
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<PAGE>
(d) COOPERATION. From the date hereof until June 30, 1998,
Johnson agrees that he shall use his best efforts to make himself available in
person at such times and places as he may be reasonably requested to by an
executive officer of the Company upon reasonable notice to Johnson for meetings
and/or discussions with potential acquirors of a substantial equity interest in,
or a substantial portion of the business or assets of, the Company or any of its
subsidiaries or affiliates and to otherwise cooperate with the Company in
connection with any such transaction. The parties agree that statements or
opinions made or expressed by Johnson in such meetings and/or discussions in
good faith and based on his honest belief that the statement is materially
correct and the opinion is materially accurate shall not be deemed to violate
any provision of this Agreement. From the date hereof until June 30, 2002,
Johnson further agrees that at the request of an executive officer of the
Company he shall provide thorough and accurate information and testimony
voluntarily to or on behalf of the Company or any of its subsidiaries or
affiliates, regarding any claim, action, proceeding or investigation
("Proceeding") by or against the Company or any of its subsidiaries or
affiliates by any third party or by any governmental agency, but he agrees not
to disclose or to discuss with anyone who is not directing or assisting in any
Proceeding, other than his attorney, the fact of or the subject matter of any
Proceeding, except as required by law. The parties agree that any information
and testimony provided by Johnson in accordance with this Section 8(d) in good
faith and based on his honest belief that such information or testimony is
materially accurate shall not be deemed to violate any provision of this
Agreement. Johnson will use his best efforts to accommodate his schedule to
cooperate with the Company, its subsidiaries and affiliates in fulfilling his
obligations
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<PAGE>
pursuant to this Section 8(d), and the Company will use its best
efforts to take Johnson's personal commitments into account in setting meetings
and/or discussions. The Company will reimburse Johnson for reasonable commuting,
parking or similar expenses incurred in complying with this Section 8(d).
(e) WITHHOLDING AND SET-OFF. In addition to, and not in lieu
of any legal or equitable rights and remedies which may be available to the
Company, the Company shall have the right, after giving 10 calendar days prior
written notice to Johnson of the claim of any breach by him of Section 8(e)(i),
(ii), (iii) or (iv) and of the amount to be withheld (during which 10 calendar
day period he shall have a right to discuss with the Company his position with
respect to the claim covered by the notice) to withhold (until the final
disposition of any claim by the Company or any of its affiliates against Johnson
for which such amount is withheld by the Company) any payments and amounts due
for other obligations to Johnson hereunder (including, without limitation, the
payments pursuant to Section 3 and the obligations to honor the exercise of
stock options under Section 5 (provided that Johnson agrees that he shall not
exercise any options during any such 10 calendar day period) amounts which, in
the reasonable judgment of the Company, are or will be sufficient to compensate
it and its affiliates for any loss, cost, damage, expense, fines or penalties
which may arise out of or result from any of the following actions by Johnson:
(i) engaging in the activities prohibited by Section 8(a)
through (c) above or Section 9;
(ii) disparaging or criticizing, orally or in writing, the
performance of the Board of Directors or any director of
the Company or of
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<PAGE>
any specific former or current officer of the
Company or any of its affiliates or any president
or vice president of the Company or any of its
affiliates or the Company's management as a group to any
person; or
(iii) initiating or participating in discussions of Company
business matters with officers of the Company or its
affiliates other than at the request of an executive
officer of the Company; or
(iv) breaching in any material respect any other provision of
this Agreement if Johnson fails to cure such a breach
which is capable of being cured within 10 calendar days
notice to Johnson;
and, upon final disposition of such claim (by order of court of competent
jurisdiction, after expiration or waiver of all appeals or by settlement) shall
have the right to set-off amounts so withheld against amounts awarded to the
Company in such final disposition. If the final disposition by order of court is
in favor of Johnson, in whole or in part, then all amounts in excess of those,
if any, determined by such court to be properly withheld shall be promptly paid
to Johnson, together with interest at the rate paid, from time to time, by the
Company on borrowings from its principal lending bank. Notwithstanding anything
to the contrary herein, Johnson may divulge or discuss or provide the
information described in clauses (i) through (iv) above to the extent Johnson is
compelled by law to do so and, in such event, Johnson shall notify the Company
immediately upon any request or demand for information
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<PAGE>
so that the Company may seek a protective order or, in the Company's sole
discretion, waive compliance with certain terms of this Section 8.
Notwithstanding anything to the contrary contained in this Agreement and
without waiving any other legal or equitable remedies the Company may have, the
Compensation Committee of the Company's Board of Directors may apply Paragraph
6.d of the November 12, 1993 Amendment to the 1985 Stock Option Plan and
Paragraph 7.6 of the 1993 Stock Option Plan only in the event of a breach of
this Section 8(e)(i), (ii), (iii) or (iv) or Section 9 by Johnson.
The foregoing shall be in addition to, and not in lieu of any legal or
equitable rights and remedies to which the Company may be entitled as a result
of such conduct by Johnson.
Notwithstanding anything herein to the contrary, the rights of the Company
under this Section 8(e) are without admission, waiver or prejudice to, and
Johnson expressly reserves, all rights and remedies available to Johnson to
contest any action taken by the Company or the Compensation Committee pursuant
to this Section 8(e).
9. CONFIDENTIALITY. The Company shall issue a press release
regarding Johnson's retirement substantially in the form attached hereto as
Exhibit A. Except as required by applicable law, this Agreement and all of the
terms, conditions and provisions hereof shall be kept strictly confidential by
the Company and Johnson, except that: (i) Johnson may disclose the terms,
conditions and provisions of this Agreement to his spouse, his personal legal
counsel and financial and tax advisors and appropriate taxing authorities,
provided that each of such persons (other than taxing authorities) to whom
disclosure is made consents in writing to preserve the confidentiality of the
disclosure as
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<PAGE>
provided herein prior to such disclosure, or as required by
applicable law; and (ii) the Company may (a) file this Agreement with the
Securities and Exchange Commission (the "SEC"), (b) disclose or describe the
existence and terms of this Agreement in any document filed with the SEC or in
the Company's annual or quarterly reports to shareholders and (c) disclose and
describe the existence and terms of this Agreement to any potential acquiror of
a substantial equity interest in, or a substantial portion of the business or
assets of, the Company or any of its subsidiaries or affiliates which has
entered into a confidentiality agreement with the Company. The Company agrees
that it shall not make any disparaging remarks regarding Johnson. This covenant
shall survive the termination of Johnson's employment with the Company.
10. VOLUNTARY AGREEMENT, LEGAL CONSULTATION, REVOCATION, ETC. Johnson
agrees and acknowledges: (a) that his waiver of rights under this Agreement is
knowing and voluntary; (b) this Agreement complies in full with all of the
requirements of the Older Workers Benefits Protection Act; (c) that he
understands the terms of this Agreement, including that the release in Section 7
is a general release; (d) that the payments listed in Section 3 and the other
considerations set forth in Sections 4, 5 and 6, exceed the amount and benefits
that would normally be received by an employee or officer who resigns or is
terminated by the Company, that it exceeds what he would otherwise have been
entitled to, and, as set forth herein, that the extra consideration is in
exchange for signing this Agreement; and (e) that he has been advised by the
Company to consult with an attorney prior to executing this Agreement and has
done so. Johnson shall have twenty-one (21) days to consider the waiver of his
rights under the ADEA and if he has signed this Agreement
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<PAGE>
within such 21-day period, Johnson shall have seven (7) days from the date of
execution to revoke his consent to the waiver of his rights under the ADEA.
If no such revocation occurs, Johnson's waiver of rights under the
ADEA shall become effective seven (7) days from the date of
execution by the parties. In the event that Johnson
revokes his waiver of rights under the ADEA, the Company shall not be obligated
to make the payments set forth in Section 3 or to pay or provide the other
benefits set forth in this Agreement, and all provisions of this Agreement shall
immediately become void and of no effect and any benefits previously paid to
Johnson pursuant to this Agreement prior to the date of such revocation shall be
immediately repaid to the Company. Johnson agrees to indemnify the Company for
any taxes, liabilities, penalties, damages or losses it may incur by reason of
the allocation of the payments made pursuant to this Agreement as set forth in
Section 3 and any actions taken by the Company consistent with such allocation.
11. NO ADMISSION OF FAULT. All parties to this Agreement agree and
acknowledge that the considerations exchanged herein do not constitute and shall
not be interpreted as any admission of fault on the part of any party.
12. ENTIRE AGREEMENT; COUNTERPARTS. Other than as stated herein,
Johnson warrants that no promises or inducements have been offered for this
Agreement other than as set forth herein and that this Agreement is executed
without reliance upon any other promises or representations. This Agreement
contains the entire understanding of the parties and shall not be modified
except in writing signed by the parties hereto. This Agreement supersedes all
prior agreements and understandings concerning the subject matter hereof
including, but not limited to, the letter agreement dated January 11, 1993 from
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<PAGE>
Donald W. Brinckman to Johnson, the Non-Disclosure/Non-Competition and Invention
Assignment Agreement dated January 12, 1993 between the Company and Johnson, the
Severance Agreement dated February 23, 1993 between the Company and Johnson and
the Executive Bonus Agreement dated March 27, 1997 between the Company and
Johnson. The parties may execute this Agreement in counterparts.
13. SEVERABILITY. If any phrase, clause or provision of this
Agreement is declared invalid or unenforceable by a court of competent
jurisdiction, such phrase, clause or provision shall be deemed severed from this
Agreement, but will not affect any other provisions of this Agreement, which
shall otherwise remain in full force and effect. If any restrictions or
limitation in this Agreement is deemed to be unreasonable, onerous and unduly
restrictive by a court of competent jurisdiction, it shall not be stricken in
its entirety and held totally void and unenforceable, but shall remain effective
to the maximum extent permissible within reasonable bounds.
Johnson acknowledges and agrees that the Company will or would
suffer irreparable injury in the event of a breach or violation or threatened
breach or violation of the provisions set forth in Sections 8(e)(i), (ii), (iii)
and (iv) and 9 herein and Johnson agrees that, in the event of an actual or
threatened breach or violation of such provisions, the Company shall be awarded
injunctive relief in a court of appropriate jurisdiction to prohibit or remedy
any such violation or breach or threatened violation or breach, without the
necessity of posting any bond or security, and such right to injunctive relief
shall be in addition to any other right or remedy available to the Company.
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<PAGE>
14. WAIVER. The waiver by the Company or Johnson of any breach of any
term or condition of this Agreement shall not be deemed to constitute the waiver
of any other breach of the same or any other term or condition hereof.
15. GOVERNING LAW. This Agreement and the enforcement thereof shall
be governed and controlled in all respects by the laws of the State of Illinois,
without giving effect to its conflicts of law provisions.
16. NOTICE. Any notice to be given hereunder shall be in writing and
shall be deemed given when mailed by certified mail, return receipt requested,
addressed as follows:
To Johnson at:
650 Twin Arch Lane
Bryn Mawr, Pennsylvania 19010
with a copy to:
Joseph H. Jacovini
Dilworth, Paxson, Kalish & Kauffman, LLP
3200 Mellon Bank Center
1735 Market Street
Philadelphia, Pennsylvania 19103
To the Company at:
Safety-Kleen Corp.
1000 North Randall Road
Elgin, Illinois 60123
Attention: Chairman
with a copy to
Donald G. Lubin, Esq.
Sonnenschein Nath & Rosenthal
800 Sears Tower
Chicago, Illinois 60606-60404
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17. NEUTRAL CONSTRUCTION. The parties have negotiated this Agreement
and all of the terms and conditions contained in this Agreement in good faith
and at arm's length, and each party has been represented by counsel during such
negotiations. No term, condition, or provision contained in this Agreement will
be construed against any party or in favor of any party (i) because such party
or such party's counsel drafted, revised, commented upon, or did not comment
upon, such term, condition, or provision; or (ii) because of any presumption as
to any inequality of bargaining power between or among the parties. Furthermore,
all terms, conditions, and provisions contained in this Agreement will be
construed and interpreted in a manner which is consistent with all other terms,
conditions, and provisions contained in this Agreement.
18. EXPENSE REIMBURSEMENT. Upon receipt of substantiation in the form
of copies of invoices or statements from Dilworth, Paxson, Kalish & Kauffman,
LLP, the Company shall reimburse Johnson for up to $10,000 of his legal fees and
expenses payable to Dilworth, Paxson, Kalish & Kauffman, LLP in connection with
the negotiation of this Agreement.
19. BINDING NATURE. This Agreement shall be binding upon the heirs,
representatives, transferees, successors and assigns of the parties, including
any entity with which the Company may merge or consolidate or to which it may
transfer all or substantially all of its assets.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
JOHN G. JOHNSON, JR. SAFETY-KLEEN CORP.
/s/ JOHN G. JOHNSON JR. By: /s/ DONALD W. BRINCKMAN
Name: Donald W. Brinckman
Title: Chairman
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EXHIBIT A
[LOGO] Safety-Kleen Corp.
1000 N. Randall Road
Elgin, Illinois 60123
(847) 697-8460
FOR IMMEDIATE RELEASE For further information:
Contact: Larry Rudnick (847) 468-2408
Maureen Fisk (847) 468-2452
JOHNSON RESIGNS AT SAFETY-KLEEN;
BRINCKMAN NAMED CEO; CHALHOUB PRESIDENT
SAFETY-KLEEN TO EXPLORE STRATEGIC ALTERNATIVES
ELGIN, ILLINOIS -- AUGUST 8, 1997 -- Safety-Kleen Corp. announced today the
resignation of John G. Johnson, Jr. as Director, President and Chief
Executive Officer of the Company, effective immediately. Donald W.
Brinckman, Chairman of the Company's board, has been appointed Chief
Executive Officer. Mr. Brinckman previously served as the Company's Chief
Executive Officer from 1968 until December 31, 1994. Joseph Chalhoub, Senior
Vice President-Operations of the Company, has been named President and Chief
Operating Officer.
Safety-Kleen also announced that its Board of Directors has initiated a process
to explore strategic alternatives for enhancing shareholder value. The Board of
Directors has engaged William Blair & Company to act as its adviser and to
manage this process.
Safety-Kleen is an environmental and industrial service company dedicated to
helping businesses of all sizes recycle and process their waste streams.
Safety-Kleen stock is traded on the New York Stock Exchange under the symbol SK.
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SAFETY-KLEEN CORP.
CHANGE OF CONTROL SEVERANCE AGREEMENT
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. - PURPOSES .................................................... 1
ARTICLE II. - CERTAIN DEFINITIONS ......................................... 1
2.1 "Accrued Obligations" ....................................... 1
2.2 "Agreement Term" ............................................ 1
2.3 "Article" ................................................... 2
2.4 "Beneficial owner" .......................................... 2
2.5 "Cause" ..................................................... 2
2.6 "Change of Control" ......................................... 2
2.7 "Code" ...................................................... 2
2.8 "Disability" ................................................ 2
2.9 "Effective Date" ............................................ 2
2.10 "Good Reason" ............................................... 3
2.11 "Gross-up Payment" .......................................... 3
2.12 "Imminent Change of Control Date" ........................... 3
2.13 "IRS" ....................................................... 3
2.14 "1934 Act" .................................................. 3
2.15 "Notice of Termination" ..................................... 3
2.16 "Plans" ..................................................... 3
2.17 "Policies" .................................................. 3
2.18 "Post-Change Period" ........................................ 3
2.19 "SEC" ....................................................... 3
2.20 "Section" ................................................... 3
2.21 "Subsidiary" ................................................ 3
2.22 "Termination Date" .......................................... 3
2.23 "Termination Performance Period" ............................ 4
2.24 "Voting Securities" ......................................... 4
ARTICLE III. - POST-CHANGE PERIOD PROTECTIONS ............................ 4
3.1 Position and Duties ........................................ 4
3.2 Compensation ............................................... 5
3.3 Stock Options............................................... 7
ARTICLE IV. - TERMINATION OF EMPLOYMENT................................... 7
4.1 Disability................................................. 7
4.2 Death...................................................... 8
4.3 Cause...................................................... 8
4.4 Good Reason................................................ 9
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TABLE OF CONTENTS
ARTICLE V. - OBLIGATIONS OF THE COMPANY UPON TERMINATION................... 10
5.1 If by the Executive for Good Reason or by the Company Other
Than for Cause or Disability................................. 10
5.2 If by the Company for Cause..................................... 11
5.3 If by the Executive Other Than for Good Reason.................. 11
5.4 If by the Company for Disability................................ 11
5.5 If upon Death................................................... 12
ARTICLE VI. - NON-EXCLUSIVITY OF RIGHTS.................................... 12
6.1 Waiver of Other Severance Rights................................ 12
6.2 Other Rights.................................................... 12
ARTICLE VII. - CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.................. 12
7.1 Gross-up for Certain Taxes...................................... 12
7.2 Determination by the Executive.................................. 13
7.3 Additional Gross-up Amounts..................................... 14
7.4 Gross-up Multiple............................................... 14
7.5 Opinion of Counsel.............................................. 14
7.6 Amount Increased or Contested................................... 15
7.7 Refunds......................................................... 16
ARTICLE VIII. - EXPENSES AND INTEREST...................................... 16
8.1 Legal Fees and Other Expenses................................... 16
8.2 Interest........................................................ 16
ARTICLE IX. - NO SET-OFF OR MITIGATION..................................... 17
9.1 No Set-off by Company........................................... 17
9.2 No Mitigation................................................... 17
ARTICLE X. - CONFIDENTIALITY AND NONCOMPETITION............................ 17
10.1 Confidentiality ................................................ 17
10.2 Noncompetition/Nonsolicitation ................................. 18
10.3 Remedy ......................................................... 18
ARTICLE XI. - MISCELLANEOUS................................................ 19
11.1 No Assignability.............................................. 19
11.2 Successors.................................................... 19
11.3 Payments to Beneficiary....................................... 19
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TABLE OF CONTENTS
11.4 Non-alienation of Benefits.................................... 19
11.5 Severability.................................................. 19
11.6 Amendments.................................................... 20
11.7 Notices....................................................... 20
11.8 Counterparts.................................................. 20
11.9 Governing Law................................................. 20
11.10 Captions...................................................... 20
11.11 Tax Withholding............................................... 20
11.12 No Waiver..................................................... 20
11.13 Entire Agreement.............................................. 21
11.14 Cancellation. ................................................ 21
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SAFETY-KLEEN CORP.
CHANGE OF CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT dated as of August 18, 1997, is made between SAFETY-KLEEN
CORP., a Wisconsin corporation having its principal place of business in Elgin,
Illinois (the "Company"), and ___________________ (the "Executive"), a resident
of Illinois.
The Company and the Executive agree that this Agreement supersedes the
Safety-Kleen Corp. Severance Agreement (the "Prior Agreement") dated _________,
19__, between the Company and the executive which is hereby cancelled.
ARTICLE I.
PURPOSES
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued service of the Executive, despite the
possibility or occurrence of a change of control of the Company. The Board
believes it is imperative to reduce the distraction of the Executive that would
result from the personal uncertainties caused by a pending or threatened change
of control, to encourage the Executive's full attention and dedication to the
Company, and to provide the Executive with compensation and benefits
arrangements upon a change of control which ensure that the expectations of the
Executive will be satisfied and are competitive with those of similarly-situated
corporations. This Agreement is intended to accomplish these objectives.
ARTICLE II.
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Accrued Obligations" -- see Section 5.3.
2.2 "Agreement Term" means the period commencing on the date of this
Agreement and ending on the date which is twelve (12) months following the date
that the Company gives notice of cancellation pursuant to Section 11.14 hereof
(the "Expiration Date"); provided, however, that if an Imminent Change of
Control Date occurs before the Expiration Date, then the Agreement Term shall
automatically extend to a date which is twelve (12) months after the date of
the Imminent Change of Control Date, as further extended under the terms of
this sentence should any Imminent Change of Control Date occur prior to the
expiration of the Agreement Term as from time to time so extended; and
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provided further, that if a Change of Control occurs before the Expiration
Date, the Expiration Date shall automatically be extended to the last day of the
Post-Change Period.
2.3 "Article" means an article of this Agreement.
2.4 "Beneficial owner" means such term as defined in Rule 13d-3 of
the SEC under the 1934 Act.
2.5 "Cause" -- see Section 4.3(b).
2.6 "Change of Control" means, except as otherwise provided below, the
occurrence of any of the following:
a. any person (as such term is used in Rule 13d-5 of the SEC
under the 1934 Act) or group (as such term is defined in Section 13(d) of
the 1934 Act), other than a Subsidiary or any employee benefit plan (or
any related trust) of the Company or a Subsidiary, becomes the beneficial
owner of 20% or more of the common stock of the Company or of Voting
Securities representing 20% or more of the combined voting power of all
Voting Securities of the Company;
b. within a period of 24 months or less, the individuals
who, as of any date, constitute the Board (the "Incumbent Directors")
cease for any reason to constitute at least a majority of the Board unless
at the end of such period, the majority of individuals then constituting
the Board were nominated upon the recommendation of a majority of the
Incumbent Directors.
c. approval by the stockholders of the Company of any
of the following:
(1) a merger, reorganization or consolidation ("Merger")
with respect to which the individuals and entities who were the
respective beneficial owners of the stock and Voting Securities of
the Company immediately before such Merger do not, after such
Merger, beneficially own, directly or indirectly, more than 80%
of, respectively, the common stock and the combined voting power
of the Voting Securities of the corporation resulting from such
Merger in substantially the same proportion as their ownership
immediately before such Merger, or
(2) the sale or other disposition of all or substantially
all of the assets of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Disability" -- see Section 4.1(b).
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2.9 "Effective Date" means the first date on which a Change of
Control occurs during the Agreement Term. Despite anything in this
Agreement to the contrary, if the Company terminates the Executive's
employment before the date of a Change of Control, and if the Executive
reasonably demonstrates that such termination of employment (a) was at the
request of a third party who had taken steps reasonably calculated to effect
the Change of Control or (b) otherwise arose in connection with or anticipation
of the Change of Control, then "Effective Date" shall mean the date immediately
before the date of such termination of employment.
2.10 "Good Reason" -- see Section 4.4(b).
2.11 "Gross-up Payment" -- see Section 7.1.
2.12 "Imminent Change of Control Date" means any date on which occurs
(a) a presentation to the Company's stockholders generally or any of the
Company's directors or executive officers of a proposal or offer for a Change
of Control, or (b) the public announcement (whether by advertisement, press
release, press interview, public statement, SEC filing or otherwise) of a
proposal or offer for a Change of Control, or (c) such proposal or offer
remains effective and unrevoked.
2.13 "IRS" means the Internal Revenue Service.
2.14 "1934 Act" means the Securities Exchange Act of 1934.
2.15 "Notice of Termination" means a written notice given in accordance
with Section 12.7 which sets forth (a) the specific termination provision
in this Agreement relied upon by the party giving such notice, (b) in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under such termination provision
and (c) if the Termination Date is other than the date of receipt of such
Notice of Termination, the Termination Date.
2.16 "Plans" means plans, programs, policies or practices of the Company.
2.17 "Policies" means policies, practices or procedures of the Company.
2.18 "Post-Change Period" means the period commencing on the Effective
Date and ending on the third anniversary of such date.
2.19 "SEC" means the Securities and Exchange Commission.
2.20 "Section" means, unless the context otherwise requires, a section
of this Agreement.
2.21 "Subsidiary" means a corporation as defined in Section 424(f) of the
Code with the Company being treated as the employer corporation for purposes of
this definition.
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2.22 "Termination Date" means the date of receipt of the Notice of
Termination or any later date specified in such notice (which date shall be
not more than 15 days after the giving of such notice), as the case may be;
provided, however, that (a) if the Company terminates the Executive's
employment other than for Cause or Disability, then the Termination Date shall
be the date of receipt of such Notice of Termination and (b) if the Executive's
employment is terminated by reason of death or Disability, then the Termination
Date shall be the date of death of the Executive or the Disability Effective
Date, as the case may be.
2.23 "Termination Performance Period" -- see Section 3.2(b)(2)(B).
2.24 "Voting Securities" of a corporation means securities of such
corporation that are entitled to vote generally in the election of directors
of such corporation.
ARTICLE III.
POST-CHANGE PERIOD PROTECTIONS
3.1 Position and Duties.
a. During the Post-Change Period, (1) the Executive's
position (including offices, titles, reporting requirements and
responsibilities), authority and duties shall be at least commensurate in
all material respects with the most significant of those held, exercised
and assigned at any time during the 90-day period immediately before the
Effective Date and (2) the Executive's services shall be performed at the
location where the Executive was employed immediately before the Effective
Date or any other location less than 40 miles from such former location.
b. During the Post-Change Period (other than any periods of
vacation, sick leave or disability to which the Executive is entitled),
the Executive agrees to devote the Executive's full attention and time to
the business and affairs of the Company and, to the extent necessary to
discharge the duties assigned to the Executive in accordance with this
Agreement, to use the Executive's best efforts to perform faithfully and
efficiently such duties. During the Post-Change Period, the Executive may
(1) serve on corporate, civic or charitable boards or committees, (2)
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (3) manage personal investments, so long as such
activities are consistent with the Policies of the Company at the
Effective Date and do not significantly interfere with the performance of
the Executive's duties under this Agreement. To the extent that any such
activities have been conducted by the Executive before the Effective Date
and were consistent with the Policies of the Company at the Effective
Date, the continued conduct of such activities (or activities similar in
nature and scope) after the Effective Date shall not be deemed to
interfere with the performance of the Executive's duties under this
Agreement.
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3.2 Compensation
a. Base Salary. During the Post-Change Period, the Company
shall pay or cause to be paid to the Executive an annual base salary in
cash ("Guaranteed Base Salary"), which shall be paid in a manner
consistent with the Company's payroll practices in effect immediately
before the Effective Date at a rate at least equal to 12 times the highest
monthly base salary paid or payable to the Executive by the Company in
respect of the 12-month period immediately before the Effective Date.
During the Post-Change Period, the Guaranteed Base Salary shall be
reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in base
salary awarded to other peer executives of the Company. Any increase in
Guaranteed Base Salary shall not limit or reduce any other obligation of
the Company to the Executive under this Agreement. After any such
increase, the Guaranteed Base Salary shall not be reduced and the term
"Guaranteed Base Salary" shall thereafter refer to the increased amount.
b. Target Bonus. During the Post-Change Period, the Company shall
pay or cause to be paid to the Executive a bonus (the "Guaranteed Bonus")
for each Performance Period which ends during the Post-Change Period.
"Performance Period" means each period of time designated in accordance
with any bonus arrangement ("Bonus Plan") which is based upon performance
and approved by the Board or any committee of the Board. The Guaranteed
Bonus shall be at least equal to the greatest of:
(1) the On Plan Bonus, which shall mean the cash bonus which
the Executive would accrue under any Bonus Plan for the Performance Period
for which the Guaranteed Bonus is awarded ("Current Performance Period")
as if the performance achieved 100% of plan established pursuant to such
Bonus Plan and the maximum level of the discretionary portion is achieved;
(2) the Actual Bonus, which shall mean the cash bonus which
Executive would accrue under any Bonus Plan for the Current Performance
Period if the performance during the Current Performance Period were
measured by actual performance; provided, however, that for purposes of
Section Article V of this Agreement, the Actual Bonus for the Performance
Period in which the Termination Date occurred (the "Termination
Performance Period") shall not be less than the cash bonus which the
Executive would accrue under any Bonus Plan if performance during that
Termination Performance Period were measured by the actual performance
during the Termination Performance Period before the Termination Date
projected to the last day of such Performance Period and the maximum level
of the discretionary portion is achieved; and
(3) the Historical Bonus, which shall mean the bonus that
the Executive accrued in the last Performance Period that ended before the
Post-Change Period; provided, however, that for purposes of Article V of
this Agreement, the
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Historical Bonus for the Performance Period in which
the Termination Date occurred shall not be less than the cash bonus that
the Executive accrued in the last Performance Period that ended before the
Termination Date.
c. Incentive, Savings and Retirement Plans. In addition to
Guaranteed Base Salary and Guaranteed Bonus payable as provided in this
Section, the Executive shall be entitled to participate during the
Post-Change Period in all incentive (including long-term incentives),
savings and retirement Plans applicable to other peer executives of the
Company, but in no event shall such Plans provide the Executive with
incentive (including long-term incentives), savings and retirement
benefits which, in any case, are less favorable, in the aggregate, than
the most favorable of those provided by the Company to the Executive or to
peer executives under such Plans as in effect at any time during the
90-day period immediately before the Effective Date.
d. Welfare Benefit Plans. During the Post-Change Period, the
Executive and the Executive's family shall be eligible to participate in,
and receive all benefits under, welfare benefit Plans provided by the
Company (including, without limitation, medical, prescription, dental,
disability, salary continuance, individual life, group life, dependent
life, accidental death and travel accident insurance Plans) and applicable
to other peer executives of the Company and their families, but in no
event shall such Plans provide benefits which in any case are less
favorable, in the aggregate, than the most favorable of those provided to
the Executive or to peer executives under such Plans as in effect at any
time during the 90-day period immediately before the Effective Date.
e. Fringe Benefits. During the Post-Change Period, the
Executive shall be entitled to fringe benefits and other executive
perquisites in accordance with the most favorable Plans applicable to peer
executives of the Company, but in no event shall such Plans provide fringe
benefits and other executive perquisites which in any case are less
favorable, in the aggregate, than the most favorable of those provided by
the Company to the Executive or to peer executives under such Plans in
effect at any time during the 90-day period immediately before the
Effective Date.
f. Expenses. During the Post-Change Period, the Executive
shall be entitled to prompt reimbursement of all reasonable
employment-related expenses incurred by the Executive upon the Company's
receipt of accountings in accordance with the most favorable Policies
applicable to peer executives of the Company, but in no event shall such
Policies be less favorable, in the aggregate, than the most favorable of
those provided by the Company to the Executive or to peer executives under
such Policies in effect at any time during the 90-day period immediately
before the Effective Date.
g. Office and Support Staff. During the Post-Change Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial
and other assistance in
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accordance with the most favorable Policies applicable to peer executives
of the Company, but in no event shall such Policies be less favorable,
in the aggregate, than the most favorable of those provided by the Company
to the Executive or to peer executives under such Policies in effect
at any time during the 90-day period immediately before the Effective
Date.
h. Vacation. During the Post-Change Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable
Policies applicable to peer executives of the Company, but in no event
shall such Policies be less favorable, in the aggregate, than the most
favorable of those provided by the Company to the Executive or to peer
executives under such Policies in effect at any time during the 90-day
period immediately before the Effective Date.
3.3 Stock Options.
In addition to the other benefits provided in this Section, on the
Effective Date, the Executive shall become fully vested in any and all
outstanding stock options granted to Executive for shares of common stock
of the Company or to the extent that such options are not vested, shall
receive a lump-sum cash payment equal to the spread of all non-vested,
forfeited options as of the date such options are forfeited.
3.4 Excess/Supplemental Plans.
In addition to the other benefits provided in this Section, on the
Effective Date, the Company shall pay to Executive an amount equal to the
value (determined using the actuarial assumptions then applied by the
Pension Benefit Guaranty Corporation for determining immediate annuity
present values) of the Executive's accrued benefits under (1) the
Safety-Kleen Corp. Excess Benefit Plan, (2) the Safety-Kleen Supplemental
Executive Retirement Plan, or (3) any such successor plan or other
nonqualified unfunded retirement Plan as may be in effect as of (or as may
have been in effect at any time during the 90-day period immediately
before) the Effective Date (the "Excess/Supplemental Plans").
ARTICLE IV.
TERMINATION OF EMPLOYMENT
4.1 Disability
a. During the Post-Change Period, the Company may
terminate the Executive's employment upon the Executive's Disability
(as defined in Section 4.1(b))) by giving the Executive or his legal
representative, as applicable, (1) written notice in accordance with
Section 12.7 of the Company's intention to terminate the Executive's
employment pursuant to this Section and (2) a certification of the
Executive's Disability by a physician selected by the Company or its
insurers and reasonably acceptable to the Executive or the Executive's
legal representative.
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The Executive's employment shall terminate effective on the 30th
day (the "Disability Effective Date") after the Executive's receipt of
such notice unless, before the Disability Effective Date, the Executive
shall have resumed the full-time performance of the Executive's duties.
b. "Disability" means any medically determinable physical or
mental impairment that has lasted for a continuous period of not less than
six months and can be expected to be permanent or of indefinite duration,
and that renders the Executive unable to perform the essential functions
required under this Agreement with or without reasonable accomodation.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Post-Change Period.
4.3. Cause.
a. During the Post-Change Period, the Company may
terminate the Executive's employment for Cause.
b. "Cause" means any of the following: (i) commission by the
Executive of any felony which includes as an element of the crime a
premeditated intention to commit the act, (ii) Executive's inability to
perform his duties due to habitual alcohol or drug addiction, (iii)
serious misconduct involving dishonesty in the course of Executive's
employment, or (iv) the Executive's habitual neglect of his duties; except
that Cause shall not mean:
(1) bad judgment or negligence other than habitual
neglect of duty;
(2) any act or omission believed by the Executive in
good faith to have been in or not opposed to the interest of the Company
(without intent of the Executive to gain, directly or indirectly, a profit
to which the Executive was not legally entitled);
(3) any act or omission with respect to which a
determination could properly have been made by the Board that the
Executive met the applicable standard of conduct for indemnification or
reimbursement under the Company's by-laws, any applicable indemnification
agreement, or applicable law, in each case in effect at the time of such
act or omission; or
(4) any act or omission with respect to which notice
of termination of employment of the Executive is given more than 12 months
after the earliest date on which any member of the Board, not a party to
the act or omission, knew or should have known of such act or omission.
c. Any termination of the Executive's employment by the Company
for Cause shall be communicated to the Executive by Notice of Termination.
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4.4 Good Reason.
a. During the Post-Change Period, the Executive may
terminate his or her employment for Good Reason.
b. "Good Reason" means any of the following:
(1) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including offices, titles, reporting requirements or
responsibilities), authority or duties as contemplated by Section
3.1(a)(1), or any other action by the Company which results in a
diminution or other material adverse change in such position,
authority or duties;
(2) any failure by the Company to comply with any of
the provisions of Article III;
(3) the Company's requiring the Executive to be based
at any office or location other than the location described in
Section 3.1(a)(2);
(4) any other material adverse change to the terms and
conditions of the Executive's employment; or
(5) any purported termination by the Company of the
Executive's employment other than as expressly permitted by this
Agreement (any such purported termination shall not be effective
for any other purpose under this Agreement).
Any reasonable determination of "Good Reason" made in good faith by the
Executive shall be conclusive.
c. Any termination of employment by the Executive for Good Reason
shall be communicated to the Company by Notice of Termination. A passage
of time prior to delivery of Notice of Termination or a failure by the
Executive to include in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any right of
the Executive under this Agreement or preclude the Executive from
asserting such fact or circumstance in enforcing rights under this
Agreement.
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ARTICLE V.
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Good Reason or by the Company Other Than for
Cause or Disability. If, during the Post-Change Period, the Company shall
terminate Executive's employment other than for Cause or Disability, or if the
Executive shall terminate employment for Good Reason, the Company shall
immediately pay the Executive, in addition to all vested rights arising from the
Executive's employment as specified in Article III, a cash amount equal to the
sum of the following amounts:
a. to the extent not previously paid, the Guaranteed
Base Salary and any accrued vacation pay through the Termination Date;
b. the difference between (1) the product of (A) the
Guaranteed Bonus, multiplied by (B) a fraction, the numerator of which is
the number of days in the Termination Performance Period which elapsed
before the Termination Date, and the denominator of which is the total
number of days in the Termination Performance Period, and (2) the amount
of any Guaranteed Bonus paid to the Executive with respect to the
Termination Performance Period;
c. all amounts previously deferred by or an accrual to the
benefit of the Executive under any nonqualified deferred compensation or
pension plan, together with any accrued earnings thereon, and not yet paid
by the Company;
d. an amount equal to the product of (1) three (3.0)
multiplied by (2) the sum of (A) Guaranteed Base Salary and (B) the
Guaranteed Bonus;
e. an amount equal to the sum of the value of the unvested
portion of the Executive's accounts or accrued benefits under any
qualified plan maintained by the Company as of the Termination Date;
f. the difference between (1) an amount equal to the value
(determined using the actuarial assumptions then applied by the Pension
Benefit Guaranty Corporation for determining immediate annuity present
values) of the Executive's accrued benefits under the Excess/Supplemental
Plans (as defined in Section 3.4) calculated as though the Executive (A)
continued to accrue benefits under the Excess/Supplemental Plans for a
period of three years after the Termination Date, and (B) received
compensation during each year of such three-year period equal to the sum
of the Guaranteed Base Salary and the highest Guaranteed Bonus paid (or
payable) to the Executive in the two years preceding the Termination Date,
and (C) if Executive is at least age fifty-five (55) and has at least ten
(10) years of service with the Company, Executive were three (3) years
older than his age at the Termination Date and (2) the amount actually
previously paid by the Company to Executive pursuant to Section 3.4; and
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g. pay on behalf of Executive all fees and costs charged by
the outplacement firm selected by the Executive to provide outplacement
services or at the election of the Executive, cash equal to the fees and
expenses such outplacement firm would charge.
Until the third anniversary of the Termination Date or such later date as any
Plan of the Company may specify, the Company shall continue to provide to the
Executive and the Executive's family welfare benefits (including, without
limitation, medical, prescription, dental, disability, salary continuance,
individual life, group life, accidental death and travel accident insurance
plans and programs), fringe benefits and other executive perquisites which are
at least as favorable as the most favorable Plans of the Company applicable to
the Executive and other peer executives and their families as of the Termination
Date, but which are in no event less favorable than the most favorable Plans of
the Company applicable to the Executive and other peer executives and their
families during the 90-day period immediately before the Effective Date. The
cost of such welfare benefits shall not exceed the cost of such benefits to the
Executive immediately before the Termination Date or, if less, the Effective
Date. Notwithstanding the foregoing, if the Executive is covered under any
medical, life, or disability insurance plan(s) provided by a subsequent
employer, then the amount of coverage required to be provided by the Employer
hereunder shall be reduced by the amount of coverage provided by the subsequent
employer's medical, life, or disability insurance plan(s). The Executive's
rights under this Section shall be in addition to, and not in lieu of, any
post-termination continuation coverage or conversion rights the Executive may
have pursuant to applicable law, including without limitation continuation
coverage required by Section 4980 of the Code.
5.2 If by the Company for Cause. If the Company terminates the Executive's
employment for Cause during the Post-Change Period, this Agreement shall
terminate without further obligation by the Company to the Executive, other than
the obligation immediately to pay the Executive in cash the Executive's
Guaranteed Base Salary through the Termination Date, plus the amount of any
compensation previously deferred by the Executive, plus any accrued vacation
pay, in each case to the extent not previously paid.
5.3 If by the Executive Other Than for Good Reason. If the Executive
terminates employment during the Post-Change Period other than for Good Reason,
Disability or death, this Agreement shall terminate without further obligations
by the Company, other than the obligation immediately to pay the Executive in
cash all amounts specified in clauses (a), (b) and (c) of the first sentence of
Section 5.1 (such amounts collectively, the "Accrued Obligations").
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Post-Change Period, this Agreement shall terminate without further obligations
to the Executive, other than
(a) the Company's obligation immediately to pay the Executive
in cash all Accrued Obligations, and
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(b) the Executive's right after the Disability Effective Date to
receive disability and other benefits at least equal to the greater of (1)
those provided under the most favorable disability Plans applicable to
disabled peer executives of the Company in effect immediately before the
Termination Date or (2) those provided under the most favorable disability
Plans of the Company in effect at any time during the 90-day period
immediately before the Effective Date.
5.5 If upon Death. If the Executive's employment is terminated by reason of
the Executive's death during the Post-Change Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than the obligation immediately to pay the
Executive's estate or beneficiary in cash all Accrued Obligations. Despite
anything in this Agreement to the contrary, the Executive's family shall be
entitled to receive benefits at least equal to the most favorable benefits
provided by the Company to the surviving families of peer executives of the
Company under such Plans, but in no event shall such Plans provide benefits
which in each case are less favorable, in the aggregate, than the most favorable
of those provided by the Company to the Executive under such Plans in effect at
any time during the 90-day period immediately before the Effective Date.
ARTICLE VI.
NON-EXCLUSIVITY OF RIGHTS
6.1 Waiver of Other Severance Rights. To the extent that payments
are made to the Executive pursuant to Section 5.1, the Executive hereby
waives the right to receive severance payments under any other Plan or
agreement of the Company.
6.2 Other Rights. Except as provided in Section 6.1, this Agreement
shall not prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other Plans,
provided by the Company or any of its Subsidiaries and for which the
Executive may qualify, nor shall this Agreement limit or otherwise
affect such rights as the Executive may have under any other agreements with the
Company or any of its Subsidiaries. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any Plan of the Company or
any of its Subsidiaries and any other payment or benefit required by law at or
after the Termination Date shall be payable in accordance with such Plan or
applicable law except as expressly modified by this Agreement.
ARTICLE VII.
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
7.1 Gross-up for Certain Taxes. If it is determined (by the reasonable
computation of the Company's independent auditors, which determinations shall
be certified to by such auditors and set forth in a written certificate
("Certificate") delivered to the Executive) that
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any benefit received or deemed received by the Executive from the Company
pursuant to this Agreement or otherwise (collectively, the "Payments") is or
will become subject to any excise tax under Section 4999 of the Code or any
similar tax payable under any United States federal, state, local or other law
(such excise tax and all such similar taxes collectively, "Excise Taxes"),
then the Company shall, immediately after such determination, pay the
Executive an amount (the "Gross-up Payment") equal to the product of
(a) the amount of such Excise Taxes
multiplied by
(b) the Gross-up Multiple (as defined in Section 7.4).
The Gross-up Payment is intended to compensate the Executive for the Excise
Taxes and any federal, state, local or other income or excise taxes or other
taxes payable by the Executive with respect to the Gross-up Payment.
The Executive or the Company may at any time request the preparation and
delivery to the Executive of a Certificate. The Company shall, in addition to
complying with Section 7.2, cause all determinations and certifications under
the Article to be made as soon as reasonably possible and in adequate time to
permit the Executive to prepare and file the Executive's individual tax returns
on a timely basis.
7.2 Determination by the Executive.
a. If the Company shall fail to deliver a Certificate to the
Executive (and to pay to the Executive the amount of the Gross-up Payment,
if any) within 14 days after receipt from the Executive of a written
request for a Certificate, or if at any time following receipt of a
Certificate the Executive disputes the amount of the Gross-up Payment set
forth therein, the Executive may elect to demand the payment of the amount
which the Executive, in accordance with an opinion of counsel to the
Executive ("Executive Counsel Opinion"), determines to be the Gross-up
Payment. Any such demand by the Executive shall be made by delivery to the
Company of a written notice which specifies the Gross-up Payment
determined by the Executive and an Executive Counsel Opinion regarding
such Gross-up Payment (such written notice and opinion collectively, the
"Executive's Determination"). Within 14 days after delivery of the
Executive's Determination to the Company, the Company shall either (1) pay
the Executive the Gross-up Payment set forth in the Executive's
Determination (less the portion of such amount, if any, previously paid to
the Executive by the Company) or (2) deliver to the Executive a
Certificate specifying the Gross-up Payment determined by the Company's
independent auditors, together with an opinion of the Company's counsel
("Company Counsel Opinion"), and pay the Executive the Gross-up Payment
specified in such Certificate. If for any reason the Company fails to
comply with clause (2) of the preceding sentence, the Gross-up
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Payment specified in the Executive's Determination shall be controlling
for all purposes.
b. If the Executive does not make a request for, and the Company
does not deliver to the Executive, a Certificate, the Company shall, for
purposes of Section 7.3, be deemed to have determined that no Gross-up
Payment is due.
7.3 Additional Gross-up Amounts. If, despite the initial
conclusion of the Company and/or the Executive that certain Payments are
neither subject to Excise Taxes nor to be counted in determining whether other
Payments are subject to Excise Taxes (any such item, a "Non-Parachute Item"),
it is later determined (pursuant to the subsequently-enacted provisions of
the Code, final regulations or published rulings of the IRS, final judgment of
a court of competent jurisdiction or the Company's independent auditors that
any of the Non-Parachute Items are subject to Excise Taxes, or are to be
counted in determining whether any Payments are subject to Excise Taxes, with
the result that the amount of Excise Taxes payable by the Executive is greater
than the amount determined by the Company or the Executive pursuant to
Section 7.1 or 7.2, as applicable, then the Company shall pay the Executive
an amount (which shall also be deemed a Gross-up Payment)
equal to the product of
(a) the sum of (1) such additional Excise Taxes and (2) any
interest, fines, penalties, expenses or other costs incurred by the
Executive as a result of having taken a position in accordance with a
determination made pursuant to Section 7.1
multiplied by
(b) the Gross-up Multiple.
7.4 Gross-up Multiple. The Gross-up Multiple shall equal a fraction, the
numerator of which is one (1.0), and the denominator of which is one (1.0) minus
the sum, expressed as a decimal fraction, of the rates of all federal, state,
local and other income and other taxes and any Excise Taxes applicable to the
Gross-up Payment; provided that, if such sum exceeds 0.75, it shall be deemed
equal to 0.75 for purposes of this computation. (If different rates of tax are
applicable to various portions of a Gross-up Payment, the weighted average of
such rates shall be used.)
7.5 Opinion of Counsel. "Executive Counsel Opinion" means a legal opinion
of nationally recognized executive compensation counsel that there is a
reasonable basis to support a conclusion that the Gross-up Payment determined by
the Executive has been calculated in accord with this Article and applicable
law. "Company Counsel Opinion" means a legal opinion of nationally recognized
executive compensation counsel that (a) there is a reasonable basis to support a
conclusion that the Gross-up Payment set forth of the Certificate of Company's
independent auditors has been calculated in accord with this Article and
applicable law, and (b) there is no reasonable basis for the calculation of the
Gross-up Payment determined by the Executive.
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7.6 Amount Increased or Contested. The Executive shall notify the Company
in writing of any claim by the IRS or other taxing authority that, if
successful, would require the payment by the Company of a Gross-up Payment. Such
notice shall include the nature of such claim and the date on which such claim
is due to be paid. The Executive shall give such notice as soon as practicable,
but no later than 10 business days, after the Executive first obtains actual
knowledge of such claim; provided, however, that any failure to give or delay in
giving such notice shall affect the Company's obligations under this Article
only if and to the extent that such failure results in actual prejudice to the
Company. The Executive shall not pay such claim less than 30 days after the
Executive gives such notice to the Company (or, if sooner, the date on which
payment of such claim is due). If the Company notifies the Executive in writing
before the expiration of such period that it desires to contest such claim, the
Executive shall:
a. give the Company any information that it
reasonably requests relating to such claim,
b. take such action in connection with contesting such claim
as the Company reasonably requests in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
c. cooperate with the Company in good faith to
contest such claim, and
d. permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including related interest
and penalties, imposed as a result of such representation and payment of costs
and expenses. Without limiting the foregoing, the Company shall control all
proceedings in connection with such contest and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner. The Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify the Executive, on an after-tax basis, for any Excise Tax or income
tax, including related interest or penalties, imposed with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. The Company's control of the contest shall be limited to
issues with
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respect to which a Gross-up Payment would be payable. The Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the IRS or other taxing authority.
7.7 Refunds. If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 7.6, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section 7.6) promptly pay the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 7.6, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such determination before the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-up Payment required to be paid. Any contest of a denial of
refund shall be controlled by Section 7.6.
ARTICLE VIII.
EXPENSES AND INTEREST
8.1 Legal Fees and Other Expenses.
a. If the Executive incurs legal, accounting and other fees or other
expenses in a good faith effort to obtain benefits under this Agreement
(including, without limitation, the fees and other expenses of the
Executive's legal counsel and the accounting and other fees and expenses in
connection with the delivery of the Opinion referred to in Article VII),
regardless of whether the Executive ultimately prevails, the Company shall
reimburse the Executive on a monthly basis upon the written request for
such fees and expenses to the extent not reimbursed under the Company's
officers and directors liability insurance policy, if any. The existence of
any controlling case or regulatory law which is directly inconsistent with
the position taken by the Executive shall be evidence that the Executive
did not act in good faith.
b. Reimbursement of legal fees and expenses shall be made
monthly upon the written submission of a request for reimbursement
together with evidence that such fees and expenses are due and payable or
were paid by the Executive. If the Company shall have reimbursed the
Executive for legal fees and expenses and it is later determined that the
Executive was not acting in good faith, all amounts paid on behalf of, or
reimbursed to, the Executive shall be promptly refunded to the Company.
8.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such
amount became due and owing, interest shall
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accrue on such amount from the date it became due and owing until the date of
payment at a annual rate equal to two percent (2.0%) above the base commercial
lending rate announced by The Northern Trust Company in effect from time to
time during the period of such nonpayment.
ARTICLE IX.
NO SET-OFF OR MITIGATION
9.1 No Set-off by Company. The Executive's right to receive when due the
payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Time is of the essence in the performance by the Company of its
obligations under this Agreement. Any claim which the Company may have against
the Executive, whether for a breach of this Agreement or otherwise, shall be
brought in a separate action or proceeding and not as part of any action or
proceeding brought by the Executive to enforce any rights against the Company
under this Agreement.
9.2 No Mitigation. The Executive shall not have any duty to mitigate the
amounts payable by the Company under this Agreement by seeking new employment
following termination. Except as specifically otherwise provided in this
Agreement, all amounts payable pursuant to this Agreement shall be paid without
reduction regardless of any amounts of salary, compensation or other amounts
which may be paid or payable to the Executive as the result of the Executive's
employment by another employer.
ARTICLE X.
CONFIDENTIALITY AND NONCOMPETITION
10.1 Confidentiality. Executive acknowledges that it is the policy of the
Company and its subsidiaries to maintain as secret and confidential all valuable
and unique information and techniques acquired, developed or used by the Company
and its subsidiaries relating to their business, operations, employees and
customers, which gives the Company and its subsidiaries a competitive advantage
in the businesses in which the Company and its subsidiaries are engaged
("Confidential Information"). Executive recognizes that all such Confidential
Information is the sole and exclusive property of the Company and its
subsidiaries, and that disclosure of Confidential Information would cause damage
to the Company and its subsidiaries. Executive agrees that, except as required
by the duties of his employment with the Company and/or its subsidiaries and
except in connection with enforcing the Executive's rights under this Agreement
or if compelled by a court or governmental agency, he will not, without the
consent of the Company, disseminate or otherwise disclose any Confidential
Information obtained during his employment with the Company and/or its
subsidiaries for so long as such information is valuable and unique.
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10.2 Noncompetition/Nonsolicitation.
a. Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if Executive's
employment is terminated for any reason, thereafter for a period of one
(1) year, Executive will not at any time directly or indirectly, in any
capacity, engage or participate in, or become employed by or render
advisory or consulting or other services in connection with any Prohibited
Business as defined in Section 10.2(d).
b. Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if Executive's
employment is terminated for any reason, thereafter for a period of one
(1) year, Executive shall not make any financial investment, whether in
the form of equity or debt, or own any interest, directly or indirectly,
in any Prohibited Business. Nothing in this Section 10.2(b) shall,
however, restrict Executive from making any investment in any company
whose stock is listed on a national securities exchange or actively traded
in the over-the-counter market; provided that (1) such investment does not
give Executive the right or ability to control or influence the policy
decisions of any Prohibited Business, and (2) such investment does not
create a conflict of interest between Executive's duties hereunder and
Executive's interest in such investment.
c. Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if Executive's
employment is terminated for any reason, thereafter for a period of one
(1) year, Executive shall not (1) employ any employee of the Company
and/or its subsidiaries or (2) interfere with the Company's or any of its
subsidiaries' relationship with, or endeavor to entice away from the
Company and/or its subsidiaries any person, firm, corporation, or other
business organization who or which at any time (whether before or after
the date of Executive's termination of employment), was an employee,
customer, vendor or supplier of, or maintained a business relationship
with, any business of the Company and/or its subsidiaries which was
conducted at any time during the period commencing one year prior to the
termination of employment.
d. For the purpose of this Section 10.2, "Prohibited
Business" shall be defined as any entity and any branch, office or
operation thereof, which is a direct and material competitor of the
Company wherever the Company does business, in the United States or
abroad.
10.3 Remedy. Executive and the Company specifically agree that, in the
event that Executive shall breach his obligations under this Article X, the
Company and its subsidiaries will suffer irreparable injury and no adequate
remedy for such breach, and shall be entitled to injunctive relief therefor, and
in particular, without limiting the generality of the foregoing, the Company
shall not be precluded from pursuing any and all remedies it may have at law or
in equity for breach of such obligations; provided, however, that such breach
shall not in any manner or degree whatsoever limit, reduce or otherwise affect
the
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obligations of the Company under this Agreement, and in no event shall an
asserted breach of the Executive's obligations under this Article X constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
ARTICLE XI.
MISCELLANEOUS
11.1 No Assignability. This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
11.2 Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Any successor to the business
and/or assets of the Company which assumes or agrees to perform this Agreement
by operation of law, contract, or otherwise shall be jointly and severally
liable with the Company under this Agreement as if such successor were the
Company.
11.3 Payments to Beneficiary. If the Executive dies before receiving
amounts to which the Executive is entitled under this Agreement, such amounts
shall be paid in a lump sum to the beneficiary designated in writing by the
Executive, or if none is so designated, to the Executive's estate.
11.4 Non-alienation of Benefits. Benefits payable under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, before actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
under this Agreement shall be void.
11.5 Severability. If any one or more articles, sections or other portions
of this Agreement are declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any article, section or other portion not so declared to be unlawful
or invalid. Any article, section or other portion so declared to be unlawful or
invalid shall be construed so as to effectuate the terms of such article,
section or other portion to the fullest extent possible while remaining lawful
and valid.
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11.6 Except as provided in Sections 2.2 and 11.14 hereof, this Agreement
shall not be altered, amended or modified except by written instrument executed
by the Company and Executive.
11.7 Notices. All notices and other communications under this Agreement
shall be in writing and delivered by hand or by first class registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
-----------------------------
-----------------------------
-----------------------------
If to the Company:
Safety-Kleen Corp.
One Brinckman Way
Elgin, Illinois 60123
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
11.9 Governing Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of Illinois without regard to its choice
of law principles.
11.10 Captions. The captions of this Agreement are not a part of the
provisions hereof and shall have no force or effect.
11.11 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
11.12 No Waiver. The Executive's failure to insist upon strict compliance
with any provision of this Agreement shall not be deemed a waiver of such
provision or any other provision of this Agreement. A waiver of any provision of
this Agreement shall not be deemed a waiver of any other provision, and any
waiver of any default in any such provision shall not be deemed a waiver of any
later default thereof or of any other provision.
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11.13 Entire Agreement. This Agreement contains the entire understanding of
the Company and the Executive with respect to its subject matter.
11.14 Cancellation. The Company may, at any time prior to a Change in
Control, unilaterally cancel this Agreement on behalf of all parties hereto by
notifying the Executive of such cancellation in writing at least twelve (12)
months prior to the effective date of the cancellation, provided however that no
such notice may be given after an Imminent Change of Control Date.
IN WITNESS WHEREOF, the Executive and the Company have executed
this Agreement as of the date first above written.
-------------------------------------
SAFETY-KLEEN CORP.
By:
Title:
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SAFETY-KLEEN CORP. SEVERANCE AGREEMENT PARTICIPANTS
Hyman K. Bielsky Senior Vice President/General Counsel
James L. Breece Vice President Technical
Donald W. Brinckman Chief Executive Officer
Roy D. Bullinger Senior Vice President Business Management and
Marketing
Robert J. Burian Senior Vice President Human Resources
Andrew A. Campbell Senior Vice President, Finance and Chief Financial
Officer
Michael H. Carney Senior Vice President Marketing Services
Glenn R. Casbourne Vice President Engineering and Oil Recycle Operations
Joseph Chalhoub President and Chief Operating Officer
David A. Dattilo Senior Vice President Sales and Service
Lawrence G. Davenport Vice President Information Services and Chief
Information Officer
Scott E. Fore Senior Vice President Environment, Health & Safety
F. Henry Habicht, II Senior Vice President Corporate Development
Scott D. Krill Assistant General Counsel and Secretary
Ulisse Marini Vice President Solvent Recycle Operations
Clyde R. Phillips Vice President Sales Eastern Division
Clark J. Rose Senior Vice President, Operations
Laurence M. Rudnick Treasurer
Clifford J. Schulz Controller
SAFETY-KLEEN CORP. 1997 MANAGEMENT INCENTIVE PLAN
The Directors of Safety-Kleen Corp. have heretofore decided to compensate
their officers and key management personnel under a compensation plan that
will include base salary plus incentive bonus. The purpose of the
incentive plan is to supplement by incentive bonuses the remuneration for
officers and key management personnel which is competitive externally,
equitable internally, and properly rewarding for performance in the
responsibility assigned. On the recommendation of the Compensation
Committee, the following Management Incentive Plan is hereby established
for officers and key management personnel of the Company.
I. CALCULATION OF MANAGEMENT INCENTIVE FUND
Each year the Board of Directors will establish an EVA Target for the year
and create an incentive fund, consisting of both a formula and
discretionary fund, based on the improvement in EVA relative to the target
as Follows:
A. Expected EVA improvement is the dollar amount by which EVA must
increase in any plan year relative to the actual EVA achieved in the
prior plan year, in order for target bonuses to be funded
Expected EVA improvement is an estimate of investor's expectations
for Safety-Kleen operating performance. This estimate is derived
based on the relationship between Safety-Kleen's market
capitalization, its Capital, and its current EVA as of a certain
date.
B. EVA INTERVAL
The EVA Interval represents the amount of deviation from Expected
EVA Improvement that doubles (positive deviation) or eliminates
(negative deviation) target bonuses.
The EVA Interval reflects the inherent volatility of a business to
ensure that short-term cyclical business changes do not result in
extreme positive or negative bonus declarations. The effect of a
volatility based interval is that: (1) zero bonuses are declared for
performance at about the 15th percentile of potential outcomes; and
(2) Two times target bonuses are declared for performance at about
the 85th percentile of potential outcomes.
The EVA Interval for Safety-Kleen is initially based on the
volatility of Safety-Kleen stock and the relationship of stock price
to EVA improvement. The EVA Interval in future plan years will
change in proportion to the aggregate target bonus pool. This
maintains a consistent share of incremental EVA improvement between
management and the shareholders.
C. CALCULATION OF THE DISCRETIONARY ELEMENT OF THE PLAN
In addition to the fund created by the above calculations, an
additional fund consisting of an amount not exceeding 50% of the
formula amount will be available for discretionary incentive
allocations.
<PAGE>
II. ALLOCATION OF FUNDS
A. DETERMINATION OF PLAN PARTICIPANTS
Determination of who will participate in the Plan will be determined
by the Compensation Committee (Committee). The Chief Executive
Officer/Chairman of the Board (Chairman) and the President/COO
(President) in consultation with other corporate officers, will make
recommendations to the Committee. Eligibility will be in accordance
with job responsibility and salary grade. The list of job
classifications to be included in the Plan will be submitted at the
beginning of each calendar year for the approval of the Committee.
B. DETERMINATION OF INDIVIDUAL FUND SHARES
The percentage share formula incentive fund for each officer
participant will be recommended by the President and the Chairman
and submitted to the Compensation Committee for its approval at the
beginning of each calendar year. Non-officer participant percent
shares will be developed by the President and the Chairman in
consultation with other officers.
C. PAYMENT OF ANNUAL INCENTIVE
The individual share calculations for the formula incentive
resulting from the above calculation, together with the recommended
discretionary share, which can range from 0% to 50% of the formula
amount, shall be submitted to the Compensation Committee for its
final approval during the first quarter of the year following the
fiscal year involved.
The President and the Chairman will recommend the discretionary
amount for each officer based on his analysis of each individual's
performance during the year. A non-officer participant's
discretionary share will be recommended by the participant's
immediate supervisor for approval by the President and the Chairman.
D. BONUS BANK
Declared bonuses for participants will be paid from a Bonus Bank. A
participant's declared bonus in a given year will be deposited into
the Bonus Bank (and thereby added to any existing Bonus Bank
balance). (Exhibit 1)
Bonuses will be paid from the Bonus Bank as follows:
1. 100% of available Bonus Bank balance will be paid up to
the participant's target award;
2. an additional 1/3 of any excess positive Bonus Bank balance
will also be paid in the given year;
3. the remaining 2/3 of any excess positive Bonus Bank balance
will remain in the Bonus Bank, to be paid out in future years
based on future EVA performance of the participant's EVA
business unit.
<PAGE>
III. INCENTIVE PLAN PARTICIPATION AND COMMUNICATIONS
The President and the Chairman shall notify the Compensation Committee of
the Board regarding officers and the key management position that will be
included in the Plan for the current year. Such a list should be
determined as early as possible in any fiscal year and no later than the
end of the first quarter of each fiscal year. Early identification of
participants is desirable to provide maximum opportunity for communicating
throughout the year regarding company performance and each individual
participant's related bonus opportunity, thereby maximizing the
effectiveness of the Incentive Plan.
IV. GENERAL PROVISIONS
A. PLAN ELIGIBILITY
To be eligible to participate under the plan, an officer or employee
must be actively employed with the company on the last working day
of the year for which the year's compensation is payable; provided,
that in the event a participant's employment is terminated prior to
year-end by reason of death occurring after June 1, his share of the
formula incentive fund will be adjusted on the basis of his
full-year share, prorated for the period of his actual employment.
B. LESS THAN FULL-YEAR'S EMPLOYMENT
In the event a participant's employment commences after January 1st
and before October 1st, adjustment of his share of the formula
incentive fund will be on the basis of his full share, prorated for
the period of the participant's actual employment. Participants
hired after October 1st will not receive an award for the current
year.
C. TRANSFERS
A plan participant who is transferred from one EVA business unit to
another EVA business unit during a plan year will receive bonus
declarations and payments according to the following rules:
1. The award declared for the year of the transfer will be
determined according to the full year EVA results of both EVA
business units in which the participant worked during the plan
year, and pro rated based on the number of months of service
in each EVA business unit.
2. Any positive or negative bonus bank balance will be carried
over.
D. BONUS BANK BALANCES UPON TERMINATION
In cases of termination's due to retirement at or after attainment
of age 55, death, disability, reduction in force, or the sale or
closing of a plant or EVA business unit, all positive Bonus Bank
balances attributable to a terminating participant will be paid in
full at the end of the plan year of termination.
Bonus Bank balances are forfeitable upon termination for any reason
not delineated above.
<PAGE>
V. CHANGE OF CONTROL
A. In the event of a Change of Control, the Company shall pay or
cause to be paid to each eligible participant as of the date of
the Change of Control a bonus ("the Guaranteed Bonus") for each
performance period which ends after the Change of Control.
"Performance Period" means each period of time designated in
accordance with any bonus arrangement ("Bonus Plan") which is
based upon performance and approved by the Board or any committee
of the Board. The Guaranteed Bonus shall be at least equal to
the greatest of:
1. The On Plan Bonus, which shall mean the cash bonus which the
Participant would accrue under any Bonus Plan for the
Performance Period for which the Guaranteed Bonus is awarded
("Current Performance Period") as if the performance achieved
100% of plan established pursuant to such Bonus Plan and the
maximum level of discretionary portion is achieved;
2. The Actual Bonus, which shall mean the cash bonus which the
Participant would accrue under any Bonus Plan for the Current
Performance Period if the performance during the Current
Performance Period were measured by actual performance and the
maximum level of discretionary portion is achieved; and
3. The Historical Bonus, which shall mean the bonus that the
Participant accrued in the last Performance Period that ended
before the Change of Control.
B. "Change of Control" means the occurrence of any of the following:
1. any person (as such term is used in Rule 13(d)-5 of the
SEC under the 1934 Act) or group (as such term is defined
in Section 13(d) of the 1934 Act), other than a Subsidiary
or any employee benefit plan (or any related trust) of the
Company or a Subsidiary, becomes the beneficial owner of
twenty percent (20%) or more of the common stock of the
Company or of Voting Securities representing 20% or more of
the combined voting power of all Voting Securities of the
Company;
2. Within a period of twenty-four (24) months or less, the
individuals who, as of any date, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at
least a majority of the Board unless at the end of such
period, the majority of individuals then constituting the
Board were nominated upon recommendation of a majority of the
Incumbent Directors.
3. Approval by the stockholders of the Company of any of the
following:
a) a merger, reorganization or consolidation ("Merger")
with respect to which the individuals and entities
who were the respective beneficial owners of the
stock and Voting Securities of the Company
immediately before such Merger do no, after such
Merger, beneficially own, directly or indirectly,
more than 80 percent (80%) of, respectively, the
common stock and the combined voting power of the
Voting Securities of the corporation resulting from
such Merger in substantially the same proportion as
their ownership immediately before such Merger, or
b) the sale or other disposition of all or
substantially all of the assets of the Company.
<PAGE>
VI. FINAL RESPONSIBILITY FOR PLAN ADMINISTRATION
A. Notwithstanding the foregoing provisions, all matters pertaining to
the administration of this Plan, including but not limited to the
determination of the Fund amount, selection of participants, amounts
of awards to be paid to individual participants, and other policy
matters, shall be within the sole discretion of the Board of
Directors.
B. Nothing in this document is to be construed as to provide for a
duplicative payment under the Change of Control Severance Agreement
for any participant covered by such an agreement.
C. This plan may be revoked, amended or revised by the Board of
Directors of the Company. In the event that the Plan is revoked,
amended or revised during the Plan year, participants will be paid a
bonus pro-rated to the date the Plan is revoked, amended or revised
based upon the Plan formula. A discretionary award will be granted
that is no less than the award granted in the previous year as
determined by the Board of Directors.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 1
NOTE: THIS EXAMPLE REFLECTS THE SAFETY-KLEEN CORP.
CONSOLIDATED TARGET AND BONUS INTERVAL.
ASSUMPTIONS
---------------------------------------------------------------------------
<S> <C> <C> <C>
Base Salary $100,000 Plan Year EVA(R)($000s) 1,055.0
Target Award % 30% Prior Year Actual EVA(R) (6,445.0)
Target EVA Award $27,000 Expected EVA(R) Improvement 6,500.0
Beginning Bonus Bank Balance$ 5,000 EVA(R) Interval 12,500.0
</TABLE>
CALCULATION OF BONUS DECLARATION
- ---------------------------------------------------------------------------
Plan Year EVA $1,055.0
- Prior Year Actual EVA (6,445.0)
---------
= EVA Improvement 7,500.0
- Expected EVA Improvement 6,500.0
-------
= Excess EVA Improvement 1,000.0
/ EVA Interval 12,500.0
--------
= Performance Multiple 8.0%
+ Target Multiple 100.0%
------
= Bonus Multiple 108.0%
x Target Bonus 27,000.0
--------
= Bonus Declaration 29,160.0
[CHART]
<PAGE>
EXHIBIT 1 (CONTINUED)
CALCULATION OF BONUS PAID
---------------------------------------------------------------------------
Beginning Bonus Bank Balance $5,000.0
+ Plan Year Bonus Declaration 29,160.0
--------
= Available Bonus Bank Balance 34,160.0
- Target Bonus 27,000.0
--------
= Excess Bonus Bank Balance 7,160.0
Payment up to Target Bonus 27,000.0
+ 1/3 Excess Bonus Bank Balance 2,386.7
--------
= Plan Year Payment 29,386.7
Available Bonus Bank Balance 34,160.0
- Plan Year Payment 29,386.7
--------
= Ending Bonus Bank Balance 4,773.3
SAFETY-KLEEN CORP. 1998 MANAGEMENT INCENTIVE PLAN
The Directors of Safety-Kleen Corp. have heretofore decided to compensate
their officers and key management personnel under a compensation plan that
will include base salary plus incentive bonus. The purpose of the
incentive plan is to supplement by incentive bonuses the remuneration for
officers and key management personnel which is competitive externally,
equitable internally, and properly rewarding for performance in the
responsibility assigned. On the recommendation of the Compensation
Committee, the following Management Incentive Plan is hereby established
for officers and key management personnel of the Company.
I. CALCULATION OF MANAGEMENT INCENTIVE FUND
Each year the Board of Directors will establish a Target for the year and
create an incentive fund, consisting of both a formula and discretionary
fund.
A. CALCULATION OF FORMULA ELEMENT OF THE PLAN
The Target will be based on any one or more of the following
criteria or a combination thereof: 1) net earnings; 2) earnings
per share; 3) earnings before interest, taxes, depreciation
and/or amortization; 4) pre-tax operating income; 5) return on
equity; 6) return on assets; 7) cash flows; 8) return on invested
capital; 9) Economic Value Added (EVA); and 10) total shareholder
return. The Criteria will be determined and attached to this
document no later than March 1, 1998.
B. CALCULATION OF THE DISCRETIONARY ELEMENT OF THE PLAN
In addition to the fund created by the above calculations, an
additional fund consisting of an amount not exceeding 50% of the
formula amount will be available for discretionary incentive
allocations.
II. ALLOCATION OF FUNDS
A. DETERMINATION OF PLAN PARTICIPANTS
Determination of who will participate in the Plan will be determined
by the Compensation Committee (Committee). The Chief Executive
Officer/Chairman of the Board (Chairman) and the President/COO
(President) in consultation with other corporate officers, will make
recommendations to the Committee. Eligibility will be in accordance
with job responsibility and salary grade. The list of job
classifications to be included in the Plan will be submitted for the
approval of the Committee.
B. DETERMINATION OF INDIVIDUAL FUND SHARES
The percentage share formula incentive fund for each officer
participant will be recommended by the President and the Chairman
and submitted to the Compensation Committee for its approval at the
beginning of each calendar year. Non-officer participant percent
shares will be developed by the President and the Chairman in
consultation with other officers.
<PAGE>
C. PAYMENT OF ANNUAL INCENTIVE
The individual share calculations for the formula incentive
resulting from the above calculation, together with the recommended
discretionary share, which can range from 0% to 50% of the formula
amount, shall be submitted to the Compensation Committee for its
final approval.
The President and the Chairman will recommend the discretionary
amount for each officer based on his analysis of each individual's
performance during the year. A non-officer participant's
discretionary share will be recommended by the participant's
immediate supervisor for approval by the President and the Chairman.
III. INCENTIVE PLAN PARTICIPATION AND COMMUNICATIONS
The President and the Chairman shall notify the Compensation Committee of
the Board regarding officers and the key management position that will be
included in the Plan for the current year. Such a list should be
determined as early as possible in any fiscal year and no later than the
end of the first quarter of each fiscal year. Early identification of
participants is desirable to provide maximum opportunity for communicating
throughout the year regarding company performance and each individual
participant's related bonus opportunity, thereby maximizing the
effectiveness of the Incentive Plan.
IV. GENERAL PROVISIONS
A. PLAN ELIGIBILITY
To be eligible to participate under the plan, an officer or employee
must be actively employed with the company on the last working day
of the year for which the year's compensation is payable; provided,
that in the event a participant's employment is terminated prior to
year-end by reason of death occurring after June 1, his share of the
formula incentive fund will be adjusted on the basis of his
full-year share, prorated for the period of his actual employment.
B. LESS THAN FULL-YEAR'S EMPLOYMENT
In the event a participant's employment commences after January 1st
and before October 1st, adjustment of his share of the formula
incentive fund will be on the basis of his full share, prorated for
the period of the participant's actual employment. Participants
hired after October 1st will not receive an award for the current
year.
V. CHANGE OF CONTROL
A. In the event of a Change of Control, the Company shall pay or
cause to be paid to each eligible participant as of the date of
the Change of Control a bonus ("the Guaranteed Bonus") for each
performance period which ends after the Change of Control.
"Performance Period" means each period of time designated in
accordance with any bonus arrangement ("Bonus Plan") which is
based upon performance and approved by the Board or any committee
of the Board. The Guaranteed Bonus shall be at least equal to
the greatest of:
1. The On Plan Bonus, which shall mean the cash bonus which the
Participant would accrue under any Bonus Plan for the
Performance Period for which the Guaranteed Bonus is awarded
("Current Performance Period") as if the performance achieved
100% of plan established pursuant to such Bonus Plan
<PAGE>
and the maximum level of discretionary portion is achieved;
2. The Actual Bonus, which shall mean the cash bonus which the
Participant would accrue under any Bonus Plan for the Current
Performance Period if the performance during the Current
Performance Period were measured by actual performance and the
maximum level of discretionary portion is achieved; and
3. The Historical Bonus, which shall mean the bonus that the
Participant accrued in the last Performance Period that ended
before the Change of Control.
B. "Change of Control" means the occurrence of any of the following:
1. any person (as such term is used in Rule 13(d)-5 of the
SEC under the 1934 Act) or group (as such term is defined
in Section 13(d) of the 1934 Act), other than a Subsidiary
or any employee benefit plan (or any related trust) of the
Company or a Subsidiary, becomes the beneficial owner of
twenty percent (20%) or more of the common stock of the
Company or of Voting Securities representing 20% or more of
the combined voting power of all Voting Securities of the
Company;
2. Within a period of twenty-four (24) months or less, the
individuals who, as of any date, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at
least a majority of the Board unless at the end of such
period, the majority of individuals then constituting the
Board were nominated upon recommendation of a majority of the
Incumbent Directors.
3. Approval by the stockholders of the Company of any of the
following:
a) a merger, reorganization or consolidation ("Merger")
with respect to which the individuals and entities
who were the respective beneficial owners of the
stock and Voting Securities of the Company
immediately before such Merger do no, after such
Merger, beneficially own, directly or indirectly,
more than 80 percent (80%) of, respectively, the
common stock and the combined voting power of the
Voting Securities of the corporation resulting from
such Merger in substantially the same proportion as
their ownership immediately before such Merger, or
b) the sale or other disposition of all or
substantially all of the assets of the Company.
VI. FINAL RESPONSIBILITY FOR PLAN ADMINISTRATION
A. Notwithstanding the foregoing provisions, all matters pertaining to
the administration of this Plan, including but not limited to the
determination of the Fund amount, selection of participants, amounts
of awards to be paid to individual participants, and other policy
matters, shall be within the sole discretion of the Board of
Directors.
B. Nothing in this document is to be construed as to provide for a
duplicative payment under the Change of Control Severance Agreement
for any participant covered by such an agreement.
C. This plan may be revoked, amended or revised by the Board of
Directors of the Company. In the event that the Plan is revoked,
amended or revised during the Plan year, participants will be
paid a bonus pro-rated to the date the Plan is revoked, amended
or revised based upon the Plan formula. A discretionary award
will be granted that is no less than the discretionary award
granted in the previous year as determined by the Board of
Directors.
<PAGE>
APPENDIX 1
1998 MANAGEMENT INCENTIVE PLAN BASED ON EVA
The Compensation Committee has adopted EVA as the basis for determining
Management Incentive Plan Bonuses for 1998. The On Plan or Target bonus pool for
1998 is $5,633,000. The individual formula shares and participation schedule
were also adopted.
A. Expected EVA improvement is the dollar amount by which EVA must
increase in any plan year relative to the actual EVA achieved in the
prior plan year, in order for target bonuses to be funded
Expected EVA improvement is an estimate of investor's expectations
for Safety-Kleen operating performance. This estimate is derived
based on the relationship between Safety-Kleen's market
capitalization, its Capital, and its current EVA as of a certain
date.
B. EVA INTERVAL
The EVA Interval represents the amount of deviation from Expected
EVA Improvement that doubles (positive deviation) or eliminates
(negative deviation) target bonuses.
The EVA Interval reflects the inherent volatility of a business to
ensure that short-term cyclical business changes do not result in
extreme positive or negative bonus declarations. The effect of a
volatility based interval is that: (1) zero bonuses are declared for
performance at about the 15th percentile of potential outcomes; and
(2) Two times target bonuses are declared for performance at about
the 85th percentile of potential outcomes.
The EVA Interval for Safety-Kleen is initially based on the
volatility of Safety-Kleen stock and the relationship of stock price
to EVA improvement. The EVA Interval in future plan years will
change in proportion to the aggregate target bonus pool. This
maintains a consistent share of incremental EVA improvement between
management and the shareholders.
C. BONUS BANK
Declared bonuses for participants will be paid from a Bonus Bank. A
participant's declared bonus in a given year will be deposited into
the Bonus Bank (and thereby added to any existing Bonus Bank
balance). (Exhibit 1)
Bonuses will be paid from the Bonus Bank as follows:
1. 100% of available Bonus Bank balance will be paid up to
the participant's target award;
2. an additional 1/3 of any excess positive Bonus Bank balance
will also be paid in the given year;
the remaining 2/3 of any excess positive Bonus Bank balance will
remain in the Bonus Bank, to be paid out in future years based on
future EVA performance of the participant's EVA business unit.
<PAGE>
APPENDIX 1 (CONTINUED)
A. BONUS BANK BALANCES UPON TERMINATION
In cases of terminations due to retirement at or after attainment of
age 55, death, disability, reduction in force, or the sale or
closing of a plant or EVA business unit, all positive Bonus Bank
balances attributable to a terminating participant will be paid in
full at the end of the plan year of termination.
Bonus Bank balances are forfeitable upon termination for any reason
not delineated above.
B. TRANSFERS
A plan participant who is transferred from one EVA business unit to
another EVA business unit during a plan year will receive bonus
declarations and payments according to the following rules:
1. The award declared for the year of the transfer will be
determined according to the full year EVA results of both EVA
business units in which the participant worked during the plan
year, and pro rated based on the number of months of service
in each EVA business unit.
2. Any positive or negative bonus bank balance will be carried
over.
<PAGE>
EXHIBIT 1
NOTE: THIS EXAMPLE REFLECTS THE SAFETY-KLEEN CORP.
CONSOLIDATED TARGET AND BONUS INTERVAL.
ASSUMPTIONS
---------------------------------------------------------------------------
Base Salary $100,000 Plan Year EVA(R) ($000s) 1,055.0
Target Award % 30% Prior Year Actual EVA(R) (6,445.0)
Target EVA Award $27,000 Expected EVA(R) Improvement 6,500.0
Beginning Bonus Bank Balance $5,000 EVA(R) Interval 12,500.0
CALCULATION OF BONUS DECLARATION
---------------------------------------------------------------------------
Plan Year EVA $1,055.0
- Prior Year Actual EVA (6,445.0)
---------
= EVA Improvement 7,500.0
- Expected EVA Improvement 6,500.0
-------
= Excess EVA Improvement 1,000.0
/ EVA Interval 12,500.0
--------
= Performance Multiple 8.0%
+ Target Multiple 100.0%
------
= Bonus Multiple 108.0%
x Target Bonus 27,000.0
--------
= Bonus Declaration 29,160.0
[CHART]
<PAGE>
EXHIBIT 1 (CONTINUED)
CALCULATION OF BONUS PAID
---------------------------------------------------------------------------
Beginning Bonus Bank Balance $5,000.0
+ Plan Year Bonus Declaration 29,160.0
--------
= Available Bonus Bank Balance 34,160.0
- Target Bonus 27,000.0
--------
= Excess Bonus Bank Balance 7,160.0
Payment up to Target Bonus 27,000.0
+ 1/3 Excess Bonus Bank Balance 2,386.7
--------
= Plan Year Payment 29,386.7
Available Bonus Bank Balance 34,160.0
- Plan Year Payment 29,386.7
--------
= Ending Bonus Bank Balance 4,773.3
SAFETY-KLEEN CORP.
SUBSIDIARIES OF THE REGISTRANT
The following are wholly-owned subsidiaries of the Company and include
all subsidiaries other than those which, when considered in the aggregate as
a single subsidiary, would not constitute a significant subsidiary.
JURISDICTION OF
NAME INCORPORATION
Safety-Kleen Canada, Inc. Canada
Safety-Kleen U.K. Limited United Kingdom
Safety-Kleen Beteiligungs GmbH Germany
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CORPORATION'S CONSOLIDATED BALANCE SHEET AND
CONSOLIDATED STATEMENT OF EARNINGS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-06-1997
<CASH> 13,273
<SECURITIES> 0
<RECEIVABLES> 149,653
<ALLOWANCES> 8,056
<INVENTORY> 48,853
<CURRENT-ASSETS> 240,381
<PP&E> 878,272
<DEPRECIATION> 372,838
<TOTAL-ASSETS> 1,037,192
<CURRENT-LIABILITIES> 165,586
<BONDS> 246,080
0
0
<COMMON> 5,839
<OTHER-SE> 489,879
<TOTAL-LIABILITY-AND-EQUITY> 1,037,192
<SALES> 0
<TOTAL-REVENUES> 680,172
<CGS> 0
<TOTAL-COSTS> 507,143
<OTHER-EXPENSES> 96,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,362
<INCOME-PRETAX> 64,917
<INCOME-TAX> 24,620
<INCOME-CONTINUING> 40,297
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,297
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0
</TABLE>
[LOGO]
Safety-Kleen Corp.
1000 N. Randall Road
Elgin, IL 60123
(847) 697-8460
For further information:
FOR IMMEDIATE RELEASE CONTACT:
MAUREEN FISK
(847) 468-2452
SAFETY-KLEEN CORP. REPORTS
THIRD QUARTER 1997 OPERATING RESULTS
ELGIN, ILLINOIS -- SEPTEMBER 29, 1997 -- Safety-Kleen Corp. (NYSE:SK)
today announced results for its third quarter ended Sept. 6, 1997. Consolidated
revenue for the 12-week period was $230 million, an increase of 8% compared with
the similar period in 1996. Net earnings rose to $15.1 million, an increase of
8% over the $14.0 million reported in the third quarter of 1996. On a per share
basis, earnings were $0.26, compared with $0.24 in the same quarter one year
ago. The Company reported average shares outstanding were approximately 58.7
million.
For the first thirty-six weeks of 1997, consolidated revenue was $680
million, an increase of 9% compared with $626 million during the same period in
1996. Net earnings were $40.3 million, relatively unchanged from $40.7 million
during the same period one year ago. Year-to-date earnings per share were $0.69
compared with $0.70 per share in 1996.
Commenting on the results, Joseph Chalhoub, President and Chief Operating
Officer noted, "Excluding the impact of a stronger dollar, on a year-over-year
basis consolidated revenue for the quarter was up 9%. Our Industrial Services
revenue for the third quarter grew 11% and Automotive Services increased 10%
compared with the prior year quarter. We also saw Imaging reach break-even at
the gross profit line, another plus for this quarter," Chalhoub noted. The
Company's Oil Recovery Service ("ORS") also netted a small profit during the
third quarter on a revenue increase of 5%. "We continue to see earnings
improvement on a sequential
- MORE -
[logo] PRINTED ON RECYCLED PAPER.
<PAGE>
Safety-Kleen Corp.
ADD ONE
basis in our ORS business due primarily to the aggressive cost reduction program
we have in place," Chalhoub added.
Safety-Kleen also noted that its newer businesses, Imaging, Vacuum
Services, and Lab Pack contributed approximately $14 million in revenue during
the quarter and are on track to exceed their goal of $50 million in combined
revenue for 1997. "We expect these businesses to continue to grow rapidly for
the foreseeable future and ultimately contribute gross profit margins comparable
to our established businesses. At present, our Industrial Waste Services
business offers considerable growth opportunities for the Company and we are
testing new services that we hope to announce shortly," Chalhoub said.
Andrew Campbell, Chief Financial Officer of the Company added, "SG&A
expenses declined 4.4% from the previous quarter to approximately 13.6% of
revenue due in part to lower employee-related expenses. We hope to be able to
maintain this trend going forward. In addition, we recognized a one-time,
favorable tax credit during the quarter which reduced our effective tax rate to
37%. We expect the tax rate to return closer to the 38% level going forward,"
Campbell noted. In addition, the third quarter 1997 results include
non-recurring charges of $1.6 million after tax related to severance costs, and
also reflect the benefit of adjustments to previously established reserves of a
similar amount.
Safety-Kleen is a leading environmental and industrial service company
dedicated to helping businesses recycle and process both hazardous and
non-hazardous waste streams. Safety-Kleen shares are traded on the New York
Stock Exchange under the symbol "SK".
PRIVATE SECURITIES LITIGATION REFORM ACT DISCLOSURE
This press release contains various forward-looking statements, including
revenue and operating projections. There are many factors that could cause
actual results to differ materially, such as: adoption of new environmental laws
and regulations; general business conditions, such as the level of competition;
changes in demand for the Company's services and the price of petroleum based
products.
- END -
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF EARNINGS
(thousands, except per share amounts)
TWELVE THIRTY-SIX
WEEKS ENDED WEEKS ENDED
Sept. 6, Sept. 7, Sept. 6, Sept. 7,
1997 1996 1997 1996
Revenue
North America
<S> <C> <C> <C> <C>
Automotive/Retail Repair Services ..................... $ 61,958 $ 56,200 $ 181,834 $ 165,307
Industrial Services
Parts Cleaner ....................................... 31,981 29,641 94,747 87,274
Fluid Recovery ...................................... 37,960 33,166 111,063 96,587
Total Industrial .................................... 69,941 62,807 205,810 183,861
Oil Recovery Services ................................. 37,622 36,015 106,136 102,488
Other ................................................. 36,300 34,583 111,757 102,595
Total North America ................................... 205,821 189,605 605,537 554,251
Europe ................................................... 24,193 23,493 74,635 71,925
Consolidated Revenue ....................................... 230,014 213,098 680,172 626,176
Operating costs and expenses ............................... 171,352 155,274 507,143 455,885
Selling and administrative expenses ........................ 31,274 30,456 96,579 90,283
Operating income ........................................... 27,388 27,368 76,450 80,008
Interest income ............................................ 299 208 829 640
Interest expense ........................................... (3,707) (4,388) (12,362) (13,098)
Earnings before income taxes ............................... 23,980 23,188 64,917 67,550
Income taxes ............................................... 8,862 9,184 24,620 26,865
Net earnings ............................................... $ 15,118 $ 14,004 $ 40,297 $ 40,685
Earnings per common and common
equivalent share ......................................... $ 0.26 $ 0.24 $ 0.69 $ 0.70
Average number of common and
common
equivalent shares outstanding ............................ 58,665 58,330 58,490 58,078
Cash dividends per common share ............................ $ 0.09 $ 0.09 $ 0.27 $ 0.27
</TABLE>
- --------------------------------
1. The Company's interim reporting periods are twelve weeks each for the first
three reporting periods of the year and seventeen and sixteen weeks for the
fourth reporting period of 1997 and 1996, respectively.
