<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14C-5(D)(2))
[X] Definitive Information Statement
Safety-Kleen Corp.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LOGO
----------------
INFORMATION STATEMENT AND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 9, 1998
A Special Meeting (the "Special Meeting") of Shareholders ("Shareholders")
of Safety-Kleen Corp., a Wisconsin corporation ("Safety-Kleen"), will be held
at 10:00 a.m., Central Time, on January 9, 1998 at the Elgin Community College
Business Conference Center, for the sole purpose of voting on the Resolution
attached as Exhibit A ("Laidlaw Resolution") to the Notice ("Laidlaw Notice")
pursuant to Section 180.1150 of the Wisconsin Statutes, dated November 13,
1997. The Laidlaw Notice was delivered to Safety-Kleen by Laidlaw
Environmental Services, Inc., a Delaware corporation ("Laidlaw
Environmental"), and its direct and indirect subsidiaries, LES, Inc. a
Delaware corporation ("LESI"), and LES Acquisition, Inc., a Delaware
corporation ("Acquisition" and collectively with Laidlaw Environmental and
LESI, the "Laidlaw Parties").
The Laidlaw Resolution describes the action proposed to be taken at the
Special Meeting and the effect thereof. The Laidlaw Notice, the Laidlaw
Resolution, and the Preliminary Prospectus dated December 16, 1997, of Laidlaw
Environmental ("Preliminary Prospectus"), attached as Exhibit B to the Laidlaw
Notice, are each enclosed herewith. THE LAIDLAW RESOLUTION AND SUCH ACTION ARE
NOT A VOTE ON LAIDLAW ENVIRONMENTAL'S EXCHANGE OFFER PROPOSAL TO ACQUIRE
SAFETY-KLEEN, AS REFLECTED IN ITS PRELIMINARY PROSPECTUS.
The Board of Directors of Safety-Kleen has determined not to take a position
on the Laidlaw Resolution, and will not solicit proxies for the Special
Meeting. The Laidlaw Parties have filed preliminary proxy material for the
Special Meeting and, accordingly, Safety-Kleen expects that they will solicit
proxies in favor of the Laidlaw Resolution. In addition, of course,
shareholders may vote in person at the Special Meeting. Safety-Kleen expects
that the Laidlaw Parties will move that the Laidlaw Proposal be adopted at the
Special Meeting. Upon such motion, assuming a quorum is present, a vote will
be taken.
December 19, 1997 has been fixed as the record date ("Record Date") for the
determination of shareholders entitled to notice of and to vote at the Special
Meeting or any adjournments or postponements thereof. Only holders of record
of outstanding shares of Safety-Kleen common stock, par value $.10 per share
("Common Stock"), at the close of business on the Record Date are entitled to
notice of and to vote at the Special Meeting or any adjournments or
postponements thereof. As of December 10, 1997, there were 59,099,639 shares
of Common Stock outstanding. Record holders of Common Stock on the Record Date
are entitled to one vote per share. A list of shareholders of record as of the
Record Date will be available at the Special Meeting.
----------------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
1
<PAGE>
SAFETY-KLEEN ASSUMES NO RESPONSIBILITY FOR THE CONTENTS OF THE LAIDLAW
NOTICE, THE LAIDLAW RESOLUTION, OR THE PRELIMINARY PROSPECTUS, WHICH WERE
SUPPLIED TO SAFETY-KLEEN BY THE LAIDLAW PARTIES, AND WHICH SAFETY-KLEEN IS
LEGALLY REQUIRED TO TRANSMIT TO ITS SHAREHOLDERS UNDER SECTION 180.1150 OF THE
WISCONSIN STATUTES AND THE ORDER DATED DECEMBER 12, 1997, OF THE FEDERAL
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS IN SAFETY-KLEEN CORP. V.
LAIDLAW ENVIRONMENTAL SERVICES, CASE NO. 97 C 8003.
This Information Statement and Notice are being transmitted to Shareholders
on or about December 19, 1997.
PRINCIPAL EXECUTIVE OFFICES
The principal executive offices of Safety-Kleen are located at One Brinckman
Way, Elgin, Illinois 60123-7857.
REQUIRED VOTE
Under Safety-Kleen's by-laws, a majority of the outstanding shares of Common
Stock entitled to vote, represented in person or by proxy, will constitute a
quorum at the Special Meeting. Approval of the Laidlaw Resolution requires the
presence of a quorum and approval by a majority of the votes of shares present
in person or represented by proxy at the Special Meeting and entitled to vote
on the Laidlaw Resolution. Proxies and ballots marked "FOR" approval of the
Laidlaw Resolution, including executed proxies not marked with respect to the
Laidlaw Resolution, will be voted in favor of approval of the Laidlaw
Resolution. Accordingly, abstentions by those present or represented at the
meeting will have the same effect as a vote against the Laidlaw Resolution.
Broker non-votes are deemed not to have been entitled to vote on the Laidlaw
Resolution: accordingly, such unvoted shares will have no effect on the
outcome of the vote.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the Common Stock ownership as of November 18,
1997 of (i) shareholders who, to the knowledge of Safety-Kleen, owned
beneficially more than 5% of the outstanding shares of Common Stock; (ii) each
of Safety-Kleen's directors; (iii) each person who served as chief executive
officer of Safety-Kleen during the last fiscal year; (iv) the four most highly
compensated executive officers of Safety-Kleen serving at the end of the last
fiscal year; and (v) Safety-Kleen's directors and executive officers as a
group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME OWNED(1) SHARES(2)
---- ------------ -------------
FIVE PERCENT SHAREHOLDERS:
<S> <C> <C>
FMR Corp.
82 Devenonshire St., Boston, MA 02109............ 7,464,709* 12.74%
Ariel Capital Management
307 N. Michigan, Chicago, IL 60601............... 3,569,830* 6.09%
<CAPTION>
EMERY FAMILY GROUP:
<S> <C> <C>
Joan Emery Lammers
1801 Seminary St., Alton, IL 62002............... 1,948,673(3) 3.32%
William H. Emery II
11388 SW Riverwoods Rd., Portland, OR 97219...... 1,645,510 2.81%
Lucy T. Otzen
100 Anchor Drive, #472, N. Key Largo, FL 33037... 1,481,093(4) 2.53%
Edward W. Emery, Jr.
Route 18, Box 13, Bedford, IN 47421.............. 60,521(5) .11%
Circle L. Enterprises L.P.
Landmark Center, P.O. Box 1056 Lake Geneva, WI
53147............................................ 1,367,520(4) 1.33%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME OWNED(1) SHARES(2)
---- ------------ -------------
DIRECTORS AND EXECUTIVE OFFICERS
<S> <C> <C>
Donald W. Brinckman.............................. 907,100(6) 1.53%
Hyman K. Bielsky................................. 57,858(7) **
Roy D. Bullinger................................. 64,275(8) **
Robert J. Burian................................. 125,036(9) **
Andrew A. Campbell............................... -- **
Michael H. Carney................................ 137,244(10) **
Joseph Chalhoub.................................. 352,146(11) **
David A. Dattilo................................. 121,435(12) **
Lawrence Davenport............................... 8,158(13) **
Richard T. Farmer................................ 43,390(14) **
Scott E. Fore.................................... 92,260(15) **
Russell A. Gwillim............................... 198,493(16) **
F. Henry Habicht II.............................. 47,118(17) **
Edgar D. Jannotta................................ 67,500(14) **
John G. Johnson, Jr.............................. 99,179(18) **
Scott D. Krill................................... 4,362(19) **
Karl G. Otzen.................................... 1,481,093(4) 2.53%
Clark J. Rose.................................... 79,914(20) **
Laurence M. Rudnick.............................. 45,590(21) **
Paul D. Schrage.................................. 31,180(14) **
C. James Schulz.................................. 17,300(22) **
Marcia E. Williams............................... 12,250(23) **
Robert W. Willmschen............................. 148,755(24) **
W. Gordon Wood................................... 71,317(14) **
<CAPTION>
ALL DIRECTORS AND OFFICERS AS A GROUP
<S> <C> <C>
(24 persons)..................................... 4,212,953(25) 6.99%
</TABLE>
- --------
*Based on Schedule 13F filings at September 30, 1997. At November 30, 1997,
Ariel owned 1,970,061 shares based on its Schedule 13G filing.
**Denotes less than one percent of shares outstanding.
(1) Under regulations of the Securities and Exchange Commission, persons who
own or have the power to vote or dispose of shares, either alone or
jointly with others, are deemed to be the beneficial owners of such
shares. Such persons are also deemed to be the beneficial owners of shares
beneficially owned by certain close family members.
(2) Shares subject to options exercisable within 60 days of November 18, 1997
are considered outstanding for the purpose of determining the percent of
the class held by the holder of such option, but not for the purpose of
computing the percentage held by others.
(3) The shares shown for Joan Emery Lammers include 683,760 shares contributed
by or on behalf of Mrs. Lammers in December 1992 to Circle L Enterprises
L.P. (the "Circle L Limited Partnership"). See Note (4).
(4) Karl G. Otzen and Lucy T. Otzen (the "Otzens") are husband and wife. For
purposes of this table, each is deemed to own shares owned by the other,
and accordingly the same shares are shown opposite each of their names. In
December 1992, the Otzens caused 683,760 of the shares shown opposite each
of their names to be contributed to Circle L Limited Partnership. The
general partner which controls the Partnership is a corporation in which
Karl G. Otzen, Lucy T. Otzen,
3
<PAGE>
Joan Emery Lammers and her husband (the "Lammers") each own 25% of the
voting stock and each occupies one of the four positions on the Board of
Directors. Because the Otzens and Lammers share voting power over all of
the shares held by the Partnership, each of them may be deemed to "own"
all shares in the Partnership under the criteria governing this table. To
enhance clarity of presentation, however, the shares contributed to the
Partnership by Joan Emery Lammers are shown only opposite her name in the
table and the shares contributed by the Otzens are shown only opposite
their respective names. The shares shown opposite the Otzens' names also
include: 757,721 shares owned by trusts of which the Otzens are co-
trustees, 9,100 shares owned by a trust of which The Northern Trust
Company is trustee and 30,000 shares subject to options exercisable by
Karl G. Otzen within 60 days of November 18, 1997.
(5) All shares are owned by a trust of which The Northern Trust Company is
trustee.
(6) Includes 73 shares owned by his wife, 537,492 shares subject to options
exercisable within 60 days of November 18, 1997 and 1,260 shares held in
Safety-Kleen's 401(k) plan as to which he does not have voting control.
(7) Includes 53,487 shares subject to options exercisable within 60 days of
November 18, 1997 and 1,686 shares held in Safety-Kleen's 401(k) plan as
to which he does not have voting control.
(8) Includes 53,537 shares subject to options exercisable within 60 days of
November 18, 1997.
(9) Includes 121,175 shares subject to options exercisable within 60 days of
November 18, 1997.
(10) Includes 90,775 shares subject to options exercisable within 60 days of
November 18, 1997.
(11) Includes 275,000 shares owned by Breslube Industries, Ltd. of which 100%
is owned by Mr. Chalhoub. Also included are 59 shares owned by his wife,
75 shares owned by his son and 77,012 shares subject to options
exercisable within 60 days of November 18, 1997.
(12) Includes 90,090 shares subject to options exercisable within 60 days of
November 18, 1997.
(13) Includes 8,137 shares subject to options exercisable within 60 days of
November 18, 1997 and 21 shares held in Safety-Kleen's 401(k) plan as to
which he does not have voting control.
(14) Includes 30,000 shares subject to options exercisable within 60 days of
November 18, 1997.
(15) Includes 89,999 shares subject to options exercisable within 60 days of
November 18, 1997 and 332 shares held in Safety-Kleen's 401(k) plan as to
which he does not have voting control.
(16) Includes 30,223 shares owned by his wife and 30,000 shares subject to
options exercisable within 60 days of November 18, 1997. Mr. Gwillim is
also a co-trustee for 45,827 shares held in an irrevocable trust for
which he has no beneficial ownership; such shares are not included in the
table.
(17) Includes 44,500 shares subject to options exercisable within 60 days of
November 18, 1997 and 218 shares held in Safety-Kleen's 401(k) plan as to
which he does not have voting control.
(18) Includes 700 shares owned by his wife, 85,375 shares subject to options
exercisable within 60 days of November 18, 1997 and 532 shares held in
the Company's 401(k) plan as to which he does not have voting control.
Mr. Johnson resigned from the Company on August 8, 1997.
(19) Includes 3,974 shares subject to options exercisable within 60 days of
November 18, 1997 and 288 shares held in Safety-Kleen's 401(k) plan as to
which he does not have voting control.
(20) Includes 68,157 shares subject to options exercisable within 60 days of
November 18, 1997.
(21) Includes 43,849 shares subject to options exercisable within 60 days of
November 18, 1997.
(22) Includes 15,375 shares subject to options exercisable within 60 days of
November 18, 1997.
(23) Includes 11,250 shares subject to options exercisable within 60 days of
November 18, 1997.
4
<PAGE>
(24) Includes 99,826 shares subject to options exercisable within 60 days of
November 18, 1997. Mr. Wilmschen resigned from the Company on July 28,
1997.
(25) Includes 1,674,010 shares subject to options exercisable within 60 days of
November 18, 1997 and 4,337 shares held in Safety-Kleen's 401(k) plan as
to which they do not have voting control.
* * *
By Order of the Board of Directors
Scott Krill
Secretary
December 19, 1997
Elgin, Illinois
THIS INFORMATION STATEMENT AND NOTICE IS NOT A SOLICITATION OF PROXIES
5
<PAGE>
NOTICE PURSUANT TO SECTION 180.1150
OF THE WISCONSIN STATUTES
November 13, 1997
This Notice is delivered to Safety-Kleen Corp., a Wisconsin corporation
("Safety-Kleen"), by Laidlaw Environmental Services, Inc., a Delaware
corporation ("Laidlaw Environmental"), and its direct and indirect
subsidiaries, LES, Inc., a Delaware corporation ("LESI"), and LES Acquisition,
Inc., a Delaware corporation ("Acquisition" and collectively with Laidlaw
Environmental and LESI, the "Laidlaw Parties"), pursuant to Section 180.1150 of
the Wisconsin Statutes.
Pursuant to Section 180.1150(4) of the Wisconsin Statutes, if Safety-Kleen
is a "resident domestic corporation" (as defined in Section 180.1150(1)(c) of
the Wisconsin Statutes), the Laidlaw Parties desire a shareholder vote under
subsection (5) of Section 180.1150 of the Wisconsin Statutes and hereby request
that Safety-Kleen submit for the approval of its shareholders the resolution
attached hereto as Exhibit A at a meeting called for this purpose no less than
thirty (30) days and no more than fifty (50) days after the date of this Notice.
Pursuant to Section 180.1150(4) of the Wisconsin Statutes, the Laidlaw
Parties state the following:
(a) The identity of the persons filing this notice are Laidlaw
Environmental Services, Inc., a Delaware corporation, and its direct
and indirect subsidiaries LES, Inc., a Delaware corporation, and LES
Acquisition, Inc., a Delaware corporation.
(b) The resolution attached hereto as Exhibit A and this Notice are
submitted to Safety-Kleen pursuant to Section 180.1150(4) of the
Wisconsin Statutes.
(c) The Laidlaw Parties beneficially own 601.100 shares of Safety-Kleen
Common Stock as of the date hereof and no such shares are owned of
record.
(d) The Laidlaw Parties propose to acquire, and for purposes of Section
180.1150 of the Wisconsin Statutes (if Safety-Kleen is a "resident
domestic corporation") are seeking approval of the acquisition of, up
to 100% of the issued and outstanding equity securities of Safety-
Kleen.
(e) The circumstances, terms and conditions under which the Safety-Kleen
equity securities are proposed to be acquired by the Laidlaw Parties,
including the source of funds or other consideration and other details
of the financial arrangements of the transaction, are set forth in the
preliminary prospectus attached hereto as Exhibit B. Although the
Laidlaw Parties have no present intent to purchase equity securities
of Safety-Kleen otherwise than as described in Exhibit B, they reserve
the right to acquire such securities by any other lawful means.
<PAGE>
(f) The terms of the proposed acquisition, including the source of funds
or other consideration and other details of the financial arrangements
of the transaction, are included in the preliminary prospectus
attached hereto as Exhibit B. In addition to the information contained
therein, Safety-Kleen is advised that the Laidlaw Parties have no
present plans or proposals to take any of the actions referred to in
clause (f) of subsection 4 of Section 180.1150 of the Wisconsin
Statutes except as noted in the preliminary prospectus and except that
the headquarters of Safety-Kleen will be moved to Columbia, South
Carolina and the board of directors of the combined Safety-
Kleen/Laidlaw Environmental business will consist of management of the
combined entity and, after Laidlaw Environmental has the opportunity
to assess Safety-Kleen's business, there may be changes in Safety-
Kleen's management.
LAIDLAW ENVIRONMENTAL
SERVICES, INC.
LES, INC.
LES ACQUISITION, INC.
<PAGE>
EXHIBIT A TO NOTICE PURSUANT TO
SECTION 180.1150 OF THE WISCONSIN STATUTES
NOVEMBER 13, 1997
RESOLUTION TO BE SUBMITTED TO THE
SHAREHOLDERS OF SAFETY-KLEEN CORP.
WHEREAS, pursuant to Section 180.1150 of the Wisconsin Statutes, subject to
certain exceptions, the voting power of any voting securities held by a person
that holds more than 20% of the outstanding voting securities of a "resident
domestic corporation" (as defined in Section 180.1150(1)(c) of the Wisconsin
Statutes) shall, for the voting securities in excess of 20% of the voting
securities, be limited to 10% of the full voting power of such securities (the
"Voting Limitation");
WHEREAS, the regular voting power with respect to such shares may be
restored by an affirmative vote of a majority of the resident domestic
corporation's shares represented at a meeting of the issuer's shareholders at
which a quorum is present and entitled to vote thereon;
WHEREAS, Laidlaw Environmental Services, Inc., a Delaware corporation
("Laidlaw Environmental"), and its direct and indirect subsidiaries LES, Inc., a
Delaware corporation ("LESI"), and LES Acquisition, Inc., a Delaware corporation
("Acquisition" and collectively with Laidlaw Environmental and LESI, the
"Laidlaw Parties"), have publicly announced their intention to make an offer to
acquire all of the issued and outstanding equity securities (the "Shares") of
Safety-Kleen Corp., a Wisconsin corporation (the "Corporation"); and
WHEREAS, the obligation of the Laidlaw Parties to acquire any Shares will
be subject, among other things, to the Laidlaw Parties being satisfied that the
Voting Limitation of Section 180.1150 is not applicable to Shares to be acquired
pursuant to the offer or that full voting rights for all Shares to be acquired
by the Laidlaw Parties have been restored in accordance with Section 180.1150,
and accordingly the Laidlaw Parties have requested that, if the Corporation is a
"resident domestic corporation" subject to Section 180.1150 of the Wisconsin
Statutes, the Corporation's shareholders vote to restore the voting power with
respect to the Shares in accordance with Section 180.1150(3)(i) of the Wisconsin
Statutes.
NOW THEREFORE, IT IS RESOLVED: That regular voting power shall be restored
for all Shares now held or hereafter acquired by any of the Laidlaw Parties in
accordance with Section 180.1150(5)(c) of the Wisconsin Statutes.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER , 1997.
PROSPECTUS
OFFER TO EXCHANGE EACH OUTSTANDING
COMMON SHARE
(INCLUDING THE ASSOCIATED SHARE PURCHASE RIGHTS)
OF
SAFETY-KLEEN CORP.
FOR
$15.00 NET PER SHARE IN CASH
(SUBJECT TO REDUCTION AS DESCRIBED BELOW)
AND
$15.00 OF COMMON STOCK
(SUBJECT TO VARIATION AS DESCRIBED BELOW)
OF
LAIDLAW ENVIRONMENTAL SERVICES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE"). SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY
TIME PRIOR TO THE EXPIRATION DATE.
Laidlaw Environmental Services, Inc., a Delaware corporation ("Laidlaw
Environmental"), and LES Acquisition, Inc., a Delaware corporation and indirect
wholly-owned subsidiary of Laidlaw Environmental ("LES Acquisition"), hereby
offer, upon the terms and subject to the conditions set forth herein and in the
related Letter of Transmittal (collectively, the "Laidlaw Environmental Offer"),
to exchange $15.00 net in cash (subject to reduction as described herein, the
"Cash Consideration") and that number of shares of Common Stock, par value $1.00
per share, of Laidlaw Environmental ("Laidlaw Environmental Common Stock"),
equal to the Exchange Ratio (as defined herein) (the "Stock Consideration" and,
together with the Cash Consideration, the "Laidlaw Environmental Offer
Consideration"), for each outstanding Common Share, par value $0.10 per share
(each, a "Share" and collectively, the "Shares"), of Safety-Kleen Corp., a
Wisconsin corporation ("Safety-Kleen"), including (unless and until Laidlaw
Environmental and LES Acquisition declare that the Rights Condition (as defined
below) is satisfied) the associated Common Share Purchase Rights (each, a
"Right" and collectively, the "Rights") issued pursuant to the Rights Agreement,
dated as of November 9, 1988, between Safety-Kleen and First National Bank of
Chicago, as Rights Agent, as amended by a First Amendment to Rights Agreement,
dated as of August 10, 1990 and by a Second Amendment to Rights Agreement, dated
as of November 20, 1997 (as so amended, the "Rights Agreement"), validly
tendered on or prior to the Expiration Date and not properly withdrawn. Unless
the context otherwise requires and unless and until the Rights are redeemed, all
references to Shares shall include the associated Rights. All references herein
to Rights shall include all benefits that may inure to holders of the Rights
pursuant to the Rights Agreement.
(Continued on following page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DEALER MANAGER FOR THE OFFER IS:
BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
"Exchange Ratio" means the quotient (rounded to the nearest 1/100,000)
determined by dividing $15.00 by the weighted average trading prices for Laidlaw
Environmental Common Stock (as reported on the New York Stock Exchange, Inc.
(the "NYSE") Composite Transactions reporting system as published in The Wall
Street Journal or, if not published therein, in another authorative source) (the
"Laidlaw Environmental Average Price") for ten NYSE trading days (each, a
"Trading Day") selected by lot from the twenty Trading Days ending three
business days immediately prior to the Expiration Date, provided, that the
Exchange Ratio shall not be less than 2.80 nor greater than 3.50. See "The
Laidlaw Environmental Offer -- The Exchange Ratio" for a complete discussion of
the Exchange Ratio.
The Cash Consideration to be paid pursuant to the Laidlaw Environmental
Offer shall be reduced by the aggregate amount of any termination fees or
expenses paid or reimbursed (or payable or reimbursable) by Safety-Kleen
pursuant to that certain Agreement and Plan of Merger, dated as of November 20,
1997 (the "Buyout Merger Agreement"), by and among SK Parent Corp. ("Parent"),
SK Acquisition Corp. ("Purchaser") and Safety-Kleen and (ii) any incremental
costs, including the cost of new severance arrangements and other expenses
Safety-Kleen may incur in connection with the Buyout Merger Agreement (such
fees, expenses and other costs, the "Buyout Proposal Expenses"). See "The
Laidlaw Environmental Offer -- The Cash Consideration" for a complete discussion
of the Cash Consideration.
LAIDLAW ENVIRONMENTAL'S OBLIGATION TO EXCHANGE THE LAIDLAW ENVIRONMENTAL
OFFER CONSIDERATION FOR SHARES PURSUANT TO THE LAIDLAW ENVIRONMENTAL OFFER IS
CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR, WHERE APPLICABLE,
WAIVER OF THE FOLLOWING CONDITIONS: (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES WHICH, TOGETHER WITH
SHARES OWNED BY LAIDLAW ENVIRONMENTAL AND ITS AFFILIATES, CONSTITUTE AT LEAST
TWO THIRDS OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS
(AS THOUGH ALL OPTIONS OR OTHER SECURITIES CONVERTIBLE INTO OR EXERCISABLE OR
EXCHANGEABLE FOR SHARES (OTHER THAN THE RIGHTS) HAD BEEN SO CONVERTED, EXERCISED
OR EXCHANGED) AS OF THE DATE THE SHARES ARE ACCEPTED FOR EXCHANGE BY LAIDLAW
ENVIRONMENTAL PURSUANT TO THE LAIDLAW ENVIRONMENTAL OFFER (THE "MINIMUM TENDER
CONDITION"), (II) THE SAFETY-KLEEN BOARD HAVING REDEEMED THE RIGHTS OR AMENDED
THE RIGHTS AGREEMENT SO THAT THE RIGHTS ARE INAPPLICABLE TO THE ACQUISITION OF
SHARES PURSUANT TO THE LAIDLAW ENVIRONMENTAL OFFER, OR LAIDLAW ENVIRONMENTAL
BEING OTHERWISE SATISFIED IN ITS SOLE DISCRETION THAT THE RIGHTS ARE INVALID OR
ARE NOT APPLICABLE TO THE ACQUISITION OF SHARES PURSUANT TO THE LAIDLAW
ENVIRONMENTAL OFFER AND THE PROPOSED MERGER (THE "RIGHTS PLAN CONDITION"), AND
(III) LAIDLAW ENVIRONMENTAL BEING SATISFIED, IN ITS SOLE DISCRETION, EITHER THAT
THE PROVISIONS OF SECTION 180.1141 AND SECTION 180.1150 OF THE WISCONSIN
STATUTES (THE "WISCONSIN STATUTES") ARE INAPPLICABLE TO LAIDLAW ENVIRONMENTAL,
LES ACQUISITION AND THE TRANSACTIONS CONTEMPLATED HEREIN, OR THAT (A) FULL
VOTING RIGHTS FOR ALL SHARES TO BE ACQUIRED BY LAIDLAW ENVIRONMENTAL AND LES
ACQUISITION PURSUANT TO THE LAIDLAW ENVIRONMENTAL OFFER HAVE BEEN RESTORED BY
THE SHAREHOLDERS OF SAFETY-KLEEN PURSUANT TO THE WISCONSIN STATUTES, AND (B) THE
WISCONSIN STATUTES WILL NOT PROHIBIT FOR ANY PERIOD OF TIME THE CONSUMMATION OF
THE MERGER OR ANY OTHER "BUSINESS COMBINATION" (AS DEFINED IN SUCH STATUTES)
INVOLVING SAFETY-KLEEN AND LAIDLAW ENVIRONMENTAL OR LES ACQUISITION, OR ANY OF
THEIR RESPECTIVE AFFILIATES (THE "WISCONSIN STATUTORY CONDITION"), THE MINIMUM
TENDER CONDITION, THE RIGHTS PLAN CONDITION, THE WISCONSIN STATUTORY CONDITION
AND THE OTHER CONDITIONS SET FORTH UNDER THE CAPTION "THE LAIDLAW ENVIRONMENTAL
OFFER -- CONDITIONS OF THE LAIDLAW ENVIRONMENTAL OFFER -- CERTAIN OTHER
CONDITIONS OF THE LAIDLAW ENVIRONMENTAL OFFER" SHALL BE REFERRED TO COLLECTIVELY
AS THE "LAIDLAW
ii
<PAGE>
ENVIRONMENTAL OFFER CONDITIONS." TERMS USED BUT NOT DEFINED ABOVE ARE DEFINED
HEREINAFTER.
THIS PROSPECTUS AND THE LAIDLAW ENVIRONMENTAL OFFER MADE HEREBY DO NOT
CONSTITUTE A SOLICITATION OF ANY PROXIES. ANY SUCH SOLICITATION WILL BE MADE
ONLY PURSUANT TO SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF
SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT").
---------------------
Laidlaw Environmental is unable to predict the amount of time necessary to
obtain, among other things, the shareholder, governmental and regulatory
approvals and consents required to complete the Laidlaw Environmental Offer and
the transactions contemplated herein. However, the time necessary to obtain such
approvals and consents may extend beyond the Expiration Date, and Laidlaw
Environmental reserves the right to extend the Laidlaw Environmental Offer from
time to time in its sole discretion.
---------------------
IMPORTANT
Any Safety-Kleen Shareholder desiring to tender all or any portion of his
or her Shares and the associated Rights should either (a) complete and sign the
Letter of Transmittal or a facsimile copy thereof in accordance with the
instructions in the Letter of Transmittal, and mail or deliver the Letter of
Transmittal or such facsimile and any other required documents to IBJ Schroder
Bank & Trust Company (the "Exchange Agent") and either deliver the certificates
for such Shares and, if separate, certificates for the Rights to the Exchange
Agent along with the Letter of Transmittal, deliver such Shares (and Rights, if
applicable) pursuant to the procedures for book-entry transfer set forth herein
(in the case of Rights, only if such procedures are available) or comply with
the guaranteed delivery procedures set forth below or (b) request his or her
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such Safety-Kleen Shareholder. Any Safety-Kleen Shareholder
having Shares and, if applicable, Rights registered in the name of a broker,
dealer, commercial bank, trust company or other nominee is urged to contact such
broker, dealer, commercial bank, trust company or other nominee if he or she
desires to tender such Shares and, if applicable, Rights.
Safety-Kleen Shareholders will be required to tender one Right for each
Share tendered in order to effect a valid tender of Shares, unless and until
Laidlaw Environmental declares that the Rights Plan Condition is satisfied or
waived. Unless and until the Safety-Kleen Distribution Date (as defined herein)
occurs, a tender of Shares will constitute a tender of the associated Rights.
A Safety-Kleen Shareholder that desires to tender Shares and, if
applicable, Rights and whose certificates for such Shares and, if applicable,
Rights are not immediately available or who cannot comply with the procedures
for book-entry transfer on a timely basis or who cannot deliver all required
documents to the Exchange Agent prior to the Expiration Date, may tender such
Shares and, if applicable, Rights, by following the procedure for guaranteed
delivery.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Prospectus. Requests for additional
copies of this Prospectus and the Letter of Transmittal may be directed to the
Information Agent or to brokers, dealers, commercial banks or trust companies.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE LAIDLAW ENVIRONMENTAL OFFER OTHER THAN
THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY LAIDLAW ENVIRONMENTAL OR BEAR, STEARNS & CO. INC. (THE
"DEALER MANAGER"). THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A
SOLICITATION TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THE LAIDLAW ENVI-
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<PAGE>
RONMENTAL OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON
BEHALF OF, SAFETY-KLEEN SHAREHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR
ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. HOWEVER, LAIDLAW ENVIRONMENTAL MAY, IN ITS SOLE DISCRETION, TAKE
SUCH ACTION AS IT MAY DEEM NECESSARY TO MAKE THE LAIDLAW ENVIRONMENTAL OFFER IN
ANY SUCH JURISDICTION AND EXTEND THE LAIDLAW ENVIRONMENTAL OFFER TO SAFETY-KLEEN
SHAREHOLDERS IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY EXCHANGE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF LAIDLAW ENVIRONMENTAL OR SAFETY-KLEEN
SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED OR THE DATE HEREOF.
IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE
THE LAIDLAW ENVIRONMENTAL OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE
LAIDLAW ENVIRONMENTAL OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF LAIDLAW
ENVIRONMENTAL BY BEAR, STEARNS & CO. INC. AS DEALER MANAGER, OR ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... v
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. vi
SAFETY-KLEEN INFORMATION.................................... vii
PROSPECTUS SUMMARY.......................................... 1
RISK FACTORS................................................ 18
REASONS FOR THE LAIDLAW ENVIRONMENTAL OFFER................. 21
BACKGROUND OF THE LAIDLAW ENVIRONMENTAL OFFER............... 22
THE LAIDLAW ENVIRONMENTAL OFFER............................. 30
COMPARISON OF LAIDLAW ENVIRONMENTAL OFFER AND BUYOUT
PROPOSAL.................................................. 52
THE MERGER.................................................. 53
INFORMATION REGARDING SAFETY-KLEEN.......................... 54
INFORMATION REGARDING LAIDLAW ENVIRONMENTAL................. 55
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 62
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION............................................... 64
DESCRIPTION OF LAIDLAW ENVIRONMENTAL CAPITAL STOCK.......... 68
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES AND LAIDLAW
ENVIRONMENTAL COMMON STOCK................................ 69
COMPARISONS OF DELAWARE AND WISCONSIN LAW -- SIMILARITIES... 69
COMPARISON OF DELAWARE AND WISCONSIN LAW -- DIFFERENCES..... 72
MARKET PRICES............................................... 76
VALIDITY OF LAIDLAW ENVIRONMENTAL COMMON STOCK.............. 77
EXPERTS..................................................... 77
SCHEDULE A -- DIRECTORS AND EXECUTIVE OFFICERS OF LAIDLAW
ENVIRONMENTAL............................................. A-1
SCHEDULE B -- OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL
OWNERS AND SAFETY-KLEEN MANAGEMENT........................ B-1
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
AVAILABLE INFORMATION
Laidlaw Environmental and Safety-Kleen are subject to the informational
requirements of the Exchange Act, and in accordance therewith file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by Laidlaw Environmental and Safety-Kleen with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the public reference facilities in the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of information may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Because Laidlaw Environmental and Safety-Kleen each file certain
documents electronically with the Commission, reports, proxy and information
statements and other information regarding Laidlaw Environmental and
Safety-Kleen may also be accessed through the Commission's Web site,
http//:www.sec.gov. Laidlaw Environmental Common Stock and the Shares are listed
and traded on the NYSE, and Laidlaw Environmental Common Stock is also traded on
the Pacific Exchange, Inc. Reports, proxy statements and other information filed
by Laidlaw Environmental and Safety-Kleen with the Commission may be inspected
at the
v
<PAGE>
offices of the NYSE, 20 Broad Street, New York, New York 10005, and in the case
of Laidlaw Environmental, at the offices of the Pacific Exchange at 301 Pine
Street, San Francisco, California 94104.
This Prospectus does not contain all of the information set forth in the
Registration Statement on Form S-4 (together with all amendments and exhibits
thereto, the "Registration Statement"), covering the Laidlaw Environmental
Common Stock offered hereby, which has been filed with the Commission, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission, and to which portions reference is hereby made for further
information with respect to Laidlaw Environmental and Safety-Kleen and the
securities offered hereby. Statements contained herein concerning the provisions
of certain documents are not necessarily complete and, in each instance,
reference is made to the copies of such documents filed as exhibits to the
Registration Statement or otherwise filed with the Commission, for a more
complete description of the matter involved. Each such statement is qualified in
its entirety by such reference.
Not later than the date of commencement of the Laidlaw Environmental Offer,
Laidlaw Environmental and LES Acquisition will file with the Commission a
statement on Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act
furnishing certain information with respect to the Laidlaw Environmental Offer.
Such Schedule and any amendments thereto should be available for inspection and
copying as set forth above (except that such Schedules and any amendments
thereto will not be available at the regional offices of the Commission).
Pursuant to Rule 409 promulgated under the Securities Act and Rule 12b-21
promulgated under the Exchange Act, Laidlaw Environmental will request that
Safety-Kleen and its independent public accountants, Arthur Andersen LLP,
provide to Laidlaw Environmental the information required for complete
disclosure concerning the business, operations, financial condition and
management of Safety-Kleen. Laidlaw Environmental will provide any and all
information that it receives from Safety-Kleen or Arthur Andersen LLP prior to
the expiration of the Laidlaw Environmental Offer and that Laidlaw Environmental
deems material, reliable and appropriate in a subsequently prepared amendment or
supplement hereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS
THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST TO: CORPORATE SECRETARY, LAIDLAW
ENVIRONMENTAL SERVICES, INC., 1301 GERVAIS STREET, SUITE 300, COLUMBIA, SOUTH
CAROLINA 29201. TELEPHONE REQUESTS MAY BE DIRECTED TO THE CORPORATE SECRETARY'S
DEPARTMENT AT (803) 933-4200. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, ANY REQUEST FOR DOCUMENTS SHOULD BE SUBMITTED NOT LATER THAN FIVE
BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
The following documents filed with the Commission by Laidlaw Environmental
(File No. 1-8368) are incorporated herein by reference:
(a) Laidlaw Environmental Form 10-K for the fiscal year ended August
31, 1997 (the "Laidlaw Environmental 1997 Form 10-K");
(b) Laidlaw Environmental Proxy Statement, dated October 28, 1997, for
Laidlaw Environmental's annual meeting to be held on November 25, 1997 (the
"Laidlaw Environmental 1997 Annual Meeting Proxy Statement");
(c) Laidlaw Environmental Current Report on Form 8-K, dated November
5, 1997, two Current Reports on Form 8-K, dated November 14, 1997, a
Current Report on Form 8-K, dated November 19, 1997, a Current Report on
Form 8-K, dated November 21, 1997, a Current Report on Form 8-K, dated
November 25, 1997, and a Current Report on Form 8-K, dated December 8, 1997
(the "Laidlaw Environmental Forms 8-K");
vi
<PAGE>
(d) Laidlaw Environmental Proxy Statement, dated December 2, 1997, as
amended, for Safety-Kleen's Special Meeting to be held on January 9, 1998;
and
(e) Laidlaw Environmental Proxy Statement, dated December 16, 1997,
for Safety-Kleen's Special Meeting to be held on ,1998.
The following documents filed with the Commission by Safety-Kleen (File No.
1-6513) are incorporated herein by reference:
(a) Safety-Kleen Form 10-K for the fiscal year ended December 28, 1996
(the "Safety-Kleen 1996 Form 10-K") (except for the report of
Safety-Kleen's independent auditors contained therein which is not
incorporated herein by reference because the consent of Safety-Kleen's
independent auditors has not yet been obtained);
(b) Safety-Kleen Forms 10-Q for the quarterly periods ending March 22,
June 14 and September 6, 1997 (the "Safety-Kleen Forms 10-Q");
(c) Safety-Kleen Proxy Statement, dated March 28, 1997, for the
Safety-Kleen annual meeting held May 9, 1997 (the "Safety-Kleen Annual
Meeting Proxy Statement");
(d) Safety-Kleen Current Reports on Form 8-K, dated August 8, 1997,
November 18, 1997 and November 21, 1997 (the "Safety-Kleen Forms 8-K"); and
(e) Safety-Kleen Proxy Statement, dated November 26, 1997, as amended,
for Safety-Kleen's Special Meeting to be held on , 1998.
All documents filed by either Laidlaw Environmental or Safety-Kleen
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date hereof and prior to the date the Laidlaw Environmental Offer is
terminated or the Shares are accepted for exchange shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of such
filing. See "Available Information." Any statement contained herein or in a
document incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part hereof, except as so modified or superseded.
This Prospectus contains certain analyses and statements with respect to
the Financial Condition, Results of Operations and Business of Laidlaw
Environmental following the consummation of the Laidlaw Environmental Offer and
the Merger, including statements relating to the cost savings or synergies that
may be realized from the Merger. See "Prospectus Summary -- Reasons for the
Laidlaw Environmental Offer -- Enhanced Business Opportunities" and "Background
of Laidlaw Environmental Offer." These analyses and statements include
forward-looking statements with respect to, among other things, expected cost
savings from the Merger, future business decisions, and other uncertainties
which, although considered reasonable by Laidlaw Environmental, are subject to
uncertainties and involve matters that are beyond Laidlaw Environmental's
control and difficult to predict. See "Summary -- Cautionary Statement Regarding
Forward-Looking Statements." Further information and other factors which could
affect the financial results of Laidlaw Environmental after the Merger are
included in the filings with the Securities and Exchange Commission incorporated
by reference herein.
SAFETY-KLEEN INFORMATION
While Laidlaw Environmental has included information concerning
Safety-Kleen insofar as it is known or reasonably available to Laidlaw
Environmental, Safety-Kleen is not affiliated with Laidlaw Environmental and
Safety-Kleen has not to date permitted access by Laidlaw Environmental to
Safety-Kleen's books and records for the purpose of preparing this Prospectus.
Therefore, information concerning Safety-Kleen that has not been made public was
not available to Laidlaw Environmental for the purpose of preparing this
Prospectus. Although Laidlaw Environmental has no knowledge that would indicate
that statements relating to Safety-Kleen contained or incorporated by reference
in this Prospectus in reliance upon publicly available information are
inaccurate or incomplete, Laidlaw Environmental was not involved in the
preparation of such information and statements and, for the foregoing reasons,
is not in a position to verify any such information or statements.
vii
<PAGE>
PROSPECTUS SUMMARY
The information below is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus,
including the documents incorporated in this Prospectus by reference.
Safety-Kleen Shareholders are urged to read this Prospectus and the attachments
hereto, and the documents incorporated herein by reference, in their entirety.
As used in this Prospectus, the terms "Laidlaw Environmental" and "Safety-Kleen"
refer to such entities and, unless the context otherwise requires, their
subsidiaries. Unless otherwise indicated, all information set forth in this
Prospectus assumes (i) that the Buyout Proposal Expenses are not paid and do not
result in a reduction in the Cash Consideration paid to the Safety-Kleen
Stockholders and (ii) that the Laidlaw Environmental Average Price is equal to
or greater than $4.28571 and less than or equal to $5.35714. If the Buyout
Proposal Expenses are paid, assuming Buyout Proposal Expenses of $75,000,000
($50,000,000 breakup fee paid to the Buyout Group and $25,000,000 reimbursed to
the Buyout Group), the Cash Consideration would be reduced by $ per
Share.
LAIDLAW ENVIRONMENTAL BUSINESS
Laidlaw Environmental provides hazardous and industrial waste management
services throughout North America. Laidlaw Environmental collects, transports,
treats and disposes of waste by incineration, landfilling and other methods at
its facilities located in the United States and Canada. Laidlaw Environmental
also operates waste processing, recycling and repackaging facilities and has
analytical laboratories at its facilities in several states.
On May 15, 1997, pursuant to a February 6, 1997 stock purchase agreement
(the "Stock Purchase Agreement") between Rollins Environmental Services, Inc.
("Rollins") and Laidlaw Inc. ("Laidlaw"), Rollins acquired the hazardous and
industrial waste operations of Laidlaw ("Old LESI") (the "Acquisition"). The
Acquisition was accounted for as a reverse acquisition using the purchase method
of accounting. Rollins issued 120 million common shares and a $350 million 5%
subordinated convertible pay-in-kind debenture, and paid $349.1 million in cash
($400 million, less assumed debt of $50.9 million), to Laidlaw to consummate the
Acquisition. Concurrent with the closing of the Acquisition, the continuing
legal entity changed its name from Rollins Environmental Services, Inc. to
Laidlaw Environmental Services, Inc. As a result of the Acquisition, Laidlaw
owns approximately 67% of the issued common shares of Laidlaw Environmental.
Laidlaw Environmental accordingly adopted Old LESI's fiscal year-end of August
31.
Old LESI consisted of all direct and indirect subsidiaries of Laidlaw
engaged in the hazardous and industrial waste business, other than JTM
Industries, Inc. and its subsidiary, KBK Enterprises, Inc. Prior to the
Acquisition, Old LESI provided hazardous and industrial waste services from 85
service locations in 26 states and seven Canadian provinces. Although Old LESI
was a conglomerate of separate entities, these entities conducted such services
primarily under the name "Laidlaw Environmental Services."
Laidlaw Environmental, in providing hazardous and industrial waste
services, is engaged in five primary lines, or classes, of business: (a) service
center; (b) landfill; (c) incineration; (d) transportation; and (e) specialty
services, including polychlorinated biphenyl ("PCB") management, wastewater
treatment and other specialty services.
Laidlaw Environmental's revenues and income are derived from one industry
segment principally in the United States, which includes the collection,
transportation, processing/recovery and disposal of hazardous and industrial
wastes. This segment renders services to a variety of commercial, industrial,
governmental and residential customers. Substantially all revenues represent
income from unaffiliated customers.
Laidlaw Environmental was incorporated in Delaware in 1968. Its principal
executive office is located at 1301 Gervais Street, Suite 300, Columbia, South
Carolina 29201 and its telephone number is (803) 933-4200.
LES Acquisition is a newly formed Delaware corporation, indirectly wholly
owned by Laidlaw Environmental. LES Acquisition has no operations other than in
connection with Laidlaw Environmental's efforts to acquire Safety-Kleen.
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<PAGE>
SAFETY-KLEEN BUSINESS
The following information concerning Safety-Kleen is excerpted from the
Safety-Kleen 1996 Form 10-K and other publicly available information.
Safety-Kleen was incorporated in July 1963 under the laws of the State of
Wisconsin. Safety-Kleen's principal executive office is located at 1 Brinckman
Way, Elgin, Illinois 60123, and its telephone number is (847) 697-8460.
Safety-Kleen groups its operations geographically into North America and
Europe. Safety-Kleen further segregates its North American services into four
broad categories: industrial services; automotive/retail repair services; oil
recovery services; and other services. Safety-Kleen performed nearly 5 million
individual services and reclaimed more than 300 million gallons of contaminated
fluid through a network of 230 branches worldwide in 1996. Safety-Kleen collects
and recycles used products at thirteen recycling centers, two lube oil
refineries, and three fuel blending facilities.
Safety-Kleen operates in the continental United States, Canada, the United
Kingdom, the Republic of Ireland, Puerto Rico, Belgium, France, Italy, Spain and
Germany. Safety-Kleen has licensee operations in Japan and Korea.
On August 8, 1997 Safety-Kleen announced the resignation of John G.
Johnson, Jr., President and Chief Executive Officer of Safety-Kleen. Donald W.
Brinckman, Chairman of Safety-Kleen's Board of Directors, who had previously
served as Safety-Kleen's Chief Executive Officer from 1968 until December 31,
1994, was appointed Chief Executive Officer. Safety-Kleen also announced that
its Board of Directors had engaged the services of William Blair & Company
("William Blair") to act as advisor to Safety-Kleen and manage the process of
exploring strategic options for enhancing shareholder value.
On November 20, 1997, Safety-Kleen announced that it had entered into the
Buyout Merger Agreement with Parent and Purchaser, two newly-formed affiliates
of Philip Services Corp. ("Philip Services"), Apollo Advisors, L.P. ("Apollo")
and Blackstone Management Associates III, L.P. ("Blackstone" and, together with
Philip Services and Apollo, the "Buyout Group"), pursuant to which Purchaser
will merge with and into Safety-Kleen in a transaction in which Safety-Kleen
Shareholders will receive $27 per Share in cash (the "Buyout Proposal"). The
closing of the Buyout Proposal is subject to certain conditions, including the
approval of Safety-Kleen's Shareholders and both the debt and equity funding of
the financing arrangements of the Buyout Group. See "Background of The Laidlaw
Environmental Offer -- The Buyout Proposal."
REASONS FOR THE LAIDLAW ENVIRONMENTAL OFFER
Laidlaw Environmental Offer Premium. The purpose of the Laidlaw
Environmental Offer is for Laidlaw Environmental to obtain control of, and
ultimately the entire equity interest in, Safety-Kleen. Laidlaw Environmental
presently intends, as soon as practicable after consummation of the Laidlaw
Environmental Offer, to propose and seek to have Safety-Kleen effect a merger
(the "Merger") of LES Acquisition with and into Safety-Kleen pursuant to the
provisions of the Wisconsin Statutes and the Delaware General Corporation Law
(the "DGCL"). The consideration per Share in the Merger would be identical to
the Laidlaw Environmental Offer Consideration. Safety-Kleen has not provided
Laidlaw Environmental with information that might be relevant to the structuring
of the Merger. Laidlaw Environmental therefore reserves the right to change the
structure of the Merger upon receipt of such information. If the Merger is
consummated, Safety-Kleen will become an indirect wholly-owned subsidiary of
Laidlaw Environmental.
Laidlaw Environmental believes that the Laidlaw Environmental Offer is in
the best interests of the Safety-Kleen Shareholders because, among other things,
the Laidlaw Environmental Offer Consideration represents a 68.4% premium to the
per Share closing price on the NYSE on August 7, 1997, the day before
Safety-Kleen announced the retention of William Blair, a 36.8% premium to the
per Share closing price on the NYSE on November 3, 1997, the last trading day
prior to the public announcement of Laidlaw Environmental's intention to make
the Laidlaw Environmental Offer, and an 11.1% premium to the $27.00 per Share
merger consideration in the Buyout Proposal. See "Reasons for the Laidlaw
Environmental Offer -- Laidlaw Environmental Offer Premium." In developing its
belief that the Laidlaw Environmental Offer is in
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<PAGE>
the best interests of Safety-Kleen Shareholders, Laidlaw Environmental possessed
limited information with respect to the particular circumstances, from a tax
standpoint, of individual Safety-Kleen Shareholders. The Laidlaw Environmental
Offer will be a taxable transaction for United States federal income tax
purposes and may also be taxable under applicable state, local and foreign tax
laws. However, if the Board of Directors of Safety-Kleen agrees to discuss a
business combination with Laidlaw Environmental, the Laidlaw Environmental Offer
and the Merger may be restructured as a partially tax-free merger for United
States federal income tax purposes. All Safety-Kleen Shareholders should
consider the federal income tax consequences of the Laidlaw Environmental Offer
summarized under "The Laidlaw Environmental Offer -- Certain Federal Income Tax
Consequences" and are urged to consult with their own tax advisors to determine
the federal, state and local tax consequences of their particular circumstances.
Enhanced Business Opportunities. In addition to the premium being offered
per Share, Laidlaw Environmental believes that Safety-Kleen Shareholders will
benefit in several ways as a result of becoming shareholders of Laidlaw
Environmental. Upon consummation of the Laidlaw Environmental Offer, Laidlaw
Environmental intends to build upon Safety-Kleen's leading market presence and
quality brand equity. In addition, Laidlaw Environmental's management believes
that annual cost savings of approximately $100 to $130 million would result from
the combination of the two companies due to an anticipated elimination of
duplicative general and administrative and other public company costs, the
closure of overlapping service center facilities, the increased utilization of
those facilities that remain open, and the internalization of various waste
streams. Laidlaw Environmental expects to begin achieving cost savings within
three months of the Merger, and to fully implement the cost savings within the
first year after consummation of the Merger. Laidlaw Environmental believes that
its acquisition of Safety-Kleen will result in a further strengthening of
Laidlaw Environmental's market position by: (i) providing additional service
center market coverage in key geographic regions including Kentucky, Minnesota,
and New Jersey; (ii) introducing a smaller-sized customer base to complement
Laidlaw Environmental's existing customer base of medium- and large-sized
customers; (iii) allowing for increased vertical integration through the use of
Laidlaw Environmental facilities to process waste streams collected by
Safety-Kleen service centers; and (iv) providing significant expansion into the
solvent recycling market.
If the Merger is consummated, Laidlaw Environmental will consider the sale
of two assets of Safety-Kleen: (i) Safety-Kleen's European operations and (ii)
Safety-Kleen's oil recovery services business. These divestitures (and possibly
other divestitures) will be further assessed as additional information becomes
available. See "Reasons for the Laidlaw Environmental Offer -- Enhanced Business
Opportunities."
BACKGROUND OF THE LAIDLAW ENVIRONMENTAL OFFER
On August 8, 1997 Safety-Kleen announced the resignation of John G.
Johnson, Jr., President and Chief Executive Officer of Safety-Kleen. Donald W.
Brinckman, Chairman of Safety-Kleen's Board of Directors, who had previously
served as Safety-Kleen's Chief Executive Officer from 1968 until December 31,
1994, was appointed Chief Executive Officer. Safety-Kleen also announced that
its Board of Directors had engaged the services of William Blair to act as
advisor to Safety-Kleen and manage the process of exploring strategic options
for enhancing shareholder value.
On August 8, 1997, William Blair sent a copy of the Safety-Kleen
Confidentiality Letter to one of Laidlaw Environmental's investment bankers, Mr.
David E. Thomas, Jr. of Raymond James & Associates, Inc. ("Raymond James") and
stated that an offering circular would be available early in the week of August
18, 1997, and that such circular would be distributed to parties that had
executed a confidentiality agreement. Laidlaw Environmental did not respond to
this letter and William Blair called Laidlaw Environmental's representative and
asked that Laidlaw Environmental sign the confidentiality agreement. Laidlaw
Environmental was willing to sign a confidentiality agreement, but not the one
proposed by Safety-Kleen, which contained a two year standstill provision.
In mid-September 1997, there were further discussions between the two
investment banks in which Laidlaw Environmental's representatives requested a
meeting of the two companies and their advisors so that Laidlaw Environmental
could fully describe why a business combination was in both companies' best
interests.
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<PAGE>
Safety-Kleen's representative continued to request that Laidlaw Environmental
sign a confidentiality agreement containing the two-year standstill provision.
He also stated that if Laidlaw Environmental would submit its proposal in
writing, Safety-Kleen would consider a meeting with Laidlaw Environmental.
On September 24, 1997, Mr. Thomas delivered a letter to Mr. Jeffrey W.
Corum of William Blair, informing Mr. Corum of Laidlaw Environmental's interest
in pursuing negotiations with Safety-Kleen. In particular, Mr. Thomas's letter
requested a meeting between the management of Laidlaw Environmental and the
management of Safety-Kleen and pointed out several unique features of Laidlaw
Environmental's proposed transaction including the potential cost savings
available from combining the operations of Laidlaw Environmental and
Safety-Kleen. Mr. Thomas's letter suggested structuring the transaction as a
reverse merger in which Safety-Kleen would issue one share of its stock for
every three shares of Laidlaw Environmental stock.
Shortly thereafter Mr. Corum responded to Mr. Thomas's letter by telephone
stating that only upon Laidlaw Environmental's delivery of a confidentiality and
standstill agreement acceptable to Safety-Kleen, would Safety-Kleen meet with
Laidlaw Environmental. Subsequent to their telephone conversations, Mr. James R.
Bullock, Chairman of Laidlaw Environmental, attempted to call Mr. Brinckman, who
did not return his call. Mr. Bullock then called Mr. E. David Coolidge of
William Blair in an effort to arrange a meeting with Safety-Kleen. Mr. Coolidge
repeated Safety-Kleen's refusal to meet with Laidlaw Environmental in the
absence of a confidentiality agreement containing a standstill provision that
would prohibit Laidlaw Environmental for a period of two years from submitting
any proposal to acquire Safety-Kleen unless such proposal is directed solely to
the management of Safety-Kleen and Safety-Kleen shall have requested in advance
the submission of such proposal.
On November 3, 1997, the Laidlaw Environmental Board of Directors met and
determined to proceed with the Initial Offer (as defined below) as well as to
retain Bear, Stearns & Co. Inc. ("Bear Stearns") to work together with Raymond
James as its financial advisor. Laidlaw Environmental management had previously
retained Katten Muchin & Zavis to serve as legal counsel. Also on November 3,
1997, in a letter to Mr. Brinckman, Mr. Bullock informed Mr. Brinckman and the
Safety-Kleen Board of Directors of Laidlaw Environmental's intention to acquire
Safety-Kleen for a price per Share of $14.00 in cash and 2.4 shares of Laidlaw
Environmental Common Stock (the "Initial Offer"), that Laidlaw Environmental was
willing to execute a confidentiality agreement provided such agreement did not
contain a standstill provision, and that Laidlaw Environmental continued to
believe that substantial annual cost savings and synergies would result from a
combination of the two companies. For these and other reasons, Laidlaw
Environmental would consider and pursue various options with respect to an
acquisition of Safety-Kleen notwithstanding Safety-Kleen's refusal to meet with
representatives of Laidlaw Environmental. The letter also informed Mr. Brinckman
that Laidlaw Environmental had executed a commitment letter with
Toronto-Dominion Bank to provide all necessary financing for the Initial Offer
and the Merger and again encouraged Mr. Brinckman and the Safety-Kleen Board of
Directors to meet with representatives of Laidlaw Environmental to discuss the
possibility of a mutually beneficial negotiated transaction. The full text of
Mr. Bullock's letter is set forth below under the heading "Background of the
Laidlaw Environmental Offer."
On November 3, 1997 after receipt of Mr. Bullock's letter, Mr. Brinckman
delivered a letter to Mr. Bullock requesting that Laidlaw Environmental execute
a confidentiality and standstill agreement and informing Mr. Bullock that the
Safety-Kleen Board of Directors would fully consider Laidlaw Environmental's
proposal along with others received by Safety-Kleen. In addition, Mr. Brinckman
stated that representatives of Safety-Kleen, together with its financial
advisors, would meet with representatives of Laidlaw Environmental, together
with its financial advisors, to discuss information concerning Laidlaw
Environmental and the estimated cost savings and synergies. The full text of Mr.
Brinckman's letter is set forth below under the heading " Background of the
Laidlaw Environmental Offer."
On November 4, 1997, Laidlaw Environmental publicly announced its intention
to pursue the Initial Offer and the Merger.
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On November 5, 1997, Mr. Bullock and a representative of Bear Stearns met
with Mr. Brinckman, Mr. Joseph Chalhoub, Senior Vice President of Safety-Kleen,
and representatives of William Blair to discuss potential synergies that could
be achieved through a combination of the two companies and ways the parties
could work together. Mr. Bullock stated that Laidlaw Environmental was prepared
to sign a mutual confidentiality agreement that would not contain a standstill
provision so that Laidlaw Environmental and Safety-Kleen could share information
with each other. In response, Safety-Kleen repeated its requirement that Laidlaw
Environmental sign a confidentiality and standstill agreement.
Subsequent to the November 5th meeting, the representatives of the parties
exchanged correspondence reiterating their positions with respect to the
confidentiality and standstill agreement.
On November 13, 1997, Laidlaw Environmental filed the Registration
Statement of which this Prospectus is a part. A copy of the Registration
Statement was sent to Mr. Brinckman, along with a letter from Mr. Bullock
emphasizing the strategic importance of combining the two companies and
reiterating Laidlaw Environmental's desire to engage in negotiations with
Safety-Kleen. Mr. Bullock also expressed Laidlaw Environmental's willingness to
put the decision to accept the Initial Offer directly to the Safety-Kleen
Shareholders. Mr. Bullock requested the cooperation of the Safety-Kleen Board of
Directors in eliminating any antitakeover obstacles which would prohibit the
shareholders from accepting the Initial Offer. The full text of Mr. Bullock's
letter is set forth below under the heading "-- Background of the Laidlaw
Environmental Offer."
On November 13, 1997, Laidlaw Environmental also sent a notice to
Safety-Kleen pursuant to Section 180.1150 of the Wisconsin Statutes requesting
that the Safety-Kleen Board of Directors convene a special meeting of
shareholders and submit for shareholder approval a resolution to restore full
voting power to any Shares Laidlaw Environmental would acquire as a result of
the Laidlaw Environmental Offer. See "The Laidlaw Environmental
Offer -- Conditions of the Laidlaw Environmental Offer -- Wisconsin Statutory
Condition."
By a second letter dated November 13, 1997, Laidlaw Environmental, having
in its judgment complied with the Wisconsin Statutes, also requested the right
to inspect and copy the Safety-Kleen Shareholder list for the purpose of
communicating directly with the Safety-Kleen Shareholders. See "-- Litigation."
On November 20, 1997, Safety-Kleen announced that it had entered into the
Buyout Merger Agreement with the Buyout Group. Pursuant to the Buyout Merger
Agreement, an acquisition subsidiary formed by the Buyout Group would merge with
and into Safety-Kleen (the "Buyout Merger"), with Safety-Kleen as the surviving
company in a transaction in which the Safety-Kleen Shareholders would receive
$27.00 per Share in cash. As a result of the Buyout Merger, Safety-Kleen would
become a wholly-owned subsidiary of a new holding company formed by the Buyout
Group and would continue to operate under its current management and out of its
current headquarters. The closing of the Buyout Merger is subject to certain
conditions, including the approval of at least 66 2/3% of Safety-Kleen's
Shareholders and both the debt and equity funding of the financing arrangements
of the Buyout Group. Pursuant to the Buyout Merger Agreement, Safety-Kleen is
required to pay a termination fee of $50 million and to reimburse the Buyout
Group for its expenses in an amount up to $25 million under certain conditions,
including in the event that the Buyout Merger Agreement is terminated and the
Laidlaw Environmental Offer by Laidlaw Environmental is accepted by the Safety-
Kleen Shareholders.
Later that day, in a letter from Mr. Bullock to Mr. Brinckman, Laidlaw
Environmental increased its offer to $30.00 per share, consisting of $15.00 in
cash (subject to reduction for break-up fees, new severance arrangements and
other expenses), and Laidlaw Environmental Common Stock with a market value of
$15.00 (assuming that the Laidlaw Environmental Average Price (as defined in
" The Laidlaw Environmental Offer -- The Exchange Ratio") is no more than
$5.35714 per share and no less than $4.28571 per share at the time of the
consummation of the Laidlaw Environmental Offer). The full text of Mr. Bullock's
letter is set forth under the heading "Background of the Laidlaw Environmental
Offer."
On November 26, 1997, Safety Kleen filed a proxy statement on Schedule 14A
with respect to the proposal to consider and approve the Buyout Merger
Agreement.
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On December 2, 1997, Laidlaw Environmental and LES Acquisition filed a
proxy statement on Schedule 14A with respect to the proposal that pursuant to
Section 180.1150 of the Wisconsin Statutes the Safety-Kleen Shareholders restore
full voting power to any Shares acquired by Laidlaw Environmental or LES
Acquisition (the "Voting Rights Proposal").
On December 9, 1997, Safety-Kleen announced that a Safety-Kleen Shareholder
meeting to consider the Voting Rights Proposal would be held on January 9, 1998,
with a record date for such meeting of December 19, 1997 (the "Control Share
Meeting").
COMPARISON OF LAIDLAW ENVIRONMENTAL OFFER AND BUYOUT PROPOSAL
Laidlaw Environmental believes that the Laidlaw Environmental Offer is
superior to the Buyout Proposal because (i) Laidlaw Environmental believes the
Laidlaw Environmental Offer Consideration exceeds the $27.00 per Share Buyout
Proposal price, (ii) the Laidlaw Environmental Offer provides Safety-Kleen
Shareholders with the opportunity to participate in the future growth of the
combined Laidlaw Environmental/Safety-Kleen entity, which growth Laidlaw
Environmental believes will be created by the complimentary strategic fit of
their respective businesses and the cost savings achievable through eliminating
duplicate administrative costs, closing overlapping facilities and increasing
utilization; and (iii) the Buyout Proposal is conditioned upon receipt of both
debt and equity financing and the Buyout Group has no contractual obligation to
Safety-Kleen to provide or obtain such financing. See "Prospectus
Summary -- Reasons for the Laidlaw Environmental Offer," and "Comparison of
Laidlaw Environmental Offer and Buyout Proposal."
LITIGATION
Claims filed by Safety-Kleen. On November 17, 1997, Safety-Kleen commenced
litigation in the United States District Court for the Northern District of
Illinois alleging that Laidlaw Environmental violated Section 5(b)(1) of the
Securities Act of 1933 by making a "premature offer" and unlawful proxy
solicitation. As a remedy for that alleged violation, Safety-Kleen requested
that it be relieved of its obligation to provide Laidlaw Environmental with its
list of shareholders so that Safety-Kleen would not be in a position of
facilitating a violation of the federal securities laws. The Safety-Kleen
complaint ("the Safety-Kleen Complaint") further alleged that Laidlaw
Environmental's request that Safety-Kleen call a special meeting of its
shareholders failed to comply with the state law notice requirements.
Safety-Kleen contended that the notice served by Laidlaw Environmental failed to
provide sufficient disclosure of the financing to be used in connection with the
Laidlaw Environmental Offer. Safety-Kleen sought declaratory judgment that it
need not schedule the special meeting or provide access to its shareholder list.
Claims Filed by Laidlaw Environmental. On November 24, 1997, Laidlaw
Environmental filed its answer to the Safety-Kleen Complaint in which Laidlaw
Environmental denied each of Safety-Kleen's claims and raised certain
affirmative defenses. On that date, Laidlaw Environmental also filed a
counterclaim against Safety-Kleen and each member of its board of directors (the
"Director Defendants") seeking, among other things: (i) an order compelling
Safety-Kleen to call a special shareholders' meeting to vote on the resolution
proposed by Laidlaw Environmental in accordance with Section 180.1150(5)(a) of
the Wisconsin Statutes to restore full voting rights to any Shares acquired by
Laidlaw Environmental in the Laidlaw Environmental Offer and the Merger; (ii) an
order compelling the production of Safety-Kleen's shareholder lists, to be
produced promptly and at Safety-Kleen's expense; (iii) an order (w) declaring
that the Director Defendants have breached their fiduciary duties to
Safety-Kleen's shareholders, including Laidlaw Environmental, by refusing to
negotiate with Laidlaw Environmental, entering into the Buyout Proposal, and
agreeing to the unlawful provisions of the Buyout Merger Agreement, including
the break-up fee, (x) compelling the Director Defendants to carry out their
fiduciary duties to Safety-Kleen's shareholders, including Laidlaw
Environmental, by implementing and adhering to procedures under which the
transaction providing the best value reasonably available can be obtained for
Safety-Kleen's shareholders, (y) enjoining Safety-Kleen and the Director
Defendants from proceeding with the Buyout Proposal or paying a "break-up fee"
to the Buyout Group, and (z) directing the Director Defendants to negotiate with
Laidlaw Environmental regarding the Laidlaw Environmental Offer; (iv) an order
compelling the Director Defendants to amend the Rights Plan to make it
inapplicable to the Laidlaw Environmental Offer or to redeem the Rights; (v) an
order (pursuant to
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the derivative claim) requiring the Director Defendants to account to
Safety-Kleen for waste of corporate assets and all other damages caused by their
approval of the Buyout Proposal; and (vi) an award of costs of suit and
reasonable attorneys' fees, and for such other relief as the court may deem just
and appropriate.
On November 26, 1997, Laidlaw Environmental presented its Motion for
Preliminary Injunction in which Laidlaw Environmental sought (i) an order
compelling Safety-Kleen to call the Control Share Meeting to vote on the Voting
Rights Proposal to restore full voting rights to any Shares acquired by Laidlaw
Environmental and (ii) an order compelling the production of the list of
Safety-Kleen Shareholders.
In a ruling issued on December 4, 1997, the United States District Court
for the Northern District of Illinois ordered Safety-Kleen to comply with the
provisions of Section 180.1150 of the Wisconsin Statutes by calling the Control
Share Meeting to consider the Voting Rights Proposal. The Court also ordered
Safety-Kleen to provide a shareholder list to Laidlaw Environmental.
Also on December 4, 1997, Laidlaw Environmental presented a second Motion
for Preliminary Injunction in which it sought to (i) enjoin Safety-Kleen and its
Board of Directors from consummating an unlawful agreement to sell Safety-Kleen
for $27 per share or paying a "break-up fee" to the Buyout Group; (ii) require
Safety-Kleen's Board of Directors to fulfill their fiduciary duties of loyalty
and care to the Safety-Kleen Shareholders and fairly consider all offers for the
purchase of Safety-Kleen, including the Laidlaw Environmental Offer; and (iii)
direct Safety-Kleen's Board of Directors to amend the Rights Agreement to make
it inapplicable to the Laidlaw Environmental Offer or redeem the Rights created
therein. An evidentiary hearing on the December 4 motion is scheduled for
January 6, 1997.
Claims filed by Third Partes. Between November 4, 1997 and November 12,
1997, six class action lawsuits were filed against Safety-Kleen and various
directors of Safety-Kleen by Safety-Kleen Shareholders not affiliated with
Laidlaw Environmental. In general, these lawsuits seek to (i) cause Safety-Kleen
to cooperate with any entity or person having a bona fide interest in a
transaction with Safety-Kleen, (ii) order the Safety-Kleen Board of Directors to
appropriately evaluate Safety-Kleen's value and to take appropriate steps to
enhance this value, and (iii) cause Safety-Kleen's Board of Directors to act
independently in the best interest of the public shareholders of Safety-Kleen.
MARKET PRICES
The Shares are listed and traded on the NYSE under the symbol "SK." The
Laidlaw Environmental Common Stock is listed and traded on the NYSE under the
symbol "LLE," and is also traded on the Pacific Exchange, Inc. See "Market
Prices" below for historical information regarding the market price per share of
the Shares and the Laidlaw Environmental Common Stock. On August 7, 1997, the
date prior to the date Safety-Kleen announced its retention of William Blair,
the closing price per Share, as reported on the NYSE Composite Tape, was
$17.8125, and the closing price per share of Laidlaw Environmental Common Stock,
as reported on the NYSE Composite Tape, was $3.1875. On November 3, 1997, the
date prior to the date of the public announcement of Laidlaw Environmental's
intention to acquire Safety-Kleen, the closing price per Share, as reported on
the NYSE Composite Tape, was $21.9375, and the closing price per share of
Laidlaw Environmental Common Stock, as reported on the NYSE Composite Tape, was
$4.9375. On November 19, 1997, the date prior to the announcement of the Buyout
Proposal and Laidlaw Environmental's revised Laidlaw Environmental Offer, the
closing price per Share, as reported on the NYSE Composite Tape, was $26.0625.
On , 1997, the date prior to the date of this Prospectus, the
closing price per Share, as reported on the NYSE Composite Tape, was
$ , and the closing price per share of Laidlaw Environmental Common
Stock, as reported on the NYSE Composite Tape, was $ . Shareholders are
urged to obtain current market information for Laidlaw Environmental Common
Stock and the Shares. No assurance can be given as to market prices of Laidlaw
Environmental Common Stock and the Shares at the Expiration Date of the Laidlaw
Environmental Offer. The market value of the shares of Laidlaw Environmental
Common Stock that holders of Shares will receive upon consummation of the
Laidlaw Environmental Offer may vary from the market value of shares of Laidlaw
Environmental Common Stock that holders of Shares would have received if the
Laidlaw Environmental Offer had been consummated on the date of this Prospectus.
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THE LAIDLAW ENVIRONMENTAL OFFER
General. Laidlaw Environmental hereby offers, upon the terms and subject
to the conditions set forth herein and in the related Letter of Transmittal, to
exchange the Laidlaw Environmental Offer Consideration for each outstanding
Share validly tendered on or prior to the Expiration Date and not properly
withdrawn. The Laidlaw Environmental Offer Consideration per Share (and
accompanying Rights) consists of $15.00 net in cash (subject to reduction as
described below) and that number of shares of Laidlaw Environmental Common Stock
equal to the Exchange Ratio. See "Laidlaw Environmental Offer."
Cash Consideration. The Cash Consideration to be paid pursuant to the
Laidlaw Environmental Offer shall be reduced by the quotient of (x) the
aggregate amount of (i) any termination fees or expenses paid or reimbursed (or
payable or reimbursable) by Safety-Kleen pursuant to the Buyout Merger Agreement
and (ii) the Buyout Proposal Expenses divided by (y) the number of outstanding
Shares (on a fully diluted basis) as of the Expiration Date. The term
"Expiration Date" shall mean 5:00pm New York City time on , 1998,
unless and until Laidlaw Environmental extends the period of time for which the
Laidlaw Environmental Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Laidlaw Environmental Offer, as
so extended by Laidlaw Environmental, shall expire. See "Laidlaw Environmental
Offer -- The Cash Consideration."
The Exchange Ratio. "Exchange Ratio" means the quotient (rounded to the
nearest 1/100,000) determined by dividing $15.00 by the weighted average trading
prices for Laidlaw Environmental Common Stock (as reported on the New York Stock
Exchange, Inc. (the "NYSE") Composite Transactions reporting system as published
in The Wall Street Journal or, if not published therein, in another
authoritative source) (the "Laidlaw Environmental Average Price") for ten NYSE
trading days (each, a "Trading Day") selected by lot from the twenty Trading
Days ending three business days immediately prior to the Expiration Date,
provided, that the Exchange Ratio shall not be less than 2.80 nor greater than
3.50. Accordingly, subject to changes in the actual market value of Laidlaw
Environmental Common Stock on the date that Shares are actually exchanged, each
Share will be exchanged for (in addition to the Cash Consideration) Laidlaw
Environmental Common Stock having a market value of $15.00 if the Laidlaw
Environmental Average Price is between $4.28571 and $5.35714. If the Laidlaw
Environmental Average Price is greater than $5.35714, each Share will be
exchanged for (in addition to the Cash Consideration) Laidlaw Environmental
Common Stock having a market value of more than $15.00, and, conversely, if the
Laidlaw Environmental Average Price is less than $4.28571, each Share will be
exchanged for (in addition to the Cash Consideration) Laidlaw Environmental
Common Stock having a market value of less than $15.00, in each case subject to
changes in the actual market value of Laidlaw Environmental Common Stock on the
date that Shares are actually exchanged. Cash will be paid in lieu of any
fractional shares of Laidlaw Environmental Common Stock. See "The Laidlaw
Environmental Offer -- The Exchange Ratio." Laidlaw Environmental Common Stock
is listed for trading under the symbol "LLE" on the NYSE. On , 1997,
the closing price of Laidlaw Environmental Common Stock on the NYSE was
$ . Based on such closing price, the Exchange Ratio would be ,
and each Share would be converted into $15.00 net in cash (subject to reduction
as described above) and shares of Laidlaw Environmental Common Stock. The
Exchange Ratio will change as the market price of the Laidlaw Environmental
Common Stock changes. The actual Laidlaw Environmental Average Price and
Exchange Ratio will be calculated as of the third Trading Day immediately prior
to the Expiration Date, as described above, and a press release will be issued
announcing the actual Exchange Ratio prior to the opening of the second Trading
Day prior to the Expiration Date (as it may be extended from time to time).
Conditions of the Laidlaw Environmental Offer. Laidlaw Environmental's
obligation to exchange the Laidlaw Environmental Offer Consideration for Shares
pursuant to the Laidlaw Environmental Offer is conditioned upon, among other
things, the satisfaction or, where applicable, waiver of each of the Laidlaw
Environmental Offer Conditions. Subject to the applicable rules and regulations
of the Commission, Laidlaw Environmental expressly reserves the right, in its
sole discretion, at any time or from time to time, to delay acceptance for
exchange or, regardless of whether such Shares were theretofore accepted for
exchange, exchange of any Shares pursuant to the Laidlaw Environmental Offer or
to amend or terminate the Laidlaw Environmental Offer and not accept for
exchange or exchange any Shares not theretofore accepted for
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exchange or exchanged, upon the failure of any of the conditions to the Laidlaw
Environmental Offer to be satisfied. Laidlaw Environmental reserves the absolute
right to waive any defect or irregularity in the tender of any securities and to
waive any of the Laidlaw Environmental Offer Conditions (other than the Laidlaw
Environmental Stockholder Approval Condition, the Regulatory Approval Condition
and the condition related to the effectiveness of the Registration Statement).
Although Laidlaw Environmental reserves the right to do so, Laidlaw
Environmental does not currently intend to waive the Minimum Tender Condition,
the Wisconsin Statutory Condition, the Rights Plan Condition or the Buyout
Expense Condition. See "The Laidlaw Environmental Offer -- Conditions of the
Laidlaw Environmental Offer." Waiver or amendment of any of these conditions may
require an extension of the Laidlaw Environmental Offer.
Regulatory Approvals. The acquisition of Shares by Laidlaw Environmental
pursuant to the Laidlaw Environmental Offer is subject to the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended (the "HSR Act") and the rules (the
"Rules") that have been promulgated thereunder. On November 26, 1997, Laidlaw
Environmental filed with the Antitrust Division of the Department of Justice
(the "Antitrust Division") and the Federal Trade Commission (the "FTC") a
Hart-Scott-Rodino Notification and Report Form with respect to the Laidlaw
Environmental Offer to acquire up to 100% of the outstanding Shares, and Laidlaw
Environmental and LES Acquisition will not acquire any Shares until the
applicable waiting period for such acquisition has expired or been terminated.
European Regulatory Approvals. The acquisition of Shares by Laidlaw
Environmental pursuant to the Laidlaw Environmental Offer is subject to prior
notification requirements of several of the member countries of the European
Union in which Safety-Kleen operates. Based on the limited information
concerning Safety-Kleen that is available to Laidlaw Environmental, filings will
be necessary in the Republic of Ireland and Federal Republic of Germany. In
addition, filings may also be necessary in Italy and Belgium. The necessary
filings must be made in sufficient time to allow the passing of a one month
waiting period before Laidlaw Environmental's acquisition of Shares pursuant to
this Laidlaw Environmental Offer may be completed. No pre-merger notification
under the European Economic Community's Merger Control Regulation is required
for the proposed transaction.
Canadian Competitive Act. Under the Canadian Federal Competition Act (the
"Competition Act"), acquisition transactions, insofar as they relate to the
acquisition of such Canadian subsidiaries, qualify as a "merger" if they are of
sufficient size to be subject to the notification and waiting period
requirements of the Competition Act. The Competition Act is administered by the
Canadian Director of Investigation and Research appointed under the Competition
Act (the "Competition Act Director"). Laidlaw Environmental believes that the
proposed transaction requires notification and intends to file the required
information with the Competition Act Director.
Under separate "merger" provisions of the Competition Act, which operate
independently of its notification and waiting period requirements, if an
acquisition is likely to give rise to a substantial prevention or lessening of
competition in a market in Canada, the Competition Act Director may apply for a
remedial order (such as an injunction or an order to divest specified assets or
securities) to be issued by a quasi-judicial body.
Timing of the Laidlaw Environmental Offer. The Laidlaw Environmental Offer
is currently scheduled to expire on , 1998; however, it is Laidlaw
Environmental's current intention to extend the Laidlaw Environmental Offer from
time to time as necessary until all conditions to the Laidlaw Environmental
Offer have been satisfied or waived. See "The Laidlaw Environmental
Offer -- Extension, Termination and Amendment." Laidlaw Environmental has
received a commitment letter from Toronto-Dominion Bank in which it states that
it will provide or arrange credit facilities in the amount necessary to fund
payment of the Cash Consideration. See "The Laidlaw Environmental
Offer -- Source and Amount of Funds." In the unlikely event that the financing
is not available, Laidlaw Environmental currently intends to extend the Laidlaw
Environmental Offer to ensure that five business days remain for Safety-Kleen
Shareholders to tender their Shares in the Laidlaw Environmental Offer
subsequent to obtaining such financing. See "The Laidlaw Environmental
Offer -- Source and Amount of Funds." Laidlaw Environmental expects that the
Laidlaw Environmental Stockholder Approval Condition will be satisfied on or
about , 1998, the date on which it plans to call a special meeting
of its stockholders (the "Laidlaw Environmental Special Meeting"), to
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approve the increase in the number of authorized shares of Laidlaw Environmental
Common Stock from 350,000,000 to 750,000,000 and the issuance of shares of
Laidlaw Environmental Common Stock in connection with the Laidlaw Environmental
Offer and the Merger.
Extension, Termination and Amendment. Laidlaw Environmental expressly
reserves the right (but will not be obligated), in its sole discretion, at any
time or from time to time, and regardless of whether any of the events set forth
in "The Laidlaw Environmental Offer -- Conditions of the Laidlaw Environmental
Offer" shall have occurred or shall have been determined by Laidlaw
Environmental to have occurred, (a) to extend the period of time during which
the Laidlaw Environmental Offer is open by giving oral or written notice of such
extension to the Exchange Agent, which extension will be announced no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date, and (b) to amend the Laidlaw Environmental Offer in
any respect (including, without limitation, by decreasing or increasing the
consideration offered in the Laidlaw Environmental Offer to holders of Shares
and/or by increasing or decreasing the number of Shares being sought in the
Laidlaw Environmental Offer) by giving oral or written notice of such amendment
to the Exchange Agent. The rights reserved by Laidlaw Environmental in this
paragraph are in addition to Laidlaw Environmental's right to terminate the
Laidlaw Environmental Offer as described in "The Laidlaw Environmental
Offer -- Extension, Termination and Amendment." There can be no assurance that
Laidlaw Environmental will exercise its right to extend the Laidlaw
Environmental Offer. However, it is Laidlaw Environmental's current intention to
extend the Laidlaw Environmental Offer until all Laidlaw Environmental Offer
Conditions have been satisfied or waived. See "The Laidlaw Environmental
Offer -- Extension, Termination and Amendment." During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the Laidlaw
Environmental Offer, subject to the right of a tendering Safety-Kleen
Shareholder to withdraw his or her Shares. See "The Laidlaw Environmental
Offer -- Withdrawal Rights."
Exchange of Shares; Delivery of Laidlaw Environmental Common Stock and Cash
Consideration. Upon the terms and subject to the conditions of the Laidlaw
Environmental Offer (including, if the Laidlaw Environmental Offer is extended
or amended, the terms and conditions of any such extension or amendment),
Laidlaw Environmental will accept for exchange, and will exchange, Shares (and
Rights, if applicable) validly tendered and not properly withdrawn as promptly
as practicable following the Expiration Date. See "The Laidlaw Environmental
Offer -- Exchange of Shares; Delivery of Laidlaw Environmental Common Stock and
Cash Consideration."
Withdrawal Rights. Tenders of Shares (and Rights, if applicable) made
pursuant to the Laidlaw Environmental Offer are irrevocable, except that Shares
(and Rights, if applicable) tendered pursuant to the Laidlaw Environmental Offer
may be withdrawn at any time prior to the Expiration Date, and, unless
theretofore accepted for exchange and exchanged by Laidlaw Environmental for the
Laidlaw Environmental Offer Consideration pursuant to the Laidlaw Environmental
Offer, may also be withdrawn at any time after , 1998. See "The
Laidlaw Environmental Offer -- Withdrawal Rights."
Procedure for Tendering Shares. For a Safety-Kleen Shareholder to validly
tender Shares (and Rights, if applicable) pursuant to the Laidlaw Environmental
Offer, (i) a properly completed and duly executed Letter of Transmittal (or
manually executed facsimile thereof), together with any required signature
guarantees, or an Agent's Message (as defined herein) in connection with a
book-entry transfer, and any other required documents, must be transmitted to
and received by the Exchange Agent at one of its addresses set forth on the back
cover of this Prospectus and either certificates for tendered Shares (and
Rights, if applicable) must be received by the Exchange Agent at such address or
such Shares (and Rights, if applicable) must be tendered pursuant to the
procedures for book-entry transfer (in the case of Rights, if available) set
forth under "The Laidlaw Environmental Offer -- Procedure for Tendering" (and a
confirmation of receipt of such tender received), in each case, prior to the
Expiration Date, or (ii) such Safety-Kleen Shareholder must comply with the
guaranteed delivery procedure set forth under "The Laidlaw Environmental
Offer -- Procedure for Tendering."
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Safety-Kleen Shareholders will be required to tender one Right for each
Share tendered in order to effect a valid tender of Shares, unless the Rights
Plan Condition has been satisfied or waived. Unless the Safety-Kleen
Distribution Date occurs, a tender of Shares will constitute a tender of the
associated Rights.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES (AND RIGHTS CERTIFICATES, IF
APPLICABLE) AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
THE MERGER
The purpose of the Laidlaw Environmental Offer is to enable Laidlaw
Environmental to acquire control of, and ultimately the entire equity interest
in, Safety-Kleen. Laidlaw Environmental presently intends, following
consummation of the Laidlaw Environmental Offer, to propose and seek to have LES
Acquisition merge with Safety-Kleen. In the Merger, each then outstanding Share
(other than Shares owned by Laidlaw Environmental or any of its affiliates, and
Shares held in the treasury of Safety-Kleen (if Safety-Kleen is so authorized)
or by any subsidiary of Safety-Kleen) would be cancelled in exchange for the
right to receive the same consideration paid pursuant to the Laidlaw
Environmental Offer. Safety-Kleen has not agreed to provide Laidlaw
Environmental with information that might be relevant to the structuring of the
Merger. Laidlaw Environmental therefore reserves the right to change the
structure of the Merger upon receipt of such information.
If the Minimum Tender Condition and other Laidlaw Environmental Offer
Conditions are satisfied, and the Laidlaw Environmental Offer is consummated,
Laidlaw Environmental and its affiliates will own not less than two-thirds of
the outstanding Shares. Accordingly, Laidlaw Environmental and its affiliates
will at such time have sufficient voting power in Safety-Kleen to approve the
Merger independently of the votes of any other Safety-Kleen Shareholders.
Laidlaw Environmental presently intends to vote any and all Shares owned by
Laidlaw Environmental and its affiliates following consummation of the Laidlaw
Environmental Offer to approve the Merger.
Safety-Kleen Shareholders may have appraisal rights under Wisconsin law in
connection with the Merger. See "-- Dissenter Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Laidlaw Environmental has been advised by its counsel, Katten Muchin &
Zavis, that the exchange of Shares for Laidlaw Environmental Common Stock and
cash pursuant to the Laidlaw Environmental Offer and Merger will be a taxable
transaction for U.S. federal income tax purposes and may also be taxable under
applicable state, local and foreign tax laws. If the Board of Directors of
Safety-Kleen agrees to discuss a business combination with the Laidlaw
Environmental, the Laidlaw Environmental Offer and the Merger may be
restructured to be a partially tax-free merger for U.S. federal income tax
purposes.
All Safety-Kleen Shareholders should carefully read the summary of the
federal income tax consequences of the Laidlaw Environmental Offer and the
Merger under "The Laidlaw Environmental Offer -- Certain Federal Income Tax
Consequences" and are urged to consult with their own tax advisors as to the
federal, state, local and foreign tax consequences in their particular
circumstances.
EFFECT OF LAIDLAW ENVIRONMENTAL OFFER ON MARKET FOR SHARES; REGISTRATION UNDER
THE EXCHANGE ACT
The exchange of Shares pursuant to the Laidlaw Environmental Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and, depending upon the number of
11
<PAGE>
Shares so purchased, could adversely affect the liquidity and market value of
the remaining Shares held by the public.
The Shares are listed and traded on the NYSE. Depending upon the number of
Shares acquired pursuant to the Laidlaw Environmental Offer, following
consummation of the Laidlaw Environmental Offer, the Shares may no longer meet
the requirements of the NYSE for continued listing and may no longer constitute
"margin securities" for the purposes of the Federal Reserve Board's margin
regulations, in which event the Shares would be ineligible as collateral for
margin loans made by brokers. For a description of the treatment of Shares in
the Merger, see "The Merger."
DISSENTER RIGHTS
Holders of Shares do not have appraisal rights as a result of the Laidlaw
Environmental Offer. [In the event the Merger is consummated, the Safety-Kleen
Shareholders will have appraisal rights with respect to the Merger under Section
180.1302 of the Wisconsin Statutes if Safety-Kleen is a Wisconsin "resident
domestic corporation" for purposes of the Wisconsin Statutes. Based on the
information available to Laidlaw Environmental at this time, it is unclear
whether Safety-Kleen is a "resident domestic corporation" for purposes of the
Wisconsin Statutes.]
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES AND LAIDLAW ENVIRONMENTAL COMMON
STOCK
As a consequence of the exchange of Shares for shares of Laidlaw
Environmental Common Stock in the Laidlaw Environmental Offer and the
cancellation of Shares as a result of the Merger, shareholders of Safety-Kleen,
a corporation incorporated under the laws of Wisconsin, would become
shareholders of Laidlaw Environmental, a Delaware corporation. Such holders
would have certain rights as Laidlaw Environmental shareholders that are
different from the rights they currently have in Safety-Kleen, both because of
the differences between the Laidlaw Environmental Certificate of Incorporation
(the "Laidlaw Environmental Certificate") and Laidlaw Environmental's by-laws
(the "Laidlaw Environmental By-laws"), on the one hand, and the Safety-Kleen
Articles of Incorporation (the "Safety-Kleen Articles") and by-laws (the
"Safety-Kleen By-Laws"), on the other hand, and because of differences between
Wisconsin and Delaware corporation law. For a comparison of the charter and
by-law provisions of Laidlaw Environmental and Safety-Kleen and of Wisconsin and
Delaware law, see "Comparison of the Rights of Holders of Shares and Laidlaw
Environmental Common Stock."
DESCRIPTION OF LAIDLAW ENVIRONMENTAL CAPITAL STOCK
The authorized capital stock of Laidlaw Environmental consists of
350,000,000 shares of Laidlaw Environmental Common Stock, par value $1.00 per
share and 1,000,000 shares of preference stock, $1.00 par value. As of October
14, 1997, there were 180,549,911 shares of Laidlaw Environmental Common Stock
issued and outstanding. No preferred stock has been issued.
Holders of shares of Laidlaw Environmental Common Stock are entitled to one
vote per share for each share held. Subject to the rights of holders of shares
of outstanding Laidlaw Environmental Preferred Stock (if any), holders of shares
of Laidlaw Environmental Common Stock have equal rights to participate in
dividends when declared and, in the event of liquidation, in the net assets of
Laidlaw Environmental available for distribution to shareholders.
For information relating to ownership of Laidlaw Environmental Common Stock
by certain beneficial owners and directors and executive officers of Laidlaw
Environmental, see the Laidlaw Environmental 1997 Annual Meeting Proxy
Statement. As of October 14, 1997, as a group, Laidlaw Environmental's
directors, executive officers and their affiliates (including Laidlaw Inc.)
beneficially owned approximately 70.29% of the outstanding shares of Laidlaw
Environmental Common Stock. If the Merger is consummated, current Safety-Kleen
Shareholders (other than Laidlaw Environmental) would hold approximately %
of the outstanding shares of post-Merger Laidlaw Environmental, and Laidlaw
Environmental's present directors, executive officers and affiliates as a group
would hold approximately % of the outstanding shares of post-Merger Laidlaw
Environmental.
12
<PAGE>
For additional information concerning the capital stock of Laidlaw
Environmental, see "Description of Laidlaw Environmental Capital Stock."
THE EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed Exchange Agent in
connection with the Laidlaw Environmental Offer. A duly executed Letter of
Transmittal (or facsimile copies thereof), together with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
certificates for Shares (and Rights, if applicable) should be sent by each
tendering Safety-Kleen Shareholder or his or her broker, dealer, bank or nominee
to the Exchange Agent at the addresses set forth on the back cover of this
Prospectus.
REQUEST FOR ASSISTANCE AND ADDITIONAL COPIES
Requests for information or assistance concerning the Laidlaw Environmental
Offer may be directed to the Dealer Manager or the Information Agent at their
respective addresses set forth on the back cover of this Prospectus. Requests
for additional copies of this Prospectus and the Letter of Transmittal should be
directed to the Information Agent.
LAIDLAW ENVIRONMENTAL AND SAFETY-KLEEN COMPARATIVE PER SHARE DATA
The following table sets forth comparative per share data of Laidlaw
Environmental and Safety-Kleen on both a historical and pro forma combined
basis. This table should be read in conjunction with each entity's historical
financial statements and notes thereto as set forth in the filings incorporated
by reference herein (but which in the case of Safety-Kleen are not covered by
the report of Safety-Kleen's independent accountants for purposes of this
Prospectus), and in conjunction with the unaudited pro forma combined financial
information appearing elsewhere in this Prospectus. See "Laidlaw Environmental
and Safety-Kleen Unaudited Pro Forma Combined Financial Information."
The pro forma information set forth below gives effect to (a) the Rollins
Acquisition defined under the heading "Laidlaw Environmental/Rollins Pro Forma
Combined", and (b) the Rollins Acquisition, the Laidlaw Environmental Offer, the
Merger and the other transactions described herein under the heading "Laidlaw
Environmental/Safety-Kleen Pro Forma Combined", as if each had occurred as of
September 1, 1996. Both the Rollins Acquisition and the Merger and pending
acquisitions have been presented using the purchase method of accounting. This
information does not reflect the estimated cost savings of the Rollins
Acquisition, nor the cost savings of approximately $100 to $130 million that
Laidlaw Environmental management believes may result from the Merger. The pro
forma combined per share data is not necessarily indicative of actual results of
operations of Laidlaw Environmental, Rollins, and Safety-Kleen had the
transactions assumed therein occurred on the dates specified, nor are they
indicative of future expected results.
13
<PAGE>
<TABLE>
<CAPTION>
LAIDLAW LAIDLAW
ENVIRONMENTAL/ ENVIRONMENTAL/
LAIDLAW ROLLINS SAFETY-KLEEN SAFETY-KLEEN
ROLLINS ENVIRONMENTAL PRO FORMA SAFETY-KLEEN PRO FORMA PRO FORMA
HISTORICAL HISTORICAL COMBINED HISTORICAL COMBINED(1) EQUIVALENT(2)
---------- ------------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Book value per common
share:
August 31, 1997...... N/A $ 1.82 $ 1.82 $8.49 $ 3.34 $10.28
Year ended August 31,
1997:
Income (loss) per
common share from
continuing
operations........ (0.26) (1.33) (1.61) 1.04 (0.64) (1.98)
Cash dividends....... 0.00 0.00 0.00 0.36 0.00 0.00
</TABLE>
- ----------------
(1) See "Laidlaw Environmental and Safety-Kleen Selected Unaudited Pro Forma
Financial Information."
(2) The Safety-Kleen pro forma equivalent represents the Laidlaw
Environmental/Safety-Kleen pro forma combined book value, dividends and
income (loss) per common share multiplied by an Exchange Ratio of 3.077,
which assumes a Laidlaw Environmental share price of $4.875.
SELECTED FINANCIAL DATA
The summary below sets forth selected historical financial data and
selected unaudited pro forma combined financial data. This financial data should
be read in conjunction with the historical financial statements and notes
thereto contained in the filings incorporated by reference herein (but which, in
the case of Safety-Kleen, are not covered by the report of Safety-Kleen's
independent accountants for purposes of this Prospectus), and in conjunction
with the unaudited pro forma combined financial information and notes thereto
appearing elsewhere in this Prospectus. See "Unaudited Pro Forma Combined
Financial Information."
SELECTED HISTORICAL FINANCIAL DATA OF LAIDLAW ENVIRONMENTAL
The selected historical financial data of Laidlaw Environmental set forth
below has been derived from financial statements of Laidlaw Environmental as
they appeared in the Laidlaw Environmental 1997 Form 10-K. The Laidlaw
Environmental 10-K should be read in conjunction with Laidlaw Environmental's
selected historical financial data.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- -------- --------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................ $ 678,619 $ 652,973 $ 599,241 $517,804 $511,554
Income (loss) from continuing
operations(1)..................... $ (183,452) $ 6,714 $ 16,765 $ 22,531 $ 11,654
Income (loss) per share from
continuing operations(1).......... $ (1.329) $ 0.056 $ 0.140 $ 0.188 $ 0.097
Cash dividends per common share..... -- -- -- -- --
BALANCE SHEET DATA:
Working capital..................... $ 76,095 $ 40,677 $ 60,075 $ 90,831 $119,522
Total assets........................ $1,610,878 $1,491,294 $1,367,411 $974,053 $947,976
Long-term debt...................... $ 540,096 $ 55,838 $ 64,256 $ 18,454 $ 24,253
Stockholders' equity(2)............. $ 327,965 $1,094,777 $1,056,266 $798,597 $795,887
Weighted average common and common
stock equivalents outstanding
(000's)........................... 138,033 120,000 120,000 120,000 120,000
</TABLE>
- ----------------
(1) Fiscal year 1997 includes restructuring charge, net of tax benefit, of $200
million ($332 million pre-tax) or $1.45 per share.
(2) For fiscal years 1993 to 1996 inclusive, stockholders' equity represents the
net investment of Laidlaw Inc. in Laidlaw Environmental.
14
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF SAFETY-KLEEN
The selected historical financial data of Safety-Kleen set forth below has
been derived from financial statements of Safety-Kleen as they appeared in
Safety-Kleen's Form 10-K filed with the Commission for each of the five fiscal
years in the period ended December 28, 1996 and the Safety-Kleen Form 10-Q for
the period ended September 6, 1997. The Safety-Kleen 1996 Form 10-K should also
be read in conjunction with Safety-Kleen's selected historical financial data.
<TABLE>
<CAPTION>
36 WEEKS ENDED FISCAL YEAR
--------------------------- ---------------------------------------------------------------
SEPTEMBER 6, SEPTEMBER 7,
1997 1996 1996 1995 1994 1993 1992(3)
------------ ------------ ---------- ---------- --------- ---------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues............. $ 680,172 $626,176 $ 923,126 $ 859,251 $ 791,267 $ 795,508 $ 794,542
Income (loss) from
continuing
operations......... $ 40,297 $ 40,685 $ 61,109 $ 53,303 $ 50,094 $ (101,346)(1) $ 45,637(2)
Net income (loss) per
share from
continuing
operations......... $ 0.69 $ 0.70 $ 1.05 $ 0.92 $ 0.87 $ (1.76)(1) $ 0.79(2)
Cash dividends per
common share....... $ 0.27 $ 0.27 $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 0.34
BALANCE SHEET DATA:
Working capital...... $ 74,795 $ 72,340 $ 43,532 $ 31,766 $ 53,472 $ 47,729
Total assets......... $1,037,192 $1,044,823 $1,009,050 $ 973,444 $ 950,664 $1,006,446
Long-term debt....... $ 246,080 $ 276,954 $ 283,715 $ 284,125 $ 288,633 $ 300,724
Stockholders'
Equity............. $ 495,718 $ 480,290 $ 433,435 $ 396,336 $ 362,664 $ 492,095
Weighted average
common and common
stock equivalents
(000's)............ 58,490 58,078 58,152 57,857 57,741 57,679 57,768
</TABLE>
- ----------------
(1) Includes restructuring and special charges, net of tax benefit, of $136
million ($229 million pre-tax) or $2.36 per share.
(2) Includes $300,000 ($.01 per share) increase in net earnings from cumulative
effect of prior years effect of adopting Statement of Financial Accounting
Standards (SFAS) No. 106 on accounting for post-retirement benefits and SFAS
No. 109 on accounting for income taxes.
(3) Fiscal year 1992 was a fifty-three week year. All other years presented were
fifty-two weeks.
15
<PAGE>
LAIDLAW ENVIRONMENTAL, ROLLINS AND SAFETY-KLEEN SELECTED UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
combines the consolidated income statements of Laidlaw Environmental and
Rollins, and the consolidated balance sheets and income statements of Laidlaw
Environmental and Safety-Kleen as if the Rollins Acquisition, Laidlaw
Environmental Offer, the Merger and the other transactions described herein had
occurred for all periods presented. These statements are prepared on the basis
of accounting for the Rollins Acquisition and the Merger as a purchase and are
based on the assumptions set forth in the notes thereto. These statements and
the pro forma information presented below do not reflect the estimated cost
savings of approximately $100 to $130 million Laidlaw Environmental believes
will result from the Merger or the estimated cost savings of the Rollins
Acquisition. The following information is not necessarily indicative of the
financial position or the actual results of operation that would have occurred
had the transactions assumed herein occurred on such dates or of expected future
results. This information should be read in conjunction with and is qualified in
its entirety by the consolidated financial statements and accompanying notes of
Laidlaw Environmental and Safety-Kleen included in the documents described under
"Incorporation of Certain Documents by Reference" (but which, in the case of
Safety-Kleen, are not covered by the reports of Safety-Kleen's independent
accountants for purposes of this Prospectus) the consolidated financial
statements and accompanying notes of Rollins, and the pro forma combined
financial statements and accompanying discussion and notes set forth under
"Unaudited Pro Forma Combined Financial Information."
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
---------------
YEAR ENDED
AUGUST 31, 1997
---------------
(UNAUDITED)
($ IN
THOUSANDS,
EXCEPT PER
SHARE
AMOUNTS)
<S> <C>
STATEMENT OF INCOME DATA:
Revenue..................................................... $1,802,627
Income (loss) from continuing operations.................... (233,288)
Income (loss) from discontinued operations.................. 20
Net income (loss)........................................... (233,268)
PER SHARE DATA(1):
Income (loss) from continuing operations.................... (0.644)
Income (loss) from discontinued operations.................. 0.000
Net income (loss)........................................... (0.644)
Weighted average common and common stock equivalents
(000)..................................................... 362,289
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
---------------
AS OF
AUGUST 31, 1997
---------------
(UNAUDITED)
($ IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Assets
Total current assets...................................... $ 491,921
Total assets.............................................. 4,475,043
Liabilities
Total current liabilities................................. 412,945
Long term debt............................................ 1,639,615
Subordinated convertible debenture........................ 350,000
Total liabilities......................................... 3,280,084
Stockholders' Equity........................................ 1,194,959
</TABLE>
- ----------------
(1) Assumes an Exchange Ratio of 3.077.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Prospectus Summary," "-- Reasons for the
Laidlaw Environmental Offer," "-- Certain Federal Income Tax Consequences," and
"-- Background of the Laidlaw Environmental Offer," "-- Reasons for the Laidlaw
Environmental Offer -- Enhanced Business Opportunities," "Background of the
Laidlaw Environmental Offer," "The Laidlaw Environmental Offer -- Certain
Federal Income Tax Consequences," "Comparison of Laidlaw Environmental Offer and
Buyout Proposal," "The Merger -- General," and "Unaudited Pro Forma Combined
Financial Information" including any forecasts, projections and descriptions of
anticipated cost savings and synergies referred to therein, and certain
statements incorporated by reference from documents filed with the Commission by
Laidlaw Environmental and Safety-Kleen, including any statements contained
herein or therein regarding the development or possible assumed future results
of operations of Laidlaw Environmental's and Safety-Kleen's businesses, the
markets for Laidlaw Environmental's and Safety-Kleen's services and products,
anticipated capital expenditures, regulatory developments and the effects of the
Laidlaw Environmental Offer and the Merger, any statements preceded by, followed
by or that include the words "believes," "expects," "anticipates," or similar
expressions, and other statements contained or incorporated by reference herein
regarding matters that are not historical facts, are or may constitute
forward-looking statements. Because such statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. The risks and uncertainties that may
cause actual results to differ include, among others, general economic
conditions, risks associated with acquisitions, fluctuations in operating
results because of acquisitions and variations in stock prices, changes in
applicable federal, state and local laws and regulations, especially
environmental regulations, alternate and emerging technologies, competition and
pricing pressures, overcapacity in the industry, seasonal fluctuations due to
weather, uncertainties of litigation, and risks associated with the operation,
growth and integration of the newly acquired businesses. As a result of these
factors, Laidlaw Environmental's revenue and income could vary significantly
from quarter to quarter, and past financial performance should not be considered
a reliable indicator of future performance. All subsequent written and oral
forward-looking statements attributable to Laidlaw Environmental or persons
acting on its behalf are expressly qualified in their entirety by the cautionary
statements set forth or referred to above in this paragraph. Investors are
cautioned not to place undue reliance on such statements, which speak only as of
the date hereof. Laidlaw Environmental undertakes no obligation to release
publicly any revision to these forward-looking statements to reflect events of
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events, except as may be required in periodic filings with the
Commission.
17
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following are
certain factors that should be considered by Safety-Kleen Shareholders in
evaluating the Offer and an investment in Laidlaw Environmental Common Stock.
UNCERTAINTIES IN INTEGRATING OPERATIONS AND ACHIEVING COST SAVINGS
Laidlaw Environmental and Safety-Kleen and certain direct and indirect
subsidiaries each are large enterprises with operations in different markets.
The success of any business combination, including the Merger, is in part
dependent on the ability following the Merger to consolidate operations and
integrate departments, systems and procedures and thereby obtain business
efficiencies, economies of scale and related cost savings. The consolidation of
operations, the integration of departments, systems and procedures and the
reallocation of staff present significant management challenges. There can be no
assurance that future consolidated results will improve as a result of the
Merger, or as to the timing or extent to which cost savings and efficiencies
anticipated by Laidlaw Environmental will be achieved.
OWNERSHIP OF LAIDLAW ENVIRONMENTAL
As of November 30, 1997, Laidlaw owns beneficially approximately 67.0% of
the outstanding Laidlaw Environmental Common Stock. Laidlaw also holds a $350
million 5% Subordinated Convertible Pay-In-Kind Debenture due 2009 of Laidlaw
Environmental (the "PIK Note"). For the first two years after the issuance of
the PIK Note, interest is mandatorily paid in Laidlaw Environmental Common Stock
and thereafter principal and interest may be paid in Laidlaw Environmental
Common Stock at the election of Laidlaw Environmental. The number of shares of
Laidlaw Environmental Common Stock for each such payment shall be equal to the
dollar amount in accrued interest or principal due divided by the average of the
daily closing prices of a share of Common Stock on the NYSE-Composite
Transactions for the ten consecutive trading days selected by the Company
commencing not more than 20 days before, and ending not later than, the date
such payment is due. Beginning on May 15, 2002, and continuing until the
business day prior to the repayment of the PIK Note, the PIK Note is
convertible, in whole or in part, at the option of the holder, into shares of
Laidlaw Environmental Common Stock. The conversion will be at a price equal to
the conversion price of $3.75 per share, subject to adjustment under certain
circumstances. If the Offer is successful and the Merger consummated, Laidlaw's
beneficial ownership of Laidlaw Environmental (without taking into account the
PIK Note) will be reduced to 36% of the outstanding Laidlaw Environmental Common
Stock.
The Board of Directors of Laidlaw Environmental is comprised of ten
members, three of whom were designated by Laidlaw, three by Rollins and three
jointly by Laidlaw and Rollins and one selected by the Board. To Laidlaw
Environmental's knowledge, there are presently no agreements with respect to
future nominations to the Board of Directors of Laidlaw Environmental.
LEVERAGE
After consummation of the Merger, Laidlaw Environmental will be highly
leveraged with substantial debt service obligations, including principal and
interest obligations with respect to bank debt of as much as $ .
Therefore, Laidlaw Environmental will be particularly susceptible to adverse
changes in its industry, the economy and the financial markets generally. In
addition, Laidlaw Environmental's ability to obtain additional debt financing
will be limited by restrictive covenants under the terms of its credit
agreements and any other debt instruments and those limits on financing may
therefore limit Laidlaw Environmental's ability to service its existing debt
obligations through additional debt financing if cash flow from operations is
insufficient to service such obligations.
ENVIRONMENTAL REGULATION
The operations of businesses of Laidlaw Environmental and Safety-Kleen are
subject to certain federal, state, territorial, provincial and local
requirements which regulate health, safety, environment, zoning and land-use.
Operating and other permits are generally required for incinerators, landfills,
transfer and storage
18
<PAGE>
facilities, certain collection vehicles, storage tanks and other facilities
owned or operated by Laidlaw Environmental or Safety-Kleen, and these permits
are subject to revocation, modification and renewal. Although Laidlaw
Environmental believes that the facilities of Laidlaw Environmental and (based
on Safety-Kleen's public disclosures) Safety-Kleen meet federal, state and local
requirements in all material respects and have all of the required operating and
other permits, it may be necessary to expend considerable time, effort and money
to keep existing or acquired facilities of Laidlaw Environmental and
Safety-Kleen in compliance with applicable requirements, including new
regulations, and to maintain existing permits and approvals and to obtain the
permits and approvals necessary to increase their capacity. Applicable
requirements are enforceable by injunctions and fines or penalties, including
criminal penalties. These regulations are administered by the United States
Environmental Protection Agency (the "EPA") and various other federal, state and
local environmental and health and safety agencies and authorities, including
the Occupational Safety and Health Administration of the United States
Department of Labor and by the provincial environmental ministries in Canada.
The United States Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), imposes liability for damages and
the cleanup of sites from which there is a release or threatened release of a
hazardous substance into the environment on, among others, the current and
former owners and operators of such sites. Given the substantial costs involved
in a CERCLA cleanup and the difficulty of obtaining insurance for environmental
impairment liability, such liability could have a material impact on Laidlaw
Environmental's business, financial condition and future prospects. See
"Business of Laidlaw Environmental -- Regulation."
With respect to various operating facilities, Laidlaw Environmental is
required to provide certain financial assurances with respect to certain
statutorily required closure and post-closure obligations. These financial
assurances may take the form of insurance, guarantees, bonds, letters of credit
or deposits of cash, to the extent acceptable to the United States, Canadian or
other foreign, state, territorial, federal, provincial or local courts,
executive offices, legislatures, governmental agencies or ministries,
commissions, or administrative, regulatory or self-regulatory authorities or
instrumentalities ("Governmental Entities") requiring such assurances. Following
the consummation of the Merger, Laidlaw Environmental will be obligated to
provide financial assurances for current Safety-Kleen operations as well. There
can be no assurance that Laidlaw Environmental will be able to provide the
required financial assurances without increased cost or at all.
RISKS OF PENDING AND FUTURE LEGAL PROCEEDINGS
In addition to the costs of complying with environmental regulations,
hazardous waste treatment companies generally will continue to be involved in
legal proceedings in the ordinary course of business. Alleged failure by Laidlaw
Environmental or Safety-Kleen to comply with laws and regulations may lead to
the imposition of fines or the denial, revocation or delay of the renewal of
permits and licenses by Governmental Entities. In addition, such Governmental
Entities as well as surrounding landowners may claim that Laidlaw Environmental
or Safety-Kleen are liable for environmental damages. Citizens groups have
become increasingly active in challenging the grant or renewal of permits and
licenses for hazardous waste facilities, and responding to such challenges has
further increased the costs associated with establishing new facilities or
expanding current facilities. A significant judgment against Laidlaw
Environmental or Safety-Kleen, the loss of a significant permit or license or
the imposition of a significant fine could have a material adverse effect on
Laidlaw Environmental's business, financial condition and future prospects.
Laidlaw Environmental and Safety-Kleen are each currently a party to various
legal proceedings, as well as environmental proceedings which have arisen in the
ordinary course of its business. No assurance can be given with respect to the
outcome of these legal and environmental proceedings or the effect such outcomes
may have on Laidlaw Environmental. Although Laidlaw Environmental believes that
losses resulting from the ultimate resolution of such proceedings will not have
a material adverse effect on the business, financial condition or future
prospects of Laidlaw Environmental, an unfavorable resolution of any matter
individually or in the aggregate could have a material adverse effect on the
business, financial condition and future prospects of Laidlaw Environmental.
19
<PAGE>
COMPETITIVE ENVIRONMENT
Laidlaw Environmental and Safety-Kleen operate in highly competitive
environments. In addition, the hazardous waste industry is changing as a result
of rapid consolidation. The future success of Laidlaw Environmental will be
affected by such changes, the nature of which cannot be forecast with certainty.
There can be no assurance that such developments will not create additional
competitive pressures on Laidlaw Environmental's business.
INTERNATIONAL OPERATIONS
Upon completion of the Merger, Laidlaw Environmental will have business
operations in the United States, Canada and Europe. Certain risks are inherent
in international operations, including the risks of differing regulation,
currency fluctuations and differing tax treatment. Laidlaw Environmental
currently operates under substantially Canadian and United States-based
environmental and other regulation. After the Merger, it will also be subject to
European regulation. Also, the relative value of United States dollar, Canadian
dollar and European currencies could change. The impact of future exchange rate
fluctuations on the results of operations cannot be accurately predicted. After
the Merger, Laidlaw Environmental will be subject to U.S., European and Canadian
tax laws and regulations. The application of United States and foreign tax laws
and regulations to Laidlaw Environmental and to intercompany relationships
created by the Merger will be subject to audit and review by independent
national tax authorities. In addition, business practices or laws in Europe may
impose costs, restrictions or requirements on such activities that differ in
significant respects from the U.S. business environment.
CYCLICAL AND SEASONAL NATURE OF BUSINESS
The hazardous waste business is cyclical to the extent that it is dependent
upon a stream of waste from cyclical industries. If those cyclical industries
slow significantly, the business that Laidlaw Environmental receives from those
industries is likely to slow. Also, Laidlaw Environmental's business is somewhat
seasonal in that less waste is received in winter months.
LAIDLAW ENVIRONMENTAL SHARES
In considering whether to tender their Shares to Laidlaw Environmental
pursuant to the Offer, Safety-Kleen Shareholders should consider that the value
of the Offer Consideration depends to a large extent on the price of Laidlaw
Environmental Common Stock. Pursuant to the Offer, each Share will be exchanged
for $15.00 in cash (subject to reduction for termination fees and expenses and
incremental costs, includes incremental costs of new severance arrangements as
described in "The Laidlaw Environmental Offer -- The Cash Consideration" below),
and the number of shares of Laidlaw Environmental Common Stock equal to the
Exchange Ratio (as defined and described under "The Laidlaw Environmental
Offer -- The Exchange Ratio" below). Safety-Kleen Shareholders should be aware
that depending upon the Exchange Ratio and the reduction to the Cash
Consideration, the Laidlaw Environmental Offer Consideration per Share may be
less than $30.00.
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REASONS FOR THE LAIDLAW ENVIRONMENTAL OFFER
LAIDLAW ENVIRONMENTAL OFFER CONSIDERATION AND PREMIUM
Pursuant to the Laidlaw Environmental Offer, each Share will be exchanged
for $15.00 net in cash (subject to reduction for any Buyout Proposal Expenses
paid by Safety-Kleen) and $15.00 in shares of Laidlaw Environmental Common
Stock, assuming that the Laidlaw Environmental Average Price is no less than
$4.28571 and no greater than $5.35714. Accordingly, the per Share price premium
which Safety-Kleen Shareholders will receive in the Laidlaw Environmental Offer
will depend on the amount of any Buyout Proposal Expenses payable by
Safety-Kleen and the Laidlaw Common Stock trading price at the time of
consummation of the Laidlaw Environmental Offer.
Laidlaw Environmental believes that the Laidlaw Environmental Offer is in
the best interests of Safety-Kleen Shareholders because, among other things, the
Laidlaw Environmental Offer Consideration represents a 68.4% premium to the per
Share closing price on the NYSE on August 7, 1997, the date prior to the
announcement of William Blair's retention, a 36.8% premium to the per Share
closing price on the NYSE on November 3, 1997, the last trading day prior to the
public announcement of Laidlaw Environmental's intention to make the Laidlaw
Environmental Offer and an 11.1% premium to the Buyout Proposal. In developing
its belief that the Laidlaw Environmental Offer is in the best interests of
Safety-Kleen Shareholders, Laidlaw Environmental possessed limited information
with respect to the particular circumstances, from a tax standpoint, of
individual Safety-Kleen Shareholders. Laidlaw Environmental therefore cannot
make a conclusive determination as to the tax impact of the Laidlaw
Environmental Offer and the Merger on all Safety-Kleen Shareholders. The
following table shows the premium of the Laidlaw Environmental Offer
Consideration over the per Share closing price on the NYSE on the date prior to
public announcement of William Blair's retention, on the last trading day
immediately prior to the public announcement of the Laidlaw Environmental Offer.
<TABLE>
<CAPTION>
LAIDLAW
ENVIRONMENTAL
OFFER SAFETY-KLEEN PERCENT
PRICE* SHARE PRICE DIFFERENTIAL**
------------- ------------ --------------
<S> <C> <C> <C>
August 7, 1997, the date prior to public announcement of
William Blair's retention................................. $30.00 $17.8125 68.4%
November 3, 1997, the last trading day before the public
announcement of Laidlaw Environmental's intention to
acquire Safety-Kleen...................................... $30.00 $21.9375 36.8%
</TABLE>
- ----------------
* Assumes that no Buyout Proposal Expenses are paid and that the Laidlaw
Environmental Average Price is equal to or greater than $4.28571 and less
than or equal to $5.35714.
** Based on the closing price of the Shares on the indicated dates.
ENHANCED BUSINESS OPPORTUNITIES
In addition to the significant premium being offered per Share, Laidlaw
Environmental believes that Safety-Kleen Shareholders will benefit in several
ways as a result of becoming shareholders of Laidlaw Environmental. Upon
consummation of the Laidlaw Environmental Offer, Laidlaw Environmental intends
to build upon Safety-Kleen's leading market presence and quality brand equity.
In addition, Laidlaw Environmental's management believes that annual cost
savings of approximately $100 to $130 million would result from the combination
of the two companies due to an anticipated elimination of duplicative general
and administrative and other public company costs, the closure of overlapping
service center facilities, the increased utilization of those facilities that
remain open, and the internalization of various waste streams. Laidlaw
Environmental believes that its acquisition of Safety-Kleen will result in a
further strengthening of Laidlaw Environmental's market position by: (i)
providing additional service center market coverage in key geographic regions
including Kentucky, Minnesota, and New Jersey; (ii) introducing a smaller-sized
customer base to complement Laidlaw Environmental's existing customer base of
medium- and large-sized customers; (iii) allowing for increased vertical
integration through the use of Laidlaw Environmental facilities
21
<PAGE>
to process waste streams collected by Safety-Kleen service centers; and (iv)
providing significant expansion into the solvent recycling market.
BACKGROUND OF THE LAIDLAW ENVIRONMENTAL OFFER
On August 8, 1997 Safety-Kleen announced the resignation of John G.
Johnson, Jr., President and Chief Executive Officer of Safety-Kleen. Donald W.
Brinckman, Chairman of Safety-Kleen's Board of Directors, who had previously
served as Safety-Kleen's Chief Executive Officer from 1968 until December 31,
1994, was appointed Chief Executive Officer. Safety-Kleen also announced that
its Board of Directors had engaged the services of William Blair to act as
advisor to Safety-Kleen and manage the process of exploring strategic options
for enhancing shareholder value.
On August 8, 1997, William Blair sent a copy of the Safety-Kleen
Confidentiality Letter to one of Laidlaw Environmental's investment bankers, Mr.
David E. Thomas, Jr. of Raymond James & Associates, Inc. and stated that an
offering circular would be available early in the week of August 18, 1997, and
that such circular would be distributed to parties that had executed a
confidentiality agreement. Laidlaw Environmental did not respond to this letter
and William Blair called Laidlaw Environmental's representative and asked that
Laidlaw Environmental sign the confidentiality agreement. Laidlaw Environmental
was willing to sign a confidentiality agreement, but not the one proposed by
Safety-Kleen, which contained a two year standstill provision.
In mid-September 1997, there were further discussions between the two
investment banks in which Laidlaw Environmental's representatives requested a
meeting of the management of the two companies and their advisors so that
Laidlaw Environmental could fully describe why a business combination was in
both companies' best interests. Safety-Kleen's representative continued to
request that Laidlaw Environmental sign the confidentiality agreement containing
the two-year standstill provision. He also stated that if Laidlaw Environmental
would submit its proposal in writing, Safety-Kleen would consider a meeting with
Laidlaw Environmental.
On September 24, 1997, Mr. Thomas of Raymond James, financial advisor to
Laidlaw Environmental, delivered a letter to Mr. Jeffrey W. Corum of William
Blair, informing Mr. Corum of Laidlaw Environmental's interest in pursuing
negotiations with Safety-Kleen. In particular, Mr. Thomas's letter requested a
meeting between management of Laidlaw Environmental and management of
Safety-Kleen and pointed out several unique features of Laidlaw Environmental's
proposed transaction including the potential cost savings available from
combining the operations of Laidlaw Environmental and Safety-Kleen. Mr. Thomas's
letter suggested structuring the transaction as a reverse merger in which
Safety-Kleen would issue one share of its stock for every three shares of
Laidlaw Environmental stock.
Shortly thereafter, Mr. Corum responded to Mr. Thomas's letter by telephone
stating that only upon Laidlaw Environmental's delivery of a confidentiality and
standstill agreement acceptable to Safety-Kleen, would Safety-Kleen commence
negotiations with Laidlaw Environmental. Subsequent to their telephone
conversations, Mr. James R. Bullock, Chairman of Laidlaw Environmental,
attempted to call Mr. Brinckman, who did not return his call. Mr. Bullock then
called Mr. E. David Coolidge, III of William Blair in an effort to arrange a
meeting with Safety-Kleen. Mr. Coolidge repeated Safety-Kleen's refusal to meet
with Laidlaw Environmental in the absence of a confidentiality and standstill
agreement.
On November 3, 1997, the Laidlaw Environmental Board of Directors met and
determined to proceed with the Initial Offer as well as to retain Bear Stearns
to work together with Raymond James as financial advisors to Laidlaw
Environmental. Laidlaw Environmental management had previously retained Katten
Muchin & Zavis to serve as legal counsel. Also on November 3, 1997, in a letter
to Mr. Brinckman, Mr. James R. Bullock, Chairman of Laidlaw Environmental,
informed Mr. Brinckman and the Safety-Kleen Board of Directors of Laidlaw
Environmental's intention to pursue the Initial Offer, that Laidlaw
Environmental was willing to execute a confidentiality agreement provided such
agreement did not contain a standstill provision, and that Laidlaw Environmental
continued to believe that annual cost savings and synergies could result from a
combination of the two companies. For these and other reasons, Laidlaw
Environmental would consider and
22
<PAGE>
pursue various options with respect to an acquisition of Safety-Kleen
notwithstanding Safety-Kleen's refusal to meet with representatives of Laidlaw
Environmental. The letter also informed Mr. Brinckman that Laidlaw Environmental
had executed a commitment letter with Toronto-Dominion Bank to provide all
necessary financing for the Initial Offer and the Merger and again encouraged
Mr. Brinckman and the Safety-Kleen Board to meet with representatives of Laidlaw
Environmental to discuss the possibility of a mutually beneficial negotiated
transaction.
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<PAGE>
The text of Mr. Bullock's November 3 letter follows. Note that the letter
contains Laidlaw Environmental's opinion regarding the availability of and value
of anticipated cost savings and synergies, and Laidlaw Environmental's
interpretation of certain actions and statements of Safety-Kleen and its
advisors.
LETTERHEAD FOR JAMES R. BULLOCK
November 3, 1997
Mr. Donald W. Brinckman
Chairman & Chief Executive Officer
Safety-Kleen Corp.
900 North Randall Road
Elgin, Illinois
USA 60123
Dear Mr. Brinckman:
I am writing to you in my capacity as Chairman of Laidlaw Environmental
Services, Inc. Since your August 8th announcement that you would explore
strategic alternative to enhance shareholder value, we have sought
unsuccessfully, directly through phone calls to you and indirectly through your
advisors, to meet with you to pursue the combination of our companies. Six weeks
ago, at the request of your financial advisor, we submitted a preliminary merger
proposal to which you have yet to respond. Needless to say, we are frustrated by
your continuing unwillingness to engage in constructive dialogue.
As you are aware, your advisors have insisted that we sign an agreement that
would permit us to propose strategic alternatives that maximize value for your
shareholders only if you "shall have requested in writing in advance the
submission of such proposal". We have made clear on numerous occasions our
willingness to sign a confidentiality agreement that protects nonpublic
information you choose to share with us. In light of our experience to date,
however, we will not sign any agreement that does not ensure that your
shareholders have the opportunity to consider our offer and to maximize the
value of their stock.
In response to your continuing unwillingness to meet or commence discussions
with us in a meaningful way, our Board of Directors today authorized and
directed senior management of Laidlaw Environmental Services, Inc. to pursue the
acquisition of Safety-Kleen Corp. We have executed commitment letters with the
Toronto-Dominion Bank to provide all the necessary financing for this
acquisition. We have engaged Bear Stearns & Co., Inc. and Raymond James and
Associates Inc. to serve as our financial advisors and Katten Muchin and Zavis
to serve as our legal counsel.
Our offer for each share of Safety-Kleen Corp. is a combination of $14.00 in
cash and 2.4 common shares of Laidlaw Environmental Services, Inc. stock. This
represents approximately an 18.2% premium to Safety-Kleen's closing price on
Friday and a 46% premium to Safety-Kleen's trading price prior to your August
8th announcement. Please note that our offer is not subject to due diligence or
a financing contingency. We have fully committed financing sufficient to
complete the combination. We believe our offer represents a full and fair price
based on the publicly available information we have reviewed. However, should
you be willing to meet with us, we are prepared to consider any additional
information you may wish to provide that demonstrates that a higher valuation is
warranted. We continue to prefer a negotiated transaction.
Together our companies can create greater shareholder value than can either
of us alone. We estimate annual cost savings and synergy's will exceed $90
million. We believe the stock market will embrace this transaction and will
reward the combined company with enhanced stock performance. Our offer ensures
your shareholders participate in this exciting future.
We believe it is in the best interests of our companies to proceed
immediately to negotiate a definitive agreement, containing customary public
company terms and conditions, and to consummate a transaction by year-end. Given
the importance we place on this combination, we are prepared to commit the
resources necessary to see its timely completion. We and our advisors would be
pleased to meet you and your advisors in Chicago either later today or tomorrow
to complete the necessary papers.
In recognition of the strategic nature and compelling financial benefits of
our proposed combination to your shareholders and our willingness to consider
modifications to our offer as warranted, we expect you not to enter into any
binding merger or similar agreement with any other party without first exploring
with us the full merits of combining our two companies.
Our Board of Directors unanimously supports this merger. We trust you and
the other members of Safety-Kleen's Board of Directors will consider the best
interests of Safety-Kleen's shareholders and will agree to meet with us promptly
to achieve a mutually beneficial transaction.
We look forward to hearing from you later today.
Sincerely,
James R. Bullock, Chairman
cc: Safety-Kleen, Board of Directors
Laidlaw Environmental Services, Inc., Board of Directors
Douglas T. Lake, Bear Stearns & Co. Inc.
David E. Thomas, Jr., Raymond James & Associates Inc.
Herbert S. Wander, Katten Muchin & Zavis
William Blair & Company, LLC
24
<PAGE>
On November 3, 1997 after receipt of Mr. Bullock's letter, Mr. Brinckman
delivered a letter to Mr. Bullock requesting that Laidlaw Environmental execute
a confidentiality and standstill agreement and informing Mr. Bullock that the
Board of Directors of Safety-Kleen would fully consider Laidlaw Environmental's
proposal along with other proposals received by Safety-Kleen. In addition, Mr.
Brinckman stated that representatives of Safety-Kleen, together with its
financial advisors, would meet with representatives of Laidlaw Environmental,
together with its financial advisors, to discuss information concerning Laidlaw
Environmental and the estimated cost savings and synergies.
The text of Mr. Brinckman's November 3 letter is as follows:
November 3, 1997
VIA FACSIMILE
Mr. James R. Bullock
Chairman
Laidlaw Environmental Services, Inc.
3221 North Service Road
P.O. Box 5028
Burlington, Ontario
Canada L7R 3Y8
Dear Mr. Bullock:
Thank you for your letter of November 3, 1997.
As you know, we are engaged in a process of exploring strategic
alternatives for enhancing shareholder value. That process includes a possible
sale of the Company. Every prospective purchaser engaged in that phase of the
process has signed a confidentiality and standstill agreement that is designed
to produce even-handed treatment of participants. We urge you -- as we have
previously -- to sign that agreement and participate in this process on the same
basis as each of the other potential bidders.
In any event, our Board of Directors will fully consider your proposal
along with others that we receive. For purposes of furthering our understanding
and evaluation of your proposal, our financial advisors, William Blair &
Company, together with representatives of the Company, would be pleased to meet
with you in Chicago at a mutually convenient time so that you can furnish us
with information concerning Laidlaw Environmental Services and your estimated
cost savings and synergies. Please call John Carton of William Blair
(312/364-8426) to arrange for this meeting. In addition, if you execute our
confidentiality and standstill agreement accepting the same ground rules as our
other potential bidders, arrangements will be made to promptly provide you with
non-public information concerning the Company.
We appreciate your interest in Safety-Kleen and look forward to hearing
from you.
Sincerely,
Donald W. Brinckman
DWB/mb
On November 4, 1997, Laidlaw Environmental publicly announced its intention
to pursue the Initial Offer and the Merger.
On November 5, 1997, Mr. Bullock and a representative of Bear Stearns met
with Mr. Brinckman, Mr. Joseph Chalhaub, Senior Vice President of Safety-Kleen,
and representatives of William Blair to discuss potential synergies that could
be achieved through a combination of the two companies and ways the parties
could work together. Mr. Bullock stated that Laidlaw Environmental was prepared
to sign a mutual confidentiality agreement that would not contain a standstill
provision so that Laidlaw Environmental and Safety-Kleen could share information
with each other. In response, Safety-Kleen repeated its requirement that Laidlaw
Environmental sign a confidentiality and standstill agreement.
Subsequent to the November 5th meeting, the representatives of the parties
exchanged correspondence reiterating their positions with respect to the
confidentiality and standstill agreement.
25
<PAGE>
On November 13, 1997, Laidlaw Environmental filed the Registration
Statement of which this Prospectus is a part. A copy of the Registration
Statement was sent to Mr. Brinckman, along with a letter from Mr. Bullock
emphasizing Laidlaw Environmental's belief in the strategic importance of
combining the two companies and reiterating Laidlaw Environmental's desire to
engage in negotiations with Safety-Kleen. Mr. Bullock also expressed Laidlaw
Environmental's willingness to put the decision to accept the Initial Offer
directly to the Safety-Kleen Shareholders. Mr. Bullock requested the cooperation
of the Safety-Kleen Board of Directors in eliminating any antitakeover obstacles
which would prohibit the shareholders from accepting the Initial Offer.
The text of the November 13 letter follows. Note that the letter contains
statements regarding Laidlaw Environmental's interpretation of certain actions
and statements of Safety-Kleen and its advisors.
November 13, 1997
Mr. Donald W. Brinckman
Chairman & Chief Executive Officer
Safety-Kleen Corp.
1000 North Randall Road
Elgin, Illinois
USA 60123
Dear Mr. Brinckman:
We continue to be frustrated at the lack of progress in engaging in
substantive dialogue with you due to your continuing insistence that we sign a
standstill agreement. We believe our offer of $14.00 in cash and 2.4 shares of
Laidlaw Environmental Services, Inc. common stock represents outstanding value
for your shareholders.
The combination of our two companies is of compelling strategic importance
to both our shareholders. We have repeatedly sought to work with you in a
cooperative manner to achieve a mutually beneficial transaction. Unfortunately,
our efforts have come to naught.
As we discussed in Chicago, under the securities laws we are required to
file a registration statement relating to our offer with the Securities and
Exchange Commission. We took that step today. As a courtesy, we are enclosing a
copy of these materials for you. As soon as we are permitted to so, we will make
our offer directly to Safety-Kleen Corp. shareholders. We strongly believe that
Safety-Kleen Corp. shareholders, the owners of the company to whom your Board
owes fiduciary duties, are the ones who should ultimately decide whether our
offer and the strategic benefits the combination promises are as compelling to
them as they are to us.
As you will appreciate, in order for Safety-Kleen Corp. shareholders to
accept our offer, we must be assured that all antitakeover devices put in place
by your Board or otherwise applicable under Wisconsin law will not apply to our
offer. Accordingly, we hereby request that your Board amend your poison pill to
make it inapplicable to an acquisition of Safety-Kleen Corp. shares pursuant to
our offer, approve our acquisition of Safety-Kleen Corp. shares pursuant to our
offer for purposes of Section 180.1141 of the Wisconsin Statutes and take or
agree to take any other action necessary or appropriate to eliminate all
antitakeover devices.
In addition, we are furnishing you with the resolution and notice
contemplated by Section 180.1150(4) of the Wisconsin Statutes. We request that,
as required by statute, your Board call a special meeting of Safety-Kleen Corp.
shareholders to vote on the resolution and that such meeting be held no sooner
than 30 nor later than 50 days from the date hereof. In this connection, we are
enclosing a request that you furnish us with a list of Safety-Kleen Corp.
shareholders so that we can communicate with them directly and solicit proxies
for the special meeting.
We do not take these actions lightly. Your failure to work with us leaves
us no alternative. We remain hopeful your board, after due consideration, will
determine to engage us in negotiations that lead to a mutually beneficial merger
of our two outstanding companies.
Yours very truly
James R. Bullock
Chairman
On November 13, 1997, Laidlaw Environmental also sent a notice to
Safety-Kleen pursuant to Section 180.1150 of the Wisconsin Statutes requesting
that the Safety-Kleen Board of Directors convene a special meeting of
shareholders and submit for shareholder approval a resolution to restore regular
voting power to any Shares Laidlaw Environmental acquires as a result of the
Laidlaw Environmental Offer. See "The Laidlaw Environmental Offer -- Conditions
of the Offer -- Wisconsin Statutory Condition."
26
<PAGE>
By a second letter dated November 13, 1997, Laidlaw Environmental, having
in its judgment complied with the Wisconsin Statutes, requested the right to
inspect and copy the Safety-Kleen Shareholder list for the purpose of
communicating directly with the Safety-Kleen Shareholders. See "-- Litigation."
On November 20, 1997, Safety-Kleen announced that it had entered into the
Buyout Merger Agreement with the Buyout Group. Pursuant to the Buyout Merger
Agreement, an acquisition subsidiary formed by the Buyout Group would merge with
and into Safety-Kleen (the "Buyout Merger"), with Safety-Kleen as the surviving
company, in a transaction in which Safety-Kleen Shareholders would receive
$27.00 per Share in cash. As a result of the Buyout Merger, Safety-Kleen would
become a wholly-owned subsidiary of a new holding company formed by the Buyout
Group and would continue to operate under its current management out of its
current headquarters. The closing of the Buyout Merger is subject to certain
conditions, including the approval of at least 66 2/3% of Safety-Kleen's
Shareholders and both the debt and equity funding of the financing arrangements
of the Buyout Group. Pursuant to the Buyout Merger Agreement, Safety-Kleen is
required to pay a termination fee of $50 million and to reimburse the Buyout
Group for its expenses in an amount up to $25 million under certain conditions,
including in the event that the Buyout Merger Agreement is terminated and the
Laidlaw Environmental Offer by Laidlaw Environmental is accepted by the Safety-
Kleen Shareholders.
Later that day, in a letter from Mr. Bullock to Mr. Brinckman, Laidlaw
Environmental increased its offer to $30.00 per share, consisting of $15.00 in
cash (subject to reduction for break-up fees, new severance arrangements and
other expenses), and $15.00 in Laidlaw Environmental Common Stock, subject to
variation as described herein.
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<PAGE>
The text of the November 20 letter follows. Note that the letter contains
statements regarding to Laidlaw Environmental's interpretation of certain
actions and statements of Safety-Kleen and its advisors.
November 20, 1997
Mr. Donald W. Brinckman
Chairman of the Board
Safety-Kleen Corp.
1000 North Randall Road
Elgin, Illinois 60123
Dear Mr. Brinckman:
Your announcement this morning resolves any ambiguity on the issue of
whether the Safety-Kleen Board of Directors recognizes that the best route to
maximizing shareholder value is through the sale of the company. Under these
circumstances it is equally apparent the Safety-Kleen Board has a fiduciary duty
to act as a responsible auctioneer.
I am writing to advise that we are increasing our offer to acquire
Safety-Kleen to $30.00 per share consisting of $15.00 cash and $15.00 in Laidlaw
Environmental common stock. The cash portion will be reduced by any incremental
costs, such as break-up fees, new severance arrangements and other expenses,
Safety-Kleen may have incurred in connection with its agreement with Philip
Services and others. We presume these costs are insignificant given your
fiduciary duties to Safety-Kleen shareholders, our long standing offer to
negotiate all aspects of our proposal including price and the lack of any
mention of these costs in your public announcement. The exchange ratio of the
stock portion of our offer will be between 2.8 and 3.5 shares based on the
weighted average trading price for Laidlaw Environmental shares for 10 days
selected by lot from the 20 trading days ending three business days immediately
prior to closing.
Our offer ensures Safety-Kleen shareholders will have the opportunity to
share directly in the value this combination creates. In addition, the stock
portion of our offer can be delivered to Safety-Kleen shareholders on a tax
deferred basis with the value of our shares protected by the collar.
Although I remain puzzled by your lack of interest in our offers to date,
clearly with the terms now embodied in this letter it is time for us to put
behind us the posturing over standstill agreements or litigation on procedural
issues. We trust you and the other members of Safety-Kleen's Board of Directors
will consider the best interests of Safety-Kleen shareholders and agree to meet
with us immediately to negotiate a definitive agreement. We reiterate our
willingness to enter into a mutual confidentiality agreement to facilitate
negotiations.
As time is of the essence, may we hear from you promptly.
Yours very truly,
Laidlaw Environmental Services, Inc.
James R. Bullock
Chairman of the Board
On November 26, 1997, Safety Kleen filed the Buyout Proposal Proxy
Statement.
On December 2, 1997, Laidlaw Environmental and LES Acquisition filed a
proxy statement on Schedule 14A with respect to the proposal that pursuant to
Section 180.1150 of the Wisconsin Statutes the Safety-Kleen Shareholders restore
full voting power to any Shares acquired by Laidlaw Environmental or LES
Acquisition (the "Voting Rights Proposal"). A preliminary copy of this proxy
statement was mailed to Safety-Kleen Shareholders on December , 1997.
On December 9, 1997, in compliance with the court ruling of December 4,
1997, Safety-Kleen announced that a Safety-Kleen Shareholder meeting to consider
the Voting Rights Proposal would be held on January 9, 1998, with a record date
for such meeting of December 19, 1997 (the "Control Share Meeting").
LITIGATION
Claims Filed by Safety-Kleen. On November 17, 1997, Safety-Kleen commenced
litigation in the United States District Court for the Northern District of
Illinois alleging that Laidlaw Environmental violated Section 5(b)(1) of the
Securities Act of 1933 by making a "premature offer" and unlawful proxy
solicitation. As a remedy for that alleged violation, Safety-Kleen requested
that it be relieved of its obligation to provide Laidlaw Environmental with its
list of shareholders so that Safety-Kleen would not be in a position of
facilitating a violation of the federal securities laws. The Safety-Kleen
Complaint further alleged that Laidlaw Environmental's request that Safety-Kleen
call a special meeting of its shareholders failed to comply with the
28
<PAGE>
state law notice requirements. Safety-Kleen contended that the notice served by
Laidlaw Environmental failed to provide sufficient disclosure of the financing
to be used in connection with the Laidlaw Environmental Offer. Safety-Kleen
sought declaratory judgment that it need not schedule the special meeting or
provide access to its shareholder list.
Claims Filed by Laidlaw Environmental. On November 24, 1997, Laidlaw
Environmental filed its answer to the Safety-Kleen Complaint in which Laidlaw
Environmental denied each of Safety-Kleen's claims and raised certain
affirmative defenses. On that date, Laidlaw Environmental also filed a
counterclaim against Safety-Kleen and each member of its board of directors (the
"Director Defendants") seeking, among other things: (i) an order compelling
Safety-Kleen to call a special shareholders' meeting to vote on the resolution
proposed by Laidlaw Environmental in accordance with Section 180.1150(5)(a) of
the Wisconsin Statutes to restore full voting rights to any Shares acquired by
Laidlaw Environmental in the Laidlaw Environmental Offer and the Merger; (ii) an
order compelling the production of Safety-Kleen's shareholder lists, to be
produced promptly and at Safety-Kleen's expense; (iii) an order (w) declaring
that the Director Defendants have breached their fiduciary duties to
Safety-Kleen's shareholders, including Laidlaw Environmental, by refusing to
negotiate with Laidlaw Environmental, entering into the Buyout Proposal, and
agreeing to the unlawful provisions of the Buyout Merger Agreement, including
the break-up fee, (x) compelling the Director Defendants to carry out their
fiduciary duties to Safety-Kleen's shareholders, including Laidlaw
Environmental, by implementing and adhering to procedures under which the
transaction providing the best value reasonably available can be obtained for
Safety-Kleen's shareholders, (y) enjoining Safety-Kleen and the Director
Defendants from proceeding with the Buyout Proposal or paying a "break-up fee"
to the Buyout Group, and (z) directing the Director Defendants to negotiate with
Laidlaw Environmental regarding the Laidlaw Environmental Offer; (iv) an order
compelling the Director Defendants to amend the Rights Plan to make it
inapplicable to the new Laidlaw Environmental Offer or to redeem the Rights; (v)
an order (pursuant to the derivative claim) requiring the Director Defendants to
account to Safety-Kleen for waste of corporate assets and all other damages
caused by their approval of the Buyout Proposal; and (vi) an award of costs of
suit and reasonable attorneys' fees, and for such other relief as the court may
deem just and appropriate.
On November 26, 1997, Laidlaw Environmental presented its Motion for
Preliminary Injunction in which Laidlaw Environmental sought (i) an order
compelling Safety-Kleen to call the Control Share Meeting to vote on the Voting
Rights Proposal and (ii) an order compelling the production of the list of
Safety-Kleen Shareholders.
In a ruling issued on December 4, 1997, the United States District Court
for the Northern District of Illinois ordered Safety-Kleen to comply with the
provisions of Section 180.1150 of the Wisconsin Statutes by calling a meeting of
the Safety-Kleen Shareholders to consider the Voting Rights Proposal. The court
also ordered Safety-Kleen to provide the shareholder list to Laidlaw
Environmental.
Also on December 4, 1997, Laidlaw Environmental presented a second Motion
for Preliminary Injunction in which it sought (i) to enjoin Safety-Kleen and its
board of directors from consummating an unlawful agreement to sell Safety-Kleen
for $27 per share or paying a "break-up fee" to the Buyout Group; (ii) to
require Safety-Kleen's Board of Directors to fulfill their fiduciary duties of
loyalty and care to the Safety-Kleen Shareholders and fairly consider all offers
for the purchase of Safety-Kleen, including the Laidlaw Environmental Offer; and
(iii) to direct Safety-Kleen's Board of Directors to amend the Rights Agreement
to make it inapplicable to the Laidlaw Environmental Offer or redeem the Rights
created therein. An evidentiary hearing on the December 4 motion is scheduled
for January 6, 1997.
Claims filed by Third Parties. Between November 4, 1997 and November 12,
1997, six class action lawsuits were filed against Safety-Kleen and various
directors of Safety-Kleen by Safety-Kleen Shareholders not affiliated with
Laidlaw Environmental. In general, these lawsuits seek to (i) cause Safety-Kleen
to cooperate with any entity or person having a bona fide interest in a
transaction with Safety-Kleen, (ii) order the Safety-Kleen Board of Directors to
appropriately evaluate Safety-Kleen's value and to take appropriate steps to
enhance this value, and (iii) cause Safety-Kleen's Board of Directors to act
independently in the best interest of the public shareholders of Safety-Kleen.
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<PAGE>
THE LAIDLAW ENVIRONMENTAL OFFER
GENERAL
Laidlaw Environmental hereby offers, upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal, to
exchange the Laidlaw Environmental Offer Consideration for each outstanding
Share validly tendered on or prior to the Expiration Date and not properly
withdrawn. The Laidlaw Environmental Offer Consideration per Share (and
accompanying Rights) consists of $15.00 net in cash (subject to reduction as
described below) and that number of shares of Laidlaw Environmental Common Stock
equal to the Exchange Ratio.
Tendering shareholders will not be obligated to pay any charges or expenses
of the Exchange Agent or any brokerage commissions. Except as set forth in the
Instructions to the Letter of Transmittal, transfer taxes on the exchange of
Shares pursuant to the Laidlaw Environmental Offer will be paid by or on behalf
of Laidlaw Environmental.
The purpose of the Laidlaw Environmental Offer is to enable Laidlaw
Environmental to obtain control of, and ultimately the entire common equity
interest in, Safety-Kleen. Laidlaw Environmental presently intends, as soon as
practicable after consummation of the Laidlaw Environmental Offer, to propose
and seek to have Safety-Kleen effect the Merger. In the Merger, each outstanding
Share (other than Shares owned by Laidlaw Environmental or any of its
affiliates, Shares held in the treasury of Safety-Kleen (if Safety-Kleen is so
authorized) or by any subsidiary of Safety-Kleen and Shares owned by
Safety-Kleen Shareholders who perfect appraisal rights under Wisconsin law)
would be cancelled in exchange for the right to receive the Laidlaw
Environmental Offer Consideration. See "The Merger."
In the event that Laidlaw Environmental obtains all of the Shares pursuant
to the Laidlaw Environmental Offer and/or the Merger, former holders of Shares
(other than Laidlaw Environmental) would own approximately 43.4% of the
outstanding shares of Laidlaw Environmental Common Stock, based on the number of
shares of Laidlaw Environmental Common Stock outstanding on October 14, 1997.
Laidlaw Environmental's obligation to exchange the Laidlaw Environmental
Offer Consideration for Shares pursuant to the Laidlaw Environmental Offer is
subject to satisfaction or waiver of the Minimum Tender Condition, the Rights
Plan Condition and the Wisconsin Statutory Condition (in each case as defined on
the cover page of this Prospectus) and the other conditions set forth under
"-- Conditions of the Laidlaw Environmental Offer."
According to the Safety-Kleen September 6, 1997 Form 10-Q, as of September
6, 1997, there were 58,400,729 Shares outstanding. As of November 18, 1997,
Laidlaw Environmental beneficially owned 601,100 Shares, or approximately 1.03%
of the outstanding Shares.
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This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed to registered holders of Shares and will be furnished
to brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on such shareholder lists, or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares by
Laidlaw Environmental.
THE CASH CONSIDERATION
The Cash Consideration to be paid pursuant to the Laidlaw Environmental
Offer shall be reduced by the quotient of (x) the aggregate amount of (i) any
termination fees or expenses paid or reimbursed (or payable or reimbursable) by
Safety-Kleen pursuant to the Agreement and Plan of Merger, dated as of November
20, 1997 (the "Buyout Merger Agreement"), by and among SK Parent Corp.
("Parent"), SK Acquisition Corp. ("Purchaser") and Safety-Kleen and (ii) any
incremental costs, including the costs of new severance arrangements and other
expenses Safety-Kleen may incur in connection with the Buyout Merger Agreement
(such fees, expenses and other costs, the "Buyout Proposal Expenses") divided by
(y) the number of outstanding Shares (on a fully diluted basis) as of the
Expiration Date. On November 24, 1997, Laidlaw Environmental filed a
counterclaim in the United States District Court for the Northern District of
Illinois against Safety-Kleen and its board of directors seeking, among other
things, preliminary and permanent injunctive relief declaring invalid the
termination fee and expense reimbursement provisions of the Buyout Merger
Agreement. A hearing on the request is scheduled for January 6, 1997. Laidlaw
Environmental submitted a request in writing to Safety-Kleen for a statement
setting forth any incremental costs, including the cost of new severance
arrangements and other expenses that Safety-Kleen has incurred or may reasonably
be expected to incur in connection with the Buyout Merger Agreement. Although
Safety-Kleen's December 10, 1997 response confirmed that Safety-Kleen had agreed
to pay a break-up fee of $50 million and transaction expenses of up to $25
million to the Buyout Group under certain circumstances, the letter failed to
specify the incremental severance and other costs that Safety-Kleen had incurred
or may in the future incur in connection with the Buyout Merger Agreement.
THE EXCHANGE RATIO
"Exchange Ratio" means the quotient (rounded to the nearest 1/100,000)
determined by dividing $15.00 by the weighted average of the trading prices for
Laidlaw Environmental Common Stock (as reported on the New York Stock Exchange,
Inc. (the "NYSE") Composite Transactions reporting system as published in The
Wall Street Journal or, if not published therein, in another authoritative
source) (the "Laidlaw Environmental Average Price") for ten NYSE trading days
(each, a "Trading Day") selected by lot from the twenty Trading Days ending
three business days immediately prior to the Expiration Date, provided, that the
Exchange Ratio shall not be less than 2.80 nor greater than 3.50. Accordingly,
subject to changes in the actual market value of Laidlaw Environmental Common
Stock on the date that Shares are actually exchanged, each Share will be
exchanged for (in addition to the Cash Consideration) Laidlaw Environmental
Common Stock having a market value of $15.00 if the Laidlaw Environmental
Average Price is between $4.28571 and $5.35714. If the Laidlaw Environmental
Average Price is greater than $5.35714, each Share will be exchanged for (in
addition to the Cash Consideration) Laidlaw Environmental Common Stock having a
market value of more than $15.00, and, conversely, if the Laidlaw Environmental
Average Price is less than $4.28571, each Share will be exchanged for (in
addition to the Cash Consideration) Laidlaw Environmental Common Stock having a
market value of less than $15.00, in each case subject to changes in the actual
market value of Laidlaw Environmental Common Stock on the date that Shares are
actually exchanged. Cash will be paid in lieu of any fractional shares of
Laidlaw Environmental Common Stock. Laidlaw Environmental Common Stock is listed
for trading under the symbol "LLE" on the NYSE. On , 1997, the
closing price of Laidlaw Environmental Common Stock on the NYSE was $ .
Based on such closing price, the Exchange Ratio would be , and each Share
would be converted into $15.00 net in cash (subject to reduction as described
above) and shares of Laidlaw Environmental Common Stock. The Exchange
Ratio will change as the market price of the Laidlaw Environmental Common Stock
changes. Safety-Kleen Shareholders may call (800) - any time on or
after the date hereof through the Expiration Date for the current Exchange Ratio
calculated for purposes of responding to telephone inquiries based on the
average
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of the closing prices of Laidlaw Environmental Common Stock for the ten
consecutive Trading Days preceding the date the call is placed. The actual
Laidlaw Environmental Average Price and Exchange Ratio will be calculated as of
the third Trading Day immediately prior to the Expiration Date, as described
above, and a press release will be issued announcing the actual Exchange Ratio
prior to the opening of the second Trading Day prior to the Expiration Date (as
it may be extended from time to time).
The following table sets forth for illustrative purposes the Exchange Ratio
at a variety of assumed Laidlaw Environmental Average Prices. This table is
illustrative only, the actual Laidlaw Environmental Average Price will be
determined as set forth above.
<TABLE>
<CAPTION>
MARKET VALUE OF
LAIDLAW ENVIRONMENTAL LAIDLAW ENVIRONMENTAL
AVERAGE PRICE EXCHANGE RATIO COMMON SHARES
--------------------- -------------- ---------------------
<S> <C> <C>
$4.20 3.50 $14.70
$4.40 3.409 $15.00
$4.60 3.261 $15.00
$4.80 3.125 $15.00
$5.00 3.0 $15.00
$5.20 2.885 $15.00
$5.40 2.8 $15.12
</TABLE>
SAFETY-KLEEN RIGHTS
No separate payment will be made by Laidlaw Environmental for the Rights
pursuant to the Laidlaw Environmental Offer. The Rights are presently evidenced
by the certificates for the Shares, and the tender by a Safety-Kleen Shareholder
of his or her Shares prior to the Distribution Date (as defined below) will also
constitute a tender of the associated Rights. Upon the earlier to occur of (i)
10 days following a public announcement that a person has acquired beneficial
ownership of 20% or more of the outstanding Shares (an "Acquiring Person") or
(ii) 10 business days (or such later date as may be determined by action of the
Safety-Kleen Board prior to such time as any person or group becomes an
Acquiring Person) following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer which would result in the person
making the offer becoming an Acquiring Person (the earlier of such dates being
called the "Distribution Date"), separate certificates evidencing the Rights
will be mailed to holders of record of the Shares as of the close of business on
the Distribution Date and such separate Rights certificates alone will evidence
the Rights.
If the Distribution Date occurs and separate certificates representing the
Rights are distributed by Safety-Kleen or the Rights Agent to holders of Shares
prior to the time a holder's Shares are tendered pursuant to the Laidlaw
Environmental Offer, certificates representing a number of Rights equal to the
number of Shares tendered must be delivered to the Exchange Agent, or, if
available, a book-entry confirmation received by the Exchange Agent with respect
thereto, in order for such Shares to be validly tendered. If a Distribution Date
occurs and separate certificates representing the Rights are not distributed
prior to the time Shares are tendered pursuant to the Laidlaw Environmental
Offer, Rights may be tendered prior to a Safety-Kleen Shareholder receiving the
certificates for Rights by use of the guaranteed delivery procedure described
under "-- Procedure for Tendering" below.
In connection with the Buyout Merger Agreement, the Board of Directors of
Safety-Kleen approved a Second Amendment to the Rights Agreement, dated as of
November 20, 1997 (the "Second Rights Amendment"). The Second Rights Amendment
provides, among other things, that the execution, delivery and performance of
the Buyout Merger Agreement will not (i) cause Parent, Purchaser or any of their
respective Affiliates or Associates to become an "Acquiring Person" (as defined
in the Rights Agreement), (ii) give rise to a "Distribution Date" (as defined in
the Rights Agreement) or (iii) trigger certain other events specified in the
Rights Agreement.
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TIMING OF THE LAIDLAW ENVIRONMENTAL OFFER
The Laidlaw Environmental Offer is currently scheduled to expire on
, 1998; however, it is Laidlaw Environmental's current intention to
extend the Laidlaw Environmental Offer from time to time as necessary until all
conditions to the Laidlaw Environmental Offer have been satisfied or waived. See
"-- Extension, Termination and Amendment." Laidlaw Environmental has received a
commitment letter from Toronto-Dominion Bank stating that it will provide or
arrange credit facilities in the amount necessary to fund payment of the Cash
Consideration. See "-- Source and Amount of Funds." In the unlikely event that
Laidlaw Environmental has not obtained financing for the Cash Consideration
prior to five business days before the Expiration Date, Laidlaw Environmental
currently intends to extend the Laidlaw Environmental Offer to ensure that five
business days remain for Safety-Kleen Shareholders to tender their Shares in the
Laidlaw Environmental Offer subsequent to obtaining financing. See "-- Source
and Amount of Funds." Laidlaw Environmental expects that the Laidlaw
Environmental Stockholder Approval Condition will be satisfied on or about
, 1998, the date on which it plans to call the Laidlaw Environmental
Special Meeting, to approve the issuance of shares of Laidlaw Environmental
Common Stock in connection with the Laidlaw Environmental Offer and the Merger.
EXTENSION, TERMINATION AND AMENDMENT
Laidlaw Environmental expressly reserves the right (but will not be
obligated), in its sole discretion, at any time or from time to time, and
regardless of whether any of the events set forth in "-- Conditions of the
Laidlaw Environmental Offer" shall have occurred or shall have been determined
by Laidlaw Environmental to have occurred, to extend the period of time during
which the Laidlaw Environmental Offer is to remain open by giving oral or
written notice of such extension to the Exchange Agent, which extension will be
announced no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. There can be no assurance that
Laidlaw Environmental will exercise its right to extend the Laidlaw
Environmental Offer. However, it is Laidlaw Environmental's current intention to
extend the Laidlaw Environmental Offer until all Laidlaw Environmental Offer
Conditions have been satisfied or waived. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Laidlaw
Environmental Offer, subject to the right of a tendering Safety-Kleen
Shareholder to withdraw his or her Shares. See "-- Withdrawal Rights."
Subject to the applicable rules and regulations of the Commission, Laidlaw
Environmental also reserves the right, in its sole discretion, at any time or
from time to time, (i) to delay acceptance for, exchange of, or, regardless of
whether such Shares (and Rights, if applicable) were theretofore accepted for
exchange, exchange of any Shares (and Rights, if applicable) pursuant to the
Laidlaw Environmental Offer, or to terminate the Laidlaw Environmental Offer and
not accept for exchange or exchange any Shares (and Rights, if applicable) not
theretofore accepted for exchange, or exchanged, upon the failure of any of the
conditions of the Laidlaw Environmental Offer to be satisfied and (ii) to waive
any condition (other than the Laidlaw Environmental Stockholder Approval
Condition, the Regulatory Approval Condition and the condition relating to the
effectiveness of the Registration Statement) or otherwise amend the Laidlaw
Environmental Offer in any respect, by giving oral or written notice of such
delay, termination or amendment to the Exchange Agent and by making a public
announcement thereof. Any such extension, termination, amendment or delay will
be followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that any material change in the
information published, sent or given to Safety-Kleen Shareholders in connection
with the Laidlaw Environmental Offer be promptly disseminated to Safety-Kleen
Shareholders in a manner reasonably designed to inform Safety-Kleen Shareholders
of such change) and without limiting the manner in which Laidlaw Environmental
may choose to make any public announcement, Laidlaw Environmental shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
Laidlaw Environmental confirms that if it makes a material change in the
terms of the Laidlaw Environmental Offer or the information concerning the
Laidlaw Environmental Offer, or if it waives a material
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<PAGE>
condition of the Laidlaw Environmental Offer, Laidlaw Environmental will extend
the Laidlaw Environmental Offer to the extent required under the Exchange Act.
If, prior to the Expiration Date, Laidlaw Environmental shall increase or
decrease the percentage of Shares being sought or the consideration offered to
holders of Shares, such increase or decrease shall be applicable to all holders
whose Shares are accepted for exchange pursuant to the Laidlaw Environmental
Offer, and, if at the time notice of any such increase or decrease is first
published, sent or given to holders of Shares, the Laidlaw Environmental Offer
is scheduled to expire at any time earlier than the tenth business day from and
including the date that such notice is first so published, sent or given, the
Laidlaw Environmental Offer will be extended until the expiration of such ten
business day period. For purposes of the Laidlaw Environmental Offer, a
"business day" means any day other than a Saturday, Sunday or a federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time.
EXCHANGE OF SHARES; DELIVERY OF LAIDLAW ENVIRONMENTAL OFFER CONSIDERATION
Upon the terms and subject to the conditions of the Laidlaw Environmental
Offer (including, if the Laidlaw Environmental Offer is extended or amended, the
terms and conditions of any such extension or amendment), Laidlaw Environmental
will accept for exchange, and will exchange, Shares (and Rights, if applicable)
validly tendered and not properly withdrawn as promptly as practicable following
the Expiration Date. In addition, subject to applicable rules of the Commission,
Laidlaw Environmental expressly reserves the right to delay acceptance of or the
exchange of Shares (and Rights, if applicable) in order to comply with any
applicable law. In all cases, exchange of Shares (and Rights, if applicable)
tendered and accepted for exchange pursuant to the Laidlaw Environmental Offer
will be made only after receipt by the Exchange Agent of certificates for such
Shares (and Rights, if applicable) (or a confirmation of a book-entry transfer
of such Shares (and Rights, if applicable) in the Exchange Agent's account at
The Depository Trust Company (the "Book-Entry Transfer Facility")), a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and any
other required documents.
For purposes of the Laidlaw Environmental Offer, Laidlaw Environmental will
be deemed to have accepted for exchange Shares (and Rights, if applicable)
validly tendered and not withdrawn as, if and when Laidlaw Environmental gives
oral or written notice to the Exchange Agent of its acceptance of the tenders of
such Shares (and Rights, if applicable) pursuant to the Laidlaw Environmental
Offer. Delivery of Laidlaw Environmental Common Stock and Cash Consideration in
exchange for Shares (and Rights, if applicable) pursuant to the Laidlaw
Environmental Offer and cash in lieu of fractional shares of Laidlaw
Environmental Common Stock will be made by the Exchange Agent as soon as
practicable after receipt of such notice. The Exchange Agent will act as agent
for tendering Safety-Kleen Shareholders for the purpose of receiving Laidlaw
Environmental Common Stock, the Cash Consideration and cash to be paid in lieu
of fractional shares of Laidlaw Environmental Common Stock from Laidlaw
Environmental and transmitting such Laidlaw Environmental Common Stock and cash
to tendering Safety-Kleen Shareholders. Under no circumstances will interest be
paid by Laidlaw Environmental by reason of any delay in making such exchange.
If any tendered Shares are not accepted for exchange pursuant to the terms
and conditions of the Laidlaw Environmental Offer for any reason, or if
certificates are submitted for more Shares than are tendered, certificates for
such unexchanged Shares will be returned without expense to the tendering
Safety-Kleen Shareholder or, in the case of Shares tendered by book-entry
transfer of such Shares into the Exchange Agent's account at a Book-Entry
Transfer Facility pursuant to the procedures set forth below under "-- Procedure
for Tendering," such Shares will be credited to an account maintained within
such Book-Entry Transfer Facility as soon as practicable following expiration or
termination of the Laidlaw Environmental Offer.
CASH IN LIEU OF FRACTIONAL SHARES OF LAIDLAW ENVIRONMENTAL COMMON STOCK
No certificates representing fractional shares of Laidlaw Environmental
Common Stock will be issued pursuant to the Laidlaw Environmental Offer. In lieu
thereof, each tendering shareholder who would otherwise be entitled to a
fractional share of Laidlaw Environmental Common Stock will receive cash in an
amount equal to such fraction (expressed as a decimal and rounded to the nearest
0.01 of a share) times the
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<PAGE>
closing price for shares of Laidlaw Environmental Common Stock on the NYSE
Composite Tape on the date such Safety-Kleen Shareholder's Shares are accepted
for exchange by Laidlaw Environmental.
WITHDRAWAL RIGHTS
Tenders of Shares (and Rights, if applicable) made pursuant to the Laidlaw
Environmental Offer are irrevocable, except that Shares (and Rights, if
applicable) tendered pursuant to the Laidlaw Environmental Offer may be
withdrawn pursuant to the procedures set forth below at any time prior to the
Expiration Date, and, unless theretofore accepted for exchange and exchanged by
Laidlaw Environmental for the Laidlaw Environmental Offer Consideration pursuant
to the Laidlaw Environmental Offer, may also be withdrawn at any time after
.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at one of its
addresses set forth on the back cover of this Prospectus, and must specify the
name of the person having tendered the Shares (and Rights, if applicable) to be
withdrawn, the number of Shares (and Rights, if applicable) to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares (and Rights, if applicable).
The signature(s) on the notice of withdrawal must be guaranteed by a
financial institution (including most banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (an "Eligible Institution") unless such
Shares (and Rights, if applicable) have been tendered for the account of any
Eligible Institution. If Shares (and Rights, if applicable) have been tendered
pursuant to the procedures for book-entry tender as set forth below under
"-- Procedure for Tendering," any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares (and Rights, if applicable) and must otherwise comply with
such Book-Entry Transfer Facility's procedures. If certificates have been
delivered or otherwise identified to the Exchange Agent, the name of the
registered holder and the serial numbers of the particular certificates
evidencing the Shares (and Rights, if applicable) withdrawn must also be
furnished to the Exchange Agent as aforesaid prior to the physical release of
such certificates.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Laidlaw Environmental, in its
sole discretion, which determination shall be final and binding. Neither Laidlaw
Environmental, the Exchange Agent, the Information Agent, the Dealer Manager nor
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification. Any Shares (and Rights, if applicable)
properly withdrawn will be deemed not to have been validly tendered for purposes
of the Laidlaw Environmental Offer. However, withdrawn Shares (and Rights, if
applicable) may be retendered by following one of the procedures described under
"-- Procedure for Tendering" at any time prior to the Expiration Date.
A withdrawal of Shares shall also constitute a withdrawal of the associated
Rights. Rights may not be withdrawn unless the associated Shares are also
withdrawn.
PROCEDURE FOR TENDERING
For a Safety-Kleen Shareholder to validly tender Shares (and Rights, if
applicable) pursuant to the Laidlaw Environmental Offer, (i) a properly
completed and duly executed Letter of Transmittal (or manually executed
facsimile thereof), together with any required signature guarantees, or an
Agent's Message (as defined below) in connection with a book-entry transfer, and
any other required documents, must be transmitted to and received by the
Exchange Agent at one of its addresses set forth on the back cover of this
Prospectus and either certificates for tendered Shares (and Rights, if
applicable) must be received by the Exchange Agent at such address or such
Shares (and Rights, if applicable) must be tendered pursuant to the procedures
for book-entry transfer set forth below (and a confirmation of receipt of such
tender received (such confirmation, a "Book-Entry Confirmation")), in each case
prior to the Expiration Date, or (ii) such Safety-Kleen Shareholder must comply
with the guaranteed delivery procedure set forth below.
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<PAGE>
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Exchange Agent, and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares (and Rights, if applicable) that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that Laidlaw Environmental may enforce such agreement against
such participant.
Safety-Kleen Shareholders will be required to tender one Right for each
Share tendered in order to effect a valid tender of Shares, unless the Rights
Plan Condition has been satisfied or waived. Unless the Safety-Kleen
Distribution Date occurs, a tender of Shares will constitute a tender of the
associated Rights. If the Safety-Kleen Distribution Date occurs and separate
certificates representing the Rights are distributed by Safety-Kleen or the
Rights Agent to holders of Shares prior to the time a holder's Shares are
tendered pursuant to the Laidlaw Environmental Offer, certificates representing
a number of Rights equal to the number of Shares tendered must be delivered to
the Exchange Agent, or, if available, a Book-Entry Confirmation received by the
Exchange Agent with respect thereto, in order for such Shares to be validly
tendered. If the Safety-Kleen Distribution Date occurs and separate certificates
representing the Rights are not distributed prior to the time Shares are
tendered pursuant to the Laidlaw Environmental Offer, Rights may be tendered
prior to a shareholder receiving the certificates for Rights by use of the
guaranteed delivery procedure described below. If Rights certificates are
distributed but are not available to a shareholder prior to the time Shares are
tendered pursuant to the Laidlaw Environmental Offer, a tender of Shares
constitutes an agreement by the tendering shareholder to deliver to the Exchange
Agent pursuant to the guaranteed delivery procedure described below, prior to
the expiration of the period to be specified in the Notice of Guaranteed
Delivery and the related Letter of Transmittal for delivery of Rights
certificates or a Book-Entry Confirmation for Rights (the "Rights Delivery
Period"), Rights certificates representing a number of Rights equal to the
number of Shares tendered. Laidlaw Environmental reserves the right to require
that it receive such Rights certificates (or a Book-Entry Confirmation with
respect to such Rights) prior to accepting Shares for exchange. If Rights
certificates are distributed, Laidlaw Environmental will distribute a separate
letter of transmittal for such Rights certificates. If Rights certificates are
tendered separately from Shares, then a properly completed letter of transmittal
for Rights certificates (or manually executed facsimile thereof) must be
submitted with respect to such Rights. Laidlaw Environmental reserves the right
to require that it receive such Rights certificates (or a Book-Entry
Confirmation with respect to such Rights) prior to accepting Shares for
exchange.
Nevertheless, Laidlaw Environmental will be entitled to accept for exchange
Shares tendered by a shareholder prior to receipt of the Rights certificates
required to be tendered with such Shares or a Book-Entry Confirmation with
respect to such Rights and either (i) subject to complying with applicable rules
and regulations of the Commission, withhold payment for such Shares pending
receipt of the Rights certificates or a Book-Entry Confirmation for such Rights
or (ii) exchange Shares accepted for exchange pending receipt of the Rights
certificates or a Book-Entry Confirmation for such Rights in reliance upon the
guaranteed delivery procedure described below. In addition, after expiration of
the Rights Delivery Period, Laidlaw Environmental may instead elect to reject as
invalid a tender of Shares with respect to which Rights certificates or a Book-
Entry Confirmation for an equal number of Rights have not been received by the
Exchange Agent. Any determination by Laidlaw Environmental to make payment for
Shares in reliance upon such guaranteed delivery procedure or, after expiration
of the Rights Delivery Period, to reject as invalid, shall be made, subject to
applicable law, in the sole and absolute discretion of Laidlaw Environmental.
The Exchange Agent will establish accounts with respect to the Shares at
the Book-Entry Transfer Facility for purposes of the Laidlaw Environmental Offer
within two business days after the date of the mailing of the final Prospectus,
and any financial institution that is a participant in any of the Book-Entry
Transfer Facility systems may make book-entry delivery of the Shares by causing
the Book-Entry Transfer Facility to transfer such Shares into the Exchange
Agent's account in accordance with the Book-Entry Transfer Facility's procedure
for such transfer. However, although delivery of Shares may be effected through
book-entry at the Book-Entry Transfer Facility, the Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer, and any other
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<PAGE>
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at one or more of its addresses set forth on the back cover of
this Prospectus prior to the Expiration Date, or the guaranteed delivery
procedure described below must be complied with. No assurance can be given,
however, that book-entry delivery of Rights will be available. If book-entry
delivery is not available, a tendering shareholder will be required to tender
Rights by means of delivery of Rights certificates or pursuant to the guaranteed
delivery procedure set forth below.
No signature guarantee is required on the Letter of Transmittal in cases
where (a) the Letter of Transmittal is signed by the registered holder(s) of the
Shares (including any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
therewith and such holder(s) have not completed the instruction entitled
"Special Issuance Instructions" on the Letter of Transmittal or (b) such Shares
are tendered for the account of an Eligible Institution. Otherwise, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. If the certificates for Shares or Rights (if any) are registered in
the name of a person other than the signer of the Letter of Transmittal, or if
certificates for unexchanged Shares or Rights (if any) are to be issued to a
person other than the registered holder(s), the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates, with
the signature(s) on the certificates or stock powers guaranteed as aforesaid.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO CASH
CONSIDERATION AND CASH RECEIVED IN LIEU OF FRACTIONAL SHARES OF LAIDLAW
ENVIRONMENTAL COMMON STOCK, A SHAREHOLDER MUST PROVIDE THE EXCHANGE AGENT WITH
HIS OR HER CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY WHETHER SUCH
SHAREHOLDER IS SUBJECT TO BACKUP WITHHOLDING OF FEDERAL INCOME TAX BY COMPLETING
THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. CERTAIN
SHAREHOLDERS (INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN
INDIVIDUALS) ARE NOT SUBJECT TO THESE BACKUP WITHHOLDING AND REPORTING
REQUIREMENTS. IN ORDER FOR A FOREIGN INDIVIDUAL TO QUALIFY AS AN EXEMPT
RECIPIENT, THE SHAREHOLDER MUST SUBMIT A FORM W-8, SIGNED UNDER PENALTIES OF
PERJURY, ATTESTING TO THAT INDIVIDUAL'S EXEMPT STATUS.
If a Safety-Kleen Shareholder desires to tender Shares (and Rights, if
applicable) pursuant to the Laidlaw Environmental Offer and such shareholder's
certificates are not immediately available or such shareholder cannot deliver
the certificates and all other required documents to the Exchange Agent prior to
the Expiration Date or such shareholder cannot complete the procedure for
book-entry transfer on a timely basis, such Shares (and Rights, if applicable)
may nevertheless be tendered, provided that all of the following conditions are
satisfied:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Laidlaw
Environmental, is received by the Exchange Agent as provided below on or
prior to the Expiration Date; and
(c) the certificates for all tendered Shares (or a confirmation of a
book-entry transfer of such securities into the Exchange Agent's account at
a Book-Entry Transfer Facility as described above), in proper form for
transfer, together with a properly completed and duly executed Letter of
Transmittal (or
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facsimile thereof), with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within three NYSE trading days after the date of execution of such Notice
of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such Notice.
In all cases, exchanges of Shares (and Rights, if applicable) tendered and
accepted for exchange pursuant to the Laidlaw Environmental Offer will be made
only after timely receipt by the Exchange Agent of certificates for Shares (and
Rights, if applicable) (or timely confirmation of a book-entry transfer of such
securities into the Exchange Agent's account at a Book-Entry Transfer Facility
as described above), properly completed and duly executed Letter(s) of
Transmittal (or facsimile(s) thereof), or an Agent's Message in connection with
a book-entry transfer, and any other required documents. Accordingly, tendering
Safety-Kleen Shareholders may be paid at different times depending upon when
certificates for Shares (and Rights, if applicable) or confirmations of
book-entry transfers of such Shares (and Rights, if applicable) are actually
received by the Exchange Agent.
By executing a Letter of Transmittal as set forth above, the tendering
Safety-Kleen Shareholder irrevocably appoints designees of Laidlaw Environmental
as such shareholder's attorneys-in-fact and proxies, each with full power of
substitution, to the full extent of such shareholder's rights with respect to
the Shares (and Rights, if applicable) tendered by such shareholder and accepted
for exchange by Laidlaw Environmental and with respect to any and all other
Shares (and Rights, if applicable) and other securities issued or issuable in
respect of the Shares (and Rights, if applicable) on or after ,
1998. Such appointment is effective, and voting rights will be affected, when
and only to the extent that Laidlaw Environmental deposits the shares of Laidlaw
Environmental Common Stock and Cash Consideration for Shares tendered by such
shareholder with the Exchange Agent. All such proxies shall be considered
coupled with an interest in the tendered Shares and therefore shall not be
revocable. Upon the effectiveness of such appointment, all prior proxies given
by such shareholder will be revoked, and no subsequent proxies may be given
(and, if given, will not be deemed effective). Laidlaw Environmental's designees
will, with respect to the Shares for which the appointment is effective, be
empowered, among other things, to exercise all voting and other rights of such
shareholder as they, in their sole discretion, deem proper at any annual,
special or adjourned meeting of Safety-Kleen Shareholders, by written consent in
lieu of any such meeting or otherwise. Laidlaw Environmental reserves the right
to require that, in order for Shares to be deemed validly tendered, immediately
upon Laidlaw Environmental's exchange of such Shares, Laidlaw Environmental must
be able to exercise full voting rights with respect to such Shares.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Shares (and Rights, if
applicable) will be determined by Laidlaw Environmental, in its sole discretion,
which determination shall be final and binding. Laidlaw Environmental reserves
the absolute right to reject any and all tenders of Shares (and Rights, if
applicable) determined by it not to be in proper form or the acceptance of or
exchange for which may, in the opinion of Laidlaw Environmental's counsel, be
unlawful. Laidlaw Environmental also reserves the absolute right to waive any of
the conditions of the Laidlaw Environmental Offer (other than the Laidlaw
Environmental Stockholder Approval Condition, the Regulatory Approval Condition
and the condition relating to the effectiveness of the Registration Statement),
or any defect or irregularity in the tender of any Shares (and Rights, if
applicable). No tender of Shares (and Rights, if applicable) will be deemed to
have been validly made until all defects and irregularities in tenders of Shares
have been cured or waived. Neither Laidlaw Environmental, the Exchange Agent,
the Information Agent, the Dealer Manager nor any other person will be under any
duty to give notification of any defects or irregularities in the tender of any
Shares or will incur any liability for failure to give any such notification.
Laidlaw Environmental's interpretation of the terms and conditions of the
Laidlaw Environmental Offer (including the Letter of Transmittal and
instructions thereto) will be final and binding.
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The tender of Shares and Rights (if any) pursuant to any of the procedures
described above will constitute a binding agreement between the tendering
Safety-Kleen Shareholder and Laidlaw Environmental upon the terms and subject to
the conditions of the Laidlaw Environmental Offer.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of all the material anticipated federal
income tax consequences of the Laidlaw Environmental Offer and the Merger and
represents the opinion of Katten Muchin & Zavis, counsel to Laidlaw
Environmental. It does not address any tax consequences of the Laidlaw
Environmental Offer and the Merger to persons who exercise appraisal rights, if
any, to the Merger. This discussion may not apply to certain classes of persons
subject to special tax treatment, such as foreign persons, insurance companies,
tax-exempt organizations, financial institutions, dealers in securities, persons
who acquired Shares pursuant to the exercise of employee stock options or rights
or otherwise as compensation and persons who hold Shares as part of a straddle
or conversion transaction. This discussion is based upon laws, regulations,
rulings and decisions, all of which are subject to change (possibly with
retroactive effect), and no ruling has been or will be requested from the
Internal Revenue Service (the "Service") on the tax consequences of the Laidlaw
Environmental Offer and the Merger.
The exchange of Shares for Laidlaw Environmental Common Stock and cash
pursuant to the Laidlaw Environmental Offer and Merger will be a taxable
transaction for U.S. federal income tax purposes and may also be taxable under
applicable state, local and foreign tax laws. In general, for U.S. federal
income purposes, each Safety-Kleen Shareholder will realize gain or loss equal
to the difference between (x) the amount of cash and the fair market value of
the shares Laidlaw Environmental Common Stock received and (y) the Safety-Kleen
Shareholder's adjusted tax basis in the Shares exchanged therefor. Such gain or
loss will be capital gain or loss if the Safety-Kleen Shareholder holds the
Shares as a capital asset and will be long-term gain or loss if the Safety-Kleen
Shareholder's holding period for the Shares is more than eighteen months. The
Safety-Kleen Shareholder will have a tax basis in the Laidlaw Environmental
Common Stock received equal to the fair market value thereof and the
shareholder's holding period for the Laidlaw Environmental Common Stock will
begin on the day following the date of the exchange.
If the Board of Safety-Kleen agrees to the Laidlaw Environmental Offer, the
Merger may be restructured as a partially tax-free merger for U.S. federal
income tax purposes. If the Merger is structured to qualify as a partially
tax-free merger for U.S. federal income tax purposes, the material anticipated
federal income tax consequences to the Safety-Kleen Shareholders will be as
follows:
1. No gain or loss will be recognized or be included in the income of
a Safety-Kleen Shareholder to the extent that a Safety-Kleen Shareholder
exchanges Shares for Laidlaw Environmental Common Stock in the Merger.
2. A Safety-Kleen Shareholder will recognize taxable income to the
extent that the Safety-Kleen Shareholder receives cash in the Merger in an
amount equal to the lesser of (i) the amount of cash received in the
Merger, or (ii) an amount equal to the difference between (a) the amount of
cash and the fair market value of the shares of Laidlaw Environmental
Common Stock received and (b) the Safety-Kleen Shareholder's adjusted tax
basis in the Shares exchanged therefor. Such gain generally will be
long-term capital gain if the Shares are a capital asset in the hands of
the Safety-Kleen Shareholders and their holding period for the shares is
more than eighteen months.
3. Assuming that a Safety-Kleen Shareholder holds the Shares as a
capital asset, such Shareholder's holding period for the Laidlaw
Environmental Common Stock received in the Merger will include the period
during which such Shares were held; and
4. The tax basis of the Laidlaw Environmental Common Stock received in
the Merger will be equal to the tax basis a Safety-Kleen Shareholder has in
Shares immediately before the Merger, decreased by the amount of cash
received in the Merger, and increased by the amount of gain recognized by a
Safety-Kleen Shareholder in the Merger.
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This discussion relates to all of the material anticipated federal income
tax consequences of the Laidlaw Environmental Offer and the Merger. The analysis
contain herein does not address state, local or foreign tax consequences of the
Laidlaw Environmental Offer and the Merger, and is not intended as a substitute
for careful tax planning, particularly since certain of the tax consequences of
the Laidlaw Environmental Offer and the Merger will not be the same for all
taxpayers. Consequently, each holder should consult such holder's own tax
advisor as to the specific tax consequences of the Laidlaw Environmental Offer
and the Merger to such holder.
EFFECT OF LAIDLAW ENVIRONMENTAL OFFER ON MARKET FOR SHARES; REGISTRATION UNDER
THE EXCHANGE ACT
The exchange of Shares pursuant to the Laidlaw Environmental Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and, depending upon the number of Shares so purchased,
could adversely affect the liquidity and market value of the remaining Shares
held by the public.
The Shares are listed and traded on the NYSE. Depending upon the number of
Shares acquired pursuant to the Laidlaw Environmental Offer, the Shares may no
longer meet the requirements of such exchange for continued listing. For
example, published guidelines of the NYSE indicate that the NYSE would consider
delisting the outstanding Shares if, among other things, (i) the number of
publicly held Shares (exclusive of holdings of officers, directors and members
of their immediate families and other concentrated holdings of 10% or more)
should fall below 600,000, (ii) the number of record holders of 100 or more
Shares should fall below 1,200 or (iii) the aggregate market value of publicly
held Shares should fall below $5 million. According to the Safety-Kleen Form
10-Q for the quarter ended September 6, 1997, there were, as of September 6,
1997, 58,400,729 Shares outstanding. As of December 28, 1996 there were 8,042
holders of record of Shares.
If the NYSE were to delist the Shares, the market could be adversely
affected. It is possible that the Shares would be traded on other securities
exchanges or in the over-the-counter market, and that price quotations would be
reported by such exchanges, or through the National Association of Securities
Dealers, Inc., Automated Quotations System ("Nasdaq") or by other sources. The
extent of the public market for the Shares and the availability of such
quotations would, however, depend upon the number of holders and/or the
aggregate market value of the Shares remaining at such time, the interest in
maintaining a market in the Shares on the part of securities firms, the possible
termination of registration of Shares under the Exchange Act, as described
below, and other factors.
The Shares are presently "margin securities" under the regulations of the
Federal Reserve Board, which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending on factors
similar to those described above with respect to listing and market quotations,
following consummation of the Laidlaw Environmental Offer the Shares may no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations, in which event the Shares would be ineligible as
collateral for margin loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated by Safety-Kleen upon application to the
Commission if the outstanding Shares are not listed on a national securities
exchange and if there are fewer than 300 holders of record of Shares.
Termination of registration of the Shares under the Exchange Act would reduce
the information required to be furnished by Safety-Kleen to its shareholders and
to the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) and the requirement
of furnishing a proxy statement in connection with shareholders' meetings
pursuant to Section 14(a) and the related requirement of furnishing an annual
report to shareholders, no longer applicable with respect to the Shares.
Furthermore, the ability of "affiliates" of Safety-Kleen and persons holding
"restricted securities" of Safety-Kleen to dispose of such securities pursuant
to Rule 144 under the Securities Act may be impaired or eliminated. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be eligible for Nasdaq reporting or for continued inclusion on
the Federal Reserve Board's list of "margin securities."
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The Rights currently are registered under the Exchange Act and are listed
on the NYSE, but currently are attached to the outstanding Shares and are not
separately transferable. If the Distribution Date occurs, the Rights may become
transferable apart from the Shares, unless previously redeemed. If the Rights
are not redeemed or invalidated and Laidlaw Environmental waives the Rights Plan
Condition, then the foregoing discussion with respect to the effect of the
Laidlaw Environmental Offer on the Shares would be similarly applicable to the
Rights (although the continued listing criteria are different).
PURPOSE OF THE LAIDLAW ENVIRONMENTAL OFFER; THE MERGER
The purpose of the Laidlaw Environmental Offer is to enable Laidlaw
Environmental to obtain control of, and ultimately the entire equity interest
in, Safety-Kleen.
The Laidlaw Environmental Offer, as the first step in the acquisition by
Laidlaw Environmental, is intended to facilitate the acquisition of all Shares.
Laidlaw Environmental presently intends, following consummation of the Laidlaw
Environmental Offer, to propose and seek to have Safety-Kleen effect the Merger.
In the Merger, each outstanding Share (other than Shares owned by Laidlaw
Environmental or any of its affiliates, Shares held in the treasury of
Safety-Kleen or by any subsidiary of Safety-Kleen and Shares owned by
Safety-Kleen Shareholders who perfect dissenter rights under Wisconsin law)
would be canceled in exchange for the right to receive the Laidlaw Environmental
Offer Consideration. Assuming the Minimum Tender Condition is satisfied and the
other Conditions to the Laidlaw Environmental Offer are satisfied (or waived, as
applicable) and Laidlaw Environmental consummates the Laidlaw Environmental
Offer, Laidlaw Environmental would be able to consummate the Merger without any
additional vote of the holders of Laidlaw Environmental Common Stock or the vote
of any other Safety-Kleen Shareholder.
It is Laidlaw Environmental's current intention to consummate the Laidlaw
Environmental Offer as soon as the conditions to the Laidlaw Environmental Offer
are satisfied and to consummate the Merger in .
CONDITIONS OF THE LAIDLAW ENVIRONMENTAL OFFER
Minimum Tender Condition. The Laidlaw Environmental Offer is conditioned
upon, among other things, there being validly tendered and not withdrawn prior
to the Expiration Date a number of Shares which, together with Shares owned by
Laidlaw Environmental and its affiliates, will constitute at least two-thirds of
the total number of outstanding Shares on a fully diluted basis (as though all
options or other securities convertible into or exercisable or exchangeable for
Shares, other than the Rights, had been so converted, exercised or exchanged) as
of the date the Shares are accepted for exchange by Laidlaw Environmental
pursuant to the Laidlaw Environmental Offer. Based upon information set forth in
the Safety-Kleen Form 10-Q for the quarter ended September 6, 1997, as of
September 6, 1997, there were 58,400,729 Shares outstanding. As of November 18,
1997, Laidlaw Environmental owned 601,100 Shares, or approximately 1.03% of the
outstanding Shares. Based on the foregoing, Laidlaw Environmental believes that
the Minimum Tender Condition would be satisfied if at least an aggregate of
42,302,789 Shares (or 66 2/3%) of the Shares expected to be outstanding
immediately prior to the consummation of the Laidlaw Environmental Offer had
been validly tendered pursuant to the Laidlaw Environmental Offer and not
withdrawn. Laidlaw Environmental reserves the right (but shall not be
obligated), subject to the rules and regulations of the Commission, to waive or
amend the Minimum Tender Condition and to exchange fewer than such number of
Shares as would satisfy the Minimum Tender Condition pursuant to the Laidlaw
Environmental Offer; provided, however, that, in the event of such waiver or
amendment, the Laidlaw Environmental Offer shall expire no sooner than ten
business days from the date of such waiver or amendment.
Laidlaw Environmental Stockholder Approval Condition. The Laidlaw
Environmental Offer is conditioned, among other things, upon the authorization
to increase the number of shares of Laidlaw Environmental Common Stock and the
approval of the issuance of shares of Laidlaw Environmental Common Stock in
connection with the Laidlaw Environmental Offer and the Merger by holders of the
requisite number of shares of Laidlaw Environmental Common Stock necessary for
the authorization and issuance shall have been obtained (the "Laidlaw
Environmental Stockholder Approval Condition"). The authorization to increase
the
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number of shares of Laidlaw Environmental Common Stock to 750,000,000 must be
approved by a majority of the outstanding shares of Laidlaw Environmental Common
Stock. The issuance of Laidlaw Environmental Common Stock pursuant to the
Laidlaw Environmental Offer and the Merger must be approved by the holders of a
majority of the shares of Laidlaw Environmental Common Stock voted at a meeting
of such holders at which the total number of votes cast represents over 50% in
interest of all shares of Laidlaw Environmental Common Stock outstanding on the
applicable record date. Laidlaw Environmental intends to seek such approvals at
the Laidlaw Environmental Special Meeting to be held on or about ,
1998. Laidlaw, which presently owns 67% of Laidlaw Environmental Common Stock,
intends to vote its shares to approve the increase in the number of shares of
Laidlaw Environmental Common Stock and the issuance of Laidlaw Environmental
Common Stock pursuant to the Laidlaw Environmental Offer and the Merger.
Rights Plan Condition. The Laidlaw Environmental Offer is conditioned
upon, among other things, the satisfaction of the Rights Plan Condition. The
Rights Plan Condition may be satisfied in several ways, including the current
Safety-Kleen Board may (a) amend the Rights Agreement so that the Rights would
not be triggered by the Laidlaw Environmental Offer and the Merger or (b) redeem
the Rights.
Set forth below is certain additional information concerning the Rights
Agreement. This information is based upon information included in Safety-Kleen's
publicly filed documents.
On November 9, 1988, the Safety-Kleen Board declared a dividend of one
common share purchase right ("Right") on each outstanding Share payable to
Safety-Kleen Shareholders of record on November 21, 1988 (the "Record Date").
Each Right entitles the holder thereof to buy one Share at an exercise price of
$73.33, subject to adjustment. The terms of the Rights are set forth in the
Rights Agreement. The following description of the Rights is qualified in its
entirety by reference to the Rights Agreement which is filed as an exhibit to
the Safety-Kleen Registration Statement on Form 8-A dated December 28, 1988, as
amended on August 27, 1990.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 20% or more of the outstanding
Shares or (ii) 10 business days (or such later date as may be determined by
action of the Safety-Kleen Board prior to such time as any person or group
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 20% or more of
such outstanding Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced by Share certificates.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Shares. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Share certificates
issued after the Record Date will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Shares will also constitute the transfer of the Rights associated with the
Shares represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Shares as of the close
of business on the Distribution Date and such separate Right Certificate alone
will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on November 21, 1998 (the "Final Expiration Date"), unless the Rights are
earlier redeemed by Safety-Kleen, as described below.
A person shall not be deemed to have become an "Acquiring Person" for any
purposes if, as determined in good faith by the Safety-Kleen Board, he
inadvertently becomes an Acquiring Person and promptly thereafter divests
himself of sufficient Shares to no longer be an "Acquiring Person".
The Purchase Price payable, and the number of Shares or other securities or
property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Shares, (ii) upon the grant
to holders of the Shares of certain rights or warrants to subscribe for or
purchase Shares at a price, or securities convertible into Shares with a
conversion price, less than the then current market price of the Shares or
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(iii) upon the distribution to holders of the Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Shares) or of subscription
rights or warrants (other than those referred to above). With certain
exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional Shares will be issued and in lieu thereof, an adjustment in
cash will be made based on the market price of the Shares on the last trading
day prior to the date of exercise.
If any person becomes an Acquiring Person, each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will be void),
will have the right to receive upon exercise of such Right that number of Shares
having a market value of two times the exercise price of the Right.
In addition, if Safety-Kleen is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Shares and prior to the acquisition by such person or group of 50% or more of
the outstanding Shares, the Safety-Kleen Board may exchange the Rights (other
than Rights owned by such person or group which have become void), in whole or
in part, at an exchange ratio of one Share per Right (subject to adjustment).
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Shares, the Safety-Kleen Board may redeem the Rights in whole, but not in part,
at a price of 0.67 cents per Right, subject to adjustment (the "Redemption
Price"). The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Safety-Kleen Board in its sole
discretion may establish; provided, however, that no redemption will be
permitted or required after the acquisition by any person or group of affiliated
or associated persons of beneficial ownership of 20% or more of the outstanding
Shares. Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of the Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Safety-Kleen Board without
the consent of the holders of the Rights including an amendment to lower the
threshold for exercisability of the Rights from 20% to not less than the greater
of (i) any percentage greater than the largest percentage of the outstanding
Shares then known to Safety-Kleen to be beneficially owned by any person or
group of affiliated or associated persons and (ii) 10%, except that from and
after such time as any person becomes an Acquiring Person no such amendment may
adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of Safety-Kleen including, without limitation, the right
to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group of persons that attempts to acquire
Safety-Kleen in a manner which causes the Rights to become exercisable.
In connection with the Buyout Merger Agreement, the Board of Directors of
Safety-Kleen approved the Second Rights Amendment. The Second Rights Amendment
provides, among other things, that the execution, delivery and performance of
the Merger Agreement will not (i) cause Parent, Purchaser or any of their
respective Affiliates or Associates to become an "Acquiring Person" (as defined
in the Rights Agreement), (ii) give rise to a "Distribution Date" (as defined in
the Rights Agreement) or (iii) trigger certain other events specified in the
Rights Agreement.
Wisconsin Statutory Condition. The Laidlaw Environmental Offer is
conditioned upon, among other things, Laidlaw Environmental being satisfied, in
the reasonable judgement of Laidlaw, either that the provisions of Section
180.1141 and Section 180.1150 of the Wisconsin Statutes are inapplicable to
Laidlaw
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Environmental, LES Acquisition and the transactions contemplated herein, or that
(i) full voting rights for all Shares to be acquired by Laidlaw Environmental
and LES Acquisition pursuant to the offer have been restored by the shareholders
of Safety-Kleen pursuant to the Wisconsin Statutes, and (ii) the Wisconsin
Statutes will not prohibit for any period of time the consummation of the Merger
or any other "business combination" (as defined in such statutes) involving
Safety-Kleen and Laidlaw Environmental or LES Acquisition, or any of their
respective affiliates.
Section 180.1141 of the Wisconsin Statutes ("Wisconsin Business Combination
Statute") prohibits certain business combinations involving a Wisconsin
"resident domestic corporation" (as defined in Section 180.1140(9)(a) of the
Wisconsin Statutes). This portion of the Wisconsin Statutory Condition may be
satisfied by (i) the Safety-Kleen Board of Directors approving the Laidlaw
Environmental Offer for the purposes of Section 180.1141 prior to the
consummation of the Laidlaw Environmental Offer or (ii) Laidlaw Environmental
being satisfied, in its sole discretion, that Safety-Kleen is not a "resident
domestic corporation" as defined in Section 180.1140(9)(a) of the Wisconsin
Statutes. For a summary of the Business Combination Statute, see "Comparison of
the Rights of Holders of Shares and Laidlaw Environmental Common Stock --
Comparison of Delaware and Wisconsin Law -- Differences -- Anti-Takeover
Statutes."
Section 180.1150 of the Wisconsin Statutes ("Wisconsin Control Share
Statute") limits the voting power of shares of a "resident domestic corporation"
(as defined in Section 180.1150(1)(c) of the Wisconsin Statutes) that are held
by certain persons holding in excess of 20% of the voting power of such shares
in the election of the directors. This portion of the Wisconsin Statutory
Condition may be satisfied by (i) the affirmative vote of a majority of the
voting power of shares represented and entitled to vote at a special meeting of
Safety-Kleen Shareholders to restore regular voting power of the Shares to be
acquired by Laidlaw Environmental, or (ii) Laidlaw Environmental being
satisfied, in its sole discretion, that the provisions of the Wisconsin Control
Share Acquisition Statute do not in any way restrict Laidlaw Environmental's and
LES Acquisition's ability to consummate the Merger. A Safety-Kleen Shareholder
meeting to consider the Voting Rights Proposal has been scheduled for January 9,
1998. For a summary of the Wisconsin Control Share Acquisition Statute, see
"Comparison of the Rights of Holders of Shares and Laidlaw Environmental Common
Stock -- Comparison of Delaware and Wisconsin
Law -- Differences -- Anti-Takeover Statutes."
Laidlaw Environmental and LES Acquisition are requesting that
Safety-Kleen's Board of Directors take appropriate action so that the Wisconsin
Business Combination Statute is not applicable to the acquisition of Shares
pursuant to the Laidlaw Environmental Offer or a subsequent business combination
involving Laidlaw Environmental or LES Acquisition and Safety-Kleen. There can
be no assurance that the Safety-Kleen Board of Directors will do so. See
"Reasons for the Laidlaw Environmental Offer -- Background of the Laidlaw
Environmental Offer."
The Wisconsin Statutes contain certain other provisions restricting certain
business combinations and other transactions with significant shareholders under
certain circumstances. See "Comparison of Delaware and Wisconsin
Law -- Differences."
Regulatory Approval Condition. The Laidlaw Environmental Offer is
conditioned upon, among other things, all regulatory approvals required to
consummate the Laidlaw Environmental Offer (the "Requisite Regulatory
Approvals") having been obtained and remaining in full force and effect, all
statutory waiting periods in respect thereof having expired and no such approval
containing any conditions or restrictions which the Laidlaw Environmental Board
determines will or reasonably could be expected to materially impair the
strategic and financial benefits expected to result from the Laidlaw
Environmental Offer (the "Regulatory Approval Condition"). Laidlaw Environmental
will use its reasonable best efforts to obtain the Requisite Regulatory
Approvals. As described below, applications and notices seeking the Requisite
Regulatory Approvals have been or will be promptly filed. The Laidlaw
Environmental Offer cannot proceed in the absence of the Requisite Regulatory
Approvals. Although no assurances can be given, Laidlaw Environmental
anticipates that it will receive all Requisite Regulatory Approvals on a timely
basis.
Antitrust. Under the HSR Act, and the Rules that have been promulgated
thereunder, certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "Antitrust Division") and the Federal Trade Commis-
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sion ("FTC") and certain waiting period requirements have been satisfied. The
acquisition of Shares by Laidlaw Environmental pursuant to the Laidlaw
Environmental Offer is subject to the expiration of the statutory waiting period
under the HSR Act.
On November 26, 1997, Laidlaw filed with the Antitrust Division and the FTC
a Hart-Scott-Rodino Notification and Report Form (the "Notification Form") with
respect to the Laidlaw Environmental Offer. Under the applicable provisions of
the HSR Act, the purchase of Shares under the Laidlaw Environmental Offer could
not be consummated until the expiration of a 30-day waiting period following the
filing of the Notification Form by Laidlaw, unless Laidlaw receives a request
for additional information or documentary material or the Antitrust Division and
the FTC terminate the waiting period thereto. If, within such 30-day waiting
period, either the Antitrust Division or the FTC requests additional information
or material from Laidlaw and/or Safety-Kleen concerning the Laidlaw
Environmental Offer, the waiting period will be extended for an additional 20
days after Laidlaw has substantially complied with such request. Only one
extension of the waiting period pursuant to a request for additional information
is authorized by the HSR Act. Thereafter, the waiting period may be extended
only by court order or with the consent of Laidlaw.
Laidlaw Environmental will not accept for exchange Shares tendered pursuant
to the Laidlaw Environmental Offer unless and until the waiting period
requirements imposed by the HSR Act with respect to the Laidlaw Environmental
Offer have been satisfied.
Federal and state antitrust enforcement agencies frequently scrutinize,
under the antitrust laws, transactions such as Laidlaw Environmental's
acquisition of Shares pursuant to the Laidlaw Environmental Offer. At any time
before or after Laidlaw Environmental's acquisition of Shares, any such agency
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the acquisition of
Shares pursuant to the Laidlaw Environmental Offer or otherwise or seeking
divestiture of Shares acquired by Laidlaw Environmental or divestiture of
substantial assets of Laidlaw Environmental and/or Safety-Kleen. Private parties
may also bring legal action under the antitrust laws under certain
circumstances.
Based upon an examination of publicly available information relating to the
businesses in which both Laidlaw Environmental and Safety-Kleen are engaged,
Laidlaw Environmental believes that the Laidlaw Environmental Offer will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Laidlaw Environmental Offer on antitrust grounds will not be
made or that, if such a challenge is made, Laidlaw Environmental will prevail.
Canadian Competition Act. Under the Canadian Federal Competition Act (the
"Competition Act"), acquisition transactions, insofar as they relate to the
acquisition of such Canadian subsidiaries, qualify as a "merger" if they are of
sufficient size to be subject to the notification and waiting period
requirements of the Competition Act. The Competition Act is administered by the
Canadian Director of Investigation and Research appointed under the Competition
Act (the "Competition Act Director"). Laidlaw Environmental believes that the
proposed transaction requires notification and intends to file the required
information with the Competition Act Director.
Under separate "merger" provisions of the Competition Act, which operate
independently of its notification and waiting period requirements, if an
acquisition is likely to give rise to a substantial prevention or lessening of
competition in a market in Canada, the Competition Act Director may apply for a
remedial order (such as an injunction or an order to divest specified assets or
securities) to be issued by a quasi-judicial body (the "Competition Tribunal").
Europe. The acquisition of Shares by Laidlaw Environmental pursuant to the
Laidlaw Environmental Offer is subject to prior notification requirements of
several of the member countries of the European Union in which Safety-Kleen
operates. Based on the limited information concerning Safety-Kleen that is
available to Laidlaw Environmental, filings will be necessary in the Republic of
Ireland and Federal Republic of Germany. In addition, filings may also be
necessary in Italy and Belgium. The necessary filings must be made in sufficient
time to allow the passing of a one month waiting period before Laidlaw
Environmental's acquisition
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of shares pursuant to the Laidlaw Environmental Offer may be completed. No
pre-merger notification under the European Economic Community's Merger Control
Regulation is required for the proposed transaction.
Buyout Expense Condition. The acquisition of Shares by Laidlaw
Environmental pursuant to the Laidlaw Environmental Offer is subject to Laidlaw
Environmental's receipt of a final judicial determination (i) to the effect that
Safety-Kleen is not obligated to, and may not, pay any Buyout Proposal Expenses
or (ii) stating the amount of Buyout Proposal Expenses that Safety-Kleen is
required to pay (the "Buyout Expense Condition"). Although Laidlaw Environmental
has initiated litigation against Safety-Kleen and its Board of Directors seeking
to have the provisions in the Buyout Merger Agreement requiring the payment of
Buyout Proposal Expenses declared invalid, there can be no assurance that such
relief will be granted. In such event, Laidlaw Environmental will seek to have a
judicial determination of the amount of Buyout Proposal Expenses required to be
paid by Safety-Kleen in order to permit a determination of the amount of the
Cash Consideration to be paid pursuant to the Laidlaw Environmental Offer.
General. Except as set forth above, based upon an examination of publicly
available information filed by Safety-Kleen with the Commission and other
publicly available information with respect to Safety-Kleen, Laidlaw
Environmental is not aware of (a) any license or regulatory permit which appears
to be material to the business of Safety-Kleen and its subsidiaries, taken as a
whole, and which is likely to be adversely affected by Laidlaw Environmental's
acquisition of Shares pursuant to the Laidlaw Environmental Offer or (b) any
approval or other action by any state, federal or foreign governmental
administrative or regulatory agency or authority that would be required prior to
the acquisition of Shares pursuant to the Laidlaw Environmental Offer. Laidlaw
Environmental presently intends to take such actions with respect to any
approvals as will enable it to consummate the Laidlaw Environmental Offer. In
this regard, Laidlaw Environmental expressly reserves the right to challenge the
validity and applicability of any state, foreign or other statutes or
regulations purporting to require approval of the consummation of the Laidlaw
Environmental Offer.
There can be no assurance that any license, permit, approval or other
action, if needed, would be obtained, or would be obtained without substantial
conditions, or, if so obtained, when it would be obtained, or that adverse
consequences might not result to Safety-Kleen, Laidlaw Environmental or their
respective businesses in the event of adverse regulatory action or inaction.
THE LAIDLAW ENVIRONMENTAL OFFER IS CONDITIONED UPON, AMONG OTHER THINGS,
LAIDLAW ENVIRONMENTAL HAVING RECEIVED ALL REQUIRED REGULATORY APPROVALS FOR THE
ACQUISITION OF SHARES PURSUANT TO THE LAIDLAW ENVIRONMENTAL OFFER, THE MERGER
AND THE OTHER TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING APPROVALS AND CONSENTS
FROM THE ANTITRUST DIVISION AND THE FTC AND SUCH APPROVALS AND CONSENTS
REMAINING IN FULL FORCE AND EFFECT, ALL STATUTORY WAITING PERIODS IN RESPECT
THEREOF HAVING EXPIRED AND NO SUCH APPROVAL CONTAINING ANY CONDITIONS OR
RESTRICTIONS WHICH THE LAIDLAW ENVIRONMENTAL BOARD DETERMINES WILL OR REASONABLY
COULD BE EXPECTED TO MATERIALLY IMPAIR THE STRATEGIC AND FINANCIAL BENEFITS
EXPECTED TO RESULT FROM THE LAIDLAW ENVIRONMENTAL OFFER.
Certain Other Conditions of the Laidlaw Environmental Offer.
Notwithstanding any other provision of the Laidlaw Environmental Offer and
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act (relating to Laidlaw Environmental's
obligation to exchange or return tendered Shares promptly after the termination
or withdrawal of the Laidlaw Environmental Offer), Laidlaw Environmental shall
not be required to accept for exchange or exchange any Shares, may postpone the
acceptance for exchange or exchange for tendered Shares and may, in its sole
discretion, terminate or amend the Laidlaw Environmental Offer as to any Shares
not then exchanged if at the Expiration Date any of the Laidlaw Environmental
Offer Conditions have not been satisfied or waived or if on or after the date of
this Prospectus and on or prior to the Expiration Date any of the following
events shall not have occurred:
(a) The shares of Laidlaw Environmental Common Stock (and accompanying
Rights) which shall be issued to the Safety-Kleen Shareholders in the
Laidlaw Environmental Offer and the Merger shall have been authorized for
listing on the NYSE, subject to official notice of issuance.
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(b) The Registration Statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission.
(c) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Laidlaw Environmental Offer and/or the Merger or
any of the other transactions contemplated by this Prospectus shall be in
effect. No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any court,
administrative agency or commission or other governmental authority or
instrumentality which prohibits, restricts or makes illegal the
consummation of the Laidlaw Environmental Offer and/or the Merger.
(d) There shall not have occurred or been threatened (i) any general
suspension of trading in, or limitation on times or prices for, securities
on any national securities exchange or in the over-the-counter market in
the United States, (ii) any significant adverse change in interest rates,
the financial markets or major stock exchange indices in the United States
or abroad or in the market price of Shares, including, without limitation,
a decline of at least 10% in either the Dow Jones Average of Industrial
Stocks or the Standard & Poor's 500 Index from that existing at the close
of business on , 1998, (iii) any change in the general
political, market, economic, regulatory or financial conditions in the
United States or abroad that could, in the reasonable judgment of Laidlaw
Environmental, have a material adverse effect upon the business,
properties, assets, liabilities, capitalization, stockholders' equity,
condition (financial or otherwise), operations, licenses or franchises,
results of operations or prospects of Safety-Kleen or any of its
subsidiaries or the trading in, or value of, the Shares, (iv) any material
change in United States currency exchange rates or any other currency
exchange rates or a suspension of, or limitation on, the markets therefor,
(v) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (vi) any limitation (whether or not
mandatory) by any government, domestic, foreign or supranational, or
governmental entity on, or other event that in the reasonable judgment of
Laidlaw Environmental might affect, the extension of credit by banks or
other lending institutions, (vii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (viii) in the case of any of the
foregoing existing at the time of the commencement of the Laidlaw
Environmental Offer, a material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of Laidlaw Environmental
and may be asserted by Laidlaw Environmental regardless of the circumstances
giving rise to any such conditions (including any action or inaction by Laidlaw
Environmental) or may be waived by Laidlaw Environmental in whole or in part
(other than the Laidlaw Environmental Stockholder Approval Condition, the
Regulatory Approval Condition and the condition relating to effectiveness of the
Registration Statement). The determination as to whether any condition has been
satisfied shall be in the sole judgment of Laidlaw Environmental and will be
final and binding on all parties. The failure by Laidlaw Environmental at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, and each such right shall be deemed a continuing right which may be
asserted at any time and from time to time. Notwithstanding the fact that
Laidlaw Environmental reserves the right to assert the failure of a condition
following acceptance for exchange but prior to exchange in order to delay
exchange or cancel its obligation to exchange properly tendered Shares, Laidlaw
Environmental will either promptly exchange such Shares or promptly return such
Shares.
SOURCE AND AMOUNT OF FUNDS
Laidlaw Environmental estimates that the total amount of funds required
pursuant to the Laidlaw Environmental Offer to pay for the Cash Consideration in
connection with the exchange of all Shares outstanding on a fully diluted basis,
to refinance Laidlaw Environmental's existing bank debt, to refinance
Safety-Kleen's existing and outstanding indebtedness and to pay fees and
expenses related to the Laidlaw Environmental Offer will be approximately $1.5
billion. See "The Laidlaw Environmental Offer -- Fees and Expenses." Laidlaw
Environmental plans to obtain the outside funds necessary to finance the Cash
Consideration pursuant to credit facilities to be arranged by TD Securities
(USA), Inc. ("TDSI"). Laidlaw
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Environmental has received a written financing commitment (the "Commitment
Letter") from TDSI and Toronto-Dominion Bank ("TD") to provide senior secured
credit facilities in the aggregate principal amount of up to $1.8 billion (the
"Senior Credit Facilities"). The terms of the definitive agreement for the
Senior Credit Facilities (the "Loan Agreement") have not yet been finalized. The
following is a summary of the anticipated principal terms of the Senior Credit
Facilities based upon the Commitment Letter. This summary is subject to
finalization of the Loan Agreement and is qualified in its entirety by reference
to the Commitment Letter, which is filed as Exhibit (4)(p) hereto.
The Credit Facilities will consist of four parts: (i) a $400,000,000 6-year
Senior Secured Revolving Credit Facility with a $200,000,000 letter of credit
sublimit (the "Revolving Credit Facility" or "Facility A"), (ii) a $500,000,000
6-year Senior Secured Amortizing Term Loan ("Facility B"), (iii) a $450,000,000
Minimally Amortizing 7-year Senior Secured Term Facility ("Facility C") and (iv)
a $450,000,000 Minimally Amortizing 8-year Senior Secured Term Loan ("Facility
D"); (Facility B, Facility C and Facility D, collectively, the "Term Loans").
The Credit Facilities will be secured by all of the tangible assets of the
combined companies to the extent required by the syndicate of banks and other
financial institutions (collectively, the "Lenders") acceptable to Laidlaw
Environmental and the Agent that will make the loans pursuant to the Credit
Facilities. All of the capital stock of Laidlaw Environmental's subsidiaries,
including the acquired Safety-Kleen subsidiaries, will be pledged as part of
such security for the Credit Facilities, and such subsidiaries will guaranty the
obligations of Laidlaw Environmental to the Lenders. The Term Loans will be
drawn in full on the closing date. The Revolving Credit Facility will be
available commencing on the closing date at which time $200,000,000 will be
available for letters of credit and $250,000,000 will be available for loans,
subject to an aggregate maximum of $400,000,000.
Facility A will have no scheduled amortization. The Term Loans will require
aggregate principal repayments of $84 million in each of years 1, 2, 3 and 4,
$109 million in each of years 5 and 6, $428 million in year 7 and $419 million
in year 8.
Borrowings under the Senior Credit Facilities will bear interest at a
floating rate based upon, at LES Acquisition's option, (i) the higher of the TD
prime rate and the federal funds rate plus 0.50% per annum, or (ii) the London
Interbank Offered Rate ("LIBOR") adjusted for reserves, in each case plus a
margin based upon the total leverage ratio of LES Acquisition. LES Acquisition
also will pay administration fees, commitment fees, re-syndication fees (under
certain circumstances) and certain expenses and provide certain indemnities, all
of which LES Acquisition believes to be customary for commitments of this type.
The commitment fees have been paid or will be payable, as applicable, in stages,
beginning with the execution of the Commitment Letter and ending with a final
payment upon consummation of the financing. The Commitment Letter may be
extended beyond its expiration date of March 31, 1998 upon payment of an
additional fee.
The Loan Agreement will contain conditions precedent, representations and
warranties, covenants (including financial covenants such as total leverage
ratio test, a fixed charge coverage test, an interest coverage ratio test and a
maximum contingent obligation to operating cash flow ratio test), events of
default and other provisions customary for such financings.
TD's commitment to provide the Senior Credit Facilities is conditioned on,
among other things, the following: the negotiation, execution and delivery of
the Loan Agreement; receipt of all necessary or desirable governmental,
shareholder and third-party consents; the absence of a material adverse change
in the business assets, operations, condition (financial or otherwise), or
prospects of LES Acquisition, Safety-Kleen and their respective subsidiaries on
a consolidated basis; the execution of definitive agreements relating to the
Merger and the Laidlaw Environmental Offer; satisfactory completion of due
diligence examinations; prior or contemporaneous repayment in full of all
existing indebtedness of each of LES Acquisition and Safety-Kleen; and the
successful syndication of $400 million of the $1.8 billion commitment; and after
consummation of the transactions at closing, either (i) Laidlaw Environmental
shall hold a sufficient number of shares to effect the Merger or (ii) the Merger
shall have been or, concurrently with the closing, shall be, consummated, and
the surviving corporation shall be a wholly-owned subsidiary of LES Acquisition.
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It is anticipated that the indebtedness incurred through borrowings under
the Senior Credit Facilities will be repaid from funds generated internally by
LES Acquisition and its subsidiaries, and from other sources. No final decisions
have been made concerning the method LES Acquisition will employ to repay such
indebtedness. Such decisions when made will be based on LES Acquisition's review
from time to time of the advisability of particular actions, as well as on
prevailing interest rates and financial and other economic conditions.
CERTAIN DEBT INSTRUMENTS OF SAFETY-KLEEN
The long-term debt of Safety-Kleen as of September 6, 1997 totaled
$246,080,000. This long-term debt is comprised of (i) 9 1/4% Senior Notes due in
1999 (the "9 1/4% Notes"); (ii) 8 1/2% Senior Notes due in 1998 (the "8 1/2%
Notes", and together with the 9 1/4% Notes, the "Notes"); and (iii) unsecured
notes payable to banks under revolving lines of credit and uncommitted lines of
credit.
Upon the occurrence of a downgrade in a credit agency's rating of the
9 1/4% Notes in conjunction with a change of control, each holder of the Notes
may require the repurchase of all or part of such holder's Notes at a price
equal to the principal amount plus accrued interest.
RELATIONSHIPS WITH SAFETY-KLEEN
Except as to the transactions described below effected on the New York
Stock Exchange by a wholly owned subsidiary of Laidlaw Environmental, neither
Laidlaw Environmental nor, to the best of its knowledge, any of the persons
listed on Schedule A hereto nor any associate or majority-owned subsidiary of
any of the foregoing, beneficially owns or has a right to acquire any equity
securities of Safety-Kleen nor have they effected any transaction in such equity
securities during the last 60 days.
<TABLE>
<CAPTION>
NUMBER OF PRICE
DATE PURCHASED SHARES BOUGHT PER SHARE
- - -------------- ------------- ---------
<S> <C> <C>
10/02/97.................................................. 100 $23.8750
10/28/97.................................................. 78,000 $20.5000
10/28/97.................................................. 85,000 $20.7500
10/28/97.................................................. 43,000 $21.5000
10/28/97.................................................. 23,000 $19.7500
10/28/97.................................................. 10,000 $20.2600
10/28/97.................................................. 2,000 $19.5000
10/29/97.................................................. 191,000 $22.0000
10/29/97.................................................. 91,000 $21.9375
10/29/97.................................................. 25,100 $21.8750
10/29/97.................................................. 38,200 $21.8125
10/29/97.................................................. 9,700 $21.7500
10/29/97.................................................. 5,000 $21.6250
</TABLE>
Neither Laidlaw Environmental nor, to the best of its knowledge, any of the
persons listed on Schedule A hereto has (i) any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of Safety-Kleen, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies; (ii) had any contacts or negotiations with Safety-Kleen or its
affiliates concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets, except as described herein; or (iii)
has had any transaction with Safety-Kleen or any of its executive officers,
directors or affiliates that would require disclosure under the rules and
regulations of the Commission applicable to the Laidlaw Environmental Offer
except existing and present business relationships (e.g., providing services to
each other or considering the purchase or sale of discrete assets or operations
or alliances) in the ordinary course of business none of which are material, the
sale of
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certain assets of a Laidlaw Environmental subsidiary to Safety-Kleen in February
1996 and the accompanying cooperative services agreement which is in the process
of being terminated.
FEES AND EXPENSES
Laidlaw Environmental has retained Morrow & Co., Inc. ("Information Agent")
to act as Information Agent in connection with the Laidlaw Environmental Offer.
The Information Agent may contact holders of Shares by mail, telephone,
electronic mail and personal interviews and may request brokers, dealers and
other nominee shareholders to forward the Laidlaw Environmental Offer materials
to beneficial owners of Shares. The Information Agent will be paid a customary
fee of up to $150,000 for such services, plus reimbursement of out-of-pocket
expenses, and Laidlaw Environmental will indemnify the Information Agent against
certain liabilities and expenses in connection with the Laidlaw Environmental
Offer, including liabilities under federal securities laws.
Bear Stearns is acting as financial advisor to Laidlaw Environmental in
connection with its effort to acquire Safety-Kleen and as Dealer Manager in
connection with the Laidlaw Environmental Offer, for which services Laidlaw
Environmental has paid to Bear Stearns aggregate fees equal to $1,500,000, and
has agreed to pay additional amounts to Bear Stearns (up to a maximum of
$3,250,000).
Raymond James is acting as financial advisor to Laidlaw Environmental in
connection with its effort to acquire Safety-Kleen, for which services, and for
assistance rendered by Raymond James in connection with prior purchases of
Shares by Laidlaw Environmental, Laidlaw Environmental has agreed to pay Raymond
James aggregate fees up to a maximum of $1,000,000 (all of which is contingent
upon consummation of the Merger).
Laidlaw Environmental has also agreed to reimburse each of the financial
advisors for all out-of-pocket expenses incurred by such financial advisors
(including consultant and attorney's fees), and has agreed to indemnify each of
Bear Stearns and Raymond James and certain related persons and entities against
certain liabilities and expenses in connection with their respective
engagements, including certain liabilities under the federal securities laws. In
connection with each of Bear Stearns' and Raymond James' engagement, Laidlaw
Environmental anticipates that certain employees of Bear Stearns and Raymond
James may communicate in person, by telephone or otherwise with a limited number
of institutions, brokers or other persons who are Safety-Kleen Shareholders.
Neither Bear Stearns nor Raymond James will receive any fee for or in connection
with such solicitation activities by its employees apart from the fees it is
otherwise entitled to receive as described above.
In addition to the fees to be received by each of Bear Stearns and Raymond
James in connection with its engagement as financial advisor to Laidlaw
Environmental, Raymond James has in the past rendered various investment banking
and financial advisory services for Laidlaw Environmental for which it has
received customary compensation. Both Bear Stearns and Raymond James may in the
future render services to Laidlaw Environmental for which they will receive
customary fees.
Laidlaw Environmental has retained IBJ Schroder Bank & Trust Company
("Exchange Agent") to act as Exchange Agent in connection with the Laidlaw
Environmental Offer. Laidlaw Environmental will pay the Exchange Agent
reasonable and customary compensation for its services in connection with the
Laidlaw Environmental Offer, plus reimbursement for out-of-pocket expenses, and
will indemnify the Exchange Agent against certain liabilities and expenses in
connection therewith, including liabilities under the federal securities laws.
Laidlaw Environmental will not pay any fees or commissions to any broker or
dealer or other person (other than the Dealer Manager and the Information Agent)
for soliciting tenders of Shares pursuant to the Laidlaw Environmental Offer.
Brokers, dealers, commercial banks and trust companies will be reimbursed by
Laidlaw Environmental for customary mailing and handling expenses incurred by
them in forwarding material to their customers.
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ACCOUNTING TREATMENT
Laidlaw Environmental will account for the acquisition of Shares pursuant
to the Laidlaw Environmental Offer and the Merger using the purchase method of
accounting. Accordingly, the purchase price will be allocated to assets acquired
and liabilities assumed based on their estimated fair values at the acquisition
date. Safety-Kleen's financial position and results of operations will not be
included in Laidlaw Environmental's consolidated accounts prior to the
consummation date of the Merger.
STOCK EXCHANGE LISTING
The Laidlaw Environmental Common Stock (with accompanying Rights) is listed
on the NYSE and the Pacific Exchange, Inc. (the "Pacific Exchange"). Application
will be made to list the Laidlaw Environmental Common Stock to be issued
pursuant to the Laidlaw Environmental Offer and the Merger on the NYSE and the
Pacific Exchange. As described above under "The Laidlaw Environmental
Offer -- Conditions of the Laidlaw Environmental Offer -- Laidlaw Environmental
Shareholder Approval Condition," pursuant to the rules of the NYSE, the issuance
of Laidlaw Environmental Common Stock in the Laidlaw Environmental Offer and the
Merger must be approved by the holders of a majority of the shares of Laidlaw
Environmental voting stock, voting as a single class, voted at a meeting of such
holders at which the total number of votes cast represents over 50% in interest
of all shares of Laidlaw Environmental voting stock outstanding on the
applicable record date.
WISCONSIN STATE LAWS
Although Laidlaw Environmental and LES Acquisition consider it unlikely, it
is possible that the Laidlaw Environmental Offer may be subject to Chapter 552
of the Wisconsin Statutes (the "Wisconsin Corporate Take-Over Law"). The
Wisconsin Corporate Take-Over Law makes it unlawful, under certain
circumstances, for any person to make a take-over offer involving a target
company in Wisconsin, which meets certain criteria, or to acquire any equity
securities of such a target company pursuant to the take-over offer, unless a
registration statement has been filed with the Wisconsin Division of Securities
ten days prior to the commencement of the take-over offer and has become
effective or such take-over is exempted by rule or order of the Wisconsin
Division of Securities. The Wisconsin Corporate Take-Over Law also imposes
certain reporting and filing requirements on persons making such a take-over
offer and makes unlawful certain fraudulent and deceptive practices, all of
which provisions may be applicable to the Laidlaw Environmental Offer. The
applicability of the Wisconsin Corporate Take-Over Law depends on the percentage
of Safety-Kleen's outstanding common shares held of record by residents of
Wisconsin, which is not determinable with certainty from publicly available
information. Laidlaw Environmental and LES Acquisition have received from the
Wisconsin Division of Securities an exemption order permitting the Laidlaw
Environmental Offer to be made without prior registration, provided that no
Shares will be purchased or taken up pursuant to the Laidlaw Environmental Offer
unless a registration is effective or registration is found not to be required
after the information necessary to make this determination is obtained from
Safety-Kleen. If it is found that compliance is required, Laidlaw Environmental
and LES Acquisition presently intend to comply with the Wisconsin Corporate
Take-Over Law, including making any required filings. Laidlaw Environmental and
LES Acquisition both have reserved their rights to challenge the
constitutionality of the Wisconsin Corporate Take-Over Law or its applicability
to them.
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COMPARISON OF LAIDLAW ENVIRONMENTAL OFFER AND BUYOUT PROPOSAL
The following comparison contains forward-looking statements and actual
results may differ materially from those expressed or implied by such
statements. See "Cautionary Statement Regarding Forward-Looking Statements"
above. In addition to the factors referred to above under "Cautionary Statement
Regarding Forward-Looking Statements", the risks associated with the operation,
integration and growth of combining the businesses could cause actual results of
the combined entity to differ materially from the results expected by Laidlaw
Environmental. See "Risk Factors."
PREMIUM
We believe the Laidlaw Environmental Offer would provide a value per Share
in excess of the $27.00 per Share consideration offered in the Buyout Merger
Agreement even after the reduction of the Cash Consideration payable pursuant to
the Laidlaw Environmental Offer for certain fees and expenses discussed under
"The Laidlaw Environmental Offer -- Cash Consideration" (assuming that the
market value of Laidlaw Environmental Common Stock is no more than $5.35714 and
no less than $4.28571). The actual per Share price premium will depend on the
amount of the Buyout Proposal Expenses payable by Safety-Kleen and the market
value of Laidlaw Environmental at the time of consummation of the Laidlaw
Environmental Offer.
FUTURE GROWTH AND APPRECIATION
Unlike the Buyout Merger Agreement, the Laidlaw Environmental Offer
provides Safety-Kleen shareholders the ability to participate in the future
growth of the combined Laidlaw Environmental and Safety-Kleen entity and the
potential appreciation of the value of its stock. The consummation of the Buyout
Merger would not only result in the payment to Safety-Kleen shareholders of an
inferior price for their Shares, but would also deprive them of an opportunity
to participate in the upside potential of the combined entity.
Strategic Fit. The combination of Laidlaw Environmental and Safety-Kleen
will bring together complimentary assets that on a combined basis will be better
able to compete in the hazardous waste management marketplace. A service center
network that links Laidlaw Environmental's customers to its treatment and
disposal facilities such as landfills and incinerators is one of Laidlaw
Environmental's primary operational strengths. These service centers
differentiate Laidlaw Environmental from its competitors and allow for both
responsiveness and accountability in managing a customer's hazardous waste
stream. The acquisition of Safety-Kleen will further increase vertical
integration of the Laidlaw Environmental business and enhance its service
centers' recovery capabilities by processing waste streams collected by
Safety-Kleen. In addition, Laidlaw Environmental believes that its acquisition
of Safety-Kleen will result in a further strengthening of Laidlaw
Environmental's market position by:
- providing additional service center market coverage in key geographic
regions including Kentucky, Minnesota, and New Jersey:
- introducing a smaller-sized customer base to compliment Laidlaw
Environmental's existing customer base of medium- and large-sized
customers; and
- providing significant expansion into the solvent recycling market.
Synergies. Upon consummation of the Laidlaw Environmental Offer, Laidlaw
Environmental intends to build upon Safety-Kleen's leading market presence and
quality brand equity. Laidlaw Environmental's management believes that annual
cost savings of approximately $100 to $130 million would result from the
combination of the two companies due to an anticipated elimination of
duplicative head office and regional office general and administrative and other
public company costs, the closure of forty (40) to fifty (50) overlapping
service center facilities, the increased utilization of those facilities that
remain open from such efficiencies as improved transportation route density, for
example, and the internalization of various waste streams. Laidlaw Environmental
expects to begin achieving cost savings within three months of the Merger, and
to fully implement the cost savings within the first year after consummation of
the Merger. Laidlaw Environmental will also consider the sale of Safety-Kleen's
European operations and its oil recovery business.
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This rationalization is expected to strengthen Laidlaw Environmental's market
position, improve the overall industry fundamentals through capacity reduction
and result in immediate cost savings. Through a successful merger with Rollins
Environmental Services, Inc. ("Rollins"), which took place in May of 1997,
Laidlaw Environmental has demonstrated its ability to manage the integration of
an acquisition and capitalize on the benefits that can accrue to merged
companies in its industry. To date, Laidlaw Environmental believes synergies
achieved in the Rollins merger, on an annualized basis, total approximately $90
million.
CONDITIONAL NATURE OF THE BUYOUT MERGER AGREEMENT
General. Unlike the Laidlaw Environmental Offer, which will be subject to
conditions that are standard in transactions of this type (see "The Laidlaw
Environmental Offer -- Conditions"), the Buyout Merger Agreement is subject to
significant additional risks that are inherent in the absence of any direct
contractual arrangements between Safety-Kleen and any member of the Buyout
Group. Safety-Kleen shareholders should be aware that the Buyout Proposal Proxy
Statement does not refer to any agreement with Safety-Kleen that is binding on
any member of the Buyout Group. The Buyout Merger Agreement was executed by the
Parent and the Purchaser, both newly organized shell companies with no operating
history and no assets. In addition, other agreements related to the transactions
described in the Buyout Proposal Proxy Statement appear to have been entered on
behalf of the Buyout Group only by the shell companies and not the parties
constituting the Buyout Group. Safety-Kleen may have no contractual recourse
against any member of the Buyout Group should Parent refuse to consummate the
Buyout Merger or breach any of its obligations under the Buyout Merger Agreement
or any related agreement or arrangement.
Funding Commitments. The Buyout Merger Agreement provides that the Buyout
Group's obligations are subject to obtaining both the debt and equity financing
for the transaction. According to the Buyout Proposal Proxy Statement, the
equity portion of the Buyout Merger financing is to consist of contributions of
$200 million from each of the Buyout Group members, who have executed a
commitment letter addressed to the shell company Parent to that effect. However,
the purported "equity commitments" have not been made directly to Safety Kleen
and are not enforceable by it. Moreover, there is no covenant binding on any
member of the Buyout Group to use any efforts to ensure that the Parent will
receive the equity contributions required to consummate the Buyout Merger.
In connection with the Laidlaw Environmental Offer, Laidlaw Environmental
has received a written financing commitment from the Toronto-Dominion Bank and
TD Securities (USA), Inc. and the Laidlaw Environmental Offer is not contingent
on financing.
Uncertainties of Pending Litigation. According to the Buyout Proposal
Proxy Statement, the Buyout Merger is conditioned upon there being no pending
litigation that challenges the Buyout Merger and has a substantial likelihood of
success against Parent, Purchaser, Safety-Kleen or any subsidiary of
Safety-Kleen. According to the Buyout Proposal Proxy Statement, Safety-Kleen is
currently involved in a litigation in the District Court for the Northern
District of Illinois involving Laidlaw Environmental and six shareholder
derivative actions in the Illinois state court. See "Background of the
Offer -- Litigation." Safety-Kleen does not discuss in its Proxy Statement
whether the Parent has determined that any such pending court actions would
cause the litigation condition to fail to be satisfied.
The Laidlaw Environmental Offer is not subject to a comparable condition.
THE MERGER
GENERAL
If the Minimum Tender Condition is satisfied and other Laidlaw
Environmental Offer Conditions are satisfied (or waived, as applicable) and the
Laidlaw Environmental Offer is consummated, Laidlaw Environmental and its
affiliates will own two-thirds of the outstanding Shares. Accordingly, Laidlaw
Environmental and its affiliates will at such time have sufficient voting power
in Safety-Kleen to approve the Merger independently of the votes of any other
Safety-Kleen Shareholders, and Laidlaw Environmental
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presently intends to vote any and all Shares then owned by Laidlaw Environmental
and its affiliates to approve the Merger.
Rule 13e-3 of the General Rules and Regulations under the Exchange Act,
which Laidlaw Environmental does not believe would be applicable to the Merger
as long as the Merger occurred within one year of consummation of the Laidlaw
Environmental Offer, would require, among other things, that certain financial
information concerning Safety-Kleen, and certain information relating to the
fairness of the proposed transaction and the consideration offered to
Safety-Kleen Shareholders therein, be filed with the Commission and disclosed to
Safety-Kleen Shareholders prior to consummation of the Merger.
Laidlaw Environmental reserves the right to acquire, following the
consummation or termination of the Laidlaw Environmental Offer, additional
Shares through open-market purchases, privately negotiated transactions, a
tender offer or exchange offer, or otherwise, upon such terms and at such prices
as it shall determine, which may be more or less favorable than those of the
Laidlaw Environmental Offer. Laidlaw Environmental and its affiliates also
reserve the right to dispose of any or all Shares acquired by them pursuant to
the Laidlaw Environmental Offer or otherwise, upon such terms and at such prices
as they shall determine.
In connection with the Laidlaw Environmental Offer, Laidlaw Environmental
has reviewed, and will continue to review, on the basis of available
information, various possible business strategies that it might consider in the
event that it acquires all or substantially all of the common equity interest in
Safety-Kleen. Laidlaw Environmental also intends to conduct a detailed review of
Safety-Kleen and its assets, corporate structure, capitalization, operations,
properties, policies, management and personnel and consider which changes, if
any, would be desirable in light of the circumstances which then exist. Such
strategies could include, among other things, changes in Safety-Kleen's
business, corporate structure, capitalization and consideration of disposition
of certain assets or lines of business of Safety-Kleen. If the Merger is
consummated, the Safety-Kleen Board of Directors will be reconstituted to
include directors selected by Laidlaw Environmental. Although Laidlaw
Environmental anticipates making significant changes in Safety-Kleen's senior
management and executive officer team if the Merger is consummated, Laidlaw
Environmental has not yet considered specific changes in Safety-Kleen
management.
If the Merger is consummated, Laidlaw Environmental will consider the sale
of two assets of Safety-Kleen after the Merger: (i) Safety-Kleen's European
operations and (ii) Safety-Kleen's oil recovery services business. Laidlaw
Environmental will fully assess these potential divestitures, and possibly other
potential divestitures, as additional information regarding Safety-Kleen becomes
available.
Except as noted herein, Laidlaw Environmental does not have any present
plans or proposals that would result in an extraordinary corporate transaction,
such as a merger, reorganization or liquidation, or sale or transfer of a
material amount of assets, involving Safety-Kleen or any of its subsidiaries, or
any material changes in Safety-Kleen's corporate structure or business. However,
because Laidlaw Environmental has not had access to Safety-Kleen's books and
records, additional changes may be made after a full review of Safety-Kleen's
operations is completed.
DISSENTER RIGHTS
Holders of Shares do not have appraisal rights as a result of the Laidlaw
Environmental Offer. [In the event the Merger is consummated, the Safety-Kleen
Shareholders will have appraisal rights with respect to the Merger under Section
180.1302 of the Wisconsin Statutes if Safety-Kleen is a Wisconsin "resident
domestic corporation" as defined in the Wisconsin Statutes. Based on the
information available to Laidlaw Environmental at this time, it is unclear
whether Safety-Kleen is a "resident domestic corporation" for purposes of the
Wisconsin Statutes.]
INFORMATION REGARDING SAFETY-KLEEN
The following information is taken from the Safety-Kleen Annual Report on
Form 10-K for the fiscal year ending December 28, 1996.
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Safety-Kleen is a leader in servicing the recycling and waste needs of
companies in the automotive/retail repair, industrial, imaging and other
business sectors. Over 2,800 Safety-Kleen specialists service customers from a
branch network that extends across North America and Western Europe.
Focusing primarily on the needs of smaller businesses, Safety-Kleen
performed nearly five million individual services and reclaimed more than 300
million gallons of contaminated fluid through a network of 230 branches
worldwide in 1996. Safety-Kleen collects and recycles used products at thirteen
recycle centers, two lube oil re-refineries, and three fuel-blending facilities.
Safety-Kleen operates in the continental U.S., Canada, the United Kingdom,
the Republic of Ireland, Puerto Rico, Belgium, France, Italy, Spain and Germany.
Safety-Kleen has licensee operations in Japan and Korea. Safety-Kleen Corp. was
incorporated in July, 1963 under the laws of the State of Wisconsin.
INFORMATION REGARDING LAIDLAW ENVIRONMENTAL
The following describes the business and management of Laidlaw
Environmental. Additional information regarding Laidlaw Environmental is
contained in its filings with the Commission pursuant to the Exchange Act. See
"Available Information" and "Incorporation of Certain Documents by Reference."
BUSINESS OF LAIDLAW ENVIRONMENTAL
Laidlaw Environmental provides hazardous and industrial waste management
services throughout North America. Laidlaw Environmental collects, transports,
treats and disposes of waste by incineration, landfilling and other methods at
its facilities located in the United States and Canada. Laidlaw Environmental
also operates waste processing, recycling and repackaging facilities and has
analytical laboratories at its facilities in several states.
On May 15, 1997, pursuant to the February 6, 1997, stock purchase agreement
(the "Stock Purchase Agreement") between Rollins Environmental Services, Inc.
("Rollins") and Laidlaw Inc. ("Laidlaw"), Rollins acquired (the "Acquisition")
the hazardous and industrial waste operations of Laidlaw ("Old LESI" or the
"Accounting Acquirer"). The business combination was accounted for as a reverse
acquisition using the purchase method of accounting. Rollins issued 120 million
Common Shares and a $350 million 5% subordinated convertible debenture, and paid
$349.1 million in cash ($400 million, less debt of $50.9 million assumed), to
Laidlaw to consummate the Acquisition. Concurrent with the closing of the
Acquisition, the continuing legal entity changed its name from "Rollins
Environmental Services, Inc." to "Laidlaw Environmental Services, Inc." As a
result of the Acquisition, Laidlaw owns 67% of the issued common shares of
Laidlaw Environmental. Laidlaw Environmental accordingly adopted the Old LESI's
fiscal year-end of August 31.
Old LESI consisted of all direct and indirect subsidiaries of Laidlaw
engaged in the hazardous and industrial waste business, other than JTM
Industries, Inc. and its subsidiary, KBK Enterprises, Inc. Prior to the
Acquisition, Old LESI provided hazardous and industrial waste services from 85
service locations in 26 states and seven Canadian provinces. Although Old LESI
was a conglomerate of separate entities, these entities conducted such services
primarily under the name "Laidlaw Environmental Services."
Laidlaw Environmental was incorporated in Delaware in 1968. Its principal
executive office is located at 1301 Gervais Street, Suite 300, Columbia, South
Carolina 29201 and its telephone number is 803-933-4200.
Laidlaw Environmental, in providing hazardous and industrial waste
services, is engaged in five primary lines, or classes, of business: (a) service
center, (b) landfill, (c) incineration, (d) transportation and (e) specialty
services, including polychlorinated biphenyl ("PCB") management, wastewater
treatment and other specialty services.
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The percentages of Laidlaw Environmental's gross revenue contributed by its
business classes for the last three fiscal years ended August 31, were as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service Centers............................................. 38% 39% 41%
Landfill.................................................... 22 25 21
Incineration................................................ 11 4 4
Transportation.............................................. 12 12 15
Specialty Services.......................................... 17 20 19
--- --- ---
Total Revenue..................................... 100% 100% 100%
=== === ===
</TABLE>
SERVICE CENTERS
Service centers across the United States and Canada work in partnership
with Laidlaw Environmental's treatment and disposal facilities to provide an
integrated service delivery system. Waste materials are transported from a
customer site to a service center, where they are temporarily stored or
consolidated with compatible waste streams for more efficient transportation to
final treatment and/or disposal destinations. All of Laidlaw Environmental's
service centers in the United States have Part B permits under the United States
Resource Conservation and Recovery Act ("RCRA") that, among other things, allow
Laidlaw Environmental to store waste for up to one year for bulking and/or
transfer purposes. Additionally, Laidlaw Environmental operates smaller
satellite locations which act as local collection points for the service
centers. Through its service center network, Laidlaw Environmental can access
its customers quickly in order to collect their waste streams, thus enabling
customers to remain in compliance with on-site storage regulations.
Laidlaw Environmental also has on-site field operations headquartered at
its service centers, including lab-packing services, field services and
household hazardous waste collection programs.
Laidlaw Environmental performs a variety of resource recovery processes at
many of its service centers. Resource recovery involves the distillation of used
solvents to remove contaminants and then the sale of the material to the market
as a solvent or for use as fuel. Most of these hazardous materials come from the
aerospace and transportation industries and the metals finishing industries.
Fuel substitution, mainly, in the energy intensive cement manufacturing process,
is the most prevalent form of resource recovery.
LANDFILLS
Laidlaw Environmental operates 12 landfills located throughout the United
States and Canada. A total of eight landfills are designed and permitted for the
disposal of hazardous wastes. Four landfills are operated for non-hazardous
industrial waste disposal, and to a lesser extent, municipal solid waste.
Laidlaw Environmental operates eight of the 23 permitted hazardous waste
landfills in North America, with 52 million cubic yards of remaining permitted
capacity (which at current fill rates represents in excess of 50 years of
capacity). Of these facilities, six are located in the United States and two in
Canada.
In the United States, Laidlaw Environmental's hazardous waste landfills
have been issued RCRA Subtitle C permits. The EPA's permitting process for RCRA
Subtitle C landfills is very rigorous. Before a permit can be issued, the
applicant must provide detailed waste analysis, spill prevention and control
counter-measure plans, detailed design specifications (which include liner
design, leak detection systems and rainwater removal systems), groundwater
monitoring, employee training and geologic/hydrogeologic investigations.
Furthermore, the applicant must post financial assurance instruments for
landfill cell and site closure and post-closure care. All six of Laidlaw
Environmental's United States hazardous waste landfills have received Part B
landfill permits and meet or exceed Subtitle C requirements. These permits are
generally issued for periods of five or ten years, after which the permit must
be reviewed by state and/or federal regulators before the permit can be renewed
for additional terms. Management is not aware of any issues at any of Laidlaw
Environmental's sites that would preclude the renewal of its Part B landfill
permits. During the last 12 months, approximately 0.9 million cubic yards of
hazardous wastes were disposed of in these landfills.
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In addition to its hazardous waste landfill sites, Laidlaw Environmental
operates four nonhazardous industrial landfills with over 209 million cubic
yards of remaining permitted capacity. Laidlaw Environmental's non-hazardous
landfill facilities are permitted to accept commercial industrial waste,
including wastes from foundries, demolition and construction, machine shops,
automobile manufacturing, printing, metal fabrications and recycling. Laidlaw
Environmental's facility in Carbon County, Utah also accepts municipal solid
waste. During the last 12 months, 1.4 million cubic yards of non-hazardous
wastes were disposed of in these landfills.
INCINERATION
Laidlaw Environmental offers a wide range of technological capabilities and
locations to customers through a collection of incineration facilities.
Incineration is the preferred method for the treatment of organic hazardous
waste, because it effectively destroys the contaminants at temperatures in
excess of 2,000 degrees Fahrenheit. High temperature incineration effectively
eliminates organic wastes such as herbicides, plastics, halogenated solvents,
pesticides, pharmaceutical and refinery wastes, regardless of whether they are
gases, liquids, sludges or solids. Federal and state incineration regulations
require a destruction and removal efficiency of 99.99% for most organic wastes
and 99.9999% for PCBs and dioxin.
Laidlaw Environmental operates four United States-based solids and liquids
capable incinerators with annual capacity of over 250,000 tons, two hazardous
waste liquid injection incinerators in Canada, and one in the United States, and
two lower volume specialty incineration facilities in the United States.
Laidlaw Environmental's incineration facilities in Bridgeport, New Jersey;
Deer Park, Texas; Coffeyville, Kansas; and Aragonite, Utah, are designed to
process liquid organic wastes, sludges, solids, soil and debris. The Deer Park
facility has two kilns and a rotary reactor. Additionally, the Deer Park
facility has an on-site landfill for the disposal of ash and other waste
material produced as a result of the incineration process. The landfill is built
and permitted to RCRA hazardous waste standards.
Laidlaw Environmental's incineration facilities in Roebuck, South Carolina,
Mercier, Quebec and Sarnia, Ontario are liquid injection incinerators, designed
primarily for the destruction of liquid organic waste. The Mercier facility also
has a system to blend and destroy pumpable sludges. Typical wastestreams include
wastewater containing concentrated organic levels not amenable to conventional
physical/chemical waste treatment, pesticide and herbicide waste, waste with
high chlorinated organic concentrations and flammable materials.
All but one of Laidlaw Environmental's United States incineration
facilities have received Part B permits under RCRA. The facility in Roebuck,
South Carolina has received EPA approval for that portion of the Part B permit
under EPA authority; however, the required state permit which was originally
issued in 1987 is currently under appeal. Part B permits are generally issued
for periods of five or ten years, after which the permit must be reviewed by
state and/or federal regulators before the permit can be renewed for additional
terms. Management is not aware of any issues at any of Laidlaw Environmental's
sites that would preclude the renewal of any of its Part B permits.
During fiscal year 1997, Laidlaw Environmental closed its incinerators at
Baton Rouge, Louisiana, and Clive, Utah, reducing utilization of less efficient
and redundant facilities. During fiscal year 1998, Laidlaw Environmental plans
to close its incinerators at Coffeyville, Kansas, and Roebuck, South Carolina,
reducing excess capacity. These four closures will eliminate approximately
244,000 tons of practical capacity from the off-site commercial incineration
market. The industry's total off-site commercial incinerator practical capacity
was estimated at 1.26 million tons in 1996, according to EI Digest.
TRANSPORTATION
Laidlaw Environmental's transportation operations facilitate the movement
of materials between locations, which is key to the operation of Laidlaw
Environmental's network of hazardous and industrial waste facilities.
Transportation may be accomplished by truck, rail, or other mode, with
company-owned assets or in conjunction with third-party transporters.
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Specially designed containment systems, vehicles and other equipment
permitted for hazardous waste transport, along with drivers trained in
transportation skills and hazardous waste procedures, provide for the movement
of customer waste streams.
SPECIALTY SERVICES
Other specialty services provided by Laidlaw Environmental include PCB
management services, wastewater treatment, harbor and channel dredging, remedial
construction and consulting, industrial services, analytical services,
biological treatment, and paint and solvent recovery.
Laidlaw Environmental recycles PCB contaminated oils and reclaims metals
from PCB contaminated equipment. Laidlaw Environmental accomplishes this
recycling and reclamation through a de-chlorination process operated from seven
facilities mainly in the eastern United States and Canada.
Laidlaw Environmental provides field services for industrial customers at
their sites and at government installations, federal and state Superfund sites,
laboratories and schools across North America. These activities range from
typical environmental remediation and construction to specialized services.
Laidlaw Environmental recently adopted its INSITE program, an environmental
outsourcing program that allows companies to achieve their environmental goals
while focusing on their core business.
Laidlaw Environmental also offers a range of wastewater treatment
technology, facilities and customer services. Wastewater treatment is provided
from four facilities and consists of four basic business lines: hazardous
wastewater treatment, mobile treatment, sludge dewatering/drying and
nonhazardous wastewater treatment. These services include the reduction,
treatment and disposal of both hazardous and non-hazardous wastewater, sludges
and solids for both bulk and drummed waste. Laidlaw Environmental removes
hazardous components from hazardous industrial liquids and/or
chemically/physically makes hazardous industrial liquids non-hazardous through
blending and treatment technology. Specialized techniques reduce residues by
recycling/reusing spent products. Batch treatment technologies also enable
Laidlaw Environmental to handle hard-to-treat wastewater streams.
Hazardous wastewater treatment involves the safe detoxification of
hazardous components from liquid waste streams. The hazardous properties are
neutralized (pH adjustment) and/or reduced to non-leachable state, through a
multistep treatment process. The resulting treated effluent is tested prior to
discharge to ensure compliance with discharge limits, while the sludge is
dewatered and tested to ensure that it meets the requirements for off-site
disposal as a nonhazardous waste. Because certain wastes carry hazardous waste
designation throughout the treatment system, these wastes are treated separately
to minimize dewatered sludge disposal costs. Laidlaw Environmental's wastewater
treatment facilities are fully-permitted and approved under applicable
regulations.
Mobile wastewater treatment and dewatering equipment is used to dewater
industrial sludges at the generators' sites. Turn-key services include
laboratory, trained operators, treatment supplies and equipment, dewatering and
stabilization technology -- all designed to provide optimal treatment chemistry
that reduces the volume of sludge generated for off-site disposal.
Sludge drying uses transportable equipment that reduces the amount of
entrained liquid in dewatered sludge. This process is particularly effective for
organic sludges that must be incinerated at high cost. Drying greatly reduces
ultimate disposal and transportation costs by minimizing the volume of waste
sent off-site for treatment.
Laidlaw Environmental treats non-hazardous waste streams at all of its
hazardous wastewater plants and operates a facility specifically designed for
non-hazardous wastewater and consumer goods destruction in Chattanooga,
Tennessee.
In connection with the Acquisition, Laidlaw Environmental's hazardous
wastewater facility in Nashville, Tennessee was closed in May of 1997.
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COMPETITION
The hazardous and industrial waste management industry is highly
competitive. The sources of competition vary by locality and by type of service
rendered, with competition coming from the other major waste services companies
and thousands of privately owned firms in North America which offer waste
services. Laidlaw Environmental also competes with municipalities and larger
plants which provide their own waste services. In acquiring new contracts and
maintaining business, Laidlaw Environmental experiences competition primarily in
the areas of pricing and service.
Total hazardous waste industry revenues for 1995 were estimated to have
been approximately $3 billion. Prior to the Acquisition, Old LESI, Rollins and
three other large waste management companies accounted for 65% of the hazardous
waste management industry's revenues in 1995, according to EI Digest (October
1996). The pro forma combined revenues of Laidlaw Environmental for the year
ended August 31, 1996, would have given Laidlaw Environmental a 30% market share
of the hazardous waste industry revenues for 1995.
Service center competition consists of two companies with national coverage
providing varying forms of waste collection assets or facilities. A number of
companies also compete on a local and regional basis.
Ten of the 15 hazardous waste landfills not operated by Laidlaw
Environmental are operated by three competitors with landfill facilities spread
throughout the United States.
Competitors operate large-scale incinerators at eight locations throughout
North America. Other companies have applied for or received permits to construct
and operate hazardous waste incinerators. Competition is also encountered from
cement kilns, which use hazardous waste-derived fuel as a supplemental fuel
source.
CUSTOMERS
Laidlaw Environmental conducts business with more than 18,000 customers.
These customers represent diverse industries, including automotive manufacturers
and suppliers, chemical and petrochemical, computer and micro-processor
manufacturers, primary metals, paper, furniture, aerospace and pharmaceutical,
and are located throughout the United States and Canada. During fiscal 1997 no
one customer accounted for more than six percent of Laidlaw Environmental's
consolidated revenues.
The hazardous waste management business is cyclical to the extent that it
is dependent upon a stream of waste from cyclical industries. If those cyclical
industries slow significantly, the business that Laidlaw Environmental receives
from those industries is likely to slow.
SEASONALITY
Adverse winter weather moderately affects some of Laidlaw Environmental's
operations, particularly during the second fiscal quarters. The main reason for
this effect is reduced volumes of waste being received at Laidlaw
Environmental's facilities and higher operating costs associated with operating
in sub-freezing weather and high levels of snowfall.
REGULATIONS
The collection and disposal of solid and hazardous wastes are subject to
the laws and regulations promulgated by United States, Canadian or other
foreign, state, territorial, federal, provincial or local courts, executive
offices, legislatures, governmental agencies or ministries, commissions or
administrative, regulatory or self-regulatory authorities or instrumentalities
which regulate health, safety, the environment, zoning and land-use.
Environmental laws and regulations require hazardous waste disposal facilities
to obtain permits, which generally outline the procedures under which the
facilities must be operated. Governmental authorities have the power to enforce
compliance with these, regulations, and violations of permit conditions, or of
the regulations, even if unintentional, may result in fines, shutdowns, remedial
work or revocation of the permit. Regulations vary but generally govern
collection, storage and disposal activities and the location and use of
facilities and impose restrictions to prohibit or minimize air and water
pollution.
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Laidlaw Environmental's business is significantly affected by federal,
state, provincial and local environmental law, including RCRA, the Toxic
Substances Control Act, CERCLA, the Clean Water Act and the Clean Air Act, and
corresponding state laws and related regulations and enforcement practices.
Safety standards under the Occupational Safety and Health Act are also
applicable to Laidlaw Environmental's business.
RCRA provides for the establishment of a national hazardous waste
management program through a comprehensive regulatory system. Among other
things, it defines hazardous wastes and provides standards for generators,
transporters and disposers of hazardous wastes, and for the issuance of permits
for sites where such material is treated, stored or disposed. These regulations
also require Laidlaw Environmental's facilities to demonstrate financial
assurance for sudden and accidental and, in the case of land based treatment
facilities, non-sudden and gradual pollution occurrences. Financial assurance
for future closure and post-closure expenses must also be maintained. Laidlaw
Environmental believes that each facility operating under interim status will be
issued its final RCRA permit and that each permit will be renewed at the end of
its existing term. However, any such issuance or renewal could include
conditions requiring further capital expenditures or corrective actions.
Although Laidlaw Environmental also believes that each of its operating
facilities complies in all material respects with the applicable requirements of
RCRA, it may be necessary to expend considerable time, effort and money to keep
existing or acquired facilities of Laidlaw Environmental in compliance with
applicable requirements, including new regulations, to maintain existing permits
and approvals and to obtain the permits and approvals necessary to increase
their capacity.
CERCLA, among other things, imposes financial liability for damages and the
cleanup of sites from which there is a release or threatened release of
hazardous substances into the environment. Present and past owners and operators
of sites which release hazardous substances, as well as generators and
transporters of the waste material, are jointly and severally liable for
remediation costs and environmental damages. Given the substantial costs
involved in a CERCLA cleanup and the difficulty of obtaining insurance for
environmental impairment liability, such liability could have a material impact
on Laidlaw Environmental's business, financial condition and future prospects.
The Clean Water Act regulates the discharge of pollutants into surface
waters and sewers from a variety of sources, including disposal sites and
treatment facilities. Laidlaw Environmental is required to obtain discharge
permits and conduct sampling and monitoring programs. The Clean Air Act
regulates the emission of certain potentially harmful substances into the air.
These regulations also impact Laidlaw Environmental's operations. Laidlaw
Environmental believes each of its operating facilities complies in all material
respects with the applicable requirements.
ENVIRONMENTAL LIABILITIES AND CAPITAL EXPENDITURES
A portion of Laidlaw Environmental's capital expenditures are related to
compliance with environmental laws and regulations. Laidlaw Environmental
estimates capital spending of approximately $1 million for fiscal year 1998, and
$3 million in the aggregate for the fiscal years 1999 through 2001 in order to
comply with RCRA, the Clean Air Act and other environmental laws and regulations
currently in effect.
In addition to these capital expenditures, Laidlaw Environmental may incur
costs in connection with closure activities at certain of its sites. When
Laidlaw Environmental discontinues using or changes the use of a hazardous waste
management unit, formal closure procedures must be followed, and such procedures
must be approved by federal or state environmental authorities. In some cases,
costs are incurred to complete remedial cleanup work at the site. In addition at
certain of Laidlaw Environmental's other operating sites, remedial cleanup work
is required as part of the RCRA Corrective Action Program or other state and
federal programs. As shown in Laidlaw Environmental's Consolidated Balance Sheet
and more fully described in Note 6 of the Notes to Consolidated Financial
Statements, incorporated herein by reference, Laidlaw Environmental has recorded
liabilities of $183.1 million as of August 31, 1997, for remedial cleanup work,
Superfund site liability, closure activities and certain other environmental
expenses related to its operating and previously closed sites.
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With respect to various operating facilities, Laidlaw Environmental is
required to provide financial assurance with respect to certain statutorily
required closure and post-closure obligations totaling $450 million at August
31, 1997. Historically, Laidlaw provided certain of these financial assurances
in the form of parental guaranties. As a result of the Acquisition, Laidlaw
Environmental will be obligated to provide most of these financial assurances.
Laidlaw Environmental intends to provide the required financial assurance
through a combination of letters of credit and insurance policies, as allowed by
the applicable regulatory authorities.
EMPLOYEES
As of August 31, 1997, 4,500 employees provided Laidlaw Environmental's
hazardous waste services, of whom 1,500 were executive, supervisory, clerical
and sales personnel. Approximately 12% of Laidlaw Environmental's employees were
represented by various collective bargaining groups. Management believes that
its relations with its employees are excellent.
MANAGEMENT
Certain information regarding the directors and executive officers of
Laidlaw Environmental is set forth on Schedule A annexed hereto.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
combines the consolidated income statements of Laidlaw Environmental and Rollins
and the consolidated balance sheets and income statements of Laidlaw
Environmental and Safety-Kleen as if the Rollins Acquisition, the Laidlaw
Environmental Offer, the Merger and the other transactions described herein had
occurred for all periods presented. These statements are prepared on the basis
of accounting for the Acquisition and the Merger as a purchase and are based on
the assumptions set forth in the notes thereto. These statements do not reflect
the estimated cost savings of the Rollins Acquisition, nor the cost savings of
approximately $100 to $130 million Laidlaw Environmental believes will result
from the Merger. This information should be read in conjunction with and is
qualified in its entirety by the consolidated financial statements and
accompanying notes of Laidlaw Environmental and Safety-Kleen included in the
documents described under "Incorporation of Certain Documents by Reference" (but
which, in the case of Safety-Kleen, are not covered by the reports of Safety-
Kleen's independent accountants for purposes of this Prospectus), the Rollins
financial statements included herein and the pro forma accompanying discussion
and notes set forth under this section.
The following information is being presented for illustrative purposes only
and is not necessarily indicative of the financial position or operating results
that would have occurred had the transactions assumed herein been consummated at
the beginning of the periods for which the transactions are being given effect,
nor is it necessarily indicative of future operating results or financial
position.
LAIDLAW ENVIRONMENTAL, ROLLINS AND SAFETY-KLEEN
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS
HISTORICAL LAIDLAW ------------ LAIDLAW SAFETY- ----------- PRO FORMA
ROLLINS ENVIRONMENTAL DR/(CR) ENVIRONMENTAL KLEEN DR/(CR) COMBINED
---------- ------------- ------------ ------------- ---------- ----------- ----------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $150,985 $ 678,619 $ 4,099(Da) $ 825,505 $977,122 $ -- $1,802,627
Expenses:
Operating................ 149,791 485,062 (4,099)(Da) 630,754 645,488 -- 1,276,242
Depreciation and
amortization........... 22,606 53,506 (6,345)(Db) 69,767 77,741 33,722(D1) 181,230
Selling, general and
administrative......... 22,371 73,068 95,439 137,961 -- 233,400
Restructuring charge..... -- 331,697 331,697 -- -- 331,697
-------- --------- ------------ ---------- -------- ------- ----------
Total expenses..... 194,768 943,333 (6,345) 1,127,637 861,190 33,722 2,022,569
-------- --------- ------------ ---------- -------- ------- ----------
Operating income (loss)... (43,783) (264,714) (6,345) (302,152) 115,932 33,722 (219,942)
Allocated interest
expense.................. -- 24,030 24,030 -- -- 24,030
Interest expense.......... 5,856 20,243 9,625(Dc) 35,724 18,504 85,136(D2) 139,364
Other income.............. -- 2,865 2,865 1,587 -- 4,452
-------- --------- ------------ ---------- -------- ------- ----------
Income (loss) from
continuing operations
before income tax........ (49,639) (306,122) 3,280 (359,041) 99,015 118,858 (378,884)
Income tax expense
(benefit)................ (17,460) (122,789) 3,251(Dd) (136,998) 38,294 (47,011)(D3) (145,715)
-------- --------- ------------ ---------- -------- ------- ----------
Income (loss) from
continuing operations
before minority
interest................. (32,179) (183,333) 6,531 (222,043) 60,721 71,847 (233,169)
Minority interest (net of
tax)..................... -- (119) -- (119) -- -- (119)
-------- --------- ------------ ---------- -------- ------- ----------
Income (loss) from
continuing operations.... $(32,179) $(183,452) $ 6,531 $ (222,162) $ 60,721 $71,847 $ (233,288)
======== ========= ============ ========== ======== ======= ==========
Loss per share from
continuing operations
(Note D5)................ $ (1.329) $ (0.644)
Weighted average common
and common stock
equivalents outstanding
(000s)................... 138,033 362,289(D4)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
62
<PAGE>
LAIDLAW ENVIRONMENTAL SERVICES, INC.
PRO FORMA COMBINED BALANCE SHEET
AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA ADJUSTMENTS
LAIDLAW SAFETY- --------------------------- PRO FORMA
ENVIRONMENTAL KLEEN DR CR COMBINED
------------- ---------- ---------- ---------- ----------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......... $ 11,160 $ 13,273 $ -- $ -- $ 24,433
Trade and other accounts
receivable....................... 210,914 141,597 -- -- 352,511
Inventories........................ 7,927 48,853 -- -- 56,780
Other current assets............... 21,539 36,658 -- -- 58,197
---------- ---------- ---------- ---------- ----------
Total current assets........ 251,540 240,381 -- -- 491,921
---------- ---------- ---------- ---------- ----------
Property, plant and equipment, net... 1,236,569 629,561 1,295,644(D6) -- 3,161,774
Goodwill............................. 70,527 136,479 537,965(D7) -- 744,971
Other assets......................... 52,242 30,771 6,636(D8) 76,377
---------- ---------- ---------- ---------- ----------
Total assets................ $1,610,878 $1,037,192 $1,833,609 $ 6,636 $4,475,043
========== ========== ========== ========== ==========
LIABILITIES
Current liabilities
Accounts payable................... $ 48,148 $ 63,563 $ $ $ 111,711
Accrued liabilities................ 115,211 102,023 -- -- 217,234
Current portion of long-term
debt............................. 12,086 -- -- 71,914(D10) 84,000
---------- ---------- ---------- ---------- ----------
Total current liabilities... 175,445 165,586 -- 71,914 412,945
---------- ---------- ---------- ---------- ----------
Deferred items Income taxes.......... 49,790 57,361 518,258(D14) $ 625,409
Other.............................. 179,668 72,447 -- 252,115
Long-term debt....................... 528,010 246,080 -- 865,525(D10) 1,639,615
Subordinated convertible debenture... 350,000 -- -- 350,000
---------- ---------- ---------- ---------- ----------
Total liabilities........... 1,282,913 541,474 1,455,697 3,280,084
STOCKHOLDERS' EQUITY
Common stock......................... 180,435 5,839 -- 172,006(D11) 358,280
Additional paid-in capital........... 385,200 194,977 -- 494,172(D12) 1,074,349
Retained earnings (accumulated
deficit)........................... (237,670) 294,902 294,902(D13) -- (237,670)
---------- ---------- ---------- ---------- ----------
Total stockholders'
equity.................... 327,965 495,718 294,902 666,178 1,194,959
---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity...... $1,610,878 $1,037,192 $ 294,902 $2,121,875 $4,475,043
========== ========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
63
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
A. SUMMARY OF LAIDLAW ENVIRONMENTAL OFFER
Laidlaw Environmental hereby offers, upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal, to
exchange the Laidlaw Environmental Offer Consideration for each outstanding
Share validly tendered on or prior to the Expiration Date and not properly
withdrawn. The Laidlaw Environmental Offer Consideration per share consists of
$15.00 net in cash (subject to reduction as described in "The Laidlaw
Environmental Offer -- Cash Consideration") and Laidlaw Environmental Common
Stock with a fair market value of $15.00 (assuming that the Laidlaw
Environmental Average Price is no more than $5.35714 per share and no less than
$4.28571 per share at the time of the consummation of the Laidlaw Environmental
Offer. See "The Laidlaw Environmental Offer -- The Exchange Ratio").
According to the Safety-Kleen Form 10-Q for the period ended September 6,
1997, as of September 6, 1997, there were 58,400,729 Shares outstanding. Laidlaw
Environmental beneficially owns 601,100 Shares, or approximately 1.03% of the
outstanding Shares.
In contemplation of the Merger, Laidlaw has received a commitment letter
from The Toronto Dominion Bank (the "Agent") to provide the Credit Facilities.
The Credit Facilities will consist of four parts: (i) a $400,000,000 6-year
Senior Secured Revolving Credit Facility with a $200,000,000 letter of credit
sublimit (the "Revolving Credit Facility" or "Facility A"), (ii) a $500,000,000
6-year Senior Secured Amortizing Term Loan ("Facility B"), (iii) a $450,000,000
Minimally Amortizing 7-year Senior Secured Term Loan ("Facility C") and (iv) a
$450,000,000 Minimally Amortizing 8-year Senior Secured Term Loan ("Facility
D"); (Facility B, Facility C and Facility D, collectively, the "Term Loans").
The Credit Facilities will be secured by all of the tangible assets of the
combined companies to the extent required by the syndicate of banks and other
financial institutions (collectively, the "Lenders") acceptable to Laidlaw
Environmental and the Agent that will make the loans pursuant to the Credit
Facilities. All of the capital stock of Laidlaw Environmental's subsidiaries,
including the acquired Safety-Kleen subsidiaries, will be pledged as part of
such security for the Credit Facilities, and such subsidiaries will guaranty the
obligations of Laidlaw Environmental to the Lenders. The Term Loans will be
drawn in full on the closing date. The Revolving Credit Facility will be
available commencing on the closing date at which time $200,000,000 will be
available for letters of credit and $250,000,000 will be available for loans,
subject to an aggregate maximum of $400,000,000. Interest per annum on the
Credit Facilities will vary depending on the particular Credit Facility, whether
Laidlaw Environmental chooses to borrow under Eurodollar or non-Eurodollar loans
and, with respect to Facilities A and B the current total leverage ratio. Under
the terms of the Credit Facilities, Laidlaw Environmental will be required to
use interest rate swaps to manage the risk of interest rate fluctuations. The
terms of such interest rate swaps have not been established.
64
<PAGE>
B. ACCOUNTING TREATMENT ($ IN THOUSANDS)
If the Merger is consummated, it will be accounted for using the purchase
method of accounting applied in accordance with generally accepted accounting
principles. Accordingly, the assets and liabilities of Safety-Kleen will be
recorded at their estimated fair value, with any difference between the amount
of such fair value and the purchase price being recorded as goodwill. The
operating results of the combined company will include the results of operations
of Safety-Kleen from and after the closing date. (The following assumes no
Buyout Proposal Expenses are paid by Safety-Kleen).
The aggregate merger purchase price totals $1,804,433 and is comprised as
follows:
<TABLE>
<S> <C> <C>
Safety-Kleen Shares outstanding at September 6, 1997
according to Safety-Kleen's September 6, 1997 Form 10-Q... 58,400,729
Safety-Kleen Shares previously acquired by Laidlaw
Environmental............................................. (601,100)
----------
Safety-Kleen Shares remaining to acquire.................... 57,799,629
----------
Cash cost at $15.00 per Safety-Kleen Share.................. $ 866,994
Cost of additional Laidlaw Environmental Shares to be
issued:
Number of Laidlaw Environmental Shares to be issued (Note
1)........................................................ 177,844,924
Price per Share........................................... $4.875
Total cost........................................ 866,994
----------
1,733,988
Cost of Safety-Kleen Shares previously acquired by Laidlaw
Environmental............................................. 13,000
Cost of "in-the-money" Safety-Kleen stock options that are
assumed to fully vest..................................... 57,445
----------
Total merger purchase price....................... $1,804,433
==========
</TABLE>
Note 1: Range of possible Exchange Ratios between 2.8 and 3.5 could result
in the number of Laidlaw Environmental Shares ranging between 161,838,961 and
202,298,702.
The price per share of the additional Laidlaw Environmental shares to be
issued of $4.875 is the average of the closing NYSE market price for the five
trading days before November 20, 1997, the date of the public announcement of
Laidlaw Environmental's intention to make the Laidlaw Environmental Offer.
The purchase price has been allocated to the assets acquired and
liabilities assumed based on estimated fair values at August 31, 1997, as
follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 240,381
Property, plant and equipment............................... 1,925,205
Goodwill.................................................... 674,444
Other assets................................................ 24,135
Current liabilities......................................... (165,586)
Deferred income taxes....................................... (575,619)
Other deferred items........................................ (72,447)
Long-term debt.............................................. (246,080)
----------
Merger purchase price....................................... $1,804,433
==========
</TABLE>
C. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined balance sheet gives effect to
the Laidlaw Environmental Offer, the Merger and the other transactions described
herein as if they had occurred on August 31, 1997. The unaudited pro forma
combined statement of income for the year ended August 31, 1997 gives effect to
(a) the Rollins Acquisition under the heading "Pro Forma Laidlaw Environmental,"
and (b) the Rollins
65
<PAGE>
Acquisition, the Laidlaw Environmental Offer, the Merger and the other
transactions described herein under the heading "Pro Forma Combined" as if each
had occurred as of September 1, 1996.
The unaudited pro forma combined balance sheet at August 31, 1997
includes the balance sheet of Laidlaw Environmental at August 31, 1997 and the
balance sheet of Safety-Kleen at September 6, 1997. Since the August 31, 1997
balance sheet of Laidlaw Environmental reflects the Acquisition of Rollins on
May 15, 1997, no pro forma disclosure is required. The unaudited pro forma
combined statement of income for the year ended August 31, 1997 includes Laidlaw
Environmental for the year ended August 31, 1997, Rollins for the period
September 1, 1996 to May 15, 1997, and for Safety-Kleen, the aggregate of the 16
weeks ended December 28, 1996 plus the 36 weeks ended September 6, 1997. Because
Safety-Kleen does not report depreciation and amortization expense in its
unaudited interim financial statements, Laidlaw Environmental's management has
estimated Safety-Kleen's historical depreciation and amortization expense for
this period on the basis that it is the same as that reported for the year ended
December 31, 1996.
Both the recent and pending acquisitions have been presented using the
purchase method of accounting. Accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based upon management's best
preliminary estimate of their fair values, based upon publicly available
documents and information. The preliminary allocation of the purchase price with
respect to Safety-Kleen will be subject to further adjustments as Laidlaw
Environmental finalizes the allocation of the purchase price in accordance with
generally accepted accounting principles. Management does not anticipate that
the final allocation of the purchase price will result in a material change to
income. The goodwill acquired is being amortized over 40 years on a
straight-line basis.
During the report periods there were no material transactions between
Laidlaw Environmental and Safety-Kleen.
The unaudited combined pro forma financial information does not purport to
be indicative of the combined financial position or combined results of
operations of Laidlaw Environmental, Rollins and Safety-Kleen had the
transactions assumed therein occurred on the dates specified, nor are they
indicative of future financial position or results of operations. The unaudited
pro forma financial information does not give effect to potential cost savings
of the Rollins acquisition, nor the cost savings of approximately $100 to $130
million that Laidlaw Environmental management believes may be realized as a
result of the Merger. There can be no assurances that such cost savings, if any,
will be achieved.
The unaudited pro forma financial information should be read in conjunction
with the historical consolidated financial statements of Laidlaw Environmental,
Rollins and Safety-Kleen and the notes thereto included elsewhere herein.
D. PRO FORMA ADJUSTMENTS ($ AND SHARES IN THOUSANDS)
The following adjustments and elimination entries have been made to the
unaudited pro forma combined statement of income to reflect the Rollins
Acquisition, as of the beginning of fiscal year 1997 using the purchase method
of accounting:
(a) To eliminate transactions between combined companies.
(b) To adjust depreciation to reflect the fair value adjustment of property
and equipment and to reflect the effects of the Rollins Acquisition upon
goodwill amortization.
(c) To adjust expense to reflect financing costs associated with the
Rollins Acquisition.
(d) To adjust income taxes (benefits) to record the pro forma income taxes
(benefits) as computed under Statement of Financial Accounting Standard No. 109
on pro forma pre-tax income (loss).
66
<PAGE>
The following adjustments and elimination entries have been made to the
unaudited pro forma combined statement of income to reflect the acquisition of
Safety-Kleen by Laidlaw Environmental using the purchase method of accounting
for the Merger:
1. To adjust depreciation and amortization expense to reflect the fair
value adjustment of property, plant and equipment and the effect of the
Merger on goodwill amortization, as follows:
<TABLE>
<CAPTION>
<S> <C>
To eliminate Safety-Kleen's estimated historical intangible
and other asset amortization expense...................... $(15,531)
To record amortization expense related to goodwill arising
as a result of the Merger................................. 16,861
To record depreciation expense related to certain
Safety-Kleen property, plant and equipment (primarily
buildings, land, improvements and processing equipment)
written up to estimated fair value........................ 32,392
--------
Total adjustment.................................. $ 33,722
========
</TABLE>
2. To adjust interest expense for the impact of the additional
long-term debt associated with the Merger, as follows:
<TABLE>
<CAPTION>
<S> <C>
To eliminate historical Safety-Kleen interest expense....... $(18,504)
To record interest expense on $1,183,519(1) of borrowings at
8.76%(2) under the Senior Credit Facilities............... 103,640
--------
Total adjustment.................................. $ 85,136
========
</TABLE>
- ----------------
(1) Includes additional long-term debt associated with Merger (Note D10)
and anticipated refinancing of Safety-Kleen historical long-term
debt of $246,080
(2) At current rates pursuant to the terms of the Senior Credit
Facilities.
3. To adjust income taxes (benefits) to record the pro forma income
taxes (benefits) as computed under SFAS 109 on pro forma pre-tax income
(loss).
4. Pro forma weighted average common and common stock equivalents
outstanding comprise:
<TABLE>
<CAPTION>
EXCHANGE RATIO
-----------------------------
<S> <C> <C> <C>
3.077 2.8 3.5
Laidlaw Environmental weighted average
historical for year ended August 31, 1997... 138,033 138,033 138,033
Adjustment for Rollins Acquisition............ 46,411 46,411 46,411
Additional Laidlaw Environmental shares to be
issued in connection with the Merger (see
Note B)..................................... 177,845 161,839 202,299
------- ------- -------
Pro forma total..................... 362,289 346,283 386,743
======= ======= =======
Pro forma loss per share............ $(0.644) $(0.674) $(0.603)
</TABLE>
5. Fully diluted earnings per share amounts, which would include the
dilutive effect of the subordinated convertible debenture, have not been
included as the effect of such inclusion would be to increase earnings per
share, and thus be anti-dilutive.
67
<PAGE>
The following adjustments and elimination have been made to the
unaudited pro forma combined balance sheet to reflect the acquisition of
Safety-Kleen by Laidlaw Environmental using the purchase method of
accounting for the Merger:
6. To writeup certain Safety-Kleen property, plant and equipment to
fair value.
7. To eliminate the historical book value of Safety-Kleen's intangible
assets and record the goodwill resulting from the Merger as follows:
<TABLE>
<S> <C>
Eliminate historical Safety-Kleen intangible assets......... $(136,479)
Record goodwill arising from the Merger (See Note A)........ 674,444
---------
Net goodwill adjustment........................... $ 537,965
=========
</TABLE>
8. To write-off the estimated book value of Safety-Kleen's other
assets.
9. Laidlaw Environmental's management estimates that approximately
$100 million of costs related to facility closures, severance costs and
other direct acquisition costs would be incurred in connection with the
Merger; these estimates of costs are not yet based on sufficient factual
information so as to be included as pro forma adjustments and are subject
to change as additional information becomes available.
10. To record the additional long-term debt associated with the Merger
(see Note B), as follows:
<TABLE>
<S> <C>
Cash component of acquiring outstanding Safety-Kleen
shares.................................................... $866,994
Cost of Safety-Kleen shares previously acquired............. 13,000
Cost of stock options....................................... 57,445
--------
Total long-term debt adjustment............................. $937,439
Less: current portion adjustment............................ (71,914)
--------
Net long-term debt adjustment..................... $865,525
========
--------
</TABLE>
11. To record the additional common stock associated with the Merger,
as follows:
<TABLE>
<S> <C>
Eliminate historical Safety-Kleen common stock.............. $ (5,839)
Issuance of additional Laidlaw Environmental common stock
(Note B).................................................. 177,845
--------
Total common stock adjustment..................... $172,006
========
</TABLE>
12. To record the impact on additional paid-in capital associated with
the Merger, as follows:
<TABLE>
<S> <C>
Eliminate historical Safety-Kleen additional paid-in
capital................................................... $(194,977)
Issuance of additional Laidlaw Environmental common stock
(Note B).................................................. 689,149
---------
Total additional historical paid-in capital
adjustment...................................... $ 494,172
=========
</TABLE>
13. To eliminate historical Safety-Kleen retained earnings.
14. To record the incremental change in the Laidlaw Environmental tax
liability and benefit which results from the adjustment of certain assets
and the recording of certain liabilities utilizing the Federal statutory
rate of 35% plus an effective state rate of 5%.
DESCRIPTION OF LAIDLAW ENVIRONMENTAL CAPITAL STOCK
The authorized capital stock of Laidlaw Environmental consists of
350,000,000 shares of Laidlaw Environmental Common Stock, par value $1.00 per
share, and 1,000,000 shares of Laidlaw Environmental Preferred Stock, par value
$1.00 per share (the "Laidlaw Environmental Preferred Stock").
LAIDLAW ENVIRONMENTAL COMMON STOCK
As of October 14, 1997, there were 180,549,911 shares of Laidlaw
Environmental Common Stock issued and outstanding. In connection with the
Laidlaw Environmental Offer, Laidlaw Environmental will seek approval from its
shareholders to increase the amount of authorized shares of Laidlaw
Environmental
68
<PAGE>
Common Stock to 750,000,000 shares. The holders of Laidlaw Environmental Common
Stock are entitled to one vote per share on all matters requiring stockholder
action. The holders of the Laidlaw Environmental Common Stock participate
ratably in liquidation, subject to the payment to the holders of any outstanding
class of Laidlaw Environmental Preferred Stock of the preferential amounts to
which they are entitled.
Dividends on the Laidlaw Environmental Common Stock may be declared and
paid only out of surplus or net profits legally available for the payment of
dividends.
LAIDLAW ENVIRONMENTAL PREFERRED STOCK
Laidlaw Environmental is authorized to issue 1,000,000 shares of Laidlaw
Environmental Preferred Stock, which may be issued from time to time in one or
more series, each such series to have such distinctive designation or title as
may be fixed by the Laidlaw Environmental Board of Directors prior to the
issuance of any shares thereof. Each series may differ from each other series
already outstanding as may be declared from time to time by the Laidlaw
Environmental Board of Directors in the following respects: (i) the rate of
dividend; (ii) the amount per share, if any, which the Laidlaw Environmental
Preferred Stock shall be entitled to receive upon redemption, liquidation,
distribution or sale of assets, dissolution or winding up of Laidlaw
Environmental; (iii) terms and conditions of conversions, if any; and (iv) terms
of sinking fund, redemption or purchase account, if any. As of November 10,
1997, Laidlaw Environmental had no Laidlaw Environmental Preferred Stock
outstanding.
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES
AND LAIDLAW ENVIRONMENTAL COMMON STOCK
As a consequence of the exchange of Shares for shares of Laidlaw
Environmental Common Stock in the Laidlaw Environmental Offer and the
cancellation of Shares as a result of the Merger, shareholders of Safety-Kleen,
a company incorporated under the laws of the State of Wisconsin, would become
shareholders of Laidlaw Environmental, a Delaware corporation. The rights of
Safety-Kleen Shareholders are currently governed by Wisconsin law (including the
Wisconsin Statutes), the Safety-Kleen Articles and the Safety-Kleen By-Laws.
Upon the exchange of Shares for Laidlaw Environmental Common Stock, the rights
of Safety-Kleen Shareholders will be governed by Delaware law (including the
DGCL), the Laidlaw Environmental Certificate and the Laidlaw Environmental
By-laws.
The following is a summary of certain similarities and material differences
between the rights of holders of Shares and the rights of holders of Laidlaw
Environmental Common Stock. The summary discusses certain material aspects of
the rights of Safety-Kleen Shareholders under Wisconsin law, the Safety-Kleen
Articles, the Safety-Kleen By-Laws and the Rights Agreement as compared with the
rights of Laidlaw Environmental stockholders under Delaware law, the Laidlaw
Environmental Certificate and the Laidlaw Environmental By-laws but is qualified
in its entirety by reference to such laws and instruments, including the
aforementioned instruments of Safety-Kleen and Laidlaw Environmental. Complete
copies of all such laws and instruments may be obtained in the manner set forth
above under the caption "Available Information."
COMPARISONS OF DELAWARE AND WISCONSIN LAW -- SIMILARITIES
Modern corporation laws have evolved to the point where the laws of most
states contain substantially similar provisions regarding major features of
corporate existence. Certain relevant similarities between the DGCL and the
Wisconsin Statutes are described below:
Classified Board of Directors; Removal of Directors. Both the DGCL
and the Wisconsin Statutes allow the Board of Directors to be divided into
two or three classes. Under the DGCL, absent a provision to the contrary in
a corporation's certificate of incorporation, directors on a classified
board can be removed only for cause. The Wisconsin Statutes allow for the
removal of directors on a classified board with or without cause unless the
articles of incorporation or by-laws provide that the directors may be
removed only for cause.
69
<PAGE>
Pursuant to the Laidlaw Environmental Certificate, Laidlaw
Environmental's Board of Directors is divided into three classes, with each
class serving a three-year term. Any director of Laidlaw Environmental may
be removed at any time by the stockholders, but only for cause, and only at
a meeting of the stockholders called for that purpose by the affirmative
vote of the holders of 75% or more of the Shares of Laidlaw Environmental
entitled to vote at an election of directors. The Safety-Kleen Articles
provide that the Safety-Kleen Board of Directors will be divided into three
classes, with each class serving a three-year term. Safety-Kleen directors
may be removed only for cause and only by a vote of holders of not less
than two-thirds of the issued and outstanding shares of Safety-Kleen.
Preferred Stock. The DGCL permits the Board of Directors to decrease
the number of authorized shares of any series of preferred stock (but not
below the number of shares then outstanding). The Wisconsin Statutes,
however, do not permit a Board of Directors to decrease the number of
shares in a series of preferred stock.
Laidlaw Environmental has one million shares of "blank check"
preferred stock authorized, none of which is issued. Safety-Kleen has one
million shares of "blank check" preferred stock authorized, none of which
(according to Safety-Kleen's public filings) is issued.
Required Vote for Authorization of Certain Actions. Both the DGCL and
the Wisconsin Statutes permit the authorization of a merger, dissolution or
disposition of substantially all the assets of corporations by the holders
of a majority of the outstanding shares of capital stock entitled to vote.
Under the Wisconsin Statutes, this majority shareholder vote also applies
to a share exchange.
Pursuant to the Laidlaw Environmental Certificate, any merger, sale,
lease, exchange, transfer or other disposition of assets of Laidlaw
Environmental having an aggregate fair market value of $5,000,000, or the
issuance of securities of Laidlaw Environmental having an aggregate fair
market value of $5,000,000, shall, if such transaction is to be consummated
with an "Interested Stockholder," require the affirmative vote of not less
than 75% of the outstanding Common Stock of Laidlaw Environmental. For
purposes of the Laidlaw Environmental Certificate, an "Interested
Stockholder" is a stockholder that owns, or upon consummation of the
transaction, will own, in excess of 30% of the voting securities of Laidlaw
Environmental, or is an affiliate of Laidlaw Environmental and at any time
within two years prior to the date of the transaction was a beneficial
owner of not less than 20% of the voting securities of Laidlaw
Environmental. Pursuant to the Safety-Kleen Articles, the affirmative vote
of not less than two-thirds of all outstanding voting securities of
Safety-Kleen is required for any merger, consolidation, sale, lease,
exchange or other disposition of all or substantially all of the property
or assets of Safety-Kleen.
Shareholder Action by Consent. Under the DGCL, unless the certificate
of incorporation provides otherwise, any action which may be taken by the
stockholders at a meeting may also be taken without a meeting by written
consent of the holders of such number of shares as, if present at a
meeting, could have so acted by vote. Under the Wisconsin Statutes,
shareholders may take action without a meeting by unanimous written
consent, or, if a Wisconsin corporation so elects in its articles of
incorporation, by less than unanimous written consent.
The Laidlaw Environmental By-Laws specifically deny stockholders the
right to take action without a meeting by written consent. The Safety-Kleen
Articles do not permit action by written consent of the shareholders with
less than unanimous written consent, and accordingly action by written
consent of the shareholders of Safety-Kleen would require unanimous
consent.
Interested Director Transactions. Under both the DGCL and the
Wisconsin Statutes, contracts or transactions in which one or more of the
corporation's directors has an interest are not void or voidable solely
because of such interest or because such director was present at the
directors' or shareholders' meeting where such contract or transaction was
approved, if certain conditions are met. Under the laws of both Wisconsin
and Delaware, if the director's interest is fully disclosed and a vote is
taken in good faith, such contracts or transactions may be approved by a
majority vote of the shareholders (excluding under the Wisconsin Statutes
shares held by the interested director or entities controlled by the
interested director) or of the disinterested directors. If the contracts or
transactions are shown to be fair and
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reasonable as to the corporation at the time that they are authorized,
approved or ratified by the board of directors, then separate shareholder
or disinterested director approval is not required.
Under the DGCL, a quorum for a separate determination by the board is
a majority of the total number of directors, with the interested director
counted for purposes of determining whether a quorum exists. Under
Wisconsin Statutes, a quorum is deemed to exist if a majority of directors
who have no interest in the transaction vote to authorize it; no separate
quorum determination is made. Finally, under Wisconsin Statutes shares
owned by or voted under control of an interested director or an entity in
which the interested director has a material financial interest or of which
he or she is a general partner may not be "counted" for purposes of a
shareholder vote respecting the transaction in which the director has an
interest.
Indemnification of Directors and Officers. Under the DGCL,
indemnification provisions are strictly elective. The Wisconsin Statutes
provides for mandatory indemnification of a director or officer against
certain liabilities and expenses (i) to the extent such officers or
directors are successful in the defense of a proceeding (whether brought in
the name of the corporation or by a third party) and (ii) in proceedings in
which the director or officer is not successful in the defense thereof,
unless (in the latter case only) it is determined that the director or
officer breached or failed to perform his or her duties to the corporation
and such breach or failure constituted (a) a willful failure by the
director or officer to deal fairly with the corporation or its shareholders
in connection with a matter in which the director or officer had a material
conflict of interest; (b) a violation of the criminal law, unless the
director or officer had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was
unlawful; (c) a transaction from which the director or officer derived an
improper personal profit; or (d) willful misconduct. The Wisconsin Statutes
specifically state that it is the public policy of Wisconsin to require or
permit indemnification in connection with a proceeding involving securities
regulation, as described therein, to the extent otherwise required or
permitted under the Wisconsin Statutes as described above. The Wisconsin
Statutes also do not limit indemnification of expenses in connection with a
claim by or on behalf of the corporation as is mandated by the DGCL.
The DGCL permits a corporation to adopt a provision in its certificate
of incorporation that limits the monetary liability of the corporation's
directors to the corporation or its stockholders for a breach of the
director's fiduciary duty of care. The Laidlaw Environmental Certificate
contains such a provision. Under the DGCL, a corporation may not limit a
director's monetary liability for (i) any breach of the director's duty of
loyalty to the corporation or its stockholders; (ii) an act or omission not
in good faith or involving intentional misconduct or knowing violation of
law; (iii) the payment of unlawful dividends or unlawful stock repurchases
or redemptions; or (iv) any transaction in which the director received an
improper personal benefit.
Unlike the DGCL, the Wisconsin Statutes automatically limit the
liability of directors of Wisconsin corporations statutorily, without
requiring a provision in a corporation's articles of incorporation. Under
the Wisconsin Statutes, the personal liability of a director to the
corporation and its shareholders is eliminated, except where (a) the
liability is based on a breach of the director's duty (whether duty of care
or duty of loyalty) to the corporation and its shareholders and (b) such
breach constitutes (i) the director's willful failure to deal fairly with
the corporation or its shareholders in connection with a matter in which
the director had a material conflict of interest; (ii) a violation of
criminal law, unless the director had reasonable cause to believe that his
or her conduct was lawful or no reasonable cause to believe his or her
conduct was unlawful; (iii) a transaction from which the director derived
an improper personal profit; or (iv) willful misconduct. The DGCL does not
specifically define the type of conduct that constitutes a breach of a
director's "duty of loyalty," while clauses (i) and (iii) above define the
specific types of behavior under the Wisconsin Statutes that constitute a
breach of a director's duty of loyalty that would preclude elimination of
personal liability. Because of the vagaries of the DGCL in this regard, it
is possible that a broad interpretation of a breach of a director's duty of
loyalty under the DGCL could result in the imposition of personal liability
on a director under the DGCL when such conduct would be shielded from
liability under the Wisconsin Statutes. A director may also be found
personally liable to a
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corporation for the amount of a distribution made in violation of the
Wisconsin Statutes if the director's vote constitutes conduct described in
the preceding sentence.
Both the Safety-Kleen By-Laws and the Laidlaw Environmental By-Laws
provide for indemnification to the fullest extent permitted by law.
COMPARISON OF DELAWARE AND WISCONSIN LAW -- DIFFERENCES
Although it is impractical to note all of the differences between the
corporation laws of Delaware and Wisconsin, the following is a summary of the
significant differences between the DGCL and the Wisconsin Statutes as
applicable to the Laidlaw Environmental Offer and the Merger:
Corporate Franchise Taxes. Under Delaware law, corporations are
assessed a franchise tax based upon the "assumed par value" of their
outstanding shares or total shares issued, whichever is less. Wisconsin has
no comparable tax for domestic corporations.
Special Meetings of Shareholders. Under Delaware law, a special
meeting of stockholders may be called only by the Board of Directors. Under
Wisconsin law, a special meeting of shareholders must also be called by the
Board of Directors pursuant to a written demand of the holders of not less
than one-tenth of the votes entitled to be cast at such meeting or by such
other person as may be designated in the articles or by-laws.
The Laidlaw Environmental Certificate provides that special meetings
of the stockholders may be called only by the Chairman of the Board of
Directors, the President of Laidlaw Environmental or the Chairman of the
Executive Committee of the Board of Directors of Laidlaw Environmental. The
Safety-Kleen By-Laws provide that special meetings of the shareholders may
be called by the Chairman of the Board of Directors, the Board of
Directors, or the President of Safety-Kleen at the request of holders of at
least 10% of all votes entitled to be cast at a meeting of the
shareholders, if such shareholders meet certain notice requirements in
requesting a meeting.
Inspection of Corporate Records. The DGCL permits any stockholder of
record to inspect the corporate records of a corporation upon a good faith
showing of a proper purpose, and the stockholder list must be made
available for inspection at least 10 days before a stockholders' meeting
and may be inspected by any stockholder. By contrast, under the Wisconsin
Statutes, in order to inspect and copy the corporate records of a
corporation, including the shareholder list, a shareholder must be a
shareholder of record who either has been a shareholder of record of the
corporation for at least 6 months before making a demand or holds at least
5% of the outstanding shares of the corporation. Under the Wisconsin
Statutes, a shareholder's demand must also be made for a proper purpose. In
addition, under the Wisconsin Statutes, all shareholders may inspect the
shareholder list for a meeting beginning two business days after the notice
of a meeting of shareholders is given and ending at the conclusion of the
meeting. Further, under the Wisconsin Statutes, a shareholder who has
delivered a notice and resolution pursuant to Section 180.1150(4) of the
Wisconsin Statutes is entitled to inspect and copy the record of
shareholders.
Dividends. Under the DGCL, a corporation may pay dividends and
repurchase stock out of surplus and any net profits for the fiscal year in
which the dividend was declared or for the preceding fiscal year provided
that no payment may reduce capital below the amount of capital represented
by all classes of shares having a preference upon the distribution of
assets. Under the Wisconsin Statutes, the board of directors may authorize
and the corporation may make distributions to its shareholders unless after
such distribution the corporation would not be able to pay its debts as
they become due or its total assets after the distribution would be less
than the sum of its total liabilities plus, unless the articles of
incorporation provide otherwise, the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution.
Dissenters' Rights. Under both Delaware and Wisconsin law, a
shareholder is entitled to receive payment of the fair value of the
shareholder's common stock if the shareholder dissents from a proposed
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merger or consolidation. Under the DGCL, dissenters' rights are not
available in the case of a sale of all or substantially all of the assets
of a corporation. Dissenters' rights also are not available for
stockholders of the surviving corporation if the merger did not require the
approval of the stockholders of the surviving corporation or if the shares
of the Delaware corporation that is party to a merger or consolidation are
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or are held of record by not less
than 2,000 persons and in the merger or consolidation stockholders receive
shares of stock of the corporation surviving or resulting from the merger
or consolidation and/or shares of stock of any other corporation which are
either listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 persons and/or cash in lieu of fractional shares of the foregoing or
any combination of the foregoing.
In addition to being applicable in the case of a merger, under the
Wisconsin Statutes, dissenters' rights are available in the case of a share
exchange or sale of all or substantially all of the assets of a Wisconsin
corporation. Dissenters' rights may also be made applicable by affirmative
provision in the articles of incorporation, by-laws or a board of
directors' resolution in the case of certain amendments to the articles of
incorporation or other actions requiring a shareholder vote. Under the
Wisconsin Statutes, holders of record and beneficial owners of the Shares
may be entitled to dissenters' rights to object to the Merger and demand
payment of the "fair value" of their Shares in cash, if they properly
exercise such rights in connection with the consummation of the Merger in
accordance with the provisions of the Wisconsin Statutes. Such dissenters'
rights will not be available if the Shares are registered on a national
securities exchange or quoted on the National Association of Securities
Dealers, Inc. automated quotations system on the record date fixed to
determine the shareholders of the Company entitled to notice of a
shareholders' meeting at which shareholders are to vote on the Merger,
unless the Merger would be a "business combination" as defined in Section
180.1130(3) of the Wisconsin Statutes. The Merger would not be a "business
combination" if, among other things, it is consummated as a short-form
merger under the Wisconsin Statutes (where Laidlaw Environmental owns 90%
or more of each class of outstanding shares of a subsidiary corporation, it
may merge the subsidiary corporation into itself upon adoption of a merger
agreement by the board of directors of a parent corporation and upon
complying with certain notice requirements, but without approval of the
shareholders of the parent or the subsidiary) or, at the time, Safety-Kleen
does not have a class of equity securities held of record by 500 or more
persons and at least 100 shareholders of record who have unlimited voting
rights and who are residents of the State of Wisconsin. "Fair Value" of the
Shares would be determined immediately before the consummation of the
Merger, excluding any appreciation or depreciation in anticipation of the
Merger unless such exclusion would be inequitable; provided, however, that
if the Merger is a business combination, "fair value" will be determined
pursuant to Section 180.1130(9)(a) of the Wisconsin Statutes with reference
to the public market price of the Shares if available or, if not available,
by a good faith determination of the Company's Board of Directors. The
"fair value" as so determined, could be equal to, more or less than the
value per Share to be paid pursuant to the Laidlaw Environmental Offer and
the Merger.
The foregoing summary of the rights of dissenting shareholders does
not purport to be a complete statement of the procedures to be followed by
shareholders desiring to exercise their dissenters' rights in connection
with the Merger. The preservation and exercise of dissenters' rights are
conditioned on strict adherence to the applicable provisions of the
Wisconsin Statutes.
Director and Officer Discretion. Under the provisions of Section
180.0827 of the Wisconsin Statutes (the "Wisconsin Stakeholder
Provisions"), in discharging his or her duties to the corporation and in
determining what he or she believes to be in the best interests of the
corporation, a director or officer may, in addition to considering the
effects of any action on shareholders, consider the effects of the action
on employees, suppliers, customers, the communities in which the
corporation operates and any other factors that the director or officer
considers pertinent. Under Delaware law, the consideration that a board may
give to nonstockholder constituencies is less clear. Under Delaware
judicial doctrine, a
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director may generally consider the effect of a proposed action on
nonstockholder constituencies when these interests are not adverse to the
interests of stockholders.
Anti-Takeover Statutes. DGCL Section 203 (the "Delaware Business
Combination Statute") applies to certain business combinations involving a
corporation and certain of its stockholders. Unless the corporation's
certificate of incorporation expressly provides that Section 203 of the
DGCL shall not apply, the Delaware Business Combination Statute prevents an
"Interested Stockholder" (defined generally as a person with 15% or more of
the corporation's outstanding voting stock) from engaging in a "Business
Combination" (defined to include a variety of transactions, including a
sale of assets, merger and almost any related party transaction) with a
Delaware corporation for three years following the date such person became
an Interested Stockholder, unless (i) before such person became an
Interested Stockholder, the board of directors of the corporation approved
the transaction in which the Interested Stockholder became an Interested
Stockholder or approved the Business Combination; (ii) upon consummation of
the transaction which resulted in the Interested Stockholder becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by certain employee stock ownership plans); or (iii)
following the transaction in which such person became an Interested
Stockholder, the Business Combination is approved by the board of directors
of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting
stock of the corporation not owned by the Interested Stockholder. The
Delaware Business Combination Statute currently applies to Laidlaw
Environmental.
Sections 180.1140 to 180.1144 of the Wisconsin Statutes (the
"Wisconsin Business Combination Statute") regulate a broad range of
"business combinations" between a Wisconsin corporation and an "interested
stockholder." The Wisconsin Business Combination Statute defines a
"business combination" to include a merger or share exchange, sale, lease,
exchange, mortgage, pledge, transfer or other disposition of assets equal
to at least 5% of the market value of the stock or assets of the company or
10% of its earning power, or issuance of stock or rights to purchase stock
with a market value equal to at least 5% of the outstanding stock, adoption
of a plan of liquidation and certain other transactions involving an
"interested stockholder." An "interested stockholder" is defined as a
person who beneficially owns, directly or indirectly, 10% of the voting
power of the outstanding voting stock of a corporation or who is an
affiliate or associate of the corporation and beneficially owned 10% of the
voting power of the then outstanding voting stock within the last three
years. The Wisconsin Business Combination Statute prohibits a corporation
from engaging in a business combination (other than a business combination
of a type specifically excluded from the coverage of the statute) with an
interested stockholder for a period of three years following the date such
person becomes an interested stockholder, unless the board of directors
approved the business combination or the acquisition of the stock that
resulted in a person becoming an interested stockholder before such
acquisition. Business combinations after the three-year period following
the stock acquisition date are permitted only if (i) the board of directors
approved the acquisition of the stock prior to the acquisition date; (ii)
the business combination is approved by a majority of the outstanding
voting stock not beneficially owned by the interested stockholder; or (iii)
the consideration to be received by shareholders meets certain requirements
of the statute with respect to form and amount. Unlike the prohibition on
business combinations in the Delaware Business Combination Statute, which
is inapplicable if the interested stockholder acquires at least 85% of the
outstanding voting stock at the time of becoming an interested stockholder
or if during the three-year period of the prohibition the board of
directors and holders of two-thirds of the unaffiliated shares approve the
business combination, the Wisconsin Business Combination Statute's
prohibition on business combinations applies for three years after the
acquisition of at least 10% of the outstanding shares without regard to the
percentage of shares owned by the interested stockholder and cannot be
avoided by subsequent action of the board of directors or shareholders.
Sections 180.1130 to 180.1132 of the Wisconsin Statutes provide that
certain mergers, share exchanges or sales, leases, exchanges or other
dispositions of assets in a transaction involving a
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"significant shareholder" and an issuing public corporation are subject to
a supermajority vote of shareholders (the "Wisconsin Fair Price Statute"),
in addition to any approval otherwise required. A "significant shareholder"
is defined as a person who beneficially owns, directly or indirectly, 10%
or more of the voting stock of a corporation or an affiliate of the
corporation which beneficially owned, directly or indirectly, 10% or more
of the voting stock of the corporation within the last two years. Such
business combination must be approved by 80% of the voting power of the
corporation's stock and at least two-thirds of the voting power of the
corporation's stock not beneficially held by the significant shareholder
who is party to the relevant transaction or any of its affiliates or
associates, in each case voting together as a single group, unless the
following fair price standards have been met: (i) the aggregate value of
the per share consideration is equal to the higher of (a) the highest price
paid for any common shares of the corporation by the significant
shareholder in the transaction in which it became a significant shareholder
or within two years before the date of the business combination; (b) the
market value of the corporation's shares on the date of commencement of any
tender offer by the significant shareholder, the date on which the person
became a significant shareholder or the date of the first public
announcement of the proposed business combination, whichever is higher; or
(c) the highest liquidation or dissolution distribution to which holders of
the shares would be entitled; and (ii) either cash, or the form of
consideration used by the significant shareholder to acquire the largest
number of shares, is offered. [THE EFFECT OF THIS STATUTE ON SAFETY-KLEEN
IS PRESENTLY UNSETTLED. EFFECTIVE OCTOBER 14, 1997, THE WISCONSIN
LEGISLATURE AMENDED THIS STATUE TO APPLY ONLY TO A RESIDENT DOMESTIC
CORPORATION THAT DOES NOT HAVE A CLASS OF VOTING STOCK THAT IS REGISTERED
OR TRADED ON A NATIONAL SECURITIES EXCHANGE OR THAT IS REGISTERED UNDER
SECTION 12(G) OF THE SECURITIES EXCHANGE ACT. HOWEVER, ON NOVEMBER 19,
1997, THE WISCONSIN LEGISLATURE PASSED A BILL, WHICH AWAITS THE GOVERNOR'S
SIGNATURE, RETROACTIVELY AMENDING THE DEFINITION OF RESIDENT DOMESTIC
CORPORATION TO APPLY ONLY TO A RESIDENT DOMESTIC CORPORATION THAT DOES HAVE
A CLASS OF VOTING STOCK THAT IS REGISTERED OR TRADED ON A NATIONAL
SECURITIES EXCHANGE OR THAT IS REGISTERED UNDER SECTION 12(G) OF THE
SECURITIES EXCHANGE ACT. THE GOVERNOR IS EXPECTED TO SIGN THE BILL PRIOR TO
, 1997].
Under Section 180.1150 (the "Wisconsin Control Share Statute") of the
Wisconsin Statutes, the voting power of shares, including shares issuable
upon conversion of convertible securities or exercise of options or
warrants, of a "resident domestic corporation" held by any person or
persons acting as a group in excess of 20% of the voting power in the
election of directors is limited to 10% of the full voting power of those
shares, unless the articles of incorporation otherwise provide. This
restriction does not apply to shares acquired directly from the resident
domestic corporation, in certain specified transactions, or in a
transaction in which the corporation's shareholders have approved
restoration of the full voting power of the otherwise restricted shares.
[THE EFFECT OF THIS STATUTE ON SAFETY-KLEEN IS PRESENTLY UNSETTLED.
EFFECTIVE OCTOBER 14, 1997, THE WISCONSIN LEGISLATURE AMENDED THIS STATUTE
TO APPLY ONLY TO A RESIDENT DOMESTIC CORPORATION THAT DOES NOT HAVE A CLASS
OF VOTING STOCK THAT IS REGISTERED OR TRADED ON A NATIONAL SECURITIES
EXCHANGE OR THAT IS REGISTERED UNDER SECTION 12(G) OF THE SECURITIES
EXCHANGE ACT. HOWEVER, ON NOVEMBER 19, 1997, THE WISCONSIN LEGISLATURE
PASSED A BILL, WHICH AWAITS THE GOVERNOR'S SIGNATURE, RETROACTIVELY
AMENDING THE DEFINITION OF RESIDENT DOMESTIC CORPORATION TO APPLY ONLY TO A
RESIDENT DOMESTIC CORPORATION THAT DOES HAVE A CLASS OF VOTING STOCK THAT
IS REGISTERED OR TRADED ON A NATIONAL SECURITIES EXCHANGE OR THAT IS
REGISTERED UNDER SECTION 12(G) OF THE SECURITIES EXCHANGE ACT. THE GOVERNOR
IS EXPECTED TO SIGN THE BILL PRIOR TO , 1997].
Section 180.1134 (the "Wisconsin Defensive Action Restrictions") of
the Wisconsin Statutes provides that in addition to the vote otherwise
required by law or the articles of incorporation of a resident domestic
corporation the approval of the holders of a majority of the shares
entitled to vote is required before such a corporation can take certain
action while a takeover offer is being made or after the takeover offer has
been publicly announced and before it is concluded. Under the Wisconsin
Defensive Action Restrictions, shareholder approval is required for the
corporation to (i) acquire more than 5% of the outstanding voting shares at
a price above the market price from any individual or organization that
owns more than 3% of the outstanding voting shares and has held such shares
for less than two years, unless an equal offer is made to acquire all
voting shares; or (ii) sell or option assets of the corporation which
amount to at least 10% of the market value of the corporation, unless in
the case of this clause (ii) the corporation has at least three independent
directors and a majority of the independent directors
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vote to opt out of this provision. The DGCL does not have a similar
provision. [THE EFFECT OF THIS STATUTE ON SAFETY-KLEEN IS PRESENTLY
UNSETTLED. EFFECTIVE OCTOBER 14, 1997, THE WISCONSIN LEGISLATURE AMENDED
THIS STATUTE TO APPLY ONLY TO A RESIDENT DOMESTIC CORPORATION THAT DOES NOT
HAVE A CLASS OF VOTING STOCK THAT IS REGISTERED OR TRADED ON A NATIONAL
SECURITIES EXCHANGE OR THAT IS REGISTERED UNDER SECTION 12(G) OF THE
SECURITIES EXCHANGE ACT. HOWEVER, ON NOVEMBER 19, 1997, THE WISCONSIN
LEGISLATURE PASSED A BILL, WHICH AWAITS THE GOVERNOR'S SIGNATURE,
RETROACTIVELY AMENDING THE DEFINITION OF RESIDENT DOMESTIC CORPORATION TO
APPLY ONLY TO A RESIDENT DOMESTIC CORPORATION THAT DOES HAVE A CLASS OF
VOTING STOCK THAT IS REGISTERED OR TRADED ON A NATIONAL SECURITIES EXCHANGE
OR THAT IS REGISTERED UNDER SECTION 12(G) OF THE SECURITIES EXCHANGE ACT.
THE GOVERNOR IS EXPECTED TO SIGN THE BILL PRIOR TO , 1997].
Statutory Shareholder Liability. Wisconsin law provides that
shareholders of Wisconsin domestic corporations and foreign corporations
registered to do business in Wisconsin are personally liable, up to the
value of the consideration paid to the corporation for their shares, for
certain debts owed to employees for services performed. While the Wisconsin
Statutes specify that such liability is limited to the par value of the
shares, this has been interpreted by at least one Wisconsin trial court to
mean the consideration paid to a corporation for shares. This decision was
affirmed by a split decision of the Wisconsin Supreme Court with one
justice abstaining. As a result, the affirmance is without precedential
effect. Delaware has no comparable provision.
"Going Private" Transactions. The securities regulations of the State
of Wisconsin (Wisconsin Administrative Code Section DFI -- Sec. 6.05)
contain provisions that under certain circumstances may require a filing in
connection with the fairness of certain "going private" transactions.
Laidlaw Environmental believes such provisions are not applicable to the
Laidlaw Environmental Offer or the Merger.
OTHER COMPARISONS
Preemptive Rights. No shareholder of Safety-Kleen or Laidlaw Environmental
has preemptive rights with regard to shares of common or preferred stock.
Shareholder Rights Plan. As described above in "The Laidlaw Environmental
Offer -- Conditions of the Laidlaw Environmental Offer -- Rights Agreement,"
Safety-Kleen has entered into the Rights Agreement pursuant to which Shares in
issue on or after November 9, 1988 entitle the holder thereof to one Right,
subject to certain exceptions.
Laidlaw Environmental is a party to a similar agreement which is triggered
by a tender offer for or acquisition of 15% or more of the issued and
outstanding Laidlaw Environmental Common Stock.
MARKET PRICES
The Laidlaw Environmental Common Stock is listed and principally traded on
the NYSE. The Shares are listed and traded on the NYSE. The following table sets
forth the range of high and low sales prices as reported on the NYSE Composite
Tape.
<TABLE>
<CAPTION>
LAIDLAW
ENVIRONMENTAL SAFETY-KLEEN
------------------ ------------------
PRICE RANGE PRICE RANGE
------------------ ------------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
First Quarter..................................... 5 1/2 4 17 7/8 14 1/2
Second Quarter.................................... 5 4 1/8 18 1/8 15
Third Quarter..................................... 5 1/4 4 1/4 18 12 7/8
Fourth Quarter.................................... 4 1/2 2 3/4 15 3/4 13 3/4
</TABLE>
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<TABLE>
<CAPTION>
LAIDLAW
ENVIRONMENTAL SAFETY-KLEEN
------------------ ------------------
PRICE RANGE PRICE RANGE
------------------ ------------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996
First Quarter..................................... 3 1/8 2 15 7/8 13 3/8
Second Quarter.................................... 4 1/2 2 1/4 17 1/2 14 1/2
Third Quarter..................................... 4 1/2 2 5/8 18 5/8 15 1/8
Fourth Quarter.................................... 2 7/8 1 5/8 17 1/4 14 3/4
1997
First Quarter..................................... 3 3/8 1 3/4 18 3/8 14 1/2
Second Quarter.................................... 5 1/4 2 5/8 17 11/16 14 1/8
Third Quarter..................................... 5 15/16 2 7/8 26 16
Fourth Quarter (through December , 1997)........
</TABLE>
On November 3, 1997, the last trading day prior to the public announcement
of Laidlaw Environmental's offer to acquire Safety-Kleen, the closing sales
price per Share was $22.125, and the closing sales price per share of Laidlaw
Environmental Common Stock was $4.9375. On , 1997, the last trading
day prior to the date of the Prospectus, the closing price per Share was
$ , and the closing price per share of Laidlaw Environmental Common
Stock was $ . Past price performance is not necessarily indicative of
likely future price performance. Holders of Shares are urged to obtain current
market quotations for shares of Laidlaw Environmental Common Stock.
Laidlaw Environmental has not paid cash dividends during the past two
fiscal years and does not presently anticipate paying any cash dividends in the
future. Laidlaw Environmental's existing credit facility precludes the payment
of cash dividends.
According to the Safety-Kleen 1996 Form 10-K, there were, as of December
28, 1996, 8,042 holders of record of Shares. As of October 7, 1997, there were
6,234 holders of record of shares of Laidlaw Environmental Common Stock.
According to the Safety-Kleen Form 8-K filed November 10, 1988, the Rights
are listed on the NYSE, but are currently attached to all outstanding Shares and
may not be traded separately. Upon the occurrence of the Safety-Kleen
Distribution Date, the Rights are to trade separately from the Shares.
VALIDITY OF LAIDLAW ENVIRONMENTAL COMMON STOCK
The validity of the shares of Laidlaw Environmental Common Stock offered
hereby will be passed upon for Laidlaw Environmental by Katten Muchin & Zavis,
525 West Monroe Street, Chicago, Illinois 60661.
EXPERTS
The consolidated balance sheets as of August 31, 1997 and 1996 and the
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended August 31, 1997, of Laidlaw Environmental
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement have been incorporated herein in reliance on the report of Coopers &
Lybrand L.L.P. independent accountants, given on the authority of that firm as
experts in accounting and auditing. The consolidated balance sheets as of
September 30, 1996 and 1995 and the related consolidated statements of
operations and cash flows for each of the years in the period ended September
30, 1996, of Rollins included in this Prospectus have been included herein in
reliance on the report of KPMG Peat Marwick LLP, independent accountants, given
on the authority of that firm as experts in accounting and auditing.
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SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF LAIDLAW ENVIRONMENTAL
Directors and Executive Officers of Laidlaw Environmental. The name,
business address, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of Laidlaw
Environmental are set forth below. Unless otherwise indicated, each occupation
set forth opposite an individual's name refers to employment with Laidlaw
Environmental. Unless otherwise indicated, each director and executive officer
listed below is a citizen of the United States.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
NAME AND BUSINESS ADDRESS AGE LAST FIVE YEARS, DIRECTORSHIPS OF PUBLIC COMPANIES
- - ------------------------- --- --------------------------------------------------
<S> <C> <C>
Kenneth W. Winger.................... 59 President, Chief Executive Officer and Director of
President, Chief Executive Officer Laidlaw Environmental since May 15, 1997; President,
and Director of Laidlaw Chief Operating Officer and sole director of Laidlaw
Environmental since May 1997 Environmental Services (US), Inc. from July 1995 until
Laidlaw Environmental Services, Inc. May 1997; Executive Vice President for Business
1301 Gervais Street, Suite 300 Development of Laidlaw Waste Systems, Ltd. from January
Columbia, S.C. 29201 1995 until July 1995; from May 1991 until December 1994,
Senior Vice President for Corporate Development of
Laidlaw Inc. Mr. Winger also is a director of ViroGroup,
Inc. Non-U.S. citizen.
James R. Bullock..................... 53 President and Chief Executive Officer of Laidlaw Inc.
Director of Laidlaw Environmental since October 1993; for more than a year prior thereto,
and Chairman of the Board since May President and Chief Executive Officer of Cadillac
1997 Fairview Corporation Limited. Mr. Bullock also is a
Laidlaw Inc. director of Laidlaw Inc. Non-U.S. citizen.
3221 North Service Road
Burlington, Ontario L7R 3Y8
John R. Grainger..................... 48 Executive Vice President and Chief Operating Officer of
Director of Laidlaw Environmental Laidlaw Inc. since September 1997; President and Chief
since May 1997 Operating Officer of Laidlaw Transit, Inc. since May
Laidlaw Inc. 1992. Mr. Grainger currently serves as Chairman of the
3221 North Service Road Human Resources and Compensation Committee. Non-U.S.
Burlington, Ontario L7R 3Y8 citizen.
Leslie W. Haworth.................... 54 Senior Vice President and Chief Financial Officer of
Director of Laidlaw Environmental Laidlaw Inc. for more than five years. Mr. Haworth
since May 1997 currently serves as Chairman of the Audit Committee.
Laidlaw Inc. Non-U.S. citizen.
3221 North Service Road
Burlington, Ontario L7R 3Y8
John W. Rollins, Sr.................. 81 Chairman of the Board and Chief Executive Officer of
Director of Rollins Environmental Rollins Truck Leasing Corp. for more than five years.
Services, Inc. since 1982 Mr. Rollins was Chairman of the Board and Chief
Rollins Truck Leasing Corp. Executive Officer of Rollins Environmental Services,
2200 Concord Pike Inc. from 1988 until May 15, 1997. Mr. Rollins also is a
One Rollins Plaza director of Matlack Systems, Inc., Rollins, Inc., RPC,
Wilmington, DE 19803 Inc. and Dover Downs Entertainment, Inc. Mr. Rollins is
the father of John W. Rollins, Jr.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
NAME AND BUSINESS ADDRESS AGE LAST FIVE YEARS, DIRECTORSHIPS OF PUBLIC COMPANIES
- - ------------------------- --- --------------------------------------------------
<S> <C> <C>
John W. Rollins, Jr.................. 55 President and Chief Operating Officer and a director of
Director of Rollins Environmental Rollins Truck Leasing Corp. for more than five years;
Services, Inc. since 1982 Chairman of the Board of Matlack Systems, Inc. for more
Rollins Truck Leasing Corp. than five years. Mr. Rollins was Senior Vice Chairman of
2200 Concord Pike the Board of Rollins Environmental Services, Inc. from
One Rollins Plaza 1988 until May 15, 1997. Mr. Rollins also is a director
Wilmington, DE 19803 of Dover Downs Entertainment, Inc. Mr. Rollins is a
member of the Human Resources and Compensation
Committee. Mr. Rollins is the son of John W. Rollins,
Sr.
David E. Thomas, Jr.................. 40 Senior Managing Director and the Head of the Investment
Director of Laidlaw Environmental Banking Group of Raymond James since July 1996; from
since June 1997 1991 until July 1996, Managing Director of Raymond
Raymond James & Associates, Inc. James. Mr. Thomas also is a director of Reynolds, Smith
880 Carillon Parkway and Hills, Inc. Mr. Thomas is a member of the Human
St. Petersburg, FL 33716 Resources and Compensation Committee.
Henry B. Tippie...................... 70 For more than five years, Chairman of the Board and
Director of Rollins Environmental President of Tippie Services; for more than five years,
Services, Inc. since 1982 Chairman of the Executive Committee and Vice Chairman of
Tippie Service, Inc. the Board of Rollins Truck Leasing Corp. Mr. Tippie was
3420 Executive Center Drive, NW Chairman of the Executive Committee of Rollins
Suite 163 Environmental Services, Inc. from 1988 until May 15,
Austin, TX 78731 1997. Mr. Tippie also is a director of Matlack Systems,
Inc., Dover Downs Entertainment, Inc., RPC, Inc. and
Rollins Inc. Mr. Tippie is a member of the Audit
Committee.
James L. Wareham..................... 58 President of AK Steel Corporation since March 1997; from
Director of Laidlaw Environmental 1992 until 1996, Chief Executive Officer of
since June 1997 Wheeling-Pittsburgh Steel Corporation. Mr. Wareham is a
AK Steel Corporation member of the Audit Committee.
703 Curtis Street
Middleton, OH 45043
Grover C. Wrenn...................... 55 Chairman and Chief Executive Officer of Better Health
Director of Laidlaw Environmental Network, Inc. since June 1996; Chief Executive Officer
since July 1997 of EnSys Environmental Products, Inc. from April 1995
4 Wolfe Street through December 1996; and President and Chief Executive
Alexandria, VA 22314 Officer of Applied Bioscience International from 1991
through March 1995. Mr. Wrenn also is a director of
Strategic Diagnostics, Inc. and Pharmakinetics Labora-
tories, Inc.
Michael J. Bragagnolo................ 51 Executive Vice President and Chief Operating Officer of
Executive Vice President and Chief Laidlaw Environmental Services, Inc. since May 15, 1997;
Operating Officer of Laidlaw Executive Vice President and Chief Operating Officer of
Environmental since May 1997 Laidlaw Environmental Services (US), Inc. from January
Laidlaw Environmental Services, Inc. 1997 until May 1997; Executive Vice President of United
1301 Gervais Street, Suite 300 States Operations of Laidlaw Waste Systems, Inc. from
Columbia, SC 29201 September 1993 until January 1997; Vice President of
Strategic Analysis and Planning of Laidlaw Waste
Systems, Inc. from December 1991 until September 1993.
Non-U.S. citizen.
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
NAME AND BUSINESS ADDRESS AGE LAST FIVE YEARS, DIRECTORSHIPS OF PUBLIC COMPANIES
- - ------------------------- --- --------------------------------------------------
<S> <C> <C>
Henry H. Taylor...................... 53 Vice President, General Counsel and Secretary of Laidlaw
Vice President, General Counsel and Environmental Services, Inc. since May 15, 1997; Vice
Secretary of Laidlaw Environmental President of Legal and Regulatory Affairs and Secretary
since May 1997. of Laidlaw Environmental Services (US), Inc. September
Laidlaw Environmental Services, Inc. 1995 until May 1997; Vice President of Legal Affairs of
1301 Gervais Street, Suite 300 Laidlaw Environmental Services (US), Inc. May 1990 until
Columbia, SC 29201 January 1995.
Paul R. Humphreys.................... 38 Senior Vice President of Finance and Chief Financial
Senior Vice President, Finance and Officer of Laidlaw Environmental Services, Inc. since
Chief Financial Officer of Laidlaw May 15, 1997; Vice President of Finance for Laidlaw
Environmental since May 1997 Environmental Services (US), Inc. January 1995 until May
Laidlaw Environmental Services, Inc. 1997; Manager of Finance for Laidlaw Inc. from 1988
1301 Gervais Street, Suite 300 until January 1995. Non-U.S. citizen.
Columbia, SC 29201
</TABLE>
A-3
<PAGE>
SCHEDULE B
OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL OWNERS
AND SAFETY-KLEEN MANAGEMENT
The following table and notes thereto, which, other than information
regarding Laidlaw Environmental, are reproduced from the Safety-Kleen Proxy
Statement, set forth certain information with respect to beneficial ownership of
Shares as of March 28, 1997 by (a) all directors of Safety-Kleen, (b) the named
directors and officers of Safety-Kleen, including the executive officers of
subsidiaries of Safety-Kleen and (c) all directors and executive officers of
Safety-Kleen as a group. The following table also sets forth certain information
with respect to beneficial ownership of Shares by Laidlaw Environmental as of
the date of this Prospectus. An asterisk indicates ownership of less than one
percent of outstanding Shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING
NAME BENEFICIALLY OWNED(1) COMMON STOCK(2)
- ------ --------------------- ------------------
<S> <C> <C>
Donald W. Brinckman.................................... 869,156(3) 1.48%
Joseph Chalhoub........................................ 350,683(4) *
David A. Dattilo....................................... 119,972(5) *
Richard T. Farmer...................................... 42,750(6) *
Russell A. Gwillim..................................... 197,981(7) *
F. Henry Habicht II.................................... 42,226(8) *
Edgar D. Jannotta...................................... 67,500(6) *
John G. Johnson, Jr.................................... 91,513(9) *
Karl G. Otzen.......................................... 1,480,581(11) 2.54%
Paul D. Schrage........................................ 31,180(6)
Marcia E. Williams..................................... 8,500(10) *
W. Gordon Wood......................................... 70,805(6) *
</TABLE>
- -----------------
* Denotes less than one percent of shares outstanding.
(1) Under regulations of the Securities and Exchange Commission, persons who
own or have the power to vote or dispose of shares, either alone or jointly
with others, are deemed to be the beneficial owners of such shares. Such
persons are also deemed to be the beneficial owners of shares beneficially
owned by certain close family members.
(2) Shares subject to options exercisable within 60 days of February 26, 1997
are considered outstanding for the purpose of determining the percent of
the class held by the holder of such option, but not for the purpose of
computing the percentage held by others.
(3) Includes 73 shares owned by his wife, 431,091 shares subject to options
exercisable within 60 days of February 26, 1997 and 1,033 shares held in
the Company's 401(k) plan as to which he does not have voting control.
(4) Includes 275,000 shares owned by Breslube Industries, Ltd. of which 100% is
owned by Mr. Chalhoub. Also included are 59 shares owned by his wife, 75
shares owned by his son and 75,549 shares subject to options exercisable
within 60 days of February 26, 1997.
(5) Includes 88,627 shares subject to options exercisable within 60 days of
February 26, 1997.
(6) Includes 30,000 shares subject to options exercisable within 60 days of
February 26, 1997.
(7) Includes 30,223 shares owned by his wife and 30,000 shares subject to
options exercisable within 60 days of February 26, 1997. Mr Gwillim is also
a co-trustee for 45,827 shares held in an irrevocable trust for which he
has no beneficial ownership; such shares are not included in the table.
(8) Includes 39,712 shares subject to options exercisable within 60 days of
February 26, 1997 and 114 shares held in the Company's 401(i) plan as to
which he does not have voting control.
(9) Includes 700 shares owned by his wife, 81,962 shares subject to options
exercisable within 60 days of February 26, 1997 and 322 shares held in the
Company's 401(k) plan as to which he does not have voting control.
(10) Includes 7,500 shares subject to options exercisable within 60 days of
February 26, 1997.
(11) Karl G. Otzen and Lucy T. Otzen (the "Otzens") are husband and wife. For
purposes of this table, Karl G. Otzen is deemed to own shares owned by Lucy
T. Otzen, and accordingly such number of shares is shown. In December 1992,
the Otzens caused 683,760 of their shares to be contributed to Circle L
Limited Partnership. The general partner which controls the Partnership is
a corporation in which Karl G. Otzen, Lucy T. Otzen, Joan Emery Lammers and
her husband (the "Lammers"). Each owns 25% of
B-1
<PAGE>
the voting stock and each occupies one of the four positions on the Board
of Directors. Because the Otzens and Lammers share voting power over all of
the shares held by the Partnership, each of them may be deemed to "own" all
shares in the partnership under the criteria governing this table. To
enhance clarity of presentation, however, the shares contributed to the
Partnership by Joan Emery Lammers are shown opposite Karl G. Otzen's name
and also included are 757,721 shares owned by trustees of which the Otzens
are co-trustees, 9,100 shares owned by a trust of which The Northern Trust
Company is trustee and 30,000 shares subject to options exercisable by Karl
G. Otzen within 60 days of February 26, 1997.
B-2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF ROLLINS ENVIRONMENTAL
SERVICES, INC.
Report of Independent Certified Public Accountants........ F-2
Consolidated Balance Sheet as of September 30, 1996 and
1995................................................... F-3
Consolidated Statement of Operations for the Years Ended
September 30, 1996, 1995 and 1994...................... F-4
Consolidated Statement of Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994...................... F-5
Notes to the Consolidated Financial Statements............ F-6
Consolidated Balance Sheet as of March 31, 1997 and March
31, 1996 (unaudited)................................... F-16
Consolidated Statement of Operations for the Quarter Ended
March 31, 1997 and 1996 (unaudited) and for the Six
Months Ended March 31, 1996 and 1995 (unaudited)....... F-17
Notes to the Consolidated Financial Statements
(unaudited)............................................ F-19
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Rollins Environmental Services, Inc.
We have audited the consolidated financial statements of Rollins
Environmental Services, Inc. and subsidiaries as of September 30, 1996 and 1995
and the related consolidated statements of operations and cash flows for each of
the years in the three-year period ended September 30, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rollins
Environmental Services, Inc. and subsidiaries as of September 30, 1996 and 1995,
and the results of their operations and their cash flows for each of the years
in the three-year period ended September 30, 1996, in conformity with generally
accepted accounting principles.
As discussed in the Notes to the Consolidated Financial Statements, in
fiscal year 1994, the Company changed its method of accounting for income taxes.
KPMG Peat Marwick LLP
Wilmington, Delaware
November 8, 1996, except for the last paragraph under the footnote
"Indebtedness", which is as of November 27, 1996
F-2
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (includes short-term investments
of 1996 -- $18,166; 1995 -- $32,108)................... $ 27,231 $ 38,691
Accounts receivable, net of allowance for doubtful
accounts: 1996 -- $648; 1995 -- $681................... 42,302 42,774
Deferred income taxes..................................... 5,616 4,948
Income taxes recoverable.................................. 7,059 10,637
Other current assets...................................... 11,356 12,122
-------- --------
Total Current Assets.............................. 93,564 109,172
Property and Equipment, net................................. 272,811 298,673
Excess of Cost Over Net Assets of Businesses Acquired....... 9,331 10,054
Other Assets................................................ 9,261 11,585
-------- --------
Total Assets...................................... $384,967 $429,484
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 21,369 $ 23,705
Accrued liabilities....................................... 34,432 29,283
Accrued remediation and other costs....................... 1,970 3,723
Current maturities of long-term debt...................... 1,728 1,689
-------- --------
Total Current Liabilities......................... 59,499 58,400
Long-term Debt.............................................. 132,453 134,181
Accrued Remediation and Other Costs......................... 9,829 11,959
Other Liabilities........................................... 7,396 10,456
Deferred Income Taxes....................................... 21,307 29,819
Commitments and Contingent Liabilities (see notes to the
Consolidated Financial Statements)
Shareholders' Equity
Preferred stock, $1 par value
Shares outstanding: None
Common stock, $1 par value
Shares outstanding: 1996 and 1995 -- 60,375,811........ 60,376 60,376
Additional paid-in capital................................ 4,650 4,650
Retained earnings......................................... 89,457 119,643
-------- --------
Total Shareholders' Equity........................ 154,483 184,669
-------- --------
Total Liabilities and Shareholders' Equity........ $384,967 $429,484
======== ========
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of these
statements.
F-3
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................... $241,130 $217,367 $181,468
Expenses:
Operating................................................. 209,855 181,766 134,053
Special charge............................................ -- -- 14,500
Depreciation.............................................. 33,502 26,710 22,760
Selling and administrative................................ 34,830 32,563 26,649
Interest.................................................. 8,854 4,983 382
-------- -------- --------
287,041 246,022 198,344
-------- -------- --------
Loss Before Income Tax Benefits and Cumulative Effect of
Change in Accounting Principle............................ (45,911) (28,655) (16,876)
Income tax benefits......................................... (15,725) (10,363) (6,399)
-------- -------- --------
Loss Before Cumulative Effect of Change in Accounting
Principle................................................. (30,186) (18,292) (10,477)
Cumulative effect (to September 30, 1993) of adoption of
SFAS No. 109.............................................. -- -- 543
-------- -------- --------
Net Loss.................................................... $(30,186) $(18,292) $ (9,934)
======== ======== ========
Loss per Share:
Loss before cumulative effect of change in accounting
principle.............................................. $ (.50) $ (.30) $ (.17)
Cumulative effect of adoption of SFAS No. 109............. -- -- .01
-------- -------- --------
Loss Per Share.............................................. $ (.50) $ (.30) $ (.16)
======== ======== ========
Average common shares and equivalents outstanding (000)..... 60,401 60,400 60,377
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of these
statements.
F-4
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss.................................................... $(30,186) $(18,292) $ (9,934)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities, net of acquisitions:
Special charge............................................ -- -- 14,500
Expenditures charged to accrued remediation and other
costs.................................................. (3,883) (3,937) (2,874)
Depreciation and amortization............................. 34,253 26,839 22,760
Changes in assets and liabilities:
Current and deferred income taxes...................... (5,602) (6,828) (6,468)
Accounts receivable.................................... 472 (774) 2,636
Accounts payable and accrued liabilities............... 2,813 15,668 5,643
Other, net............................................. (269) 1,116 (477)
-------- -------- --------
Net cash (used in) provided by operating activities.... (2,402) 13,792 25,786
-------- -------- --------
Cash Flows From Investing Activities:
Acquisition of businesses, net of cash acquired........... -- (9,588) --
Purchase of property and equipment........................ (7,832) (20,051) (18,002)
Proceeds from sales of equipment.......................... 463 428 75
-------- -------- --------
Net cash used in investing activities.................. (7,369) (29,211) (17,927)
-------- -------- --------
Cash Flows From Financing Activities:
Repayment of long-term debt............................... (1,689) (662) (662)
Exercise of stock options................................. -- -- 88
-------- -------- --------
Net cash used in financing activities.................. (1,689) (662) (574)
-------- -------- --------
Cash And Cash Equivalents:
Net (decrease) increase in cash and cash equivalents........ (11,460) (16,081) 7,285
Beginning of period....................................... 38,691 54,772 47,487
-------- -------- --------
End of period............................................. $ 27,231 $ 38,691 $ 54,772
======== ======== ========
Supplemental Information:
Interest paid............................................. $ 9,254 $ 4,219 $ 549
Income taxes recovered.................................... $(10,123) $ (3,640) $ (472)
======== ======== ========
Noncash Investing and Financing Activities:
Acquisition of businesses
Fair value of assets acquired.......................... $ -- $169,572 $ --
Cash paid.............................................. -- 9,599 --
-------- -------- --------
Liabilities assumed and incurred.................. $ -- $159,973 $ --
======== ======== ========
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of these
statements.
F-5
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ORGANIZATION AND ACCOUNTING POLICIES
Organization. Rollins Environmental Services, Inc. consists solely of
industrial waste treatment and disposal. Essentially all of the Company's
operations are conducted within the United States.
Consolidation. The consolidated financial statements include the accounts
of all subsidiaries. Intercompany transactions and balances among these
subsidiaries have been eliminated.
Revenue recognition. Revenues from waste treatment and disposal and the
related costs associated with the treatment and disposal are recognized at the
time when the material is received by the Company at one of five incineration
plants which is the point in time when the Company assumes liabilities for the
handling of the waste. Pursuant to contracts with its customers, Rollins accepts
title to waste materials at such time and provides contractual indemnification
to its customers against future liability with respect to the waste materials,
liability which by federal law is joint and several for any persons responsible
for the generation, treatment, transportation or disposal of the waste
materials. Since the Company's incineration services are dependent upon mixing
certain types of wastes with other compatible or complementary wastes, and this
process may require several additional days to complete, the Company invoices
customers upon receipt of waste. In addition, it is often not possible to
ascertain the date of destruction for waste which has been commingled.
Concurrent with the billing process is the recording of a receivable from the
customer and the recognition of revenue. Since a majority of the waste streams
are incinerated within a few days, it is not administratively practical to defer
the recording of revenue until the waste is incinerated, which typically occurs
within a short period of time after the waste is received.
The above practice matches revenue and the related variable expenses.
Disposal of waste by incineration is a multi-stage process. Steps in the process
may include packaging, manifesting, transportation, laboratory and analytical
work, interim storage, repackaging, treatment, and mixing or blending prior to
incineration, none of which require significant incremental variable expense. In
connection with the incineration process, accrued variable expenses for
untreated waste at September 30, 1996 were $2,607,000, which represented less
than 2% of total operating expenses in fiscal 1996. Since the industry requires
large investments in costly and complex facilities, the proportion of fixed
expenses to total expenses is substantially higher than in many other
industries, which minimize the exposure that might otherwise occur in estimating
variable expense.
Earnings (loss) per share. Earnings (loss) per share are computed assuming
the conversion of all potentially dilutive outstanding stock options.
Cash equivalents. Cash equivalents, carried at cost which approximates
fair market value, represent short-term investments with an original maturity at
purchase of three months or less.
Property and equipment. The Company provides for depreciation on a
straight-line, specific item basis net of salvage or residual values over the
assets' estimated useful lives. The estimated useful lives are 10 to 40 years
for buildings, three to 20 years for equipment and vehicles, and 10 years for
site improvements. Major additions and improvements are capitalized and
depreciated over the remaining lives of the assets. Repairs and maintenance are
charged to expense as incurred. Where landfill disposal operations have been
conducted on the same parcels of land where the Company conducts its
incineration and other treatment operations, land is carried at cost and
expenditures in connection with the preparation and operation of landfills are
charged to expense as incurred. Where landfill operations are conducted on
subsequently acquired parcels of land, the cost of the land and landfill
preparation costs are deferred and charged to expense as the airspace in the
landfill is filled.
Goodwill. The excess of cost over net assets of businesses acquired is
being amortized on a straight-line basis over twenty years. The Company
periodically reviews goodwill to assess recoverability and impairments would be
recognized in operating results if a permanent diminution in value were to
occur.
F-6
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Environmental remediation reserves. The Company establishes reserves for
environmental remediation at hazardous waste sites not owned by the Company when
it is both probable a liability has been incurred and a reasonable estimate of
the costs can be determined. The Company recognizes recoveries from third
parties when it is probable that such amounts will be realized and such amounts
are not offset against the related environmental remediation liability. The
receivable amounts from third parties at September 30, 1996 is not material.
The Company records accruals for certain environmental remediation
activities at its facilities where commitments have been made and reasonable
cost estimates are possible. The cost of operating and maintaining systems and
equipment constructed for environmental remediation, as well as the cost of
treating recovered groundwater, are charged to operating expense as incurred.
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Fair values of financial instruments. The carrying amounts reported in the
balance sheet for current assets and current liabilities approximate their fair
value at September 30, 1996.
SPECIAL CHARGE
A special charge of $14,500 ($9,031 after tax benefit or $.15 per share)
was recorded in the second quarter of fiscal year 1994. The charge included: (1)
various engineering and other expenditures ($8,200) on projects no longer
considered viable in the current business climate; (2) estimated expenditures
($5,000) for capping of a closed landfill and related activities; and (3)
miscellaneous items ($1,300).
ACQUISITIONS
On March 31, 1995, the Company acquired from Westinghouse Electric
Corporation all of the capital stock of National Electric, Inc. ("NEI"), a
wholly owned subsidiary of Westinghouse Electric Corporation. NEI owns all of
the capital stock of Aptus, Inc. NEI is not conducting any business operations.
Aptus is engaged in the sale of services related to the transportation, storage,
laboratory analysis and incineration of certain types of hazardous waste.
The purchase price of $132,039 consisted of a cash payment of $6,500, the
assumption of Westinghouse Electric Corporation's obligations and duties in
connection with the $45,700 Variable Rate Hazardous Waste Treatment Revenue
Bonds, and the issuance of $13,839 of 7.75% Senior Unsecured Debentures and
$66,000 of 7.25% Convertible Subordinated Debentures.
On April 28, 1995, the Company acquired all of the common stock of Allworth
of Tennessee, Inc., a waste processing facility for a cash payment of $3,099.
These acquisitions were accounted for using the purchase method and,
accordingly, the assets acquired and the liabilities assumed have been recorded
at their fair values on their acquisition dates. This treatment resulted in an
excess of cost over net assets acquired of approximately $10,000.
The results of operations of these companies are included in the
Consolidated Statement of Operations from the acquisition dates forward.
F-7
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions had occurred at the beginning of the
periods presented and do not purport to be indicative of what would have
occurred had the acquisitions been made as of those dates or of future operating
results.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Revenues.................................................... $261,779 $282,058
Net loss.................................................... $(24,653) $(12,742)
Loss per share.............................................. $ (.41) $ (.21)
======== ========
</TABLE>
PROPERTY AND EQUIPMENT
The property and equipment accounts are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
Land........................................................ $ 31,324 $ 31,324
Buildings................................................... 75,661 72,169
Equipment and vehicles...................................... 303,305 299,035
Site improvements........................................... 39,978 30,250
Construction in progress.................................... 5,525 17,277
Accumulated depreciation.................................... (182,982) (151,382)
--------- ---------
$ 272,811 $ 298,673
========= =========
</TABLE>
Commitments for the purchase of capital assets amounted to $471 at
September 30, 1996.
INCOME TAXES
The income tax benefits for the three years ended September 30, 1996 are
comprised as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Current:
Federal............................................... $ (7,262) $(10,446) $(3,242)
State................................................. 199 144 639
Deferred:
Federal............................................... (8,192) 1,277 (2,228)
State................................................. (470) (1,338) (1,568)
-------- -------- -------
Income tax benefits..................................... $(15,725) $(10,363) $(6,399)
======== ======== =======
</TABLE>
F-8
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the income tax benefits for the three years ended
September 30, 1996 with amounts calculated by applying the statutory federal
income tax rate for those years to the loss before income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Federal income tax benefits at statutory rate........... $(16,069) $(10,029) $(5,907)
State income tax benefits............................... (1,566) (977) (604)
Valuation allowance..................................... 1,390 201 --
Other................................................... 520 442 112
-------- -------- -------
Income tax benefits..................................... $(15,725) $(10,363) $(6,399)
======== ======== =======
</TABLE>
The tax effect of temporary differences which comprise the current and
non-current deferred income tax amounts shown on the balance sheet are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Accrued remediation and closure costs..................... $ 4,478 $ 6,007
Expenses deductible when paid............................. 7,659 5,907
State net operating loss benefits, expiring 2001-2011..... 4,359 2,678
Federal net operating loss benefits, expiring 2010-2011... 18,624 7,000
Other..................................................... 187 497
------- -------
Total gross deferred tax assets................... 35,307 22,089
Less valuation allowance.......................... (3,368) (2,138)
------- -------
Net deferred tax assets........................... 31,939 19,951
------- -------
Deferred tax liabilities:
Excess of tax over book depreciation...................... 44,108 44,032
Section 172(f) carryback claim............................ 3,331 --
Other..................................................... 191 790
------- -------
Total gross deferred liabilities.................. 47,630 44,822
------- -------
Net deferred tax liability........................ $15,691 $24,871
======= =======
</TABLE>
As of October 1, 1993, the Company adopted SFAS No. 109 -- Accounting for
Income Taxes which requires the use of the liability method of accounting for
deferred income taxes. The cumulative effect on prior years of this adoption was
a reduction of the 1994 net loss by $543 ($.01 per share).
At September 30, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of $53,211 which will expire on various dates
through 2010 and 2011. Operating loss carryforwards of $16,200 were generated by
Aptus, Inc. prior to its acquisition on March 31, 1995. The use of Aptus, Inc.'s
pre-acquisition operating losses is subject to limitations imposed by the
Internal Revenue Code. The Company has recorded a valuation allowance for
federal and state purposes of $3,368 to reflect the estimated amount of deferred
tax assets which may not be realized principally due to expiration of operating
loss carryforwards. The valuation allowance includes $1,701 of tax benefits
related to Aptus, Inc.'s pre-acquisition tax losses which, if realized, would
reduce goodwill.
The change in the valuation allowance for deferred tax assets resulted from
management's assessment that some additional portion of the deferred tax assets
may not be realized. The realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those
temporary
F-9
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
differences become deductible. Management considered the scheduled reversals of
deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment.
In September 1996, the Company filed Form 1139 "Corporate Application for
Tentative Refund" to carryback its 1995 net loss as provided for in Section
172(f) of the Internal Revenue Code, claiming a federal income tax refund of
$3,331. In September of 1996, the Company also filed Form 1120X for 1994,
carrying back its net operating loss as provided for in Section 172(f) claiming
a refund of $1,433. This amount has not been received and has not been recorded
in the Company's financial statements. Section 172(f) is an area of the tax law
without significant precedent and there may be substantial opposition by the IRS
to the Company's refund claims. Therefore, the $3,331 received in October 1996
also has been recorded on the Company's financial statements as a deferred tax
liability. The $1,433 claimed on the Company's 1994 Form 1120X will be recorded
as a deferred tax liability in the Company's financial statements at such time
as the amount is received.
ACCRUED LIABILITIES
Accrued liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1996 1995
------- -------
<S> <C> <C>
Environmental remediation (Non-owned sites)(1).............. $13,560 $ 8,873
Employee compensation....................................... 5,223 5,543
Taxes other than income..................................... 5,086 4,995
Insurance and legal......................................... 1,432 2,339
Landfill capping costs...................................... 1,792 2,208
------- -------
Other....................................................... 7,339 5,325
$34,432 $29,283
======= =======
</TABLE>
- ----------------
(1) At September 30, 1996, the Company reclassified $4,600 from other
liabilities to environmental remediation (non-owned sites) to reflect
settlement with the EPA of the Bridgeport Rental & Oil Services Superfund
Site (BROS) for $13,035. On November 14, 1996, payments totalling $13,035
were made to the Trustees of the BROS Environmental Remediation Trust in
fulfillment of the Company's settlement obligations.
SHAREHOLDERS' EQUITY
Changes in the components of shareholders' equity are as follows:
<TABLE>
<CAPTION>
$1 PAR VALUE ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at September 30, 1993............ $60,350 $4,588 $147,869 $212,807
Net loss................................. (9,934) (9,934)
Exercise of stock options................ 26 62 88
------- ------ -------- --------
Balance at September 30, 1994............ 60,376 4,650 137,935 202,961
Net loss................................. (18,292) (18,292)
------- ------ -------- --------
Balance at September 30, 1995............ 60,376 4,650 119,643 184,669
Net loss................................. (30,186) (30,186)
------- ------ -------- --------
Balance at September 30, 1996............ $60,376 $4,650 $ 89,457 $154,483
======= ====== ======== ========
</TABLE>
F-10
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is authorized to issue 120,000,000 shares of its $1 Par Value
Common Stock and 1,000,000 shares of its $1 Par Value Preferred Stock. The terms
and conditions of each issue of preferred stock are determined by the Board of
Directors. No preferred stock has been issued.
Each share of common stock outstanding includes one common stock purchase
right (a "Right") which is non-detachable and non-exercisable until certain
defined events occur, including certain tender offers or the acquisition by a
person or group of affiliated or associated persons of 15% of the Company's
common stock. Upon the occurrence of certain defined events, the Right entitles
the holder to purchase additional stock of the Company or stock of an acquiring
company at a 50% discount. The Right expires on June 30, 1999 unless earlier
redeemed by the Company at a price of $.01 per Right.
STOCK OPTION PLAN
Under the Company's stock option plan, options to purchase common stock of
the Company may be granted to officers and key employees at not less than 100%
of the fair market value at the date of grant.
Option activity is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Number of options
Outstanding at beginning of year..... 982,802 658,868 674,660
Granted.............................. 341,200 394,200 200,610
Exercised............................ -- -- (25,557)
Expired or canceled.................. (114,017) (70,266) (190,845)
--------------- --------------- ---------------
Outstanding at September 30............ 1,209,985 982,802 658,868
=============== =============== ===============
At September 30
Options available for grant.......... 76,790 339,390 717,390
Options exercisable.................. 500,812 384,375 317,900
Per share prices
Options granted...................... $2.25 to $ 3.88 $4.13 to $ 5.00 $4.63 to $ 5.75
Options exercised.................... -- -- $3.47
Options outstanding.................. $2.25 to $12.25 $4.13 to $12.25 $4.63 to $12.80
=============== =============== ===============
</TABLE>
TRANSACTIONS WITH RELATED PARTIES
Certain directors and officers of the Company are also directors and
officers of Rollins Truck Leasing Corp. and Matlack Systems, Inc.
The Company purchased transportation services from subsidiaries of Matlack
Systems, Inc. in the amount of $13,916 in 1996, $13,265 in 1995 and $3,175 in
1994. The cost of these services has been included in operating expense in the
Consolidated Statement of Operations.
The Company also purchased fuel for its vehicles, information systems
services, and rented transportation equipment and office space from Rollins
Truck Leasing Corp., its subsidiaries and affiliates. The aggregate cost of
these materials, services and rents, which have been included in operating
expense or selling and administrative expense, as appropriate, in the
Consolidated Statement of Operations, was $4,769 in 1996, $6,617 in 1995 and
$6,551 in 1994.
An officer of the Company is the trustee of an employee benefits trust
which provides certain insurance and health care benefits to employees of the
Company. Contributions to the trust, which were charged to
F-11
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operating or selling and administrative expense, as appropriate, were $7,385 in
1996, $6,792 in 1995 and $5,156 in 1994.
In the opinion of management of the Company, the foregoing transactions
were effected at rates which approximate those which the Company would have
realized or incurred had such transactions been effected with independent third
parties.
INDEBTEDNESS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1996 1995
-------- --------
<S> <C> <C>
7.25% Convertible Subordinated Debentures, due 2005......... $ 66,000 $ 66,000
Variable Rate Hazardous Waste Treatment Revenue Bonds, due
2020 (Interest rates range from 3.5% to 3.7%)............. 45,700 45,700
7.75% Senior Unsecured Debentures, due 2001-2005............ 13,839 13,839
Promissory note, interest at prime (8.25%), due 1996-2001... 5,333 6,400
Other Long-Term Debt........................................ 3,309 3,931
Less Current Maturities..................................... (1,728) (1,689)
-------- --------
$132,453 $134,181
======== ========
</TABLE>
Other long-term debt consists of real estate purchase money mortgage
obligations payable in installments to 2001, at interest rates of 9% and 10%.
Land with carrying value of $5,504 is pledged as collateral.
The aggregate amounts of maturities and sinking fund requirements for all
indebtedness over the next five years are as follows: 1997 -- $1,728;
1998 -- $1,728; 1999 -- $1,728; 2000 -- $1,728 and 2001 -- $4,496.
Due to the variable rate provisions of the Hazardous Waste Treatment
Revenue Bonds and the Promissory note, the carrying value approximates fair
value. The fair value of the Convertible Subordinated and Senior Unsecured
Debentures is $19,800 less than the face value based on an agreement between the
sole holder of the Debentures and Laidlaw. The fair value of the remaining
long-term debt approximates its carrying value.
The 7.25% Convertible Subordinated Debentures due on March 31, 2005 are
convertible into shares of the Company's common stock at a conversion price
equal to $6.15 at any time prior to maturity. These Debentures contain default
provisions which provide for accelerated repayment should the Company be in
default with regard to the 7.75% Senior Unsecured Debentures. At the option of
the Company, the Debentures are redeemable under certain circumstances on or
after March 31, 1998 should the price per share of the Company's common stock
exceed $6.97.
The 7.75% Senior Unsecured Debentures contain covenants that restrict or
limit the ability of the Company to pay dividends, incur indebtedness,
repurchase common stock and the sale of assets. The Company must also maintain a
fixed charge coverage ratio and a minimum tangible net worth of $145,000.
At September 30, 1996, the Company was not in compliance with the fixed
charge coverage ratio with respect to the 7.75% Senior Unsecured Debentures.
Emerging Issues Task Force Issue No. 86-30, "Classification of Obligations When
a Violation is Waived by the Creditor," requires a company to reclassify
long-term debt as current when a covenant violation has occurred absent a loan
modification and it is probable that the borrower will not be able to comply
with the same covenant at measurement dates that are within the next twelve
months. On November 27, 1996, the Company received a waiver of this covenant
with respect to the period ended September 30, 1996 and the debt agreement was
amended to reduce the quarterly fixed charge coverage ratio requirement for the
periods up to and including September 30, 1997. Based upon current projections,
management of the Company believes that it will be able to remain in compliance
under the terms
F-12
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of the amended agreement. Additionally, the Company collateralized the 7.75%
Senior Unsecured Debentures and the 7.25% Convertible Subordinated Debentures by
granting a security interest in $22,000 of the Company's accounts receivable and
a second mortgage on certain land with a carrying value of $4,973.
PENSION PLANS
The Company maintains a noncontributory pension plan for eligible
employees. Pension costs are funded in accordance with the provisions of the
Internal Revenue Code. The Company also maintains a nonqualified,
noncontributory defined benefit pension plan for certain employees to restore
pension benefits reduced by federal income tax regulations. The cost associated
with the plan is determined using the same actuarial methods and assumptions as
those used for the Company's qualified pension plan.
The components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost.............................................. $ 1,834 $ 1,398 $ 1,777
Interest cost............................................. 1,345 1,102 1,032
Return on plan assets..................................... (1,796) (3,579) (420)
Net amortization and deferral............................. 170 2,455 (492)
------- ------- -------
Net periodic pension cost................................. $ 1,553 $ 1,376 $ 1,897
======= ======= =======
</TABLE>
The following table sets forth the funded status and the amount recognized
in the Company's balance sheet for the plans:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested.................................................... $14,967 $11,928
Non-vested................................................ 1,080 1,107
------- -------
$16,047 $13,035
======= =======
Projected benefit obligation................................ $19,844 $16,203
Plan assets at market value................................. 18,571 16,395
Projected benefit obligation in excess of (under) plan
assets.................................................... 1,273 (192)
Unrecognized gain........................................... 4,150 4,751
Unrecognized prior service.................................. (129) (139)
Unamortized unfunded projected benefit obligation at
adoption.................................................. (691) (768)
------- -------
Accrued pension liability................................... $ 4,603 $ 3,652
======= =======
</TABLE>
The discount rate and the rate of assumed compensation increase for all
three years were 8.0% and 5.0%, respectively. The expected long-term rate of
return on assets was 9.0% for 1996 and 1995 and 9.5% for 1994.
The assets of the plan at September 30, 1996 were invested 75% in equity
securities, 19% in fixed income securities and the balance in other interest
bearing accounts.
Effective October 1, 1994, the Company established a defined contribution
401(k) plan which permits participation by substantially all employees not
represented under a collective bargaining agreement. The Company's 401(k)
expense was $54 in 1996 and $34 in 1995.
F-13
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMMITMENTS AND CONTINGENT LIABILITIES
Environmental laws and regulations require hazardous waste disposal
facilities to obtain operating permits which generally outline the procedures
under which the facility must be operated. Violations of permit conditions or of
the regulations, even if immaterial or unintentional, may result in fines,
shutdowns, remedial work or revocation of the permit. The Company believes it is
in compliance with the requirements of all of its operating permits and related
federal and state regulations.
The Company is the subject of various lawsuits and claims by government
agencies with respect to clean-up of hazardous waste sites not owned by the
Company. Management believes any payments which may be required will ultimately
be substantially recoverable from insurance coverage. The Company believes that
it is only remotely likely that the ultimate resolution of these lawsuits and
claims would be material.
Accrued remediation and other costs were $11,799 and $15,682 at September
30, 1996 and 1995, respectively. Accrued remediation for non-Company-owned
sites, which is included in accrued liabilities and other liabilities, was
$14,604 and $14,570 at September 30, 1996 and 1995, respectively. Major elements
of cost in these reserves include groundwater recovery systems, slurry wall or
alternative containment systems, excavation and disposal of soil and waste
material, and engineering study and report costs associated with the remedial
activities. These major cost elements are segregated according to facility
location and are based on studies performed for the Environmental Protection
Agency and the states where the facilities operate. Changing federal or state
standards as well as technological developments and alternative engineering
solutions may affect the cost estimates in the future. Based on the status of
the various remedial programs at the facilities, it is expected that most, if
not all, of the remedial work will occur within the next five years. The Company
believes that the ultimate costs associated with these remediation activities,
after giving consideration to existing accruals, will not be material.
Regulatory agencies normally require operators with temporary or long-term
permits to provide insurance protection for other parties in the event of
environmental damage and to provide for continued maintenance after operations
are terminated. The Company has supplied financial assurance to regulatory
agencies and others in the aggregate amount of $56,808 at September 30, 1996,
which included letters of credit of $6,707. The balance is satisfied principally
by a combination of insurance and trust funds.
LEASE COMMITMENTS
The Company leases some of the premises and equipment used in its
operations. Leases classified as operating leases expire on various dates during
the next eight years. Total rental expense for all operating leases except those
with terms of a month or less was $4,915 in 1996, $4,266 in 1995 and $4,392 in
1994.
Minimum future rental payments required under operating leases having
non-cancelable terms in excess of one year as of September 30, 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
-------------------------
<S> <C>
1997........................................................ $ 5,900
1998........................................................ 4,702
1999........................................................ 2,622
2000........................................................ 1,620
2001........................................................ 1,282
Later years................................................. 1,152
----------
Total minimum payment required.............................. $17,278
==========
</TABLE>
F-14
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER MARCH JUNE SEPTEMBER
31 31 30(1) 30(1)
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
1996
- -------------------------------------------------
Revenues....................................... $ 61,436 $ 58,731 $ 61,582 $ 59,381
Gross profit (loss)............................ 724 (4,355)(2) (191)(3) 2 (3)
Loss before income tax benefit................. (10,409) (14,978) (9,534) (10,990)
Net loss....................................... (6,673) (9,561) (6,207) (7,745)
Loss per share................................. (.11) (.16) (.10) (.13)
1995
- -------------------------------------------------
Revenues....................................... 49,907 43,354 63,287 60,819
Gross profit (loss)............................ 7,977 (742)(2) 556 (1,622)(4)
Earnings (loss) before income tax (benefits)... 1,876 (7,508) (10,094) (12,929)
Net earnings (loss)............................ 1,220 (4,577) (6,606) (8,329)
Earnings (loss) per share...................... .02 (.08) (.11) (.13)
</TABLE>
- -----------------
(1) Results for the quarters ended June 30 and September 30, 1995 include the
results of operations of acquired companies for the periods in which they
were owned by the Company.
(2) The gross losses shown for the second fiscal quarter of 1996 and 1995
resulted principally from the seasonal winter effects, such as low air
temperatures and snow, which impact operations during the January through
March time period.
(3) The gross loss and nominal gross profit shown for the third and fourth
fiscal quarters of 1996, respectively, resulted primarily from lower
revenues caused by a shift in product mix from higher priced solid waste to
lower priced liquid waste.
(4) The gross loss shown for the fourth fiscal quarter of 1995 resulted
principally from higher maintenance costs during an unscheduled shut down of
the then recently acquired facilities from Westinghouse Electric
Corporation.
F-15
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
--------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (includes short-term investments
of:
$16,988 -- March; $18,166 -- September................. $ 19,612 $ 27,231
Accounts receivable, net.................................. 35,936 42,302
Income taxes recoverable.................................. -- 7,059
Deferred income taxes..................................... 5,101 5,616
Other current assets...................................... 6,540 11,356
--------- ---------
Total current assets.............................. 67,189 93,564
Property and equipment, at cost
Land...................................................... 31,324 31,324
Buildings................................................. 76,129 75,661
Equipment and vehicles.................................... 304,027 303,305
Site improvements......................................... 40,780 39,978
Construction in progress.................................. 5,970 5,525
Accumulated depreciation.................................. (198,215) (182,982)
--------- ---------
260,015 272,811
Excess of cost over net assets of businesses acquired....... 9,080 9,331
Other assets................................................ 9,135 9,261
--------- ---------
Total assets...................................... $ 345,419 $ 384,967
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................... $ 19,615 $ 21,369
Accrued liabilities....................................... 17,488 34,432
Accrued remediation and other costs....................... 2,387 1,970
Income taxes payable...................................... 399 --
Current maturities of long-term debt...................... 1,728 1,728
--------- ---------
Total current liabilities......................... 41,617 59,499
Long-term debt.............................................. 131,428 132,453
Accrued remediation and other costs......................... 7,723 9,829
Other liabilities........................................... 8,531 7,396
Deferred income taxes....................................... 19,144 21,307
Shareholders' equity
Preferred stock, $1 par value, 1,000,000 shares
authorized; issued and outstanding -- None
Common stock, $1 par value, 120,000,000 shares authorized;
issued and outstanding:
March -- 60,375,811; September -- 60,375,811........... 60,376 60,376
Additional paid-in capital................................ 4,650 4,650
Retained earnings......................................... 71,950 89,457
--------- ---------
Total shareholders' equity........................ 136,976 154,483
--------- ---------
Total liabilities and shareholders' equity........ $ 345,419 $ 384,967
========= =========
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of these
statements.
F-16
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------ -------------------
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................................... $ 46,553 $58,731 $105,937 $120,167
-------- ------- -------- --------
Operating expenses..................................... 48,965 54,259 98,112 106,997
Depreciation........................................... 7,783 8,419 15,897 15,949
Selling and administrative expenses.................... 7,424 8,720 15,271 17,934
Interest expense....................................... 2,126 2,311 4,362 4,674
-------- ------- -------- --------
66,298 73,709 133,642 145,554
-------- ------- -------- --------
Loss before income tax benefit......................... (19,745) (14,978) (27,705) (25,387)
Income tax benefit..................................... (7,406) (5,417) (10,198) (9,153)
-------- ------- -------- --------
Net loss............................................... $(12,339) $(9,561) $(17,507) $(16,234)
======== ======= ======== ========
Loss per share......................................... $ (.20) $ (.16) $ (.29) $ (.27)
======== ======= ======== ========
Average common shares and equivalents outstanding
(000)................................................ 60,385 60,378
Dividends paid per common share........................ None None None None
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of these
statements.
F-17
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(17,507) $(16,234)
Adjustments to reconcile net loss to net cash used in
operating activities:
Expenditures charged to accrued remediation and other
costs................................................. (1,689) (1,537)
Depreciation and amortization.......................... 16,161 16,362
Changes in assets and liabilities:
Current and deferred income taxes.................... 5,810 728
Accounts receivable.................................. 6,366 508
Accounts payable and accrued liabilities............. (18,698) (6,675)
Other, net........................................... 6,064 1,423
-------- --------
Net cash used in operating activities.................. (3,493) (5,425)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment........................ (3,101) (5,788)
Proceeds from sale of equipment........................... -- 119
-------- --------
Net cash used in investing activities.................. (3,101) (5,669)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt............................... (1,025) (984)
-------- --------
Net cash used in financing activities.................. (1,025) (984)
-------- --------
Cash and cash equivalents:
Net decrease in cash and cash equivalents................... (7,619) (12,078)
Beginning of period....................................... 27,231 38,691
-------- --------
End of period............................................. $ 19,612 $ 26,613
======== ========
Supplemental information:
Interest paid............................................. $ 4,531 $ 4,862
Income taxes recovered.................................... $(16,008) $ (9,880)
</TABLE>
F-18
<PAGE>
ROLLINS ENVIRONMENTAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
STATEMENT PREPARATION
The accompanying unaudited condensed consolidated financial statements do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the unaudited condensed consolidated financial statements contain
all material adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the consolidated financial position of Rollins at
March 31, 1997 and 1996, and the consolidated results of its operations and cash
flows for the six months ended March 31, 1997 and 1996. Operating results for
these interim periods are not necessarily indicative of the results that can be
expected for a full year.
F-19
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each Safety-Kleen Shareholder
or his or her broker, dealer, commercial bank, trust company or other nominee to
the Exchange Agent at one of its addresses set forth below.
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY HAND BY OVERNIGHT COURIER BY MAIL
1 State Street 1 State Street P.O. Box 84
New York, New York 10004 New York, New York 10004 Bowling Green Station
Attn: Reorg. Dept. Attn: Reorg. Dept. New York, New York 10004
Securities Processing Securities Processing Attn: Reorg. Dept.
Window SC-1 Window SC-1 Securities Processing
Window SC-1
By Facsimile Transmission Telephone Number
(for Eligible Institutions only) For information call collect:
(212) 858-2611 (212) 858-2100
Confirm by telephone: (212) 858-2013
</TABLE>
Any questions or requests for assistance or additional copies of the Prospectus,
the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed
to the Information Agent or the Dealer Manager at their respective telephone
numbers and locations listed below. You may also contact your local broker,
commercial bank, trust company or nominee for assistance concerning the Laidlaw
Environmental Offer.
The Information Agent for the Laidlaw Environmental Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, NY 10022
Call collect 212/754-8000
Toll Free 800/566-9061
Banks and Brokerage
Firms please call:
800/662-5200
The Dealer Manager for the Laidlaw Environmental Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, NY 10167
212/272-2000
Toll Free 800/999-2000
