<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
WASTE MANAGEMENT, INC.
(Name of Registrant as Specified In Its Charter)
The Board of Directors of Waste Management, Inc.
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- -------------------------------------------------------------------------------
1
<PAGE>
LOGO
3003 Butterfield Road -- Oak Brook, Illinois 60523
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1998
You are cordially invited to attend the annual meeting of stockholders of
Waste Management, Inc. which will be held at the Drury Lane Theater, 100 Drury
Lane (Illinois Highway 83 and Roosevelt Road), Oakbrook Terrace, Illinois, on
Friday, May 15, 1998, at 2:00 p.m., Central time, for the following purposes:
1. To elect directors.
2. To consider and vote upon an amendment to the Company's Restated
Certificate of Incorporation to provide for the annual election of all
directors.
3. To ratify the appointment of Arthur Andersen LLP as independent auditors
for 1998.
4. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on March 18, 1998 are
entitled to vote at the meeting. A list of such stockholders will be available
for examination by any stockholder for any purpose germane to the meeting,
during normal business hours, at the principal office of the Company, 3003
Butterfield Road, Oak Brook, Illinois, for a period of 10 days prior to the
meeting.
It is important that your shares be represented at the meeting regardless of
how many you hold. Whether or not you intend to attend in person, we urge you
to mark, date and sign the enclosed proxy and return it in the enclosed
envelope, which does not require postage if mailed in the United States.
LOGO
Herbert A. Getz
Senior Vice President and Secretary
Oak Brook, Illinois
March , 1998
YOU ARE URGED TO MARK, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY. THE PROXY IS
REVOCABLE AT ANY TIME PRIOR TO ITS USE.
Printed on recycled paper LOGO
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice of Annual Meeting
Proxy Statement........................................................... 1
Election of Directors (Proxy Item No. 1)................................ 2
Securities Ownership of Management.................................... 6
Securities Ownership of Certain Beneficial Owners..................... 11
Meetings and Committees of the Board.................................. 11
Compensation.......................................................... 13
Amendment of Restated Certificate of Incorporation to Provide for the
Annual Election of All Directors (Proxy Item No. 2).................... 36
Ratification of Appointment of Independent Auditors (Proxy Item No. 3).. 37
General Information..................................................... 37
</TABLE>
<PAGE>
WASTE MANAGEMENT, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1998
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Waste Management, Inc. (the "Company") of proxies for
use at the annual meeting of stockholders of the Company to be held at the
Drury Lane Theater, 100 Drury Lane (Illinois Highway 83 and Roosevelt Road),
Oakbrook Terrace, Illinois at 2:00 p.m., Central time, on May 15, 1998, and at
any adjournment of the meeting. Proxies properly signed and returned on time
will be voted at the meeting in accordance with the directions noted on the
proxy. If no direction is indicated, they will be voted for the election of
the nominees named in this proxy statement as directors, for the proposal to
amend the Restated Certificate of Incorporation to provide for the annual
election of all directors, for the ratification of the appointment of Arthur
Andersen LLP as independent auditors for 1998, and on other matters presented
for a vote in accordance with the judgment of the persons acting under the
proxies. Any stockholder giving a proxy has the power to revoke it at any time
before it is voted, either in person at the meeting, by written notice to the
Secretary of the Company or by delivery of a later-dated proxy.
Election of each director requires the affirmative vote of the holders of a
plurality of the shares of the Company's common stock present in person or
represented by proxy and entitled to vote at the meeting. Approval of the
proposal to ratify the appointment of the independent auditors requires the
affirmative vote of the holders of a majority of the shares of the Company's
common stock present in person or represented by proxy and entitled to vote at
the meeting. Approval of the proposal to amend the Company's Restated
Certificate of Incorporation to provide for the annual election of all
directors requires the approval of the holders of shares representing at least
80% of the outstanding shares of common stock of the Company. Abstentions and
broker non-votes are counted as shares present in the determination of whether
the shares of stock represented at the meeting constitute a quorum. Each is
tabulated separately. Abstentions are counted in tabulations of the votes cast
on proposals presented to stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
The Board of Directors has adopted a confidential voting policy. Any proxy,
written consent or ballot submitted to the Company by a stockholder in
connection with the annual meeting will be kept confidential and not be
disclosed to the Company or any of its directors, officers, or employees
except in the event of a contested proxy solicitation or whenever necessary to
meet applicable legal requirements (including asserting or defending a claim
by or against the Company and investigating possible voting irregularities).
The Company's transfer agent may continue to send the Company any proxy card
on which a stockholder has written a comment. The confidential voting policy
also provides that the vote tabulators and inspectors of election acting at
the meeting will be independent.
The Company's executive offices are located at 3003 Butterfield Road, Oak
Brook, Illinois 60523 (telephone 630/572-8800). It is expected that proxy
materials will be mailed to stockholders beginning on or about March , 1998.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on March 18, 1998 are
entitled to vote at the annual meeting of stockholders. The only voting stock
of the Company outstanding is its common stock, of which shares
were outstanding of record as of the close of business on March 18, 1998. Each
share of common stock is entitled to one vote.
1
<PAGE>
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
Four directors are to be elected at the meeting. The persons named below
have been designated by the Board as nominees for election as Class I
directors, for a term expiring at the annual meeting of stockholders in 2001.
Two of the nominees are serving as Class I directors as of the date hereof.
Two nominees, and , are not currently serving as
directors of the Company. Jerry E. Dempsey, Dr. James B. Edwards and Alexander
B. Trowbridge, who are presently serving as Class I directors, have each
informed the Board of Directors that he will retire from the Board at the end
of his current term, which expires at the upcoming annual meeting of
stockholders.
Unless otherwise instructed, properly signed proxies which are returned on
time will be voted for election of the four nominees for Class I directors.
If, however, any of such nominees should be unable to be a nominee because of
an unexpected occurrence, the proxies will be voted for such other person or
persons as will be determined by the holders of the proxies in their
discretion, or the Board of Directors may make an appropriate reduction in the
number of directors to be elected. The Class II and Class III directors named
below have terms which expire in 1999 and 2000, respectively.
As used herein, "WTI" means Wheelabrator Technologies Inc., an approximately
67%-owned subsidiary of the Company. The Company has agreed to acquire in a
cash merger all of the remaining shares of WTI that it does not own, subject
to obtaining the approval of the holders of a majority of WTI's shares (other
than the Company) at a special meeting of stockholders which has been called
to be held on March 30, 1997. "WM International" means Waste Management
International plc, which is a subsidiary owned 56% by the Company and 12% by
each of WTI and Rust International Inc. ("Rust"), which is a subsidiary owned
approximately 60% by the Company and 40% by WTI.
NOMINEES FOR TERMS EXPIRING AT THE ANNUAL MEETING IN 2001 (CLASS I DIRECTORS):
H. JESSE ARNELLE, age 64, has been a director of the Company
since 1992. In October 1997, he became counsel to Womble,
Carlyle, Sandridge and Rice, a law firm in Winston-Salem, North
Carolina. For more than ten years prior thereto, Mr. Arnelle was
a senior partner of Arnelle, Hastie, McGee, Willis and Greene, a
San Francisco-based law firm. From 1993 to 1998, he served as
Vice Chairman and the Chairman of the Pennsylvania State
University Board of Trustees. Mr. Arnelle is also a director of
Florida Power & Light (FPL Group), Eastman Chemical Co., Textron
Corporation, Wells Fargo & Company and Wells Fargo Bank N.A.,
Armstrong World Industries and Union Pacific Resources, Inc.
LOGO
[to come]
- ------------
2
<PAGE>
JOHN C. POPE, age 48, has served as a director of the Company
since November, 1997. Since January 1996, he has been Chairman
of the Board of MotivePower Industries, Inc., a manufacturer and
remanufacturer of locomotives and locomotive components. Mr.
Pope served as President and Chief Operating Officer of United
Airlines and its parent corporation, UAL Corporation, from April
1992 to July 1994. Prior thereto he served as Vice Chairman of
both companies beginning in November 1990, and as Executive Vice
President, Marketing and Finance beginning in October 1990, as
Executive Vice President, Marketing and Planning from May 1989
to September 1990 and as Chief Financial Officer beginning in
January 1988. Mr. Pope is also a director of Federal-Mogul
Corporation, Wallace Computer Services, Inc., Medaphis
Corporation, MotivePower Industries, Inc., Lamalie Associates,
Inc. and Dollar Thrifty Automotive Group, Inc.
LOGO
[to come]
- ------------
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 1999 (CLASS II
DIRECTORS):
DR. PASTORA SAN JUAN CAFFERTY, age 57, has served as a
director of the Company since July 1994. She has been a
Professor since 1985 at the University of Chicago, where she has
been a member of the faculty since 1971. Dr. Cafferty also
serves as a director of Kimberly-Clark Corporation, Harris
Bankcorp and its subsidiary, Harris Trust and Savings Bank, and
People's Energy Corporation and on the boards of the Rush-
Presbyterian-St. Luke's Medical Center and the Lyric Opera
Association, both in Chicago.
LOGO
DONALD F. FLYNN, age 58, has served as a director of the
Company since 1981 and as Chairman of the Board and President of
Flynn Enterprises, Inc., a financial advisory and venture
capital firm, since February 1988. He has also been since
February 1997 the Vice Chairman of Blue Chip Casino, Inc., an
owner and operator of a riverboat gaming vessel in Michigan
City, Indiana. He also served as Chairman of the Board and Chief
Executive Officer of Discovery Zone, Inc. ("Discovery Zone"), an
operator of indoor fun and fitness centers for children, from
July 1992 until February 1996 and May 1995, respectively.
Discovery Zone, which in March 1996 announced that it filed a
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code,
emerged from bankruptcy with a Plan of Reorganization that was
approved by the bankruptcy court in July 1997. Mr. Flynn was a
Senior Vice President of the Company from May 1975 to January
1991. He also served as the Company's Chief Financial Officer
from March 1972 to December 1989 and the Company's Treasurer
LOGO from May 1979 to December 1986. Mr. Flynn is also a director of
Extended Stay America, Inc., Psychemedics Corporation, WTI and
WM International.
3
<PAGE>
JAMES R. PETERSON, age 70, has been a director of the Company
since 1980 and was a director and President and Chief Executive
Officer of The Parker Pen Company from January 1982 to January
1985. The Parker Pen Company was principally involved in the
manufacture and distribution of writing instruments and in
providing temporary help services. Mr. Peterson is also a
director of The Dun & Bradstreet Corporation and Cognizant
Corporation.
LOGO
STEVEN G. ROTHMEIER, age 51, has served as a director of the
Company since March 1997 and has been Chairman and Chief
Executive Officer of Great Northern Capital, a private
investment management, consulting and merchant banking firm,
since March 1993. From November 1989 until March 1993, he was
President of IAI Capital Group, a venture capital and merchant
banking firm. For more than ten years prior thereto, he served
Northwest Airlines, Inc. or its parent corporation, NWA, Inc.,
in various executive capacities, including Chairman and Chief
Executive Officer from 1986 to 1989. Mr. Rothmeier is also a
director of Honeywell, Inc., Department 56, Inc., EW Blanch
Holdings, Inc. and Precision Castparts Corp.
LOGO
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2000 (CLASS III
DIRECTORS):
RODERICK M. HILLS, age 67, has served as a director of the
Company since November 1997, President of Hills Enterprises,
Ltd. (formerly The Manchester Group Ltd.), a consulting firm,
since 1987 and as a Partner in Hills & Hills, a law firm, since
1994. Mr. Hills has also served as Vice Chairman of Oak
Industries, Inc., a manufacturing firm, since 1989. Mr. Hills
served from September to November 1996 as Chairman of Federal-
Mogul Corporation, an automotive parts manufacturing firm. Mr.
Hills served as Chairman of the Securities & Exchange Commission
from 1975 to 1977 and as counsel to the President of the United
States in 1975. Mr. Hills is also a Director of Federal-Mogul
Corporation and Oak Industries, Inc.
LOGO
ROBERT S. MILLER, age 56, has served as a director since May
1997 and as Acting Chairman of the Board and Chief Executive
Officer of the Company since October 1997. Mr. Miller is also
serving as Vice Chairman of Morrison Knudsen Corporation, an
engineering and construction firm. He served as Chief Executive
Officer of Federal Mogul Corporation, an automotive parts
manufacturing firm, from September until November 1996 and as
Chairman of Morrison Knudsen Corporation from April 1995 until
September 1996. In addition, since 1993 he has served as Vice
President and Treasurer of Moore Mill and Lumber, a privately-
held forest products firm, and from 1992 to 1993, he served as
Senior Partner of James D. Wolfensohn, Inc., an investment
banking firm. From 1979 to 1992, Mr. Miller worked at Chrysler
Corporation, an automobile and truck manufacturing firm, rising
to become Vice Chairman of the Board after serving as the
Company's Chief Financial Officer. Mr. Miller is a director of
LOGO Federal Mogul Corporation, Fluke Corporation, Morrison Knudsen
Corporation, Pope & Talbot, Inc., and Symantec Corporation.
4
<PAGE>
PAUL M. MONTRONE, age 56, has served as a director of the
Company since January 1997. Mr. Montrone has been Chairman of
the Board since January 1998 and President, Chief Executive
Officer and a director since December 1991, of Fisher Scientific
International, Inc., a distributor of laboratory equipment and
supplies. Since May 1995, Mr. Montrone has served as Chairman of
the General Chemical Group, Inc., a manufacturer and distributor
of chemicals ("General Chemical") and from prior to 1992 to May
1995 as President and a director of General Chemical. He also
served as Vice Chairman of the Board of Abex, Inc., a designer
and manufacturer of engineered components for aerospace,
defense, industrial and commercial markets, or its predecessors,
from 1992 to 1995. Mr. Montrone was a director of WTI or a
predecessor thereof from prior to 1989 until January 1997.
LOGO
PEER PEDERSEN, age 73, has been a director of the Company
since 1979 and Chairman of the Board and Managing Partner of the
law firm of Pedersen & Houpt, P.C. for more than the past five
years. Mr. Pedersen is also a director of Aon Corporation,
Boston Chicken, Inc., Latin American Growth Fund, Tennis
Corporation of America and Extended Stay America, Inc.
LOGO
5
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth certain information as of February 1, 1998 as
to the beneficial ownership of common stock of the Company by the directors,
the nominees for director, each person who served as Chief Executive Officer
during 1997, the four other most highly compensated executive officers of the
Company as of December 31, 1997, two additional individuals who were not
serving as executive officers at December 31, 1997, but for whom disclosure is
required pursuant to the rules of the Securities and Exchange Commission (the
"SEC"), and all directors, the nominees for director and persons serving as
executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
SHARES OF COMMON STOCK COMMON
OTHER THAN OF THE COMPANY STOCK
EXERCISABLE EXERCISABLE BENEFICIALLY OF THE
OPTIONS OPTIONS OWNED(2) COMPANY
----------- ----------- ---------------- ----------
<S> <C> <C> <C> <C>
Directors
(Other than Executive
Officers)
H. Jesse Arnelle......... 1,338 15,000 16,338(3) *
Pastora San Juan
Cafferty................ 5,000 12,000 17,000 *
Jerry E. Dempsey......... 370,017 0 370,017 *
James B. Edwards......... 2,277 9,000 11,277 *
Donald F. Flynn.......... 508,234 0 508,234 *
Roderick M. Hills........ 1,021 0 1,021 *
Paul M. Montrone......... 4,500 3,000 7,500 *
Peer Pedersen............ 232,258 0 232,258(3) *
James R. Peterson........ 84,068 0 84,068(3) *
John C. Pope............. 4,621 0 4,621 *
Steven G. Rothmeier...... 1,511 3,000 4,511 *
Alexander B. Trowbridge.. 2,400 0 2,400(3) *
Current and Former
Executive Officers(1)
Robert S. Miller......... 1,511 0 1,511(3)
Dean L. Buntrock......... 2,133,305 1,172,645 3,305,950 *
Jerry W. Caudle.......... 44,387 120,291 164,678 *
Herbert A. Getz.......... 82,564 182,762 265,326 *
Joseph M. Holsten........ 63,193 67,924 131,117 *
William P. Hulligan...... 42,634 218,609 261,243 *
James E. Koenig.......... 100,883 450,894 551,777 *
Ronald T. LeMay.......... 0 0 0 *
D. P. Payne.............. 51,543 299,167 350,710 *
Phillip B. Rooney........ 694,739 1,258,537 1,953,276 *
All directors, nominees for
director and executive
officers as a group
including persons named
above (27 persons)........ 4,543,903 4,070,494 8,614,397 1.9%
</TABLE>
- --------
*Less than 1 percent.
(1) Pursuant to the Company's Non-Qualified Profit Sharing and Savings Plus
Plan, Messrs. Buntrock, Caudle, Getz, Holsten, Hulligan, Payne, Rooney and
all executive officers as a group acquired beneficial ownership of the
equivalent of an additional 77,943, 11,791, 368, 311, 25,737, 17,937,
66,086 and 209,868 shares, respectively, of common stock of the Company in
connection with their voluntary deferral of incentive awards pursuant to
the terms of the Company's Corporate Incentive Bonus Plan.
6
<PAGE>
(2) Directors and executive officers included in the group have sole voting
power and sole investment power over shares listed, except (i) shares
covered by options granted under the Company's stock option plans which
were exercisable within 60 days of February 1, 1998; (ii) shares held
pursuant to the Company's Profit Sharing and Savings Plan; (iii) Messrs.
Edwards, Pedersen and Peterson, whose shares listed above include 312,
12,856 and 1,668 shares issuable upon conversion of the convertible
subordinated notes due 2005 of the Company ("Company Notes"), respectively;
and (iv) Messrs. Buntrock, Dempsey, Getz, Koenig, Miller, Pedersen and
Rooney, and all executive officers and directors as a group (including such
individuals), who have shared voting and investment power over 146,833,
394,020, 42,032, 52,631, 1,000, 19,402, 58,392 and 716,310 shares,
respectively. Such shares shown for Messrs. Buntrock, Dempsey, Pedersen and
Rooney are held in trusts or foundations over which such individuals share
voting and investment power with other co-trustees or directors of such
trusts and foundations. Such shares shown for Messrs. Getz, Koenig and
Miller are held jointly with their spouses. Ownership of shares shown for
Messrs. Buntrock, Dempsey, Edwards, Getz, Koenig, Pope and Rooney, and for
all executive officers and directors as a group, includes shares of common
stock of the Company not held directly by them but held by or for the
benefit of (i) their spouses or (ii) their minor children and other
children residing with them, as to which they have neither investment power
nor voting power. Shares were held by or for the benefit of such spouses or
children of the following persons and the executive officers and directors
as a group at February 1, 1998, in the amounts indicated: Mr. Buntrock--
41,373 (held by spouse); Mr. Dempsey--1,000 (held by spouse); Dr. Edwards--
254 (held by spouse with 104 such shares issuable upon conversion of
Company Notes), Mr. Getz--240 (held by spouse), Mr. Koenig--30 (held by
spouse), Mr. Pope--600 (held in trust for children), Mr. Rooney--102,648
(held by spouse directly and as trustee for children); and all executive
officers and directors as a group (including such individuals)--146,252.
Additionally, ownership of shares shown for Mr. Koenig includes 1,200
shares held by him as trustee of a family trust in which Mr. Koenig has no
pecuniary interest. Each of the above named persons and the members of such
group disclaim any beneficial ownership of such shares.
(3) Pursuant to the Company's Deferred Directors' Fee Plan, described below
under "Outside Directors' Plans," Messrs. Arnelle, Miller, Pedersen, and
Peterson have also acquired beneficial ownership of the equivalent of
1,239, 1,158, 30,541 and 4,950 shares, respectively, of the Company's
common stock through their voluntary deferral of all or a portion of their
directors' fees. Pursuant to the Company's Directors' Phantom Stock Plan,
described below under "Outside Directors' Plans," Messrs. Pedersen,
Peterson and Trowbridge each have also acquired beneficial ownership of the
equivalent of 40,000 shares of the Company's common stock.
7
<PAGE>
OWNERSHIP OF WTI COMMON STOCK
The following table sets forth certain information as of February 1, 1998 as
to the beneficial ownership of WTI common stock by the directors, the nominees
for director, each person who served as Chief Executive Officer during 1997,
the four other most highly compensated executive officers of the Company as of
December 31, 1997, two additional individuals who were not serving as
executive officers at December 31, 1997, but for whom disclosure is required
under SEC rules, and all directors, the nominees for director and persons
serving as executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF WTI
COMMON STOCK PERCENT OF
BENEFICIALLY WTI COMMON
NAME OWNED(1)(2)(3) STOCK(2)(3)
- ---- -------------- -----------
<S> <C> <C>
Directors (Other than Executive Officers)
H. Jesse Arnelle.................................. 0 *
Pastora San Juan Cafferty......................... 0 *
Jerry E. Dempsey.................................. 34,336 *
James B. Edwards.................................. 0 *
Donald F. Flynn................................... 45,245 *
Roderick M. Hills................................. 0 *
Paul M. Montrone.................................. 256,000 *
Peer Pedersen..................................... 0 *
James R. Peterson................................. 0 *
John C. Pope...................................... 0 *
Steven G. Rothmeier............................... 0 *
Alexander B. Trowbridge........................... 0 *
Executive Officers
Robert S. Miller................................. 0 *
Dean L. Buntrock.................................. 116,377 *
Jerry W. Caudle................................... 0 *
Herbert A Getz.................................... 73,414 *
Joseph M. Holsten................................. 0 *
William P. Hulligan............................... 0 *
James E. Koenig................................... 1,500 *
Ronald T. LeMay................................... 0 *
D. P. Payne....................................... 0 *
Phillip B. Rooney................................. 374,769 *
All directors, the nominee for director and
executive officers
as a group including persons named above (27
persons)........................................... 901,641 *
</TABLE>
- --------
*Less than 1 percent.
(1) Directors and executive officers included in the group have sole voting
power and sole investment power over WTI shares listed, except (i) WTI
shares covered by options exercisable within 60 days of February 1, 1998;
(ii) 10,000 WTI shares deemed to be beneficially owned by each of Messrs.
Buntrock, Flynn and Rooney as a result of restricted units granted
pursuant to WTI's Restricted Unit Plan for Non-Employee Directors, (iii)
1,000 shares held by Mr. Dempsey's spouse and (iv) Messrs. Getz and
Koenig, and all executive officers and directors as a group, who have
shared voting and investment power over 73,414, 1,500 and 74,914 WTI
shares, respectively. Such shares shown for Messrs. Getz and Koenig are
held jointly with their spouses. Such persons disclaim any beneficial
ownership of the WTI shares subject to such restricted units.
(2) Excludes an aggregate of 104,621,810 WTI shares beneficially owned by the
Company that may be deemed beneficially owned by Mr. Miller because he may
be deemed to be an affiliate of the Company. Mr. Miller disclaims any
beneficial ownership of such WTI shares.
8
<PAGE>
(3) The numbers and percentages of WTI shares shown in the table above are
based on the assumption that currently outstanding stock options covering
WTI shares which were exercisable within 60 days of February 1, 1998 had
been exercised as follows: Mr. Montrone--256,000; and all executive
officers and directors as a group (including such individuals)--256,000.
Such persons and the members of such group disclaim any beneficial
ownership of the shares subject to such options.
OWNERSHIP OF WM INTERNATIONAL ORDINARY SHARES
The following table sets forth certain information as of February 1, 1998 as
to the beneficial ownership of WM International ordinary shares (including
ordinary shares represented by American Depositary Shares) by the directors,
the nominees for director, each person who served as Chief Executive Officer
during 1997, the four other most highly compensated executive officers of the
Company as of December 31, 1997, two additional individuals who were not
serving as executive officers at December 31, 1997 but for whom disclosure is
required under SEC rules, and all directors, the nominees for director and
persons serving as executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF WM
INTERNATIONAL
ORDINARY PERCENT OF WM
SHARES INTERNATIONAL
BENEFICIALLY ORDINARY
NAME OWNED(1)(2)(3) SHARES(2)(3)
- ---- -------------- -------------
<S> <C> <C>
Directors (Other than Executive Officers)
H. Jesse Arnelle............................... 0 *
Pastora San Juan Cafferty...................... 0 *
Jerry E. Dempsey............................... 5,000 *
James B. Edwards............................... 2,000 *
Donald F. Flynn................................ 250,000 *
Roderick M. Hills.............................. 0 *
Peer Pedersen.................................. 5,000 *
James R. Peterson.............................. 0 *
John C. Pope................................... 0 *
Steven G. Rothmeier............................ 0 *
Alexander B. Trowbridge........................ 300 *
Current and Former Executive Officers
Robert S. Miller............................... 0 *
Dean L. Buntrock............................... 211,600 *
Jerry W. Caudle................................ 0 *
Herbert A. Getz................................ 40,000 *
Joseph M. Holsten.............................. 307,666 *
William P. Hulligan............................ 50,000 *
James E. Koenig................................ 202,500 *
Ronald T. LeMay................................ 0 *
D. P. Payne.................................... 200 *
Phillip B. Rooney.............................. 210,000 *
All directors, the nominee for director and
executive officers as a
group including persons named above (27
persons)....................................... 1,708,099 *
</TABLE>
- --------
*Less than 1 percent.
(1) Directors and executive officers included in the group have sole voting
power and sole investment power over WM International shares listed,
except (i) WM International shares covered by options exercisable within
60 days of February 1, 1998; and (ii) Messrs. Koenig, Payne, and
Trowbridge, and all executive officers and directors as a group (including
such individuals), who have shared voting and investment power over 2,500,
200, 300 and 3,000 WM International shares,
9
<PAGE>
respectively. Such WM International shares shown for Messrs. Koenig, Payne
and Trowbridge are held jointly with their respective spouses. Ownership of
shares shown for Messrs. Buntrock and Dempsey includes WM International
shares not held directly by them but held by or for the benefit of their
spouses as to which they have neither investment power nor voting power. WM
International shares were held by or for the benefit of such spouses of the
following persons at February 1, 1998 in the amounts indicated: Mr.
Buntrock--1,500; Mr. Dempsey--5,000. Each of the above named persons
disclaims any beneficial ownership of such shares.
(2) Excludes an aggregate of 300,000,000 WM International shares beneficially
owned by the Company that may be deemed beneficially owned by Messrs.
Miller and Holsten because each such person may be deemed to be an
affiliate of the Company. Excludes an aggregate of 45,000,000 WM
International shares beneficially owned by WTI that may be deemed
beneficially owned by Mr. Miller because he may be deemed to be an
affiliate of WTI. Each such person disclaims any beneficial ownership of
such WM International shares.
(3) The numbers and percentages of WM International shares shown in the table
above are based on the assumption that currently outstanding stock options
covering WM International shares which were exercisable within 60 days of
February 1, 1998 had been exercised as follows: Messrs. Buntrock, Flynn,
Getz, Koenig, Holsten and Rooney 200,000, 200,000, 40,000, 200,000,
306,666 and 200,000, respectively; and all executive officers and
directors as a group (including such individuals)--1,569,999. Such persons
and members of such group disclaim any beneficial ownership of the shares
subject to such options.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company does not know of any person who, as of February 1, 1998,
directly owned more than five percent of the Company's outstanding common
stock. The Company, however, received a copy of a Schedule 13D filed by a
group consisting of George Soros, Soros Fund Management LLC, Quantum
Industrial Partners LDC, QIH Management Investor, L.P., QIH Management, Inc.,
Stanley F. Druckenmiller, and Duquesne Capital Management, L.L.C. The Schedule
13D filed by such persons indicate that such persons may be deemed to be a
group within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended. The Company also received a Schedule 13G for the year ended
December 31, 1997 from Barrow, Hanley, Mewhinney & Strauss, Inc. ("BHMS").
Pursuant to the aggregation and attribution rules relating to the beneficial
ownership of securities promulgated under the Securities Exchange Act of 1934,
as amended, BHMS is deemed to be the beneficial owner of such shares shown
because BHMS is an investment management company which exercises discretionary
investment management over accounts holding such shares. No managed account
alone owns five percent or more of the Company's common stock. The information
presented in the following table is taken from the above-referenced Schedules
13D and 13G:
<TABLE>
<CAPTION>
TITLE AMOUNT AND NATURE
OF NAME AND ADDRESS OF BENEFICIAL PERCENT OF
CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
------ ----------------------------------------- ----------------- ----------
<S> <C> <C> <C>
Common Barrow, Hanley, Mewhinney & Strauss, Inc. 22,684,500 5.0
Stock One McKinney Plaza
3232 McKinney Avenue
Dallas, Texas 75204-2429
Common George Soros 25,225,600 5.5
Stock Soros Fund Management LLC
QIH Management Investor, L.P.
QIH Management, Inc.
Stanley F. Druckenmiller
888 Seventh Avenue, 33rd Floor
New York, New York 10106
Quantum Industrial Partners LDC
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Duquesne Capital Management, L.L.C.
2579 Washington Road, Suite 322
Pittsburgh, Pennsylvania 15241-2591
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors has designated several committees of the Board,
including a Compensation and Stock Option Committee, an Audit Committee, and a
Nominating and Governance Committee. The Board of Directors held an aggregate
of 17 regular and special meetings in 1997.
The Compensation and Stock Option Committee is responsible for making
recommendations to the Board of Directors regarding salaries and incentive
awards to be paid to executive officers of the Company, and for the
administration of and the grant of equity-based incentives under the Company's
1997 Equity Incentive Plan (the "1997 Company Plan"), and the administration
of the Company's 1982 Stock Option Plan, as amended (the "1982 Company Plan")
and 1992 Stock Option Plan (the "1992 Company Plan" and together with the 1982
Company Plan and the 1997 Company Plan, the "Employee Plans"). The Audit
Committee's functions include making recommendations to the Board of Directors
on the selection of the Company's auditors, reviewing the arrangements for and
scope of the
11
<PAGE>
independent auditors' examination, reviewing the results of the annual audit,
meeting with the independent auditors, the Board of Directors and certain
officers of the Company to review the adequacy of internal controls and
reporting, reviewing compliance with the Company's policies on business ethics
and environmental, health and safety compliance and performing any other
duties or functions deemed appropriate by the Board. The Nominating and
Governance Committee's principal function is to identify and propose to the
full Board qualified nominees to fill vacancies on the Board as they occur,
and to review and report to the Board on director compensation, monitor and
make recommendations to the Board as to corporate governance matters and
review and make recommendations to the Board concerning the organization and
functioning of the Board and its committees.
The Compensation and Stock Option Committee currently consists of Messrs.
Pedersen (Chairman), Arnelle, Edwards, Montrone, Peterson and Dr. Cafferty;
the Audit Committee currently consists of Messrs. Hills (Chairman), Pope and
Rothmeier; and the Nominating and Governance Committee currently consists of
Messrs. Trowbridge (Chairman), Arnelle, Miller and Montrone.
During 1997, the Compensation and Stock Option Committee met eleven times,
the Audit Committee met six times and the Nominating and Governance Committee
met four times. In 1997, during the time each director served in such
capacity, nine directors attended 100% of the aggregate of the regular and
special meetings of the Board of Directors and applicable committee meetings,
six other directors attended at least 85% of the aggregate of all meetings of
the Board of Directors and applicable committee meetings, and Dr. Edwards
attended 70% of the aggregate of all meetings of the Board of Directors and
applicable committee meetings.
12
<PAGE>
COMPENSATION
The following table sets forth certain information with respect to
compensation for services in all capacities paid by the Company and its
subsidiaries for the past three years, to or on behalf of each person who
served as Chief Executive Officer during 1997, the four other most highly
compensated executive officers of the Company as of December 31, 1997, and two
additional individuals who were not serving as executive officers at December
31, 1997, but for whom disclosure is required under SEC rules:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------- -----------------------------------------------
BONUS AWARDS PAYOUTS
------------------ ----------- ---------
OTHER SECURITIES LONG- ALL OTHER
ANNUAL RESTRICTED UNDERLYING TERM INCENTIVE
NAME AND PRINCIPAL STOCK- COMPEN- STOCK OPTIONS INCENTIVE COMPEN-
POSITION(5) YEAR SALARY CASH BASED SATION(2) AWARDS(5) (SHARES)(6) PAYOUTS SATION(7)
------------------ ---- --------- -------- --------- --------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert S. Miller 1997 $ 92,308 $ 0 $ -- $ 12,500 78,000 0 $ 0
Acting Chairman of the
Board and Chief
Executive Officer
Dean L. Buntrock 1997 0 0 243,447(3) 0 283,111 0 0
Former Chairman of the 1996 1,250,000 0 0 88,516(3) 0 176,656 0 750
Board and Chief 1995 1,400,000 0 1,792,000(1) 437,980(1)(3) 0 205,505 0 10,500
Executive Officer(8)
Ronald T. LeMay 1997 450,000 0 -- 11,684,300 2,000,000 0 0
Former Chairman of the
Board, President and
Chief Executive
Officer(8)
Phillip B. Rooney 1997 2,500,000 0 57,934 0 0 0 750
Former President and 1996 1,250,000 0 435,247(1) 124,880(1) 0 476,183 0 750
Chief Executive
Officer(8) 1995 1,000,000 0 1,141,000(1) 261,280(1) 0 146,789 0 10,500
Joseph M. Holsten 1997 650,000 0 -- 1,794,375 166,556 0 750
Executive Vice 1996 440,000 252,058 0 225,280(4) 0 173,253 0 0
President and Chief 1995 400,000 246,750 0 96,957(4) 0 175,780 0 10,500
Operating Officer
James E. Koenig 1997 600,000 0 -- 0 79,867 0 750
Former Executive Vice 1996 600,000 355,000 0 -- 1,485,000 186,514 0 750
President(8) 1995 517,000 420,000 0 -- 0 62,615 0 10,500
Jerry W. Caudle 1997 325,000 0 -- 770,775 27,038 0 750
Senior Vice 1996 310,000 97,534 97,534(1) -- 0 22,003 0 750
President 1995 300,000 0 182,400(1) -- 0 24,771 0 8,803
Herbert A. Getz 1997 450,000 0 0 59,900 0 750
Senior Vice President, 1996 450,000 112,500 0 1,155,000 146,136 0 750
General Counsel 1995 365,000 300,000 0 0 44,725 0 10,500
and Secretary
William P. Hulligan 1997 475,000 0 -- 0 51,373 0 750
Executive Vice 1996 475,000 0 95,000(1) -- 0 48,699 0 750
President, 1995 445,000 0 365,790(1) 74,748(1) 0 36,743 0 10,500
Waste Management of
North America, Inc.
D. P. Payne 1997 420,000 0 -- 1,054,575 55,907 0 750
Senior Vice President 1996 420,000 0 105,000(1) -- 0 43,060 0 750
1995 400,000 0 322,250(1) 74,879(1) 0 47,706 0 750
</TABLE>
- -------
(1) All of the amounts shown under "Bonus--Stock-Based" were deferred and are
deemed to be invested in shares of the Company's common stock, and thus
fully "at risk" until after retirement or other termination of employment.
The deferring officers received a 20% Company match of the bonus deferred,
included under "Other Annual Compensation," which vests over a four-year
period and is also deemed invested and "at risk" in the same manner as the
deferred bonus. See note 1 to the "Ownership of Company Common Stock"
table on page 6.
13
<PAGE>
(2) Excludes perquisites and other benefits, unless the aggregate amount of
such compensation is at least the lesser of either $50,000 or 10 percent
of the total annual salary and bonus reported for the named executive
officer.
(3) Includes financial planning expenses of $68,000 paid by the Company on
behalf of the named executive officer in 1995 and 1996 and $60,000 in
1997, and personal use of Company aircraft valued at $174,749.
(4) Includes foreign service premium ($96,000 in 1996 and $40,000 in 1995) and
housing allowance ($96,000 in 1996 and $40,000 in 1995).
(5) The value shown is as of the date of issuance. Dividends are paid or
accrued on restricted stock awards at the same rate as paid to all
stockholders. For a description of the restrictions on such stock, see
"Certain Transactions."
(6) The numbers shown in the table above represent options for the purchase of
shares of the Company's common stock granted to the named persons under
the Employee Plans. For Mr. Holsten, such numbers include the following
numbers of shares underlying options to acquire common stock of WM
International: 160,000 in 1996 and 140,000 in 1995.
(7) Amounts of All Other Compensation are amounts contributed by the Company
for fiscal years 1995, 1996 and 1997 under the Company's Profit Sharing
and Savings Plan and for fiscal year 1995 under the Company's Profit
Sharing and Savings Plus Plan for the persons named above.
(8) Robert S. Miller served in such capacity from October 29, 1997. Dean L.
Buntrock served in such capacity from February 17, 1997 until July 13,
1997. Ronald T. LeMay served in such capacity from July 13, 1997 until
October 29, 1997. Phillip B. Rooney served in such capacity from January
1, 1997 to February 17, 1997. James E. Koenig served in such capacity
until October 31, 1997. William P. Hulligan served in such capacity until
November 30, 1997.
14
<PAGE>
STOCK OPTIONS
The following tables set forth certain information with respect to stock
options granted to the persons named in the Summary Compensation Table during
the year ended December 31, 1997. No options were granted to the persons named
in the Summary Compensation Table during the year ended December 31, 1997 by
WTI or WM International.
COMPANY OPTION GRANTS IN 1997
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
OF COMPANY ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(8)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------------------
NAME GRANTED(1) IN 1997 (PER SHARE) DATE(7) 0% 5% 10%
- ---- ---------- ---------- ----------- ---------- --- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert S. Miller........ 3,000(2) .05 $30.05 5/09/07 $ 0 $ 56,695 $ 143,676
75,000(3) 1.21 23.375 11/04/07 0 1,102,531 2,794,030
Dean L. Buntrock........ 150,000(4) 2.42 33.00 3/04/07 0 3,113,028 7,889,025
133,111(5) 2.15 30.05 5/09/07 0 2,515,569 6,374,947
Ronald T. LeMay......... 2,000,000 32.24 33.10 7/13/07 0 41,632,824 105,505,751
Phillip B. Rooney....... -- -- -- -- -- -- --
Jerry W. Caudle......... 27,038(5) .44 30.05 5/09/07 0 510,972 1,294,903
Herbert A. Getz......... 59,900(5) .97 30.05 5/09/07 0 1,132,007 2,868,728
James E. Koenig......... 79,867(5) 1.29 30.05 5/09/07 0 1,509,349 3,824,987
William P. Hulligan..... 51,373(5) .83 30.05 5/09/07 0 970,862 2,460,354
Joseph M. Holsten....... 66,556(5) 1.07 30.05 5/09/07 0 1,257,794 3,187,497
100,000(6) 1.61 33.85 6/20/07 0 2,128,808 5,394,818
D. P. Payne............. 55,907(5) .90 30.05 5/09/07 0 1,056,546 2,677,496
All Stockholders as a
group(9)............... -- -- $30.05 5/09/07 $ 0 $8,585,108,686 $21,756,350,814
</TABLE>
- --------
(1) The option holder has the right to pay the exercise price by delivering
previously acquired shares of the Company's common stock, and to have
shares withheld to satisfy tax withholding requirements in connection with
the exercise of options. Such options become immediately exercisable upon
a Change in Control of the Company, as defined in the option plan. Options
are non-transferable other than by will or the laws of descent and
distribution.
(2) Options become exercisable May 9, 1998.
(3) Options become exercisable upon termination of service.
(4) Options become exercisable in three equal cumulative annual installments
commencing March 4, 1998.
(5) Options become exercisable in three equal cumulative annual installments
commencing May 9, 1998.
(6) Options become exercisable in three equal cumulative installments
commencing June 20, 1998.
(7) Options have a term of ten years, subject to earlier termination in
certain events related to termination of employment. Mr. LeMay's options
terminated upon his resignation. Mr. Koenig's options terminate on October
31, 2000.
(8) The amounts under the columns labeled "5%" and "10%" are included by the
Company pursuant to certain rules promulgated by the Securities and
Exchange Commission and are not intended to forecast future appreciation,
if any, in the price of the Company's stock. Such amounts are based on the
assumption that the named persons hold the options granted for their full
term. The actual value of the options will vary in accordance with the
market price of the Company's common stock.
15
<PAGE>
The column headed "0%" is included to demonstrate that the options were
granted at fair market value and optionees will not recognize any gain
without an increase in the stock price, which increase benefits all
stockholders commensurately.
(9) Based upon the price of the Company's stock and the total shares
outstanding as of the date of grant, if the price of the Company's common
stock increased at the 5% or 10% rates shown in the table above,
stockholders as a group would realize aggregate gains (excluding
dividends) in the amounts shown above during the period from grant date to
the May 9, 2007 option expiration date.
The following table sets forth certain information as to each exercise of
stock options during the year ended December 31, 1997 by the persons named in
the Summary Compensation Table and the fiscal year-end value of unexercised
options:
AGGREGATED OPTION EXERCISES IN 1997 AND 1997 YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDER- VALUE OF UNEXERCISED IN-
LYING UNEXERCISED OPTIONS THE-MONEY OPTIONS AT
SHARES AT DECEMBER 31, 1997 DECEMBER 31, 1997(1)
ACQUIRED VALUE ------------------------------ -------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- -------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Miller
Company Options........ 0 $ 0 0 78,000 $ 0 $309,375
Dean L. Buntrock
Company Options........ 0 0 1,217,704 0 88,451 0
WM International
Options............... 0 0 200,000 0 0 0
Ronald T. LeMay
Company Options........ 0 0 0 0 0 0
Phillip B. Rooney
Company Options........ 0 0 1,323,408 0 152,844 0
WM International
Options............... 0 0 200,000 0 0 0
Jerry W. Caudle
Company Options........ 0 0 112,957 49,963 29,391 2,064
Herbert A. Getz
Company Options........ 0 0 167,383 172,231 32,280 3,727
WTI Options............ 240,000 1,515,744 0 0 0 0
WM International
Options............... 0 0 40,000 0 0 0
James E. Koenig
Company Options........ 0 0 455,318 0 59,209 0
WTI Options............ 120,000 757,872 0 0 0 0
WM International
Options............... 0 0 200,000 0 0 0
William P. Hulligan
Company Options........ 0 0 202,376 96,086 43,145 3,061
Joseph M. Holsten
Company Options........ 0 0 63,506 187,317 18,158 2,981
WM International
Options............... 0 0 306,666 153,334 0 0
D. P. Payne
Company Options........ 0 0 284,814 100,515 285,228 3,975
</TABLE>
- --------
(1) Market value less exercise price, before payment of applicable income
taxes.
16
<PAGE>
LONG TERM INCENTIVE PLAN AWARDS
The following table sets forth certain information as to awards under the
Waste Management, Inc. Long Term Incentive Plan (the "LTIP") with respect to
the year ended December 31, 1997 to the persons named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS
SHARES, OR OTHER UNDER NON-STOCK
UNITS OR PERIOD UNTIL PRICE BASED PLANS(3)
OTHER MATURATION -----------------------------
NAME RIGHTS(1) OR PAYOUT(2) THRESHOLD TARGET MAXIMUM
- ---- --------- ------------ --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Robert S. Miller........... -- -- -- -- --
Dean L. Buntrock........... -- -- -- -- --
Ronald T. LeMay............ -- -- -- -- --
Phillip B. Rooney.......... -- -- -- -- --
Jerry W. Caudle............ -- 3 years $130,000 $130,000 $ 812,500
Herbert A Getz............. -- 3 years 180,000 180,000 1,125,000
James E. Koenig............ -- 3 years 240,000 240,000 1,500,000
Joseph M. Holsten.......... -- 3 years 260,000 260,000 1,625,000
William P. Hulligan........ -- -- -- -- --
D. P. Payne................ -- 3 years 168,000 168,000 1,050,000
</TABLE>
- --------
(1) Awards consist of the designation of target percentages of annual salary
at the end of the performance period to be paid if the Company achieves
certain performance objectives. No payout occurs unless the Company
achieves certain threshold performance objectives. Above the threshold,
payouts may be greater than the target percentage to the extent that the
Company's performance exceeds or fails to meet the target objectives
specified in the plan. Payouts under the LTIP are based on the rank of the
Company's total stockholder return (stock price appreciation plus
reinvested dividends) among the total stockholder returns of the companies
that comprise the Dow Jones Industrial Average over the performance
period.
(2) The performance period includes calendar years 1997, 1998 and 1999.
(3) At the end of the performance period, an amount equal to 50% of the
performance award, if any, is to be paid in cash, and the remaining 50% is
to be deemed to be invested in common stock of the Company. The
participant is entitled to receive the value of such deemed investment on
the date three years after the end of the performance period; provided
that the participant is an officer of the Company or one of its
subsidiaries on that date. Estimated future payouts were calculated using
1997 salaries, assume that a performance award will be earned at the
levels shown, and do not reflect any possible subsequent increase or
decrease in the value of the portion of the award which would be required
to be deferred under the terms of the plan.
17
<PAGE>
PENSION AND RETIREMENT PLANS
The following table sets forth estimated annual benefits payable upon
retirement under the Company's Pension Plan and its Supplemental Executive
Retirement Plan ("SERP") to employees of the Company in specified remuneration
and years of service classifications. For purposes of the following table, it
is assumed that the five executive officers named in the cash compensation
table are eligible for the SERP benefits and that each such officer's
annualized Final Average Compensation (as defined below) will be equal to his
average annual compensation for the three years ended December 31, 1997.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)(3)
---------------------------------------------------------
REMUNERATION(1) 15 20 25 30 35 40
- --------------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 400,000........... $ 90,000 $120,000 $150,000 $180,000 $ 210,000 $ 240,000
500,000........... 112,500 150,000 187,500 225,000 262,500 300,000
600,000........... 135,000 180,000 225,000 270,000 315,000 360,000
700,000........... 157,500 210,000 262,500 315,000 367,500 420,000
800,000........... 180,000 240,000 300,000 360,000 420,000 480,000
900,000........... 202,500 270,000 337,500 405,000 472,500 540,000
1,000,000........... 225,000 300,000 375,000 450,000 525,000 600,000
1,100,000........... 247,500 330,000 412,500 495,000 577,500 660,000
1,200,000........... 270,000 360,000 450,000 540,000 630,000 720,000
1,300,000........... 292,500 390,000 487,500 585,000 682,500 780,000
1,400,000........... 315,000 420,000 525,000 630,000 735,000 840,000
1,500,000........... 337,500 450,000 562,500 675,000 787,500 900,000
1,600,000........... 360,000 480,000 600,000 720,000 840,000 960,000
1,700,000........... 382,500 510,000 637,500 765,000 892,500 1,020,000
1,800,000........... 405,000 540,000 675,000 810,000 945,000 1,080,000
1,900,000........... 427,500 570,000 712,500 855,000 997,500 1,140,000
2,000,000........... 450,000 600,000 750,000 900,000 1,050,000 1,200,000
</TABLE>
- --------
(1) Upon normal retirement at age 65 or after completing five years of
participation in the Company's Pension Plan, whichever is later, a
participant is entitled to a pension based on the average of the
participant's eligible compensation for the highest five consecutive years
out of his or her last 10 years of service. For this purpose, a
participant's eligible compensation generally includes all of his or her
cash compensation, subject, in 1997, to the statutory maximum of $160,000.
The annual lifetime benefit is equal to (i) 1% of average eligible
compensation, multiplied by (ii) the number of his or her years of
service, and, for a participant retiring at age 65 with 10 years of
service, may not be less than $100 per month. Under the SERP, eligible
participants who retire following age 60, or retire with at least 30 years
of service, are entitled to a monthly benefit equal to (i) 1.5% of the
participant's Final Average Compensation per year of service (Final
Average Compensation is the monthly average compensation of such
participant for the highest three consecutive calendar years out of his or
her last 10 calendar years of service), reduced by (ii) the amount of such
participant's monthly benefit under the Pension Plan. Compensation used
for calculating benefits under the SERP includes only the participant's
salary and annual incentive bonus. Eligible participants are those
officers who have served in such capacities for at least 10 years at the
time of retirement. Payment of benefits under the SERP is made on the same
basis as payments under the Pension Plan, and both plans provide for
reduced payouts in the event of early retirement.
(2) At December 31, 1997, the credited years of service for current and former
executive officers were as follows: Mr. Miller--0; Mr. Buntrock--41; Mr.
LeMay--0; Mr. Rooney--28; Mr. Caudle--22; Mr. Getz--14; Mr. Koenig--20;
Mr. Hulligan--19; Mr. Holsten--15; Mr. Payne--7.
18
<PAGE>
(3) Benefits shown are computed on a straight-life annuity basis at normal
retirement age. Provision is made for payment of pensions in joint and
survivor form and in various other forms and at other times, on an
actuarially equivalent basis. Benefits are not subject to reduction for
social security benefits.
COMPENSATION OF DIRECTORS
Each member of the Board of Directors of the Company who is not an employee
of the Company is paid an annual retainer of $50,000. Such directors also
receive $1,000 for each day on which they perform substantial work on behalf
of a Committee of the Board, which includes attendance at meetings of
Committees of which such directors are members. Each director is expected to
accumulate, over a five year period, an equity interest in the Company
equivalent to 300% of the annual retainer for Board service. The Company
maintains a major medical expense insurance policy which is available to all
directors of the Company. The policy covers the medical and dental expenses of
the directors in excess of the coverage provided by the director's primary
health insurance program.
OUTSIDE DIRECTORS' PLANS
The Company has two unfunded deferred compensation plans for non-employee
members of its Board of Directors. Under the Deferred Directors' Fee Plan, as
amended, such directors may make an irrevocable election annually to defer
receipt of all or a portion of the directors' fees payable to them until
termination of their membership on the Board of Directors. Such amounts
deferred prior to January 1, 1998 are deemed to be invested in the Company's
common stock or, at the election of the director, in the common stock of any
of the Company's majority-owned public subsidiaries, and during the period of
deferral, such deferred amounts are credited with the dividends or stock
splits that would be received had such investment actually been made. Upon
termination of the director's service, the common stock deemed reflected by
his or her deferred account is deemed to be sold, and the deemed proceeds of
such sale (or an amount equal to the amount originally deferred, if greater)
will be distributed to the director in cash, in a lump sum or installments.
Accounts deferred after December 31, 1997 will be credited with interest from
time to time at a rate equal to the weekly average rate on the ten year U.S.
Treasury Note. Upon termination of the director's service, the value of the
account on the books of the Company will be distributed to the director in
cash, in a lump sum or installment.
Under the Directors' Phantom Stock Plan, certain non-employee directors
received a one-time grant of 5,000 Phantom Shares at the time of adoption of
such plan or at the time they first became directors. Each of such Phantom
Shares was initially deemed to be equal in value to one share of the Company's
common stock at the time of award. Phantom Shares are credited to a
bookkeeping account which is adjusted to reflect stock (but not cash)
dividends or stock splits which would be received with respect to an
equivalent number of shares of the Company's common stock. Upon termination of
the director's service, the director is paid an amount in cash, in a lump sum
or installments, for each Phantom Share then credited to his or her account,
equal to the then difference between the market price of the Company's common
stock at the time of award and the average closing prices of one share of the
Company's common stock on the New York Stock Exchange Composite Tape for the
most recent 10 consecutive trading days immediately preceding such
termination. In 1991, the Company's Board of Directors terminated its
authority to make additional grants under the Directors' Phantom Stock Plan.
STOCK OPTION PLANS FOR NON-EMPLOYEE DIRECTORS
The 1992 Stock Option Plan for Non-Employee Directors (the "Directors Plan")
of the Company provides for the awards of options covering an aggregate of
150,000 shares of the Company's common stock. Each director of the Company
first elected in 1997 or thereafter who is neither an officer nor full-time
employee of the Company or any of its subsidiaries, upon election or
appointment to the
19
<PAGE>
Board of Directors, is granted an option to purchase 3,000 shares of the
Company's common stock on the date of election and on the next four
anniversaries if re-elected. Each such director elected before 1997 received
an option to purchase a total of 15,000 shares of the Company's common stock
on the date of his or her election. All options under the Directors Plan are
granted at the fair market value of the stock at the time of grant and are for
a term of 10 years from the date of grant. Options granted in 1997 or
thereafter become exercisable after one year following the grant date. Options
granted prior to 1997 become exercisable with respect to 20% of the total
number of shares subject to the option six months after the date of grant and
with respect to an additional 20% at the end of each 12-month period
thereafter on a cumulative basis during the succeeding four years.
Under the Directors Plan, in the event that the Company's shares of common
stock are changed by a stock dividend, split or combination of shares, or a
merger, consolidation or reorganization with another company in which holders
of the Company's common stock receive other securities, or any other relevant
change in the capitalization of the Company, a proportionate or equitable
adjustment will be made in the number or kind of shares subject to unexercised
options or available for options and in the purchase price for shares. If an
option expires or is terminated or cancelled unexercised as to any shares,
such released shares may again be optioned (including a grant in substitution
for a cancelled option). Shares subject to options may be made available from
unissued or reacquired shares of common stock.
Options are not transferable by the optionee otherwise than by will or the
laws of descent and distribution, provided that the Board of Directors may
grant options that are transferable, without payment of consideration, to
immediate family members of the optionee or to trusts or partnerships for such
partnerships for such family members or to charitable organizations (each an
"Option Transferee"), subject to the Company's procedures for administration,
and may amend outstanding options to provide for such transferability. Options
terminate if the optionee ceases to be a director of the Company for any
reason other than death, permanent disability, resignation or retirement. If
the optionee ceases to be a director because of death or permanent disability,
the optionee or the optionee's heirs, legatees, legal representative or the
Option Transferee may exercise the option in full at any time during its term
within three months after the date of termination. In the event of resignation
or retirement, an option may be exercised by the optionee (or if the optionee
dies within three months after such termination, by the optionee's heirs,
legatees or legal representative) or the Option Transferee at any time during
its specified term prior to three months after the date of such resignation or
retirement, but only to the extent it was exercisable at the date of such
resignation or retirement.
Prior to January 1, 1992, upon election to the Board of Directors non-
employee directors received options for 10,000 shares under the Company's 1981
Stock Option Plan for Non-Employee Directors (the "1981 Plan"), the terms of
which are substantially similar to the Directors Plan. No person who is the
holder of an option granted under the 1981 Plan or the Employee Plans or who
has purchased shares upon the exercise of such an option is eligible for a
grant of options under the Directors Plan.
DIRECTORS' CHARITABLE ENDOWMENT PROGRAM
The Company maintains a Directors' Charitable Endowment Program pursuant to
which the Company has purchased life insurance policies on members of the
Board of Directors. Under the program, death benefits will be paid to the
Company, and the Company in turn will donate such death benefits (up to
$100,000 for each year of service on the Company's Board of Directors, subject
to a $1,000,000 limit) to one or more charitable organizations recommended by
the director. Directors derive no financial benefit from this program because
all charitable deductions accrue solely to the Company.
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Company's Board of
Directors consisted during 1997 of Messrs. Pedersen (Chairman), Arnelle,
Edwards, Montrone and Peterson and Dr. Cafferty. There are no interlocks
requiring disclosure or insider members of this committee.
In accordance with rules promulgated by the Securities and Exchange
Commission, the information included under the captions "Report of the
Compensation and Stock Option Committee" and "Company Stock Performance"
will not be deemed to be filed or to be proxy soliciting material or
incorporated by reference in any prior or future filings by the Company
under the Securities Act of 1933 or the Securities Exchange Act of 1934.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The compensation of the Company's executive officers is determined or
recommended by the Compensation and Stock Option Committee (the "Compensation
Committee") of the Board of Directors. Each member of the Compensation
Committee is a director who is not an employee of the Company or any of its
affiliates. In addition, the Board of Directors adopted Board Practices
Guidelines in 1996 requiring all members of certain Board committees,
including the Compensation Committee, to be independent. Independence
requires, among other things, that committee members not be affiliated with
any firms which provide professional services to the Company or its
subsidiaries, except as to matters pending when the Board of Directors adopted
the Guidelines.
GENERAL POLICIES
The Company's philosophy towards its executive compensation program centers
around four general elements. These are: (i) a salary subject to annual
adjustment based on the individual's qualifications, assessed contribution to
the Company's success, and prevailing levels of salary paid to executives in
similar positions of responsibility with comparable companies; (ii) an annual
incentive target with payment based on the Company's or business unit's
performance; (iii) a long term incentive target with payment based on the
Company's performance over a three-year business cycle; and (iv) grants of
options for Company stock, the size of which are determined by the
individual's position with the Company. The incentive component is
substantial. Approximately one-half to two-thirds of total targeted
compensation is "at risk" based on the performance of the Company's business.
As an executive officer's level of management responsibility increases, a
greater portion of his or her potential total compensation depends upon the
performance of the Company or one or more of its business units as measured by
objective standards over one or more years.
In assessing the competitiveness of the compensation payable to the
Company's executive officers, the Compensation Committee considers data from
surveys of other companies. As to the Company's most senior executive
officers, the Compensation Committee reviews primarily compensation data for a
group of 24 comparator companies compiled with the assistance of the Company's
independent compensation consultant (the "Comparator Companies"). The
Comparator Companies were selected primarily because their size (between $4.3
and $17.7 billion in annual revenue) and operating and financial
characteristics make it likely that they will compete for the services of
executives who have experience and skills similar to those which the Company
requires. The Company's annual revenue for 1996 placed it approximately in the
middle of the group of the Comparator Companies. References in this report to
the Comparator Companies include published survey data furnished by the
Company's compensation consultant in the case of several officers.
Under the Omnibus Budget Reconciliation Act of 1993, compensation paid to
certain executive officers of the Company in excess of $1 million in 1995 and
subsequent years may be non-deductible for federal income tax purposes unless
the compensation qualifies as "performance-based"
21
<PAGE>
compensation or is otherwise exempt under the law and Treasury regulations.
The Company's policy is to seek to structure its executive officer incentive
compensation to qualify as "performance-based" compensation so as to attempt
to preserve its deductibility for federal income tax purposes. However, there
can be no assurance that such compensation will continue to be deductible for
federal income tax purposes. The Compensation Committee may also determine in
any year in light of all applicable circumstances that it would be in the best
interests of the Company for awards to be paid under its incentive
compensation plans or otherwise in a manner that would not satisfy the
requirements of such tax law and regulations for deductibility.
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY
RELEVANT FACTORS
The Compensation Committee annually establishes the base salaries, subject
to the approval of the Board of Directors, and incentive compensation which
will be paid to the Company's executive officers. In setting compensation, the
Compensation Committee generally takes into account a number of factors,
including the Company's results of operations and other Company performance
measures, competitive compensation data, comparisons of salaries, incentive
compensation terms and responsibilities among the Company's executive
officers, the desired proportion of incentive compensation in the officer's
total compensation package and qualitative factors bearing on an individual's
experience, responsibilities, management and leadership abilities and job
performance. The Compensation Committee does not generally expressly assign
greater weight to any one or more such factors than to others.
The Company's compensation consultant found that while overall compensation
for the group of executive officers is generally competitive, 1996 salary
levels for the executive officers were generally above the 50th percentile of
the comparable positions within the Comparator companies. Offsetting this were
below market levels of target incentive awards for 1996 for this group of
officers.
1996 COMPANY PERFORMANCE AND MANAGEMENT INITIATIVES
In the process of determining 1997 compensation for the Company's executive
officers, the Compensation Committee considered a number of factors regarding
the Company's overall 1996 corporate performance compared to 1995. The
Company's revenue increased only 1.48% over 1995. The Compensation Committee
noted that management had not met its goal of double-digit earnings growth.
The Compensation Committee observed that a substantial portion of the
shortfall was attributable to the decline in the price of recyclable
commodities, over which the Company had no control. The Company greatly
exceeded its 1996 cash flow target by generating approximately $1.2 billion of
owners' cash. Also, operating results at Waste Management International, plc
("WM International") were ahead of plan despite the impact of the low
commodity prices on its business. Further, the Committee took into account
that management continued to review and refine the Company's long-term
strategy by presenting a revised strategic plan focusing on the concentration
of the Company's efforts in the waste management services industry, divesting
non-core and underperforming assets, restructuring to reduce costs,
capitalizing on the Waste Management brand name and expanding the Company's
stock purchase program.
SALARY
In order to realign total compensation with a heavier weighting toward
incentive compensation, none of the executive officers, other than Messrs.
Holsten and Sanford received salary increases for 1997. Messrs. Holsten and
Sanford received a promotional salary increase due to their assumption in
February 1997 of increased duties and responsibilities as Executive Vice
President and Chief Operating Officer, and as Senior Vice President and Chief
Financial Officer, respectively. Mr. Holsten
22
<PAGE>
also received an increase in salary as consideration for his execution of
employment agreement containing a three-year covenant not to compete with the
Company. These increases placed Mr. Holsten's salary at approximately the 50th
percentile for the Comparator Companies and resulted in Mr. Sanford's salary
remaining below the 50th percentile for the Comparator Companies. The
Compensation Committee's actions in respect the Chief Executive Officers'
salaries are described separately under "Compensation of the Chief Executive
Officers--Salary" below.
INCENTIVE COMPENSATION PLANS
In administering the Company's incentive compensation plans in which the
executive officers (other than Mr. Miller) participate, the Compensation
Committee (i) considers the Company's results of operations and other Company
performance measures and management's plans for the Company's growth and
profitability and achievement of strategic goals, (ii) determines the
corporate performance criteria to be used for the determination of incentive
compensation awards, and (iii) fixes award levels. The Company has typically
had in effect at any one time both an annual and multi-year incentive
compensation plan. In addition, in 1997 the Company's stockholders approved a
new equity incentive plan that permits the Compensation Committee to award
stock options, stock appreciation rights, shares of restricted stock and
performance shares or units.
Annual Plan
For 1997, all of the Company's executive officers (other than Mr. Miller)
were named participants in the Company's Corporate Incentive Bonus Plan (the
"Annual Plan"). For 1997, the performance criterion under the Annual Plan was
changed from budgeted earnings per share and cash flow goals to Economic Value
Added(R) (EVA(R)). In deciding upon a measurement criterion and in redesigning
the Annual Plan to implement the EVA(R) criterion, the Compensation Committee
was advised extensively by Stern Stewart & Co. EVA(R) is a measure of the
"economic profit" of a business, including a charge for all capital employed
in the business, and is closely linked to the creation of stockholder value.
The EVA(R) measurement has also been used by the Company in its 1997 budget
process and implemented throughout the Company's operations. Under the Annual
Plan, target awards in 1997 for executive officers ranged from 50% to 70% of
the participant's year-end salary.
For most executive officers (other than the Chief Executive Officers, who
are discussed separately below), the target awards of the Annual Plan
applicable for 1997 were the same as in 1996. The Company did not meet its
consolidated EVA(R) target for 1997, although the Company's principal waste
management services operating units partially attained their respective EVA(R)
targets. Therefore, while most executive officers did not receive an incentive
payment from the Annual Plan for 1997, Mr. Caudle received a bonus with
respect to the performance of his principal business unit.
Long Term Plan
Under the Company's Long Term Incentive Plan (the "Long Term Plan"), the
Compensation Committee determines participants' target awards as a percentage
of the participant's salary at the end of each performance period, which
normally lasts for three years. The target award would be payable depending on
the Company's total return to stockholders compared to that of the 30
companies comprising the Dow Jones Industrial Average (the "DJIA") during the
performance period. Total return to stockholders is defined for this purpose
as the sum of price appreciation plus reinvested dividends over the
performance period, divided by the share price at the beginning of the period.
Under the Long Term Plan, participants will be paid target awards if the
Company's total stockholder return places it at the 50th percentile of the
DJIA companies. The percentage of the target awards to be paid will vary
upwards to 300% of the target award if the Company's total stockholder return
places it at a higher percentile ranking in relation to the DJIA companies. If
the Company's total stockholder
23
<PAGE>
return places it below the 50th percentile ranking in relation to the DJIA
companies, then no award is to be paid for the relevant performance period.
The Long Term Plan also mandates that the payment of one-half of any award
otherwise payable at the end of a performance period be deferred for an
additional three-year period and deemed invested in shares of the Company,
subject to increase or decrease in value over the deferral period and subject
to forfeiture if the officer voluntarily leaves the Company.
During 1997, there were three ongoing performance periods, 1995 through 1997
(which has expired without there being any awards payable for the performance
period), 1996 through 1998, and 1997 through 1999. For the 1997 through 1999
performance period, most of the Company's executive officers were again named
as plan participants having the same target award participations as had been
approved in 1996 for the 1996 through 1998 performance period. No payments
have been made to date under the Long Term Plan.
Equity Incentives
In 1997, the Company replaced its stock option plan with the more broad-
based 1997 Equity Incentive Plan (the "1997 Plan"). Under the 1997 Plan, the
Compensation Committee has discretion to grant several types of equity
incentive awards to participants. The Company's executive officers typically
receive grants of stock options each year determined by dividing percentages
of the officers' salaries by the market price of the Company's stock at the
time of grant. The Company's compensation consultant had demonstrated to the
Compensation Committee that while total targeted compensation for the
executive officers was competitive, the amount of their equity incentive
compensation was below competitive levels. Therefore, the Compensation
Committee generally increased the size of the 1997 stock option grants
(measured by the market price of the Company's stock at the time of grant) to
grants ranging from 250% to 400% of the officers' salaries. In addition, Mr.
Holsten received a separate stock option grant in connection with his
employment agreement discussed above. All options granted under the 1997 Plan
were non-qualified stock options granted at an exercise price equal to 100% of
fair market value on the date of grant. These options typically have a term of
ten years and become exercisable in cumulative increments of one-third of the
total number of shares subject to the option during each of the first three
years of the option term.
Executive officers of the Company who serve as directors or executive
officers of Wheelabrator Technologies Inc. or WM International, both of which
are subsidiaries of the Company, are also eligible to participate in stock
option plans maintained by those companies. See "Compensation--Stock Options"
for information as to stock option grants by these subsidiaries to Company
executive officers. In making stock option grants to the Company's executive
officers, the Compensation Committee considers prior grants made to them under
both the Company's plan and subsidiaries' plans. No such stock options were
granted to directors or executive officers of the Company in 1997.
In March and June 1997, the Compensation Committee recommended, and the
Company's Board of Directors approved, restricted stock grants and employment
agreements for the executive officers of the Company (other than Messrs. Getz,
Hulligan and Koenig and the Chief Executive Officers). The Compensation
Committee intended these restricted stock grants (which will not vest, in the
ordinary course, until the tenth anniversary of the grant date) to be
substantial incentives to the officers to remain with the Company and continue
the development and implementation of the Company's strategic plans. See the
discussion as to these agreements under "Certain Transactions" herein.
OFFICER STOCK OWNERSHIP AND DEFERRED COMPENSATION PROGRAMS
In 1995, the Company instituted an officer stock ownership program. Under
the program, Company officers are expected to acquire and maintain specified
levels of ownership of stock of the Company and its publicly held
subsidiaries, ranging from total stock value of one salary for certain
24
<PAGE>
officers to five times salary in the case of the Chief Executive Officer. Also
in 1995, the Company adopted a deferred compensation program whereby Company
officers are encouraged to defer payments under the Annual Plan into an
unfunded investment account that tracks the performance of the Company's
stock. Officers who participate have their deferral investment "matched" by a
20% credit to the officer's deferral account, subject to vesting requirements.
The value of the deferral accounts is subject to increase or decrease in
accordance with Company stock price movements and hence is fully "at risk."
The deferral continues for so long as the officer is an employee of the
Company and thereby effectively commits the participating officers to an
equity investment in the Company for the duration of their careers with the
Company.
As of October 31, 1997, the end of the second year of the policy, officers
subject to the stock ownership policy owned the equivalent of an aggregate of
approximately 356,000 shares of Company common stock, with a total market
value on that date of approximately $8,255,000.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICERS
Over the course of 1997 four individuals served for a portion of the year as
Chief Executive Officer of the Company. Phillip B. Rooney served as Chief
Executive Officer until February 17, 1997 at which time Dean L. Buntrock
resumed the position (from which he had retired in June 1996) in an interim
capacity until a new Chief Executive Officer could be hired. On July 13, 1997,
the Company elected Ronald T. LeMay as Chairman of the Board and Chief
Executive Officer. Mr. LeMay resigned from that position on October 29, 1997
at which time Robert S. Miller was elected Acting Chairman of the Board and
Chief Executive Officer.
SALARY
Mr. Rooney's compensation during 1997 was not adjusted from the 1996 level
prior to his resignation. Upon his resignation as Chief Executive Officer, Mr.
Rooney began receiving payments of $2.5 million a year for a period of five
years. These payments are being made pursuant to Mr. Rooney's Employment
Agreement with the Company, which was amended in 1996 in connection with his
election as Chief Executive Officer.
The Compensation Committee reviewed Mr. Buntrock's compensation arrangement
in light of his assuming the duties of Chief Executive Officer on an interim
basis. In this regard, Mr. Buntrock requested that the Committee take steps to
make his 1997 compensation 100% performance-based. The Compensation Committee
determined to grant Mr. Buntrock's request and reduced his salary to $0 for
1997.
Mr. LeMay's annual salary was established by the Board at $1.5 million as
part of a comprehensive employment agreement negotiated with Mr. LeMay in
connection with his recruitment as Chief Executive Officer of the Company. The
salary ceased to be paid upon Mr. LeMay's resignation.
Mr. Miller's salary as Acting Chief Executive Officer was established by the
Board at the annual rate of $600,000 effective upon the date of his election.
The salary was determined as a result of the Committee's review of publicly
available information regarding the salaries and other forms of compensation
paid to the interim chief executive officers of other large capitalization
companies.
INCENTIVE COMPENSATION PLANS
Annual Plan
The Compensation Committee had not yet set Mr. Rooney's 1997 target Annual
Plan participation at the time of his resignation. Upon Mr. Buntrock's
election as Acting Chief Executive Officer, the Compensation Committee acted
to set his 1997 target Annual Plan participation at 70% of the target
25
<PAGE>
award level that would have been granted to Mr. Rooney (which the Committee
determined would have been 80%, the same as for 1996). Because Mr. Buntrock
had agreed to receive $0 in salary, the Compensation Committee established a
hypothetical salary amount of $1 million for purposes of determining the
amount of the target award. This resulted in a target award of $560,000, none
of which was earned.
Pursuant to the employment agreement entered into with Mr. LeMay, he was
granted a 1997 target Annual Plan participation level of 80% of salary, with a
minimum payment of $1 million. Under the terms of the Annual Plan, Mr. LeMay
forfeited his rights to any payment upon his voluntary resignation prior to
year-end.
Mr. Miller was not designated as a participant in the Annual Plan for 1997.
Long Term Plan
Under the Company's Long Term Plan, for the performance period ending
December 31, 1999, the Compensation Committee had not determined Mr. Rooney's
target award at the time of his resignation. His target had been set at 50% of
his salary for the preceding year's Long Term Plan award. The Compensation
Committee determined to set Mr. Buntrock's target award for the 1997-1999
performance period at 70% of the former Chief Executive Officer's target
award, using a hypothetical salary for Mr. Buntrock of $1 million. This
resulted in a target award of $350,000, none of which was earned.
Pursuant to the employment agreement entered into with Mr. LeMay, he was
granted pro-rata participation in the 1996-1998 and 1997-1999 performance
periods and was to fully participate in the 1998-2000 performance period. Mr.
LeMay's agreement provided for guaranteed minimum payouts for the 1996-1998
and 1997-1999 performance periods. Under the terms of the Long Term Plan, Mr.
LeMay's right to receive any payment was forfeited upon his voluntary
resignation from the Company prior to the end of the performance periods.
Mr. Miller was not designated as a participant in the Long Term Plan for any
performance periods.
The 1994-1996 and 1995-1997 performance periods under the Long Term Plan
have ended with no award being paid to the Chief Executive Officers or any
other participating officers.
Stock Options
At the time of Mr. Rooney's departure, the Compensation Committee had not
set his stock option grant level for 1997 and he was not granted any options.
Pursuant to Mr. Buntrock's request and the Compensation Committee's decision
to put all of Mr. Buntrock's compensation "at risk," the Compensation
Committee acted to grant Mr. Buntrock 150,000 stock options priced at $33 per
share (which was equal to 100% of fair market value on the date of grant), and
having an estimated value under the Black-Scholes valuation method of
approximately $1,161,000, in lieu of the payment to Mr. Buntrock of any cash
salary for 1997. Additionally, Mr. Buntrock received a regular grant of stock
options at 400% of a hypothetical $1 million salary amount. The exercise price
of such options is $30.05 per share (which was equal to 100% of fair market
value on the date of grant). In connection with Mr. Buntrock's retirement at
year-end, the Compensation Committee acted to accelerate the vesting of his
unvested options and continue their exercisability until the end of their
respective terms.
Pursuant to the employment agreement with Mr. LeMay, he was awarded two
separate stock option grants under the 1997 plan. The first was a signing
bonus of options for 1,500,000 shares of Company stock. The second was a grant
of options for 500,000 shares of Company stock. Both grants
26
<PAGE>
were immediately exercisable at $33.10 per share. Mr. LeMay had not exercised
any of the options and forfeited all unexercised options upon his voluntary
resignation. Mr. LeMay's employment agreement also provided for grants of
options to purchase 500,000 shares of Company stock on April 1 of each of
1998, 1999, 2000 and 2001 if he was employed on such dates. None of these
grants had been made prior to his voluntary resignation.
As additional consideration for Mr. Miller's services as Acting Chairman of
the Board and Chief Executive Officer, the Compensation Committee granted him
options to purchase 75,000 shares of the Company's stock under the 1997 Plan
at an exercise price of $23.375 per share (which was equal to 100% of fair
market value on the date of grant) and having an estimated value under the
Black-Scholes valuation method of approximately $569,000. In establishing the
size of the option grant, the Compensation Committee considered the amount of
salary purposed to be paid and publicly available data concerning the
compensation paid to interim chief executive officers of other large
capitalization companies. The options represent approximately one-half of Mr.
Miller's total targeted annual compensation from the Company. The Compensation
Committee recognized that Mr. Miller may not serve as Acting Chairman of the
Board and Chief Executive Officer for a full year, in which case the portion
of his compensation represented by the options would be greater than
approximately one-half. The options become exercisable upon the appointment of
a new Chief Executive Officer, or Mr. Miller's earlier death or disability or
termination of service by written notice of the Board. The options will remain
exercisable until the earlier of November 3, 2007 or the 90th day after Mr.
Miller terminates his service on the Board.
Other Equity Awards
Mr. LeMay also received a grant of 353,000 restricted shares of the
Company's common stock pursuant to his employment agreement with the Company.
The Restricted Stock Agreement with respect to such shares provided that
restrictions on such shares lapse at the rate of 20% per year of employment.
No restrictions had lapsed as of the date of Mr. LeMay's voluntary resignation
and, therefore, he forfeited all rights to such shares.
Pursuant to his employment agreement, Mr. LeMay also received stock
appreciation rights in respect of one million shares of Sprint Corporation
common stock with respect to which he had forfeited stock option rights as a
result of joining the Company. These stock appreciation rights were forfeited
upon his voluntary resignation from the Company.
EMPLOYMENT AGREEMENT
In connection with Mr. LeMay's becoming the Company's Chief Executive
Officer, the Compensation Committee negotiated an employment agreement, which
it recommended to the full Board of Directors. The terms of Mr. LeMay's
employment agreement have been referred to above and are set forth in this
Proxy Statement under "Certain Transactions."
Following Mr. Miller's election as Acting Chairman of the Board and Chief
Executive Officer, the Compensation Committee recommended for approval by the
Board and the Board accepted an employment agreement with respect to his
services. The terms of Mr. Miller's agreement have been referred to above and
are set forth in this Proxy Statement under "Certain Transactions."
Peer Pedersen, Chairman
H. Jesse Arnelle
Pastora San Juan Cafferty
James B. Edwards
Paul M. Montrone
James R. Peterson
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COMPANY STOCK PERFORMANCE
The following graphs and tables compare the yearly percentage change in the
cumulative total returns on the Company's common stock, the Standard & Poors
500 Stock Index and the Salomon Smith Barney Solid Waste Index (in each case
assuming dividend reinvestment) for the 10-year and five-year periods ended
December 31, 1997:
COMPARISON OF 10-YEAR CUMULATIVE RETURN
VS. S&P 500 AND SALOMON SMITH BARNEY SOLID WASTE INDICES(1)
LOGO
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Company $100 111 190 192 233 224 150 152 177 197 170
- ------------------------------------------------------------------------------------------------
S&P 500 Index 100 117 154 149 194 209 230 233 320 394 526
- ------------------------------------------------------------------------------------------------
Salomon Smith Barney Solid Waste Index 100 107 174 157 167 153 116 120 138 162 179
</TABLE>
- --------
(1) Assumes $100 invested on December 31, 1987 in Company common stock, the
S&P 500 index and the Salomon Smith Barney Solid Waste Index. Historical
results are not necessarily indicative of future performance.
28
<PAGE>
COMPARISON OF 5-YEAR CUMULATIVE RETURN
VS. S&P 500 AND SALOMON SMITH BARNEY SOLID WASTE INDICES(1)
LOGO
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Company $100 67 68 79 88 76
- -----------------------------------------------------------------------
S&P 500 Index 100 110 112 153 189 252
- -----------------------------------------------------------------------
Salomon Smith Barney Solid Waste Index 100 75 78 90 105 116
</TABLE>
- --------
(1) Assumes $100 invested on December 31, 1992 in Company common stock, the
S&P 500 Index and the Salomon Smith Barney Solid Waste Index. Historical
results are not necessarily indicative of future performance.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
In 1997 Dr. Cafferty and Mr. Montrone made late filings of reports required
by Section 16(a) relating to purchases of the Company's common stock. Such
reports were due on July 10, 1997 and September 8, 1997, respectively, and
were filed on July 26, 1997 and September 13, 1997.
29
<PAGE>
CERTAIN TRANSACTIONS
When an option is exercised by an optionee under the Employee Plans or WTI's
stock option plans at a time when the fair market value of the underlying
stock exceeds the option exercise price, the difference is treated as ordinary
income to the optionee for income tax purposes and the company which issued
the options is entitled to a deduction equal to such amount. To facilitate an
optionee's purchase of stock upon exercise of such options, the Company and
WTI have each adopted a policy of making available interest-free loans, in an
amount up to the equivalent of all applicable tax withholding requirements, to
optionees whose exercise of options results in ordinary income to them in
excess of $10,000. All such loans normally are required to be repaid not later
than April 15 in the year following the year in which such loans were made,
unless otherwise extended. There were no such loans from the Company and WTI
in excess of $60,000 made pursuant to such policy in 1997.
The Company and WTI also each makes available to optionees interest-free
loans for a period not to exceed 15 days to facilitate the exercise of options
and the sale of the underlying stock. The largest aggregate amounts of such
loans from the Company and WTI in excess of $60,000 which were outstanding to
the directors and executive officers of the Company since January 1, 1997 were
as follows: Mr. Koenig--$1,416,800. Such loan was repaid and did not remain
outstanding at March 15, 1998.
The Company also extended Mr. Getz an interest free loan in the amount of
$2,136,744 to facilitate the exercise of WTI options during a period in which
Mr. Getz was precluded from selling the underlying shares. Such loan was
repaid and did not remain outstanding at March 15, 1998.
In June 1996, in connection with his election as the Company's Chief
Executive Officer, the Company entered into an amended and restated employment
agreement with Phillip B. Rooney. The agreement replaced an agreement
originally entered into between the Company and Mr. Rooney in 1986. Under the
agreement Mr. Rooney would be paid a minimum annual salary of $1,250,000 as
President and Chief Executive Officer of the Company. Mr. Rooney also was
eligible to receive annual bonuses and all benefits generally available to
executives of the Company. The Company also agreed to provide Mr. Rooney with
a split-dollar life insurance arrangement with a death benefit of
approximately $10 million. The term of Mr. Rooney's employment under the
agreement was to continue through June 6, 2001 and would have been
automatically extended on each anniversary date for a period of five years
from such anniversary date unless either party gave written notice of
termination prior to the anniversary date. Upon the death or permanent
disability of Mr. Rooney, the Company would have paid annually $2,500,000 for
the balance of the term of the agreement. If the Company breached or
terminated the agreement or reduced the nature and scope of Mr. Rooney's
authority and duties, it would have continued to pay him for five years unless
the termination was for cause, in which case its obligations under the
agreement would have ceased. In the event of a change in control of the
Company, Mr. Rooney was entitled to elect to terminate the agreement and
receive a lump sum payment of three times his average annual compensation
(including bonuses) over the immediately preceding five years, which amount
would be increased should an excise tax be imposed on him because of the
payment. Were a change in control of the Company to have occurred on December
31, 1997 and if Mr. Rooney's employment with the Company were terminated as
provided in the employment agreement, it is estimated that Mr. Rooney would
have been eligible to receive approximately $ (assuming no increase
for any excise tax). During the term of the agreement and for a period of
three years thereafter, Mr. Rooney agreed not to compete with the Company or
its subsidiaries. In connection with Mr. Rooney's resignation as President and
Chief Executive Officer on February 17, 1997, the Company gave notice of its
decision to terminate such agreement. As a result of such notice, the
agreement will terminate on February 17, 2002, unless earlier terminated
pursuant to the agreement. During 1997, Mr. Rooney began to receive cash
compensation under the agreement at an annual rate of $2,500,000 in lieu of
all salary, bonuses, incentive or other performance-based compensation and the
Compensation Committee accelerated the vesting of all unvested stock options
held by Mr. Rooney.
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In August 1996, the Company entered into employment agreements with James E.
Koenig, former Executive Vice President of the Company, and Herbert A. Getz,
Senior Vice President and General Counsel of the Company (the "Executives").
The agreements provide that Mr. Koenig would be paid a minimum annual salary
of $600,000 and Mr. Getz would be paid a minimum annual salary of $450,000.
Each of the Executives also would be eligible to receive annual bonuses and
all benefits generally available to executives of the Company. The term of the
Executive's employment under each of the agreements continues until August 14,
1999 and is automatically extended on each anniversary date for a period of
three years from such anniversary date unless the Company gives notice of
termination, in which case the term is automatically extended and expires
three years from the date of such notice. Upon the death or permanent
disability of the Executive, the Company will pay annually the Executive's
then current base salary for thirty-six months. If the Company terminates the
agreement or reduces the nature and scope of the Executive's duties or
relocates the primary employment location of the Executive, it will continue
to pay him his then current base salary and his prorated annual bonus and long
term bonus for three years unless the termination was for cause, in which case
its obligations under the agreement cease. In the event of a change of control
of the Company, the Executive may elect to terminate the agreement and receive
a lump sum payment of three times his average annual compensation (including
bonuses) over the immediately preceding five years, which amount will be
increased should an excise tax be imposed on him because of the payment. Were
a change in control to have occurred on December 31, 1997 and if each
Executive's employment with the Company were terminated as provided in the
employment agreements, it is estimated that Messrs. Koenig and Getz would have
been eligible to receive approximately $ and $ ,
respectively (assuming no increase for any excise tax). During the term of the
agreements, and for a period of one year thereafter, each Executive has agreed
not to compete with the Company or its subsidiaries. Concurrently with the
execution of the employment agreements, the Company granted to Mr. Koenig
45,000 shares of its common stock and to Mr. Getz 35,000 shares of its common
stock, subject in each case to a restricted stock agreement. Under the terms
of the restricted stock agreements, the Executive cannot sell, assign, pledge
or otherwise transfer such shares until the expiration of the period of the
covenant not to compete contained in the employment agreement or his death or
permanent disability. Except as provided below, if the Executive voluntarily
terminates his employment prior to the tenth anniversary of the grant of such
shares, all shares shall be forfeited. If such termination occurs after such
tenth anniversary, such shares shall be vested, but remain subject to such
restrictions. Vesting accelerates upon termination by the Company of the
Executive's employment other than for cause, upon his retirement on or after
reaching age 60, if the Company reduces the nature or scope of his authority
and duties or his compensation or changes the location of his employment, or
upon his death or permanent disability. Dividends upon such shares are deemed
to be reinvested in additional shares and subject to the same restrictions. In
connection with Mr. Koenig's resignation as Executive Vice President on
October 31, 1997, the Company gave notice of its decision to terminate Mr.
Koenig's employment agreement. As a result of such notice, the agreement will
terminate on October 31, 2000, unless earlier terminated pursuant to the
agreement. During 1997, Mr. Koenig began to receive cash compensation at an
annual rate of $600,000.
In March 1997, the Company's Board of Directors approved an employment
security agreement with John D. Sanford, the Company's Senior Vice President
and Chief Financial Officer. Mr. Sanford voluntarily resigned on October 29,
1997. The term of the agreement was to continue until March 11, 1999, and was
to be automatically extended on each anniversary date for a period of two
years from such anniversary date unless the Company were to give notice of
termination, in which case the term would expire two years from such date. If
the Company were to have terminated Mr. Sanford's employment, or reduced the
nature and scope of Mr. Sanford's duties or relocated his primary employment
location, it would have continued to pay him his then current base salary for
two years and his prorated annual bonus for the year of such termination,
reduction or relocation, unless the termination was for cause, in which case
its obligations under the agreement would cease. In addition, the Company was
required to request the Compensation Committee to accelerate all of Mr.
Sanford's
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unvested stock options. During the term of the agreement and for a period of
one year thereafter, Mr. Sanford agreed not to compete with the Company or its
subsidiaries. The Compensation Committee also granted to Mr. Sanford 28,800
restricted shares of its common stock under the Company's 1997 Equity
Incentive Plan (the "1997 Equity Plan). Upon Mr. Sanford's voluntary
termination of his employment, all shares were forfeited.
In March 1997, the Company's Board of Directors approved an employment
security agreement with Jerry W. Caudle, a Senior Vice President of the
Company, the terms of which are substantially similar to Mr. Sanford's
employment security agreement. The Compensation Committee also granted to Mr.
Caudle 23,900 shares of restricted common stock under the Company's 1997
Equity Plan. Under the terms of the restricted stock award agreement entered
into in connection with this grant, and except as provided below, Mr. Caudle
will not be able to sell, assign, pledge or other transfer such shares until
no earlier than ten years from the date of the grant. If Mr. Caudle
voluntarily terminates his employment before the tenth anniversary of the date
of the grant, or if he should be terminated by the Company for cause, all
shares will be forfeited. Vesting of all such shares will accelerate upon a
change in control of the Company, Mr. Caudle's retirement after age 62, or his
death or disability. If Mr. Caudle's employment is terminated without cause,
the vesting of such shares will be accelerated at 2.5% of the grant for every
three months of completed service after the date of the grant. Release of
vested shares will occur upon satisfaction of the obligation not to compete
under Mr. Caudle's employment security agreement. Dividends upon such shares
will be deemed to be reinvested in additional shares and subject to the same
restrictions.
In June 1997, the Company's Board of Directors approved an employment
security agreement with Joseph M. Holsten, the Company's Executive Vice
President and Chief Operating Officer. The term of the agreement continues
until June 20, 2000, provided that unless a party gives 30 days' prior written
notice on June 20, 1998 and on each successive June 20, the term of the
agreement shall be renewed for a period ending on the earlier of the date
three years from such June 20 or the date of his sixty-second birthday unless
earlier terminated pursuant to the terms of the agreement. The agreement
provides for Mr. Holsten's salary to be increased to $650,000 as of June 20,
1997, and for him to be paid a cash bonus of $300,000 for 1997. If the Company
terminates Mr. Holsten's employment, or reduces the nature and scope of Mr.
Holsten's duties or relocates his primary employment location, it will
continue to pay him his then current base salary for three years and his
prorated annual and long term incentive plan compensation with respect to any
participation rights in the Company's annual or long term incentive plans
which have been awarded prior to the date of the notice of termination, unless
the termination was for cause in which case all of the Company's obligations
under the agreement will cease. In addition, under such circumstances the
Company will request the Compensation Committee to accelerate all of Mr.
Holsten's unvested stock options. During the term of the agreement and for a
period of one year thereafter or during the three-year period after
termination, if longer, Mr. Holsten has agreed not to compete with the Company
or its subsidiaries. The Compensation Committee also granted to Mr. Holsten
55,000 shares of restricted common stock under the 1997 Equity Plan. The terms
of Mr. Holsten's restricted stock award agreement are substantially similar to
those of Mr. Caudle. The Compensation Committee also approved granting to Mr.
Holsten options to acquire 100,000 shares of the Company's common stock under
the 1997 Company Plan. In connection with the agreement, the Company has
agreed to loan Mr. Holsten $1,000,000 to purchase shares of the Company's
common stock at an annual rate equal to the three month London Interbank
Offered Rate for the first London business day of each quarter that the loan
is outstanding.
In connection with his transfer in 1995 from CWM, where he was President, to
the Company, the Company entered into an employment agreement with D. P. Payne
under which Mr. Payne will be paid a minimum annual salary of $400,000. Mr.
Payne also is eligible to receive annual bonuses and all benefits generally
available to executives of the Company. The term of Mr. Payne's employment
under
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the agreement continues through December 31, 1999. Upon the death or permanent
disability of Mr. Payne, the Company will pay his then current salary
(including bonuses accrued as of the date of termination) for the balance of
the calendar year in which such death or disability occurs but in no event for
less than 180 days. If the Company terminates Mr. Payne's employment, it will
continue to pay him an amount equal to his base salary until the end of the
term of the agreement plus any unpaid but fully accrued annual bonus for the
prior calendar year payable under the Annual Plan, unless the termination was
for cause, in which case its obligations under the agreement cease. During the
term of the agreement and for two years after the termination of the
agreement, Mr. Payne has agreed not to compete with the Company or its
subsidiaries. In March 1997, the Compensation Committee approved granting to
Mr. Payne 34,500 restricted shares of common stock under the 1997 Company
Plan. The terms of Mr. Payne's restricted stock award agreement are
substantially similar to those of Mr. Caudle. In June 1997, Mr. Payne's
employment agreement was amended to provide that in the event he should be
terminated without cause during the term of the agreement or at any time
thereafter, he would be provided with a minimum of ten years' service credit
under the SERP.
In June 1997, the Company entered into a Supplemental Retirement Benefit
Agreement with Thomas C. Hau, then the Company's Vice President, Controller
and Principal Accounting Officer, which provides that, if Mr. Hau remains
employed by the Company until at least April 1, 1998, or such earlier date as
his employment is terminated as a result of death, disability or involuntary
termination other than for cause, the monthly SERP benefit payable to Mr. Hau
shall be equal to three percent of Mr. Hau's Final Average Compensation per
year of service, and that Mr. Hau's benefits under the Company's Profit
Sharing and Savings Plus Plan will be vested.
Effective July 13, 1997, the Company entered into an employment agreement
with Ronald T. LeMay, in connection with his election as Chairman of the
Board, President and Chief Executive Officer of the Company. Mr. LeMay
voluntarily resigned on October 29, 1997. The term of Mr. LeMay's employment
under the agreement was to continue until July 13, 2002, and was to be
automatically extended for additional one-year periods after such date unless
either party were to give at least 12 months prior written notice electing not
to extend the term of employment. The employment agreement provided that Mr.
LeMay would be paid an annual base salary of $1,500,000, subject to increase
in the discretion of the Board of Directors, and would participate in the
Company's Corporate Incentive Bonus Plan with a target bonus opportunity equal
to 80% of his base salary and with his 1997 incentive award to be not less
than $1 million. The agreement also provided that Mr. LeMay would participate
in the LTIP, with guaranteed minimum payouts of $350,000 and $250,000 for the
performance periods ending in 1998 and 1999, respectively. The agreement
further provided that Mr. LeMay would be awarded options to acquire 500,000
shares of the Company's common stock in each of four years beginning in April
1998 at an exercise price not less than the closing sale price of the common
stock on the date of grant. Each such future option grant would have vested
nine and one-half years after the date of grant, provided that if the price of
a share of the Company's common stock were at least 1.6105 times the exercise
price for at least 30 trading days within a consecutive period of 45 trading
days between the fourth and fifth anniversaries of the date of grant, that
grant would become exercisable on the fifth anniversary of the date of the
grant.
Pursuant to the employment agreement, Mr. LeMay was granted under the 1997
Equity Plan (a) 353,000 restricted shares of the Company's common stock with
terms substantially similar to those of Mr. Caudle's restricted stock award
described above, except that the restrictions were to lapse with respect to
20% of the restricted shares on each of the first five anniversaries of the
award date, and (b) options to purchase a total of two million shares of the
Company's common stock at an exercise price of $33.10 per share. Under the
employment agreement, Mr. LeMay was also granted stock appreciation rights
with respect to 500,000 shares of Sprint Corporation common stock at an
exercise price of $47.9375 per share, which were to become exercisable on June
9, 2002 and expire on June 8, 2007. Mr. LeMay was granted stock appreciation
rights with respect to an additional 500,000 shares of
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Sprint Corporation common stock at the same exercise price, which were to
become exercisable on the fifth anniversary of the grant date only if the fair
market value of Sprint Corporation common stock were at least $95.875 per
share on any 30 trading days within a consecutive period of 45 trading days
between the fourth and fifth anniversaries of the grant date, or
alternatively, if such condition were not met, on the last day of such a 45-
day period between the fourth and sixth anniversaries of the grant date but
only if the fair market value of Sprint Corporation common stock were at least
$95.875 on any 30 trading days during such period. Under the employment
agreement, Mr. LeMay also received credit for 12 years of benefit and
eligibility service under the SERP upon commencement of employment (with his
SERP benefits to vest at the rate of 20% on each of the first five
anniversaries of the effective date of the employment agreement and to be
offset by any other pension benefit he may have received from the Company or
Sprint Corporation), and was also entitled to a survivor benefit in the form
of 10 annual payments each equal to 25% of his highest annual salary during
the five-year period immediately preceding his death if he were to die before
retirement (or if he were to die after retiring or becoming permanently
disabled, a benefit equal to 300% of his highest annual salary during the
five-year period immediately prior to the time of his retirement or
disability, payable either in a lump sum or in installments). At least 13
months before retirement, Mr. LeMay was permitted to elect a supplemental
retirement benefit in lieu of all or a portion of such survivor benefit.
In the event Mr. LeMay's employment were terminated due to his death, the
Company would have been required to pay his base salary through the end of the
month in which the death occured, he would have received pro rata payouts of
any annual incentive and LTIP awards, his outstanding stock options would have
been exercisable until the earlier of the first anniversary of the date of
death or the tenth anniversary of the date of grant, the restrictions on his
restricted stock would have lapsed, and the Sprint Corporation stock
appreciation rights would have been exercisable in accordance with their
terms. In the event of his termination due to disability, Mr. LeMay would have
been entitled to receive substantially the same benefits. In the event Mr.
LeMay's employment were terminated without cause or constructively terminated
without cause, the Company would have been obligated to pay his base incentive
and LTIP awards plus an annual incentive award based on his target bonus
opportunity for 24 months following the date of termination, his outstanding
stock options would have been exercisable until the earlier of the third
anniversary of the date of termination or the tenth anniversary of the date of
grant, the restrictions on his restricted stock would have lapsed, and the
Sprint Corporation stock appreciation rights would have been exercisable in
accordance with their terms. In the event of termination without cause or
constructive termination without cause after a change in control of the
Company, Mr. LeMay would have received the same benefits, except that in lieu
of the salary and annual incentive benefits described above, Mr. LeMay would
have received his base salary and annual incentive awards for 36 months
following termination, which amount would have been increased should an excise
tax be imposed on him because of the payments. During the term of his
employment and for a period of three years thereafter, Mr. LeMay agreed not to
compete with the Company or its subsidiaries. As a result of his voluntary
resignation on October 29, 1997, Mr. LeMay forfeited all benefits under his
employment agreement other than salary through the date of resignation.
Effective October 29, 1997, the Company entered into an employment agreement
with Robert S. Miller, Acting Chairman of the Board and Chief Executive
Officer of the Company. The term of Mr. Miller's employment under the
agreement continues until the earlier of (a) approval by the Board of
Directors of the Company of the hiring of a successor as Chairman of the Board
and Chief Executive Officer, (b) Mr. Miller's death or disability, or (c)
termination of his service upon written notice given either by Mr. Miller or
the Board at least seven days prior to the effective date of such termination.
The agreement provides that Mr. Miller will be paid a salary at the annual
rate of $600,000 for so long as he serves as Acting Chairman of the Board and
Chief Executive Officer. Pursuant to the agreement, Mr. Miller was granted an
option under the 1997 Company Plan to purchase 75,000 shares of common stock
at an exercise price of $23.375, exercisable upon the termination of his
service. Upon becoming
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exercisable, the option will remain exercisable through the earlier of
November 3, 2007 or the ninetieth day after Mr. Miller ceases to serve as a
member of the Board. The salary and option described above are Mr. Miller's
exclusive compensation for his service as Acting Chairman of the Board and
Chief Executive Officer of the Company.
On February 9, 1998, subject to the approval of the Compensation and Stock
Option Committee of the Board of Directors and the full Board, the Company's
Acting Chief Executive Officer extended an offer of employment to Paul G.
George as the Company's new Senior Vice President--Human Resources. The Board
approved the offer of employment and in connection therewith, approved an
employment security agreement. The term of the agreement continues until March
10, 1999 and automatically extends on each March 10 for a period of two years
from such anniversary date unless the Company were to five notice of
termination, in which case the term would expire two years from such date. If
the Company were to terminate Mr. George's employment, or reduce the nature
and scope of Mr. George's duties or relocate his primary employment location,
it would continue to pay him his then current base salary for two years and
his prorated annual bonus for the year of such termination, reduction or
relocation, unless the termination was for cause, in which case its
obligations under the agreement would cease. In addition, the Company would be
required to request the Compensation Committee to accelerate all of Mr.
George's unvested stock options. The agreement also gives Mr. George
protection in the form of a tax gross-up payment in the event an excise tax
under Internal Revenue Code Section 4999 is triggered upon a change in control
under the Company's 1997 Equity Incentive Plan or its deferred compensation
plan. During the term of the agreement and for a period of one year
thereafter, Mr. George has agreed not to complete with the Company or its
subsidiaries.
On February 5, 1998, the Company sold an aircraft with a net book value of
$11,491,835 to Dean L. Buntrock, former Chairman of the Board and Chief
Executive Officer of the Company, for $14,058,886 in cash. The price was
determined after the Company obtained four independent appraisals ranging from
$13,772,998 to $14,500,000, with an average of $14,165,124, which was then
reduced by half of the estimated amount of an avoided broker's commission. The
Company also entered into an agreement pursuant to which the Company may lease
the aircraft on a non-exclusive basis. The lease has a one year term, subject
to termination by either party at any time upon thirty days' notice. The
Company also entered into a sublease of hangar space for the aircraft for a
term of one year, renewing annually thereafter, pursuant to which the Company
will recoup approximately 25% of the Company's charges for rent, taxes,
utilities, common area maintenance and other support costs at the Company's
hangar. The Company also entered into a management services agreement pursuant
to which the Company will provide flight crews, maintenance, recordkeeping and
scheduling services for the aircraft. The Company is to be paid a management
fee of $60,000 per year, two pilots' salaries and benefits, one mechanic's
salary and benefits, and 100% of the necessary recurring training costs for
two pilots and one mechanic. In addition, Mr. Buntrock will pay separately all
direct expenses connected with the operation and maintenance of the aircraft.
The Management Services Agreement will have a term of one year. If this
agreement is terminated, the hangar sublease will terminate as well. The terms
of these agreements with Mr. Buntrock were reviewed and approved by the Audit
Committee and the Board of Directors as being fair to the Company and in its
best interests.
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PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS (PROXY ITEM NO. 2)
The Board of Directors has unanimously approved and recommends to the
stockholders of the Company that they consider and approve a proposal to amend
the Company's Restated Certificate of Incorporation to eliminate the division
of the Board of Directors into three classes, with one class elected each year
for a three-year term. Under the proposal, the entire Board of Directors would
be elected annually as the terms of Directors expire. Specifically, the Board
of Directors recommends that Article Fifth of the Company's Restated
Certificate of Incorporation be amended to read as follows:
"FIFTH: The number of directors constituting the Board of Directors shall
be that number, not less than three nor more than fifteen, as shall be
fixed by the by-laws of the corporation.
"Each director elected prior to the 1999 annual meeting of the
stockholders, shall hold office for the term of years for which that
director was elected, and each director elected at or after the 1999 annual
meeting of the stockholders, shall hold office until the next annual
meeting of stockholders.
"Each director shall serve until the annual meeting of stockholders for
the year in which his or her term expires and until his or her successor is
duly elected and qualified, subject, however, to his or her prior death,
retirement, resignation or removal for cause. Should a vacancy occur or be
created, whether arising through death, retirement, resignation or removal
of a director for cause, or through an increase in the number of directors,
such vacancy shall be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director."
In addition, the Board of Directors recommends that Article Sixth of the
Company's Restated Certificate of Incorporation be amended to remove the
requirement that future changes to Article Fifth require the approval of the
holders of shares representing at least 80% of the outstanding shares of
Common Stock.
In 1985, the stockholders of the Company approved an amendment to the
Company's Restated Certificate of Incorporation which divided the Board of
Directors into three classes, with approximately one-third of the Directors
elected each year to staggered three-year terms. Approximately 78% of the
Company's stockholders voting on this amendment voted in favor of it. A
classified Board helps to ensure that a majority of the Board at any given
time has prior experience serving as directors of the Company. This enhances
the likelihood of stability and continuity in the leadership and policies of
the Company while preserving the ability of the Company's stockholders to make
changes in the Board's membership. This also provides the Company and its
stockholders with advantages in the context of a proposal to acquire the
Company, by ensuring that the Company and its stockholders are represented by
an experienced and knowledgeable Board, which is structured in such a manner
as to discourage tactics that the Board believes are disruptive and
inequitable.
The Board of Directors believes that the advantages of a classified Board
continue to exist. However, the Board of Directors recognizes that a
significant number of the Company's stockholders voted on different proposals
to eliminate the classified Board at annual meetings in 1996 and 1997 (46% in
1996 and 73% in 1997), and that many stockholders now perceive the annual
election of all directors as an appropriate means of enabling them to express
their views on the performance of the Board and thereby increase the Board's
accountability to the stockholders. While the Board recognizes the advantages
of a classified Board, the Board also acknowledges the benefits of annual
election of directors. In light of the substantial support expressed by
stockholders, the Board has, once again, determined to put the matter to a
stockholder vote.
Under Delaware law, an amendment to the Restated Certificate of
Incorporation must be declared advisable by the Board of Directors before it
is submitted to a vote of the stockholders. Accordingly, the Board of
Directors has passed the necessary resolution declaring the advisability of
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the amendment to provide for the annual election of all directors and formally
recommending an affirmative vote. Under the Restated Certificate of
Incorporation, amendment of Article Fifth requires the approval of the holders
of shares representing at least 80% of the outstanding shares of Common Stock.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS (PROXY ITEM NO. 3)
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed the firm of Arthur Andersen LLP as independent auditors for the
Company for 1998, subject to ratification by the stockholders. If the
stockholders do not ratify the selection of Arthur Andersen LLP, the Board of
Directors will reconsider the selection of independent auditors.
Arthur Andersen LLP has served as the Company's independent auditors since
1969. Representatives of Arthur Andersen LLP will be present at the 1998
annual meeting of stockholders, will have the opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
VOTING OF SHARES HELD IN CERTAIN PLANS
If you are a participant in the Waste Management, Inc. 1988 Employee Stock
Ownership Plan, you are entitled to direct the trustees of the plan to vote
the shares credited to your individual account in accordance with your
instructions. This may be accomplished by marking and returning the
instruction form accompanying the mailing and relating to the shares in the
plan credited to your account. If you do not return such form, your shares
held in the plan will not be voted. If you are also a direct owner of shares
(acquired other than through this plan), you will receive a separate mailing
containing a proxy card relating to such shares.
If you are a participant in the Waste Management Dividend Reinvestment and
Stock Purchase Plan, the proxy card provided to you covers the shares held for
you by the plan and any shares held directly by you. If you do not return such
proxy card, your shares held in this plan (as well as any shares owned by you
directly) will not be voted for you. You are, therefore, urged to return the
proxy card promptly, duly signed and dated.
FINANCIAL STATEMENTS
The Company has enclosed its Annual Report to Stockholders for the year
ended December 31, 1997 with this Proxy Statement. Stockholders are referred
to the report for financial and other information about the Company, but such
report is not incorporated in this Proxy Statement and is not a part of the
proxy soliciting material.
PROPOSALS BY STOCKHOLDERS
Under the proxy solicitation rules of the Securities and Exchange Commission
(the "Proxy Rules"), any proposals by stockholders intended to be presented at
the 1999 annual meeting must be received by the Company no later than
November , 1998 in order to be considered by the Board of Directors for
inclusion in the Company's 1999 Proxy Statement. In order for a stockholder to
nominate
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a candidate for director or bring an item of business before the annual
meeting, under the Company's by-laws timely notice of the nomination or the
item of business must be received by the Company in advance of the meeting.
Ordinarily, such notices must be received not less than 90 nor more than 120
days before the anniversary date of the immediately preceding annual meeting
(but if the annual meeting is called for a date that is not within 30 days
before or after such anniversary date, notice by the stockholder must be
received not later than the tenth day following the day on which notice of the
date of the annual meeting was mailed or public announcement of such date was
made, whichever occurs first). The stockholder filing notice of a nomination
must provide in the notice to the Company all information relating to the
nominee that would be required to be disclosed in solicitations of proxies for
election of directors under the Proxy Rules and the nominee's written consent
to being named. A stockholder wishing to bring an item of business before an
annual meeting must provide in the notice to the Company a brief description
of the item and the reasons for conducting such business at the annual
meeting. In either case, the notice to the Company must also include certain
information about the stockholder making the nomination or bringing such
business before the meeting, including name and address, class and number of
shares of the Company's capital stock owned by the stockholder as of the
record date, a description of all arrangements or understandings between such
stockholder and any other person in connection with the nomination or proposal
of such business, including their names, a representation that such
stockholder intends to appear in person or by proxy at the annual meeting, and
in the case of a nomination, any other information relating to such
stockholder as would be required to be disclosed in a proxy statement under
the Proxy Rules. These requirements are separate from and in addition to the
requirements a stockholder must meet to have a proposal considered for
inclusion in the Company's 1999 Proxy Statement.
In each case, the notice must be given to the Secretary of the Company,
whose address is 3003 Butterfield Road, Oak Brook, Illinois 60523. Any
stockholder desiring a copy of the Company's by-laws will be furnished one
without charge upon written request to the Secretary.
OTHER MATTERS
You are again urged to attend the annual meeting. Proxies will be solicited
by the Board of Directors through use of the mails. Proxies may also be
solicited by directors, officers and a small number of other employees of the
Company personally or by mail, telephone or otherwise, but such persons will
not be compensated for such services. Brokerage firms, banks, fiduciaries,
voting trustees or other nominees will be requested to forward the soliciting
material to the beneficial owners of stock held of record by them, and the
Company has hired Morrow & Co., Inc. to coordinate the solicitation of proxies
by and through such holders for a fee of approximately plus
expenses. The entire cost of the Board of Directors' solicitation will be
borne by the Company.
The Board of Directors does not intend to present, and does not have any
reason to believe that others will present, any item of business at the annual
meeting other than those specifically set forth in the notice of the meeting.
However, if other matters are presented for a vote, the proxies will be voted
as to such matters in accordance with the judgment of the persons acting under
the proxies.
By Order of the Board of Directors,
LOGO
Herbert A. Getz
Senior Vice President and Secretary
38
<PAGE>
VOTING INSTRUCTION FORM VOTING INSTRUCTION FORM
WASTE MANAGEMENT, INC.
1988 EMPLOYEE STOCK OWNERSHIP PLAN
ANNUAL MEETING, MAY 15, 1998
The undersigned hereby instructs the trustees of the Waste Management, Inc.
1988 Employee Stock Ownership Plan to vote, by proxy or in person, at the
Annual Meeting of Stockholders of Waste Management, Inc. to be held on Friday,
May 15, 1998, and at any adjournments thereof, the shares of common stock of
Waste Management, Inc. allocated to the undersigned's account in such Plan on
March , 1998, as designed below, and in their discretion, the trustees are
authorized to vote upon such other business as may properly come before the
meeting.
IF THIS VOTING INSTRUCTION FORM, REQUESTED BY THE TRUSTEES WITH RESPECT TO A
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY, IS
PROPERLY EXECUTED AND RECEIVED BY HARRIS TRUST & SAVINGS BANK ON OR BEFORE MAY
, 1998, THE SHARES ALLOCATED TO THE UNDERSIGNED'S ACCOUNT IN THE WASTE
MANAGEMENT, INC. 1988 EMPLOYEE STOCK OWNERSHIP PLAN ON MARCH , 1998 WILL BE
VOTED IN THE MANNER INSTRUCTED HEREIN. IF NO INSTRUCTION IS MADE OR THIS FORM
IS NOT RECEIVED BY HARRIS TRUST & SAVINGS BANK ON OR BEFORE MAY , 1998, THE
SHARES WILL NOT BE VOTED.
PLEASE MARK, SIGN, DATE AND MAIL THIS FORM PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
WASTE MANAGEMENT, INC.
0
I
0
- -
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
For
0
Against
0
Abstain
0
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3
2. Proposal to amend the Company's Restated Certificate of Incorporation to
provide for the annual election of all Directors.
For All (Except Nominee(s) written below)
0
1.Election of Class I Directors--
Nominees: H. Jesse Arnelle, John C. Pope.
-------------------------------------------------------------------------------
For
0
Withheld
0
For
0
Against
0
Abstain
0
3. Ratification of appointment of Arthur Andersen LLP as independent auditors
for 1998.
4. In their discretion, on such other business as may properly come before the
meeting or any adjournment thereof.
This form when properly executed will be voted in the manner directed herein
by the undersigned stockholder(s). If no direction is made, this Proxy will be
voted as recommended by the Board of Directors.
Dated: _____________________________________________________________ , 1998
Signature(s)___________________________________________________________________
- -------------------------------------------------------------------------------
SIGNATURE OF STOCKHOLDER(S)-PLEASE SIGN NAME EXACTLY AS IMPRINTED (DO NOT
PRINT). PLEASE INDICATE ANY CHANGE OF ADDRESS. NOTE: YOU MAY REVOKE YOUR IN-
STRUCTION TO VOTE SHARES ALLOCATED TO YOUR ACCOUNT AT ANY TIME PRIOR TO THE
STOCKHOLDERS' MEETING
s FOLD AND DETACH HERE s
PLEASE VOTE, SIGN, DATE AND RETURN THIS FORM PROMPTLY USING THE ENCLOSED
ENVELOPE
<PAGE>
PROXY PROXY
WASTE MANAGEMENT, INC.
ANNUAL MEETING, MAY 15, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
, , and , each
with power of substitution, are hereby authorized to vote all shares of common
stock of Waste Management, Inc. which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders of Waste
Management, Inc., to be held on Friday, May 15, 1998, and at any adjournment
thereof, as designated below, and in their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
meeting.
A MAJORITY (OR IF ONLY ONE, THEN THAT ONE) OF THE ABOVE PERSONS OR THEIR
SUBSTITUTES WHO SHALL BE PRESENT AND ACTING AT THE MEETING SHALL HAVE THE
POWERS CONFERRED HEREBY.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
WASTE MANAGEMENT, INC.
PLEASE MARK VOTE IN OVAL
IN THE FOLLOWING MANNER
USING DARK INK ONLY.
0
I
0
- -
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
For
0
Against
0
Abstain
0
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3
2. Proposal to amend the Company's Restated Certificate of Incorporation to
provide for the annual election of all Directors.
For All (Except Nominee(s) written below)
0
1.Election of Class I Directors--
Nominees: H. Jesse Arnelle, John C. Pope.
-------------------------------------------------------------------------------
For
0
Withheld
0
For
0
Against
0
Abstain
0
3. Ratification of appointment of Arthur Andersen LLP as independent auditors
for 1998.
4. In their discretion, on such other business as may properly come before the
meeting or any adjournment thereof.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder(s). If no direction is made, this Proxy will be
voted as recommended by the Board of Directors.
Dated: _____________________________________________________________ , 1998
Signature(s)___________________________________________________________________
- -------------------------------------------------------------------------------
SIGNATURE OF STOCKHOLDER(S)-PLEASE SIGN NAME EXACTLY AS IMPRINTED (DO NOT
PRINT). PLEASE INDICATE ANY CHANGE OF ADDRESS. NOTE: EXECUTORS, ADMINISTRA-
TORS, TRUSTEES AND OTHERS SIGNING IN A REPRESENTATIVE CAPACITY SHOULD INDICATE
THE CAPACITY IN WHICH THEY SIGN. IF SHARES ARE HELD JOINTLY, EACH HOLDER
SHOULD SIGN.
s FOLD AND DETACH HERE s
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED
ENVELOPE
