<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
BROWNING-FERRIS INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the 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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[BROWNING-FERRIS INDUSTRIES, INC. LOGO]
BROWNING-FERRIS INDUSTRIES, INC.
P.O. BOX 3151
HOUSTON, TEXAS 77253
January 27, 1998
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders of
Browning-Ferris Industries, Inc. on March 4, 1998, at 2:00 p.m., Houston time,
in the Company's auditorium located on the 14th floor of the corporate office at
757 N. Eldridge, Houston, Texas.
Whether or not you plan to be present, please sign and return your proxy as soon
as possible so that your vote will be recorded; a self-addressed envelope is
provided.
/s/ WILLIAM D. RUCKELSHAUS
William D. Ruckelshaus
Chairman of the Board of Directors
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Holders of Common Stock:
Notice is hereby given that the Annual Meeting of Shareholders of
Browning-Ferris Industries, Inc., a Delaware corporation (the "Company"), will
be held on March 4, 1998, at 2:00 p.m., Houston time, in the Company's
auditorium located on the 14th floor of the corporate office at 757 N. Eldridge,
Houston, Texas for the following purposes:
(1) To elect three directors of the Company, each for a three-year term;
(2) To consider and vote upon the approval of the selection of Arthur
Andersen LLP as auditors for the Company's 1998 fiscal year; and
(3) To consider and act upon such other matters as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has determined that only those persons who were
holders of record of Common Stock of the Company at the close of business on
January 6, 1998, the record date, will be entitled to notice of, and to vote at,
the meeting and any adjournment thereof.
By Order of the Board of
Directors,
/s/ GERALD K. BURGER
Gerald K. Burger
Vice President and Secretary
Houston, Texas
January 27, 1998
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE AT
YOUR EARLIEST CONVENIENCE.
<PAGE> 4
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 4, 1998
This Proxy Statement and the accompanying form of proxy are being furnished
to the shareholders of Browning-Ferris Industries, Inc., a Delaware corporation
(the "Company" or "BFI"), in connection with a solicitation of proxies by the
Board of Directors of the Company for use at the Annual Meeting of Shareholders
to be held on Wednesday, March 4, 1998, at 2:00 p.m., Houston time, in the
Company's auditorium located on the 14th floor of the Company's principal
executive offices at 757 N. Eldridge, Houston, Texas and at any adjournment
thereof (the "Meeting"). This Proxy Statement and the accompanying form of proxy
are being first sent or given to shareholders on or about January 27, 1998.
All shares represented by a properly executed proxy in the accompanying
form received in time for the Meeting, and not revoked, will be voted. Unless
the shareholder otherwise specifies therein, such shares will be voted by the
persons named as proxy holders:
FOR the election as directors of the Company of those three nominees
for director for three-year terms, as listed under the caption "Election of
Directors" herein; and
FOR the approval of the selection by the Board of Directors of Arthur
Andersen LLP as auditors for the Company's 1998 fiscal year.
The persons named as proxies on the accompanying form of proxy, William D.
Ruckelshaus, Chairman of the Board of Directors of the Company, and Gerald K.
Burger, Vice President and Secretary of the Company, were selected by the
Directors and Corporate Governance Committee of the Board of Directors of the
Company.
The accompanying form of proxy is for use at the Meeting if a shareholder
is unable to attend or does not desire to vote in person. A shareholder who
executes a proxy may revoke it at any time before the proxy is exercised by
giving written notice to the Secretary of the Company, by delivering a later
dated proxy, or by voting in person at the Meeting.
RECORD DATE AND VOTING AT THE MEETING
The holders of record on January 6, 1998, the record date, of Common Stock,
$.16 2/3 par value (the "Common Stock"), of the Company will be entitled to one
vote per share on each matter submitted for shareholder approval. At the close
of business on the record date, there were outstanding 195,299,541 shares of
Common Stock of which 188,755,012 shares are entitled to vote, and the holders
of a majority of the 188,755,012 total shares, whether present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the Meeting. No other voting securities of the Company were outstanding at
the close of business on the record date.
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented by proxy and entitled to vote at the Meeting is
required for (a) the election of directors,
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(b) approval of the appointment of independent auditors and (c) approval of such
other matters as may properly come before the Meeting or any adjournment
thereof.
A shareholder entitled to vote for the election of directors can withhold
authority to vote for all nominees for director or can withhold authority to
vote for certain nominees for director. Under Delaware law, abstentions from the
proposal to approve the appointment of auditors have the same legal effect as a
vote against the proposal. Broker non-votes on the proposals to elect directors
or approve the appointment of auditors are treated as shares as to which voting
power has been withheld by the beneficial holders of those shares and,
therefore, are not counted for purposes of determining whether a majority has
been achieved.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended
September 30, 1997 has been or is being furnished to all shareholders entitled
to vote at the Meeting. The Annual Report to Shareholders does not constitute a
part of the proxy soliciting material.
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<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of January 16, 1998, the amount of the
Company's Common Stock beneficially owned by each of its directors and nominees
for director, each executive officer named in the Summary Compensation Table,
and all directors, nominees for director and executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
------------------------------------------------
SOLE VOTING AND OPTIONS OTHER PERCENT
INVESTMENT EXERCISABLE BENEFICIAL OF
NAME POWER (1) WITHIN 60 DAYS OWNERSHIP CLASS
---- --------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
William D. Ruckelshaus.............. 97,164 38,750 2,228(2) *
Bruce E. Ranck...................... 103,730 660,150 5,782(2) *
J. Gregory Muldoon.................. 23,354 110,125 3,670(2) *
Norman A. Myers..................... 269,796 352,625 4,487(2) *
Jeffrey E. Curtiss.................. 37,835 125,250(3) 1,481(2)(4) *
Rufus Wallingford................... 12,990 62,500 5,620(2) *
Gregory D. Brenneman................ 20,719 1,250 -0- *
William T. Butler................... 3,822 36,250 -0- *
C. Jackson Grayson, Jr. ............ 23,522 6,250 -0- *
Gerald Grinstein.................... 1,394 36,250 1,000(5) *
Harry J. Phillips, Sr. ............. 368,443(6) 379,900 7,155(2)(7) *
Joseph L. Roberts, Jr. ............. 1,322 36,250 -0- *
Marc J. Shapiro..................... 4,322 8,750 -0- *
Robert M. Teeter.................... 3,322(8) 36,250(8) -0- *
Marina v.N. Whitman................. 3,322 36,250 -0- *
Louis A. Waters (9)................. -0- 256,275 7,420(2) *
All Executive Officers, Nominees for
Director and Directors as a Group
(20 persons)...................... 1,012,185 2,475,275 47,272 1.8%
</TABLE>
- ---------------
* Less than one percent
(1) Includes restricted shares of the Company's Common Stock. The holder has
sole voting power and no investment power until such restricted shares vest.
After vesting, the holder has sole investment and voting powers.
(2) Represents shares allocated to the employee through participation in the
Company's Employee Stock Ownership and Savings Plan, according to the latest
statement for said plan. Such shares can be voted by each employee, and each
employee has investment authority over the shares held in the employee's
account in such plan, except for shares acquired with Company matching
contributions. In the case of a tender offer, the trustee shall tender or
not tender shares as directed by each participant.
(3) Excludes options to purchase 10,000 shares of Common Stock which were
transferred by Mr. Curtiss to family trusts for which he is not trustee and
disclaims beneficial ownership therein.
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(4) Does not include up to 7,000 shares that may be acquired by conversion of
the Company's 7.25% Automatic Common Exchange Securities.
(5) Shares held jointly with spouse.
(6) Includes 292,334 shares held by a limited partnership of which Mr. Phillips
is sole general partner.
(7) Includes 877 shares held by spouse in which Mr. Phillips claims an indirect
ownership.
(8) Includes shares held in a trust of which Mr. Teeter serves as the trustee.
(9) Mr. Waters served as an executive officer of the Company in his capacity as
Chairman and CEO of BFI International, Inc. until March 11, 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning each person
known by the Company to own beneficially more than five percent of the
outstanding voting shares of the Company's Common Stock:
<TABLE>
<CAPTION>
SHARES
NAME OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS
---------------- ------------ ----------
<S> <C> <C>
Fidelity Management and Research Corporation................ 25,026,967(1) 13%
87 Devonshire Street
Boston, Massachusetts 02109-3605
The Capital Group Companies, Inc............................ 22,300,120(2) 12%
135 South State College Blvd.
Brea, California 92821
</TABLE>
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(1) Information is based on a Form 13-F for September 30, 1997.
(2) Information is based on a Form 13-G for December 31, 1996.
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ELECTION OF DIRECTORS
NOMINEES
Three directors are to be elected at the Meeting. In accordance with the
Company's Restated Certificate of Incorporation, the Board of Directors is
divided into three classes, each of which serves for a three-year term. William
T. Butler, Joseph L. Roberts, Jr. and Marina v.N. Whitman are being nominated to
serve until the Company's 2001 Annual Meeting of Shareholders and until their
respective successors have been duly elected and qualified. Each of the nominees
currently serves as a director of the Company. C. Jackson Grayson, Jr. will be
retiring from the Board of Directors at the expiration of his current term on
March 4, 1998, and the Board of Directors currently anticipates that it will
elect a new director during 1998 to fill the vacancy created by Dr. Grayson's
retirement.
Unless otherwise instructed, the persons named as proxies in the enclosed
form of proxy will vote in favor of the three nominees named above. Although the
Board of Directors does not contemplate that any of the nominees will become
unable to serve, if such a situation should occur before the Meeting, it is
expected either (a) that the persons named in the proxy will vote for another
nominee designated by the Board of Directors, or (b) that the authorized number
of directors will be reduced accordingly.
The following table contains certain information as of January 16, 1998,
with respect to the nominees and the directors who are currently serving terms
expiring in 1998, 1999 or 2000:
<TABLE>
<CAPTION>
EXPIRATION
OF
POSITIONS AND OFFICES SERVED AS A PRESENT
NAME WITH THE COMPANY DIRECTOR SINCE AGE TERM
---- ------------------------- -------------- --- ----------
<S> <C> <C> <C> <C>
William D. Ruckelshaus........... Chairman of the Board and 1987 65 1999
Director(1)
Bruce E. Ranck................... President, Chief 1990 49 1999
Executive
Officer and Director(1)
Gregory D. Brenneman............. Director(2)(4) 1997 36 2000
*William T. Butler............... Director(1)(3) 1990 65 1998
C. Jackson Grayson, Jr........... Director(2)(4) 1979 74 1998
Gerald Grinstein................. Director(3)(5) 1990 65 1999
Harry J. Phillips, Sr............ Director(1) 1970 67 2000
*Joseph L. Roberts, Jr........... Director(2) 1991 62 1998
Marc J. Shapiro.................. Director(4)(5) 1994 50 2000
Robert M. Teeter................. Director(2)(5) 1989 58 2000
*Marina v.N. Whitman............. Director(3)(4) 1992 62 1998
</TABLE>
- ---------------
(1) Member of the Executive Committee
(2) Member of the Corporate Responsibility Committee
(3) Member of the Compensation Committee
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<PAGE> 9
(4) Member of the Audit Committee
(5) Member of the Directors and Corporate Governance Committee
* Indicates nominees for director for a three-year term expiring in 2001 and
until their respective successors have been duly elected and qualified.
BACKGROUND OF NOMINEES FOR DIRECTOR AND OTHER DIRECTORS
Mr. Ruckelshaus was elected a director in June 1987 and Chairman of the
Board and Chief Executive Officer in September 1988. He stepped down as the
Company's Chief Executive Officer in October 1995, but remains as Chairman of
the Board. Mr. Ruckelshaus also serves as a director of Cummins Engine Company,
Inc., Monsanto Company, Nordstrom, Inc., Weyerhaeuser Company, Solutia Inc.,
Coinstar, Inc. and Gargoyles Inc.
Mr. Ranck was elected President and Chief Executive Officer in October
1995, having served as President and Chief Operating Officer of the Company
since November 1991 and as Executive Vice President (Solid Waste
Operations -- North America) from October 1989 until November 1991. Prior to
that time, he served as a Regional Vice President in one of the Company's former
regions. He also serves as a director of Furon Company.
Mr. Brenneman is currently President and Chief Operating Officer of
Continental Airlines, Inc., a position he has held since April 1995. He also
serves as a director of Continental Airlines, Inc. and as Vice Chairman of
Continental Micronesia and Continental Express. Prior to his joining Continental
Airlines, he was a partner in Bain & Company, Inc., a consulting firm, where he
specialized in corporate turnarounds.
Dr. Butler serves as Chancellor of Baylor College of Medicine in Houston,
Texas, where he previously served as President and Chief Executive Officer from
1979 until January 1996. He is also the past Chairman of the Association of
American Medical Colleges. Dr. Butler also serves as a director of C.R. Bard,
Inc. and Chairman of the Board of Lyondell Petrochemical Company.
Dr. Grayson is the founder and Chairman of the Board of American
Productivity and Quality Center, a privately funded educational and research
center located in Houston, Texas, a position he has held with the center since
its formation in 1975. Due to the retirement age provision as set forth in the
Company's Guidelines on Corporate Governance Issues, Dr. Grayson is not eligible
to seek reelection as a director of the Company at the expiration of his current
term on March 4, 1998. Dr. Grayson has agreed to serve as an advisory director
of the Company.
Mr. Grinstein currently serves as Chairman of the Board of Delta Airlines,
Inc. He also serves as a director of Sundstrand Corporation, Imperial Holly
Corporation and PACCAR Inc. Mr. Grinstein served as Chairman, Chief Executive
Officer, President and a director of Burlington Northern Santa Fe Corporation
and Burlington Northern Railroad Company from 1989 until his retirement in
December 1995.
Mr. Phillips served as Chairman of the Board and Chief Executive Officer of
the Company from September 1980 until September 1988, when he was elected
Chairman of the Executive Committee.
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<PAGE> 10
Mr. Phillips is a director of RFS Hotel Investors, Inc., Buckeye Technologies,
Inc., Buckman Laboratories, Morgan Keegan Inc. and the National Commerce
Bancorporation, Memphis, Tennessee.
Dr. Roberts is Senior Pastor of the Ebenezer Baptist Church in Atlanta,
Georgia. He also serves as a member of various civic organizations.
Mr. Shapiro currently serves as Vice Chairman, Finance and Risk Management
of The Chase Manhattan Bank. Before assuming his current role in September 1997,
he was Chairman, President and Chief Executive Officer of Texas Commerce Bank
National Association, a subsidiary of The Chase Manhattan Corporation. He also
serves as a director of Weingarten Realty Investors, Santa Fe Energy Resources,
Inc. and Burlington Northern Santa Fe Corporation.
Mr. Teeter has served as President of Coldwater Corporation, a strategic
planning and public affairs consulting firm since 1988. He is also a director of
United Parcel Service, Bank of Ann Arbor, Durakon Industries, Inc. and Optical
Imagine Systems.
Dr. Whitman has served as Professor of Business Administration and Public
Policy at the University of Michigan since 1992. Previously, she spent thirteen
years at General Motors Corporation, six years as Vice President and Chief
Economist and seven years as Vice President and Group Executive, Public Affairs
Staffs. She currently serves as a director of The Procter & Gamble Company, The
Chase Manhattan Corporation, Alcoa Corporation and UNOCAL Corporation.
COMMITTEES
The members of the Company's Executive, Audit, Compensation, Corporate
Responsibility, and Directors and Corporate Governance Committees are reflected
in the preceding table.
The Executive Committee may exercise all the powers of the Board of
Directors between meetings of the Board of Directors, except as delegated by the
By-laws of the Company or the Board of Directors to another standing or special
committee, or as reserved by the Board of Directors, but the Executive Committee
does not have the power to elect or remove officers, approve a merger of the
Company, recommend a sale of substantially all the Company's assets, recommend a
dissolution of the Company, amend the Company's By-laws or Restated Certificate
of Incorporation, declare dividends on the Company's outstanding securities, or,
except as expressly authorized by the Board of Directors, issue any of the
Company's Common Stock or Preferred Stock.
The Audit Committee recommends to the Board of Directors the selection of
the Company's independent accountants; confers with the Company's independent
accountants regarding the scope and adequacy of annual audits; reviews reports
from the independent accountants; and meets with the independent accountants and
with the Company's internal auditors and financial personnel to review the
adequacy of the Company's accounting principles, financial controls and
policies.
The Compensation Committee reviews the Company's compensation philosophy
and programs, and exercises authority with respect to the payment of direct
salaries and incentive
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<PAGE> 11
compensation to directors and officers; loans to or guarantees of obligations of
such persons and some employee loans; the administration of the stock incentive
plans of the Company; and oversees the administration and results of operations
of the Company's retirement and other benefit plans.
The Corporate Responsibility Committee's responsibilities include the
surveying, monitoring and guiding of the Company's role in the fulfillment of
its social responsibilities toward its shareholders, employees and the general
public in the conduct of its normal business activities.
The Directors and Corporate Governance Committee is empowered to recommend
to the Board of Directors nominees for election as directors and persons to fill
director vacancies and newly created directorships; recruit potential director
candidates; recommend changes to the Board of Directors concerning the
responsibilities and composition of the Board of Directors and its committees;
select the members of the proxy committee charged with voting solicited proxies
at shareholder meetings; and review proxy comments received from shareholders
relating to the Board of Directors. In addition, the Directors and Corporate
Governance Committee will consider shareholders' suggestions of nominees for
director that are submitted in writing to the Committee, at the address of the
Company's principal executive offices, not less than 90 days in advance of the
date the Company's proxy statement was released to shareholders in connection
with the previous year's annual meeting of shareholders.
During the last fiscal year, the Executive Committee held two meetings; the
Audit Committee held two meetings; the Compensation Committee held five
meetings; the Corporate Responsibility Committee held one meeting; the Directors
and Corporate Governance Committee held four meetings; and the Board of
Directors held six meetings. No incumbent director attended fewer than 75
percent of the aggregate number of board meetings and meetings of committees on
which he or she served.
DIRECTOR COMPENSATION
In fiscal 1997, non-employee members of the Board of Directors were paid an
annual retainer fee of $30,000, $20,000 of which was paid in cash and $10,000 of
which was paid in shares of the Company's Common Stock. In addition,
non-employee directors may be compensated in varying annual amounts for
participation on committees. Employee-directors of the Company do not receive
any additional compensation from the Company for their service as directors.
Members of the Audit Committee receive $8,000 (Chairman receives $12,000);
Compensation Committee members receive $6,000 (Chairman receives $9,000); the
non-employee director member of the Executive Committee receives $10,000
(Chairman is an employee-director); and the Corporate Responsibility Committee
and the Directors and Corporate Governance Committee members receive $4,000
(Chairman of each committee receives $6,000). In addition, non-employee
directors are paid attendance fees of $1,000 for each meeting of the Board of
Directors and $500 for each committee meeting.
Under the Company's Non-Employee Director Stock Plan, each non-employee
director is granted a non-qualified option to purchase 5,000 shares of the
Company's Common Stock upon his or her initial election or appointment to the
Board of Directors. Thereafter, each non-employee
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<PAGE> 12
director receives an annual option grant for the purchase of 2,500 shares of the
Company's Common Stock.
The Company also has a Deferred Compensation Plan for its directors.
Participating directors may elect to defer all or a portion of their director
fees that are paid in cash in (i) an unfunded interest bearing account, (ii) a
BFI phantom stock account that earns dividend equivalents or (iii) other
investment options as offered in the Company's Employee Stock Ownership and
Savings Plan. A director may elect to receive cash distributions from his or her
account either prior to or following termination of service.
As part of its corporate charitable giving program, the Company makes cash
contributions directly to various charitable organizations, including
organizations with which certain directors are affiliated. The Company does not
consider these contributions to be compensation to the directors who are
affiliated with such organizations. The Company's charitable giving program does
not include any "director legacy" donations.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is pleased to
present its annual report on executive compensation. This Committee report
describes the components of the Company's executive officer compensation program
and explains the basis on which fiscal year 1997 compensation determinations
were made by the Committee with respect to the executive officers of the
Company, including the executive officers that are named in the compensation
tables included in this Proxy Statement.
COMPENSATION PHILOSOPHY AND OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM
The Committee's overriding philosophy is to establish executive
compensation policies that are linked to the Company's mission and the sustained
creation of shareholder value. The Committee is responsible for approving the
design of, assessing the effectiveness of, and administering executive
compensation programs that support achievement of the Company's strategic
business objectives and core values. To ensure objectivity in the fulfillment of
its responsibilities, the Committee is composed entirely of independent,
non-employee directors who meet on a regular basis during the fiscal year.
The following objectives continue to serve as the guiding principles for
all compensation decisions:
- Align variable compensation opportunities with shareholder interests,
such that the executive compensation program is highly sensitive to
Company performance, defined in terms of shareholder value creation;
- Focus management on achieving financial and operating objectives that
have been demonstrated to be primary, sustainable drivers of shareholder
value over the long-term;
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<PAGE> 13
- Provide a competitive total compensation opportunity, commensurate with
performance, that enables the Company to attract and retain key
executives; and
- Integrate all corporate and field pay programs with the Company's annual
and long-term business objectives, thereby encouraging teamwork in
implementing an organization driven towards customer service and
satisfaction.
The Company's long-term financial goals continue to focus on improving both
returns on investment and operating cash flow as indicated below, in order to
better align performance objectives with the creation of shareholder value:
- Generate cash returns on gross assets in excess of the weighted average
cost of capital;
- Increase profits at a faster pace than the increase in revenues; and
- Maintain a strong credit rating appropriate for supporting business
operations.
New annual and long-term incentive plans were implemented for fiscal year
1997 and are described for each compensation component below. The Committee
believes that the Company's current executive compensation program has been
designed and is administered in a manner consistent with these objectives.
COMPENSATION PROGRAM COMPONENTS
The Committee regularly reviews the Company's compensation program to
ensure that salary levels and incentive opportunities are competitive. This
process entails an annual assessment of both the total compensation levels and
the individual pay components. In determining competitive compensation, the
Committee obtains information on a large number of companies through published
national executive compensation surveys and comparative analyses of compensation
data compiled from proxy statements. The Committee focuses its analysis
primarily on organizations with comparable revenues, asset size, number of
employees and service industry classifications. The universe of companies used
for competitive compensation comparisons is broader than those companies which
comprise the published industry index in the Performance Graph included in this
Proxy Statement, since the Company's competitors for management talent extend
beyond the Company's direct competitors.
BASE SALARY -- It is the objective of the Committee to establish base
salary levels for the Company's executive officers that are generally comparable
to similar executive positions in companies of similar size and complexity as
the Company. Actual officer salaries are approved by the Committee and are based
on a combination of factors, including the performance of the executive, his or
her salary relative to the competitive market, the salary increase budget for
the Company, and the recommendation of the Chief Executive Officer. Additional
considerations may include the background, experience, and scope of
accountability of the executive. All named executive officers have entered into
employment agreements with the Company (see "Employment and Severance
Agreements"). Under these agreements, the Committee has the sole discretion for
11
<PAGE> 14
determining any increase in base salary; however, pursuant to the agreements,
base salaries may not be decreased.
ANNUAL INCENTIVE COMPENSATION -- The objective of the Management Incentive
Plan is to deliver competitive levels of compensation for the attainment of
annual financial objectives and operating results that the Committee believes
are primary drivers of stock price performance over time. Target awards for the
Company's executive officers under the plan represent the 50th percentile of the
competitive market for executive positions at companies of similar size and
complexity. Actual awards are determined based primarily on the Company's and
executive's performance during the fiscal year, with the maximum award available
being two times the target incentive for executive officers. During fiscal year
1997, the Company's officers awards were based primarily on attainment of
certain operating cash flow, return on gross assets and customer satisfaction
goals.
To attain the financial objectives for fiscal year 1997, the Company was
required to improve its return on gross assets and generate increased cash flow,
which together were weighted 75% for each of the named executive officers.
Customer satisfaction required that the Company deliver consistent and
integrated service of the highest quality through the teamwork and cooperation
of a customer-driven organization, and was weighted 25% for each of the named
executive officers. In addition, all other executive officers were responsible
for achieving team and individual performance objectives that demonstrated
commitment to Company values and encouraged individual accountability. To ensure
alignment of the plan with shareholder interests, above-target incentive awards
could only be earned if superior financial results in excess of plan goals were
achieved.
Fiscal year 1997 presented a shift in the Company's focus from external
growth to an emphasis on internal growth with success measured by cash flow and
return on gross assets. The measurement for the return on gross assets
represented the quotient of operating cash flow divided by average gross assets.
The Company was successful in delivery on four of the five milestones
established for fiscal year 1997, that included lowering SG&A costs as a percent
of revenue, capital expenditures and interest-bearing debt while improving the
return on gross assets and the operating profit margin. Adjustments were made to
the operating cash flow target based on the Company's divestiture activity
during fiscal year 1997, as prescribed by the plan.
While most of the Company's goals for fiscal year 1997 were met, the
attainment levels associated with the Management Incentive Plan's goals resulted
in the Company's officers receiving awards that were equal to approximately 60%
of their target awards.
The Company's milestones for fiscal year 1998, which consist of targets for
(i) the return on gross assets, (ii) the operating margin, (iii) SG&A costs as a
percent of revenue and (iv) internal and external growth, should continue to
align the Company's performance objectives with the interests of its
shareholders. In addition, incentive compensation under the Management Incentive
Plan will continue to link employees to common goals and reward them only as
shareholders and customers benefit from improved performance by the Company.
To encourage executives to hold a significant ownership stake in the
Company, executives can elect to receive payment of up to 100% of their annual
incentive award in restricted Common Stock,
12
<PAGE> 15
with a premium of 25% additional shares, under the Company's Convertible Annual
Incentive Award Plan. Stock granted for this purpose is restricted for a
two-year period during which the shares are forfeitable and the executive cannot
sell, transfer, pledge or assign ownership.
STOCK INCENTIVE PLAN -- The Committee strongly believes that by providing
those persons who have substantial responsibility for the management and
profitable growth of the Company with an opportunity to increase their ownership
of Company stock, the best interest of the Company's shareholders and executives
will be closely aligned. During 1997, executives were eligible to receive stock
options giving them the right to purchase shares of Common Stock of the Company
at a specified price in the future. Options granted in fiscal year 1997 have a
term of ten years, become exercisable, subject to certain exceptions, in annual
increments of 25% beginning one year after the date of grant, and have an option
price equal to 100% of the fair market value of the Company's Common Stock on
the date of grant. No stock options granted under the current plans have been
repriced, nor will the Committee consider option repricing in the future.
In determining stock option grants, the Committee establishes a competitive
range (with the midpoint of the competitive range approximating the 50th
percentile of the survey data) of annualized long-term award values based on
each executive's salary level, position, and compensation mix. The annualized
award range is then converted to actual numbers of stock options with the value
of stock options estimated using the Black-Scholes option valuation model. The
actual number of options granted is based upon each executive's contribution and
performance. Additionally, from time to time, special circumstances (i.e.,
significant changes in position or responsibilities, etc.) may be considered in
making an option award, and there have been instances, in prior year grants, of
exceptions to the normal range where the Committee deemed it appropriate.
LONG-TERM INCENTIVE PLAN -- For fiscal year 1997, the Committee approved
the reallocation of approximately two-thirds of the executive officers' and
certain key executives' stock option participation over the next four years into
an upfront grant of performance shares that vest and are converted into shares
of the Company's Common Stock only when both of the following critical
performance measures are met:
- Significant improvement in operating cash flow after subtracting a charge
for the Company's cost of capital, which requires that the Company earns
an average annual return on gross assets over the five-year period
beginning October 1, 1996 that meets pre-established cumulative dollar
amounts exceeding 13%; and
- Appreciation in the value of the Company's Common Stock over the same
five-year period.
The Long-Term Incentive Plan established provisions for partial vesting of
performance shares as performance measures are attained, while full vesting in
the performance shares occurs only when (i) the fair market value of the
Company's Common Stock reaches $50 per share and (ii) the Company achieves
substantially improved cash flow.
13
<PAGE> 16
EXECUTIVE STOCK OWNERSHIP GUIDELINES
To further align the interests of executives with the Company's
shareholders in terms of both risk and reward, the Committee established stock
ownership guidelines that are designed to encourage the accumulation and
retention of a significant portion of the Company's Common Stock by its
executive officers. The guidelines suggest that by the end of calendar year
2000, each executive officer hold a minimum of three times base salary in the
Company's Common Stock.
Eligible shares include stock held as a shareholder of record, in brokerage
accounts, restricted shares granted under the Convertible Incentive Award Plan,
stock acquired through the Company's Stock Ownership and Savings [401(k)] Plan,
and any deferred compensation in the form of phantom share units. A variety of
mechanisms have been developed to provide opportunities for executives to
increase stock ownership over an extended time.
DISCUSSION OF 1997 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The Company's Guidelines on Corporate Governance Issues require an annual
evaluation of the Chief Executive Officer's ("CEO") performance. As part of this
process, the Committee is responsible for conducting an independent assessment
of the CEO's performance which includes soliciting feedback from the Company's
directors. Every director is requested to complete a written evaluation of the
CEO's performance based on a formal position description for the job of CEO,
which outlines responsibilities and key business objectives in each of the
following areas:
- Leadership
- Strategic Planning
- Financial Goals and Systems
- Financial Results
- Succession Planning
- Human Resources
- Communications with Shareholders
- External and Board Relations
In considering the compensation for the CEO for fiscal year 1997, the
Committee has reviewed Mr. Ranck's existing compensation arrangements and both
Company and individual performance. The Committee has made the following
determinations regarding Mr. Ranck's fiscal year 1997 compensation:
- While there was no increase in Mr. Ranck's $600,000 base salary during
fiscal year 1997, as a result of the CEO evaluation process described
above, and Mr. Ranck's salary as compared to the competitive market, the
Committee increased Mr. Ranck's base salary to $800,000 effective October
1, 1997;
- The Committee made an annual incentive award for fiscal year 1997 to Mr.
Ranck in the amount of $253,470; and
14
<PAGE> 17
- A stock option grant of 38,000 shares (at an option price equal to fair
market value on the date of grant) was made during fiscal year 1997, and
170,000 performance shares were awarded pursuant to the Company's
Long-Term Incentive Plan.
The Committee will continue to use the results of the CEO evaluation
process as part of its deliberations when considering future adjustments to Mr.
Ranck's compensation.
CONCLUSION -- After completing its assessment of all compensation elements,
the Committee believes that the total compensation opportunity offered to
executives of the Company is competitive with the compensation programs provided
by other comparable corporations. The Committee also believes that the Company's
incentive plans will continue to encourage and reward participants to perform
consistent with the returns that are generated on behalf of the Company's
shareholders and customers. The Committee will continue to monitor the
effectiveness of the Company's total compensation program to ensure that it
supports the strategic human resource needs and integrity of the Company.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Gerald Grinstein, Chairman
William T. Butler
Marina v.N. Whitman
15
<PAGE> 18
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the S&P 500 Index and to the Dow Jones Pollution Control Index
for the Company's last five fiscal years. The graph assumes that the value of
the investment in the Company's Common Stock and each index was $100 at
September 30, 1992 and that all dividends were reinvested:
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD POLLUTION CONTROL
(FISCAL YEAR COVERED) BFI S&P 500 INDEX INDEX
<S> <C> <C> <C>
1992 100 100 100
1993 99 113 88
1994 141 117 92
1995 137 152 93
1996 116 183 99
1997 180 257 121
</TABLE>
16
<PAGE> 19
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation of the Chief Executive Officer, each of the Company's four other
most highly compensated executive officers for the fiscal year ended September
30, 1997, and a former executive officer that held office during fiscal 1997
(collectively, the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
- ----------------------------------------------------------------------------- -----------------------
(a) (b) (c) (d) (e) (f) (g) (h)
SECURITIES
UNDERLYING
RESTRICTED STOCK
OTHER ANNUAL STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) (SHARES) COMPENSATION(4)
--------------------------- ---- -------- -------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce E. Ranck 1997 $600,000 $126,700 $ -0- $158,400 38,000 $ 4,000
President and 1996 600,000 -0- -0- -0- 250,000 3,750
Chief Executive Officer 1995 500,000 500,000 8,483 -0- 55,000 3,750
J. Gregory Muldoon 1997 437,000 128,600 -0- 53,500 18,500 4,000
Executive Vice President 1996 365,800 -0- -0- -0- 176,000 3,750
and Chief Operating 1995 290,000 174,100 -0- 72,500 24,000 3,750
Officer
Norman A. Myers 1997 508,000 126,500 -0- 52,600 15,500 2,992
Executive Vice President and 1996 508,000 -0- -0- -0- 52,500 2,992
Chief Development Officer 1995 475,000 237,500 -0- 297,400 50,000 2,976
Jeffrey E. Curtiss 1997 364,000 -0- -0- 137,200 11,000 3,070
Senior Vice President 1996 364,000 -0- -0- -0- 27,500 3,070
and Chief Financial 1995 300,000 120,100 7,318 150,200 25,000 2,889
Officer
Rufus Wallingford 1997 364,000 54,900 -0- 68,500 11,000 4,000
Senior Vice President and 1996 364,000 -0- -0- -0- 27,500 3,750
General Counsel 1995 350,000 140,000 8,640 175,300 25,000 3,750
Louis A. Waters 1997 513,000 69,500 -0- -0- 15,500 187,222(5)
Former Chairman and CEO 1996 465,000 -0- -0- -0- 44,400 183,703(5)
of BFI International, Inc. 1995 426,000 232,500 7,722 291,100 44,400 181,218(5)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) The bonus amount for fiscal 1997 includes the cash portion paid to and
deferred by the officer (Messrs. Muldoon and Wallingford deferred 25% and
10%, respectfully, of their cash awards); the remaining portion of the
incentive compensation awards for Messrs. Ranck, Muldoon, Myers, Curtiss and
Wallingford was paid in restricted shares of the Company's Common Stock, the
amount of shares being determined by the officer's personal election under
the Company's Convertible Annual Incentive Award Plan. Mr. Curtiss elected
to receive 100%, Messrs. Ranck and Wallingford each elected to receive 50%,
and Messrs. Muldoon and Myers each elected to
17
<PAGE> 20
receive 25%, of their fiscal 1997 incentive compensation award in restricted
shares (see note (3) below for details regarding the terms of the restricted
shares).
(2) For fiscal 1997 and 1996, the named executive officers did not receive any
perquisites or other personal benefits in which the aggregate amount of such
compensation exceeded $50,000 or 10% of the total of his annual salary and
bonus. For fiscal 1995, consists of income and the tax gross-up associated
with spousal attendance at a Board of Directors' meeting.
(3) On December 2, 1997, Messrs. Ranck, Muldoon, Myers, Curtiss and Wallingford
were granted a total of 12,970 restricted shares of the Company's Common
Stock based upon the percentages elected by the officers under the Company's
Convertible Annual Incentive Award Plan for fiscal 1997, which included an
additional 25% stock premium. The restricted shares are restricted for a
two-year period, during which time the officers cannot sell, transfer,
pledge or assign them, but as the registered holders of these shares, the
officers can vote the shares and receive any dividends. At the end of the
two-year restricted period, taxable income will be recognized in an amount
to equal fair market value of the shares on that date. The value of the
restricted shares issued is based on the fair market value of the Company's
Common Stock which is the closing price of the stock the trading day
preceding date of grant. The number and value, respectively, of the
aggregate restricted share holdings as of September 30, 1997 for each named
executive officer were as follows: Muldoon: 2,340 shares, $89,100; Myers:
9,595 shares, $365,200; Curtiss: 4,845 shares, $184,400; Wallingford: 5,655
shares, $215,200; and Waters: 9,390 shares, $357,400.
(4) Consists of the amount of the Company's match for each named executive
officer under the BFI Employee Stock Ownership and Savings Plan.
(5) Includes $183,222, $179,953 and $177,468 in retirement pay for fiscal 1997,
1996 and 1995, respectively, earned for 20 years of service prior to his
position as Chairman and Chief Executive Officer of BFI International, Inc.
Mr. Waters, as beneficiary, receives trust payments paid in accordance with
a trust agreement. Mr. Waters ceased being an executive officer on March 11,
1997. See "Employment and Severance Agreements" herein for a discussion of
Mr. Waters' employment agreement.
18
<PAGE> 21
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock options
granted to the named executive officers in the last fiscal year:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ----------------------------------------------------------------------------------- -------------
(a) (b) (c) (d) (e) (f)
NUMBER OF PERCENTAGE GRANT DATE
SECURITIES OF TOTAL PRESENT
UNDERLYING OPTIONS VALUE BASED
OPTIONS GRANTED TO EXERCISE ON
GRANTED EMPLOYEES IN PRICE EXPIRATION BLACK-SCHOLES
NAME (SHARES)(1) FISCAL YEAR (PER SHARE) DATE MODEL(2)
---- ----------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Bruce E. Ranck.............. 38,000 1.9% $26.50 11/04/2006 $286,900
J. Gregory Muldoon.......... 18,500 0.9% 26.50 11/04/2006 139,700
Norman A. Myers............. 15,500 0.8% 26.50 11/04/2006 117,000
Jeffrey E. Curtiss.......... 11,000 0.6% 26.50 11/04/2006 83,100
Rufus Wallingford........... 11,000 0.6% 26.50 11/04/2006 83,100
Louis A. Waters............. 15,500 0.8% 26.50 11/04/2006 117,000
</TABLE>
- ---------------
(1) All options were granted on November 5, 1996 and were granted under the
Company's 1993 Stock Incentive Plan, except for the option granted to Mr.
Ranck, which was granted from the 1990 Stock Option Plan. Twenty-five
percent of the above options become exercisable one year after the date of
grant and, subject to certain acceleration provisions, 25% will become
exercisable each year thereafter on a cumulative basis.
(2) Based upon the Black-Scholes option valuation model, which estimates the
present dollar value of BFI Common Stock to be $7.55 per option share, as
adjusted for vesting schedule. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise price
on the date the option is exercised, so that there is no assurance the value
realized will be at or near the value estimated by the Black-Scholes model.
The assumptions underlying the Black-Scholes model include (a) an expected
volatility of 24.48% based on the prior two years of quarter-end closing
stock prices of BFI Common Stock, (b) a risk-free rate of return of 6.69%,
which approximates the 10-year Treasury bond rate, (c) BFI Common Stock
dividend yield of 2.57%, and (d) a six-year period from time of grant until
exercise.
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<PAGE> 22
STOCK OPTIONS EXERCISED IN LAST FISCAL YEAR
The following table sets forth the aggregate option exercises during the
last fiscal year and the value of outstanding options at September 30, 1997 for
each of the named executive officers:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND SEPTEMBER 30, 1997 OPTION VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED
SEPTEMBER 30, 1997 IN-THE-MONEY OPTIONS AT
SHARES (SHARES) SEPTEMBER 30, 1997(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce E. Ranck........... -0- $ -0- 560,650 266,750 $6,737,000 $2,224,500
J. Gregory Muldoon....... 2,000 3,200 148,000 168,500 1,508,100 1,392,900
Norman A. Myers.......... -0- -0- 310,625 92,375 2,910,600 868,800
Jeffrey E. Curtiss....... -0- -0- 108,125 35,375 1,511,300 371,800
Rufus Wallingford........ -0- -0- 41,875 40,625 448,800 364,000
Louis A. Waters.......... 60,000 677,000 219,100 82,100 2,608,200 779,700
</TABLE>
- ---------------
(1) Computed based upon the difference between aggregate fair market value and
aggregate exercise price at September 30, 1997.
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth certain information regarding performance
share awards to the named executive officers in the last fiscal year:
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE-BASED PLANS (2)
NUMBER OF PERIOD UNTIL ---------------------------------
PERFORMANCE MATURATION THRESHOLD TARGET MAXIMUM
NAME SHARES OR PAYOUT (SHARES) (SHARES) (SHARES)
---- ----------- ------------ --------- -------- --------
<S> <C> <C> <C> <C> <C>
Bruce E. Ranck...................... 170,000 5 years 42,500 85,000 170,000
J. Gregory Muldoon.................. 84,000 5 years 21,000 42,000 84,000
Norman A. Myers..................... 72,000 5 years 18,000 36,000 72,000
Jeffrey E. Curtiss.................. 50,000 5 years 12,500 25,000 50,000
Rufus Wallingford................... 50,000 5 years 12,500 25,000 50,000
Louis A. Waters (3)................. 18,000 5 years N/A N/A N/A
</TABLE>
- ---------------
(1) In fiscal 1997, the Company established a Long-Term Incentive Plan ("LTIP").
Awards under the LTIP consist of grants of performance shares which are
convertible into an equivalent
20
<PAGE> 23
number of shares of Common Stock upon the attainment of certain Company and
stock price performance measures. In its discretion, the Compensation
Committee of the Board of Directors (the "Committee") is authorized to
terminate the LTIP at the end of the four years. It is expected that the
Committee will terminate the plan and seek any required shareholder approval
to institute a new long-term plan if, at the end of four years, substantial
progress has not been made in attaining the performance goals described
below. Awards of performance shares do not provide the participant with
rights to dividends or voting rights prior to issuance of shares of Common
Stock pursuant to such award. Upon issuance of such Common Stock,
participants will also receive a cash payment equal to the sum of all
dividends that would have been declared on the Common Stock from October 1,
1996 through the issuance date.
(2) The performance shares will vest in increments of 25% based on the
attainment of two performance goals. Each performance goal will have been
attained when the target levels for the two performance measures:
"Cumulative Cash Value Added" or "Cumulative CVA" (which is defined
generally as operating cash flow minus a charge for the Company's cost of
capital) and "Moving Average Stock Price", as defined in the LTIP, have been
attained and are concurrently in effect as of the end of any fiscal quarter
during the term of the plan. The table below sets forth the target levels
that must be achieved to attain each of the performance goals and the
percentage of performance shares that vest upon the attainment of each goal:
<TABLE>
<CAPTION>
PERFORMANCE GOALS
------------------------------
1 2 3 4
--- ---- ---- ----
<S> <C> <C> <C> <C>
Cumulative CVA (in millions)...................... $20 $130 $240 $350
Moving Average Stock Price........................ $35 $ 40 $ 45 $ 50
Vesting of Performance Shares..................... 25% 25% 25% 25%
Cumulative Vesting of Performance Shares.......... 25% 50% 75% 100%
</TABLE>
(3) Mr. Waters was initially awarded 72,000 performance shares; however, due to
his change in status with the Company effective March 11, 1997, he will only
be eligible to vest up to 18,000 shares of the Company's Common Stock for
the first hurdle based upon the attainment of the goals as set forth under
the LTIP.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Bruce E. Ranck and Norman A. Myers are each parties to employment
agreements with the Company. Their agreements provide for continuously renewing
five-year terms until age 65, and continuing year to year thereafter until
terminated by the Company or the employee. The agreements also provide for the
payment of minimum annual base salaries and for participation by the employee in
all Company benefit plans and programs. The current annual salary for Messrs.
Ranck and Myers is $800,000 and $534,000, respectively.
The employment agreements for Messrs. Ranck and Myers include provisions
governing part-time status, termination and change in control. If the Company
should terminate an agreement other than for cause (as defined in the
agreements), or the Company breaches the agreement, or the employee is not
elected and serving in his current capacity for the Company, or the employee's
21
<PAGE> 24
duties or responsibilities are materially changed or diminished (without his
consent) from his current duties, the agreement may be terminated by either
party on a date five years after notice of termination is given. During that
ensuing period, the employee would continue his employment on a part-time basis
and be available to consult with the Company. Generally, the employee's
compensation while on part-time status would be 75 percent of the average of the
employee's compensation (including salary and bonus) for the two highest of the
three years prior to the employee going on part-time status. In the event that
Messrs. Ranck and Myers were terminated without cause during 1998 or if the
employee terminated the agreement because of a breach by the Company, his annual
compensation on part-time status would be approximately $723,600 and $615,900,
respectively, subject to an annual cost-of-living adjustment. As a part-time
status employee, he would continue to participate in the Company's benefit plans
and programs. The agreement with each employee also provides that he may elect
part-time status upon attaining the age of 62, at reduced annual compensation,
subject to an annual cost-of-living adjustment, but without any participation in
the Company's incentive compensation plans.
In the event of a change in control of the Company, the employee may elect
to receive a lump sum payment equal to three times the employee's average
annualized base compensation includable in gross income over the five taxable
years preceding the tax year in which the change in control occurs. If a change
in control were to occur during 1998 and the election to take the change in
control payment were made by Messrs. Ranck and Myers, they would receive
approximately $2,514,600 and $2,262,800, respectively. The election by the
employee to take the change in control payment would be in lieu of other
benefits and rights under such employee's agreement, except, generally, amounts
payable under pension, insurance and similar plans, reimbursement for legal and
other advisory expenses and certain stock option and indemnification rights.
J. Gregory Muldoon, Jeffrey E. Curtiss and Rufus Wallingford each has an
employment agreement with the Company, which has a continuously renewing
three-year term until age 65, unless sooner terminated by the parties. The
agreements provide for the payment of a minimum annual base salary and for
participation by the officers in all Company benefit plans and programs. The
current annual salary for Messrs. Muldoon, Curtiss and Wallingford is $534,000,
$383,000 and $383,000, respectively. The employment agreements include
provisions governing inactive status, termination and change of control. If the
Company should terminate the agreements other than for cause (as defined in the
agreements), the termination would be effective on the third anniversary of the
date of notice of termination (or, if sooner, when the officer reaches age 65),
and the officer would go on inactive status on the date of such notice. The
officer's compensation while on inactive status would be 75% of the base salary
that the officer was earning prior to such notice and the officer would continue
to participate in the Company's benefit programs. In the event of a change of
control of the Company and if the officer has not been placed on inactive status
by the Company or terminated for cause, then he may elect (within twelve months
after the date of the change of control) to receive a lump sum payment equal to
three times his base amount (as defined by federal tax law). If a change of
control were to occur during 1998 and Messrs. Muldoon, Curtiss and Wallingford
elected to take the change of control payment, they would receive approximately
$2,298,200, $1,249,000 and $1,491,800, respectively. Such lump sum payments
would terminate all of the officers' rights under their agreements.
22
<PAGE> 25
Effective March 11, 1997, Louis A. Waters no longer served as an executive
officer or Chairman and CEO of BFI International, Inc. Pursuant to his
employment agreement, Mr. Waters will continue on part-time status until March
11, 2002. Mr. Waters' current salary pursuant to his employment agreement is
$553,608 for the five-year period and will not be subject to any percentage
increase in the Consumer Price Index. After twenty years of service, Mr. Waters
began to receive a monthly retirement benefit on February 1, 1989 pursuant to a
Company-funded trust of which Mr. Waters is the beneficiary. His current monthly
retirement benefit payment under the trust agreement is approximately $15,300.
Upon actual retirement from the Company, Mr. Waters' employment agreement
provides that the current retirement benefit payment will be replaced by a
monthly benefit that is estimated at age 65 to be $7,400. This retirement
benefit will be in addition to those payable from the BFI Retirement Plan and
the BFI Benefit Restoration Plan (see "Retirement and Restoration Plans"). His
employment agreement also provides that his retirement benefits will increase
annually based upon 75% of the percentage increase in the Consumer Price Index.
RETIREMENT AND RESTORATION PLANS
The Company's defined-benefit retirement plan (the "Plan") covers all
employees of the Company located in the United States, except certain employees
subject to collective bargaining agreements and certain other employees covered
by other plans not made a part of the Plan. Certain employees are also covered
by either the BFI Benefit Restoration Plan or the BFI Cash Balance Restoration
Plan.
Generally, the Plan provides that, on December 31 of each year, account
balances established for each eligible employee are credited in an amount equal
to 4.5% of the salary and bonus received by such employee during the period
beginning January 1 and ending December 31 of that year. Currently, the balance
in each employee's account earns interest at a rate of 6% per year. The normal
retirement age under the Plan is 65 with an early retirement option at age 55
with ten years of vesting service. Benefits under the Plan vest after five years
of vesting service. Each of Messrs. Myers and Waters' benefit is not less than
the benefit calculated under the prior plan formula.
The estimated annual benefits payable at age 65 (as a single life annuity)
for each named executive officer are as follows: Mr. Ranck, $389,000; Mr.
Muldoon, $297,000; Mr. Myers, $334,000; Mr. Curtiss, $115,000; Mr. Wallingford,
$37,000; and Mr. Waters, $268,000. See discussion under "Employment and
Severance Agreements" for information concerning additional retirement benefits
for Mr. Waters.
Currently, the Internal Revenue Code limits the pension from the Plan to
$130,000 and limits the annual pay used to calculate pensions to $160,000; these
amounts are indexed annually to the changes in Social Security benefits. If the
annual pension to any person would be limited by Sections 415 or 401(A)(17) of
the Internal Revenue Code, such amounts otherwise payable to the Plan
participant pursuant to the Plan may be paid directly to such participant by the
Company, depending on whether he is also a participant of either of the BFI
Benefit Restoration Plan or the BFI Cash Balance Benefit Restoration Plan. The
purpose of the BFI Benefit Restoration Plan is to pay all participants in the
plan the full retirement benefit otherwise payable to them but for the benefit
23
<PAGE> 26
limitations imposed by Section 415 and the pay limitation imposed by Section
401(A)(17) of the Internal Revenue Code. The purpose of the BFI Cash Balance
Restoration Plan is to pay all participants in the plan the retirement benefit
otherwise payable but for the benefit limitation imposed by Section 401(A)(17)
of the Internal Revenue Code.
CERTAIN TRANSACTIONS
In September 1997, the Company commenced a $1 billion equity buy-back
program. In connection with this program, the Company has purchased shares of
Company Common Stock from certain of its officers and directors and expects to
engage in similar transactions during the remainder of 1998. All such purchases
are based on the closing sales price of the Company's Common Stock on the last
trading day preceding the transaction date. In November 1997, the Company
purchased 299,800 shares at $36.125 per share from Mr. Ruckelshaus, and 15,000
shares at $36.4375 per share from Dr. Grayson, each of whom is a director of the
Company. In November 1997, the Company purchased 35,200 shares of the Company's
Common Stock at $36.375 per share from Mr. Myers and, in December 1997,
purchased 1,700 shares at $36.1875 per share from Mr. Wallingford and 51,095
shares at $35.5625 from Mr. Muldoon.
PROPOSAL TO APPROVE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Andersen LLP as independent
auditors of the Company and its subsidiaries for the fiscal year ending
September 30, 1998. This appointment was made subject to the approval of the
Company's shareholders. Accordingly, the following resolution will be offered at
the Meeting:
"RESOLVED, that the appointment by the Board of Directors of
Browning-Ferris Industries, Inc. of Arthur Andersen LLP as the auditors of
the Company and its subsidiary companies for the fiscal year ending
September 30, 1998, is hereby approved."
Arthur Andersen LLP has been serving the Company in this capacity since
1973 and has advised the Company that it will have in attendance at the Meeting
a representative who will be afforded an opportunity to make a statement, if
such representative desires to do so, and will respond to appropriate questions
presented at the Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 furnished to the Company during
its most recent fiscal year and Forms 5 furnished to the Company with respect to
its most recent fiscal year, the Company believes that all transactions by
reporting persons were reported on a timely basis.
OTHER MATTERS
Management of the Company does not intend to present any other items of
business and knows of no other items of business that are likely to be brought
before the Meeting, except those
24
<PAGE> 27
set forth in the foregoing Notice of Annual Meeting of Shareholders. However, if
any other matters should properly come before the Meeting, the persons named in
the enclosed proxy will have discretionary authority to vote such proxy in
accordance with their best judgment on such matters.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any shareholder who wishes to submit a proposal to be presented at the 1999
Annual Meeting of Shareholders must deliver such proposal to the Secretary of
the Company. The proposal must be received at the Company's executive offices
(757 N. Eldridge, Houston, Texas 77079) no later than September 30, 1998 for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
COST OF SOLICITATION
This solicitation is made on behalf of the Board of Directors of the
Company. The cost of solicitation of proxies in the accompanying form will be
paid by the Company. The Company will also, pursuant to regulations of the
Securities and Exchange Commission, make arrangements with brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy materials
to their principals and will reimburse them for their reasonable expenses in so
doing. In addition to solicitation by use of the mails, certain directors,
officers and employees of the Company may solicit the return of proxies by
telephone, telegram or personal interviews. In addition, the Company has
retained Morrow & Co., Inc., New York, New York, to assist in the solicitation
of proxies and will pay approximately $10,000 in fees for the solicitation of
proxies to such firm, plus reimbursement of expenses.
By Order of the
Board of Directors,
/s/ Gerald K. Burger
Gerald K. Burger
Vice President and Secretary
Houston, Texas
January 27, 1998
25
<PAGE> 28
[BROWNING-FERRIS INDUSTRIES, INC. LOGO]
BROWNING-FERRIS INDUSTRIES, INC.
---------------------------------------
---------------------------------------
NOTICE OF 1998 ANNUAL MEETING
AND
PROXY STATEMENT
---------------------------------------
---------------------------------------
IMPORTANT
PLEASE SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED
Recycled paper LOGO ENVELOPE.
<PAGE> 29
BROWNING-FERRIS INDUSTRIES, INC.
PROXY - ANNUAL MEETING OF SHAREHOLDERS - MARCH 4, 1998
The undersigned shareholder of record on January 6, 1998, of
P Browning-Ferris Industries, Inc., a Delaware corporation (the
"Company"), hereby appoints WILLIAM D. RUCKELSHAUS and GERALD K.
R BURGER, either one or both of them, proxies of the undersigned, with
full power of substitution, to vote, as designated below, at the
O annual meeting of shareholders of the Company to be held on March 4,
1998, at 2:00 p.m., Houston time, in the Company's auditorium located
X on the 14th floor of the corporate office at 757 N. Eldridge, Houston,
Texas 77079, and at any adjournment thereof, the number of votes which
Y the undersigned would be entitled to cast if personally present:
To elect the following three nominees to serve as directors for
three-year terms and until their successors are duly elected and
qualified:
William T. Butler
Joseph L. Roberts, Jr.
Marina v.N. Whitman
--------------------------------------
SEE REVERSE
SIDE
--------------------------------------
<PAGE> 30
This Proxy is solicited on behalf of the Board of Directors and will
be voted. If no direction is made, this Proxy will be voted "FOR" all of
the Board of Directors' nominees and "FOR" proposal (2).
<TABLE>
<CAPTION>
============================================================================================================================
The Board of Directors recommends a vote FOR proposals 1 and 2.
============================================================================================================================
<S> <C>
1. Election of Directors FOR WITHHELD 3. In their discretion, the proxies are authorized to
(see reverse) [ ] [ ] vote on such other matters as may properly come
before the meeting or any adjournment thereof.
For, except vote withheld from the
following nominee(s): All as more particularly described in the Proxy
Statement relating to such meeting, receipt of which
- ----------------------------------- is hereby acknowledged.
- -----------------------------------
2. Proposal to approve the appointment of Arthur Andersen
LLP as auditors for the Company's 1998 fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
============================================================================================================================
</TABLE>
Please sign your name here exactly as it appears hereon.
Joint owners must each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give
your full title as it appears hereon. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
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Signature(s) Date
