<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:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
WASTE MANAGEMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(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
[WASTE MANAGEMENT, INC. LOGO]
WASTE MANAGEMENT, INC.
1001 FANNIN STREET, SUITE 4000
HOUSTON, TEXAS 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
To Our Stockholders:
The 2000 Annual Meeting of Stockholders (the "Meeting") of Waste
Management, Inc. (the "Company") will be held at the Hyatt Hotel at 1200
Louisiana Street, Houston, Texas 77002, on May 16, 2000, at 11:00 a.m., Houston,
Texas time, for the purpose of considering and voting on:
1. Election of three directors to serve for three-year terms.
2. Approval of an amendment to the Company's 1996 Stock Option Plan for
Non-Employee Directors (the "Non-Employee Director Plan") that would
increase the number of shares of the Company's common stock available
for awards under the Non-Employee Director Plan.
3. Approval of the adoption of the Company's 2000 Stock Incentive Plan (the
"Incentive Plan").
4. Approval of an amendment to the Company's Employee Stock Purchase Plan
(the "ESPP") that would increase the number of shares reserved for
purchase and issuance under the ESPP.
5. Approval of the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000.
6. Such other business as may properly be brought before the Meeting or any
adjournments thereof.
The Meeting may be postponed or adjourned from time to time, and at any
reconvened meeting, actions with respect to the matters specified in this notice
may be taken without further notice to stockholders unless required by the
By-laws of the Company.
Only stockholders of record at the close of business on March 24, 2000 are
entitled to notice of, and to vote on all matters at, the Meeting and any
adjournments thereof. A list of all such stockholders will be available for
inspection for proper purposes at the Meeting and, during the ten days prior to
the Meeting, at the offices of the Company, 1001 Fannin Street, Suite 4000,
Houston, Texas 77002.
By Order of the Board of Directors,
/s/ LAWRENCE O'DONNELL, III
----------------------------------
Lawrence O'Donnell, III
Senior Vice President, General
Counsel and Secretary
April 5, 2000
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ENCLOSED PREPAID ENVELOPE.
<PAGE> 3
WASTE MANAGEMENT, INC.
1001 FANNIN STREET, SUITE 4000
HOUSTON, TEXAS 77002
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Waste Management, Inc., a Delaware corporation ("Waste
Management" or the "Company"), of proxies to be voted at its 2000 Annual Meeting
of Stockholders to be held at the Hyatt Hotel, 1200 Louisiana Street, Houston,
Texas 77002 on May 16, 2000 at 11:00 a.m., Houston, Texas time, and at any
adjournment(s) thereof (such meeting or adjournment(s) thereof are referred to
as the "Meeting"). This Proxy Statement and the accompanying materials will be
mailed on or about April 10, 2000, to holders of record of common stock, par
value $0.01 per share ("Common Stock"), of the Company as of the record date.
Solicitation of proxies by mail is expected to begin on or about April 10,
2000. In addition to use of the mails, proxies may be solicited by personal
interview, telephone and facsimile, and by banks, brokerage houses, and other
institutions. All costs of soliciting proxies for the Meeting will be borne by
the Company. The Company has retained Corporate Investor Communications, Inc. to
coordinate the solicitation of proxies for a fee of $7,500 plus expenses.
Nominees or fiduciaries will be requested to forward the solicitation for the
execution of proxies. The Company will, upon request, reimburse banks, brokerage
houses, other institutions, nominees, and fiduciaries for their reasonable
expenses in forwarding solicitation materials to beneficial owners.
SHARES AS TO WHICH PROXIES HAVE BEEN EXECUTED WILL BE VOTED AS SPECIFIED IN
THE PROXIES. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED:
- FOR THE ELECTION OF NOMINEES LISTED HEREIN AS DIRECTORS,
- FOR THE APPROVAL OF THE AMENDMENT TO THE NON-EMPLOYEE DIRECTOR PLAN,
- FOR THE ADOPTION OF THE INCENTIVE PLAN,
- FOR THE APPROVAL OF THE AMENDMENT TO THE ESPP AND
- FOR THE APPROVAL OF THE APPOINTMENT OF AUDITORS.
Any stockholder returning the accompanying proxy may revoke such proxy at
any time prior to its exercise by (a) giving written notice to the Company of
such revocation, (b) voting in person at the Meeting, or (c) executing and
delivering to the Company a later-dated proxy. Written revocations and
later-dated proxies should be sent to the Secretary of Waste Management, Inc.,
1001 Fannin Street, Suite 4000, Houston, Texas 77002.
ANNUAL REPORT
A copy of the Company's 1999 Annual Report to Stockholders, covering the
fiscal year ended December 31, 1999, including the Company's Annual Report on
Form 10-K containing financial statements, is enclosed with this Proxy
Statement. Neither the Annual Report to Stockholders nor the Annual Report on
Form 10-K is incorporated by reference into this Proxy Statement or deemed to be
a part of the materials for the solicitation of proxies.
1
<PAGE> 4
VOTING SECURITIES
The record date for determining stockholders entitled to notice of, and to
vote at, the Meeting is the close of business on March 24, 2000. On that date,
the Company had outstanding and entitled to vote 627,236,438 shares of Common
Stock. Holders of record of Common Stock on the record date will be entitled to
one vote for each share held on all matters properly brought before the Meeting.
The affirmative vote of a plurality of the votes cast at the Meeting will
be required for the election of directors. A properly executed proxy marked
"Withhold Authority" with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated, although it
will be counted for purposes of determining whether there is a quorum. For each
other item to be acted upon at the Meeting, the affirmative vote of a majority
of the shares represented in person or by proxy and entitled to vote upon a
matter will be required for approval. A properly executed proxy marked
"Abstain", although counted for purposes of determining whether there is a
quorum, will not be voted. Accordingly, an abstention will have the same effect
as a vote cast against that matter.
A majority of the votes entitled to be cast on matters to be considered at
the Meeting constitutes a quorum. If a share is represented for any purpose at
the Meeting, it is deemed to be present for all other matters. In accordance
with the rules of the New York Stock Exchange (the "NYSE"), brokers and nominees
may be precluded from exercising their voting discretion with respect to certain
matters to be acted upon (e.g., any proposal which would substantially affect
the rights or privileges of the Common Stock) and thus, in the absence of
specific instructions from the beneficial owner of the shares, will not be
empowered to vote the shares on such matters. A broker non-vote will not be
counted in determining the number of shares necessary for approval of the
proposals. Shares represented by such broker non-votes will, however, be counted
for purposes of determining whether there is a quorum. None of the matters to be
acted upon at the Meeting are considered to substantially affect the rights or
privileges of the Common Stock. Accordingly, broker non-votes will not have any
impact on the vote on a matter.
The following information relates to the holders of Common Stock known to
the Company on December 31, 1999 to own beneficially more than 5% or more of the
Common Stock, in each case according to a schedule 13G filed with the Securities
and Exchange Commission (the "SEC") by the respective stockholder. For the
purposes of this Proxy Statement, beneficial ownership of securities is defined
in accordance with the rules of the SEC to mean generally the power to vote or
dispose of securities, regardless of any economic interest therein.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
--------------------------------------
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF CLASS
- ---------------- ---------------- -------------------
<S> <C> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc. .................. 35,505,069 5.8%
One McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, Texas 75204-2429
Oppenheimer Capital......................................... 36,749,584 5.9%
1345 Avenue of the Americas
New York, New York 10105
Southeastern Asset Management, Inc. ........................ 61,394,007(1) 9.9%
6075 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
</TABLE>
- ---------------
(1) Does not include 755,000 shares held by completely non-discretionary
accounts over which Southeastern Asset Management, Inc. has neither voting
nor dispositive power and for which it disclaims beneficial ownership.
2
<PAGE> 5
ELECTION OF DIRECTORS
The Board of Directors of the Company (hereinafter referred to as the
"Board of Directors" or the "Board") is divided into three classes, each
consisting of approximately one-third of the total number of the members of the
Board of Directors. Directors are elected for a term of three years. At the
Meeting, the term of office of the Class II directors will expire, and three
directors will be nominated to serve in that class until Waste Management's
annual meeting in 2003 and until their respective successors are elected. The
terms of office of the Class III and Class I directors will expire at Waste
Management's annual meetings in 2001 and 2002, respectively.
Neither of Messrs. Hills nor York, whose terms will expire at the Meeting,
is standing for reelection as a Class II director. Mr. Hills is retiring as a
director of the Company in accordance with the retirement provisions contained
in the Company's Corporate Governance Guidelines. Mr. York is not standing for
reelection to enable him to devote his time and attention to his new
responsibilities as President, Chief Executive Officer and Chairman of the Board
of Micro Warehouse, Inc. Waste Management's Board of Directors intends to cause
the nomination of Robert S. Miller, Paul M. Montrone and A. Maurice Myers for
election as Class II directors. Mr. Myers has served, since his election to the
Board in November 1999, as a Class I director. Due to the retirement of Messrs.
Hills and York, the Board of Directors, in accordance with the Company's
By-laws, has designated Mr. Myers as a Class II director effective following the
Meeting in order to make each class as nearly as equal as possible.
Unless a stockholder requests that voting of his proxy be withheld for any
one or more of the nominees for directors by so directing on the proxy card, the
shares represented by the proxy will be voted FOR election of the three nominees
described below. If any nominee becomes unavailable for any reason, then the
shares represented by proxy will be voted FOR the remainder of the listed
nominees and FOR such other nominees as may be designated by the Board of
Directors of Waste Management as replacements for those who become unavailable.
The following sets forth information concerning the position, age, time
with the Company as a director and class and committee membership for the year
following the Meeting for each of the nominees for election to the Board of
Directors and each director who will continue in office after the Meeting.
<TABLE>
<CAPTION>
DIRECTOR DIRECTOR
NAME DESCRIPTION AGE(1) SINCE CLASS
- ---- ----------- ------ -------- --------
<S> <C> <C> <C> <C>
A. Maurice Myers(2)............. Chairman of the Board, President 59 1999 II
and Chief Executive Officer
H. Jesse Arnelle(5)............. Director 66 1998 III
Pastora San Juan Cafferty(3).... Director 59 1998 I
Ralph F. Cox(5)................. Director 67 1996 I
Robert S. Miller(5)............. Director 58 1998 II
Paul M. Montrone(3)(4)(6)....... Director 58 1998 II
John C. Pope(4)(6).............. Director 51 1998 III
Steven G. Rothmeier(4)(6)....... Director 53 1998 I
Ralph V. Whitworth(3)(5)........ Director 44 1998 III
</TABLE>
- ---------------
(1) As of March 31, 2000
(2) Member of the Special Committee II
(3) Member of the Compensation Committee
(4) Member of the Audit Committee
(5) Member of the Nominating and Governance Committee
(6) Member of the Special Committee I
3
<PAGE> 6
NOMINEES (CLASS II DIRECTORS)
Robert S. Miller. Mr. Miller has served as special advisor to Aetna Inc., a
health insurer, since February 2000. From November 1999 until February 2000, Mr.
Miller served as President and a director of Reliance Group Holdings, Inc., a
property and casualty insurance company. Mr. Miller served as President and
Chief Executive Officer of the Company from August 1999 until November 1999 and
as Non-Executive Chairman of the Board of the Company from July 1998 until May
1999. Mr. Miller was a director of Waste Management Holdings, Inc., formerly
known as Waste Management, Inc. ("WMH"), from May 1997 until the acquisition of
WMH by the Company in July 1998 ("WM Merger"). Mr. Miller also served as
Chairman of the Board and Acting Chief Executive Officer of WMH from October
1997 to July 1998. Mr. Miller serves as Vice Chairman of Morrison Knudsen
Corporation, an engineering and construction firm. He also 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. Mr. Miller is a director of
Federal Mogul Corporation, Morrison Knudsen Corporation, Pope & Talbot, Inc.,
and Symantec Corporation.
Paul M. Montrone. Mr. Montrone has been Chief Executive Officer and a
director of Fisher Scientific International Inc., a distributor of laboratory
equipment and supplies, since December 1991 and Chairman of the Board since
January 1998. Mr. Montrone serves as Chairman of the General Chemical Group,
Inc., a producer of industrial chemicals and Chairman of GenTek, Inc., a leading
provider of telecommunication technologies, automotive components and
performance chemicals. Mr. Montrone is a member of the Industry Policy Advisory
Committee, as well as the Business Roundtable, serving on its Health and
Retirement Task Force. Mr. Montrone serves as an advisory director of Sintokogio
Ltd., and as President and Chief Executive Officer of the Metropolitan Opera
Association and on the boards of various other non-profit institutions,
including the Wang Center for the Performing Arts, the Foundation for the
National Institute of Health and the Columbia University Graduate School of
Business. Mr. Montrone also serves as Managing Director of Latona Associates,
Inc., a private merchant bank. Mr. Montrone was a director of WMH from January
1997 until July 1998 and was Chief Executive Officer and a director of
Wheelabrator Technologies Inc., a wholly owned subsidiary of the Company, or a
predecessor thereof from prior to 1989 until January 1997.
A. Maurice Myers. Mr. Myers has been Chairman of the Board, Chief Executive
Officer and President of the Company since November 1999. Mr. Myers served as
Chairman of the Board of Yellow Corp., a freight transportation company, from
July 1996 until November 1999 and as a director, President and Chief Executive
Officer from April 1996 until November 1999. Mr. Myers also served as President
and Chief Operating Officer of America West Airlines, Inc. from January 1994
until December 1995 and as President and Chief Executive Officer of Aloha Air
Group, Inc. from August 1983 until December 1993. Mr. Myers is on the board of
directors of Director of Cheap Tickets, Inc. and Hawaiian Electric Industries,
Inc.
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2001 (CLASS III
DIRECTORS):
H. Jesse Arnelle. Mr. Arnelle currently serves as "Of Counsel" to Womble,
Carlyle, Sandridge and Rice of Winston-Salem, North Carolina. Mr. Arnelle was
senior partner of Arnelle, Hastie, McGee, Willis and Greene, a San
Francisco-based law firm, until 1996. He also served as Vice Chairman and
Chairman of the Board of Trustees of the Pennsylvania State University from 1992
to 1998. Mr. Arnelle served as a director of WMH from 1992 until July 1998. Mr.
Arnelle is currently a director of Florida Power & Light ("FPL Group"), Eastman
Chemical Corporation, Textron Corporation, Gannett Corporation and Union Pacific
Resources, Inc.
John C. Pope. Mr. Pope serves as Chairman of the Board of PFI Group, a
private investment firm. Mr. Pope served as Chairman of the Board of MotivePower
Industries, Inc., a manufacturer and remanufacturer of locomotives and
locomotive components from January 1996 to November 1999. Mr. Pope served as
President, Chief Operating Officer and a director of United Airlines and its
parent company, UAL Corporation, from May 1992 to July 1994. Mr. Pope was a
director of WMH from January 1997 until July
4
<PAGE> 7
1998. Mr. Pope is currently a director of Federal Mogul Corporation, Wallace
Computer Services, Inc., Air Canada Corporation, Per-Se Technologies, Inc. and
Dollar Thrifty Automotive Group, Inc.
Ralph V. Whitworth. Mr. Whitworth has been a principal and managing member
of Relational Investors LLC, a private investment company since March 1996. He
has also been a partner in Batchelder & Partners, Inc., a financial advisory and
investment-banking firm based in San Diego, California since January 1997. Mr.
Whitworth served as Acting Chairman of the Board of the Company since July 13,
1999 and as Chairman of the Board of the Company from August 1999 until November
1999. Mr. Whitworth has served as Chairman of the Board of Apria Healthcare
Group Inc. since April 1998 and has been a director since January 1998. Mr.
Whitworth is also a director of Sirius Radio, Inc., Tektronix Inc. and Mattel
Inc.
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2002 (CLASS I DIRECTORS):
Pastora San Juan Cafferty. Ms. Cafferty has been a Professor since 1985 at
the University of Chicago, where she has been a member of the faculty since
1971. She served as a director of WMH from July 1994 until July 1998. Ms.
Cafferty currently serves as a director of Kimberly-Clark Corporation, People's
Energy Corporation, Bankmont Financial Corporation and its subsidiaries, Harris
Bankcorp, Inc. and Harris Trust and Savings Bank.
Ralph F. Cox. Mr. Cox has been a management consultant for the past four
years. From March 1990 until February 1994, Mr. Cox was President of Greenhill
Petroleum Corporation, a subsidiary of Western Mining Corporation. From 1985
through 1990, he served as President and Chief Operating Officer of Union
Pacific Resources Company, a petroleum exploration and production company.
Before 1985, Mr. Cox spent 31 years with Atlantic Richfield Company. Mr. Cox was
a director of Sanifill, Inc. from September 1993 until August 1996. Mr. Cox
serves as a director of Abraxas Petroleum Corp. and CH2M Hill, a consulting
engineering firm. He also serves as an Independent Trustee for The Fidelity
Group of funds.
Steven G. Rothmeier. Mr. Rothmeier 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 was a director of WMH from March 1997 to July 1998. Mr. Rothmeier
is a director of GenCorp., Inc., Department 56, Inc., EW Blanch Holdings, Inc.
and Precision Castparts Inc.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Waste Management Board of Directors held seven meetings in 1999. In
1999, the Board of Directors had an Audit Committee, the Compensation Committee,
an Executive Committee, a Nominating and Governance Committee, a Special
Committee I and a Special Committee II.
The Audit Committee, which was comprised of Messrs. Hills (Chairman), Pope
and Rothmeier, met eight times in 1999. The Audit Committee recommends to the
Board of Directors the selection of the Company's independent accounts and
reviews external and internal audit plans and activities, the independence of
the internal and external independent auditors, the annual financial statements,
and the system of internal financial controls, and approves all significant fees
for audit, audit-related and non-audit services provided by independent
auditors.
The Compensation Committee, which was comprised of Messrs. York (Chairman)
and Montrone and Ms. Cafferty, met ten times in 1999. The Compensation Committee
reviews and recommends compensation for Waste Management officers and employees,
recommends to the Board of Directors new, as well as changes to existing,
incentive compensation and benefit plans, sets annual incentive plan bonus goals
and grants options under the Company's stock option plans.
The Executive Committee, which was comprised of Messrs. Whitworth
(Chairman), Hills, Miller, York and Myers, met one time in 1999. The Executive
Committee may act for the Board of Directors when action is required between
Board meetings and may act on behalf of the Board on all but major corporate
matters. All
5
<PAGE> 8
actions taken by the Executive Committee must be reported at the Board's next
meeting. The Board of Directors plans to disband the Executive Committee as of
the Meeting.
The Nominating and Governance Committee, which is comprised of Messrs.
Whitworth (Chairman), Arnelle, Cox and Miller, met four times in 1999. The
Nominating and Governance Committee's principal function is to identify and
propose to the full Board qualified nominees to fill Board vacancies as they
occur, and to review and report to the Board on director compensation, evaluate
the performance of the Board and its members, 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. Additionally, the Nominating and Governance Committee
will consider stockholders' suggestions of nominees for director that are
submitted in writing to the Nominating and Governance Committee at the address
of the Company's principal executive offices no later than December 6, 2000 and
no earlier than November 6, 2000.
The Special Committee I, which is comprised of Messrs. Hills (Chairman),
Pope and Rothmeier, met one time in 1999. The Special Committee I's principal
function is to conduct a full investigation and evaluation of all matters
relating to: (i) the reporting of the Company's first and second quarter 1999
operating results; (ii) the sales of Company stock by certain corporate
officials; and (iii) the allegations made in pending litigation respecting these
matters and to report its findings and recommendations to those members of the
full Board it finds are sufficiently disinterested to act upon its findings and
recommendations.
The Special Committee II, whose sole member is Mr. Myers, is responsible
for making decisions concerning the Company's response to allegations contained
in certain shareholders' derivative lawsuits and to investigate the conduct of
the Board of Directors of WMH in connection with the WM Merger and the Board of
Directors of the Company in connection with the acquisition of Eastern
Environmental Services, Inc. in December 1998.
During 1999, each director attended more than 75% of all meetings of the
entire Waste Management Board of Directors and the committees on which he
served.
In 1999, the Company's compensation for directors who are not also
employees of Waste Management consisted of a grant of options to purchase 10,000
shares of Common Stock and an annual retainer of $20,000. Under the Company's
1999 Deferred Compensation Plan (the "Deferred Compensation Plan"), non-
employee directors are able to elect to receive their annual retainer, in lieu
of cash, in either (i) phantom stock or (ii) an equal combination of cash and
phantom stock. Phantom stock is credited to the accounts of the directors
electing to participate on January 15 and July 15 of each year. On the
Determination Date (as defined in the Deferred Compensation Plan), directors
electing to participate receive that amount of phantom stock as is equal to the
compensation otherwise payable to such director in cash divided by the fair
market value of a share of the Company's Common Stock on the Determination Date.
The Company reimburses directors for their travel and out-of-pocket expenses
incurred in attending Board and committee meetings.
The Company, through its Special Committee I, has been conducting an
internal investigation regarding the allegations that were made in 1999
concerning the Company's second quarter 1999 earnings communications. In
connection with Mr. Hills' services relating to the internal investigation and
his other assignments for the Company during 1999, Mr. Hills received 35,000
shares of restricted stock of the Company and is being compensated at an hourly
rate of $400 per hour for time spent in connection with the investigation.
On August 13, 1999, Messrs. Miller, Whitworth and York received stock
options to purchase 250,000, 250,000 and 50,000 shares, respectively, of the
Company's common stock as compensation by reason of their assignments for the
Company during 1999, including membership on the Executive Committee of the
Board of Directors and Mr. Miller acting as President and CEO from August
through November 1999 and Mr. Whitworth serving as acting Chairman of the Board
beginning in July and then as Chairman of the Board from August through November
of 1999. Additionally, Messrs. Miller and Whitworth were compensated at a rate
of $25,000 per month for their services as President and CEO and Chairman of the
Board, respectively.
6
<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of March 1, 2000 (unless
otherwise indicated) with respect to the beneficial ownership of Common Stock by
each nominee for director and each director who will continue to serve after the
meeting, certain executive officers of Waste Management, including each person
who served as the Chief Executive Officer during 1999, Waste Management's five
most highly compensated officers other than the Chief Executive Officer who were
serving as officers at December 31, 1999 and two additional individuals who
would have been included had they been serving as officers at December 31, 1999
("named executive officers"), and all executive officers and directors of Waste
Management as a group. Except as otherwise indicated below, each of the persons
named in the table has sole voting and investment power with respect to all
shares of Common Stock beneficially owned.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP
-------------------------
NUMBER OF PERCENTAGE
NAME SHARES OF CLASS
- ---- ---------- ----------
<S> <C> <C>
H. Jesse Arnelle............................................ 22,977(1) *
Pastora San Juan Cafferty................................... 24,500(2) *
Ralph F. Cox................................................ 47,376(3) *
Robert A. Damico............................................ 49,789(4) *
John E. Drury............................................... 5,389,114(5) *
Rodrick M. Hills............................................ 54,066(6) *
Robert S. Miller............................................ 188,913(7) *
Paul M. Montrone............................................ 17,612(8) *
A. Maurice Myers............................................ 376,111(9) *
John C. Pope................................................ 17,093(10) *
Rodney R. Proto............................................. 2,436,271(11) *
William A. Rothrock......................................... 80,159(12) *
Steven G. Rothmeier......................................... 15,833(13) *
Douglas G. Sobey............................................ 781,366(14) *
David Sutherland-Yoest...................................... 781,366(15) *
Ralph V. Whitworth.......................................... 1,201,474(16) *
Charles A. Wilcox........................................... 138,404(17) *
Jerome B. York.............................................. 30,000(18) *
Directors and executive officers as a group (23 persons).... 12,374,232 *
</TABLE>
- ---------------
* Represents less than one percent (1%) of the outstanding shares of Common
Stock of the Company.
(1) Includes 10,875 shares issuable pursuant to options exercisable within 60
days. Also includes the equivalent of approximately 396 shares Mr. Arnelle
acquired through the voluntary deferral of directors' fees pursuant to the
Deferred Compensation Plan.
(2) Includes 20,875 shares issuable pursuant to options exercisable within 60
days.
(3) Includes 37,800 shares issuable pursuant to options exercisable within 60
days. Also includes the equivalent of approximately 1,075 shares Mr. Cox
acquired through the voluntary deferral of directors' fees pursuant to the
Deferred Compensation Plan.
(4) Includes 43,668 shares issuable pursuant to options exercisable within 60
days.
(5) Includes 5,176 shares owned by Mr. Drury's wife. Also includes 4,300,000
shares issuable pursuant to options and warrants exercisable within 60
days.
(6) Includes 12,175 shares issuable pursuant to options exercisable within 60
days, 10,000 of which are held by The Hills Family Partnership II. Also
includes the equivalent of approximately 2,710 shares Mr. Hills acquired
through the voluntary deferral of directors' fees pursuant to the Deferred
Compensation Plan.
(7) Includes 172,708 shares issuable pursuant to options exercisable within 60
days. Also includes the equivalent of approximately 1,479 shares Mr. Miller
acquired through the voluntary deferral of directors' fees pursuant to the
Deferred Compensation Plan.
7
<PAGE> 10
(8) Includes 14,350 shares issuable pursuant to options exercisable within 60
days.
(9) Includes 111,111 shares issuable pursuant to options exercisable within 60
days. Also represents 265,000 shares of restricted stock that vest in equal
installments on each of the first three anniversaries of November 10, 1999.
(10) Includes 435 shares held by Mr. Pope as trustee for a trust. Also includes
12,175 shares issuable pursuant to options exercisable within 60 days and
the equivalent of approximately 1,580 shares Mr. Pope acquired through the
voluntary deferral of directors' fees pursuant to the Deferred Compensation
Plan.
(11) Includes 2,207,500 shares issuable pursuant to options exercisable within
60 days. Also includes 100,000 shares issuable pursuant to options held in
the name of a family trust, which are exercisable within 60 days.
(12) Includes 80,159 shares issuable pursuant to options exercisable within 60
days.
(13) Includes 14,350 shares issuable pursuant to options exercisable within 60
days. Also includes the equivalent of approximately 244 shares Mr.
Rothmeier acquired through the voluntary deferral of directors' fees
pursuant to the Deferred Compensation Plan.
(14) Includes 280,450 shares issuable pursuant to options exercisable within 60
days.
(15) Includes 574,353 shares issuable pursuant to options exercisable within 60
days. Also includes 5,000 shares held by Mr. Sutherland-Yoest's daughter.
(16) Includes 15,000 shares issuable pursuant to options exercisable within 60
days. Also includes the equivalent of approximately 194 shares Mr.
Whitworth acquired through the voluntary deferral of directors' fees
pursuant to the Deferred Compensation Plan. Also includes 1,186,000 shares
owned by various limited partnerships and managed accounts controlled by
Relational Investors, L.L.C., of which Mr. Whitworth is a managing member.
Mr. Whitworth disclaims any beneficial ownership as to these shares except
to the extent of his pecuniary interest therein.
(17) Includes 137,000 shares issuable pursuant to options exercisable within 60
days.
(18) Includes 20,000 shares issuable pursuant to options exercisable within 60
days.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the federal securities laws, Waste Management's directors, executive
officers and any person holding more than ten percent of Waste Management Common
Stock are required to file reports of their initial ownership and any changes to
such ownership with Waste Management, the New York Stock Exchange and the SEC.
Specific due dates for these reports have been established by regulation and
Waste Management is required to report in this Proxy Statement any failure to
file by these dates during 1999. Based solely on a review of the copies of
reports furnished to Waste Management and written representations from the
executive officers and directors, the Company believes that its executive
officers and directors complied with all filing requirements of Section 16(a) of
the Securities Exchange Act of 1934, as amended, except that Mr. Wilcox
inadvertently failed to report one transaction that occurred May 1999, which was
reported on an amended Section 16 form on June 21, 1999, and also filed a report
concerning a transaction that occurred in June 1999, on July 20, 1999, ten days
after the due date for such report.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth information with respect to: (1) persons
serving as Waste Management's Chief Executive Officer during 1999, (2) the five
most highly compensated executive officers at December 31, 1999, other than the
Chief Executive Officer, whose total annual salary and bonus for 1999 exceeded
$100,000 and (3) two other executive officers who, had they been serving in such
capacities at December 31, 1999, would have been included in the group of five
most highly compensated executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------ RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS OPTIONS COMPENSATION(6)
- --------------------------- ---- ---------- ---------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A. Maurice Myers................. 1999 $ 124,230 $ 650,000 $4,124,063(4) 1,500,000 $ 25,698(7)
Chairman of the Board, 1998 -- -- -- -- --
President and Chief 1997 -- -- -- -- --
Executive Officer(1)
Robert S. Miller................. 1999 $ 80,769 -- -- 260,000(5) --
Former President and Chief 1998 -- -- -- -- --
Executive Officer(1) 1997 -- -- -- -- --
John E. Drury.................... 1999 $1,207,540 $ 0 -- 0 $ 7,200
Former Chairman of the 1998 862,308 2,200,000 -- 1,500,000 5,000
Board and Chief Executive 1997 600,000 660,000 -- 800,000 303,589(8)
Officer(1)
Rodney R. Proto.................. 1999 $ 884,874 $ 0 -- 0 $ 7,200
Former President and Chief 1998 608,642 1,400,000 -- 1,000,000 5,000
Operating Officer(2) 1997 380,000 440,000 -- 400,000 4,750
Robert A. Damico................. 1999 $ 400,000 $ 0 -- 0 $ 7,200
Senior Vice President -- 1998 310,449 612,334 -- 186,965 5,375
Midwest Area 1997 265,577 154,447 -- 16,587 27,471(9)
Miller J. Mathews, Jr............ 1999 $ 400,000 $ 0 -- 0 $ 7,200
Senior Vice President -- 1998 353,077 672,200 -- 200,000 5,000
Southern Area 1997 258,654 225,160 -- 100,000 4,759
Douglas G. Sobey................. 1999 $ 415,385 $ 0 -- 0 $ 3,384
Senior Vice President -- 1998 343,269 657,600 -- 200,000 5,000
Western Area 1997 199,487 462,800 -- 25,000 4,750
William A. Rothrock.............. 1999 $ 200,000 $ 887,710 -- 0 $ 6,502
Senior Vice President -- 1998 211,539 738,038 -- 100,000 5,000
Business Development 1997 152,250 621,750 -- 200,000 4,750
David Sutherland-Yoest........... 1999 $ 479,214 $ 0 -- 0 $ 6,507
Former Senior Vice 1998 484,037 390,445 -- 200,000 5,000
President -- Atlantic Area(3) 1997 330,000 518,700 -- 125,000 171,530(10)
Charles A. Wilcox................ 1999 $ 400,000 $ 0 -- 0 $ 7,200
Senior Vice President -- 1998 365,537 786,800 -- 200,000 12,200
Eastern Area 1997 260,000 490,600 -- 125,000 11,100
</TABLE>
- ---------------
(1) Mr. Myers has served in such positions since November 10, 1999. Mr.
Whitworth served as Acting Chairman of the Board since July 13, 1999 and as
Chairman of the Board form August 13, 1999 until November 10, 1999. Mr.
Miller served in such positions from August 13, 1999 through November 10,
1999. Mr. Drury served as Chief Executive Officer until September 22, 1999
and as a member of the Board of Directors until October 19, 1999.
(2) Mr. Proto served in such positions until August 13, 1999.
9
<PAGE> 12
(3) Mr. Sutherland-Yoest served in such position until November 2, 1999.
(4) Represents 265,000 shares of restricted stock granted at the low trading
price on the NYSE on November 11, 1999 ($15.5625 per share). The restricted
shares vest in equal installments on each of the three anniversaries of
November 11, 1999. Prior to vesting, Mr. Myers cannot sell, transfer,
pledge or assign the shares, although he may vote them and receive any
dividends.
(5) Includes Mr. Miller's annual grant on January 4, 1999 of 10,000 options
granted pursuant to the Non-Employee Director Plan. Also includes 250,000
options granted in consideration of Mr. Miller's responsibilities as a
member of the Executive Committee. See "Information Regarding the Board and
its Committees."
(6) Includes contributions by the Company under its 401(k) plan. Excludes
perquisites or other benefits unless the aggregate amount of such benefits
is equal to or greater than the lesser of $50,000 or 10% of the total
annual salary and bonus of such named executive officer.
(7) Consists of $25,698 paid by the Company for Mr. Myers' life insurance
premiums.
(8) Includes $298,839 paid by the Company for relocation and housing expenses
in 1997.
(9) Includes $26,721 paid by the Company for relocation expenses in 1998.
(10) Includes $166,780 paid by the Company for relocation and housing expenses
in 1997.
The following table sets forth information concerning the grant of stock
options during 1999 to the named executive officers:
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PERCENTAGE OF POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATE OF
SHARES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE ----------------------------
NAME GRANTED FISCAL 1999 (PER SHARE) 5% 10%
- ---- ---------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
A. Maurice Myers............. 1,500,000(1) 27.83% $15.5625 $14,680,759 $37,203,926
Robert S. Miller............. 250,000(2) 4.64% $23.3750 $ 3,675,103 $ 9,313,433
10,000(2) * $47.1250 $ 296,398 $ 751,131
John E. Drury................ 0 -- -- -- --
Rodney R. Proto.............. 0 -- -- -- --
Robert A. Damico............. 0 -- -- -- --
Miller J. Mathews, Jr. ...... 0 -- -- -- --
William A. Rothrock.......... 0 -- -- -- --
Douglas G. Sobey............. 0 -- -- -- --
David Sutherland-Yoest....... 0 -- -- -- --
Charles A. Wilcox............ 0 -- -- -- --
</TABLE>
- ---------------
* Represents less than one percent (1%).
(1) Of the options granted to Mr. Myers, 650,000 options vest as follows: (i)
1/3 of the options shall vest upon the average closing price of the
Company's common stock exceeding $21.50 for 60 consecutive trading days,
(ii) 1/3 of the options shall vest upon the average closing price of the
Company's common stock exceeding $27.00 for 60 consecutive trading days,
(iii) 1/3 of the options shall vest upon the average closing price of the
Company's common stock exceeding $34.00 for 60 consecutive trading days and
(iv) 100% of the options shall vest in full on November 11, 2004,
notwithstanding the foregoing. The remaining 850,000 vest as follows: (i)
111,111 options vested on November 11, 1999, (ii) 222,222 options vest on
November 11, 2001, (iii) 283,333 options vest on November 11, 2002, (iv)
172,222 options vest on November 11, 2003 and (v) 61,112 options vest on
November 11, 2004.
(2) Options vest in full on first anniversary of date of grant.
10
<PAGE> 13
(3) The potential realizable value of each grant of options assuming that the
market price of the underlying security appreciates in value from the date
of grant to the end of the option term, which is equal to ten (10) years, at
the rates of 5% and 10% compounded annually.
The following table sets forth information concerning the exercise of stock
options during 1999 by Waste Management's named executive officers:
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Maurice Myers.......... 0 $ 0 111,111 1,388,889 $ 180,555 $2,256,945
Robert S. Miller.......... 54,375 $ 1,238,769 172,708 260,000 $ 0 $ 5,000
John E. Drury............. 0 $ 0 4,300,000 0 $5,281,000 $ 0
Rodney R. Proto........... 7,372 $ 174,624 2,300,128 0 $ 335,940 $ 0
Robert A. Damico.......... 77,829 $ 985,735 43,668 143,989 $ 0 $ 0
Miller J. Mathews, Jr. ... 77,146 $ 2,629,277 114,991 253,003 $ 0 $ 0
William A. Rothrock....... 123,403 $ 3,959,706 80,159 206,000 $ 0 $ 0
Douglas G. Sobey.......... 302,000 $10,912,708 215,300 179,000 $ 390,419 $ 0
David Sutherland-Yoest.... 210,000 $ 7,754,096 574,353 0 $ 45,863 $ 0
Charles A. Wilcox......... 46,178 $ 2,011,951 137,000 244,000 $ 245,070 $ 0
</TABLE>
- ---------------
(1) Computed based upon the difference between aggregate fair market value based
on NYSE Composite Tape closing price on December 31, 1999 (of $17.1875 per
share) and the aggregate exercise price.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Each of Messrs. Myers, Damico, Mathews, Rothrock, Sobey and Wilcox is party
to an employment agreement with Waste Management. Mr. Miller, who served as
President and Chief Executive Officer during 1999, was paid for his services as
such as described in the Summary Compensation Table and is compensated as a
non-employee director as described under "Information Regarding the Board of
Directors and its Committees"; however, Mr. Miller has not been, nor is he
currently, party to an employment or severance agreement with the Company. None
of Messrs. Drury, Proto, or Sutherland-Yoest is currently employed by the
Company; however, each of these former officers was party to an employment
agreement with the Company and is currently receiving severance payments under
such agreements, as described below.
Each of the employment agreements of the officers provides for the payment
of minimum annual base salaries and for participation in all Waste Management
benefit plans and programs. Mr. Myers' agreement provides for continuously
renewing terms of five years, and Messrs. Damico, Rothrock, Sobey and Wilcox are
each party to employment agreements that have continuously renewing terms of
three years. Mr. Mathews is party to an employment agreement for a three-year
term, which term can be extended by Mr. Mathews, at his option, for an
additional three-year period; provided that during such additional term Mr.
Mathews shall only work 50% of the time and his salary shall be 75% of his
highest base salary in the preceding three years. Each of the employment
agreements includes provisions governing compensation and severance benefits
upon termination of employment with Waste Management and upon certain changes in
control of Waste Management. Additionally, Mr. Myers' agreement provides for the
payment by the Company to Mr. Myers supplemental retirement benefits of $600,000
provided Mr. Myers remains employed by the Company until the fifth anniversary
of his employment. In the event Mr. Myers' employment is terminated before the
fifth anniversary, payments are pro-rated as follows: $500,000 on and after the
fourth anniversary; $400,000 on and
11
<PAGE> 14
after third anniversary; $100,000 on and after the 18-month anniversary and no
rights to payment in the event he does not remain employed by the Company until
the 18-month anniversary.
In the event the employment of the employee is terminated by reason of
death or total disability, the employment agreements provide that Waste
Management shall pay (i) all accrued and unpaid base salary of the respective
employee, (ii) all benefits to which the employee is entitled under any Waste
Management benefit plans or policies and (iii) the base salary which would have
been payable to the employee if he had continued in employment throughout the
respective employment term or, for Mr. Myers, two years following the
termination of employment. In addition, all stock options held by the employee
become fully vested and are exercisable for one year following the termination,
not to exceed the term of the option.
Messrs. Damico, Myers, Rothrock, Sobey and Wilcox's employment agreements
provide that the employee's employment may be terminated by Waste Management for
"cause" (as defined in the employment agreements) or without cause. Mr. Mathews'
agreement provides that Waste Management can terminate his employment only for
cause during the initial full-time term, and during the additional part-time
term, can be terminated by the Company with or without cause. In the event that
an employee's employment is terminated for cause, the employment agreements
provide that Waste Management shall pay all accrued and unpaid base salary of
the respective employee and all benefits to which he is entitled under any Waste
Management benefit plans or policies in accordance with the terms of such plans
or policies.
In the event that an employee's employment is terminated without cause,
Messrs. Mathews, Rothrock, Sobey and Wilcox's agreements provide that, in
addition to amounts payable upon a termination for cause, Waste Management shall
pay to the respective employee, for a period of three years after the date of
termination, an annual amount equal to 75% of his highest total annual direct
compensation (as defined in the agreements) for the last three years. Mr.
Damico's employment agreement provides for an annual payment equal to the
greater of 100% of his then base salary and 75% of the average of the highest
annual direct compensation in two out of the three last calendar years.
Additionally, each such employee shall be eligible for a bonus pro-rated as of
the date of termination. Mr. Mathews' agreement provides that, in the event his
termination by the Company is other than for cause, Mr. Mathews will be given
notice of the Company's intent to terminate his agreement and Mr. Mathews will
have thirty days to correct the situation. If the issue is not resolved, the
Company may elect to terminate the agreement and shall pay Mr. Mathews through
the end of the thirty-day response period. Mr. Myers' agreement provides that in
the event of termination without cause or for "good reason" (as defined in his
agreement) he will receive a payment equal to 200% of his base salary plus
target bonus at the time of termination in addition to amounts payable upon a
termination for cause. Each of the agreements also provides that the employee
will maintain certain health benefits and other insurance coverage for such
employee and his spouse and dependents for a specified period after termination
by the Company without cause or by the employee for good reason. In the case of
each of Messrs. Damico, Rothrock, Sobey and Wilcox, upon a termination by the
Company without cause, all stock options held by the employee become fully
vested, and are exercisable for a period of one year after the date of
termination, not to exceed the term of the option. Mr. Myers' agreement provides
that his stock options and restricted stock grants will continue to vest
according to their original schedules for the two-year period following his
termination and he will have two years and six months following the date of
termination to exercise such options, not to exceed the term of the option.
Each of the employment agreements provides for termination by the employee
at any time after providing Waste Management with 90 days written notice, other
than Mr. Myers' agreement, which requires 90 days notice only in the case of his
termination for good reason. In the event an employee terminates the agreement
without good reason, other than following a "change in control" (as defined in
the employment agreement) of Waste Management, the employee will be entitled to
receive all of his accrued and unpaid base salary and all benefits to which he
is entitled under any Waste Management benefit plans or policies in accordance
with the terms of such plans or policies.
The employment agreements provide that if the employee terminates his
employment for good reason or is terminated for cause in connection with a
change in control of Waste Management, the compensation payable to the employee
shall include: (i) all accrued and unpaid base salary of the respective
employee;
12
<PAGE> 15
(ii) all benefits to which he is entitled under any Waste Management benefit
plans or policies, which shall be determined and paid in accordance with the
terms of such plan, policies and arrangements; (iii) an amount equal to $1.00
less than three times the employee's "base amount" within the full meaning of
Section 280G of the Code (an amount equal to 300% of the base salary and target
bonus, plus a pro-rated maximum bonus in the event of a change in control, in
the case of Mr. Myers); (iv) the immediate vesting of all accrued and unpaid
benefits, awards and grants (including stock options, which will remain
exercisable for a period of one year for each of the officers other than Mr.
Myers, whose options remain exercisable for three years; provided, that in no
case shall options remain exercisable after the term of the option); and (v) a
bonus or incentive compensation payment, pro-rated as of the effective date of
resignation or termination, payable immediately. In the event that the benefits
payable to the employee constitute an "excess parachute payment" under Section
280G of the Code, the employment agreements provide that Waste Management shall
pay the employee an additional amount to reimburse him on an after-tax basis for
any excise tax imposed on such payments under Section 4999 of the Code.
The employment agreements also include such non-competition,
non-solicitation and non-disparagement covenants as are customary, in nature and
scope, for such agreements.
Pursuant to the employment agreements Messrs. Drury, Proto and
Sutherland-Yoest were parties to, each became fully vested in all benefits,
awards and grants accrued but unpaid as of the date of his departure, including
stock options, which remain exercisable for five years following such date.
Additionally, each of Messrs. Drury, Proto and Sutherland-Yoest is receiving
annual severance payments from the Company in accordance with his employment
agreement in an amount equal to 75% of his total annual direct compensation as
of the date of termination for a period of five years. Finally, each of Messrs.
Drury, Proto and Sutherland-Yoest is subject to non-competition,
non-solicitation and non-disparagement covenants for as long as severance
payments are being made by the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of Waste Management,
Inc. has prepared the following report regarding 1999 executive compensation.
The Compensation Committee, which is composed entirely of non-employee
directors, is responsible for all components of the Company's officer
compensation programs and the aggregate cost-related aspects of non-officer
compensation. The Compensation Committee works closely with the entire Board of
Directors in the execution of its duties. This report provides specific
information regarding compensation for the Company's named executive officers,
as well as compensation information for all officers of the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES OF EXECUTIVE COMPENSATION
Programs
It is the philosophy of the Company and the Committee that all compensation
programs should (i) link pay and performance and (ii) attract, motivate, reward
and retain the executive talent required to achieve corporate objectives. Waste
Management also focuses strongly on compensation tied to stock price
performance, since this form of compensation provides the clearest link to
enhanced shareholder value. From time to time, the Committee works with
compensation consultants to assist with the design, implementation and
communication of various compensation plans. The Company determines competitive
levels of compensation using published compensation surveys for general industry
companies of comparable size to the Company as measured by revenues and
information obtained from compensation consultants.
The Company's compensation programs for executives include base salaries,
annual performance-based incentives, certain executive benefits and long-term
incentives. Each of these pay delivery programs is further detailed below.
13
<PAGE> 16
Base Salaries
Base salaries for the Company's executive officers in 1999 were reviewed
through comparisons with the market survey data described above. The Committee
does not consider any financial performance criteria on a formula basis in
determining salary increases. Rather, the Committee, using its discretion,
considers market base salary rates, average annual salary increases for
executives in companies of all sizes across the country, and overall corporate
financial performance. The Committee also makes a subjective review of
individual performance in making base salary increase decisions for executives.
These criteria are assessed in a non-formula fashion and are not weighted. The
current base salary levels for named executive officers still employed by the
Company at year-end 1999 are, overall, consistent with the 50th percentile of
the published compensation survey data previously described.
Annual Incentive Compensation
Under the Company's original 1999 annual incentive plan, award
opportunities were set at a level sufficient to pay incentive compensation
consistent with the market 75th percentile if certain earnings per share ("EPS")
targets were achieved. As a result of financial challenges the Company
experienced during 1999 and changes in executive leadership, in September 1999,
the Committee revised the 1999 annual incentive plan to reward newly established
EPS objectives and operating income objectives for corporate and field officers,
respectively, for the remainder of the year. These objectives were weighted 75%.
In addition, improvements in accounts receivable and customer service
performance were weighted 25% for purposes of calculating annual incentives.
Since the plan was revised at mid-year, the Committee reduced award
opportunities under the plan to 40% of the original 1999 award opportunities.
While some executive officers received bonus payments under this plan, none
of the named executive officers received payouts under the plan. However,
bonuses were paid to Mr. Myers, as described in the Chief Executive Officer
section below, and Mr. Rothrock. Mr. Rothrock does not receive incentive
compensation under the annual incentive plan applicable to other officers, and
instead receives his bonus payments under a separate incentive plan for business
development personnel.
Long-Term Incentive Compensation
The Company believes that its executive officers should have an ongoing
stake in the success of the Company. The Company also believes these key
employees should have a considerable portion of their total compensation tied to
the Company's stock price performance, since stock-related compensation is
directly tied to shareholder value.
The only stock option awards provided to named executive officers in 1999
were for Mr. Myers and Mr. Miller. No option grants were made to other executive
officers in 1999 because the awards made to the officers in 1998 were intended
to compensate them through 1999. Stock options provide a strong tie between pay
and performance, since executives realize value from stock options only if the
Company's stock price rises after the date of grant. All stock options in 1999
were granted at 100% of fair market value at the time of grant.
Other Executive Benefits and Perquisites
The Company also provides certain benefits and perquisites to its key
executive officers. These benefits and perquisites are not tied to any formal
performance criteria and are intended to serve as part of a competitive total
compensation package. These benefits and perquisites include, but are not
limited to, supplemental retirement plans and change-in-control arrangements.
Levels of Company benefits and perquisites for executives were in line with
market 50th to 75th percentile levels.
1999 CHIEF EXECUTIVE OFFICER COMPENSATION
The Company had a transition in CEO leadership in 1999. After Mr. Drury's
resignation, Mr. Miller became President and CEO until a replacement could be
named. Mr. Myers became the new CEO in late 1999. This section describes
compensation for each of these executives in 1999.
14
<PAGE> 17
Base Salary
Mr. Drury's base salary for 1999 was established based on market data for
companies with revenues over $10 billion and also reflected the Committee's
assessment of his performance through 1998. His base salary was established near
the market 50th percentile. The Committee set an annualized base salary of
$300,000 for Mr. Miller's interim service as President and CEO. Mr. Myers'
annualized base salary was established at $850,000 by the Committee. This base
salary was established below the market 50th percentile in recognition of the
stock-based compensation awards provided to Mr. Myers.
Annual Bonus
Mr. Drury was not paid a bonus for 1999 performance because he terminated
employment prior to the end of the year and also because the Company did not
achieve its EPS objectives. Mr. Miller was not eligible for a bonus payment
under the arrangement with the Company pursuant to which he agreed to serve as
President and CEO after Mr. Drury's resignation. Mr. Myers' bonus was $650,000
and reflected a payment made to compensate him for bonus payments he forfeited
from his previous employer by joining Waste Management in November 1999.
Long-Term Incentives
Mr. Drury received no stock option awards in 1999 because he received an
option award in 1998 intended to compensate him through 1999.
Mr. Miller received an option grant of 260,000 options in 1999. Of this
amount, 10,000 options were granted pursuant to the Non-Employee Director Plan
for his service as a director and 250,000 were granted to compensate him for his
service as a member of the Executive Committee of the Board of Directors as well
as his service as President and CEO.
Mr. Myers received long-term incentive awards in the form of restricted
stock and stock options. Mr. Myers received 265,000 shares of restricted stock,
which vest at a rate of one-third per year over three years. This grant was to
replace unvested stock option gains he forfeited by leaving his prior employer.
He also received 1.5 million stock options. Of this number, 650,000 cliff vest 5
years after the date of grant. However, vesting may be accelerated if certain
share price hurdles ($21.50, $27.00 and $34.00) are met for 60 consecutive
trading days. The remaining 850,000 options vest incrementally over a five year
period. The total option award was intended to provide Mr. Myers with a
significant stake in the Company's stock price performance and to induce him to
join the Company as CEO.
All option awards were granted at 100% of fair market value on the date of
grant. The performance sensitivity of stock options is a result of options
producing income for the recipient only if the stock price rises after the grant
date.
Limitation of Tax Deduction for Executive Compensation
Under Section 162(m) of the Internal Revenue Code, publicly traded
companies may not receive a tax deduction on non-performance based compensation
to executive officers in excess of $1 million. The Company's compensation plans
have been designed to qualify compensation under those for deductibility under
Section 162(m). The Committee may, however, authorize payment of nondeductible
compensation in the future if it determines that such action would be in the
best interest of the Company's stockholders.
Compensation Committee Members:
Jerome B. York, Chairman
Pastora San Juan Cafferty
Paul M. Montrone
15
<PAGE> 18
PERFORMANCE GRAPH
The following performance graph compares the performance of Waste
Management Common Stock to the S&P 500 Index and to the Dow Jones Pollution
Control Index for the period of five years commencing December 31, 1994, and
ending December 31, 1999. The graph assumes that $100 was invested on December
31, 1994 in Waste Management Common Stock and in each index and that all
dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
GRAPH
<TABLE>
<CAPTION>
COMPANY DOW S&P
------- --- ---
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 166.00 110.00 134.00
1996 280.00 116.00 161.00
1997 345.00 123.00 211.00
1998 410.00 132.00 268.00
1999 151.00 66.00 320.00
</TABLE>
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C>
Waste Management.................... $100 $166 $280 $345 $410 $151
Dow Jones Pollution Control Index... $100 $110 $116 $123 $132 $ 66
S&P 500 Index....................... $100 $134 $161 $211 $268 $320
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Messrs. York and Montrone and Ms. Cafferty served on the
Compensation Committee of the Board of Directors. During 1999, no executive
officer of Waste Management served as (i) a member of the compensation committee
(or other board committee performing equivalent functions) of another entity,
one of whose executive officers served on the Compensation Committee, (ii) a
director of another entity, one of whose executive officers served on the
Compensation Committee or (iii) a member of the compensation committee (or other
board committee performing equivalent functions) of another entity, one of whose
executive officers served as a director of Waste Management.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1999, the Company's Board of Directors adopted a strategic plan
that includes, among other things, divesting of certain of the Company's
international assets, its non-core assets and up to 10% of its North American
solid waste assets. Batchelder & Partners, Inc., a financial consulting firm in
which Mr. Whitworth owns an approximately 10% interest ("BP"), served as a
financial advisor to the Company in connection with its strategic plan. Pursuant
to an agreement between BP and the Company, the Company agreed to pay BP a fee
of $3 million, payable upon completion of the engagement, reimburse BP for
certain expenses and indemnify BP and certain related persons for certain
liabilities related to or arising out of its engagement. Additionally, fifty
percent of the fee paid to BP by the Company was allocated to Relational
Investors LLC ("RILLC"), of which Mr. Whitworth owns an approximately 34% equity
interest and serves as a managing member, in accordance with certain agreements
between RILLC and its clients, which require fee sharing with respect to certain
fees received by RILLC and its affiliates.
In May 1995, the Company made a personal loan to Douglas G. Sobey, Senior
Vice President -- Western Area in the aggregate principal amount of $200,000.
Since January 1, 1999, the largest amount outstanding under such loan was
approximately $87,000. The loan, which was interest free, was paid in full in
March 2000.
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In January 1999, the Company made an interest free loan to Rodney R. Proto,
former President and Chief Operating Officer of the Company, in the aggregate
principal amount of $3,363,791 for the payment of the federal tax liability due
from Mr. Proto's exercise in January 1998 of 360,000 options to purchase shares
of the Company's Common Stock. Mr. Proto repaid the loan in full on May 28,
1999.
PROPOSAL FOR APPROVAL OF AMENDMENT TO THE NON-EMPLOYEE DIRECTOR PLAN
Description of the Amendment
Subject to the approval of stockholders, the Board of Directors has amended
the Company's Non-Employee Director Plan to increase the number of shares of
Common Stock subject to such plan by 1,000,000 shares, thus increasing the
authorized shares under the plan from 1,400,000 to 2,400,000 shares. Waste
Management has for many years utilized stock incentives as part of its overall
compensation program, and the Company's Board of Directors believes stock
options and stock-based incentives play an important role in attracting and
retaining the services of outstanding non-employee directors and in encouraging
such directors to have a greater personal financial investment in Waste
Management to more closely align their interests with stockholders.
When the Non-Employee Director Plan was originally approved at the 1996
annual meeting of stockholders, Waste Management had approximately 66,000,000
shares outstanding. Waste Management currently has over 627,000,000 shares
outstanding. Prior to the amendment and as of March 31, 2000, options to acquire
975,000 shares of Waste Management Common Stock had been granted under the
Non-Employee Director Plan and 425,000 shares remained available for future
awards. Therefore, the Board of Directors believes that the amendment to the
Non-Employee Director Plan is necessary to assure that an adequate number of
shares of Waste Management Common Stock will be available for future award
grants in order to continue to attract and retain services of outside
non-employee directors and encourage them to have a personal financial interest
in the Company.
The affirmative vote of the holders of a majority of the shares of Waste
Management Common Stock present or represented by proxy and entitled to vote at
the Meeting is required to approve the amendment to the Non-Employee Director
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
NON-EMPLOYEE DIRECTOR PLAN.
Description of the Non-Employee Director Plan
The Non-Employee Director Plan provides that an option to purchase a total
of 10,000 shares of Waste Management Common Stock will be automatically granted
in January of each year in which a director who is not an officer or full-time
employee of Waste Management or any of its subsidiaries is serving as a
director. The Board of Directors may, in its discretion, provide for an annual
option grant to purchase a different number of shares of Waste Management Common
Stock and for additional grants to eligible directors. Each of the continuing
non-employee directors of the Company will be eligible to receive the automatic
grant, as well as any discretionary grants, in the next fiscal year.
Stock options granted under the Non-Employee Director Plan permit the
recipient to purchase shares of Waste Management Common Stock at the fair market
value, determined on the date of grant, regardless of the fair market value on
the date of exercise. On March 31, 2000, the fair market value of the Company's
Common Stock was approximately $13.56. Each option is for a term of ten years
and will become exercisable in full on the first anniversary of the date of
grant. The purchase price for shares to be purchased pursuant to options may be
paid in cash, by check, by promissory note, by shares of the Company's Common
Stock or by a combination of these methods of payments.
If an option holder ceases to be a director of the Company for any reason
other than death, permanent disability, resignation or retirement, such option
holder's option shall expire and all rights to purchase shares pursuant thereto
shall terminate immediately. In the event of death, permanent disability,
resignation or retirement, the option may be exercised in full by the option
holder, his heirs, legatees or legal representatives
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at any time during its specified term. Upon a change in control (as defined in
the plan) of the Company, all options granted under the Non-Employee Director
Plan will become immediately exercisable.
Certain Federal Income Tax Consequences of Options
All options granted under the Non-Employee Director Plan are nonqualified
options not entitled to special tax treatment under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). An option holder will generally
not recognize any taxable income at the time he is granted a nonqualified stock
option. However, upon its exercise, the option holder will recognize ordinary
income for federal tax purposes measured by the excess of the then fair market
value of the shares over the exercise price. The income realized by the option
holder will be subject to income and other employee withholding taxes.
The option holder's basis for determination of gain or loss upon the
subsequent disposition of the shares acquired upon the exercise of a
nonqualified stock option will be the amount paid for such shares plus any
ordinary income recognized as a result of the exercise of such option. Upon
disposition of any shares acquired pursuant to the exercise of a nonqualified
stock option, the difference between the sale price and the option holder's
basis in the shares will be treated as a capital gain or loss and generally will
be characterized as a long-term capital gain or loss if the shares have been
held for more than one year at their disposition.
In general, there will be no federal income tax deduction allowed to the
Company upon the grant or termination of a nonqualified stock option or a sale
or disposition of the shares acquired upon the exercise of a nonqualified stock
option. However, upon the exercise of a nonqualified stock option, the Company
will be entitled to a deduction for federal income tax purposes equal to the
amount of ordinary income that an option holder is required to recognize as a
result of the exercise, provided that the deduction is not otherwise disallowed
under the Code.
The foregoing is only a summary of certain effects of federal income
taxation upon the option holder and the Company with respect to the grant and
exercise of options under the Non-Employee Director Plan, does not purport to be
complete and does not discuss the tax consequences of the option holder's death
or the income tax law of any local, state or foreign jurisdiction in which any
option holder may reside.
The foregoing description of the Non-Employee Director Plan is qualified in
its entirety by, and should be read in conjunction with, the text of the
Non-Employee Director Plan, a copy of which, as proposed to be amended, is
attached hereto as Appendix A.
PROPOSAL FOR APPROVAL OF ADOPTION OF INCENTIVE PLAN
Description of Proposal
The Board of Directors will present at the Meeting a proposal to approve
the adoption of the Incentive Plan which was adopted by the Board of Directors
on February 29, 2000, subject to approval of stockholders, and is recommended
for approval of the stockholders. The Incentive Plan would authorize the Board
of Directors, through its Compensation Committee, to grant, either alone or in
combination, nonqualified stock options that do not qualify for special
treatment under Section 422 of the Code, incentive stock options under Section
422A of the Code, reload options, alternate appreciation rights, limited rights
and stock bonuses. Grants may be made to officers, other employees and
consultants of Waste Management who are responsible for or contribute to the
management, growth, success and profitability of Waste Management and who are
designated by the Compensation Committee.
The Board of Directors considers stock based incentives to be an important
part of the overall compensation package Waste Management has for many years
utilized as part of its overall compensation program. The Waste Management Board
believes stock options and stock-based incentives play an important role in
attracting and retaining the services of outstanding personnel and in
encouraging such employees to have a greater personal financial investment in
Waste Management, thus more closely aligning their interests with stockholders.
Therefore, the Board of Directors believes that the adoption of the Incentive
Plan is necessary to assure that an adequate number of shares of Waste
Management Common Stock will be
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available for future award grants in order to provide appropriate incentives to
employees and consultants of the Company.
The Company currently has a 1993 Stock Incentive Plan (the "1993 Plan") and
a 2000 Broad-Based Employee Plan (the "Broad-Based Plan"). The 1993 Plan, which
was originally approved by stockholders at the Company's 1993 annual meeting of
stockholders, provides for the same types of awards and generally contains the
same terms and conditions as the Incentive Plan. The 1993 Plan authorizes a
total of 26,500,000 shares for issuance; however, as of February 2000, the
number of shares available for issuance under such plan was approximately
2,800,000. Therefore, the Board of Directors adopted the Broad-Based Plan
effective February 28, 2000 in order to meet any shortfall of shares available
for annual grants awarded in the year 2000. The Broad-Based Plan, because it
meets the definition of "broadly-based" under the NYSE rules and policies
concerning stockholder approval, did not require approval of stockholders. The
Broad-Based Plan authorizes the issuance of 3,000,000 shares for grants of
awards, and generally provides for the same types of awards and contains the
same terms and conditions as both the Incentive Plan and the 1993 Plan;
provided, however, that only employees who are not officers of the Company are
eligible for awards under the Broad-Based Plan. At its meeting in February 2000,
the Compensation Committee issued annual grants of awards to employees of the
Company under the Broad-Based Plan and the 1993 Plan, nearly exhausting all of
the shares available under such plans. As of March 31, 2000, there were
available for issuance approximately 964,000 shares under the 1993 Plan and
approximately 234,000 shares under the Broad-Based Plan. Therefore, adoption of
the Incentive Plan is necessary to ensure shares will be available for future
awards.
The affirmative vote of the holders of a majority of the shares of Waste
Management Common Stock present or represented by proxy and entitled to vote at
the Meeting is required for approval of the adoption of the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE INCENTIVE
PLAN.
Description of Incentive Plan
Stock options permit the recipient to purchase shares of Waste Management
Common Stock at the fair market value, determined on the date of grant,
regardless of the fair market value on the date of exercise. Reload options,
which are granted concurrently with or subsequent to the award of stock options,
permit the option holder to receive options to purchase that number of shares of
Common Stock, at the fair market value on the date the reload option becomes
effective, that is equal to the number of shares of Common Stock used to pay the
exercise price of the related stock option or, to the extent authorized by the
Compensation Committee, the number of shares of Common Stock withheld by the
Company for payment of the exercise price of the related stock option or used to
satisfy any tax withholdings incident to the exercise of the related stock
option. Alternate appreciation rights, which are granted concurrently with or
subsequent to the award of any stock option or reload option, permit the holder
thereof to receive the excess of the fair market value of the Common Stock on
the exercise date over the exercise price of the related option, payable in
shares of Common Stock. Limited rights may be granted in connection with stock
options, reload options, or alternate appreciation rights, and, like alternate
appreciation rights, allow the holder thereof to receive the appreciation on the
related option or right, payable in shares of Common Stock, but only during a
specified limited time period. The exercise of an alternative appreciation right
or limited right generally cancels an equal number of options or rights related
to the exercised alternative appreciation or limited right. Stock bonuses may
provide the recipient all of the rights of a Waste Management stockholder,
including the right to vote the shares and receive dividends; however, the stock
may not be transferred by the recipient until certain restrictions, consisting
of performance or time based vesting criteria (as determined by the Compensation
Committee), lapse. On March 31, 2000, the fair market value of the Company's
Common Stock was approximately $13.56.
Each stock option granted under the Incentive Plan must be exercised within
ten years after the date of grant, unless earlier terminated in connection with
termination of employment, and becomes exercisable in accordance with the terms
established by the Compensation Committee at the time of grant. Reload options
have the same terms as the underlying stock options, and must be exercised
within the same time period as the underlying stock option. Reload options
become exercisable six months after the date of grant. Alternate
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appreciation and limited rights also have the same terms as their related
securities, and alternative appreciation rights are exercisable to the same
extent as any related security. Limited rights are exercisable for a period of
seven months following a change in control of the Company (as defined in the
Incentive Plan); provided, they are never exercisable within the six-month
period following the date of grant.
In addition to the overall limit of 29,000,000 shares available for
issuance under the Incentive Plan, in accordance with the requirements of
Section 422 of the Code, the plan limits the number of shares that may be
subject to incentive stock options to 29,000,000 shares. In accordance with the
requirements of the regulations under Section 162(m) of the Code, the Inventive
Plan limits the number of shares that may be granted to an individual
participant in any fiscal year to 1,500,000 shares. Additionally, the Incentive
Plan limits the amount of shares that may be used for alternate appreciation
rights, limited rights and stock bonuses to 25% of the shares authorized under
the Incentive Plan.
New Plan Benefits. Future grants to be made under the 2000 Stock Incentive
Plan will be authorized by the Compensation Committee in its sole discretion.
For this reason, it is not possible to determine the benefits or amounts that
will be received by any particular employees or group of employees in the
future.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
Nonqualified Stock Options. For a description of the federal income tax
consequences of nonqualified stock options, see "Certain Federal Income Tax
Consequences of Options" described above, under "Description of the Non-Employee
Director Plan."
Incentive Stock Options. Upon the grant or exercise of an "incentive stock
option" within the meaning of Section 422 of the Code, no income will be
realized by the participant for federal income tax purposes and Waste Management
will not be entitled to any deduction. However, the excess of the fair market
value of the stock as of the date of exercise over the exercise price will
constitute an adjustment to taxable income for purposes of the alternative
minimum tax. If the shares of stock underlying an incentive stock option are not
disposed of within the one-year period beginning on the date of the transfer of
such shares to the participant, nor within the two-year period beginning on the
date of grant of the option, any profit realized by the participant upon the
disposition of such shares will be taxed as long-term capital gain and no
deduction will be allowed to Waste Management. If the shares are disposed of
within the one-year period from the date of transfer of such shares to the
participant or within the two-year period from the date of grant of the option,
the excess of the fair market value of the shares upon the date of exercise or,
if less, the fair market value on the date of disposition, over the exercise
price, will be taxable as ordinary income of the participant at the time of
disposition, and a corresponding deduction will be allowed to Waste Management.
Certain additional rules apply if the exercise price for an option is paid in
shares previously owned by the participant. If an option that is intended to
qualify as an incentive stock option is exercised by a person who was not
continually employed by Waste Management or certain of its affiliates from the
date of grant of such option to a date not more than three months prior to such
exercise (or one year if such person is disabled), then such option will not
qualify as an incentive stock option and will instead be taxed as a nonqualified
stock option, as described above.
The foregoing does not constitute a definitive statement of the federal
income tax effects of options under the Incentive Plan, and each participant in
the plan should consult with his own tax advisor to determine the particular tax
effects of the provisions discussed herein.
The foregoing description of the Incentive Plan is qualified in its
entirety by, and should be read in conjunction with, the text of the Incentive
Plan, a copy of which is attached hereto as Appendix B.
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PROPOSAL FOR APPROVAL OF AMENDMENT TO THE ESPP
Description of the Amendment
The Board of Directors believes it is in the best interests of the Company
to encourage stock ownership by its employees. Accordingly, the Board of
Directors approved the establishment of the ESPP, which was approved by the
Company's stockholders at the Company's 1997 annual meeting of stockholders. An
aggregate of 1,000,000 shares of Common Stock was originally authorized for
purchase and issuance pursuant to the ESPP. As of March 31, 2000, approximately
55,000 employees were eligible to participate in the ESPP whereas only
approximately 5,350 employees were eligible at the time of the ESPP's original
adoption. As of March 31, 2000, approximately 367,500 shares were available for
purchase and issuance under the ESPP. Therefore, the Board of Directors will
present at the Meeting a proposal to approve an amendment to the ESPP that would
increase the number of shares authorized for purchase and issuance under the
ESPP to 2,250,000 shares of Common Stock.
The affirmative vote of the holders of a majority of the shares of Waste
Management Common Stock present or represented by proxy and entitled to vote at
the Meeting is required for approval of the adoption of the ESPP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE ESPP.
Description of the ESPP
On the first day (the "Enrollment Date") of each six month period (each, an
"Offering Period") commencing on January 1 and terminating the following June 30
or commencing on July 1 and terminating on the following December 31, each
employee who is eligible to participate in the ESPP and who has enrolled therein
will receive an option to purchase on the last day of the applicable Offering
Period (the "Exercise Date") up to a number of shares of Common Stock determined
by dividing such employee's payroll deductions accumulated in the ESPP during
such Offering Period by 85% of the fair market value of a share of Common Stock
on the applicable Enrollment Date or Exercise Date, whichever is lower. The
price of each of the shares offered in a given Offering Period shall be the
lower of: (i) 85% of the fair market value of a share of Common Stock on the
Enrollment Date, or (ii) 85% of the fair market value of a share of Common Stock
on the applicable Exercise Date. On March 31, 2000, the fair market value of the
Company's Common Stock was approximately $13.56.
The ESPP is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee has the authority to interpret all
provisions of the ESPP. All employees of the Company and its participating
subsidiaries who have been employed by the Company for at least one year are
eligible to participate in the ESPP, except for employees whose customary
employment is twenty hours or fewer per week or employees whose customary
employment is for not more than five months in any calendar year.
Eligible employees may elect to participate in the ESPP by completing an
enrollment agreement provided by the Company that authorizes payroll deductions
from such employee's pay. The payroll deduction may not exceed ten percent of
the employee's gross pay. In addition, an employee cannot contribute more than
any amount which would (a) result in the employee, immediately after the
purchase of Common Stock under the ESPP, owning Common Stock and/or holding
outstanding options to purchase Common Stock possessing five percent or more of
the total combined voting power of all outstanding capital stock of the Company,
or (b) permit such employee to purchase capital stock of the Company under all
stock purchase plans of the Company at a rate which would exceed $25,000 in fair
market value of capital stock in a calendar year in which such employee has
outstanding options to purchase Common Stock. In any event, no employee may make
payroll deductions in any one-year in excess of $21,250.
The Compensation Committee shall invest all payroll deductions in the
Company's general corporate account. No interest shall accrue or be credited to
such payroll deductions, and an employee participating in
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the ESPP may not make any additional payments into such account. Employees may
purchase Common Stock under the ESPP only through payroll deductions.
The Board of Directors may amend the ESPP at any time. However, the ESPP
may not be amended in any way that will cause rights issued thereunder to fail
to meet the requirements for employee stock purchase plans as defined in Section
423 of the Code, including stockholder approval if required.
The ESPP terminates on (i) the Exercise Date that employees participating
in the ESPP become entitled to purchase an aggregate number of shares of Common
Stock greater than the number of reserved shares of Common Stock remaining
available for purchase under the ESPP, or (ii) the date on which the ESPP is
terminated by the Board of Directors.
Federal Income Tax Consequences
The ESPP is intended to be an "employee stock purchase plan" as defined in
Section 423 of the Code, which provides that an employee does not have to pay
any federal income tax when he joins the ESPP or when he receives shares of
Common Stock. The employee is, however, required to pay a federal income tax on
the difference, if any, between the price at which he sells the shares received
under the ESPP and the price paid for them.
The foregoing does not constitute a definitive statement of the federal
income tax effects under the ESPP, and each participant in the ESPP should
consult with his own tax advisor to determine the particular tax effects of the
provisions discussed herein.
The foregoing description of the ESPP is qualified in its entirety by, and
should be read in conjunction with, the text of the ESPP, a copy of which, as
proposed to be amended, is attached hereto as Appendix C.
PROPOSAL FOR SELECTION OF AUDITORS
The Board of Directors, acting upon the recommendation of the Audit
Committee, has appointed, subject to approval by the stockholders, the firm of
Arthur Andersen LLP, independent public accountants, to audit the consolidated
financial statements of the Company and its subsidiaries for the fiscal year
ending December 31, 2000. This firm acted as auditors for the Company during the
year ended December 31, 1999.
Representatives of Arthur Andersen LLP will be present at the Meeting, will
have an 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 APPROVAL OF ARTHUR ANDERSEN
LLP TO SERVE AS INDEPENDENT PUBLIC ACCOUNTANTS TO AUDIT THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY AND ITS SUBSIDIARIES FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2000.
PROPOSALS OF STOCKHOLDERS
The Board of Directors will consider proposals of stockholders intended to
be presented for action at the 2001 annual meeting of stockholders. Pursuant to
the Company's By-laws, any stockholder proposals must be submitted in writing
and be received at the Company's principal executive offices, 1001 Fannin
Street, Suite 4000, Houston, Texas 77002, Attn: Corporate Secretary no later
than December 6, 2000, and no earlier than November 6, 2000 to be included in
the Company's proxy statement relating to the 2001 annual meeting of
stockholders.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters to
be presented for action at the Meeting other than those listed in the Notice of
Meeting and referred to herein. If any other matters properly come before the
Meeting or any adjournment thereof, it is intended that the proxies solicited
hereby be voted thereon in accordance with the recommendations of the Board of
Directors of the Company.
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APPENDIX A
WASTE MANAGEMENT, INC.
1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE. The principal purpose of this 1996 Stock Option Plan for
Non-Employee Directors (the "Plan") is to benefit WASTE MANAGEMENT, INC. (the
"Company") and its subsidiaries through offering its directors who are not
officers or full-time employees of the Company or any of its subsidiaries an
opportunity to become holders of stock in the Company, thereby giving them a
stake in the growth and prosperity of the Company, in order to enable them to
represent the viewpoint of other stockholders of the Company more effectively
and to encourage them to continue serving as directors of the Company.
2. ADMINISTRATION. The Plan shall be administered by the Executive
Committee of the Board of Directors (the "Committee"), whose interpretation of
the terms and provisions of the Plan and whose determination of matters
pertaining to options granted under the Plan shall be final and conclusive."
3. ELIGIBILITY. Options shall be granted under this Plan only to members of
the Board of Directors who are not officers or full-time employees of the
Company or any of its subsidiaries (each such director receiving options granted
under the Plan and each other person entitled to exercise an option granted
under the Plan is referred to herein as an "Optionee").
4. GRANT OF OPTIONS. (a) An option under which a total of 10,000 shares of
the common stock of the Company may be purchased from the Company shall be
automatically granted to each eligible director of the Company on the first
business day of January of each year in which such eligible director is still
serving as a director (whether or not such director's term has been continuous).
Notwithstanding the foregoing, the Committee may provide for an annual option
grant for the purchase of a different number of Company shares and for such
additional grants to eligible persons under this Plan as the Committee may in
its discretion determine. The aggregate number of shares which shall be
available to be so optioned under this Plan shall be 2,400,000 shares. Such
number of shares, and the number of shares subject to options outstanding under
the Plan, shall be subject in all cases to adjustment as provided in Paragraph
10 hereof. No option shall be granted under the Plan subsequent to January 1,
2006.
(b) Notwithstanding any of the foregoing to the contrary, in the event an
option expires or is terminated or canceled unexercised as to any shares of
common stock, such released shares may again be the subject of an option granted
under the Plan. Shares subject to options may be made available from unissued or
reacquired shares of common stock.
(c) Nothing contained in the Plan or in any option granted pursuant thereto
shall in itself confer upon any Optionee any right to continue serving as a
director of the Company or interfere in any way with any right of the Board of
Directors or stockholders of the Company to remove such director pursuant to the
restated certificate of incorporation or by-laws of the Company or applicable
law.
5. OPTION PRICE. Subject to adjustment under Paragraph 10 hereof, the
option price shall be the fair market value, on the date as of which the option
is granted, of the stock subject to the option, which shall be, for purposes of
this Paragraph, the lowest trading price of the Company's common stock on the
New York Stock Exchange Composite Tape (as reported in The Wall Street Journal,
Southwest Edition) (or, if the Company's common stock is not then traded on the
New York Stock Exchange, on the principal market where such common stock is
actively traded) on the date as of which the option is granted.
6. DURATION OF OPTIONS; VESTING. Subject to the provisions of Paragraph 8
hereof, each option shall be for a term of ten years. Each option shall become
exercisable with respect of 100% of the total number of shares subject to the
option on the first anniversary of the date of grant.
7. EXERCISE OF OPTION. (a) An option may be exercised by giving written
notice to the Company, attention of the Secretary, specifying the number of
shares to be purchased, accompanied by the full purchase
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price for the shares to be purchased in cash, by check, or a "cashless-broker"
exercise pursuant to procedures established by the Committee from time to time,
by a promissory note in the form specified by the Company and payable to the
Company 15 business days after the date of exercise of the option, by shares of
the Company's common stock or by a combination of these methods of payment. For
this purpose, the per share value of the Company's common stock shall be the
fair market value on the date of exercise (or if the date of exercise is not a
trading day on the trading day next preceding the date of exercise), which shall
be, for purposes of this Paragraph, the average of the highest and lowest sales
price of the Company's common stock on the New York Stock Exchange Composite
Tape (as reported in The Wall Street Journal, Southwest Edition) (or, if the
Company's common stock is not then traded on the New York Stock Exchange, on the
principal market where such common stock is actively traded) on such date.
(b) At the time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the Optionee (or his
or her heirs, legatees or legal representatives, as the case may be) as a
condition upon the exercise thereof, to deliver to the Company a written
representation of present intention to purchase the shares for investment and
not for distribution. In the event such representation is required to be
delivered, an appropriate legend may be placed upon each certificate delivered
to the Optionee upon his or her exercise of part or all of the option and a stop
transfer order may be placed with the transfer agent. Each option shall also be
subject to the requirement that, if at any time the Company determines, in its
discretion, that the listing, registration or qualification of the shares
subject to the option upon any securities exchange or under any state, federal
or foreign law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in consideration with, the issue
or purchase of shares thereunder, the option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company.
8. TERMINATION-EXERCISE THEREAFTER. (a) In the event an Optionee ceases to
be a director of the Company for any reason other than death, permanent
disability, resignation or retirement, such Optionee's option shall expire and
all rights to purchase shares pursuant thereto shall terminate immediately.
(b) In the event of death, permanent disability (as the term is defined in
the Social Security Act, as now in effect or as it shall be subsequently
amended), resignation or retirement, the vesting of any unvested options shall
accelerate and such options may be exercised in full by the Optionee or, if the
Optionee is not living, by the Optionee's heirs, legatees, or legal
representatives, as the case may be, at any time during its specified term after
the date of death, permanent disability, resignation or retirement.
9. TRANSFERABILITY. (a) Except as provided in subparagraph (b) below, no
Option will be transferable by an Optionee other than by will or the laws of
descent and distribution and Options will be exercisable during the lifetime of
the Optionee only by the Optionee or by the Optionee's legal representative.
(b) Notwithstanding the foregoing, Options may be transferred (in whole or
in part in a form approved by the Company) by an Optionee to (i) the spouse,
children or grandchildren of the Optionee ("Immediate Family Members"), (ii) a
trust or trusts for the exclusive benefit of the Immediate Family Members and,
if applicable, the Optionee, or (iii) a partnership in which such Immediate
Family Members and, if applicable, the Optionee are the only partners. Following
any such transfer, the Option shall continue to be subject to the same terms and
conditions as were applicable to the Option immediately prior to the transfer. A
transferee of an Option may not transfer the Option except to an Immediate
Family Member or the Optionee.
10. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
Company's outstanding common stock is changed by any stock dividend, stock split
or combination of shares, the number of shares subject to the Plan and to
options granted thereunder shall be proportionately adjusted, (b) in the event
of any merger, consolidation or reorganization of the Company with any other
corporation or corporations, there shall be substituted on an equitable basis as
determined by the Board of Directors, for each share of common stock then
subject to the Plan and for each share of common stock then subject to an option
granted under the Plan, the number and kind of shares of stock, other
securities, cash or other property to which the holders of common stock of the
Company will be entitled pursuant to the transaction, and (c) in the event of
any other relevant change in the
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capitalization of the Company, the Board of Directors shall provide for an
equitable adjustment in the number of shares of common stock then subject to the
Plan and to each share of common stock then subject to an option granted under
the Plan. In the event of any such adjustment, the exercise price per share
shall be proportionately adjusted.
11. CHANGE IN CONTROL. Any option granted under the Plan prior to the date
of a "Change in Control" shall be immediately exercisable in full on such date,
without regard to any times of exercise established under the Paragraph 6
hereof. The term "Change in Control" shall mean the occurrence, at any time
during the specified term of an option granted under the Plan, of any of the
following events:
(i) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person (an "Acquiror") and as a result
of such merger, consolidation or reorganization less than 75% of the
outstanding voting securities or other capital interests of the surviving,
resulting or acquiring corporation or other legal person are owned in the
aggregate by the stockholders of the Company, directly or indirectly,
immediately prior to such merger, consolidation or reorganization, other
than the Acquiror or any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(ii) The Company sells all or substantially all of its business and/or
assets to an Acquiror, of which less than 75% of the outstanding voting
securities or other capital interests are owned in the aggregate by the
stockholders of the Company, directly or indirectly, immediately prior to
such sale, other than any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person or group (as the terms "person" and "group" are
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and the
rules and regulations promulgated thereunder) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of 20% or
more of the issued and outstanding shares of voting securities of the
Company; or
(iv) During any period of two consecutive years, individuals who at
the beginning of any such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of
each new director of the Company was approved by a vote of at least
two-thirds of such directors of the Company then still in office who were
directors of the Company at the beginning of any such period.
12. AMENDMENT OF PLAN. The Board of Directors of the Company or any
authorized committee thereof may amend or discontinue the Plan at any time,
provided, however, that the Plan may not be amended more than once every six
months except to comport with the changes in the Internal Revenue Code, the
Employee Retirement Income Security Act of 1976, as amended, or the rules and
regulations under each, and provided further, that no such amendment or
discontinuance shall (a) without the consent of the Optionee change or impair
any option previously granted, or (b) without the approval of the holders of a
majority of the shares of voting common stock of the Company which are present
or represented at a duly held stockholders' meeting, (i) increase the maximum
number of shares which may be purchased by all eligible directors pursuant to
the Plan, (ii) change the purchase price, or (iii) change the option period or
increase the time limitations on the grant of options.
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APPENDIX B
WASTE MANAGEMENT, INC.
2000 STOCK INCENTIVE PLAN
ARTICLE I. GENERAL
SECTION 1.1. Purpose. The purposes of this Stock Incentive Plan (the
"Plan") are to: (1) closely associate the interests of the employees and
consultants of Waste Management, Inc. and its Subsidiaries and Affiliates
(collectively referred to as the "Company") with the shareholders to generate an
increased incentive to contribute to the Company's future success and
prosperity, thus enhancing the value of the Company for the benefit of its
stockholders; (2) provide employees and consultants with a proprietary ownership
interest in the Company commensurate with Company performance, as reflected in
increased shareholder value; (3) maintain competitive compensation levels
thereby attracting and retaining highly competent and talented employees and
consultants; and (4) provide an incentive to employees and consultants for
continuous employment with or services to the Company.
SECTION 1.2. Administration.
(a) The Plan shall be administered by a committee of non-employee directors
appointed by the Board of Directors of the Company (the "Committee"), as
constituted from time to time.
(b) The Committee shall have the authority, in its sole discretion and from
time to time to:
(i) designate the employees and consultants or classes of employees of
and consultants to the Company eligible to participate in the Plan;
(ii) grant awards ("Awards") provided in the Plan in such form and
amount as the Committee shall determine;
(iii) impose such limitations, restrictions, and conditions, not
inconsistent with this Plan, upon any such Award as the Committee shall
deem appropriate; and
(iv) interpret the Plan and any agreement, instrument, or other
document executed in connection with the Plan; adopt, amend, and rescind
rules and regulations relating to the Plan; and make all other
determinations and take all other action necessary or advisable for the
implementation and administration of the Plan.
(c) Decisions and determinations of the Committee on all matters relating
to the Plan shall be in its sole discretion and shall be final, conclusive, and
binding upon all persons, including the Company, any participant, any
stockholder of the Company, and any employee or consultant. A majority of the
members of the Committee may determine its actions and fix the time and place of
its meetings. No member of the Committee shall be liable for any action taken or
decision made in good faith relating to the Plan or any Award thereunder.
SECTION 1.3. Eligibility for Participation. Participants in the Plan
("Participants") shall be selected by the Committee from the employees of and
consultants to the Company who are responsible for or contribute to the
management, growth, success and, profitability of the Company. In making this
selection and in determining the form and amount of Awards, the Committee shall
consider any factors deemed relevant, including the individual's functions,
responsibilities, value of services to the Company, and past and potential
contributions to the Company's profitability and growth.
SECTION 1.4. Types of Awards Under Plan. Awards under the Plan may be in
the form of any one or more of the following:
(i) Stock Options, as described in Article II;
(ii) Incentive Stock Options, as described in Article III;
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(iii) Reload Options, as described in Article IV;
(iv) Alternate Appreciation Rights, as described in Article V;
(v) Limited Rights, as described in Article VI;
(vi) Substitution Awards, as described in Article VII; and/or
(vii) Stock Bonus Awards, as described in Article VIII.
Awards under the Plan shall be evidenced by an Award Agreement between the
Company and the recipient of the Award, in form and substance satisfactory to
the Committee, and not inconsistent with this Plan.
SECTION 1.5. Aggregate Limitation on Awards.
(a) Shares of stock which may be issued under the Plan shall be authorized
and unissued or treasury shares of Common Stock, $.01 par value, of the Company
("Common Stock"). Subject to the further provisions of this Section 1.5 and
Section 9.10, the maximum number of shares of Common Stock which may be issued
under the Plan shall be 29,000,000; provided, however, that no more than 25% of
such shares may be used for Awards under Articles V, VI and VIII herein.
(b) For purposes of calculating the maximum number of shares of Common
Stock that may be issued under the Plan:
(i) all the shares issued (including the shares, if any, withheld for
tax withholding requirements) shall be counted when cash is used as full
payment for shares issued upon exercise of a Stock Option, Incentive Stock
Option, or Reload Option;
(ii) only the shares issued (including the shares, if any, withheld
for tax withholding requirements) as a result of an exercise of Alternate
Appreciation Rights shall be counted; and
(iii) only the net shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when shares of
Common Stock or another Award under the Plan are used or withheld as full
or partial payment for shares issued upon exercise of a Stock Option,
Incentive Stock Option, or Reload Option;
provided, however, in all events the maximum number of shares of Common Stock
that may be issued pursuant to Incentive Stock Options is 29,000,000.
(c) In addition to shares of Common Stock actually issued pursuant to the
exercise of Stock Options, Incentive Stock Options, Reload Options, or Alternate
Appreciation Rights, there shall be deemed to have been issued a number of
shares equal to the number of shares of Common Stock in respect of which Limited
Rights (as described in Article VI) shall have been exercised.
(d) Shares tendered by a Participant or withheld as payment for shares
issued upon exercise of a Stock Option, Incentive Stock Option, or Reload Option
shall be available for issuance under the Plan. Any shares of Common Stock
subject to a Stock Option, Incentive Stock Option, or Reload Option that for any
reason is terminated unexercised or expires shall again be available for
issuance under the Plan, but shares subject to a Stock Option, Incentive Stock
Option, or Reload Option that are not issued as a result of the exercise of
Limited Rights shall not again be available for issuance under the Plan.
(e) The maximum number of shares of Common Stock with respect to which any
Participant may receive Awards in any calendar year is 1,500,000.
SECTION 1.6. Effective Date and Term of Plan.
(a) The Plan shall become effective on the date it is approved by the
holders of a majority of the shares of Common Stock present in person or by
proxy and entitled to vote on the matter.
(b) No Awards shall be made under the Plan after the tenth anniversary of
the effective date of this Plan; provided, however, that the Plan and all Awards
made under the Plan prior to such date shall remain in
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effect until such Awards have been satisfied or terminated in accordance with
the Plan and the terms of such Awards.
ARTICLE II. STOCK OPTIONS
SECTION 2.1. Award of Stock Options. The Committee may from time to time,
and subject to the provisions of the Plan and such other terms and conditions as
the Committee may prescribe, grant to any Participant in the Plan one or more
options to purchase the number of shares of Common Stock ("Stock Options")
allotted by the Committee. The date a Stock Option is granted shall mean the
date selected by the Committee as of which the Committee allots a specific
number of shares to a Participant pursuant to the Plan.
SECTION 2.2. Stock Option Agreements. The grant of a Stock Option shall be
evidenced by a written Award Agreement, executed by the Company and the holder
of the Stock Option (the "Optionee"), stating the number of shares of Common
Stock subject to the Stock Option evidenced thereby, and in such form as the
Committee may from time to time determine.
SECTION 2.3. Stock Option Price. The Option Price per share of Common Stock
deliverable upon the exercise of a Stock Option shall be an amount selected by
the Committee and shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Stock Option is granted.
SECTION 2.4. Term and Exercise. A Stock Option shall not be exercisable
prior to six months from the date of its grant unless a shorter period is
provided by the Committee or by another Section of this Plan, and may be
exercised during the period established by the Committee, but not after ten
years from the date of grant thereof (the "Option Term"). No Stock Option shall
be exercisable after the expiration of its Option Term.
SECTION 2.5. Manner of Payment. Each Award Agreement providing for Stock
Options shall set forth the procedure governing the exercise of the Stock Option
granted thereunder, and shall provide that, upon such exercise in respect of any
shares of Common Stock subject thereto, the Optionee shall pay to the Company,
in full, the Option Price for such shares with cash, which may be pursuant to a
"cashless-broker" exercise pursuant to procedures established by the Committee
from time to time, or with previously owned Common Stock, or at the discretion
of the Committee, in whole or in part with, the surrender of another Award under
the Plan, the withholding of shares of Common Stock issuable upon exercise of
such Stock Option, other property, or any combination thereof (each based on the
Fair Market Value of such Common Stock, Award or other property on the date the
Stock Option is exercised as determined by the Committee).
SECTION 2.6. Delivery of Shares. As soon as practicable after receipt of
payment, the Committee shall deliver to the Optionee a certificate or
certificates for such shares of Common Stock. The Optionee shall become a
shareholder of the Company with respect to Common Stock represented by share
certificates so issued and as such shall be fully entitled to receive dividends,
to vote and to exercise all other rights of a shareholder.
SECTION 2.7. Death, Retirement and Termination of Employment of
Optionee. Unless otherwise provided in an Award Agreement or otherwise agreed to
by the Committee:
(a) Upon the death of the Optionee, any rights to the extent exercisable by
the Optionee on the date of termination of employment or consulting, as the case
may be, may be exercised by the Optionee's estate, or by a person who acquires
the right to exercise such Stock Option by bequest or inheritance or by reason
of the death of the Optionee, provided that such exercise occurs within both the
remaining effective term of the Stock Option and one year after the Optionee's
death. The provisions of this Section shall apply notwithstanding the fact that
the Optionee's employment may have terminated prior to death.
(b) Upon termination of the Optionee's employment by reason of retirement
or permanent disability (as each is determined by the Committee), the Optionee
may, within 36 months from the date of termination, exercise any Stock Options
to the extent such Stock Options are exercisable on the date of such termination
of employment.
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(c) Except as provided in Subsections (a) and (b) of this Section 2.7, or
except as otherwise determined by the Committee, all Stock Options shall
terminate three months after the date of the termination of the Optionee's
employment or consulting, as the case may be, and shall be exercisable during
such period only to the extent exercisable on the date of termination of
employment or consulting.
SECTION 2.8. Tax Election. Recipients of Stock Options who are directors or
executive officers of the Company or who own more than 10% of the Common Stock
of the Company ("Section 16(a) Option Holders") at the time of exercise of a
Stock Option may elect, in lieu of paying to the Company an amount required to
be withheld under applicable tax laws in connection with the exercise of a Stock
Option in whole or in part, to have the Company withhold shares of Common Stock
having a fair market value equal to the amount required to be withheld. Such
election may not be made prior to six months following the grant of the Stock
Option, except in the event of a Section 16(a) Option Holders's death or
disability. The election may be made at the time the Stock Option is exercised
by notifying the Company of the election, specifying the amount of such
withholding and the date on which the number of shares to be withheld is to be
determined ("Tax Date"), which shall be either (i) the date the Stock Option is
exercised or (ii) a date six months after the Stock Option was granted, if
later. The number of shares of Common Stock to be withheld to satisfy the tax
obligation shall be the amount of such tax liability divided by the fair market
value of the Common Stock on the Tax Date (or if not a business day, on the next
closest business day). If the Tax Date is not the exercise date, the Company may
issue the full number of shares of Common Stock to which the Section 16(a)
Option Holders is entitled, and such option holder shall be obligated to tender
to the Company on the Tax Date a number of such shares necessary to satisfy the
withholding obligation. Certificates representing such shares of Common Stock
shall bear a legend describing such Section 16(a) Option Holders obligation
hereunder.
SECTION 2.9. Effect of Exercise. The exercise of any Stock Option shall
cancel that number of related Alternate Appreciation Rights and/or Limited
Rights, if any, that is equal to the number of shares of Common Stock purchased
pursuant to said option unless otherwise agreed by the Committee in an Award
Agreement or otherwise.
ARTICLE III. INCENTIVE STOCK OPTIONS
SECTION 3.1. Award of Incentive Stock Options. The Committee may, from time
to time and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any employee of the Company
or a Subsidiary one or more "incentive stock options" (intended to qualify as
such under the provisions of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") ("Incentive Stock Options") to purchase the number of
shares of Common Stock allotted by the Committee. The date an Incentive Stock
Option is granted shall mean the date selected by the Committee as of which the
Committee allots a specific number of shares to a participant pursuant to the
Plan.
SECTION 3.2. Incentive Stock Option Agreements. The grant of an Incentive
Stock Option shall be evidenced by a written Award Agreement, executed by the
Company and the holder of an Incentive Stock Option (the "Optionee"), stating
the number of shares of Common Stock subject to the Incentive Stock Option
evidenced thereby, and in such form as the Committee may from time to time
determine.
SECTION 3.3. Incentive Stock Option Price. The Option Price per share of
Common Stock deliverable upon the exercise of an Incentive Stock Option shall be
at least 100% of the Fair Market Value of a share of Common Stock on the date
the Incentive Stock Option is granted; provided, however, the Option Price per
share of Common Stock deliverable upon the exercise of an Incentive Stock Option
granted to any owner of 10% or more of the total combined voting power of all
classes of stock of the Company and its subsidiaries shall be at least 110% of
the fair market value of a share of Common Stock on the date the Incentive Stock
Option is granted.
SECTION 3.4. Term and Exercise. Each Incentive Stock Option shall not be
exercisable prior to six months from the date of its grant unless a shorter
period is provided by the Committee or another Section of this Plan, and may be
exercised during the period established by the Committee, but not after ten
years from
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the date of grant thereof (the "Option Term"). No Incentive Stock Option shall
be exercisable after the expiration of its Option Term.
SECTION 3.5. Maximum Amount of Incentive Stock Option Grant. To the extent
that the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options granted are exercisable for the first time by an
individual during any calendar year under all incentive stock option plans of
the Company and its parent and subsidiary corporations exceeds $100,000, such
Incentive Stock Options shall be treated as Options which do not constitute
Incentive Stock Options.
SECTION 3.6. Death of Optionee. Unless otherwise provided in an Award
Agreement:
(a) Upon the death of the Optionee, any Incentive Stock Option exercisable
by the Optionee on the date of termination of employment may be exercised by the
Optionee's estate or by a person who acquires the right to exercise such
Incentive Stock Option by bequest or inheritance or by reason of the death of
the Optionee, provided that such exercise occurs within both the remaining
option term of the Incentive Stock Option and one year after the Optionee's
death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the Optionee's employment may have terminated prior to death.
SECTION 3.7. Retirement or Disability. Unless otherwise provided in an
Award Agreement, upon the termination of the Optionee's employment by reason of
permanent disability or retirement (as each is determined by the Committee), the
Optionee may, within 36 months from the date of such termination of employment,
exercise any Incentive Stock Options to the extent such Incentive Stock Options
were exercisable at the date of such termination of employment. Notwithstanding
the foregoing, the tax treatment available pursuant to Section 422 of the Code
upon the exercise of an Incentive Stock Option will not be available to an
Optionee who exercises any Incentive Stock Options more than (i) 12 months after
the date of termination of employment due to permanent disability or (ii) three
months after the date of termination of employment due to retirement.
SECTION 3.8. Termination for Other Reasons. Except as provided in Sections
3.6 and 3.7 or except as otherwise determined by the Committee, all Incentive
Stock Options shall terminate three months after the date of the termination of
the Optionee's employment and shall be exercisable during such period only to
the extent exercisable on the date of termination of employment.
SECTION 3.9. Applicability of Stock Options Sections. Sections 2.5, Manner
of Payment; 2.6, Delivery of Shares; 2.8, Tax Elections and 2.9, Effect of
Exercise, applicable to Stock Options, shall apply equally to Incentive Stock
Options. Such Sections are incorporated by reference in this Article III as
though fully set forth herein.
ARTICLE IV. RELOAD OPTIONS
SECTION 4.1. Authorization of Reload Options. Concurrently with or
subsequent to the award of Stock Options to any Participant in the Plan, the
Committee may authorize reload options ("Reload Options") to purchase shares of
Common Stock. The number of Reload Options shall equal (i) the number of shares
of Common Stock used to pay the exercise price of the underlying Stock Options
or Incentive Stock Options and (ii) to the extent authorized by the Committee,
the number of shares of Common Stock withheld by the Company in payment of the
exercise price underlying the Stock Option or Incentive Stock Option or used to
satisfy any tax withholding requirement incident to the exercise of the
underlying Stock Options or Incentive Stock Options. The grant of a Reload
Option will become effective upon the exercise of underlying Stock Options,
Incentive Stock Options, or Reload Options through the use of shares of Common
Stock held by the Optionee or the withholding of shares by the Company in
payment of the exercise price of the underlying Stock Option or Incentive Stock
Option held by the Optionee. Notwithstanding the fact that the underlying option
may be an Incentive Stock Option, a Reload Option is not intended to qualify as
an "incentive stock option" under Section 422 of the Code.
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SECTION 4.2. Reload Option Amendment. Each Award Agreement shall state
whether the Committee has authorized Reload Options with respect to the Stock
Options and/or Incentive Stock Options covered by such Award Agreement. Upon the
exercise of an underlying Stock Option, Incentive Stock Option, or other Reload
Option, the Reload Option will be evidenced by an amendment to the underlying
Award Agreement in such form as the Committee shall approve.
SECTION 4.3. Reload Option Price. The Option Price per share of Common
Stock deliverable upon the exercise of a Reload Option shall be the Fair Market
Value of a share of Common Stock on the date the grant of the Reload Option
becomes effective.
SECTION 4.4. Term and Exercise. Each Reload Option is fully exercisable six
months from the effective date of grant. The term of each Reload Option shall be
equal to the remaining option term of the underlying Stock Option and/or
Incentive Stock Option.
SECTION 4.5. Termination of Employment. Unless otherwise determined by the
Committee in an Award Agreement or otherwise, no additional Reload Options shall
be granted to Optionees when Stock Options, Incentive Stock Options, and/or
Reload Options are exercised pursuant to the terms of this Plan following
termination of the Optionee's employment.
SECTION 4.6. Applicability of Stock Options Sections. Sections 2.5, Manner
of Payment; 2.6, Delivery of Shares; 2.7, Death, Retirement and Termination of
Employment of Optionee; 2.8, Tax Election; and 2.9, Effect of Exercise,
applicable to Stock Options, shall apply equally to Reload Options. Such
Sections are incorporated by reference in this Article IV as though fully set
forth herein.
ARTICLE V. ALTERNATE APPRECIATION RIGHTS
SECTION 5.1. Award of Alternate Appreciation Rights. Concurrently with or
subsequent to the award of any Stock Option, Incentive Stock Option, or Reload
Option to purchase one or more shares of Common Stock, the Committee may,
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the Optionee with respect to each share of
Common Stock covered by an Option, a related alternate appreciation right
permitting the Optionee to be paid the appreciation on the Option in lieu of
exercising the Option ("Alternate Appreciation Right").
SECTION 5.2. Alternate Appreciation Rights Agreement. Alternate
Appreciation Rights shall be evidenced by written Award Agreements in such form
as the Committee may from time to time determine.
SECTION 5.3. Exercise. An Optionee who has been granted Alternate
Appreciation Rights may, from time to time, in lieu of the exercise of an equal
number of Options, elect to exercise one or more Alternate Appreciation Rights
and thereby become entitled to receive from the Company payment in Common Stock
of the number of shares determined pursuant to Sections 5.4 and 5.5. Alternate
Appreciation Rights shall be exercisable only to the same extent and subject to
the same conditions as the Options related thereto are exercisable, as provided
in this Plan. The Committee may, in its discretion, prescribe additional
conditions to the exercise of any Alternate Appreciation Rights.
SECTION 5.4. Amount of Payment. The amount of payment to which an Optionee
shall be entitled upon the exercise of each Alternate Appreciation Right shall
be equal to 100% of the amount, if any, by which the Fair Market Value of a
share of Common Stock on the exercise date exceeds the Option Price per share on
the Option related to such Alternate Appreciation Right. A Section 16(a) Option
Holder may elect to withhold shares of Common Stock issued under this Section to
pay taxes as described in Section 2.8.
SECTION 5.5. Form of Payment. The number of shares to be paid shall be
determined by dividing the amount of payment determined pursuant to Section 5.4
by the Fair Market Value of a share of Common Stock on the exercise date of such
Alternate Appreciation Rights. As soon as practicable after exercise, the
Company shall deliver to the Optionee a certificate or certificates for such
shares of Common Stock.
SECTION 5.6. Effect of Exercise. Unless otherwise provided in an Award
Agreement or agreed to by the Committee, the exercise of any Alternate
Appreciation Rights shall cancel an equal number of Stock Options,
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Incentive Stock Options, Reload Options, and Limited Rights, if any, related to
said Alternate Appreciation Rights.
SECTION 5.7. Termination of Employment, Retirement, Death or
Disability. Unless otherwise provided in an Award Agreement or agreed to by the
Committee:
(a) Upon termination of the Optionee's employment (including
employment as a director of the Company after an Optionee terminates
employment as an employee of the Company) by reason of permanent disability
or retirement (as each is determined by the Committee) or consulting, the
Optionee may, within six months from the date of such termination, exercise
any Alternate Appreciation Rights to the extent such Alternate Appreciation
Rights are exercisable during such six-month period.
(b) Except as provided in Section 5.7(a), all Alternate Appreciation
Rights shall terminate three months after the date of the termination of
the Optionee's employment, consulting or upon the death of the Optionee.
ARTICLE VI. LIMITED RIGHTS
SECTION 6.1. Award of Limited Rights. Concurrently with or subsequent to
the award of any Stock Option, Incentive Stock Option, Reload Option, or
Alternate Appreciation Right, the Committee may, subject to the provisions of
the Plan and such other terms and conditions as the Committee may prescribe,
award to the Optionee with respect to each share of Common Stock covered by an
Option, a related limited right permitting the Optionee, during a specified
limited time period, to be paid the appreciation on the Option in lieu of
exercising the Option ("Limited Right").
SECTION 6.2. Limited Rights Agreement. Limited Rights granted under the
Plan shall be evidenced by written Award Agreements in such form as the
Committee may from time to time determine.
SECTION 6.3. Exercise Period. Limited Rights are exercisable in full for a
period of seven months following the date of a Change in Control of the Company
(the "Exercise Period"); provided, however, that Limited Rights may not be
exercised under any circumstances until the expiration of the six-month period
following the date of grant.
SECTION 6.4. Amount of Payment. The amount of payment to which an Optionee
shall be entitled upon the exercise of each Limited Right shall be equal to 100%
of the amount, if any, which is equal to the difference between the Option Price
per share of Common Stock covered by the related Option and the Market Price of
a share of such Common Stock. "Market Price" is defined to be the greater of (i)
the highest price per share of the Company's Common Stock paid in connection
with any Change in Control and (ii) the highest price per share of the Company's
Common Stock reflected in the consolidated trading tables of The Wall Street
Journal (presently the New York Stock Exchange -- Composite Transactions) during
the 60-day period prior to the Change in Control.
SECTION 6.5. Form of Payment. Payment of the amount to which an Optionee is
entitled upon the exercise of Limited Rights, as determined pursuant to Section
6.4, shall be made solely in cash.
SECTION 6.6. Effect of Exercise. If Limited Rights are exercised, the Stock
Options, Incentive Stock Options, Reload Options, and Alternate Appreciation
Rights, if any, related to such Limited Rights shall cease to be exercisable to
the extent of the number of shares with respect to which the Limited Rights were
exercised. Upon the exercise or termination of the Stock Options, Incentive
Stock Options, Reload Options, and Alternate Appreciation Rights, if any,
related to such Limited Rights, the Limited Rights granted with respect thereto
terminate to the extent of the number of shares as to which the related options
and Alternate Appreciation Rights were exercised or terminated.
SECTION 6.7. Retirement or Disability. Upon termination of the Optionee's
employment (including employment as a director of the Company after an Optionee
terminates employment as an employee of the Company) by reason of permanent
disability or retirement (as each is determined by the Committee) or
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consulting, the Optionee may, within six months from the date of such
termination, exercise any Limited Right to the extent such Limited Right is
exercisable during such six-month period.
SECTION 6.8. Death of Optionee or Termination for Other Reasons. Except as
provided in Sections 6.7 and 6.9, or except as otherwise determined by the
Committee, all Limited Rights granted under the Plan shall terminate upon the
termination of the Optionee's employment, consulting or upon the death of the
Optionee.
SECTION 6.9. Termination Related to a Change in Control. The requirement
that an Optionee be terminated by reason of retirement or permanent disability
or be employed by the Company at the time of exercise pursuant to Sections 6.7
and 6.8, respectively, is waived during the Exercise Period as to an Optionee
who (i) was employed by the Company at the time of the Change in Control and
(ii) is subsequently terminated by the Company other than for just cause or who
voluntarily terminates if such termination was the result of a good faith
determination by the Optionee that as a result of the Change in Control he is
unable to effectively discharge his present duties or the duties of the position
which he occupied just prior to the Change in Control. As used herein "just
cause" shall mean willful misconduct or dishonesty or conviction of or failure
to contest prosecution for a felony, or excessive absenteeism unrelated to
illness.
ARTICLE VII. SUBSTITUTION AWARDS
SECTION 7.1. Awards may be granted under the Plan from time to time in
substitution for stock options held by individuals employed by corporations who
become employees of the Company as a result of a merger or consolidation of the
employing corporation with the Company, or the acquisition by the Company of the
assets of the employing corporation, or the acquisition by the Company of stock
of the employing corporation with the result that such employing corporation
becomes a Subsidiary or an Affiliate.
ARTICLE VIII. BONUS STOCK AWARDS
SECTION 8.1. Award of Bonus Stock. The Committee may from time to time, and
subject to the provisions of this Plan and such other terms and conditions as
the Committee may prescribe, grant to any Participant in the Plan shares of
Common Stock ("Stock Bonus"). A Stock Bonus shall vest (i) in the case of
performance-based vesting criteria, no sooner than one year following the date
of the Stock Bonus grant, and (ii) in the case of time-based vesting criteria,
no sooner than one-third of the grant on each subsequent anniversary of the date
of grant. Notwithstanding the foregoing, the Committee may grant a fully vested
Stock Bonus in lieu of an earned cash bonus.
SECTION 8.2. Stock Bonus Agreements. The grant of a Stock Bonus shall be
evidenced by a written Award Agreement, executed by the Company and the
recipient of a Stock Bonus, in such form as the Committee may from time to time
determine, providing for the terms of such grant, including any vesting
schedule, restrictions on the transfer of such Common Stock or other matters.
ARTICLE IX. MISCELLANEOUS
SECTION 9.1. General Restriction. Each Award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration, or qualification of the shares of Common
Stock subject to or related thereto upon any securities exchange or under any
state or federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the grantee of an Award with respect
to the disposition of shares of Common Stock, is necessary or desirable as a
condition of, or in connection with, the granting of such Award or the issue or
purchase of shares of Common Stock thereunder, such Award may not be consummated
in whole or in part unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
SECTION 9.2. Non-Assignability. Except as provided below, no Award under
the Plan shall be assignable or transferable by the recipient thereof, except by
will or by the laws of descent and distribution,
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and during the life of the recipient, such Award shall be exercisable only by
such person or by such person's guardian or legal representative.
Notwithstanding the foregoing, as provided by the Committee in an Award
Agreement, Awards (other than Incentive Stock Options) may be transferred (in
whole or in part in a form approved by the Company) by a Participant to (i) the
spouse, children or grandchildren of the Participant ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of the Immediate
Family Members and, if applicable, the Participant, or (iii) a partnership in
which such Immediate Family Members and, if applicable, the Participant are the
only partners. Following any such transfer, the Award shall continue to be
subject to the same terms and conditions as were applicable to the Award
immediately prior to the transfer. A transferee of an Award may not transfer the
Award except to an Immediate Family Member or the Participant.
SECTION 9.3. Withholding Taxes. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under the Plan, the Company
shall have the right to require the grantee to remit to the Company an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery of any certificates for such shares.
Alternatively, the Company may issue or transfer such shares of the Company net
of the number of shares sufficient to satisfy the withholding tax requirements.
For withholding tax purposes, the shares of Common Stock shall be valued on the
date the withholding obligation is incurred.
SECTION 9.4. Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any Participant
the right to continue in the employment of, or consulting to, the Company or
effect any right which the Company may have to terminate the employment or
consulting relationship of such Participant.
SECTION 9.5. Non-Uniform Determination. The Committee's determinations
under the Plan (including without limitation determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not such persons are
similarly situated.
SECTION 9.6. Rights as a Shareholder. The recipient of any Award under the
Plan shall have no right as a shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued to him.
SECTION 9.7. Definitions. In this Plan the following definitions shall
apply:
(a) "Subsidiary" means any corporation of which, at the time more than
50% of the shares entitled to vote generally in an election of directors
are owned directly or indirectly by the Company or any subsidiary thereof.
(b) "Affiliate" means any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with the Company.
(c) "Fair Market Value" as of any date and in respect or any share of
Common Stock means the lowest reported trading price on such date or on the
next business day, if such date is not a business day, of a share of Common
Stock reflected in the consolidated trading tables of The Wall Street
Journal (presently the New York Stock Exchange -- Composite Transactions)
or any other publication selected by the Committee, provided that, if
shares of Common Stock shall not have been quoted on the New York Stock
Exchange for more than 10 days immediately preceding such date or if deemed
appropriate by the Committee for any other reason, the fair market value of
shares of Common Stock shall be as determined by the Committee in such
other manner as it may deem appropriate. In no event shall the Fair Market
Value of any share of Common Stock be less than its par value.
(d) "Option" means Stock Option, Incentive Stock Option, or Reload
Option.
(e) "Option Price" means the purchase price per share of the Common
Stock deliverable upon the exercise of a Stock Option, Incentive Stock
Option, or Reload Option.
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(f) "Change in Control" means the occurrence, at any time during the
specified term of an Option granted under the Plan, of any of the following
events:
(i) The Company is merged or consolidated or reorganized into or
with another corporation or other legal person (an "Acquiror") and as a
result of such merger, consolidation or reorganization less than 75% of
the outstanding voting securities or other capital interests of the
surviving, resulting or acquiring corporation or other legal person are
owned in the aggregate by the stockholders of the Company, directly or
indirectly, immediately prior to such merger, consolidation or
reorganization, other than the Acquiror or any corporation or other
legal person controlling, controlled by or under common control with the
Acquiror;
(ii) The Company sells all or substantially all of its business
and/or assets to an Acquiror, of which less than 75% of the outstanding
voting securities or other capital interests are owned in the aggregate
by the stockholders of the Company, directly or indirectly, immediately
prior to such sale, other than any corporation or other legal person
controlling, controlled by or under common control with the Acquiror;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person or group (as the terms "person" and "group"
are used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and
the rules and regulations promulgated thereunder) has become the
beneficial owner (as the term "beneficial owner") is defined under Rule
13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 20% or more of the issued and outstanding shares of voting
securities of the Company; or
(iv) During any period of two consecutive years, individuals who at
the beginning of any such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's
stockholders, of each new director of the Company was approved by a vote
of at least two-thirds of such directors of the Company then still in
office who were directors of the Company at the beginning of any such
period.
SECTION 9.8. Leaves of Absence. The Committee shall be entitled to make
such rules, regulations, and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by the recipient of any Award.
Without limiting the generality of the foregoing, the Committee shall be
entitled to determine (i) whether or not any such leave of absence shall
constitute a termination of employment within the meaning of the Plan and (ii)
the impact, if any, of any such leave of absence on Awards under the Plan
theretofore made to any recipient who takes such leave of absence.
SECTION 9.9. Newly Eligible Employees. The Committee shall be entitled to
make such rules, regulations, determinations and awards as it deems appropriate
in respect of any employee who becomes eligible to participate in the Plan or
any portion thereof after the commencement of an award or incentive period.
SECTION 9.10. Adjustments. In any event of any change in the outstanding
Common Stock by reason of a stock dividend or distributions, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the like,
the Committee may appropriately adjust the number of shares of Common Stock that
may be issued under the Plan, the number of shares of Common Stock subject to
Options theretofore granted under the Plan, and any and all other matters deemed
appropriate by the Committee.
SECTION 9.11. Changes in the Company's Capital Structure.
(a) The existence of outstanding Options, Alternative Appreciation
Rights, or Limited Rights shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, or other changes in the
Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution
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or liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(b) If, while there are outstanding Options, the Company shall effect
a subdivision or consolidation of shares or other increase or reduction of
the number of shares of the Common Stock outstanding without receiving
compensation therefor in money, services or property, then (i) in the event
of an increase in the number of such shares outstanding, the number of
shares of Common Stock then subject to Options hereunder shall be
proportionately increased; and (ii) in the event of a decrease in the
number of such shares outstanding the number of shares then available for
Option hereunder shall be proportionately decreased.
(c) After a merger of one or more corporations into the Company, or
after a consolidation of the Company and one or more corporations in which
the Company shall be the surviving corporation, each holder of an
outstanding Option shall, at no additional cost, be entitled upon exercise
of such Option to receive (subject to any required action by stockholders)
in lieu of the number of shares as to which such Option shall then be so
exercisable, the number and class of stock or other securities to which
such holder would have been entitled to receive pursuant to the terms of
the agreement of merger or consolidation if, immediately prior to such
merger or consolidation, such holder had been the holder of record of a
number of shares of the Company equal to the number of shares as to which
such Option had been exercisable.
(d) If the Company is merged into or consolidated with another
corporation or other entity under circumstances where the Company is not
the surviving corporation, or if the Company sells or otherwise disposes of
substantially all of its assets to another corporation or other entity
while unexercised Options remain outstanding, then the Committee may direct
that any of the following shall occur:
(i) If the successor entity is willing to assume the obligation to
deliver shares of stock or securities after the effective date of the
merger, consolidation or sale of assets, as the case may be, each holder
of an outstanding Option shall be entitled to receive, upon the exercise
of such Option and payment of the Option Price, in lieu of shares of
Common Stock, such shares of stock or other securities as the holder of
such Option would have been entitled to receive had such Option been
exercised immediately prior to the consummation of such merger,
consolidation or sale, and any related Alternate Appreciation Right and
Limited Right associated with such Option shall apply as nearly as
practicable to the shares of stock or other securities purchasable upon
exercise of the Option following such merger, consolidation or sale of
assets.
(ii) The Committee may waive any limitations set forth in or
imposed pursuant to this Plan or any Award Agreement with respect to
such Option and any related Alternate Appreciation Right or Limited
Option such that such Option and related Alternate Appreciation Right
and Limited Right shall become exercisable prior to the record or
effective date of such merger, consolidation or sale of assets.
(iii) The Committee may cancel all outstanding Options and
Alternate Appreciation Rights (but not Limited Rights) as of the
effective date of any such merger, consolidation, or sale of assets
provided that prior notice of such cancellation shall be given to each
holder of an Option at least 30 days prior to the effective date of such
merger, consolidation, or sale of assets, and each holder of an Option
shall have the right to exercise such Option and any related Alternate
Appreciation Right in full during a period of not less than 30 days
prior to the effective date of such merger, consolidation, or sale of
assets. No action taken by the Committee under this subsection shall
have the effect of terminating, and nothing in this subsection shall
permit the Committee to terminate, any Limited Right held by an
Optionee.
(e) Except as herein provided, the issuance by the Company of Common
Stock or any other shares of capital stock or services convertible into
shares of capital stock, for cash property, labor done or other
consideration, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding Options.
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SECTION 9.12. Change in Control. Any Award granted under the Plan prior to
the date of a Change in Control shall be immediately exercisable in full on such
date, without regard to any times of exercise established under its Award
Agreement; provided, however, in no event shall Stock Options or Incentive Stock
Options be exerciseable after the tenth anniversary of their respective grant
dates.
SECTION 9.13. Amendment of the Plan.
(a) The Committee may without further action by the shareholders and
without receiving further consideration from the Participants, amend this
Plan or condition or modify Awards under this Plan in response to changes
in securities or other laws or rules, regulations or regulatory
interpretations thereof applicable to this Plan or to comply with stock
exchange rules or requirements.
(b) The Committee may at any time and from time to time terminate or
modify or amend the Plan in any respect, except that without shareholder
approval the Committee may not (i) increase the maximum number of shares of
Common Stock which may be issued under the Plan (other than increases
pursuant to Section 9.10), (ii) extend the period during which any Award
may be granted or exercised, (iii) extend the term of the Plan, (iv) change
the class of eligible Participants in the Plan, or (v) materially increase
benefits available to Participants under the Plan if such increase would
require shareholder approval pursuant to the listed company rules of the
New York Stock Exchange, Inc. as such rules may be amended from time to
time. The termination or any modification or amendment of the Plan, except
as provided in subsection (a), shall not, without the consent of a
Participant, affect his or her rights under an Award previously granted to
him or her.
SECTION 9.14. Effective Date. The Plan shall become effective upon
stockholder approval.
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APPENDIX C
WASTE MANAGEMENT, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
Waste Management, Inc. hereby establishes the Waste Management, Inc. 1997
Employee Stock Purchase Plan (the "Plan"), the terms of which are as set forth
below.
1. Definitions. As used in the Plan the following terms shall have the
meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee appointed by the Board to administer
the Plan as described in Section 4 below.
(d) "Common Stock" means the common stock, $0.01 par value, of the Company.
(e) "Company" means Waste Management, Inc., a Delaware corporation, or any
successor.
(f) "Continuous Employment" means the absence of any interruption or
termination of service as an Eligible Employee with the Company and/or its
Participating Subsidiaries. Continuous Employment shall not be considered
interrupted in the case of an authorized leave of absence, provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
(g) "Eligible Compensation" means, with respect to each Participant for
each pay period; the regular base earnings paid to the Participant by the
Company or one or more Participating Subsidiaries during the Offering Period,
plus any elective salary deferral contributions made therefrom pursuant to Code
Section 125 or Section 401(k).
(h) "Eligible Employee" means an employee of the Company or one of its
Participating Subsidiaries who is customarily employed for at lease 20 hours per
week and more than five months in a calendar year.
(i) "Enrollment Date" means the first day of each Offering Period.
(j) "Exercise Date" means the last day of each Offering Period.
(k) "Exercise Price" means the price per share of the shares of Common
Stock offered in a given Offering Period determined as provided in Section 10
below.
(l) "Fair Market Value" means, with respect to a share of Common Stock as
of any Enrollment Date or Exercise Date, the closing price of such Common Stock
on the New York Stock Exchange on such date, as reported in The Wall Street
Journal. In the event that such a closing price is not available for an
Enrollment Date or an Exercise Date, the Fair Market Value of .a share of Common
Stock on such date shall be the closing price of a share of the Common Stock on
the New York Stock Exchange on the last business day prior to such date or such
other amount as may be determined by the Committee by any fair and reasonable
means.
(m) "Offering Period" means each six-month period commencing on January 1
and terminating on the following June 30 or commencing on July 1 and terminating
on the following December 31; provided, however, the initial Offering Period
shall commence on the later of (i) April l, 1997 or (ii) the effective date of
the S-8 Registration Statement covering the shares of Common Stock issuable
under the Plan and ending on the first June 30 or December 31 to occur
thereafter.
(n) "Participant" means an Eligible Employee who has elected to participate
in the Plan by filing an enrollment agreement with the Company as provided in
Section 7 below.
(o) "Participating Subsidiary" means any Subsidiary not excluded from
participation in the Plan by the Committee, in its sole discretion.
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(p) "Subsidiary" means any corporation, domestic or foreign, of which the
Company owns, directly or indirectly, not less than 50% of the total combined
voting power of all classes of stock or other equity interests and that
otherwise qualifies as a "subsidiary corporation" within the meaning of Section
424(f) of the Code or any successor thereto.
2. Purpose of the Plan.
The purpose of the Plan is to provide an incentive for present and future
employees of the Company and its Participating Subsidiaries to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the intention of the Company
that the Plan qualify as an "employee stock purchase plan" under Section 423 of
the Code. Accordingly, the provisions of the Plan shall be administered,
interpreted and construed in a manner consistent with the requirements of that
section of the Code.
3. Shares Reserved for the Plan.
There shall be reserved for issuance and purchase by Participants under the
Plan an aggregate of 2,250,000 shares of Common Stock, subject to adjustment as
provided in Section 15 below. Shares of Common Stock subject to the Plan may be
newly issued shares or treasury shares. If and to the extent that any-.option to
purchase shares of Common Stock shall not be exercised for any reason or if such
right to purchase shares shall terminate as provided herein, the shares that
have not been so purchased hereunder shall again become available for the
purposes of the Plan unless the Plan shall have been terminated.
4. Administration of the Plan.
(a) The Plan shall be administered by a Committee appointed by, and which
shall serve at the pleasure of, the Board. The Committee shall have authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to correct any defect or rectify any omission in this Plan
or to reconcile any inconsistency in this Plan or any Option, and to make all
other determinations necessary or advisable for the administration of the Plan,
all of which actions and determinations shall be final, conclusive and binding
on all persons. The act or determination of a majority of the members of the
Committee shall be deemed to be the act or determination of the Committee.
(b) The Committee may request advice or assistance or employ such other
persons as it in its discretion deems necessary or appropriate for the proper
administration of the Plan, including, but not limited to employing a brokerage
firm, bank or other financial institution to assist in the purchase of shares,
delivery of reports or other administrative aspects of the Plan.
5. Eligibility to Participate in the Plan.
Subject to limitations imposed by Section 423(b) of the Code, any Eligible
Employee who is employed by the Company or a Participating Subsidiary on an
Enrollment Date shall be eligible to participate in the Plan for the Offering
Period beginning on that Enrollment Date.
6. Offering Periods.
The Plan shall consist of consecutive Offering Periods until the Plan is
terminated.
7. Election to Participate in the Plan.
(a) Each Eligible Employee may elect to participate in the Plan by
completing an enrollment agreement in the form provided by the Company and
filing such enrollment agreement with the Company prior to the applicable
Enrollment Date, unless another time for filing the enrollment form is set by
the Committee for all Eligible Employees with respect to a given Offering
Period.
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(b) Payroll deductions for a Participant shall commence on the first
payroll date following the Enrollment Date and shall end on the last payroll
date in the Offering Period to which such authorization is applicable, unless
sooner terminated by the Participant as provided in Section 12.
(c) Unless a Participant elects otherwise prior to the Enrollment Date of
the immediately succeeding Offering Period, an Eligible Employee who is
participating in an Offering Period as of the Exercise Date of such Offering
Period shall be deemed (i) to have elected to participate in the immediately
succeeding Offering Period and (ii) to have authorized the same payroll
deduction for such immediately succeeding Offering Period as was in effect for
such Participant immediately prior to the succeeding Offering Period.
8. Payroll Deductions.
(a) All Participant contributions to the Plan shall be made only by payroll
deductions. At the time a Participant files the enrollment agreement with
respect to an Offering Period, the Participant shall authorize payroll
deductions to be made on each payroll date during the Offering Period in an
amount of from 1 % to 10% of the Eligible Compensation which the Participant
receives on each payroll date during such Offering Period. The amount of such
payroll deductions shall be a whole percentage (i.e., 1 %, 2%, 3%, etc.) of the
Participant's Eligible Compensation.
(b) All payroll deductions made for a Participant shall be deposited in the
Company's general corporate account and shall be credited to the Participant's
account under the Plan. No interest shall accrue or be credited with respect to
the payroll deductions of a Participant under the Plan. A Participant may not
make any additional payments into such account. All payroll deductions received
or held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(c) Except as provided in Section 12, a Participant may not change his
contribution election during an Offering Period.
(d) Notwithstanding the foregoing, no Participant may make payroll
deductions during any year in excess of $21,250.
9. Grant of Options.
(a) On the Enrollment Date of each Offering Period, subject to the
limitations set forth in Sections 3 and 9(b) hereof, each Eligible Employee
shall be granted an option to purchase on the Exercise Date for such Offering
Period (at the Exercise Price determined as provided in Section 10 below) up to
a number of shares of the Company's Common Stock determined by dividing such
Eligible Employee's payroll deductions accumulated during the Offering Period
ending on such Exercise Date by 85% of the fair market value of a share of the
Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower.
(b) Notwithstanding any provision of the Plan to the contrary, no Eligible
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Eligible Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
stock and/or hold outstanding options to purchase stock possessing 5% or more of
the total combined voting power or value of all classes of stock of the Company
or of any Subsidiary of the Company, or (ii) which permits such Eligible
Employee's rights to purchase stock under all employee stock purchase plans of
the Company and its Subsidiaries to accrue at a rate which exceeds $25,000 of
fair market value of such stock (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any time.
10. Exercise Price.
The Exercise Price of each of the shares offered in a given Offering Period
shall be the lower of: (i) 85% of the Fair Market Value of a share of the Common
Stock. on the Enrollment Date, or (ii) 85% of the Fair Market Value of a share
of the Common Stock on the applicable Exercise Date.
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11. Exercise of Options.
Unless a Participant withdraws from the Plan as provided in Section 12, the
Participant's option for the purchase of shares will be exercised automatically
on each Exercise Date, and the maximum number of full shares subject to the
option will be purchased for the Participant at the applicable Exercise Price
with the accumulated payroll deductions in the Participant's account. Any amount
remaining in the Participant's account after an Exercise Date shall be refunded
to the Participant.
12. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all but not less than all of the payroll
deductions credited to the Participant's account under the Plan at any time by
giving written notice to the Company. All of the Participant's payroll
deductions credited to the Participant's account will be paid to him promptly
after receipt of the Participant's notice of withdrawal, the Participant's
participation in the Plan will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made. Payroll deductions
will not resume on behalf of a Participant who has withdrawn from the Plan
unless written notice is delivered to the Company within the enrollment period
preceding the commencement of a new Offering Period directing the Company to
resume payroll deductions.
(b) Upon termination of the Participant's Continuous Employment prior to
the Exercise Date of the Offering Period for any reason, including retirement or
death, the payroll deductions credited to the Participant's account will be
returned to the Participant or, in the case of death, to the Participant's
estate, and the Participant's options to purchase shares under the Plan will be
automatically terminated.
(c) In the event a Participant ceases to be an Eligible Employee during an
Offering Period, the Participant will be deemed to have elected to withdraw from
the Plan, the payroll deductions credited to the Participant's account will be
returned to the Participant, and the Participant's options to purchase shares
under the Plan will be terminated.
(d) A Participant's withdrawal from an Offering Period will not affect the
Participant's eligibility to participate in a succeeding Offering Period.
13. Transferability.
Options to purchase Common Stock granted under the Plan are not
transferable by a Participant and are exercisable only by the Participant.
14. Reports.
Individual accounts will be maintained for each Participant in the Plan.
Statements of account will be given to participating Employees semi-annually
promptly following each Exercise Date, which statements will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
15. Adjustments Upon Changes in Capitalization.
(a) If the outstanding shares of Common Stock are increased or decreased,
or are changed into or are exchanged for a different number or kind of shares,
as a result of one or more reorganizations, restructurings, recapitalizations,
reclassifications, stock splits, reverse stock splits, stock dividends or the
like, upon authorization of the Committee, appropriate adjustments shall be made
in the number and/or kind of shares, and the per share option price thereof,
which may be issued in the aggregate and to any Participant upon exercise of
options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of the Company,
each Offering Period will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Committee. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each, option under
the Plan shall be assumed or an
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<PAGE> 44
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, that the Participant shall have the right to exercise the option
as to all of the optioned stock, including shares as to which the option would
not otherwise be exercisable. If the Committee makes an option fully exercisable
in lieu of assumption or substitution in the event of a merger or sale of
assets, the committee shall notify the Participant that the option shall be
fully exercisable for a stated period, which shall not be less than 10 days from
the date of such notice, and the option will terminate upon the expiration of
such period.
(c) In all cases, the Committee shall have full discretion to exercise any
of the powers and authority provided under this Section 15, and the Committee's
actions hereunder shall be final and binding on all Participants. No fractional
shares of stock shall be issued under the Plan pursuant to any adjustment
authorized under the provisions of this Section 15.
16. Amendment of the Plan.
The Board may at any time, or from time to time, amend the Plan in any
respect; provided, however, that the Plan may not be amended in any way that
will cause rights issued under the Plan to fail to meet the requirements for
employee stock purchase plans as defined in Section 423 of the Code or any
successor thereto, including, without limitation, shareholder approval if
required.
17. Termination of the Plan.
The Plan and all rights of Eligible Employees hereunder shall terminate:
(a) on the Exercise Date that Participants become entitled to purchase a
number of shares greater than the number of reserved shares remaining available
for purchase under the Plan; or
(b) at any time, at the discretion of the Board.
In the event that the Plan terminates under circumstances described in
Section 17(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis.
18. Notices.
All notices or other communications by a Participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
19. Shareholder Approval.
The Plan shall be subject to approval by the shareholders of the Company
within twelve months after the date the Plan is adopted by the Board of
Directors. If such shareholder approval is not obtained prior to the first
Exercise Date, the Plan shall be null and void and all Participants shall be
deemed to have withdrawn on such Exercise Date pursuant to Section 12.
20. Conditions Upon Issuance of Shares.
(a) The Plan, the grant and exercise of options to purchase shares of
Common Stock under the Plan, and the Company's obligation to sell and deliver
shares upon the exercise of options to purchase shares shall be subject to all
applicable federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required.
(b) The Company may make such provisions as it deems appropriate for
withholding by the Company pursuant to all applicable tax laws of such: amounts
as the Company determines it is required to withhold in connection with the
purchase or sale by a Participant of any Common Stock acquired pursuant to the
Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.
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<PAGE> 45
WASTE MANAGEMENT, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 16, 2000
The undersigned hereby appoints A. Maurice Myers and Lawrence O'Donnell,
III as proxies, and each of them with full power of substitution, to vote all
shares of Common Stock, par value $.01 per share, of Waste Management, Inc. that
the undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held on May 16, 2000, at 11:00 a.m., Central time, or at any adjournment
thereof, as follows:
An executed Proxy that does not designate a vote shall be deemed to grant
authority for any item not designated.
ALL SHARES WILL BE VOTED AS DIRECTED HEREIN AND UNLESS OTHERWISE DIRECTED
WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" ITEMS 2, 3, 4 and 5. YOU
MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO A VOTE THEREON.
ATTENTION PARTICIPANTS IN 401(K) PLANS: If you have an interest in the Common
Stock of Waste Management, Inc. through participation in the Waste Management
Retirement Savings Plan or the Waste Management Retirement Savings Plan for
Collectively Bargained Employees, you may confidentially instruct the Trustee(s)
of the respective plan on how to vote the shares representing your proportionate
interest in such plan's assets. The Trustee(s) shall vote shares in accordance
with any instructions received. Any shares for which the Trustee(s) has not
received timely voting instructions shall be voted by the Trustee(s) in its sole
discretion.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 46
[x] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. To elect three members of the Board of Directors of Waste Management, Inc.
to serve as Class II directors for a three-year term expiring at the Waste
Management annual meeting of stockholders to be held in the year 2003.
NOMINEES: Robert S. Miller, Paul M. Montrone and A. Maurice Myers
FOR ALL NOMINEES WITHHELD
[ ] [ ]
[ ]
---------------------------------------------------
For all nominees, except as noted above
2. To approve the amendment to the Company's 1996 Stock Option Plan for
Non-Employee Directors to increase the number of shares of the Company's
common stock available for awards under the Non-Employee Director Plan from
1,400,000 to 2,400,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve of the adoption of the Company's 2000 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve the amendment to the Company's Employee Stock Purchase Plan to
increase the number of shares of the Company's common stock available for
purchase and issuance under the Employee Stock Purchase Plan from 1,000,000
to 2,250,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To approve the appointment of Arthur Andersen LLP as independent auditors
for 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. In their discretion, upon such other matters (including procedural and
other matters relating to the conduct of the meeting) which may properly
come before the meeting and any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3, 4 AND 5.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
PLEASE COMPLETE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
Please sign as name appears on this card. Joint owners should each sign.
Executors, administrators, trustees, etc. should give their full title.
Signature: Date:
--------------------------- ----------------------
Signature: Date:
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