SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
WASTE CONNECTIONS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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NOTICE AND PROXY STATEMENT
WASTE CONNECTIONS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 2004
Dear Stockholder:
You are invited to attend the annual meeting of stockholders of WASTE
CONNECTIONS, INC. to be held on Wednesday, May 26, 2004, at 10:00 A.M., Pacific
Time. The meeting will be held at the California State University Sacramento
Alumni Center, 6000 J Street, Sacramento, California 95819, for the following
purposes:
1. To elect one Class III director to serve for a term of three years;
2. To approve the amendment of our Amended and Restated Certificate of
Incorporation to (a) increase the authorized number of shares of
common stock from 50,000,000 to 100,000,000 shares and (b) delete
references to the Series A Preferred Stock which converted to common
stock upon the completion of our initial public offering;
3. To approve the 2004 Equity Incentive Plan; and
4. To ratify the appointment of Ernst & Young LLP as our independent
auditors for the year 2004.
Only stockholders of record at the close of business on March 29, 2004
are entitled to receive notice of and to vote at the annual meeting or any
adjournment of the annual meeting.
Waste Connections' Annual Report for the year 2003 is enclosed for
your convenience.
Stockholders of record may vote their proxies by signing, dating and
returning the enclosed proxy card. If your shares are held in the name of a bank
or broker, you may be able to vote by telephone or on the Internet. Please
follow the instructions on the form you receive from your bank or broker. The
method by which you decide to vote will not limit your right to vote at the
annual meeting. If you later decide to attend the annual meeting in person, you
may vote your shares even if you have submitted a proxy in writing, by telephone
or on the Internet.
By Order of the Board of Directors,
Robert D. Evans
SECRETARY
April 8, 2004
Your vote is important. Whether or not you plan to attend the annual
meeting, please sign and date the enclosed proxy card or follow any telephone or
Internet procedures established by your bank or broker.
WASTE CONNECTIONS, INC.
35 IRON POINT CIRCLE, SUITE 200
FOLSOM, CALIFORNIA 95630
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PROXY STATEMENT
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FOR ANNUAL MEETING OF STOCKHOLDERS
To be Held on May 26, 2004
The Board of Directors of WASTE CONNECTIONS, INC., a Delaware
Corporation, is furnishing this proxy statement and the accompanying proxy card
to solicit proxies from holders of our common stock for the annual meeting of
stockholders to be held on Wednesday, May 26, 2004, for the purposes described
in the Notice of Annual Meeting.
We will bear the costs of soliciting proxies from our stockholders. In
addition to soliciting proxies by mail, our directors, officers and employees,
without receiving additional compensation, may solicit proxies by telephone, by
telegram or in person. We will arrange for brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of common stock these brokerage firms, custodians, nominees and
fiduciaries hold of record, and we will reimburse them for reasonable
out-of-pocket expenses incurred in forwarding these materials. We are first
mailing this proxy statement to our stockholders on or about April 9, 2004.
VOTING AT THE MEETING
The record date for determining stockholders entitled to notice of and
to vote at the annual meeting was the close of business on March 29, 2004. On
that date 29,081,012 shares of common stock were outstanding, all of which are
entitled to vote on all matters that properly come before the annual meeting.
Each stockholder has one vote for each share of common stock held. In addition,
on March 29, 2004 we had 7,561,220 shares of common stock reserved for issuance
upon the conversion of outstanding 5 1/2% Convertible Subordinated Notes due
2006 and Floating Rate Convertible Subordinated Notes due 2022, none of which is
entitled to vote at the annual meeting.
Each proxy that we receive prior to the annual meeting will, unless
revoked, be voted in accordance with the instructions we are given for that
proxy. If no instruction is given, the shares will be voted FOR the election of
our nominee for director listed in this proxy statement, FOR the amendment of
our Amended and Restated Certificate of Incorporation to (a) increase the
authorized number of shares of common stock from 50,000,000 to 100,000,000
shares and (b) delete references to the Series A Preferred Stock which converted
to common stock upon the completion of our initial public offering, FOR the
adoption of our 2004 Equity Incentive Plan and FOR ratification of the
appointment of Ernst & Young LLP as our independent auditors for 2004.
A stockholder who has given a proxy in writing may revoke it at any
time before it is voted at the annual meeting in any of three ways:
o by delivering a written notice of revocation to the Secretary of Waste
Connections;
o by delivering a duly executed proxy bearing a later date to the
Secretary of Waste Connections; or
o by attending the meeting and voting in person.
A quorum of stockholders is necessary to take action at the annual
meeting. A majority of the outstanding shares of common stock, represented in
person or by proxy, will constitute a quorum. We will use an automated system
administered by our transfer agent to tabulate the votes at the annual meeting.
Under certain circumstances, a broker or other nominee may have discretionary
authority to vote certain shares of common stock if the broker or nominee has
not received instructions from the beneficial owner or other person entitled to
vote. We will treat directions to withhold authority, abstentions and broker
non-votes (which occur when a broker or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because the broker or
other nominee does not have discretionary voting power for that item and has not
received instructions from the beneficial owner) as present and entitled to vote
for purposes of determining whether a quorum is present at the annual meeting.
Accordingly, directions to withhold authority, abstentions and broker
non-votes will have no effect on the election of directors or on the voting on a
matter that requires the affirmative vote of a certain percentage of the votes
cast or shares voting on a matter, but will be the equivalent of a "no" vote on
a matter that requires the affirmative vote of a certain percentage of the votes
entitled to be cast on a matter.
A plurality of the votes of the shares present in person or
represented by proxy at the meeting is required to elect our nominee as a
director. The affirmative vote of at least a majority of the outstanding shares
of common stock is required to approve the amendment our Amended and Restated
Certificate of Incorporation. The affirmative vote of at least a majority of the
shares of common stock present in person or represented by proxy at the annual
meeting is required to approve the 2004 Equity Incentive Plan and to ratify the
appointment of Ernst & Young LLP as independent auditors for the year 2004.
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PRINCIPAL STOCKHOLDERS
The following table shows the amount of Waste Connections' common stock beneficially owned,
as of March 1, 2004, by: (i) each person or entity that we know owns more than 5% of our common stock;
(ii) the "named executive officers" identified below under "Executive Compensation" and each director of
Waste Connections; and (iii) all current directors, nominees and executive officers of Waste Connections
as a group. An asterisk in the percent of outstanding shares column indicates beneficial ownership of less
than 1% by a director.
PERCENTAGE
OF OUTSTANDING
SHARES OF
NAME OF BENEFICIAL OWNER (1) NUMBER COMMON STOCK
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Westfield Capital Management Co., LLC (2)............................ 2,603,000 9.0
Franklin Resources, Inc. (2) (3)..................................... 2,003,597 6.9
T. Rowe Price Associates, Inc. (2)................................... 1,907,800 6.6
FMR Corp. (2)........................................................ 1,739,950 6.0
Ronald J. Mittelstaedt (4)........................................... 521,018 1.8
Steven F. Bouck (5).................................................. 356,072 1.2
Darrell W. Chambliss (6)............................................. 177,128 0.6
Eugene V. Dupreau (7)................................................ 149,283 0.5
Robert D. Evans (8).................................................. 109,334 0.4
William J. Razzouk (9)............................................... 78,500 *
Robert H. Davis (10) ................................................ 48,100 *
Michael W. Harlan (11)............................................... 43,000 *
Worthing F. Jackman (12)............................................. 25,000 0.1
All executive officers and directors as a group (16 persons)......... 1,827,959 6.3
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(1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange
Commission. In general, a person who has voting power and/or investment power with respect to
securities is treated as the beneficial owner of those securities. Shares of common stock subject
to options and/or warrants currently exercisable or exercisable within 60 days and shares of
common stock into which convertible securities are convertible within 60 days count as outstanding
for computing the percentage beneficially owned by the person holding such options, warrants and
convertible securities. Except as otherwise indicated by footnote, we believe that the persons
named in this table have sole voting and investment power with respect to the shares of common
stock shown.
(2) The address of Westfield Capital Management Co., LLC is One Financial Center, Boston, Massachusetts
02111. The address of Franklin Resources, Inc. is One Franklin Parkway, San Mateo, CA 94403. The
address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202. The
address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109. The share ownership of
Westfield Capital Management Co., LLC is based on a Schedule 13G filed with the Securities and
Exchange Commission on March 18, 2004. The share ownership of Franklin Resources, Inc. is based on
a Schedule 13G filed with the Securities and Exchange Commission on February 9, 2004. The share
ownership of T. Rowe Price Associates, Inc. is based on a Schedule 13G filed with the Securities
and Exchange Commission on February 10, 2004. The share ownership of FMR Corp. is based on a
Schedule 13G/A filed with the Securities and Exchange Commission on February 17, 2004.
(3) Includes 105,160 shares that would result from the conversion of 5 1/2% Convertible Subordinated
Notes due 2006.
(4) Includes 220,001 shares purchasable under currently exercisable options and 60,000 shares
subject to a prepaid forward contract. Also includes 241,017 shares held by Mittelstaedt
Enterprises, L.P., of which Mr. Mittelstaedt is a limited partner. Excludes 2,600 shares held
by the Mittelstaedt Family Trust as to which Mr. Mittelstaedt disclaims beneficial ownership.
(5) Includes 10,000 shares owned by Mr. Bouck's two minor sons and 195,250 shares purchasable under
currently exercisable options.
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(6) Includes 110,417 shares purchasable under currently exercisable options.
(7) Includes 66,667 shares purchasable under currently exercisable warrants and 40,001 shares
purchasable under currently exercisable options.
(8) Includes 108,334 shares purchasable under currently exercisable options.
(9) Includes 77,500 shares purchasable under currently exercisable options.
(10) Includes 45,000 shares purchasable under currently exercisable options.
(11) Includes 40,000 shares purchasable under currently exercisable options.
(12) Includes 25,000 shares purchasable under currently exercisable options.
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PROPOSAL I -- ELECTION OF DIRECTORS
Our Board of Directors is currently composed of five directors and is divided into three classes. One class
is elected each year for a three-year term. At the annual meeting, Mr. Mittelstaedt will be nominated to serve in
Class III until the annual meeting of stockholders to be held in 2007 and until a successor has been duly elected
and qualified. Proxies will be voted, unless otherwise indicated, for the election of Mr. Mittelstaedt for
director. Proxies will be voted in a discretionary manner if Mr. Mittelstaedt is unable to serve. Mr. Mittelstaedt
currently serves as President, Chief Executive Officer and Chairman of Waste Connections, and is a director of the
company.
Certain information about Mr. Mittelstaedt and the directors serving in Class I and Class II, whose terms
expire in future years, is set forth below.
NAME AND BACKGROUND AGE DIRECTOR
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SINCE
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NOMINEE FOR CLASS III DIRECTOR FOR TERM EXPIRING IN 2007
RONALD J. MITTELSTAEDT has been President, Chief Executive Officer and a director of Waste 40 1997
Connections since the company was formed, and was elected Chairman in January 1998. Mr.
Mittelstaedt has more than 15 years of experience in the solid waste industry. He served as a
consultant to United Waste Systems, Inc., with the title of Executive Vice President, from
January 1997 to August 1997, where he was responsible for corporate development for all states
west of Colorado. As Regional Vice President of USA Waste Services, Inc. (including Sanifill,
Inc., which was acquired by USA Waste Services, Inc.) from November 1993 to January 1997, he
was responsible for all operations in 16 states and Canada. Mr. Mittelstaedt held various
positions at Browning- Ferris Industries, Inc. from August 1988 to November 1993, most
recently as Division Vice President in northern California, overseeing the San Jose market.
Previously he was the District Manager responsible for BFI's operations in Sacramento and the
surrounding areas.
CLASS I DIRECTORS CONTINUING IN OFFICE - TERM EXPIRING IN 2005
EUGENE V. DUPREAU has been Vice President-- Western Region and a director of Waste Connections 56 1998
since February 1998. Mr. Dupreau served as President and a director of Madera Disposal
Systems, Inc. beginning in 1981 and 1985, respectively, and held both positions until Waste
Connections acquired Madera in 1998. Mr. Dupreau also holds two California State Contractors
License, Class A and C 12. He has served as a director of several civic and charitable
organizations in Madera County.
ROBERT H. DAVIS is President/Chief Executive Officer and a director of GreenMan Technologies, 61 2001
Inc., a tire shredding and recycling company. Prior to joining GreenMan, Mr. Davis served as
Vice President of Recycling for Browning-Ferris Industries, Inc. from 1990 to 1997. A 26-year
veteran of the solid waste and recycling industry, Mr. Davis has also held executive positions
with Fibres International, Garden State Paper Company and SCS Engineers, Inc.
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NAME AND BACKGROUND AGE DIRECTOR
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SINCE
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CLASS II DIRECTORS CONTINUING IN OFFICE - TERM EXPIRING IN 2006
MICHAEL W. HARLAN is Executive Vice President, Chief Operating Officer and Chief Financial 43 1998
Officer of U.S. Concrete, Inc., a major producer of ready-mixed concrete and related concrete
products. From November 1997 to January 30, 1998, Mr. Harlan served as a consultant to Waste
Connections on various financial matters. From March 1997 to August 1998, Mr. Harlan was Vice
President and Chief Financial Officer of Apple Orthodontix, Inc., a publicly traded company
that provides practice management services to orthodontic practices in the U.S. and Canada. In
January 2000, approximately 17 months after Mr. Harlan departed from Apple Orthodontix, Apple
Orthodontix filed a voluntary case under chapter 11 of the federal bankruptcy code. From
April 1991 to December 1996, Mr. Harlan held various positions in the finance and acquisition
departments of USA Waste Services, Inc. (including Sanifill, Inc., which was acquired by USA
Waste Services, Inc.), including serving as Treasurer and Assistant Secretary, beginning in
September 1993. From May 1982 to April 1991, Mr. Harlan held various positions in the tax and
corporate financial consulting services division of Arthur Andersen LLP, where he was a Manager
since July 1986.
WILLIAM J. RAZZOUK owns WJR Advisors and WJR Ventures, management consulting and investment 56 1998
firms. From August 2000 to December 2002, he was a Managing Director of Paradigm Capital
Partners, LLC, a venture capital firm in Memphis, Tennessee that focuses on meeting the
capital and advisory needs of emerging growth companies. From September 1998 to August 2000,
he was Chairman of PlanetRx.com, an e-commerce company focused on healthcare and sales of
prescription and over-the-counter medicines, health and beauty products and medical supplies.
He was also Chief Executive Officer of that company from September 1998 until April 2000.
From April 1998 until September 1998, Mr. Razzouk owned a management consulting business and
an investment company that focused on identifying strategic acquisitions. From September 1997
until April 1998, he was also the President, Chief Operating Officer and a director of Storage
USA, Inc., a publicly traded real estate investment trust that owns and operates more than 350
mini storage warehouses. He served as the President and Chief Operating Officer of America
Online from February 1996 to June 1996. From 1983 to 1996, Mr. Razzouk held various management
positions at Federal Express Corporation, most recently as Executive Vice President, World
Wide Customer Operations, with full worldwide profit and loss responsibility. Mr. Razzouk
previously held management positions at ROLM Corporation, Philips Electronics and Xerox
Corporation. He previously was a director of Fritz Companies, Inc., Sanifill, Inc., Cordis
Corp., Storage USA, PlanetRx.com, America Online, and La Quinta Motor Inns.
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
Our Board of Directors held five meetings during 2003. The Board of Directors has an Executive Committee, an
Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Each director attended
at least 75% of the meetings of the Board of Directors and the committees on which he served in 2003. The Board has
determined that each of Messrs. Harlan, Razzouk and Davis is "independent" within the meaning of Section 10A(m)(3) of
the Securities Exchange Act of 1934 and Section 303A.02 of the New York Stock Exchange Listed Company Manual.
Our policy on director attendance at annual meetings of stockholders is that directors are invited but not
required to attend. Mr. Mittelstaedt, the Chairman of the Board, and Mr. Davis attended the annual meeting of
stockholders in 2003.
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The Executive Committee, whose Chairman is Mr. Mittelstaedt and whose
other current members are Mr. Harlan and Mr. Razzouk, met seven times in 2003.
The Executive Committee is authorized to exercise all of the powers and
authority of the Board of Directors in managing our business and affairs, other
than to authorize matters required by Delaware law to be approved by the
stockholders, and other than adopting, amending or repealing any By-law. Between
meetings of the Board, the Executive Committee approves all acquisitions by us
for stock and all acquisitions by us for cash or other consideration of $2.5
million or more.
The Audit Committee, whose chairman is Mr. Harlan and whose other
current members are Mr. Razzouk and Mr. Davis, met six times in 2003. The Board
has determined that all of the members of the Audit Committee are "financially
literate" within the meaning of Section 303A.07 of the New York Stock Exchange
Listed Company Manual and are "independent" as defined in Sections
303.01(B)(2)(a) and (3) and 303A.02 of that Manual and Item 7(d)(3)(iv) of
Schedule 14A under the Securities Exchange Act of 1934. The Board has also
determined that Mr. Harlan is an "audit committee financial expert" as defined
in Section 401(h) of Regulation S-K of the Securities and Exchange Commission.
The committee's duties are discussed below under "Audit Committee Report." A
current copy of the Audit Committee charter, which our Board has adopted, is
attached as Exhibit A and is available on our website at
www.wasteconnections.com.
The Compensation Committee, whose chairman is Mr. Razzouk and whose
other current members are Mr. Harlan and Mr. Davis, met four times in 2003. This
committee is responsible for establishing our executive officer compensation
policies and administering such policies. The Compensation Committee studies,
recommends and implements the amount, terms and conditions of payment of any and
all forms of compensation for our directors, executive officers, employees,
consultants and agents; approves and administers any guarantee of any obligation
of, or other financial assistance to any officer or other employee; and approves
the grant of options, warrants, restricted stock and other forms of equity
incentives to officers, directors, employees, agents and consultants. See
"Executive Compensation - Compensation Committee Report on Executive
Compensation." The Board has determined that all members of the Compensation
Committee are "independent" as defined in Section 303A.02 of the New York Stock
Exchange Listed Company Manual. A current copy of the Compensation Committee
charter is attached as Exhibit B and is available on our website at
www.wasteconnections.com.
In 2003, the Board of Directors established a Nominating and Corporate
Governance Committee to recommend to the Board director nominees and to develop
and implement corporate governance principles. Mr. Davis is chairman of the
Nominating and Corporate Governance Committee, and Messrs. Harlan and Razzouk
are members of that committee. The Committee did not meet in 2003, but has met
once in 2004. The Board has determined that all of the members of the Nominating
and Corporate Governance Committee are "independent" as defined in Section
303A.02 of the New York Stock Exchange Listed Company Manual. A copy of the
Nominating and Corporate Governance Committee Charter is attached as Exhibit C
and is available on our website at www.wasteconnections.com.
Our Board believes that directors must have the highest personal and
professional ethics, integrity and values. They must be committed to
representing the long-term interests of our stockholders. They must have
objective perspective, practical wisdom, mature judgment and expertise, and
operational or financial skills and knowledge useful to the oversight of our
business. Our goal is to have a Board that represents diverse experiences at
policy-making levels in business and other areas relevant to our activities.
Directors should be committed to serving on the Board for an extended period of
time. In addition to the foregoing qualities, the Nominating and Corporate
Governance Committee will take a number of other factors into account in
considering candidates as nominees for the Board, including the following: (i)
whether the candidate is independent within the meaning of Rule 303A.02 of the
New York Stock Exchange Listed Company Manual and Item 7(d)(3)(iv) of Schedule
14A under the Securities Exchange Act of 1934; (ii) relevant business, academic
or other experience; (iii) willingness and ability to attend and participate
actively in Board and Committee meetings and otherwise to devote the time
necessary to serve, taking into consideration the number of other boards on
which the candidate serves and the candidate's other business and professional
commitments; (iv) potential conflicts of interest; (v) whether the candidate is
a party to any adverse legal proceeding; (vi) the candidate's reputation; (vii)
specific expertise and qualifications relevant to any Committee that the
candidate is being considered for, such as whether a candidate for the Audit
Committee meets the applicable financial literacy or audit committee financial
expert criteria; (viii) willingness and ability to meet our director's equity
ownership guidelines; (ix) willingness to adhere to our Code of Conduct and
Ethics; (x) ability to interact positively and constructively with other
directors and management; (xi) willingness to participate
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in a one-day new director orientation session; (xii) willingness to attend
educational forums or workshops to enhance understanding of new and evolving
governance requirements; and (xiii) the size and composition of the current
Board.
When seeking candidates for director, the Nominating and Corporate
Governance Committee may solicit suggestions from incumbent directors,
management, third party advisors, business and personal contacts, and
stockholders. The Committee may also engage the services of a search firm. After
conducting an initial evaluation, the Nominating and Corporate Governance
Committee will make arrangements for candidates it considers suitable to be
interviewed by each member of the Committee. Each candidate will be required to
complete a standard directors and officers questionnaire, completed by all of
the directors annually. The Committee may also ask the candidate to meet with
members of our management. If the Committee believes that the candidate would be
a valuable addition to the Board, it will recommend the candidate for nomination
to the Board.
The Nominating and Corporate Governance Committee will apply the
criteria described above when considering candidates recommended by stockholders
as nominees for the Board. A stockholder who wishes to submit a candidate for
consideration at an annual meeting of stockholders must notify the Secretary of
Waste Connections in writing no later than 120 calendar days before the one-year
anniversary of the date our proxy statement was released to stockholders in
connection with the previous year's annual meeting. The stockholder's written
notice must include information about the proposed nominee, including name, age,
business address, residence address, telephone number and e-mail address,
principal occupation, shares of our common stock beneficially owned, and any
other information required in proxy solicitations, including employment history,
participation as a director of other public or private corporations, and
information about any relationship or understanding between the proposing
stockholder and the candidate or any other person (naming that person) pursuant
to which the nomination is to be made. The written notice must be accompanied by
the executed consent of each nominee to serve as a director if elected.
Before nominating a sitting director for reelection at an annual
meeting, the Nominating and Corporate Governance Committee will consider the
director's performance and contribution to the Board.
We have adopted a Code of Conduct and Ethics that applies to all of
our directors, officers, and employees. We have made the Code of Conduct and
Ethics available on our website at www.wasteconnections.com.
HOW TO CONTACT DIRECTORS
Stockholders may communicate with the Board generally or with a
specific director at any time by writing to the Board or a specific director,
care of the Secretary of Waste Connections, Inc., 35 Iron Point Circle, Suite
200, Folsom, California 95630. The Secretary will forward all communications to
the Board or a specific director, as applicable, as soon as practicable after
receipt without screening the communication. Stockholders are requested to
provide their contact information and to state the number of shares of our
common stock that they beneficially own in communications to the Board. Because
other appropriate avenues of communication exist for matters that are not of
stockholder interest, such as general business complaints or employee
grievances, stockholders are urged to limit their communications to the Board to
matters that are of stockholder interest and that are appropriate for
consideration at the Board level.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of Waste Connections do not
currently receive any compensation as directors or for attending meetings of the
Board of Directors or its committees. Each independent director receives a
monthly retainer of $1,000 plus a fee of $4,500 for attending each Board meeting
and each committee meeting (unless held on the same day as a full Board meeting)
in person, a fee of $750 for attending each significant, non-routine telephonic
Board or committee meeting, and reimbursement of reasonable expenses incurred.
We grant each independent director who has not been an employee of
ours at any time during the 12 months preceding his or her initial election and
appointment to the Board an option to purchase shares of our common stock at the
time of his or her initial election or appointment. We also grant each
independent director an option to purchase at least 20,000 shares of our common
stock each year during which the director serves on the Board. All such options
have an exercise price equal to the fair market value of the common stock on the
grant date, vest in full on the
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grant date, and expire upon the earlier to occur of ten years after the grant date or one year after the
director ceases to be a member of the Board.
DIRECTORS' EQUITY OWNERSHIP
The Board has established a policy that requires each current independent director to acquire,
by December 2005, a number of shares of our common stock with a market value at the time of purchase equal
to approximately three times the director's annual cash compensation for serving as a director. New directors
are required to acquire ownership of that number of shares over a three year period of time commencing with
their appointment or election to the Board.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table contains information about the annual and long-term compensation earned in 2001,
2002, and 2003 by our Chief Executive Officer, Ronald J. Mittelstaedt, and our four most highly compensated
executive officers other than Mr. Mittelstaedt. The persons named in the table are sometimes referred to in this
proxy statement as the "named executive officers." Mr. Mittelstaedt has been compensated in accordance with the
terms of his employment agreement, which is described below.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------------------
SHARES
ANNUAL COMPENSATION UNDERLYING
-------------------------------------- RESTRICTED OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER STOCK GRANTED (1)
--------------------------- ------ ---------- ---------- ----------- ------------ -----------
Ronald J. Mittelstaedt............... 2001 $ 295,000 $ -- $ -- -- 115,000
President, Chief Executive 2002 295,000 157,000 -- -- 130,000
Officer and Chairman 2003 295,000 -- -- -- 115,000
Steven F. Bouck...................... 2001 192,913 -- -- -- 70,000
Executive Vice President 2002 200,000 85,000 -- -- 85,000
and Chief Financial Officer 2003 218,692 -- -- -- 80,000
Darrell W. Chambliss................. 2001 149,112 -- -- -- 50,000
Executive Vice President and Chief 2002 154,154 70,000 -- -- 60,000
Operating Officer 2003 176,115 -- -- -- 65,000
Robert D. Evans...................... 2001 -- -- -- -- --
Executive Vice President, General 2002 106,923 100,000 1,000,000 -- 130,000
Counsel and Secretary (2) 2003 203,058 -- -- -- 75,000
Worthing F. Jackman.................. 2001 -- -- -- -- --
Vice President-- Finance and 2002 -- -- -- -- --
Investor Relations 2003 105,346 56,733 100,000 -- 75,000
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(1) See "Option Grants" below.
(2) "Other" annual compensation earned by Mr. Evans in 2002 consists of stock options granted with an aggregate
exercise price $600,000 below the fair market value on the date of grant and a $400,000 signing bonus, a
portion of which is payable to Mr. Evans at his discretion through 2004.
(3) "Other" annual compensation earned by Mr. Jackman in 2003 consists of a signing bonus.
8
STOCK OPTIONS
OPTION GRANTS. The following table contains information concerning the grant of options to purchase shares
of our common stock during 2003 to the named executive officers.
2003 OPTION GRANTS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (3)
NAME OF OPTIONS EMPLOYEES PRICE ------------------------
BENEFICIAL OWNER GRANTED (1) IN 2003 PER SHARE (2) EXPIRATION DATE 5% 10%
---------------- ----------- ---------- ------------- --------------- ---------- ----------
Ronald J. Mittelstaedt...... 115,000 7.0% $ 32.62 2/20/2013 $2,359,172 $5,978,606
Steven F. Bouck............. 80,000 4.9 32.62 2/20/2013 1,641,163 4,159,030
Darrell W. Chambliss........ 65,000 4.0 32.62 2/20/2013 1,333,445 3,379,212
Robert D. Evans............. 75,000 4.6 32.62 2/20/2013 1,538,591 3,899,091
Worthing F. Jackman......... 75,000 4.6 32.29 4/24/2013 1,523,026 3,859,646
----------------
(1) Options for 111,935 shares granted to Mr. Mittelstaedt and all options granted to Messrs. Bouck, Chambliss,
Evans and Jackman vest over a three-year period commencing on the date of grant. Options for 3,065 shares
granted to Mr. Mittelstaedt vest on the third anniversary of the date of grant.
(2) All options granted to the named executive officers were granted at fair market value as determined by the
Compensation Committee on the date of grant.
(3) Amounts reported in these columns represent amounts that the named executive officers could realize on exercise
of options immediately before they expire, assuming that our common stock appreciates at 5% or 10% annually.
These amounts do not take into account taxes and expenses that may be payable on such exercise. The amount
actually realized will depend on the price of our common stock when the options are exercised, which may be
before the term expires. The Securities and Exchange Commission requires the table to reflect 5% and 10%
annualized rates of stock price appreciation. We do not project those rates and our common stock may not
appreciate at those rates.
OPTION VALUES. The following table shows information about the named executive officers' exercises of
options during 2003 and the value of their unexercised options outstanding as of December 31, 2003.
AGGREGATED OPTION EXERCISES IN 2003 AND YEAR-END OPTION VALUES
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME OF ACQUIRED VALUE DECEMBER 31, 2003 DECEMBER 31, 2003 (1)
BENEFICIAL OWNER ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------- ----------- ---------- ----------- ------------- ----------- -------------
Ronald J. Mittelstaedt...... 56,667 $1,067,253 143,334 239,999 $ 2,048,410 $ 1,943,427
Steven F. Bouck............. 13,000 326,154 118,167 159,999 1,921,516 1,484,170
Darrell W. Chambliss........ 29,999 664,069 53,333 121,667 695,917 1,091,221
Robert D. Evans............. -- -- 83,334 121,666 1,080,604 655,046
Worthing F. Jackman......... -- -- -- 75,000 -- 411,000
----------------
(1) Based on the closing price of our common stock of $37.77 on the New York Stock Exchange on December 31, 2003,
less the per share exercise price.
9
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of the named
executive officers. The employment agreements with Messrs. Mittelstaedt and
Chambliss were entered into on October 1, 1997, and amended effective June 1,
2000. Mr. Mittelstaedt's employment agreement was amended again effective March
1, 2004. The employment agreement for Mr. Chambliss terminates on May 31, 2006,
while Mr. Mittelstaedt's terminates on February 28, 2007. The terms of the
employment agreements for Messrs. Mittelstaedt and Chambliss are automatically
extended for an additional year on the anniversary of their effective date, thus
extending the terms to three years from that date, unless either party has given
the other notice of termination. The employment agreement with Mr. Bouck was
entered into on February 1, 1998, and was amended effective June 1, 2000. The
initial term of Mr. Bouck's employment agreement terminates on March 31, 2004.
Mr. Bouck's employment agreement is automatically renewed for successive terms
of one year at the end of its term, unless either party gives the other notice
of termination. The employment agreement with Mr. Evans was entered into on May
10, 2002 and terminates on May 31, 2006. On June 1 of each year, Mr. Evans'
employment agreement is automatically extended for an additional year, thus
extending the term to three years from such date, unless either party gives the
other notice of termination. The employment agreement with Mr. Jackman was
entered into in April 2003 and terminates on April 25, 2006. On April 25 of each
year commencing in 2004, Mr. Jackman's employment agreement is automatically
extended for an additional year, thus extending the term to three years from
such date, unless either party gives the other notice of termination.
Waste Connections or the named executive officer may terminate each
agreement with or without cause at any time. If we terminate the agreement
without cause (as defined in the agreement) or if the named executive officer
terminates the agreement for good reason (as defined in the agreement), we are
required to make certain severance payments, and all of the named executive
officer's unvested options, warrants and rights relating to our common stock
will immediately vest and all options that they then hold would be exercisable
for a period ranging from three years to five years from the date of
termination. A change in control of Waste Connections (as defined in the
agreement) is generally treated as a termination of the named executive officer
without cause.
Severance payments payable to Messrs. Mittelstaedt, Chambliss and
Evans would be equal to the officer's base salary and a prorated portion of the
maximum bonus payable to them for the year in which the termination occurs, plus
an amount equal to three times their respective then current base salary and
maximum bonus for the year in which termination occurs. The severance payment
payable to Mr. Jackman would be equal to his base salary payable through his
termination date and the full (not prorated) maximum bonus payable to him for
the year in which the termination occurs, plus an amount equal to three times
his then current base salary and maximum bonus for the year in which termination
occurs. Mr. Mittelstaedt's severance payment is payable in a lump sum, subject
to his compliance with certain provisions of his employment agreement. In the
case of Messrs. Chambliss, Evans and Jackman, one-third of their severance
payment is payable on termination of employment, and one-third is payable on
each of the first and second anniversaries of termination of employment, subject
to compliance with certain provisions of their respective employment agreements.
Mr. Evans' employment agreement provides that he may borrow up to $400,000 from
us in $100,000 increments during each twelve month period commencing June 1,
2002, 2003, 2004 and 2005 bearing interest at the rate of 6% per annum. Any such
loan would be due and payable May 31, 2006, although if the market value of
options for 70,000 shares granted to Mr. Evans in 2002 is not greater than $1.5
million for a specified period in the year before the loan is due, the principal
and any accrued interest will be forgiven, unless Mr. Evans elects to extend the
loan for another year. Mr. Evans has not borrowed any of these funds from us. As
part of Mr. Evans' severance package, the principal and accrued but unpaid
interest on these borrowings would be forgiven and, if the amount borrowed were
less than $400,000, Mr. Evans would receive a lump sum payment of $400,000, less
the principal amount of these borrowings that is forgiven.
In the event of a change in control, Messrs. Mittelstaedt, Chambliss,
Evans and Jackman would be entitled to payment of their respective severance
amounts in a lump sum and not in installments. In the event Mr. Mittelstaedt
voluntarily terminates his employment or his employment is terminated for cause,
we have the option to make him subject to the terms of a non-competition
agreement for a period of 18 months from the date of termination, in which case
he would be entitled to the same severance benefits to which he would be
entitled in the event of a termination without cause.
10
Severance payments to Mr. Bouck would be a lump sum equal to his base
salary and prorated portion of the maximum bonus payable to him for the year in
which termination occurs, plus an amount equal to the greater of the aggregate
total compensation paid to him for the twelve months preceding termination or
the amount remaining payable under his agreement. Mr. Bouck would be entitled to
the same payments on a change in control.
In addition to their severance payments, in the event of a change in
control, the named executive officers would be entitled to receive either (i)
options to purchase stock of the acquiring company for the same number of shares
as they would have received had they exercised their Waste Connections options
immediately prior to the acquisition resulting in a change in control and
received for the shares acquired on exercise of such options shares of the
acquiring company in the change in control transaction (the aggregate exercise
price for the shares covered by such options would be the aggregate exercise
price for the Waste Connections options) or (ii) a lump sum payment equal on an
after-tax basis to at least the net after-tax gain they would have realized on
exercise of such options of the acquiring company and sale of the underlying
shares.
The base salaries and maximum performance bonuses as a percentage of
annual base salary for the named executive officers for the year 2004 are set
forth below:
ANNUAL BASE SALARY MAXIMUM BONUS
------------------ -------------
Ronald J. Mittelstaedt....... $295,000 100%
Steven F. Bouck.............. $230,000 50%
Darrell W. Chambliss......... $200,000 50%
Robert D. Evans.............. $215,000 50%
Worthing F. Jackman.......... $165,000 50%
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We employ John Felts, the brother-in-law of Ronald Mittelstaedt, as a
Network Manager. The total salary and bonus compensation we paid to Mr. Felts in
2003 was $80,066. In addition, Mr. Felts realized a gain of $29,757 in 2003 on
the sale of common stock received on exercise of options. In 2003, we granted
options to Mr. Felts for 5,000 shares of our common stock. The options were
granted on the same terms and conditions as options to all other employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 2003, the Compensation Committee of our Board consisted of Messrs.
Razzouk, Harlan and Davis. None of our executive officers served as a director
or member of the compensation committee of another entity which had an executive
officer that served as a director or member of our Compensation Committee.
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has prepared the following report for Waste
Connections' stockholders on executive compensation.
COMPENSATION PROCEDURES AND POLICIES. The Compensation Committee
determines the compensation of all of Waste Connections' executive officers,
including the named executive officers. All decisions by the Compensation
Committee relating to the compensation of executive officers, including
decisions relating to stock options, are reviewed by the full Board of
Directors.
Our executive compensation philosophy and specific compensation plans
tie a significant portion of executive compensation to Waste Connections'
success in meeting specified targets of growth in operating income before
depreciation and amortization as well as budgeted earnings per share annually.
Our compensation objectives include attracting and retaining the best possible
executive talent, motivating executive officers to achieve the company's
performance objectives, rewarding individual performance and contributions, and
linking executive and stockholder interests through equity-based plans.
Our executive compensation consists of three key components: base
salary, performance bonuses and stock options. Each of these components is
intended to complement the others which, taken together, satisfy our
compensation objectives. The Compensation Committee's policies with respect to
each of the three components, including the bases for the compensation awarded
to Ronald J. Mittelstaedt, as the company's Chief Executive Officer, are
discussed below.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly-held corporations for compensation in excess of $1,000,000
paid for any fiscal year to a corporation's Chief Executive Officer and its four
(4) other most highly compensated officers. However, the statute exempts
qualifying performance-based compensation from the deduction limit if certain
requirements are met. The policy of the Compensation Committee is to structure
the compensation of the company's executive officers to avoid the loss of the
deductibility of any compensation, even though Section 162(m) does not preclude
the payment of compensation in excess of $1,000,000. Notwithstanding the above,
the Compensation Committee reserves the authority to award non- deductible
compensation in circumstances as it deems appropriate. The company believes that
Section 162(m) will not have any effect on the deductibility of the compensation
of any executive officer for 2003.
BASE SALARY. Each fiscal year, the Compensation Committee reviews the
base salary of our Chief Executive Officer and the recommendation of the Chief
Executive Officer with regard to the base salary of each of our other executive
officers and approves, with any modifications it deems appropriate, annual base
salaries for each of the executive officers. The Compensation Committee reviews
available national survey data regarding salaries of those persons holding
comparable positions at comparably sized solid waste service companies to
establish base salary ranges. Each base salary range is based upon a fair market
base salary that is at the low end of the range for comparable companies. The
base salaries paid in 2003 to each of the executive officers, including the
Chief Executive Officer, were within the desired ranges.
ANNUAL PERFORMANCE BONUS. The Compensation Committee also considers
the payment of cash performance bonuses as part of its compensation program.
Annual cash bonuses reflect a policy of requiring a certain level of financial
and operational performance, generally measured in growth in revenues through
acquisitions and on achieving target levels of operating income before
depreciation and amortization and earnings per share, for the prior fiscal year
before any cash bonuses are earned by executive officers. In general, the
Compensation Committee has tied maximum potential bonus compensation to base
salary at levels that make the company competitive to other comparably sized
solid waste services companies. We did not pay cash performance bonuses to our
executive officers for 2003, except to Mr. Jackman, whose bonus for 2003 was
guaranteed.
STOCK OPTIONS. The company's executive officers are also entitled to
participate in the Second Amended and Restated 1997 Stock Option Plan and the
2002 Senior Management Equity Incentive Plan, and will be entitled to
participate in the 2004 Equity Incentive Plan discussed elsewhere in this proxy
statement should our stockholders approve that plan. The Compensation Committee
believes that it is to Waste Connections' advantage to increase the interest of
the executives in the company's welfare, as such employees share the primary
responsibility for the company's management and growth. In addition, the
Compensation Committee believes that, because new option grants are set at fair
market value, such grants have the effect of increasing the executive's price
targets for the
12
company's common stock. Moreover, the company's stock option plans provide a
significant non-cash form of compensation, which is intended to benefit Waste
Connections and its stockholders by enabling the company to continue to attract
and to retain qualified personnel without having a negative impact on its cash
flow. The Compensation Committee generally sets option grant levels at ranges
that exceed those of comparably sized solid waste companies.
CHIEF EXECUTIVE'S COMPENSATION FOR 2003. On October 1, 2000, Mr.
Mittelstaedt's base salary was increased to $295,000 per year, which level
remained in effect through December 31, 2003. Mr. Mittelstaedt's performance
bonus for 2003 was based on Waste Connections achieving specified levels of
growth in revenues, achieving a specified level of operating income before
depreciation and amortization and achieving a specified earnings per share. The
company did not achieve these levels for 2003 and thus Mr. Mittelstaedt was not
entitled to receive a bonus. On February 20, 2003, Waste Connections granted Mr.
Mittelstaedt 111,935 non-qualified options and 3,065 incentive stock options to
purchase shares of Waste Connections common stock at a price of $32.62 per
share. The non-qualified options vest ratably on an annual basis over three
years from the date of grant and expire on February 20, 2013. The incentive
stock options vest on the third anniversary of the grant date and expire on
February 20, 2013.
FUTURE CHANGES IN COMPENSATION PHILOSOPHY. In anticipation of being
required to expense stock options commencing in 2005 and the variable impact of
stock options on determining the number of shares outstanding for purposes of
calculating fully diluted earnings per share, the Compensation Committee intends
to begin implementing changes to the company's compensation philosophy in 2004.
Generally, during the next three years, our intent is to increase base salary,
cash performance bonuses and restricted stock grants, and to reduce the number
of options granted to our employees, officers and directors. The 2004 Equity
Incentive Plan described elsewhere in this proxy statement is designed to allow
us to begin that transition.
This report is submitted on behalf of the Compensation Committee.
William J. Razzouk, Chairman
Michael W. Harlan
Robert H. Davis
13
AUDIT COMMITTEE REPORT
The Audit Committee has prepared the following report for Waste
Connections' stockholders.
The Audit Committee, whose chairman is Mr. Harlan and whose other
current members are Mr. Razzouk and Mr. Davis, met six times in 2003. The Audit
Committee operates under a written charter adopted by the Board of Directors.
Management is responsible for Waste Connections' internal controls and
the financial reporting process. The company's independent auditors are
responsible for performing an independent audit of the company's consolidated
financial statements in accordance with generally accepted auditing standards
and issuing a report thereon. The Audit Committee's responsibilities are to
review the company's internal controls and the objectivity of its financial
reporting, and to meet with appropriate financial personnel and the company's
independent auditors in connection with these reviews. The Audit Committee also
reviews the professional services provided by the company's independent auditors
and reviews such other matters concerning Waste Connections' accounting
principles and financial and operating policies, controls and practices, its
public financial reporting policies and practices, and the results of its annual
audit as the Committee may find appropriate or as may be brought to the
Committee's attention.
In this context, the Audit Committee has met and held discussions with
Waste Connections' management and its independent auditors. Management
represented to the Audit Committee that Waste Connections' consolidated
financial statements were prepared in accordance with generally accepted
accounting principles, and the Audit Committee has reviewed and discussed the
consolidated financial statements with management and the independent auditors.
The Audit Committee discussed with the independent auditors matters required to
be discussed by the Statement on Auditing Standards No. 61 (Communication with
Audit Committee).
The independent auditors also provided to the Audit Committee the
written disclosures and letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees). The Audit Committee
discussed with the independent auditors that firm's independence and considered
the compatibility of non-audit services with the auditors' independence.
Based on the Audit Committee's discussions with management and the
independent auditors and its review of the representations of management and the
report of the independent auditors, the Audit Committee recommended that the
Board of Directors include the audited consolidated financial statements in
Waste Connections' Annual Report on Form 10-K for the year ended December 31,
2003 filed with the Securities and Exchange Commission.
This report is submitted on behalf of the Audit Committee.
Michael W. Harlan, Chairman
William J. Razzouk
Robert H. Davis
14
COMPARSION OF TOTAL STOCKHOLDER RETURN
The following graph compares the total cumulative stockholder returns
on common stock over the past five fiscal years for Waste Connections with the
total cumulative returns of S & P 500 and a peer group index selected by us from
12/31/1998 through 12/31/2003. The graph assumes an investment of $100 in our
common stock on 12/31/1998, and the reinvestment of all dividends (we have not
paid any dividends during the period indicated). This chart has been calculated
in compliance with Securities and Exchange Commission requirements and prepared
by Research Data Group Inc., which holds a license to use the S&P 500 index
herein.
The peer group consists of the following companies: Allied Waste
Industries, Inc., Casella Waste Systems, Inc., Republic Services, Inc., Waste
Industries USA, Inc. and Waste Management, Inc.
Comparison of 5 Year Cumulative Total Return*
Among Waste Connections, Inc., the S&P 500 Index
and a Peer Group
[PERFORMANCE GRAPH]
*$100 invested on 12/31/98 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
Cumulative Total Return
--------------------------------------------------------------
12/98 12/99 12/00 12/01 12/02 12/03
WASTE CONNECTIONS, INC. 100.00 78.57 179.93 168.65 210.12 205.55
S & P 500 100.00 121.04 110.02 96.95 75.52 97.18
PEER GROUP 100.00 39.13 59.48 67.41 51.21 66.29
THE STOCK PRICE PERFORMANCE INCLUDED IN THIS GRAPH IS NOT NECESSARILY INDICATIVE
OF FUTURE STOCK PRICE PERFORMANCE.
15
PROPOSAL 2-- AMENDMENT OF AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION TO (A) INCREASE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK AND (B) DELETE REFERENCES TO SERIES A PREFERRED STOCK
WHICH CONVERTED TO COMMON STOCK
Our Amended and Restated Certificate of Incorporation currently
authorizes 50,000,000 shares of common stock and 7,500,000 shares of preferred
stock, all with a par value of $0.01 per share. As of March 1, 2004, 43,476,161
shares of our common stock were either issued and outstanding, reserved for
issuance upon conversion or exercise of outstanding securities or reserved for
future issuance under our various equity incentive plans.
At the annual meeting, our stockholders will be asked to consider and
act on an amendment of our Amended and Restated Certificate of Incorporation to
(a) increase the authorized number of shares of common stock from 50,000,000 to
100,000,000 shares and (b) delete references to the Series A Preferred Stock
which converted to common stock upon the completion of our initial public
offering. The Board of Directors approved this amendment of the Amended and
Restated Certificate of Incorporation on February 3, 2004.
Waste Connections has grown significantly since its inception in 1997.
Our Board believes that the increase in authorized shares is necessary to enable
us to reserve a sufficient number of shares to meet all known requirements and
provide flexibility in the future for general corporate purposes such as stock
dividends or splits, acquisitions, equity and convertible security financings,
and issuances under stock option, restricted stock, warrant or other employee
equity incentive plans. The deletion of references to out Series A Preferred
Stock is administative in nature and not material, as all such shares converted
to common stock upon the completion of our initial public offering and we do not
currently have any preferred stock outstanding.
The proposed amendment would increase the number of shares of common
stock that we are authorized to issue from 50,000,000 to 100,000,000. The
additional 50,000,000 shares would be part of the existing class of common
stock, and, if and when issued, would have the same rights and privileges as the
shares of common stock currently issued and outstanding. The common stock does
not and will not have any preemptive rights to purchase newly issued shares.
Unless deemed advisable by the Board of Directors, no further
stockholder authorization would be sought for the issuance of additional shares
of common stock. The Board of Directors has no immediate plans, intentions or
commitments to issue additional shares of common stock for any purpose,
including rendering more difficult or discouraging a merger, tender offer, proxy
contest or other change in control of Waste Connections.
If the amendment is approved, Article V, Section A of Waste
Connections' Amended and Restated Certificate of Incorporation would be amended
and restated to read as follows:
"The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The amount of
the total authorized capital stock of the Corporation is 107,500,000 shares,
divided into (a) 100,000,000 shares of Common Stock, par value $0.01 per share,
and (b) 7,500,000 shares of Preferred Stock, par value $0.01 per share."
In addition, if the amendment is approved, Article V, Section C of
Waste Connections Amended and Restated Certificated of Incorporation, which sets
forth the powers, designations, preferences and other special rights of our
Series A Preferred Stock, all of which converted to common stock upon the
completion of our initial public offering, would be deleted in its entirety.
If the amendment is approved by the stockholders, we expect to file
with the Delaware Secretary of State, promptly after the annual meeting, an
Amended and Restated Certificate of Incorporation to become effective on May 27,
2004.
BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR the proposal to amend the
Amended and Restated Certificate of Incorporation to (a) increase the authorized
number of shares of common stock from 50,000,000 to 100,000,000 shares and (b)
delete references to the Series A Preferred Stock which converted to common
stock upon the completion of our initial public offering.
16
PROPOSAL 3 -- APPROVAL OF 2004 EQUITY INCENTIVE PLAN
GENERAL
We are asking our stockholders to approve the 2004 Equity Incentive
Plan, which authorizes up to 1,500,000 shares of common stock for issuance
pursuant to nonqualified stock options and restricted stock awards under that
plan. A copy of the 2004 Equity Incentive Plan is attached to this proxy
statement as Exhibit D.
Our Board believes that our continued success depends on our ability
to attract and retain highly competent persons as employees, officers, directors
and consultants. We believe that one of the best ways to attain this objective
is to give such persons the opportunity to acquire an ownership interest in the
company, either by purchasing shares of our common stock through the exercise of
options, or by being granted shares of restricted stock. As of March 1, 2004, we
had 5,006 options available to be granted under the Second Amended and Restated
1997 Stock Option Plan, 172,393 options available to be granted under the 2002
Stock Option Plan, 1,245,000 options available to be granted under the 2002
Senior Management Equity Incentive Plan, 14,574 shares of restricted stock
available to be awarded under the 2002 Restricted Stock Plan, and 453,000
warrants available to be granted under the Consultant Incentive Plan. We believe
that the numbers of options and shares of restricted stock remaining available
for grant under these plans are insufficient for our hiring and retention goals.
Accordingly, on April 1, 2004, the Board of Directors decided to
create a new plan, the 2004 Equity Incentive Plan, in order to attract and
retain highly competent employees, officers, directors and consultants.
The 2004 Equity Incentive Plan provides for the issuance of an
aggregate of up to 1,500,000 nonqualified stock options and shares of restricted
stock to employees, officers, directors and consultants, of which up to 300,000
shares may be delivered as restricted stock. No option or restricted stock award
may be granted under this plan until the plan is approved by the stockholders.
Approval of the 2004 Equity Incentive Plan requires the affirmative vote of a
majority of the shares of common stock represented in person or by proxy at the
Annual Meeting.
Upon approval of the 2004 Equity Incentive Plan by our stockholders,
our Board of Directors intends to make certain amendments to our existing Second
Amended and Restated 1997 Stock Option Plan, 2002 Stock Option Plan, 2002 Senior
Management Equity Incentive Plan and Consultant Incentive Plan that would
preclude the grant of options or warrants with exercise prices below the fair
market value of the underlying common stock on the date of grant and would
reduce by 300,000 the number of warrants available for grant under the
Consultant Incentive Plan.
SUMMARY OF 2004 EQUITY INCENTIVE PLAN
The 2004 Equity Incentive Plan (the "Plan") is intended to give
employees, officers, directors and consultants additional incentives by
increasing their proprietary interest in the company. The Plan permits the grant
of nonqualified stock options and restricted stock. Our employees, officers,
directors and consultants are eligible to participate in the Plan. As of March
1, 2004, approximately 3,671 employees, 13 officers, five directors and no
consultants were eligible to participate in the Plan. The Plan is administered
by the Board or, in the Board's discretion, a committee of the Board. The Board
decides the persons to whom options or restricted stock awards are granted, the
size, term, grant date, exercise price, expiration date, vesting schedule and
other terms and conditions of options, and the size, grant date and other terms
and conditions of restricted stock awards.
The Board may amend the Plan at any time, but no amendment may alter
or impair rights under any option or restricted stock award granted before such
amendment unless the optionee or restricted stock participant consents in
writing, and the Board will seek the consent of the stockholders to any
amendment to the extent required by law or the New York Stock Exchange Listed
Company Manual. Any amendments or modifications to the terms of any options and
restricted stock grants permitted by the Plan may be effected by including the
modification or amendment in an employment or consulting agreement between us or
one of our subsidiaries and the employee or consultant.
OPTIONS. Options generally become exercisable in installments
according to a vesting schedule in the option agreement. No option will be
exercisable more than five years after the grant date. All options granted under
the Plan shall have an exercise price equal to the fair market value of the
underlying common stock on the date of grant, as determined by the Board. The
purchase price of the shares as to which an option may be exercised shall be
paid to the company at the time of exercise either (i) in cash, or (ii) in the
absolute discretion of the Board, at the time of the grant or thereafter, (A) by
the withholding of shares of stock issuable on exercise of the option
17
or the delivery to the company of other stock owned by the optionee, provided in
either case that the optionee has owned shares of stock equal in number to the
shares so withheld for a period sufficient to avoid a charge to the company's
reported earnings, (B) according to a deferred payment or other arrangement
(which may include, without limiting the generality of the foregoing, the use of
stock) with the person to whom the option is granted or to whom the option is
transferred, to the extent consistent with applicable law, (C) by delivery of a
properly executed notice together with irrevocable instructions to a broker
providing for the assignment to the company of the proceeds of a sale or loan
with respect to some or all of the stock being acquired on the exercise of the
option, including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System (a "cashless exercise"), or (D) in any
other form or combination of forms of legal consideration that may be acceptable
to the Board. In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred payment
arrangement, or if less, the maximum rate permitted by law.
Each option agreement shall provide that in the event that the company
is subject to a change in control: (i) all outstanding options shall be
automatically accelerated and become immediately exercisable and (ii) the Board
may, in its discretion, or by the terms of any agreement of sale, merger or
consolidation giving rise to the change in control, provide that the shares
subject to an option may (a) continue as an immediately exercisable option of
the company (if the company is the surviving corporation), (b) be assumed as
immediately exercisable options by the surviving corporation or its parent, (c)
be substituted by immediately exercisable options granted by the surviving
corporation or its parent with substantially the same terms for the original
option, or (d) be cancelled after payment to the optionee of an amount in cash
or other consideration equal to the total number of shares subject to the option
multiplied by the remainder of (1) the amount per share to be received by
holders of the company's stock in the sale, merger or consolidation, minus (2)
the exercise price per share of the shares subject to the option.
If an optionee with outstanding options retires or becomes disabled
and does not die within the three months after retirement or disability, he or
she may exercise his or her options, but only during the period ending on the
earlier of (i) six months after disability or retirement (or such longer period
specified in the option agreement), or (ii) the expiration of the term set in
the option agreement. Options not exercised within the periods specified above
will terminate, and the shares of common stock subject to the options will
become available for issuance under the Plan. If an optionee dies (i) while an
employee, officer, director or consultant, or (ii) within 3 months after
termination of the optionee's continuous status as an employee, officer,
director or consultant because of his or her disability or retirement, his or
her options may be exercised (to the extent that the optionee was entitled to do
so on the date of death or termination) by the optionee's estate or by a person
who shall have acquired the right to exercise the options by bequest or
inheritance, but only within the period ending on the earlier of (A) one year
after the optionee's death (or such shorter or loner period specified in the
option agreement, which period shall not be less than six months), or (B) the
expiration date specified in the option agreement. If, after the optionee's
death, the optionee's estate or the person who acquired the right to exercise
the optionee's options does not exercise the options within the time specified
above, the options shall terminate and the shares covered by the options shall
revert to and again become available for issuance under the Plan. If an
optionee's engagement as an employee, officer, director or consultant ends
because of a reason other than the optionee's death, retirement or disability,
his or her options terminate on the date such engagement terminates, and the
shares of common stock subject to the options become available for issuance
under the Plan. The Board has the discretion to extend the expiration date of
any option beyond the periods described above, but not beyond the expiration
date of the option as set forth in the option agreement.
Each option agreement may include the company's right to repurchase,
when the optionee's engagement terminates, any shares of the company's common
stock the optionee acquired on exercise of options.
RESTRICTED STOCK. The restricted stock awards granted under the Plan
will be in the form of common stock. The Board shall determine the vesting
schedule on all restricted stock grants. The Board presently anticipates that
most restricted stock grants will vest in annual installments over a four-year
restriction period, beginning on the first anniversary of the award, in an equal
number of shares per installment, but the Board reserves the right to establish
a different schedule either in specific instances or in general in the future.
An award of restricted stock may be made without requiring any cash payment from
the recipient, or may require a cash payment from the recipient in an amount no
greater than the fair market value of the restricted stock as of the date of the
award.
18
Each restricted stock agreement shall provide that if Waste
Connections becomes subject to a change in control, any restrictions on
restricted stock held by that recipient will automatically terminate and the
stock will vest immediately.
If a restricted stock recipient's status as an employee, officer,
director or consultant terminates during the restriction period for any reason
(including death, disability or retirement), his or her restricted shares will
be forfeited and revert to Waste Connections. Any shares that are no longer
restricted (for example, those shares that have already vested on anniversaries
of the award) will not be forfeited. Shares that are forfeited and revert to
Waste Connections will again become available for issuance under the Plan.
Restricted stock awards granted under the Plan are generally not
transferable during the restriction period except by will or by the laws of
descent and distribution. Each restricted stock recipient may designate to whom
his or her award should be distributed on his or her death.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
OPTIONS. Under current law, the optionee does not realize any taxable
income when granted a nonqualified stock option, and the company does not
receive a tax deduction. When an optionee exercises a nonqualified stock option,
he or she recognizes ordinary income equal to the excess of the fair market
value on the exercise date of the shares of common stock purchased on exercise
of the option, over the exercise price. The company may deduct the same amount.
The optionee's holding period for such stock begins on the exercise date.
RESTRICTED STOCK. Restricted stock awarded under the Plan is generally
taxable to the recipient as compensation at ordinary income rates at the time
that such stock becomes vested and non-forfeitable, based on the fair market
value of such stock at the date of such vesting. The recipient's holding period
for such stock begins on the vesting date. If the recipient then sells such
stock more than twelve months after such vesting date, the difference between
the selling price and the fair market value of the stock as of such vesting date
will be long-term capital gain or loss.
A recipient may make an election pursuant to section 83(b) of the
Internal Revenue Code within 30 days of the date of the grant of an award to
include in gross income for the year of the grant the fair market value of such
stock as of the date of the grant. Such election must be filed with the Internal
Revenue Service within 30 days of the date of the grant. A recipient who makes
the election must report income at ordinary income rates in the year of the
grant based on the value of the stock at the time of the grant, whether or not
the recipient ever receives freely tradable stock.
The company is generally entitled to take a compensation deduction
equal to the amount of ordinary income recognized by the recipient of restricted
stock, either at the time of vesting, or in cases where the recipient makes an
election under section 83(b) of the Internal Revenue Code, at the time of
issuance.
BOARD RECOMMENDATION
The 2004 Equity Incentive Plan is a key component of attracting and
retaining highly qualified employees, officers, directors and consultants. The
Board believes that it is to the company's advantage to increase the interest of
our employees, officers, directors and consultants in the company's welfare,
because such persons share the primary responsibility for the company's
continued success. In addition, the Board believes that stock option plans,
restricted stock plans and warrant plans provide a significant non-cash form of
compensation, which benefits the company and its stockholders by enabling us to
continue to attract and retain qualified personnel, without having a negative
impact on our cash flow. As a consequence, the Board of Directors recommends a
vote FOR approval of the adoption of the 2004 Equity Incentive Plan.
19
PROPOSAL 4 -- APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, the Board of Directors
has reappointed Ernst & Young LLP as independent auditors to audit the
consolidated financial statements of Waste Connections for the year 2004. A
summary of fees we paid to Ernst & Young LLP for services rendered in 2003 and
2002 is set forth below.
AUDIT FEES
Fees for audit services totaled approximately $840,000 and $650,000 in
2003 and 2002, respectively, including fees associated with the annual audits of
our consolidated financial statements, reviews of the consolidated financial
statements included in our quarterly reports on Form 10-Q, comfort letters,
consents, assistance with review of documents filed with the SEC, and accounting
consultations.
AUDIT-RELATED FEES
Fees for audit-related services totaled approximately $0 and $388,000
in 2003 and 2002, respectively. Audit-related services principally include
acquisition-related due diligence and related accounting consultations.
TAX FEES
Fees for tax compliance, advice and planning totaled approximately
$38,000 and $36,000 in 2003 and 2002, respectively. Tax compliance, advice and
planning principally included analysis to determine the amount of personal
goodwill associated with acquisitions in 2002 and 2003.
ALL OTHER FEES
Fees for miscellaneous consulting projects totaled approximately
$7,000 and $0 in 2003 and 2002, respectively. Miscellaneous consulting projects
principally included advice and consultation regarding the establishment of best
practices for our internal audit department.
The Audit Committee considers the services provided by Ernst & Young
described under "Audit-Related Fees," "Tax Fees" and "All Other Fees" to be
compatible with Ernst & Young LLP's maintaining its independence.
PRE-APPPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted a policy that requires advance
approval of all audit, audit-related, tax services, and other services performed
by the independent auditor. The policy provides for pre-approval by the Audit
Committee of specifically defined audit and non-audit services. Unless the
specific service has been previously pre-approved with respect to that year, the
Audit Committee must approve the permitted service before the independent
auditor is engaged to perform it. The Audit Committee has delegated to the
chairman of the Audit Committee authority to approve permitted services,
provided that the chairman reports all approvals to the Committee at its next
meeting. All of the services described above under "Audit Fees," "Audit-Related
Fees," "Tax Fees" and "All Other Fees" were approved by the Audit Committee.
In 2003, the Audit Committee commenced negotiations with Ernst & Young
LLP related to the terms of its engagement. As a result of these negotiations,
the Audit Committee signed an extension of that firm's engagement agreement for
audit and tax related services.
We expect representatives of Ernst & Young LLP to be present at the
annual meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to answer appropriate questions.
The Board of Directors recommends a vote in favor of ratification of
the appointment. If the stockholders should fail to ratify the appointment of
the independent auditors, the Board of Directors would reconsider the
appointment.
20
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of reports on Forms 3, 4 and 5 and any
amendments thereto furnished to us pursuant to Section 16 of the Securities
Exchange Act of 1934, as amended, and written representations from the executive
officers and directors that no other reports were required, we believe that no
executive officers or directors were late in filing such reports during 2003.
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
To be considered for inclusion in next year's proxy materials,
stockholder proposals to be presented at the Waste Connections' 2005
Annual Meeting must be in writing and be received by the Secretary of the
company, at the address set forth on the first page of this proxy statement, no
later than December 10, 2004. Stockholder proposals submitted after that date
will be considered untimely within the meaning of Rules 14a-5(e)(2) and
14a-4(c)(1) under the Securities Exchange Act of 1934 unless received between 60
and 90 days before the date of the 2005 Annual Meeting, in accordance with our
Amended and Restated Bylaws.
By Order of the Board of Directors,
Robert D. Evans
SECRETARY
April 8, 2004
A COPY OF WASTE CONNECTIONS' 2003 ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K WILL BE FURNISHED TO STOCKHOLDERS FREE OF
CHARGE UPON WRITTEN REQUEST TO THE OFFICE OF THE CHIEF FINANCIAL OFFICER OF THE
COMPANY.
21
EXHIBIT A
---------
Waste Connections, Inc.
Audit Committee Charter
WASTE CONNECTIONS, INC.
-----------------------
AUDIT COMMITTEE CHARTER
-----------------------
Organization
------------
The Audit Committee of the Board of Directors will consist of at least three
directors, all of whom are independent of the Company and its management.
A member of the Audit Committee will be considered independent if the member
does not receive any compensation from the Company other than compensation as a
director, meets the independence standards required by the New York Stock
Exchange, and satisfies the independence requirements set forth in the Company's
Corporate Governance Guidelines.
All Audit Committee members must be financially literate and satisfy all other
requirements of the New York Stock Exchange regarding audit committee members.
At least one member must be an "audit committee financial expert", as defined by
SEC regulations.
The Board of Directors will annually determine that the members of the Audit
Committee satisfy all applicable independence, financial literacy, audit
committee financial expert and other qualification requirements.
Members of the Audit Committee are appointed by the Board of Directors and may
be removed by the Board of Directors in its discretion.
Statement of Purpose
--------------------
The Audit Committee provides assistance to the directors in fulfilling their
responsibility to the Company's stockholders, potential stockholders, the
investment community and others, by overseeing the integrity of the Company's
financial statements; the financial reporting process; the Company's systems of
internal accounting and financial controls; the Company's compliance with legal
and regulatory requirements; the independent auditors' qualifications and
independence; and the performance of the Company's internal audit function and
independent auditors. In carrying out this purpose, it is the Audit Committee's
responsibility to maintain free and open communication among the committee, the
directors, the independent auditors and the Company's management.
The Audit Committee is authorized to investigate any matter brought to its
attention, with full access to all books, records, facilities and personnel of
the Company and the authority to engage independent counsel and accounting and
other advisors as it determines necessary to carry out its duties. The fees and
expenses of such independent counsel and accounting and other advisors will be
approved by the chair of the Committee and paid by the Company.
Responsibilities
----------------
The Audit Committee policies and procedures should remain flexible, to allow it
to react to changing conditions and to ensure to the directors and stockholders
that the corporate accounting and reporting practices of the Company are in
accordance with all requirements and are of the highest quality.
However, at a minimum, the Audit Committee will:
o Be directly responsible for the appointment, termination (subject to
applicable stockholder ratification), compensation and oversight of the
independent auditors engaged to audit the financial statements of the
Company and its divisions and subsidiaries, including resolution of
disagreements between management and the independent auditors regarding
financial reporting issues. The Audit Committee has the sole authority to
approve all auditing engagements and all non-audit engagements of the
independent auditors, will approve all such services before they are
rendered, and will disclose its approval of non-audit services to the
Company's stockholders to the extent required by law. The Committee may
delegate a single member of the committee to pre-approve non-audit
services, in which case each such pre-approval will be presented to the
full Committee at its next meeting.
A-1
o At least annually, obtain and review a report from the Company's
independent auditors that describes the audit firm's internal
quality-control procedures, any material issues raised by the most recent
internal quality-control review or peer review of the audit firm, or by any
inquiry or investigation by governmental or professional authorities within
the past five years regarding any audits carried out by the audit firm, and
corrective measures taken, and all relationships between the audit firm and
the Company. Review with the independent auditors the nature and scope of
any disclosed relationships or professional services and take, or recommend
to the Board of Directors, appropriate action to ensure the continuing
independence of the auditors.
o Set clear Company hiring policies for employees or former employees of the
Company's independent auditors that satisfy SEC and New York Stock Exchange
requirements.
o Meet with the independent auditors and financial management of the Company
(including the Company's internal audit staff) to review the scope of and
plans for their respective audits and timely quarterly reviews for the
current year and the procedures to be used, including compensation and the
adequacy of staffing.
o At the conclusion of each annual audit, review the audit directly with the
independent auditors, including any problems, difficulties, comments or
recommendations of the independent auditors, and management's response.
o Report the results of the annual audit to the Board of Directors. If
requested by the Board, invite the independent auditors to attend the full
Board of Directors meeting to assist in reporting the results of the annual
audit or to answer other directors' questions (alternatively, the other
directors, particularly the other independent directors, may be invited to
attend the Audit Committee meeting during which the results of the annual
audit are reviewed).
o At least annually, review with the independent auditors and the Company's
financial and accounting personnel the adequacy and effectiveness of the
accounting and financial controls of the Company, including the
responsibilities, budget and staffing of the Company's internal audit
function, procedures to assess, monitor and manage business risks, and
legal and ethical compliance programs. Elicit recommendations for the
improvement of such controls and procedures and particular areas where new
or more detailed controls or procedures are desirable.
o Review analyses prepared by the Company's management and the independent
auditors about the Company's critical accounting policies and principles,
significant financial reporting issues and judgments made in preparation of
the financial statements (including analyses of the effects of alternative
GAAP methods on the financial statements), and significant changes in the
Company's selection or application of accounting principles. Review any
off-balance sheet structures that may have a material effect on the
Company's financial statements or related compliance policies. Review with
the Company's management and the independent auditors their judgements
about the quality, not just the acceptability, of accounting principles and
the degree of aggressiveness or conservatism of the Company's accounting
principles and underlying estimates.
o Review reports received from regulators and legal, accounting and
regulatory initiatives that may have a material effect on the Company's
financial statements or related compliance policies.
o Review the annual audited and quarterly financial statements (including
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations") with the Company's management and the
independent auditors before they are filed with the SEC (and before their
inclusion in a press release, if possible). Discuss the results of these
reviews and any other matters communicated to the Committee by the
independent auditors. The chair of the Committee may represent the full
Committee for purposes of these reviews and discussions.
o Discuss earnings press releases (paying particular attention to any "pro
forma" or "adjusted" non-GAAP information) and financial information and
earnings guidance provided to analysts and rating agencies. The chair of
the Committee may represent the full Committee for this purpose.
A-2
o Periodically meet separately with the Company's management, with the
personnel responsible for the Company's internal audit functions and with
the independent auditors to discuss issues and concerns. Among the items to
be discussed in the separate meetings with the independent auditors are the
independent auditors' evaluation of the Company's financial, accounting and
auditing personnel.
o Establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls
or auditing matters, and the confidential, anonymous submission by
employees of concerns about questionable accounting or auditing matters.
o Review accounting and financial human resources and succession planning
within the Company.
o Have the authority to delegate any of its responsibilities to single
members of the Committee or sub-committees, as the Committee deems
appropriate in its sole discretion.
o Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each committee meeting with, the Board of
Directors. Regularly review with the full Board any issues that arise with
respect to the quality or integrity of the Company's financial statements,
compliance with legal or regulatory requirements, performance and
independence of the Company's independent auditors or the performance of
the internal audit function.
o Prepare the Audit Committee's report to be included in the Company's annual
report to stockholders or proxy statement, as required by SEC regulations.
Include a copy of this Charter in the annual report to stockholders or the
proxy statement at least triennially or the year after any significant
amendment to the Charter.
o Perform an annual performance self-evaluation of the Audit Committee.
o Obtain the full Board of Directors' approval of this Charter and review and
reassess this Charter at least annually and otherwise as conditions
require.
A-3
EXHIBIT B
---------
Waste Connections, Inc.
Compensation Committee Charter
WASTE CONNECTIONS, INC.
-----------------------
COMPENSATION COMMITTEE CHARTER
------------------------------
Organization
------------
The Compensation Committee of the Board of Directors will consist of at least
three directors, all of whom are independent of the Company and its management.
Members of the Committee will be considered independent if they do not receive
any compensation from the Company other than their compensation as directors,
meet the independence standards required by the New York Stock Exchange, and
satisfy the independence requirements set forth in the Company's Corporate
Governance Guidelines. Members of the Compensation Committee are appointed by
the Board of Directors and may be removed by the Board of Directors in its
discretion.
The Board of Directors will annually determine that the members of the
Compensation Committee are independent.
Statement of Purpose
--------------------
The Compensation Committee will discharge the Board of Directors'
responsibilities relating to executive compensation and produce an annual report
on executive compensation for inclusion in the Company's proxy statement, in
accordance with applicable rules and regulations.
Responsibilities
----------------
In carrying out its purposes, the Committee will:
o Assist the Board of Directors in identifying and evaluating potential
candidates for executive positions, including the chief executive officer,
and oversee the development of executive succession plans.
o Annually review and approve the Company's goals and objectives relevant to
compensation for the chief executive officer. The Committee will evaluate
at least annually the chief executive officer's performance in light of
these goals and objectives and, based on that evaluation, set the chief
executive officer's annual compensation, including salary, bonus, incentive
and equity compensation.
o Annually review and approve the evaluation process and compensation
structure for the Company's senior executive officers. The Committee will
evaluate at least annually the performance of the Company's senior
executive officers and, based on that evaluation, approve their annual
compensation, including salary, bonus, incentive and equity compensation.
o Oversee management's decisions concerning the performance and compensation
of other Company officers, employees, consultants and agents.
o Make recommendations to the Board of Directors concerning compensation and
benefits for non-management directors.
o Make recommendations to the Board of Directors regarding the Company's
incentive and equity-based compensation plans. Approve the grant of
options, warrants and other forms of incentive and equity-based
compensation to the Company's officers, directors, employees, agents and
consultants.
o Have authority to retain, terminate and compensate such compensation
consultants, outside counsel and other advisors as the Committee deems
appropriate. The Committee has sole authority to retain, terminate and
approve fees for any consultant engaged to evaluate the Company's chief
executive officer. The fees and expenses of such consultants, counsel and
other advisors will be approved by the chair of the Committee and paid by
the Company.
B-1
o Administer any loan or other extension of credit to any executive officer
or director of the Company that was already maintained by the Company on
July 30, 2002, and approve and administer any loan or other extension of
credit to such persons that is otherwise permitted by applicable laws and
regulations.
o Approve and administer any loan to or other extension of credit to, any
guarantee of any obligation of, or other similar assistance to any
non-executive officer or other employee of the Company or any of its
subsidiaries.
o Prepare and publish an annual executive compensation report in the
Company's proxy statement, in accordance with applicable SEC regulations.
o Have the authority to delegate any of its responsibilities to single
members of the Committee or sub-committees as the Committee deems
appropriate in its sole discretion.
o Report its actions and any recommendations to the Board of Directors after
each Committee meeting.
o Perform an annual performance self-evaluation of the Compensation
Committee.
o Obtain the full Board of Directors' approval of this Charter and review and
assess this Charter at least annually and otherwise as conditions require.
B-2
EXHIBIT C
---------
Waste Connections, Inc.
Nominating and Corporate Governance Committee Charter
WASTE CONNECTIONS, INC.
-----------------------
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
-----------------------------------------------------
Organization
------------
The Nominating and Corporate Governance Committee of the Board of Directors will
consist of at least three directors, all of whom are independent of the Company
and its management.
Members of the Committee will be considered independent if they do not receive
any compensation from the Company other than their compensation as directors,
meet the independence standards required by the New York Stock Exchange, and
satisfy the independence requirements set forth in the Company's Corporate
Governance Guidelines. Members of the Committee are appointed by the Board of
Directors and may be removed by the Board of Directors in its discretion.
The Board of Directors will annually determine that the members of the
Nominating and Corporate Governance Committee are independent.
Statement of Purpose
--------------------
The Nominating and Corporate Governance Committee will identify qualified
individuals to become Board members, select or recommend to the Board director
nominees for each meeting of stockholders at which one or more directors will be
elected and for vacancies to be filled by the Board of Directors, and develop
and recommend to the Board and assist the Board in implementing the Company's
corporate governance principles.
Responsibilities
----------------
In carrying out its purposes, the Committee will:
o Lead the search for individuals qualified to become members of the Board of
Directors and select director nominees to be presented for stockholder
approval at each meeting of stockholders at which one or more directors
will be elected and to fill vacancies on the Board. The Committee will
select individuals as director nominees who meet the qualification
standards for directors set forth in the Company's Corporate Governance
Guidelines.
o Appoint or recommend to the Board the persons to serve on each other Board
committee. Although the Committee may consult with the Company's management
regarding these recommendations, it will ultimately determine its
nominations or recommendations in executive session without the presence of
management.
o Develop and recommend to the Board of Directors for its approval a set of
Corporate Governance Guidelines and a Code of Conduct and Ethics for the
Company (including a Code of Ethics for the Chief Executive Officer and
Senior Financial Officers, as required by Section 406 of the Sarbanes-Oxley
Act). The Committee will review the Guidelines and Code on an annual basis,
or more frequently if appropriate, and recommend changes as necessary.
o Have the sole authority to waive provisions of the Company's Code of
Conduct and Ethics with respect to executive officers and directors in
specific circumstances where the Committee determines that such waiver is
appropriate, subject to compliance with applicable laws and regulations.
Any such waivers will be promptly disclosed to the Company's stockholders
to the extent required by applicable laws and regulations.
o Develop and recommend to the Board of Directors for its approval an annual
self-evaluation process for the Board and its committees. The Committee
will oversee the annual self-evaluations.
o Have sole authority to retain and terminate any search firm engaged to
assist in identifying director candidates, including sole authority to
approve any search firm's fees and other terms of the engagement.
C-1
o Maintain regular contact with the Company's management, which may include,
in the Committee's discretion, meeting with the officers responsible for
implementing the Company's Code of Conduct and Ethics and legal compliance,
without the presence in such meetings of other executive officers or
non-independent directors.
o Have authority to retain outside counsel and any other advisors as the
Committee deems appropriate in its sole discretion. The fees and expenses
of such counsel and other advisors will be approved by the chair of the
Committee and paid by the Company.
o Review and approve the participation by any officer, director or employee
on the board of directors of another for-profit company.
o Review and approve any material transaction between the Company and any
director or executive officer or entity affiliated with such person,
including assessing whether the transaction is fair and in the Company's
interests, why the Company should enter into it with a related rather than
an unrelated party, and whether public disclosure is required.
o Have the authority to delegate any of its responsibilities to single
members of the Committee or sub-committees, as the Committee deems
appropriate in its sole discretion.
o Report its actions and recommendations to the Board of Directors after each
Committee meeting.
o Perform an annual performance self-evaluation of the Nominating and
Corporate Governance Committee.
o Obtain the full Board of Directors' approval of this Charter and review and
assess this Charter at least annually and otherwise as conditions require.
C-2
EXHIBIT D
---------
Waste Connections, Inc.
2004 Equity Incentive Plan
WASTE CONNECTIONS, INC.
2004 EQUITY INCENTIVE PLAN
1. PURPOSE.
The purpose of the Plan is to provide a means for the Company and any
Subsidiary, through the grant of Nonqualified Stock Options and/or Restricted
Stock to selected Employees (including officers), Directors and Consultants, to
attract and retain persons of ability as Employees, Directors and Consultants,
and to motivate such persons to exert their best efforts on behalf of the
Company and any Subsidiary.
2. DEFINITIONS.
(a) "BOARD" means the Company's Board of Directors.
(b) "CHANGE IN CONTROL" means:
(i) any reorganization, liquidation or consolidation of the
Company, or any merger or other business combination of the Company with any
other corporation, other than any such merger or other combination that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty percent
(50%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such transaction;
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company; or
(iii) any "person" (as defined in Section 13(d) and 14(d) of
the Exchange Act) shall become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of fifty percent (50%) or more
of the Company's outstanding voting securities (except that for purposes of this
definition, "person" shall not include any person (or any person that controls,
is controlled by or is under common control with such person) who as of the date
of an Option Agreement or a Restricted Stock Agreement owns ten percent (10%) or
more of the total voting power represented by the outstanding voting securities
of the Company, or a trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or a corporation that is owned directly or
indirectly by the stockholders of the Company in substantially the same
percentage as their ownership of the Company).
A transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by the
persons who held the Company's securities immediately before such transaction.
(c) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "COMMITTEE" means a committee appointed by the Board in
accordance with section 4(b) of the Plan.
(e) "COMPANY" means Waste Connections, Inc., a Delaware corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by
the Company or a Subsidiary to render consulting services and who is compensated
for such services; provided that the term "Consultant" shall not include
Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Consultant is not interrupted or terminated,
or, in the case of a Director who is not an Employee, the term means the
Director remains a Director of the Company. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of (i) any leave of absence approved
by the Board, including sick leave, military leave or any other personal leave,
or (ii) transfers between locations of the Company or between the Company and a
Subsidiary or their successors.
(h) "DIRECTOR" means a member of the Company's Board.
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(i) "DISABILITY" means permanent and total disability within the
meaning of section 422(c)(6) of the Code.
(j) "EMPLOYEE" means any person employed by the Company or any
Subsidiary of the Company. Any officer of the Company or a Subsidiary is an
Employee. A Director is not an Employee unless he or she has an employment
relationship with the Company or a Subsidiary in addition to being a Director.
Service as a Consultant shall not be sufficient to constitute "employment" by
the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of Stock
determined as follows:
(i) If the Stock is listed on any established stock exchange
or a national market system, including without limitation the New York Stock
Exchange, its Fair Market Value shall be the closing sales price for the Stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system on the market trading day of the date of determination, or, if the date
of determination is not a market trading day, the last market trading day prior
to the date of determination, in each case as reported in The Wall Street
Journal or such other sources as the Board deems reliable;
(ii) If the Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Stock on the
market trading day of the date of determination, or, if the date of
determination is not a market trading day, the last market trading day prior to
the date of determination; or
(iii) In absence of an established market for the Stock, the
Fair Market Value thereof shall be determined in good faith by the Board."
(m) "NONQUALIFIED STOCK OPTIONS" means Options that are not intended
to qualify as incentive stock options within the meaning of section 422 of the
Code.
(n) "OPTION AGREEMENT" means a written certificate or agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan that apply to Options.
(o) "OPTIONEE" means an Employee, Director or Consultant who holds
an outstanding Option.
(p) "OPTIONS" means Nonqualified Stock Options.
(q) "PLAN" means this Waste Connections, Inc. 2004 Equity Incentive
Plan.
(r) "RESTRICTED STOCK AGREEMENT" means a written certificate or
award agreement between the Company and a Restricted Stock Participant
evidencing a Restricted Stock Award. Each Restricted Stock Agreement shall be
subject to the terms and conditions of the Plans that apply to Restricted Stock.
(s) "RESTRICTED STOCK AWARD" means shares of Restricted Stock
awarded pursuant to the terms and conditions of the Plan.
(t) "RESTRICTED STOCK PARTICIPANT" means an Employee, Director or
Consultant who holds an outstanding Restricted Stock Award.
(u) "RESTRICTED STOCK" means Stock awarded under the Plan in
accordance with the terms and conditions set forth in section 6.
(v) "RESTRICTION PERIOD" means a time period, which may or may not
be based on performance goals and/or the satisfaction of vesting provisions
(which may depend on the continued service of the applicable Restricted Stock
Participant), that applies to, and is established or specified by the Board at
the time of, each Restricted Stock Award.
(w) "RULE 16B-3" means Rule 16b-3 under the Exchange Act or any
successor to Rule 16b-3, as amended from time to time.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(y) "STOCK" means the Common Stock of the Company.
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(z) "SUBSIDIARY" means any corporation that at the time an Option or
Restricted Stock Award is granted under the Plan qualifies as a subsidiary of
the Company under the definition of "subsidiary corporation" contained in
section 424(f) of the Code, or any similar provision hereafter enacted.
3. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 8 for changes in Stock, the
Stock that may be sold pursuant to Options shall not exceed 1,500,000 shares,
minus the number of shares delivered pursuant to Restricted Stock Awards. The
Stock that may be delivered pursuant to Restricted Stock Awards shall not exceed
300,000 shares. The Company shall reserve for Options 1,500,000 Shares, subject
to adjustment as provided in Section 8. If any Option for any reason terminates,
expires or is cancelled without having been exercised in full, the Stock not
purchased under such Option shall revert to and again become available for
issuance under the Plan. Shares of Stock that are issued pursuant to Restricted
Stock Awards may be either authorized and unissued shares (which will not be
subject to preemptive rights) or previously issued shares acquired by the
Company or any Subsidiary. Any shares of Stock subject to a Restricted Stock
Award that are forfeited shall revert to and again become available for issuance
under the Plan.
4. ADMINISTRATION.
(a) BOARD'S POWER AND RESPONSIBILITIES. The Plan shall be
administered by the Board or, at the election of the Board, by a Committee, as
provided in subsection (b), or, as to certain functions, by an officer of the
Company, as provided in subsection (c). Subject to the Plan, the Board shall:
(i) determine and designate from time to time those
Employees, Directors and Consultants to whom Options and/or Restricted Stock
Awards are to be granted;
(ii) authorize the granting of Options and Restricted Stock
Awards;
(iii) determine the number of shares subject to each Option,
the exercise price of each Option, the time or times when and the manner in
which each Option shall be exercisable, and the duration of the exercise period;
(iv) determine the number of shares of Stock to be included
in any Restricted Stock Award, the Restriction Period for such Award, and the
vesting schedule of such Award over the Restriction Period;
(v) construe and interpret the Plan and the Option
Agreements and Restricted Stock Agreements, and establish, amend and revoke
rules and regulations for the Plan's administration, and correct any defect,
omission or inconsistency in the Plan or any Option Agreement or Restricted
Stock Agreement in a manner and to the extent it deems necessary or expedient to
make the Plan fully effective;
(vi) adopt such procedures and subplans and grant Options or
Restricted Stock Awards on such terms and conditions as the Board determines
necessary or appropriate to permit participation in the Plan by individuals
otherwise eligible to so participate who are foreign nationals or employed
outside of the United States, or otherwise to conform to applicable requirements
or practices of jurisdictions outside of the United States;
(vii) prescribe and approve the form and content of
certificates and agreements for use under the Plan;
(viii) establish and administer any terms, conditions,
performance criteria, restrictions, limitations, forfeiture, vesting schedule,
and other provisions of or relating to any Option or Restricted Stock Award;
(ix) grant waivers of terms, conditions, restrictions and
limitations under the Plan or applicable to any Option or Restricted Stock
Award, or accelerate the vesting of any Option or Restricted Stock Award;
(x) amend or adjust the terms and conditions of any
outstanding Option or Restricted Stock Award and/or adjust the number and/or
class of shares of Stock subject to any outstanding Option or Restricted Stock
Award, provided that no such amendment or adjustment shall reduce the exercise
price of any Option to a price lower than the Fair Market Value of the Stock
covered by such Option on the date the Option was granted;
(xi) at any time and from time to time after the granting of
an Option or Restricted Stock Award, specify such additional terms, conditions
and restrictions with respect to any such Option or Restricted Stock Award as
may be deemed necessary or appropriate to ensure compliance with any and all
applicable laws or rules, including,
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but not limited to, terms, restrictions and conditions for compliance with
applicable securities laws and methods of withholding or providing for the
payment of required taxes;
(xii) offer to buy out a Restricted Stock Award previously
granted, based on such terms and conditions as the Board shall establish with
and communicate to the Restricted Stock Participant at the time such offer is
made;
(xiii) to the extent permitted under the applicable Restricted
Stock Agreement, permit the transfer of a Restricted Stock Award by one other
than the Restricted Stock Participant who received the grant of such Restricted
Stock Award; and
(xiv) take any and all other actions it deems necessary for
the purposes of the Plan.
The Board shall have full discretionary authority in all matters related
to the discharge of its responsibilities and the exercise of its authority under
the Plan. Decisions and actions by the Board with respect to the Plan and any
Option or Restricted Stock Agreement shall be final, conclusive and binding on
all persons having or claiming to have any right or interest in or under the
Plan and/or any Option or Restricted Stock Agreement.
(b) AUTHORITY TO DELEGATE TO COMMITTEE. The Board may delegate
administration of the Plan to a Committee of the Board. The Committee shall
consist of not less than two members appointed by the Board. Subject to the
foregoing, the Board may from time to time increase the size of the Committee
and appoint additional members, remove members (with or without cause) and
appoint new members in substitution therefor, or fill vacancies, however caused.
If the Board delegates administration of the Plan to a Committee, the Committee
shall have the same powers theretofore possessed by the Board with respect to
the administration of the Plan (and references in this Plan to the Board shall
apply to the Committee), subject, however, to such resolutions, not inconsistent
with the provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the Committee at any time and revest in the Board
the administration of the Plan.
(c) AUTHORITY TO DELEGATE TO OFFICERS. The Board may delegate
administration of sections 4(a)(i) through 4(a)(iv) above to the Chief Executive
Officer of the Company; provided, however, that such officer may not grant
Options and Restricted Stock Awards for more than 1,000,000 shares of Stock in
the aggregate.
(d) TEN YEAR GRANT PERIOD. Notwithstanding the foregoing, no Option
or Restricted Stock Award shall be granted after the expiration of ten years
from the effective date of the Plan specified in section 14 below.
(e) MODIFICATION OF TERMS AND CONDITIONS THROUGH EMPLOYMENT OR
CONSULTING AGREEMENTS. Notwithstanding the provisions of any Option Agreement or
Restricted Stock Agreement, any modifications to the terms and conditions of any
Option or Restricted Stock Award permitted by section 4(a) with respect to any
Employee or Consultant may be effected by including the modification in an
employment or consulting agreement between the Company or a Subsidiary and the
Optionee or Restricted Stock Participant.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted shall be evidenced by an Option Agreement in
substantially the form attached hereto as Annex A or such other form as may be
approved by the Board. Each Option Agreement shall include the following terms
and conditions and such other terms and conditions as the Board may deem
appropriate:
(a) OPTION TERM. Each Option Agreement shall specify the term for
which the Option thereunder is granted and shall provide that such Option shall
expire at the end of such term. The Board may extend such term; provided that
the term of any Option, including any such extensions, shall not exceed five
years from the date of grant.
(b) EXERCISE PRICE. Each Option Agreement shall specify the exercise
price per share, as determined by the Board at the time the Option is granted,
which exercise price shall in no event be less than the Fair Market Value when
the Option is granted.
(c) VESTING. Each Option Agreement shall specify when it is
exercisable. The total number of shares of Stock subject to an Option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). An Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period or
any prior period as to which the Option shall have become vested but shall not
have been fully exercised. An Option may be subject to such other terms
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and conditions on the time or times when it may be exercised (which may be based
on performance or other criteria) as the Board deems appropriate.
(d) PAYMENT OF PURCHASE PRICE ON EXERCISE. Each Option Agreement
shall provide that the purchase price of the shares as to which such Option may
be exercised shall be paid to the Company at the time of exercise either (i) in
cash, or (ii) in the absolute discretion of the Board (which discretion may be
exercised in a particular case without regard to any other case or cases), at
the time of the grant or thereafter, (A) by the withholding of shares of Stock
issuable on exercise of the Option or the delivery to the Company of other Stock
owned by the Optionee, provided in either case that the Optionee has owned
shares of Stock equal in number to the shares so withheld for a period
sufficient to avoid a charge to the Company's reported earnings, (B) subject to
compliance with applicable law, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of Stock) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to section 5(e), (C) by delivery of a
properly executed notice together with irrevocable instructions to a broker
providing for the assignment to the Company of the proceeds of a sale or loan
with respect to some or all of the Stock being acquired upon the exercise of the
Option, including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System (a "cashless exercise"), or (D) in any
other form or combination of forms of legal consideration that may be acceptable
to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred payment
arrangement, or if less, the maximum rate permitted by law.
(e) TRANSFERABILITY. An Option shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of by the Optionee
during his or her lifetime, whether by operation of law or otherwise, other than
by will or the laws of descent and distribution applicable to the Optionee, and
shall not be made subject to execution, attachment or similar process; provided
that the Board may in its discretion at the time of approval of the grant of an
Option or thereafter permit an Optionee to transfer an Option to a trust or
other entity established by the Optionee for estate planning purposes, and may
permit further transferability or impose conditions or limitations on any
permitted transferability. Otherwise, during the lifetime of an Optionee, an
Option shall be exercisable only by such Optionee. In the event any Option is to
be exercised by the executors, administrators, heirs or distributees of the
estate of a deceased Optionee, or such an Optionee's beneficiary, in any such
case pursuant to the terms and conditions of the Plan and the applicable Option
Agreement and in accordance with such terms and conditions as may be specified
from time to time by the Board, the Company shall be under no obligation to
issue Stock thereunder unless and until the Board is satisfied that the person
or persons to receive such Stock is the duly appointed legal representative of
the deceased Optionee's estate or the proper legatee or distributee thereof or
the named beneficiary of such Optionee.
(f) EXERCISE OF OPTION AFTER DEATH OF OPTIONEE. If an Optionee dies
(i) while an Employee, Director or Consultant, or (ii) within three months after
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant because of his or her Disability or retirement, his or her Options
may be exercised (to the extent that the Optionee was entitled to do so on the
date of death or termination) by the Optionee's estate or by a person who shall
have acquired the right to exercise the Options by bequest or inheritance, but
only within the period ending on the earlier of (A) one year after the
Optionee's death (or such shorter or longer period specified in the Option
Agreement, which period shall not be less than six months), or (B) the
expiration date specified in the Option Agreement. If, after the Optionee's
death, the Optionee's estate or the person who acquired the right to exercise
the Optionee's Options does not exercise the Options within the time specified
herein, the Options shall terminate and the shares covered by such Options shall
revert to and again become available for issuance under the Plan.
(g) EXERCISE OF OPTION AFTER TERMINATION OF OPTIONEE'S CONTINUOUS
STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT AS A RESULT OF DISABILITY OR
RETIREMENT. If an Optionee's Continuous Status as an Employee, Director or
Consultant terminates as a result of the Optionee's Disability or retirement,
and the Optionee does not die within the following three months, the Optionee
may exercise his or her Options (to the extent that the Optionee was entitled to
exercise them on the date of termination), but only within the period ending on
the earlier of (i) six months after
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Disability or retirement (or such longer period specified in the Option
Agreement), and (ii) the expiration of the term set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Options within the time specified herein, the Options shall terminate, and the
shares covered by such Options shall revert to and again become available for
issuance under the Plan.
(h) NO EXERCISE OF OPTION AFTER TERMINATION OF OPTIONEE'S CONTINUOUS
STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT OTHER THAN AS A RESULT OF DEATH,
DISABILITY OR RETIREMENT. If an Optionee's Continuous Status as an Employee,
Director or Consultant terminates other than as a result of the Optionee's
death, Disability or retirement, all right of the Optionee to exercise his or
her Options shall terminate on the date of termination of such Continuous Status
as an Employee, Director or Consultant. The Options shall terminate on such
termination date, and the shares covered by such Options shall revert to and
again become available for issuance under the Plan.
(i) EXCEPTIONS. Notwithstanding subsections (f), (g) and (h), the
Board shall have the authority to extend the expiration date of any outstanding
Option in circumstances in which it deems such action to be appropriate,
provided that no such extension shall extend the term of an Option beyond the
expiration date of the term of such Option as set forth in the Option Agreement.
(j) COMPANY'S REPURCHASE RIGHT OR OPTION SHARES. Each Option
Agreement may, but is not required to, include provisions whereby the Company
shall have the right to repurchase any and all shares acquired by an Optionee on
exercise of any Option granted under the Plan, at such price and on such other
terms and conditions as the Board may approve and as may be set forth in the
Option Agreement. Such right shall be exercisable by the Company after
termination of an Optionee's Continuous Status as an Employee, Director or
Consultant, whenever such termination may occur and whether such termination is
voluntary or involuntary, with cause or without cause, without regard to the
reason therefor, if any.
6. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.
(a) RESTRICTED STOCK AWARD AGREEMENT. Each Restricted Stock Award
shall be evidenced by a Restricted Stock Agreement in substantially the form
attached hereto as Annex B or such other form as may be approved by the Board.
Each Restricted Stock Agreement shall be executed by the Company and the
Restricted Stock Participant to whom such Restricted Stock Award has been
granted, unless the Restricted Stock Agreement provides otherwise; two or more
Restricted Stock Awards granted to a single Restricted Stock Participant may,
however, be combined in a single Restricted Stock Agreement. A Restricted Stock
Agreement shall not be a precondition to the granting of a Restricted Stock
Award; no person shall have any rights under any Restricted Stock Award,
however, unless and until the Restricted Stock Participant to whom the
Restricted Stock Award shall have been granted (i) shall have executed and
delivered to the Company a Restricted Stock Agreement or other instrument
evidencing the Restricted Stock Award, unless such Restricted Stock Agreement
provides otherwise, and (ii) has otherwise complied with the applicable terms
and conditions of the Restricted Stock Award.
(b) RESTRICTED STOCK AWARDS SUBJECT TO PLAN. All Restricted Stock
Awards under the Plan shall be subject to all the applicable provisions of the
Plan, including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith, as the Board shall determine and which
are set forth in the applicable Restricted Stock Agreement. Subject to the terms
and restrictions of this section 6 or the applicable Restricted Stock Agreement
or determined by the Board, on delivery of Restricted Stock to a Restricted
Stock Participant, or creation of a book entry evidencing a Restricted Stock
Participant's ownership of shares of Restricted Stock, pursuant to section 6(f),
the Restricted Stock Participant shall have all of the rights of a stockholder
with respect to such shares.
(c) DISCRETIONARY AWARD. The Board may, in its discretion, authorize
a Restricted Stock Award to a Participant. The Board may make any such
Restricted Stock Award without the requirement of any cash payment from the
Restricted Stock Participant to whom such Restricted Stock Award is made, or may
require a cash payment from such a Restricted Stock Participant in an amount no
greater than the aggregate Fair Market Value of the Restricted Stock as of the
date of grant in exchange for, or as a condition precedent to, the completion of
such Restricted Stock Award and the issuance of such shares of Restricted Stock.
(d) TRANSFERABILITY. During the Restriction Period stated in the
Restricted Stock Agreement, the Restricted Stock Participant who receives a
Restricted Stock Award shall not be permitted to sell, transfer, pledge, assign,
encumber or otherwise dispose of such Restricted Stock whether by operation of
law or otherwise and shall not
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be made subject to execution, attachment or similar process. Any attempt by such
Restricted Stock Participant to do so shall constitute the immediate and
automatic forfeiture of such Restricted Stock Award. Notwithstanding the
foregoing, the Restricted Stock Agreement may permit the payment or distribution
of a Restricted Stock Participant's Award (or any portion thereof) after his or
her death to the beneficiary most recently named by such Restricted Stock
Participant in a written designation thereof filed with the Company, or, in lieu
of any such surviving beneficiary, as designated by the Restricted Stock
Participant by will or by the laws of descent and distribution. In the event any
Restricted Stock Award is to be paid or distributed to the executors,
administrators, heirs or distributees of the estate of a deceased Restricted
Stock Participant, or such a Restricted Stock Participant's beneficiary, in any
such case pursuant to the terms and conditions of the Plan and the applicable
Restricted Stock Agreement and in accordance with such terms and conditions as
may be specified from time to time by the Board, the Company shall be under no
obligation to issue Stock thereunder unless and until the Board is satisfied
that the person or persons to receive such Stock is the duly appointed legal
representative of the deceased Restricted Stock Participant's estate or the
proper legatee or distributee thereof or the named beneficiary of such
Restricted Stock Participant.
(e) FORFEITURE OF RESTRICTED STOCK. If, during the Restriction
Period, the Restricted Stock Participant's Continuous Status as an Employee,
Director or Consultant terminates for any reason, all of such Restricted Stock
Participant's shares of Restricted Stock as to which the Restriction Period has
not yet expired shall be forfeited and revert to the Plan, unless the Board has
provided otherwise in the Restricted Stock Agreement or in an employment or
consulting agreement with the Restricted Stock Participant, or the Board, in its
discretion, otherwise determines to waive such forfeiture.
(f) RECEIPT OF STOCK CERTIFICATES. Each Restricted Stock Participant
who receives a Restricted Stock Award shall be issued one or more stock
certificates in respect of such shares of Restricted Stock. Any such stock
certificates for shares of Restricted Stock shall be registered in the name of
the Restricted Stock Participant but shall be appropriately legended and
returned to the Company or its agent by the recipient, together with a stock
power or other appropriate instrument of transfer, endorsed in blank by the
recipient. Notwithstanding anything in the foregoing to the contrary, in lieu of
the issuance of certificates for any shares of Restricted Stock during the
applicable Restriction Period, a "book entry" (i.e., a computerized or manual
entry) may be made in the records of the Company, or its designated agent, as
the Board, in its discretion, may deem appropriate, to evidence the ownership of
such shares of Restricted Stock in the name of the applicable Restricted Stock
Participant. Such records of the Company or such agent shall, absent manifest
error, be binding on all Restricted Stock Participants hereunder. The holding of
shares of Restricted Stock by the Company or its agent, or the use of book
entries to evidence the ownership of shares of Restricted Stock, in accordance
with this section 6(f), shall not affect the rights of Restricted Stock
Participants as owners of their shares of Restricted Stock, nor affect the
Restriction Period applicable to such shares under the Plan or the Restricted
Stock Agreement.
(g) DIVIDENDS. A Restricted Stock Participant who holds outstanding
shares of Restricted Stock shall not be entitled to any dividends paid thereon,
other than dividends in the form of the Company's stock.
(h) EXPIRATION OF RESTRICTION PERIOD. A Restricted Stock
Participant's shares of Restricted Stock shall become free of the foregoing
restrictions on the earlier of a Change in Control or the expiration of the
applicable Restriction Period and the Company shall, subject to sections 7(a)
and 7(b), then deliver stock certificates evidencing such Stock to such
Restricted Stock Participant.
(i) SUBSTITUTION OF RESTRICTED STOCK AWARDS. The Board may accept
the surrender of outstanding shares of Restricted Stock (to the extent that the
Restriction Period or other restrictions applicable to such shares have not yet
lapsed) and grant new Restricted Stock Awards in substitution for such
Restricted Stock.
7. CONDITIONS ON EXERCISE OF OPTIONS AND ISSUANCE OF SHARES.
(a) SECURITIES LAW COMPLIANCE. The Plan, the grant of Options and
Restricted Stock Awards thereunder, the exercise of Options thereunder and the
obligation of the Company to sell and deliver shares of Stock on the exercise of
Options and, in the case of Restricted Stock Awards, on expiration of the
applicable Restriction Period, shall be subject to all applicable Federal and
state laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required, in the opinion of the Board. Options may
not be exercised, Restricted Stock Awards may not be granted, and shares of
Stock may not be issued if any such action would constitute a
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violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. No Option may be exercised unless (i) a
registration statement under the Securities Act shall at the time of exercise of
the Option be in effect with respect to the shares issuable upon exercise of the
Option or (ii) in the opinion of legal counsel to the Company, the shares
issuable upon exercise of the Option may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. No Stock may be issued in connection with a Restricted Stock Award unless
(i) a registration statement under the Securities Act shall at the time of
issuance of the Stock be in effect with respect to the shares of Stock to be
issued or (ii) in the opinion of legal counsel to the Company, the shares of
Stock to be issued on expiration of the applicable Restriction Period may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of any
Option and the issuance of any Stock in connection with a Restricted Stock
Award, the Company may require the Optionee or the Restricted Stock Participant
to satisfy any qualifications that may be necessary or appropriate to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(b) INVESTMENT REPRESENTATIONS. The Company may require any Optionee
or Restricted Stock Participant, or any person to whom an Option or Restricted
Stock Award is transferred, as a condition of exercising such Option or
receiving shares of Stock pursuant to such Restricted Stock Award, to (A) give
written assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option or receiving such Stock, and (B) to give written
assurances satisfactory to the Company stating that such person is acquiring the
Stock for such person's own account and not with any present intention of
selling or otherwise distributing the Stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall not apply if (1) the
issuance of the Stock has been registered under a then currently effective
registration statement under the Securities Act, or (2) counsel for the Company
determines as to any particular requirement that such requirement need not be
met in the circumstances under the then applicable securities laws. The Company
may, with the advice of its counsel, place such legends on stock certificates
issued under the Plan as the Company deems necessary or appropriate to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Stock.
8. ADJUSTMENTS ON CERTAIN EVENTS.
(a) NO EFFECT ON POWERS OF BOARD OR SHAREHOLDERS. The existence of
the Plan and any Options or Restricted Stock Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's or its subsidiaries' capital structure or its
business, any merger or consolidation of the Company or a subsidiary of the
Company, any issue of debt, preferred or prior preference stock ahead of or
affecting Stock, the authorization or issuance of additional shares of Stock,
the dissolution or liquidation of the Company or its subsidiaries, any sale or
transfer of all or part of its assets or business or any other corporate act or
proceeding.
(b) CHANGES IN CONTROL.
(i) OPTIONS. Each Option Agreement shall provide that in the
event that the Company is subject to a Change in Control:
(A) immediately prior thereto all outstanding
Options shall be automatically accelerated and become immediately exercisable as
to all of the shares of Stock covered thereby, notwithstanding anything to the
contrary in the Plan or the Option Agreement; and
(B) the Board may, in its discretion, and on such
terms and conditions as it deems appropriate, by resolution adopted by the Board
or by the terms of any agreement of sale, merger or consolidation giving rise to
the Change in Control, provide that, without Optionee's consent, the shares
subject to an Option may (1) continue as an immediately exercisable Option of
the Company (if the Company is the surviving corporation), (2) be assumed
D-8
as immediately exercisable Options by the surviving corporation or its parent,
(3) be substituted by immediately exercisable options granted by the surviving
corporation or its parent with substantially the same terms for the Option, or
(4) be cancelled after payment to the Optionee of an amount in cash or other
consideration delivered to stockholders of the Company in the transaction
resulting in a Change in Control of the Company equal to the total number of
shares subject to the Option multiplied by the remainder of (i) the amount per
share to be received by holders of the Company's Stock in the sale, merger or
consolidation, minus (ii) the exercise price per share of the shares subject to
the Option.
(ii) RESTRICTED STOCK AWARDS. Each Restricted Stock Agreement
shall provide that, immediately prior to a Change in Control, all restrictions
imposed by the Board on any outstanding Restricted Stock Award shall be
immediately automatically canceled, the Restriction Period applicable to all
outstanding Restricted Stock Awards shall immediately terminate, and such
Restricted Stock Awards shall be fully vested, and any applicable performance
goals shall be deemed achieved at not less than the target level,
notwithstanding anything to the contrary in the Plan or the Restricted Stock
Agreement.
(c) ADJUSTMENT OF SHARES. The aggregate number, class and kind of
shares of stock available under the Plan as to which Restricted Stock Awards may
be granted, the limitation set forth in section 4(c) on the number of shares of
Stock that may be issued by a single officer under the Plan, the number, class
and kind of shares under each outstanding Restricted Stock Award, the exercise
price of each Option and the number of shares purchasable on exercise of such
Option shall be appropriately adjusted by the Board in its discretion to
preserve the benefits or potential benefits intended to be made available under
the Plan or with respect to any outstanding Options or Restricted Stock Awards
or otherwise necessary to reflect any such change, if the Company shall (i) pay
a dividend in, or make a distribution of, shares of Stock (or securities
convertible into, exchangeable for or otherwise entitling a holder thereof to
receive Stock), or evidences of indebtedness or other property or assets, on
outstanding Stock, (ii) subdivide the outstanding shares of Stock into a greater
number of shares, (iii) combine the outstanding shares of Stock into a smaller
number of shares or (iv) issue any shares of its capital stock in a
reclassification of the Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the resulting
corporation). An adjustment made pursuant to this section 8(c) shall, in the
case of a dividend or distribution, be made as of the record date therefor and,
in the case of a subdivision, combination or reclassification, be made as of the
effective date thereof. In case of any adjustment pursuant to this paragraph
with respect to an Option, the total number of shares and the number of shares
or other units of such other securities purchasable on exercise of the Option
immediately prior thereto shall be adjusted so that the Optionee shall be
entitled to receive at the same aggregate purchase price the number of shares of
Stock and the number of shares or other units of such other securities that the
Optionee would have owned or would have been entitled to receive immediately
following the occurrence of any of the events described above had the Option
been exercised in full immediately prior to the occurrence (or applicable record
date) of such event. If, as a result of any adjustment pursuant to this section
8(c), the Optionee shall become entitled to receive shares of two or more
classes or series of securities of the Company, the Board shall equitably
determine the allocation of the adjusted exercise price between or among shares
or other units of such classes or series and shall notify the Optionee of such
allocation. Any new or additional shares or securities received by a Restricted
Stock Participant shall be subject to the same terms and conditions, including
the Restriction Period, as related to the original Restricted Stock Award.
(d) RECEIPT OF ASSETS OTHER THAN STOCK. If at any time, as a result
of an adjustment made pursuant to this section 8, an Optionee or Restricted
Stock Participant shall become entitled to receive any shares of capital stock
or shares or other units of other securities or property or assets other than
Stock, the number of such other shares or units so receivable on any exercise of
the Option or expiration of the Restriction Period shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Stock in this
section 8, and the provisions of this Plan with respect to the shares of Stock
shall apply, with necessary changes in points of detail, on like terms to any
such other shares or units.
(e) FRACTIONAL SHARES. All calculations under this section 8 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be, but in no event shall the Company be obligated to issue any
fractional share.
(f) INABILITY TO PREVENT ACTS DESCRIBED IN SECTION 8; UNIFORMITY OF
ACTIONS NOT REQUIRED. No Optionee or Restricted Stock Participant shall have or
be deemed to have any right to prevent the consummation of the acts described
D-9
in this section 8 affecting the number of shares of Stock subject to any Option
or Restricted Stock Award held by the Optionee or Restricted Stock Participant.
Any actions or determinations by the Board under this section 8 need not be
uniform as to all outstanding Options or Restricted Stock Awards, and need not
treat all Optionees or all Restricted Stock Participants identically.
9. TAX WITHHOLDING OBLIGATIONS.
(a) GENERAL AUTHORIZATION. The Company is authorized to take
whatever actions are necessary and proper to satisfy all obligations of
Optionees and Restricted Stock Participants (including, for purposes of this
section 9, any other person entitled to exercise an Option or Restricted Stock
Award pursuant to the Plan, an Option Agreement or a Restricted Stock Agreement)
for the payment of all Federal, state, local and foreign taxes in connection
with any Option or Restricted Stock Award (including, but not limited to,
actions pursuant to the following section 9(b)).
(b) WITHHOLDING REQUIREMENT AND PROCEDURE.
(i) OPTIONS. Whenever the Company proposes or is required to
issue or transfer shares of Stock with respect to an Option, the Company shall
have the right to require the grantee to remit to the Company an amount
sufficient to satisfy any Federal, state or local withholding tax requirements
prior to the delivery of any certificate or certificates for such shares.
Alternatively, the Company may issue or transfer such shares net of the number
of shares sufficient to satisfy the withholding tax requirements. For
withholding tax purposes, the shares of Stock shall be valued on the date the
withholding obligation is incurred.
(ii) RESTRICTED STOCK. Each Restricted Stock Participant
shall, no later than the date as of which the value of the Restricted Stock
Award first becomes includible in the gross income of the Restricted Stock
Participant for income tax purposes, pay to the Company in cash, or make
arrangements satisfactory to the Company regarding payment to the Company of,
any taxes of any kind required by law to be withheld with respect to the Stock
or other property subject to such Restricted Stock Award. No Stock shall be
delivered to a Restricted Stock Participant with respect to a Restricted Stock
Award until such payment or arrangement has been made. The Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to such Restricted Stock Participant.
Notwithstanding the above, the Board may, in its discretion and pursuant to
procedures approved by the Board, permit the Restricted Stock Participant to
elect withholding by the Company of Stock or other property otherwise
deliverable to such Restricted Stock Participant pursuant to his or her
Restricted Stock Award, provided, however, that the amount of any Stock so
withheld shall not exceed the amount necessary to satisfy the Company's required
tax withholding obligations using the minimum statutory withholding rates for
Federal, state and/or local tax purposes, including payroll taxes, that are
applicable to supplemental taxable income in full or partial satisfaction of
such tax obligations, based on the Fair Market Value of the Stock on the payment
date.
(c) SECTION 83(B) ELECTION. If a Restricted Stock Participant makes
an election under Code Section 83(b), or any successor section thereto, to be
taxed with respect to a Restricted Stock Award as of the date of transfer of the
Restricted Stock rather than as of the date or dates on which the Restricted
Stock Participant would otherwise be taxable under Code Section 83(a), such
Restricted Stock Participant shall deliver a copy of such election to the
Company immediately after filing such election with the Internal Revenue
Service. Neither the Company nor any of its affiliates shall have any liability
or responsibility relating to or arising out of the filing or not filing of any
such election or any defects in its construction.
10. AMENDMENT, TERMINATION OR SUSPENSION OF THE PLAN.
(a) AMENDMENT, TERMINATION OR SUSPENSION OF PLAN. The Board may, at
any time and with or without prior notice, amend, alter, suspend, or terminate
the Plan, retroactively or otherwise, for any reason; provided, however, that
unless otherwise required by law or specifically provided herein, no such
amendment, alteration, suspension, or termination shall be made that would
materially impair the previously accrued rights of any Optionee or Restricted
Stock Participant with respect to his or her Option or Restricted Stock Award
without his or her written consent.
(b) AMENDMENT OF OPTIONS AND RESTRICTED STOCK AWARDS. The Board may
amend the terms of any Option or Restricted Stock Award previously granted,
including any Option Agreement or Restricted Stock Agreement, retroactively or
prospectively, but no such amendment shall materially impair the previously
accrued rights of any
D-10
Optionee or Restricted Stock Participant with respect to any such Option or
Restricted Stock Award without his or her written consent.
(c) AUTOMATIC TERMINATION OF PLAN. Unless sooner terminated, the
Plan shall terminate on the date that Options and Restricted Stock Awards
representing in the aggregate the total number of shares of Stock subject to the
Plan have been issued pursuant to the Plan's provisions, and no shares covered
by a Restricted Stock Award are any longer subject to any Restriction Period.
11. RIGHTS OF EMPLOYEES, DIRECTORS, CONSULTANTS AND OTHER PERSONS.
This Plan and the Options and Restricted Stock Awards shall not confer
on any Optionee, Restricted Stock Participant or other person:
(a) Any rights or claims under the Plan except in accordance with
the provisions of the Plan and the applicable agreement;
(b) Any right with respect to continuation of employment by the
Company or any Subsidiary or engagement as a Consultant or Director, nor shall
they interfere in any way with the right of the Company or any Subsidiary that
employs or engages an Optionee or a Restricted Stock Participant to terminate
that person's employment or engagement at any time with or without cause.
(c) Any right to be selected to participate in the Plan or to be
granted an Option or Restricted Stock Award; or
(d) Any right to receive any bonus, whether payable in cash or in
Stock, or in any combination thereof, from the Company or its subsidiaries, nor
be construed as limiting in any way the right of the Company or its subsidiaries
to determine, in its sole discretion, whether or not it shall pay any employee
or consultant bonus, and, if so paid, the amount thereof and the manner of such
payment.
12. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT.
So long as a class of the Company's equity securities is registered
under section 12 of the Exchange Act, the Company intends that the Plan shall
comply in all respects with Rule 16b-3. If during such time any provision of
this Plan is found not to be in compliance with Rule 16b-3, that provision shall
be deemed to have been amended or deleted as and to the extent necessary to
comply with Rule 16b-3, and the remaining provisions of the Plan shall continue
in full force and effect without change. All transactions under the Plan during
such time shall be executed in accordance with the requirements of section 16 of
the Exchange Act and the applicable regulations promulgated thereunder.
13. LIMITATION OF LIABILITY AND indemnification.
(a) CONTRACTUAL LIABILITY LIMITATION. Any liability of the Company
or its subsidiaries to any Optionee or Restricted Stock Participant with respect
to any Option or Restricted Stock Award shall be based solely on contractual
obligations created by the Plan and the Option Agreements and Restricted Stock
Agreements.
(b) INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as Directors or officers, Directors and
officers to whom authority to act for the Board or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
D-11
14. MISCELLANEOUS
(a) EFFECTIVE DATE. The effective date of the Plan shall be the date
the Plan is approved by the stockholders of the Company or such later date as
shall be determined by the Board.
(b) ACCEPTANCE OF TERMS AND CONDITIONS OF PLAN. By accepting any
benefit under the Plan, each Optionee and Restricted Stock Participant and each
person claiming under or through such Optionee or Restricted Stock Participant
shall be conclusively deemed to have indicated their acceptance and ratification
of, and consent to, all of the terms and conditions of the Plan and any action
taken under the Plan by the Company, the Board or the Committee, in any case in
accordance with the terms and conditions of the Plan.
(c) NO EFFECT ON OTHER ARRANGEMENTS. Neither the adoption of the
Plan nor anything contained herein shall affect any other compensation or
incentive plans or arrangements of the Company or its subsidiaries, or prevent
or limit the right of the Company or any subsidiary to establish any other forms
of incentives or compensation for their Employees, Directors or Consultants or
grant or assume restricted stock or other rights otherwise than under the Plan.
(d) CHOICE OF LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of California, without regard to such
state's conflict of law provisions, and, in any event, except as superseded by
applicable Federal law.
D-12
Annex A
NONQUALIFIED STOCK OPTION AGREEMENT
____________, Optionee:
Waste Connections, Inc. (the "Company"), pursuant to its 2004 Equity
Incentive Plan (the "Plan"), has this __________, 20__, granted to you, the
optionee named above, an option to purchase shares of the common stock of the
Company ("Stock"). This option is not intended to qualify and will not be
treated as an "incentive stock option" within the meaning of section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
The grant under this Nonqualified Stock Option Agreement (the
"Agreement") is in connection with and in furtherance of the Company's
compensatory benefit plan for participation of the Company's Employees,
Directors and Consultants. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Plan. The option granted
hereunder shall be subject to and governed by the following terms and
conditions:
1. VESTING SCHEDULE. The total number of shares of Stock subject to
this option is _______________ shares. Subject to the limitations herein and in
the Plan, this option shall become exercisable (vest) as follows:
Number of Shares Date of Earliest Exercise
(Installment) (Vesting)
The installments provided for are cumulative. Each such installment that becomes
exercisable shall remain exercisable until expiration or earlier termination of
the option.
2. EXERCISE PRICE.
(a) The exercise price of this option is $______________ per
share.
(b) Payment of the exercise price per share is due in full
in cash (including check) on exercise of all or any part of each installment
that has become exercisable by you; provided that, if at the time of exercise
the Stock is publicly traded and quoted regularly in the WALL STREET JOURNAL,
payment of the exercise price, to the extent permitted by the Company and
applicable statutes and regulations, may be made by having the Company withhold
shares of Stock issuable on such exercise, by delivering shares of Stock already
owned by you, by cashless exercise described in Section 5(d) of the Plan and
complying with its provisions, or by delivering a combination of such forms of
payment. Such Stock (i) shall be valued at its Fair Market Value at the close of
business on the date of exercise, (ii) if originally acquired from the Company,
must have been held for the period required to avoid a charge to the Company's
reported earnings, and (iii) must be owned free and clear of any liens, claims,
encumbrances or security interests.
3. PARTIAL OR EARLY EXERCISE.
(a) Subject to the provisions of this Agreement, you may
elect at any time during your Continuous Status as an Employee, Director or
Consultant to exercise this option as to any part or all of the shares subject
to this option at any time during the term hereof, including, without
limitation, a time prior to the date of earliest exercise (vesting) stated in
paragraph 1 hereof; provided that:
(i) a partial exercise of this option shall be
deemed to cover first vested shares and then unvested shares next vesting;
(ii) any shares so purchased that shall not have
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
available from the Company; and
(iii) you shall enter into an Early Exercise Stock
Purchase Agreement in the form available from the Company with a vesting
schedule that will result in the same vesting as if no early exercise had
occurred.
(b) The election provided in this paragraph 3 to purchase
shares on the exercise of this option prior to the vesting dates shall cease on
termination of your Continuous Status as an Employee, Director or Consultant and
may not be exercised from or after the date thereof.
Annex A: Page 1
4. FRACTIONAL SHARES. This option may not be exercised for any
number of shares that would require the issuance of anything other than whole
shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary herein, this option may not be exercised if the issuance of shares of
Stock upon exercise would constitute a violation of any applicable federal,
state or foreign securities laws or other law or regulations or the requirements
of any stock exchange or market system upon which the Stock may then be listed.
In addition, this option may not be exercised unless (a) a registration
statement under the Securities Act shall at the time of exercise of the option
be in effect with respect to the shares issuable upon exercise of the option or
(b) in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the exercise of any option, the Company may require the Optionee to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
6. TERM. The term of this option commences on the date hereof and,
unless sooner terminated as set forth below or in the Plan, terminates on
________________ (which date shall be no more than five years from the date this
option is granted). In no event may this option be exercised on or after the
date on which it terminates. This option shall terminate prior to the expiration
of its term on the date of termination of your Continuous Status as an Employee,
Director or Consultant for any reason or for no reason, unless:
(a) such termination is due to your retirement or Disability
and you do not die within the three months after such termination, in which
event the option shall terminate on the earlier of the termination date set
forth above or six months after such termination of your Continuous Status as an
Employee, Director or Consultant; or
(b) such termination is due to your death, or such
termination is due to your retirement or Disability and you die within three
months after such termination, in which event the option shall terminate on the
earlier of the termination date set forth above or the first anniversary of your
death.
Notwithstanding any of the foregoing provisions to the contrary however,
this option may be exercised following termination of your Continuous Status as
an Employee, Director or Consultant only as to that number of shares as to which
it shall have been exercisable under paragraph 1 of this Agreement on the date
of such termination.
7. CONDITIONS ON EXERCISE.
(a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to section 7 of the Plan.
(b) By exercising this option you agree that the Company (or
a representative of the underwriters) may, in connection with an underwritten
registration of the offering of any securities of the Company under the Exchange
Act, require that you not sell or otherwise transfer or dispose of any shares of
Stock or other securities of the Company during such period (not to exceed 180
days) following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Exchange Act as may be requested by the
Company or the representative of the underwriters. For purposes of this
restriction, you will be deemed to own securities which (A) are owned directly
or indirectly by you, including securities held for your benefit by nominees,
custodians, brokers or pledgees, (B) may be acquired by you within sixty days of
the Effective Date, (C) are owned directly or indirectly, by or for your
brothers or sisters (whether by whole or half blood), spouse, ancestors and
lineal descendants, or (D) are owned, directly or indirectly, by or for a
corporation, partnership, estate or trust of which you are a shareholder,
partner or beneficiary, but only to the extent of your proportionate interest
therein as a shareholder, partner or beneficiary thereof. You further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.
Annex A: Page 2
8. ADJUSTMENTS ON CERTAIN EVENTS.
(a) In the event that the Company is subject to a Change in
Control:
(i) immediately prior thereto this option shall be
automatically accelerated and become immediately exercisable as to all of the
shares of Stock covered hereby, notwithstanding anything to the contrary in the
Plan or this Agreement; and
(ii) the Board may, in its discretion, and on such
terms and conditions as it deems appropriate, by resolution adopted by the Board
or by the terms of any agreement of sale, merger or consolidation giving rise to
the Change in Control, provide that, without Optionee's consent, the shares
subject to this option may (A) continue as an immediately exercisable option of
the Company (if the Company is the surviving corporation), (B) be assumed as
immediately exercisable options by the surviving corporation or its parent, (C)
be substituted by immediately exercisable options granted by the surviving
corporation or its parent with substantially the same terms for this option, or
(D) be cancelled after payment to Optionee of an amount in cash or other
consideration delivered to stockholders of the Company in the transaction
resulting in a Change in Control of the Company equal to the total number of
shares subject to this option multiplied by the remainder of (1) the amount per
share to be received by holders of the Company's Stock in the sale, merger or
consolidation, minus (2) the exercise price per share of the shares subject to
this option.
(b) The exercise price shall be subject to adjustment from
time to time in the event that the Company shall (i) pay a dividend in, or make
a distribution of, shares of Stock (or securities convertible into, exchangeable
for or otherwise entitling a holder thereof to receive Stock), or evidences of
indebtedness or other property or assets, on outstanding Stock, (ii) subdivide
the outstanding shares of Stock into a greater number of shares, (iii) combine
the outstanding shares of Stock into a smaller number of shares or (iv) issue
any shares of its capital stock in a reclassification of the Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the resulting corporation). An adjustment made pursuant to this
section 8(b) shall, in the case of a dividend or distribution, be made as of the
record date therefor and, in the case of a subdivision, combination or
reclassification, be made as of the effective date thereof. In any such case,
the total number of shares and the number of shares or other units of such other
securities purchasable on exercise of the option immediately prior thereto shall
be adjusted so that the Optionee shall be entitled to receive at the same
aggregate purchase price the number of shares of Stock and the number of shares
or other units of such other securities that the Optionee would have owned or
would have been entitled to receive immediately following the occurrence of any
of the events described above had the option been exercised in full immediately
prior to the occurrence (or applicable record date) of such event. If, as a
result of any adjustment pursuant to this section 8(b), the Optionee shall
become entitled to receive shares of two or more classes or series of securities
of the Company, the Board shall equitably determine the allocation of the
adjusted exercise price between or among shares or other units of such classes
or series and shall notify the Optionee of such allocation.
(c) If at any time, as a result of an adjustment made
pursuant to this section 8, the Optionee shall become entitled to receive any
shares of capital stock or shares or other units of other securities or property
or assets other than Stock, the number of such other shares or units so
receivable on any exercise of the option shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares of Stock in this section 8, and the
provisions of this Agreement with respect to the shares of Stock shall apply,
with necessary changes in points of detail, on like terms to any such other
shares or units.
(d) All calculations under this section 8 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be,
but in no event shall the Company be obligated to issue any fractional share on
any exercise of the option.
9. NON-TRANSFERABILITY. This option is generally not transferable,
except by will or by the laws of descent and distribution, unless the Company
expressly permits a transfer, such as to a trust or other entity for estate
planning purposes. Unless the Company approves such a transfer, this option is
exercisable during your life only by you.
10. RIGHTS OF OPTIONEE. This Agreement is not an employment contract
and nothing in this Agreement shall be deemed to create in any way whatsoever
any obligation on your part to continue in the employ of the Company, or of the
Company to continue your employment with the Company. If this option is granted
to you in connection with your performance of services as a Consultant,
references to employment, Employee and similar terms shall
Annex A: Page 3
be deemed to include the performance of services as a Consultant; provided that
no rights as an Employee shall arise by reason of the use of such terms.
11. TAX WITHHOLDING OBLIGATIONS. Whenever the Company proposes or is
required to issue or transfer shares of Stock to you with respect to an Option,
the Company shall have the right to require you to remit to the Company an
amount sufficient to satisfy any Federal, state or local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares. Alternatively, the Company may issue or transfer such shares net of the
number of shares sufficient to satisfy the withholding tax requirements. For
withholding tax purposes, the shares of Stock shall be valued on the date the
withholding obligation is incurred.
12. NOTICE. Any notice or other communication to be given under or
in connection with this Agreement or the Plan shall be given in writing and
shall be deemed effectively given on receipt or, in the case of notices from the
Company to you, five days after deposit in the United States mail, postage
prepaid, addressed to you at the address specified below or at such other
address as you may hereafter designate by notice to the Company.
13. AGREEMENT SUBJECT TO PLAN. This Agreement is subject to all
provisions of the Plan, a copy of which is attached hereto and made a part of
this Agreement, and is further subject to all interpretations, amendments, rules
and regulations which may from time to time be promulgated and adopted pursuant
to the Plan. In the event of any conflict between the provisions of this
Agreement and those of the Plan, the provisions of the Plan shall control.
Annex A: Page 4
WASTE CONNECTIONS, INC.
By _________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Waste Connections, Inc. 2004 Equity Incentive Plan
Notice of Exercise
The undersigned:
(a) Acknowledges receipt of the foregoing Nonqualified Stock Option
Agreement and the attachments referenced therein and understands that all rights
and liabilities with respect to the option granted under the Agreement are set
forth in such Agreement and the Plan; and
(b) Acknowledges that as of the date of grant set forth in such
Agreement, the Agreement sets forth the entire understanding between the
undersigned optionee and the Company and its Subsidiaries regarding the
acquisition of Stock pursuant to the option and supersedes all prior oral and
written agreements on that subject with the exception of (i) the options, if
any, previously granted and delivered to the undersigned under stock option
plans of the Company, and (ii) the following agreements only:
NONE: _____________
(Initial)
OTHER: _________________________
_________________________
_________________________
_____________________________________
OPTIONEE
Address: ____________________________
____________________________
Annex A: Page 5
NOTICE OF EXERCISE
Waste Connections, Inc.
35 Iron Circle, Suite 200
Folsom, CA 95630-8589 Date of Exercise: __________
Ladies and Gentlemen:
This constitutes notice under my Nonqualified Stock Option Agreement
that I elect to purchase the number of shares of Common Stock ("Stock") of Waste
Connections, Inc. (the "Company") for the price set forth below.
Option Agreement dated: _______________________
Number of shares as
to which option is
exercised: _______________________
Certificates to be
issued in name of: _______________________
Total exercise price: $______________________
Cash payment delivered
herewith: $______________________
Value of __________ shares
of _________________ common
stock delivered herewith:1 $______________________
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Waste Connections, Inc. 2004 Equity
Incentive Plan or the Option Agreement, and (ii) to provide for the payment by
me to you (in the manner designated by you) of your withholding obligation, if
any, relating to the exercise of this option.
I hereby represent, warrant and agree with respect to the shares of
Stock of the Company that I am acquiring by this exercise of the option (the
"Shares") that, if required by the Company (or a representative of the
underwriters) in connection with an underwritten registration of the offering of
any securities of the Company under the Securities Act, I will not sell or
otherwise transfer or dispose of any shares of Stock or other securities of the
Company during such period (not to exceed 180 days) following the effective date
of the registration statement of the Company filed under the Securities Act (the
"Effective Date") as may be requested by the Company or the representative of
the underwriters. For purposes of this restriction, I will be deemed to own
securities that (i) are owned, directly or indirectly by me, including
securities
---------------------
1 Shares must meet the public trading requirements set forth in the
Option Agreement. Shares must be valued in accordance with the terms of the
option being exercised, must have been owned for the minimum period required in
the Option Agreement, and must be owned free and clear of any liens, claims,
encumbrances or security interests. Certificates must be endorsed or accompanied
by an executed assignment separate from certificate. held for my benefit by
nominees, custodians, brokers or pledgees; (ii) may be acquired by me within
sixty days of the Effective Date; (iii) are owned directly or indirectly, by or
for my brothers or sisters (whether by whole or half blood), spouse, ancestors
and lineal descendants; or (iv) are owned, directly or indirectly, by or for a
corporation, partnership, estate or trust of which I am a shareholder, partner
or beneficiary, but only to the extent of my proportionate interest therein as a
shareholder, partner or beneficiary thereof. I further agree that the Company
may impose stop-transfer instructions with respect to securities subject to this
restriction until the end of such period.
Very truly yours,
____________________________________
Annex A: Page 6
ANNEX B
RESTRICTED STOCK AGREEMENT
_____________________, Restricted Stock Participant:
Waste Connections, Inc. (the "Company"), pursuant to its 2004 Equity
Incentive Plan (the "Plan"), has this , 20___, granted to you, the participant
named above, an award of Restricted Stock ("Award") for a total of shares of
common stock of the Company ("Stock").
The grant under this Restricted Stock Agreement (the "Agreement") is in
connection with and in furtherance of the Company's compensatory benefit plan
for participation of the Company's Employees, Directors and Consultants.
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the Plan. The Award granted hereunder shall be subject to
and governed by the following terms and conditions:
1. PURCHASE PRICE. The purchase price for each share of Stock
awarded by this Agreement is $0.00.
2. VESTING OF PLAN AWARDS. The Award of Restricted Stock shall be
deemed non-forfeitable and such Stock shall no longer be considered Restricted
Stock on the earlier of a Change in Control or the expiration of the Restriction
Period on the following dates with respect to the following percentages of the
total shares of Restricted Stock awarded, and the Company shall, within a
reasonable time and subject to section 3, deliver stock certificates evidencing
such Stock to you:
(a) SCHEDULE OF EXPIRATION OF RESTRICTION PERIOD. The
overall restriction period, which begins on the date of the grant of the Award
and ends on the ________ anniversary of the grant of the Award (the "Restriction
Period"), expires in _____ equal phases:
Restriction Period Expires with
Respect to the Following
Date Percentage of Total Shares of
Restricted Stock Awarded
-------------------------------------------------------------- ----------------------------------
On grant 0%
As of ____________, 20__ (first anniversary of grant) __%
[As of ____________, 20__ (second anniversary of grant)] [__%]
[As of ____________, 20__ (third anniversary of grant)] [__%]
[As of ____________, 20__ (fourth anniversary of grant)] [__%]
(b) FORFEITURE OF RESTRICTED STOCK. If, during the
Restriction Period, your Continuous Status as an Employee, Director or
Consultant terminates for any reason, you will forfeit any shares of Restricted
Stock as to which the Restriction Period has not yet expired.
3. CONDITIONS ON AWARDS. Notwithstanding anything to the contrary
herein:
(a) SECURITIES LAW COMPLIANCE. Awards may not be granted and
shares of stock may not be issued if either such action would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system on
which the Stock may then be listed. In addition, no Stock may be issued unless
(a) a registration statement under the Securities Act shall at the time of
issuance of the Stock be in effect with respect to the shares of Stock to be
issued or (b) in the opinion of legal counsel to the Company, the shares of
Stock to be issued on expiration of the applicable Restriction Period may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the issuance of any
Stock, the Company may require you to satisfy any qualifications that may be
necessary or appropriate to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
Annex B: Page 1
(b) INVESTMENT REPRESENTATION. The Company may require you,
or any person to whom an Award is transferred, as a condition of receiving
shares of Stock pursuant to such Award, to (A) give written assurances
satisfactory to the Company as to your knowledge and experience in financial and
business matters or to employ a purchaser representative reasonably satisfactory
to the Company who is knowledgeable and experienced in financial and business
matters, and that you are capable of evaluating, alone or together with the
purchaser representative, the merits and risks of receiving such Stock, and (B)
to give written assurances satisfactory to the Company stating that you are
acquiring the Stock for your own account and not with any present intention of
selling or otherwise distributing the Stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall not apply if (1) the
issuance of the Stock has been registered under a then currently effective
registration statement under the Securities Act, or (2) counsel for the Company
determines as to any particular requirement that such requirement need not be
met in the circumstances under the then applicable securities laws.
4. NON-TRANSFERABILITY OF AWARD. During the Restriction Period
stated herein, you shall not sell, transfer, pledge, assign, encumber or
otherwise dispose of the Restricted Stock whether by operation of law or
otherwise and shall not make such Restricted Stock subject to execution,
attachment or similar process. Any attempt by you to do so shall constitute the
immediate and automatic forfeiture of such Award. Notwithstanding the foregoing,
you may designate the payment or distribution of the Award (or any portion
thereof) after your death to the beneficiary most recently named by you in a
written designation thereof filed with the Company, or, in lieu of any such
surviving beneficiary, as designated by you by will or by the laws of descent
and distribution. In the event any Award is to be paid or distributed to the
executors, administrators, heirs or distributees of your estate, or to your
beneficiary, in any such case pursuant to the terms and conditions of the Plan
and in accordance with such terms and conditions as may be specified from time
to time by the Committee, the Company shall be under no obligation to issue
Stock thereunder unless and until the Committee is satisfied that the person or
persons to receive such Stock is the duly appointed legal representative of your
estate or the proper legatee or distributee thereof or your named beneficiary.
5. ADJUSTMENTS ON CERTAIN EVENTS.
(a) CHANGES IN CONTROL. Immediately prior to a Change in
Control, all restrictions imposed by the Committee on any outstanding Award
shall be immediately automatically canceled, the Restriction Period shall
immediately terminate and the Award shall be fully vested, notwithstanding
anything to the contrary in the Plan or the Agreement.
(b) ADJUSTMENT OF SHARES. The number, class and kind of
shares under the Award shall be appropriately adjusted by the Committee in its
discretion to preserve the benefits or potential benefits intended to be made
available under the Plan or with respect to the Award or otherwise necessary to
reflect any such change, if the Company shall (i) pay a dividend in, or make a
distribution of, shares of Stock (or securities convertible into, exchangeable
for or otherwise entitling a holder thereof to receive Stock), or evidences of
indebtedness or other property or assets, on outstanding Stock, (ii) subdivide
the outstanding shares of Stock into a greater number of shares, (iii) combine
the outstanding shares of Stock into a smaller number of shares or (iv) issue
any shares of its capital stock in a reclassification of the Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the resulting corporation). An adjustment made pursuant to this
section 5(b) shall, in the case of a dividend or distribution, be made as of the
record date therefor and, in the case of a subdivision, combination or
reclassification, be made as of the effective date thereof. Any new or
additional shares or securities that you receive are subject to the same terms
and conditions, including the Restriction Period, as related to the original
Award.
(c) RECEIPT OF ASSETS OTHER THAN STOCK. If at any time, as a
result of an adjustment made pursuant to this section 5, you shall become
entitled to receive any shares of capital stock or shares or other units of
other securities or property or assets other than Stock, the number of such
other shares or units so receivable on expiration of the Restriction Period
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the shares of
Stock in this section 5, and the provisions of this Agreement with respect to
the shares of Stock shall apply, with necessary changes in points of detail, on
like terms to any such other shares or units.
(d) FRACTIONAL SHARES. All calculations under this section 5
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be, but in no event shall the Company be obligated to issue any
fractional share.
Annex B: Page 2
(e) INABILITY TO PREVENT ACTS DESCRIBED IN SECTION 5;
UNIFORMITY OF ACTIONS NOT REQUIRED. No Restricted Stock Participant shall have
or be deemed to have any right to prevent the consummation of the acts described
in this section 5 affecting the number of shares of Stock subject to any Award
held by the Restricted Stock Participant. Any actions or determinations by the
Committee under this section 5 need not be uniform as to all outstanding Awards,
and need not treat all Restricted Stock Participants identically.
6. RIGHTS OF RESTRICTED STOCK PARTICIPANT. This Plan and the Awards
shall not confer on you or other person:
(a) Any rights or claims under the Plan except in accordance
with the provisions of the Plan and the applicable agreement;
(b) Any right with respect to continuation of employment or
a consulting or directorship arrangement with the Company or any Subsidiary, nor
shall they interfere in any way with the right of the Company or any Subsidiary
that employs you or engages you as a consultant or director to terminate your
employment or consulting or directorship arrangement at any time with or without
cause;
(c) Any right to be selected to participate in the Plan or
to be granted an Award; or
(d) Any right to receive any bonus, whether payable in cash
or in Stock, or in any combination thereof, from the Company or its
subsidiaries, nor be construed as limiting in any way the right of the Company
or its subsidiaries to determine, in its sole discretion, whether or not it
shall pay any employee, consultant or director bonuses, and, if so paid, the
amount thereof and the manner of such payment.
7. TAX WITHHOLDING OBLIGATIONS.
(a) WITHHOLDING REQUIREMENT AND PROCEDURE. You shall (and in
no event shall Stock be delivered to you with respect to an Award until), no
later than the date as of which the value of the Award first becomes includible
in your gross income for income tax purposes, pay to the Company in cash, or
make arrangements satisfactory to the Company, as determined in the Committee's
discretion, regarding payment to the Company of, any taxes of any kind required
by law to be withheld with respect to the Stock or other property subject to
such Award, and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to
you. Notwithstanding the above, the Committee may, in its discretion and
pursuant to procedures approved by the Committee, permit you to elect
withholding by the Company of Stock or other property otherwise deliverable to
you pursuant to your Award, provided, however, that the amount of any Stock so
withheld shall not exceed the amount necessary to satisfy the Company's required
tax withholding obligations using the minimum statutory withholding rates for
Federal, state and/or local tax purposes, including payroll taxes, that are
applicable to supplemental taxable income in full or partial satisfaction of
such tax obligations, based on the Fair Market Value of the Stock on the payment
date.
(b) SECTION 83(B) ELECTION. If you make an election under
Code Section 83(b), or any successor section thereto, to be taxed with respect
to an Award as of the date of transfer of the Restricted Stock rather than as of
the date or dates on which you would otherwise be taxable under Code Section
83(a), you shall deliver a copy of such election to the Company immediately
after filing such election with the Internal Revenue Service. Neither the
Company nor any of its affiliates shall have any liability or responsibility
relating to or arising out of the filing or not filing of any such election or
any defects in its construction.
8. NOTICE. Any notice or other communication to be given under or
in connection with this Agreement or the Plan shall be given in writing and
shall be deemed effectively given on receipt or, in the case of notices from the
Company to you, five days after deposit in the United States mail, postage
prepaid, addressed to you at the address specified below or at such other
address as you may hereafter designate by notice to the Company.
Annex B: Page 3
9. AGREEMENT SUBJECT TO PLAN. This Agreement is subject to all
provisions of the Plan, a copy of which is attached hereto and made a part of
this Agreement, and is further subject to all interpretations, amendments, rules
and regulations which may from time to time be promulgated and adopted pursuant
to the Plan. In the event of any conflict between the provisions of this
Agreement and those of the Plan, the provisions of the Plan shall control.
WASTE CONNECTIONS, INC.
By _____________________________________
Ronald J. Mittelstaedt
President and Chief Executive Officer
ATTACHMENT:
Waste Connections, Inc. 2004 Equity Incentive Plan
The undersigned:
(a) Acknowledges receipt of the foregoing Restricted Stock Award
Agreement and the attachments referenced therein and understands that all rights
and liabilities with respect to the Award granted under the Agreement are set
forth in such Agreement and the Plan; and
(b) Acknowledges that as of the date of the Award set forth in such
Agreement, the Agreement sets forth the entire understanding between the
undersigned participant and the Company and it Subsidiaries regarding the
acquisition of Stock pursuant to the Award and supersedes all prior oral and
written agreements on that subject.
______________________________________
RESTRICTED STOCK PARTICIPANT
Address: ____________________________
____________________________
Annex B: Page 4
WASTE CONNECTIONS, INC.
35 IRON POINT CIRCLE, SUITE 200
FOLSOM, CALIFORNIA 95630
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 26, 2004
The undersigned holder of Common Stock of Waste Connections, Inc.
("WCI") acknowledges receipt of WCI's Proxy Statement dated April 8, 2004, and
Annual Report to Stockholders for 2003. The undersigned revokes all prior
proxies and appoints Ronald J. Mittelstaedt and Steven F. Bouck, and each of
them, individually and with full powers of substitution and resubstitution,
proxies for the undersigned to vote all shares of WCI Common Stock that the
undersigned would be entitled to vote at the Annual Meeting of Stockholders to
be held on Wednesday, May 26, 2004 at 10:00 A.M., Pacific Time, at the
California State University Sacramento Alumni Center, 6000 J Street, Sacramento,
California 95819, and any adjournment thereof, as designated on the reverse side
of this Proxy Card.
THIS PROXY WILL BE VOTED ACCORDING TO THE SPECIFICATIONS YOU MAKE ON THE REVERSE
SIDE. IF YOU DO NOT SPECIFY ON THE REVERSE SIDE BUT YOU DO SIGN AND DATE THIS
PROXY CARD, THIS PROXY WILL BE VOTED FOR THE PROPOSALS REFERRED TO IN (1), (2),
(3) AND (4) ON THE REVERSE SIDE.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
(DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL)
[X] Please mark votes as in this example.
THE WCI BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE IN PROPOSAL 1 AND
"FOR" PROPOSALS 2, 3 AND 4.
1. ELECTION OF DIRECTORS. Election of the following nominee as a
director:
Nominee: Ronald J. Mittelstaedt
[ ] FOR [ ] WITHHELD FROM NOMINEE
NOMINEE
2. Approval of amendment of WCI's Amended and Restated Certificate of
Incorporation to (a) increase the authorized number of shares of
common stock from 50,000,000 to 100,000,000 shares and (b) delete
references to the Series A Preferred Stock which converted to common
stock upon the completion of WCI's initial public offering.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Adoption of the 2004 Equity Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
1
4. Ratification of appointment of Ernst & Young LLP as WCI's independent
auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If you plan to attend the Annual Meeting of Stockholders, please mark the
following box. [ ]
DATED: , 2004
----------------------------------------------
SIGNATURE OF STOCKHOLDER
----------------------------------------------
TITLE, IF ANY
----------------------------------------------
SIGNATURE OF STOCKHOLDER IF HELD JOINTLY
----------------------------------------------
TITLE, IF ANY
PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THIS PROXY CARD. IF YOU HOLD
SHARES JOINTLY, EACH STOCKHOLDER SHOULD SIGN. IF YOU SIGN AS AN ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE.
IF THE SIGNER IS A CORPORATION, PLEASE SIGN THE FULL CORPORATE NAME BY THE
PRESIDENT OR AN AUTHORIZED OFFICER. IF THE SIGNER IS A PARTNERSHIP, PLEASE SIGN
THE FULL PARTNERSHIP NAME BY AN AUTHORIZED PERSON. PLEASE MARK, SIGN, DATE AND
MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
2