Republic Services, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
þ Definitive Proxy
Statement
o Definitive
Additional Materials
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Soliciting Material Pursuant to §240.14a-12 |
REPUBLIC SERVICES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
o Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined): |
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials: |
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
April 1, 2005
Dear Stockholder:
We invite you to attend the 2005 Annual Meeting of Stockholders
of Republic Services, Inc., which we will hold at
10:30 a.m. on Thursday, May 12, 2005 on the
7th Floor of the AutoNation Tower, 110 S.E.
6th Street, Fort Lauderdale, Florida 33301. On the
following pages we describe in the formal notice and proxy
statement the matters our stockholders will consider at the
annual meeting.
In addition to the specific matters we will request our
stockholders to act upon, we will report on our business and
provide our stockholders an opportunity to ask questions of
general interest.
Whether or not you plan to attend in person, it is important
that you have your shares represented at the annual meeting.
Please date and sign your proxy card and return it in the
enclosed envelope as soon as possible. The board of
directors recommends that stockholders vote FOR each of the
director nominees, FOR the Companys proposal described in
the proxy statement and AGAINST the stockholder proposal
described in the proxy statement. Thank you.
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Sincerely, |
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James E. OConnor |
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Chairman of the Board |
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and Chief Executive Officer |
110 S.E. 6th Street
Fort Lauderdale, Florida 33301
NOTICE OF THE 2005 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Republic Services, Inc.:
We will hold the 2005 Annual Meeting of Stockholders of Republic
Services, Inc. at 10:30 a.m. on Thursday, May 12, 2005
on the 7th Floor of the AutoNation Tower, 110 S.E. 6th Street,
Fort Lauderdale, Florida 33301, for the following purposes:
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To elect directors to a term of office expiring at the annual
meeting of stockholders in the year 2006 or until their
respective successors are duly elected and qualified; |
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To ratify the appointment of Ernst & Young LLP as our
companys independent public accountants for 2005; |
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To consider the stockholder proposal further described on page
25; and |
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To transact such other business as may properly come before the
annual meeting or any adjournment thereof. |
Only stockholders of record at the close of business on
March 21, 2005 are entitled to notice of and to vote at the
annual meeting or any adjournment of the annual meeting.
We cordially invite you to attend the annual meeting in person.
Even if you plan to attend in person, we request that you
date, sign and return the enclosed proxy at your earliest
convenience. You may revoke your proxy at any time before
its use.
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By Order of the Board of Directors, |
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David A. Barclay |
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Senior Vice President, |
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General Counsel and Assistant |
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Secretary |
Fort Lauderdale, Florida
April 1, 2005
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.
REPUBLIC SERVICES, INC.
110 S.E. 6th Street
Fort Lauderdale, Florida 33301
PROXY STATEMENT
We furnish this proxy statement in connection with the
solicitation of proxies by our board of directors for use at our
2005 Annual Meeting of Stockholders, or any postponement or
adjournment of the meeting. We will hold the annual meeting at
10:30 a.m. on Thursday, May 12, 2005 on the 7th Floor
of the AutoNation Tower, 110 S.E. 6th Street,
Fort Lauderdale, Florida 33301.
We mailed this proxy statement, the notice of annual meeting,
the proxy card and our annual report to our stockholders on or
about April 1, 2005.
Record Date
Only stockholders of record at the close of business on
March 21, 2005 may vote at the annual meeting.
Shares Outstanding and Voting Rights
The only voting stock of our company currently outstanding is
our common stock. As of the close of business on March 21,
2005, there were 146,578,768 shares of common stock outstanding.
Each share of common stock issued and outstanding is entitled to
one vote on each of the matters properly presented at the annual
meeting.
Proxy Procedure
Proxies properly executed and returned in a timely manner will
be voted at the annual meeting according to the voting
instructions noted on the proxies. Proxies without voting
instructions will be voted to elect the individuals nominated as
directors in this proxy statement, for our companys
proposal set forth in the notice of annual meeting, against the
stockholder proposal further described on page 25, and in
the best judgment of the persons acting under the proxies on
other matters presented for a vote. Any stockholder giving a
proxy has the power, at any time before it is voted, to revoke
it in person at the annual meeting, by written notice to the
secretary of our company at the address above, or by delivery to
the secretary of our company of a later-dated proxy.
The inspector of elections appointed for the meeting will
tabulate the votes cast by proxy or in person at the annual
meeting. The inspector will count these votes in determining
whether or not a quorum is present. A majority of the shares
entitled to vote, represented in person or by proxy, will
constitute a quorum for the transaction of business at the
annual meeting. Abstentions and broker shares, which are shares
held in street name, that are voted as to any matter at the
meeting will be included in determining the number of shares
present or represented at the annual meeting. Broker shares that
are not voted on any matter at the annual meeting will not be
included in determining the number of shares present or
represented at the annual meeting.
Our 401(k) Plan provides that the trustee of the
401(k) Plan shall vote the number of shares of our common
stock allocated to a participants account as instructed by
the participant. Courts have held that trustees are required to
follow participants instructions
unless they determine that doing so would breach their fiduciary
responsibilities under the Employee Retirement Income Security
of 1974, as amended. Voting instruction forms are being mailed
to all participants in the 401(k) Plan. If a participant
also owns shares outside the 401(k) Plan, the participant
must return both the proxy card and the voting instruction forms
as indicated on those forms.
Voting Requirements
Each director will be elected by the affirmative vote of a
plurality of the votes cast by the shares of common stock
present at the annual meeting, in person or by proxy, and
entitled to vote on the election of directors. The affirmative
vote of the holders of a majority of our common stock present at
the annual meeting, in person or by proxy, and entitled to vote,
is required for each other item and to approve any other matter
duly brought to a vote at the annual meeting.
Broker shares that are not voted on a particular proposal at the
annual meeting will have no effect on that matter. Abstentions
from voting on a particular proposal will have the effect of
votes against the particular proposal.
Costs of Solicitation
Our board of directors will solicit proxies by mail. Our
directors, officers and a small number of other employees of our
company may also solicit proxies personally or by mail,
telephone, or otherwise. We will not compensate these persons
for their solicitation. We will request brokerage firms, banks,
fiduciaries, voting trustees or other nominees to forward the
soliciting material to each beneficial owner of stock held of
record by them. We have hired The Altman Group, Inc. to
coordinate the solicitation of proxies by and through these
holders for a fee of approximately $6,500 plus expenses. We will
bear the entire cost of the solicitation.
BIOGRAPHICAL INFORMATION REGARDING DIRECTORS/ NOMINEES
AND EXECUTIVE OFFICERS
Directors
We provide below biographical information for each current
director and each person who is a nominee for election as a
director of our company at the annual meeting.
James E. OConnor, age 55, was named Chairman of the
board of directors in January 2003. He continues to serve as
Chief Executive Officer and as a director, positions he was
named to in December 1998. From 1972 to 1978 and from 1982 to
1998, Mr. OConnor served in various positions with
Waste Management, Inc., an integrated solid waste service
company, including Senior Vice President from 1997 to 1998, Area
President of Waste Management of Florida, Inc. from 1992 to
1997, Senior Vice President of Waste Management North
America from 1991 to 1992 and Vice President
Southeastern Region from 1987 to 1991.
Harris W. Hudson, age 62, was named our Vice Chairman,
Secretary and a director in May 1998. From 1996 until 1998,
Mr. Hudson served as Chairman of the Solid Waste Group of
AutoNation, Inc., our former parent company and the
nations largest automotive
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retailer. In 1995 and 1996, Mr. Hudson served as President
of AutoNation. From 1983 until 1995, Mr. Hudson served as
Chairman, Chief Executive Officer and President of Hudson
Management Corporation, a solid waste collection company that he
founded. In 1995, Hudson Management merged with AutoNation (then
known as Republic Waste Industries, Inc.). From 1964 until 1982,
Mr. Hudson served as Vice President of Waste Management of
Florida and its predecessor.
John W. Croghan, age 74, was named a director in July
1998. Since April 2002, Mr. Croghan has served as Chairman
of Rail-Splitter Capital Management, LLC, an investment
management firm formerly known as CMF Capital Management, Inc.
Mr. Croghan was President and General Partner of Lincoln
Partners, a partnership of Lincoln Capital Management Inc. He
was a founder and, from 1967 through December 2000, the Chairman
of Lincoln Capital Management, an investment management firm.
Mr. Croghan was retired from January 2001 until April 2002.
He is a director of Schwarz Paper Company.
W. Lee Nutter, age 61, was named a director in
February 2004 to fill a vacancy on our board resulting from the
board voting to increase the number of directors.
Mr. Nutter is Chairman, President and Chief Executive
Officer of Rayonier, Inc., a leading supplier of high
performance specialty cellulose fibers. Mr. Nutter joined
Rayonier in 1967 in the Northwest Forest Operations and in 1984
was named Vice President, Timber and Wood, Inc., a leading
supplier of high performance specialty cellulose fibers; Vice
President, Forest Products in 1985; Senior Vice President,
Operations in 1986 and Executive Vice President in 1987.
Mr. Nutter was elected President and Chief Operating
Officer and a director of Rayonier in 1996 and to his current
position effective January 1999. Mr. Nutter serves on the
board of directors and the Executive Committee of the American
Forest and Paper Association and on the board of directors of
the National Council for Air and Stream Improvement.
Mr. Nutter is also a member of the North Florida Regional
Board of SunTrust Bank.
Ramon A. Rodriguez, age 59, was named a director in March
1999. Mr. Rodriguez has served as President and Chief
Executive Officer of Madsen, Sapp, Mena, Rodriguez & Co.,
P.A., a firm of certified public accountants, since 1981. He is
a past Chairman of the Florida Board of Accountancy and was also
President of the Florida Institute of Certified Public
Accountants. Mr. Rodriguez is also a member of the board of
directors of Bancshares of Florida, a bank holding company and
of DME Corporation, a defense contractor.
Allan C. Sorensen, age 66, was named a director in
November 1998. Mr. Sorensen is the President and Chief
Executive Officer, a co-founder and Vice Chairman of the board
of directors of Interim Health Care, Inc., which Interim
Services, Inc., now known as Spherion Corporation, spun-off in
October 1997. Prior to that, Mr. Sorensen served as a
director and in various capacities including President, Chief
Executive Officer and Chairman of Interim Services from 1967 to
1997. He was a member of the board of directors of H&R
Block, Inc. from 1979 until 1993 when Interim Services was spun
off in an initial public offering.
Michael W. Wickham, age 58, was named a director in
October 2004 to fill a vacancy on our board resulting from the
retirement of a former director. From 1996 to 2003,
Mr. Wickham served as President and Chief Executive Officer
of Roadway Corporation. He also served as Chairman of Roadway
from 1998 until his planned
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retirement in December 2003. He served as President of Roadway
from July 1990 through March 1998 and Director of Roadway since
1989.
Executive Officers
We provide below biographical information for each of our
executive officers who is not a nominee for director.
Michael J. Cordesman, age 57, was named President and
Chief Operating Officer in February 2003. From March 2002 until
February 2003, he served as our Vice President and Chief
Operating Officer. Mr. Cordesman served as our Eastern
Region Vice President from June 2001 until February 2003. From
1999 to 2001, Mr. Cordesman served as Vice President of the
Central Region for Superior Services, Inc. From 1980 until 1999,
Mr. Cordesman served in various positions with Waste
Management including Vice President of the Mid-Atlantic Region
from 1992 until 1999.
David A. Barclay, age 42, was named Senior Vice
President, General Counsel and Assistant Secretary in August
1998. Mr. Barclay served as Senior Vice President and
General Counsel of AutoNations Solid Waste Group from
March 1998 until July 1998. Prior to that, from January 1997 to
February 1998, Mr. Barclay was Vice President and Associate
General Counsel of AutoNation.
Tod C. Holmes, age 56, was named Senior Vice President
and Chief Financial Officer in August 1998. Mr. Holmes
served as our Vice President Finance from June 1998
until August 1998 and as Vice President of Finance of
AutoNations Solid Waste Group from January 1998 until July
1998. From 1987 to 1998, Mr. Holmes served in various
positions with Browning-Ferris Industries, Inc., including Vice
President, Investor Relations from 1996 to 1998, Divisional Vice
President, Collection Operations from 1995 to 1996, Divisional
Vice President and Regional Controller Northern
Region from 1993 to 1995, and Divisional Vice President and
Assistant Corporate Controller from 1991 to 1993.
PROPOSAL 1
ELECTION OF DIRECTORS
The board of directors currently consists of seven members. The
board of directors, upon recommendation of the nominating and
corporate governance committee, and with respect to
Messrs. OConnor and Hudson, also in accordance with
the terms of their employment agreements, has designated the
persons named below as nominees for election as directors, for a
term expiring at the annual meeting of stockholders in the year
2006. All nominees are currently serving as directors.
Mr. Wickham was named to the board of directors in October
2004 to fill a vacancy created by the retirement of a former
director. Each director is elected by the affirmative vote of a
plurality of the votes cast by the shares of common stock
present at the annual meeting, in person or by proxy, and
entitled to vote for the election of directors. It is the
intention of the persons named in the enclosed form of proxy to
vote the proxies they receive for the election of the nominees
named below, unless a particular proxy withholds authorization
to do so or provides other contrary instructions. Each of the
nominees has indicated that he is willing and able to serve as a
director. If before the annual meeting any nominee becomes
unable to serve, an event which is not anticipated by the board
of directors, the proxies will be voted for the election of
whomever the board of directors may designate.
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Nominees For Director
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James E. OConnor |
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Harris W. Hudson |
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John W. Croghan |
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W. Lee Nutter |
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Ramon A. Rodriguez |
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Allan C. Sorensen |
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Michael W. Wickham |
The board of directors unanimously recommends a vote
FOR the election of each of the nominees for
director named above. Proxies executed and returned will be so
voted unless contrary instructions are indicated thereon.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE MATTERS
The board of directors develops our business strategy,
establishes our overall policies and standards, and reviews the
performance of management in executing our business strategy and
implementing our policies and standards. We keep directors
informed of our operations at meetings and through reports and
analyses presented to the board of directors and committees of
the board. Significant communications between the directors and
management also occur apart from meetings of the board of
directors and committees of the board.
Corporate Governance
The board of directors held five meetings and took seven actions
by unanimous written consent during 2004. Each incumbent
director attended at least 80% of the total number of meetings
of the board of directors and the total number of meetings held
by all committees of the board on which he served. Two directors
attended our 2004 annual meeting of stockholders.
The board of directors has determined that our five
non-management directors, Messrs. Croghan, Nutter,
Rodriguez, Sorensen and Wickham, have met the standards of
independence as set forth in our Corporate Governance
Guidelines, which are consistent with the listing standards
established by the New York Stock Exchange. The non-management
directors meet at least once per year in an executive session.
The non-management directors elect a presiding director for each
executive session at which the non-management directors meet. In
2004, our non-management directors met three times in executive
session.
Our executive officers attend ISS-accredited seminars and
continuing education programs relating to corporate governance
matters.
Presiding Director
The board of directors has created the position of Presiding
Director to serve as the lead non-management director of the
board of directors. The Presiding Director position shall at all
times be held by an independent director, as that
term is defined from time to time by the listing standards of
the New York Stock Exchange and as determined by the board of
directors in accordance with its Corporate Governance Guidelines.
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The Presiding Director will have, in addition to the powers and
authorities of a member of our board of directors, the power and
authority to (a) preside at all meetings of non-management
directors when they meet in executive session without the
participation of management, (b) set agendas, priorities
and procedures for meetings of non-management directors when
they meet in executive session without the participation of
management, (c) coordinate with non-management directors
the review, revision, addition or deletion of proposed agenda
items for any meeting of the board of directors,
(d) request access to any employee of the company at any
time, and (e) retain independent outside financial, legal
or other advisors on behalf of any committee or subcommittee of
the board of directors.
The nominating and corporate governance committee shall
recommend a member of the board of directors to serve as
Presiding Director. Upon approval by the board of directors,
such person shall serve as Presiding Director for a period of
not more than two (2) consecutive years. The current
Presiding Director of the company is Mr. Sorensen, who was
approved by the board of directors effective as of
October 1, 2004.
Board Committees and Meetings
The board of directors has established four committees: the
executive committee, the audit committee, the compensation
committee and the nominating and corporate governance committee.
Committee member appointments are re-evaluated annually and
approved by the board of directors at its next regularly
scheduled meeting that follows the annual meeting of
stockholders. Information regarding each of the current
committees is as follows:
Executive Committee
The executive committee consists of Messrs. OConnor
and Hudson. The executive committee has full authority to
exercise all the powers of the board of directors between
meetings of the board of directors, except as reserved by the
board of directors.
The executive committee does not have the power to elect or
remove executive officers, approve a merger of our company,
recommend a sale of substantially all of our assets, recommend a
dissolution of our company, amend our certificate of
incorporation or by-laws, declare dividends on our outstanding
securities, or, except as authorized by the board of directors,
issue any common stock or preferred stock. The board of
directors has given the executive committee authority to approve
acquisitions, borrowings, guarantees or other transactions not
involving more than $50 million in cash, securities or
other consideration. The executive committee took twelve actions
by unanimous written consent during 2004.
Audit Committee
The audit committee consists of Messrs. Rodriguez
(Chairman), Croghan, Nutter, Sorensen and Wickham. The five
members of the audit committee meet the independence, education
and experience requirements of the Sarbanes-Oxley Act of 2002
and the rules and regulations promulgated in accordance
therewith, and the listing standards of the New York Stock
Exchange. Our board has also determined that
Messrs. Croghan and Rodriguez each qualify as an
audit committee financial expert within the meaning
of Item 401(h) of Regulation S-K under the Securities
Act of 1934, as amended.
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The audit committee assists the board of directors in monitoring
(a) the integrity of our financial statements, (b) our
compliance with legal and regulatory requirements, and
(c) the independence and performance of our internal and
external auditors. Furthermore, the audit committee has the
ultimate authority and responsibility to select, evaluate and,
where appropriate, terminate and replace the independent
auditor. The audit committee operates under a written charter
adopted by the board of directors. This charter was amended and
restated by our board of directors during 2002, 2003 and again
in 2004. A copy of our current Audit Committee Charter is
available to view at our website, www.republicservices.com, and
was included as an appendix to our proxy statement for the 2004
annual meeting of stockholders. The audit committee held seven
meetings and took two actions by unanimous written consent
during 2004.
Compensation Committee
The compensation committee consists of Messrs. Nutter
(Chairman), Croghan, Rodriguez, Sorensen and Wickham. The five
members of the compensation committee are independent as that
term is defined under the Sarbanes-Oxley Act of 2002 and the
rules and regulations promulgated in accordance therewith, and
in the listing standards of the New York Stock Exchange.
The compensation committee reviews our companys
compensation philosophy and programs, exercises authority with
respect to the payment of salaries and incentive compensation to
directors who are not members of the compensation committee and
to executive officers, and administers our companys stock
incentive plan. The compensation committee operates under a
written charter adopted by the board of directors, which was
amended and restated on January 27, 2005. A copy of the
Third Amended and Restated Compensation Committee Charter is
available to view at our website, www.republicservices.com, and
is included herein as Appendix A. The compensation
committee held six meetings and took three actions by unanimous
written consent during 2004.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee was formed in
late 2002, although previously our audit committee also had
responsibility as our nominating committee. The nominating and
corporate governance committee consists of Messrs. Croghan
(Chairman), Nutter, Rodriguez, Sorensen and Wickham. The five
members of the nominating and corporate governance committee are
independent as that term is defined under the Sarbanes-Oxley Act
of 2002 and the rules and regulations promulgated in accordance
therewith, and in the listing standards of the New York Stock
Exchange.
The nominating and corporate governance committee is responsible
for soliciting recommendations for candidates for the board of
directors, developing and reviewing background information for
such candidates, and making recommendations to the board of
directors with respect to candidates for directors proposed by
shareholders. In evaluating candidates for potential director
nomination, the nominating and corporate governance committee
will consider, among other things, candidates that are
independent, if required, who possess personal and professional
integrity, have good business judgment, and have relevant
business and industry experience, education and skills, and who
would be effective as a director in conjunction with the full
board in collectively serving the long-term
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interests of our stockholders in light of the needs and
challenges facing the board of directors at the time. All
candidates will be reviewed in the same manner, regardless of
the source of recommendation. Messrs. OConnor and
Hudson are nominated for election to our board of directors at
each annual meeting of stockholders pursuant to the terms of
their employment agreements with us. See Executive
Compensation-Employment Agreements, elsewhere in this
proxy statement.
During 2004, pursuant to our bylaws, our board of directors
voted to increase the number of directors by one to a total of
seven directors, which resulted in a vacancy on the board. In
filling this vacancy and the vacancy created by the retirement
of a former director, our nominating and corporate governance
committee paid a fee to a professional search firm to assist it
in identifying, evaluating and conducting due diligence on
potential appointees. The search firm identified and recommended
Messrs. Nutter and Wickham and participated in various
meetings of the nominating and corporate governance committee at
which the appointment of Messrs. Nutter and Wickham was
discussed. Messrs. Nutter and Wickham were appointed to our
board of directors to fill these vacancies on February 12,
2004 and October 27, 2004, respectively, and subsequent to
that were appointed to our audit, compensation and nominating
and corporate governance committees.
In addition to the foregoing duties, the nominating and
corporate governance committee is also responsible for
developing and recommending to the board of directors a set of
Corporate Governance Guidelines applicable to us. The nominating
and corporate governance committee operates under a written
charter adopted by the board of directors. A copy of our
nominating and corporate governance committee charter is
available to view at our website, www.republicservices.com and
was included as an appendix to our proxy statement for the 2004
annual meeting of stockholders. The nominating and corporate
governance committee will consider nominations from stockholders
that are entitled to vote for the election of directors. The
nominating and corporate governance committee held five meetings
and took two actions by unanimous written consent during 2004.
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EXECUTIVE COMPENSATION
The following statement made by the compensation committee of
the board of directors of Republic Services, Inc. shall not be
deemed incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, and shall not otherwise be deemed filed
under either of these acts.
Executive Compensation Policies
The compensation committee of the board of directors is
responsible for reviewing and approving executive compensation,
including base salaries, awards of stock options and restricted
stock, and annual and long-term awards under the companys
Executive Incentive Plan. The compensation committee currently
consists of Mr. Nutter, the Chairman of the committee, and
Messrs. Croghan, Rodriguez, Sorensen and Wickham, each of
whom is a non-employee director of our company.
Our executive compensation packages are designed to attract,
motivate and retain executive talent. In determining the
compensation of our executive officers, the committee takes into
account factors which it considers relevant. These factors
include individual management performance during the year,
consideration of industry trends and business conditions in
general, as well as market compensation for executives of
comparable background and experience.
During 2000, the committee engaged a compensation consulting
firm to conduct a comprehensive review of executive
compensation. This review was undertaken to determine whether
the compensation packages afforded to our executive officers
were competitive and/or complete when compared with similarly
situated companies. During both 2002 and 2003, the committee
engaged another compensation consulting firm to conduct further
reviews of executive compensation. In both of these further
reviews, the consulting firm was asked to review the current
compensation packages for the companys top 25 officers and
compare them with packages offered to officers at a targeted
universe of peer group companies as established during the 2000
review. The analysis and development of findings entailed
regular status review meetings with the committee. Ultimately,
the consulting firm provided the committee with its findings and
analysis, which were taken into account in determining the
committees policies and bases for compensating the
companys executive officers and its chief executive
officer.
The general structure of each executive compensation package
remains primarily weighted toward incentive forms of
compensation so that an executive officers interests are
aligned with the interests of the companys stockholders.
The compensation packages have been designed based on
recommendations received from the compensation consulting firm
and are generally designed as follows:
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1. Salary. The companys executive officers did
not receive salary increases for 2004. In lieu of a salary
increase, the companys executive officers received a grant
of restricted stock in January 2004 that fully vested on
January 1, 2005. |
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2. Restricted Stock. In 2004, we granted 7,500
shares of restricted stock to the companys executive
officers under the 1998 Stock Incentive Plan in lieu of salary
increases. We granted these shares of restricted stock at $26.16
per share, based on the closing price of our common stock on the
date of grant. These shares of restricted stock vested on
January 1, 2005. Separately during 2004, we granted an |
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additional 72,000 shares of restricted stock to the
companys executive officers under the companys 1998
Stock Incentive Plan in lieu of option grants. We granted these
shares of restricted stock at $26.16 per share, based on the
closing price of our common stock on the date of grant. The
shares of restricted stock vest at the rate of 25% per year in
each of the four years following the date of grant, subject to
vesting acceleration based on the Companys achievement of
certain annual performance goals. As a result of the
Companys performance in 2004, the vesting schedule
acceleration resulted in one-half of the shares vesting on the
first anniversary of the date of grant. The company anticipates
that it will continue to make annual restricted stock grants to
its executive officers in lieu of stock options. |
|
|
3. Executive Incentive Plan. The Executive Incentive
Plan authorizes the granting of annual awards and long-term
awards to executive officers selected from time to time by the
compensation committee to participate in the plan. Annual awards
are designed to recognize the annual achievement by a
participant of short-term goals and objectives of the company.
Long-term awards are designed to recognize the impact of the
participant upon the achievement by the company of longer term
success in enhancing stockholder values. |
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|
|
|
|
Annual Awards. For 2004, our executive officers were
eligible to receive annual awards under our Executive Incentive
Plan based upon achieving predetermined levels of
(a) earnings per share and (b) free cash flow. Free
cash flow is defined as cash provided by operating activities
less purchases of property and equipment, plus proceeds from the
sale of property and equipment. During 2004, we exceeded our
predetermined level of earnings per share and achieved our
predetermined level of free cash flow and, accordingly, our
executive officers were granted bonuses of 160% of such
pre-determined levels. |
|
|
|
Long-Term Awards. Long-term awards under the Executive
Incentive Plan are based on three-year rolling performance
periods of three calendar years each. A new performance period
begins on January 1 of each year, and payouts with respect
to each performance period are scheduled following the end of
each applicable three-year period. The payouts are based upon
achieving predetermined levels of (a) cash flow value
creation, which we define as net income plus after-tax interest
expense plus depreciation, depletion, amortization and accretion
less capital charges (net average assets multiplied by our
targeted weighted-average cost of capital), and (b) return
on invested capital. The committee believes using these
variables serves to align managements interests with the
companys stockholders. The committee also believes these
variables tie long-term compensation more directly to actual
executive performance rather than measures based upon the
vagaries of the stock market. |
In 2002, after determining that one-time charges incurred in the
fourth quarter of 2001 would preclude the executives from
achieving the performance targets set at the beginning of 2001
for the three-year period ending December 31, 2003, the
compensation committee revised the three-year performance period
to a two-year performance period ending December 31, 2003
(thus eliminating the impact of 2001) and reduced the potential
awards for such two-year performance period to equal two-thirds
of the amounts originally granted for the three-year period. In
2004, the compensation committee also established new long-term
targets and awards for a new three-year period ending
December 31, 2006.
10
Compensation of the Chief Executive Officer
In determining the 2005 compensation paid to
Mr. OConnor, our Chief Executive Officer, the
committee took into account his abilities, business experience
and performance during the 2004 fiscal year. The
committees assessment of Mr. OConnors
performance included expanding our business, continuing to
integrate acquired businesses, increasing profitability and
maximizing stockholder value. During 2004,
Mr. OConnor received a salary of $840,007.
Mr. OConnor also received 27,000 shares of restricted
stock. Under the Executive Incentive Plan,
Mr. OConnor received an annual award of $940,808 and
a long-term award in the amount of $652,500. The committee
believes that tying Mr. OConnors remuneration
to the objectives described above, including the performance of
our common stock, will enhance our companys long-term
performance and stability by providing Mr. OConnor
with an incentive to meet these objectives.
Compensation Deduction Limitation
Section 162(m) of the Internal Revenue Code imposes a
limitation on the deductibility of nonperformance-based
compensation in excess of $1 million paid to named
executive officers. The committee believes that the company
should be able to continue to manage its executive compensation
program for named executive officers so as to preserve the
related federal income tax deductions.
Summary
The committee believes that the companys executive
compensation policies and programs serve the interests of the
stockholders and the company effectively. The committee believes
that the compensation packages provided to our named executive
officers provide motivation for executives to contribute to the
companys overall success and enhance stockholder value.
The committee will continue to monitor the effectiveness of the
companys compensation programs and will recommend changes,
when appropriate, to meet the companys needs.
|
|
|
Compensation Committee: |
|
|
W. Lee Nutter, Chairman |
|
John W. Croghan |
|
Ramon A. Rodriguez |
|
Allan C. Sorensen |
|
Michael W. Wickham |
11
Compensation Committee Interlocks and Insider
Participation
Messrs. Sorensen, Croghan and Rodriguez served as members
of the compensation committee throughout 2004. Mr. Nutter
became a member of the compensation committee on March 1,
2004 and Mr. Wickham became a member of the compensation
committee on October 28, 2004. No member of the
compensation committee was an officer or employee of our company
during the prior year or was formerly an officer of our company.
During the year ended December 31, 2004, none of our
executive officers served on the compensation committee of any
other entity, any of whose directors or executive officers
served either on our board of directors or on our compensation
committee.
Performance Graph
The following performance graph compares the performance of our
common stock to the New York Stock Exchange Composite Index and
to an index of peer companies we selected. The peer group
consists of Allied Waste Industries, Inc. and Waste Management,
Inc. The graph covers the period from December 31, 1999 to
December 31, 2004. The graph assumes that the value of the
investment in our common stock and in each index was $100 at
December 31, 1999 and that all dividends were reinvested.
Cumulative Total Return
Based on initial investment of $100 on December 31,
1999
Indexed Returns
Years Ending
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| |
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Base | |
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Period | |
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|
December | |
|
December | |
|
December | |
|
December | |
|
December | |
|
December | |
Company Name/Index |
|
1999 | |
|
2000 | |
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
| |
Republic Services, Inc.
|
|
$ |
100 |
|
|
$ |
120.61 |
|
|
$ |
140.14 |
|
|
$ |
147.23 |
|
|
$ |
180.76 |
|
|
$ |
239.37 |
|
NYSE Composite Index
|
|
|
100 |
|
|
|
101.01 |
|
|
|
90.70 |
|
|
|
72.72 |
|
|
|
94.01 |
|
|
|
105.44 |
|
Peer Group
|
|
|
100 |
|
|
|
162.05 |
|
|
|
182.14 |
|
|
|
130.72 |
|
|
|
170.43 |
|
|
|
167.84 |
|
12
Summary Compensation Table
The following tables set forth compensation information
regarding our Chief Executive Officer and our other four most
highly compensated executive officers during the year ended
December 31, 2004:
|
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|
|
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|
|
|
|
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Long-Term Compensation | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
Annual Compensation | |
|
Awards | |
|
Payouts | |
|
|
|
|
|
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
Other Annual | |
|
Restricted Stock | |
|
Securities Underlying | |
|
LTIP | |
|
All Other | |
Name and Principal Position |
|
Year | |
|
Salary | |
|
Bonus | |
|
Compensation(1) | |
|
Award(s)(2) | |
|
Options/SARs | |
|
Payouts | |
|
Compensation | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
James E. OConnor
|
|
|
2004 |
|
|
$ |
840,007 |
|
|
$ |
940,808 |
|
|
|
|
|
|
$ |
706,320 |
|
|
|
|
|
|
$ |
652,500 |
|
|
$ |
48,306 |
(3) |
(Chairman and Chief
|
|
|
2003 |
|
|
|
811,032 |
|
|
|
294,002 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
350,224 |
|
|
|
40,583 |
(4) |
Executive Officer)
|
|
|
2002 |
|
|
|
787,423 |
|
|
|
995,400 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
|
|
|
|
13,679 |
(5) |
|
Harris W. Hudson
|
|
|
2004 |
|
|
|
303,461 |
|
|
|
|
|
|
|
|
|
|
|
78,480 |
|
|
|
|
|
|
|
|
|
|
|
5,055 |
(7) |
(Vice Chairman and
|
|
|
2003 |
|
|
|
401,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
4,008 |
(8) |
Secretary)
|
|
|
2002 |
|
|
|
501,306 |
|
|
|
|
|
|
$ |
179,414 |
(6) |
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Michael J. Cordesman(9)
|
|
|
2004 |
|
|
|
425,016 |
|
|
|
408,015 |
|
|
|
|
|
|
|
457,800 |
|
|
|
|
|
|
|
217,500 |
|
|
|
16,925 |
(10) |
(President and Chief
|
|
|
2003 |
|
|
|
385,887 |
|
|
|
106,254 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
74,767 |
|
|
|
17,874 |
(11) |
Operating Officer)
|
|
|
2002 |
|
|
|
331,392 |
|
|
|
313,200 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
19,541 |
(12) |
|
Tod C. Holmes
|
|
|
2004 |
|
|
|
400,001 |
|
|
|
320,001 |
|
|
|
|
|
|
|
457,800 |
|
|
|
|
|
|
|
435,000 |
|
|
|
19,356 |
(13) |
(Senior Vice President
|
|
|
2003 |
|
|
|
369,935 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
246,600 |
|
|
|
15,449 |
(14) |
and Chief Financial Officer)
|
|
|
2002 |
|
|
|
348,289 |
|
|
|
315,000 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
5,058 |
(5) |
|
David A. Barclay
|
|
|
2004 |
|
|
|
324,989 |
|
|
|
207,994 |
|
|
|
|
|
|
|
457,800 |
|
|
|
|
|
|
|
275,500 |
|
|
|
15,405 |
(15) |
(Senior Vice President
|
|
|
2003 |
|
|
|
307,847 |
|
|
|
64,998 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
148,222 |
|
|
|
12,099 |
(16) |
and General Counsel)
|
|
|
2002 |
|
|
|
297,999 |
|
|
|
216,000 |
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
3,626 |
(5) |
|
|
|
|
(1) |
Except as otherwise disclosed, the aggregate total value of
perquisites, other personal benefits, securities or property, or
other annual compensation did not equal or exceed the lesser of
$50,000 or ten percent of the annual salary and bonus for any
person named in the table during 2002, 2003 or 2004. |
|
(2) |
The 7,500 shares of restricted stock that were granted in lieu
of salary increases vested on January 1, 2005. The
72,000 shares that were granted in lieu of option grants
vest 25% per year in each of the four years following the date
of grant, subject to vesting acceleration based on the
Companys achievement of certain annual performance goals.
As a result of the Companys performance in 2004, the
vesting schedule acceleration resulted in one-half of the 72,000
shares of restricted stock vesting on the first anniversary of
the date of grant. Cash dividends are payable on the shares of
restricted stock. |
|
(3) |
Consists of $9,180 for financial planning; $4,100 of matching
contributions under our 401(k) Plan; $26,604 of matching
contributions under our Deferred Compensation Plan; and $8,422
of imputed income from life insurance. |
|
(4) |
Consists of $4,000 of matching contributions under our 401(k)
Plan; $32,601 of matching contributions under our Deferred
Compensation Plan; and $3,982 of imputed income from life
insurance. |
|
(5) |
Consists of matching contributions under our 401(k) Plan and our
Supplemental Savings Plan. |
|
(6) |
Amounts reflect payments made on behalf of Mr. Hudson for
aircraft use, which was included in his Form W-2 as
compensation. |
|
(7) |
Consists of $3,075 of matching contributions under our 401(k)
Plan and $1,980 of imputed income from life insurance. |
|
(8) |
Consists of $3,000 of matching contributions under our 401(k)
Plan and $1,008 of imputed income from life insurance. |
|
(9) |
Mr. Cordesman began serving as our Vice President and Chief
Operating Officer in March 2002 and became our President and
Chief Operating Officer in February 2003. |
|
|
(10) |
Consists of $570 for financial planning; $4,100 of matching
contributions under our 401(k) Plan; $8,116 of matching
contributions under our Deferred Compensation Plan; and $4,139
of imputed income from life insurance. |
(11) |
Consists of $2,043 of relocation expense; $4,000 of matching
contributions under our 401(k) Plan; $10,017 of matching
contributions under our Deferred Compensation Plan; and $1,814
of imputed income from life insurance. |
(12) |
Consists of $18,500 of relocation expense and $1,041 of matching
contributions under our 401(k) Plan. |
(13) |
Consists of $450 for financial planning; $4,100 of matching
contributions under our 401(k) Plan; $10,925 of matching
contributions under our Deferred Compensation Plan; and $3,881
of imputed income from life insurance. |
(14) |
Consists of $4,000 of matching contributions under our 401(k)
Plan; $9,685 of matching contributions under our Deferred
Compensation Plan; and $1,764 of imputed income from the life
insurance. |
(15) |
Consists of $3,762 for financial planning; $4,100 of matching
contributions under our 401(k) Plan; $6,823 of matching
contributions under our Deferred Compensation Plan; and $720 of
imputed income from life insurance. |
(16) |
Consists of $4,000 of matching contributions under our 401(k)
Plan; $6,587 of matching contributions under our Deferred
Compensation Plan; and $1,512 of imputed income from life
insurance. |
13
Aggregated Option Exercises and Year-End Option Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
|
|
Underlying Unexercised | |
|
Value of Unexercised | |
|
|
Shares | |
|
|
|
Options At | |
|
In-the-Money Options At | |
|
|
Acquired | |
|
|
|
December 31, 2004 | |
|
December 31, 2004(1) | |
|
|
On | |
|
Value | |
|
| |
|
| |
|
|
Exercise | |
|
Realized | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
James E. OConnor
|
|
|
75,000 |
|
|
$ |
1,165,328 |
|
|
|
375,000 |
|
|
|
90,000 |
|
|
$ |
5,776,425 |
|
|
$ |
1,413,000 |
|
Harris W. Hudson
|
|
|
|
|
|
|
|
|
|
|
795,000 |
|
|
|
|
|
|
|
12,829,250 |
|
|
|
|
|
Michael J. Cordesman
|
|
|
20,000 |
|
|
|
227,096 |
|
|
|
28,750 |
|
|
|
56,250 |
|
|
|
419,475 |
|
|
|
838,975 |
|
Tod C. Holmes
|
|
|
35,000 |
|
|
|
546,481 |
|
|
|
140,000 |
|
|
|
60,000 |
|
|
|
2,212,925 |
|
|
|
942,000 |
|
David A. Barclay
|
|
|
45,000 |
|
|
|
691,183 |
|
|
|
130,382 |
|
|
|
60,000 |
|
|
|
2,029,152 |
|
|
|
942,000 |
|
|
|
(1) |
The value of in-the-money options was calculated by determining
the difference between the closing price of a share of our
common stock as reported on the New York Stock Exchange
composite tape on December 31, 2004 and the exercise price
of the options. |
Executive Incentive Plan
Long-Term Awards in Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under | |
|
|
Performance or | |
|
Non-Stock Price-Based Plans(1) | |
|
|
Other Period Until | |
|
| |
|
|
Maturation or Payout | |
|
Threshold | |
|
Target | |
|
Maximum | |
|
|
| |
|
| |
|
| |
|
| |
James E. OConnor
|
|
|
1/1/04 12/31/06 |
|
|
$ |
137,000 |
|
|
$ |
548,000 |
|
|
$ |
822,000 |
|
Michael J. Cordesman
|
|
|
1/1/04 12/31/06 |
|
|
|
62,500 |
|
|
|
250,000 |
|
|
|
375,000 |
|
Tod C. Holmes
|
|
|
1/1/04 12/31/06 |
|
|
|
91,250 |
|
|
|
365,000 |
|
|
|
547,500 |
|
David A. Barclay
|
|
|
1/1/04 12/31/06 |
|
|
|
62,500 |
|
|
|
250,000 |
|
|
|
375,000 |
|
|
|
(1) |
See Executive Incentive Plan on page 19 for a
general description of the criteria to be applied in determining
the amounts payable as long-term awards. |
Compensation of Directors
During 2004, we paid each of our non-employee directors and
those directors who are not full-time members of the
companys management a $40,000 annual retainer, an
additional annual retainer of $10,000 for each board committee
chairmanship held and $1,500 for each board or committee meeting
attended. In addition, under our 1998 Stock Incentive Plan, each
non-employee director and those directors who are not full-time
members of the companys management received deferred stock
units equal to 3,000 shares of our common stock.
In addition to the retainer and meeting fees that we pay our
non-employee directors and those directors who are not full-time
members of the companys management, under our 1998 Stock
Incentive Plan, we make an initial grant of deferred stock units
to each non-employee director upon joining the board. In 2004,
Mr. Wickham received 5,000 deferred stock units upon his
appointment to the board in October. During 2005, we will make
an initial grant of 6,000 deferred stock units to each
non-employee director upon joining the board. Thereafter, we
will make annual grants of 4,000 deferred stock units to each of
our non-employee directors and those directors who are not
full-time members of the companys management who remain a
member of our board. The deferred stock units
14
are deferred until the directors board service ends. As of
March 15, 2005, we have granted 4,000 deferred stock units
to each of our non-employee directors and those directors who
are not full-time members of the companys management for
their 2005 service. We also reimburse our non-employee directors
and those directors who are not full-time members of the
companys management for reasonable expenses incurred for
attending board of director and committee meetings. We have not
adopted any other policies regarding directors
compensation and benefits.
Employment Agreements
James E. OConnor. We entered into a three-year
employment agreement with James E. OConnor to serve as our
President and Chief Executive Officer, effective as of
October 25, 2000 and as amended on January 31, 2003.
The agreement will continue in effect on a rolling
three year basis, meaning that at any time during the agreement,
three years will remain in the term of the agreement. The
agreement provides that Mr. OConnor will continue his
service on our board of directors and that
Mr. OConnor will be nominated for election to our
board of directors at each annual meeting of stockholders during
the term of the agreement. Per the agreement,
Mr. OConnors annual salary is $790,000 unless
our board of directors expressly provides otherwise.
Mr. OConnor received an annual base salary of
$790,000 for our 2002 fiscal year and, based on the board of
directors annual review of Mr. OConnor, the
board determined to increase his annual base salary to $840,000
per year effective August 1, 2003. For 2004,
Mr. OConnor received a grant of 3,000 shares of
restricted stock in lieu of a salary increase.
Mr. OConnors annual salary may be increased at
any time at the discretion of our board of directors to reflect
merit or for other increases.
In addition to his base salary, Mr. OConnor was and
is eligible for an annual bonus of up to 90% of his annual base
salary through the term of the agreement.
Mr. OConnors annual bonus is based on the
achievement of corporate goals and objectives established by our
board of directors or an appropriate committee of the board of
directors. Under the agreement, Mr. OConnor is
entitled to participate in our stock option plans and other
employee compensation programs that we may establish.
Mr. OConnor also is entitled to health, life and
disability insurance and he may participate in other benefit
programs that we may establish. Mr. OConnor is also
entitled to be reimbursed annually for financial, estate and tax
planning activities in an amount not to exceed two percent of
his annual base salary.
Under the agreement, we may terminate Mr. OConnor at
any time with or without cause and
Mr. OConnor may at any time terminate his employment
with or without good reason, in each case as defined
in the agreement. If we terminate Mr. OConnor without
cause or if Mr. OConnor terminates his employment
with good reason, then Mr. OConnor will be entitled
to the following as severance payments:
|
|
|
|
|
Mr. OConnor will continue to receive his salary
through the date of termination and afterwards for three years
from the date of termination, |
|
|
|
Mr. OConnor will continue to receive his health
benefits for a period ending no later than the third anniversary
of the date of termination, |
|
|
|
all of Mr. OConnors stock options or other
stock grants will immediately vest in full and remain
exercisable until the earlier of their expiration or three years
from the date of termination, |
15
|
|
|
|
|
all incentive cash grants shall immediately vest and be payable
to Mr. OConnor as if all targets and conditions had
been met, except where a specific service is required of
Mr. OConnor for a specific period of time, in which
case the maximum amount of the incentive cash grant will be
payable on a pro rata basis, and |
|
|
|
Mr. OConnor will be paid the balance of all amounts
credited to his deferred compensation account. |
Upon a change of control, as defined in the agreement, if,
within two years after the change of control,
Mr. OConnors employment is terminated by us
without cause or if Mr. OConnor terminates his
employment with good reason, then we are required to pay
Mr. OConnor:
|
|
|
|
|
the severance payments described above, paid in a single lump
sum, and |
|
|
|
three times the maximum annual bonus that Mr. OConnor
would have been eligible to receive in the fiscal year when the
termination occurred, paid in a single lump sum. |
Under the agreement, Mr. OConnor is subject to
confidentiality obligations, as well as non-compete and
non-solicitation covenants, for a three-year period following
the termination of his employment.
Any successor to our company will be required to assume and
perform all of our covenants, agreements and obligations under
the agreement.
Tod C. Holmes. We entered into a two-year employment
agreement with Tod C. Holmes to serve as our Senior Vice
President and Chief Financial Officer, effective as of
October 25, 2000 and as amended on January 31, 2003.
The agreement will continue in effect on a rolling two-year
basis. Per the agreement, Mr. Holmes salary is
$350,000 unless our board of directors expressly provides
otherwise. Mr. Holmes received an annual base salary of
$350,000 for our 2002 fiscal year and, based on our board of
directors annual review of Mr. Holmes, the board
determined to increase his annual base salary to $400,000 per
year effective August 1, 2003. For 2004, Mr. Holmes
received a grant of 1,500 shares of restricted stock in lieu of
a salary increase. Mr. Holmes annual salary may be
increased at any time at the discretion of our board of
directors to reflect merit or for other increases.
In addition to his base salary, Mr. Holmes was and is
eligible for an annual bonus of up to 60% of his annual base
salary through the term of the agreement. Mr. Holmes
annual bonus is based on the achievement of corporate goals and
objectives established by our board of directors or an
appropriate committee of the board of directors. Under the
agreement, Mr. Holmes is entitled to participate in our
stock option plans and other employee compensation programs that
we may establish. Mr. Holmes also is entitled to health,
life, and disability insurance and he may participate in other
benefit programs that we may establish. Mr. Holmes is also
entitled to be reimbursed annually for financial, estate and tax
planning activities in an amount not to exceed two percent of
his annual base salary.
Under the agreement, we may terminate Mr. Holmes at any
time with or without cause and Mr. Holmes may
at any time terminate his employment with or without good
reason, in each case as defined in the agreement. If we
terminate Mr. Holmes
16
without cause or if Mr. Holmes terminates his employment
with good reason, then Mr. Holmes will be entitled to the
following as severance payments:
|
|
|
|
|
Mr. Holmes will continue to receive his salary through the
date of termination and afterwards for two years from the date
of termination, |
|
|
|
Mr. Holmes will continue to receive his health benefits for
a period ending no later than the second anniversary of the date
of termination, |
|
|
|
all of Mr. Holmes stock options or other stock grants
will immediately vest in full and will remain exercisable until
the earlier of their expiration or two years from the date of
termination, |
|
|
|
all incentive cash grants shall immediately vest and be payable
to Mr. Holmes as if all targets and conditions had been
met, except where a specific service is required of
Mr. Holmes for a specific period of time, in which case the
maximum amount of the incentive cash grant will be payable on a
pro rata basis, and |
|
|
|
Mr. Holmes will be paid the balance of all amounts credited
to his deferred compensation account. |
Upon a change of control, as defined in the agreement, if,
within two years after the change of control,
Mr. Holmes employment is terminated by us without
cause or if Mr. Holmes terminates his employment with good
reason, then we are required to pay Mr. Holmes:
|
|
|
|
|
three times his annual salary, paid in a single lump sum, |
|
|
|
three times the maximum annual bonus that Mr. Holmes would
have been eligible to receive in the fiscal year when the
termination occurred, paid in a single lump sum, and |
|
|
|
the additional severance payments and benefits described above. |
Under the agreement, Mr. Holmes is subject to
confidentiality obligations, as well as non-compete and
non-solicitation covenants, for a three-year period following
the termination of his employment.
Any successor to our company will be required to assume and
perform all of our covenants, agreements and obligations under
the agreement.
David A. Barclay. We entered into a two-year employment
agreement with David A. Barclay to serve as our Senior Vice
President and General Counsel, effective as of October 25,
2000 and as amended on January 31, 2003. The agreement is
substantially on the same terms as Mr. Holmes
agreement, which is described above, except that
Mr. Barclay received an annual base salary of $300,000 for
our 2002 fiscal year and, based on the board of directors
annual review of Mr. Barclay, the board determined to
increase his annual base salary to $325,000 effective
August 1, 2003, For 2004, Mr. Barclay received a grant
of 1,500 shares of restricted stock in lieu of a salary
increase. Also, Mr. Barclay was and is eligible for an
annual bonus of up to 50% of his annual base salary through the
term of the agreement.
Michael J. Cordesman. We entered into a two-year
employment agreement with Michael J. Cordesman to serve as our
President and Chief Operating Officer, effective as of
January 31, 2003, and as amended on February 28, 2003.
The agreement is substantially
17
on the same terms as Mr. Holmes agreement, which is
described above, except that Mr. Cordesman received an
annual base salary of $360,000 from February 28, 2003 until
July 31, 2003, and received an annual base salary of
$425,000 from August 1, 2003 until February 29, 2004,
prorated for the partial year. Mr. Cordesmans salary
for any year after February 29, 2004 will be $425,000
unless our board of directors expressly provides otherwise. For
2004, Mr. Cordesman received a grant of 1,500 shares of
restricted stock in lieu of a salary increase. Also,
Mr. Cordesman was and is eligible for an annual bonus of up
to 70% of his annual base salary during the 2003 fiscal year and
each year thereafter, through the term of the agreement.
Harris W. Hudson. We entered into a six and one-half year
employment agreement with Harris W. Hudson to serve as our Vice
Chairman, effective as of July 31, 2001. Mr. Hudson
received an annual base salary of $500,000 for our 2002 fiscal
year, $400,000 for our 2003 fiscal year, $300,000 for our 2004
fiscal year and will receive $200,000 for our 2005 fiscal year
and $100,000 for our 2006 and 2007 fiscal years. Unless earlier
terminated in accordance with its terms, Mr. Hudsons
agreement will expire on December 31, 2007. The agreement
provides that Mr. Hudson will continue his service on our
board of directors and that Mr. Hudson will be nominated
for election to our board of directors at each annual meeting of
stockholders during the term of the agreement.
Mr. Hudson will not participate in any bonus program.
During the term of the agreement, Mr. Hudson is entitled to
health, life and disability insurance. During the term of the
agreement, Mr. Hudson will participate in our stock option
plans on the same basis that our independent directors
participate in these plans. Stock options previously granted to
Mr. Hudson will continue to vest and be exercisable in
accordance with the terms of the options granted.
Under the agreement, we may terminate Mr. Hudson at any
time with or without cause and Mr. Hudson may
terminate his employment with or without good
reason, in each case as defined in the agreement. If we
terminate Mr. Hudson without cause or if Mr. Hudson
terminates his employment with good reason, then Mr. Hudson
will be entitled to the following as severance payments:
|
|
|
|
|
Mr. Hudson will continue to receive his salary through the
end of the term of the agreement, |
|
|
|
Mr. Hudson will continue to receive his health benefits for
a period ending no later than the third anniversary of the date
of termination, and |
|
|
|
all of Mr. Hudsons stock options or other stock
grants will immediately vest in full and will remain exercisable
until the earlier of their expiration or December 31, 2009. |
Upon a change of control, as defined in the agreement, if,
within two years after a change of control,
Mr. Hudsons employment is terminated by us without
cause or if Mr. Hudson terminates his employment with good
reason, and if Mr. Hudson so elects, we are required to pay
to him the severance payments described above in a single lump
sum.
Under the agreement, Mr. Hudson is subject to
confidentiality obligations, as well as non-compete and
non-solicitation covenants, for a three-year period following
the termination of employment.
Any successor to the company will be required to assume and
perform all of our covenants, agreements and obligations under
the agreement.
18
Stock Incentive Plan
In July 1998, we adopted the Republic Services, Inc. 1998 Stock
Incentive Plan, which was amended and restated on March 6,
2002 and again on January 29, 2004. As amended and restated
to date, the 1998 Stock Incentive Plan provides for the grant of
options to purchase shares of common stock, stock appreciation
rights, restricted stock and deferred stock to employees and
non-employee directors at the discretion of our board of
directors. We have reserved 27,000,000 shares of common stock
for issuance under the 1998 Stock Incentive Plan.
As of March 14, 2005, we had options to purchase 12,393,547
shares of our common stock outstanding under our 1998 Stock
Incentive Plan. Beginning in 2004, in addition to prior option
grants, we granted restricted stock to our executive officers
and deferred stock units to our directors who were not full-time
members of the companys management. During 2005, we have
granted options to purchase 1,661,000 shares of our common
stock, 82,000 shares of restricted stock and 24,000 deferred
stock units. 4,222,373 shares remain available for grants and
awards under our 1998 Stock Incentive Plan.
Executive Incentive Plan
The Executive Incentive Plan authorizes the granting of annual
awards and long-term awards to executive officers selected from
time to time by the compensation committee to participate in the
plan. Annual awards are designed to recognize the annual
achievement by a participant of short-term goals and objectives
of the company. Long-term awards are designed to recognize the
impact of the participant upon the achievement by the company of
longer term success in enhancing shareholder values.
Annual Awards. Our executive officers are eligible to
receive annual awards under our Executive Incentive Plan based
upon achieving predetermined levels of (a) earnings per
share and (b) free cash flow. Free cash flow is defined as
cash provided by operating activities less purchases of property
and equipment, plus proceeds from the sale of property and
equipment.
Long-Term Awards. Long-term awards under the Executive
Incentive Plan are based on three-year rolling performance
periods of three calendar years each. A new performance period
begins on January 1 of each year, and payouts with respect to
each performance period are scheduled following the end of each
applicable three-year period. The payouts are based upon
achieving predetermined levels of (a) cash flow value
creation, which we define as net income plus after-tax interest
expense plus depreciation, depletion, amortization and accretion
less capital charges (net average assets multiplied by our
targeted weighted-average cost of capital), and (b) return
on invested capital. The committee believes using these
variables serves to align managements interests with the
companys stockholders. The committee also believes these
variables tie long-term
19
compensation more directly to actual executive performance
rather than measures based upon the vagaries of the stock market.
In 2002, after determining that one-time charges incurred in the
fourth quarter of 2001 would preclude the executives from
achieving the performance targets set at the beginning of 2001
for the three-year period ending December 31, 2003, the
compensation committee revised the three-year performance period
to a two-year performance period ending December 31, 2003
(thus eliminating the impact of 2001) and reduced the potential
awards for such two-year performance period to equal two-thirds
of the amounts originally granted for the three-year period.
401(k) Plan
We have adopted a 401(k) Savings and Retirement Plan that
qualifies for preferential tax treatment under Section 401(a) of
the Internal Revenue Code. Under the plan, all of our employees
who are not covered by a collective bargaining agreement may
participate in the plan following 90 days of service with
the company. In 2005, our employees are permitted to contribute
up to 15% of their salaries (up to a maximum contribution of
$14,000 per year, and an additional $4,000 for employees who are
50 years old or older). We match one-half of the first four
percent of an employees contributions under the plan in
shares of our common stock. The match is made on a quarterly
basis and is fully vested when made.
Deferred Compensation Plan
In 2003, we amended the Republic Services, Inc. Deferred
Compensation Plan. This plan provides an opportunity for our key
employees and non-employee directors to make pre-tax
payroll-deducted salary, stock grant and/or annual or long-term
award deferrals to the respective plans at the beginning of each
plan year at any percentage up to 90% for every compensation
category, and for some compensation categories, up to 100%.
Employee Stock Purchase Plan
We have adopted the Republic Services, Inc. Amended and Restated
Employee Stock Purchase Plan. All of our employees who work at
least 20 hours per week and have worked for us at least three
months may voluntarily participate in the plan. During specified
offering periods, these eligible employees may, through payroll
deductions, buy whole and fractional shares of our common stock
at a purchase price equal to 85% of the lower of (1) the
fair market value of our common stock on the first day of the
offering period and (2) the fair market value of our common
stock on the last day of the offering period. Employees may sell
the common stock purchased under the plan after they have owned
the shares for at least 180 consecutive days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
20
AUDIT COMMITTEE REPORT
The following statement made by the audit committee shall not
be deemed incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, and shall not otherwise be deemed filed
under either of these acts.
Management is responsible for the companys internal
controls, financial reporting processes and compliance with laws
and regulations and ethical business standards. The independent
auditor is responsible for performing an independent audit of
the companys consolidated financial statements in
accordance with generally accepted auditing standards and
issuing a report thereon. The audit committees
responsibility is to monitor and oversee these processes on
behalf of the board of directors.
In this context, the audit committee has reviewed and discussed
the audited financial statements with management and the
independent auditors. The audit committee has discussed with the
independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with
Audit Committees).
In addition, the audit committee has received from the
independent auditors the written disclosures and the letter
required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed
with them their independence from the company and its
management. The audit committee has considered whether the
independent auditors provision of audit-related and other
non-audit services to the company is compatible with maintaining
the auditors independence.
Finally, the audit committee has evaluated the independent
auditors role in performing an independent audit of the
companys financial statements in accordance with generally
accepted auditing standards and applicable professional and firm
auditing standards, including quality control standards. The
audit committee has received assurances from the independent
auditors that the audit was subject to its quality control
system for its accounting and auditing practice in the United
States. The independent auditors have further assured the audit
committee that its engagement was conducted in compliance with
professional standards and that there was appropriate continuity
of personnel working on the audit, availability of national
office consultation to conduct the relevant portions of the
audit, and availability of personnel at foreign affiliates to
conduct the relevant portions of the audit.
In reliance on the reviews, discussions and evaluations referred
to above, the audit committee recommended to the board of
directors that the audited financial statements be included in
the companys annual report on Form 10-K for the
fiscal year ended December 31, 2004 for filing with the
Securities and Exchange Commission. By recommending to the board
of directors that the audited financial statements be so
included, the audit committee is not opining on the accuracy,
completeness or presentation of the information contained in the
audited financial statements.
|
|
|
Audit Committee: |
|
|
Ramon A. Rodriguez, Chairman |
|
John W. Croghan |
|
W. Lee Nutter |
|
Allan C. Sorensen |
|
Michael W. Wickham |
21
AUDIT AND RELATED FEES
Audit Fees
The following table presents the aggregate fees billed to us by
Ernst & Young for the audit of our annual financial
statements for the fiscal years ended December 31, 2004 and
2003 and other services provided during those periods:
|
|
|
|
|
|
|
|
|
|
|
2003 | |
|
2004 | |
|
|
| |
|
| |
Audit Fees
|
|
$ |
669,491 |
|
|
$ |
1,612,938 |
|
Audit-Related Fees
|
|
|
56,644 |
|
|
|
26,000 |
|
Tax Fees
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
726,135 |
|
|
$ |
1,638,938 |
|
|
|
|
|
|
|
|
Fees for audit services include fees associated with the annual
audit and Form 10-K, the review of our reports on
Form 10-Q and comfort letters. Audit fees for 2004 also
include amounts related to Ernst & Youngs report
on our internal controls in accordance with the Sarbanes-Oxley
Act of 2002. Audit-related fees primarily include accounting
consultation related to adoption of new pronouncements and
employee benefit plan audits.
Pre-Approval Policies and Procedures
Our audit committee pre-approves all fees to be paid to our
independent public accountants in accordance with the
Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in accordance therewith.
PROPOSAL 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Our audit committee has selected the firm of Ernst &
Young LLP as independent public accountants of our company and
its subsidiaries for the year ending December 31, 2005.
This selection will be presented to the stockholders for
ratification at the annual meeting. Ernst & Young has
been serving our company in this capacity since June 2002. If
the stockholders do not ratify the appointment of
Ernst & Young, the selection of independent public
accountants may be reconsidered by our audit committee.
Representatives of Ernst & Young are expected to be present
at the annual meeting, will have the opportunity to make a
statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
The board of directors recommends a vote FOR
ratification of the appointment of Ernst & Young LLP as the
companys independent public accountants for 2005.
22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Based solely upon a review of (1) Forms 3 and 4 and
amendments to each form furnished to us pursuant to
Rule 16a-3(e) under the Exchange Act during our fiscal year
ended December 31, 2004, (2) any Forms 5 and
amendments to the forms furnished to us with respect to our
fiscal year ended December 31, 2004, and (3) any
written representations referred to us in subparagraph (b)(2)(i)
of Item 405 of Regulation S-K under the Exchange Act,
no person who at any time during the fiscal year ended
December 31, 2004 was a director, officer or, to our
knowledge, a beneficial owner of more than 10% of our common
stock failed to file on a timely basis reports required by
Section 16(a) of the Exchange Act during the fiscal year
ended December 31, 2004 or prior fiscal years.
SECURITY OWNERSHIP OF FIVE PERCENT SHAREHOLDERS
The following table shows certain information as of
March 1, 2005 with respect to the beneficial ownership of
common stock by each of our stockholders who is known by us to
be a beneficial owner of more than 5% of our outstanding common
stock.
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned | |
Name of |
|
| |
Beneficial Owner |
|
Number | |
|
Percent | |
|
|
| |
|
| |
Cascade Investment LLC
|
|
|
18,078,300 |
(1) |
|
|
12.1 |
% |
|
2365 Carillon Point, Kirkland, WA 98033
|
|
|
|
|
|
|
|
|
|
|
(1) |
Based on Amendment No. 5 to Schedule 13G filed with
the SEC by Cascade Investment LLC on February 17, 2004. The
shares beneficially owned by Cascade may be deemed beneficially
owned by William H. Gates III as the sole member of Cascade.
Mr. Gates also may be deemed to beneficially own 900,000
shares of our common stock held by the Bill & Melinda Gates
Foundation (the Foundation). Michael Larson, the
manager and executive officer of Cascade, has voting and
investment power with respect to the common stock held by
Cascade. In addition, Mr. Larson acts with investment
discretion for Mr. Gates, as sole trustee of the
Foundation, in respect of the common stock owned by the
Foundation. Mr. Larson disclaims any beneficial ownership
of the common stock beneficially owned by Cascade, the
Foundation or Mr. Gates. |
23
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows certain information as of
March 14, 2005 with respect to the beneficial ownership of
common stock by (1) each of our current directors,
(2) each of the executive officers listed in the
Summary Compensation Table on page 10 and
(3) all of our current directors and director nominees and
executive officers as a group. We have adjusted share amounts
and percentages shown for each individual, entity or group in
the table to give effect to shares of common stock that are not
outstanding but which the individual, entity or group may
acquire upon exercise of all options exercisable within
60 days of March 14, 2005. However, we do not deem
these shares of common stock to be outstanding for the purpose
of computing the percentage of outstanding shares beneficially
owned by any other individual, entity or group.
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned | |
Name of |
|
| |
Beneficial Owner |
|
Number** | |
|
Percent | |
|
|
| |
|
| |
James E. OConnor
|
|
|
496,980 |
(1) |
|
|
* |
|
Harris W. Hudson
|
|
|
802,742 |
(2) |
|
|
* |
|
John W. Croghan
|
|
|
207,000 |
(3) |
|
|
* |
|
W. Lee Nutter
|
|
|
14,000 |
(4) |
|
|
* |
|
Ramon A. Rodriguez
|
|
|
97,000 |
(5) |
|
|
* |
|
Allan C. Sorensen
|
|
|
107,000 |
(6) |
|
|
* |
|
Michael W. Wickham
|
|
|
9,000 |
(7) |
|
|
* |
|
Michael J. Cordesman
|
|
|
87,248 |
(8) |
|
|
* |
|
Tod C. Holmes
|
|
|
226,699 |
(9) |
|
|
* |
|
David A. Barclay
|
|
|
201,738 |
(10) |
|
|
* |
|
All directors and executive officers as a group (10 persons)
|
|
|
2,249,407 |
(11) |
|
|
1.5 |
% |
|
|
|
* |
|
|
|
|
Less than 1 percent. |
** |
|
All share numbers have been rounded to the nearest whole share
number. |
(1) |
|
The aggregate amount of common stock beneficially owned by
Mr. OConnor consists of 30,000 shares owned directly
by him, 40,000 shares of restricted stock, vested options to
purchase 420,000 shares, 821 shares owned through our 401(k)
Plan, 4,525 shares owned through our Deferred Compensation Plan
and 1,634 shares owned through our Employee Stock Purchase Plan. |
(2) |
|
The aggregate amount of common stock beneficially owned by
Mr. Hudson consists of 100 shares owned directly by him,
vested options to purchase 795,000 shares, 642 shares owned
through our 401(k) Plan and 7,000 deferred stock units. |
(3) |
|
The aggregate amount of common stock beneficially owned by
Mr. Croghan consists of 103,025 shares owned directly by
him, vested options to purchase 100,000 shares and 7,000
deferred stock units. |
(4) |
|
The aggregate amount of common stock beneficially owned by
Mr. Nutter consists of 5,000 shares owned directly him and
9,000 deferred stock units. |
(5) |
|
The aggregate amount of common stock beneficially owned by
Mr. Rodriguez consists of vested options to purchase 90,000
shares and 7,000 deferred stock units. |
(6) |
|
The aggregate amount of common stock beneficially owned by
Mr. Sorensen consists of vested options to purchase 100,000
shares and 7,000 deferred stock units. |
(7) |
|
The aggregate amount of common stock beneficially owned by
Mr. Wickham consists of 9,000 deferred stock units. |
(8) |
|
The aggregate amount of common stock beneficially owned by
Mr. Cordesman consists of 10,500 shares owned directly by
him, 26,000 shares of restricted stock, vested options to
purchase 48,750 shares, 403 shares owned through our 401(k)
Plan, 633 shares owned through our Deferred Compensation Plan
and 962 shares owned through our Employee Stock Purchase Plan. |
(9) |
|
The aggregate amount of common stock beneficially owned by
Mr. Holmes consists of 24,500 shares owned directly by him,
26,000 shares of restricted stock, vested options to acquire
170,000 shares, 1,311 shares owned through our 401(k) Plan,
2,180 shares owned through our Deferred Compensation Plan and
2,708 shares owned through our Employee Stock Purchase Plan. |
(10) |
|
The aggregate amount of common stock beneficially owned by
Mr. Barclay consists of 13,500 shares owned directly by
him, 26,000 shares of restricted stock, vested options to
acquire 160,382 shares, 1,128 shares owned through our 401(k)
Plan and 728 shares owned through our Deferred Compensation Plan. |
24
|
|
|
(11) |
|
The aggregate amount of common stock beneficially owned by all
current directors, director nominees and executive officers as a
group consists of (a) 183,600 shares owned directly,
(b) 118,000 shares of restricted stock, (c) vested
options to purchase 1,884,132 shares, (d) 4,305 shares
owned through our 401(k) Plan, (e) 8,066 shares owned
through our Deferred Compensation Plan, (f) 46,000 deferred
stock units and (g) 5,304 shares owned through our Employee
Stock Purchase Plan. |
PROPOSAL 3
STOCKHOLDER PROPOSAL
The Amalgamated Bank LongView MidCap 400 Index Fund, which owns
more than $2,000 of the companys common stock, proposes
the adoption of the following resolution and has furnished the
following statement in support of its proposal:
Resolved: The shareholders of Republic Services,
Inc. urge the board of directors to seek shareholder approval
for future severance agreements with senior executives that
provide benefits in an amount exceeding 2.99 times the sum of
the executives base salary plus bonus. Future
severance agreements include employment agreements
containing severance provisions; retirement agreements; change
in control agreements; and agreements renewing, modifying or
extending existing such agreements. Benefits include
lump-sum cash payments (including payments in lieu of medical
and other benefits) and the estimated present value of periodic
retirement payments, fringe benefits and consulting fees
(including reimbursable expenses) to be paid to the executive.
Supporting Statement: Republic Services has entered into
a series of severance agreements, commonly known as golden
parachutes, that provide significant compensation to
Republic Services most senior executives if they are
terminated or leave the company in certain situations after a
change in control at the company.
Thus, the employment agreement for CEO James OConnor
provides that if he is terminated without cause or leaves for
good reason within two years after a change in
control, Mr. OConnor would receive:
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a cash payment equal to three times his salary and annual bonus; |
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continued benefit plan coverage for three years; |
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accelerated vesting of all stock options or other stock grants;
and |
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a tax gross-up payment for any excise taxes owed on
this payout. |
Severance agreements may be appropriate in some circumstances.
Nonetheless, we believe that the potential cost of such
agreements entitles shareholders to be heard when a company
contemplates paying out at least three times the amount of an
executives salary and bonus.
A shareholder approval requirement may induce restraint when
parties negotiate such agreements. Also, if a change in control
situation does occur, one reason may be that executives have not
managed the company in ways that maximize shareholder value, a
factor that argues against overly generous severance pay, or at
least in favor of shareholders having a say on compensation in
that situation.
Moreover, it can be costly to the shareholders if a company pays
the excise tax that an executive owes on golden parachute
payouts that exceed his or her average W-2
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compensation over the preceding five years. An article in the
October 2001 Journal of Accountancy estimates that golden
parachutes with such gross-up provisions can cost a company over
$3 to pay every $1 of benefits, and the after-tax costs can be
as high as $5 for every $1 of benefits.
Because it may not always practical to obtain prior shareholder
approval, Republic Services should have the option, in
implementing this proposal, to seek approval after the material
terms of the agreement are reached.
Institutional investors such as the California Public Employees
Retirement System recommend shareholder approval of these types
of agreements in its proxy voting guidelines, and several
companies have adopted this policy in recent years.
We urge shareholders to vote FOR this proposal.
COMPANY RESPONSE TO STOCKHOLDER PROPOSAL
The company does not believe that this proposal would enhance
stockholder value and be in the best interests of Republic
Services stockholders. To the contrary, we believe it
could hinder our board of directors ability to attract and
compensate qualified executives.
First, executive compensation matters at Republic Services are
overseen by the board of directors through a committee that is,
and has always been, comprised exclusively of independent
directors. Our executive compensation programs are designed to
attract and retain highly qualified executives and to motivate
executives to maximize stockholder returns.
The board of directors believes that use of employment and
severance agreements for a limited group of key employees is
reasonable, appropriate and absolutely necessary. We operate in
an industry that has experienced much volatility in the past few
years. We need the most qualified executives to set the pace for
the future. Like many corporations, we use these types of
agreements because they promote stockholders interests by
enabling the company to employ and retain the most qualified
executives. The number and type of agreements that Republic
Services has with its executives are consistent with industry
practice.
In addition, implementation of this proposal would be costly and
disruptive to the efficiency of the company. To call a special
meeting of stockholders to approve an agreement prior to signing
with an executive would result in considerable expense to the
company and is unworkable on its face. Alternatively under the
proposal, Republic Services could be required to present the
agreement to stockholders after the material terms of the
agreement are reached. This would mean that we would be unable
to assure a potential executive or officer that the agreement
would be approved or ratified. As a result of this uncertainty,
a candidate could not be sure of the terms of employment and
would be more likely to accept a competing offer that provided
final terms.
Vote Required and Recommendation of Board of Directors.
The affirmative vote of the holders of a majority of the common
shares present in person or represented by proxy and entitled to
vote on the stockholder proposal is required to approve the
stockholder proposal, which is framed as a
recommendation to the board of directors. An
abstention is treated as being present and entitled to vote on
the matter and, therefore, has the effect of a vote against the
stockholder proposal. A broker non-vote is treated
as not being
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entitled to vote on the matter and, therefore, is not counted
for purposes of determining whether the stockholder proposal has
been approved.
The board of directors recommends a vote AGAINST the adoption
of this stockholder proposal. Proxies solicited by the board of
directors will be so voted unless stockholders specify otherwise
in their proxies.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Any stockholder who wishes to present a proposal for action at
our next annual meeting of stockholders, presently scheduled for
May 2006, or wishes to nominate a director candidate for our
board of directors, must submit such proposal or nomination in
writing to the corporate Secretary at Republic Services, Inc.,
110 S.E. 6th Street, Fort Lauderdale, Florida 33301. The
proposal or nomination should comply with the time period and
information requirements as set forth in our by-laws relating to
stockholder business or stockholder nominations, respectively.
Stockholders interested in submitting a proposal for inclusion
in the Proxy Statement for the 2006 annual meeting of
stockholders may do so by following the procedures prescribed in
SEC Rule 14a-8. To be eligible for inclusion, stockholder
proposals must be received by our corporate Secretary at the
above address no later than December 1, 2005.
STOCKHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS
Any stockholder who wishes to communicate with the board of
directors, a committee of the board, the non-management
directors as a group or any member of the board, may send
correspondence to the corporate Secretary at Republic Services,
Inc., 110 S.E. 6th Street, Fort Lauderdale, Florida 33301.
The corporate Secretary will compile and submit on a periodic
basis all stockholder correspondence to the entire board of
directors, or, if and as designated in the communication, to a
committee of the board, the non-management directors as a group
or an individual member. The independent members of the board of
directors have approved this process.
OTHER MATTERS
You are again invited to attend the annual meeting at which our
management will present a review of our progress and operations.
Management does not intend to present any other items of
business and knows of no other matters that will be brought
before the annual meeting. However, if any additional matters
are properly brought before the annual meeting, the persons
named in the enclosed proxy shall vote the proxies in their
discretion in the manner they believe to be in the best interest
of our company. We have prepared the accompanying form of proxy
at the direction of the board of directors and provide it to you
at the request of the board of directors. Your board of
directors has designated the proxies named therein.
THE COMPANYS ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2004, INCLUDING FINANCIAL STATEMENTS, IS BEING
MAILED TO STOCKHOLDERS WITH THIS PROXY STATEMENT. A COPY OF THE
COMPANYS ANNUAL REPORT ON FORM 10-K FOR 2004 FILED WITH
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THE COMMISSION, EXCLUDING EXHIBITS, MAY BE OBTAINED WITHOUT
CHARGE BY WRITING TO THE SECRETARY OF THE COMPANY, WHOSE ADDRESS
IS 110 S.E. 6TH STREET, FORT LAUDERDALE, FLORIDA 33301
OR BY VISITING THE COMPANYS WEBSITE AT
WWW.REPUBLICSERVICES.COM.
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APPENDIX A
Republic Services, Inc.
Third Amended and Restated Compensation Committee Charter
January 27, 2005
The Compensation Committee (the Committee) is
appointed by the Board of Directors (the Board) to
assist the Board in (i) determining Republic Services,
Inc.s (the Company) compensation philosophy
and programs, (ii) reviewing and approving corporate goals
and objectives relevant to the compensation of the Chief
Executive Officer (the CEO) and the other executive
officers of the Company, including payment of salaries, bonuses
and incentive compensation, (iii) evaluating the
performance of the CEO in light of those goals and objectives,
and determining and approving the CEOs compensation level
based on this evaluation, (iv) making recommendations to
the Board with respect to the compensation plans, incentive
compensation plans and equity-based plans of executive officers,
and administering the Companys stock option and other
employee benefits plans, including the 1998 Stock Incentive
Plan, as amended and restated March 6, 2002 and as further
amended on January 29, 2004, and the 401(k) Plan, and
(v) producing a compensation committee report on executive
compensation as required by the Securities and Exchange
Commission (the SEC) to be included in the
Companys annual proxy statement or annual report on
Form 10-K filed with the SEC.
The Committee shall consist of at least three members, one of
which shall serve as Chairman. The members of the Committee
shall meet the independence requirements of the New York Stock
Exchange, the SEC and Section 162(m) of the Internal
Revenue Code of 1986, as such requirements may be amended from
time to time. The members and the chairperson of the Committee
shall be appointed by the Board and may be removed by the Board.
Should any member of the Committee cease to be an independent
director, such member shall immediately resign his or her
membership on the Committee.
The Committee shall meet at least once each year. Additional
meetings may be called by the Chairman of the Committee as
needed. A majority of the members of the Committee shall
constitute a quorum for the transaction of business. Minutes are
recorded by the Secretary to the Committee. Approval of any
matter by a majority of the members present at a meeting at
which a quorum is present shall constitute approval of that
matter by the Committee. The Committee may also act by unanimous
written consent without a meeting. The Committee may form and
delegate authority to sub-committees when appropriate, provided
that any such sub-committee must be composed entirely of
independent directors and have a published committee charter.
In discharging its duties, the Committee shall have the
authority to retain special legal, accounting or other
consultants to advise the Committee. The Committee may request
any officer or employee of the Company or the Companys
outside counsel to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.
The Committee shall make regular reports to the Board. Nothing
in this Charter should be construed as precluding discussion of
CEO compensation with the Board generally, as it is not the
intent of this Charter to impair communication among members of
the Board.
A-1
The Committee shall have and may exercise the powers of the
Board in matters related to the following duties and
responsibilities:
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1. In consultation with the Companys Chief Executive
Officer, establish a compensation philosophy which, and create
and administer programs designed to: (a) fairly reward the
Companys executive and other officers for performance
benefiting the Companys stockholders, and (b) effectively
attracts and retains the executive talent necessary to
successfully lead and manage the Company. |
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2. From time to time review competitive practices and
trends, both inside and outside the Companys industry, to
determine the adequacy of the Companys executive
compensation programs. |
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3. Evaluate the performance of the Companys Chief
Executive Officer. |
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4. Administer, interpret and implement the Companys
executive compensation programs in a manner consistent with the
Companys corporate financial goals and compensation
philosophy including, without limitation, the following
activities: |
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a. Review, consider, and approve participation and
eligibility in the various components of the Companys
executive compensation programs. |
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b. Review and approve compensation levels for the
Companys officers who have been designated as
executive officers for purposes of Section 16
of the Securities and Exchange Act of 1934, as amended. |
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c. Review compensation levels for the Companys other
officers. |
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d. Review and approve employment contracts and other
agreements for the Companys executive and other officers. |
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e. Periodically review executive supplementary benefits
and, as appropriate, the organizations retirement,
benefit, and special compensation programs involving significant
cost. |
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f. Establish annual and long-term performance criteria and
goals at the beginning of each performance period, and certify
results achieved at the end of each period, for the executive
officers of the Company. |
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5. In consultation with the Companys Chief Executive
Officer, establish a general compensation approach and
philosophy applicable to the Companys overall employee
population. |
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6. Subject to items that require approval of the
Companys Board and/or stockholders, approve and administer
the Companys 1998 Stock Incentive Plan, as amended and
restated March 6, 2002 and as further amended on
January 29, 2004. |
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7. Prepare annual reports summarizing compensation levels
for the Companys five (5) most highly compensated
executive officers and explaining the relationship between
executive officer compensation and the Companys
performance, as required by the Securities and Exchange
Commission and generally accepted business practices. |
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8. Review and recommend to the Board any changes in
remuneration paid to members of the Board in connection with
service on the Board or on its Committees. |
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9. Conduct an annual performance evaluation of the
Committee. |
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10. Review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for
approval. |
A-2
PROXY
REPUBLIC SERVICES, INC.
This proxy is solicited on behalf of the Board of
Directors
James E.
OConnor and David A. Barclay, each with power of
substitution, are hereby authorized to vote all shares of common
stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of
Republic Services, Inc. to be held on May 12, 2005, or any
postponements or adjournments of the meeting, as indicated
hereon.
This proxy, when
properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is given, this proxy
will be voted FOR the election of all nominees for director, FOR
proposal 2 set forth on the other side of this proxy and AGAINST
proposal 3 set forth on the other side of this proxy. As to
any other matter, said proxies shall vote in accordance with
their best judgment.
The undersigned hereby
acknowledges receipt of the Notice of the 2005 Annual Meeting of
Stockholders, the Proxy Statement, and the Annual Report.
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1. Election of directors:
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o FOR all
nominees listed below |
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o WITHHOLD AUTHORITY
to vote for all nominees listed below |
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o *EXCEPTIONS
(FOR all nominees except as indicated in space below) |
The board of directors unanimously recommends that you vote
FOR all nominees. The Nominees: James E. OConnor,
Harris W. Hudson, John W. Croghan, W. Lee Nutter, Ramon A.
Rodriguez, Allan C. Sorensen and Michael W. Wickham.
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* INSTRUCTIONS: |
To withhold authority to vote for any individual nominee, mark
the Exceptions box above and write that
nominees name in the space provided below. |
(Continued and to be signed on reverse side)
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2. Ratification of the appointment of Independent Public
Accountants
FOR o AGAINST o ABSTAIN o
The board of directors unanimously recommends that you vote
FOR ratification of the appointment of Ernst & Young LLP as
the companys independent public accountants for 2005.
3. Stockholder proposal to require stockholder
approval of future severance agreements
FOR o AGAINST o ABSTAIN o
The board of directors unanimously recommends that you vote
AGAINST the stockholder proposal. |
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4. In their discretion, on such other matters as may
properly come before the meeting.
o Change
of Address and/or Comments Mark
Here: |
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Please sign exactly as name appears hereon When shares are held
by joint tenants, both should sign. If acting as attorney,
executor, trustee, or in any representative capacity, sign name
and title.
Dated ------------, 2005
Signature
Signature
if held jointly
Votes must be indicated
with x in black or blue
ink. |
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD
USING THE ENCLOSED ENVELOPE.