SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
|_| Definitive Proxy Statement Commission Only (as permitted
|_| Definitive Additional Materials by Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to Rule 14a-12
WASTE CONNECTIONS, INC.
-----------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
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(1) Title of each class of securities to which transaction applies: Common
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
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PRELIMINARY
NOTICE AND PROXY STATEMENT
WASTE CONNECTIONS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2003
Dear Stockholder of WASTE CONNECTIONS, INC.:
You are invited to attend the annual meeting of stockholders of WASTE
CONNECTIONS, INC. to be held on Friday, May 23, 2003, at 10:00 A.M., Pacific
Time. The meeting will be held at the Marriott Rancho Cordova, 11211 Point East
Drive, Rancho Cordova, California 95742 for the following purposes:
1. To elect two Class II directors to serve for a term of three years;
2. To approve the amendment of our Certificate of Incorporation to
increase the authorized number of shares of common stock from
50,000,000 to 150,000,000 shares;
3. To ratify the appointment of Ernst & Young LLP as our independent
auditors for the year 2003; and
4. To consider such other business as may properly come before the annual
meeting or any adjournment of the annual meeting.
Only stockholders of record at the close of business on March 31, 2003, are
entitled to receive notice of and to vote at the annual meeting or any
adjournment of the annual meeting.
Waste Connections' Annual Report for the year 2002 is enclosed for your
convenience.
Stockholders of record may vote their proxies by signing, dating and
returning the enclosed proxy card. If your shares are held in the name of a bank
or broker, you may be able to vote by telephone or on the Internet. Please
follow the instructions on the form you receive from your bank or broker. The
method by which you decide to vote will not limit your right to vote at the
annual meeting. If you later decide to attend the annual meeting in person, you
may vote your shares even if you have submitted a proxy in writing, by telephone
or on the Internet.
By Order of the Board of Directors,
Robert D. Evans
SECRETARY
April __, 2003
Your vote is important. Whether or not you plan to attend the annual
meeting, please sign and date the enclosed proxy or follow any telephone or
Internet procedures established by your bank or broker.
2
WASTE CONNECTIONS, INC.
35 IRON POINT CIRCLE, SUITE 200
FOLSOM, CALIFORNIA 95630
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PROXY STATEMENT
---------------
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2003
The Board of Directors of WASTE CONNECTIONS, INC., a Delaware corporation,
is furnishing this proxy statement and the accompanying proxy card to solicit
proxies from holders of our common stock for the annual meeting of stockholders
to be held on Friday, May 23, 2003, for the purposes described in the Notice of
Annual Meeting. We will bear the costs of soliciting proxies from our
stockholders. In addition to soliciting proxies by mail, our directors, officers
and employees, without receiving additional compensation, may solicit proxies by
telephone, by telegram or in person. We will arrange for brokerage firms and
other custodians, nominees and fiduciaries to forward solicitation materials to
the beneficial owners of common stock these brokerage firms, custodians,
nominees and fiduciaries hold of record, and we will reimburse them for
reasonable out-of-pocket expenses incurred in forwarding these materials. We are
first mailing this proxy statement to our stockholders on or about April ___,
2003.
VOTING AT THE MEETING
The record date for determining stockholders entitled to notice of and to
vote at the annual meeting was the close of business on March 31, 2003. On that
date 28,152,853 shares of common stock were outstanding, all of which are
entitled to vote on all matters that properly come before the annual meeting.
Each stockholder has one vote for each share of common stock held.
Each proxy that we receive prior to the annual meeting will, unless revoked,
be voted in accordance with the instructions we are given for that proxy. If no
instruction is given, the shares will be voted FOR the election of our nominees
for director listed in this proxy statement, FOR the amendment of our
Certificate of Incorporation to increase the authorized number of shares of
common stock from 50,000,000 to 150,000,000 shares and FOR ratification of the
appointment of Ernst & Young LLP. A stockholder who has given a proxy in writing
may revoke it at any time before it is voted at the annual meeting in any of
three ways:
o by delivering a written notice of revocation to the Secretary of Waste
Connections;
o by delivering a duly executed proxy bearing a later date to the
Secretary of Waste Connections; or
o by attending the meeting and voting in person.
A quorum of stockholders is necessary to take action at the annual meeting.
A majority of the outstanding shares of common stock, represented in person or
by proxy, will constitute a quorum. We will use an automated system administered
by our transfer agent to tabulate the votes at the annual meeting. Under certain
circumstances, a broker or other nominee may have discretionary authority to
vote certain shares of common stock if the broker or nominee has not received
instructions from the beneficial owner or other person entitled to vote. We will
treat directions to withhold authority, abstentions and broker non-votes (which
occur when a broker or other nominee holding shares for a beneficial owner does
not vote on a particular proposal because the broker or other nominee does not
have discretionary voting power for that item and has not received instructions
from the beneficial owner) as present and entitled to vote for purposes of
determining whether a quorum is present at the annual meeting.
Accordingly, directions to withhold authority, abstentions and broker
non-votes will have no effect on the election of directors or on the voting on a
matter that requires the affirmative vote of a certain percentage of the votes
cast or shares voting on a matter, but will be the equivalent of a "no" vote on
a matter that requires the affirmative vote of a certain percentage of the votes
entitled to be cast on a matter.
No minimum number of votes is required to elect our nominees as directors.
The affirmative vote of at least a majority of the outstanding shares of common
stock is required to approve the amendment to our Certificate of Incorporation.
The affirmative vote of
3
a majority of the shares of common stock present in person or represented by
proxy at the annual meeting is required to ratify the appointment of Ernst &
Young LLP as independent auditors for the year 2003.
PRINCIPAL STOCKHOLDERS
The following table shows the amount of Waste Connections' common stock
beneficially owned, as of March 31, 2003, by: (i) each person or entity that we
know owns more than 5% of our common stock; (ii) the "named executive officers"
identified in "Executive Compensation" and each director of Waste Connections;
and (iii) all current directors, nominees and executive officers of Waste
Connections as a group.
PERCENTAGE
OF OUTSTANDING
NUMBER OF SHARES OF
NAME OF BENEFICIAL OWNER(1) SHARES COMMON STOCK
--------------------------- ------ ------------
FMR Corp (2). ...................................................... 2,414,204 8.6%
Westfield Capital Management Co., LLC (2)........................... 1,594,460 5.7
Ronald J. Mittelstaedt (3).......................................... 824,221 2.9
Eugene V. Dupreau (4)............................................... 170,000 0.6
Michael W. Harlan (5)............................................... 23,000 0.1
William J. Razzouk (6).............................................. 58,500 0.2
Robert H. Davis (7) ................................................ 60,100 0.2
Steven F. Bouck (8)................................................. 280,839 1.0
Darrell W. Chambliss (9)............................................ 148,748 0.5
Robert D. Evans (10)................................................ 61,000 0.2
Michael R. Foos (11)................................................ 106,346 0.4
All executive officers and directors as a group (15 persons)........ 1,920,340 6.8
-------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In general, a person who has voting
power and/or investment power with respect to securities is treated as the
beneficial owner of those securities. Shares of common stock subject to
options and/or warrants currently exercisable or exercisable within 60 days
and shares of common stock into which convertible securities are
convertible within 60 days count as outstanding for computing the
percentage beneficially owned by the person holding such options, warrants
and convertible securities. Except as otherwise indicated by footnote, we
believe that the persons named in this table have sole voting and
investment power with respect to the shares of common stock shown.
(2) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts
02109. The address of Westfield Capital Management Co., LLC is One
Financial Center, Boston, Massachusetts 02111. The share ownership of FMR
Corp. is based on a Schedule 13G filed with the Securities and Exchange
Commission on February 15, 2003, and the share ownership of Westfield
Capital Management Co., LLC is based on a Schedule 13G filed with the
Securities and Exchange Commission on January 16, 2003.
(3) Includes 156,667 shares purchasable under currently exercisable options and
300,000 shares subject to a zero-cost collar. Also includes 212,553 shares
held by Mittelstaedt Enterprises, L.P., of which Mr. Mittelstaedt is a
limited partner. Excludes 2,600 shares held by the Mittelstaedt Family
Trust as to which Mr. Mittelstaedt disclaims beneficial ownership.
(4) Includes 66,667 shares purchasable under currently exercisable warrants and
28,333 shares purchasable under currently exercisable options.
(5) Includes 20,000 shares purchasable under currently exercisable options.
(6) Includes 57,500 shares purchasable under currently exercisable options.
(7) Includes 60,000 shares purchasable under currently exercisable options.
(8) Includes 10,000 shares owned by Mr. Bouck's two minor sons, 129,917 shares
purchasable under currently exercisable options and 60,000 shares subject
to a zero-cost collar.
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(9) Includes 82,082 shares purchasable under currently exercisable options, and
33,333 shares subject to a zero-cost collar.
(10) Includes 60,000 shares purchasable under currently exercisable options.
(11) Includes 95,417 shares purchasable under currently exercisable options, and
33,333 shares subject to a zero-cost collar.
PROPOSAL I -- ELECTION OF DIRECTORS
Our Board of Directors is currently composed of five directors and is
divided into three classes. One class is elected each year for a three-year
term. At the annual meeting, Messrs. Harlan and Razzouk will be nominated to
serve in Class II until the annual meeting of stockholders to be held in 2006
and until a successor has been duly elected and qualified. Proxies will be
voted, unless otherwise indicated, for the election of Messrs. Harlan and
Razzouk for director. Proxies will be voted in a discretionary manner if Messrs.
Harlan and Razzouk are unable to serve. Messrs. Harlan and Razzouk currently
serve as directors of the Company.
Certain information about Messrs. Harlan and Razzouk and the directors
serving in Class I and Class III, whose terms expire in future years, is set
forth below.
DIRECTOR
NAME AND BACKGROUND AGE SINCE
------------------- --- -----
NOMINEES FOR CLASS II DIRECTOR FOR TERM EXPIRING IN 2006 42 1998
MICHAEL W. HARLAN is Senior Vice President, Chief Financial Officer and a
director of U.S. Concrete, Inc., a company focused on acquiring businesses in
the ready-mix concrete industry. From November 1997 to January 30, 1998, Mr.
Harlan served as a consultant to Waste Connections on various financial matters.
From March 1997 to August 1998, Mr. Harlan was Vice President and Chief
Financial Officer of Apple Orthodontix, Inc., a publicly traded company that
provides practice management services to orthodontic practices in the U.S. and
Canada. In January 2000, approximately 17 months after Mr. Harlan departed from
Apple Orthodontix, Apple Orthodontix filed a voluntary case under chapter 11 of
the federal bankruptcy code. From April 1991 to December 1996, Mr. Harlan held
various positions in the finance and acquisition departments of USA Waste
Services, Inc. (including Sanifill, Inc., which was acquired by USA Waste
Services, Inc.), including serving as Treasurer and Assistant Secretary,
beginning in September 1993. From May 1982 to April 1991, Mr. Harlan held
various positions in the tax and corporate financial consulting services
division of Arthur Andersen LLP, where he was a Manager since July 1986.
WILLIAM J. RAZZOUK owns WJR Advisors and WJR Ventures, management consulting and 55 1998
investment firms. From August 2000 to December 2002, he was a Managing Director
of Paradigm Capital Partners, LLC, a venture capital firm in Memphis, Tennessee
that focuses on meeting the capital and advisory needs of emerging growth
companies. From September 1998 to August 2000, he was Chairman of PlanetRx.com,
an e-commerce company focused on healthcare and sales of prescription and
over-the-counter medicines, health and beauty products and medical supplies. He
was also Chief Executive Officer of that company from September 1998 until April
2000. From April 1998 until September 1998, Mr. Razzouk owned a management
consulting business and an investment company that focused on identifying
strategic acquisitions. From September 1997 until April 1998, he was also the
President, Chief Operating Officer and a director of Storage USA, Inc., a
publicly traded real estate investment trust that owns and operates more than
350 mini storage warehouses. He served as the President and Chief Operating
Officer of America Online from February 1996 to June 1996. From 1983 to 1996,
Mr. Razzouk held various management positions at Federal Express Corporation,
most recently as Executive Vice President, World Wide Customer Operations, with
full worldwide profit and loss responsibility. Mr. Razzouk previously held
management positions at ROLM Corporation, Philips Electronics and Xerox
Corporation. He previously was a director of Fritz Companies, Inc., Sanifill,
Inc., Cordis Corp., Storage USA, PlanetRx.com, America Online, and La Quinta
Motor Inns.
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DIRECTOR
NAME AND BACKGROUND AGE SINCE
------------------- --- -----
CLASS I DIRECTORS CONTINUING IN OFFICE - TERM EXPIRING IN 2005
EUGENE V. DUPREAU has been Vice President-- Western Region and a director of 55 1998
Waste Connections since February 23, 1998. Mr. Dupreau served as President and a
director of Madera Disposal Systems, Inc. beginning in 1981 and 1985,
respectively, and held both positions until Waste Connections acquired Madera in
1998. He serves as a director of several civic and charitable organizations in
Madera County.
ROBERT H. DAVIS is Chief Executive Officer and a director of GreenMan 60 2001
Technologies, Inc., a tire shredding and recycling company. Prior to joining
GreenMan, Mr. Davis served as Vice President of Recycling for Browning-Ferris
Industries, Inc. from 1990 to 1997. A 26-year veteran of the solid waste and
recycling industry, Mr. Davis has also held executive positions with Fibres
International, Garden State Paper Company and SCS Engineers, Inc.
CLASS III DIRECTORS CONTINUING IN OFFICE - TERM EXPIRING IN 2004
RONALD J. MITTELSTAEDT has been President, Chief Executive Officer and a 39 1997
director of Waste Connections since the company was formed, and was elected
Chairman in January 1998. Mr. Mittelstaedt has more than 14 years of experience
in the solid waste industry. He served as a consultant to United Waste Systems,
Inc., with the title of Executive Vice President, from January 1997 to August
1997, where he was responsible for corporate development for all states west of
Colorado. As Regional Vice President of USA Waste Services, Inc. (including
Sanifill, Inc., which was acquired by USA Waste Services, Inc.) from November
1993 to January 1997, he was responsible for all operations in 16 states and
Canada. Mr. Mittelstaedt held various positions at Browning-Ferris Industries,
Inc. from August 1988 to November 1993, most recently as Division Vice President
in northern California, overseeing the San Jose market. Previously he was the
District Manager responsible for BFI's operations in Sacramento and the
surrounding areas.
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
Our Board of Directors held six meetings during 2002. The Board of Directors has
an Executive Committee, an Audit Committee, a Compensation Committee, and a
Nominating and Corporate Governance Committee. Each director attended at least
80% of the meetings of the Board of Directors and the committees on which he
served in 2002. The Board has determined that each of Messrs. Harlan, Razzouk
and Davis is "independent" within the meaning of Section 10A of the Securities
Exchange Act of 1934 and the corporate governance rule proposals approved by the
New York Stock Exchange Board of Directors and submitted to the Securities and
Exchange Commission for approval.
The Executive Committee, whose Chairman is Mr. Mittelstaedt and whose other
current members are Mr. Harlan and Mr. Razzouk, met six times in 2002. The
Executive Committee is authorized to exercise all of the powers and authority of
the Board of Directors in managing Waste Connections' business and affairs,
other than to authorize matters required by Delaware law to be approved by the
stockholders, and other than adopting, amending or repealing any By-law. Between
meetings of the board, the Executive Committee approves all acquisitions by
Waste Connections for stock and for cash or other consideration of $2.5 million
or more.
The Audit Committee, whose chairman is Mr. Harlan and whose other current
members are Mr. Razzouk and Mr. Davis, met eight times in 2002. The Board has
determined that all of the members of the Audit Committee are "financially
literate" within the meaning of the corporate governance rule proposals approved
by the New York Stock Exchange Board of Directors and submitted to the
Securities and Exchange Commission for approval. The Board has also determined
that Mr. Harlan is an "audit committee financial expert" as defined in Section
401(h) of Regulation S-K of the Securities and Exchange Commission and is
"independent" as defined in Section 303.01(B)(2)(a) of the listing standards of
the New York Stock Exchange. The committee's duties are discussed below under
"Audit Committee Report." The Board of Directors has amended its written charter
for the Audit Committee, which is attached as Exhibit A.
6
The Compensation Committee, whose chairman is Mr. Razzouk and whose other
current member is Mr. Harlan, met eight times in 2002. This committee is
responsible for establishing Waste Connections' executive officer compensation
policies and administering such policies. The Compensation Committee studies,
recommends and implements the amount, terms and conditions of payment of any and
all forms of compensation for our directors, executive officers, employees,
consultants and agents; approves and administers any guarantee of any obligation
of, or other financial assistance to any officer or other employee; and approves
the grant of options, warrants and other forms of equity incentives to officers,
directors, employees, agents and consultants. See "Executive Compensation -
Compensation Committee Report on Executive Compensation."
The Board of Directors established a Nominating and Corporate Governance
Committee on March 28, 2003, to recommend to the Board director nominees and to
develop and recommend to the Board and assist the Board in implementing
corporate governance principles. Mr. Davis is Chair of the Nominating and
Corporate Governance Committees, and Messrs. Harlan and Razzouk are members of
that committee.
The Nominating and Corporate Governance Committee will consider candidates
for director recommended by stockholders. A stockholder who wishes to submit a
candidate for consideration at the annual meeting of stockholders scheduled to
be held on May 26, 2004, must notify the Secretary of Waste Connections in
writing no earlier than February 26, 2004, nor later than March 27, 2004. The
stockholder's written notice must include information about each proposed
nominee, including name, age, business address, residence address, principal
occupation, shares beneficially owned and any other information required in
proxy solicitations. The notice must also include the nominating stockholder's
name and address and the number of shares of our common stock beneficially owned
by the nominating stockholder. The written notice must be accompanied by the
executed consent of each nominee to serve as a director if elected. These
procedures are prerequisites under Waste Connections' Amended and Restated
By-laws to a stockholder nominating a candidate at the meeting.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of Waste Connections do not
currently receive any compensation for attending meetings of the Board of
Directors. Each independent director receives a monthly retainer of $1,000 plus
a fee of $4,500 for attending each Board meeting and each committee meeting
(unless held on the same day as the full Board meeting), in addition to
reimbursement of reasonable expenses.
Each independent director who has not been an employee of Waste Connections
at any time during the 12 months preceding his initial election and appointment
to the Board is granted an option to purchase shares of our common stock at the
time of his or her initial election or appointment. Waste Connections granted to
Mr. Davis an option to purchase 20,000 shares of common stock at $29.86 per
share, which became exercisable on June 8, 2002.
Waste Connections grants each independent director, each year during which
such person serves on the Board, an option to purchase at least 20,000 shares of
our common stock. All such options have an exercise price equal to the fair
market value of the common stock on the grant date, vest in full on the grant
date, and expire upon the earlier to occur of ten years after the grant date or
one year after the director ceases to be a member of the Board.
DIRECTORS' EQUITY OWNERSHIP
On December 6, 2002, the Board established a policy requiring that, over a
three-year period, each independent director acquire ownership of a number
shares of Waste Connections' common stock with a market value at the time of
purchase equal to approximately three times each director's annual cash
compensation for serving as a director.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table contains information about the annual and long-term
compensation earned in 2000, 2001 and 2002 by the Chief Executive Officer,
Ronald J. Mittelstaedt, and the four most highly compensated executive officers
other than Mr. Mittelstaedt. The persons named in the table are sometimes
referred to in this proxy statement as the "named executive officers." The Chief
Executive Officer has been compensated in accordance with the terms of his
Employment Agreement described below.
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SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-------------------------
SHARES
UNDERLYING
ANNUAL COMPENSATION OPTIONS/
-------------------------------------- RESTRICTED WARRANTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER STOCK GRANTED(1) COMPENSATION
--------------------------- ----- ----------- ----------- ----------- ----------- ------------ --------------
Ronald J. Mittelstaedt............... 2000 $ 257,250 $ 120,000 $ 8,340 -- 70,000 --
President, Chief Executive 2001 295,000 -- 4,297 -- 115,000 --
Officer and Chairman 2002 295,000 157,000 5,176 -- 130,000 --
Steven F. Bouck...................... 2000 156,154 47,000 1,800 -- -- --
Executive Vice President 2001 192,913 -- -- -- 70,000 --
and Chief Financial Officer 2002 200,000 85,000 -- -- 85,000 --
Darrell W. Chambliss................. 2000 132,260 37,000 -- -- -- --
Executive Vice President-- 2001 149,112 -- -- -- 50,000 --
Operations 2002 154,154 70,000 -- -- 60,000 --
Robert D. Evans...................... 2000 -- -- -- -- -- --
Executive Vice President, General 2001 -- -- -- -- -- --
Counsel and Secretary (2) 2002 106,923 100,000 1,000,000 -- 130,000 --
Michael R. Foos...................... 2000 131,202 25,000 -- -- -- --
Chief Accounting Officer 2001 143,836 -- -- -- 45,000 --
and Vice President-- Finance 2002 145,327 45,000 -- -- 50,000 --
----------
(1) See "Option and Warrant Grants" below.
(2) "Other" annual compensation earned by Mr. Evans in 2002 consists of
stock options granted with an aggregate exercise price $600,000 below
the fair market value on the date of grant (see "Options and Warrant
Grants" below) and a $400,000 signing bonus that is payable to Mr.
Evans at his discretion through 2004.
8
STOCK OPTIONS AND WARRANTS
OPTION AND WARRANT GRANTS. The following table contains information
concerning the grant of options and warrants to purchase shares of our common
stock during 2002 to the named executive officers.
2002 OPTION AND WARRANT GRANTS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SHARES OPTIONS AND STOCK PRICE
UNDERLYING WARRANTS APPRECIATION FOR
OPTIONS AND GRANTED TO EXERCISE OPTION/WARRANT TERM(3)
NAME OF WARRANTS EMPLOYEES PRICE ------------------------
BENEFICIAL OWNER GRANTED(1) IN 2002 PER SHARE(2) EXPIRATION DATE 5% 10%
---------------- ---------- --------- ------------ --------------- ------------------------
Ronald J. Mittelstaedt...... 130,000 8.5% $ 27.80 7/18/2012 $2,272,825 $5,759,785
Steven F. Bouck............. 81,250 5.3 23.91 2/1/2012 1,221,746 3,096,144
3,750 0.2 27.80 7/18/2012 65,562 166,148
Darrell W. Chambliss........ 56,250 3.7 23.91 2/1/2012 845,824 2,143,484
3,750 0.2 27.80 7/18/2012 65,562 166,148
Robert D. Evans............. 60,000 3.9 22.00 6/4/2012 830,141 2,103,740
70,000 4.6 32.01 6/4/2012 1,409,164 3,571,099
Michael R. Foos............. 46,250 3.0 23.91 2/1/2012 695,455 1,762,420
3,750 0.2 27.80 7/18/2012 65,562 166,148
----------
(1) The options for 70,000 shares granted to Mr. Evans and all options granted
to Messrs. Mittelstaedt, Bouck, Chambliss and Foos vest over a three-year
period commencing on the date of grant. The options for 60,000 shares
granted to Mr. Evans vested immediately on the date of grant; however,
shares purchased on exercise of these options are restricted as to sale
with the restriction period lapsing as to 20,000 shares on each of June 1,
2003, June 1, 2004 and June 1, 2005.
(2) The options for 70,000 shares granted to Mr. Evans and all options granted
to Messrs. Mittelstaedt, Bouck, Chambliss and Foos were granted at fair
market value as determined by the Board of Directors on the date of grant.
The options for 60,000 shares granted to Mr. Evans at $22.00 per share were
granted at a discount of $10.00 per share from the fair market value as
determined by the Board of Directors on the date of grant. The value of Mr.
Evans' options for 60,000 shares was $600,000 on the grant date.
(3) Amounts reported in these columns represent amounts that the named
executive officer could realize on exercise of options and warrants
immediately before they expire, assuming that our common stock appreciates
at 5% or 10% annually. These amounts do not take into account taxes and
expenses that may be payable on such exercise. The amount actually realized
will depend on the price of our common stock when the options are
exercised, which may be before the term expires. The Securities and
Exchange Commission requires the table to reflect 5% and 10% annualized
rates of stock price appreciation. We do not project those rates and our
common stock may not appreciate at those rates.
OPTION AND WARRANT VALUES. The following table shows information about the
named executive officers' exercises of options and warrants during 2002 and the
value of their unexercised options and warrants outstanding as of December 31,
2002.
AGGREGATED OPTION EXERCISES IN 2002 AND YEAR-END OPTION AND WARRANT VALUES
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AND IN-THE-MONEY OPTIONS AND
WARRANTS AT WARRANTS AT
SHARES DECEMBER 31, 2002 DECEMBER 31, 2002(1)
NAME OF ACQUIRED VALUE ----------------------------- ------------------------------
BENEFICIAL OWNER ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------- ----------- ---------- -------------- ------------- --------------- --------------
Ronald J. Mittelstaedt............... -- $ -- 95,001 229,999 $ 1,870,151 $ 3,105,657
Steven F. Bouck...................... -- -- 79,500 131,666 1,642,205 1,867,120
Darrell W. Chambliss................. 66,666 1,821,875 46,666 93,333 949,071 1,318,991
Robert D. Evans...................... -- -- 60,000 70,000 996,600 462,000
Michael R. Foos...................... 65,000 1,103,998 65,000 80,000 1,577,462 1,126,837
----------
(1) Based on the closing price of our common stock of $38.61 on the New York
Stock Exchange on December 31, 2002, less the per share exercise price.
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EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of the named executive
officers. The employment agreements with Messrs. Mittelstaedt, Chambliss and
Foos were entered into on October 1, 1997, and amended effective June 1, 2000.
Messrs. Mittelstaedt's, Chambliss's and Foos's Employment Agreements terminate
on May 31, 2005. On each June 1, the terms of Messrs. Mittelstaedt's,
Chambliss's and Foos's Employment Agreements are automatically extended for an
additional year, thus extending the terms to three years from that date, unless
either party has given the other notice of termination. The employment agreement
with Mr. Bouck was entered into on February 1, 1998, and was amended effective
June 1, 2000. The initial term of Mr. Bouck's Employment Agreement terminated on
March 31, 2003 and was automatically renewed through March 31, 2004. Mr. Bouck's
Employment Agreement is automatically renewed for successive terms of one year
at the end of its initial term, unless either party gives the other notice of
termination. The employment agreement with Mr. Evans was entered into on May 10,
2002. The initial term of Mr. Evans' Employment Agreement terminates on May 31,
2005. On June 1 of each year, commencing June 1, 2003, Mr. Evans' Employment
Agreement is automatically extended for an additional year, thus extending the
term to three years from such date, unless either party gives the other notice
of termination.
Waste Connections or the named executive officer may terminate each
agreement with or without cause at any time. If we terminate the agreement
without cause (as defined in the agreement) or if the named executive officer
terminates the agreement for good reason (as defined in the agreement), we are
required to make certain severance payments, and all of the named executive
officer's unvested options, warrants and rights relating to our common stock
will immediately vest. A change of control of Waste Connections (as defined in
the agreement) is generally treated as a termination of the named executive
officer without cause.
Mr. Mittelstaedt's severance payment would be a lump sum payment in an
amount equal to his base salary and prorated portion of the maximum bonus
payable to him for the year in which the termination occurs, an amount equal to
three times his total compensation (including bonuses and other payments) for
the twelve months preceding the date of termination, plus three payments of
$1,333,333 each payable on the date of termination and each of the first and
second anniversaries of the date of termination, subject to compliance with
certain provisions of his Employment Agreement. On a change in control (as
defined in the Mr. Mittelstaedt's Employment Agreement), Mr. Mittlestaedt would
be entitled to receive the same payment up to a maximum of $5,500,000, payable
in a lump sum and not in installments.
Severance payments to Messrs. Chambliss, Foos and Evans would be a sum
equal to base salary and prorated portion of the maximum bonus payable to them
for the year in which the termination occurs plus an amount equal to three times
their respective then current base salary and maximum bonus for the year in
which termination occurs. One-third of such amount is payable on termination of
employment, and one-third is payable on each of the first and second
anniversaries of termination of employment, subject to compliance with certain
provisions of their respective Employment Agreements. Mr. Evans' Employment
Agreement provides that he may borrow up to $400,000 from Waste Connections in
$100,000 increments during each twelve month period commencing June 1, 2002,
2003, 2004 and 2005 bearing interest at the rate of 6% per annum. Any such loan
would be due and payable May 31, 2006, although if the market value of options
for 70,000 shares granted to Mr. Evans in 2002 is not greater than $1.5 million
for a specified period in the year before the loan is due, the principal and any
accrued interest will be forgiven, unless Mr. Evans elects to extend the loan
for another year. Mr. Evans has not borrowed any of these funds from us. As part
of Mr. Evans' severance package, the principal and accrued but unpaid interest
on these borrowings would be forgiven and, if the amount borrowed were less than
$400,000, Mr. Evans would receive a lump sum payment of $400,000, less the
principal amount of these borrowings that is forgiven. In the event of a change
in control, Messrs. Chambliss, Foos and Evans would be entitled to payment of
their respective severance amounts in a lump sum and not in installments.
Severance payments to Mr. Bouck would be a lump sum equal to his base
salary and prorated portion of the maximum bonus payable to him for the year in
which termination occurs, plus an amount equal to the greater of the aggregate
total compensation paid to him for the twelve months preceding termination or
the amount remaining payable under his agreement. Mr. Bouck would be entitled to
the same payments on a change in control.
In addition to their severance payments, in the event of a change in
control, the named executive officers would be entitled to receive either (i)
options to purchase stock of the acquiring company for the same number of shares
as they would have received had they exercised their Waste Connections options
immediately prior to the acquisition resulting in a change in control and
received for the shares acquired on exercise of such options shares of the
acquiring company in the change in control transaction. (The aggregate exercise
price for the shares covered by such options would be the aggregate exercise
price for the Waste Connections options.) or (ii) a lump sum payment equal on an
after-tax basis to at least the net after-tax gain they would have realized on
exercise of such options of the acquiring company and sale of the underlying
shares.
10
The base salaries and maximum performance bonuses as a percentage of annual
base salary for the named executive officers for the year 2003 is set forth
below:
ANNUAL BASE SALARY MAXIMUM BONUS
Ronald J. Mittelstaedt........... $295,000 100%
Steven F. Bouck.................. 200,000 50%
Darrell W. Chambliss............. 170,000 50%
Robert D. Evans.................. 200,000 50%
Michael R. Foos.................. 160,000 35%
CERTAIN TRANSACTIONS
Until May 31, 2002, Mr. Evans was a partner in the law firm of Shartsis,
Friese & Ginsburg LLP, which performed legal services for us. In 2002, we paid
Shartsis, Friese & Ginsburg LLP approximately $1,782,700 for legal fees and
expenses. Mr. Evans has received and will receive payments from that firm with
respect to income earned while he was a partner, a return of his invested
capital and certain fees payable to withdrawing partners. The amount of payments
from Shartsis, Friese & Ginsburg LLP to Mr. Evans is determined in part by the
amount of fees paid by us to that firm. No additional payments are due Mr. Evans
for periods after December 31, 2002.
Prior to joining us as a full time employee on May 1, 2002, Kenneth O.
Rose, our Senior Vice President-Administration, performed consulting services
under a consulting agreement between Waste Connections and Sterling Holdings,
LLC, a limited liability company owned by Mr. Rose and members of his family. We
paid approximately $116,000 to Sterling Holdings, LLC for these consulting
services and reimbursement of expenses.
Waste Connections employs John Felts, the brother-in-law of Ronald
Mittelstaedt, as a Network Manager. The total salary and bonus compensation paid
to Mr. Felts in 2002 by Waste Connections was $59,750. In addition, Mr. Felts
realized a gain of $84,438 on the sale of common stock received on exercise of
options. In 2002, we granted options to Mr. Felts for 4,000 share of our common
stock. The options were granted on the same terms and conditions as options to
all other employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee in 2002 was Messrs. Harlan and Razzouk. No
executive officer of Waste Connections served as a director or member of the
Compensation Committee of another entity, one of whose executive officers served
as a director or member of the Compensation Committee of Waste Connections.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has prepared the following report on executive
compensation to our stockholders.
COMPENSATION PROCEDURES AND POLICIES. The Compensation Committee determines
the compensation of all of the executive officers, including the named executive
officers. All decisions by the Compensation Committee relating to the
compensation of executive officers, including decisions relating to stock
options, are reviewed and approved by the full Board of Directors.
Our executive compensation philosophy and specific compensation plans tie a
significant portion of executive compensation to our success in meeting
specified targets of growth in revenues and earnings before interest, taxes,
depreciation and amortization ("EBITDA") as well as budgeted earnings per share
annually. Our compensation objectives include attracting and retaining the best
possible executive talent, motivating executive officers to achieve our
performance objectives, rewarding individual performance and contributions, and
linking executive and stockholder interests through equity-based plans.
Our executive compensation consists of three key components: base salary,
performance bonuses and stock options, each of which is intended to complement
the others and, taken together, satisfy our compensation objectives. The
Compensation Committee's policies with respect to each of the three components,
including the bases for the compensation awarded to Ronald J. Mittelstaedt, as
the Company's Chief Executive Officer, are discussed below.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly-held corporations for compensation in excess of $1,000,000
paid for any fiscal year to the Company's Chief Executive Officer and the four
(4) other most highly compensated officers. However, the statute exempts
qualifying performance-based compensation from the deduction limit if certain
requirements are met. The policy of the Compensation Committee is to structure
the compensation of the Company's executive
11
officers to avoid the loss of the deductibility of any compensation, even though
Section 162(m) does not preclude the payment of compensation in excess of
$1,000,000. Notwithstanding, the Compensation Committee reserves the authority
to award non-deductible compensation in circumstances as it deems appropriate.
The Company believes that Section 162(m) will not have any effect on the
deductibility of the compensation of any executive officer for 2002.
BASE SALARY. Each fiscal year, the Compensation Committee reviews the base
salary of the Company's Chief Executive Officer and the recommendation of the
Chief Executive Officer with regard to the base salary of the other executive
officers of the Company and approves, with any modifications it deems
appropriate, annual base salaries for each of the executive officers.
Recommended base salaries of the executive officers are based upon the base
salary ranges recommended annually by the Chief Executive Officer of the
Company. National survey data available regarding salaries of those persons
holding comparable positions at comparably sized solid waste service companies
is reviewed by the Compensation Committee to establish base salary ranges. The
base salary range is based upon a fair market base salary that is at the low end
of the range for comparable companies. The base salaries paid in 2002 to each of
the executive officers, including the Chief Executive Officer, were within the
recommended ranges.
ANNUAL PERFORMANCE BONUS. The Compensation Committee also considers the
payment of cash performance bonuses as part of its compensation program. Annual
cash bonuses reflect a policy of requiring a certain level of financial and
operational performance, generally measured in growth in revenues through
acquisitions and on achieving target levels of EBITDA and earnings per share,
for the prior fiscal year before any cash bonuses are earned by executive
officers. In general, the Compensation Committee has tied maximum potential
bonus compensation to base salary at levels that make us competitive in the
comparably sized solid waste services companies.
STOCK OPTIONS. The Company's executive officers are also entitled to
participate in the 1997 Stock Option Plan and the 2002 Senior Management Equity
Incentive Plan. The Compensation Committee believes that it is to Waste
Connections' advantage to increase the interest of the executives in our
welfare, as such employees share the primary responsibility for our management
and growth. In addition, the Compensation Committee believes that, because new
option grants are set at fair market value, such grants have the effect of
increasing the executive's price targets for our common stock. Moreover, our
stock option plan provides a significant non-cash form of compensation, which is
intended to benefit Waste Connections and its stockholders by enabling us to
continue to attract and to retain qualified personnel without having a negative
impact on our cash flow. The Compensation Committee generally sets option grant
levels at ranges that exceed those of comparably sized solid waste companies.
CHIEF EXECUTIVE'S COMPENSATION FOR 2002. On October 1, 2000, Mr.
Mittelstaedt's base salary was increased to $295,000 year and remained in effect
through December 31, 2002. Mr. Mittelstaedt's performance bonus for 2002 was
based on Waste Connections achieving specified levels of growth in revenues and
in achieving a specified level of EBITDA. The Company achieved these levels for
2002 and thus Mr. Mittelstaedt was entitled to receive a bonus of up to
$295,000, which equaled 100% of his base salary for 2002. However, Mr.
Mittelstaedt elected not to receive the maximum bonus to which he was entitled
for 2002 and requested to the Compensation Committee that he receive a bonus of
$157,000, which was approved by the Compensation Committee and paid to Mr.
Mittelstaedt in 2003. On June 4, 2002, Waste Connections granted Mr.
Mittelstaedt 119,209 non-qualified options and 10,791 incentive stock options to
purchase shares of Waste Connections common stock at a price of $27.80 per
share. These options vest ratably on an annual basis over three years from the
date of grant and expire on June 4, 2012.
This report is submitted on behalf of the Compensation Committee.
William J. Razzouk, Chairman
Michael W. Harlan
AUDIT COMMITTEE REPORT
The Audit Committee has prepared the following report to our stockholders.
The Audit Committee, whose chairman is Mr. Harlan and whose other current
members are Mr. Razzouk and Mr. Davis, met eight times in 2002. The Audit
Committee operates under a written charter adopted by the Board of Directors
(Exhibit A).
Management is responsible for Waste Connections' internal controls and the
financial reporting process. Our independent auditors are responsible for
performing an independent audit of our consolidated financial statements in
accordance with generally accepted accounting standards and issuing a report
thereon. The Audit Committee's responsibilities are to review our internal
controls and the objectivity of our financial reporting, and to meet with
appropriate financial personnel and our independent auditors in connection with
these reviews. The Audit Committee also reviews the professional services
provided by our independent auditors and reviews
12
such other matters concerning our accounting principles and financial and
operating policies, controls and practices, our public financial reporting
policies and practices, and the results of our annual audit as it may find
appropriate or as may be brought to its attention.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that Waste Connections' consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and the
Audit Committee has reviewed and discussed the consolidated financial statements
with management and the independent auditors. The Audit Committee discussed with
the independent auditors matters required to be discussed by the Statement on
Auditing Standards No. 61 (Communication with Audit Committee).
The independent auditors also provided to the Audit Committee the written
disclosures and letter required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). The Audit Committee discussed
with the independent auditors that firm's independence and considered the
compatibility of non-audit services with the auditors' independence.
Based on the Audit Committee's discussions with management and the
independent auditors and its review of the representations of management and the
report of the independent auditors, the Audit Committee recommended that the
Board of Directors include the audited consolidated financial statements in
Waste Connections' Annual Report on Form 10-K for the year ended December 31,
2002 filed with the Securities and Exchange Commission.
This report is submitted on behalf of the Audit Committee.
Michael W. Harlan, Chairman
William J. Razzouk
Robert H. Davis
COMMON STOCK PRICE PERFORMANCE GRAPH
The following common stock price performance graph compares the change in
cumulative total stockholder returns on our common stock for 2002, with the
cumulative total return of the S&P 500 and an index of peer group issues ("Peer
Group Index") over the same period, assuming the investment of $100 on May 22,
1998, and the reinvestment of dividends. The Peer Group Index includes Allied
Waste Industries, Inc., Casella Waste Systems, Inc., Republic Services, Inc.,
Waste Industries, Inc. and Waste Management, Inc.
[PERFORMANCE GRAPH]
------------------------ ---------------- ----------------- --------------- ------------------ ---------------
12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002
------------------------ ---------------- ----------------- --------------- ------------------ ---------------
WCN $ 128.7 $ 101.1 $ 231.5 $ 217.0 $ 270.4
------------------------ ---------------- ----------------- --------------- ------------------ ---------------
Peer Group Index 91.7 45.1 47.5 55.8 44.9
------------------------ ---------------- ----------------- --------------- ------------------ ---------------
S&P 500 110.7 132.3 118.9 103.4 79.2
------------------------ ---------------- ----------------- --------------- ------------------ ---------------
13
PROPOSAL 2 - AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
Our Certificate of Incorporation currently authorizes 50,000,000 shares of
common stock and 7,500,000 shares of preferred stock, all with a par value of
$0.01 per share. At the annual meeting, our stockholders will be asked to
consider and act on an amendment to our Certificate of Incorporation to increase
the authorized number of shares of common stock from 50,000,000 to 150,000,000
shares. The Board of Directors approved this amendment to the Certificate of
Incorporation on March 28, 2003. No change is being proposed to the authorized
preferred stock.
Waste Connections has grown significantly since inception in 1997. Our
Board believes that the increase in authorized shares is necessary to enable
Waste Connections to reserve a sufficient number of shares to meet all known
requirements and provide flexibility in the future for general corporate
purposes such as stock dividends or splits, acquisitions, equity and convertible
security financings, and issuances under stock option, warrant or other employee
incentive plans.
The proposed amendment would increase the number of shares of common stock
that Waste Connections is authorized to issue from 50,000,000 to 150,000,000.
The additional 100,000,000 shares would be part of the existing class of common
stock, and, if and when issued, would have the same rights and privileges as the
shares of common stock currently issued and outstanding. The common stock does
not and will not have any preemptive rights to purchase newly issued shares.
Unless deemed advisable by the Board of Directors, no further stockholder
authorization would be sought for the issuance of additional shares of common
stock. The Board of Directors has no immediate plans, intentions or commitments
to issue additional shares of common stock for any purpose, including rendering
more difficult or discouraging a merger, tender offer, proxy contest or other
change in control of Waste Connections.
If the amendment is approved, Article V, Section A of Waste Connections'
Amended and Restated Certificate of Incorporation would be amended and restated
to read as follows:
"The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The amount
of the total authorized capital stock of the Corporation is 157,500,000
shares, divided into (a) 150,000,000 shares of Common Stock, par value
$0.01 per share, and (b) 7,500,000 shares of Preferred Stock, par value
$0.01 per share."
If the amendment is approved by the stockholders, we expect to file with
the Delaware Secretary of State, promptly after the annual meeting, a
Certificate of Amendment of Certificate of Incorporation to become effective on
May 27, 2003.
BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR the proposal to amend the
Certificate of Incorporation to increase the authorized number of shares of
common stock from 50,000,000 to 150,000,000 shares.
14
PROPOSAL 3 -- APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, the Board of Directors has
reappointed Ernst & Young LLP as independent auditors to audit the consolidated
financial statements of Waste Connections for the year 2003. A summary of fees
for 2002 and 2001 to Ernst & Young LLP is as follows:
AUDIT FEES
Fees for audit services totaled approximately $650,000 and $615,000 in 2002
and 2001, respectively, including fees associated with the annual audits of our
consolidated financial statements, reviews of the consolidated financial
statements included in our quarterly reports on Form 10-Q, comfort letters,
consents, assistance with review of documents filed with the SEC, and accounting
consultations.
AUDIT-RELATED FEES
Fees for audit-related services totaled approximately $388,000 and $479,000
in 2002 and 2001, respectively. Audit-related services principally include
acquisition related due diligence and related accounting consultations.
TAX FEES
Fees for tax advice and planning totaled approximately $36,000 and $27,000
in 2002 and 2001, respectively.
ALL OTHER FEES
Ernst & Young LLP did not bill us for any other services for year 2002 or
2001.
The Audit Committee considers the services provided by Ernst & Young
described under " Audit-Related Fees" and "Tax Fees" to be compatible with Ernst
& Young LLP's maintaining its independence.
We expect representatives of Ernst & Young LLP to be present at the annual
meeting. They will have an opportunity to make a statement if they desire to do
so and will be available to answer appropriate questions.
The Board of Directors recommends a vote in favor of ratification of the
appointment. If the stockholders should fail to ratify the appointment of the
independent auditors, the Board of Directors would reconsider the appointment.
15
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of reports on Forms 3, 4 and 5 and any
amendments thereto furnished to the Company pursuant to Section 16 of the
Securities Exchange Act of 1934, as amended, and written representations from
the executive officers and directors that no other reports were required, we
believe that no executive officers or directors were late in filing such reports
during 2002, except for one director, Eugene V. Dupreau, who filed one Form 4
late, reporting four transactions in which a total of 1,205 shares of the
Company's common stock were given by Mr. Dupreau as gifts.
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
To be considered for inclusion in next year's proxy materials, stockholder
proposals to be presented at the Company's 2003 Annual Meeting must be in
writing and be received by Waste Connections no later than December ___, 2003.
Stockholder proposals submitted after that date will be considered untimely
within the meaning of Rules 14a-5(e)(2) and 14a-4(c)(1) under the Securities
Exchange Act of 1934, unless received between 60 and 90 days before the date of
the 2004 Annual Meeting.
OTHER BUSINESS
The Board of Directors does not know of any business to be brought before
the annual meeting other than the matters described in the Notice of Annual
Meeting. However, if any other matters are properly presented for action, it is
the intention of each person named in the accompanying proxy to vote the proxy
in accordance with his judgment on such matters.
By Order of the Board of Directors,
Robert D. Evans
SECRETARY
April __, 2003
A COPY OF THE COMPANY'S 2002 ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K WILL BE FURNISHED TO STOCKHOLDERS FREE OF CHARGE UPON
WRITTEN REQUEST TO THE OFFICE OF THE CHIEF FINANCIAL OFFICER OF THE COMPANY.
16
EXHIBIT A
WASTE CONNECTIONS, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
The Audit Committee of the Board of Directors will consist of at least three
directors, all of whom are independent of the Company and its management.
A member of the Audit Committee will be considered independent if the member
does not receive any compensation from the Company other than compensation as a
director, meets the independence standards required by the New York Stock
Exchange, and satisfies the independence requirements set forth in the Company's
Corporate Governance Guidelines.
All Audit Committee members must be financially literate and satisfy all other
requirements of the New York Stock Exchange regarding audit committee members.
At least one member must be an "audit committee financial expert", as defined by
SEC regulations.
The Board of Directors will annually determine that the members of the Audit
Committee satisfy all applicable independence, financial literacy, audit
committee financial expert and other qualification requirements.
Members of the Audit Committee are appointed by the Board of Directors and may
be removed by the Board of Directors in its discretion.
STATEMENT OF PURPOSE
The Audit Committee provides assistance to the directors in fulfilling their
responsibility to the Company's stockholders, potential stockholders, the
investment community and others, by overseeing the integrity of the Company's
financial statements; the financial reporting process; the Company's systems of
internal accounting and financial controls; the Company's compliance with legal
and regulatory requirements; the independent auditors' qualifications and
independence; and the performance of the Company's internal audit function and
independent auditors. In carrying out this purpose, it is the Audit Committee's
responsibility to maintain free and open communication among the committee, the
directors, the independent auditors and the Company's management.
The Audit Committee is authorized to investigate any matter brought to its
attention, with full access to all books, records, facilities and personnel of
the Company and the authority to engage independent counsel and accounting and
other advisors as it determines necessary to carry out its duties. The fees and
expenses of such independent counsel and accounting and other advisors will be
approved by the chair of the Committee and paid by the Company.
RESPONSIBILITIES
The Audit Committee policies and procedures should remain flexible, to allow it
to react to changing conditions and to ensure to the directors and stockholders
that the corporate accounting and reporting practices of the Company are in
accordance with all requirements and are of the highest quality.
However, at a minimum, the Audit Committee will:
o Be directly responsible for the appointment, termination (subject to
applicable stockholder ratification), compensation and oversight of the
independent auditors engaged to audit the financial statements of the
Company and its divisions and subsidiaries, including resolution of
disagreements between management and the independent auditors regarding
financial reporting issues. The Audit Committee has the sole authority to
approve all auditing engagements and all non-audit engagements of the
independent auditors, will approve all such services before they are
rendered, and will disclose its approval of non-audit services
17
to the Company's stockholders to the extent required by law. The Committee
may delegate a single member of the committee to pre-approve non-audit
services, in which case each such pre-approval will be presented to the
full Committee at its next meeting.
o At least annually, obtain and review a report from the Company's
independent auditors that describes the audit firm's internal
quality-control procedures, any material issues raised by the most recent
internal quality-control review or peer review of the audit firm, or by any
inquiry or investigation by governmental or professional authorities within
the past five years regarding any audits carried out by the audit firm, and
corrective measures taken, and all relationships between the audit firm and
the Company. Review with the independent auditors the nature and scope of
any disclosed relationships or professional services and take, or recommend
to the Board of Directors, appropriate action to ensure the continuing
independence of the auditors.
o Set clear Company hiring policies for employees or former employees of the
Company's independent auditors that satisfy SEC and New York Stock Exchange
requirements.
o Meet with the independent auditors and financial management of the Company
(including the Company's internal audit staff) to review the scope of and
plans for their respective audits and timely quarterly reviews for the
current year and the procedures to be used, including compensation and the
adequacy of staffing.
o At the conclusion of each annual audit, review the audit directly with the
independent auditors, including any problems, difficulties, comments or
recommendations of the independent auditors, and management's response.
o Report the results of the annual audit to the Board of Directors. If
requested by the Board, invite the independent auditors to attend the full
Board of Directors meeting to assist in reporting the results of the annual
audit or to answer other directors' questions (alternatively, the other
directors, particularly the other independent directors, may be invited to
attend the Audit Committee meeting during which the results of the annual
audit are reviewed).
o At least annually, review with the independent auditors and the Company's
financial and accounting personnel the adequacy and effectiveness of the
accounting and financial controls of the Company, including the
responsibilities, budget and staffing of the Company's internal audit
function, procedures to assess, monitor and manage business risks, and
legal and ethical compliance programs. Elicit recommendations for the
improvement of such controls and procedures and particular areas where new
or more detailed controls or procedures are desirable.
o Review analyses prepared by the Company's management and the independent
auditors about the Company's critical accounting policies and principles,
significant financial reporting issues and judgments made in preparation of
the financial statements (including analyses of the effects of alternative
GAAP methods on the financial statements), and significant changes in the
Company's selection or application of accounting principles. Review any
off-balance sheet structures that may have a material effect on the
Company's financial statements or related compliance policies. Review with
the Company's management and the independent auditors their judgements
about the quality, not just the acceptability, of accounting principles and
the degree of aggressiveness or conservatism of the Company's accounting
principles and underlying estimates.
o Review reports received from regulators and legal, accounting and
regulatory initiatives that may have a material effect on the Company's
financial statements or related compliance policies.
o Review the annual audited and quarterly financial statements (including
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations") with the Company's management and the
independent auditors before they are filed with the SEC (and before their
inclusion in a press release, if possible). Discuss the results of these
reviews and any other matters communicated to the Committee by the
independent auditors. The chair of the Committee may represent the full
Committee for purposes of these reviews and discussions.
o Discuss earnings press releases (paying particular attention to any "pro
forma" or "adjusted" non-GAAP information) and financial information and
earnings guidance provided to analysts and rating agencies. The chair of
the Committee may represent the full Committee for this purpose.
o Periodically meet separately with the Company's management, with the
personnel responsible for the Company's internal audit functions and with
the independent auditors to discuss issues and concerns. Among the items to
be discussed in the separate
18
meetings with the independent auditors are the independent auditors'
evaluation of the Company's financial, accounting and auditing personnel.
o Establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls
or auditing matters, and the confidential, anonymous submission by
employees of concerns about questionable accounting or auditing matters.
o Review accounting and financial human resources and succession planning
within the Company.
o Have the authority to delegate any of its responsibilities to single
members of the Committee or sub-committees, as the Committee deems
appropriate in its sole discretion.
o Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each committee meeting with, the Board of
Directors. Regularly review with the full Board any issues that arise with
respect to the quality or integrity of the Company's financial statements,
compliance with legal or regulatory requirements, performance and
independence of the Company's independent auditors or the performance of
the internal audit function.
o Prepare the Audit Committee's report to be included in the Company's annual
report to stockholders or proxy statement, as required by SEC regulations.
Include a copy of this Charter in the annual report to stockholders or the
proxy statement at least triennially or the year after any significant
amendment to the Charter.
o Perform an annual performance self-evaluation of the Audit Committee.
o Obtain the full Board of Directors' approval of this Charter and review and
reassess this Charter at least annually and otherwise as conditions
require.
19
WASTE CONNECTIONS, INC.
35 IRON POINT CIRCLE, SUITE 200
FOLSOM, CALIFORNIA 95630
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 23, 2003
The undersigned holder of Common Stock of Waste Connections, Inc. ("WCI")
acknowledges receipt of WCI's Proxy Statement dated April _, 2003, and Annual
Report to Stockholders for 2002. The undersigned revokes all prior proxies and
appoints Ronald J. Mittelstaedt and Steven F. Bouck, and each of them,
individually and with full powers of substitution and resubstitution, proxies
for the undersigned to vote all shares of WCI Common Stock that the undersigned
would be entitled to vote at the Annual Meeting of Stockholders to be held on
Friday, May 23, 2003 at 10:00 A.M., Pacific Time, at the Marriott Rancho
Cordova, 11211 Point East Drive, Rancho Cordova, California 95742, and any
adjournment thereof, as designated on the reverse side of this Proxy Card.
THIS PROXY WILL BE VOTED ACCORDING TO THE SPECIFICATIONS YOU MAKE BELOW. IF YOU
DO NOT SPECIFY BELOW BUT YOU DO SIGN AND DATE THIS PROXY CARD, THIS PROXY WILL
BE VOTED FOR THE PROPOSALS REFERRED TO IN (1), (2) AND (3) BELOW, AND IN THE
DISCRETION OF THE PERSONS NAMED AS PROXIES AS TO ANY OTHER MATTERS THAT PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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(CONTINUED FROM FACE OF CARD)
[X] Please mark your votes as in this example.
THE WCI BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IN PROPOSAL 1.
1. ELECTION OF DIRECTORS. Election of the following nominees as a director:
Michael W. Harlan
[ ] FOR [ ] WITHHOLD AUTHORITY
William J. Razzouk
[ ] FOR [ ] WITHHOLD AUTHORITY
THE WCI BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
2. Amendment of Waste Connections' Certificate of Incorporation to increase the
authorized number of shares of common stock from 50,000,000 to 150,000,000
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE WCI BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3.
3. Ratification of Appointment of Ernst & Young LLP as independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. OTHER BUSINESS. To transact such other matters as may properly come before
the special meeting or any adjournments thereof.
[ ] AUTHORIZED [ ] NOT AUTHORIZED
If you plan to attend the Annual Meeting of Stockholders, please mark the
following box and promptly return this Proxy Card. [ ]
DATED:__________________________________, 2003
______________________________________________
SIGNATURE OF STOCKHOLDER
______________________________________________
TITLE, IF ANY
______________________________________________
SIGNATURE OF STOCKHOLDER IF HELD JOINTLY
______________________________________________
TITLE, IF ANY
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PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THIS PROXY CARD. IF YOU HOLD
SHARES JOINTLY, EACH STOCKHOLDER SHOULD SIGN. IF YOU SIGN AS AN ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE.
IF THE SIGNER IS A CORPORATION, PLEASE SIGN THE FULL CORPORATE NAME BY THE
PRESIDENT OR AN AUTHORIZED OFFICER. IF THE SIGNER IS A PARTNERSHIP, PLEASE SIGN
THE FULL PARTNERSHIP NAME BY AN AUTHORIZED PERSON. PLEASE MARK, SIGN, DATE AND
MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
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