UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
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¨ | Preliminary Proxy Statement | |||
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
x | Definitive Proxy Statement | |||
¨ | Definitive Additional Materials | |||
¨ | Soliciting Material under Rule 14a-12 | |||
STERICYCLE, INC. | ||||
(Name of registrant as specified in its charter) | ||||
(Name of person(s) filing proxy statement, if other than the registrant) | ||||
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¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. | |||
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NOTICE OF 20142016 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 201425, 2016
Dear Stockholder:
You are cordially invited to attend our 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, May 21, 201425, 2016 at 11:00 a.m. Central Daylight Time at the Hilton Garden InnDoubleTree Hotel Chicago O’Hare Airport, 2930 SouthAirport-Rosemont, 5460 North River Road, Des Plaines,Rosemont, Illinois 60018.
At the Annual Meeting, you will be asked to consider and vote on the following matters:
the election to the Board of Directors (the “Board”) of the 910 nominees for director named in this proxy statement,statement;
approval of our 2014 Incentivethe Stericycle, Inc. Canadian Employee Stock Plan, under which stock options, stock appreciation rights, shares of restricted stock and restricted stock units may be awarded for up to a total of 2,500,000 shares of our common stock,Purchase Plan;
ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2014,2016;
an advisory vote to approve executive compensation (the “say-on-pay” vote);
a non-binding advisory resolution to approve the compensation of our named executive officers as disclosed in this proxy statement (sometimes referred to as the “say-on-pay” vote),stockholder proposal on an independent chairman;
a non-binding advisory resolution to recommend the frequency of a say-on-pay vote (every one, two or three years),
approval of an amendment to our amended and restated certificate of incorporation to give stockholders the right to call a special meeting,stockholder proposal entitled “Shareholder Proxy Access”; and
any other matter that properly comes before the meeting.
Only stockholders of record at the close of business on the record date of March 21, 201428, 2016 are entitled to vote at the Annual Meeting.
Admission to the Annual Meeting is byrequires an admissions card. If you plan to attend the meeting in person, please complete and return the Admission Request Form on the back cover of this proxy statement and an admissions card will be mailed to you. If you are the beneficial owner of shares held in street name, you must also provide confirmation of your stock ownership with your Admission Request Form. All Admission Request Forms must be received by May 14, 2014.18, 2016. An admissions card is not transferable. If you need directions to the meeting, please call Investor Relations at (800) 643-0240 ext. 2012.
For the convenience of our stockholders of record who do not plan to attend the Annual Meeting in person but who want their shares voted, we have enclosed a proxy card. If you do not plan to attend the Annual Meeting, please complete and return the proxy card in the envelope provided or go towww.proxyvote.com and follow the instructions. If you return your proxy card and later decide to attend the Annual Meeting and then vote in person, your earlier proxy card (or earlier vote by telephone or ifInternet) will be revoked. Your attendance at the Annual Meeting, by itself, does not revoke an earlier proxy. If for any other reason you want to revoke your proxy, you may do so at any time before your proxy is voted.
For the Board of Directors
Charles A. Alutto | Mark C. Miller | |
President and Chief Executive Officer | Executive Chairman of the Board |
April 11, 201415, 2016
Lake Forest, Illinois
Important Notice Regarding the Availability of Proxy Materials
for the 2016 Annual Meeting of Stockholders to be Held on May 25, 2016
The Proxy Statement, Notice of Annual Meeting and
2015 Annual Report to Stockholders are available at www.proxyvote.com
SUMMARY INFORMATIONSummary Information
This summary highlights information contained elsewhere in this proxy statement. It does not contain all information that you should consider, and you should read the entire proxy statement carefully before voting.
Annual Meeting of StockholdersANNUAL MEETING OF STOCKHOLDERS
•Time and Date: | 11:00 a.m. Central Daylight Time on |
•Place: | DoubleTree Hotel Chicago O’Hare 5460 North River Road Rosemont, Illinois 60018 |
2930 South River Road
Des Plaines, Illinois 60018
•Record Date: | March |
•Voting: | Stockholders as of the record date are entitled to |
• Attendance: | Admission to the meeting |
Meeting Agenda and Voting RecommendationsMEETING AGENDA AND VOTING RECOMMENDATIONS
Agenda Item | Board Recommendation | Page | ||
Election of | FOR EACH NOMINEE | 8 | ||
Approval of | FOR | |||
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for | FOR | 39 | ||
Advisory vote to approve executive compensation (the “say-on-pay” vote) | FOR | |||
Stockholder proposal on | ||||
Stockholder proposal entitled “Shareholder Proxy Access” | ||||
Board NomineesBOARD NOMINEES
The following table provides summary information about the nominees for director. Each director is elected by a majority of votes cast.
Nominee | Age | Director Since | Principal Occupation | Committees | Age | Director Since | Principal Occupation | Committees | ||||||||||||
Mark C. Miller | 58 | 1992 | Executive Chairman of the Board, Stericycle, Inc. | None | 60 | 1992 | Executive Chairman of the Board, Stericycle, Inc. | None | ||||||||||||
Jack W. Schuler | 73 | 1990 | Lead Director and former Chairman, Stericycle, Inc.; former president and chief operating officer, Abbott Laboratories; former chairman, Ventana Medical Systems, Inc.; co-founder and partner, Crabtree Partners LLC | • Nominating and Governance (Chair) | 75 | 1990 | Lead Director and former Chairman, Stericycle, Inc.; former president and chief operating officer, Abbott Laboratories; former chairman, Ventana Medical Systems, Inc.; co-founder and partner, Crabtree Partners LLC | • Nominating and Governance (Chair) | ||||||||||||
Charles A. Alutto | 48 | 2012 | President and Chief Executive Officer, Stericycle Inc. | None | 50 | 2012 | President and Chief Executive Officer, Stericycle Inc. | None | ||||||||||||
Thomas D. Brown | 66 | 2008 | Former senior vice president and president of the diagnostics division, Abbott Laboratories | • Audit | ||||||||||||||||
Lynn D. Bleil | 52 | 2015 | Former Senior Partner, McKinsey & Company | • Audit |
Nominee | Age | Director Since | Principal Occupation | Committees | Age | Director Since | Principal Occupation | Committees | ||||||||||||
Thomas D. Brown | 68 | 2008 | Former senior vice president and president of the diagnostics division, Abbott Laboratories | • Compensation | ||||||||||||||||
Thomas F. Chen | 64 | – | Former senior vice president and president of international nutrition, Abbott Laboratories | — | 66 | 2014 | Former senior vice president and president of international nutrition, Abbott Laboratories | • Audit | ||||||||||||
Rod F. Dammeyer | 73 | 1998 | Chairman, CAC, LLC; former vice chairman, Anixter International; former managing partner, Equity Group Investments, LLC. | • Audit (Chair) • Nominating and Governance | 75 | 1998 | Chairman, CAC, LLC; former vice chairman, Anixter International; former managing partner, Equity Group Investments, LLC. | • Audit (Chair) • Nominating and Governance | ||||||||||||
William K. Hall | 70 | 2006 | Former chairman and chief executive officer, Procyon Technologies, Inc.; former chairman and chief executive officer, Falcon Building Products, Inc. | • Audit | 72 | 2006 | Former chairman and chief executive officer, Procyon Technologies, Inc.; former chairman and chief executive officer, Falcon Building Products, Inc. | • Compensation (Chair) | ||||||||||||
John Patience | 66 | 1989 | Chairman of the board of Accelerate Diagnostics, Inc.; co-founder and partner, Crabtree Partners LLC; former vice chairman, Ventana Medical Systems, Inc.; former partner, McKinsey & Company | • Nominating and Governance • Audit | 68 | 1989 | Chairman of the board of Accelerate Diagnostics, Inc.; co-founder and partner, Crabtree Partners LLC; former vice chairman, Ventana Medical Systems, Inc.; former partner, McKinsey & Company | • Audit • Nominating and Governance | ||||||||||||
Mike S. Zafirovski | 60 | 2012 | Former director, president and chief executive officer of Nortel Networks Corporation; former director, president and chief operating officer of Motorola, Inc.; former president and chief executive officer of General Electric Lighting | • Compensation | 62 | 2012 | Former director, president and chief executive officer of Nortel Networks Corporation; former director, president and chief operating officer of Motorola, Inc.; former president and chief executive officer of General Electric Lighting | • Compensation |
Compensation HighlightsCOMPENSATION HIGHLIGHTS
Our compensation program is performance-oriented and designed to provide strong incentives to our executive officers to continue to improve our operating performance and thereby create value for all of our stockholders. The following table sets forth the 20132015 compensation for each named executive officer as determined under SEC rules. See the notes accompanying the Summary Compensation Table on page 2325 for more information.
Named Executive Officer | Salary | Bonus | Option Awards | All Other Compensation | Total Compensation | Salary | Bonus | Option Awards | All Other Compensation | Total Compensation | ||||||||||||||||||||||||||||||
Charles A. Alutto | $ | 348,077 | $ | 513,215 | $ | 3,176,224 | $ | 1,750 | $ | 4,039,266 | $ | 488,269 | $ | 465,327 | $ | 2,510,200 | $ | 1,750 | $ | 3,465,546 | ||||||||||||||||||||
Mark C. Miller | $ | 144,423 | $ | 149,917 | $ | 1,164,616 | $ | 1,750 | $ | 1,460,706 | $ | 147,462 | $ | 87,194 | $ | 753,060 | $ | 1,750 | $ | 989,466 | ||||||||||||||||||||
Frank J.M. ten Brink | $ | 307,269 | $ | 362,476 | $ | 1,482,238 | $ | 1,750 | $ | 2,153,733 | ||||||||||||||||||||||||||||||
Richard T. Kogler | $ | 307,269 | $ | 362,476 | $ | 1,482,238 | $ | 1,750 | $ | 2,153,733 | ||||||||||||||||||||||||||||||
Daniel V. Ginnetti | $ | 346,923 | $ | 234,871 | $ | 1,026,900 | $ | 1,750 | $ | 1,610,444 | ||||||||||||||||||||||||||||||
Brent Arnold | $ | 343,077 | $ | 234,871 | $ | 1,026,900 | $ | 1,750 | $ | 1,606,598 | ||||||||||||||||||||||||||||||
Michael J. Collins | $ | 272,115 | $ | 290,333 | $ | 952,867 | $ | 1,750 | $ | 1,517,065 | $ | 342,500 | $ | 205,703 | $ | 753,060 | $ | 1,750 | $ | 1,303,013 |
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GENERAL INFORMATION
ii
28161 North Keith Drive
Lake Forest, Illinois 60045
PROXY STATEMENT
20142016 Annual Meeting of Stockholders
To Be Held on May 21, 201425, 2016
In this proxy statement, “we,” “us,” “our”“our,” “Stericycle” and the “Company” all refer to Stericycle, Inc.
GENERAL INFORMATIONGeneral Information
Why didWHY DID I receive this proxy statement and other materials?RECEIVE THIS PROXY STATEMENT AND OTHER MATERIALS?
The Board of Directors (the “Board”) of Stericycle, Inc. is soliciting proxies to vote shares of our common stock at the 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, May 21, 201425, 2016 at 11:00 a.m. Central Daylight Time, at the Hilton Garden InnDoubleTree Hotel Chicago O’Hare Airport, 2930 SouthAirport-Rosemont, 5460 North River Road, Des Plaines,Rosemont, Illinois 60018.
This proxy statement and our annual report to stockholders (which includes a copy of our Annual Report on Form 10-K for the year ended December 31, 2013)2015), wereare first being made available to stockholders on April 11, 2014.15, 2016. Although both are made available together, our annual report to stockholders is not part of this proxy statement.
What will stockholders vote on at the Annual Meeting?WHAT WILL STOCKHOLDERS VOTE ON AT THE ANNUAL MEETING?
Stockholders will vote on following matters at the Annual Meeting:
the election to the Board of the 910 nominees for director named in this proxy statement (Item 1),;
approval of our 2014 Incentivethe Stericycle, Inc. Canadian Employee Stock Purchase Plan under which stock options, stock appreciation rights, shares of restricted stock and restricted stock units may be awarded for up to a total of 2,500,000 shares of our common stock (Item 2),;
ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 20142016 (Item 3),;
an advisory vote to approve executive compensation (the “say-on-pay” vote) (Item 4);
a non-binding advisory resolution to approve the compensation of our named executive officers as disclosed in this proxy statement (sometimes referred to as the “say-on-pay” vote)stockholder proposal on an independent chairman (Item 4),5);
a non-binding advisory resolution to recommend the frequency of a say-on-pay vote (every one, two or three years) (Item 5),
approval of an amendment to our amended and restated certificate of incorporation to give stockholders the right to call a special meetingstockholder proposal entitled “Shareholder Proxy Access” (Item 6), and
any other matter that properly comes before the meeting.
What are the Board’s voting recommendations?
The Board recommends that you vote your shares:
FOR each of the 910 nominees for election to the Board (Item 1),;
2016Proxy Statement | Stericycle, Inc. • 1 |
GENERAL INFORMATION
FOR approval of our 2014 Incentivethe Stericycle, Inc. Canadian Employee Stock Purchase Plan (Item 2),;
FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 20142016 (Item 3),;
FOR the advisory resolutionvote to approve theexecutive compensation of our named executive officers as disclosed in this proxy statement (Item 4),;
FOR EVERY YEARAGAINST as the frequency recommended by the resolutionstockholder proposal on the frequency of a say-on-pay votean independent chairman (Item 5),; and
FORAGAINST the approval of an amendment to our amended and restated certificate of incorporation to give stockholders the right to call a special meetingstockholder proposal entitled “Shareholder Proxy Access” (Item 6).
Who may vote at the Annual Meeting?WHO MAY VOTE AT THE ANNUAL MEETING?
Only stockholders of record as of the close of business on March 21, 201428, 2016 are entitled to vote at the Annual Meeting. Each outstanding share of common stock as of the record date is entitled to one vote on all matters that come before the meeting. There is no cumulative voting.
As of the close of business on the record date of March 21, 2014,28, 2016, there were 85,090,91184,815,104 shares of our common stock issued and outstanding.
Why didWHY DID I receive only a one-page notice in the mail regarding the Internet availability of proxy materials instead of receiving a full set of printed proxy materials?RECEIVE ONLY A ONE-PAGE NOTICE IN THE MAIL REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS INSTEAD OF RECEIVING A FULL SET OF PRINTED PROXY MATERIALS?
In accordance with the “notice and access” rules of the U.S. Securities and Exchange Commission (“SEC”), we have elected to provide access to our proxy materials, including this proxy statement and our annual report to stockholders, over the Internet, and accordingly, we mailed our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about April 11, 2014.15, 2016. This noticeNotice contains instructions on how to access our proxy materials over the Internet, how to request a printed or electronic copy of these materials and how to vote by Internet, telephone or mail. The voting facilities over the Internet or by telephone will remain open until 11:59 p.m. Eastern Daylight Time on May 24, 2016.
The Notice of Internet Availability of Proxy Materials is not a proxy card and cannot be used to vote your shares.
What is the difference between a stockholder of record and a beneficial owner of shares held in street name?WHAT IS THE DIFFERENCE BETWEEN A STOCKHOLDER OF RECORD AND A BENEFICIAL OWNER OF SHARES HELD IN STREET NAME?
If your shares are registered directly in your name with our stock registrar and transfer agent, Wells Fargo Shareowner Services, you are considered the stockholder of record for those shares and have the right to vote those shares directly. You may vote in person at the Annual Meeting or by proxy.
If your shares are held in an account at a brokerage firm, bank or other nominee (for convenient reference, a “broker”), you are considered the beneficial owner of those shares, which are said to be held in “street name,” and the broker is considered the stockholder of record for voting purposes. As the beneficial owner you cannot vote the shares in your account directly, but you have the right to instruct the broker how to vote them.
As a beneficial owner, you are invited to attend the Annual Meeting, but because you are not a stockholder of record, you may not vote your shares at the Annual Meeting unless you obtain a valid proxy from your broker.
IfIF I am a stockholder of record, how doAM A STOCKHOLDER OF RECORD, HOW DO I vote?VOTE?
You may vote in several ways. You may vote in person at the Annual Meeting, or you may vote by proxy over the Internet or by telephone by following the instructions provided in the Notice of Internet Availability of Proxy Materials.Notice.
2016Proxy Statement | Stericycle, Inc. • 2 |
GENERAL INFORMATION
In addition, if you request copies of our proxy materials in printed form, you may vote by completing and signing the proxy card included in the materials and returning it in the postage-paid envelope provided.
IfIF I am a beneficial owner of shares held in street name, how doAM A BENEFICIAL OWNER OF SHARES HELD IN STREET NAME, HOW DO I instruct my broker how to vote?INSTRUCT MY BROKER HOW TO VOTE?
If you are a beneficial owner of our common stock, the Notice of Internet Availability of Proxy Materials was forwarded to you by your broker. You may instruct your broker how to vote over the Internet or by telephone by following the instructions provided in the Notice.
In addition, if you request copies of our proxy materials in printed form, you may instruct your broker how to vote by completing and signing the voting instruction card included in the materials and returning it in the postage-paid envelope provided.
What happens ifWHAT HAPPENS IF I am a stockholder of record and sign and return the proxy card but do not make any voting choices?AM A STOCKHOLDER OF RECORD AND SIGN AND RETURN THE PROXY CARD BUT DO NOT MAKE ANY VOTING CHOICES?
The proxy holders (the persons named as proxies) will vote your shares in accordance with the Board’s voting recommendations for Items 1, 2, 3, 4, 5 and 6. See “What are the Board’s voting recommendations?” above.
We do not expect that any other matters will properly come before the Annual Meeting. If, however, any other matters do come before the meeting, the proxy holders will vote your shares in accordance with their judgment.
What happens ifWHAT HAPPENS IF I am a beneficial owner of shares held in street name and do not give voting instructions to my broker?AM A BENEFICIAL OWNER OF SHARES HELD IN STREET NAME AND DO NOT GIVE VOTING INSTRUCTIONS TO MY BROKER?
Under the stock exchange and other rules governing brokers who are voting shares held in street name, brokers have authority to vote those shares at their discretion on routine“routine” matters but may not vote those shares on “non-routine” matters. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2016 (Item 3) is considered a routine matter under the relevant rules. All of the other items to be voted on (Items 1, 2, 4, 5 and 6) are considered non-routine matters.
A “broker non-vote” occurs when your broker returns a proxy card for your shares held in street name but does not vote on a particular matter because (i) the broker has not received voting instructions from you and (ii) the broker does not have authority to vote on the matter without instructions because the matter is of a non-routine nature.
Which items to Broker non-votes will not have any effect on the result of the vote when they occur. There will be votednot be any broker non-votes on at the Annual Meeting are “routine” and which are “non-routine”?
The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2016 (Item 3) is considered a routine matter under the relevant rules. All of the other items, because brokers will have discretionary authority to be votedvote on (Items 1, 2, 4, 5 and 6) are considered non-routine matters.this matter.
What is the quorum required for the Annual Meeting?WHAT IS THE QUORUM REQUIRED FOR THE ANNUAL MEETING?
Holders of a majority of our outstanding shares entitled to vote at the Annual Meeting who are present in person or represented by proxy will constitute a quorum to conduct business at the meeting.
If you are a stockholder of record and vote your shares by proxy, your shares will be counted for purposes of determining whether a quorum is present even if your voting choice is to abstain. Similarly, if you are a beneficial owner of shares held in street name and do not give voting instructions to your broker, your shares will be counted for purposes of determining whether a quorum is present if your broker votes your shares on any routine matter.
2016Proxy Statement | Stericycle, Inc. • 3 |
GENERAL INFORMATION
What are my choices in voting on the matters to be voted on at the Annual Meeting?WHAT ARE MY CHOICES IN VOTING ON THE MATTERS TO BE VOTED ON AT THE ANNUAL MEETING?
On Item 1 (the election of directors), you may vote “For” or “Against” each individual nominee or “Abstain” from voting on the nominee’s election.
On Item 2 (approval of our 2014 Incentivethe Stericycle, Inc. Canadian Employee Stock Purchase Plan), Item 3 (ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm)firm for 2016), Item 4 (the say-on-pay vote), Item 5 (stockholder proposal on independent chairman) and Item 6 (approval of amendment to certificate of incorporation)(stockholder proposal entitled “Shareholder Proxy Access”), you may vote “For” or “Against” the proposal or “Abstain” from voting on the proposal.
On Item 5 (the frequency of a say-on-pay vote), you may vote for “Every Year,” “Every Two Years” or “Every Three Years,” or you may “Abstain” from voting on the proposal.WHAT ARE THE VOTING REQUIREMENTS TO APPROVE THE MATTERS TO BE VOTED ON AT THE ANNUAL MEETING?
What are the voting requirements to approve the matters to be voted on at the Annual Meeting?
Item 1 (election of directors): Each nominee for election as a director must receive more “For” votes than “Against” votes in order to be elected as a director. Abstentions and broker non-votes will not have any effect on the voting.result of the vote.
Item 2 (approval of our 2014 Incentivethe Stericycle, Inc. Canadian Employee Stock Purchase Plan): This proposal requires for approval the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote. Abstentions and broker non-votes will have the same effect as a vote “Against.” Broker non-votes will not have any effect on the result of the vote.
Item 3 (ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm)firm for 2016): This proposal requires for approval the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote. Abstentions and broker non-votes will have the same effect as a vote “Against.” Brokers will have discretionary authority to vote on Item 3, and therefore, there will not be any broker non-votes on this matter.
Item 4 (the say-on-pay vote): This proposal requires for approval the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote. Abstentions and broker non-votes will have the same effect as a vote “Against.”
Item 5 (the frequency of a say-on-pay vote): The frequency recommended under this proposal will be the frequency with the highest number of votes cast by stockholders present in person or represented by proxy, entitled to vote and voting. Abstentions and broker Broker non-votes will not have any effect on the voting.result of the vote.
Item 6 (approval of amendment to certificate of incorporation)5 (stockholder proposal on independent chairman): This proposal requires for approval the affirmative vote of a majority of the shares outstanding as of the record date (March 21, 2014).present in person or represented by proxy and entitled to vote. Abstentions and broker non-votes will have the same effect as a vote “Against.” Broker non-votes will not have any effect on the result of the vote.
Item 6 (stockholder proposal entitled “Shareholder Proxy Access”): This proposal requires for approval the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote. Abstentions will have the same effect as a vote “Against.” Broker non-votes will not have any effect on the result of the vote.
CanCAN I change my vote afterCHANGE MY VOTE AFTER I have voted?HAVE VOTED?
If you are a stockholder of record, you may change your vote by voting again over the Internet or by telephone (before those voting facilities are closed at 11:59 p.m. Eastern Daylight Time on May 20, 2014)24, 2016) or by returning a new, properly completed proxy card bearing a later date than the date of your original proxy card. In addition, you may revoke your proxy by attending the Annual Meeting in person and requesting to vote.
Attendance at the meeting in person will not, by itself, revoke your proxy. You may also revoke your proxy any time before the final vote at the Annual Meeting by filing a signed notice of revocation with the Secretary of the Company at 28161 North Keith Drive, Lake Forest, Illinois 60045.
2016Proxy Statement | Stericycle, Inc. • 4 |
GENERAL INFORMATION
If you are a beneficial owner of shares held in street name, you may submit new voting instructions to your broker over the Internet or by telephone (before those voting facilities are closed at 11:59 p.m. Eastern Daylight Time on May 20, 2014)24, 2016).
How canHOW CAN I find out the voting results of the Annual Meeting?FIND OUT THE VOTING RESULTS OF THE ANNUAL MEETING?
The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of elections and reported in a current report on Form 8-K which we will file with the SEC within four business days following the Annual Meeting.
Who is paying for the cost of this proxy solicitation?WHO IS PAYING FOR THE COST OF THIS PROXY SOLICITATION?
We will bear the cost of this proxy solicitation. Some of our officers and employees may solicit proxies by personal conversations, telephone, regular mail or email, but they will not receive any additional compensation for doing so. We will reimburse brokers and others for their reasonable charges and expenses in forwarding our proxy materials to stockholders who are beneficial owners of shares of our common stock.
HowMULTIPLE INDIVIDUALS RESIDING IN MY HOME ARE BENEFICIAL OWNERS OF STERICYCLE COMMON STOCK. WHY DID WE RECEIVE ONLY ONE MAILING?
We are sending only one envelope with multiple Notices to you if you share a single address with another stockholder, unless we have received instructions to the contrary from you. This practice, known as “householding,” is designed to eliminate duplicate mailings, conserve natural resources and reduce our printing and mailing costs. We will promptly deliver a separate Notice to you upon written or verbal request. If you wish to receive duplicate mailings in the future, you may contact Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. If you currently receive multiple Notices, you can request householding by contacting our Investor Relations as described above. If you own your shares through a broker, bank or other nominee, you can request householding by contacting the holder of record.
HOW CAN I attend the Annual Meeting?ATTEND THE ANNUAL MEETING?
We encourage our stockholders to attend the Annual Meeting. Admission to the meeting is byrequires an admissions card. If you plan to attend the meeting in person, please complete and return the Admission Request Form on the back cover of this proxy statement and an admissions card will be mailed to you. If you are the beneficial owner of shares held in street name, you must also provide confirmation of your stock ownership with your Admission Request Form (for example, by providing a copy of a brokerage firm statement).
All Admission Request Forms must be received by May 14, 2014.18, 2016. An admissions card is not transferable and will admit only the stockholder or stockholders to whom it was issued. If you need directions to the meeting, please call Investor Relations at (800) 643-0240 ext. 2012.
2016Proxy Statement | Stericycle, Inc. • 5 |
Stock Ownership by Directors and Officers
STOCK OWNERSHIP BY DIRECTORS AND OFFICERS
The following table provides information about the beneficial ownership of shares of our common stock as of the record date of March 21, 201428, 2016 by (1) each of our directors and nominees for director, (2) each of our executive officers listed in the Summary Compensation Table on page 2325 and (3) all of our directors and executive officers as a group:
Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) | |||||||
Directors (and nominees) | ||||||||
Mark C. Miller(3)(4) | 1,068,932 | 1.3 | % | |||||
Jack W. Schuler(3) | 1,279,771 | 1.5 | % | |||||
Charles A. Alutto(5) | 133,323 | * | ||||||
Thomas D. Brown | 43,241 | * | ||||||
Thomas F. Chen | — | * | ||||||
Rod F. Dammeyer(3) | 76,136 | * | ||||||
William K. Hall | 38,031 | * | ||||||
Jonathan T. Lord, M.D. | 66,388 | * | ||||||
John Patience(3) | 251,394 | * | ||||||
Ronald G. Spaeth | 39,313 | * | ||||||
Mike S. Zafirovski | 5,168 | * | ||||||
Officers | ||||||||
Frank J.M. ten Brink(3) | 178,242 | * | ||||||
Richard T. Kogler | 106,581 | * | ||||||
Michael J. Collins | 85,901 | * | ||||||
All directors and executive officers as a group (13 persons) | 3,372,421 | 4.0 | % |
Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) | |||||||
Directors | ||||||||
Mark C. Miller | 1,206,369 | 1.4 | % | |||||
Jack W. Schuler(3) | 702,071 | * | ||||||
Charles A. Alutto | 278,768 | * | ||||||
John Patience(3) | 200,805 | * | ||||||
Thomas D. Brown | 57,776 | * | ||||||
Rod F. Dammeyer(3) | 48,587 | * | ||||||
William K. Hall | 36,472 | * | ||||||
Mike S. Zafirovski | 24,297 | * | ||||||
Thomas F. Chen | 12,778 | * | ||||||
Lynn D. Bleil | 6,507 | * | ||||||
Named Executive Officers | ||||||||
Michael J. Collins | 111,660 | * | ||||||
Daniel V. Ginnetti | 71,085 | * | ||||||
Brent Arnold(3) | 67,760 | * | ||||||
All directors and executive officers as a group(15 persons) | 2,830,495 | 3.3 | % |
* | Less than 1%. |
(1) | This column includes shares of common stock issuable upon the exercise of stock options exercisable as of or within 60 days after March |
(2) | Shares of common stock issuable under a stock option exercisable as of or within 60 days after March |
(3) | The shares shown as beneficially owned by Mr. Schuler include |
2016Proxy Statement | Stericycle, Inc. • 6 |
STOCK OWNERSHIP
Stock Ownership of Certain StockholdersSTOCK OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table provides information about the beneficial ownership of our common stock by each person who was known to us to be the beneficial owner as of the record date (March 21, 2014)28, 2016) of more than 5% of our outstanding common stock:
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
The Vanguard Group, Inc.(1) 100 Vanguard Boulevard Malvern, Pennsylvania 19355 | 5,736,982 | 6.7 | % | |||||
Brown Advisory Incorporated(2) 901 South Bond Street, Ste. 400 Baltimore, Maryland 21231 | 5,085,570 | 5.9 | % | |||||
BlackRock, Inc.(3) 40 East 52nd Street New York, New York 10022 | 4,858,363 | 5.7 | % |
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
The Vanguard Group, Inc.(1) 100 Vanguard Boulevard Malvern, Pennsylvania 19355 | 7,152,533 | 8.4% | ||||||
BlackRock, Inc.(2) 55 East 52nd Street New York, New York 10055 | 5,557,708 | 6.5% | ||||||
Brown Advisory Incorporated(3) 901 South Bond Street, Ste. 400 Baltimore, Maryland 21231 | 4,865,678 | 5.7% |
(1) | The shares shown as beneficially owned are derived from the Schedule 13G (Amendment No. |
(2) | The shares shown as beneficially owned are derived from the Schedule 13G (Amendment No. 2) that |
(3) | The shares shown as beneficially owned are derived from the Schedule 13G (Amendment No. 4) that |
2016Proxy Statement | Stericycle, Inc. • 7 |
ITEM 1 ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Our Board of Directors is currently composed of 10 directors. However, two of our incumbent directors, Jonathan T. Lord, M.D. and Ronald G. Spaeth, have declined to seek reelection to the Board. As a result, the Nominating and Governance Committee and the Board have unanimously nominated Thomas F. Chen for election to the Board by our stockholders and, in accordance with our bylaws, the Board has fixed the number of directors constituting the Board at nine. With the exception of Mark C. Miller, our Executive Chairman of the Board, and Charles A. Alutto, our President and Chief Executive Officer, all of our directors are outside directors (i.e., directors who are neither officers nor employees of ours). The Board has determined that all of our outside directors are independent under the applicable listing standards of the NASDAQ Global Select Market.Market (“NASDAQ”).
Each director elected at the Annual Meeting will hold office until our annual meeting of stockholders in 20152017 or until his or her successor is elected and qualified.
Other than Mr. Chen, all nominees for election as directors are incumbent directors. The election of directors is uncontested.
Voting in Uncontested Director ElectionsVOTING IN UNCONTESTED DIRECTOR ELECTIONS
Under an amendment to our bylaws, that our Board of Directors adopted in March 2011, a nominee for election as a director must receive a majority of the votes cast in order to be elected as a director in an uncontested election (an election in which the number of nominees for election is the same as the number of directors to be elected). In other words, the nominee must receive more “for” votes than “against” votes, with abstentions and broker non-votes not having any effect on the voting.
If a nominee for election as a director is an incumbent director and the nominee is not re-elected, Delaware law provides that the director continues to serve as a “holdover” director until his successor is elected and qualified or until he resigns. Under our amended bylaws, an incumbent director who is not re-elected is required to tender his resignation as a director. Our Nominating and Governance Committee will review the circumstances and recommend to the Board whether to accept or reject the director’s resignation or take any other action. The Board is required to act on this recommendation and publicly disclose its decision and the rationale behind its decision within 90 days from the date that the election results are certified.
Nominees for DirectorNOMINEES FOR DIRECTOR
The following table provides information about the nominees for election as directors.
Nominee | Position with the Company | Age | ||||
Mark C. Miller | Executive Chairman of the Board of Directors | |||||
Jack W. Schuler | Lead Director | |||||
Charles A. Alutto | President, Chief Executive Officer, Director | |||||
Lynn D. Bleil | Director | 52 | ||||
Thomas D. Brown | Director | |||||
Thomas F. Chen | Director | |||||
Rod F. Dammeyer | Director | |||||
William K. Hall | Director | |||||
John Patience | Director | |||||
Mike S. Zafirovski | Director |
Mark C. Miller has served as our Executive Chairman since January 2013 and director as of May 1992. He became our Chief Executive Officer in May 1992 and Chairman of the Board of Directors in August 2008.2008, and served in each of those roles until January 2013. From May 1989 until joining us, Mr. Miller served as vice president for the Pacific, Asia and Africa in the international
division of Abbott Laboratories, a diversified health
2016Proxy Statement | Stericycle, Inc. • 8 |
ITEM 1 ELECTION OF DIRECTORS
care company, which he joined in 1976 and where he held a number of management and marketing positions. Mr. Miller serves as a director of Accelerate Diagnostics, Inc., a developer of automated diagnostics systems, and formerly served as a director of Ventana Medical Systems, Inc., a developer and supplier of automated diagnostic systems. He received a B.S. degree in computer science from Purdue University, where he graduated Phi Beta Kappa. Mr. Miller was selected by Morningstar, Inc. as its “2009 CEO of the Year.”
Jack W. Schuler has served as the Lead Director of our Board of Directors since August 2008 and served as our Chairman of the Board from January 1990 until becoming Lead Director. From January 1987 to August 1989 he served as president and chief operating officer of Abbott Laboratories, a diversified health care company, where he also served as a director from April 1985 to August 1989. Mr. Schuler serves as a director of Hansen Medical, Inc., a developer and manufacturer of medical robotics technology, Quidel Corporation, a developer and manufacturer of point-of-care diagnostic tests, and Accelerate Diagnostics, Inc., a developer of automated diagnostics systems, and formerly served as chairman of the board of directors of Ventana Medical Systems, Inc., and as a director of Hansen Medical, Inc., Medtronic, Inc., Amgen Incorporated, Chiron Corporation, Elan Corporation, plc, and ICOS Corporation. He is a co-founder of Crabtree Partners LLC, a private investment firm in Lake Forest, Illinois, and is a former trustee of Carleton College. Mr. Schuler received a B.S. degree in mechanical engineering from Tufts University and aan M.B.A. degree from the Stanford University Graduate School of Business Administration.
Charles A. Alutto has served as our President and Chief Executive Officer since January 2013 and as a director since November 2012. He joined us in May 1997 following our acquisition of the company where he was then employed. He became an executive officer in February 2011 and served as President, Stericycle USA. He previously held various management positions with us, including vice president and managing director of SRCL Europe and corporate vice president of our large quantity generator business unit. Mr. Alutto received a B.S. degree in finance from Providence College and aan M.B.A. degree in finance from St. John’s University.
Lynn D. Bleil has served as a director since May 2015. Ms. Bleil was the leader of McKinsey & Company’s West Coast Healthcare Practice, and a leader of McKinsey’s worldwide Healthcare Practice. She retired in November 2013 as a Senior Partner (Director) in the Southern California Office of McKinsey. During her more than 25 years with McKinsey, she worked exclusively within the healthcare sector, advising senior management and boards of leading companies on corporate and business unit strategy, mergers and acquisitions and integration, marketing and sales, public policy and organization. Ms. Bleil also serves as a director of DST Systems, Inc., a financial and health services information technology company, Sonova Holding AG, and Auspex Pharmaceuticals, Inc. (sold to Teva in May 2015). Ms. Bleil holds a B.S.E. degree in Chemical Engineering from Princeton University and an M.B.A. degree from the Stanford Graduate School of Business.
Thomas D. Brown has served as a director since May 2008. From 1974 until his retirement in 2002, Mr. Brown held various sales, marketing and management positions at Abbott Laboratories, where he served as a senior vice president and president of the diagnostics division from 1998 to 2002 and as corporate vice president for worldwide commercial operations from 1993 to 1998. He is a director of Quidel Corporation and Cepheid, a molecular diagnostics company, and formerly served as a director of Ventana Medical Systems, Inc. Mr. Brown received a B.A. degree from the State University of New York at Buffalo.
Thomas F. Chen has been nominated for election to our Board of Directors at the Annual Meeting.served as a director since May 2014. Mr. Chen served as senior vice president and president of international nutrition of Abbott Laboratories before retiring in 2010. During his 22-year career at Abbott, Mr. Chen served in a number of roles with expanded responsibilities, primarily in Pacific/Asia/Africa where he oversaw expansion into a number of emerging markets. Prior to Abbott, he held several management positions at American Cyanamid Company, which later merged with Pfizer. He is a director of Baxter International Inc. and formerly served as a director of Cyanotech Corporation. Mr. Chen received a Bachelor’s degree in International Business from National Cheng Chi University in Taipei, Taiwan, and aan M.B.A. degree from Indiana University.
Rod F. Dammeyer has served as a director since January 1998. He is the chairman of CAC, LLC, a private company providing capital investment and management advisory services, and is the former vice chairman of
2016Proxy Statement | Stericycle, Inc. • 9 |
ITEM 1 ELECTION OF DIRECTORS
Anixter International, where he served from 1985 until February 2001, and the former managing partner of corporate investments of Equity Group Investments, L.L.C., where he served from 1995 until June 2000. Mr. Dammeyer serves as a director of Quidel Corporation, a developer and manufacturer of point-of-care diagnostic tests, and aswas an independent trustee of various Invesco funds through December 2015, and formerly served as a director of Ventana Medical Systems, Inc. prior to its being acquired in February 2008 and as a director of The Scripps Research Institute. Mr. Dammeyer received a B.S. degree in accounting from Kent State University.
William K. Hall has served as a director since August 2006. He is a private equity investor who served from 2000 to 2009 as chairman of the board and chief executive officer of Procyon Technologies, Inc., a privately-
privately owned holding company. From 1994 to 2000, Mr. Hall was chairman and chief executive officer of Falcon Building Products, Inc., a manufacturer and distributor of residential and commercial construction and home improvement products. He serves as a director of Actuant Corporation, a diversified industrial products manufacturer, and W.W. Grainger, a supplier of facilities maintenance products, as a director of Real Industry, Inc., a diversified metals company, and as a trustee of the Rush University Medical Center.Center, and formerly served as a director of Actuant Corporation, a diversified industrial products manufacturer. Mr. Hall received a B.S.E. degree in aeronautical engineering, a M.S. degree in mathematical statistics, and M.B.A. and Ph.D. degrees in business from the University of Michigan.
John Patience has served as a director since our incorporation in March 1989. He is a co-founder and partner of Crabtree Partners LLC, a private investment firm in Lake Forest, Illinois, which was formed in June 1995. He is currently the chairman of the board and a director of Accelerate Diagnostics, Inc., a developer of automated diagnostics systems. He formerly served as a director and vice chairman of the board of directors of Ventana Medical Systems, Inc., a public company prior to its being acquired in February 2008. From January 1988 to March 1995, he was a general partner in a venture capital firm which he co-founded and which led our pre-IPO funding. He was previously a partner in the consulting firm of McKinsey & Company, specializing in health care. Mr. Patience received B.A. and LL.B. degrees from the University of Sydney in Sydney, Australia, and aan M.B.A. degree from the Wharton School of Business of the University of Pennsylvania.
Mike S. Zafirovskihas served as a director since November 2012. Mr. Zafirovski is the founder and president of The Zaf Group LLC, a management consulting and investment firm established in November 2012. Mr. Zafirovski has also served as an executive advisor to The Blackstone Group, a private investment banking company, since October 2011. From November 2005 to August 2009, Mr. Zafirovski served as the president and chief executive officer and a director of Nortel Networks Corporation. Prior to that, he was the president and chief operating officer and a director of Motorola, Inc. from July 2002 to January 2005, and remained a consultant to and a director of Motorola until May 2005. He served as executive vice president and president of the personal communications sector of Motorola from June 2000 to July 2002. Prior to joining Motorola, Mr. Zafirovski spent nearly 25 years with General Electric Company, where he served in management positions, including 13 years as president and chief executive officer of five businesses in the consumer, industrial and financial services areas, his most recent being president and chief executive officer of GE Lighting from July 1999 to May 2000. Mr. Zafirovski also serves as a director of The Boeing Company and threetwo private companies (Apria Healthcare Group Inc., and non-executive chairman of the board for DJO Global, Inc. and Polymer Group Inc.). He received a B.A. degree in mathematics from Edinboro University in Pennsylvania.
Director QualificationsDIRECTOR QUALIFICATIONS
We believe that our 910 director nominees possess the experience, qualifications and skills that warrant their election as directors. Our directors have in common, among other qualities, a breadth of business experience, seasoned judgment and an insistence on looking beyond the next quarter or the next year in directing and supporting our management. From their service on the boards of other public and private companies, our directors also bring to us the insights that they gain from the operating policies, governance structures and growth dynamics of these other companies.
2016Proxy Statement | Stericycle, Inc. • 10 |
ITEM 1 ELECTION OF DIRECTORS
Our directors individually bring to the Board a wide range of experience, backgrounds and knowledge. Among other things that each of our directors brings: Mr. Miller brings a wealth of knowledge of our industry; Mr. Alutto brings experience in sales and marketing, operations, and general management of our industry; Mr. Schuler brings experience managing the operations of a multinational healthcare company and knowledge of the dynamics of the healthcare industry; Mr. Alutto brings experience in sales and marketing, operations, and general management of our industry; Ms. Bleil brings significant expertise in the healthcare industry; Mr. Brown brings experience managing the operations of a multinational diagnostics business; Mr. Chen brings experience in managing and expanding the operations of a multinational nutrition business in Asia and emerging markets; Mr. Dammeyer brings experience in a very wide range of businesses; Mr. Hall brings experience in developing, managing and expanding global manufacturing companies; Mr. Patience brings experience with public and private healthcare companies; and Mr. Zafirovski brings experience managing the operations of multinational communications and technology companies.
When the Board elected Mr. Zafirovski as a director in November 2012, it was aware that Nortel Networks Corporation had filed for bankruptcy protection in January 2009 while Mr. Zafirovski was serving as its president and chief executive officer and a director. The Board concluded that this event did not impair Mr. Zafirovski’s ability to serve as one of the Company’s directors.
Committees of the BoardCOMMITTEES OF THE BOARD
Our Board of Directors has standing Compensation, Audit, and Nominating and Governance Committees. All of the members of each committee are outside directors who are independent under the applicable NASDAQ listing standards of the NASDAQ Global Select Market.standards.
The Compensation Committee makes recommendations to the Board of Directors concerning the base salaries and cash bonuses of our executive officers and reviews our employee compensation policies generally. The Committeecommittee also administers our stock option plans as they apply to our executive officers. In addition, the Committeecommittee periodically reviews our compensation practices to evaluate whether they pose enterprise or other risks to us.
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the integrity of our financial statements, the qualifications and experience of our independent accountants, the performance of our internal audit function and our independent accountants, and our compliance with legal and regulatory requirements.
The Audit Committee reviews our risk management policies and practices and reports any significant issues to the Board. Matters of risk management are brought to the Committee’scommittee’s attention by our Executive Vice President and Chief Financial Officer, who fills the functional role of our chief risk officer,General Counsel or by our chief regulatory compliance officer or our principal internal auditor who focuses on potential weaknesses that could result in a failure of an internal control process. Our management reviews and reports on potential areas of risk at the Committee’scommittee’s request or at the request of other members of the Board.
Nominating and Governance Committee
The Nominating and Governance Committee identifies and evaluates possible nominees for election to the Board of Directors and recommends to the Board a slate of nominees for election at the annual meeting of stockholders. The Committeecommittee also recommends to the Board director assignments to the Board’s committees. In addition, the Committeecommittee develops, recommends to the Board and oversees the implementation of our corporate governance policies and practices.
2016Proxy Statement | Stericycle, Inc. • 11 |
ITEM 1 ELECTION OF DIRECTORS
The Nominating and Governance Committee considers a variety of factors in evaluating a candidate for selection as a nominee for election as a director. These factors include the candidate’s personal qualities, with a particular emphasis on probity, independence of judgment and analytical skills, and the candidate’s professional experience, educational background, knowledge of our business and healthcare services generally and experience serving on the boards of other public companies. In evaluating a candidate’s qualification for election to the Board, the Committeecommittee also considers whether and how the candidate would contribute to the Board’s diversity, which we define broadly to include gender and ethnicity as well as background, experience and other individual qualities and attributes. The Committeecommittee has not established any minimum qualifications that a candidate must possess. In determining whether to recommend an incumbent director for re-election, the Committeecommittee also considers the director’s preparation for and participation in meetings of the Board of Directors and the committee or committees of the Board on which the director serves.
In identifying potential candidates for selection in the future as nominees for election as directors, the Nominating and Governance Committee relies on suggestions and recommendations from the other directors, management, stockholders and others and, when appropriate, may retain a search firm for assistance. The Committeecommittee will consider candidates proposed by stockholders and will evaluate any candidate proposed by a stockholder on the same basis that it evaluates any other candidate. Any stockholder who wants to propose a candidate should submit a written recommendation to the Committeecommittee indicating the candidate’s qualifications and other relevant biographical information and providing preliminary confirmation that the candidate would be willing to serve as a director. See page 14 “CommunicationsAny such recommendation should be addressed to the Board of Directors, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045.
In addition to recommending director candidates to the Nominating and Governance Committee, stockholders may also, pursuant to procedures established in our bylaws, directly nominate one or more director candidates to stand for election at an annual meeting of stockholders. A stockholder wishing to make such a nomination must deliver written notice of the nomination to the secretary of the Company not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders. If, however, the date of the annual meeting is more than 30 days before or after the first anniversary, the stockholder’s notice must be received no later than the close of business on the 90th day, and no earlier than the 120th day, prior to the annual meeting.
In accordance with a recent amendment to our bylaws, stockholders may now also submit director nominees to the Board to be included in our annual proxy statement, known as “proxy access.” Stockholders who intend to submit director nominees for inclusion in our proxy materials for the 2017 Annual Meeting of Stockholders must comply with the Board.”requirements of proxy access as set forth in our bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the Company not less than 120 days nor more than 150 days prior to the anniversary of the date that the Company first mailed its proxy materials for the annual meeting of the previous year.
The charters of the Compensation, Audit, and Nominating and Governance Committees are available on our website,www.stericycle.com.www.stericycle.com.
2016Proxy Statement | Stericycle, Inc. • 12 |
ITEM 1 ELECTION OF DIRECTORS
Committee Members and Meetings
The following table provides information about the membership of the committees of the Board of Directors during 2013:Directors.
Director | Compensation Committee | Audit Committee | Nominating and Governance Committee | |||||||||
Mark C. Miller | ||||||||||||
Jack W. Schuler | x* | |||||||||||
Charles A. Alutto | ||||||||||||
Lynn D. Bleil | x | |||||||||||
Thomas D. Brown | x | |||||||||||
Thomas F. Chen | x | |||||||||||
Rod F. | x* | x | ||||||||||
William K. Hall | x* | |||||||||||
| ||||||||||||
John Patience | x | x | ||||||||||
| ||||||||||||
Mike S. Zafirovski | x |
* |
(1) | The Board of Directors has determined that Mr. Dammeyer, the Chairman of the Audit Committee, is an |
Our Board of Directors held fiveeight meetings in person or by teleconference during 20132015 and acted without a formal meeting on a number of occasions by the unanimous written consent of the directors. The Audit Committee held eight meetings in person or by teleconference during the year. The Compensation Committee held twofour meetings during the year, one in person and one by teleconference.year. The Nominating and Governance Committee held twothree meetings in person during the year.
All of our directors Each director attended in person or participated by teleconference in allat least 75% of the aggregate of the total number of Board meetings and the total number of meetings of theall Board committees on which he or she served during his or her term of Directors during 2013, with the exception that two directors missed a telephonic meeting. All of the members of the Audit, Compensation and Nominating and Governance Committees attended in person or participated by teleconference in all of the meetings of those committees during the year, with the exception that one member of the Audit Committee missed three meetings, another member of the Audit Committee missed two meetings, and a third member of the Audit Committee missed one meeting.service.
We encourage our directors to attend the annual meeting of stockholders. All of the nominees for election as directors attended the 20132015 Annual Meeting of Stockholders, and we anticipate that all of our directors will attend this year’s Annual Meeting.
We amended our bylaws in August 2008 and November 2012 to require the Board of Directors to appoint one of our outside directors as the Lead Director if and when our president and chief executive, or any other officer or employee, is serving as the Executive Chairman of the Board. The Lead Director is required to be independent under the NASDAQ listing standards, of the NASDAQ Global Select Market, and serves at the Board’s pleasure until the next election of directors by the stockholders.
Working with the Executive Chairman of the Board, the Lead Director is responsible for coordinating the scheduling and agenda of boardBoard meetings and the preparation and distribution of agenda materials. The Lead Director presides when the Board meets in executive session or in the absence of the Executive Chairman of the Board and may call special meetings of the Board when he considers appropriate. In general, the Lead Director oversees the scope, quality and timeliness of the flow of information from our management to the boardBoard and serves as an independent point of contact for stockholders wishing to communicate with the Board other than through the Executive Chairman of the Board.
2016Proxy Statement | Stericycle, Inc. • 13 |
ITEM 1 ELECTION OF DIRECTORS
In August 2008, our Chairman of the Board, Jack W. Schuler, resigned as Chairman after serving for more than 18 years, and our Board appointed Mr. Schuler as our Lead Director, and he still serves in this position. Also in August 2008, the Board appointed our then President and Chief Executive Officer, Mark C. Miller, who had served in these positions for more than 16 years, to the additional position of Chairman of the Board. Effective January 2013, Charles A. Alutto became our President and Chief Executive Officer and Mr. Miller assumed the position of Executive Chairman of the Board. At this time, the Board believes that the Executive Chairman arrangement, together with the Lead Director, serve the Company well. It is anticipated that Mr. Miller will transition from Executive Chairman to Chairman during 2016 and that Mr. Schuler will continue as Lead Director following that transition. The combined experience and knowledge of Messrs. Alutto, Miller and Schuler in their respective roles of Chief Executive Officer, Executive Chairman and Lead Director provide the Board and Charles A. Alutto becamethe Company with continuity of leadership that has enabled the Company’s success with sufficient independent oversight of the Board through our President and Chief Executive Officer.Lead Director.
Corporate GovernanceCORPORATE GOVERNANCE
Executive Sessions of the Board
Our Board of Directors excuses Mr. Alutto, our President and Chief Executive Officer, as well as any of our other executive officers who may be present by invitation, from a portion of each meeting of the Board in order to allow the Board, with our Lead Director presiding, to review Mr. Alutto’s performance as President and Chief Executive Officer and to enable each director to raise any matter of interest or concern without the presence of management.
Our directors annually review the performance of the Board of Directors and its committees and the performance of their fellow directors by completing confidential evaluation forms that are returned to Mr. Schuler as the Chairman of the Nominating and Governance Committee. At a subsequent meeting of the Board, Mr. Schuler leads a discussion with the full Board of any issues and suggestions for improvement identified in his review of these evaluation forms.
Policy on Related Party Transactions
The Board of Directors has adopted a written policy requiring certain transactions with related parties to be approved in advance by the Audit Committee. For purposes of this policy, a related party includes any director or executive officer or an immediate family member of any director or executive officer. The transactions subject to review include any transaction, arrangement or relationship (or any series of similar transactions, arrangements and relationships) in which (i) we or one of our subsidiaries will be a participant, (ii) the aggregate amount involved exceeds $100,000 and (iii) a related party will have a direct or indirect interest. In reviewing proposed transactions with related parties, the Audit Committee considers the benefits to us of the proposed transaction, the potential effect of the proposed transaction on the director’s independence (if the related party is a director), and the terms of the proposed transaction and whether those terms are comparable to the terms available to an unrelated third party or to employees generally. There were no such transactions during 2013since January 1, 2015 that required the Audit Committee’s approval.
The Board of Directors annually reviews and approves our succession planning for our Chief Executive Officer, our other executive officers and a number of other officers.
Required Resignation on Change in Job Responsibilities
By informal agreement, theThe Board of Directors has adopted a policy that a director must tender his resignation if the director’s principal occupation or business association changes substantially from the position that he held when originally elected to the Board. The Nominating and Governance Committee will then review the circumstances of the director’s
2016Proxy Statement | Stericycle, Inc. • 14 |
ITEM 1 ELECTION OF DIRECTORS
new position or retirement and recommend to the full Board whether to accept or reject the director’s resignation in light of the contribution that he can be expected to continue to make to the Board.
CommunicationsAnti-Hedging and Anti-Pledging Policy
Our directors, executive officers and other designated employees are generally prohibited from engaging in certain transactions in respect of our common stock including certain hedging and derivative transactions and short sales. In addition, these persons are generally prohibited from holding our common stock in a margin account or otherwise pledging our common stock as collateral for a loan.
In order to encourage sound financial reporting and enhance individual accountability, we maintain a clawback policy that allows us to recover from our executive officers certain performance-based compensation in the event of certain accounting restatements. If we are required to prepare a restatement of our financial statements due to material noncompliance with any financial reporting requirement under the securities laws, the Compensation Committee will seek to recover from a covered officer certain performance-based compensation if the covered officer is determined to have engaged in fraud or intentional misconduct that materially contributed to the need for the restatement or if otherwise required by applicable SEC or NASDAQ rules.
Risk Oversight
The Board regularly devotes time during its meetings to review and discuss the most significant risks facing the Company, and management’s responses to those risks. During these discussions, the Chief Executive Officer, Chief Financial Officer, General Counsel and other members of senior management present management’s assessment of risks, a description of the most significant risks facing the Company and any mitigating factors and plans or practices in place to address and monitor those risks. In addition, the Board conducts an annual, in-depth review of the Company’s business, which includes detailed analysis and consideration of strategic, operational, financial, competitive, compliance and compensation risk areas.
Each Board committee addresses relevant risk topics as part of its committee responsibilities. The committees oversee the Company’s risk profile and exposures relating to matters within the scope of their authority and provide periodic reports to the full Board about their deliberations and recommendations. The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and its overall compensation philosophy.
Responsibility for risk management flows to individuals and entities throughout our Company as described above, including our Board, Board committees and senior management. We believe our culture has facilitated, and will continue to facilitate, effective risk management across the Company.
Stockholders who would like to communicate with the Board may do so by writing to the Board of Directors, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. Our Investor Relations department will process all communications received. Communications relating to matters within the scope of the Board’s responsibilities will be forwarded to the Executive Chairman of the Board and at his direction to the other directors, and communications relating to ordinary day-to-day business matters that are not within the scope of the Board’s responsibilities will be forwarded to the appropriate officer or executive. Communications addressed to the Lead Director will be forwarded to him and at his direction to the other directors, and communications addressed to a particular committee of the Board will be forwarded to the chair of that committee and at his direction to the other members of the committee.
2016Proxy Statement | Stericycle, Inc. • 15 |
ITEM 1 ELECTION OF DIRECTORS
EQUITY COMPENSATION PLANS
The following table summarizes information as of December 31, 2015 relating to our equity compensation plans pursuant to which stock option grants, restricted stock awards or other rights to acquire shares of our common stock may be made or issued:
Equity Compensation Plan Information
Plan Category | Number of (a) | Weighted- (b) | Number of Securities (c) | |||||||||
Equity compensation plans approved by our security holders(1) | 5,398,111 | $ | 92.11 | 3,317,483 | ||||||||
Equity compensation plans not approved by our security holders(2) | 8,143 | $ | 45.59 | — |
(1) | These plans consist of our 2014 Incentive Compensation Plan, 2011 Incentive Compensation Plan, 2008 Incentive Stock Plan, 2005 Incentive Stock Plan, and the Employee Stock Purchase Plan. |
(2) | The only plan in this category is our 2000 Non-statutory Stock Option Plan. |
In 2000, our Board of Directors approved the 2000 Non-statutory Stock Option Plan (the “2000 Plan”), which authorized the granting of non-statutory stock options for 7,000,000 shares of our common stock to employees (but not to officers or directors). The 2000 Plan expired in February 2010.
2016Proxy Statement | Stericycle, Inc. • 16 |
AUDIT COMMITTEE REPORT
AUDIT COMMITTEE REPORTAudit Committee Report
Under the Audit Committee’s charter, the Audit Committee of the Board of Directors assists the Board in fulfilling its oversight responsibilities relating to the integrity of the Company’s financial statements, the qualifications and experience of Company’s independent registered public accounting firm, the performance of the Company’s internal audit function and independent registered public accounting firm, and the Company’s compliance with applicable legal and regulatory requirements. The Audit Committee’s charter is available on the Company’s website,www.stericycle.com. The members of the Audit Committee who served during 20132015 were Messrs. Dammeyer (Chairman), Brown, HallChen and Patience.Patience and Ms. Bleil.
In regard to our role, we note that it is the responsibility of the Company’s management to prepare financial statements in accordance with accounting principles generally accepted in the United States, and that it is the responsibility of the Company’s independent registered public accounting firm to audit those financial statements. The Audit Committee’s responsibility is one of oversight, and we do not provide expert or other special assurance regarding the Company’s financial statements or the quality of the audits performed by the Company’s independent registered public accountants.accounting firm.
In carrying out our oversight responsibility, we review and discuss with both management and Ernst & Young LLP, the Company’s independent registered public accounting firm, all quarterly and annual financial statements prior to their issuance. We reviewed and discussed with both management and Ernst & Young LLP the quarterly and annual financial statements for the fiscal year ended December 31, 2013.2015. Our reviews and discussions with Ernst & Young LLP included executive sessions without the presence of the Company’s management. They also included discussions of the matters required to be discussed pursuant to Statement on Auditing StandardsStandard No. 61,16,CommunicationCommunications with Audit Committees, as amended (AICPA,Professional Standards, vol. 1 AU section 380), as adoptedissued by the Public Company Accounting Oversight Board, in Rule 3200T, including, among other items, the quality of the Company’s accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the Company’s financial statements. We also discussed with Ernst & Young LLP matters relating to their independence, including a review of their audit and non-audit fees and the letter and written disclosures that the Audit Committee received from Ernst & Young LLP pursuant to Rule 3526 of the Public Company Accounting Oversight Board,CommunicationsCommunication with Audit Committees Concerning Independence.
In addition, we continued to monitor the scope and adequacy of the Company’s internal controls, including staffing levels and requirements, and we reviewed programs and initiatives to strengthen the effectiveness of the Company’s internal controls and steps taken to implement recommended improvements.
On the basis of these reviews and discussions, we recommended to the Board of Directors that the Board approve the inclusion of the Company’s audited financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 20132015 for filing with the U.S. Securities and Exchange Commission.SEC.
Audit Committee
Rod F. Dammeyer, Chairman
Lynn D. Bleil
Thomas D. Brown
William K. HallF. Chen
John Patience
2016Proxy Statement | Stericycle, Inc. • 17 |
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Discussion and Analysis
Compensation Philosophy.Philosophy. Our compensation program for executive officers has threetwo objectives:
to attract, motivate and retain highly qualified executive officers; and
to make a substantial portion ofstructure their compensation, aside from their base salaries, to be dependent on the Company’s attainment of a measurable Company-wide performance target;targets and
to structure most of their compensation the sustained growth in our stock price, so that they benefit only if our stockholders benefit.
Our compensation program is straightforward and has remained essentially unchanged in design for more than 16 years. The program consists of cash compensation and long-term incentive compensation. Cash compensation is paid in the form of a base salary and aan annual cash performance bonus, and long-term incentive compensation is paid in the form of stock options.options and restricted stock units (RSUs).
Performance-Oriented. Our compensation program is performance-oriented. We favor (i) annual cash performance bonuses and (ii) stock options and RSUs, both vesting in 20% annual increments over five years as the principal components of our executive officers’ compensation. Historically, annual cash performance bonuses have been paid to our executive officers based upon the achievement of EBITDA (earnings before interest, taxes, depreciation and amortization) targets developed from our annual operating plan and budget as approved by our Board of Directors. Beginning in 2016, we have added return on invested capital (ROIC) as a second performance metric in our annual bonus program. We believe that these two components provide strong incentives to our executive officers to continue to improve our operating performance and the return on our capital investments, thereby createcreating value for all of our stockholders. In 2015, annual cash performance bonuses and stock options represented 81.3% of the total compensation of our named executive officers. As a result, a substantial portion of our executive officers’ compensation is impacted, both positively and negatively, by company performance and stockholder return.
The following table presents some key data reflecting our performance-oriented compensation program:
Key Data | 2013 | 2012 | 2011 | |||||||||
Year-over-year increase in non-GAAP earnings per diluted share(1) | 12.4 | % | 15.4 | % | 13.2 | % | ||||||
Total stockholder return(2) | 24.5 | % | 19.7 | % | (3.7 | )% | ||||||
Performance bonus and stock options of named executive officers as a percentage of their total compensation | 87.7 | % | 86.2 | % | 86.8 | % | ||||||
Year-over-year increase (decrease) in total compensation of our Chief Executive Officer: | ||||||||||||
Charles A. Alutto(3) | — | — | — | |||||||||
Mark C. Miller(4) | — | (36.0 | )% | 12.3 | % |
Compensation Committee. Compensation decisions for our executive officers are made by the Compensation Committee of our Board of Directors. All of the Committee’s members are independent under the applicable NASDAQ listing standards. The Committee’s decisions relating to base salaries and annual cash performance bonuses are subject to the review and approval of the full Board; the Committee’s decisions relating to stock options and RSUs are reviewed by the full Board but are not subject to its approval.
Compensation Guidelines.Consultant. In 2014, the Compensation Committee retained Deloitte Consulting LLP, an independent compensation consultant, to review our compensation philosophy and practices for our executive officers and the composition of our peer group of companies. Taking the results of the consultant’s review into consideration, in 2015 the Compensation Committee adjusted our compensation plans for our executive officers and refined our peer group of companies as described below. The Committee concluded that the annual cash salaries for our executive officers were below market as compared to our peer companies and implemented a four-year plan to increase base salaries to better align them with the peer group and the company’s stated compensation philosophy. The Compensation Committee also modified the target levels for annual cash performance bonuses for our executive officers.
Compensation Goals for Executive Officers. The Compensation Committee takes into account a number of factors in setting the base salaries and annual cash performance bonus percentages offor our executive officers and in determining the stock options and RSUs to be granted to them. The principal factors drivingIn 2015, the Committee’s decisions continueCommittee modified these compensation goals to remain: (i) providingtarget our executive officers withofficers’ total potential cashdirect compensation (base salary, annual incentive and long-term incentive compensation) at the 50th to 60th percentile shown on an informal survey of executive officer compensation at 14 public companies providing waste management, healthcare, chemical treatment, storage and related business services and (ii) providing our principal executive officers (our chief executive officer, chief operating officer and chief financial officer) with long-term incentive compensation up to the 75th percentile shown on this survey for their positions.peer group.
2016Proxy Statement | Stericycle, Inc. • 18 |
The
COMPENSATION DISCUSSION AND ANALYSIS
For 2015, the peer group of companies surveyed consisted of ABM Industries, Inc., Brink’s Company, Ecolab Inc., Charles River Laboratories International, Inc., Chemed Corporation, Cintas Corporation, Clean Harbors, Inc. Corrections Corporation of America, Covanta Holding Corporation, Ecolab Inc., Equifax, Inc., Healthcare Services Group, Inc., Iron Mountain Incorporated, J.B. Hunt Transportation Services, Inc., Paychex, Inc., Republic Services, Inc., Rollins, Inc. and Waste Connections, Inc. The component companies in our survey may change from year to year as we continue to refine the list of surveyed companies for comparability to us in respect of factors like company size, performance, services offered, and industries served.
Base Salaries. During 2013,2015, Mr. Alutto’s base salary which was increased in 2012, was raised to $350,000. The$485,000, and the base salaries of the other named executive officers which were also increased in 2012, were raised in 2013 to $309,000$340,000 for Messrs. ten BrinkGinnetti and Kogler,Arnold and $275,000to $335,000 for Mr. Collins. Mr. Miller’s base salary which was decreased in 2012, was decreasedremained at $142,000. These salary adjustments were made during the first year of our four year plan to $142,000.align executive base salaries with our peer group.
Annual Cash Performance Bonuses. Our annual cash performance bonus program is intended to provide a short-term cash incentive to our executive officers.officers, for achieving our annual business plans. Each executive officer is eligible for aan annual cash performance bonus equal to a specified percentage of his base salary. For 2013,2015, the annual cash performance bonus percentages of our named executive officers were 125% for Mr. Alutto, 100%90% for Messrs. ten BrinkGinnetti and Kogler,Arnold, and 90%80% for Messrs. Collins and Mr. Miller. Using EBITDA (earnings before interest, taxes, depreciation and amortization) as the performance metric in 2015, the Compensation Committee setsset target levels each year on the basis of the EBITDA shown in our final operating plan and budget for the year as approved by our Board of Directors, subject to any adjustments that the Compensation Committee considers appropriate to refine EBITDA as an internal measure of our operating performance. These target levels provide for potential annual cash performance bonuses increasing linearly from the 100% level (a(an annual cash performance bonus equal to the specified percentage of the executive officer’s base salary) to the 150%200% level (a(an annual cash performance bonus equal to 150%200% of the specified percentage of the executive officer’s base salary).
For 2013,2015, our target EBITDA for the payment of annual cash performance bonuses at the 100% level was $641.9$808.0 million (compared to $572.8$707.6 million for 2012)2014), and our target EBITDA for payment of annual cash performance bonuses at the maximum 150%200% level was $649.9$848.4 million (compared to $580.8$715.6 million for 2012)2014 at the then-maximum 150% level). Our actual EBITDA for the year for purposes of the annual cash performance bonus program was $644.7$789.2 million (the sum of income from operations of $535.6$487.6 million plus $88.4$127.4 million of depreciation and amortization plus $20.7$174.4 million of acquisition-related expenses, restructuring costs, litigation expenses, and other items that the Compensation Committee did not consider part of our day-to-day operations).
Our executive officers accordingly received annual cash performance bonuses for 2013,2015, paid in February 2014,2016, equal to 117%76.75% of the annual cash performance bonus percentages of their base salaries. The annual cash performance bonuses for Messrs. Alutto, ten Brink, Kogler,Ginnetti, Arnold, Collins and Miller were $513,215, $362,476, $362,476, $290,333,$465,327, $234,871, $234,871, $205,703, and $149,917,$87,194, respectively.
Stock Option Grants. We useIn 2015, we used stock options as the major component of the long term compensation of our executive officers because of the performance incentives that stock options provide. Our stock options are always granted at the closing price of our stock on the date of the grant, and thus the value to our executive officers of their stock
options depends entirely on the subsequent growth in value of our stock. The executive officers’ stock options accordingly provide an incentive for sustained levels of superior performance that contribute to our overall success as reflected in the market price of our stock, to the benefit not just of our executive officers but all of our stockholders.
At the Compensation Committee’s meeting in February 2013,2015, the Committee determined the annual stock option grants to our executive officers and to our employees generally taking into account (i) our operating performance, (ii) prior stock option grants, (iii) stock option grants and compensation practices at other companies with which members of the compensation committee were familiar and (iv) the goal of limiting stock
2016Proxy Statement | Stericycle, Inc. • 19 |
COMPENSATION DISCUSSION AND ANALYSIS
option grants to executive officers and employees generally to no more than 10% of our fully-diluted shares over a trailing five-year period, thus averaging dilution of no more than 2% a year.
The Committee adjusted the stock option grants to Messrs. Alutto, ten Brink and Kogler on the basis of the long-term incentive compensation guideline previously described. In this regard,2015, the Committee considered the positions of chief financial officer and chief operating officer to be of equal value and used the average of the long-term incentive compensation for these positions at the 75th percentile in determining thegranted stock options granted to Messrs. ten Brink and Kogler.
The Committee granted options for a total of 378,300 shares to our named executive officers as follows: Mr. Alutto, 145,500110,000 shares; Messrs. ten BrinkArnold and Kogler,Ginnetti, each 67,900 shares; Mr. Collins, 43,65045,000 shares; and Mr.Messrs. Collins and Miller, 53,350each 33,000 shares.
Bonus Conversion ProgramProgram.. We maintain a bonus conversion program for our executive officers and other management employees allowing them to convert all or a portion of their annual cash performance bonuses into stock options. The program is intended to enable our executive officers and other participants to trade current compensation for the possibility of greater rewards in the future if our stock continues to performperforms well.
AllUnder our bonus conversion program, a participant may irrevocably elect in advance of any annual cash performance bonus award to forgo some portion or all of any annual cash performance bonus otherwise payable to him or her and receive instead an immediately vested nonstatutory stock option under one of our namedstock option plans at an exercise price per share equal to the closing price of a share of our common stock on the bonus award date. The number of shares for which an option is granted is determined by dividing (i) five times the amount of the cash bonus that the participant elected to forgo by (ii) the average closing price of our common stock during the year for which the bonus is payable.
Four of our executive officers participated in this program in respect of their annual cash performance bonuses for 20132015 payable in February 2014.2016. Mr. Alutto elected to forgo $51,321$23,266 of his annual cash performance bonus and received instead an option for 1,8731,007 shares, Mr. ten BrinkArnold elected to forgo $36,248$11,744 of his annual cash performance bonus and received instead an option for 1,323508 shares, Mr. Kogler similarlyGinnetti elected to forgo $36,248$11,744 of his annual cash performance bonus and received instead an option for 1,323 shares, Mr. Collins elected to forgo $58,067 of his performance bonus and received instead an option for 2,119508 shares and Mr. Miller elected to forgo his entire annual cash performance bonus and received instead an option for 5,4703,773 shares.
Types of Compensation Not Provided. We believe that an understanding of our compensation program for executive officers is enhanced by noting some of the types of compensation or benefits that we do not provide:
we do not maintain any retirement, supplemental retirement or deferred compensation plan for our executive officers (aside from an employee stock purchase plan and a conventional 401(k) plan in which virtually all U.S. employees are eligible to participate);
while awards of restricted stock and restricted stock units are authorized under our 2005, 2008, and 2011 stock option plans, we have never made any awards of restricted stock or RSUs to our executive officers;
we have not entered into any agreement or adopted any plan providing for severance benefits or salary continuation payments to any of our executive officers in the event of a change of control or termination of employment; and
we do not provide any perquisites or personal benefits to any of our executive officers.
Compensation DecisionsCOMPENSATION DECISIONS
In addition to the two guidelines previously described (see Overview—Compensation Guidelines,Goals for Executive Officers, on page 17)18), the Compensation Committee takes into account a number of other factors in setting the base salaries and annual cash performance bonus percentages of our executive officers and determining the stock options and RSUs to be granted to them. The
Committee’s decisions are made with a view to reaching an overall result that, in the Committee’s subjective judgment, is appropriate and fair to the particular executive officer, both in absolute terms and relative to the compensation of the other executive officers, and fair as well to us and to our stockholders. The Committee does not reach this result in a mechanical fashion but, rather, considers each executive officer’s role and contribution to our performance, the officer’s compensation history and the compensation practices at other companies with which members of the Committee are familiar.
Compensation decisions are made annually at the regular meeting of the Compensation Committee during the first quarter of year, typically in February, when the results of our prior year’s performance are available internally and can be taken into account by the Committee in determining the executive officers’ annual cash performance bonuses for the prior year and their base salaries and annual cash performance bonus percentages for the current year. The Committee believes that incentives are likely to have a greater effect on performance the sooner they are communicated and accordingly determines annual cash performance bonus percentages and annual option grants as early in the year as practicable. The Committee’s decisions are made without regard to our anticipated earnings or other announcements.
Our Chief Executive Officer makes recommendations to the Committee regarding the compensation of the otherour executive officers other than himself, but management does not otherwise participate in the Committee’s decisions. Compensation decisions for our Chief Executive Officer are made in executive session by the independent members of the Committee.
2016Proxy Statement | Stericycle, Inc. • 20 |
COMPENSATION DISCUSSION AND ANALYSIS
The Committee reviews the results of the voting on each annual non-binding “say-on-pay” proposal. Last year, a substantial majority (approximatelyapproximately 97%) of our stockholders who voted on the “say-on-pay” proposal at the 20132015 Annual Meeting approved our executive compensation as described in the Compensation Discussion and Analysis and tabular disclosures in our proxy statement for the meeting. The Committee did not implement any changes in executive compensation during 2015 or 2016 as a direct result of the stockholders’ advisory vote.
In November 2012, the Compensation Committee decreased the base salary of Mr. Miller to $142,000 and increased the base salary of Mr. Alutto to $350,000, in each case effective January 1, 2013, to reflect the changes in their respective roles as of the effective date.
In February 2013, the Compensation Committee increased the base salaries of each of Messrs. ten Brink and Kogler to $309,000, and raised the base salary of Mr. Collins to $275,000. In February 2014,2016, the Compensation Committee increased the base salary of Mr. Alutto to $385,000,$585,000, increased the base salaries each of Messrs. ten BrinkArnold and KoglerGinnetti to $335,000,$380,000, and increased the base salary of Mr. Collins to $300,000.$370,000. Mr. Miller’s base salary remains unchanged at $142,000.was reduced to $50,000 in connection with the anticipated transition of his role from Executive Chairman to Chairman during 2016. These salary adjustments were made consistent with our four year plan to adjust base salaries for our executive officers relative to our peer group as described above in Overview—Compensation Consultant.
Performance BonusesANNUAL CASH PERFORMANCE BONUSES
Under
In February 2015, the Compensation Committee modified our annual cash performance bonus program,program. Prior to this modification, if we failfailed to attain our target EBITDA for payment of annual cash performance bonuses at the 100% level, our executive officers arewere not assured of any bonuses. In these circumstances, the Compensation Committee maycould decide in its discretion either that no annual cash performance bonuses arewere warranted or that it would be appropriate to award on the basis of individual merit cash bonuses of some order of magnitude smaller than the annual cash performance bonuses that would have been paid if we had attained our target EBITDA for payment of annual cash performance bonuses at the 100% level.
Beginning in February 2015, our annual cash performance bonus program now provides for a 50% payout(i.e., 50% of an executive officer’s bonus percentage of his base salary) if we attain at least 95% of our target EBITDA, with no annual cash performance bonus payouts at all if we fail to attain the 95% level.
The Compensation Committee also increased the performance level at which annual cash performance bonus payouts would be made at the maximum amount. Prior to this change, annual cash performance bonuses at the maximum 150% payout were payable if our actual EBITDA was equal to or exceeded an amount that, in practice, was less than 1.0% more than our target EBITDA. With the Committee’s change, annual cash performance bonus payouts at the maximum level are now payable only if our actual EBITDA is 105% of our target EBITDA, and the maximum annual cash performance bonus payout is increased to 200% if the 105% EBITDA level is exceeded.
In February 2014,2016, the Compensation Committee determinedadded return on invested capital (ROIC) as a second metric in our annual cash performance bonus program. The ROIC component of the bonus program is structured to leave unchangedincentivize our executive officers to continue to achieve returns in excess of the company’s cost of capital. Achievement at the threshold level would result in a 50% payout, achievement at the target level would result in a 100% payout, and achievement at 112% of the target level would result in a 200% payout. For 2016, 75% of the annual cash performance bonus is tied to achievement of our EBITDA goal and 25% of the bonus is tied to achievement of our ROIC goal.
In February 2016, the Compensation Committee set the following annual cash performance bonus percentages for 20142016 for each of our named executive officers, withofficers: 150% for Mr. Miller atAlutto; 100% for Messrs. Arnold and Ginnetti; and 90%, for Mr. Alutto at 125%, Messrs. ten BrinkCollins; and Kogler at 100%, and50% for Mr. Collins at 90%.Miller.
2016Proxy Statement | Stericycle, Inc. • 21 |
COMPENSATION DISCUSSION AND ANALYSIS
The exercise price per share of an option granted under one of our stock option plans may not be less than the closing price of a share of our common stock on the date of the option grant. The maximum term of an option may not exceed 10 years, and an option may be exercised only when it is vested and only while the executive officer or other employee remains an employee of ours and for a limited period following the termination of his or her employment.
Options granted to executive officers and employees generally vest over five years at the rate of one-fifth of the option shares on each of the first five anniversaries of the option grant date. (As noted below, options granted under our bonus conversion program are immediately vested.) Options also become exercisable upon the option holder’s death or upon a “change in control.”
We currently have three stock option plans under which new stock options may be granted to our executive officers and employees generally: (i) the 2011 Incentive Stock Plan, which our stockholders approved in May 2011, (ii) the 2008 Incentive Stock Plan, which our stockholders approved in May 2008, and (iii) the 2005 Incentive Stock Plan, which our stockholders approved in April 2005. There are also stock options outstanding under our 2000 Nonstatutory Stock Option Plan, which expired in February 2010, and our 1997 Stock Option Plan, which expired in January 2007. See Item 2 of this proxy statement.
As of December 31, 2013, there were 2,225,223 shares available for future option grants under the 2011 plan, 125,580 shares available for future option grants under the 2008 plan and 7,823 shares were available for future option grants under the 2005 plan.
In February 2014,2016, the Committee determined the annual stock option grants to our executive officers and to our employees generally. The Committee granted options for a total of 303,000 shares to our named executive officers as follows: Mr. Alutto, 119,000105,406 shares; Messrs. ten BrinkArnold and Kogler,Ginnetti, each 56,00044,595 shares; Mr. Collins 30,811 shares; and Messrs. Collins andMr. Miller each 36,00020,271 shares.
Bonus Conversion ProgramRESTRICTED STOCK UNITS
Under our bonus conversion program,
Based on a participant may irrevocably electreview of market practices and with input from its consultant, in advance of any bonus award2016 the Compensation Committee decided to forgo some portion or all of any performance bonus otherwise payableadd RSU awards to him and receive instead an immediately vested nonstatutory stock option under onethe long-term incentive component of our execution compensation program, allocating annual equity awards to our executive officers in 75% stock option plans at an exercise price per share equal to the closing price of a share of our common stock on the bonus award date.
options and 25% RSUs. The number of shares for which an option is grantedRSUs awarded is determined by dividing (i)on the basis of a specified multipletarget grant date fair value of total equity awards with RSUs being granted at a conversion ratio of one RSU for every 5 stock options replaced. RSUs granted to executive officers and employees generally vest over five years at the rate of one-fifth of the amountRSU shares on each of the cash bonus thatfirst five anniversaries of the participant electedgrant date. RSUs also become fully vested and released upon the RSU holder’s death or upon a “change in control.”
In February 2016, the Committee determined the annual RSU grants to forgo by (ii) the average closing price of our common stock during the year for which the bonus is payable. Our Board of Directors has fixed the multiple at four for 2013named executive officers and 2014.to our employees generally. The Committee granted RSU awards to our named executive officers as follows: Mr. Alutto, 7,027 shares; Messrs. Arnold and Ginnetti, each 2,972 shares; Mr. Collins 2,054 shares; and Mr. Miller 1,351 shares.
Employee Stock Purchase PlanRETIREMENT PLANS AND DEFERRED COMPENSATION ARRANGEMENTS
We maintain an employee stock purchase plan (the “ESPP”), which our stockholders approved in May 2001. The ESPP currently authorizes 900,000 shares of our common stock to be purchased by qualifying employees at a 15% discount from the market price of the stock through payroll deductions during two six-month offerings each year. In May 2013, our stockholders approved an amendment to the ESPP increasing the number of shares available for issuance from 600,000 shares to 900,000 shares. A qualifying employee who elects to participate in an offering is granted an option on the first day of the offering for a number of shares equal to the employee’s payroll deductions under the ESPP during the offering period (which may not exceed $5,000) divided by the option price per share. The option price per share is the lower of 85% of the closing price of a share of our common stock on the first trading day of the offering period or 85% of the closing price on the last trading day of the offering period.
Each employee of Stericycle, Inc. or of a U.S. subsidiary of ours who has completed six months’ employment as of the first day of an offering and who is a full-time employee, or a part-time employee who customarily works at least 20 hours per week, is eligible to participate in the offering. During 2012, we implemented a separate employee stock purchase plan for our employees in the United Kingdom as a sub-plan under the ESPP.
During 2013, Messrs. Collins and Alutto each purchased 114 shares under the ESPP, and Messrs. Kogler and ten Brink each purchased 95 shares.
We maintain a 401(k) plan in which employees who have completed 90 days’ employment are eligible to participate. We have discretion under the plan to make matching contributions of a percentage of the participants’ own contributions to the plan as the Board of Directors determines each year. For 2013, we made a matching contribution of 50% of each participant’s contributions to the plan, up to a maximum matching contribution of $1,750. We made the maximum matching contribution for each of Messrs. Miller, Alutto, Kogler, Collins and ten Brink.
Retirement Plans and Deferred Compensation Arrangements
Aside from our ESPPemployee stock purchase plan and 401(k) plan, we do not maintain any other qualified plans (for example, a qualified defined benefit or a money purchase pension plan), and we have not adopted any nonqualified retirement or deferred compensation plan or arrangement.
Retiree Medical BenefitsPERQUISITES AND PERSONAL BENEFITS
In February 2009, we adopted a supplement to our self-insured medical plan to allow eligible employees to continue to participate in the plan following retirement, with the same coverage and benefits as active employees, at an actuarially determined cost to the retired employee equivalent to the cost of coverage of an active employee for the type of coverage selected. Eligible employees are management employees at or above the specified grade level (thus including our executive officers), who are age 50 or older, who have worked for us for at least 10 years, and the sum of whose age plus his or her years of service is 65 or more.
Perquisites and Personal Benefits
We do not provide any perquisites or personal benefits to our executive officers.
Employment AgreementsEMPLOYMENT AGREEMENTS
We have not entered into written employment agreements with any of our named executive officers. All of our executive officers have entered into confidentiality, nonsolicitation and noncompetition agreements with us.
2016Proxy Statement | Stericycle, Inc. • 22 |
COMPENSATION DISCUSSION AND ANALYSIS
Termination and Change-in-Control PaymentsTERMINATION AND CHANGE-IN-CONTROL PAYMENTS
We have not entered into salary continuation, severance or similar agreements or arrangements with any of our named executive officers. Weofficers and have no contractual or other obligation to provide severance benefits or other payments to them in the event of a change in control or termination of employment. (In this regard, however, we note that all of our stock option plans provide for the full vesting upon a change in control of all unvested options held by our employees, including our executive officers.)
Stock Ownership RequirementsSTOCK OWNERSHIP REQUIREMENTS
All of our executive officers are required to hold a minimum position in our stock. An executive officer with less than five years of service as an executive officer must have a position equal to three times his or her base salary, and an executive officer with five or more years of service must have a position equal to five times his or her base salary.
An executive officer’s stock ownership position is measured by the value of our common stock that he or she owns directly and indirectly, the value of the vested and unvested RSUs that he or she holds, and the in-the-money value of the vested and unvested stock options that he or she holds. An executive officer who does not satisfy the applicable minimum stock ownership requirement may not sell any shares of our stock, with the exception that the officer may engage in a cashless exercise of an option and sell a number of shares sufficient to pay the exercise price of the option shares and the related withholding taxes. An executive officer who satisfies the applicable minimum stock ownership requirement may not sell any shares if, as a result, he or she would then violate the applicable minimum stock ownership requirement. All of our named executive officers satisfy the applicable minimum stock ownership requirement.
2016Proxy Statement | Stericycle, Inc. • 23 |
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE REPORTCompensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s executive management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
Jonathan T. Lord, M.D.,William K. Hall, Chairman
Ronald G. SpaethThomas D. Brown
Mike S. Zafirovski
2016Proxy Statement | Stericycle, Inc. • 24 |
SUMMARY COMPENSATION TABLE
The following table provides information about the compensation paid or earned during the period 2011-20132013-2015 by our principal executive officer, principal financial officer and three most highly compensated other executive officers (the “named executive officers”):
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Name and Principal Position | Year | Salary($) | Non-Equity Incentive Plan Compensation(1) | Option Awards(2)($) | All Other Compensation(3)($) | Total($) | ||||||||||||||||||
Charles A. Alutto(4) President and Chief Executive Officer |
| 2015 2014 2013 |
| $
| 488,269 379,615 348,077 |
|
| $465,327 721,875 513,215 |
|
| $2,510,200 2,532,320 3,176,224 |
|
| $1,750 1,750 1,750 |
| $
| 3,465,546 3,635,560 4,039,266 |
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Mark C. Miller(5) Executive Chairman of the Board |
| 2015 2014 2013 |
| $
| 147,462 142,000 144,423 |
|
| $ 87,194 191,700 149,917 |
|
| $ 753,060 766,080 1,164,616 |
|
| $1,750 1,750 1,750 |
| $
| 989,466 1,101,530 1,460,706 |
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Daniel V. Ginnetti(6) Executive Vice President and Chief Financial Officer |
| 2015 2014 |
| $
| 346,923 275,385 |
|
| $234,871 187,200 |
|
| $1,026,900 478,200 |
|
| $1,750 1,750 |
| $
| 1,610,444 942,535 |
| ||||||
Brent Arnold(7) Executive Vice President and Chief Operating Officer | 2015 | $ | 343,077 | $234,871 | $1,026,900 | $1,750 | $ | 1,606,598 | ||||||||||||||||
Michael J. Collins(8) Executive Vice President and President, Recall and Return Management Systems |
| 2015 2014 2013 |
| $
| 342,500 296,154 272,115 |
|
| $205,703 405,000 290,333 |
|
| $ 753,060 766,080 952,867 |
|
| $1,750 1,750 1,750 |
| $
| 1,303,013 1,468,984 1,517,065 |
|
(1) | The amounts in this column are the gross amounts of the named executive officer’s annual cash performance bonus for the particular year before any conversion of the bonus into an option pursuant to our bonus conversion program. See the second paragraph of |
(2) | The amounts in this column represent the fair value of options that we granted in |
The amount in this column for a particular year does not include the fair value of any option that we granted during that year pursuant to our bonus conversion program in respect of the named executive officer’s performance bonus for the prior year. See the following notes (5) and (7)-(10).
The amount in this column for a particular year does not include the fair value of any option that we granted during that year pursuant to our bonus conversion program in respect of the named executive officer’s annual cash performance bonus for the prior year. See the following notes (4)-(8). |
(3) | The amounts in this column represent our matching 401(k) plan contributions for |
(4) |
|
|
Mr. Ginnetti became an executive officer when he was appointed Executive Vice President and Chief Financial Officer on August 1, 2014. The |
2016Proxy Statement | Stericycle, Inc. • 25 |
SUMMARY COMPENSATION TABLE
(7) | Mr. Arnold became an executive officer when he was appointed Executive Vice President and Chief Operating Officer on January 1, 2015. The |
The amounts in the |
2016Proxy Statement | Stericycle, Inc. • 26 |
Salaries, bonuses, and stock options, and other compensation represented the following approximate percentages of the total compensation paid to our named executive officers for 2013, 2012 and 2011:
GRANTS OF PLAN-BASED AWARDS
Approximate Percentage of Total Compensation of Named Executive Officers | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Salaries | 12.2 | % | 13.6 | % | 13.1 | % | ||||||
Bonuses | 14.8 | % | 14.6 | % | 18.1 | % | ||||||
Stock options | 72.9 | % | 71.6 | % | 68.7 | % | ||||||
Other | 0.1 | % | 0.1 | % | 0.2 | % |
The following table provides information about the stock options granted to our named executive officers during 2013.2015.
We did not make any awards to our named executive officers during 2013 of shares of restricted stock, restricted stock units or similar rights under an “equity incentive plan” or other plan or arrangement:
Name | Grant Date | Option Awards(1): Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Option Awards | ||||||||||||
Charles A. Alutto | 2/20/13 | 147,671 | $ | 95.87 | $ | 3,210,435 | ||||||||||
Mark C. Miller | 2/20/13 | 65,715 | $ | 95.87 | $ | 1,359,464 | ||||||||||
Frank J.M. ten Brink | 2/20/13 | 70,071 | $ | 95.87 | $ | 1,516,449 | ||||||||||
Richard T. Kogler | 2/20/13 | 70,071 | $ | 95.87 | $ | 1,516,449 | ||||||||||
Michael J. Collins | 2/20/13 | 45,657 | $ | 95.87 | $ | 984,494 |
Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards: Annual Cash Performance Bonuses(1) | Option Awards(2): Number of Securities | Exercise or Base Price of Option Awards($/Sh) | Grant Date Fair Option Awards($) | |||||||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||
Charles A. Alutto | 2/06/15 | 303,125 | 606,250 | 1,212,500 | 112,435 | $130.19 | $2,510,200 | |||||||||||||||||||||
Mark C. Miller | 2/06/15 | 56,800 | 113,600 | 226,000 | 39,468 | $130.19 | 753,060 | |||||||||||||||||||||
Brent Arnold | 2/06/15 | 153,000 | 306,000 | 612,000 | 45,337 | $130.19 | 1,026,900 | |||||||||||||||||||||
Daniel V. Ginnetti | 2/06/15 | 153,000 | 306,000 | 612,000 | 45,000 | $130.19 | 1,026,900 | |||||||||||||||||||||
Michael J. Collins | 2/06/15 | 104,000 | 208,000 | 536,000 | 35,733 | $130.19 | 753,060 |
(1) | As described above, awards under our annual cash performance bonus program are based on the achievement of certain performance metrics. See Compensation Discussion and Analysis – Overview – Annual Cash Performance Bonuses and – Compensation Decisions – Annual Cash Performance Bonuses for more information. |
(2) | All of these options were granted under our 2008 Incentive Stock Plan or 2011 Incentive Stock Plan. This column includes options granted in February |
2016Proxy Statement | Stericycle, Inc. • 27 |
At the Compensation Committee’s meeting in February 2014, the Committee determined the annual stock option grants to executive officers and employees generally. The Committee granted options for a total of 303,000 shares to our executive officers as follows: Mr. Alutto, 119,000 shares; Messrs. ten Brink and Kogler, each 56,000 shares; and Messrs. Collins and Miller, each 36,000 shares. All of these options have an exercise price per share of $115.69 (the closing price of our stock on the option grant date of February 11, 2014).
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
At the same meeting, the Compensation Committee also granted options to our executive officers by reason of their conversion of all or part of their respective performance bonuses for 2013 pursuant to our bonus conversion program. Mr. Alutto was granted an option for 1,873 shares by reason of his conversion of $51,321 of his performance bonus; Mr. ten Brink was granted an option for 1,323 shares by reason of his conversion of $36,248 of his performance bonus; Mr. Kogler was also granted an option for 1,323 shares by reason of his conversion of $36,248 of his performance bonus; Mr. Collins was granted an option for 2,119 shares by reason of his conversion of $58,067 of his performance bonus; and Mr. Miller was granted an option for 5,470 shares by reason of his conversion of his entire performance bonus. All of these options have an exercise price per share of $115.69 (the closing price of our stock on the option grant date of February 11, 2014).
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information about the outstanding stock options held by the named executive officers as of December 31, 2013.2015.
We did not make any awards to our named executive officers during 20132015 or earlier of shares of restricted stock, restricted stock units or similar rights under an “equity incentive plan” or other plan or arrangement, and accordingly, no such shares, units or rights were held by any of our executive officers as of December 31, 2013:2015 except as described in notes (2) and (3) below:
Option Awards | Option Awards | |||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price | Option Expiration Date(1) | Number of Securities (#) Exercisable | Number of Securities (#) Unexercisable | Option Exercise Price | Option Expiration Date(1) | ||||||||||||||||||||||||
Charles A. Alutto | 10,500 | — | $ | 38.57 | 2/6/2017 | 27,000 | — | $ | 54.59 | 6/18/2018 | ||||||||||||||||||||||
15,000 | — | $ | 53.15 | 2/15/2018 | 6,984 | — | $ | 63.00 | 7/30/2020 | |||||||||||||||||||||||
27,000 | — | $ | 54.59 | 6/18/2018 | 25,512 | 6,378 | $ | 85.00 | 2/8/2021 | |||||||||||||||||||||||
4,191 | 2,793 | $ | 63.00 | 7/30/2020 | 23,800 | 95,200 | $ | 115.69 | 2/11/2022 | |||||||||||||||||||||||
12,756 | 19,134 | $ | 85.00 | 2/8/2021 | 36,000 | 24,000 | $ | 86.24 | 2/13/2022 | |||||||||||||||||||||||
12,000 | 48,000 | $ | 86.24 | 2/13/2022 | — | 110,000 | $ | 130.19 | 2/6/2023 | |||||||||||||||||||||||
2,171 | 145,500 | $ | 95.87 | 2/20/2023 | 60,371 | 87,300 | $ | 95.87 | 2/20/2023 | |||||||||||||||||||||||
1,873 | — | $ | 115.69 | 2/11/2024 | ||||||||||||||||||||||||||||
2,435 | — | $ | 130.19 | 2/6/2025 | ||||||||||||||||||||||||||||
Mark C. Miller | 60,946 | — | $ | 38.57 | 2/6/2017 | |||||||||||||||||||||||||||
3,384 | — | $ | 29.54 | 2/3/2016 | 120,393 | — | $ | 53.15 | 2/15/2018 | |||||||||||||||||||||||
100,946 | — | $ | 38.57 | 2/6/2017 | 162,676 | — | $ | 46.83 | 2/10/2019 | |||||||||||||||||||||||
120,393 | — | $ | 53.15 | 2/15/2018 | 242,253 | — | $ | 51.55 | 2/9/2020 | |||||||||||||||||||||||
136,276 | 26,400 | $ | 46.83 | 2/10/2019 | 20,000 | — | $ | 51.20 | 2/10/2020 | |||||||||||||||||||||||
162,253 | 80,000 | $ | 51.55 | 2/9/2020 | 163,401 | 31,830 | $ | 85.00 | 2/8/2021 | |||||||||||||||||||||||
12,000 | 8,000 | $ | 51.20 | 2/10/2020 | 7,200 | 28,800 | $ | 115.69 | 2/11/2022 | |||||||||||||||||||||||
99,741 | 95,490 | $ | 85.00 | 2/8/2021 | 93,998 | 44,000 | $ | 86.24 | 2/13/2022 | |||||||||||||||||||||||
49,998 | 88,000 | $ | 86.24 | 2/13/2022 | — | 33,000 | $ | 130.19 | 2/6/2023 | |||||||||||||||||||||||
12,365 | 53,350 | $ | 95.87 | 2/20/2023 | 33,705 | 32,010 | $ | 95.87 | 2/20/2023 | |||||||||||||||||||||||
5,470 | — | $ | 115.69 | 2/11/2024 | ||||||||||||||||||||||||||||
Frank J.M. ten Brink | 17,311 | — | $ | 53.15 | 2/15/2018 | |||||||||||||||||||||||||||
6,468 | — | $ | 130.19 | 2/6/2025 | ||||||||||||||||||||||||||||
Daniel V. Ginnetti(2) | 8,000 | — | $ | 53.15 | 2/15/2018 | |||||||||||||||||||||||||||
— | 11,600 | $ | 46.83 | 2/10/2019 | 3,500 | — | $ | 50.82 | 6/27/2018 | |||||||||||||||||||||||
45,000 | 30,000 | $ | 51.55 | 2/9/2020 | 15,684 | — | $ | 46.83 | 2/10/2019 | |||||||||||||||||||||||
28,270 | 35,910 | $ | 85.00 | 2/8/2021 | 12,000 | — | $ | 51.55 | 2/9/2020 | |||||||||||||||||||||||
18,360 | 60,000 | $ | 86.24 | 2/13/2022 | 8,560 | 2,140 | $ | 85.00 | 2/8/2021 | |||||||||||||||||||||||
2,171 | 67,900 | $ | 95.87 | 2/20/2023 | 3,000 | 12,000 | $ | 115.69 | 2/11/2022 | |||||||||||||||||||||||
6,720 | 4,480 | $ | 86.24 | 2/13/2022 | ||||||||||||||||||||||||||||
Richard T. Kogler | 1,982 | — | $ | 53.15 | 2/15/2018 | |||||||||||||||||||||||||||
— | 11,600 | $ | 46.83 | 2/10/2019 | 1,500 | 6,000 | $ | 116.81 | 8/1/2022 | |||||||||||||||||||||||
— | 30,000 | $ | 51.55 | 2/9/2020 | — | 45,000 | $ | 130.19 | 2/6/2023 | |||||||||||||||||||||||
28,270 | 35,910 | $ | 85.00 | 2/8/2021 | 5,820 | 8,730 | $ | 95.87 | 2/20/2023 | |||||||||||||||||||||||
18,360 | 60,000 | $ | 86.24 | 2/13/2022 | ||||||||||||||||||||||||||||
2,171 | 67,900 | $ | 95.87 | 2/20/2023 | ||||||||||||||||||||||||||||
Michael J. Collins | 3,670 | — | $ | 53.15 | 2/15/2018 | |||||||||||||||||||||||||||
3,181 | 6,800 | $ | 46.83 | 2/10/2019 | ||||||||||||||||||||||||||||
9,479 | 12,000 | $ | 51.55 | 2/9/2020 | ||||||||||||||||||||||||||||
13,998 | 16,242 | $ | 85.00 | 2/8/2021 | ||||||||||||||||||||||||||||
9,460 | 28,000 | $ | 86.24 | 2/13/2022 | ||||||||||||||||||||||||||||
2,007 | 43,650 | $ | 95.87 | 2/20/2023 |
2016Proxy Statement | Stericycle, Inc. • 28 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards | ||||||||||||||||
Name | Number of Securities (#) Exercisable | Number of Securities (#) Unexercisable | Option Exercise Price | Option Expiration Date(1) | ||||||||||||
Brent Arnold(3) | 5,061 | — | $ | 46.83 | 2/10/2019 | |||||||||||
404 | — | $ | 47.24 | 3/2/2019 | ||||||||||||
11,500 | — | $ | 51.55 | 2/9/2020 | ||||||||||||
792 | — | $ | 55.57 | 3/1/2020 | ||||||||||||
8,960 | 2,240 | $ | 85.00 | 2/8/2021 | ||||||||||||
629 | — | $ | 83.88 | 3/1/2021 | ||||||||||||
3,000 | 12,000 | $ | 115.69 | 2/11/2022 | ||||||||||||
6,720 | 4,480 | $ | 86.24 | 2/13/2022 | ||||||||||||
711 | — | $ | 86.89 | 2/28/2022 | ||||||||||||
1,500 | 6,000 | $ | 110.14 | 4/14/2022 | ||||||||||||
— | 45,000 | $ | 130.19 | 2/6/2023 | ||||||||||||
5,820 | 8,730 | $ | 95.87 | 2/20/2023 | ||||||||||||
448 | — | $ | 97.36 | 3/7/2023 | ||||||||||||
337 | — | $ | 130.19 | 2/6/2025 | ||||||||||||
Michael J. Collins | 1,939 | — | $ | 51.55 | 2/9/2020 | |||||||||||
11,036 | 5,414 | $ | 85.00 | 2/8/2021 | ||||||||||||
7,200 | 28,800 | $ | 115.69 | 2/11/2022 | ||||||||||||
23,460 | 14,000 | $ | 86.24 | 2/13/2022 | ||||||||||||
— | 33,000 | $ | 130.19 | 2/6/2023 | ||||||||||||
19,467 | 26,190 | $ | 95.87 | 2/20/2023 | ||||||||||||
2,119 | — | $ | 115.69 | 2/11/2024 | ||||||||||||
2,733 | — | $ | 130.19 | 2/6/2025 |
(1) |
(2) | Mr. Ginnetti holds 2,500 restricted stock units that were granted to him on February 13, 2012 prior to his becoming an executive officer. All of these restricted stock units vest on February 13, 2017. Based on the closing price of our common stock of $120.60 on December 31, 2015 as reported on NASDAQ, these restricted stock units have a market value of $301,500. |
(3) | Mr. Arnold holds 2,500 restricted stock units that were granted to him on February 13, 2012 prior to his becoming an executive officer. All of these restricted stock units vest on February 13, 2017. Based on the closing price of our common stock of $120.60 on December 31, 2015 as reported on NASDAQ, these restricted stock units have a market value of $301,500. |
2016Proxy Statement | Stericycle, Inc. • 29 |
OPTION EXERCISES AND STOCK VESTED
OPTION EXERCISES AND STOCK VESTED
The following table provides information about option exercises by the named executive officers during 2013. We have2015. Prior to 2016, we did not awardedaward shares of restricted stock, restricted stock units or similar rights to any of our named executive officers, and accordingly no such shares, units or rights vested during 2013:2015:
Option Awards | ||||||||
Name | Number of Shares Acquired on Exercise(1) (#) | Value Realized on Exercise(2) ($) | ||||||
Charles A. Alutto | 14,000 | $ | 975,912 | |||||
Mark C. Miller | 52,538 | $ | 4,513,186 | |||||
Frank J.M. ten Brink | 115,240 | $ | 7,555,206 | |||||
Richard T. Kogler | 94,500 | $ | 5,458,532 | |||||
Michael J. Collins | 56,200 | $ | 3,441,604 |
Option Awards | ||||||||
Name | Number of Shares Acquired on (#) | Value Realized on Exercise(2) ($) | ||||||
Charles A. Alutto | 9,000 | $ | 709,859 | |||||
Mark C. Miller | — | $ | — | |||||
Daniel V. Ginnetti | 10,000 | $ | 904,790 | |||||
Brent Arnold | 9,000 | $ | 806,675 | |||||
Michael J. Collins | 25,000 | $ | 1,590,785 |
(1) | The information in this column is provided on an aggregate basis, and includes (i) option shares canceled in a net exercise of the option (in which option shares with a value equal to the exercise price and related withholding taxes are canceled in satisfaction of those amounts) and (ii) option shares acquired and concurrently sold to pay the exercise price and related withholding taxes in a “cashless” exercise of the option through a broker. |
(2) | The information in this column is provided on an aggregate basis. The value realized on the exercise of an option was determined by multiplying the number of shares for which the option was exercised by the difference between (i) either (A) the closing price of our common stock on the date of exercise, in the case of payment of the exercise price in cash or by delivery of shares of our common stock for cancelation or by a net exercise of the option, or (B) the sales price, in the case of a “cashless” exercise of the option, and (ii) the exercise price per share of the option. |
2016Proxy Statement | Stericycle, Inc. • 30 |
DIRECTOR COMPENSATION
The following table provides information about the compensation paid to our directors in 2013:2015:
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||
Mark C. Miller, Executive Chairman(2) | — | — | — | — | — | — | ||||||||||||||||||
Jack W. Schuler, Lead Director | — | — | $ | 153,984 | — | — | $ | 153,984 | ||||||||||||||||
Charles A. Alutto(3) | — | — | — | — | — | — | ||||||||||||||||||
Thomas D. Brown | — | — | $ | 153,984 | — | — | $ | 153,984 | ||||||||||||||||
Rod F. Dammeyer(4) | — | — | $ | 166,315 | — | — | $ | 166,315 | ||||||||||||||||
William K. Hall | — | — | $ | 153,984 | — | — | $ | 153,984 | ||||||||||||||||
Jonathan T. Lord, M.D.(5) | — | — | $ | 160,150 | — | — | $ | 160,150 | ||||||||||||||||
John Patience | — | — | $ | 153,984 | — | — | $ | 153,984 | ||||||||||||||||
Ronald G. Spaeth | — | — | $ | 153,984 | — | — | $ | 153,984 | ||||||||||||||||
Mike S. Zafirovski | — | — | $ | 153,984 | — | — | $ | 153,984 |
Name | Fees ($) | Stock Awards ($) | Option ($)(1) | Non-Equity ($) | All Other ($) | Total ($) | ||||||||||||||||||
Mark C. Miller, Executive Chairman(2) | — | — | — | — | — | — | ||||||||||||||||||
Jack W. Schuler, Lead Director | — | — | $ | 106,017 | — | — | $ | 106,017 | ||||||||||||||||
Charles A. Alutto(3) | — | — | — | — | — | — | ||||||||||||||||||
Lynn D. Bleil(4) | — | — | $ | 292,410 | — | — | $ | 292,410 | ||||||||||||||||
Thomas D. Brown | — | — | $ | 106,017 | — | — | $ | 106,017 | ||||||||||||||||
Thomas Chen | — | — | $ | 106,017 | — | — | $ | 106,017 | ||||||||||||||||
Rod F. Dammeyer(5) | — | — | $ | 114,488 | — | — | $ | 114,488 | ||||||||||||||||
William K. Hall(6) | — | — | $ | 110,252 | — | — | $ | 110,252 | ||||||||||||||||
John Patience | — | — | $ | 106,017 | — | — | $ | 106,017 | ||||||||||||||||
Mike S. Zafirovski | — | — | $ | 106,017 | — | — | $ | 106,017 |
(1) | The amounts in this column represent the fair value of options that we granted in |
As of December 31, 2013, our outside directors held vested and unvested options for the following number of shares of our common stock: Mr. Schuler, 17,810 shares; Mr. Brown, 48,486 shares; Mr. Dammeyer, 45,671 shares; Mr. Hall, 34,276 shares; Dr. Lord, 71,743 shares; Mr. Patience, 63,177 shares; Mr. Spaeth, 44,558 shares; and Mr. Zafirovski, 19,599 shares.
As of December 31, 2015, our outside directors held vested and unvested options for the following number of shares of our common stock: Mr. Schuler, 27,100 shares; Ms. Bleil, 12,809 shares; Mr. Brown, 57,776 shares; Mr. Chen, 18,007 shares; Mr. Dammeyer, 39,457 shares; Mr. Hall, 27,472 shares; Mr. Patience, 50,671 shares; and Mr. Zafirovski, 28,889 shares. |
(2) |
(3) | Mr. Alutto |
(4) | Pursuant to our Outside Directors Compensation Plan, Ms. Bleil received two options upon joining the Board in May 2015, each for a number of shares determined in accordance with the formulas described below under “Option Grants to New Directors.” The first option, for joining the Board, was for 7,878 shares and the second upon, reflecting his annual compensation as a director, was for 4,931 shares. |
(5) | Mr. Dammeyer received options for an additional |
We did not pay any fees or other cash compensation to our directors who served during 20132015 or provide them with any perquisites or other personal benefits. Pursuant to our Outside Directors Compensation Plan, we granted an option for 5,2454,931 shares to each of our outside directors elected at the annual meeting of stockholders in May 2013.2015. The number of option shares was determined by dividing (i) the product of fourfive times the director’s annual compensation of $125,000 by (ii) the average closing price of a share of our common stock
2016Proxy Statement | Stericycle, Inc. • 31 |
DIRECTOR COMPENSATION
during the 12-month period ending on the last trading day prior to the annual meeting ($95.34)126.76). The exercise price per share was the closing price of our common stock on the day of the annual meeting ($111.89)138.45), and the option vests on the first anniversary of the meeting (May 21, 2014)27, 2016). Mr. Dammeyer and Dr. LordMr. Hall received options for an additional 420394 and 210197 shares for their services as chairmenChairmen of the Audit and Compensation Committees, respectively.
Outside Directors Compensation Plan
In February 2016, the Board modified our Outside Directors Compensation Plan to align the compensation of our outside directors with the changes made to the compensation of our executive officers. Under our Outside Directors Compensation Plan, which our Board of Directors adopted in August 2006 and amended in November 2006, each director’s annual compensation for his or her services is $125,000.$125,000 (the “annual retainer”). The Board may review and updatereviews this amount annually and may update the annual retainer from time to time based on formal or informal surveys of outside directors’ compensation. Subject to the election by an eligible director to receive up to 50%payment of his or her annual compensationretainer in cash, the normal form of payment of an outside director’s annual compensationretainer is (i) a stock option reflecting athe conversion of 75%, or $93,750, of the cash compensation. Thisannual retainer and (ii) a restricted stock unit (RSU) award reflecting the conversion of 25%, or $31,250, of the annual retainer. The option isand RSU award are granted uponby reason of a director’s reelection as a director at the annual meeting of stockholders each year.
The option is for a number of shares equal to the quotient obtained by dividing (i) fourfive times the amount of cash compensationthe director’s annual retainer to be converted into an option ($93,750) by (ii) the average closing price of our common stock during the 12-month period frompreceding the prior year’sgrant date. The RSU award is for a number of shares equal to the quotient obtained by dividing (i) two times the amount of the director’s annual meeting throughretainer to be converted into an RSU award ($31,250) by (ii) the last trading day beforeaverage closing price of our common stock during the current annual meeting.12-month period preceding the grant date. The exercise price of the option is the closing price on the day ofgrant date. Both the annual meeting,option and the option vestsRSU award fully vest on the first anniversary of the annual meeting.grant date. Any portion of a director’s annual compensationretainer that he or she elects to receive in cash is paid in arrears at the time of vesting of the portion converted into an option (i.e., on the first anniversary of the annual meeting).12 equal monthly installments.
Under our Outside Directors Compensation Plan, all directors are required to hold a minimum position in our stock. For a director with less than five years’years of service, he or she must have a position equal to three times his currentor her annual compensation,retainer, or $375,000. For a director with five or more years of service, he or she must have a
position equal to five times his currentor her annual compensation,retainer, or $625,000. A director’s ownership position is measured by the value of our common stock that he or she owns directly and indirectly, the value of the vested and unvested RSUs that he or she holds, and the in-the-money value of the vested and unvested stock options that he or she holds.
A director who satisfies the minimum ownership requirement may elect to receive up to 50%all or a portion of his or her annual compensationretainer in cash. A director who does not satisfy the minimum ownership requirement must receive his or her annual compensationretainer in the normal form of payment as a stock option.option and RSU award. A director who does not satisfy the applicable minimum ownership requirement may not sell any shares of our common stock, with the exception that the director may engage in a “cashless” exercise of an option and sell a number of shares sufficient to pay the exercise price of the option shares and the related withholding taxes.
All of our outside directors currently satisfy the applicable minimum stock ownership requirement.requirement other than Mr. Chen who became a director in May 2014 and Ms. Bleil who became a director in May 2015.
Under our Outside Directors Compensation Plan, directors are not paid separate fees for attending meetings of the Board of Directors or its committees. No fees are paid to the Executive Chairman of the Board for his service as chairman. The chairman of the Audit Committee is paid a fee of $10,000 per year for his service as chairman, and the chairman of the Compensation Committee is paid a fee of $5,000 per year for his service as chairman.
2016Proxy Statement | Stericycle, Inc. • 32 |
DIRECTOR COMPENSATION
The fees to the chairmen of the Audit and Compensation Committees are paid by adding each chairman’s fee to and treating it as a part of his annual compensation as aretainer. The chairmen’s fees are reviewed annually and updated from time to time on the basis of formal or informal surveys of outside director with the effect of making 50% of each chairman’s fee eligible to be received in cash (if the chairman satisfies the applicable minimum ownership requirement) and converting the balance of the fee (or the entire fee, if the chairman does not satisfy the minimum ownership requirement) into an option.compensation.
Option Grants to New Directors
Our Outside Directors Compensation Plan provides that a new director will be granted two stock options and two RSU awards upon joining the Board. The first option, for joining the Board, is for a number of shares equal to the quotient obtained by dividing (i) the product of eight10 times 75%, or $93,750, of the director’s annual compensationretainer by (ii) the average closing price of our common stock during the 12-month period ending onpreceding the last trading day beforegrant date. The first RSU award, for joining the director’s electionboard, is for a number of shares equal to the Board.quotient obtained by dividing (A) 4 times 25%, or $31,250, of the annual retainer by (B) the average closing price of our common stock during the 12-month period preceding the grant date. The exercise price of the option is the closing price on the day of the director’s election,grant date, and one-fifth of the option shares and one-fifth of the RSU award vest on each of the first five anniversaries of the director’s election.grant date.
The new director will also be granted ana second option and second RSU award reflecting his or her annual compensation as a director.retainer. If the new director is elected at an annual meeting, the option isand the RSU award are the same as the options and RSU awards that the other directors elected at the annual meeting receive. If the new director is elected byother than at an annual meeting, (i) the Board to fill a vacancy, thesecond option is for a number of shares equal to a pro rata portion of the quotient obtained by dividing (i) the product(A) five times 75% of four times the director’s annual compensationretainer by (ii)(B) the average closing price of our common stock during the 12-month period ending onpreceding the last trading day beforegrant date, and (ii) the second RSU award is for a number of shares equal to a pro rata portion of the quotient obtained by dividing (A) two times 25% of the director’s election toannual retainer by (B) the Board.average closing price of our common stock during the 12-month period preceding the grant date. The exercise price of the option is the closing price on the day ofgrant date. Both the director’s election,option and the option vestsRSU award fully vest on the first anniversary of the prior annual meeting.
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APPROVAL OF 2014 INCENTIVESTERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
IntroductionItem 2 Approval of Stericycle, Inc. Canadian Employee Stock Purchase Plan
INTRODUCTION
In February 2014,March 2016, our Board of Directorsapproved the Stericycle, Inc. Canadian Employee Stock Purchase Plan (the “Stock Purchase Plan”) and recommended submitting the Stericycle, Inc. 2014 Incentive Stock Purchase Plan (the “2014 Plan” or “plan”) to our stockholders for their approval at the 20142016 Annual Meeting. The 2014Stock Purchase Plan will not become effective unless it is approved by our stockholders.
The purpose of the 2014Stock Purchase Plan is to recognize and reward selected officers, directors andprovide eligible employees for their efforts on the Company’s behalf, to motivate them by appropriate incentives to contribute to the Company’s attainment of its performance objectives, and to align their interests with thosecertain Canadian subsidiaries of the Company’s other stockholders through compensation based on the performanceCompany with an opportunity to become owners of the Company’s common stock.
The plan authorizes a maximumCompany through the purchase of 2,500,000 shares of our common stock for issuance pursuant to options, stock appreciation rights (“SARs”), shares of restricted stock and restricted stock units awarded under the plan.
While the 2014 Plan authorizes the award of SARs, shares of restricted stock and restricted stock units, the plan includes these features largely to provide us with flexibility in the future in providing equity compensation incentives in a changing accounting environment. At present, we contemplate that if the plan is approved by our stockholders, we would use the plan principally to grant stock options and would not use it to any significant degree to award SARs, shares of restricted stock or restricted stock units.
As of March 7, 2014, there were 1,397,874 shares of our common stock available for stock option grants and other awards under our 2011 Incentive Stock Plan, 108,746 shares available for grants and awards under our 2008 Incentive Stock Plan and 4,112 shares available for grants and awards under our 2005 Incentive Stock Plan. No shares were available for grants and awards under any of our other stock option plans, all of which previously expired in accordance with their respective terms.
The following summary describes the principal terms of the 2014 Plan. The complete text of the plan appears asExhibit A to this proxy statement. The 2014 Plan is substantially identical to our 2008 and 2011 Incentive Stock Plans approved by our stockholders.
Types of Awards. The plan permits the award of stock options, stock appreciation rights (either alone or in tandem with stock options), shares of restricted stock and restricted stock units (“RSUs”).
Number of Shares.stock. The plan authorizes a total of 2,500,000100,000 shares of our common stock to be issued pursuant to awards underpurchased by employees through payroll deductions at a 5% discount from the plan.
In determining the shares available for awards under the plan, the shares for which stock options and SARs are granted count against this maximum on a 1-for-1 basis, and the shares for which restricted stock and RSU awards are granted count against this maximum on a 2-for-1 basis (so that each share for which a restricted stock or RSU award is granted reduces by two shares the numbermarket price of shares available for which awards may be granted).
If a stock option or SAR lapses or expires unexercised or if a restricted stock or RSU award lapses, the number of shares in respect of which the stock option or SAR lapsed or expired, or twice the number of shares in respect of which the restricted stock or RSU award lapsed, is added back to the number of shares available for which awards may be granted.
Eligibility. The plan authorizes awards to be made to full-time and part-time employees of ours (or of
subsidiaries of ours) and to individuals serving as consultants, with the exception that incentive stock options may be granted only to employees.
Individual Limit on Awards. In any calendar year, the maximum number of shares for which awards may be granted to any person may not exceed 250,000 shares in the case of stock options and SARS and 100,000 shares in the case of restricted stock and RSU awards, in each case taking into account all similar types of grants and awards under other stock option and equity compensation plans of ours (other than our bonus conversion program and our employee stock purchase plan).
Term of Plan. The plan has a 10-year term which will begin on the date of approval of the plan by our stockholders. No award under the plan may be made after the plan’s expiration.
Administration.exercise date. The plan is administered by a committee of the Board of Directors (the “Committee”). The Committee is requiredintended to consist of two or more directors, all of whom are (i) “non-employee directors” as defined in Rule 16b-3be an “employee stock purchase plan” under the Securities Exchange Act of 1934, (ii) “independent directors” under the applicable listing standards of the NASDAQ Global Select Market and (iii) “outside directors” under § 162(m)section 423 of the Internal Revenue Code. Unless the Board designates a different committee, the Compensation Committee of the Board will serve as the Committee (as long as all of the members of the Compensation Committee qualify).
Subject to the express terms of the plan, the Committee has the authority to select the recipients, number of shares and other terms and conditions of each award under the plan. The Committee also has the authority to interpret the plan, adopt, revise and rescind policies and procedures to administer the plan, and make all determinations required for the plan’s administration.
Performance Goals. The Committee may condition the vesting of any award under the plan on the attainment of one or more performance goals relating to the Company as a whole or to a line of business, business unit or subsidiary. Performance goals may differ among employees and from award to award. The performance goals that the Committee specifies may relate to: earnings per share; earnings before interest, taxes, depreciation and amortization; revenues; income from operations; return on invested capital; return on assets; internal rate of return; return on stockholders’ equity; and total return to stockholders.
Stock Options. Stock options granted under the plan may be either incentive stock options intended to satisfy the requirements of section 422 of the Internal Revenue Code (“ISOs”) or nonstatutory stock options (“NSOs”). A “nonstatutory” stock option is the generic term for a stock option that does not qualify for special treatment under the Internal Revenue Code.
Term. The Committee determines the term of each stock option at the time of the grant. No option may have a term of more than 10 years.
Exercise Price. The exercise price per share of each stock option may not be less than the closing price of a share of our common stock on the date that the option is granted.
Vesting. The Committee specifies the time or times when each option becomes vested (i.e., exercisable). Vesting may be based on the holder’s continued service or on the satisfaction of specified performance goals or other conditions. The Committee may accelerate the vesting of an option at any time. An employee’s option becomes fully vested if the employee’s employment terminates by reason of his or her death. If the employee’s employment terminates for any other reason, any unvested portion of the option will lapse.
Exercisability. Once vested, an option remains exercisable for the term of the option, subject to early expiration in certain circumstances. If an employee’s employment terminates for any reason other than the employee’s death, each option that the employee holds expires as specified in the underlying award agreement, or if no expiration date is specified, 30 days after the employee’s termination. If an employee’s employment terminates by reason of his or her death, the option expires on the first anniversary of the employee’s death. The Committee may extend the expiration date of an option up to the last day of the option’s term.
Manner of Exercise. The holder of an option may exercise the vested portion of the option by giving written notice to the Committee, specifying the number of shares of common stock for which the option is being exercised, and tendering payment of the exercise price. The exercise price is payable in cash or, if permitted by the Committee, either in the underlying award agreement or at the time of exercise, by (i) delivering shares of our stock having a fair market value equal to the exercise price, (ii) directing us to withhold, from the shares otherwise issuable upon exercise of the option, shares of stock having a fair market value equal to the exercise price, (iii) an open-market broker-assisted sale pursuant to which we receive the portion of the sales proceeds equal to the exercise price, or (iv) any combination of these methods or any other method that the Committee authorizes.
No Repricing. Options may not be repriced unless the repricing is approved by our stockholders.
Special Limitations on ISOs. To the extent that the aggregate fair market value (determined in respect of each ISO on the basis of the fair market value of a share of our common stock on the ISO’s grant date) of the underlying shares of all ISOs that become exercisable by an employee for the first time in any calendar year exceeds $100,000, the options are treated as NSOs.
Transferability. No option may be transferred, assigned or pledged, except at death in accordance with the decedent’s will or the applicable laws of intestacy, or as provided in the underlying award agreement or as the Committee otherwise permits, or if (i) the transferee is a revocable trust that the employee established for estate planning reasons (in respect of which the employee is treated as the owner for federal income tax purposes) or (ii) the transferee is the spouse of the employee or a child, step-child, grandchild, parent, sibling or child of a sibling of the employee (each an “eligible transferee”), a custodian for an eligible transferee under any Uniform Transfers to Minors Act or Uniform Gifts to Minors Act or a trust for the primary benefit of one or more eligible transferees.
Stock Appreciation Rights. A stock appreciation right entitles the holder to receive the appreciation in value over a specified period of the number of shares of our common stock for which the SAR is awarded. The holder receives in settlement of the SAR an amount equal to the excess of the fair market value of a share of our common stock on the date of exercise of the SAR over the base price of the SAR, multiplied by the SAR’s number of shares. The Committee determines the vesting requirements, type of settlement and other terms of each SAR.
Base Price. The base price per share of each SAR may not be less than the closing price of a share of our common stock on the date that the SAR is granted.
Stand-Alone or Tandem SAR. A SAR may be granted on a stand-alone basis or in tandem with a related stock option. A tandem SAR entitles the employee to elect to exercise either the SAR or the related option as to all or any portion of the shares subject to the SAR and option. The exercise of a tandem SAR causes the automatic cancellation of its related option for the same number of shares, and the exercise, expiration or cancellation of the related option (other than by reason of the exercise of the tandem SAR) causes the automatic and immediate cancellation of the tandem SAR for the same number of shares.
Manner of Exercise. The holder of an SAR may exercise the vested portion of a SAR by giving written notice to the Committee, specifying the number of shares of common stock for which the SAR is being exercised. Unlike the case with a stock option, no exercise price is required to be paid.
No Repricing. SARs may not be repriced unless the repricing is approved by our stockholders.
Settlement. Upon exercise, a SAR may be settled in cash or in shares of our stock, or a combination of the two, in the Committee’s discretion. The settlement will be made on the basis of the closing price of a share of our common stock on the date of exercise of the SAR.
Similarity to Options. Many of the same terms of the plan that apply to stock option grants apply as well to awards of SARs. See “Stock Options—Term,—Vesting,—Exercisability and—Transferability.”
Restricted Stock. An award of restricted shares is an award of shares of our common stock subject to vesting requirements, restrictions on transfer and other conditions as the Committee determines.
Vesting. The Committee specifies the time or times when the restricted shares become vested (i.e., no longer subject to forfeiture). Vesting may be based on continued service or on the satisfaction of specified performance goals or other conditions. The Committee may accelerate the vesting of the restricted shares at any time.
Transferability. Prior to vesting, restricted shares may not be transferred or pledged. After vesting, the shares may still remain subject to restrictions on transfer under applicable securities laws and any restrictions that the Committee imposes in the award agreement.
Rights as Stockholder. Subject to the vesting requirements, transfer restrictions and other conditions of the award, the recipient of an award of restricted shares has all of the rights of a stockholder in respect of the restricted shares, including all voting and dividend rights.
Restricted Stock Units. A RSU unit award entitles the holder to receive a payment equal to the value of a share of our common stock at the time of payment multiplied by the number of shares subject to the award. The Committee determines the vesting requirements, type of settlement and other terms of each restricted stock unit award.
Vesting. The Committee specifies the time or times when the RSUs become vested (i.e., no longer subject to forfeiture). Vesting may be based continued service or on the satisfaction of specified performance goals or other conditions. The Committee may accelerate the vesting of the RSUs at any time.
Settlement. A RSU award may be settled in cash or in shares of our stock, or a combination of the two, in the Committee’s discretion. The settlement will be made on the basis of the closing price of a share of our common stock on the date that the award becomes payable.
Rights as Stockholder. The holder of a RSU award does not have any rights as a stockholder in respect of the shares subject to the award until the award is settled in stock and those shares have been issued to the holder.
Amendment and Termination. Our Board of Directors may amend, suspend or terminate the 2014 Plan at any time. Our stockholders are required to approve any amendment to the plan that would increase the number of shares of our common stock for which ISOs may be granted under the Plan or that would materially increase the number of shares of our common stock for which other types of awards may be made.
Change of Control. In the event of a “change of control” as defined in the 2014 Plan, all outstanding stock options, SARs and RSU awards will become fully vested and exercisable and all restrictions on the shares underlying restricted stock awards will lapse.
Federal Income Tax Consequences
Stock Options. The federal income tax treatment of ISOs and NSOs is significantly different.
The grant of an ISO or NSO will not result in any federal income tax consequences to the holder of the option or to us.
The exercise of an ISO will not result in any regular income tax to the holder of the option or any income tax consequences to us. The exercise of an ISO, however, may affect the holder’s alternative minimum tax liability. Unless the shares acquired upon exercise of the ISO are disposed of in the same year, the holder’s alternative minimum taxable income will be increased in an amount equal to the excess of (i) the fair market on the date of exercise of the shares acquired over (ii) the exercise price of the ISO.
The exercise of a NSO will result in ordinary income to the holder in an amount equal to the excess of (i) the fair market value on the date of exercise of the shares acquired over (ii) the exercise price of the NSO. We will be entitled to an income tax deduction in the same amount. If, however, payment of the exercise price of the NSO is made by delivering shares of our common stock that the holder already owns, a number of new shares equal to the number of shares delivered in payment of the exercise price will be considered to have been received in a tax-free exchange, and the holder’s basis and holding period for those new shares will be equal to holder’s basis and holding period for the shares delivered in payment. The holder will realize ordinary income equal to the fair market value on the date of exercise of the balance of the new shares received upon exercise of the NSO, and the holder’s basis in those new shares will be equal to the ordinary income realized and his or her holding period in respect of those shares will begin on the date of exercise of the NSO. In either situation, we will be entitled to an income tax deduction corresponding to the holder’s ordinary income.
Gain on the sale of shares acquired upon the exercise of an ISO is measured by the excess of (i) the amount realized on the sale of the shares over (ii) the exercise price of the ISO. If the shares acquired upon the exercise of an ISO are not sold within one year from the date of exercise or two years from the grant date of the ISO, the holder’s gain on the sale of the shares will be treated as long-term capital gain. If the shares are sold within either of these periods, a portion of the holder’s gain will be treated as ordinary income and the balance, if any, will be treated as short-term or long-term capital gain (depending upon whether the shares were held for more than one year). The portion treated as ordinary income is equal to the excess of (i) the lesser of (a) the fair market value on the date of exercise of the shares sold or (b) the amount realized on the sale of the shares, over (ii) the exercise price of the ISO. We will be entitled to an income tax deduction in the year of sale in an amount equal to the portion of the holder’s gain treated as ordinary income.
Gain on the sale of shares acquired upon exercise of a NSO is measured by the excess of (i) the amount realized on the sale of the shares over (ii) the holder’s adjusted basis in those shares. The holder’s adjusted basis is the sum of (i) the exercise price of the NSO and (ii) the ordinary income realized upon the exercise of the NSO. The holder’s gain on the sale of the shares will be treated as long-term or short-term capital gain (depending upon whether the shares were held for more than one year).
Stock Appreciation Rights. The holder of a SAR will not recognize taxable income when the SAR is granted. Upon exercise of the SAR, the amount paid in settlement, whether in cash or shares of our common stock, will be taxed as ordinary income to the holder. We will be entitled to a corresponding income tax deduction.
In the case of a tandem SAR, the tax consequences upon exercise of the SAR will be the same if the holder elects to surrender the related stock option. If the holder instead elects to exercise the tandem stock option and the SAR is automatically cancelled, the cancellation of the SAR will not be taxable to the holder.
Restricted Stock Awards. An award of shares of restricted stock is not generally a taxable event. The holder of an award of restricted shares will realize ordinary income each year in which the award vests in an amount equal to the fair market value at the time of vesting of the shares that vest. We will be entitled to a corresponding income tax deduction. The holder’s basis in those shares will be the amount of his or her ordinary income, and any gain or loss recognized on a subsequent sale of those shares will be treated as short-term or long-term capital gain (depending upon whether the shares were held for more than one year).
RSUs. An award of RSUs units is not generally a taxable event. The holder of a RSU award will realize ordinary income each year in which units vest in an amount equal to the amount paid in settlement of the vested units, whether paid in cash or shares of our common stock. We will be entitled to a corresponding income tax deduction. The holder’s basis in any shares paid in settlement will be the amount of his or her ordinary income, and any gain or loss recognized on a subsequent sale of those shares will be treated as short-term or long-term capital gain (depending upon whether the shares were held for more than one year).
Recommendation of Board of Directors
The Board of Directors believes that the 2014Stock Purchase Plan will provide an attractive benefit which will enhance our ability to continue to attract and retain dedicated and motivated employees of our Canadian subsidiaries who are critical to our success.
SUMMARY OF PRINCIPAL TERMS
The following summary describes the principal terms of the Stock Purchase Plan. The complete text of the plan appears as Exhibit A to this proxy statement.
Overview
The Stock Purchase Plan allows eligible employees of certain of our Canadian subsidiaries to purchase shares of our common stock at a discount during two six-month offering periods each year. An eligible employee who elects to participate in an offering period is granted an option on the first day of the offering period for a number of shares equal to the employee’s payroll deductions under the Stock Purchase Plan during the offering period divided by the option price per share as of the last day of the offering period (or, if such day is not a business day, the immediately preceding business day) (such date is hereinafter referred to as the “exercise date”). The option price per share is equal to 95% of the last reported sales price of a share of our common stock on NASDAQ as of the exercise date.
Administration
The Stock Purchase Plan is administered by our Board. The Board may delegate its authority to administer the Stock Purchase Plan to a committee of the Board or to an administrative committee of officers or other employees. For convenience, the term “plan administrator” is used in the balance of this summary to refer both to our Board and to any committee to which the Board may delegate its authority to administer the Stock Purchase Plan.
Subject to the terms and conditions of the Stock Purchase Plan, the plan administrator has the authority and duty to: (i) manage and control the operation of the Stock Purchase Plan; (ii) conclusively interpret and construe the provisions of the Stock Purchase Plan, and prescribe, amend and rescind rules, regulations and procedures relating to the Stock Purchase Plan; (iii) correct any defect or omission and reconcile any inconsistency in the Stock Purchase Plan; (iv) determine whether and to what extent a Canadian subsidiary of the Company may participate in the Stock Purchase Plan; and (v) make all other determinations and take all other actions as it deems necessary or desirable for the implementation and administration of the Stock Purchase Plan. The
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ITEM 2 APPROVAL OF STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
determination of the plan administrator on matters within its authorities will be conclusive and binding on the Company, the participating Canadian subsidiaries, the participants and all other persons. Any decision of the plan administrator requires a majority of its members.
Number of Shares
The Stock Purchase Plan authorizes a total of 100,000 shares of our common stock to be issued pursuant to options granted under the plan. In the event of the expiration, withdrawal, termination or other cancellation of an option under the Stock Purchase Plan, the number of shares of common stock that were subject to the option but not delivered will again be available for issuance under the Stock Purchase Plan. The maximum number of shares of common stock available under the Stock Purchase Plan is subject to adjustment in the event of any transaction involving the Company (including, without limitation, any merger, consolidation, reorganization, recapitalization, spinoff, stock dividend, extraordinary cash dividend, stock split, reverse stock split, combination, exchange or other distribution with respect to shares of our common stock or other change in the corporate structure or capitalization affecting our common stock).
Eligibility
Every employee of a participating Canadian subsidiary who has completed six months’ employment as of the first day of an offering period under the Stock Purchase Plan, and who is either (i) a full-time employee or (ii) a part-time employee who customarily works more than 20 hours per week, will be eligible to participate in the offering period. As of July 1, 2016, approximately 3,500 employees would be eligible to participate in the Stock Purchase Plan.
Offering Periods
Each year the Stock Purchase Plan will have two consecutive six-month offering periods during which eligible employees may make payroll deductions that will be credited to participant accounts and used to purchase shares of our common stock. One offering period will begin on January 1 and end on June 30, and the other offering period will begin on July 1 and end on December 31.
Election to Participate
An individual who is an eligible employee on the first day of an offering period may elect to be a participant in the Stock Purchase Plan for that offering period by completing and filing an enrollment agreement in accordance with rules and procedures established by the plan administrator.
Payroll Deduction Percentage
A participant’s enrollment agreement will specify the percentage of his or her compensation (salary or wages) for the offering period that the participant elects to have withheld and credited to his or her account for purposes of exercising the participant’s option for that offering period. The participant may specify any whole percentage of his or her compensation, but a participant’s total payroll deductions may not exceed $5,000 during any offering period (appropriately increased or reduced in the case of any offering period longer or shorter than six months).
Payroll deductions will begin with the first regular payroll period ending on or after the first day of the offering period and end with the last regular payroll period ending on or before the exercise date (or, if earlier, upon the termination of the participant’s employment or other termination of participation in the Stock Purchase Plan). Except in the case of a participant’s election to cease participation or termination of employment (as described below), a participant may not change his or her payroll deductions during an offering period, and a participant’s enrollment agreement will remain in effect indefinitely (for both the offering period in respect of which it was initially filed and all subsequent offering periods) unless the participant modifies the enrollment agreement for a subsequent offering period or the participant’s participation in the Stock Purchase Plan terminates.
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ITEM 2 APPROVAL OF STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
Grant of Options
Each participant in an offering period will be granted an option as of the first day of the offering period for a number of shares of our common stock equal to his or her payroll deductions under the plan during the offering period divided by the option price per share as of the exercise date.
Option Price
The option price per share of our common stock in any offering period will be equal to 95% of the last reported sales price of a share of our common stock on NASDAQ as of the exercise date.
Exercise of Options
On each exercise date, each participant whose participation in the Stock Purchase Plan for that offering period has not terminated will be deemed to have exercised his or her option with respect to that number of whole shares of our common stock equal to the quotient of (i) the total payroll deductions for the offering period in the participant’s account as of the exercise date and (ii) the exercise price of the option.
Limitations
In any calendar year, no participant may purchase under the Stock Purchase Plan (or any other employee stock purchase plan of the Company or any subsidiary) shares of our common stock having a fair market value (determined as of the first day of an offering period) in excess of $25,000. In addition, no option will be granted to any eligible employee if, immediately after the option is granted, he or she would own (or would be deemed to own, pursuant to the rules of the U.S. Internal Revenue Code) stock possessing 5% or more of the voting power or value of all classes of stock of the Company or any subsidiary.
Election to Cease Participation
A participant may elect to cease participation in an offering period at any time prior to the exercise date and receive a refund of the balance in his or her account. Such an election will serve to cancel the participant’s option and terminate his or her participation in both the current offering period and all subsequent offering periods, and no shares of our common stock will be purchased for the participant for the offering period in which his or her election to cease participation is effective. An election to cease participation in an offering period must be made in the manner and within the time prior to the exercise date that the plan administrator specifies. Any refund of the participant’s account balance pursuant to the participant’s election to cease participation will be paid to him or her, without interest, as soon as practicable following his or her election. A participant’s election to cease participation for one offering period will not affect his or her eligibility to participate in subsequent offering periods, subject to the terms and conditions of the Stock Purchase Plan.
Termination of Employment
In the event that a participant’s employment with the Company and its subsidiaries terminates during an offering period and prior to the exercise date of the offering period for any reason (whether as a result of his or her resignation, death or otherwise), the participant’s option will be automatically cancelled as of the date of the participant’s termination of employment, and no shares of our common stock will be purchased for the participant for the offering period in which his or her termination occurs. All amounts remaining in the participant’s account as of his or her termination date will be refunded to the participant, without interest, as soon as practicable after the participant’s termination date.
Transferability
No participant in an offering period may sell, pledge, transfer or otherwise dispose of his or her option under any circumstances.
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ITEM 2 APPROVAL OF STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
Reports
After the close of each offering period, a report will be sent to each participant (or made available to the participant through a third party provider) stating the entries made to his or her account, the number of shares of common stock purchased upon exercise of options for the offering period, and the applicable option price.
Amendment and Termination
Our Board may amend, suspend or terminate the Stock Purchase Plan at any time. Our stockholders will be required to approve any amendment that is required by applicable law or the rules of any securities exchange on which our shares of common stock are traded, including an amendment to increase the number of shares of our common stock available for issuance under the Stock Purchase Plan or a change in the eligibility provisions of the Stock Purchase Plan.
Stock Purchase Plan Benefits
The benefits to be derived under the Stock Purchase Plan by any individual are currently undeterminable. Participation in the Stock Purchase Plan is entirely voluntary and benefits will only be realized for those eligible employees who choose to allocate a portion of their compensation to the purchase of our common stock. The total number of shares of our common stock to be purchased during each offering period cannot be determined in advance, as it will vary based on individual elections and the price of our common stock on the grant date and the exercise date.
INCOME TAX CONSEQUENCES
The following is a brief discussion of the U.S. Federal income tax treatment that will generally apply to grants of options and Stock Purchase Plan by U.S. taxpayers based on the current U.S. Federal tax laws and regulations presently in effect, which are subject to change, and it does not purport to be a complete description of the Federal income tax aspects of the Plan. The following does not discuss any foreign, state or local tax consequences in connection with grants of options and purchases under the Stock Purchase Plan.
No income will be taxable to a participant upon the grant of an option under the Stock Purchase Plan or at the time shares of our common stock are purchased under the Stock Purchase Plan and we will not be entitled to a deduction. Upon the disposition of the shares acquired upon exercise of an option, the tax treatment, and our entitlement to a deduction, depends on whether the shares acquired pursuant to the Stock Purchase Plan are held for the “holding period” which is the 2 year period after the date the option is granted and one year after the exercise date, as summarized below.
In the event shares of our common stock are sold or disposed of prior to the expiration of the holding period, the excess of the fair market value of the shares on the exercise date over the option price will be treated as ordinary income to the participant. This excess will constitute ordinary income in the year of sale or other disposition even if no gain is realized on the sale or a gratuitous transfer of the shares is made. The balance of any gain will be treated as capital gain. Even if the shares are sold for less than their fair market value on the exercise date, the same amount of ordinary income is attributed to a participant and a capital loss is recognized equal to the difference between the sale price and the value of the shares on the exercise date. If a sale or disposition occurs before the expiration of the holding period, we will be entitled to a deduction for the taxable year in which such sale or disposition occurs in the same amount includible as compensation in the participant’s ordinary income.
In the event that shares of our common stock acquired pursuant to the Stock Purchase Plan are sold or disposed of (including by way of gift) after the expiration of the holding period, the participant’s ordinary income will
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ITEM 2 APPROVAL OF STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
equal the lesser of (i) the excess of the fair market value of the shares on the Grant Date (first day of the Offering Period) over the option price or (ii) the gain actually realized by the participant on the sale of the shares (if there is a gain). Any further gain on disposition will be treated as capital gain and any loss will be treated as a capital loss. If the participant holds the acquired shares for the holding period, we will not be entitled to a deduction for Federal income tax purposes with respect to shares transferred to a participant.
The Board of Directors recommends that stockholdersa vote “FOR” approval of the 2014 IncentiveCanadian Employee Stock Purchase Plan.
2016Proxy Statement | Stericycle, Inc. • 38 |
ITEM 3 RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2016
Item 3RATIFICATION OF APPOINTMENT OFINDEPENDENT PUBLIC ACCOUNTING FIRM Ratification of Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm for 2016
We have appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014.2016. Ernst & Young LLP has served as our independent registered public accounting firm since our incorporation in March 1989. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting to respond to appropriate questions and will have the opportunity to make a statement if they desire to do so.
Audit FeesAUDIT FEES
The aggregate fees billed by Ernst & Young LLP for professional services rendered in connection with the audit of our annual financial statements, audit of our internal control over financial reporting and review of our interim financial statements included in our quarterly reports on Form 10-Q, statutory audits required internationally, and assistance with and review of certain documents and letters filed with the SEC during the fiscal years ended December 31, 20132015 and 20122014 were approximately $1.5$5.4 million and $1.4$2.0 million, respectively.
Audit-Related FeesAUDIT-RELATED FEES
Ernst & Young LLP did not provide any audit-related services or other assurance or related services to us during the fiscal years ended December 31, 20132015 and 2012.2014.
Tax FeesTAX FEES
The aggregate fees billed by Ernst & Young LLP for tax compliance, tax advice, and tax planning services provided to us during the fiscal years ended December 31, 20132015 and 20122014 were approximately $0.2$0.8 million and $0.3 million, respectively.
All Other FeesALL OTHER FEES
Ernst & Young LLP did not provide any other services to us during the fiscal yearyears ended December 31, 2013 or December 31, 2012.2015 and 2014.
In accordance with policies adopted by the Audit Committee of our Board of Directors, all audit and non-audit related services to be performed for us by our independent public accountants must be approved in advance by the Audit Committee.
RatificationThe ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm will require the affirmative vote of holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting. If our stockholders do not ratify the appointment of Ernst & Young LLP, our Board of Directors may reconsider their appointment.
The Audit Committee and the Board of Directors recommendsrecommend that stockholders vote “FOR” ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014.2016.
2016Proxy Statement | Stericycle, Inc. • 39 |
ITEM 4 ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
Item 4ADVISORY VOTE ON EXECUTIVE COMPENSATION Advisory Vote to Approve Executive Compensation
Under recent changesPursuant to Section 14A of the rules governing proxy statements,Exchange Act, we are asking our stockholders have the opportunity to approve, by means of a non-binding advisory vote, the compensation of our named executive officers as disclosed in this proxy statement.
This proposal, popularly known as “say-on-pay,” enables stockholders to express or withhold their approval of our executive compensation program in general. The vote is intended to provide an assessment by our stockholders of our overall executive compensation program and not of any one or more particular elements of that program. The Compensation Committee and the full Board intend to consider and take into account the outcome of this non-binding advisory vote in making future executive compensation decisions. Because this vote is advisory and non-binding, it will not necessarily affect or otherwise limit any future compensation of any of our named executive officers. This advisory vote to approve executive compensation will be held on an annual basis at least until the next advisory vote to determine the frequency of such vote.
Our executive compensation program is described in the “Compensation Discussion and Analysis” section of this proxy statement and the related tables and narrative discussion. Stockholders are strongly urged to read this material in its entirety, and in particular to read the “Overview” on pages 16–18,18—20, to obtain an informed understanding of our executive compensation program.
We believe that our executive compensation program is firmly aligned with the long-term interests of our stockholders. In addition to enabling us to attract and retain executive officers of the necessary caliber, ourOur executive compensation program has as its objectives (i) making a substantial portion of ourattracting, motivating and retaining highly qualified executive officers’ compensation dependent on the Company’s attainment of a measurable Company-wide performance targetofficers and (ii) structuring most of their compensation, aside from their base salaries, to be dependent on the Company’s attainment of measurable Company-wide performance targets and the sustained growth in our stock price, so that they benefit only if all of our stockholders benefit.
We believe that our executive compensation program satisfies these objectives and does so in a straightforward manner which has remained essentially unchanged in design for more than 16 years.objectives. Our executive compensation program consists of cash compensation and long-term incentive compensation. CashFor 2015, cash compensation iswas paid in the form of a base salary and aan annual cash performance bonus based on EBITDA (earnings before interest, taxes, depreciation and amortization), and long-term incentive compensation iswas paid in the form of stock options. PerformanceAnnual cash performance bonuses are dependent on Company-wide performance, and stock options, which are only granted at the closing market price on the date of grant, are dependent for their value on the subsequent growth in value of our stock. PerformanceAnnual cash performance bonuses represented 14.8%13.7% and stock options represented 72.9%67.6% of our executive officers’ compensation during 20132015 and together represented 86.8%83.4% and 86.2%87.7% of their compensation during 20112014 and 2012,2013, respectively.
For these reasons and the reasons elaborated more fully in the “Compensation Discussion and Analysis” section and the related tables and narrative discussion, the Board of Directors requests stockholders to approve the following resolution:
Resolved, that the stockholders approve the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement, including the “Compensation Discussion and Analysis” section and the related compensation tables and narrative discussion.
The Board of Directors recommends a vote “FOR” this resolution approving the compensation of our namedadvisory vote to approve executive officers.compensation.
2016Proxy Statement | Stericycle, Inc. • 40 |
ITEM 5 STOCKHOLDER PROPOSAL ON INDEPENDENT CHAIRMAN
Item 5ADVISORY VOTE ON THE FREQUENY OF
Stockholder Proposal on Independent Chairman
THE ADVISORY VOTE ON EXECUTIVE COMPENSATION
UnderThe Teamsters General Fund of the same rules governing proxy statements that requireInternational Brotherhood of Teamsters, 25 Louisiana Avenue, NW, Washington, DC 20001, a say-on-pay vote (Item 4),beneficial owner of 55 shares of our stockholders also havecommon stock, has submitted the opportunity to recommend,following resolution for consideration by means of a non-binding advisory vote, the frequency with which the say-on-pay vote will be held. This vote is required at least once every six years and was last held in 2011 when stockholders voted at our Annual Meeting to recommend that the say-on-pay vote be held every year.stockholders:
In satisfactionRESOLVED: The stockholders of this requirement, stockholders will vote onStericycle, Inc. (the “Company”), ask the following resolution:
Resolved,Board of Directors to adopt a policy that, whenever possible, the stockholders recommend thatboard chairman should be a director who has not previously served as an executive officer of the non-binding advisory vote to approveCompany and who is “independent” of management. For these purposes, a director shall not be considered “independent” if, during the compensation paid the Company’s named executive officers be held with the following frequency:last three years, he or she—
every yearwas affiliated with a company that was an advisor or consultant to the Company, or a significant customer or supplier of the Company;
every two yearswas employed by or had a personal service contract(s) with the Company or its senior management;
every three yearswas affiliated with a company or non-profit entity that received the greater of $2 million or 2% of its gross annual revenues from the Company;
abstain from votinghad a business relationship with the Company that the Company had to disclose under the Securities and Exchange Commission regulations;
has been employed by a public company at which an executive officer of the Company serves as a director;
had a relationship of the sort described above with any affiliate of the Company; and,
was a spouse, parent, child, sibling or in-law of any person described above.
The frequency receivingpolicy should be implemented without violating any contractual obligation and should specify how to select an independent chairman if a current chairman ceases to be independent between annual shareholder meetings. Compliance with the highest number of votes willpolicy may be considered the frequency recommended by the stockholders. The vote on the frequency of the say-on-pay voteexcused if no independent director is advisoryavailable and non-binding. The Board of Directors intendswilling to consider and take into account the stockholders’ recommendation in making future decisions on the frequency of the say-on-pay vote.be chairman.
SUPPORTING STATEMENT
The Board of Directors, recognizes that there are diverging viewsled by its chairman, is responsible for protecting shareholders’ long-term interests by providing independent oversight of management, including the CEO, in directing the corporation’s affairs. This oversight can be diminished when the chairman is not independent.
At Stericycle, the lengthy tenure, longstanding relationships and outside financial interests among many of our directors raises serious concerns about the board’s ability to provide the rigorous, independent oversight of management required to protect shareholders’ interests. A close look at the nominating committee demonstrates the concerns applicable to the composition of the entire board. The three members of the nominating committee have been on the optimal frequencyboard for a combined 68 years. These directors also serve together on other corporate boards and made significant investments into the same companies. Shared business endeavors may pose potential conflicts of interest with directors’ duty to put shareholders’ interests first.
In its assessment of Stericycle, MSCI, the independent investment research firm, found: “Long-tenured directors can often form relationships that may compromise their independence and therefore hinder their ability to provide effective oversight. These concerns are aggravated due to additional factors, e.g., the lack of an independent chairman, which together with the high number of long-tenured directors raises concerns about whether the board is able to provide an effective counterbalance to management.”
We urge you to vote FOR this proposal.
2016Proxy Statement | Stericycle, Inc. • 41 |
ITEM 5 STOCKHOLDER PROPOSAL ON INDEPENDENT CHAIRMAN
THE COMPANY’S STATEMENT IN OPPOSITION
The Board of Directors believes that this proposal is unnecessary and is not in the best interests of our stockholders. Consequently, the Board recommends a vote “AGAINST” this proposal.
Having considered our existing corporate governance measures and the degree to which the Board exercises independent oversight of management, the Board has concluded that our stockholders are best served by affording the Board the organizational flexibility to select the person best suited for the position of Chairman and to determine the most effective leadership structure for our Company. A requirement that our Chairman be independent unwisely places arbitrary constraints on the judgment of the say-on-pay vote. Some contendBoard as to how the Company should be governed. Currently, our stockholders are best served by our former President and Chief Executive Officer, Mark C. Miller, serving as Chairman of the Board and Jack W. Schuler serving as an independent Lead Director.
Since January 2013, we have separated the roles of Chief Executive Officer and Chairman of the Board of Directors, and since August 2008 our bylaws have provided that if our Chief Executive Officer or any other officer or employee is serving as Chairman of the Board, the Board is required to appoint an outside director as our Lead Director. Our Chairman of the Board, Mr. Miller, is an officer, and accordingly, the Board has appointed Mr. Schuler as Lead Director. As required by our bylaws, Mr. Schuler is independent under the listing standards of the NASDAQ Global Select Market.
Until January 2013, Mr. Miller served as our President and Chief Executive Officer (from May 1992) and Chairman of the Board (from August 2008) and brings to the position of Chairman a unique in-depth knowledge of our Company and the regulated waste industry generally, together with a repeatedly proven ability to formulate and oversee the implementation of strategic initiatives. Moreover, our Chairman’s substantial ownership stake in our Company provides alignment with the interests of his fellow stockholders.
Mr. Schuler served as our Chairman of the Board from January 1990 until becoming Lead Director in August 2008 and brings to the position of Lead Director experience managing the operations of a multinational healthcare company and knowledge of the dynamics of the healthcare industry.
Our Lead Director’s duties are substantially similar to many of the duties typically performed by a chairman of the board. As described in “Item 1 Election of Directors—Lead Director” on page 13, the Lead Director is responsible for coordinating with the Chairman of the Board the scheduling and agenda of Board meetings and the preparation and distribution of agenda materials. The Lead Director may also call special meetings of the Board of Directors when he considers it appropriate. In general, the Lead Director oversees the scope, quality and timeliness of the flow of information from our management to the Board and serves as an independent point of contact for stockholders wishing to communicate with the Board other than through the Chairman of the Board.
Eight of ten of our directors are independent, and the Board regularly reviews the Company’s governance to ensure independent oversight of management. In addition to the requirement to empower a Lead Director when the Chairman of the Board is not independent, examples of independent oversight include the following:
All members of the Audit, Compensation, and Nominating and Governance Committees of the Board are independent. As provided in their charters, these committees have oversight responsibilities over critical matters for the Company and play a robust role in the Company’s governance, with direct access to management and authority to retain independent advisers. The oversight responsibilities of these committees include the quality and integrity of our financial statements, our compliance with legal and regulatory requirements, the performance and compensation of executive officers, the nomination of directors, and the evaluation of the effectiveness of the Board, its committees and its members.
2016Proxy Statement | Stericycle, Inc. • 42 |
ITEM 5 STOCKHOLDER PROPOSAL ON INDEPENDENT CHAIRMAN
At each regularly scheduled meeting of the Board, the independent directors meet in executive session, presided over by the Lead Director, to review the performance of management and in particular the performance of our President and Chief Executive Officer and our Chairman of the Board.
In addition, our directors annually review the performance of the Board of Directors and its committees and the performance of their fellow directors to ensure that the Board and Board committees are functioning effectively.
We believe the corporate governance measures noted above demonstrate that our Board is structured effectively to exercise independent oversight. In addition, the Company’s stockholders have considered, and declined to provide majority support to, a similar independent board chairman proposal at our 2015 Annual Meeting of Stockholders.
For the foregoing reasons, a policy that requires an independent chairman is unnecessary and not in the best interests of our stockholders.
Accordingly, the Board of Directors recommends a vote “AGAINST” this proposal.
2016Proxy Statement | Stericycle, Inc. • 43 |
ITEM 6 STOCKHOLDER PROPOSAL ENTITLED “SHAREHOLDER PROXY ACCESS”
Item 6 Stockholder Proposal Entitled “Shareholder Proxy Access”
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, a beneficial owner of no fewer than 50 shares of our common stock, has submitted the following resolution for consideration by stockholders:
Proposal [6]—Shareholder Proxy Access
RESOLVED: Shareholders ask our board of directors to adopt, and present for shareholder approval, a “proxy access” bylaw as follows:
Require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as defined herein) of any person nominated for election to the board by a shareholder or an unrestricted number of shareholders forming a group (the “Nominator”) that meets the criteria established below.
Allow shareholders to vote on such nominee on the Company’s proxy card.
The number of shareholder-nominated candidates appearing in proxy materials should not exceed one quarter of the directors then serving or two, whichever is greater. This bylaw should supplement existing rights under Company bylaws, providing that a less frequentNominator must:
a) have beneficially owned 3% or more of the Company’s outstanding common stock, including recallable loaned stock, continuously for at least three years before submitting the nomination;
b) give the Company, within the time period identified in its bylaws, written notice of the information required by the bylaws and any Securities and Exchange Commission (SEC) rules about (i) the nominee, including consent to being named in proxy materials and to serving as a director if elected; and (ii) the Nominator, including proof it owns the required shares (the “Disclosure”); and
c) certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominator’s communications with the Company shareholders, including the Disclosure and Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than the Company’s proxy materials; and (iii) to the best of its knowledge, the required shares were acquired in the ordinary course of business, not to change or influence control at the Company.
The Nominator may submit with the Disclosure a statement not exceeding 500 words in support of the nominee (the “Statement”). The Board should adopt procedures for promptly resolving disputes over whether notice of termination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations, and the priority given to multiple nominations exceeding the one-quarter limit. No additional restrictions that do not apply to other board nominees should be placed on these nominations or re-nominations.
Proxy access would “benefit both the markets and corporate boardrooms, with little cost or disruption,” raising US market capitalization by up to $140 billion. This is according to a cost-benefit analysis by the Chartered Financial Analyst Institute,Proxy Access in the United States: Revisiting the Proposed SEC Rule.
2016Proxy Statement | Stericycle, Inc. • 44 |
ITEM 6 STOCKHOLDER PROPOSAL ENTITLED “SHAREHOLDER PROXY ACCESS”
Please vote would allowto enhance shareholder value:
Shareholder Proxy Access—Proposal [6]
THE COMPANY’S STATEMENT IN OPPOSITION
Having already implemented proxy access, the Board of Directors believes that this proposal is unnecessary and is not in the best interests of our stockholders. Consequently, the Board recommends a vote “AGAINST” this proposal.
We have already taken action to provide stockholders with proxy access. The stockholder proposal conflicts in some respects with the form of proxy access adopted by the Board. The proxy access provisions adopted by the Board, in addition to our pre-existing governance structures and policies, protect the Company, best serve the interests of stockholders, and are consistent with market practice and other S&P 500 companies.
The Board has already adopted proxy access for the benefit of all stockholders.
The Board has recently adopted an amendment and restatement of the Company’s bylaws to incorporate proxy access provisions that are consistent in some respects with the proxy access provisions proposed by the proponent, but are further tailored to the Company’s particular circumstances and governance practices. The Board considered various potential formulations of proxy access, including the provisions advocated by the proponent, taking into account the composition of our stockholders and the size, tenure and structure of our Board. Based upon the Board’s assessment of the relative advantages and disadvantages to the stockholders and the Company of the various proxy access formulations, in February 2016, the Board amended the bylaws to implement proxy access in the form it believes is most appropriate for the Company and its stockholders.
Under the amendment and restatement of the bylaws adopted by the Board, any stockholder or group of up to 20 stockholders that beneficially owns 3% or more of the Company’s common stock continuously for at least three years is permitted to nominate candidates for election to the Board and to require the Company to list nominees along with the Board’s nominees in the Company’s proxy materials for an annual meeting of stockholders; provided that the stockholder (or group) and each nominee satisfy certain requirements specified in the bylaws. The eligible stockholder or group of stockholders may nominate director candidates constituting up to the greater of two or 20% of the Board seats under the proxy access provisions adopted by our Board.
In contrast, the stockholder proposal contemplates proxy access for up to one quarter of the Board, unlimited aggregation of stockholders to focus on overall design issues rather than detailssatisfy the ownership requirement and inadequate procedural safeguards. The Board believes that the terms of individual compensation decisions, would align with the goal of compensation programs such as ours which are designed to reward performance that promotesproxy access right under our bylaws strike a more appropriate balance in providing long-term, stockholder value, and would avoid the burden that annual votes would impose on stockholders required to evaluate the compensation programs of a large number of companies each year.
Others argue that an annual vote is needed to givesignificant stockholders the opportunity to react promptlyinclude nominees in our proxy materials, while limiting the risk that proxy access could lead to emerging trendsunnecessary expense and management distraction and enable special interest groups to disrupt our Board composition and corporate strategy in compensation, provide feedback before those trends become pronounced over time,furtherance of an agenda that may not be in the best interests of the Company and giveour stockholders generally.
The stockholder proposal fails to address several important considerations relevant to proxy access.
Among other things, the stockholder proposal fails to address requirements for the independence of stockholder nominees, which is required under our form of proxy access. The stockholder proposal also does not require a nominating stockholder or stockholder group to hold full voting and investment rights and the full economic interest (including the opportunity for profit and risk of loss) with regard to their shares. In addition, the stockholder proposal fails to address the treatment of borrowed shares in the share ownership requirements. Absent a requirement for the nominating stockholder to retain voting power and investment power with respect to the shares one must own to establish eligibility to nominate a director, a stockholder could have a net short position on our common stock and still be entitled to use proxy access to make a nomination. Our form of proxy access implements these requirements and also excludes borrowed shares from
2016Proxy Statement | Stericycle, Inc. • 45 |
ITEM 6 STOCKHOLDER PROPOSAL ENTITLED “SHAREHOLDER PROXY ACCESS”
being counted as part of the share ownership requirements. The Board believes that proxy access should be structured to require a sustained commitment to the Company in terms of the stockholder’s ownership interest and holding period, consistent with our focus on managing the business for long-term value.
Further, the stockholder proposal does not require nominating stockholders to retain ownership of their shares through the meeting date. A nominating stockholder could sell all or any portion of the required shares prior to the meeting date, potentially creating misalignment between the interests of the nominating stockholder and other stockholders. The proxy access provisions adopted by the Board require a nominating stockholder or group to hold the requisite shares through the date of the annual meeting.
The Board believes that proxy access without reasonable limits could detract from the effectiveness of the Board and thus adversely affect our financial and operational performance. We believe that our form of proxy access as adopted by the Compensation CommitteeBoard places reasonable limits on and requirements related to the opportunity to evaluate individual compensation decisions each yearuse of proxy access, which are in lightthe best interests of the ongoing feedback fromour stockholders.
On balance,The Company’s existing corporate governance structures ensure that the Board is accountable to stockholders, and stockholders already have several avenues to influence and voice their opinions to the Board.
In considering the proxy access stockholder proposal, the Board encourages stockholders to consider proxy access in the context of other provisions already included in our amended and restated certificate of incorporation, bylaws and other practices and policies that promote engagement with our stockholders and accountability of management and the Board to our investors. In addition to the proxy access provisions already in our bylaws, these include:
Annual election of all directors;
Majority vote standard for the election of directors (plurality vote in contested elections);
Any stockholder may nominate directors pursuant to the Company’s advance notice provisions of the bylaws and solicit proxies for director nominees under federal proxy rules;
Any stockholder may submit proposals for consideration at the Company’s annual meeting and for inclusion in the Company’s proxy statement, subject to certain conditions and SEC rules;
Stockholders may submit nominations of director candidates for consideration by the Nominating and Governance Committee;
Each stockholder may express their views on our executive compensation program through our annual non-binding “say-on-pay” vote;
All but two of our directors are independent under NASDAQ listing standards;
Our Lead Director position ensures that there are processes in place for robust and independent Board oversight;
There are no supermajority voting requirements in our amended and restated certificate of incorporation or bylaws;
There is no “poison pill;” and
Stockholders may communicate directly with the Board generally, the Executive Chairman of the Board or Lead Director individually, and any committee of the Board as a group.
For the foregoing reasons, the Board of Directors believes that the majority view among stockholdersproposal is unnecessary and prevailing practices among comparable public companies favor an annual advisory vote.not in the best interests of our stockholders.
TheAccordingly,the Board of Directors recommends a vote FOR EVERY YEAR as the frequency of the non-binding advisory vote to approve the compensation paid to the Company’s named executive officers.
Item 6APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATIONTO GIVE STOCKHOLDERS THE RIGHT TO CALL A SPECIAL MEETING“AGAINST” this proposal.
2016Proxy Statement | Stericycle, Inc. • 46 |
Our bylaws currently give our Chairman of the Board, our President and Chief Executive Officer, and the Board of Directors the right to call a special meeting of stockholders. The Board believes that our stockholders should also have this right, and has proposed an amendment to our amended and restated certificate of incorporation, as amended, that would give stockholders of record who have held a net long position in 25% of our outstanding shares for at least one year the right to require us to call a special meeting of stockholders. (A stockholder’s “net long position” is generally defined as the number of shares in which the stockholder holds a positive (or “long”) economic interest, reduced by the number of shares in which the stockholder holds a negative (or “short”) economic interest.)
OTHER MATTERS
The text of the proposed amendment appears asExhibit B to this proxy statement.
The Board of Directors believes that stockholders should have the right to call a special meeting if they hold a significant percentage interest in our shares and have held that interest for at least one year. Our bylaws already permit stockholders to propose business for consideration at the annual meeting of stockholders, and a mechanism already exists under the federal securities laws to enable stockholders to have proposals included in our proxy statement for the annual meeting. In view of these opportunities available to all stockholders and the expense and potential management distraction that a special meeting would entail, the Board of Directors believes that special meetings should be called only to consider extraordinary matters that are of concern to a broad stockholder base and that require attention prior to the next annual meeting of stockholders.
The Board of Directors has determined that a 25% threshold strikes an appropriate balance between enhancing stockholder rights and protecting against the risk that a small minority of stockholders could trigger the expense and possible distraction of a special meeting to pursue matters that are not widely viewed as requiring immediate attention. The net long position requirement and one-year holding requirements are similarly intended to protect against a special meeting being called by stockholders whose interests are transitory or are otherwise not aligned with the interests of other stockholders in the long-term success of the Company.
If the proposed amendment is adopted, the Board of Directors will adopt amendments to our bylaws implementing the special meeting right. These amendments will include, among other provisions, provisions dealing with the information required to be furnished with any special meeting request, the determination of the requesting stockholders’ net long position, the scope of business to be considered at any special meeting, and the date by which a special meeting must be held pursuant to any qualifying request.
In accordance with Delaware law, the Board of Directors has adopted resolutions approving the proposed amendment, declaring it advisable, and recommending it to the stockholders for their approval.
If the proposed amendment is not approved by our stockholders, our current bylaws will remain in effect, and stockholders will not have the right to call special meetings.
The Board of Directors recommends that stockholders vote “FOR” the amendment to our amended and restated certificate of incorporation, as amended, giving stockholders of record who have held a net long position in 25% of our outstanding shares for at least one year the right to require us to call a special meeting of stockholders.
As of the date of this proxy statement, our Board of Directors does not know of any other business to come before the Annual Meeting for consideration by our stockholders. If any other business should properly come before the meeting, the persons named as proxies in the accompanying proxy card will vote the shares of stock represented by the proxy in accordance with their judgment.
2016Proxy Statement | Stericycle, Inc. • 47 |
STOCKHOLDER PROPOSALS FOR THE 20152017 ANNUAL MEETING
Stockholder Proposals for the 2017 Annual Meeting
Any stockholder who wishes to present a proposal for consideration at our 20152017 Annual Meeting of Stockholders, and to have the proposal included in our proxy statement for the meeting, must submit the proposal to us by December 12, 2014. 16, 2016. Stockholder proposals for inclusion in our proxy statement must comply with the rules of the SEC in order to be included and should be sent to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045.
In accordance with our bylaws, any stockholder who wishes to present a proposal from the floor for consideration at our 20152017 Annual Meeting of Stockholders, without inclusion of such matters in our proxy materials, must submit the proposalproper notice to us no earlier than January 21, 201526, 2017 and no later than February 20, 2015.25, 2017.
Stockholder proposalsStockholders who intend to submit director nominees for inclusion in our proxy statementmaterials for the 2017 Annual Meeting of Stockholders must comply with the rulesrequirements of proxy access as set forth in our bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the secretary of the SecuritiesCompany no earlier than November 16, 2016, and Exchange Commission in order to be included. Stockholder proposals should be sent to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045.no later than December 16, 2016.
2016Proxy Statement | Stericycle, Inc. • 48 |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTIONSection 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons beneficially owning more than 10% of our outstanding common stock to file periodic reports of stock ownership and stock transactions with the Securities and Exchange Commission.SEC. On the basis of a review of copies of these reports, we believe that all filing requirements for 20132015 were satisfied in a timely manner, with the exception that, due to administrative error, Messrs. Schuler, ten BrinkBrown and KoglerChen each filed onea late report.report in connection with their purchase on September 10, 2015 of depositary shares, each representing a 1/10th interest in a share of our 5.25% Series A Mandatory Convertible Preferred Stock.
2016Proxy Statement | Stericycle, Inc. • 49 |
ADDITIONAL INFORMATION
ADDITIONAL INFORMATIONAdditional Information
We will provide a copy of our annual report on Form 10-K for the fiscal year ended December 31, 20132015 without charge to each stockholder as of the record date who sends a written request to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. Copies of this proxy statement and our Form 10-K as filed with the Securities and Exchange CommissionSEC are available in pdf.pdf format on our website,www.stericycle.com. Copies of this proxy statement and our Form 10-K also may be accessed directly from the SEC’s website,www.sec.gov.
2016Proxy Statement | Stericycle, Inc. • 50 |
EXHIBIT A STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
Stericycle, Inc. 2014 IncentiveCanadian Employee Stock Purchase Plan
ArticleARTICLE 1
Purpose
Stericycle, Inc. (the “Company”) has established the Stericycle, Inc. Canadian Employee Stock Purchase Plan (the “Plan”) to provide eligible employees of the Company and the Participating Companies (as defined herein) with an opportunity to become owners of the Company through the purchase of shares of Common Stock. The purpose of this plan is to recognize and reward participants for their efforts onPlan shall become effective only upon approval thereof by the Company’s behalf, to motivate participants by appropriate incentives to contribute tostockholders (which date shall be the Company’s attainment of its performance objectives, and to align participants’ interests with those“Effective Date” of the Company’s other stockholders through compensation based onPlan as set forth herein) and, once effective, shall remain in effect until all shares reserved for issuance hereunder have been issued or until the performancePlan is otherwise terminated in accordance with the provisions of the Company’s common stock.Section 8.1 hereof.
ArticleARTICLE 2
Definitions
2.1 AwardAccountmeans an Option, SAR Award, Restricted Stock Award or RSU Award undera separate bookkeeping account maintained for each Participant, which reflects the accumulated payroll deductions made on behalf of the Participant for any Offering Period, reduced for any distributions from such Account pursuant to the provisions of the Plan.
Award Agreement means a written or electronic agreement between the Company and a Participant incorporating the terms of an Award to the Participant.
2.2 Boardmeans the Company’s Board of Directors.
2.3 ChangeCanadian Subsidiarymeans a Subsidiary that is incorporated or organized under the laws of Control is defined in Article 7. The terms “continuing Director,” “appointed Director” and “elected Director” are also defined in Article 7.Canada.
2.4 Closing Pricemeans, as of any date, the last reported sales price of a share of Common Stock on the Nasdaq Global Select Market.
2.5 Codemeans the U.S. Internal Revenue Code of 1986, as amended.
2.6 common stockCommon Stockmeans the Company���sCompany’s common stock, par value $.01$0.01 per share.
Committee is defined in Paragraph 3.1. Unless the Board designates a different committee, the Compensation Committee of the Board shall serve as the Committee (as long as all of the members of the Compensation Committee qualify under Paragraph 3.1).
2.7 Companymeans Stericycle, Inc., a Delaware corporation.
2.8 ConsultantCompensationmeans gross salary or wages.
2.9 Eligible Employeemeans, in respect of an Offering Period, (a) a full-time Employee who has completed six months’ employment as of the first day of the Offering Period or (ii) a part-time Employee who customarily works more than 20 hours per week and who has completed six months’ employment as of the first day of the Offering Period.
2.10 Effective Date is defined in Article 1.
2.11 Employeemeans any individual who providesbona fide consulting or advisory servicesan employee of a Participating Company. For purposes of the Plan, references to “employment” are to employment by the Company or a Subsidiary.
Director means a directorCanadian Subsidiary of the Company.
2.12 Eligible PersonEnrollment Agreementmeans the Participant’s election to participate in respectthe Plan for an Offering Period and to have his or her Compensation reduced for such Offering Period to purchase shares of all typesCommon Stock in accordance with the terms of Awards except ISOs, any Employee, Director or Consultant and, in respect of ISOs, any Employee.the Plan.
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EXHIBIT A STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
2.13 Employee means a full-time or part-time employee of the Company or a Subsidiary.
Exchange Act means the Securities Exchange Act of 1934, as amended.
ExpirationExercise Date means the last day on whichof an Option or SAR may be exercised.Offering Period (or, if such day is not a business day, the immediately preceding business day).
2.14 Fair Market ValueOffering Periodmeans forthe period beginning on July 1, 2016 and ending on December 31, 2016 and each six month period commencing thereafter beginning on each January 1 and July 1, respectively.
2.15 Optionmeans the right of a givenParticipant to purchase shares of Common Stock in an Offering Period.
2.16 Option Grant Datemeans the first day of an Offering Period.
2.17 Option Pricemeans the last reported sales price at which shares of Common Stock may be purchased under the Plan on the Exercise Date, which price shall be equal to 95% of the Closing Price of a share of common stockCommon Stock on the NASDAQ Global Select Market (or if the day in question is not a trading day, the last reported sales price on the most recent trading day).Exercise Date.
2.18 Grant DateParticipantmeans with respect to any Offering Period, an Eligible Employee who has elected to participate in respect ofthe Plan for that Offering Period by filing an Award, the date that the Committee grants the Award or any later date that the Committee specifies as the effective date of the Award.Enrollment Agreement for such Offering Period.
2.19 ISOParticipating Company means an incentive stock option described in §422any Canadian Subsidiary which has been designated as a Participating Company for purposes of the Code.
NSO meansPlan by the Company or the Plan Administrator. A Participating Company shall cease to be a nonstatutory stock option (i.e., any stock option other than an ISO).Participating Company on the date specified by the Company or the Plan Administrator. A list of the Participating Companies as of the Effective Date is set forth in Appendix A hereto.
2.20 OptionPlanmeans an award pursuant to Article 5 of an option to purchase shares of common stock. The Committee shall designate at the time of grant whether an Option is an ISO or a NSO.Stericycle, Inc. Canadian Employee Stock Purchase Plan.
2.21 ParticipantPlan Administratormeans an Eligible Person who holds an Award underthe Board or the committee of the Board or the administrative committee of officers or other employees of the Company to which the Board has delegated its authority to administer the Plan.
2.22 Performance GoalsSubsidiarymeans one or more of the following objective performance goals fora subsidiary corporation with respect to the Company a division or a Subsidiary, measured over a 12-month or longer period and specified eitheras determined in absolute terms or in percentage terms relative to a target, base period, index or peer group:
earnings per share
earnings before interest, taxes, depreciation and amortization
revenues
income from operations
return on invested capital
return on assets
internal rate of return
return on stockholders’ equity
total return to stockholders
Plan means this plan, as it may be amended. The name of this Plan is the “Stericycle, Inc. 2014 Incentive Stock Plan.”
Restricted Shares means shares of common stock subject to a risk of forfeiture or other restrictions that will lapse if and when specified service requirements, Performance Goals or other conditions are satisfied.
Restricted Stock Award means an award of Restricted Shares pursuant to Article 6.
Restricted Stock Unit means a contractual right to receive one share of common stock in the future if and when specified service requirements, performance goals or other conditions are satisfied.
RSU Award means an award pursuant to Article 6 of Restricted Stock Units to an Eligible Person.
SAR, or stock appreciation right, means a contractual right to receive a payment representing the excess of the Fair Market Value of a share of common stock on the date that the right is exercised over the exercise price per share of the right.
SAR Award means an award of a Stand-Alone SAR or Tandem SAR pursuant to Article 5.
Stand-Alone SAR means an SAR that is not related to an Option.
share means a share of the Company’s common stock.
Subsidiary means a “subsidiary corporation” as defined in §accordance with Section 424(f) of the Code.
Tandem SAR means an SAR that is related to an Option.ARTICLE 3
Termination Date means the date of termination of service to the Company or a Subsidiary by an Employee. The following shall not be considered a termination of service: (i) a transfer of employment from the Company to a Subsidiary or from a Subsidiary to the Company or to another Subsidiary; or (ii) becoming a Consultant or Director and ceasing to serve as an Employee.Shares Available
Article 3
Administration
3.1 Shares Reserved.The Boardshares of Directors shall designate a committee of the Board (the “Committee”) to administer the Plan. The Committee shall consist of two or more directors all of whom shallCommon Stock which may be (i) “non-employee directors” as defined in Rule 16b-3issued under the Exchange Act, (ii) “independent directors” under the applicable listing standards of the NASDAQ Global Select Market and (iii) “outside directors” under §162(m) of the Code.
Subject to the terms of the Plan the Committee shall have the authority to select the Eligible Persons to whom Awards are to be granted and to determine the time, type, number of shares, vesting, restrictions, limitations and other terms and conditions of each Award.
Awards under the Plan need not be uniform in respect of different Eligible Persons, whether or not similarly situated. The Committee may consider such factors as it deems relevant in selecting Eligible Persons for Awards and in determining their Awards.
The Committee may condition the vesting of any Award on the attainment of one or more Performance Goals. Performance Goals may differ from Participant to Participant and from Award to Award. The Committee shall specify the applicable Performance Goal or Goals in the underlying Award Agreement (but in no event later than the latest permissible date to enable the Award to qualify as performance-based compensation under §162(m) of the Code). The Committee’s evaluation of a Performance Goal’s attainment may be adjusted to exclude any extraordinary events and transactions as described in Accounting Principles Board Opinion No. 30, but in all other respects, the measurement of Performance Goals shall be determined in accordance with the Company’s financial statements and U.S. generally accepted accounting principles.
The Committee may interpret the Plan, adopt, revise and rescind policies and procedures to administer the Plan, and make all factual and other determinations required for Plan’s administration.
The Committee’s determinations, interpretations and other actions shall be final and binding. No member of the Committee shall be liable for any action of the Committee in good faith.
The members of the Committee shall elect a chairman, and the Committee shall meet as necessary at the call of the chairman or any two members of the Committee. A majority of the members of the Committee shall constitute a quorum, and all actions of the Committee at a meeting at which a quorum is present shall be taken by majority vote.
A member of the Committee may participate in any meeting of the Committee by a conference telephone call or other means that enable all persons participating in the meeting to hear one another, and participation in this manner shall constitute his or her presence in person at the meeting. The Committee also may act by the unanimous written consent of its members.
Article 4
Plan Operation
This Plan shall become effective if and when approved by the Company’s stockholders at the 2014 Annual Meeting of Stockholders.
This Plan shall have a term of 10 years, expiring on the tenth anniversary of its approval by the Company’s stockholders (but remaining in effect, however, for outstanding Awards). No Award may be granted under the Plan after its expiration.
The maximum total number of shares of common stock for which Awards may be granted under this Plan is 2,500,000 shares. This maximum shall be subject to the capitalization adjustments under Paragraph 4.6.
The shares for which Options and SARs are granted shall count against this limit on a 1-for-1 basis, and the shares for which Restricted Stock Awards and RSU Awards are granted shall count against this limit on a 2-for-1 basis (so that each share for which a Restricted Stock Award or RSU Award is granted reduces by two shares the available number of shares for which Awards may be granted).
The shares for which Awards may be granted shall be shares currently authorized but unissued or shares thatcurrently held or subsequently acquired by the Company currently holds or subsequently acquires as treasury shares includingor shares purchased in the open market or in private transactions.
The determinationtransactions (including shares purchased in the open market with Participants’ Account balances under the Plan). Subject to the provisions of Section 3.3, the number of shares of common stock available for AwardsCommon Stock which may be issued under the Plan shall take into account the following:not exceed 100,000 shares.
(a) If3.2 Reusage of Shares. In the event of the expiration, withdrawal, termination or other cancellation of an Option lapses or expires unexercised,under the Plan, the number of shares in respect of which the Option lapsed or expired shall be added back to the available number of shares for which Awards may be granted.
(b) If a RestrictedCommon Stock Award or RSU Award lapses or is forfeited, the shares in respect of which the Award lapsed or was forfeited shall be added back to the available number of shares for which Awards may be granted.
(c) If a SAR Award or RSU Award is settled in cash, the number of shares in respect of which the Award was settled in cash shall not be added back to the available number of shares for which Awards may be granted.
(d) If the exercise price of an Option is paid by delivery of shares of common stock pursuant to Paragraph 5.8, the number of shares issued upon exercise of the Option, without netting the shares delivered in payment of the exercise price, shall be taken into account in determining the available number of shares for which Awards may be granted.
In any calendar year, the maximum number of shares for which Awards may be granted to any Eligible Person shall not exceed 250,000 shares in the case of Options and SARS and 100,000 shares in the case of Restricted Stock and RSU Awards, in each case taking into account all similar types of grants and awards under other stock option and equity compensation plans of the Company (other than the Company’s bonus conversion program and the Company’s employee stock purchase plan). These maximums shall bethat were subject to the capitalization adjustmentsOption but not delivered shall again be available for issuance under Paragraph 4.6.the Plan.
3.3 Adjustments to Shares Reserved.In the event of aany transaction involving the Company (including, without limitation, any merger, consolidation, reorganization, recapitalization, spinoff, stock dividend, extraordinary cash dividend, stock split, reverse stock split, combination, exchange or other distribution with respect to shares of Common Stock or other change in the number of outstanding shares of common stock by reason of a stock dividend, stock split, recapitalization, reorganizationcorporate structure or capitalization affecting the like,Common Stock), the Committee may,Plan Administrator shall make such adjustments to the Plan and Options under the Plan as the Plan Administrator determines appropriate in the case of a reverse stock split, the Committee shall, equitably adjust the following in orderits sole discretion to prevent a dilution or enlargement ofpreserve the benefits or potential benefits intendedof the Plan and the Options. Action by the Plan Administrator may include (a) adjustment of the number and kind of shares which are or may be subject to Options under the Plan, (b) adjustment of the
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EXHIBIT A STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
number and kind of shares subject to outstanding Options under the Plan, (c) adjustment to the Exercise Price of outstanding Options under the Plan, (d) cancellation of outstanding Options, and (e) any other adjustments that the Plan Administrator determines to be providedequitable.
3.4 Insufficient Shares. If, on an Exercise Date, Participants in the aggregate have outstanding Options to purchase more shares of Common Stock than are then available for purchase under the Plan: (i) thePlan, each Participant shall be eligible to purchase a reduced number of shares of Common Stock on a pro rata basis and any excess payroll deductions shall be returned to such Participants, without interest, all as provided by uniform and nondiscriminatory rules adopted by the Plan Administrator.
ARTICLE 4
Plan Administration
The Plan shall be administered by the Plan Administrator.Subject to the terms and conditions of the Plan, the Plan Administrator shall have the authority and duty to (a) manage and control the operation of the Plan; (b) conclusively interpret and construe the provisions of the Plan, and prescribe, amend and rescind rules, regulations and procedures relating to the Plan; (c) correct any defect or omission and reconcile any inconsistency in the Plan; (d) determine whether and to what extent a company will be a Participating Company; and (e) make all other determinations and take all other actions as it deems necessary or desirable for which Awardsthe implementation and administration of the Plan. The determination of the Plan Administrator on matters within its authorities shall be conclusive and binding on the Company, the Participating Companies, the Participants and all other persons. Any decision of the Plan Administrator shall be made by a majority of its members.
ARTICLE 5
Participation
An individual who is an Eligible Employee on the first day of an Offering Period may elect to become a Participant in the Plan for that Offering Period by completing and filing an Enrollment Agreement in accordance with rules and procedures established by the Plan Administrator. Notwithstanding any other provision of the Plan, individuals who are not treated as common law employees by the Company or a Participating Company on their payroll records are excluded from Plan participation even if a court or administrative agency determines that such individuals are common law employees and not independent contractors.No employee of the Company or any Participating Company shall be eligible to participate in the Plan if the Plan Administrator determines that such participation could be in violation of any local law.
ARTICLE 6
Options
6.1 Option Grants. As of each Option Grant Date, each Eligible Employee who is a Participant for such Offering Period shall be deemed to have been granted an “Option” under the Plan (ii)which, subject to the maximum numberterms and conditions of the Plan, grants the Participant the right to purchase shares for which Awards may be granted to any Eligible Person in a calendar year, (iii)of Common Stock under the aggregate number of shares in respect of each outstanding AwardPlan on the Exercise Date and (iv)at the exercise price of each outstanding Option and SAR. The Committee may also makePrice.
6.2 Limitations. Notwithstanding any other equitable adjustmentsprovision of the Plan to the contrary:
(a) | No Participant may purchase under the Plan (or any other employee stock purchase plan of the Company or any Subsidiary) in any calendar year shares of Common Stock having a Fair Market Value (as determined as of the Option Grant Date) in excess of $25,000. |
(b) | No Option shall be granted to any Eligible Employee if, immediately after the Option is granted, he or she would own (or would be deemed to own, applying the rules of Section 423(b)(3) of the Code) stock possessing 5% or more of the voting power or value of all classes of stock of the Company or any Subsidiary. |
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EXHIBIT A STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
The provisions of Section 6.2 shall be interpreted in accordance with Section 423(b)(8) of the Code. For purposes of this Article 6, the rules of Section 424(d) of the Code shall apply in determining the stock ownership of an individual.
6.3 Payroll Deductions.A Participant’s Enrollment Agreement shall specify the percentage of his or her Compensation for the Offering Period that the Committee considers appropriate. ExceptParticipant elects to have withheld and credited to his or her Account for purposes of exercising the Participant’s Option for that Offering Period. The Participant may specify any whole percentage of his or her Compensation not exceeding $5,000 during any Offering Period (appropriately increased or reduced in the case of any Offering Period longer or shorter than six months). Payroll deductions shall begin with the first regular payroll period ending on or after the first day of the Offering Period and end with the last regular payroll period ending on or before the Exercise Date (or, if earlier, upon the termination of the Participant’s employment or other termination of participation in the Plan). Except as provided in Article 7, a reverseParticipant may not change his or her payroll deductions during an Offering Period and a Participant’s Enrollment Agreement shall remain in effect indefinitely (for both the Offering Period in respect of which it was initially filed and all subsequent Offering Periods) unless the Participant modifies such Enrollment Agreement for a subsequent Offering Period or the Participant’s participation in the Plan terminates. A Participant’s payroll deductions shall be further subject to the following:
(a) | If a Participant’s Compensation is insufficient in any payroll period to allow the entire payroll deduction contemplated under the Plan and his or her Enrollment Agreement, no deduction will be made for such payroll period. Payroll deductions will resume with the next payroll period in which the Participant has Compensation sufficient to allow for the deductions. Payroll deductions under the Plan shall be made in any payroll period only after other withholdings, deductions, garnishments and the like have been made, and only if the remaining Compensation is sufficient to allow the entire payroll deduction contemplated. |
(b) | All payroll deductions made with respect to a Participant shall be credited to his or her Account under the Plan. A Participant may participate in the Plan only through payroll deductions and no other contributions will be accepted. No interest will accrue or be paid on any amount credited to a Participant’s Account (or withheld from a Participant’s pay). Except as otherwise provided in Article 7 all amounts in a Participant’s Account will be used to purchase shares of Common Stock and no cash refunds will be made from such Account. |
6.4 Option Exercise.On each Exercise Date, each Participant whose participation in the Plan for that Offering Period has not terminated shall be deemed to have exercised his or her Option with respect to that number of whole shares of Common Stock equal to the quotient of (i) the balance in the Participant’s Account as of the Exercise Date and (ii) the Exercise Price.
6.5 Registration/Certificates. Shares of Common Stock purchased by a Participant under the Plan shall be issued in the name of the Participant. Shares of Common Stock will be uncertificated; provided, however, that a stock split, adjustmentscertificate for whole shares shall be delivered to the Participant the upon the Participant’s request.
6.6 Excess Account Balances.Any amounts remaining in a Participant’s Account as of any Exercise Date after the purchase of shares of Common Stock described herein shall be distributed to the Participant, without interest, as soon as practicable after the Exercise Date; provided, however, that any amounts attributable to any fractional share that was not purchased on the Exercise Date shall be carried over to the next Offering Period unless the Participant’s participation in the Plan terminates at the end of the Offering Period.
ARTICLE 7
Termination of Participation
7.1 Termination of Employment. In the event that a Participant’s employment with the Company and its Subsidiaries terminates during an Offering Period and prior to the Exercise Date of the Offering Period for any reason (whether as a result of his or her resignation, death or otherwise), the Participant’s Option shall be
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EXHIBIT A STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
automatically cancelled as of the date of the Participant’s termination of employment and no shares of Common Stock will be purchased for the Participant for the Offering Period in which his or her termination occurs. All amounts remaining in the Participant’s Account as of his or her termination date shall be refunded to the Participant, without interest, as soon as practicable after the Participant’s termination date.
7.2 Election To Cease Participation. A Participant may elect to cease participation in an Offering Period at any time prior to the Exercise Date and receive a refund of the balance in his or her Account. The Participant’s election shall serve to cancel the Participant’s Option and terminate his or her participation in both the current Offering Period and all subsequent Offering Periods and no shares of Common Stock will be purchased for the Participant for the Offering Period in which his or her election to cease participation is effective. An election to cease participation in an Offering Period shall be made in the Committee’s discretion,manner and its decisionswithin the time prior to the Exercise Date that the Plan Administrator specifies. Any refund of the Participant’s Account balance pursuant to the Participant’s election pursuant to this Section 7.2 shall be final and binding.
Article 5
Stock Options and SARs
The Committee may grant an Optionpaid to him or SARher, without interest, as soon as practicable following his or her election to any Eligible Person. Subjectcease participation. A Participant’s election to the terms of this Plan, the Committeecease participation for one Offering Period shall determinenot affect his or her eligibility to participate in subsequent Offering Periods, subject to the restrictions, limitations and other terms and conditions of each Option and SAR Award.the Plan.
The Committee7.3 Account Balances. No interest shall designate each Option as either an ISO or NSO, and shall designate each SAR Award as eitheraccrue on any amounts credited to a Stand-Alone SAR or a Tandem SAR. A Tandem SAR may not be granted later thanParticipant’s Account. After the time that its related Option is granted.
The Committee shall determine the exercise priceclose of each Option and SAR. The exercise price per share may notOffering Period, a report shall be less than the Closing Price on the Grant Date of the Option or SAR.
Except for capitalization adjustments under Paragraph 4.6 or as approved by the Company’s stockholders, the exercise price per share of any outstanding Option or SAR may not be reduced, and the Option or SAR may not be surrenderedsent to each Participant (or made available to the Company for cash or as consideration forParticipant through a third party provider) stating the grant of a new Option or SAR with a lower exercise price per share.
The Committee shall determine the time or times at which each Option and Stand-Alone SAR becomes vested. Vesting may be based on continuous service or on the attainment of Performance Goals or other conditions specified in the Award Agreement. A Tandem SAR shall vest if andentries made to the extent that its related Option vests, and shall expire or be canceled when its related Option expires or is canceled. No Option or SAR may have an Expiration Date more than 10 years from its Grant Date.
Each Option and SAR held by an Employee shall become fully vested as of his or her Termination Date if the Employee’s termination of employment occurs by reason of his or her death. In addition, the Committee, in its discretion, may accelerate the vesting of an Option or SAR at any time.
In the case of an Option or SAR held by an Employee whose employment terminates:
(a) if and to the extent that the Option or SAR is unvested as of the Employee’s Termination Date, the Option or SAR shall lapse on the Termination Date; and
(b) if and to the extent that the Option or SAR is vested as of the Employee’s Termination Date, the Option or SAR shall expire as specified in the underlying Award Agreement, or if no date is specified, (i) on the earlier of 30 days after the Employee’s Termination Date or the expiration date of the Option or SAR, or (ii) if the Employee’s employment terminated by reason of his or her death, on the earlier of the first anniversary of the Employee’s death or the expiration date of the Option or SAR.
The Committee may extend the expiration date of the Option or SAR to any date up to the last day of the term of the Option or SAR.
No Option or SAR may be transferred, assigned or pledged, whether by operation of law or otherwise, except (i) as provided in the underlying Award Agreement or as the Committee otherwise permits, or (ii) as provided by will or the applicable laws of intestacy or (iii) if:
(a) the transferee is a revocable trust that the employee established for estate planning reasons (in respect of which the employee is treated as the owner for federal income tax purposes); or
(b) the transferee is (i) the spouse of the employee or a child, step-child, grandchild, parent, sibling or child of a sibling of the employee (each an “eligible transferee”), (ii) a custodian for an eligible transferee under any Uniform Transfers to Minors Act or Uniform Gifts to Minors Act or (iii) a trust for the primary benefit of one or more eligible transferees.
Transfers described in the preceding clause (b) shall be subject to any restrictions and requirements that the Committee considers appropriate (for example, the transferee’s written agreement to be bound by the terms of the Plan and the underlying Award Agreement).
No Option or SAR shall be subject to execution, attachment or similar process.
To the extent that the aggregate fair market value (determined in respect of each ISO on the basis of the Fair Market Value of a share of common stock on the ISO’s Grant Date) of the underlying shares of all ISOs that become exercisable by an individual for the first time in any calendar year exceeds $100,000, the Options shall be treated as NSOs. This limitation shall be applied by taking ISOs into account in the order in which they were granted.
In the case of an ISO granted to an Employee who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or any Subsidiary), the exercise price per share may not be less than 110% of the Closing Price on the Grant Date and the ISO may not have an Expiration Date more than five years from the Grant Date.
The Award Agreement underlying an Option that the Committee designates as an ISO may contain any additional terms, beyond those of this Plan, that the Committee considers necessary or desirable to include to assure that the Option complies with the requirements of § 422 of the Code.
A vested Option or SAR may be exercised in full or only partially (but in the case of a partial exercise, only in respect of a whole number of shares) by (i) written notice to the Committee or its designee statingAccount, the number of shares in respect of which the Option or SAR is being exercised and, in the case of an Option, (ii) full payment of the exercise price of those shares.
Payment of the exercise price of an Option shall be made by check or, if permitted by the Committee (either in the underlying Award Agreement or at the time of exercise), by: (i) delivery of shares of common stock having a Fair Market Value on the date of exercise equal to the exercise price; (ii) directing the Company to withhold, from the shares otherwise issuableCommon Stock purchased upon exercise of Options for such Offering Period, and the applicable Option shares having a Fair Market Value onPrice. All payroll deductions made under the date of exercise equal to the exercise price; (iii)Plan may be used by an open-market broker-assisted sale pursuant to which the Company is promptly delivered the portion of the sales proceeds necessary to pay the exercise price; (iv)for any combination of these methods of payment; or (v) any other method of payment that the Committee authorizes.
A Tandem SAR shall entitle the Participant to elect to exercise either the SAR or the related Option as to all or any portion of the shares subject to the SAR and Option. The exercise of a Tandem SAR shall cause the immediate and automatic cancellation of its related Option with respect to the same number of shares,corporate purpose and the exercise, expiration or cancellation of the related Option (other thanCompany shall not be obligated to segregate such payroll deductions except as required by reason of the exercise of the Tandem SAR) shall cause the automatic and immediate cancellation of the Tandem SAR with respect to the same number of shares.
Settlement of a SAR may be made, in the Committee’s discretion, in shares of common stock or in cash, or in a combination of the two, subject to applicable tax withholding requirements. Any cash payment in settlement of a SAR shall be made on the basis of the Fair Market Value of a share of common stock on the date that the SAR is exercised.law.
Article 6
Restricted Stock
and Restricted Stock Units
The Committee may issue Restricted Shares or grant Restricted Stock Units to any Eligible Person. Subject to the terms of this Plan, the Committee shall determine the restrictions, limitations and other terms and conditions of each Restricted Stock Award and RSU Award.
The Committee shall determine the time or times at which each Restricted Stock Award or RSU Award becomes vested. Vesting may be based on continuous service or on the attainment of specified Performance Goals or other conditions specified in the Award Agreement.
Each Restricted Stock Award and RSU Award held by an Employee shall become fully vested as of his or her Termination Date if the Employee’s termination of employment occurs by reason of his or her death. In addition, the Committee, in its discretion, may accelerate the vesting of a Restricted Stock Award or RSU Award at any time.
Prior to the vesting of a Restricted Stock Award, the Restricted Shares subject to the Award may not be transferred, assigned or pledged (except as provided in the Award Agreement or as the Committee permits) and shall not be subject to execution, attachment or similar process. (After vesting, the shares may still remain subject
to restrictions on transfer under applicable securities laws and any restrictions imposed by the Award Agreement.) The Committee may require each certificate representing Restricted Shares to bear a legend making appropriate reference to the restrictions on the shares, and may also require that the certificate, together with a stock power duly endorsed in blank by the Participant, remain in the Company’s physical custody or in escrow with a third party until all restrictions have lapsed.
Subject to the terms of the Plan and the underlying Award Agreement, a Participant shall have all of the rights of a stockholder in respect of the Restricted Shares subject to a Restricted Stock Award, including the right to vote the shares and to receive all dividends and other distributions in respect of the shares. The Committee may provide in the Award Agreement for the payment of dividends and distributions to the Participant when dividends are paid to stockholders generally or at the time of vesting or distribution of the Restricted Shares.
A Participant shall not have any rights as a stockholder in respect of the shares of common stock subject to a RSU Award until those shares have been issued and delivered to the Participant pursuant to the terms of the Award.
Settlement of a RSU Award may be made, in the Committee’s discretion, in shares of common stock or in cash, or in a combination of the two, subject to applicable tax withholding requirements. Any cash payment in settlement of a RSU Award shall be made on the basis of the Fair Market Value of a share of common stock on the date that the shares subject to the Award become issuable to the Participant.
The Committee may (but shall not be required to) permit a Participant to elect to defer the delivery of shares upon the vesting or settlement of a Restricted Stock Award or RSU Award. Any such election shall be for a deferral period and in a manner and on terms that the Committee approves and that comply with the requirements of § 409A of the Code.
Article 7
Change of Control
Upon a Change of Control, all outstanding Awards shall become fully vested and exercisable, and all restrictions on the shares underlying Restricted Stock Awards shall lapse.
A “Change of Control” means an event or the last of a series of related events by which:
(a) any Person directly or indirectly acquires or otherwise becomes entitled to vote stock having 51% or more of the voting power in elections for directors; or
(b) during any 24-month period a majority of the members of the Board of Directors ceases to consist of directors who were:
(1) Directors at the beginning of the period (“continuing Directors”); or
(2) elected to office after the start of the period by the Board of Directors with the approval of two-thirds of the incumbent continuing Directors (“appointed Directors”); or
(3) elected to office after the start of the period by the Company’s stockholders following nomination for election by the Board of Directors with the approval of two-thirds of the incumbent continuing and appointed Directors (“elected Directors”); or
(4) elected to office after the start of the period by the Board of Directors with the approval of two-thirds of the incumbent continuing, appointed and elected Directors; or
(5) elected to office after the start of the period by the Company’s stockholders following nomination for election by the Board of Directors with the approval of two-thirds of the incumbent continuing, appointed and elected Directors; or
(c) the Company merges or consolidates with another corporation, and holders of outstanding shares of the Company’s common stock immediately prior to the merger or consolidation do not own stock in the survivor of the merger or consolidation having more than 75% of the voting power in elections for directors; or
(d) the Company sells all or a substantial portion of the consolidated assets of the Company and its Subsidiaries, and the Company does not own stock in the purchaser having more than 75% of the voting power in elections for directors.
As used in this definition, a “Person” means any “person” as that term is used in sections 13(d) and 14(d) of the Exchange Act, together with all of that person’s “affiliates” and “associates” as those terms are defined in Rule 12b-2 under the Exchange Act.
ArticleARTICLE 8
Miscellaneous Provisions
Each Award under the Plan shall be evidenced by an Award Agreement which shall be subject to8.1 Amendment and incorporate the terms of the Plan.
The Company may withhold an amount sufficient to satisfy its withholding tax obligations, if any, in connection with any Award under the Plan, and the Company may defer making any payment or delivery of shares pursuant to the Award unless and until the Participant indemnifies the Company to its satisfaction in respect of its withholding obligation.
Termination.The Board may amend, suspend or terminate thethis Plan at any time. The Company’s stockholders shall be required to approve any amendment that would materiallyas required by applicable law or the rules of any securities exchange on which the shares of Common Stock are traded, including an amendment to increase the number of shares of common stockCommon Stock available for which Awards may be granted or that would increase the number of shares of common stock for which ISOs may be granted (other than an amendment authorizedissuance under Paragraph 4.6). If the Plan is terminated,or a change in the Plan shall remain in effect for Awards outstanding as of its termination. No amendment, suspension or terminationeligibility provisions of the Plan shall adversely affect the rightsPlan.
8.2 Nontransferability of the holderOptions. No Participant in an Offering Period may sell, pledge, transfer or otherwise dispose of any outstanding Award without his or her consent.Option under any circumstances.
8.3 No Right to Employment; Limitation of Implied Rights.The Committee may adopt, amendPlan does not constitute a contract of employment or continued service and terminate a supplement toparticipation in the Plan to permit Employees in another country to receive Awards under the supplement (on termswill not inconsistent with the terms of Awards under the Plan) in compliance with that country’s securities, tax and other laws.
Nothing in this Plan or in any Award Agreement shall give any personemployee the right to continuebe retained in the employ of the Company or any SubsidiaryParticipating Company or limitany right or claim to any benefit under the Plan unless such right or claim has specifically accrued under the terms of the Plan. Participation in the Plan by a Participant shall not create any rights in such Participant as a stockholder of the Company or Subsidiary to terminate his or her employment.until shares of Common Stock are registered in the name of the Participant.
8.4 Notices.Notices required or permitted under this Plan shall be considered to have been duly given if sent by certified or registered mail addressed to the CommitteePlan Administrator at the Company’s principal office or to any other person at his or her address as it appears on the Company’s payroll or other records.
8.5 Severability.If any provision of this Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions, and the Plan shall be construed and administered as if the illegal or invalid provision had not been included.
This Plan and all Award Agreements shall be governed in accordance with the8.6 Governing Law. The laws of the State of Illinois.Delaware will govern all matters relating to the Plan except to the extent they are superseded by the laws of the United States.
2016Proxy Statement | Stericycle, Inc. • A-5 |
EXHIBIT A STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
8.7 Exhibit BCompliance with Applicable Laws; Limits on Issuance. Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Common Stock under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act, and the applicable requirements of any securities exchange or similar entity on which the Common Stock is listed). Prior to the issuance of any shares of Common Stock under the Plan, the Company may require a written statement that the recipient is acquiring the shares for investment and not for the purpose or with the intention of distributing the shares and will not dispose of them in violation of the registration requirements of the Securities Act. All shares of Common Stock acquired pursuant Options granted hereunder shall be subject to any applicable restrictions contained in the Company’s certificate of incorporation or bylaws. In addition, the Committee may impose such restrictions on any shares of Common Stock acquired pursuant to the exercise of Options as it may deem advisable, including, without limitation, restrictions under applicable securities laws, under the requirements of any stock exchange or market upon which such Common Stock is then listed and/or traded, and restrictions under any blue sky or state securities laws applicable to such Common Stock.
2016Proxy Statement | Stericycle, Inc. • A-6 |
EXHIBIT A STERICYCLE, INC. CANADIAN EMPLOYEE STOCK PURCHASE PLAN
APPENDIX A
Proposed Amendment to
Certificate of IncorporationPARTICIPATING COMPANIES
The proposed amendment would add the following as a new Article 12 to Stericycle’s amendedStericycle, ULC and restated certificate of incorporation, as amended:Subsidiaries
2016Proxy Statement | Stericycle, Inc. • A-7 |
Article 12
Special Meetings of Stockholders
A special meeting of stockholders may be called for any purpose or purposes by the chairman of the board or the president and chief executive officer, or by the secretary of the Corporation at the direction of the board of directors. Subject to the applicable provisions of the bylaws implementing this Article 12, a special meeting of stockholders shall be called by the secretary of the Corporation at the written request of one or more stockholders of record who have continuously held, for at least one year prior to the date of delivery of their special meeting request, a net long position in shares representing in the aggregate at least 25% of the Corporation’s outstanding shares of common stock.
28161 North Keith Drive
Lake Forest, Illinois 60045
20142016 ANNUAL MEETING OF STOCKHOLDERS
May 21, 201425, 2016
Your vote is important!
Please sign and promptly return your proxy card or voting instruction card in the enclosed envelope or, if your shares are registered in your name, vote your shares telephonically, by calling (800) 690-6903, or via the Internet, by going to www.proxyvote.com.
If your shares are registered in the name of a broker, you may be able to vote your shares telephonically or via the internet. Check the information provided to you by your broker to see which options are available to you.
Admission Request Form for 20142016 Annual Meeting
I am a stockholder of Stericycle, Inc. ((If your shares are registered in a broker’s name, please enclose confirmation of stock ownership.) I plan to attend the 20142016 Annual Meeting to be held on Wednesday, May 21, 2014,25, 2016, at 11:00 a.m., Central Daylight Time, at the Hilton Garden InnDoubleTree Hotel Chicago O’Hare Airport, 2930 SouthAirport-Rosemont, 5460 North River Road, Des Plaines,Rosemont, Illinois 60018. Please send me an admissions card. I understand thatan admissions card will admit only the stockholder or stockholders to whom it is issued, and may not betransferred.
Name | ||
Please print name of stockholder | ||
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Please print name of stockholder (if joint owner) | ||
Address |
City | State |
| Zip Code |
Telephone | ( ) |
If you plan to attend the Annual Meeting, please detach, complete and return the Admission Request Form above directly to Stericycle, Inc., Annual Meeting Ticket Requests, 28161 North Keith Drive, Lake Forest, Illinois 60045.All Admission Request Forms must be received by May 14, 201418, 2016.
To avoid a delay in receipt of your admissions card, mail the Admission Request Form separately. Do not return it with your proxy card or mail it in the enclosed envelope.
If you need directions to the Annual Meeting, please call Investor Relations at (800) 643-0240 ext. 2012.
STERICYCLE, INC.
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice, and Proxy Statement and Annual Report are available atwww.proxyvote.com. www.proxyvote.com.
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E09174-P77585
STERICYCLE, INC.
20142016 ANNUAL MEETING OF STOCKHOLDERS
Wednesday, May 21, 201425, 2016 at 11:00AM00 a.m. Central Daylight Time
The Hilton Garden InnDoubleTree Hotel Chicago O’Hare Airport
2930 SouthAirport—Rosemont 5460 North River Road
Des Plaines, Rosemont, Illinois 60018
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I or we hereby appoint each of Jack W. Schuler, Rod F. Dammeyer and John Patience (the “proxies”) as my or our proxy, each with the power to appoint his substitute, and authorize each of them acting alone to vote all of the shares of common stock, par value $.01 per share, of Stericycle, Inc. (the “Company”) held of record by me or us on March 21, 201428, 2016 at the 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, May 21, 201425, 2016 at 11:00 a.m. Central Daylight Time, at the Hilton Garden InnDoubleTree Hotel Chicago O’Hare Airport, 2930 SouthAirport-Rosemont, 5460 North River Road, Des Plaines,Rosemont, Illinois 60018, and at any adjournment of the Annual Meeting.
If properly completed and returned, this Proxy will be voted as directed. If no direction is given, this Proxy will be voted in accordance with the recommendations of the Company’s Board of Directors, i.e., FOR each of the nine10 nominees for election as a director (Item 1), FOR approval of the Company’s 2014 IncentiveStericycle, Inc. Canadian Employee Stock Purchase Plan (Item 2), FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 20142016 (Item 3), FOR approval of the advisory resolution approving thevote to approve executive compensation paid to the Company’s executive officers (Item 4), FOR 1 year asAGAINST the frequency recommended bystockholder proposal on independent chairman (Item 5) and AGAINST the advisory vote on the frequency of the advisory vote on executive compensation (Item 5), and FOR approval of an amendment to the Company’s amended and restated certificate of incorporation to give stockholders the right to call a special meetingstockholder proposal entitled “Shareholder Proxy Access” (Item 6). This Proxy will be voted in the best judgment of the proxies in respect of any other business that properly comes before the Annual Meeting.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE
Address changes/comments: | ||||||||
(If you noted any address changesAddress Changes and/or Comments above, please mark the corresponding box on the reverse side.)
(Continued and to be signed on reverse side.)