UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 8-K
_____________________________
Current Report
Pursuant To Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 19, 2016
_____________________________
Waste Connections, Inc.
(Exact name of registrant as specified in its charter)
_____________________________
| Canada | 1-34370 | 98-1202763 | ||
|
(State or other jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
610 Applewood Crescent, 2nd Floor
Vaughan
Ontario L4K 0E3
Canada
(Address of principal executive offices)
Registrant’s telephone number, including area code: (905) 532-7510
Not Applicable
(Former name or address, if changed since last report.)
_____________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01. | Entry into a Material Definitive Agreement |
The information set forth under Item 5.02 is incorporated herein by reference.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
On July 19, 2016, the Board of Directors (the “ Board ”) of Waste Connections, Inc., a corporation organized under the laws of Ontario (the “ Company ”), approved and adopted an amendment (the “ Amendment ”) to the Company’s Nonqualified Deferred Compensation Plan (the “ Plan ”). The Amendment amends the Plan to limit the type of bonus compensation that is eligible for deferral under the Plan to bonus and cash incentive plans that are calculated on the basis of a period of at least twelve (12) months and further excludes any such bonus or cash incentive plans that are based on any period shorter than twelve (12) months, including those paid under the Synergy Bonus Program (as described below). The foregoing description of the Amendment is a summary, and the full text of the Amendment is filed as Exhibit 10.1 hereto and incorporated herein by reference.
Also on July 19, 2016, the Board approved and adopted the Company’s Synergy Bonus Program (the “ Synergy Program ”) pursuant to the Company’s 2016 Incentive Compensation Plan. Under the Synergy Program, certain of the Company’s key employees, including the Company’s named executive officers (“ NEOs ”) disclosed below, will have the opportunity to earn bonuses payable in cash based on the attainment of certain expense reduction and cash flow savings goals following the combination of the Company (formerly known as Progressive Waste Solutions Ltd.) and Waste Connections US, Inc., a Delaware corporation (formerly known as Waste Connections, Inc.). Bonuses awarded under the Synergy Program will be calculated based on a bonus pool, which will be credited with ten percent (10%) of the dollar value of the expense reduction amount and the cash flow savings amount (the “ Bonus Pool ”). If earned, all such bonuses awarded under the Synergy Program shall be paid in cash between January 1, 2017, and March 31, 2017, following a determination by the Board’s Compensation Committee (the “ Committee ”) (i) that the Company has attained the performance goals required by the Synergy Program, (ii) of the amount to be credited to the Bonus Pool, and (iii) of the amount to be paid to each participant in the Synergy Program. Bonuses awarded under the Synergy Program are not eligible for deferral under the Plan, pursuant to the Amendment (as described above). Each of the NEOs, as well as certain other executive officers and key employees, will be assigned a target percentage of the Bonus Pool by the Committee. With respect to the NEOs, the Committee has designated the following target percentages, threshold (minimum) bonus payments and target (maximum) bonus payment amounts for each NEO:
| Named Executive Officer |
Target Percentage |
Synergy Bonus
Amount if Threshold (USD $85 million) is Achieved ($) |
Synergy Bonus
Amount if Target (USD $125 million) is Achieved ($) |
|||||||||
| Ronald J. Mittelstaedt | 13.5 | % | $ | 1,147,500 | $ | 1,687,500 | ||||||
| Worthing F. Jackman | 7.1 | % | 603,500 | 887,500 | ||||||||
| Steven F. Bouck | 13.0 | % | 1,105,000 | 1,625,000 | ||||||||
| Darrell W. Chambliss | 6.5 | % | 552,500 | 812,500 | ||||||||
| Patrick J. Shea | 5.2 | % | 442,000 | 650,000 | ||||||||
The foregoing description of the Synergy Program is a summary, and the full text of the Synergy Program is filed as Exhibit 10.2 hereto and incorporated herein by reference.
| Item 8.01. | Other Events |
On June 1, 2016, the Committee approved and adopted the Company’s Compensation Recoupment Policy (the “ Clawback Policy ”). The Clawback Policy provides that if an accounting restatement occurs, the Board shall seek to require the forfeiture or repayment of incentive compensation paid to an executive officer during the three completed fiscal years preceding the date of the restatement that is in excess of the amount that would have been awarded to, vested and/or paid to the executive under the restatement if (i) the executive officer engaged in fraud or intentional misconduct that materially contributed to the need for the restatement or (ii) a clawback is otherwise required by the applicable rules and regulations of the Securities and Exchange Commission or any national securities exchange on which the Company’s common shares are listed. The foregoing description of the Clawback Policy is a summary, and the full text of the Clawback Policy is filed as Exhibit 99.1 hereto and incorporated herein by reference.
1
| Item 9.01. | Financial Statements, Pro Forma Financial Information and Exhibits |
| d) | Exhibits. |
|
Number |
Description |
|
|
10.1 |
Amendment to the Waste Connections, Inc. Nonqualified Deferred Compensation Plan. |
|
| 10.2 |
Waste Connections, Inc. Synergy Bonus Program |
|
| 99.1 | Waste Connections, Inc. Compensation Recoupment Policy |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Waste Connections, Inc. | ||
| (Registrant) | ||
| By: | /s/ Patrick J. Shea | |
| Patrick J. Shea | ||
| Senior Vice President, General Counsel and Secretary | ||
Date: July 22, 2016
3
EXHIBIT INDEX
|
Number |
Description |
|
|
10.1 |
Amendment to the Waste Connections, Inc. Nonqualified Deferred Compensation Plan. |
|
| 10.2 |
Waste Connections, Inc. Synergy Bonus Program |
|
| 99.1 | Waste Connections, Inc. Compensation Recoupment Policy |
Exhibit 10.1
AMENDMENT TO THE
WASTE CONNECTIONS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
WHEREAS, Waste Connections, Inc., an Ontario corporation (the “ Employer ”), has previously established the Waste Connections, Inc. Nonqualified Deferred Compensation Plan (the “ Plan ”) for the benefit of a select group of management or highly compensated employees and directors; and
WHEREAS, the Employer most recently amended and restated the Plan effective December 1, 2014; and
WHEREAS, the Employer desires to clarify the type of bonus compensation that is subject to deferral under the Plan; and
NOW, THEREFORE, pursuant to Section 11.2 of the Plan, the following amendment is hereby made, and shall be effective on the date executed below.
| 1. | Section 1.9 of the Plan is hereby amended (underline showing additions), to be and read as follows: |
“1.9 “Bonus” shall mean any compensation, in addition to Base Salary, Commissions and LTIP Amounts, earned by a Participant for services rendered during a Plan Year, under any Employer’s annual bonus and cash incentive plans. For clarification purposes, the term “Bonus” shall only include bonus and cash incentive plans that are calculated based on a period of at least twelve (12) months and shall exclude any bonus and cash incentive compensation that is paid based on any period of time shorter than a twelve (12) month period, including, but not limited to, amounts paid under the Synergy Bonus Program. ”
IN WITNESS WHEREOF, the Employer has caused this instrument to be executed this 19th day of July, 2016.
| WASTE CONNECTIONS, INC. | ||
| By: |
/s/ Ronald J. Mittelstaedt |
|
| Its: | Chief Executive Officer | |
Exhibit 10.2
Waste Connections, Inc.
Synergy Bonus Program
Background
| · | The Compensation Committee has adopted this Synergy Bonus Program (the “ Synergy Program ”) to reward key employees of Waste Connections, Inc. and its subsidiaries (the “ Company ”) based on the attainment of expense reduction and cash flow savings goals following the combination of Waste Connections, Inc. (Delaware) (“ WCN US ”) and Progressive Waste Solutions Ltd. (“ Progressive ”). The bonus paid under the Synergy Program, if any, will be measured based on (i) the degree to which the Company reduces its SG&A and third party insurance premiums, and (ii) the amount of cash flow savings which results from the implementation of the combined company’s new corporate structure (collectively, the “ Synergies ”). Selected executives and key managers are expected to substantially impact the realization of Synergies. |
| · | The Synergy Program is established pursuant to the Waste Connections, Inc. 2016 Incentive Compensation Plan (the “ 2016 Plan ”) and any amounts paid under the Synergy Program shall be Performance Awards under the 2016 Plan. |
| · | Payments made under the Synergy Program are intended to qualify as “performance-based compensation” for purposes of IRC Section 162(m). |
| · | Payments made under the Synergy Program are intended to provide incentive compensation for future performance of the participating executives and key managers. |
Program Terms
| · | The Synergy Program will be administered by the Compensation Committee of the Board of Directors. |
| · | Payments from the Synergy Program will be calculated based on a bonus pool (the “ Bonus Pool ”), which will be credited with 10% of the Synergy Amount (defined below). Payments from the Bonus Pool are subject to the following requirements: |
| o | No amount will be credited to the Bonus Pool unless the Synergy Amount is equal to, or exceeds, USD $85 million. |
| o | To the extent the Synergy Amount is equal to or greater than USD $85 million, then 10% of such amount shall be credited to the Bonus Pool. |
| o | The maximum amount which may be credited to the Bonus Pool shall be USD $12.5 million, which would occur if the Synergy Amount is equal to USD $125 million. If the Synergy Amount exceeds USD $125 million, no additional amount will be credited to the Bonus Pool. |
| · | The Compensation Committee, in its complete and sole discretion, may reduce the amount credited to the Bonus Pool, as permitted by IRC Section 162(m) and the terms of the 2016 Plan, but may not take any action to increase such amount. |
Participation and Maximum Awards
| · | Individual awards shall be calculated as a fixed percentage of the amount credited to the Bonus Pool, subject to the terms and conditions listed below. |
| · | Participants and their individual maximum awards will be recommended by management and approved by the Compensation Committee. |
| · | Each of the Named Executive Officers (NEOs), as well as certain other executive officers and key employees, will be assigned a target percentage of the Bonus Pool by the Compensation Committee. With respect to the NEOs, the Compensation Committee has designated the following target percentages, threshold (minimum) bonus payments and maximum bonus payment amounts. |
| Named Executive Officer |
Target Percentage |
Synergy Bonus
Amount if Threshold (USD $85 million) is Achieved ($) |
Synergy Bonus
Amount if Target (USD $125 million) is Achieved ($) |
|||||||
| Ronald J. Mittelstaedt | 13.5% | $ | 1,147,500 | $ | 1,687,500 | |||||
| Worthing F. Jackman | 7.1% | 603,500 | 887,500 | |||||||
| Steven F. Bouck | 13.0% | 1,105,000 | 1,625,000 | |||||||
| Darrell W. Chambliss | 6.5% | 552,500 | 812,500 | |||||||
| Patrick J. Shea | 5.2% | 442,000 | 650,000 | |||||||
| · | To the extent that a portion of the dollar amount credited to the Bonus Pool is not paid to an individual originally approved as a participant by the Compensation Committee, such amount shall be forfeited from the Bonus Pool. Notwithstanding the preceding, the Compensation Committee may, in its sole discretion, elect to pay some or all of such amount to one or more individuals, including employees not originally approved as participants by the Compensation Committee, as an additional bonus to recognize superior performance; provided, however, that no portion of such discretionary bonus payments may be made to an employee who is classified as a “Covered Employee” for purposes of IRC Section 162(m) or Treasury Regulation Section 1.162-27(c)(2). |
Synergies Performance Measure Definitions
| · | The “ Performance Period ” shall begin on June 1, 2016 and end on December 31, 2016. |
| · | The “ Synergy Amount ” shall be the dollar value of (i) the Expense Reduction Amount, plus (ii) the Cash Flow Savings Amount. |
| · | The “ Expense Reduction Amount ” shall be equal to the itemized reduction in annual SG&A expenses and third party insurance premiums due to the integration of WCN US and Progressive; provided, however, that any increases in budgeted level SG&A and third-party insurance premiums, calculated on an annualized basis, which result from the merger of Progressive and WCN US shall be determined as of December 31, 2016 and applied to reduce the Expense Reduction Amount. |
| · | The “ Cash Flow Savings Amount ” shall be equal to the increase in the Company’s forecasted annual free cash flow due to cash tax savings resulting from the combination of WCN US and Progressive. The Company shall identify and/or implement tax planning strategies during the Performance Period to enable the Company to attain these forecasted cash tax savings. The attainment of this performance factor will be measured based on an analysis from the Company’s outside tax advisors. At the end of the Performance Period, the Committee shall determine the increase to the Company’s forecasted annual free cash flow due to the identification and/or implementation of these changes. |
Form and Timing of Cash Payment
| · | Awards will be paid in cash, by the Company or by the subsidiary which employs the applicable participant. |
| · | Bonus payments under the Synergy Program will be made during the period between January 1, 2017 and March 31, 2017; provided, however, that no such payment will be made prior to the date the Compensation Committee certifies (i) the attainment of the performance goals listed above, (ii) the dollar amount to be credited to the Bonus Pool, and (iii) the amount to be paid to each participant in the Synergy Program. |
Additional Terms and Conditions
| · | The Compensation Committee reserves the right, in its sole discretion, to decrease any bonus payouts to any participant under the Synergy Program, regardless of the level of bonus targets that have been achieved (or bonus levels that have been estimated), including, without limitation, to reduce or provide for no bonus payout to a participant even though one or more targets under the Synergy Program have been achieved. If an eligible employee terminates employment with the Company prior to an applicable payment date, he/she shall irrevocably forfeit any rights to receive a payment under the Synergy Program. |
| · | The Compensation Committee may revise, amend or otherwise adjust the terms and conditions of the Synergy Program to the extent permitted under IRC Section 162(m), including, without limitation, participation, goals, award levels, timing and form of payments that it, in its sole discretion, deems necessary to meet unanticipated circumstances or significant changes in the structure of the Company. Such modifications will be made only after conferring with management. Notwithstanding the preceding, no adjustment will be made by the Compensation Committee if such action would (i) result in a loss of tax deductions under IRC Section 162(m), or (ii) result in imposition of any tax penalties under IRC Section 409A. |
Exhibit 99.1
WASTE CONNECTIONS, INC.
COMPENSATION RECOUPMENT POLICY
Introduction
The Board of Directors (the “ Board ”) of Waste Connections, Inc., an Ontario corporation (the “ Company ”), is dedicated to maintaining and enhancing a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. The Board has therefore adopted this policy, which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws (the “ Policy ”), and which is intended to comply with Section 954 of the Dodd-Frank Act.
Administration
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee of the Board, in which case references herein to the Board shall be deemed references to the Compensation Committee. Any determinations made by the Board shall be final and binding on all affected individuals.
Covered Executives
This policy applies to the Company’s current and former executive officers, as determined by the Board in accordance with Section 10D of the Exchange Act and the listing standards of the New York Stock Exchange, and such other employees who may from time to time be deemed subject to the Policy by the Board (“ Covered Executives ”). For purposes of this Policy, an executive officer means an executive officer as defined under Section 16 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).
Incentive Compensation Covered By the Policy
For purposes of this Policy, “ Incentive Compensation ” means any compensation earned, granted or vested, in whole or in part, by a Covered Employee upon the attainment of the following measures: (i) any financial reporting measures which are based on accounting principles using the Company’s financial statements, and any measures derived from these measures; or (ii) Company total shareholder return (“ TSR ”) (each measured referred to as a “ Financial Goal ”). For avoidance of doubt, salary, discretionary cash bonuses, stock options and restricted shares (both of which were not granted or earned based on Financial Goals) and which vest over time, and awards that are based purely on non-Financial Goals are not subject to this Policy.
Accounting Restatement Triggering Event
For purposes of this Policy, a “ Restatement ” means an accounting restatement that the Company is required to prepare due to the Company’s material noncompliance with any financial reporting requirement under the securities laws. For the avoidance of doubt, an accounting restatement that occurs as a result of a change in accounting principles shall not be deemed a Restatement.
Recoupment Period Covered and Amount
If a Restatement occurs, the Board shall review all Incentive Compensation paid to Covered Executives on the basis of having met or exceeded specific performance targets for performance periods during the Restatement period. With respect to each Covered Executive, the Board shall seek to require the forfeiture or repayment of the Incentive Compensation, whether vested or unvested and including gains on equity, during the three completed fiscal years preceding the date on which the Company is required to prepare the Restatement, that is in excess of what would have been awarded to, vested and/or paid to the Covered Executive under the Restatement, either (1) if the Covered Executive engaged in fraud or intentional misconduct which materially contributed to the need for the Restatement, or (2) to the extent required by Applicable Rules (defined below) adopted prior to or after the granting of the applicable Incentive Compensation.
For purposes of this Policy, compensation shall be deemed to have been received in the fiscal period in which the financial reporting measure is attained, even if the compensation is not actually paid until a later date and the compensation is subject to additional service-based or nonFinancial Goal based vesting conditions after the period ends. The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data in the original financial statements over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the restated data in the financial statements contained in the Restatement. If the Financial Goals were tied to TSR, the Board shall make a reasonable estimate as to the impact of the Restatement on the TSR, and its resulting impact on Incentive Compensation that would have been paid.
Method of Recoupment
The Board will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder, which may include, without limitation:
| (a) | requiring reimbursement of cash incentive compensation previously paid; | |
| (b) | seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any equity-based awards; | |
| (c) | offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive; | |
| (d) | cancelling outstanding vested or unvested equity awards; and/or | |
| (e) | taking any other remedial and recovery action permitted by law, as determined by the Board. |
No Indemnification
The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive Compensation, nor shall the Company provide any insurance protection against the same.
Interpretation and Limitations
It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act and any applicable rules or standards adopted by the Securities and Exchange Commission or any national securities exchange on which the Company’s shares are listed (the “ Applicable Rules ”). The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy, provided, however, that this Policy must be enforced if triggered, except to the extent: (i) recoupment would violate foreign home country laws, or (ii) after attempting to recoup under the Policy, the Board determines that the cost of pursuing recoupment exceeds the recoverable amount.
Effective Date
This Policy shall be effective as of the date it is adopted by the Board and shall apply to Incentive Compensation that is approved, granted, awarded or paid out to Covered Executives for financial reporting measures attained in a fiscal year beginning on or after that date.
Amendment; Termination
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to comply with the requirements of Section 10D of the Exchange Act and any applicable rules or standards adopted by the Securities and Exchange Commission or any national securities exchange on which the Company’s shares are listed. The Board may terminate this Policy at any time.
Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award agreement or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.