UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.  )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

 

 

þ  Definitive Proxy Statement

 

o  Definitive Additional Materials

 

o  Soliciting Material Pursuant to §240.14a-12

 

REPUBLIC SERVICES, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 3, 2009

 

Dear Stockholder:

 

We invite you to attend the 2009 Annual Meeting of Stockholders of Republic Services, Inc., which we will hold at 10:30 a.m., local time, on Thursday, May 14, 2009 at the Marriott at McDowell Mountains, 16770 N. Perimeter Drive, Scottsdale, Arizona 85260.

 

We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish these proxy materials and our annual report to stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need more quickly, while lowering our costs of printing and delivery and reducing the environmental impact of our Annual Meeting. On or about April 3, 2009, we are mailing to our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our 2009 proxy materials and annual report and vote electronically via the Internet. The Notice of Internet Availability of Proxy Materials also contains instructions on how to receive a paper copy of these materials. We will not mail the Notice of Internet Availability of Proxy Materials to stockholders who had previously elected to receive a paper copy of the materials.

 

Whether or not you plan to attend in person, it is important that you have your shares represented at the Annual Meeting. We urge you to vote and to submit your proxy as promptly as possible. If you are a registered stockholder and attend the meeting, you may revoke your proxy and vote your shares in person. If you hold your shares through a bank or broker and you want to vote your shares in person at the meeting, please contact your bank or broker to obtain a legal proxy. Thank you.

 

Sincerely,

 

James E. O’Connor
Chairman of the Board
and Chief Executive Officer

 

TABLE OF CONTENTS

 

 

 

REPUBLIC SERVICES, INC.
18500 NORTH ALLIED WAY
PHOENIX, ARIZONA 85054

 

NOTICE OF THE 2009 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 2009

 

To the Stockholders of Republic Services, Inc.:

 

The Annual Meeting (the “Annual Meeting”) of stockholders of Republic Services, Inc., a Delaware corporation (“Republic,” “we,” “us,” or “our company”), will be held at the Marriott at McDowell Mountains, 16770 N. Perimeter Drive, Scottsdale, Arizona 85260, on May 14, 2009 at 10:30 AM, MST, for the following purposes:

 

 

Only stockholders of record at the close of business on March 16, 2009 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting or any postponement or adjournment of the Annual Meeting. A list of such stockholders will be available commencing April 6, 2009, and may be examined prior to the Annual Meeting at our corporate headquarters during normal business hours.

 

We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish these proxy materials and our annual report on the Internet. Stockholders of record have been mailed a Notice of Internet Availability of Proxy Materials, which provides stockholders with instructions on how to access the proxy materials and our annual report on the Internet, and, if they prefer, how to request paper copies of these materials. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need more quickly, while lowering our costs of printing and delivery and reducing the environmental impact of our Annual Meeting.

 

Your participation at our Annual Meeting is important. To ensure your representation, if you do not expect to be present at the meeting, at your earliest convenience, please vote your shares as instructed in your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card. The prompt return of proxies will ensure a quorum and save our company the expense of further solicitation.

 

By Order of the Board of Directors,

 

James E. O’Connor
Chairman of the Board and
Chief Executive Officer

 

Phoenix, AZ

April 3, 2009

 

REPUBLIC SERVICES, INC.
18500 NORTH ALLIED WAY
PHOENIX, ARIZONA 85054

 

PROXY STATEMENT

 

REGARDING

 

THE ANNUAL MEETING OF STOCKHOLDERS

 

TO BE HELD ON MAY 14, 2009

 

This proxy statement is being provided to stockholders in connection with the solicitation by the Board of Directors (the “Board of Directors” or the “Board”) of Republic Services, Inc., a Delaware corporation (“Republic,” “we,” “us,” or “our company”), of proxies to be voted at the Annual Meeting of stockholders (the “Annual Meeting”) to be held in Scottsdale, Arizona on May 14, 2009, and at any adjournment, for the purposes set forth in the accompanying notice.

 

The Securities and Exchange Commission permits us to deliver a single Notice of Internet Availability of Proxy Materials to one address shared by two or more of our stockholders. This delivery method is referred to as “householding” and can result in savings for our company. To take advantage of this opportunity, we deliver a single Notice of Internet Availability of Proxy Materials to multiple stockholders who share an address. If you prefer to receive separate copies of the Notice of Internet Availability of Proxy Materials, either now or in the future, or if you currently are a stockholder sharing an address with another stockholder and wish to receive only one copy of future Notices of Internet Availability of Proxy Materials for your household, please send your request in writing to us at the following address: Republic Services, Inc., Attn: Investor Relations Department, 18500 North Allied Way, Phoenix, Arizona 85054.

 

As permitted by the “notice and access” rules adopted by the Securities and Exchange Commission, we are making our proxy statement and our 2008 Annual Report to Stockholders (which includes our Annual Report on Form 10-K) available electronically via the Internet. On or about April 3, 2009, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials containing the instructions on how to access this proxy statement and our annual report and how to vote online. Stockholders who receive the notice will not receive a printed copy of the proxy materials in the mail. If you would like to receive a printed copy of our proxy materials or 2008 Annual Report to Stockholders, please follow the instructions included in the Notice of Internet Availability of Proxy Materials.

 

Unless the context requires otherwise, reference in this Proxy Statement to “we,” “us,” or “our company,” refers to Republic Services, Inc. and its consolidated subsidiaries.

 

 

 

 

 

 

 

 

 

 

 

Record Date

 

Only stockholders of record at the close of business on March 16, 2009 may vote at the Annual Meeting.

Shares Outstanding and Voting Rights

 

The only voting stock of our company currently outstanding is our common stock. As of the close of business on March 16, 2009, there were 379,040,575 shares of common stock outstanding. Each share of common stock issued and outstanding is entitled to one vote on each of the matters properly presented at the Annual Meeting.

 

The trustee of our 401(k) Plan will vote shares held in each participant’s account in accordance with instructions provided by the participant on a completed proxy card. If a participant does not provide a completed proxy card, the trustee of the 401(k) Plan will vote the shares in a participant’s account in the same proportion that it votes shares for which it received valid and timely proxy cards from other participants.

 

As part of the merger with Allied Waste Industries, Inc. (“Allied”) in December 2008, we also acquired the Allied Waste 401(k) Plan for which the trustee receives voting instructions from us and votes in accordance with our instructions. At no time do the voting rights for this plan pass to the participants or beneficiaries of the plan.

 

Eleven directors of our company are to be elected at the Annual Meeting, with each director to hold office until our next Annual Meeting or until his respective successor is elected and qualified (the “Nominees”). The Nominees have been nominated by the Board based on the recommendation of the Nominating and Corporate Governance Committee of the Board. Each Nominee has consented to be named in this proxy statement and has agreed to serve as a member of the Board if elected. If any Nominee should become unavailable for election, the proxy may be voted for a substitute nominee selected by the persons named in the proxy or the size of the Board may be reduced accordingly. The Board is not aware of any existing circumstances likely to render any Nominee unavailable.

 

The Nominees who receive a majority of the votes cast by the holders of our common stock represented at the Annual Meeting, without giving effect to abstentions, will be duly elected directors. Republic is a Delaware corporation and, under Delaware law, if an incumbent director is not elected, that director remains in office until the director’s successor is duly elected and qualified or until the director’s death, resignation or retirement. To address this potential outcome, in December 2008, the Board also adopted a director resignation policy in our by-laws. Under this policy, the Board of Directors will nominate for further service on the Board of Directors only those incumbent candidates who tender, in advance, irrevocable resignations, and the Board has obtained such conditional resignations from the nominees in this year’s proxy statement. The irrevocable resignations are contingent on the failure to receive the required vote at any Annual Meeting at which they are nominated for re-election and Board acceptance of the resignation. The Nominating and Corporate Governance Committee will recommend to the Board whether to accept or reject the tendered resignation. The Board will publicly disclose its decision within 90 days following certification of the election results. If the Board does not accept the resignation, the director will continue to serve until the next Annual Meeting and until his or her successor is duly elected, or until his or her earlier resignation or removal. If the Board accepts the resignation, then the Board, in its sole discretion, may fill any resulting vacancy, subject to certain rights held by the Continuing Republic Committee or the Continuing Allied Committee, as applicable, to fill any vacancies until our 2010 Annual Meeting of stockholders, as described below.

 

In connection with our merger with Allied in December 2008, our bylaws were amended and restated to provide for the following board composition until the close of business on the day immediately prior to our 2011 Annual Meeting of stockholders, referred to as the “Continuation Period”:

 

 

The Board of Directors recommends a vote “FOR” the election of all eleven nominees to our Board of Directors.

 

Information about each of the Nominees is set forth below:

 

 

James E. O’Connor was named Chairman of the Board of Directors in January 2003. He has served as our Chief Executive Officer and as a director since December 1998. From 1972 to 1978 and from 1982 to 1998, Mr. O’Connor served in various positions with Waste Management, Inc., an integrated solid waste service company, including Senior Vice President from 1997 to 1998, Area President of Waste Management of Florida, Inc. from 1992 to 1997, Senior Vice President of Waste Management — North America from 1991 to 1992 and Vice President — Southeastern Region from 1987 to 1991.

 

John W. Croghan was named a director in July 1998.  Since April 2002, Mr. Croghan has served as Chairman of Rail-Splitter Capital Management, LLC, an investment management firm. He was a founder and, from 1967 through December 2000, the Chairman of Lincoln Capital Management, an investment management firm. Mr. Croghan is also a former director of Blockbuster Entertainment Corp., Chicago Mercantile Exchange, Lindsay Manufacturing Co. and Morgan Stanley Closed-End Funds. Mr. Croghan is a Chartered Financial Analyst.

 

James W. Crownover was named a director in December 2008 upon the close of the merger between Republic Services, Inc. and Allied Waste Industries, Inc. Prior to the merger, Mr. Crownover served as a director of Allied Waste Industries, Inc. from December 2002 until December 2008. Mr. Crownover completed a 30-year career with McKinsey & Company, Inc. when he retired in 1998. He headed McKinsey’s Southwest practice for many years, and also co-headed the firm’s worldwide energy practice. In addition, he served as a member of McKinsey’s Board of Directors. Mr. Crownover also serves as a director of Chemtura Corporation, Weingarten Realty Investors, and FTI Consulting, Inc. He also is Chairman of the Board of Trustees of Rice University and a trustee of the Houston Grand Opera.

 

William J. Flynn was named a director in December 2008 upon the close of the merger between Republic Services, Inc. and Allied Waste Industries, Inc. Prior to the merger, Mr. Flynn served as a director of Allied Waste Industries, Inc. from February 2007 until December 2008. Mr. Flynn is the President and Chief Executive Officer of Atlas Air Worldwide Holdings, Inc. Prior to joining Atlas in 2006, Mr. Flynn served as President and Chief Executive Officer of GeoLogistics Corporation from 2002 until its sale to PWC Logistics in 2005. Mr. Flynn was a Senior Vice President with CSX Corporation from 2000 to 2002 and held various positions of increasing responsibility with Sea-Land Service Inc. from 1977 to 1999. Mr. Flynn also serves as a director of Atlas and Horizon Lines, Inc. He also is a director of the Air Transport Association.

 

David I. Foley was named a director in December 2008 following the close of the merger between Republic Services, Inc. and Allied Waste Industries, Inc. Prior to the merger, Mr. Foley served as a director of Allied Waste Industries, Inc. from March 2006 until December 2008. Mr. Foley is a Senior Managing Director at the Blackstone Group, L.P. (“Blackstone”). Blackstone holds investments in our company. Prior to joining Blackstone in 1995, Mr. Foley was an

employee of AEA Investors, Inc. from 1991 to 1993 and a consultant with The Monitor Company from 1989 to 1991. He also serves as a director of Foundation Coal Holdings, Inc.

 

Nolan Lehmann was named a director in December 2008 upon the close of the merger between Republic Services, Inc. and Allied Waste Industries, Inc. Prior to the merger, Mr. Lehmann served as a director of Allied Waste Industries, Inc. from October 1990 until December 2008. Mr. Lehmann was also Lead Director of Allied Waste Industries, Inc. from February 2007 until December 2008. Since April 2008, Mr. Lehmann has been a managing director of Altazano Management, LLC, a private wealth management advisory firm. From 1983 until his retirement in June 2005, Mr. Lehmann was President of Equus Capital Management Corporation, a registered investment advisor, and from 1991 to June 2005, he was President and a director of Equus II Incorporated, a registered public investment company. Mr. Lehmann is a certified public accountant. Mr. Lehmann also serves as a director of several private corporations. He is a director of Child Advocates of Harris County.

 

W. Lee Nutter was named a director in February 2004. Prior to his retirement in 2007, Mr. Nutter was Chairman, President and Chief Executive Officer of Rayonier, Inc., a leading supplier of high performance specialty cellulose fibers with timberland and other higher value land holdings. Mr. Nutter continues to serve as a director of Rayonier as well as a director of NiSource Inc., J.M. Huber Corporation and the North Florida Regional Board of SunTrust.

 

Ramon A. Rodriguez was named a director in March 1999.  Mr. Rodriguez has served as President and Chief Executive Officer of Madsen, Sapp, Mena, Rodriguez & Co., P.A., a firm of certified public accountants, from 1981 through 2006 when the firm was acquired by Crowe Horwath LLP. He is a past Chairman of the Florida Board of Accountancy and was also President of the Florida Institute of Certified Public Accountants. Mr. Rodriguez serves as a director of Bank of Florida Corporation, a bank holding company.

 

Allan C. Sorensen was named a director in November 1998. Mr. Sorensen is a co-founder of Interim Health Care, Inc., which Interim Services, Inc., now known as Spherion Corporation, spun off in October 1997. From October 1997 until February 2007, Mr. Sorensen served as Interim Health’s Vice Chairman and from 2004 until February 2007, Mr. Sorensen also served as Interim Health’s Chief Executive Officer and President. Before the spin-off, Mr. Sorensen served as a director and in various capacities including President, Chief Executive Officer and Chairman of Interim Services from 1967 to 1997. He was a member of the board of directors of H&R Block, Inc. from 1979 until 1993, when Interim Services was spun off in an initial public offering.

 

John M. Trani was named a director in December 2008 upon the close of the merger between Republic Services, Inc. and Allied Waste Industries, Inc. Prior to the merger, Mr. Trani served as a director of Allied Waste Industries, Inc. from February 2007 until December 2008. Mr. Trani was Chairman of Accretive Commerce (formerly New Roads) from February 2004 until it was acquired in September 2007. Prior to that, Mr. Trani was Chairman and Chief Executive Officer of the Stanley Works from 1997 until his retirement in 2003. Prior to joining Stanley, Mr. Trani served in various positions of increasing responsibility with General Electric Company from 1978 to 1996. Mr. Trani was a Senior Vice President of GE and President and Chief Executive Officer of its Medical Systems Group from 1986 to 1996. Mr. Trani also serves as a director of Goss International and Arise Inc. He is a Special Advisor to Young America Corporation.

 

Michael W. Wickham was named a director in October 2004. From 1996 to 2003, Mr. Wickham served as President and Chief Executive Officer of Roadway Corporation. He also served as Chairman of Roadway from 1998 until his planned retirement in December 2003. He served as President of Roadway from July 1990 through March 1998 and a director of Roadway from 1989 until his planned retirement in December 2003. Mr. Wickham also serves as a director of C.H. Robinson Worldwide, Inc., a transportation, logistics and sourcing company and several private companies.

 

See the section under the heading “Executive Officers” for biographical information on our non-director executive officers.

 

Presiding Director

 

The Board of Directors has created the position of Presiding Director to serve as the lead non-employee director of the Board of Directors. The Presiding Director position shall at all times be held by an “independent” director, as that term

is defined from time to time by the listing standards of the New York Stock Exchange (“NYSE”) and as determined by the Board of Directors in accordance with its Corporate Governance Guidelines.

 

The Presiding Director will have, in addition to the powers and authorities of a member of our Board of Directors, the power and authority to (a) preside at all meetings of non-employee directors when they meet in executive session without the participation of management, (b) set agendas, priorities and procedures for meetings of non-employee directors when they meet in executive session without the participation of management, (c) coordinate with non-employee directors the review, revision, addition or deletion of proposed agenda items for any meeting of the Board of Directors, (d) request access to any employee of the company at any time, and (e) retain independent outside financial, legal or other advisors on behalf of any committee or subcommittee of the Board of Directors.

 

The Nominating and Corporate Governance Committee recommends a member of the Board of Directors to serve as Presiding Director. The current Presiding Director of the company is Mr. Nutter, who was approved by the Board of Directors effective as of October 2, 2006.

 

Board of Directors and Board Committees

 

The Board of Directors develops our business strategy, establishes our overall policies and standards, and reviews the performance of management in executing our business strategy and implementing our policies and standards. We keep directors informed of our operations at meetings and through reports and analyses presented to the Board of Directors and committees of the board. Significant communications between the directors and management also occur apart from meetings of the Board of Directors and committees of the board.

 

In addition to the Continuing Republic Committee and Continuing Allied Committee described above, the Board of Directors has established four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Integration Committee. Committee member appointments are evaluated annually and any changes to such appointments are approved by the Board of Directors at its next regularly scheduled meeting that follows the Annual Meeting of stockholders. Committee chairmanships rotate bi-annually.

 

Until our 2011 Annual Meeting of stockholders, each committee of our Board of Directors (other than with respect to the Continuing Republic Committee or Continuing Allied Committee) must be comprised of five members, consisting of three Continuing Republic Directors and two Continuing Allied Directors.

 

The Board of Directors held 25 meetings and took 11 actions by unanimous written consent during 2008. Each incumbent director attended at least 75% of the total number of meetings of the Board of Directors and the total number of meetings held by all committees of the board on which he served. The non-employee directors meet regularly in executive sessions.

 

Our directors and executive officers will continue to attend seminars and continuing education programs relating to corporate governance, audit and compensation matters.

 

Information regarding each of the current standing committees is as follows:

 

Audit Committee

 

The Audit Committee currently consists of Messrs. Rodriguez (Chairperson), Croghan, Flynn, Lehmann and Wickham. The five members of the Audit Committee meet the independence, education and experience requirements of the listing standards of the NYSE and the rules and regulations of the Securities and Exchange Commission. Our Board of Directors has also determined that Messrs. Rodriguez and Croghan each qualify as an “Audit Committee financial expert” within the meaning of Item 407 of Regulation S-K under the Securities Act of 1933, as amended.

 

The Audit Committee assists the Board of Directors in monitoring (a) the integrity of our financial statements, (b) our compliance with legal and regulatory requirements, and (c) the independence and performance of our internal and external auditors. Furthermore, the Audit Committee has the ultimate authority and responsibility to select, evaluate and, where appropriate, terminate and replace the independent public accountants. The Audit Committee operates under a written charter adopted by the Board of Directors in accordance with NYSE rules and all other applicable laws. The Audit Committee reviews its charter at least annually. The Audit Committee held seven meetings, took seven

actions by unanimous written consent and met regularly in executive sessions during 2008. The Audit Committee Report is on page 16.

 

Compensation Committee

 

The Compensation Committee currently consists of Messrs. Wickham (Chairperson), Foley, Lehmann, Rodriguez and Sorensen. The five members of the Compensation Committee are independent as that term is defined under the listing standards of the NYSE.

 

The Compensation Committee of our Board of Directors establishes and regularly reviews our compensation philosophy and programs, exercises authority with respect to the determination and payment of salaries and incentive compensation to executive officers, and administers our stock incentive plan. For further information on the Compensation Committee’s processes and procedures for consideration and determination of executive compensation, see the Compensation Discussion and Analysis on page 20. The Compensation Committee operates under a written charter adopted by our Board of Directors in accordance with NYSE rules and all other applicable laws. The Compensation Committee reviews its charter at least annually, and it was last amended in December 2008. The charter more fully describes the role, responsibilities and function of the Compensation Committee. The Compensation Committee held 14 meetings, took three actions by unanimous written consent and met regularly in executive sessions during 2008.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee currently consists of Messrs. Croghan (Chairperson), Crownover, Nutter, Sorensen and Trani. The five members of the Nominating and Corporate Governance Committee are independent as that term is defined under the listing standards of the NYSE.

 

The Nominating and Corporate Governance Committee identifies director candidates that it recommends to our Board of Directors for selection as the director nominees for the next Annual Meeting or, except as otherwise described above, to fill vacancies. The Nominating and Corporate Governance Committee also is responsible for developing and recommending a set of corporate governance principles applicable to our company and reviewing and providing oversight of the effectiveness of our governance practices. This committee also oversees the annual evaluation of the Board of Directors and its committees and discharges the Board of Directors’ responsibilities related to the compensation of non-employee directors. The Nominating and Corporate Governance Committee operates under a written charter adopted by the Board of Directors in accordance with the NYSE rules and all other applicable laws. The Nominating and Corporate Governance Committee reviews its charter at least annually, and it was last amended in December 2008. The Nominating and Corporate Governance Committee will consider nominations for the Board of Directors from stockholders that are entitled to vote for the election of directors, as described under the “Stockholder Director Recommendation Policy” below. The Nominating and Corporate Governance Committee held five meetings, took one action by unanimous written consent and met regularly in executive session during 2008.

 

Integration Committee

 

The Integration Committee currently consists of Messrs. Sorensen (Chairperson), Crownover, Foley, Rodriguez and Wickham. The Integration Committee is responsible for assisting our Board of Directors in overseeing the implementation, and assessing the effectiveness, of a comprehensive integration program designed to combine the business, operations and organizational cultures of Republic and Allied as a result of the merger in December 2008. The Integration Committee meets regularly with the management integration team. The Integration Committee operates under a formal charter that was approved by the Board of Directors.

 

Director Nomination Procedures

 

The Nominating and Corporate Governance Committee is generally responsible for soliciting recommendations for candidates for the Board of Directors, developing and reviewing background information for such candidates, and making recommendations to the Board of Directors with respect to candidates for directors proposed by stockholders. In evaluating candidates for potential director nomination, the Nominating and Corporate Governance Committee will consider, among other things, candidates that are independent, if required, who possess personal and professional

integrity, have good business judgment, have relevant business and industry experience, education and skills, and who would be effective as a director in conjunction with the full board in collectively serving the long-term interests of our stockholders in light of the needs and challenges facing the Board of Directors at the time.

 

When assessing the independence of a current director or prospective director candidate, the Nominating and Corporate Governance Committee considers the “per se” disqualifications to director independence in accordance with the NYSE rules. In addition, the Board of Directors, based upon the recommendation of the Nominating and Corporate Governance Committee, has adopted categorical standards, which state that certain relationships would not be considered to be material relationships that would bar a director’s independence. These categorical standards are detailed under “Director Independence.” All candidates will be reviewed in the same manner, regardless of the source of recommendation. Mr. O’Connor is nominated for election to our Board of Directors at each Annual Meeting of stockholders pursuant to the terms of his employment agreement with us. See “Employment Agreements and Post-Employment Compensation.”

 

Stockholder Director Recommendation Policy

 

The Nominating and Corporate Governance Committee will consider director candidates recommended by our stockholders. In accordance with our bylaws, a stockholder wanting to propose a nominee to serve as a director before a meeting of stockholders must give timely written notice. Such notice requirement will be deemed satisfied if in compliance with our bylaws, and must include (A) as to each person whom such stockholder proposes to nominate for election or re-election as a director, (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors under the Exchange Act, including, such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected, (ii) a description of all direct and indirect compensation and other material monetary arrangements during the past three years and any other material relationships between such stockholder, beneficial owner and their respective affiliates and associates, on the one hand, and each proposed nominee and his respective affiliates and associates, on the other hand, and (iii) a completed and signed questionnaire, representation and agreement required by Section 2.13 of our bylaws; and (B) as to such stockholder giving notice and the beneficial owner, if any, on whose behalf the nomination is made, (i) the name and address, as they appear on our books, of such stockholder and beneficial owner, (ii) (a) the class and number of shares of stock of our company which are owned beneficially and of record by such stockholder and beneficial owner, (b) any instrument derived in whole or part from the value of any class or series of shares of the company’s stock beneficially owned by such stockholder, (c) any proxy, understanding or relationship pursuant to which such stockholder has a right to vote any shares of any security of the company, (d) any short interest in any security of the company, (e) any rights to dividends on the shares of the company beneficially owned by such stockholder that are separated or separable from the underlying shares of the company, (f) any proportionate interest in shares of the company or derivative instruments held directly or indirectly by a general or limited partnership in which such stockholder is a general partner or beneficially owns an interest in a general partner, and (g) any performance-related fees (other than an asset-based fee) that such stockholder is entitled to based on any increase or decrease in the value of shares of the company or derivative instruments, including interests held by members of the stockholder’s immediate family, and (iii) any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors under the Exchange Act.

 

The Nominating and Corporate Governance Committee will determine the eligibility of a proposed nominee to serve as a director, and may reasonably require additional information to determine such eligibility. Director candidates proposed by stockholders are evaluated on the same basis as all other director candidates as discussed above. The Nominating and Corporate Governance Committee may, in its discretion, interview any director candidate proposed by a stockholder.

 

Stockholders wishing to recommend director candidates for consideration by the Nominating and Corporate Governance Committee may do so by providing the required information as described above in writing to: Attention: Office of the Corporate Secretary, Republic Services, Inc., 18500 North Allied Way, Phoenix, Arizona 85054. In order to consider a candidate for nomination at the 2010 Annual Meeting, we must receive the stockholder’s written notice not later than 90 days and not earlier than 120 days prior to the anniversary date of this year’s Annual Meeting. Refer to our company’s bylaws for additional information and notice requirements.

Director Independence

 

Our common stock is listed on the NYSE, which requires that a majority of our Board must be “independent directors” according to independence standards established by the NYSE. Following is a list of our independent directors as of the date of this proxy statement:

 

 

Harris W. Hudson resigned as a director, Vice Chairman and Secretary of Republic effective December 2, 2008. Beginning in January 2008, Mr. Hudson, a former employee, was compensated by us solely for his activities as a director in a manner consistent with the non-employee directors. We entered into a Consulting Agreement with Mr. Hudson as of December 3, 2008 for a one year period. Refer to “Certain Relationships and Related Transactions” for more information regarding Mr. Hudson’s Consulting Agreement.

 

When assessing the independence of a current director or nominee for director, the Nominating and Governance Committee considers the “per se” disqualifications from director independence in accordance with the NYSE rules. In addition, based upon the recommendation of the Nominating and Corporate Governance Committee, our Board of Directors adopted categorical standards, which provide that the following are not material relationships that would bar a director’s independence:

 

 

The Board of Directors undertook a review of director independence and considered relationships between each of the directors and their immediate family members and our company and its subsidiaries, both in the aggregate and individually. The Board of Directors determined that the ten non-employee individuals currently serving as directors meet the standards for independence set by the NYSE and the categorical standards adopted by our Board of Directors, and have no material relationships with our company that impaired their independence from our company. These individuals therefore are “independent directors” under the NYSE listing standards. There were no matters other than the matters described under “Certain Relationships and Related Transactions.”

 

Corporate Governance

 

Our company operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct, and assuring compliance with such responsibilities and standards. We continuously monitor developments and best practices in the area of corporate governance and modify our plan as warranted.

 

Corporate Governance Guidelines. Our company has adopted a set of Corporate Governance Guidelines, including specifications for director qualification and responsibility.

 

Personal Loans to Executive Officers and Directors. Our company complies with and will operate in a manner consistent with legislation prohibiting extensions of credit in the form of a personal loan to or for our directors or executive officers.

Code of Business Conduct and Ethics (“Code of Ethics”). We have adopted a Code of Ethics that complies with all applicable laws and outlines the general standards of business conduct that all of our employees, officers, and directors are required to follow. If we make any substantive amendments to the Code of Ethics or grant any waiver from a provision of the Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, Controller, or Chief Accounting Officer, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8-K.

 

The current charters for the Audit, Compensation, and Nominating and Corporate Governance committees, our Corporate Governance Guidelines, and our Code of Ethics can be obtained, free of charge, by written request to: Attention: Office of the Corporate Secretary, Republic Services, Inc., 18500 North Allied Way, Phoenix, Arizona 85054. These documents are also available on our website at www.republicservices.com.

 

Stockholder Communications with the Board of Directors

 

Any stockholder or other interested party who wishes to communicate with the Board of Directors, a committee of the board, the Presiding Director, or the non-management directors (as a group or individually), may send correspondence to: Attention: Office of the Corporate Secretary, Republic Services, Inc., 18500 North Allied Way, Phoenix, Arizona 85054. The Corporate Secretary will compile and submit on a periodic basis such correspondence to the entire Board of Directors, or, if and as designated in the communication, to the appropriate committee of the board, the Presiding Director, or the non-management directors (as a group or the appropriate individual member). The independent members of the Board of Directors have approved this process.

 

Attendance at Annual Meetings Policy

 

We do not have a formal policy requiring our directors to attend the Annual Meeting of our Stockholders, although we encourage all directors to attend. Four of our directors attended our 2008 Annual Meeting.

 

When establishing and reviewing the compensation paid to our directors, consideration is given to the level of work and involvement the directors have with our business. In addition, compensation packages available to directors in the marketplace are also considered, with particular emphasis placed on the compensation packages available to directors at our peer group companies.

 

During 2008, we paid each of our non-employee directors a $40,000 annual retainer, an additional annual retainer of $10,000 for each board committee chairmanship held and for being the Presiding Director, and $1,500 for each board or committee meeting attended. In addition, under our 1998 Stock Incentive Plan, each non-employee director received deferred stock units equal to 6,000 shares of our common stock. At the end of any quarter in which dividends were distributed to stockholders, directors received additional deferred stock units with a value (based on the closing price of Republic stock on the dividend payment date) equal to the value of dividends they would have received on all deferred stock units held by them on the dividend record date. Absent a showing of hardship, directors were required to hold all deferred stock units until the time they were no longer a member of our Board of Directors. Under the terms of these awards, these deferred stock units were settled in cash upon the close of the merger between Republic and Allied in December 2008.

 

Beginning in January 2009, the Board of Directors, as recommended by the Nominating and Corporate Governance Committee, increased (i) the annual retainer paid to each non-employee director from $40,000 to $80,000, (ii) the fees paid to each committee chairman and Presiding Director of the Board of Directors from $10,000 to $20,000, and (iii) the number of annual restricted stock units (in place of deferred stock units) granted to non-employee directors from 6,000 to 7,500 units that will be issued upon the director’s termination of service as a member of our Board of Directors. In addition, non-employee directors were granted a one-time grant of 22,500 restricted stock units that will vest and be issued in three equal annual installments commencing one year after the date of award. At the end of any quarter in which dividends are distributed to stockholders, the non-employee directors will receive additional restricted stock units with a value (based on the closing price of Republic stock on the dividend payment date) equal to the value of dividends they would have received on all restricted stock units held by them on the dividend record date. The Board of Directors determined, based on an independent study of peer company director compensation practices by our compensation consultant and acknowledgment of the services and time commitments by the non-employee directors related to the December 2008 merger of Republic and Allied, that the modification of cash compensation and equity awards was necessary to provide competitive compensation to our directors.

 

All compensation paid by us during 2008 to our non-employee directors is detailed below. Compensation paid to the Continuing Allied Directors (Messrs. Crownover, Flynn, Foley, Lehmann and Trani) for their services as members of the Board of Directors of Allied is not reflected in this table. Mr. O’Connor’s compensation is reflected in the other schedules contained in this proxy statement, and he received no additional compensation from us for his duties as a director.

 

Director Compensation in 2008

 

 

 

 

 

		Grant Date Fair
		Value of Deferred				Number of Shares of				Market Value of Shares of
		Stock Units				Stock That Have Not				Stock That Have Not Vested
Name		($)(a)				Vested (#)(b)				($)(c)
John W. Croghan			186,420				—				—
James W. Crownover			—				2,490				61,727
William J. Flynn			—				5,944				147,352
David I. Foley			—				2,490				61,727
Nolan Lehmann			—				2,490				61,727
Harris W. Hudson			186,420				—				—
W. Lee Nutter			186,420				—				—
Ramon A. Rodriguez			186,420				—				—
Allan C. Sorensen			186,420				—				—
John M. Trani			—				5,944				147,352
Michael W. Wickham			186,420				—				—

 

 

 

 

		Number of Securities
		Underlying Unexercised				Option Exercise				Option Expiration
Name		Options Exercisable (#)				Price ($)				Date
John W. Croghan			15,000				9.50				1/3/2010
			15,000				9.70				1/30/2011
			15,000				11.60				1/31/2012
			15,000				12.82				2/5/2013
James W. Crownover			11,250				22.64				12/12/2012
			4,500				19.62				5/21/2013
			4,500				28.00				5/21/2014
William J. Flynn			—				—				—
David I. Foley(a)			—				—				—
Nolan Lehmann			4,500				44.03				6/29/2009
			4,500				13.33				5/3/2010
			4,500				37.80				5/23/2011
			4,500				24.62				5/29/2012
			4,500				19.62				5/21/2013
			4,500				28.00				5/21/2014
Harris W. Hudson			—				—				—
W. Lee Nutter			—				—				—
Ramon A. Rodriguez(b)			15,000				9.50				1/3/2010
			15,000				9.70				1/30/2011
			15,000				11.60				1/31/2012
			15,000				12.82				2/5/2013
Allan C. Sorensen			15,000				9.50				1/3/2010
			15,000				9.70				1/30/2011
			15,000				11.60				1/31/2012
			15,000				12.82				2/5/2013
John M. Trani			—				—				—
Michael W. Wickham			—				—				—

 

 

 

 

The following statement made by the Audit Committee shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under either of these acts.

 

Management is responsible for the company’s internal controls, financial reporting processes, and compliance with laws and regulations and ethical business standards. The independent auditor is responsible for performing an independent audit of the company’s consolidated financial statements in accordance with generally accepted auditing standards and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes on behalf of the Board of Directors.

 

In this context, the Audit Committee has reviewed and discussed the audited financial statements with management and the independent auditors. The Audit Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, “Communication with Audit Committees.”

 

In addition, the Audit Committee has received from the independent auditors the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the audit committee concerning independence, and has discussed with the independent auditor the independent auditor’s independence. The Audit Committee has considered whether the independent auditors’ provision of audit-related and other non-audit services to the company is compatible with maintaining the auditors’ independence.

 

Finally, the Audit Committee has evaluated the independent auditors’ role in performing an independent audit of the company’s financial statements in accordance with generally accepted auditing standards and applicable professional and firm auditing standards, including quality control standards. The Audit Committee has received assurances from the independent auditors that the audit was subject to its quality control system for its accounting and auditing practice in the United States. The independent auditors have further assured the Audit Committee that its engagement was conducted in compliance with professional standards and that there was appropriate continuity of personnel working on the audit, availability of national office consultation to conduct the relevant portions of the audit, and availability of personnel at foreign affiliates to conduct the relevant portions of the audit.

 

In reliance on the reviews, discussions and evaluations referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 for filing with the Securities and Exchange Commission. By recommending to the Board of Directors that the audited financial statements be so included, the Audit Committee is not opining on the accuracy, completeness or presentation of the information contained in the audited financial statements.

 

Submitted by the Audit Committee:

 

Ramon A. Rodriguez, Chairperson

John W. Croghan

William J. Flynn

Nolan Lehmann

Michael W. Wickham

 

Independent Auditor Fee Information

 

The following table presents the aggregate fees billed to us by Ernst & Young LLP for the audit of our annual financial statements for the fiscal years ended December 31, 2008 and 2007 and other services provided during those periods:

 

 

Fees for audit services include fees associated with the annual audit and Form 10-K, the review of our reports on Form 10-Q and comfort letters. Audit fees also include amounts related to Ernst & Young LLP’s report on our internal controls in accordance with the Sarbanes-Oxley Act of 2002. In 2007, audit-related fees consisted of audits of employee benefit plans. In 2008, audit-related fees consisted primarily of due diligence work performed as part of the merger with Allied.

 

Pre-Approval Policies and Procedures

 

Our Audit Committee pre-approves all fees to be paid to our independent public accountants in accordance with the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in accordance therewith.

 

Based solely upon a review of (1) Forms 3 and 4 and amendments to each form furnished to us pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934, as amended, during our fiscal year ended December 31, 2008, (2) any Forms 5 and amendments to the forms furnished to us with respect to our fiscal year ended December 31, 2008, and (3) any written representations referred to us in subparagraph (b)(1) of Item 405 of Regulation S-K under the Securities Exchange Act of 1934, as amended, no person who at any time during the fiscal year ended December 31, 2008 was a director, officer or, to our knowledge, a beneficial owner of more than 10% of our common stock failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended, during the fiscal year ended December 31, 2008 or prior fiscal years, except that (1) Mr. Holmes filed a late Form 4 on January 12, 2009 reporting (a) a disposition of Republic shares when a stock fund in his deferred compensation account was paid out in cash in connection with the Allied merger and (b) an acquisition of shares of Republic common stock acquired in exchange for shares of Allied common stock in connection with the merger, and (2) Mr. O’Connor filed a late Form 4 on January 9, 2009 reporting a disposition of Republic shares when a stock fund in his deferred compensation account was paid out in cash in connection with the Allied merger.

SECURITY OWNERSHIP OF FIVE PERCENT STOCKHOLDERS

 

The following table shows certain information as of March 16, 2009 with respect to the beneficial ownership of common stock by each of our stockholders who is known by us to be a beneficial owner of more than 5% of our outstanding common stock.

 

 

 

 

 

The following table shows certain information as of March 16, 2009 with respect to the beneficial ownership of common stock by (1) our current directors, (2) each of the executive officers listed in the Summary Compensation Table and (3) all of our current directors and these executive officers as a group. We have adjusted share amounts and percentages shown for each individual in the table to give effect to shares of common stock that are not outstanding but which the individual may acquire upon exercise of all options exercisable within 60 days of March 16, 2009. However, we do not deem these shares of common stock to be outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by any other individual listed on the table.

 

 

 

 

 

 

Our executive officers serve at the pleasure of the Board and are subject to annual appointment by the Board at its first meeting following the Annual Meeting of stockholders. Following is a list of our current executive officers. Biographical information about each of our current executive officers follows the table.

 

 

See “Election of Directors — Biographical Information Regarding Director Nominees and Executive Officers” for biographical information about Mr. O’Connor.

 

Donald W. Slager was named President and Chief Operating Officer in December 2008. Prior to that, Mr. Slager served as President and Chief Operating Officer of Allied from January 2005 and Executive Vice President and Chief Operating Officer of Allied from June 2003. Mr. Slager was Senior Vice President Operations from December 2001 to June 2003. Previously, Mr. Slager served as Vice President — Operations from February 1998 to December 2001, as Assistant Vice President — Operations from June 1997 to February 1998, and as Regional Vice President of the Western Region from June 1996 to June 1997. Mr. Slager also served as District Manager for the Chicago Metro District from 1992 to 1996. Before Allied’s acquisition of National Waste Services in 1992, he served at National Waste Services as General Manager from 1990 to 1992 and in other management positions with that company since 1985.

 

Tod C. Holmes was named Executive Vice President and Chief Financial Officer in December 2008. Prior to that, Mr. Holmes served as Senior Vice President and Chief Financial Officer from August 1998 to December 2008. Mr. Holmes served as our Vice President — Finance from June 1998 until August 1998 and as Vice President of Finance of our former parent company’s Solid Waste Group from January 1998 until June 1998. From 1987 to 1998, Mr. Holmes served in various positions with Browning-Ferris Industries, Inc., including Vice President, Investor Relations from 1996 to 1998, Divisional Vice President, Collection Operations from 1995 to 1996, Divisional Vice President and Regional Controller — Northern Region from 1993 to 1995, and Divisional Vice President and Assistant Corporate Controller from 1991 to 1993.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Background and Role of the Compensation Committee

 

The Compensation Committee of our Board of Directors establishes and regularly reviews our compensation philosophy and programs, exercises authority with respect to the determination and payment of salaries and incentive compensation to executive officers, and administers our stock incentive plan. Five members of our Board of Directors sit on the Compensation Committee, each of whom is independent as that term is defined under listing standards of the NYSE.

 

Compensation Program Objectives

 

Our executive compensation program is designed to attract and retain our officers and to motivate them to increase shareholder value on both an annual and a longer-term basis primarily by improving our earnings and return on invested capital and generating increasing levels of free cash flow. In 2008, we defined free cash flow as cash provided by operating activities less purchases of property and equipment, plus proceeds from sales of property and equipment as presented in our consolidated statements of cash flows. Free cash flow is allocated and deployed by the Board of Directors to pay down debt and pay quarterly cash dividends to our stockholders, among other things.

 

The Compensation Committee structures compensation packages that are primarily weighted toward incentive forms of compensation to ensure that each officer’s interests are aligned with the interests of our stockholders. Our incentive forms of compensation do not focus on individual goals or individual performance, but instead focus on organization-wide strategic goals and objectives. We believe that stockholder interests are best served — and that our officers’ interests are best aligned with those of our stockholders — by establishing, working toward and achieving team-oriented strategic goals and objectives that affect our entire organization. The relationship between our company’s ability to improve earnings and return on invested capital and to generate free cash flow is closely tied to the financial rewards received by our stockholders. Consequently, the success of our officers in improving earnings and return on invested capital and generating free cash flow is closely linked to the financial rewards received by them.

 

Our compensation programs have evolved significantly during our past ten years as a publicly traded company, reflecting the increasing complexity of our business and the competitive challenges of the marketplace.

 

For a short period of time after our initial public offering, one of our main strategic objectives was to grow our business through acquisitions. Beginning in late 1999, as a result of industry-specific conditions, we shifted our strategic objectives from growing through acquisitions to growing our business organically, improving our return on invested capital, generating free cash flow and distributing such cash flow in various forms to our stockholders. Consistent with this shift in strategic focus, in early 2001 our Compensation Committee adopted a long-term cash incentive plan to reward our named executive officers’ ability to achieve our strategic objectives by generating increasing amounts of free cash flow and improving our return on invested capital over an extended time horizon.

 

Beginning in late 2003 and continuing through 2009, the Compensation Committee retained the services of Pearl Meyer & Partners to assist the Compensation Committee with its review of compensation for our senior executives, including our named executive officers. In addition, Pearl Meyer & Partners was asked to conduct an annual market comparison analysis and also has been utilized as a regular advisor to the Compensation Committee regarding ongoing compensation issues. The Compensation Committee retains Pearl Meyer & Partners directly, supervises all work assignments performed by them, and reviews and approves all work invoices received from Pearl Meyer & Partners for payment. Nevertheless, there are instances when Pearl Meyer & Partners must work with our management in order to obtain compensation information and data to perform its tasks. Other than as described above, Pearl Meyer & Partners was not asked to perform any other services for us.

 

In addition to Pearl Meyer & Partners, the Compensation Committee has the ability to retain any other advisors it deems necessary or desirable in order for it to discharge its duties. In 2008 and continuing into 2009, the Compensation Committee retained the law firm of Fried, Frank, Harris, Shriver & Jacobson LLP to assist in the development of restated employment agreements for the named executive officers. The Compensation Committee has sole authority to terminate the retention of any consultant or advisor it has retained.

 

When making decisions regarding the compensation of named executive officers, the Compensation Committee considers data and analyses prepared by Pearl Meyer & Partners that include our company’s prior performance and historical pay to the named executive officers and the appropriateness of such compensation compared to that of our peer group companies. General compensation surveys compiled by other consulting firms are also reviewed and considered by the Compensation Committee in determining the appropriateness of executive compensation. Finally,

the Compensation Committee also considers the compensation recommendations set forth by the Chief Executive Officer for executive officers other than himself. In considering compensation matters generally, and the compensation packages of the named executive officers in particular, the Compensation Committee routinely meets in executive session outside the presence of the named executive officers or any of our other employees.

 

Elements of Compensation

 

For 2008, our compensation program for named executive officers consisted of the following components:

 

 

  –  Long-term cash incentive awards

 

  –  Equity compensation

 

 

Each of these components is reflected in the Summary Compensation Table and is discussed in detail below.

 

The Compensation Committee reviewed Republic’s employee benefit plans and severance agreements in connection with the merger with Allied. The Compensation Committee determined unanimously that the closing of the merger with Allied constituted a change of control under various Republic employee benefit plans and severance agreements. As a result of this determination, the closing of the merger triggered accelerated vesting of certain benefits under various Republic employee benefit plans and increased benefits payable under certain severance agreements in connection with employment terminations upon or after the merger.

 

Why Each Element of Compensation is Paid and How the Amount of Each Element of Compensation is Determined

 

As mentioned above, our compensation packages are primarily weighted toward incentive compensation, although we do not adhere to a precise mathematical allocation between salary and incentive compensation. Nevertheless, a significant portion of our named executive officers’ total compensation is placed at risk through annual and long-term incentive cash and equity compensation.

 

Salaries. During 2008 and prior to the merger, the annual cash salaries paid to Messrs. O’Connor, Cordesman, Holmes and Barclay were $925,000, $520,000, $440,000 and $350,000, respectively. These reflected increases from the prior year of $68,200, $61,000, $32,000 and $18,500, respectively. These increases reflected individual performance as well as change in the competitive marketplace as reflected in salary changes for similar positions in our peer group companies. Also, during the years 2004 through 2007, the Compensation Committee had granted each named executive officer individual shares of restricted stock in lieu of cash raises. The restricted stock vested on January 1 of the year following the year with respect to which the grant was made. There were no grants of restricted stock in lieu of cash raises during 2008. As part of the merger, Messrs. Cordesman and Barclay left the company and the annual cash salaries established for Messrs. O’Connor, Slager and Holmes were $1,100,000, $875,000, and $575,000, respectively. These salary increases reflected the increasing responsibilities of each role as the result of the merger.

 

Annual Incentive Compensation. Annual incentive compensation for each of our named executive officers is governed by our Executive Incentive Plan which was approved by our stockholders at the company’s 2003 Annual Meeting. Under this plan, each of our named executive officers is eligible to receive annual incentive compensation upon achieving predetermined levels of (a) earnings per share and (b) free cash flow, both of which are approved by the Compensation Committee at the beginning of our fiscal year following approval by the Board of Directors of the company’s annual budget.

 

During 2008, the annual incentive target payouts for each of our named executive officers (other than Mr. Slager, who joined our company from Allied in connection with our December 2008 merger with Allied) were as follows:

 

For annual cash incentive awards in 2008, in the event our free cash flow target and our earnings per share target were both met but not exceeded, the percentage of the Annual Incentive Target Payout amount to each named executive officer would have been calculated as a percentage of his salary as set forth above. One-half of the targeted payout amount would have been attributable to free cash flow and one-half to earnings per share. If our free cash flow target was met or exceeded, and our earnings per share target was exceeded, the targeted payout amount to each named executive officer would have increased. Based on the 2008 targets, that increase would have been approximately 14% for each $.01 by which we exceeded our earnings per share target, up to a maximum of $.07 per share, resulting in a possible maximum target payout equal to 200% of the targeted payout amount calculated pursuant to the table above. There would have been no increase in the targeted payout amount to the named executive officers in the event our free cash flow target was met or exceeded, but our earnings per share target was not exceeded. In the event we did not meet our free cash flow or our earnings per share targets but we achieved 75% of the budgeted increase in either free cash flow or earnings per share from the prior year’s actual results to the current year’s target, there would have been a payment to participants of 50% of the targeted payment amount attributable to either free cash flow or earnings per share. For increases in either free cash flow or earnings per share above the 75% threshold but below the targeted amount, results would have been interpolated and annual incentive compensation would have been paid to participants on a ratable basis between 50% of the targeted payment amount and the targeted payment amount.

 

For 2008, our free cash flow target was $340 million and our earnings per share target was $1.78 per share. The annual incentive plan has a feature providing that the plan pays out at target upon a change in control. In connection with the contemplated merger with Allied, the Compensation Committee determined that the merger constituted a change of control for purposes of the plan. As a result, upon the close of our merger, all annual incentives to our executives were paid at target. Had we not paid at target due to the merger, we would have paid annual incentives that were based upon actual results. Payments for the 2008 annual incentive are reflected in the Summary Compensation Table in the column titled Non-Equity Incentive Plan Compensation. These annual incentive payments to the named executive officers averaged 97% of salary. Mr. Slager became an employee of Republic upon the close of the merger between Republic and Allied and therefore was not a participant in the Republic 2008 annual incentive as described above. Mr. Slager participated in the 2008 Allied Waste Senior Management Incentive Plan and was paid an annual incentive by Allied in November 2008 of $1,301,000.

 

For 2009, the Compensation Committee changed the target payouts as a percentage of salary to reflect the greater responsibilities each of the executives will have as the result of the merger. The 2009 percentages are as follows, assuming approval by the stockholders at the Annual Meeting of the Executive Incentive Plan as amended and restated:

 

 

For 2009, in the event our free cash flow target and our earnings per share target are both met but not exceeded, the percentage of the Annual Incentive Target Payout amount to each named executive officer will be calculated as a percentage of his salary as set forth above. One-half of the targeted payout amount will be attributable to free cash flow and one-half to earnings per share. For 2009, the definition of free cash flow is changed to exclude working capital, proceeds from fixed asset sales, and cash received or paid in connection with legacy Allied tax disputes. If our free cash flow target is met or exceeded, and our earnings per share target is exceeded, the targeted payout amount to each named executive officer will increase. That increase will be approximately 6.7% of the targeted payout amount for each $.01 by which we exceed our earnings per share target, up to a maximum of $.15 per share, resulting in a possible maximum payout equal to 200% of the targeted payout amount calculated pursuant to the table above. There will be no increase in the targeted payout amount to the named executive officers in the event our free cash flow target is met or exceeded, but our earnings per share target is not exceeded. In the event we do not meet, but achieve approximately 87% of, our free cash flow or our earnings per share targets, there will be a payment to participants of 25% of the targeted payment amount attributable to either free cash flow or earnings per share, as applicable. For increases in either free cash flow or earnings per share above the 87% threshold but below the targeted amount, results will be interpolated and annual incentive compensation will be paid to participants on a ratable basis between 25% of the targeted payment amount and the targeted payment amount.

 

Messrs. Cordesman and Barclay left the company as part of the merger and therefore are not participants in the 2009 annual incentive as described above.

Long-Term Incentive Compensation. For 2008, long-term incentive compensation included a mix of a long-term cash incentive, restricted stock and stock options. Following the merger, the Compensation Committee determined that the appropriate mix of long-term awards for our named executive officers following the merger would be 40 percent restricted stock, 40 percent stock options and 20 percent long-term cash incentives.

 

Long-Term Cash Incentive Compensation. Similar to annual incentive payments, long-term cash incentive payments are based on achieving pre-established performance goals which are set under our Executive Incentive Plan.

 

Long-term cash incentive awards are based on three-year rolling periods of three calendar years each. A new performance period begins on January 1 of each year, and payouts with respect to each performance period are scheduled to occur following the end of the applicable three-year period. The payouts of the long-term awards are based upon achieving pre-determined levels of (a) cash flow value creation, which we define as net income plus after-tax interest expense plus depreciation, depletion, amortization and accretion less capital charges (net average assets multiplied by our weighted average cost of capital), and (b) return on invested capital, both of which are approved by the Compensation Committee at the beginning of each three-year performance cycle. We believe that our stockholders are primarily concerned with our ability to generate free cash flow and provide them with a reasonable return on their investment. As such, we also believe that using these variables serves to closely align management’s interests with our stockholders’ interests. In addition, we believe that these variables tie long-term incentive compensation more directly to actual performance of the company and its officers rather than measures based upon the vagaries of the stock market.

 

The Compensation Committee, with the advice of its initial compensation consultant, established targeted levels of cash flow value creation and return on invested capital for our initial performance period of 2001 to 2003. These targets were the same for all participants in the plan and have been revised upward since that time for each subsequent performance period based on our actual performance, as well as business and financial projections of our future performance. Additionally, also with the advice of its initial compensation consultant, the Compensation Committee established dollar-based long-term incentive compensation payout targets for our initial performance period of 2001 to 2003. Since then, the Compensation Committee has generally increased these payout targets in the range of 5% to 10% per performance period. In the event the cash flow value creation or return on invested capital targets are exceeded during any performance period, the payout to named executive officers and other participants can be increased upward to a maximum of 150% of the targeted payout amount. On an annual basis, both the proposed targets for cash flow value creation and return on invested capital and the proposed payout targets to participants have been reviewed by the compensation consulting firm then engaged by the Compensation Committee. Since 2004, the consulting firm conducting this review has been Pearl Meyer & Partners.

 

During 2008, the long-term incentive payout targets for the 2008 to 2010 performance period were established and are reflected in the Grants of Plan-Based Awards table. For the 2008 to 2010 performance period, targeted cash flow value creation was $1,480 million and targeted return on invested capital was 14.8%. This plan had a feature that provided for a payout at target upon a change in control. The merger with Allied was deemed a change in control for this plan and all awards were paid at target in December 2008. Also during 2008, the long-term incentive payouts for the 2006 to 2008 and 2007 to 2009 performance periods were paid at target as a result of the same change in control provision described above. The amounts of long-term incentive compensation paid to the named executive officers for the 2006 to 2008, 2007 to 2009, and 2008 to 2010 performance periods are reflected in the Summary Compensation Table in the column titled Non-Equity Incentive Plan Compensation. These long-term incentive plan payments to named executive officers averaged 246% of salary and, when combined with annual incentive payments, averaged 343% of salary.

 

In 2009, the Compensation Committee established the long-term incentive payout targets for the 2009 to 2011 performance period, based on targeted cash flow value creation (“CFVC”) and return on invested capital (“ROIC”) over the period, and subject to approval of the Executive Incentive Plan as amended and restated at the Annual Meeting. In the event our CVFC and ROIC targets are both met but not exceeded, the target awards payable in 2012 under this plan to Messrs. O’Connor, Slager, and Holmes will be $1,250,000, $650,000, and $500,000, respectively. If our CVFC and ROIC each exceed their target by 15% or more, then the awards will be a maximum of 150% of the amounts stated in the preceding sentence. If we achieve CVFC and ROIC at the threshold of 85% of target, awards will be 50% of the target awards stated above. Results between threshold and target, and results between target and maximum, will be interpolated. Each of the two measures, CVFC and ROIC, is weighted equally. If neither threshold is reached, no award will be paid under this 2009 to 2011 Long-Term Incentive Plan.

 

Synergy Incentive Plan. In our proxy statement for the November 14, 2008 Special Meeting of Stockholders, we announced our plan to implement integration bonuses to motivate and reward management for cost savings initiatives to be realized by combining the operations and administrative functions of Allied and Republic. In that proxy statement, the Compensation Committee stated that it would seek approval of the plan, which is called the Synergy Incentive Plan, at the 2009 Annual Meeting. The Synergy Incentive Plan will be implemented under the authority of the Executive

Incentive Plan, as we have proposed to be amended by our stockholders. See “Proposal 3: Approval of the Republic Services, Inc. Executive Incentive Plan (as amended and restated effective as of March 12, 2009).”

 

The Synergy Incentive Plan would provide a cash bonus for the achievement of measurable annual integration cost savings of between $100 million and $150 million. The implementation period for specific actions designed to achieve these savings is the fiscal years 2009 and 2010. The savings to be rewarded will be measured during the fiscal year 2011. The Company has worked with Deloitte Consulting LLC to develop: 1) a list of specific actions that will be implemented; 2) a rigorous process for tracking and measuring the cost savings and the cost to implement; and 3) a reporting process for management and the Board of Directors. An Integration Committee of the Board of Directors (as described under the section entitled “Board of Directors and Corporate Governance Matters — Integration Committee”) has been created to oversee the implementation of the cost savings initiatives. Management will report at least quarterly to the Integration Committee on specific progress on the implementation of these actions and the realization of the associated savings. The Integration Committee will review and approve any proposed modifications to the overall integration plan on an ongoing basis. The Compensation Committee, in cooperation with the Integration Committee, will approve awards to be made upon completion of the measurement period.

 

Total awards that may be made under the Synergy Incentive Plan are potentially $69 million, of which $33 million may be made to Messrs. O’Connor, Slager and Holmes in the maximum amounts of $15 million, $10 million, and $8 million, respectively.

 

As is discussed in Proposal 3 “Employment Agreements — Waiver of Good Reason in Connection with the Implementation of the Synergy Incentive Plan,” to be eligible for an award under the Synergy Incentive Plan, each of Mr. O’Connor and Mr. Holmes must waive (or not exercise) his right to terminate his employment for good reason as a result of the relocation of the company’s headquarters to Arizona after the merger with Allied. Under his current employment agreement, and based upon rights Mr. O’Connor had under his prior employment agreement, Mr. O’Connor may elect such a termination on or before the seventh day after the Annual Meeting. If Mr. O’Connor had terminated his employment on December 31, 2008, he would have received a cash severance payment of approximately $21.2 million (plus a gross-up for excise taxes arising as a result of the merger). If Mr. Holmes does not sign a new employment agreement, he will not be eligible to participate in the Synergy Incentive Plan. Under the terms of Mr. Holmes’ current employment agreement, if he terminates his employment for good reason within two years of the Merger he will be entitled to receive severance benefits. If Mr. Holmes had terminated his employment on December 31, 2008, he would have received a cash severance payment of approximately $10.1 million (plus a gross-up for excise taxes arising as a result of the merger). See details regarding the contract provisions in the “Employment Agreements and Post-Employment Compensation” section of this proxy statement. These cash payments could significantly exceed the compensation Messrs. O’Connor and Holmes would receive for continued employment, particularly if the Executive Incentive Plan (and thereby the Synergy Incentive Plan) is not approved by stockholders. Accordingly, there can be no assurance that Messrs. O’Connor and Holmes will not elect to terminate their employment.

 

See Proposal 3 “New Plan Information — Synergy Incentive Plan” for additional information regarding this plan.

 

Equity Compensation. For a period of time following our initial public offering in 1998, grants of stock options were made to a significant portion of our employees, including our named executive officers. As our compensation programs evolved and we implemented our long-term incentive compensation program in 2001, we reduced both the number of employees eligible to receive options and also the number of options granted to those employees, including our named executive officers. The reduction in options granted affected all participants and reflected the Compensation Committee’s belief that the addition of new compensation programs should not simply be layered on and added to existing programs.

 

In determining equity award policies for our named executive officers following the merger, the Compensation Committee determined that it would be appropriate to continue restricted stock grants, as they align the interests of our executives with our stockholders who invested in our Company prior to the merger. Restricted stock encourages both the preservation of value already generated and growth in future value of the company. Stock options align the interests of our executives with new stockholders whose basis in our stock is at current share price and for whom growth in value from this point forward is of critical interest. As mentioned above, the appropriate mix of long-term incentive payments following the merger was deemed to be 40 percent restricted stock, 40 percent stock options and 20 percent long-term cash incentives. The first equity grants awarded according to this mix were made in December 2008, immediately following the merger, in order to provide immediate equity incentive to the new, combined senior management team.

 

Historically, equity grants were made at the first Compensation Committee meeting of each calendar year, when the Compensation Committee would approve a model that served as the template upon which equity compensation was granted to eligible employees by position, including named executive officers. Following this approval, equity compensation awards (stock options, shares of restricted stock, restricted stock units or deferred stock units) were granted

to recipients the day after the trading day in which we publicly announced financial performance for the prior year and provided financial goals for the upcoming fiscal year.

 

Following the annual equity-based compensation grant process discussed above, additional equity awards were issued to certain new employees when hired, or to current employees when promoted, into positions that were eligible for equity awards. In this case, the new or promoted employee received an equity award in an amount consistent with the model previously approved by the Compensation Committee.

 

Following the close of the merger, in December 2008 equity grants were awarded outside of our normal policy as described above. The December grant was made under the 2007 Stock Incentive Plan which prices the award as of the close of business on the date of grant.

 

We believe that equity awards offer significant motivation to our officers and other employees and serve to align their interests with those of our stockholders. While the Compensation Committee will continually evaluate the use of equity compensation types and amounts, it intends to continue to use such awards as part of the company’s overall compensation program.

 

Prior to the merger in 2008, Messrs. O’Connor, Cordesman, Holmes and Barclay received restricted stock grants equal to 52,875, 34,875, 34,125 and 34,125 shares, respectively. The shares of restricted stock were scheduled to vest in increments of 25% per year over a four year period beginning on the first anniversary date of the grant. As the result of the merger between Republic and Allied, these shares all vested on December 5, 2008. Prior to the merger in 2008, Mr. O’Connor also received a restricted stock grant equal to a maximum of 30,000 shares, the vesting of which was directly proportional to an achievement of our 2008 net income goal of $325.6 million, and provided further that Mr. O’Connor continue his employment with us through December 31, 2009. These shares also became vested as a result of the close of the merger on December 5, 2008.

 

After the merger in 2008, Messrs O’Connor, Slager and Holmes received a grant of both options and restricted stock. Messrs. O’Connor, Slager and Holmes received restricted stock grants equal to 106,383, 55,319 and 42,553 shares, respectively. Messrs. O’Connor, Slager and Holmes received options to purchase 237,640, 123,570 and 95,060 shares of Republic common stock, respectively. All of these awards vest in increments of 25% per year over a four year period beginning on the first anniversary date of the grant.

 

We maintain stock ownership guidelines for our executive officers. The current stock ownership guidelines for these individuals are equal to three times their salary. Each of the named executive officers satisfies these guidelines.

 

Other Benefits and Perquisites. Our executive compensation program includes other benefits and perquisites as more fully reflected on the table titled All Other Compensation. These benefits and perquisites are reviewed annually by the Compensation Committee with respect to amounts and appropriateness. For 2008, the benefits and perquisites to named executive officers fall into five general categories: (a) matching contributions by us to 401(k) and deferred compensation accounts, (b) retirement contributions to deferred compensation accounts, (c) value attributable to life insurance we afford our named executive officers beyond that which is offered to our employee population generally, and (d) dividends received on common stock. In addition, Mr. O’Connor has access to our airplane for personal use.

 

Matching Contributions. For all of our employees, including our named executive officers, we match a portion of contributions made by them into our 401(k) Plan. This match equals 100% of the first three percent of pay contributed and 50% of the next two percent of pay contributed by an employee. In addition, because each of our named executive officers are limited by federal law as to the amount they are permitted to contribute to our 401(k) (which in 2008 was generally limited to $15,500 per year), we have established a Deferred Compensation Plan that permits them to defer additional amounts of their compensation to better provide for their retirement. Under the Deferred Compensation Plan, some participants are also eligible for matching contributions. The matching contribution under the Deferred Compensation Plan is equal to the lesser of two percent of the participant’s plan compensation over established 401(k) limits or 50% of the amount the participant has deferred.

 

Retirement Contributions. During 2005, we began making a retirement contribution to our senior executives’ deferred compensation accounts, including the accounts of our named executive officers. This contribution is reviewed annually, is discretionary on the part of the Compensation Committee, and may be deferred or discontinued at any time. The contribution amount is a fixed dollar amount and is dependent on the participant’s title and position in the organization. In determining the level of retirement contributions for participants, we began by conducting an actuarial analysis that established a benchmark against which any plan that was ultimately adopted could be compared. Following the establishment of this actuarial benchmark, we decided upon a reduced fixed dollar amount that has remained constant for participants over time. Retirement contribution amounts vest in one of four ways. First, the amounts vest upon an officer satisfying the age, service and, in certain instances, notice requirements necessary to

qualify for retirement. Second, in the event of death or disability, the retirement contributions vest immediately. Third, in the event an officer’s employment is terminated “without cause,” the retirement contributions vest immediately but are not available to the officer until the fifth anniversary of the termination date. Fourth, in the event the company completes a transaction that is deemed a change in control, all retirement contributions vest immediately and may be paid out depending upon the original election of the participant. As a result of the merger between Republic and Allied, this change in control feature was triggered and all retirement contributions previously made to the named executive officers became vested and were distributed in 2008. No contributions have been made in 2009 for any of the named executive officers. The company is in the process of negotiating a new agreement with Mr. Holmes which may provide for a contribution to his deferred compensation account in 2009. Per his employment agreement dated February 2009, Mr. O’Connor will be credited $2,250,000 in his deferred compensation account on January 1, 2010. This amount will be immediately vested on the grant date and he will be paid the amount in accordance with the terms of the plan.

 

Supplemental Life Insurance. We provide life insurance equal to one times salary for all of our full-time, non-probationary employees. Under their employment agreements, however, we provide life insurance equal to two times salary for Messrs. O’Connor and Holmes. This benefit was also provided to Messrs. Cordesman and Barclay prior to their termination of service with the company. Historically, proceeds under these life insurance policies were used to mitigate any payment made by us to the estate of our named executive officers under their respective employment agreements. Under the terms of his amended and restated employment agreement signed February 2009, the proceeds under Mr. O’Connor’s life insurance policies are no longer used to mitigate any payments under the terms of his agreement. The proceeds would be additional payments made to his estate or other designated beneficiary. The company is in the process of negotiating a new agreement with Mr. Holmes.

 

Dividends. As previously discussed, Messrs. O’Connor, Slager, and Holmes receive grants of restricted stock and Messrs. Cordesman and Barclay received grants of restricted stock prior to their termination of service with the company. Following the date that the restricted stock is granted to them, any dividends we declare on these shares of common stock are received by them. Because we grant these shares to align these individuals’ interests with those of our stockholders, which includes the economic rewards and risks attendant with share ownership, we believe that permitting the officers to receive dividends on shares not yet vested is appropriate.

 

Airplane Use. In addition to the foregoing benefits and perquisites, Mr. O’Connor is permitted to use our airplane for personal travel. The amount reflected in the All Other Compensation table as “Aircraft Usage” represents the incremental cost of providing our aircraft to Mr. O’Connor for personal travel. This valuation is in accordance with Securities and Exchange Commission guidance and differs from the valuation under applicable tax guidance. At each quarterly meeting of our Compensation Committee, Mr. O’Connor’s personal use of our airplane for the immediately preceding calendar quarter is reviewed for reasonableness.

 

How Each Compensation Element Fits Into the Overall Compensation Objectives and Affects Decisions Regarding Other Elements

 

In establishing compensation packages for our named executive officers, numerous factors are considered including the particular executive’s experience, expertise and performance, the company’s overall performance, and compensation packages available in the marketplace for similar positions. As noted above, greater weight and emphasis is placed on forms of incentive compensation rather than salary.

 

When considering the marketplace, particular emphasis is placed upon compensation packages available at a targeted universe of peer group companies. The Compensation Committee has consistently worked to establish a meaningful set of peer group companies. We use this set of peer group companies as a reference only and do not target a specific percentile positioning for compensation amounts. During 2008, the Compensation Committee made no revisions to the peer group companies after having made substantial revisions in 2007. The peer group consists principally of direct competitors in the non-hazardous solid waste industry and companies involved in the transportation and logistics business. The peer group companies used for 2008 prior to the merger were: Allied Waste Industries, Inc., Arkansas Best Corporation, The Brinks Company, Cintas Corporation, Con-way, Inc., Ecolab Inc., J.B. Hunt Transport Services, Inc., Old Dominion Freight Line, Inc., Ryder System, Inc., Saia, Inc., U.S. Xpress Enterprises, Inc., Vulcan Materials, Inc., Waste Connections, Inc., Waste Management, Inc. and YRC Worldwide, Inc.

 

As noted above, the Compensation Committee selects and works with independent compensation consulting firms to evaluate its executive compensation program in light of the marketplace to make sure the program is competitive.

 

In consultation with Pearl Meyer & Partners, the Compensation Committee revised our peer group in the fall of 2008 to reflect the new and significantly larger dimensions of our company, in terms of revenue and market capitalization,

following the merger. This analysis was performed to be used as part of the post-merger compensation planning that was done in the fall of 2008. The new peer group consists of the following companies:

 

 

The compensation programs of these companies were considered by the Compensation Committee in establishing the structure and levels of compensation to be established for our named executive officers following the merger.

 

Employment Agreements

 

The Company maintains employment agreements with its senior executives in order to clarify their employment rights and responsibilities and to impose certain post-employment limitations on their rights to compete with us or to solicit our customers or employees. The Compensation Committee determined that it would be appropriate to negotiate new agreements with the executives in order to: establish appropriate compensation opportunities for our new, larger and more complex company; clarify executive rights and responsibilities in the case of a future separation from service, while preserving for a limited time certain rights in case of termination following the merger; modify future termination rights and benefits; modify the definition of change in control for future transactions; and update certain termination benefits to comply with changes in federal tax rules since the earlier agreements were executed. The negotiation of the new agreements is an ongoing process and, as of the date of this proxy agreement, new agreements have been executed with Mr. O’Connor and Mr. Slager. The company is in the process of negotiating a new agreement with Mr. Holmes similar to that given to other senior executives. As discussed above, if Mr. Holmes does not sign a new agreement, he will not be eligible to participate in the Synergy Incentive Plan.

 

Mr. O’Connor. Mr. O’Connor entered into his employment agreement in October 2000, and it was amended in January 2003, October 2006 and February 2007. In February 2009, the entire agreement was amended and restated to be effective as of the merger. The term of Mr. O’Connor’s amended and restated agreement is for rolling three-year periods, such that there are always three years remaining in the employment period. Mr. O’Connor’s base salary for 2009 under the amended and restated agreement is $1,100,000 and his target annual incentive compensation is 130% of salary, with a range of 0% to 260% of salary. In addition, Mr. O’Connor’s amended and restated agreement provides that the company will credit $2,250,000 to Mr. O’Connor’s deferred compensation account on January 1, 2010 (provided that he is employed on that date). Upon entering into his new agreement, Mr. O’Connor waived any existing right he had to terminate his employment for good reason at that time other than due to his relocation which, as discussed above, will continue to apply until seven days have passed from the Annual Meeting.

 

Mr. Slager. Mr. Slager entered into his employment agreement in January 2009 to be effective as of the effective time of the merger with Allied. The term of Mr. Slager’s agreement is for rolling two-year periods, such that there are always two years remaining in the employment period. Mr. Slager’s base salary for 2009 under the agreement is $875,000 and his target annual incentive compensation is 120% of salary, with a range of 0% to 240% of salary. Pursuant to the terms of his agreement, Mr. Slager received shares of restricted stock with a value of $1,000,000 upon execution of the

agreement, which will vest three years thereafter, provided that Mr. Slager is employed by the company on such date (or as otherwise provided in the agreement).

 

Further detail of these agreements is provided under the heading “Employment Agreements and Post-Employment Compensation.”

 

Deductibility of Executive Compensation

 

Our compensation programs are structured to support organization goals and priorities and stockholder interests. Section 162(m) of the Internal Revenue Code currently limits the deductibility for federal income tax purposes of compensation in excess of $1.0 million paid to each of any publicly held corporation’s chief executive officer and three other most highly compensated executive officers (excluding the chief financial officer). We may deduct certain types of compensation paid to any of these individuals only to the extent that such compensation during any fiscal year does not exceed $1.0 million. Qualifying performance-based compensation is not subject to the deduction limits if certain requirements are met. We do not have a policy that requires all of our compensation to be deductible for purposes of Section 162(m). We consider accounting treatment when making compensation determinations, but it is not fully determinative.

 

The options we grant to our executive officers are intended to qualify as performance-based compensation that is not subject to deduction limits. The restricted stock we grant to our executive officers does not so qualify because it vests over time rather than based on performance. The annual incentive compensation and long-term cash incentive compensation paid by us under the Executive Incentive Plan in connection with the merger with Allied did not qualify as performance-based compensation. We are submitting the Executive Incentive Plan, as amended and restated, to stockholders for approval at the Annual Meeting. Assuming it is approved, future payments under that plan, including annual, long-term and synergy payments, are intended to qualify as performance-based compensation that complies with Section 162(m).

 

Compensation Committee Interlocks and Insider Participation

 

Messrs. Wickham, Croghan, Nutter, Sorensen, and Rodriguez served as members of the Compensation Committee during 2008 prior to the merger with Allied. Messrs. Wickham, Sorensen, Rodriguez, Foley and Lehmann served as members of the Compensation Committee during 2008 after the merger with Allied. No member of the Compensation Committee was an officer or employee of our company during the prior year or was formerly an officer of our company. During the year ended December 31, 2008, none of our executive officers served on the Compensation Committee or board of any other entity, any of whose directors or executive officers served either on our Board of Directors or on our Compensation Committee.

 

Compensation Committee Report

 

The following statement made by the Compensation Committee shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under either of these acts.

 

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K.

 

Based on the review and discussions referred to in the paragraph immediately above, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement on Schedule 14A.

 

 

Submitted by the Compensation Committee:

 

Michael W. Wickham, Chairperson

David I. Foley

Nolan Lehmann

Ramon A. Rodriguez

Allan C. Sorensen

Summary Compensation Table

 

The following table sets forth compensation information regarding a) our Chief Executive Officer in 2008, b) our Chief Financial Officer in 2008, c) two executives who were no longer serving as executive officers as of December 31, 2008 (but who would have been included had their employment not terminated), and d) our other executive officer whose reportable compensation for 2008 was in excess of $100,000. We refer collectively to these five individuals as our named executive officers.

 

 

 

All Other Compensation

 

 

 

 

Grants of Plan-Based Awards in 2008

 

The following table sets forth information concerning each grant of an award made by us to a named executive officer during the year ended December 31, 2008 under our Executive Incentive Plan, 1998 Stock Incentive Plan and 2007 Stock Incentive Plan. Information regarding our awards under these plans is included in our Compensation Discussion and Analysis under the headings Annual Incentive Compensation, Long-Term Cash Incentive Compensation and Equity Compensation.

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth information concerning unexercised options and unvested restricted stock outstanding for each of our named executive officers at December 31, 2008: