| 10 | | Stericycle, Inc. - 2019 Proxy Statement10
STOCK OWNERSHIP Stock Ownership of Certain Stockholders Stock Ownership of Certain Stockholders The following table provides information about the beneficial ownership of our common stock by each person who was known to us to be the beneficial owner as of the record date (March 31, 2017)28, 2019) of more than 5% of our outstanding common stock: | | Name and Address of Beneficial Owner | | | Amount and Nature of
Beneficial Ownership | | | | Percent of
Class | | | Amount and Nature of
Beneficial Ownership | | | Percent of
Class | | The Vanguard Group, Inc.(1)
100 Vanguard Boulevard
Malvern, Pennsylvania 19355 | | | 7,843,149 | | | | 9.2 | % | | | 8,172,270 | | | | 9.02 | % | | T. Rowe Price Associates, Inc.(2)
100 E. Pratt Street
Baltimore, Maryland 21202 | | | 6,824,010 | | | | 8.0 | % | | | 9,181,105 | | | | 10.1 | % | | BlackRock, Inc.(3)
55 East 52ndStreet
New York, New York 10055 | | | 5,936,937 | | | | 6.9 | % | | | 7,616,828 | | | | 8.4 | % | | Baillie Gifford & Co.(4)
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
Scotland | | | | 5,393,108 | | | | 5.95 | % | |
| (1) | The shares shown as beneficially owned are derived from theBased on a Schedule 13G/A (Amendment No. 6) that The Vanguard Group, Inc. filed with the SEC on February 10, 2017. The Schedule 13G indicates that The11, 2019, the Vanguard Group Inc. hadhas sole voting power over 131,854with respect to 41,023 shares, shared voting power over 14,089with respect to 10,221 shares, sole dispositive power over 7,700,586with respect to 8,129,059 shares and shared dispositive power over 142,563with respect to 43,211 shares.
|
| (2) | The shares shown as beneficially owned are derived from theBased on a Schedule 13G that T. Rowe Price Associates, Inc.13G/A filed with the SEC on February 7, 2017. The Schedule 13G indicates that T.11, 2019, T Rowe Price Associates, Inc. hadhas sole voting power over 2,420,236with respect to 3,711,270 shares and sole dispositive power over 6,811,794with respect to 9,161,119 shares.
|
| (3) | The shares shown as beneficially owned are derived from theBased on a Schedule 13G/A (Amendment No. 3) that BlackRock, Inc. filed with the SEC on January 27, 2017. The Schedule 13G indicates that Blackrock,February 6, 2019, BlackRock, Inc. hadhas sole voting power over 5,231,205with respect to 7,204,157 shares, and sole dispositive power over 5,936,937with respect to 7,616,828 shares.
|
Stericycle, Inc. - 2017 Proxy Statement 11
| (4) | Based on a Schedule 13G filed with the SEC on February 8, 2019, Baillie Gifford & Co. has sole voting power with respect to 4,610,118 shares, and sole dispositive power with respect to 5,393,108 shares. |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 11 | |
ITEM 1 | Election of Directors |
ITEM 1 Election of Directors for aOne-Year Term Our Board is currently composed of 12thirteen directors. Mr. Alutto, Mr. Brown and Mr. Miller are not standing forre-election at the Annual Meeting. Therefore, effective as of the annual meeting of shareholders, our board of directors has fixed the size of the board at ten. With the exception of Mark C.Ms. Miller, our Chairman of the Board, and Charles A. Alutto, ourcurrent President and Chief Operating Officer and our Chief Executive Officer Elect, all of our directorsdirector nominees are outside directors (i.e., directors who are neither officersan officer nor employeesan employee of ours). Mr. Miller transitioned from the roleMurley, one of Executiveour independent directors, was elected as Chairman of the Board to Chairman of the Board immediately following our 2016 Annual Meeting of Stockholders. Although Mr. Miller is no longer an officer of the Company, he continues to be an employee of the Company and therefore is not an outside director.in March 2018. The Board has determined that all of our outside directors are independent under the applicable rules of the SEC and listing standards of the NASDAQNasdaq Global Select Market (“NASDAQ”Nasdaq”). Although all of the nominees proposed for election to our board of directors are currently members of our Board, Ms. Miller, Mr. Hackney, Ms. Hagen, Mr. Hooley and Ms. Priestly have not previously been elected by our stockholders. Ms. Miller was elected to our board in connection with her appointment as Chief Executive Officer. Mr. Hackney, Ms. Hagen, Mr. Hooley and Ms. Priestly were identified by the Nominating and Governance Committee as potential directors and were recommended by the Nominating and Governance Committee after it completed its interview and vetting process. Each director elected at the Annual Meeting will hold office until our 20182020 Annual Meeting of Stockholders or until his or her successor is duly elected and qualified. Voting in Uncontested Director Elections Under our bylaws, a nominee for election as a director must receive a majority of the votes cast in order to be elected as a director in an uncontested election (an election in which the number of nominees for election is the same as the number of directors to be elected). In other words, the nominee must receive more “for” votes than “against” votes, with abstentions and brokernon-votes not having any effect on the voting. If a nominee for election as a director is an incumbent director and the nominee is notre-elected, Delaware law provides that the director continues to serve as a “holdover” director until his successor is elected and qualified or until he resigns. Under our bylaws, an incumbent director who is notre-elected is required to tender his resignation as a director. Our Nominating and Governance Committee will review the circumstances and recommend to the Board whether to accept or reject the director’s resignation or take any other action. The Board is required to act on this recommendation and publicly disclose its decision and the rationale behind its decision within 90 days from the date that the election results are certified. Changes to OurBoard Refreshment
A number of changes have occurred in our Company’s Board of Directors over the past several years as part of our continuing efforts to ensure that our Board has the right skills and experience to best oversee management and the execution of our strategy and the associated risks. Since the beginning of 2017, Ms. Miller, Mr. Murley, Mr. Anderson, Mr. Hackney, Ms. Hagen, Mr. Hooley and Ms. Priestly have all joined the Board. Mr. Murley, Mr. Anderson and Ms. Priestly all bring substantial experience in finance, accounting and financial reporting. Ms. Priestly, Mr. Hackney, Ms. Hagen and Mr. Hooley each have broad experience in business transformation. In addition, since the beginning of 2017, several long-tenured directors have stepped down from the Board. The average tenure of the independent nominees for election as a director is less than 3 years. Further, with respect to Board leadership succession, Mr. Murley was elected as independent Chairman of the Board in March 2018 and new Chairs of the Audit, Compensation and Nominating and Governance Committees were elected in 2016 and 2017. | | | | 12 | | Stericycle, Inc. - 2019 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Board Refreshment Messrs. Dammeyer and Hall will not be standing for re-election at the Annual Meeting. The Company thanks Messrs. Dammeyer and Hall for their many years of distinguished service to the Company. As previously disclosed Messrs. Anderson and Murley joined our Board in January 2017 and will be standing for election at the Annual Meeting. Messrs. Anderson and Murley were first identified as candidates for directors by certain membersA snapshot of our outside directors. Should all2019 director nominees be elected to the Board at the Annual Meeting, the numberis set forth below.
Snapshot of directors constituting the Board will be decreased from 12 to 10 directors.2019 Director Nominees The nominees for Director are overwhelmingly independent. The nominees for Director also represent diverse points of view that contribute to a more effective decision-making process. | | | | | | | | | | | Board Independence | | Board Tenure | | Diversity of Director Nominees | | | | | | 10 Directors | | All Director nominees are independent except the CEO Elect | | Tenure of independent Director nominees (years of consecutive service) | | 60% | | Gender, ethnic or other minority representation | | | | | 
| | 2.5 years | | Average Tenure | |  | |  |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 13 | |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Nominees for Director Nominees for Director ROBERT S. MURLEY The following table provides information about the nominees for election as directors.
Director since January 2017 Age 69 Nominee | Position with the Company | Age | Mark C. Miller | Chairman of the Board of Directors | 61 | Jack W. Schuler | Lead Director | 76 | Charles A. Alutto | President, Chief Executive Officer, Director | 51 | Brian P. Anderson | Director | 66 | Lynn D. Bleil | Director | 53 | Thomas D. Brown | Director | 69 | Thomas F. Chen | Director | 67 | Experience:Robert S. Murley | Director | 67 | John Patience | Director | 69 | Mike S. Zafirovski | Director | 63 |
Stericycle, Inc. - 2017 Proxy Statement 12
MARK C. MILLER
Director Since May 1992
Age 61
Mark C. Miller has served as our Chairman since May 2016 and prior to that he was our Executive Chairman since January 2013. Mr. Miller has been a director since May 1992. He became our Chief Executive Officer in May 1992 and Chairman of the Board of Directors in August 2008, and served in each of those roles until January 2013. From May 1989 until joining us, Mr. Miller served as vice president for the Pacific, Asia and Africa in the international division of Abbott Laboratories, a diversified health care company, which he joined in 1976 and where he held a number of management and marketing positions. Mr. Miller serves as a director of Accelerate Diagnostics, Inc., a developer of automated diagnostics systems, and formerly served as a director of Ventana Medical Systems, Inc., a developer and supplier of automated diagnostic systems. He received a B.S. degree in computer science from Purdue University, where he graduated Phi Beta Kappa.
JACK W. SCHULER
Director Since January 1990
Age 76
Jack W. Schuler has served as the Lead Director of our Board of Directors since August 2008 and served as our Chairman of the Board from January 1990 until becoming Lead Director. From January 1987 to August 1989 he served as president and chief operating officer of Abbott Laboratories, where he also served as a director from April 1985 to August 1989. Mr. Schuler serves as a director of Quidel Corporation, a developer and manufacturer of point-of-care diagnostic tests, and Accelerate Diagnostics, Inc., a developer of automated diagnostics systems, and formerly served as chairman of the board of directors of Ventana Medical Systems, Inc., and as a director of Medtronic, Inc., Amgen Incorporated, Chiron Corporation, Elan Corporation, plc, Hansen Medical, Inc., and ICOS Corporation. He is a co-founder of Crabtree Partners LLC, a private investment firm in Lake Forest, Illinois, and is a former trustee of Carleton College. Mr. Schuler received a B.S. degree in mechanical engineering from Tufts University and an M.B.A. degree from the Stanford University Graduate School of Business Administration.
CHARLES A. ALUTTO
Director Since November 2012
Age 51
Charles A. Alutto has served as our President and Chief Executive Officer since January 2013 and as a director since November 2012. He joined us in May 1997 following our acquisition of the company where he was then employed. He became an executive officer in February 2011 and served as President, Stericycle USA. He previously held various management positions with us, including vice president and managing director of SRCL Europe and corporate vice president of our large quantity generator business unit. Mr. Alutto received a B.S. degree in finance from Providence College and an M.B.A. degree in finance from St. John’s University.
BRIAN P. ANDERSON
Director Since January 2017
Age 66
Brian P. Anderson has served as a director since January 2017. Mr. Anderson served Senior Vice-President and Chief Financial Officer of OfficeMax Incorporated from 2004 to 2005 and as Senior Vice President and Chief Financial Officer of Baxter International from 1997 to 2004. He joined Baxter in 1991, as Vice President, Corporate Audit, became Corporate Controller in 1993 and then Vice President, Finance in 1997. Before joining Baxter, he spent 15 years with Deloitte Consulting LLP in the Chicago office and the Washington, D.C. office as an Audit Partner. He is a member of the Board of Directors of W. W. Grainger, Inc., PulteGroup, Inc., James Hardie Industries plc, and The Nemours Foundation. He currently serves as Chairman of The Nemours Foundation, Chairman of the Audit Committees of James Hardie Industries plc and PulteGroup, and is the former Lead Director and Audit Committee Chairman of W. W. Grainger, Inc. Mr. Anderson was recently elected to The Governing Board of the Center for Audit Quality and served on the Board of A.M. Castle & Co. from 2005 to 2016, as Audit Committee Chairman (2005-2010) and Chairman of the Board 2010-2016.
LYNN D. BLEIL
Director Since May 2015
Age 53
Lynn D. Bleil has served as a director since May 2015. Ms. Bleil was the leader of the West Coast Healthcare Practice of McKinsey & Company, a management consulting firm. Ms. Bleil was also a leader of McKinsey’s worldwide Healthcare Practice. She retired in November 2013 as a Senior Partner (Director) in the Southern California Office of McKinsey. During her more than 25 years with McKinsey, she worked exclusively within the healthcare sector, advising senior management and boards of leading companies on corporate and business unit strategy, mergers and acquisitions and integration, marketing and sales, public policy and organization. Ms. Bleil also serves as a director of DST Systems, Inc., a financial and health services information technology company, Sonova Holdins AG, a global leader in hearing aids and cochlear implants, and Intermountain Healthcare’s Park City Medical Center, a non-profit healthcare organization. Ms. Bleil holds a B.S.E. degree in Chemical Engineering from Princeton University and an M.B.A. degree from the Stanford Graduate School of Business.
THOMAS D. BROWN
Director Since May 2008
Age 69
Thomas D. Brown has served as a director since May 2008. From 1974 until his retirement in 2002, Mr. Brown held various sales, marketing and management positions at Abbott Laboratories, where he served as a senior vice president and president of the diagnostics division from 1998 to 2002 and as corporate vice president for worldwide commercial operations from 1993 to 1998. He is a director of Quidel Corporation and Accelerate Diagnostics, Inc., and formerly served as a director of Ventana Medical Systems, Inc. and Cepheid Inc. Mr. Brown received a B.A. degree from the State University of New York at Buffalo.
Stericycle, Inc. - 2017 Proxy Statement 13
THOMAS F. CHEN
Director Since May 2014
Age 67
Thomas F. Chen has served as a director since May 2014. Mr. Chen served as senior vice president and president of international nutrition of Abbott Laboratories before retiring in 2010. During his 22-year career at Abbott, Mr. Chen served in a number of roles with expanded responsibilities, primarily in Pacific/Asia/Africa where he oversaw expansion into a number of emerging markets. Prior to Abbott, he held several management positions at American Cyanamid Company, which later merged with Pfizer. He is a director of Baxter International Inc. and formerly served as a director of Cyanotech Corporation. Mr. Chen received a Bachelor’s degree in International Business from National Cheng Chi University in Taipei, Taiwan, and an M.B.A. degree from Indiana University.
ROBERT S. MURLEY
Director Since January 2017
Age 67
Robert S. Murley has served as a director since January 2017.March 2018. Mr. Murley is a Senior Adviser to Credit Suisse, LLC, a financial services company. From 1975 to April 2012, Mr. Murley was employed by Credit Suisse, LLC and its predecessors. In 2005, he was appointed Chairman of Investment Banking in the Americas. Prior to that time, Mr. Murley headed the Global Industrial and Services Group within the Investment Banking Division, as well as the Chicago investment banking office. He was named a Managing Director in 1984 and appointed a Vice Chairman in 1998. Mr. Murley is a member of the board of directors of Health Insurance Innovations Inc., of privately held Brown Advisory Incorporated, and of the board of advisors of Harbour Group. He was formerly on the board of directors of Stone Energy Corporation and Apollo Education Group, Inc. Mr. Murley is an Emeritus Charter Trustee of Princeton University, a Trustee and the former Chairman of the Board of the Educational Testing Service in Princeton, New Jersey, is Vice Chairman of the Board of the Ann & Robert Lurie Children’s Hospital of Chicago and Chair of the Board of the Lurie Children’s Foundation, is a Trustee of the Museum of Science & Industry in Chicago, Illinois, is Chairman of the Board of the UCLA Anderson Board of Advisors.
Skills & Qualifications: Mr. Murley holdsMurley’s existing public company board experience, his deep knowledge of the capital markets and the economy, and his extensive experience leading and advising a Bachelorrange of Arts from Princeton University,businesses across multiple industries make him a Mastervaluable member of Business Administration from the UCLA Anderson School of Management, and a Master of Science from the London School of Economics and Political Science.Board. CINDY J. MILLER JOHN PATIENCE
Director since February 2019 Age 56 Experience: Ms. Miller joined Stericycle as President and Chief Operating Officer in October 2018. She was named President and Chief Executive Officer effective May 2019. Ms. Miller previously served as President, Global Freight Forwarding for United Parcel Service (UPS) from April 2016 to September 2018 and as President of UPS’s European region from March 2013 to March 2016. Skills & Qualifications: Ms. Miller brings to the Board deep knowledge and experience in business transformation and change management, operations management, strategy, logistics, and international business. BRIAN P. ANDERSON 
Director since January 2017 Age 68 Experience: Mr. Anderson served as Senior Vice-President and Chief Financial Officer of OfficeMax Incorporated from 2004 to 2005 and as Senior Vice President and Chief Financial Officer of Baxter International from 1997 to 2004. He joined Baxter in 1991, as Vice President, Corporate Audit, became Corporate Controller in 1993 and then Vice President, Finance in 1997. Before joining Baxter, he spent 15 years with Deloitte in the Chicago office and the Washington, D.C. office as an Audit Partner. He is a member of the Board of Directors of W. W. Grainger, Inc., PulteGroup, Inc., and James Hardie Industries plc. He currently serves as Chairman of the Audit Committee of James Hardie Industries plc, and is the former Chairman of the Nemours Foundation, Chairman of the Audit Committee of the Pulte Group and Lead Director and Audit Committee Chairman of W. W. Grainger, Inc. Mr. Anderson serves on The Governing Board of the Center for Audit Quality and served on the Board of A.M. Castle & Co. from 2005 to 2016, as Audit Committee Chairman (2005-2010) and Chairman of the Board 2010-2016. Skills & Qualifications: Mr. Anderson brings to our Board his significant experience as a chief financial officer of two large multinational companies,in-depth knowledge with respect to the preparation and review of complex financial reporting statements, and experience in risk management and risk assessment. LYNN D. BLEIL 
Director Since May 2015 Age 55 Experience: Ms. Bleil was the leader of the West Coast Healthcare Practice of McKinsey & Company, a management consulting firm. Ms. Bleil was also a leader of McKinsey’s worldwide Healthcare Practice. She retired in November 2013 as a Senior Partner (Director) in the Southern California Office of McKinsey. During her more than 25 years with McKinsey, she worked exclusively within the healthcare sector, advising senior management and boards of leading companies on corporate and business unit strategy, mergers and acquisitions and integration, marketing and sales, public policy and organization. Ms. Bleil also serves as a director of Amicus Therapeutics Inc., a biotechnology company, Alcon AG, Sonova Holdings AG, a global leader in hearing aids and cochlear implants, and Intermountain Healthcare’s Park City Medical Center, anon-profit healthcare organization. She was formerly a director of DST Systems, Inc. Skills & Qualifications: Ms. Bleil brings to the Board significant experience in the healthcare industry, as well as commercial expertise and expertise in corporate strategy, mergers and acquisitions, and financial reporting, compliance and risk management. | | | | 14 | | Stericycle, Inc. - 2019 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Nominees for Director THOMAS F. CHEN 
Director Since May 2014 Age 69 Experience: Mr. Chen served as senior vice president and president of international nutrition of Abbott Laboratories before retiring in 2010. During his22-year career at Abbott, Mr. Chen served in a number of roles with expanding responsibilities, primarily in Pacific/Asia/Africa where he oversaw expansion into emerging markets. Prior to Abbott, he held several management positions at American Cyanamid Company, which later merged with Pfizer, Inc. Mr. Chen currently serves as a director of Baxter International Inc. and an advisor to Cooperation Fund, a partnership between Goldman Sachs and the sovereign fund, China Investment Corporation, to bolster U.S. manufacturers’ market presence in China. Mr. Chen previously served as a director of Cyanotech Corporation. Skills & Qualifications: With his extensive international business experience in pharmaceutical, hospital products and nutritionals through his22-year career at Abbott, Mr. Chen provides our Board with a distinct global perspective resulting from his experience with diverse geographies and healthcare products. He also provides our Board with significant operational, strategy, mergers and acquisitions, healthcare industry, governmental and regulatory, and commercial expertise. J. JOEL HACKNEY, JR. 
Director Since March 19892019 Age 6949 John PatienceExperience: Mr. Hackney has served as a director since our incorporation in March 1989. He is a co-founder and partner of Crabtree Partners LLC, a private investment firm in Lake Forest, Illinois, which was formed in June 1995. He is currentlybeen the chairman of the boardChief Executive Officer and a director of Accelerate Diagnostics,nThrive, Inc., a developerrevenue cycle management company providing medical billing and coding, business analytics and advisory services, since January 2016. Previously, he was the Chief Executive Officer and a director of automated diagnostics systems.AVINTV from June 2013 to November 2016.
Skills & Qualifications: With more than 25 years of experience leading both private and public companies domestically and abroad, Mr. Hackney brings to our Board deep expertise in driving business transformation and profitable growth. VERONICA M. HAGEN 
Director Since June 2018 Age 73 Experience: From 2007 until her retirement in 2013, Ms. Hagen served as Chief Executive Officer of Polymer Group, Inc. and served from 2007 to 2015 as a Director. She also served as President of Polymer Group, Inc. from January 2011 until her retirement in 2013. Prior to joining Polymer Group, Inc., Ms. Hagen was the President and Chief Executive Officer of Sappi Fine Paper, a division of Sappi Limited. She has served as Vice President and Chief Customer Officer at Alcoa Inc. and owned and operated Metal Sales Associates. She is a Director of American Water Works Company, Inc., Newmont Mining Corporation and The Southern Company. Skills & Qualifications: Ms. Hagen brings business transformation expertise, senior leadership experience, corporate governance knowledge and experience, environmental matters experience and risk management experience. Ms. Hagen’s experience as chief executive officer of two global companies allows her to contribute key valuable insights to our Board regarding operations management, customer service and strategic planning. STEPHEN C. HOOLEY 
Director Since March 2019 Age 56 Experience: Mr. Hooley served as Chairman, Chief Executive Officer and President of DST Systems, Inc. from July 2014 to April 2018. He was Chief Executive Officer and President of DST Systems from September 2012 to July 2014 and President and Chief Operating Officer from July 2009 to September 2012. He was previously the President and Chief Executive Officer of Boston Financial Data Services. Skills & Qualifications: Mr. Hooley brings previous service as a public company chief executive officer and director, deep experience in the financial services and healthcare industries and extensive business transformation and strategy expertise. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 15 | |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Nominees for Director KAY G. PRIESTLY 
Director Since June 2018 Age 62 Experience:Ms. Priestly served as Chief Executive Officer of Turquoise Hill Resources Ltd. from May 2012 until her retirement in December 2014. She previously served as Chief Financial Officer of Rio Tinto Copper, a division of the Rio Tinto Group, from 2008 until her appointment as Chief Executive Officer of Turquoise Hill Resources in 2012. From 2006 to 2008, she was Vice President, Finance and Chief Financial Officer of Rio Tinto’s Kennecott Utah Copper operations. She previously spent over 24 years with global professional services firm Arthur Anderson, where she provided tax, consulting and M&A services to global companies across many industries. She is a director of TechnipFMC plc and formerly served as a director and vice chairman of the board of directors of Ventana Medical Systems,New Gold Inc., FMC Technologies, Inc. SouthGobi Resources Ltd., Turquoise Hill Resources and Stone Energy Corporation(1). Skills & Qualifications: Ms. Priestly brings to our Board extensive executive management experience as a public company prior to its being acquired in February 2008. From January 1988 to March 1995, he was a general partner in a venture capital firm which he co-foundedchief executive offer and which led our pre-IPO funding. He was previously a partner in thesenior officer of major organizations with international operations. She also brings substantial business transformation, accounting, financial, risk management, M&A and consulting firm of McKinsey & Company, specializing in health care. Mr. Patience received B.A. and LL.B. degrees from the University of Sydney in Sydney, Australia, and an M.B.A. degree from the Wharton School of Business of the University of Pennsylvania.expertise. | (1) | When the Board appointed Ms. Priestly as a director in June 2018, it was aware that Stone Energy Corporation had filed for bankruptcy protection in 2016 while Ms. Priestly was serving as a director. The Board concluded that this event did not impair Ms. Priestley’s ability to serve as one of our directors. |
MIKE S. ZAFIROVSKI MIKE S. ZAFIROVSKI
Director Since November 2012 Age 6365 Mike S. Zafirovski has served as a director since November 2012.Experience: Mr. Zafirovski is the founder and presidentPresident of The Zaf Group LLC, a management consulting and investment firm established in November 2012. Mr. Zafirovski has also served as an executive advisor to The Blackstone Group, a private investment banking company, since October 2011. From November 2005 to August 2009, Mr. Zafirovski served as the presidentPresident and chief executive officerChief Executive Officer and a director of Nortel Networks Corporation. Prior to that, he was the presidentPresident and chief operating officerChief Operating Officer and a director of Motorola, Inc. from July 2002 to January 2005, and remained a consultant to and a director of Motorola until May 2005. He served as executive vice presidentExecutive Vice President and presidentPresident of the personal communications sector of Motorola from June 2000 to July 2002. Prior to joining Motorola, Mr. Zafirovski spent nearly 25 years with General Electric Company, where he served in management positions, including 13 years as presidentPresident and chief executive officerChief Executive Officer of five businesses in the consumer, industrial and financial services areas, his most recent being presidentPresident and chief executive officerChief Executive Officer of GE Lighting from July 1999 to May 2000. Mr. Zafirovski also serves as a director of The Boeing Company and two private companies (ApriaApria Healthcare Group Inc.
Skills & Qualifications: Mr. Zafirovski provides guidance to the Board on a wide variety of strategic, operational and non-executive chairman of the board for DJO Global, Inc.).business matters based on his substantial experience leading enterprises with significant international operations. He received a B.A. degree in mathematics from Edinboro University in Pennsylvania.also provides business transformation, information technology, mergers and acquisitions, healthcare industry, and government and regulatory expertise. Stericycle, Inc.The Board of Directors recommends a vote “FOR” the election of these ten Director nominees. Proxies solicited by the Board will be so voted unless stockholders specify a different choice. - 2017 Proxy Statement 14
Director Qualifications We believe that our 10ten director nominees possess the experience, qualifications and skills that warrant their election as directors. Our directors have in common, among other qualities, a breadth of business experience, seasoned judgment and an insistence on looking beyond the next quarter or the next year in directing and supporting our management. From their service on the boards of other public and private companies, our directors also bring to us the insights that they gain from the operating policies, governance structures and growth dynamics of these other companies. The Nominating and Governance Committee seeks to ensure an experienced, exceptionally qualified Board with deep expertise in areas relevant to Stericycle. When evaluating Our directors individually bringpotential director nominees, the committee considers each individual’s professional expertise and background, in addition to his or her personal characteristics. The committee always conducts this evaluation in the context of the Board as a wide rangewhole. The committee works with the Board to determine the appropriate mix of experience, backgrounds and knowledge. Among other thingsexperiences that each ofwill foster and maintain a Board strong in its collective knowledge and best able to perpetuate our directors brings: Mr. Miller brings a wealth of knowledge of our industry; Mr. Schuler brings experience managinglong-term success. To assist in this objective, the operations of a multinational healthcare companyNominating and knowledgeGovernance Committee conducts annual evaluations of the dynamicsBoard and the Board’s committees, assessing the experience, skills, qualifications, diversity, and contributions of each individual and of the healthcare industry; Mr. Alutto bringsgroup as a whole.
| | | | 16 | | Stericycle, Inc. - 2019 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Director Qualifications The Nominating and Governance Committee regularly communicates with the Board to identify characteristics, professional experience and areas of expertise that will help meet specific Board needs, including: | • | | leadership experience, as directors who have served in significant leadership positions possess strong abilities to motivate and manage others and to identify and develop leadership qualities in others; |
| • | | business transformation experience, as we are engaged in a multi-year program to transform our company for long-term sustainability and drive profitable growth and long-term shareholder returns; |
| • | | public company board service and governance expertise, which provides directors with a solid understanding of their extensive and complex oversight responsibilities and |
| | furthers our goals of greater transparency, accountability for management and the Board and protection of stockholder interests; |
| • | | operational expertise, which gives directors specific insight into, and expertise that will foster active participation in the oversight of the development and implementation of our operating plan and business strategy; |
| • | | financial reporting,compliance and risk management expertise, which enables directors to analyze our financial statements, capital structure and complex financial transactions and oversee our accounting, financial reporting and enterprise risk management; and |
| • | | healthcare industry expertise, which is vital in understanding and reviewing our strategy. |
The following table highlights each nominee’s specific skills, knowledge and experiences in sales and marketing, operations, and general managementthese areas. A particular director may possess additional skills, knowledge or experience even though they are not indicated below: | | | | | | | | | | | | | | | | | | | | | | | | Anderson | | Bleil | | Chen | | Hackney | | Hagen | | Hooley | | Miller | | Murley | | Priestly | | Zafirovski | | | | | | | | | | | | Leadership experience (public company CEO/COO) | | | | | | | | ✓ | | ✓ | | ✓ | | ✓ | | | | ✓ | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Public company Board service/governance expertise | | ✓ | | ✓ | | ✓ | | | | ✓ | | ✓ | | | | ✓ | | ✓ | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Operational expertise (logistics/supply chain or capital intensive industry) | | | | | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | | | ✓ | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Business transformation/IT expertise | | | | | | | | ✓ | | ✓ | | ✓ | | ✓ | | | | ✓ | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Corporate strategy/M&A capability | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Financial reporting, compliance and risk management expertise | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | | | ✓ | | ✓ | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Healthcare industry expertise | | ✓ | | ✓ | | ✓ | | ✓ | | | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Government/regulatory experience | | | | | | ✓ | | | | | | ✓ | | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Talent management/HR expertise | | | | | | | | ✓ | | ✓ | | ✓ | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | | Commercial/go-to-market expertise | | | | ✓ | | ✓ | | ✓ | | | | | | ✓ | | | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | International business expertise | | ✓ | | | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | ✓ | | | | | | | | | | | | | | | | | | | | | | | Gender, ethnic or other diversity | | ✓ | | ✓ | | ✓ | | | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | | | | | | | | | | Tenure on Board (years, as of May 2019) | | 2 | | 4 | | 5 | | <1 | | 1 | | <1 | | <1 | | 2 | | 1 | | 7 |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 17 | |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Committees of our industry; Mr. Anderson brings financial experience from both healthcare and business products; Ms. Bleil brings significant expertise in the healthcare industry; Mr. Brown brings experience managing the operations of a multinational diagnostics business; Mr. Chen brings experience in managing and expanding the operations of a multinational nutrition business in Asia and emerging markets; Mr. Murley brings experience from the investment securities industry; Mr. Patience brings experience with public and private healthcare companies; and Mr. Zafirovski brings experience managing the operations of multinational communications and technology companies.Board When the Board elected Mr. Zafirovski as a director in November 2012, it was aware that Nortel Networks Corporation had filed for bankruptcy protection in January 2009 while Mr. Zafirovski was serving as its president and chief executive officer and a director. The Board concluded that this event did not impair Mr. Zafirovski’s ability to serve as one of the Company’s directors.
Committees of the Board Our Board of Directors has three standing committees: Compensation, Audit, and Nominating and Governance Committees. All of the members of each committee are outside directors who are independent under the applicable NASDAQSEC rules and Nasdaq listing standards. Compensation Committee The Compensation Committee makes recommendationsdetermines the structure, award and public disclosure of all elements of compensation and benefits paid to our CEO and other executive officers. The committee reviews and approves financial and strategic performance objectives with respect to our annual and long-term incentive plans. The committee reviews and approves the respective salaries of the Company’s executive officers in light of the Company’s goals and objectives relevant to each officer, including, as the committee deems appropriate, consideration of (i) the individual officer’s salary grade, scope of responsibilities and level of experience, (ii) the rate of inflation, (iii) the range of salary increases for the Company’s employees generally, and (iv) the salaries paid to comparable officers in comparable companies. The committee determines appropriate cash bonuses, if any, for the Company’s executive officers, after consideration of specific individual and Company performance goals and criteria and periodically reviews the aggregate amount of compensation and benefits being paid or potentially payable to the Board of Directors concerning the base salaries and cash bonuses of ourCompany’s executive officers and reviews our employee compensation policies generally.officers. The committee also administershas responsibility for overseeing the Company’s regulatory compliance with respect to compensation matters. Pursuant to the committee’s charter, the committee has responsibility for facilitating a risk review of incentive compensation programs and assessing if those incentives create risks that are reasonably likely to have a material adverse effect on our stock option plans as they apply to our executive officers. In addition,company. At the request of the Board, the committee periodically reviews executive leadership development and CEO succession planning and makes recommendations to our compensation practices to evaluate whether they pose enterprise or other risks to us.Board of Directors. Audit Committee The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the integrity of our financial statements, the qualifications and experience of our independent accountants, the performance of our internal audit function and our independent accountants, and our compliance with legal and regulatory requirements. The Audit Committee regularly reviews with the Company’s legal counsel any legal or regulatory matters that may have a material effect on the Company’s financial statements or operations. The Audit Committee also oversees, reviews and evaluates the adequacy and effectiveness of the Company’s compliance program. The Audit Committee reviews and evaluates the qualifications, performance and independence of our independent public accountants. The Audit Committee also reviews the performance, effectiveness and objectivity of the Company’s internal audit function, including its staffing, audit plan, examinations and related management responses. The Audit Committee reviews our risk management policies and practices and reports any significant issues to the Board. Matters of risk management are brought to the committee’s attention by our Executive Vice President and Chief Financial Officer, our Executive Vice President and General Counsel, our Executive Vice President and Chief Ethics and Compliance Officer, or by our principal internal auditor who focuses on potential weaknesses that could result in a failure of an internal control process.auditor. Our management reviews and reports on potential areas of risk at the committee’s request or at the request of other members of the Board. Nominating and Governance Committee The Nominating and Governance Committee develops, recommends to the Board and oversees the implementation of our corporate governance policies and practices. The committee monitors ongoing legislative and regulatory changes and initiatives pertaining to corporate governance principles, SEC disclosure rules and Nasdaq listing rules. The committee identifies and evaluates possible nominees for election to the Board of Directors and recommends to the Board a slate of nominees for election at the annual meeting of stockholders. The committee also recommends to the Board director assignments to the Board’s committees. In addition, As discussed above, the committee develops, recommends to the Board and oversees the implementation of our corporate governance policies and practices. The Nominating and Governance Committee considers a variety of factors in evaluating a candidate for selection as a nominee for election as a director. These factors include the candidate’s personal qualities, with a particular emphasis on probity, independence of judgment and analytical skills, and the candidate’s professional experience, educational background, knowledge of our business and healthcare services generally and experience serving on the boards of other public companies. In evaluating a
Stericycle, Inc. - 2017 Proxy Statement 15
candidate’s qualification for election to the Board, the committee also considers whether and how the candidate would contribute to | | | | 18 | | Stericycle, Inc. - 2019 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Committees of the Board the Board’s diversity, which we define broadly to include gender and ethnicity as well as background, experience and other individual qualities and attributes. The committee has not established any minimum qualifications that a candidate must possess. In determining whether to recommend an incumbent director forre-election, the committee also considers the director’s preparation for and participation in meetings of the Board of Directors and the committee or committees of the Board on which the director serves. In identifying potential candidates for selection in the future as nominees for election as directors, the Nominating and Governance Committee relies on suggestions and recommendations from the other directors, management, stockholders and others and, when appropriate, may retain a search firm for assistance. In February 2019, the Nominating and Governance Committee retained a leading third-party search firm to assist with identifying potential director nominees. The committee will consider candidates proposed by stockholders and will evaluate any candidate proposed by a stockholder on the same basis that it evaluates any other candidate. Any stockholder who wants to propose a candidate should submit a written recommendation to the committee indicating the candidate’s qualifications and other relevant biographical information and providing preliminary confirmation that the candidate would be willing to serve as a director. Any such recommendation should be addressed to the Board of Directors, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. In addition to recommending director candidates to the Nominating and Governance Committee, stockholders may also, pursuant to procedures established in our bylaws, directly nominate one or more director candidates to stand for election at an annual meeting of stockholders. A stockholder wishing to make such a nomination must deliver written notice of the nomination that satisfies the requirements set forth in our bylaws to the secretary of the Company not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting of stockholders. If, however, the date of the annual meeting is more than 30 days before or after the first anniversary, the stockholder’s notice must be received no more than 120 days prior to such annual meeting nor less than the later of (x) 90 days prior to such annual meeting and (y) the close of business on the 10thday following the date on which notice or public disclosure of the date of the meeting was first given or made. Stockholders may also submit director nominees to the Board to be included in our annual proxy statement, known as “proxy access.” Stockholders who intend to submit director nominees for inclusion in our proxy materials for the 20182020 Annual Meeting of Stockholders must comply with the requirements of proxy access as set forth in our bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the Company not less than 120 days nor more than 150 days prior to theone-year anniversary of the date that the Company first mailed its proxy materials for the annual meeting of the previous year. Process for Selecting Directors 
Committee Charters The charters of the Compensation, Audit and Nominating and Governance Committees are available on our investor relations website,http://investors.stericycle.com. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 19 | |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Committees of the Board Committee Members and Meetings The following table provides information about the current membership of the committees of the Board of Directors. | | | | | | | | | | | | | Director | | Compensation
Committee | | | CompensationAudit
Committee | Audit
Committee | | Nominating and
Governance
Committee | | Robert S. Murley(1) | | | | | | | | | | | | | Charles A. Alutto | | | | | | | | | | | | | Brian P. Anderson(2) | | | | | | | 
| | | | | | Lynn D. Bleil | | | 
| | | | | | | | 
| | Thomas D. Brown(3) | | |
| | | | | | | | 
| | Thomas F. Chen | | |
| | | | | | | |
| | J. Joel Hackney, Jr. | | | | | | | | | | |
| | Veronica M. Hagen | | | | | | |
| | | | | | Stephen C. Hooley | | |
| | | | | | | | | | Cindy J. Miller | | | | | | | | | | | | | Mark C. Miller | | | | | | | | | | | | | Kay G. Priestly(2) | | | | | | |
| | | | | | Mike S. Zafirovski(3) | | |
| | | | | Jack W. Schuler | | | | Charles A. Alutto |
| | | Brian P. Anderson(1) | |  * | | Lynn D. Bleil |  | |  | Thomas D. Brown | * | |  | Thomas F. Chen | | | | Rod F. Dammeyer(1) | | | | William K. Hall | | | | Robert S. Murley | | | | John Patience | | | | Mike S. Zafirovski | | | |
| Member |
| (1) | Mr. Murley serves as the independent Chairman of the Board. |
| (2) | The Board of Directors has determined that Mr. Anderson, the intended ChairmanChair of the Audit Committee, following the Annual Meeting, and Mr. Dammeyer, the current Chairman of the Audit Committee,Ms. Priestly are “audit committee financial experts” as defined in the applicable SEC rules. |
Stericycle, Inc. - 2017 Proxy Statement 16
| (3) | Mr. Brown is not standing forre-election at the Annual Meeting, and we expect that Mr. Zafirovski will succeed him as Chair of the Compensation Committee at that time. |
Our Board of Directors held four18 meetings in person or by telephone during 20162018 and acted without a formal meeting on a number ofseveral occasions by the unanimous written consent of the directors. The Audit Committee held 1715 meetings during the year. The Compensation Committee held 12six meetings during the year. The Nominating and Governance Committee held fivesix meetings during the year. Each director attended at least 80%75% or more of the aggregate of the total number of Board meetings and the total number of meetings of all Board committees on which he or she served during his or her term of service. We encourage our directors to attend the annual meeting of stockholders. With the exception of Mr. Anderson and Mr. Murley who were not yet appointed to the Board at the time, eachEach of the director nominees attended the 20162018 Annual Meeting of Stockholders, and we anticipate that all of our directorsdirector nominees will attend this year’s Annual Meeting. Lead DirectorBoard Leadership
Our bylaws requireCompany’s Board of Directors does not have a current requirement that the roles of Chief Executive Officer and Chairman of the Board be either combined or separated because the Board believes it is in the best interest of our Company to make this determination based upon the position and direction of the Company and the constitution of the Board and management team. The Board regularly evaluates whether the roles of Chief Executive Officer and Chairman of the board should be combined or separated. As part of the evolution of the Board of Directors, to appointin March 2018, Mr. Murley, one of our outsideindependent directors, as the Lead Director if and when our president and chief executive, or any other officer or employee, is serving as the Chairman of the Board. The Lead Director is required to be independent under the NASDAQ listing standards, and serves at the Board’s pleasure until the next election of directors by the stockholders. Although Mr. Miller is no longer an officer of the Company, he is not independent under the applicable NASDAQ listing standards and therefore Mr. Schuler has continued as our Lead Director. Working with thewas elected Chairman of the Board, succeeding Mr. Miller. Mr. Miller is not standing forre-election as a director at the Lead Director is responsible for coordinatingAnnual Meeting.
The Chairman confers with our CEO on matters of general policy affecting theday-to-day management of our company’s business. The Chairman coordinates the scheduling and agenda of Board meetings and the preparation and distribution of agenda materials. The Lead DirectorChairman presides whenat all meetings of the Board meets in executive session or in the absence of the Chairman of the BoardDirectors and may call special meetings of the Board when he considers it appropriate. In general, the Lead DirectorChairman oversees the scope, quality, and timeliness of the flow of | | | | 20 | | Stericycle, Inc. - 2019 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Board Leadership information from our management to the Board and serves as an independent point of contact for stockholders wishing to communicate with the Board other than through the Chairman of the Board. In August 2008, our Chairman of the Board, Jack W. Schuler, resigned as Chairman after serving for more than 18 years, and our Board appointed Mr. Schuler as our Lead Director, and he still serves in this position. Also in August 2008, the Board appointed our then President and Chief Executive Officer, Mark C. Miller, who had served in these positions for more than 16 years, to the additional position of Chairman of the Board. Effective January 2013, Charles A. Alutto became our President and Chief Executive Officer and Mr. Miller assumed the position of Executive Chairman of the Board, which he held until May 2016 when he transitioned in to the role of Chairman of the Board. At this time, theOur Board believes that thean independent Chairman together with the Lead Director, serveserves the Company well.and its stockholders well at this time. The combined experience and knowledge of Messrs. Alutto,Ms. Miller and SchulerMr. Murley in their respective roles of Chief Executive Officer,as CEO Elect and Chairman and Lead Director provide the Board and the Company with continuityaday-to-day focus on the operations of leadership that has enabled the Company’s successCompany combined with sufficient independent oversight of the Board throughand management. Ournon-management directors further facilitate the Board’s independence by meeting frequently as a group and fostering a climate of transparent communication. A high level of contact between our Lead Director.Chairman and Chief Executive Officer between Board meetings also serves to foster effective Board leadership.
Corporate Governance Executive Sessions of the Board Our Board of Directors excuses Mr. Alutto, our President and Chief Executive Officer, as well as any of our other executive officers who may be present by invitation, from a portion of each meeting of the Board in order to allow the Board, with our Lead Director Chairman presiding, to review Mr. Alutto’s performance as President andthe Chief Executive OfficerOfficer’s performance and to enable each director to raise any matter of interest or concern without the presence of management. Board Evaluation Our directors annually review the performance of the Board of Directors and its committees and the performance of their fellow directors by completing a confidential evaluation forms that areis returned to Mr. Schuler as the ChairmanChair of the Nominating and Governance Committee. The evaluations elicit input from our directors with respect to the Company’s vision, strategy, and operating performance, our CEO and senior management, and the composition and management of our Board and its committees. The evaluations also seek input from members of the Board committees in such areas as trends and issues affecting the Company, the roles and responsibilities of the committee members, the makeup and composition of the committees, participation and preparation of the committee members and the effectiveness of the committees. Each director also has the opportunity to provide confidential feedback on each other director. At a subsequent meeting of the Board, Mr. Schulerthe chair of the Nominating and Governance Committee leads a discussion with the full Board of any issues and suggestions for improvement identified in histhe review of these evaluation forms.the director evaluations. 
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 21 | |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Corporate Governance Policy on Related Party Transactions The Board of Directors has adopted a written policy requiring certain transactions with related parties to be approved in advance by the Audit Committee. For purposes of this policy, a related party includes any director, director nominee or executive officer or an immediate family member of any director, director nominee or executive officer. The transactions subject to review include any transaction, arrangement or relationship (or Stericycle, Inc. - 2017 Proxy Statement 17
any series of similar transactions, arrangements and relationships) in which (i) we or one of our subsidiaries will be a participant, (ii) the aggregate amount involved exceeds $100,000 and (iii) a related party will have a direct or indirect interest. In reviewing proposed transactions with related parties, the Audit Committee considers the benefits to us of the proposed transaction, the potential effect of the proposed transaction on the director’s independence (if the related party is a director), and the terms of the proposed transaction and whether those terms are comparable to the terms available to an unrelated third party or to employees generally. There were no such transactions since January 1, 2016during the year ended December 31, 2018 that required the Audit Committee’s approval. Succession Planning The strength of our leadership team is critical to our Company’s short and long-term success. As such, the recruitment, development and retention of talented executives and senior leaders is a priority for the Company and the Board. On an annual basis, the Board devotes time during a dedicated session to discuss talent management and succession planning. Lead by our Chief People Officer, this session includes an overview of senior leaders across the Company’s service lines, global markets, and functional shared services up to and including the executive officers of the company. The Board is also given exposure to emerging, high-potential leaders through formal presentations to the Board and working groups with Board committees. Beyond the annual succession planning session, the Board is routinely updated on workforce matters including key workforce indicators, team member engagement, recruiting programs, and talent development programs. During 2018, Stericycle announced the appointment of Ms. Miller as President and Chief Operating Officer. The Board was heavily engaged in the recruitment and selection process for this role and leveraged the appointment of a new Chief Operating Officer to build a succession plan for the Chief Executive Officer role. With the announcement of Mr. Alutto’s retirement in February 2019, Ms. Miller was named Chief Executive Officer, effective May 2, 2019. Shareholder Engagement During 2018 and under the oversight of our Chairman of the Board, Stericycle expanded its efforts for engaging with shareholders. In addition to our Company’s previous monitoring and routine shareholder engagement practices, we introduced a proactive Board outreach program which focused on building relationships with our top 25 shareholders. Our expanded engagement program included outreach during the spring of 2018 and again in the fall to gain a broader understanding of shareholder priorities. During these conversations, our Board members reviewed our corporate governance enhancements, the refreshment of our Board of Directors, annually reviewsour executive compensation philosophy and approvesprogram, and the expansion of the leadership team, which have all significantly evolved over the past three years. Additionally, we solicited feedback from shareholders on our succession planning forprogress and responded to their questions and concerns. The outreach program provided our Chief Executive Officer,Board with useful input from our other executive officersshareholders. Transparency and a numberresponsiveness is an important component of other officers.our governance commitment to shareholders. We expect to continue to expand our engagement practices in order to monitor the insights of our shareholders and proactively solicit ways to evolve our business. Risk Oversight The Board regularly devotes time during its meetings to review and discuss the most significant risks facing the Company, and management’s responses to those risks. During these discussions, the Chief Executive Officer, Chief Financial Officer, General Counsel and other members of senior management present management’s assessment of risks, a description of the most significant risks facing the Company and any mitigating factors and plans or practices in place to address and monitor those risks. In addition, the Board conducts an annual, in-depth review of the Company’s business, which includes detailed analysis and consideration of strategic, operational, financial, competitive, compliance and compensation risk areas. Each Board committee addresses relevant risk topics as part of its committee responsibilities. The committees oversee the Company’s risk profile and exposures relating to matters within the scope of their authority and provide periodic | | | | 22 | | Stericycle, Inc. - 2019 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Corporate Governance reports to the full Board about their deliberations and recommendations. The Audit Committee reviews with management significant risks and exposures identified by management, our internal audit staff or the independent accountants, and management’s steps to address these risks. The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and its overall compensation philosophy. Responsibility for risk management flows to individuals and entities throughout our Company as described above, including our Board, Board committees and senior management. We believe our culture has facilitated, and will continue to facilitate, effective risk management across the Company. Required Resignation on Change in Job Responsibilities The Board of Directors has adopted a policy that a director must tender his or her resignation if the director’s principal occupation or business association changes substantially from the position that he or she held when originally elected to the Board. The Nominating and Governance Committee will then review the circumstances of the director’s new position or retirement and recommend to the full Board whether to accept or reject the director’s resignation in light of the contributioncontributions that he or she can be expected to continue to make to the Board. Director Tenure In order to assist with Board refreshment and in bringing fresh ideas and perspectives to the Board, in March 2019, the Board revised our Corporate Governance Guidelines with respect to director tenure. The revised Guidelines generally provide that nonon-management Director may be nominated to serve a new term if he or she has already served on the Board for 15 years at the time of election. The Board of Directors may make exceptions to this policy on acase-by-case basis. Anti-Hedging and Anti-Pledging Policy Our directors, executive officers and other designated employees are prohibited from engaging in certain transactions inwith respect ofto our common stock including hedging transactions, derivative transactions and short sales. In addition, these personsexecutive officers and other designated employees are prohibited from holding our common stock in a margin account or otherwise pledging our common stock as collateral for a loan. In March 2019, our Board amended our policy to also prohibit our directors from holding our common stock in a margin account or otherwise pledging our common stock as collateral for a loan. Clawback Policy In order to encourage sound financial reporting and enhance individual accountability, we have adopted a clawback policy that allows us to recover from our executive officers certain performance-based compensation in the event of certain accounting restatements. If we are required to prepare a restatement of our financial statements due to material noncompliance with any financial reporting requirement under the securities laws, the Compensation Committee willmay seek to recover from a covered officer certain performance-based compensation if the covered officer is determined to have engaged in fraud or intentional misconduct that materially contributed to the need for the restatement or if otherwise required by applicable SEC or NASDAQNasdaq rules. 10b5-1 Trading Plan Guidelines In March 2019, our Board adopted guidelines with respect to trading plansStericycle, Inc.(“10b5-1 - 2017 Proxy Statement 18Plans”) adopted by employees or directors pursuant to Rule10b5-1 of the Securities Exchange Act of 1934, as amended (the“10b5-1 Plan Guidelines”). These10b5-1 Plan Guidelines are in addition to the requirements and conditions of applicable law and other Company policies, including our Securities Trading Policy. The10b5-1 Plan Guidelines require that10b5-1 Plans be approved by our General Counsel or his designee and that they only be adopted or amended while a trading blackout is not in effect. The10b5-1 Plan Guidelines provide for a “cooling off” period of at least 30 days before trades can occur after adoption or amendment of a10b5-1 Plan and before adoption of a new plan after early termination of an existing10b5-1 Plan. Our10b5-1 Plan Guidelines also set restrictions on the number of10b5-1 Plans a covered individual may have in effect, trading outside of an existing10b5-1 Plan and the length of time a plan may be in effect. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 23 | |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Corporate Governance Internal Controls Under the oversight of the Audit Committee, we have implemented an Internal Control Transformation Program to address historical material weaknesses. We highlight below significant remediation activities undertaken in 2018. Financial Reporting Controls: In connection with our Internal Control Transformation Program, we have continued to focus on improving our overall control environment. Our remediation actions related to improving the controls over our financial statement preparation and reporting process included the following: The Audit Committee and our company’s management have frequent communications regarding our financial reporting and internal control environment. We expanded our finance, accounting and information technology teams through the addition of experienced and qualified personnel. We aligned incentive plans with sustained effective internal controls over financial reporting and management continuous control monitoring. Our company provided additional internal controls training to our employees and standardized policies and controls where feasible. Were-designed and harmonized our control objectives across all processes and locations. Were-designed and enhanced our delegation of authority policy and processes, including implementing a systematic enabled work flow. Our company implemented a central repository for policies and quarterly checklists to confirm adherence with policies. We instituted monthly legal entity and management reporting reviews of financial statements disaggregated by key business units, regions and functional areas, to evaluate results, observe adherence to policies and agree on necessary actions to be taken before considering the period closed. Management of the respective areas meets with our corporate executives monthly in connection with these reviews. We expanded our technical accounting group that has responsibility to ensure that the accounting for complex ornon-routine transactions is appropriate. We expanded our use of specialists to assist with highly complex and technical areas of accounting, valuation and new accounting standards adoption. We enhanced our Disclosure Committee processes and reviews by adding experienced and knowledgeable members to the committee and implementing disclosure surveys to capture input from appropriate areas and levels throughout the organization. General Information Technology Controls (GITCs): During the course of 2018, we made progress in advancing foundational elements of our general information technology controls. Our remediation actions related to our GITC environment included the following: We established policies, trained personnel and implemented policies and procedures over logical access and general information technology controls. We automated user access reviews. We implemented policies and mitigating controls over incompatible segregation of duties within our information technology systems. Monitoring Activities: Our remediation actions related to monitoring our internal controls over financial reporting included the following: Enhanced control activities within our process to recognize revenue, including: Leveraging advanced technology to substantively evaluate and monitor revenue, accounts receivable, cash receipts and other accounts and activities associated with revenue recognition. Implementing a monitoring control which leverages advanced analytical processes to evaluate the appropriateness of revenue related transactions across key business units. Implementing systematic segregation of duties through system enabled work flow. Developing and implementing continuous monitoring of global financial reporting controls.
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Corporate Governance When fully implemented and operational, we believe the controls we have designed or plan to design will remediate the control deficiencies that have led to the material weaknesses we have identified and strengthen our internal controls over financial reporting. Code of Conduct The board has adopted a Code of Business Conduct and Ethics that sets forth standards regarding matters such as honest and ethical conduct, compliance with law, and full, fair, accurate, and timely disclosure in reports and documents we file with the SEC and in other public communications. The Code of Business Conduct and Ethics applies to all of our employees, officers and directors, including our principal executive officer, principal financial officer and principal accounting officer. The Code of Business Conduct and Ethics is available at our website,www.stericycle.com,and is available free of charge on written request to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, IL 60045. Any amendments to certain provisions of the Code of Business Conduct and Ethics or waivers of such provisions granted to certain executive officers will be disclosed promptly on our website. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended requires our directors, executive officers and persons beneficially owning more than 10% of our outstanding common stock to file periodic reports of stock ownership and stock transactions with the SEC. During 2017 and 2018, due to the failure of an investment advisor with discretionary authority to inform Mr. Anderson of certain transactions in our common stock, Mr. Anderson failed to timely file eleven forms 4 to report eleven transactions. In addition, due to administrative oversight by the Company, Mr. Brown and Mr. Chen each failed to timely file a form 4 to report the conversion of depositary shares into shares of our common stock and Mr. Richard Hoffman failed to timely file a form 4 to report grants of stock options, time-based restricted stock units (“RSUs”) and performance-based RSUs. Additional Information We will provide a copy of our Annual Report on Form10-K for the fiscal year ended December 31, 2018 without charge to each stockholder as of the record date who sends a written request to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. Copies of this proxy statement and our Form10-K as filed with the SEC are available in .pdf format on our investor relations website,http://investors.stericycle.com.Copies of this proxy statement and our Annual Report on Form10-K also may be accessed directly from the SEC’s website,www.sec.gov. Communications with the Board Stockholders and other interested parties who would like to communicate with the Board may do so by writing to the Board of Directors, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. Our Investor Relations department will process all communications received. Communications relating to matters within the scope of the Board’s responsibilities will be forwarded to the Chairman of the Board and, at his direction, to the other directors. Communications relating to ordinaryday-to-day business matters that are not within the scope of the Board’s responsibilities will be forwarded to the appropriate officer or executive. Communications addressed to the Lead Director will be forwarded to him and, at his direction, to the other directors, and communications addressed to a particular committee of the Board will be forwarded to the chair of that committee and, at his or her direction, to the other members of the committee. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 25 | |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Director Compensation Director Compensation in 2016 In February 2016, the Board modified our Outside Directors Compensation Plan to align the compensation of ourFor 2018, each outside directors with the changes made to the compensation of our executive officers and with the market generally. Our goal in making such changes was to provide compensation that aligned with the median compensation awarded by our peers to ensure we can continue to attract and retain a high caliber board of outside directors. These changes became effective in 2017 and are described below under “Compensation Plan for 2017 and 2018”.
Each director’s compensation for 2016 was $125,000 (the “annual retainer”) whichconsisted of an annual cash retainer of $80,000 and an annual equity retainer of $125,000. Unless deferred, the annual equity retainer was paid primarilyentirely in stock options. Directors who had already satisfied our stock ownership guidelines could elect to receive full or partial payment of the annual retainer in cash. One director chose to receive the retainer in cashtime-based RSU’s which was paid in twelve equal monthly installments. All other directors received their annual retainer in two pieces: (i) a stock option reflecting the conversion of 75%, or $93,750, of the annual retainer, and (ii) a time-based RSU award reflecting the conversion of the remaining 25%, or $31,250. Directors have received new option and RSU awards each year when elected, or reelected, at the annual meeting of stockholders, including the annual meeting held in 2016. The 2016 awards vest on May 25, 2017, the first anniversary of the grant date.
Mr. Hall elected We also paid the following retainers to receive his 2016 annual retainer in cash. This included andirectors with additional $5,000 awarded for his serviceresponsibilities as the Chairman of the Board or the Chair of a committee:
Chairman of the Board – $50,000 cash and $50,000 in RSUs Chair of the Audit Committee – $20,000 Chair of the Compensation Committee. Mr. Dammeyer received an additional $10,000, deliveredCommittee – $15,000 Chair of the Nominating and Governance Committee – $12,500 Under the terms of the Director Compensation Plan, directors may elect to convert all or a portion of the annual cash retainer to time-based RSUs. Directors may also elect to defer receipt of any or a portion of their annual director compensation and convert such compensation to deferred stock units (DSUs). DSUs are generally payable in the form of 297 options and 40 RSUs, for his service as Chairmanshares of the Audit Committee.our common stock within a certain period after a director’s death or other separation from service. We did not pay any other fees or other cash compensation to our directors who served during 20162018 or provide them with any perquisites or other personal benefits. Directors are not paid separate fees for attending meetings of the Board of Directors or its committees, and no fees were paid to the Chairman of the Board for his service as chairman.committees. Compensation Plan for 2017 and 2018
At the request of the Nominating and Governance Committee, the Compensation Committee engaged Deloitte Consulting LLP as an independent compensation consultant during 2016 to benchmark Stericycle’s compensation plan for its Board of Directors. Based on peer benchmarking data provided by the compensation consultant, the Compensation Committee determined that Stericycle’s outside directors were not compensated on par with their counterparts at other companies in our peer group or in the market generally.
Stericycle’s outside director total compensation in 2016 was 37% below the peer group median, and Stericycle was one of only three companies in our peer group to award options as the predominant form of director compensation. In order to remedy that disparity so Stericycle can continue to attract a diverse group of experienced professionals to serve on the Board, the Compensation Committee recommended adding a cash component to the Outside Directors Compensation Plan in 2017 that would bring the compensation program in alignment with the median of our peers. The Board opted to adjust director compensation in two stages over 2017 and 2018.
Beginning in 2017, directors will receive a cash retainer of $40,000 and an annual equity award of $125,000 in the form of time-based RSUs. We will continue to pay an additional $10,000 to the Chairman of the Audit Committee, and $5,000 to the Chairman of the Compensation Committee. Should a director join the Board mid-year, that individual will receive compensation that is pro-rated for the portion of the year he or she will be in active service to the Board.
Beginning in 2018, the directors’ annual cash retainer will increase to $80,000 and the annual equity award will remain at $125,000 delivered entirely in time-based RSUs. In addition, we will pay the following additional retainers beginning in 2018 to be more in line with our peer group:
• | Chairman of the Audit Committee—$20,000 | | | • | Chairman of the Compensation Committee—$15,000 | | | • | Chairman of the Nominating and Governance Committee—$12,500 | | | • | Lead Director—$25,000 |
Stericycle, Inc. - 2017 Proxy Statement 19
The following table provides information about the compensation paid to our directors in 2016.2018. Neither Mr. Alutto nor Mr. Miller* receiveMs. Miller received any additional compensation for his or her services as a director. In addition, Mr. Hackney and Mr. Hooley were not directors during 2018 and did not receive any director compensation during that year. | Name | | Fees Earned
or Paid in
Cash | | | Stock
Awards | | | Option
Awards | (1) | | Non-Equity
Incentive Plan
Compensation | | | All Other
Compensation | | | Total | | | Jack W. Schuler, Lead Director | | $ | – | | | $ | 48,247 | | | $ | 71,289 | | | | – | | | | – | | | $ | 119,536 | | | Lynn D. Bleil | | | – | | | | 48,247 | | | | 71,289 | | | | – | | | | – | | | | 119,536 | | | Thomas D. Brown | | | – | | | | 48,247 | | | | 71,289 | | | | – | | | | – | | | | 119,536 | | | Thomas Chen | | | – | | | | 48,247 | | | | 71,289 | | | | – | | | | – | | | | 119,536 | | | Rod F. Dammeyer(2) | | | – | | | | 52,146 | | | | 76,992 | | | | – | | | | – | | | | 129,138 | | | William K. Hall(3) | | | 130,000 | | | | – | | | | – | | | | – | | | | – | | | | 130,000 | | | John Patience | | | – | | | | 48,247 | | | | 71,289 | | | | – | | | | – | | | | 119,536 | | | Mike S. Zafirovski | | | – | | | | 48,247 | | | | 71,289 | | | | – | | | | – | | | | 119,536 | |
| | | | | | | | | | | | | | Name | | Fees Earned
or Provided
in
Cash | | | Stock
Awards(1) | | | Total | | | | | | Brian P. Anderson | | $ | 75,000 | | | $ | 125,000 | | | $ | 200,000 | | | | | | | | | | Lynn D. Bleil | | | 46,250 | | | | 145,000 | | | | 191,250 | | | | | | | | | | Thomas D. Brown | | | – | | | | 195,000 | | | | 195,000 | | | | | | | | | | Thomas F. Chen | | | 60,000 | | | | 125,000 | | | | 185,000 | | | | | | | | | | Veronica M. Hagen | | | 32,500 | | | | 116,000 | | | | 148,500 | | | | | | | | | | Mark C. Miller | | | 40,000 | | | | 125,000 | | | | 165,000 | | | | | | | | | | Robert S. Murley | | | 85,000 | | | | 175,000 | | | | 260,000 | | | | | | | | | | Kay G. Priestly | | | 32,500 | | | | 116,000 | | | | 148,500 | | | | | | | | | | Mike Zafirovski | | | 60,000 | | | | 125,000 | | | | 185,000 | |
| (1) | The amounts in this column represent the fair value of options that we granted in 2016 determinedStock awards are valued in accordance with FASB ASC Topic 718, excludingbased on the effect of the expected forfeiture rate. The assumptions made in the valuation of these stock options are described at the end of Note 6, Stock Based Compensation, to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2016 (available at www.stericycle.com).
| | As of December 31, 2016, our outside directors held vested and unvested options and RSUs for the following number of sharesclosing price of our common stock: Mr. Schuler, 31,308 shares; Ms. Bleil, 17,017 shares; Mr. Brown, 61,984 shares; Mr. Chen, 22,215 shares; Mr. Dammeyer, 33,814 shares; Mr. Hall, 27,472 shares; Mr. Patience, 54,879 shares; and Mr. Zafirovski, 33,097 shares.stock on the date of the grant. |
Compensation Plan for 2019 The Compensation Committee regularly reviews director compensation to ensure it remains competitive with our peer group. During 2018, the Compensation Committee asked its independent compensation consultant to conduct a market evaluation of our director pay programs relative to the market and to our peer group. After reviewing the results of that analysis, the Compensation Committee recommended no changes to the director pay program for 2019. | | | (2)26 | | Mr. Dammeyer received an additional $10,000, delivered in the form of 297 options and 40 RSUs, for his service as Chairman of the Audit Committee.Stericycle, Inc. | (3) | Mr. Hall received an additional $5,000 for his service as Chairman of the Compensation Committee. | * | For his services as Chairman and an employee, Mr. Miller received cash compensation of $50,000, a stock award with a grant date fair value of $150,123 and an option award with a grant date fair value of $473,940. - 2019 Proxy Statement |
ITEM 1 ELECTION OF DIRECTORS FOR AONE-YEAR TERM Director Compensation Stock Ownership Guidelines Under our Outside DirectorsDirector Compensation Plan, all directors are expected to hold a minimum position in our common stock. StericycleWe established this program to help align the long-term interests of directors with the interests of our stockholders. Eachnon-employee director is expected to hold four times the annual cash retainer in Stericycle, Inc.our common stock. Although there is no specific period of time in which directors are required to achieve the applicable ownership threshold, they are expected to make continuous progress toward that goal. To that end, eachnon-employee director must retain 75% of his or her stock or option awards until the minimum position requirement has been achieved. Compliance with these ownership guidelines is measured following the same process as used for confirming stock ownership by executive officers. See “Stock Ownership Guidelines” under the Other“Other Compensation MattersMatters” section. Stericycle, Inc. - 2017 Proxy Statement 20
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 27 | |
ITEM 2 | Advisory Vote to Approve Executive Compensation |
ITEM 2 Advisory Vote to Approve Executive Compensation Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are asking our stockholders to approve, by means of anon-binding advisory vote, the compensation of our named executive officers as disclosed in this proxy statement. This proposal, popularly known as “say-on-pay,“say-on-pay,” enables stockholders to express or withhold their approval of our executive compensation program in general. The vote is intended to provide an assessment by our stockholders of our overall executive compensation program and not of any one or more particular elements of that program. The Compensation Committee and the full Board intend to consider and take into account the outcome of thisnon-binding advisory vote in making future executive compensation decisions. Because this vote is advisory andnon-binding, it will not necessarily affect or otherwise limit any future compensation of any of our named executive officers. This advisory vote to approve executive compensation will be held on an annual basis at least until the next advisory vote to determine the frequency of such vote, which will occur at the Annual Meeting (see Item 3). is expected to be in 2023. Our executive compensation program is described in the “Compensation Discussion and Analysis” section of this proxy statement and the related tables and narrative discussion. Stockholders are strongly urged to read this material in its entirety, and in particular to read the “Executive Summary” on pages 22—25,section of “Compensation Discussion and Analysis” to obtain an informed understanding of our executive compensation program. We believe that our executive compensation program is firmly aligned with the long-term interests of our stockholders. Our executive compensation program has as its objectives (i) attracting, motivating and retaining highly qualified executive officers and (ii) structuring most of their compensation, aside from their base salaries, to be dependent on the Company’sour attainment of measurable Company-wide performance targets and the sustained growth in our stock price, so that they benefit only if our stockholders benefit. We believe that our executive compensation program satisfies these objectives. Our executive compensation program consists of short-term cash compensation and long-term equity-based incentive compensation. For 2016,2018, cash compensation was paid in the form of a base salary and an annual cash performance bonus based on 75% Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and 25% Adjusted ROIC (return on invested capital), and long-term incentive compensation was paid in the form of stock options, time-based RSUs and performance-based RSUs. Annual cash performance bonuses are dependent on Company-wide performance. Stock options and RSUs are only granted atlinked to the closing market price on the date of grant and are dependent for their value on the subsequent growth in valueperformance of our stock. In 2016, base salarycommon stock, and in the case of performance-based RSUs, achievement ofpre-established earnings per share (“EPS”) goals. With respect to 2018, cash compensation represented 22%, annual performance bonuses 3%,30% and equity compensation 75%70% of our CEO’s total direct compensation and cash compensation represented 37% and equity compensation represented 62% of our other NEO’s total direct compensation. Annualcompensation, respectively (we excluded separation payments from calculation of these percentages). Based on 2018 fiscal year performance, bonusesour executive officers earned 24.2% of their cash incentive target and 43% of their performance-based RSUs which were only 3% because we underperformed against our performance objectives and the bonus was paid at 13% of target.tied to 2018 performance. For these reasons and the reasons elaboratedAs more fully discussed in the “Compensation Discussion and Analysis” section and the related tables and narrative discussion, the Board of Directors requests stockholders to approve the following resolution:
Resolved, that the stockholders approve, on an advisory basis, the compensation paid toof the Company’s named executive officers as disclosed in the Compensation Discussion and Analysis section, the compensation tables, and the related narrative disclosure in this Proxy Statement. The Board of Directors recommends a vote “FOR” the approval of this advisory resolution on the compensation of our Company’s named executive officers, as disclosed in this proxy statement, includingstatement. Proxies solicited by the “Compensation Discussion and Analysis” section and the related compensation tables and narrative discussion.Board will be so voted unless stockholders specify a different choice. The Board of Directors recommends a vote“FOR” this advisory vote to approve executive compensation.
Stericycle, Inc. - 2017
| | | | 28 | | Stericycle, Inc. - 2019 Proxy Statement21
COMPENSATION DISCUSSION AND ANALYSIS Executive Summary Our 20162018 Named Executive Officers This Compensation Discussion and Analysis explains our executive compensation program generally and the compensation awarded to our CEO, CFO, andour three other most highly compensated executive officers who were serving as executive officers as of the end of 2018, and two additional individuals who would have been included as one of our three most highly compensated executives specifically.but for the fact they were not serving as executive officers as of the end of 2018. These executives, referred to as our Named Executive Officers“named executive officers” or NEOs,“NEOs”, were: | | | Name | | Title (as of December 31, 2018) | Charles A. Alutto | | Chief Executive Officer | Cindy J. Miller | | President and Chief ExecutiveOperating Officer | Daniel V. Ginnetti | | Executive Vice President and Chief Financial Officer | Kurt M. Rogers | | Executive Vice President and General Counsel | Ruth-Ellen Abdulmassih | | Executive Vice President, Communication and Related Services | Joseph B. Arnold | | Former Executive Vice President and Chief Operating Officer | Daniel V. GinnettiBrenda R. Frank | Chief Financial Officer | Michael Collins | Former Executive Vice President | Brenda R. Frank | and Chief People Officer |
Stericycle’s Executive Compensation Philosophy The
Our executive compensation program at Stericycle is developed by the Compensation Committee and approved annually by the Board of Directors. The compensation program for executive officers has two objectives: | 1. | To attract, motivate and retain highly qualified executive officers; and | | |
| 2. | To structure the bulk of executive compensation to be dependent on Stericycle’s attainment of measurable company-wideCompany-wide performance targets and sustained growth in our stock price so that executives benefit only if our stockholders benefit. |
Our executive compensation program has three components: base salary, short-term incentive awards, and long-term incentive awards. Base salary and annual performance bonuses are paid in cash, and long-term incentive compensation is paid in the form of stock options, time-based RSUs, and performance-based RSUs. We generally target our executive officers’ total direct compensation to be aligned with the median of our peer group. To ensure appropriate pay-for performance alignment, the Compensation Committee may approve compensation levels for individual executive officers above and below target pay positions, based onconsiders experience, individual contribution, and the Company’s performance relative to its peer group. group when setting pay levels. The Compensation Committee and the Board work to ensure that our executive compensation program is both market-competitive and performance-oriented. Our executive officers earn base salaries, but the majority of their target compensation comes in annual cash performance bonuses, stock options and time-based and performance-based RSUs. As a result, a substantial portion of our executive officers’ compensation is influenced, either positively or negatively, by Stericycle’s performance and by stockholder return.Company performance. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 29 | |
COMPENSATION DISCUSSION AND ANALYSIS Executive Summary Our Executive Compensation Best Practices The Compensation Committee regularly reviews the executive compensation program to ensure that it is aligned with our compensation philosophy, our Company objectives, and stockholder interests. Highlights of key elements of and exclusions from our program are noted below. | | | | | | | | | | | | What We Do: | | What We Don’t Do: | | | |  | | | | | ✓ | | Deliver significant percentage of target annual compensation as variable compensation tied to performance | |  | | Nore-pricing of underwater stock options | | | | |  | | | | | ✓ | | Align executives’ interests with stockholders’ interests through long-term incentive compensation paid in equity and with stock ownership guidelines | |  | | No excessive perquisites or personal benefits | | | | | | | | | | ✓ | | Maintain an executive compensation claw backclawback policy | | | | No tax gross-upsemployment contracts for NEOs | | | | | | | | | | ✓ | | Cap annual and long-term incentive awards | | | | | | | | | | | | | | ✓ | | Retain an independent compensation consultant to advise the Compensation Committee | | | | | | | | | | | | | | ✓ | | Prohibit officers and directors from engaging in hedge, pledgehedging, pledging or short sale transactions involving our securities | | | | | | | | | | | | | | ✓ | | Regular review of proxy advisor policies and corporate governance best practices | | | | | | | | | | | | | | ✓ | | Maintain stock ownership and retention guidelines | | | | | | | | | | | | | | ✓ | | Provide “double-trigger” vesting of equity awards in connection with a change in control | | | | | | | | |
Stericycle, Inc. - 2017 Proxy Statement 22
Our Executive Compensation Program for 20162018 Historically, our named executive officers received salaries significantly below those of comparable executives in our peer group of companies. Beginning in 2015, the Compensation Committee embarked on a four-year plan to move salaries of our executive officers toward the median of our peer group of companies. Subsequent to our acquisition ofShred-it in 2015, the Compensation Committee determined that this four year time tablefour-year timetable needed to be accelerated to reflect the increased responsibilities of the executives, to preserve internal equity, and to support retention. Prior to 2016, In 2017, our named executive officers have earnedofficer salaries were adjusted upward and annual cash performance targets were adjusted downward moving our named executive officer direct cash compensation toward the median of our peer group companies, which completed the plan approved in 2015. For 2018, no changes were made to the salaries or bonus targets for the named executive officers.
For 2018, our named executive officers’ annual cash performance bonuses were based upon the achievement of Adjusted EBITDA targets developed from our annual operating plan and budget.adjusted return on invested capital (Adjusted ROIC). Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization excluding acquisition-related expenses and other various expenses that do not reflect the ongoing performance of the business. In 2016 Adjusted EBITDA was adjusted to exclude the impact of acquisition expenses, integration expenses, restructuring and plant conversion expenses, amortization expense, the change in fair value of contingent considerations, contract exit costs, asset impairment charges, litigation expenses, and insurance proceeds. The approach used for Adjusted EBITDA for executive compensation is consistent with that used for communicating the financial performance of the company and is reviewed quarterly by both the Audit Committee and Compensation Committee. Beginning in 2016, we added adjusted return on invested capital (Adjusted ROIC) as a second performance metric to our annual bonus program. Adjusted ROIC excludes the impact of acquisitions within the current year. The calculation for Adjusted ROIC is net operating profit after taxes and amortization (NOPATA) excluding acquisition-related expenses and other various expenses that do not reflect the ongoing performance of the business divided by invested capital. In 20162018, Adjusted ROIC excluded the impact of acquisition expenses, integration expenses, restructuring and plant conversion expenses, the change in fair value of contingent considerations, contract exit costs, asset impairment charges, litigation expenses, and insurance proceeds.
For additional detail and reconciliations, see Appendix A to this proxy statement. The Board believes these two metrics for the annual cash performance bonus provide strong incentives to our executive officers to improve our operating performance and the return on our capital employed, thereby creating value for our stockholders. Our executives are also compensated with a long-term incentive program in the form of equity grants. Prior to 2016, the equity grants were in the form of stock options. For 2016,2018, the award structure of the long-term incentive plan was modified to include 75% of awards granted asequally divided among stock options, time-based RSUs, and 25% of awards granted asperformance-based RSUs. These grants of stock options and RSUsequity were designed to incentivize our named executive officers to focus on long-term value creation. | | | | 30 | | Stericycle, Inc. - 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS Executive Summary The principal elements of Stericycle’sour executive compensation program for 20162018 are summarized below. These elements are discussed in more detail under “2016“2018 Compensation Program Highlights.” | | | | | | | Compensation Element | | Form of
Compensation
Element | Form of
Compensation | Performance and
Vesting Criteria | | Purpose | | | | | Base Salary | | Cash | | N/A | | Provide fixed compensation to attract and retain key executives and to offset external factors that may impact incentive pay | | | | | Annual Cash Bonus | Cash | Cash | | Annual Adjusted EBITDA and
Adjusted ROIC objectives | | Incentivize executives to achieve annual performance goals and be rewarded commensurately | Long-term Incentives | | Stock Options (75%)(1/3)
Time-based RSUs (1/3) Performance-based
RSUs (25%)(1/3) | | Five year ratable vesting
based on continuous service Vest, or not, in three equal annual installments depending onachievement of pre-established performance metrics | | Incentivize long-term value creation and align management’s interests with those of our shareholders |
For 2018, approximately 82% of our CEO’s target total compensation and approximately 73% of our other NEO’s target total compensation was at risk. The chart below illustrates how these components were allocated in actual total compensation packages awarded toreceived by our NEOs in 2016.2018 (we excluded separation payments from calculation of these percentages).  
2016 Business Highlights
Revenues for 2016 were $3.56 billion, up 19.3% from $2.99 billion in 2015 due to acquisitions which contributed approximately $570 million to our revenue growth.
Operating income decreased 11.0% to $433.8 from $487.6 million in the same period last year. GAAP earnings per diluted share decreased 30.2% to $2.08 from $2.98 during 2015.
Stericycle, Inc. - 2017 Proxy Statement 23
While Stericycle’s overall financial performance in 2016 was lower than expected, the2018 CEO Compensation Committee and management believe that our executive compensation was aligned with performance, as shown below:
* | | | | | Realized compensation includes salary, incentive bonus, and equity that vested during the calendar year valued at the stock price as of 12/31.Stericycle, Inc. - 2019 Proxy Statement | | | 31 | |
COMPENSATION DISCUSSION AND ANALYSIS Our Compensation-Setting Process Our Compensation-Setting Process Compensation Committee Compensation decisions for our executive officers are made by the Compensation Committee of our Board of Directors, subject in some instances to approval by the full Board. All of the Committee’s members are independent under the applicable NASDAQSEC rules and Nasdaq listing standards. Peer Group Our peer group is composed of companies that are similar to us in terms of revenue, number of team members,employees, services offered, and industries served. The Compensation Committee believesCompanies in the peer group are also representative of the types of companies we compete with companies similar to the peer group for executive talent as well.talent. The Compensation Committee refers to information about our peer group primarily for the purpose of benchmarking the NEOs’ total direct compensation packages, in addition to reviewing competitivepay levels, pay practices and industry pay trends and practices.trends. For 2016,2018, the peer group consisted of the following companies: | Company Name | | 2015 Revenue
($MM) | | Employees | | Industry Focus | | ABM Industries Incorporated | | $ | 3,005 | | 120,000 | | Environmental and facility services | | Charles River Laboratories International, Inc. | | | 1,363 | | 8,600 | | Life sciences tools and services | | Chemed Corporation | | | 3,005 | | 14,400 | | Healthcare services | | Cintas Corporation | | | 4,476 | | 32,000 | | Diversified business support services | | Clean Harbors, Inc. | | | 3,275 | | 12,900 | | Environmental and facility services | | Corrections Corporation of America | | | 1,793 | | 14,000 | | Specialized REIT – facility services | | Covanta Holding Corporation | | | 3,005 | | 3,800 | | Environmental and facility services | | Ecolab Inc. | | | 13,545 | | 47,100 | | Specialty chemicals | | Equifax, Inc. | | | 2,663 | | 8,000 | | Research and business services | | Healthcare Services Group, Inc. | | | 1,436 | | 45,900 | | Diversified business support services | | Iron Mountain Incorporated | | | 3,008 | | 20,000 | | Specialized REIT – information management | | J.B. Hunt Transportation Services, Inc. | | | 6,187 | | 21,600 | | Transportation services | | Paychex, Inc. | | | 2,739 | | 13,400 | | Data processing and outsourced services | | Pitney Bowes, Inc. | | | 3,578 | | 14,800 | | Office services and supplies | | Republic Services, Inc. | | | 9,115 | | 33,000 | | Environmental and facility services | | Rollins, Inc. | | | 1,485 | | 11,300 | | Environmental and facility services | | Tetra Tech, Inc. | | | 1,718 | | 16,000 | | Environmental and facility services | | Waste Connections, Inc. | | | 2,117 | | 7,200 | | Environmental and facility services | | Stericycle, Inc | | | 3,562 | | 25,500 | | Environmental and facility services | | Median | | | 3,005 | | 14,600 | | |
| | | | | | | | | | | | | Company Name | | 2017 Revenue
($MM) | | | Employees | | | Industry Focus | | ABM Industries Incorporated | | | $ 5,986 | | | | 140,000 | | | | Business services | | Advanced Disposal Services, Inc. | | | 1,540 | | | | 5,939 | | | | Environmental and facilities services | | Charles River Laboratories International, Inc. | | | 2,022 | | | | 11,800 | | | | Medical laboratories & research | | Cintas Corporation | | | 6,477 | | | | 41,000 | | | | Business services | | Clean Harbors, Inc. | | | 3,102 | | | | 12,700 | | | | Waste management | | CoreCivic, Inc. | | | 1,774 | | | | 12,875 | | | | REIT – Diversified | | Covanta Holding Corporation | | | 1,836 | | | | 3,700 | | | | Waste management | | Ecolab Inc. | | | 14,376 | | | | 48,400 | | | | Cleaning products | | Equifax, Inc. | | | 3,416 | | | | 10,300 | | | | Credit services | | Healthcare Services Group, Inc. | | | 1,996 | | | | 55,000 | | | | Business services | | Iron Mountain Incorporated | | | 4,060 | | | | 24,000 | | | | Specialized REIT | | J.B. Hunt Transportation Services, Inc. | | | 7,921 | | | | 24,681 | | | | Transportation services | | Pitney Bowes, Inc. | | | 3,819 | | | | 14,700 | | | | Business equipment | | Republic Services, Inc. | | | 10,067 | | | | 35,000 | | | | Waste management | | Rollins, Inc. | | | 1,754 | | | | 13,126 | | | | Business services | | Tetra Tech, Inc. | | | 2,182 | | | | 16,000 | | | | Technical services | | The Brink’s Company | | | 3,482 | | | | 62,150 | | | | Security and alarm services | | UniFirst Corporation | | | 1,666 | | | | 14,000 | | | | Diversified support services | | Waste Connections, Inc. | | | 4,744 | | | | 15,283 | | | | Waste management | | Stericycle, Inc. | | | 3,549 | | | | 25,000 | | |
| Environmental and facility
services |
| Median | | | 3,416 | | | | 15,283 | | | | | |
The Compensation Committee reviews and adjusts if necessary the composition of the peer group annually.annually and makes adjustments if necessary (for example, to remove companies in the case of an acquisition). Stericycle, Inc. - 2017
| | | | 32 | | Stericycle, Inc. - 2019 Proxy Statement24
COMPENSATION DISCUSSION AND ANALYSIS Our Compensation-Setting Process Decision-Making Processes The Compensation Committee takes into account a number of factors in setting compensation and incentive award opportunities for our executive officers. These decisions are made with a view to reaching an overall result that the Committee believes is appropriate and fair to each NEO—executive officer – both in absolute terms and relative to the compensation of the other executive officers—officers – and fair as well to Stericycle and to our stockholders. The Committee also considers each executive officer’s role, contribution to our performance, and the officer’s compensation history in making compensation decisions. Compensation decisions are typically made at the regular meeting of the Compensation Committee during the firstfourth quarter of the year—typically in February, whenprior year based on market study results andyear-to-date performance of the results of our prior year’s performance are available.Company and the executive officers. The Committee considers these results in determining the executive officers’ annual cash performance bonuses for the priorcurrent year and their base salaries and annual cash performance bonus targets for the currentupcoming year. Our Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of our other NEOs, but management generally does not otherwise participate in the Committee’s decisions. The Committee provides a recommendation for the salary of our Chief Executive Officer,NEOs, but the Board must provide final approval. Decisions regarding the annual stock option and RSU grants to our executive officers and to our employees generally are also made during the first Compensation Committee meeting of the year. However,year, subject to approval by the grant date for options or RSUs is set more than a year in advanceBoard of this meeting.Directors. The Committee determines the annual stock option and RSU grants to our executive officers taking into account (i) Stericycle’sour overall operating performance, (ii) each executive officer’s individual responsibilities and performance, (iii) competitive market data, (iv) prior stock option and RSU grants, and (v) the goal of limiting stock option and RSU grants to no more than 10% of our fully-diluted shares over a trailing five-year period, thus averaging dilution of no more than 2% a year. Compensation Consultant Beginning in 2014, the
The Compensation Committee has engaged Deloitte Consulting LLP, as its independent compensation consultant, to review our executive compensation philosophy and practices and the composition of our peer group of companies over the past several years. Taking the resultscompanies. After a review of the consultant’s review over the past three years into consideration,factors prescribed by SEC and Nasdaq rules and regulations, the Compensation Committee has been executing plans to adjust our executive compensation program to be in alignment with peers, as described below under “Key Changes to the Compensation Program for 2017.”determined that Deloitte Consulting LLP is independent. 20162018 Compensation Program Highlights
Base Salaries Data provided by the compensation consultant showed that base salaries for our NEOs were substantiallyThe table below the median of our peer group. In 2015, the Compensation Committee determined that Stericycle needed to increase base salaries to make our compensation packages more competitive in the market for executive talent. Rather than make all pay adjustments in a single year, the Committee originally opted to increase base salaries over four years beginning in 2015. Accordingly,illustrates the NEOs’ base salaries were increased for 2016 as follows:over the past three fiscal years.
| | | | 2016 Salary | | | 2015 Salary | | | 2014 Salary | | | 2018 Salary | | | 2017 Salary | | 2016 Salary | | | Mr. Alutto | | $ | 585,000 | | | $ | 488,269 | | | $ | 379,615 | | | $ | 1,000,000 | | | $ | 1,000,000 | | | $ | 585,000 | | Ms. Miller | | | | 625,000 | | | | N/A | * | | | N/A | * | Mr. Ginnetti | | | | 550,000 | | | | 550,000 | | | | 380,000 | | Mr. Rogers | | | | 400,000 | | | | N/A | * | | | N/A | * | Ms. Abdulmassih | | | | 370,000 | | | | 370,000 | | | | N/A | ** | | Mr. Arnold | | | 380,000 | | | | 343,077 | | | | n/a | * | | | 550,000 | | | | 550,000 | | | | 380,000 | | | Mr. Ginnetti | | | 380,000 | | | | 346,923 | | | | 275,385 | | | | Mr. Collins | | | 370,000 | | | | 342,500 | | | | 296,154 | | | | Ms. Frank | | | 325,000 | | | | n/a | ** | | | n/a | ** | | | 400,000 | | | | 400,000 | | | | 325,000 | |
| * | Ms. Miller and Mr. ArnoldRogers were not NEOs in 2017 or 2016. |
| ** | Ms. Abdulmassih was not an NEO in 2014.2016. | ** | Ms. Frank was not an NEO in 2014 or 2015. |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 33 | |
COMPENSATION DISCUSSION AND ANALYSIS 2018 Compensation Program Highlights With thesethe increases phased in over the 2015-2017 period, base salaries for the majority of our NEOs were still substantially beloware in line with the median for our peer group. As discussed below under “Key ChangesFor 2019, the Compensation Committee engaged its compensation consultant to conduct an independent review of executive officer salaries, as it had been several years since the last such review. After considering the results of the independent review, the Compensation Committee approved salary increases for two of our executive officers and a cash incentive target increase for one executive officer, to be effective January 1, 2019. See “Our Executive Compensation Program for 2017,” the Compensation Committee opted2019”. The remaining executive officers did not receive increases to accelerate the final phase of the four-year planbase compensation or to cash incentive targets for base salary increases in 2017 to align our NEOs’ total direct compensation more closely with compensation awarded by our peer group.2019. Stericycle, Inc. - 2017 Proxy Statement 25
Annual Cash Performance Bonuses Our annual cash performance bonus program is intended to reward our executive officers for achieving our annual operating plans and budgets. Each executive officer is eligible for an annual cash performance bonus equal to a specified percentage of base salary. Historically, ourOur executive officers earnedearn annual cash performance bonuses based solely upon the achievement of Adjusted EBITDA
targets developed from our annual operating plan and budget. Beginning in 2016, we added a second performance metric—adjusted return on invested capital (Adjusted ROIC)—to our annual bonus program. The Compensation Committee believes thebudget and Adjusted ROIC metric is an appropriate addition for determining a short-term incentive to reflect the value of investment decisions, especially acquisition investments. targets. As a result, 75%70% of each NEO’s 20162018 annual cash performance bonus was tied to achievement of our Adjusted EBITDA goal and 25%30% was tied to achievement of our Adjusted ROIC goal. As discussed below under “2017 Compensation Decisions,” the Compensation Committee revised the annual cash performance bonus program for 2017 to give more weight to the Adjusted ROIC metric.
Performance Goals for 20162018 Based upon our annual business plans, the Compensation Committee established minimum, target, and maximum achievement levels for the Adjusted EBITDA portion of the annual cash performance bonus. For 2016,2018, the Adjusted EBITDA target was $981.9$800 million. There was no payout for this metric if we failed to attain Adjusted EBITDA of $932.9$752 million, and the payout for performance at or above the maximum goal of $1,031.1$840 million was capped at 200%. As with the Adjusted EBITDA portion of the bonus, the Compensation Committee fixesfixed minimum, target, and maximum Adjusted ROIC performance goals and related payout percentages. For 2016,2018, the Adjusted ROIC target was 8.64%8.00%. There was no payout for this metric if we failed to attain the minimum Adjusted ROIC of 7.61%6.96%, and the payout for performance at or above the maximum goal of 9.57%9.04% was capped at 200%. The following table shows how different levels of actual Adjusted EBITDA and Adjusted ROIC were designed to affect the payout. | | | | Adjusted EBITDA
Cash Bonus Program for 2016
75% Total Cash Bonus | | Adjusted ROIC
Cash Bonus Program for 2016
25% Total Cash Bonus | | Adjusted EBITDA Cash Bonus Program for 2018 70% Total Cash Bonus | | | Adjusted ROIC Cash Bonus Program for 2018 30% Total Cash Bonus | | | | | Percentage of
Award Payout | | Percent Adjusted
EBITDA Attainment | | Adjusted EBITDA
Target (in $ millions) | | Percentage of
Award Payout | | Adjusted
ROIC Target | | Percentage of Award Payout | | | Percent Adjusted EBITDA
Attainment | | | Adjusted EBITDA Target (in $ millions) | | | Percentage of Award Payout | | | Adjusted ROIC Target | | | Minimum | | 50% | | 95% | | $ 932.8 | | 50% | | 7.61% | | | 50% | | | | 94% | | | | $ 752 | | | | 50% | | | | 6.96% | | | Target | | 100% | | 100% | | 981.9 | | 100% | | 8.64% | | | 100% | | | | 100% | | | | 800 | | | | 100% | | | | 8.00% | | | Maximum | | 200% | | 105% or more | | 1,031.1 or more | | 200% | | 9.57% or more | | | 200% | | | | 105% or more | | | | 840 or more | | | | 200% | | | | 9.04% or more | |
Both sets of performance targets allow for payout of the annual cash performance bonuses at levels that increase proportionally from the minimum tier (an annual cash performance bonus equal to the specified percentage of the executive officer’s base salary) to the maximum. | | | | 34 | | Stericycle, Inc. - 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS 2018 Compensation Program Highlights For 2018, the annual cash performance bonus percentages for our named executive officers were as follows: | | | | | | | | | | | | Base Salary | | | Cash Performance Bonus Percentage | | Mr. Alutto | | $ | 1,000,000 | | | | 100% | | Ms. Miller(1) | | | 625,000 | | | | – | | Mr. Ginnetti | | | 550,000 | | | | 75% | | Mr. Rogers | | | 400,000 | | | | 60% | | Ms. Abdulmassih | | | 370,000 | | | | 65% | | Mr. Arnold | | | 550,000 | | | | 75% | | Ms. Frank(2) | | | 400,000 | | | | 60% | |
| (1) | Ms. Miller was not eligible for a 2018 cash performance bonus. |
| (2) | Ms. Frank did not receive a 2018 cash performance bonus due to her resignation in November, 2018. |
Performance Results for 2016 2018 Our Adjusted EBITDA for 20162018 for purposes of the annual cash performance bonus program was $856.2$727 million or 87.2% of target.and was below threshold. Our Adjusted ROIC performance in 20162018 for purposes of the annual cash performance bonus program was 7.67%,7.59% or 88.8%95.1% of target. These performance results led toresulted in an annual cash bonus payout equal to 12.87%24.2% of target, as illustrated below: 
Our executive officers received annual cash performance bonuses for 2016, paid in February 2017, as shown below:0% Adjusted EBITDA Payout x 70% 80.6% Adjusted ROIC Payout x 30% 24.2% Performance Bonus Payout Percentage
| | | Salary | | | Bonus as a
Percentage of
Base Salary | | Annual
Performance Bonus
Payout Percentage | | Annual
Performance
Bonus Award | | | Mr. Alutto | | $ | 585,000 | | | | 150 | % | | | 12.87 | % | | $ | 112,978 | | | Mr. Arnold | | | 380,000 | | | | 100 | % | | | 12.87 | % | | | 48,925 | | | Mr. Ginnetti | | | 380,000 | | | | 100 | % | | | 12.87 | % | | | 48,925 | | | Mr. Collins | | | 370,000 | | | | 80 | % | | | 12.87 | % | | | 38,110 | | | Ms. Frank | | | 325,000 | | | | 75 | % | | | 12.87 | % | | | 31,383 | |
Stericycle, Inc. - 2017 Proxy Statement 26
Long-Term Equity Incentive Awards The Compensation Committee’s first step when making long-term equity incentive awards is to determine the desired total grant date fair value of each NEO’s award in the manner described above under “Our Compensation-Setting Process.” For 2016, 75%2018, 1/3 of that total amount was awarded in the form of stock options, 1/3 of that total amount was awarded in the form of stock options,time-based RSUs and the remaining 25%1/3 was awarded in the form of time-basedperformance-based RSUs. Stock Option Grants for 20162018 Until 2016, executive officers’ long-term incentive awards were entirely in the form of stock options. With the addition of time-based RSUs and performance-based RSUs to the long-term incentive program, stock options constituted 75%approximately one third of our NEOs’ long-term compensation in 2016. 2018. The Compensation Committee believes stock options provide strong performance incentives. Our stock options are always granted at the closing price of our common stock on the date of the grant. Options Stock options vest over a period of five years and must be exercised within eight or ten years, so theirdepending on the terms of the grant. The value to our executive officersof stock options depends entirely on the growth in the value of our common stock in the years after the options are issued. Accordingly, the executive officers’ stock options provide an incentive for sustained levels of superior performance that contribute to our overall success as reflected in the market price of our common stock, which benefits all of our stockholders. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 35 | |
COMPENSATION DISCUSSION AND ANALYSIS 2018 Compensation Program Highlights The 20162018 stock option awards for our Named Executive Officersnamed executive officers were as follows: | | | | Number of
Stock Options | | Grant Date
Fair Value | | | Number of Stock
Options | | | Grant Date Fair Value | | | Mr. Alutto | | | 105,406 | | | $ | 2,136,579 | | | | 76,509 | | | $ | 1,289,942 | | Ms. Miller | | | | 60,391 | | | | 894,995 | | Mr. Ginnetti | | | | 28,605 | | | | 482,280 | | Mr. Rogers | | | | 14,485 | | | | 244,217 | | Ms. Abdulmassih | | | | 13,905 | | | | 234,438 | | | Mr. Arnold | | | 44,595 | | | | 903,940 | | | | 28,605 | | | | 482,280 | | | Mr. Ginnetti | | | 44,595 | | | | 903,940 | | | | Mr. Collins | | | 30,811 | | | | 624,539 | | | | Ms. Frank | | | 13,784 | | | | 279,402 | | | | 14,979 | | | | 252,546 | |
Time-based Restricted Stock Units for 20162018 Based on a reviewTime-based RSUs constituted approximatelyone-third of market practices and with input from its consultant, the Compensation Committee decided to incorporate time-based RSU awards as 25% of theour NEO’s long-term incentive componentcompensation in 2018, and their use is consistent with the pay practices of our executive compensation program effective in 2016.peers. The number of RSUs awarded to an NEO is determined based
on the target grant date fair value of the NEO’s total equity award. The time-based RSUs granted to executive officers in 2018 vest in equal annual installments over five years, beginning on the first anniversary of the grant date. During 2016,2018, the Compensation Committee granted time-based RSU awards to our named executive officers as follows: | | | Shares of Restricted | | Grant Date | | | | | | | | | Stock Units | | Fair Value | | | Time-based Restricted Stock Units | | | Grant Date Fair Value | | | Mr. Alutto | | | 7,027 | | | $ | 780,840 | | | | 19,127 | | | $ | 1,186,639 | | Ms. Miller | | | | 11,159 | | | | 566,654 | | Mr. Ginnetti | | | | 7,151 | | | | 443,648 | | Mr. Rogers | | | | 3,621 | | | | 224,647 | | Ms. Abdulmassih | | | | 3,476 | | | | 215,651 | | | Mr. Arnold | | | 2,972 | | | | 330,249 | | | | 7,151 | | | | 443,648 | | | Mr. Ginnetti | | | 2,972 | | | | 330,249 | | | | Mr. Collins | | | 2,054 | | | | 228,240 | | | | Ms. Frank | | | 3,418 | * | | | 389,908 | | | | 3,744 | | | | 232,278 | |
* | Ms. Frank received shares as part of her annual grant and additional shares when she became an executive officer. | | | 36 | | Stericycle, Inc. - 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS 2018 Compensation Program Highlights Performance-based Restricted Stock Units for 2018 Performance-based RSUs are the finalone-third of our NEO’s long-term incentive compensation and are also aligned with our peer group’s long-term incentive pay practices. The number of performance-based RSUs awarded to an NEO is determined based on the target grant date fair value of the NEO’s total equity award. Performance-based RSUs granted to executive officers vest, if at all, in equal installments over three years, depending on achievement during each year of the applicable annual EPS performance goal. During 2018, the Compensation Committee granted performance-based RSU awards to our named executive officers as follows: | | | | | | | | | | | | Performance-based Restricted Stock Units | | | Grant Date Fair Value | | Mr. Alutto | | | 19,127 | | | $ | 395,546 | | Ms. Miller | | | 15,778 | | | | 255,555 | | Mr. Ginnetti | | | 7,151 | | | | 147,883 | | Mr. Rogers | | | 3,621 | | | | 74,882 | | Ms. Abdulmassih | | | 3,476 | | | | 71,884 | | Mr. Arnold | | | 7,151 | | | | 147,883 | | Ms. Frank | | | 3,744 | | | | 77,426 | |
The Company began the practice of granting performance-based RSUs in 2017. The first performance period ended December 31, 2017 and no performance-based RSUs were earned for that period. The second performance period ended December 31, 2018 and 43% of the first tranche of the performance-based RSUs granted in 2018 and 43% of the second tranche of the performance-based RSUs granted in 2017 were earned. Similar to 2017, the Compensation Committee established minimum and maximum achievement levels with respect to the 2018 Adjusted EPS goal of $4.42 and $4.65, respectively. Performance in between these two points is interpolated on a straight-line basis to determine the vesting of shares. No performance-based RSUs vest if we failed to attain a minimum Adjusted EPS of $4.42, and the payout for performance at or above 98% of the target of $4.65 is capped at 100%. Our Adjusted EPS for 2018 for purposes of the performance-based RSU program was $4.45 or 95.7% of target, resulting in the vesting of 43% for the applicable tranches of the 2017 and 2018 performance-based RSU grants. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 37 | |
COMPENSATION DISCUSSION AND ANALYSIS Our Executive Compensation Program for 2019 Our Executive Compensation Program for 20172019 Key Changes to the Compensation Program for 20172019
Based on benchmark data provided by Deloitte,
We did not make any changes to the Compensation Committeebase salaries or cash bonus targets for the NEOs with respect to 2018. After conducting a market analysis with our independent advisor during 2018, we made several changes to our executive compensation program inprograms for 2019. At an individual level, we made salary adjustments for Mr. Rogers and Mr. Ginnetti and a bonus target change for Mr. Rogers to align their pay more closely with the past year to further the Compensation Committee’s goals established in 2015.market. These changes were designedeffective January 1, 2019. We also redesigned our equity program to address a substantial disparity betweenbetter align with market practices, including changes in the total direct compensation awarded to Stericycle’s NEOsvesting schedule and grant amounts and the total direct compensation awardedaddition of a retirement provision which extends the option exercise period for employees who leave the company due to executives with similar responsibilities in our peer group. Deloitte’s market data regarding compensation packagesretirement. First, the vesting period for our NEOs indicatedstock option and RSU grants was changed for 2019 awards to three years (compared to our previous practice of five years). Second, because the grants are now vesting more quickly, grant amounts were reduced in order to align with the vesting period and market norms. Third, beginning with the 2019 awards, we added a retirement provision for stock option grants that compensation was generally below the medianallows retirees a period of our peer group. To remedy the market disparity in our NEOs’ compensation, beginning in 2015, Stericycle initiated base salary increases that were intendedup to be phased in over a four-year period. The salary increases for 2016 discussed above under “2016 Compensation
Stericycle, Inc. - 2017 Proxy Statement 27
Program Highlights” reflect the second year of that gradual increase. However, in 2017, the Compensation Committee determined it was necessary12 months to accelerate the four-year phase-in and implement the remaining compensation plan changes immediately to reflect increased responsibilitiesexercise any vested options upon termination instead of the executives, to preserve internal equity, and to support retention. The most significant changes to the compensation program for 2017usual 90 days. Retirees are shown below.defined as team members who leave Stericycle at age 65, or age 55 or greater with at least 10 years of service.
We believe these changes made in 2019 are consistent with our compensation philosophy, which stresses that compensation for Stericycle’sour NEOs (and for all other employees) must be performance-based, but also aligned with the median compensation amounts and pay practices awarded by our peers to ensure we can continue to attract and retain a consistent pipeline of high caliber executive talent. The Committee does not anticipate making additional significant structuralequity awards granted in March 2018 and 2019 also provide for “double-trigger” vesting in connection with a change in control. Noted below is a summary of the changes to the program in 2018.for 2019. | | | | | Plan Impacted | | Key Changes | | Reasons for Change | Base salary | | Most NEO salaries increased an average of 41% over 2016.were unchanged compared to 2018 (two changes were made effective January 1, 2019) | | To alignkeep base salaries closer toaligned with the median of our peer group | Annual cash bonus | | Reduction on average of 23% for theMost NEO cash performance bonus opportunities were unchanged compared to 2018 (one change was made effective January 1, 2019) | | To alignkeep target cash compensation closer toaligned with the median of our peer group and to offset higher base salariesreflect company performance | | | | | | | | ReplacedMaintained metric weightings at 70% Adjusted EBITDA metric with Adjusted EBITA | | To better reflect normal operating results without being subject to valuation assumptions | | | | | | | | Reallocated metric weightings to 70% Adjusted EBITA and 30% Adjusted ROIC | | To increasemaintain the emphasis on the value generated from investment decisionskey metrics that represent Company performance | Stock options | | ReducedMaintained the stock option component of the total long-term incentive award from 75% toat one third | | To continue to align with peer practicesmanagement and allow forstockholder interests by providing an increaseincentive, the value of which depends entirely on the growth in RSUsthe value of our common stock | Time-based RSUs | | IncreasedMaintained the time-based RSU component of the total long-term incentive award from 25% toat one third | | To allow for a more balanced long-term incentive mix that is consistent with market norms | Performance-based RSUs | | IncorporatedMaintained the performance-based RSUs to represent one thirdRSU component of the long-term incentive award.
award at one third. Performance-based RSUs vest, or not, in three equal annual installments based on annual EPS performance goals | | To makemaintain the rigor and stockholder focus of the long-term equity incentive program more rigorous and stockholder-focused by tying a significant portion of the NEOs’ award to EPS | Peer group | | Added three companies—ABM Industries, Pitney Bowes, and Tetra TechNo changes were made to the peer group | | To improve comparability ofPeer group analysis showed that the current peer group, with changes made in 2017, is an appropriate benchmark for the Company | Vesting period and providegrant amounts for stock options and RSUs | | Changed the vesting period for 2019 stock option and RSU grants to three years (compared to a previous practice of five years) and reduced grant amounts accordingly | | To align more robust data setclosely with market practices and offer an equity program that is competitive with the market without increasing overall expense | Retirement provision for stock option exercise period | | Added a retirement provision for stock option grants that allows retirees a period of up to 12 months to exercise any vested options upon termination instead of the usual 90 days | | To align more closely with market practices and offer an equity program that is competitive with the market without increasing overall expense |
| | | | 38 | | Stericycle, Inc. - 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS Our Executive Compensation Program for 2019 Currently, performance-based RSUs vest ratably over a three-year period with performance goals for each tranche set annually according to each year’s business plan. Due to the business transformation and portfolio rationalization initiatives that the Company has undertaken, the annual goal-setting process has been necessary to achieve alignment between the performance targets and the annual business plan. Beginning in 2020, the Committee expects to recommend that performance-based RSUs vest at the end of a three year performance period, rather than ratably throughout the three-year period. Further, the Committee intends to change the goal-setting process from an annual process to an approach which incorporates a three year measurement period for the chosen metric. The Committee did not implement any changes in executive compensation during 2015 or 20162018 as a direct result of the stockholders’ advisory vote. The most recent vote regarding “say on pay” for our executive compensation program indicated that our stockholders support the Compensation Committee’s strategy of awarding competitive compensation featuring rigorous performance-based incentive opportunities. During the 20162018 “say on pay vote,” we received 96%90.0% support (or 89.8%, including abstentions) “for” the executive compensation plan.program. 20172019 Executive Compensation Plans
In order to maintain competitiveness with the market but reflect our company’s overall performance, the Committee approved compensation plans for Stericycle’sour NEOs that included an increaseincreases in base salary a reductionfor Mr. Ginnetti and Mr. Rogers, an increase in the cash performance incentive for Mr. Rogers, and a three-part equity program. The compensation plans for our named executive officers in 20172019 are as follows:follows (no information is given for those executives who are no longer employed by the Company): | | | | | | Cash Performance | | Granted | | | Granted | | | Granted | | | | | Base Salary | | | Bonus Percentage | | Stock Options | | | Performance RSUs | | | Time-based RSUs | | | Mr. Alutto | | $ | 1,000,000 | | | | 100 | % | | | 67,280 | | | | 13,455 | | | | 13,455 | | | Mr. Arnold | | | 550,000 | | | | 75 | % | | | 24,993 | | | | 4,998 | | | | 4,998 | | | Mr. Ginnetti | | | 550,000 | | | | 75 | % | | | 24,993 | | | | 4,998 | | | | 4,998 | | | Mr. Collins | | | 370,000 | | | | 80 | % | | | 7,499 | | | | 0 | | | | 4,499 | | | Ms. Frank | | | 400,000 | | | | 60 | % | | | 12,996 | | | | 2,599 | | | | 2,599 | |
Stericycle, Inc. - 2017 Proxy Statement 28
| | | | | | | | | | | | | | | | | | | | | | | | Base Salary | | | Cash Performance
Bonus Percentage | | | Granted
Stock Options | | | Granted
Performance-Based RSUs | | | Granted
Time-based RSUs | | Mr. Alutto | | | $1,000,000 | | | | 100% | | | | | | | | | | | | | | Ms. Miller(1) | | | 625,000 | | | | 90% | | | | 41,417 | | | | 12,005 | | | | 12,005 | | Mr. Ginnetti | | | 575,000 | | | | 75% | | | | 24,654 | | | | 7,146 | | | | 7,146 | | Mr. Rogers | | | 500,000 | | | | 70% | | | | 16,567 | | | | 4,802 | | | | 4,802 | |
| (1) | Ms. Miller’s compensation as Chief Executive Officer has not yet been determined. When such compensation has been finally determined, the Company will make a public announcement, by means of an amendment to a Current Report on Form 8-K or otherwise. |
New Executive Severance and Change in Control Plan
Upon the recommendation of the Compensation Committee, the Board of Directors adopted a plan for executive severance, including following a change in control. The plan, which went into effect on September 1, 2016, applies to Stericycle’s Chief Executive Officer and Executive Vice Presidents, as well asall the Senior Vice Presidents who are designated by the Compensation Committee to participate.named executive officers. Stericycle introduced this plan in order to be competitive with the market and enhance retention. Under the new plan, covered executivesnamed executive officers are entitled to benefits in the event of a termination of employment by Stericycleus other than for “Cause”, “Death” or “Disability” (as each is defined in the plan). A covered executive will receive the following benefits so long as the executive executes and honors a full waiver and release of claims against Stericycle, as well asnon-competition,non-solicitation, confidentiality and other restrictive covenants that Stericyclewe may deem necessary to protect itsour interests: • | An amount equal to the actual annual incentive the executive would have been paid had the executive remained employed on the payment date applicable to then current employees, prorated based on the executive’s period of service through the executive’s termination date. | | | • | An amount equal to the actual annual incentive the executive would have been paid had the executive remained employed on the payment date applicable to then current employees, prorated based on the executive’s period of service through the executive’s termination date. An amount equal to the sum of the executives’ base salary and target annual incentive, each determined as of the termination date, multiplied by the applicable “severance multiple.” For the Chief Executive Officer, the severance multiple is two. For all other executives, the severance multiple is one. Non-qualified deferred compensation benefits and employee welfare benefits pursuant to the terms of the applicable plans and policies. Payment of or reimbursement for the cost of COBRA premiums in connection with the executive’s medical, vision, prescription and dental coverage in effect as of the date of termination, to the extent such premiums exceed the premiums paid for similar provided coverage by active employees, for up to twenty-four months. Reimbursement for outplacement benefits up to $25,000. For involuntary termination (other than for “Cause”) associated with a change in control, which includes voluntary termination for “Good Reason” (as defined in the plan) | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 39 | |
COMPENSATION DISCUSSION AND ANALYSIS Other Compensation Matters within 24 months after a change in control, the benefits above remain in place but the annual incentive payment and the severance multiple changes, as follows: An amount equal to the executive’s target annual incentive, prorated based on the executive’s period of service through the executive’s termination date. An amount equal to the sum of the executives’ base salary and target annual incentive, each determined as of the | | termination date, multiplied by the applicable “severance multiple.” | | | | – | For the Chief Executive Officer, the severance multiple is 2. | | | | | – | For all other executives, the severance multiple is 1. | | | | • | Non-qualified deferred compensation benefits and employee welfare benefits pursuant to the terms of the applicable plans and policies. | | | • | Payment of or reimbursement for the cost of COBRA premiums in connection with the executive’s medical, vision, prescription and dental coverage in effect as of the date of termination, to the extent such premiums exceed the premiums paid for similar provided coverage by active employees, for up to twenty-four months. | | | • | Reimbursement for outplacement benefits up to $25,000. | | | For involuntary termination associated with a change in control, which includes voluntary termination for “Good Reason” (as defined in the plan) within 24 months after a change in control, the benefits above remain in place but the annual incentive payment and the severance multiple changes, as follows: | | | • | An amount equal to the executive’s target annual incentive, prorated based on the executive’s period of service through the executive’s termination date. | | | • | An amount equal to the sum of the executives’ base salary and target annual incentive, each determined as of the termination date, multiplied by the applicable “severance multiple.” | | | | – | For the Chief Executive Officer, the severance multiple is 3. | | | | – | For all other executives, the severance multiple is 2. | | |
For the Chief Executive Officer, the severance multiple is three. For all other executives, the severance multiple is two. In situations involving voluntary termination other than for Good Reason during the 24 month24-month post-change period or termination for cause, Stericyclewe would only be required to pay accrued obligations to the employee. Other Compensation Matters Retirement Plans and Deferred Compensation Arrangements Our Board of Directors adopted the Stericycle, Inc. Supplemental Retirement Plan effective for deferrals of compensation on and after April 1, 2017. Our named executive officers are eligible to participate in the plan. The Plan is unfunded and designed to be a nonqualified deferred compensation plan in compliance with Section 409A of the Internal Revenue Code. Under the Plan, a bookkeeping account will be created for each participant. Each year, we will credit a participant’s account with the designated portion of the participant’s compensation that the participant elected to defer for that year (the “Elective Deferral Contributions”) and may credit the participant’s account with a discretionary amount declared by us for that year (the “Company Discretionary Contributions”). Earnings on the credited amounts will be based on the performance of various investment funds available under the Plan (and as directed by the participant). The Plan permits participants to elect to receive distributions, which generally become payable upon a termination of employment or a specified date prior to termination of employment, in either a lump sum or in installments over a period of up to fifteen years. All distributions from the Plan are in cash. The participant will always be fully vested in that portion of the participant’s account attributable to the Elective Deferral Contributions, and will be vested in Company Discretionary Contributions, if any, five years from the date the first Company Discretionary Contribution is credited to the participant’s account, subject to the participant’s continued service. Vesting will be accelerated upon a participant’s termination of service due to death or disability or a change in control while the participant is still in service. The unvested portion of a participant’s account will generally be forfeited upon termination of employment. A participant’s vested interests under the Plan will be forfeited upon a termination of employment for Cause (as defined in the Plan). Perquisites and Personal Benefits We provide limited perquisites and personal benefits to our executive officers. See “2018 Summary Compensation Table – All Other Compensation” and the related footnotes. Stock Ownership Guidelines All of our executive officers andnon-employee directors are expected to hold a minimum position in our common stock. We established this program to help align the long-term interests of our executive officers andnon-employee directors with those of our stockholders. | | | | | Stock Ownership Guideline | Chief Executive Officer | | Four times his or her annual base salary | Other NEOs | | Three times their respective annual base salaries | Non-Employee Directors | | Four times their respective annual cash retainers |
| | | | 40 | | Stericycle, Inc. - 2019 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS Other Compensation Matters Although there is no specific period of time in which the executive officers andnon-employee directors are required to achieve the applicable ownership threshold, they are expected to make continuous progress toward that goal, and to comply with the following retention ratios until such guidelines have been achieved: The CEO must hold 75% of the net shares acquired upon the vesting or exercise of any equity awards (“Net Profit Shares”) until the minimum position requirement has been achieved; and The other NEOs must hold 50% of their respective Net Profit Shares until the minimum position requirement has been achieved. Thenon-employee directors must retain 75% of their Net Profit Shares until the minimum position requirement has been achieved. Shares that will count toward achievement of the stock ownership guidelines include: Shares owned outright (including employee stock purchase plan shares and securities convertible into shares of common stock on anas-converted basis) by the executive officer or director or any of such person’s immediate family members residing in the same household; Shares held in trust for the benefit of the executive officer or director or such person’s family; Shares held in our employee benefit plans, including the 401(k) Savings Plan; Shares obtained through stock option exercises and thein-the-money value of vested and unvested stock options; and Shares of unvested restricted stock and RSUs. Compliance with these stock ownership guidelines is measured periodically by our internal team responsible for handling executive compensation matters, and the results of such measurement are reported to the Compensation Committee at least once per year. On each measurement date, compliance is measured using each executive officer’s base salary then in effect, and the average trailing180-day trading price per share of our common stock on the Nasdaq Stock Market on such date. Once an executive officer has achieved the applicable ownership threshold, that person will be considered in compliance, regardless of any change in the price of our common stock, so long as such person continues to own at least the number of shares of our common stock and other awards owned at the time of achieving that threshold. Anti-Hedging and Anti-Pledging; Clawbacks See “Corporate Governance – Anti-Hedging and Anti-Pledging Policy” and “Clawback Policy” for a discussion of Company policies with respect to these matters. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 41 | |
COMPENSATION COMMITTEE REPORT The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s executive management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. Compensation Committee Thomas D. Brown, Chairman Lynn D. Bleil Thomas F. Chen Stephen C. Hooley Mike S. Zafirovski | | | | 42 | | Stericycle, Inc. - 2019 Proxy Statement |
2018 SUMMARY COMPENSATION TABLE The following table summarizes the compensation paid or earned for the fiscal years noted in the table by our named executive officers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | | Salary
($) | | | Bonus
($) | | | Option
Awards(1)
($) | | | Stock
Awards(2)
($) | | | Non-Equity
Incentive Plan
Compensation(3)
($) | | | All Other
Compensations(4)
($) | | | Total
($) | | Charles A. Alutto President and Chief
Executive Officer | | | 2018 | | | $ | 1,000,000 | | | $ | – | | | $ | 1,289,942 | | | $ | 1,582,185 | | | $ | 241,800 | | | $ | 5,693 | | | $ | 4,119,620 | | | | | 2017 | | | $ | 1,000,000 | | | $ | – | | | $ | 1,317,342 | | | $ | 1,495,299 | | | $ | – | | | $ | 3,000 | | | $ | 3,815,641 | | | | | 2016 | | | $ | 585,000 | | | $ | – | | | $ | 2,136,579 | | | $ | 780,840 | | | $ | 112,978 | | | $ | 2,000 | | | $ | 3,617,397 | | Cindy J. Miller President and Chief
Operating Officer | | | 2018 | | | $ | 156,250 | | | $ | – | | | $ | 894,995 | | | | 822,209 | | | $ | – | | | $ | 33,526 | | | $ | 1,906,980 | | Daniel V. Ginnetti Executive Vice President
and Chief Financial
Officer | | | 2018 | | | $ | 550,000 | | | $ | – | | | $ | 482,280 | | | $ | 591,531 | | | $ | 99,743 | | | $ | 3,000 | | | $ | 1,726,554 | | | | | 2017 | | | $ | 550,000 | | | $ | – | | | $ | 489,363 | | | $ | 555,444 | | | $ | – | | | $ | 3,000 | | | $ | 1,597,807 | | | | | 2016 | | | $ | 380,000 | | | $ | – | | | $ | 903,940 | | | $ | 330,249 | | | $ | 48,925 | | | $ | 2,000 | | | $ | 1,665,114 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Kurt M. Rogers Executive Vice President and
General Counsel | | | 2018 | | | $ | 400,000 | | | $ | – | | | $ | 244,217 | | | $ | 299,529 | | | $ | 58,032 | | | $ | 3,000 | | | $ | 1,004,778 | | Ruth-Ellen Abdulmassih | | | 2018 | | | $ | 370,000 | | | $ | 327,541 | (5) | | $ | 234,438 | | | $ | 287,535 | | | $ | 58,153 | | | $ | 26,681 | | | $ | 1,304,348 | | Executive Vice President, Communications and
Related Services | | | 2017 | | | $ | 370,000 | | | $ | – | | | $ | 234,882 | | | $ | 266,608 | | | $ | – | | | $ | 41,579 | | | $ | 913,069 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joseph B. Arnold Former Executive Vice
President and Chief
Operating Officer | | | 2018 | | | $ | 550,000 | | | $ | – | | | $ | 482,280 | | | $ | 591,531 | | | $ | 99,743 | | | $ | 1,012,005 | | | $ | 2,735,559 | | | | | 2017 | | | $ | 550,000 | | | $ | – | | | $ | 489,363 | | | $ | 555,444 | | | $ | – | | | $ | 3,000 | | | $ | 1,597,807 | | | | | 2016 | | | $ | 380,000 | | | $ | – | | | $ | 903,940 | | | $ | 330,249 | | | $ | 48,925 | | | $ | 2,000 | | | $ | 1,665,114 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brenda R. Frank Former Executive Vice
President and Chief
People Officer | | | 2018 | | | $ | 367,692 | | | $ | 198,616 | (6) | | $ | 252,546 | | | $ | 309,704 | | | $ | – | | | $ | 19,571 | | | $ | 1,148,129 | | | | | 2017 | | | $ | 400,000 | | | $ | – | | | $ | 254,462 | | | $ | 288,835 | | | $ | – | | | $ | 18,113 | | | $ | 961,410 | | | | | 2016 | | | $ | 325,000 | | | $ | 775,000 | (7) | | $ | 279,402 | | | $ | 389,908 | | | $ | 31,383 | | | $ | – | | | $ | 1,800,693 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | The amounts shown represent the aggregate grant date fair value of the awards for fiscal years 2018, 2017 and 2016. We calculated these amounts in accordance with the provisions of FASB ASC Topic 718, utilizing the assumptions discussed in Note 13 to our financial statements for the fiscal year ended December 31, 2018, Note 12 to our financial statements for the fiscal year ended December 31, 2017, and in Note 6 to our financial statements for the fiscal year ended December 31, 2016. |
| (2) | The amounts shown represent the aggregate grant date fair value of the awards for fiscal years 2018, 2017 and 2016, determined in accordance with FASB ASC Topic 718, based on the closing price of our common stock on the date of the grant. The grant date fair value of time-based RSUs granted in 2018 and performance-based RSUs granted in 2018 are as follows: |
| | | | | | | | | | | | Name | | Time-Based RSUs | | | Performance-Based RSUs | | | | Charles A. Alutto | | | $1,186,639 | | | | $395,546 | | | | Cindy J. Miller | | | 566,654 | | | | 255,555 | | | | Daniel V. Ginnetti | | | 443,648 | | | | 147,883 | | | | Kurt M. Rogers | | | 224,647 | | | | 74,882 | | | | Ruth-Ellen Abdulmassih | | | 215,651 | | | | 71,884 | | | | Joseph B. Arnold | | | 443,648 | | | | 147,883 | | | | Brenda R. Frank | | | 232,278 | | | | 77,426 | | | |
| Because the performance-related component of the performance-based RSUs is based on separate measurements of our performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated with respect toone-third of the total performance-based RSUs in each year of the three-year performance cycle. For 2018, with respect to each of the named executive officers other than Ms. Miller, the grant date fair value of the performance-based RSUs, as measured in accordance with FASB ASC Topic 718, is based on our closing stock price on the grant date of March 1, 2018 of $62.04 and the probable outcome of target performance of the annual performance-related component for 2018. With respect to Ms. Miller, the grant date fair value of the performance-based RSUs is based on our closing stock price on the grant due of March 12, 2019 of $48.59. Such grant relates to Ms. Miller’s hiring in October 2018. With respect to the performance-based RSUs, target performance and maximum performance are the same. |
| (3) | The amounts shown represent the gross amounts of the named executive officer’s annual cash incentive for the applicable fiscal year. |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 43 | |
2018 SUMMARY COMPENSATION TABLE | (4) | With respect to Mr. Alutto, represents $3,000 for 401(k) matching contributions and $2,693 spousal travel. With respect to Mr. Ginnetti and Mr. Rogers, represents only our matching 401(k) plan contributions for the fiscal years noted. With respect to Ms. Miller, represents $18,674 relocation expenses and $14,852 tax gross up. With respect to Mr. Arnold, represents $3,000 for 401(k) matching contributions and $1,009,005 payable pursuant to a separation agreement. With respect to Ms. Frank, represents $5,007 spousal travel and $14,564 for commuting and travel expenses reimbursed by the Company. With respect to Ms. Abdulmassih, represents $3,000 for 401(k) matching contributions and $23,681 for commuting and travel expenses reimbursed by the Company. With respect to such relocation, commuting and travel expenses, the aggregate incremental cost to our Company is determined by the amounts paid to third-party providers. |
| (5) | Represents bonuses paid to Ms. Abdulmassih in connection with certain special projects. |
| (6) | Represents a retention bonus and bonuses paid to Ms. Frank in connection with certain special projects. |
| (7) | Represents a bonus paid to Ms. Frank as part of the transition from her former employment agreement withShred-it. |
| | | | 44 | | Stericycle, Inc. - 2019 Proxy Statement |
2018 GRANTS OF PLAN-BASED AWARDS The following table provides information about the plan-based awards for our named executive officers during 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(3)
(#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options(4)
(#) | | | Exercise
or Base
Price of
Option
Awards
$/Share | | | Grant
Date
Fair
Value
of Stock
and
Option
Awards(5)
($) | | Name | | Grant
Date | | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | Charles A. Alutto | | | | | | | 500,000 | | | | 1,000,000 | | | | 2,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 76,509 | | | | 62.04 | | | | 1,289,942 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,127 | | | | | | | | | | | | 1,186,639 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | 4,782 | | | | 19,127 | | | | 19,127 | | | | | | | | | | | | | | | | 395,546 | | Cindy J. Miller | | | | | | | 281,250 | | | | 562,500 | | | | 1,125,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 11/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 60,391 | | | | 50.78 | | | | 894,995 | | | | | 11/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 11,159 | | | | | | | | | | | | 566,654 | | | | | 3/12/2019 | | | | | | | | | | | | | | | | 3,945 | | | | 15,778 | | | | 15,778 | | | | | | | | | | | | | | | | 255,555 | | Daniel V. Ginnetti | | | | | | | 206,250 | | | | 412,500 | | | | 825,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 28,605 | | | | 62.04 | | | | 482,280 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,151 | | | | | | | | | | | | 443,648 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | 1,788 | | | | 7,151 | | | | 7,151 | | | | | | | | | | | | | | | | 147,883 | | Kurt M. Rogers | | | | | | | 120,000 | | | | 240,000 | | | | 480,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,485 | | | | 62.04 | | | | 244,217 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,621 | | | | | | | | | | | | 224,647 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | 905 | | | | 3,621 | | | | 3,621 | | | | | | | | | | | | | | | | 74,882 | | Ruth-Ellen Abdulmassih | | | | | | | 120,250 | | | | 240,500 | | | | 481,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,905 | | | | 62.04 | | | | 234,438 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,476 | | | | | | | | | | | | 215,651 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | 869 | | | | 3,476 | | | | 3,476 | | | | | | | | | | | | | | | | 71,884 | | Joseph B. Arnold | | | | | | | 206,250 | | | | 412,500 | | | | 825,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 28,605 | | | | 62.04 | | | | 482,280 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,151 | | | | | | | | | | | | 443,648 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | 1,788 | | | | 7,151 | | | | 7,151 | | | | | | | | | | | | | | | | 147,883 | | Brenda R. Frank | | | | | | | 120,000 | | | | 240,000 | | | | 480,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,979 | | | | 62.04 | | | | 252,546 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,744 | | | | | | | | | | | | 232,278 | | | | | 3/01/2018 | | | | | | | | | | | | | | | | 936 | | | | 3,744 | | | | 3,744 | | | | | | | | | | | | | | | | 77,426 | |
| (1) | These amounts consist of the threshold, target and maximum cash award levels set in 2018 under the annual cash performance bonus program. Please see “Compensation Discussion and Analysis” for further information regarding the annual cash performance bonus program. |
| (2) | The amounts shown at target represent the aggregate number of performance-based RSUs that may be earned under the long-term incentive plan. The performance-based RSUs vest, if at all, in three annual installments based on annual EPS performance goals. The earnout percentage may range from 0% to 100% of the target performance-based RSUs granted, with a range of25%-100% earned at threshold to maximum performance. See “Long-Term Equity Incentive Awards – Performance-based Restricted Stock Units for 2018” in “Compensation Discussion and Analysis” above. |
| (3) | The amounts represent the time-based RSUs granted under the long-term incentive plan to the named executive officers. The time-based RSUs vest in equal annual installments over five years, beginning on the first anniversary of the grant date, provided that the executive is still employed by the Company on the vesting date. Please see “Compensation Discussion and Analysis” for further information regarding these RSU grants. |
| (4) | These amounts represent stock options granted under the long-term incentive plan to the named executive officers. These options vest in equal annual installments over five years, beginning on the first anniversary of the grant date, provided that the executive is still employed by the Company on the applicable vesting date. Please see “Compensation Discussion and Analysis” for further information regarding these stock option awards. |
| (5) | The grant date fair value of each time-based RSU award was computed in accordance with FASB ASC Topic 718 based on the closing stock price on the applicable grant date. Because the performance-related component of the performance-based RSUs is based on separate measurements of our performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated with respect |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 45 | |
2018 GRANTS OF PLAN-BASED AWARDS | toone-third of the total performance-based RSUs in each year of the three-year performance cycle. For 2018, the grant date fair value of the performance-based RSUs, as measured in accordance with FASB ASC Topic 718, is based on our closing stock price on the grant date and the probable outcome of target performance of the annual performance-related component for 2018. With respect to the performance-based RSUs, target performance and maximum performance are the same. The grant date fair value of each option award was calculated in accordance with the provisions of FASB ASC Topic 718, utilizing the assumptions discussed in Note 13 to our financial statements for the fiscal year ended December 31, 2018. |
| | | | 46 | | Stericycle, Inc. - 2019 Proxy Statement |
2018 OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END The following table provides information about the outstanding equity awards held by the named executive officers as of December 31, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | | | | Stock Awards | | Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Option
Exercise
Price ($) | | | Option
Expiration
Date(1) | | | | | | Number of
Shares or
Units of
Stock That
Have Not
Vested(2) | | | Market
Value of
Shares or
Units That
Have Not
Vested(3) | | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(4) | | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(3) | | Charles A. Alutto | | | – | | | | 76,509 | | | | 62.04 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 6,984 | | | | – | | | | 63.00 | | | | 7/30/2020 | | | | | | | | | | | | | | | | | | | | | | | | | 31,890 | | | | – | | | | 85.00 | | | | 2/8/2021 | | | | | | | | | | | | | | | | | | | | | | | | | 97,073 | | | | 23,800 | | | | 115.69 | | | | 2/11/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 60,000 | | | | – | | | | 86.24 | | | | 2/13/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 66,000 | | | | 44,000 | | | | 130.19 | | | | 2/6/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 147,671 | | | | – | | | | 95.87 | | | | 2/20/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 1,873 | | | | – | | | | 115.69 | | | | 2/11/2024 | | | | | | | | | | | | | | | | | | | | | | | | | 2,435 | | | | – | | | | 130.19 | | | | 2/6/2025 | | | | | | | | | | | | | | | | | | | | | | | | | 42,163 | | | | 63,243 | | | | 111.12 | | | | 2/5/2024 | | | | | | | | | | | | | | | | | | | | | | | | | 1,007 | | | | – | | | | 115.54 | | | | 2/26/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 13,456 | | | | 53,824 | | | | 83.35 | | | | 2/16/2025 | | | | | | | | | | | | | | | | | | | | | | | | | 341 | | | | – | | | | 82.93 | | | | 2/24/2027 | | | | | | | | 34,108 | | | | 1,251,423 | | | | 7,024 | | | | 257,711 | | Cindy J. Miller | | | – | | | | 60,391 | | | | 50.78 | | | | 11/1/2026 | | | | | | | | 11,159 | | | | 409,423 | | | | | | | | | | Daniel V. Ginnetti | | | – | | | | 28,605 | | | | 62.04 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 12,000 | | | | – | | | | 51.55 | | | | 2/9/2020 | | | | | | | | | | | | | | | | | | | | | | | | | 10,700 | | | | – | | | | 85.00 | | | | 2/8/2021 | | | | | | | | | | | | | | | | | | | | | | | | | 12,000 | | | | 3,000 | | | | 115.69 | | | | 2/11/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 11,200 | | | | – | | | | 86.24 | | | | 2/13/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 6,000 | | | | 1,500 | | | | 116.81 | | | | 8/1/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 27,000 | | | | 18,000 | | | | 130.19 | | | | 2/6/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 14,550 | | | | – | | | | 95.87 | | | | 2/20/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 17,838 | | | | 26,757 | | | | 111.12 | | | | 2/5/2024 | | | | | | | | | | | | | | | | | | | | | | | | | 508 | | | | – | | | | 115.54 | | | | 2/26/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 4,999 | | | | 19,994 | | | | 83.35 | | | | 2/16/2025 | | | | | | | | | | | | | | | | | | | | | | | | | 147 | | | | – | | | | 82.93 | | | | 2/24/2027 | | | | | | | | 12,934 | | | | 474,548 | | | | 2,621 | | | | 96,164 | | Kurt M. Rogers | | | 2,399 | | | | 9,596 | | | | 76.41 | | | | 7/24/2025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,485 | | | | 62.04 | | | | 3/1/2026 | | | | | | | | 5,541 | | | | 203,299 | | | | 1,305 | | | | 47,880 | |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 47 | |
2018 OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | | | | Stock Awards | | Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options (#)
UnExercisable | | | Option
Exercise
Price ($) | | | Option
Expiration
Date(1) | | | | | | Number
of
Shares
or Units
of Stock
That
Have
Not
Vested(2) | | | Market
Value of
Shares or
Units
That
Have Not
Vested(3) | | | Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(4) | | | Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(3) | | Ruth-Ellen Abdulmassih | | | 554 | | | | – | | | | 55.57 | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | | | | | 8,700 | | | | – | | | | 85.00 | | | | 2/8/2021 | | | | | | | | | | | | | | | | | | | | | | | | | 6,400 | | | | 3,200 | | | | 115.69 | | | | 2/11/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 8,700 | | | | – | | | | 86.24 | | | | 2/13/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 711 | | | | – | | | | 86.89 | | | | 2/28/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 2,000 | | | | – | | | | 85.57 | | | | 4/11/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 756 | | | | – | | | | 97.36 | | | | 3/7/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 7,200 | | | | 7,200 | | | | 130.19 | | | | 2/6/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 9,700 | | | | 1,939 | | | | 95.87 | | | | 2/20/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 2,000 | | | | 1,000 | | | | 111.63 | | | | 4/22/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 1,192 | | | | – | | | | 136.285 | | | | 3/5/2025 | | | | | | | | | | | | | | | | | | | | | | | | | 1,021 | | | | – | | | | 116.01 | | | | 3/11/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 2,400 | | | | 9,596 | | | | 83.35 | | | | 2/16/2025 | | | | | | | | | | | | | | | | | | | | | | | | | – | | | | 13,905 | | | | 62.04 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 4,217 | | | | 6,324 | | | | 111.12 | | | | 2/5/2024 | | | | | | | | 6,268 | | | | 229,973 | | | | 1,269 | | | | 46,560 | | Joseph B. Arnold | | | 5,061 | | | | – | | | | 46.83 | | | | 2/10/2019 | | | | | | | | | | | | | | | | | | | | | | | | | 404 | | | | – | | | | 47.24 | | | | 3/2/2019 | | | | | | | | | | | | | | | | | | | | | | | | | 11,500 | | | | – | | | | 51.55 | | | | 2/9/2020 | | | | | | | | | | | | | | | | | | | | | | | | | 792 | | | | – | | | | 55.57 | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | | | | | 11,200 | | | | – | | | | 85.00 | | | | 2/8/2021 | | | | | | | | | | | | | | | | | | | | | | | | | 629 | | | | – | | | | 83.88 | | | | 3/1/2021 | | | | | | | | | | | | | | | | | | | | | | | | | 12,000 | | | | 3,000 | | | | 115.69 | | | | 2/11/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 11,200 | | | | – | | | | 86.24 | | | | 2/13/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 711 | | | | – | | | | 86.89 | | | | 2/28/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 6,000 | | | | 1,500 | | | | 110.14 | | | | 4/14/2022 | | | | | | | | | | | | | | | | | | | | | | | | | 27,000 | | | | 18,000 | | | | 130.19 | | | | 2/6/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 14,550 | | | | – | | | | 95.87 | | | | 2/20/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 448 | | | | – | | | | 97.36 | | | | 3/7/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 337 | | | | – | | | | 130.19 | | | | 2/6/2025 | | | | | | | | | | | | | | | | | | | | | | | | | 17,838 | | | | 26,757 | | | | 111.12 | | | | 2/5/2024 | | | | | | | | | | | | | | | | | | | | | | | | | 508 | | | | – | | | | 115.54 | | | | 2/26/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 4,999 | | | | 19,994 | | | | 83.35 | | | | 2/16/2025 | | | | | | | | | | | | | | | | | | | | | | | | | 147 | | | | – | | | | 82.93 | | | | 2/24/2027 | | | | | | | | | | | | | | | | | | | | | | | | | – | | | | 28,605 | | | | 62.04 | | | | 3/1/2026 | | | | | | | | 12,934 | | | | 474,548 | | | | 2,621 | | | | 96,164 | | Brenda R. Frank | | | 4,200 | | | | – | | | | 124.32 | | | | 11/2/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 5,514 | | | | – | | | | 111.12 | | | | 2/5/2024 | | | | | | | | | | | | | | | | | | | | | | | | | – | | | | – | | | | 62.04 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | |
| | | | 48 | | Stericycle, Inc. - 2019 Proxy Statement |
2018 OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END | (1) | Other than options listed with expiration dates of February 11, 2022, April 14, 2022, February 5, 2024, November 2, 2023, and February 6, 2025 and February 24, 2027 which have8-year terms and expire on the eighth anniversary of the option grant date, these options have10-year terms and expire on the tenth anniversary of the option grant date. Options generally vest at the rate ofone-fifth (20%) of the option shares on each of the first five anniversaries of the option grant date. |
| (2) | Represents time-based RSUs that generally vest in 20% increments on each of the first through fifth year anniversaries of the date of grant. |
| (3) | Market value is based on the share price of $36.69 as of December 31, 2018. |
| (4) | The numbers shown represent performance-based RSUs, which vest, if at all, in three equal annual installments based on annual EPS performance goals. Pursuant to SEC rules, the amounts shown reflect the number of units that may be earned over the three-year period if the threshold level of EPS is achieved in each of the years. |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 49 | |
2018 OPTION EXERCISES AND STOCK VESTED The following table summarizes information regarding stock options exercised by the named executive officers and restricted stock unit awards to the named executive officers that vested during the fiscal year ended December 31, 2018. | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Shares
Acquired on
Exercise (#) | | | Value
Realized
Exercise
($)(1) | | | Number of Shares
Acquired Upon
Vesting (#) | | | Value
Realized
on Vesting
($)(2) | | Charles A. Alutto | | | 27,000 | | | | 237,211 | | | | 4,096 | | | | 303,931 | | Cindy J. Miller | | | | | | | | | | | | | | | | | Daniel V. Ginnetti | | | 10,000 | | | | 234,450 | | | | 1,593 | | | | 117,952 | | Kurt M. Rogers | | | | | | | | | | | 479 | | | | 33,123 | | Ruth-Ellen Abdulmassih | | | | | | | | | | | 769 | | | | 55,535 | | Joseph B. Arnold | | | | | | | | | | | 1,593 | | | | 117,952 | | Brenda R. Frank | | | | | | | | | | | 702 | | | | 52,396 | |
| (1) | Represents the difference between the market value of the shares acquired upon exercise and the aggregate exercise price of the shares acquired. |
| (2) | Represents the market value of the shares issued in settlement of RSU awards on the date of the awards vested, calculated using the closing sale price reported on the Nasdaq Global Select Market on the vesting date. |
| | | | 50 | | Stericycle, Inc. - 2019 Proxy Statement |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGEIN-CONTROL The Board of Directors adopted a plan for executive severance, including but not limited to following a change in control, which went into effect on September 1, 2016. For further discussion of the executive severance plan, see “Executive Severance and Change in Control Plan” in the “Compensation Discussion and Analysis” section above. Additionally, the Company’s long-term incentive plans and award agreements provide for the following treatment of awards: Upon a change in control, stock options and time-based RSU awards will vest in full and performance-based RSU awards will vest at target level and any restrictions on shares underlying the awards shall lapse. Upon a termination of employment due to death, stock options and time-based RSU awards will vest in full and performance-based RSU awards will vest at target level, without regard to satisfaction of performance targets. In the case of stock options, the vested portion of the option will expire upon the earlier of (i) the first anniversary of the executive’s death or (ii) the option’s expiration date. For terminations of employment other than by reason of death, any unvested portion of an award shall lapse and be canceled as of the executive’s termination date. In the case of stock options, the vested portion of the option will expire upon the earlier of (i) 90 days after the executive’s termination date or (ii) the option’s expiration date. Payments upon a Termination Following a Change in Control | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Severance(1) | | | Pro-Rated
Annual
Incentive(2) | | | Stock
Options(3) | | | RSUs(4) | | | Continued
Welfare and
Other Benefits(5) | | | Total | | Charles A. Alutto | | $ | 6,000,000 | | | $ | 241,800 | | | | – | | | $ | 2,282,301 | | | $ | 64,100 | | | $ | 8,588,201 | | Cindy J. Miller | | | 1,250,000 | | | | – | | | | – | | | | 409,423 | | | | 64,100 | | | | 1,723,523 | | Daniel V. Ginnetti | | | 1,925,000 | | | | 99,743 | | | | – | | | | 859,170 | | | | 64,100 | | | | 2,948,013 | | Kurt M. Rogers | | | 1,280,000 | | | | 58,032 | | | | – | | | | 394,858 | | | | 64,100 | | | | 1,796,990 | | Ruth-Ellen Abdulmassih | | | 1,221,000 | | | | 58,153 | | | | – | | | | 416,211 | | | | 64,100 | | | | 1,759,464 | |
Payments upon a Termination other than for Cause, Disability or Death (Without a Change in Control) | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Severance(6) | | | Pro-Rated
Annual
Incentive(2) | | | Stock
Options | | | RSUs | | | Continued
Welfare and
Other Benefits(5) | | | Total | | Charles A. Alutto | | $ | 4,000,000 | | | $ | 241,800 | | | | – | | | | – | | | $ | 64,100 | | | $ | 4,305,900 | | Cindy J. Miller | | | 625,000 | | | | – | | | | – | | | | – | | | | 64,100 | | | | 689,100 | | Daniel V. Ginnetti | | | 962,500 | | | | 99,743 | | | | – | | | | – | | | | 64,100 | | | | 1,126,343 | | Kurt M. Rogers | | | 640,000 | | | | 58,032 | | | | – | | | | – | | | | 64,100 | | | | 762,132 | | Ruth-Ellen Abdulmassih | | | 610,500 | | | | 58,153 | | | | – | | | | – | | | | 64,100 | | | | 732,753 | |
| (1) | In accordance with the Executive Severance andChange-in-Control Plan (the “Executive Severance Plan”), amounts in this column represent severance payments equal to three times for Mr. Alutto and two times for the other named executive officers the sum of the executive officer’s base salary and target annual incentive |
| (2) | In accordance with the Executive Severance Plan, the executive will receive a prorated annual incentive for the year in which the termination occurs, calculated based on actual performance during the year. |
| (3) | Stock options will vest in full upon (i) a change in control regardless of a termination or (ii) death. The value shown for stock options is zero given that all unvested option shares that would vest following a change in control or death were granted at an option price higher than the closing stock price of $36.69 per share on December 31, 2018. |
| (4) | Time-based RSUs will vest in full and performance-based RSUs will vest at target level upon (i) a change in control regardless of a termination or (ii) death. The value shown for RSUs was determined by multiplying the closing stock price of $36.69 per share on December 31, 2018 by the number of unvested time-based and performance-based RSUs that would vest upon a change in control or death. |
| (5) | In accordance with the Executive Severance Plan, amounts in this column represent $25,000 in outplacement services plus approximately $39,100 for the continuation of medical, dental, and life insurance for a period of 24 months. |
| (6) | In accordance with the Executive Severance Plan, amounts in this column represent severance payments equal to two times for Mr. Alutto and one time for the other named executive officers the sum of the executive officer’s base salary and target annual incentive. We paid Mr. Arnold $1,009,005 with respect to his separation in 2018. We did not make any payments to Ms. Frank pursuant to the Executive Severance Plan, in connection with her resignation in 2018. |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 51 | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGEIN-CONTROL Nonqualified Deferred Compensation On February 28, 2019, in connection with Mr. Alutto’s May 2, 2019 retirement and resignation from his position as Chief Executive Officer and a member of the Board, respectively, the Company entered into a transition agreement with Mr. Alutto (the “Agreement”). Pursuant to the Agreement, Mr. Alutto will receive, in addition to any accrued obligations: (i) continued payment of his current base salary through the date of his retirement; (ii) cash separation pay, payable in accordance with the Company’s Executive Severance and Change in Control Plan, equal to two times the sum of his base salary and target annual incentive for 2019; and(iii) pro-rata payment, through the date of his retirement, of his 2019 annual cash incentive, based on actual Company performance, payable in the first quarter of 2020. To ensure a smooth transition, Mr. Alutto will provide consulting services to the Company from the retirement date until July 31, 2019 (the “Consulting Period”), for which the Company will pay him $50,000 per month. In addition, pursuant to the Agreement, Mr. Alutto will continue to vest, pro rata on a monthly basis during the Consulting Period, with respect to outstanding time-based RSUs and stock options, and with respect to outstanding performance-based RSUs, based on actual Company performance. Pursuant to the Agreement, the period for Mr. Alutto to exercise outstanding vested stock options is extended to May 2, 2020. Nonqualified Deferred Compensation Our Board of Directors adopted the Stericycle, Inc. Supplemental Retirement Plan effective for deferrals of compensation on and after April 1, 2017. The Plan applies to directors, management and highly compensated employees of Stericycle, or an applicable Company subsidiary,subsidiary. The Plan is unfunded and designed to be a nonqualified deferred compensation plan in compliance with Section 409A of the Internal Revenue Code. Under the Plan, a bookkeeping account will be created for each participant. Each year, Stericyclewe will credit a participant’s account with the designated portion of the participant’s compensation that the participant elected to defer for that year (the “Elective Deferral Contributions”) and may credit the participant’s account with a discretionary amount declared by Stericycleus for that year (the “Company Discretionary Contributions”). Participants may defer up to 80% of salary, bonus and commissions. Earnings on the credited amounts will be based on the performance of various investment funds available under the Plan (and as directed by the participant). Participants may change investment choices daily. The Plan permits participants to elect to receive distributions, which generally become payable upon a termination of employment or a specified date prior to termination of employment, in either a lump sum or in installments over a period of up to fifteen years. All distributions from the Plan are in cash. The participant will always be fully vested in that portion of the participant’s account attributable to the Elective Deferral Contributions, and will be vested in StericycleCompany Discretionary Contributions, if any, five years from the date the first EmployerCompany Discretionary Contribution is credited to the participant’s account subject to the participant’s continued service. Vesting will be accelerated upon a participant’s termination of service due to death or disability or a change in control while the participant is still in service. The unvested portion of a participant’s account will generally be forfeited upon termination of employment. A participant’s vested interests under the Plan will be forfeited upon a termination of employment for Cause. Perquisites and Personal BenefitsThe following table summarizes information with respect to the participation of the named executive officers in the Stericycle, Inc. Supplemental Retirement Plan for the fiscal year ended December 31, 2018.
We do not provide any perquisites or personal benefits to our executive officers.
Stericycle, Inc. - 2017 Proxy Statement 29
Stock Ownership Guidelines
All of our executive officers and members of the Board of Directors are expected to hold a minimum position in our stock. Stericycle established this program to help align the long-term interests of our executive officers and non-employee directors with those of our stockholders.
| | | | | | | | | | | | | | | | | | | | | Name | | Executive
Contributions in
FY 2018 ($)(1) | | | Stericycle
Contributions in
FY 2018 ($) | | | Aggregate
Earnings in
FY 2018 ($)(2) | | | Aggregate
Withdrawals/
Distributions in
FY 2018 ($) | | | Aggregate
Balance at
12/31/18 ($)(3) | | Charles A. Alutto | | | 10,000 | | | | — | | | | (1,358 | ) | | | — | | | | 16,499 | | Cindy J. Miller | | | — | | | | — | | | | — | | | | — | | | | — | | Daniel V. Ginnetti | | | — | | | | — | | | | — | | | | — | | | | — | | Kurt M. Rogers | | | — | | | | — | | | | — | | | | — | | | | — | | Ruth-Ellen Abdulmassih | | | — | | | | — | | | | — | | | | — | | | | — | | Joseph B. Arnold | | | — | | | | — | | | | — | | | | — | | | | — | | Brenda R. Frank | | | — | | | | — | | | | — | | | | — | | | | — | |
| | Stock Ownership Guideline | Chief Executive Officer | | Four times his or her annual base salary | Other NEOs | | Three times their respective annual base salaries | Non-Employee Directors | | Four times their respective annual cash retainers |
Although there is no specific period of time in which the executive officers and non-employee directors are required to achieve the applicable ownership threshold, they are expected to make continuous progress toward that goal, and to comply with the following retention ratios until such guidelines have been achieved:
• | The CEO must hold 75% of his or her Net Profit Shares until the minimum position requirement has been achieved; and | | | • | The other NEOs must hold 50% of their respective Net Profit Shares until the minimum position requirement has been achieved. | | | • | The non-employee directors must retain 75% of his or her Net Profit Shares until the minimum position requirement has been achieved. |
Shares that will count toward achievement of the stock ownership guidelines include:
• | Shares owned outright (including ESPP shares and securities convertible into shares of common stock on an as-converted basis) by the executive officer or director or any of such person’s immediate family members residing in the same household; | | | • | Shares held in trust for the benefit of the executive officer or director or such person’s family; | | | • | Shares held in Stericycle’s employee benefit plans, including the 401(k) Savings Plan; | | | • | Shares obtained through stock option exercises and the in-the-money value of vested and unvested stock options; | | | • | Shares of vested restricted stock and vested RSUs; and | | | • | Shares of unvested restricted stock and RSUs. |
Compliance with these stock ownership guidelines is measured periodically by the internal team at Stericycle responsible for handling executive compensation matters, and the results of such measurement are reported to the Compensation Committee at least once per year. On each measurement date, compliance is measured using each executive officer’s base salary then in effect, and the average trailing 180-day trading price per share of Stericycle common stock on the Nasdaq Stock Market on such date. Once an executive officer has achieved the applicable ownership threshold, that person will be considered in compliance, regardless of any change in the price of Stericycle common stock, so long as such person continues to own at least the number of shares of Stericycle common stock and other awards owned at the time of achieving that threshold.
Stericycle, Inc. - 2017 Proxy Statement 30
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s executive management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
| (1) | Compensation Committee
William K. Hall, Chairman
Lynn D. Bleil
Thomas D. Brown
Mike S. Zafirovski
|
Stericycle, Inc. - 2017 Proxy Statement 31
2016 SUMMARY COMPENSATION TABLE
The following table provides information about the compensation paid or earned during the period 2014-2016 by our principal executive officer, principal financial officer and three most highly compensated other executive officers (the “named executive officers”):
| | | | | | | | | | | | | | | | | | Non-Equity | | | | | | | | | | | | | | | | | | | | Option | | | Stock | | | Incentive Plan | | | All Other | | | | | | | | Year | | | Salary | | | Bonus | | | Awards(1) | | | Awards(2) | | | Compensation(3) | | | Compensations(4) | | | Total | | | Charles A. Alutto(5) | | | 2016 | | | $ | 585,000 | | | $ | | | | $ | 2,136,579 | | | $ | 780,840 | | | $ | 112,978 | | | $ | 2,000 | | | $ | 3,617,397 | | | President and Chief | | | 2015 | | | | 488,269 | | | | | | | | 2,510,200 | | | | | | | | 465,327 | | | | 1,750 | | | | 3,465,546 | | | Executive Officer | | | 2014 | | | | 379,615 | | | | | | | | 2,532,320 | | | | | | | | 721,875 | | | | 1,750 | | | | 3,635,560 | | | Joseph B. Arnold(6) | | | 2016 | | | | 380,000 | | | | | | | | 903,940 | | | | 330,249 | | | | 48,925 | | | | 2,000 | | | | 1,665,114 | | Executive Vice President
and Chief Operating Officer | | | 2015 | | | | 343,077 | | | | | | | | 1,026,900 | | | | | | | | 234,871 | | | | 1,750 | | | | 1,606,598 | | | Daniel V. Ginnetti(7) | | | 2016 | | | | 380,000 | | | | | | | | 903,940 | | | | 330,249 | | | | 48,925 | | | | 2,000 | | | | 1,665,114 | | | Executive Vice President | | | 2015 | | | | 346,923 | | | | | | | | 1,026,900 | | | | | | | | 234,871 | | | | 1,750 | | | | 1,610,444 | | | and Chief Financial Officer | | | 2014 | | | | 275,385 | | | | | | | | 478,200 | | | | | | | | 187,200 | | | | 1,750 | | | | 942,535 | | | Michael J. Collins | | | 2016 | | | | 370,000 | | | | | | | | 624,539 | | | | 228,240 | | | | 38,110 | | | | 2,000 | | | | 1,262,889 | | | Executive Vice President and | | | 2015 | | | | 342,500 | | | | | | | | 753,060 | | | | | | | | 205,703 | | | | 1,750 | | | | 1,303,013 | | President Returns & Recall
Management | | | 2014 | | | | 296,154 | | | | | | | | 766,080 | | | | | | | | 405,000 | | | | 1,750 | | | | 1,468,984 | | | Brenda R. Frank | | | 2016 | | | | 325,000 | | | | 775,000 | (8) | | | 279,402 | | | | 389,908 | | | | 31,383 | | | | | | | | 1,800,693 | | Executive Vice President
and Chief People Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | The amountsamount reported in this column represent the fair value of options that we granted in 2016, 2015, and 2014 determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (“FASB ASC Topic 718”), excluding the effect of the expected forfeiture rate. The assumptions madeis reported as “Salary” in the valuation of these optionsSummary Compensation Table for 2016 are described at the end of Note 6, Stock Based Compensation, to our consolidated financial statements included in our annual report on Form 10-K for thefiscal year ended December 31, 2016 (available at www.stericycle.com). The amount in this column for a particular year does not include the fair value of any option that we granted during that year pursuant to our bonus conversion program in respect of the named executive officer’s annual cash performance bonus for the prior year. See the following notes (5)-(7).2018. | (2) | The amounts in this column represent the fair value of time-based RSUs that we granted in 2016 determined in accordance with FASB ASC Topic 718, based on the closing price of Stericycle, Inc. common stock on the date of grant. | (3) | The amounts in this column are the gross amounts of the named executive officer’s annual cash performance bonus for the particular year before any conversion of the bonus into an option pursuant to our bonus conversion program. See notes (5)-(7). | (4) | The amounts in this column represent our matching 401(k) plan contributions for 2016, 2015, and 2014, for each of our named executive officers. | (5) | The amounts in the “Non-Equity Incentive Plan Compensation” column for Mr. Alutto are the gross amounts of his annual cash performance bonus. Pursuant to our bonus conversion program, Mr. Alutto elected to forgo $5,649 of his annual cash performance bonus for 2016 and received instead an option for 341 shares and a net cash bonus of $107,329. The fair value of these bonus conversion options is not included in the amounts in Mr. Alutto’s “Option Awards” column. | (6) | The amount in the “Non-Equity Incentive Plan Compensation” column for Mr. Arnold is the gross amount of his annual cash performance bonus. Pursuant to our bonus conversion program, Mr. Arnold elected to forgo $2,446 of his annual cash performance bonus for 2016 and received instead an option for 147 shares and a net cash bonus of $46,479. The fair value of these bonus conversion options is not included in the amounts in Mr. Arnold’s “Option Awards” column. | (7) | The amount in the “Non-Equity Incentive Plan Compensation” column for Mr. Ginnetti is the gross amount of his annual cash performance bonus. Pursuant to our bonus conversion program, Mr. Ginnetti elected to forgo $2,446 of his annual cash performance bonus for 2016 and received instead an option for 147 shares and a net cash bonus of $46,479. The fair value of these bonus conversion options is not included in the amounts in Mr. Ginnetti’s “Option Awards” column. | (8) | Represents a bonus paid to Ms. Frank as part of the transition from her former employment agreement with Shred-it. |
Stericycle, Inc. - 2017
| | | | 52 | | Stericycle, Inc. - 2019 Proxy Statement322016 GRANTS OF PLAN-BASED AWARDS
The following table provides information about the plan-based awards for our named executive officers during 2016.
| | | | | | | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(2) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options(3) | | | Exercise or
Base Price
of Option
Awards
$/share | | | Grant Date
Fair Value
of Stock
and Option
Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1) | | | | | | | | | | | | | Grant Date | | Threshold | | | Target | | | Maximum | | | | | | | | | | | Charles A. Alutto | | | | $ | 438,750 | | | $ | 877,500 | | | $ | 1,755,000 | | | | | | | | | | | | | | | | | 2/5/2016 | | | | | | | | | | | | | | | | | | | 105,406 | | | $ | 111.12 | | | $ | 2,136,579 | | | | | 2/5/2016 | | | | | | | | | | | | | | | 7,027 | | | | | | | | | | | | 780,840 | | | Brent Arnold | | | | | 190,000 | | | | 380,000 | | | | 760,000 | | | | | | | | | | | | | | | | | | | | | 2/5/2016 | | | | | | | | | | | | | | | | | | | 44,595 | | | | 111.12 | | | | 903,940 | | | | | 2/5/2016 | | | | | | | | | | | | | | | 2,972 | | | | | | | | | | | | 330,249 | | | Daniel V. Ginnetti | | | | | 190,000 | | | | 380,000 | | | | 760,000 | | | | | | | | | | | | | | | | | | | | | 2/5/2016 | | | | | | | | | | | | | | | | | | | 44,595 | | | | 111.12 | | | | 903,940 | | | | | 2/5/2016 | | | | | | | | | | | | | | | 2,972 | | | | | | | | | | | | 330,249 | | | Michael J. Collins | | | | | 166,500 | | | | 333,000 | | | | 666,000 | | | | | | | | | | | | | | | | | | | | | 2/5/2016 | | | | | | | | | | | | | | | | | | | 30,811 | | | | 111.12 | | | | 624,539 | | | | | 2/5/2016 | | | | | | | | | | | | | | | 2,054 | | | | | | | | | | | | 228,240 | | | Brenda Frank | | | | | 121,875 | | | | 243,750 | | | | 487,500 | | | | | | | | | | | | | | | | | | | | | 2/5/2016 | | | | | | | | | | | | | | | | | | | 13,784 | | | | 111.12 | | | | 279,401 | | | | | 2/5/2016 | | | | | | | | | | | | | | | 3,418 | | | | | | | | | | | | 389,908 | |
(1) | These amounts consist of the threshold, target and maximum cash award levels set in 2016 under the annual cash performance bonus program. The amount actually paid to each named executive officer is included in the Non-Equity Incentive Plan Compensation column in the 2016 Summary Compensation Table. Please see “Compensation Discussion and Analysis” for further information regarding the annual cash performance bonus program. | (2) | This amount represents the time-based RSUs granted under the long-term incentive plan to the named executive officers. The RSUs vest in equal annual installments over five years, beginning on the first anniversary of the grant date, provided that the executive is still employed by the Company on the vesting date. Please see “Compensation Discussion and Analysis” for further information regarding these restricted stock unit grants. | (3) | These amounts represent stock options granted under the long-term incentive plan to the named executive officers. These options vest in equal annual installments over five years, beginning on the first anniversary of the grant date, provided that the executive is still employed by the Company on the applicable vesting date. Please see “Compensation Discussion and Analysis” for further information regarding these stock option awards. This column does not include options granted in February 2017 by reason of the named executive officers’ conversion, pursuant to our bonus conversion program, of all or part of their respective annual cash performance bonuses for 2016. |
Stericycle, Inc. - 2017 Proxy Statement 33
2016 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information about the outstanding equity awards held by the named executive officers as of December 31, 2016.
| | | Option Awards | | | Stock Awards | | | | Securities | | | Securities | | | | | | | | | | | | | | | | | Underlying | | | Underlying | | | | | | | | | | | | Market Value of | | | | | Unexercised | | | Unexercised | | | Option | | | Option | | | Shares or Units of | | | Shares or Units | | | | | Options | | | Options | | | Exercise | | | Expiration | | | Stock that Have | | | that Have Not | | | Name | | Exercisable | | | Unexercisable | | | Price | | | Date(1) | | | Not Vested(2) | | | Vested(3) | | | Charles A. Alutto | | | 27,000 | | | | – | | | $ | 54.59 | | | | 6/18/2018 | | | | | | | | | | | | | | 6,984 | | | | – | | | | 63.00 | | | | 7/30/2020 | | | | | | | | | | | | | | 31,890 | | | | – | | | | 85.00 | | | | 2/8/2021 | | | | | | | | | | | | | | 47,600 | | | | 71,400 | | | | 115.69 | | | | 2/11/2022 | | | | | | | | | | | | | | 48,000 | | | | 12,000 | | | | 86.24 | | | | 2/13/2022 | | | | | | | | | | | | | | 22,000 | | | | 88,000 | | | | 130.19 | | | | 2/6/2023 | | | | | | | | | | | | | | 89,471 | | | | 58,200 | | | | 95.87 | | | | 2/20/2023 | | | | | | | | | | | | | | 1,873 | | | | – | | | | 115.69 | | | | 2/11/2024 | | | | | | | | | | | | | | 2,435 | | | | – | | | | 130.19 | | | | 2/6/2025 | | | | | | | | | | | | | | | | | | 105,406 | | | | 111.12 | | | | 2/5/2024 | | | | | | | | | | | | | | 1,007 | | | | | | | | 115.54 | | | | 2/26/2026 | | | | 7,027 | | | $ | 541,360 | | | Joseph B. Arnold(4) | | | 5,061 | | | | – | | | $ | 46.83 | | | | 2/10/2019 | | | | | | | | | | | | | | 404 | | | | – | | | | 47.24 | | | | 3/2/2019 | | | | | | | | | | | | | | 11,500 | | | | – | | | | 51.55 | | | | 2/9/2020 | | | | | | | | | | | | | | 792 | | | | – | | | | 55.57 | | | | 3/1/2020 | | | | | | | | | | | | | | 11,200 | | | | 0 | | | | 85.00 | | | | 2/8/2021 | | | | | | | | | | | | | | 629 | | | | – | | | | 83.88 | | | | 3/1/2021 | | | | | | | | | | | | | | 6,000 | | | | 9,000 | | | | 115.69 | | | | 2/11/2022 | | | | | | | | | | | | | | 8,960 | | | | 2,240 | | | | 86.24 | | | | 2/13/2022 | | | | | | | | | | | | | | 711 | | | | – | | | | 86.89 | | | | 2/28/2022 | | | | | | | | | | | | | | 3,000 | | | | 4,500 | | | | 110.14 | | | | 4/14/2022 | | | | | | | | | | | | | | 9,000 | | | | 36,000 | | | | 130.19 | | | | 2/6/2023 | | | | | | | | | | | | | | 8,730 | | | | 5,820 | | | | 95.87 | | | | 2/20/2023 | | | | | | | | | | | | | | 448 | | | | – | | | | 97.36 | | | | 3/7/2023 | | | | | | | | | | | | | | 337 | | | | – | | | | 130.19 | | | | 2/6/2025 | | | | | | | | | | | | | | – | | | | 44,595 | | | | 111.12 | | | | 2/5/2024 | | | | | | | | | | | | | | 508 | | | | – | | | | 115.54 | | | | 2/26/2026 | | | | 2,972 | | | $ | 228,963 | | | Daniel V. Ginnetti(5) | | | 10,000 | | | | – | | | $ | 46.83 | | | | 2/10/2019 | | | | | | | | | | | | | | 12,000 | | | | – | | | | 51.55 | | | | 2/9/2020 | | | | | | | | | | | | | | 10,700 | | | | – | | | | 85.00 | | | | 2/8/2021 | | | | | | | | | | | | | | 6,000 | | | | 9,000 | | | | 115.69 | | | | 2/11/2022 | | | | | | | | | | | | | | 8,960 | | | | 2,240 | | | | 86.24 | | | | 2/13/2022 | | | | | | | | | | | | | | 3,000 | | | | 4,500 | | | | 116.81 | | | | 8/1/2022 | | | | | | | | | | | | | | 9,000 | | | | 36,000 | | | | 130.19 | | | | 2/6/2023 | | | | | | | | | | | | | | 8,730 | | | | 5,820 | | | | 95.87 | | | | 2/20/2023 | | | | | | | | | | | | | | – | | | | 44,595 | | | | 111.12 | | | | 2/5/2024 | | | | | | | | | | | | | | 508 | | | | – | | | | 115.54 | | | | 2/26/2026 | | | | 2,972 | | | $ | 228,963 | |
Stericycle, Inc. - 2017 Proxy Statement 34
| | | Option Awards | | | Stock Awards | | | | | Securities | | | Securities | | | | | | | | | | | | | | | | | Underlying | | | Underlying | | | | | | | | | | | | Market Value of | | | | | Unexercised | | | Unexercised | | | Option | | | Option | | | Shares or Units of | | | Shares or Units | | | | | Options | | | Options | | | Exercise | | | Expiration | | | Stock that Have | | | that Have Not | | | Name | | Exercisable | | | Unexercisable | | | Price | | | Date(1) | | | Not Vested(2) | | | Vested(3) | | | Michael J. Collins | | | 1,939 | | | | – | | | $ | 51.55 | | | | 2/9/2020 | | | | | | | | | | | | | | 16,450 | | | | – | | | | 85.00 | | | | 2/8/2021 | | | | | | | | | | | | | | 14,400 | | | | 21,600 | | | | 115.69 | | | | 2/11/2022 | | | | | | | | | | | | | | 30,460 | | | | 7,000 | | | | 86.24 | | | | 2/13/2022 | | | | | | | | | | | | | | 6,600 | | | | 26,400 | | | | 130.19 | | | | 2/6/2023 | | | | | | | | | | | | | | 28,197 | | | | 17,460 | | | | 95.87 | | | | 2/20/2023 | | | | | | | | | | | | | | 2,119 | | | | – | | | | 115.69 | | | | 2/11/2024 | | | | | | | | | | | | | | 2,733 | | | | – | | | | 130.19 | | | | 2/6/2025 | | | | | | | | | | | | | | – | | | | 30,811 | | | | 111.12 | | | | 2/5/2024 | | | | 2,054 | | | | $ 158,240 | | | Brenda R. Frank | | | 1,400 | | | | 5,600 | | | $ | 124.32 | | | | 11/2/2023 | | | | | | | | | | | | | | – | | | | 13,784 | | | | 111.12 | | | | 2/5/2024 | | | | 3,418 | | | | $ 263,323 | |
(1) | Other than options listed with expiration dates of February 11, 2022, April 14, 2022, February 5,2024, November 2, 2023, and February 6, 2025 which have 8-year terms and expire on the eighth anniversary of the option grant date, these options have 10-year terms and expire on the tenth anniversary of the option grant date. Options generally vest at the rate of one-fifth (20%) of the option shares on each of the first five anniversaries of the option grant date. Options granted pursuant to our bonus conversion program are immediately vested. | (2) | Represents RSUs that were granted on February 16, 2016 and vest in 20% increments on each of the first through fifth year anniversaries of the date of grant. | (3) | Market value is based on the share price of $77.04 as of December 29, 2016. | (4) | Mr. Arnold holds 2,500 RSUs that were granted to him on February 13, 2012 prior to his becoming an executive officer. All of these RSUs vested on February 13, 2017. | (5) | Mr. Ginnetti holds 2,500 RSUs that were granted to him on February 13, 2012 prior to his becoming an executive officer. All of these RSUs vested on February 13, 2017. |
2016 OPTION EXERCISES AND STOCK VESTED
The following table provides information about options that vested for named executive offices in 2016 as well as option exercised by the named executive officers during 2016. Prior to 2017, we did not award shares of restricted stock, RSUs or similar rights to any of our named executive officers, and accordingly no such shares, units or rights vested during 2016.
| | | Option Awards Exercised | | | | Number of Shares | | Realized Value | | Name | | Acquired on Exercise(1) | | on Exercise(2) | | Charles A. Alutto | | – | | – | | Joseph B. Arnold | | – | | – | | Daniel V. Ginnetti | | 17,184 | | $1,032,479 | | Michael J. Collins | | – | | – | | Brenda R. Frank | | – | | – |
(1) | The information in this column is provided on an aggregate basis, and includes (i) option shares canceled in a net exercise of the option (in which option shares with a value equal to the exercise price and related withholding taxes are canceled in satisfaction of those amounts) and (ii) option shares acquired and concurrently sold to pay the exercise price and related withholding taxes in a “cashless” exercise of the option through a broker. | (2) | The information in this column is provided on an aggregate basis. The value realized on the exercise of an option was determined by multiplying the number of shares for which the option was exercised by the difference between (i) either (A) the closing price of our common stock on the date of exercise, in the case of payment of the exercise price in cash or by delivery of shares of our common stock for cancelation or by a net exercise of the option, or (B) the sales price, in the case of a “cashless” exercise of the option, and (ii) the exercise price per share of the option. |
Stericycle, Inc. - 2017 Proxy Statement 35
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGEIN-CONTROL Nonqualified Deferred Compensation The Board of Directors adopted a plan for executive severance, including but not limited to following a change in control, which went into effect on September 1, 2016. For further discussion of the executive severance plan, see “New Executive Severance and Change in Control Plan” in the “Compensation Discussion and Analysis” section above.
Additionally, the Company’s incentive plans and award agreements provide for the following treatment of awards:
•(2) | Upon a changeThe amount reported in control, stock options and restricted stock unit awards will vestthis column was not reported in full and any restrictions on shares underlying the awards shall lapse.Summary Compensation Table as part of an individual’s compensation for the fiscal year ended December 31, 2018. |
| (3) | $7,308 was previously reported as compensation in the Summary Compensation Table in previous years. |
In fiscal year 2018, the investment options available under the Supplemental Retirement Plan and their respective notional rates of return were as follows: | | | | | Deemed Investment Option | | Fiscal Year 2018
Cumulative
Return | | American Balanced Fund | | | -2.42% | | American Capital Income Builder | | | -6.74% | | American Capital World Bond Fund | | | -1.11% | | American Century Inflation Adjusted Bond Fund | | | -2.27% | | American Growth Fund of America | | | -2.60% | | American New Economy Fund | | | -3.92% | | Blackrock High Yield Bond Fund | | | -2.76% | | Columbia Midcap Index Fund | | | -11.35% | | Columbia Quality Income Fund | | | 1.95% | | Columbia Small Cap Index Fund | | | -8.72% | | Deutsche Real Estate Securities Fund | | | -3.08% | | Eaton Vance Atlanta CapitalSMID-Cap Fund | | | -5.35% | | Franklin Small Cap Growth Fund | | | -2.33% | | Franklin Small Cap Value Fund | | | -12.30% | | Invesco Comstock Fund | | | -11.88% | | Invesco Equally Weighted S&P 500 Fund | | | -7.78% | | Lazard International Strategic Equity Portfolio | | | -10.35% | | Loomis Sayles Core Plus Bond Fund | | | -0.52% | | Lord Abbett Income Fund | | | -2.41% | | MFS International Value Fund | | | -8.89% | | MFS Massachusetts Investors Growth Stock Fund | | | 1.10% | | MFS Mid Cap Value Fund | | | -11.31% | | Oppenheimer Global Opportunities Fund | | | -17.91% | | Oppenheimer International Growth Fund | | | -19.22% | | Retirement Reserves Money Fund | | | 1.07% | | Van Eck CM Commodity Index Fund | | | -11.13% | | Virtus Vontobel Emerging Markets Opportunities Fund | | | -14.27% | |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 53 | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGEIN-CONTROL Nonqualified Deferred Compensation CEO Pay Ratio for 2018 We are required to disclose (i) the median of the annual total compensation of our employees (other than our CEO), (ii) the annual total compensation of our CEO, and (iii) the corresponding pay ratio. We believe our pay ratio is a reasonable estimate, calculated in compliance with the requirements set forth in Item 402(u) of RegulationS-K. We identified the median employee using our employee population as of December 1, 2017. The employee remained employed with Stericycle through December 31, 2018, and so we have used the same employee in our calculations for 2018. We are a global company with complex operations. As of our initial measurement date of December 1, 2017, we had 23,200 employees in over 21 countries. We have extremely small employee populations in some of these locations, which in the aggregate make up less than 5% of our total workforce. As a result, we excluded employee populations in the following locations when identifying the median employee at the end of 2017: | | | | | | | | • Australia—61 employees | | • Japan—100 employees | • | Upon a termination of employment due to death, stock options and restricted stock unit awards will vest in full. In the case of stock options, the vested portion of the option will expire upon the earlier of (i) the first anniversary of the executive’s death or (ii) the option’s expiration date. | • Austria—1 employee | | • Netherlands—35 employees | | | • Belgium—18 employees | | • South Korea—316 employees | | | • France—91 employees | | • Singapore—17 employees | | | • Germany—110 employees | | • South Africa—64 employees | | | | • Ireland—135 employees | For terminations of employment other than by reason of death, any unvested portion of an award shall lapse and be canceled as of the executive’s termination date. In the case of stock options, the vested portion of the option will expire upon the earlier of (i) 90 days after the executive’s termination date or (ii) the option’s expiration date. | • United Arab Emirates—24 employees |
We used a consistently applied compensation measure across this employee population to identify the median employee. For our consistently applied compensation measure, we used base salary paid during 2017. The majority of our employees receive base salary (paid on an hourly, weekly, biweekly or monthly basis) and do not participate in any variable incentive plans. Consequently, base salary provides an accurate depiction of total earnings for the purpose of identifying our median employee. We then calculated the median employee’s annual total compensation in the same manner as the CEO in the Summary Compensation Table, except that for both the median employee compensation and CEO compensation we included $14,333.12 related to the Company’s portion of health care insurance premiums and company contributions to HSA accounts. Payments Upon a Termination Following a Change in ControlOur median employee compensation was $59,310.61. Our CEO compensation was $4,133,953.12. Accordingly, our CEO to median employee pay ratio is 70:1.
| | | | | | Pro-Rated | | | | | | | | | Continued | | | | | | | | | | | Annual | | | Stock | | | | | | Welfare and | | | | | | Name | | Severance(1) | | | Incentive(2) | | | Options(3) | | | RSUs(4) | | | Other Benefits(5) | | | Total | | | Charles A. Alutto | | $ | 4,387,500 | | | $ | 112,978 | | | $ | 0 | | | $ | 541,360 | | | $ | 64,100 | | | $ | 5,066,838 | | | Brent Arnold | | | 1,520,000 | | | | 48,925 | | | | 0 | | | | 421,563 | | | $ | 64,100 | | | | 2,015,488 | | | Daniel V. Ginnetti | | | 1,520,000 | | | | 48,925 | | | | 0 | | | | 421,563 | | | $ | 64,100 | | | | 2,015,488 | | | Michael J. Collins | | | 1,332,000 | | | | 38,100 | | | | 0 | | | | 158,240 | | | $ | 64,100 | | | | 1,553,340 | | | Brenda Frank | | | 1,137,500 | | | | 31,383 | | | | 0 | | | | 263,323 | | | $ | 64,100 | | | | 1,457,206 | |
Payments Upon a Termination other than for Cause, Disability or Death (Without a Change in Control)
| | | | | | Pro-Rated | | | | | | | | | Continued | | | | | | | | | | | Annual | | | Stock | | | | | | Welfare and | | | | | | Name | | Severance(6) | | | Incentive(2) | | | Options | | | RSUs | | | Other Benefits(5) | | | Total | | | Charles A. Alutto | | $ | 2,925,000 | | | $ | 112,978 | | | | – | | | | – | | | $ | 64,100 | | | $ | 3,062,978 | | | Brent Arnold | | | 760,000 | | | | 48,925 | | | | – | | | | – | | | $ | 64,100 | | | | 833,925 | | | Daniel V. Ginnetti | | | 760,000 | | | | 48,925 | | | | – | | | | – | | | $ | 64,100 | | | | 833,925 | | | Michael J. Collins | | | 703,000 | | | | 38,100 | | | | – | | | | – | | | $ | 64,100 | | | | 766,100 | | | Brenda Frank | | | 568,750 | | | | 31,383 | | | | – | | | | – | | | $ | 64,100 | | | | 625,133 | |
(1) | In accordance with the executive severance plan, amounts in this column represent severance payments equal to three times for Mr. Alutto and two times for the other named executive officers the sum of the executive officer’s base salary and target annual incentive. | | (2)54 | In accordance with the executive severance plan, the executive will receive a prorated annual incentive for the year in which the termination occurs, calculated based on actual performance during the year. Because termination is assumed to occur as of the last day of the fiscal year, the amounts reported represent the full payout of the 2016 annual incentive award. | (3) | Stock options will vest in full upon (i) a change in control regardless of a termination or (ii) death. The value shown for stock options is zero given that all unvested option shares that would vest following a qualifying termination, change in control or death were granted at an option price higher than the closing stock price of $77.04 per share on December 30, 2016. | (4) | RSUs will also vest in full upon (i) a change in control regardless of a termination or (ii) death. The value shown for RSUs was determined by multiplying the closing stock price of $77.04 per share on December 30, 2016 by the number of unvested RSUs that would vest upon a qualifying termination, change in control or death. | (5) | In accordance with the executive severance plan, amounts in this column represent $25,000 in outplacement services plus approximately $39,100 for the continuation of medical, dental, and life insurance for a period of 24 months. | (6) | In accordance with the executive severance plan, amounts in this column represent severance payments equal to two times for Mr. Alutto and one time for the other named executive officers the sum of the executive officer’s base salary and target annual incentive. |
Stericycle, Inc. - 2017Stericycle, Inc. - 2019 Proxy Statement36
ITEM 3 | Advisory Vote to Approve the Frequency of the Advisory Vote to Approve Executive Compensation |
Section 14A
ITEM 3 Ratification of the Exchange Act requires the Company to include in its proxy statement a non-binding advisory vote on the compensationAppointment of our named executive officers not less frequently than once every three years. Section 14A also requires the Company to include in its proxy statement this year a separate non-binding advisory vote regarding whether the advisory vote on executive compensation should be held every year, every two years or every three years.Ernst & Young LLP as Our Independent Registered Public Accounting Firm for 2019 While the Company will continue to monitor developments in this area, the Board believes that an annual frequency (“ONE YEAR”)The Audit Committee is directly responsible for the advisory vote on executiveappointment, compensation, is the optimal interval for conductingretention and responding to an advisory vote on executive compensation. The Board of Directors believes that a ONE YEAR frequency provides the highest level of accountability and communication by enabling stockholders to provide direct input into the Company’s compensation philosophy, policies and practices as disclosed in the Company’s proxy statement every year. The Company therefore asks that you indicate your support for the non-binding advisory vote on executive compensation to be held every ONE YEAR.
For the reasons discussed above, we are asking our shareholders to vote for a ONE YEAR frequency when voting on this proposal at the Annual Meeting. This vote is an advisory vote only, and therefore it will not bind the Company or the Board. However, the Board and the Compensation Committee will consider the voting results as appropriate when adopting a policy on the frequency of future advisory votes on executive compensation. The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be considered by the Board as the shareholders’ recommendation as to the frequency of future advisory votes on executive compensation. Nevertheless, the Board may decide that it is in the best interests of our shareholders and the Corporation to hold advisory votes on executive compensation more or less frequently than the option approved by our shareholders.
The Board of Directors recommends a vote for“ONE YEAR” as the frequencyoversight of the non-binding advisory voteindependent registered public accounting firm retained to approve executive compensation.
Stericycle, Inc. - 2017 Proxy Statement 37
ITEM 4 | Ratification of the Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm for 2017 |
We haveaudit our Company’s financial statements. The Audit Committee has appointed Ernst & Young LLP (“Ernst & Young”) as our Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017.2019. Representatives of Ernst & Young are expected to be present at the Annual Meeting to respond to appropriate questions and will have the opportunity to make a statement if they desire to do so.
In considering Ernst & Young’s appointment for the 20172019 fiscal year, the Audit Committee reviewed the firm’s qualifications and competencies, including the following factors: • | Ernst & Young’s historical performance and its recent performance during its engagement for the 2016 fiscal year; | | | • | Ernst & Young’s capability and expertise in handling engagements with the breadth and complexity of Stericycle’s operations, including its approach to resolving significant accounting and auditing matters and consultations with the firm’s national office; | | | • | The qualification and experience of key members of the engagement, including the lead audit partner; | | | • | The quality of Ernst & Young’s communication with the Audit Committee regarding the conduct of the audit and with respect to issues identified in the audit; | | | • | External data on audit quality and performance, including the most recent Public Company Accounting Oversight Board (PCAOB) reports on Ernst & Young and its peer firms; | | | • | The appropriateness of Ernst & Young’s fees, on both an absolute basis and as compared to its peer firms; and | | | • | Ernst & Young’s reputation for integrity and competence in the fields of accounting and auditing. |
Ernst & Young’s historical performance and its recent performance during its engagement for the 2018 fiscal year; Ernst & Young’s capability and expertise in handling engagements with the breadth and complexity of our operations, including its approach to resolving significant accounting and auditing matters and consultations with the firm’s national office; The qualification and experience of key members of the engagement, including the lead audit partner; The quality of Ernst & Young’s communication with the Audit Committee regarding the conduct of the audit and with respect to issues identified in the audit; External data on audit quality and performance, including the most recent Public Company Accounting Oversight Board (PCAOB) reports on Ernst & Young and its peer firms; The appropriateness of Ernst & Young’s fees, on both an absolute basis and as compared to its peer firms; and Ernst & Young’s reputation for integrity and competence in the fields of accounting and auditing. Ernst & Young has served as our independent registered public accounting firm since our incorporation in March 1989.1991. The Audit Committee ensures thatis responsible for the mandatedaudit fee negotiations associated with our Company’s retention of Ernst & Young LLP. In order to assure continued auditor independence, the Audit Committee periodically considers whether there should be regular rotation of the independent registered public accounting firm. In conjunction with the required rotation of Ernst & Young’s personnel occurs routinely andYoung LLP’s lead engagement partner, the Audit Committee and its Chairman are directly involved in the selection of Ernst & Young’sYoung LLP’s new lead engagement partner. The current lead audit partner was appointed in 2016. If our stockholders do not ratify the appointment of Ernst & Young LLP, our Board may reconsider theirits appointment. The Audit Committee andWe are asking our stockholders to ratify the Board of Directors recommend that stockholders vote “FOR” ratification of the appointmentselection of Ernst & Young LLP, as our independent registered public account firm. Although ratification is not required by our bylaws or otherwise, our Board is submitting the selection of Ernst & Young LLP to our stockholders as a matter of good corporate governance. The members of the Audit Committee, and the Board believe that the continued retention of Ernst & Young LLP to serve as our Company’s independent registered public accounting firm is in the best interests of our Company and its stockholders.
The Board of Directors recommends a vote “FOR” ratification of Ernst & Young LLP as our Company’s independent registered public accounting firm for 2017.the fiscal year ending December 31, 2019. Proxies solicited by the Board will be so voted unless stockholders specify a different choice. | | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 55 | |
ITEM 3 RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019 Audit Fees Paid to Independent Auditors
The following table shows the aggregate fees billed bypaid to Ernst & Young LLP by us for professionalthe services it rendered in connection with the audit of our annual financial statements, audit of our internal control over financial reporting and review of our interim financial statements included in our quarterly reports on Form 10-Q, statutory audits required internationally, and assistance with and review of certain documents and letters filed with the SEC during the fiscal years ended December 31, 20162018 and 2015 were approximately $9.2 million and $5.4 million, respectively.December 31, 2017. Audit-Related Fees
| | | | | | | | | Description of Fees | | FY 2018 | | | FY 2017 | | Audit Fees(1) | | $ | 10,240,000 | | | $ | 8,343,000 | | Audit-Related Fees(2) | | | 1,005,000 | | | | 1,750,000 | | | | | Tax Fees(3) | | | 510,700 | | | | 191,000 | | | | | All Other Fees(4) | | | 2,300 | | | | 7,000 | | TOTAL | | $ | 11,758,000 | | | $ | 10,291,000 | | | | |
The aggregate fees billed by Ernst & Young LLP for transaction integration services provided to us during the fiscal years ended December 31, 2016 and 2015 were approximately $0.2 million and $0.4 million, respectively.
| (1) | Includes fees for the audits of annual consolidated financial statements and internal control over financial reporting, reviews of interim financial statements included in our quarterly reports on Form10-Q, certain statutory audits and assistance with and review of certain documents and letters filed with the SEC. The increase in audit fees for 2018 compared to 2017 is primarily due to increased services provided relating to remediation of material weaknesses in internal controls over financial reporting. |
Tax Fees
| (2) | Includes fees related to transaction audit and integration services. |
The aggregate fees billed by Ernst & Young for tax compliance, tax advice, and tax planning services provided to us during the fiscal years ended December 31, 2016 and 2015 were approximately $0.4 million and $0.8 million, respectively.
| (3) | Includes fees related to tax compliance, tax advice and tax planning services. |
| (4) | Includes fees related to access to online research tools. |
All Other Fees
Ernst & Young did not provide any other services to us during the fiscal years ended December 31, 2016 and 2015.Audit CommitteePre-Approval Policies
In accordance with policies adopted by the Audit Committee, of our Board of Directors, all audit andnon-audit related services to be performed for us by ourthe independent registered public accountantsaccounting firm must be approved in advance by the Audit Committee. All of the services Ernst & Young performed for us during 2018 and 2017 werepre-approved by the Audit Committee. Stericycle, Inc. - 2017
| | | | 56 | | Stericycle, Inc. - 2019 Proxy Statement38
AUDIT COMMITTEE REPORT Under the Audit Committee’s charter, theThe Audit Committee ofassists the Board of Directors assists the Board in fulfilling its oversight responsibilities relating to the integrity of the Company’s financial statements, the qualifications and experience of the Company’s independent registered public accounting firm,auditor, the performance of the Company’s internal audit function and independent registered public accounting firm,auditor, and the Company’s compliance with applicable legal and regulatory requirements. The Audit Committee’sCommittee operates pursuant to a written charter, which is available on the Company’s investor relations website,http://investors.stericycle.cominvestors.stericycle.com.. The members of the Audit Committee who served during 2016 were Messrs. Dammeyer (Chairman)is comprised of three directors, all of whom are independent and two of whom (Brian P. Anderson, the Chairman, and Kay G. Priestly), Chenhave been determined by the Board of Directors to be an “audit committee financial expert” as defined by the Securities and Patience and Ms. Bleil.
Exchange Commission. In regard to our role, we note that it is the responsibility of the Company’s management to prepare financial statements in accordance with accounting principles generally accepted in the United States, and that it is the responsibility of the Company’s independent registered public accounting firmauditor to audit those financial statements. The Audit Committee’s responsibility is one of oversight, and we do not provide expert or other special assurance regarding the Company’s financial statements or the quality of the audits performed by the Company’s independent registered public accounting firm. In carrying out our oversight responsibility, we review and discuss with both management and Ernst & Young LLP, the Company’s independent registered public accounting firm,auditor all quarterly and annual financial statements prior to their issuance. We reviewed and discussed with both management and Ernst & Young LLPthe independent auditor the quarterly and annual financial statements for the fiscal year ended December 31, 2016.2018. Our reviews and discussions with Ernst & Young LLP included executive sessions without the presence of the Company’s management. They alsoindependent auditor included discussions of the matters required to be discussed pursuant to Auditing Standard No. 1301,Communications with Audit Committees, issued by the applicable Public Company Accounting Oversight Board (“PCAOB”) standards, including among other items, the quality, not just the acceptability, of the Company’s accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the Company’s financial statements. We alsoIn addition, the Audit Committee received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young LLP matters relating to theirits independence including a review of their audit and non-audit feesfrom management and the letter and written disclosures that theCompany. The Audit Committee received fromconsidered the compatibility ofnon-audit services with Ernst & Young LLP’s independence. The Committee discussed with management significant risks and exposures identified by management, the internal auditors or Ernst & Young LLP, pursuantand management’s steps to Rule 3526 of the Public Company Accounting Oversight Board,Communication with Audit Committees Concerning Independence. address such risks. In addition, we continued to monitor the scope and adequacy of the Company’s internal controls, including staffing levels and requirements, and we reviewed programs and initiatives to strengthen the effectiveness of the Company’s internal controls and steps taken to implement recommended improvements. The meetings of the Audit Committee are designed to facilitate and encourage communication among the Audit Committee, the Company, the Company’s internal audit function and the Company’s independent auditor. The Audit Committee discussed with the internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the accounting and financial controls, and the overall quality of the Company’s financial reporting. The Audit Committee met individually with members of management in executive session. The Audit Committee held 15 meetings during fiscal year 2018. OnThe Audit Committee recognizes the basisimportance of thesemaintaining the independence of the Company’s independent auditor, both in fact and appearance. Each year, the Audit Committee evaluates the qualifications, performance, tenure and independence of the Company’s independent auditor and determines whether tore-engage the current independent auditor. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the auditors, the auditors’ global capabilities and the auditors’ technical expertise and knowledge of the Company’s operations and industry. Based on this evaluation, the Audit Committee has retained Ernst & Young LLP as the Company’s independent auditor for 2019. Ernst & Young LLP has been the independent auditor for the Company since 1991. The members of the Audit Committee and the Board believe that, due to Ernst & Young’s knowledge of the Company and of the industries in which the Company operates, it is in the best interests of the Company and its stockholders to continue retention of Ernst & Young LLP to serve as the Company’s independent auditor. Although the Audit Committee has the sole authority to appoint the independent auditors, the Audit Committee will continue to recommend that the Board of Directors ask the stockholders, at the Annual Meeting, to ratify the appointment of the independent auditors.
In reliance on the reviews and discussions referred to above, we recommended to the Board of Directors that the Board approve the inclusion of the Company’s audited financial statements in the Company’s annual reportAnnual Report on Form10-K for the year ended December 31, 20162018 for filing with the SEC. Audit Committee Rodney F. Dammeyer, Chairman
Brian P. Anderson,
John Patience
Robert S. Murley
Thomas F. Chen Chairman
Veronica M. Hagen Stericycle, Inc. - 2017 Proxy Statement 39
ITEM 5 | Approval of an Amendment to the Company’s Employee Stock Purchase Plan to Increase the Number of Shares Available for Issuance |
Introduction
On February 16, 2017, our Board approved an amendment to the Stericycle, Inc. Employee Stock Purchase Plan (the “ESPP”) increasing the number of shares of common stock available for issuance under the ESPP from 900,000 shares to 1,200,000 shares (the “Amendment”) and recommended submitting the Amendment to our stockholders for their approval at the Annual Meeting with the Board’s recommendation that stockholders vote “FOR” approval of the Amendment. The Amendment will not become effective unless it is approved by our stockholders.
The ESPP currently authorizes a total of 900,000 shares of our common stock to be issued pursuant to options granted under the ESPP. As of December 31, 2016, 103,116 shares remained available for options to be granted under the ESPP. The Amendment would increase the number of shares available for issuance pursuant to options granted under the ESPP by 300,000 shares to a total of 1,200,000 shares. The Amendment would not change any other terms of the ESPP.
Summary of Principal Terms
The following summary describes the principal terms of the ESPP. The complete text of the ESPP, reflecting the Amendment for illustrative purposes, appears as Exhibit A to this proxy statement.
Overview
The ESPP allows eligible employees to purchase shares of our common stock at a discount through payroll deductions during two six-month offerings each year. An eligible employee who elects to participate in an offering is granted an option on the last day of the offering for a number of shares equal to the employee’s payroll deductions under the ESPP during the offering period (plus any carried over cash) divided by the option price per share. The option price per share is 85% of the closing price on the last trading day of the offering period.
Administration
The ESPP is administered by our Board. The Board may delegate its authority to administer the ESPP to a standing or other committee of the board or to an administrative committee consisting of two or more of our executive officers. (For convenience, the term “plan administrator” is used in this summary to refer both to our Board and to any committee to which it may delegate its authority to administer the ESPP.)
Subject to the express terms of the ESPP, the plan administrator has the authority to determine the terms and conditions of each offering, the options granted pursuant to each offering, and the shares issued upon the exercise of those options. The plan administrator also has the authority to interpret the ESPP, adopt and revise policies and procedures to administer the ESPP, and make all determinations required for the ESPP’S administration.
Number of Shares
The ESPP currently authorizes a total of 900,000 shares of our common stock to be issued pursuant to options granted under the ESPP.
When originally approved by our stockholders in May 2001, the ESPP authorized a total of 150,000 shares of our common stock to be issued pursuant to options granted under the ESPP. As a result of 2-for-1 stock splits in May 2002 and May 2007, the authorized total increased to 600,000 shares. In February 2013, our Board approved an amendment to the ESPP increasing the number of shares available for issuance under the ESPP from 600,000 shares to 900,000 shares, and such amendment was approved by our stockholders at the 2013 Annual Meeting.
As of December 31, 2016, 103,116 shares remained available for options to be granted under the ESPP.
The Amendment would increase the number of shares available for issuance pursuant to options granted under the ESPP by 300,000 shares to a total of 1,200,000 shares.
Eligibility
Every employee of Stericycle, Inc. or one of its U.S. subsidiaries who has completed six months’ employment as of the first day of an offering under the ESPP, and who is a full-time employee or a part-time employee who customarily works at least 20 hours per week, is eligible to participate in the offering. Participation in an offering ends automatically upon termination of employment.
Offerings
Each year the ESPP makes two consecutive six-month offerings of shares of our common stock to eligible employees. One offering begins on January 1 and ends on June 30, and the other offering begins on July 1 and ends on December 31. The plan administrator may change the frequency or length of offerings each year.
Stericycle, Inc. - 2017 Proxy Statement 40
Election to Participate
Each eligible employee may elect to participate in an offering by completing and submitting an enrollment form in the manner and during the enrollment period prior to the first day of the offering specified by the plan administrator.
Payroll Deduction Percentage
A participant in an offering may specify in his or her enrollment form any whole percentage of his or her compensation that he or she elects to have withheld during the offering period. Payroll deductions during any offering may not exceed $5,000, however, and may not be changed during the offering.
A participant’s payroll deduction percentage will remain in effect for all subsequent offerings, unless the participant submits a new enrollment form within the applicable enrollment period specifying a different payroll deduction percentage.
The plan administrator maintains a separate bookkeeping account under the ESPP for each participant. A participant’s payroll deductions are credited to his or her account under the ESPP.
Grant of Options
Each participant in an offering is granted an option as of the first day of the offering for a number of shares of our common stock equal to the sum of (1) his or her payroll deductions under the ESPP during the offering period plus (2) any carried over cash from a prior offering, divided by (3) the option price per share.
Option Price
The Option Price shall be equal to 85% of the Closing Price of a share of Common Stock on the Last Day of the Offering (or on the last trading day preceding the Last Day if it is not a trading day).
Exercise of Options
A participant’s option under any offering is exercised automatically as of the last day of the offering unless the participant has withdrawn from the offering. We do not issue fractional shares, and any remaining payroll deductions credited to the participant’s account after the exercise of his or her option (“carried over cash”) is carried over to the next offering. No interest shall accrue on any carried over cash.
Crediting of Option Shares
Upon the automatic exercise of a participant’s option, the plan administrator will credit the option shares to an account for the participant at E*Trade. The participant may sell the shares credited to his or her E*Trade account at any time after they have been credited.
Limitations
No participant will be granted options that would permit his or her rights to purchase shares of common stock under the ESPP and all other employee stock purchase plans of the Company or its subsidiaries to accrue at a rate exceeding $25,000 of the fair market value of such shares (determined at the time that the option is granted) during any calendar year in which the option is outstanding. No participant will be granted an option if, immediately after the grant, the participant would directly or indirectly own stock possessing 5% or more of the voting power or value of all classes of our stock.
Withdrawal from Offering
Except for a participant who is one of our executive officers, a participant may terminate his or her participation in any offering at any time prior to the last day of the offering. Upon a participant’s withdrawal from an offering, all payroll deductions that have been credited to the participant’s account under the ESPP will be refunded to the participant without interest.
Termination of Employment
Termination of a participant’s employment for any reason will result in the automatic termination of his or her participation in a pending offering. All payroll deductions then credited to the participant’s account under the ESPP will be refunded to the participant without interest within 30 days after his or her termination of employment, and, at the participant’s request, the plan administrator will transfer to the participant all of the shares then credited to the participant’s account under the ESPP.
Transferability
No option granted under the ESPP may be sold, pledged or otherwise transferred.
Reports
After the close of each offering, each participant receives a notification from E*Trade of the number of shares purchased for their account during the offering.
Amendment and Termination
Our Board of Directors may amend, suspend or terminate the ESPP at any time. Our stockholders are required to approve any amendment to the ESPP that would increase the number of shares of common stock available to be issued upon the exercise of options granted under the ESPP.
Federal Income Tax Consequences
The ESPP is an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. A participant’s payroll deductions are subject to tax as ordinary income for federal income tax purposes in the year in which the deductions otherwise would have been paid to the employee. In general, a participant will not be subject to tax upon the grant or exercise of an option under the ESPP. A participant will be subject to tax, however, upon the sale of the shares acquired upon the exercise of an option.
Stericycle, Inc.- 2017 Proxy Statement 41
The amount of tax will depend upon the satisfaction of certain holding periods for income tax purposes:Kay G. Priestly
(a) | If the shares are sold more than two years from the date of the option grant (the first day of the offering) and more than one year from the date of the option exercise (the last day of the offering), the participant will incur a combination of ordinary income and long-term capital gain (or possibly just ordinary income) on the sale of the shares: | | | | | | | (1) | The ordinary income incurred will be the lesser of: | | | | | | (A) | 15% of the fair market value of the shares on the first day of the offering, or | | Stericycle, Inc. - 2019 Proxy Statement | | | 57 | | | (B) | the gain realized on the sale of the shares (i.e., the excess of the amount realized on the sale of the shares over the aggregate option price). | | | | | | (2) | Any gain in excess of the amount recognized by the participant as ordinary income will be treated as long-term capital gain. If the amount realized on the sale is less than the ordinary income incurred, the balance of the gain will be treated as long-term capital loss. | | | | | (b) | If the shares are sold without satisfying these income tax holding periods (i.e., the shares are sold sooner than two years from the date of the option grant—the first day of the offering—or sooner than one year from the date of the option exercise—the last day of the offering), the participant will incur a combination of ordinary income and capital gain or loss on the sale of the shares: | | | | (1) | The ordinary income will be the excess of the fair market value of the shares on the last day of the offering (the exercise date) over the aggregate option price. | | | | | (2) | Any additional gain or loss on the sale will be long-term or short-term capital gain or loss, depending upon whether the shares were held for more than one year. |
The Board of Directors recommends that stockholders vote“FOR” approval of the amendment to the Company’s Employee Stock Purchase Plan to increase the number of shares available for issuance.
ITEM 6 | Approval of the Stericycle, Inc. 2017 Long-Term Incentive Plan |
The Board recommends approval of the Stericycle, Inc. 2017 Long-Term Incentive Plan (the “Plan”). The following summary of the Plan is qualified in its entirety by the complete text of the Plan contained in Exhibit B.
Background
We currently maintain the Stericycle, Inc. 2011 Incentive Stock Plan and the Stericycle, Inc. 2014 Incentive Stock Plan. The Board adopted the Plan effective as of March 31, 2017 (subject to stockholder approval) to have in place a plan that included provisions that are currently common in the market and to enable us to grant a broader spectrum of awards, including awards that are performance-based for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
Section 162(m) of the Code provides that certain compensation in excess of $1 million that is paid to the chief executive officer and the next three most highly paid officers of a public company (other than the chief financial officer) is not deductible. Compensation which constitutes “performance-based compensation” within the meaning of Section 162(m) generally is not subject to the foregoing limitations. In order to constitute “performance-based compensation,” our stockholders must approve the material terms of the plan pursuant to which the compensation is granted and certain other requirements must be met. Generally, such stockholder approval is required every five years after initial approval. The Plan includes terms that will enable us to grant “performance-based compensation” within the meaning of Section 162(m) provided that our stockholders approve the Plan.
A total of 1,500,000 shares of our common stock, $.01 par value (“Common Stock”) are reserved for issuance under the Plan.
The Plan authorizes a broad range of awards including stock options (“Options”), stock appreciation rights (“SARs”), Full Value Awards (as more fully described below, including restricted stock, restricted stock units (“RSUs”), performance-based shares or units and other stock-based awards) and Cash Incentive Awards (as more fully described below). A person who has been granted an award under the Plan is referred to herein as a “Participant” in the Plan.
The Plan is not qualified under Section 401(a) of the Code, or, except for the deferred delivery of shares of Common Stock, subject to any provision of the Employee Retirement Income Security Act of 1974, as amended.
On March 31, 2017, the last reported sale price of our Common Stock on the NASDAQ stock market was $82.89 per share.
Stericycle, Inc. - 2017 Proxy Statement 42
Purpose
The purpose of the Plan is to:
• | attract and retain persons who are eligible to participate in the Plan; | | | • | advance our interests and the interests of our stockholders by providing persons who are eligible to participate in the Plan, upon whose judgment, initiative and efforts we largely depend, with appropriate incentives to perform in a superior manner and achieve long-range goals; and | | | • | to further align the interests of Participants with those of our stockholders, and to thereby promote the growth and long-term financial interests of us and our subsidiaries and long-term stockholder return. |
Restriction on Repricing
The Plan includes a restriction providing that, without stockholder approval or other than as a result of adjustments in connection with corporate transactions, we cannot decrease the exercise price of an Option or SAR after the date of grant or permit any Option or SAR to be surrendered to us as consideration for the grant of a replacement Option or SAR with a lower exercise price or a Full Value Award. In addition, in no event may an Option or SAR granted under the Plan be surrendered to us in consideration for a cash payment if, at the time of such surrender, the exercise price of the Option or SAR is greater than the then current fair market value of a share of Common Stock.
New Plan Benefits
The future benefits or amounts that would be received under the Plan by executive officers, nonemployee directors and nonexecutive officer employees are discretionary and are therefore not determinable at this time. In addition, the benefits or amounts that would have been received by or allocated to such persons for the last completed fiscal year if the Plan had been in effect cannot be determined.
Description of Plan
Administration
The Plan is to be administered by a committee (the “Committee”) of not fewer than two directors (or a greater number if required for compliance with certain securities laws) who are independent for purposes of stock exchange listing requirements and are non-employee directors for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). If an award is intended to constitute “performance-based compensation” for purposes of Section 162(m) of the Code, including Options and SARs, the Committee will consist solely of two or more outside directors within the meaning of Section 162(m) of the Code and applicable regulations. In the case of awards to non-employee directors, the Committee is the Board. Except as provided in the preceding sentence or as otherwise designated by the Board, the Compensation Committee of the Board will act as the Committee under the Plan. The Committee selects award recipients under the Plan who will thereby become Participants, the types of awards to be granted and the applicable terms, conditions, performance criteria, restrictions and other provisions of such awards. The Committee also has the authority to conclusively interpret the Plan and to adopt rules and procedures relating to the Plan and awards made thereunder. Subject to stock exchange listing rules and applicable law, the Committee may delegate all or any portion of its responsibilities or powers under the Plan to persons selected by it.
Eligibility
All officers, directors or other employees of us or a subsidiary and persons who are expected to become officers, employees, directors of us or a subsidiary including, in each case, directors who are not employees of us or any subsidiary (“Non-Employee Directors”), are eligible to receive awards under the Plan and thereby become Participants in the Plan. Awards to a person who is expected to become a service provider to us or a subsidiary cannot be effective prior to the date on which such person’s service begins. Incentive stock options (“ISOs”) may only be granted to employees of us and our corporate subsidiaries which satisfy certain Code requirements. Generally, a company is a subsidiary of us for Plan purposes for any period during which we (or a successor of us) owns, directly or indirectly, at least 50% of the voting or profits interests of such entity. Any other business venture in which we (or our successor) has a significant interest may also be a subsidiary of us for Plan purposes if such business venture is designated as such by the Committee.
As of March 31, 2017 there were approximately 1,045 employees and 10 Non-Employee Directors eligible to receive awards under the Plan.
Shares Available for Issuance Under the Plan; Limitations on Grants
Awards may be made under the Plan with respect to Common Stock currently authorized but unissued or, as permitted by applicable law, currently held or acquired by us as treasury shares, including shares of Common Stock purchased in the open market or in private transactions. At the discretion of the Committee, an award under the Plan may be settled in cash rather than Common Stock.
Substitute awards will not reduce the number of shares of Common Stock that may be issued under the Plan or that may be covered by awards granted to any one Participant during any period as described below. Generally, a “substitute award” is an award that is granted or shares of Common Stock issued by us in assumption of, or in substitution or exchange for, an award previously granted, or the right or obligation to make a future award, in all cases by a company acquired by us or a subsidiary or with which we or a subsidiary combines.
Stericycle, Inc. - 2017 Proxy Statement 43
The maximum number of shares of Common Stock that may be delivered under the Plan is equal to 1,500,000 shares. To the extent that any shares of Common Stock covered by an award are not delivered to a Participant or beneficiary because the award is forfeited or canceled, or the shares of Common Stock are not delivered because the award is settled in cash or used to satisfy the applicable tax withholding obligation, such shares will not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. If the exercise price of any Option granted under the Plan is satisfied by tendering shares of Common Stock to us (by either actual delivery or by attestation, including net exercise), only the number of shares of Common Stock issued net of the shares of Common Stock tendered will be considered delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. Shares that are not considered delivered under the Plan will again be available for awards under the Plan.
The following additional individual limits apply to awards under the Plan:
• | the maximum number of shares of Common Stock that may be delivered to Participants and their beneficiaries with respect to ISOs under the Plan will be equal to 1,500,000; provided that to the extent that shares not delivered must be counted against this limit as a condition of satisfying the rules applicable to ISOs, such rules will apply to the limit on ISOs granted under the Plan; | | | • | in the case of Options and SARs that are intended to be “performance-based compensation”, the maximum number of shares of Common Stock that may be covered by such awards granted to any one Participant during any calendar year may not exceed 250,000 of Common Stock; | | | • | in the case of Full Value Awards that are intended to be “performance-based compensation”, the maximum number of shares of Common Stock that may be delivered pursuant to any such award granted to any one Participant during any calendar year, regardless of whether settlement of the award is to occur prior to, at the time of, or after the time of vesting, may not exceed 250,000 shares of Common Stock; | | | • | in the case of Cash Incentive Awards that are intended to be “performance-based compensation”, the maximum amount payable to any one Participant with respect to any performance period of twelve months (pro rated for performance periods of greater or lesser than 12 months) is $3,000,000; and | | | • | in no event will the dollar value of the award granted to any Non-Employee Director for any calendar year (determined as of the date of grant) exceed $750,000. |
In the case of Full Value Awards and Cash Incentive Awards that are intended to be “performance-based compensation”, if the award is denominated in shares but an equivalent amount of cash is delivered (or vice versa), the foregoing limitations will be applied based on the methodology used by the Committee to convert shares of Common Stock to cash (or vice versa). If delivery of cash or shares of Common Stock is deferred until after the cash or shares of Common Stock are earned, any adjustment in the amount delivered to reflect actual or deemed investment experience after the cash or shares of Common Stock are earned will be disregarded.
In the event of a corporate transaction, including a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, exchange of shares, sale of assets or subsidiaries, combination or other corporate transaction, that affects the Common Stock such that the Committee determines that an adjustment is warranted in order to preserve the benefits or prevent the enlargement of benefits of awards under the Plan, the Committee will make the following adjustments to awards in the manner that it determines to be equitable in its sole discretion:
• | adjustment of the number and kind of shares (or the amount of cash) which may be delivered under the Plan (including adjustments to the individual limitations described above); | | | • | adjustment of the number and kind of shares (and the amount of cash) subject to outstanding awards; | | | • | adjustment of the exercise price of outstanding Options and SARs; and | | | • | any other adjustments that the Committee determines to be equitable, which may include, without limitation, | | | | | – | replacement of awards with other awards which the Committee determines have comparable value and which are based on stock of a company resulting from the transaction; and | | | | | – | cancellation of the award in return for cash payment of the current value of the award, determined as though the award is fully vested at the time of payment, provided that in the case of an Option or SAR, the amount of such payment may be the excess of the value of the shares of Common Stock subject to the Option or SAR at the time of the transaction over the exercise price. |
Types of Awards
Options
The Committee may grant Options to purchase shares of Common Stock, which Options may be either ISOs or non-qualified stock options (“NQOs”). The exercise price of an Option must be no less than the fair market value of a share of Common Stock on the date the Option is granted. Options that are granted in replacement of awards that are assumed in business transactions may have an exercise price below fair market value at the time of replacement if the Committee determines that is appropriate to preserve the economic benefit of the award. ISOs may only be granted to employees of us or our permitted corporate subsidiaries and must satisfy other requirements of Section 422 of the Code. An Option that does not satisfy the requirements for an ISO will be treated as a NQO. Except for reductions approved by our stockholders or adjustments for corporate transactions, the exercise price of an Option may not be decreased after the date of grant nor may an Option be surrendered to us as consideration for the grant of a replacement Option or SAR with a lower exercise price or a Full Value Award. In addition, except as approved by our stockholders, no Option granted under the Plan may be surrendered to us in consideration of a cash payment if, at the time of such surrender, the exercise price of the Option is greater than the then fair market value of a share of Common Stock. Options will be exercisable in accordance with the terms established by the Committee. The full
Stericycle, Inc. - 2017 Proxy Statement 44
exercise price of each share of Common Stock purchased upon the exercise of any Option must be paid at the time of exercise of the Option (except if the exercise price is payable through the use of a cashless exercise arrangement approved by the Committee, the exercise price may be paid as soon as practicable after exercise). Subject to applicable law, the exercise price of an Option may be payable in cash, shares of Common Stock (valued at fair market value as of the day of exercise and including net exercise), or a combination thereof. The Committee may also authorize a third party cashless exercise program.
The Committee, in its discretion, may impose such conditions, restrictions, and contingencies on the shares of Common Stock acquired pursuant to the exercise of an Option as the Committee determines to be desirable, including conformity with our recoupment or clawback policies as in effect from time to time and compliance with restrictive covenants.
Except as provided by the Committee, an Option will expire on the earliest to occur of the following:
• | if the Participant has not accepted the award by such date, the 90thfollowing the grant date; | | | • | if the Participant’s termination date occurs by reason of death or disability (as defined in the Plan), the one-year anniversary of such termination date; | | | • | if the Participant’s termination date, occurs for reasons other than death or disability and is not a termination by us or a subsidiary for cause, 90 days following such termination date; or | | | • | if the Participant’s termination date occurs by reason of termination by us or a subsidiary for cause, the termination date. |
In any event, an Option will expire no later than the 10thanniversary of the date on which it is granted (or such shorter period required by the rules of any stock exchange on which the Common Stock is listed).
SARs
A SAR entitles the Participant to receive the amount (in cash or shares of Common Stock) by which the fair market value of a specified number of shares of Common Stock on the exercise date exceeds an exercise price established by the Committee, which exercise price may not be less than the fair market value of the shares of Common Stock at the time the SAR is granted. Generally, a SAR will be exercisable in accordance with the terms established by the Committee and SARs are generally subject to the same terms and restrictions as apply to Options as described above (except for matters, such as payment of the exercise price, which do not apply to SARs), including the prohibition on lowering of the exercise price, exchanges of the SAR for cash or other awards and the expiration date provisions.
Full Value Awards
A Full Value Award is a grant of one or more shares of Common Stock or a right to receive one or more shares of Common Stock in the future (including restricted stock, RSUs, deferred stock units, performance stock and performance-based stock units). Such grants may be subject to such conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to dividend or dividend equivalent rights and deferred payment or settlement. Notwithstanding the foregoing, no dividends or dividend equivalent rights will be paid or settled on awards that have not been earned or vested.
Cash Incentive Awards
A “Cash Incentive Award” is the grant of a right to receive a payment of cash (or in the discretion of the Committee, shares of Common Stock having value equivalent to the cash otherwise payable) that is contingent on achievement of performance objectives over a specified period established by the Committee. The grant of Cash Incentive Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to deferred payment.
ITEM 4 Stockholder Proposal Entitled Special Vesting Rules for Full Value Awards Except for awards granted (a) in lieu of other compensation, (ii) as a form of payment of earned performance awards or other incentive compensation, (iii) to new hires, or (iv) as retention awards outside the United States, if an employee’s right to become vested in a Full Value Award is conditioned on the completion of a specified period of service with us or a subsidiary, without achievement of performance targets or other performance objectives (whether or not related the award is intended to be “performance-based compensation”) being required as a condition of vesting, then the required period of service for full vesting will be not less than three years subject, to the extent provided by the Committee, to pro rated vesting over the course of the applicable vesting period and to acceleration of vesting, to the extent permitted by the Committee, in the event of the Participant’s death, disability, retirement, change in control or involuntary termination). Awards to Non-Employee Directors are not subject to the foregoing restrictions.
Performance-Based Compensation
Performance awards granted to employees under the Plan that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code will be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective performance targets established by the Committee in accordance with the requirements of Section 162(m). The performance targets established by the Committee may be with respect to corporate performance, operating group or sub-group performance, company performance, other group or individual performance, or division performance, and will be based on one or more of the following performance criteria:
• | earnings (e.g., earnings before income taxes, or “EBIT”; earnings before income taxes and amortization, or “EBITA”; earnings before interest, taxes, depreciation and amortization, or “EBITDA”, earnings per share, or “EPS”) | | | • | revenues | | | • | income (e.g., income from operations, net operating income, operating income, net income) | | | • | internal rate of return | | | • | total return to stockholders | | | • | financial return ratios (e.g., return on investment, or “ROI”; return on invested capital, or “ROIC”; return on equity, or “ROE”; return on assets, or “ROA”, cash flows, cash flow return on investment, free cash flow) |
Stericycle, Inc. - 2017 Proxy Statement 45
• | market share | | | • | capital expenditures | | | • | reduction of indebtedness | | | • | cost improvement or containment | | | • | expense management | | | • | economic value added | | | • | stock price | | | • | profit | | | • | margin | | | • | operating expenses | | | • | implementation or completion of significant projects or processes | | | • | economic value created | | | • | cost targets, reductions and savings, productivity and efficiencies | | | • | strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation and other legal and compliance matters, information technology, and goals relating to contributions, dispositions, acquisitions, development and development related activity, capital markets activity and credit ratings, joint ventures and other transactions, and budget comparisons | | | • | personal professional objectives, including any of the foregoing performance targets, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation and reorganization of joint ventures, and the completion of other corporate transactions. |
Where applicable, the performance targets based on performance criteria may be expressed in terms of attaining a specified level of the particular goal or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of us or a subsidiary, division or strategic business unit of us, or may be applied to our performance relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. The performance targets based on performance criteria may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Each of the foregoing performance criteria will be determined in accordance with generally accepted accounting principles or other objective standards established by the Committee that satisfy the requirements of Section 162(m) of the Code and will be subject to certification by the Committee (including, if applicable, in accordance with Section 162(m) of the Code) and the performance targets that are based upon the performance criteria may be based on adjusted performance criteria, which adjustments will be established and determined by the Committee in an objective manner as and to the extent permitted by Section 162(m) of the Code.
The Committee is not prohibited from granting Full Value Awards or Cash Incentive Awards under the Plan and we (the Committee or any subsidiary) may grant any Cash Incentive Awards outside of the Plan that are not intended to be “performance-based compensation”. Options and SARs granted under the Plan are assumed to constitute “performance-based compensation” provided that the requirements of Section 162(m) of the Code are met with respect thereto and provided that the Committee does not make a determination to the contrary.
Change in Control
Upon a Change of Control (as defined in the Plan), all outstanding awards will become fully vested and exercisable, and all restrictions on the shares underlying Full Value Awards will lapse.
Non-U.S. Employees
In order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws and customary business practices in other countries in which we or any of our subsidiaries operates or has employees, the Committee will have the power and authority to (i) determine which Participants employed outside the United States or subject to non-United States tax laws are eligible to participate in the Plan, (ii) modify the terms and conditions of awards granted to or held by such Participants, (iii) establish subplans, modify exercise procedures and other terms and procedures relating to awards granted or held by such Participants to the extent such actions may be necessary or advisable, and (iv) take such other actions as the Committee may deem necessary or appropriate so that the value and other benefits of an award to such a Participant, as affected by foreign tax laws and other applicable restrictions, will be comparable to the value of such an award to a Participant who is resident or employed in the United States. An award may be modified pursuant to these provisions in a manner that is inconsistent with the express terms of the Plan, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) of the Exchange Act for the Participant whose award is modified. These provisions not be applied to increase the share limitations of the Plan or to otherwise change any provision of the Plan that would otherwise require the approval of the our stockholders.
Other Plan Information
Generally, awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution, and will not be subject to execution, attachment or similar process. To the extent that Participant who receives an award under the Plan has the right to exercise such award, the award may be exercised during the lifetime of the Participant only by the Participant. Options and SARs, however, may be transferred by an employee (i) if the transferee is a revocable trust that the employee established for estate planning reasons (in respect of which the employee is treated as the owner for federal income tax purposes); or (ii) the transferee is (A) the spouse of the employee or a child, step-child, grandchild, parent, sibling or child of a sibling of the employee (each an “eligible transferee”), (B) a custodian for an eligible transferee under any Uniform Transfers to Minors Act or Uniform Gifts to Minors Act, or (C) a trust for the primary benefit of one or more eligible transferees; provided, however, that such transfers will be subject to any restrictions and requirements that the Committee considers appropriate (for example, the transferee’s written agreement to be bound by the terms of the Plan and the underlying award agreement). Awards may also be transferred
Stericycle, Inc. - 2017 Proxy Statement 46
pursuant to a qualified domestic relations order, and the Committee may also establish rules relating to transfers of awards under the Plan; provided, however, that in no event will an ISO be transferable to the extent that such transferability would violate the requirements applicable to such option under Section 422 of the Code.
All awards and other payments under the Plan are subject to withholding of all applicable taxes, which withholding obligations may be satisfied, with the consent of the Committee, through the surrender of Common Stock which the Participant already owns or to which a Participant is otherwise entitled under the Plan; provided, however, previously-owned Common Stock that has been held by the Participant or Common Stock to which the Participant is entitled under the Plan may only be used to satisfy the minimum tax withholding required by applicable law (or other rates that will not have a negative accounting impact).
Unless otherwise specified by the Committee, (a) any awards under the Plan and any shares of Common Stock issued pursuant to the Plan will be subject to our compensation recovery, clawback, and recoupment policies as in effect from time to time, and (b) all of a Participant’s awards under the Plan will be forfeited in the event the Participant breaches the restrictive covenant provisions of any employment agreement or any restrictive covenant agreement (or the restrictive covenant provisions of any other plan of us or any subsidiary).
The Board may, at any time, amend, suspend or terminate the Plan, and the Board or the Committee may amend any award, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any award granted under the Plan prior to the date such amendment is adopted by the Board (or the Committee, if applicable). Adjustments relating to corporate reorganizations are not subject to the foregoing limitations. Our stockholders will be required to approve (1) any amendment that would materially increase the number of shares of Common Stock for which awards may be granted or that would increase the number of shares of Common Stock for which ISOs may be granted, (2) any amendment to the restrictions on repricing of Options and SARs, (3) any amendment to the individual limitations applicable to awards that are intended to constitute “performance-based compensation” for purposes of Section 162(m) of the Code or that apply to Non-Employee Directors, (4) any changes to the performance criteria to the extent applicable to awards intended to constitute “performance-based compensation” for purposes of Section 162(m) of the Code, and (5) any change for which such approval is required by law or the rules of any stock exchange on which the Common Stock is listed.
It is our intention that, to the extent that any provisions of this Plan or any awards granted hereunder are subject to Section 409A of the Code, the Plan and the awards comply with the requirements of Section 409A and that the Board will have the authority to amend the Plan as it deems necessary or desirable to conform to Section 409A. Notwithstanding the foregoing, we do not guarantee that awards under the Plan will comply with Section 409A of the Code and the Committee is under no obligation to make any changes to any award to cause such compliance.
U.S. Federal Income Tax Considerations
The discussion which follows is a summary, based on current law, of some significant U.S. federal income tax considerations relating to awards under the Plan. The following is based on U.S. federal tax laws and regulations presently in effect, which are subject to change, and the discussion does not purport to be a complete description of the federal income tax aspects of the Plan.
NQOs
The grant of an NQO will not result in taxable income to the Participant. Generally, the Participant will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the shares of Common Stock acquired over the exercise price for those shares of Common Stock, and we will be entitled to a corresponding deduction.
The exercise of an NQO through the delivery of previously acquired Common Stock will generally be treated as a non-taxable, like-kind exchange as to the number of shares of Common Stock surrendered and the identical number of shares of Common Stock received under the Option. That number of shares of Common Stock will take the same basis and, for capital gains purposes, the same holding period as the shares of Common Stock that are given up. The value of the shares of Common Stock received upon such an exchange that are in excess of the number given up will be includible as ordinary income to the Participant at the time of the exercise. The excess shares of Common Stock will have a new holding period for capital gain purposes and a basis equal to the value of such shares of Common Stock determined at the time of exercise.
ISOs
The grant of an ISO will not result in taxable income to the Participant. The exercise of an ISO will not result in taxable income to the Participant provided that the Participant was, without a break in service, an employee of us or a corporate subsidiary during the period beginning on the date of the grant of the Option and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the Participant is disabled, as that term is defined in the Code).
If the Participant does not sell or otherwise dispose of the shares of Common Stock within two years from the date of the grant of the ISO or within one year after receiving the transfer of such shares of Common Stock, then, upon disposition of such shares of Common Stock, any amount realized in excess of the exercise price will be taxed to the Participant as capital gain, and we will not be entitled to any deduction for Federal income tax purposes. A capital loss will be recognized to the extent that the amount realized is less than the exercise price.
If the foregoing holding period requirements are not met, the Participant will generally realize ordinary income, and a corresponding deduction will be allowed to us, at the time of the
Stericycle, Inc. - 2017 Proxy Statement 47
disposition of the shares of Common Stock, in an amount equal to the lesser of (a) the excess of the fair market value of the shares of Common Stock on the date of exercise over the exercise price, or (b) the excess, if any, of the amount realized upon disposition of the shares of Common Stock over the exercise price. If the amount realized exceeds the value of the shares of Common Stock on the date of exercise, any additional amount will be capital gain. If the amount realized is less than the exercise price, the Participant will recognize no income, and a capital loss will be recognized equal to the excess of the exercise price over the amount realized upon the disposition of the shares of Common Stock.
The exercise of an ISO through the exchange of previously acquired stock will generally be treated in the same manner as such an exchange would be treated in connection with the exercise of an NQO; that is, as a non-taxable, like-kind exchange as to the number of shares of Common Stock given up and the identical number of shares of Common Stock received under the Option. That number of shares of Common Stock will take the same basis and, for capital gain purposes, the same holding period as the shares of Common Stock that are given up. However, such holding period will not be credited for purposes of the one-year holding period required for the new shares of Common Stock to receive ISO treatment. Common shares received in excess of the number of shares of Common Stock given up will have a new holding period and will have a basis of zero or, if any cash was paid as part of the exercise price, the excess shares of Common Stock received will have a basis equal to the amount of the cash. If a disqualifying disposition (a disposition before the end of the applicable holding period) occurs with respect to any of the shares of Common Stock received from the exchange, it will be treated as a disqualifying disposition of the shares of Common Stock with the lowest basis.
SARs
A Participant generally will not realize any taxable income upon the grant of a SAR. Upon the exercise of the SAR, the Participant will recognize ordinary income in an amount equal to the amount of cash and/or the fair market value, at the date of such exercise, of the shares of Common Stock received by the Participant as a result of such exercise. We will generally be entitled to a deduction in the same amount as the ordinary income realized by the Participant.
Full Value Awards
The federal income tax consequences of a Full Value Award will depend on the type of award. The tax treatment of the grant of shares of Common Stock depends on whether the shares are subject to a substantial risk of forfeiture (determined under Code rules) at the time of the grant. If the shares are subject to a substantial risk of forfeiture, the Participant will not recognize taxable income at the time of the grant and when the restrictions on the shares lapse (that is, when the shares are no longer subject to a substantial risk of forfeiture), the Participant will recognize ordinary taxable income in an amount equal to the fair market value of the shares at that time. If the shares are not subject to a substantial risk of forfeiture or if the Participant elects to be taxed at the time of the grant of such shares under Section 83(b) of the Code, the Participant will recognize taxable income at the time of the grant of shares in an amount equal to the fair market value of such shares at that time, determined without regard to any of the restrictions. If the shares are forfeited before the restrictions lapse, the Participant will be entitled to no deduction on account thereof. The Participant’s tax basis in the shares is the amount recognized by him or her as income attributable to such shares. Gain or loss recognized by the Participant on a subsequent disposition of any such shares is capital gain or loss if the shares are otherwise capital assets.
In the case of other Full Value Awards, such as restricted stock units or performance-based stock units, the Participant generally will not have taxable income upon the grant of the award provided that there are restrictions on such awards that constitute a substantial risk of forfeiture under applicable Code rules. Participants will generally recognize ordinary income when the restrictions on awards lapse, on the date of grant if there are no such restrictions or, in certain cases, when the award is settled. At that time, the Participant will recognize taxable income equal to the cash or the then fair market value of the shares issuable in payment of such award, and such amount will be the tax basis for any shares received. In the case of an award which does not constitute property at the time of grant (such as an award of units), Participants will generally recognize ordinary income when the award is paid or settled.
We generally will be entitled to a tax deduction in the same amount, and at the same time, as the income is recognized by the Participant.
Performance-Based Compensation
A tax deduction will generally be unavailable for annual compensation in excess of $1 million paid to any of the most highly compensated officers of a public corporation (not more than five). However, amounts that constitute “performance-based compensation” are not counted toward the $1 million limit. To preserve the deduction, we have designed the Plan to enable awards thereunder to constitute “performance-based compensation” and not be counted toward the $1 million limit although we reserve the right to make awards under the Plan that do not constitute “performance-based compensation”.
Parachute Payments
Any acceleration of the vesting or payment of awards under the Plan in the event of a change in control of us may cause part or all of the consideration involved to be treated as an “excess parachute payment” under the Code, which may subject the Participant to a 20 percent excise tax and preclude deduction by us.
Stericycle, Inc. - 2017 Proxy Statement 48
Equity Compensation Plan Information
The table below sets forth the following information as of December 31, 2016 for (i) all compensation plans previously approved by our stockholders and (ii) all compensation plans not previously approved by our stockholders:
| | | | | | | | | Number of securities | | | | | | | | | | remaining available for | | | | Number of securities | | | | | | future issuance under | | | | to be issued | | | Weighted-average | | | equity compensation | | | | upon exercise of | | | exercise price of | | | plans (excluding | | | | outstanding options, | | | outstanding options, | | | securities reflected in | | | | warrants and rights | | | warrants and rights | | | column (a)) | | Plan Category | | (a) | | | (b) | | | (c) | | Equity compensation plans approved by security holders(1) | | | 5,579,925 | | | $ | 97.14 | | | 2,524,588 | | Equity compensation plans not approved by security holders(2) | | | 3,645 | | | | 49.74 | | | – | | TOTAL | | | 5,583,570 | | | $ | – | | | 2,524,588 |
(1) | These plans consist of our 2014 Incentive Compensation Plan, 2011 Incentive Compensation Plan, 2008 Incentive Stock Plan, 2005 Incentive Stock Plan, and the ESPP. | (2) | The only plan in this category is our 2000 Non-statutory Stock Option Plan, which expired in February 2010. This plan authorized the granting of non-statutory stock options for 7,000,000 shares of our common stock to employees (but not to officers or directors). |
Other Information
Approval of the Plan will require the affirmative vote of the holders of shares having a majority of the votes present in person or represented by proxy at the AnnualShareholder Meeting provided a quorum is present, with the result that shares that abstain from voting would count as votes against the Plan and broker non-votes would have no effect on the outcome.
The Board of Directors recommends that you vote FOR approval of the Plan (including, without limitation, the material terms of the Plan for purposes of Section 162(m) of the Code).
ITEM 7Improvement | Stockholder Proposal Entitled “Shareholder Proxy Access Reform” |
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, a beneficial owner of 50 shares of our common stock, has submitted the following resolution for consideration by stockholders: Proposal 4 – Special Shareholder Meeting Improvement Proposal 7—Shareholder Proxy Access Reform
Shareholders request thatResolved, Shareowners ask our board of directorsto take the steps necessary (unilaterally if possible) to enableamend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting (or the closest percentage to 10% according to state law). This proposal does not impact our board’s current power to call a special meeting.
Special meetings allow shareowners to vote on important matters, such as electing new directors that can arise between annual meetings. This proposal topic won more than 70%-support at least 50 shareholders to aggregate theirEdwards Lifesciences and SunEdison in 2013. Scores of Fortune 500 companies allow a more practical 10% of shares to equal 3%call a special meeting compared to the entrenchment requirement of our stock owned continuouslyStericycle. SRCL shareholders do not have the full right to call a special meeting that is available under state law. In fact we now have a sad joke of a right to call a special meeting. At Stericycle it would take 25% of shares (instead of 10%) and then all shares held for 3-yearsless than one continuous year would be disqualified. Thus in order to make useobtain the 25% requirement it could take the holders of 51% of SRCL shares (minus perhaps 26% of shares that were held for less than one continuous year) to obtain the 25% that representedone-year of continuous holdings. In other words it could take 51% of shares to go to the onerous trouble to initiate a special meeting in which the same 51% of shares could take action. The 2018 version of this proposal received 43% support. The support would have been higher if all shareholders had access to independent proxy voting advice. A more practical shareholder proxy access.right to call a special meeting would put shareholders in a better position to ask for improvements in our board of directors. For instance, Mark Miller had long-tenure of 26-years. Long-tenure can seriously erode director independence. Independence is a priceless attribute in a director from a shareholder perspective. Mr. Miller received 19% in negative votes compare to another Stericycle director who received 3% in negative votes. Even ifOther directors with excessive negative votes included:
Brian Anderson (25%) Charles Allutto (CEO – 14%) Thomas Brown (16%) Thomas Chen (45%) In the 20 largest public pension funds were ableyear leading up to aggregate their shares, theythe due date for this proposal Stericycle stock fell from $66 to $47. Meanwhile there is a long-term problem with fraud: A $295 million settlement was reached on behalf of a nationwide class of Stericycle customers, following a class-action lawsuit accusing the company of engaging in a price-increasing scheme that automatically inflated customers’ bills up to 18% biannually, November 2018. Stericycle agreed to pay $26 million to settle a lawsuit claiming it engaged in years of fraudulent price increases to school districts, police departments and municipalities in 12 states, October 2015. A more practical shareholder right to call a special meeting would not meet the 3% criteria forput shareholders in a continuous 3-years at most companies examined by the Council of Institutional Investors. Additionally many of the largest investors of major companies are routinely passive investors who would be unlikelybetter position to be part of the proxy access shareholder aggregation process. It is unlikelydemand that the number of shareholders who participate in the aggregation process would reach an unwieldy number due to the rigorous rules our management adopted for a shareholder to qualify as one of the aggregation participants. Plus it is easy for our management to screen aggregating shareholders because management simply needs to find one item lacking from a list of typical proxy access requirements.
This proposal is more important to our company. GMI Analyst said the Stericycle board was entrenched - 4Board seek directors had over 15 years of service, including the executive chairman with 23 years. This may impair the board’s ability to effectively oversee management. Our board also lacked an independent lead director, a position which could act to counterbalance such concerns.
better skills and ethics. Please vote to enhance shareholder value:yes: Special Shareholder Proxy Access Reform -Meeting Improvement – Proposal 7 Stericycle, Inc. - 2017 Proxy Statement 49
The Company’s Statement in Opposition
Having already implemented proxy access consistent with market practices, including our stockholder group size limitation for purposes of proxy access, the Board of Directors believes that this proposal is unnecessary and is not in the best interests of our stockholders. Consequently, the Board recommends a vote “AGAINST” this proposal.
We have already taken action to provide stockholders with a form of proxy access that is consistent with prevailing market practices, including the limitation in the number of stockholders who may aggregate their shares to meet the stock ownership requirements in our form of proxy access. Our bylaws limit any such group to 20 stockholders. For the reasons discussed below, we believe that this limitation is reasonable and serves the best interest of the Company and our stockholders. The proxy access provisions adopted by the Board, in addition to our pre-existing governance structures and policies, protect the Company, best serve the interests of stockholders, and are consistent with market practice.
The Board has already adopted proxy access for the benefit of all stockholders.
In February 2016, the Company adopted an amendment and restatement of the Company’s bylaws to incorporate proxy access provisions, which the Company believes strikes the appropriate balance between providing stockholders with meaningful proxy access rights, on the one hand, and protecting the interests of all stockholders by mitigating the potential for misuse by stockholders whose interests are not aligned with the majority of its long-term stockholders, on the other hand.
Under the amendment and restatement of the bylaws adopted by the Board, any stockholder or group of up to 20 stockholders that beneficially owns 3% or more of the Company’s common stock continuously for at least three years is permitted to nominate candidates for election to the Board and to require the Company to list nominees along with the Board’s nominees in the Company’s proxy materials for an annual meeting of stockholders; provided that the stockholder (or group) and each nominee satisfy certain requirements specified in the bylaws. The eligible stockholder or group of stockholders may nominate director candidates constituting up to the greater of two or 20% of the Board seats under the proxy access provisions adopted by our Board.
The Board considered various potential formulations of proxy access, including variations in the stockholder group size limitation, taking into account the composition of our stockholders and the size, tenure and structure of our Board. Based upon the Board’s assessment of the relative advantages and disadvantages to the stockholders and the Company of the various proxy access formulations, the Board amended the bylaws to implement proxy access in the form it believes is most appropriate for the Company and its stockholders.
The limitation in group size of 20 stockholders in our form of proxy access is broadly consistent with market practice, widely endorsed among institutional shareholders and is consistent with the idea that proxy access should be available for those stockholders who have a sufficient financial stake in the Company to cause their interests to be aligned with the interests of the Company’s stockholders as a whole.
The Company’s bylaws permit groups of up to 20 stockholders to aggregate their shares to reach the required 3% ownership threshold (with a group of investment funds under common management and investment control counting as a single stockholder). A limit in group size of 20 stockholders is broadly consistent with market practice and is widely endorsed among institutional stockholders. Specifically, 91% of all companies that have adopted proxy access since January 1, 2015 include a limitation in group size identical to our limitation of 20 stockholders.
Allowing this limited number of holders to act as a group strengthens the principle that the Board believes is shared by most of the Company’s stockholders—the right to nominate a director using the Company’s proxy statement should be available only for those stockholders who individually or with a reasonable number of additional stockholders have a sufficient financial stake in the Company to cause their interests to be aligned with the interests of the Company’s stockholders as a whole. A reasonable limitation should be established to reduce the Company’s administrative burden and costs and help reduce the risk of abuse of proxy access rights by stockholders with special interests, including interests unrelated to long-term stockholder value.
In light of the Company’s belief that the proponent’s proposed stockholder group limitation of 50 stockholders may have a number of significant adverse consequences that increase the potential for costly disruption, and that its proxy access provisions are broadly consistent with current market practice, the Board does not believe that changing the Company’s stockholder group limitation of 50 is necessary or advisable at this time.
The Company’s existing corporate governance structures ensure that the Board is accountable to stockholders, and stockholders already have several avenues to influence and voice their opinions to the Board.
In considering the proxy access reform stockholder proposal, the Board encourages stockholders to consider proxy access in the context of other provisions already included in our amended and restated certificate of incorporation, bylaws and other practices and policies that promote engagement with our stockholders and accountability of management and the Board to our investors. In addition to the proxy access provisions already in our bylaws, these include:4
• | Annual election of all directors; | | | 58 | | • | Majority vote standard for the election of directors (plurality vote in contested elections); | | | • | Any stockholder may nominate directors pursuant to the Company’s advance notice provisions of the bylaws and solicit proxies for director nominees under federal proxy rules; | | | • | Any stockholder may submit proposals for consideration at the Company’s annual meeting and for inclusion in the Company’s proxy statement, subject to certain conditions and SEC rules; | | | • | Stockholders may submit nominations of director candidates for consideration by the Nominating and Governance Committee; | | | • | Each stockholder may express their views on our executive compensation program through our annual non-binding “say-on-pay” vote; |
Stericycle, Inc. - 2017Stericycle, Inc. - 2019 Proxy Statement50
• | All but two of our directors are independent under NASDAQ listing standards; | | | • | Our independent Lead Director position ensures that there are processes in place for robust and independent Board oversight; | | | • | There are no supermajority voting requirements in our amended and restated certificate of incorporation or bylaws; | | | • | There is no “poison pill;” and | | | • | Stockholders may communicate directly with the Board generally, the Chairman of the Board or Lead Director individually, and any committee of the Board as a group. |
Finally, in regard to the composition and tenure of the Board and the proponent’s reference to entrenchment, the Company notes that five new independent directors have joined the Board since November 2012 and that two of its longer-serving members, Rod F. Dammeyer and William K. Hall, are retiring from the Board and not standing for reelection at this annual meeting.
ITEM 4 STOCKHOLDER PROPOSAL For the foregoing reasons, theTHE COMPANY’S STATEMENT IN OPPOSITION
The Board of Directors has again carefully considered this proposal and believes that thethis proposal is unnecessary and not in the best interests of our stockholders. Accordingly, The Board regularly reviews the company’s governance practices and believes that we have solid and efficient mechanisms in place to allow stockholders to communicate with the Board of Directors recommends a vote“AGAINST” this proposal.
ITEM 8 | Stockholder Proposal on the Vesting of Equity Awards Upon a Change in Control |
The Teamsters General Fund of the International Brotherhood of Teamsters, 25 Louisiana Avenue, NW, Washington, DC 20001, a beneficial owner of 55 shares of our common stock, has submitted the following resolution for consideration by stockholders:
RESOLVED: The shareholders ask the Board of Directors ofStericycle Inc.,and bring items to adopt a policy that in the event of a change in control (as defined under any applicable employment agreement, equity incentive plan or other plan), there shall be no acceleration of vesting of any equity award granted to any senior executive officer, provided, however, that the Board’s Compensation Committee may provide in an applicable grant or purchase agreement that any unvested award will vest on a partial, pro rata basis up to the time of the named executive officer’s termination, with such qualifications for an award as the Committee may determine.
For purposes of this Policy, “equity award” means an award granted under an equity incentive plan as defined in Item 402 of the SEC’s Regulation S-K, which addresses elements of executive compensation to be disclosed to shareholders. This resolution shall be implemented so as not to affect any contractual rights in existence on the date this proposal is adopted,its attention, including at annual and it shall apply only to equity awards made under equity incentive plans or plan amendments that shareholders approve after the date of the 2017 annual meeting.
SUPPORTING STATEMENT:
Stericycle Inc. (“Company”) allows senior executives full vesting of all unvested stock options upon a change of control. We do not question that some form of severance payments may be appropriate in that situation. We are concerned, however, that current practices at the Company may permit windfall awards that have nothing to do with an executive’s performance.
According to last year’s proxy statement, a change in control at the end of fiscal year 2015 could have accelerated the vesting of $91.3 million worth of stock options to Company’s five senior executives, with the CEO, entitled to $38.9 million.
We are unpersuaded by the argument that executives somehow “deserve” to receive unvested awards. To accelerate the vesting of unearned equity on the theory that an executive was denied the opportunity to earn those shares seems inconsistent with a “pay for performance” philosophy worthy of the name.
We do believe, however, that an affected executive should be eligible to receive an accelerated vesting of equity awards on a pro rata basis as of his or her termination date, with the details of any pro rata award to be determined by the Compensation Committee.
Other major corporations, including Apple, Chevron, ExxonMobil, IBM, Intel, Microsoft, and Occidental Petroleum, have limitations on accelerated vesting of unearned equity, such as providing pro rata awards or simply forfeiting unearned awards. Research from James Reda & Associates found that over one-third of the largest 200 companies now pro rate, forfeit, or only partially vest performance shares upon a change of control.
We urge you to voteFOR this proposal.
Stericycle, Inc.- 2017 Proxy Statement 51
The Company’s Statement in Opposition
The Board of Directors believes that this proposal is unnecessary and is not in the best interests of our stockholders.special stockholders’ meetings. Consequently, the Board of Directors recommends athat you vote “AGAINST”AGAINST this proposal for the reasons described below.
TheStericycle’s current ownership threshold balances the preservation of this important stockholder proposalright with the financial and administrative burdens that would result infrom misuse of the process by a competitive disadvantage in attractingsmall minority of stockholders with narrow interests.
Convening a special meeting of stockholders is a significant undertaking that requires a substantial commitment of time and retaining executives. Duefinancial resources. The Board and management would also be required to divert time from the common practices amongbusiness to prepare for and conduct the companies with which we compete for executive talent, the proposed policy could jeopardize the objectivemeeting. Because of these burdens and costs, special stockholder meetings should be extraordinary events that occur only when there are urgent and important strategic matters or profound fiduciary concerns. The current threshold of at least 25% of our compensation program to attract, retain, rewardcompany’s issued and incentivize exceptional, talented employees who will lead the Company in the successful executionoutstanding shares of its strategy and maximize stockholder value.
Many of the companies with which we compete for executive talent are not restricted in their ability to attract and retain key executives through the use of change in control equity vesting triggers, and in fact, routinely provide for accelerated vesting of equity-based awards uponcommon stock allows stockholders owning a change in control, either on a “single-trigger” or “double-trigger” basis. “Single-trigger” refers to the accelerated vesting of equity awards immediately upon a change in control. “Double-trigger” refers to the accelerated vesting of equity awards upon a change in control plus some other event, which is usually the termination of the executive within a certain time period. As the proponent notes, the Company allows senior executives full vesting of all unvested stock options upon a change of control.
The stockholder proposal could disrupt the alignment of interests between management and our stockholders.
One of the essential purposes of providing executives with equity-based awards is to align their interests with thosereasonable minority of our stockholders. The Board believescompany’s shares to call special meetings while preventing a small minority of stockholders from calling special meetings that our practice of accelerating the vesting of equity awards in the event of a change in control serves to align the interests of our executive officers with those of our stockholders and will incentivize our executive officers to remain objective, avoid conflicts of interest and stay focusedwould use corporate resources on executing a strategic changeproposals that could maximize stockholder value. Putting executives’ compensation at risk in the event of a change in control could create a conflict of interest if the Board believed a potential change in control transaction was inmay not reflect the best interests of our stockholders. As described undercompany and the heading “Compensation Discussionbroader stockholder base. If the proposal were adopted, a small minority of stockholders – potentially with narrow, short-term interests – could call special meetings to present proposals that are unlikely to garner significant support, without regard to how the costs and Analysis” in this proxy statement, a significant percentageother burdens might impact the Company’s future success or the interests of each namedthe vast majority of stockholders.
Stericycle is committed to stockholder engagement and sound governance practices. Company leaders meet regularly with stockholders to discuss our strategy, operational performance and business practices. We also meet with stockholders to share perspectives on corporate governance, executive officer’s long term compensation opportunity is in the form of stock options and restricted stock units, and at any time, our named executive officers’ unvested equity-based awards represent a significant portion of their total compensation. The proposal would eliminate our ability to provide reasonable assurance to our named executive officers that they can realize the full expected value of their equity-based awards in the event of a change in control. In addition, wesustainability matters, among other topics. We strongly believe that this commitment to ongoing dialogue with our stockholders, together with practices such as annual Director elections, a “proxy access” right for nominating Directors, no supermajority voting provisions, and our stockholders’ existing accelerationright to call special meetings protects stockholder rights without the expense and risk associated with a lower special meeting threshold.
Stericycle continues to enhance its corporate governance practices. Our company has made a number of vesting practice will motivate our employees, including our executive officers, to continue to work for us, even if they perceive that a changecorporate governance enhancements in control is imminent, which prevents the potential loss of key personnel at a time when retaining such employees could have a critical impact on the successful execution of a change in control transaction that would benefit our stockholders. The risk of job loss, coupled with the loss of significant equity awards, may present an unnecessary distraction for our executive officers and could lead to our executive officers beginning to seek new employment while a change in control transaction is being negotiated or is pending.recent years. The Board believes thatadded two new directors, both with extensive business transformation experience, in 2018. This continues the proponent’s proposal, which would have us adoptBoard’s refreshment efforts, with a policy under which equity awards of executive officers would vest on an accelerated basis using a vague, pro rata formula, would frustrate our retention objectives in a change in control situation. The stockholder proposal would result in undue restriction on the Compensation Committee’s structuring of executive compensation.
Our Board believes that stockholders’ interests are best served by recognizing that the Compensation Committee, comprised of independent, non-management directors, is in the best position to set the terms of executive compensation arrangements. Our stockholders have evidenced their overwhelming supportmajority of the Compensation’s Committee’s actions, with approximately 96% to 97%Board consisting of shares present and entitled to vote casting advisory votes approving our Company’s executive compensation atnew independent directors added in the last five annual meetings of stockholders.years and ensuring that the Board has the right expertise to execute on our company’s strategic vision. The Board believes that the Company’s treatment of equity-based awards upon a change in control, as summarized under the heading “Compensation Discussion and Analysis” in this proxy statement, appropriately balances the interests of all parties and does not grant windfall awards.
The proponent’s proposal seeks to substitute the Compensation’s Committee’s ability to exercise its informed business judgment to determine whether, and on what conditions, the acceleration of vesting of equity awards is in our and our stockholders’ best interests with the proponent’s view that the amount of time an executive officer is employed represents the extent to which an equity award is “earned.”
The Compensation Committee should continue to retain the flexibility to design and administer competitive compensation programs that reflect market conditions. Permitting the Compensation Committee to accelerate vesting of equity awards can incentivize management to maximize stockholder value, further aligning the interests of management with our stockholders. Conversely, adopting the rigid policy advanced by the proponent would frustrate the purposeappointed new chairs of the Audit, Compensation and Nominating & Governance Committees in recent years. Our Board enhanced its diversity through the addition of a number of diverse members over the last five years. The Board of Directors is also leveraging a competency and skills matrix to guide evolution of the composition of the Board. In addition, our Nominating & Governance Committee and interfere withregularly evaluates the objectivestructure of our compensation program.
Accordingly, the Board of Directors and makes recommendations to the Board of Directors regarding potential governance changes.
For the reasons set forth above, the proposal is neither necessary nor in stockholders’ best interests. Therefore, your Board of Directors recommends athat you vote“AGAINST”AGAINST this proposal. Stericycle, Inc. - 2017 Proxy Statement 52
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 59 | |
OTHER MATTERS As of the date of this proxy statement, our Board of Directors does not know of any other business to come before the Annual Meeting for consideration by our stockholders. If any other business should properly come before the meeting, the persons named as proxies in the accompanying proxy card will vote the shares of common stock represented by the proxy in accordance with their judgment. STOCKHOLDER PROPOSALS FOR THE 20182020 ANNUAL MEETING Any stockholder who wishes to present a proposal for consideration at our 20182020 Annual Meeting of Stockholders, and to have the proposal included in our proxy statement for the meeting, must submit the proposal to us by December 15, 2017.12, 2019. Stockholder proposals for inclusion in our proxy statement must comply with the rules of the SEC in order to be included and should be sent to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. In accordance with our bylaws, any stockholder who wishes to present a proposal from the floor for consideration at our 20182020 Annual Meeting of Stockholders, without inclusion of such matters in our proxy materials, must submit proper notice to us no earlier than January 24, 201823, 2020 and no later than February 23, 2018. 22, 2020. Stockholders who intend to submit director nominees for inclusion in our proxy materials for the 20182020 Annual Meeting of Stockholders must comply with the requirements of proxy access as set forth in our bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the secretarySecretary of the Company no earlier than the close of business on November 15, 2017,12, 2019, and no later than the close of business on December 15, 2017. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons beneficially owning more than 10% of our outstanding common stock to file periodic reports of stock ownership and stock transactions with the SEC. On the basis of a review of copies of these reports, we believe that all filing requirements for 2016 were satisfied in a timely manner.
ADDITIONAL INFORMATION
We will provide a copy of our annual report on Form 10-K for the fiscal year ended December 31, 2016 without charge to each stockholder as of the record date who sends a written request to Investor Relations, Stericycle, Inc., 28161 North Keith Drive, Lake Forest, Illinois 60045. Copies of this proxy statement and our Form 10-K as filed with the SEC are available in .pdf format on our investor relations website,http://investors.stericycle.com.Copies of this proxy statement and our Form 10-K also may be accessed directly from the SEC’s website,www.sec.gov.
Stericycle, Inc. - 2017 Proxy Statement 53
EXHIBIT A | Amended and Restated Employee Stock Purchase Plan |
The purpose of this plan is to encourage employees of Stericycle, Inc. (the “Company”) to continue in their employment, and to participate in the Company’s future, by allowing them to purchase shares of the Company’s common stock at a price below the market price of the stock. This plan is intended to be an employee stock purchase plan under Section 423 of the Internal Revenue Code.12, 2019.
Article 2 | Definitions | | | 60 | | Stericycle, Inc. - 2019 Proxy Statement |
AccountAPPENDIX A Definition and Reconciliation ofNon-GAAP Measures means
Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (“Adjusted EBITDA”) and Adjusted Earnings Before Interest, and Tax (“Adjusted EBIT”) is Income from operations excluding specified items outlined in the bookkeeping account established for each Participant. Board meanstable below. Management believes the Company’s Board of Directors.
Closing Price meansadjusted financial measures represent the last reported sales price of a share of Common Stock onamounts directly related to the Nasdaq National Market.
Common Stock means the Company’s common stock, par value $.01 per share.
Company means Stericycle, Inc., a Delaware corporation.
Compensation means gross salary or wages.
Eligible Employee means, in respect of an Offering, (i) a full-time Employee who has completed six months’ employment asongoing operations of the First Day ofbusiness and uses these measures in evaluating performance. All adjusted financial measures are intended to supplement the Offering or (ii) a part-time Employee who customarily works more than 20 hours per weekapplicable U.S. GAAP measures and who has completed six months’ employment as of the First Day of the Offering.
Employee means an employee of the Companyshould not be considered in isolation from, or a U.S. Subsidiary. References to “employment” are to employment by the Company or a U.S. Subsidiary.
First Day means, in respect of an Offering, the first regular business day during the Offering.
Internal Revenue Code means the Internal Revenue Code of 1986, as amended, and as it may be amended in the future.
Last Day means, in respect of an Offering, the last regular business day during the Offering.
Officer means (i) the Company’s President and Chief Executive Officer, Chief Operating Officer, or Chief Financial Officer (ii) any Executive Vice President and (iii) any other person who is considered an “officer” of the Companyreplacement for, purposes of Rule 16a-1(f) under the Securities Exchange Act of 1934.
Offering means an offering of Common Stock pursuant to Options granted under this Plan.
Option means the right of a Participant to purchase shares of Common Stock in an Offering.
Option Grant Date means the First Day of an Offering.
Option Expiration Date means the Last Day of an Offering.
Option Price means, in respect of an Option, the price per share at which shares of Common Stock may be purchased pursuant to the exercise of the Option.
Option Shares means the shares of Common Stock issued upon the exercise of an Option.
Participant means an Eligible Employee who elects to participate in an Offering.
Plan means this plan, as it may be amended. The name of this Plan is the “Stericycle, Inc. Employee Stock Purchase Plan.”
Plan Administrator means the Board or the committee of the Board or the administrative committee of Officers of the Company to which the Board has delegated its authority to administer the Planfinancial measures prepared in accordance with Paragraph 5.1U.S. GAAP and may not be comparable to or calculated in the same manner asNon-GAAP financial measures published by other companies.
The company calculates Adjusted Return on Invested Capital (“ROIC”) by dividing Adjusted Net Operating Profit after Tax (“NOPAT”) by the average of the prior two year ending amounts for Invested Capital. Stericycle uses the following calculation for Invested Capital: Total Assets less Cash and Equivalents, less Short Term Investments, less Current Liabilities, plus Current Portion of Long Term Debt. “NOPAT” is calculated by reducing “Adjusted EBIT” (referenced above) by Intangible Amortization and current year acquisitions and multiplying by (1 – Adjusted Tax Rate) plus Intangible Amortization. The adjusted tax rate is calculated by dividing thePre-tax Book Income excluding specified items outlined in table below by Income Tax Benefit/(Expense) plus the tax impact of the specified items (referenced above). In order to normalize the “ROIC” equation for the fact that Intangible Amortization is added back to “NOPAT”, the Accumulated Amortization of Intangible Assets is also added back to the average Invested Capital. Adjusted Earnings Before Interest and Tax (“Adjusted EBIT”) | | | | | | | | | | | | | | | | | | | | | | | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | Total | | Income from Operations US GAAP | | | 54.1 | | | | 62.4 | | | | 68.3 | | | | (345.9 | ) | | | (161.1 | ) | Business Transformation | | | 22.1 | | | | 21.8 | | | | 21.0 | | | | 17.7 | | | | 82.6 | | Intangible Amortization | | | 31.9 | | | | 32.9 | | | | 31.8 | | | | 33.7 | | | | 130.3 | | Acquisition and Integration | | | 4.1 | | | | 1.8 | | | | 1.6 | | | | 2.3 | | | | 9.8 | | Operational Optimization | | | 8.9 | | | | 7.0 | | | | 3.6 | | | | 9.9 | | | | 29.4 | | Divestitures | | | 4.1 | | | | 13.0 | | | | 2.0 | | | | 1.4 | | | | 20.5 | | Litigation, Settlements, and Regulatory Compliance | | | 27.5 | | | | 16.4 | | | | 17.3 | | | | 32.0 | | | | 93.2 | | Impairment | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 385.2 | | | | 385.2 | | Other | | | 5.8 | | | | 2.9 | | | | 6.2 | | | | 14.2 | | | | 29.1 | | Income from Operations (Adjusted) | | | 158.5 | | | | 158.2 | | | | 151.8 | | | | 150.5 | | | | 619.0 | | Depreciation | | | 30.8 | | | | 32.7 | | | | 32.1 | | | | 30.0 | | | | 125.6 | | EBITDA (Adjusted) | | | 189.3 | | | | 190.9 | | | | 183.9 | | | | 180.5 | | | | 744.6 | |
| | | | | | Stericycle, Inc. - 2019 Proxy Statement | | | 61 | |
APPENDIX A DEFINITION AND RECONCILIATION OFNON-GAAP MEASURES U.S. Subsidiary means a “subsidiary corporation” as defined in Section 424(f) of the Internal Revenue Code (with the Company as the “employer corporation”Adjusted Return on Invested Capital (“ROIC”) which is incorporated under the laws of Delaware or another American state or under the laws of the Commonwealth of Puerto Rico.
| | | | | | | Article 32018 Total | Effective Date | Net Operating Profit After Tax (“NOPAT”) | | | | | | | Income from Operations US GAAP | | | (161.1 | ) | | | Business Transformation | | | 82.6 | | | | Acquisition and Integration | | | 9.8 | | | | Operational Optimization | | | 29.4 | | | | Divestitures | | | 20.5 | | | | Litigation, Settlements, and Regulatory Compliance | | | 93.2 | | | | Impairment | | | 385.2 | | | | Other | | | 29.1 | | | | Current Year Acquisitions | | | (3.4 | ) | | | Net Operating Profit Before Tax | | | 485.4 | | | | Pre-tax Book Income | | | (275.4 | ) | | | Adjustments | | | 780.2 | | | | Pre-tax Book Income (Adjusted) | | | 504.8 | | | | Tax (Benefit)/Expense | | | (29.8 | ) | | | Tax Impact of Adjustments | | | 155.6 | | | | Adjusted Tax Benefit/Expense | | | 125.8 | | | | Tax Rate as Reported | | | 10.8% | | | | Tax Rate Adjusted | | | 24.6% | | | | Net Operating Profit After Tax | | | 368.5 | | | | Intangible Amortization | | | 130.3 | | | | NOPAT | | | 498.8 | | | |
Invested Capital This Plan became effective as of July 1, 2001, following approval by the Company’s stockholders at the Annual Meeting on May 15, 2001.
| | | | | | | | | | | | 2017
Total | | | 2018
Total | | Total Assets | | | 6,988.3 | | | | 6,455.5 | | | | | less: Cash | | | (42.2 | ) | | | (34.3 | ) | | | | less: Short Term Investments | | | (0.1 | ) | | | 0.0 | | | | | less: Current Liabilities | | | (969.4 | ) | | | (733.2 | ) | | | | plus: Current Portion of Long Term Debt | | | 119.5 | | | | 104.3 | | | | | Invested Capital | | | 6,096.1 | | | | 5,792.3 | | | | | Average Invested Capital (2017 and 2018) | | | | | | | 5,944.2 | | | | | plus: Accumulated Amortization | | | | | | | 499.9 | | | | | Invested Capital | | | | | | | 6,444.1 | | | | | Return on Invested Capital (“ROIC”) | | | | | | | 7.7% | | | | |
Article 4 | Shares Available | |
The total number of Option Shares which may be issued under this Plan is 1,200,000 shares (subject to adjustment as provided in Paragraph 7.1).
Stericycle, Inc. - 2017
| 62 | | Stericycle, Inc. - 2019 Proxy Statement54Article 5 | Plan Administration |
This Plan shall be administered by the Board. The Board may delegate its authority to administer the Plan (but not its power to amend, suspend or terminate this Plan) to a standing or other committee of the Board or to an administrative committee consisting of any two or more Officers.
APPENDIX A DEFINITION AND RECONCILIATION OFNON-GAAP MEASURES Subject to and not inconsistent with the provisions of the Plan, the Plan Administrator shall have the authority, in its discretion, to determine the terms, conditions, restrictions and limitations applicable to each Offering, the Options granted pursuant to the Offering, and the Option Shares issued upon the exercise of those Options.
The Plan Administrator may interpret the Plan, adopt and revise policies, procedures and guidelines to administer the Plan, and make all determinations required for the Plan’s administration. The actions of the Plan Administrator shall be final and binding.
All Eligible Employees shall have the same rights and privileges under the Plan with the exception that, as provided in Article 6, the number of shares of Common Stock that may be purchased under Options granted in any Offering may bear a uniform relationship to compensation. All policies, procedures and determinations in the administration of the Plan shall be applied uniformly and consistently to all persons in similar circumstances.
Unless the Plan Administrator specifies otherwise (by providing for Offerings of a different frequency or length, or by canceling any Offering prior to the First Day of the Offering), there shall be two Offerings each calendar year. The first Offering shall be begin on January 1 and end on the following June 30 of each year, and the second Offering shall begin on July 1 and end on the following December 31.
Each Eligible Employee as of the First Day of any Offering who has elected to participate in the Offering shall be granted an Option as of the First Day of the Offering pursuant to the terms of the Offering. The Option shall be for a number of shares of Common Stock equal to the quotient obtained by dividing (i) the aggregate Compensation to be withheld and credited to the Participant’s Account during the Offering by (ii) the Option Price (as determined in accordance with Paragraph 6.5).
Each Eligible Employee (and each other Employee who will become and in fact becomes an Eligible Employee as of the First Day of the Offering) may participate in any Offering by completing an enrollment agreement in the manner and within the time prior to the First Day of the Offering that the Plan Administrator specifies.
A Participant’s enrollment agreement shall specify the percentage of his or her Compensation during the Offering that the Participant elects to have withheld and credited to his or her Account for purposes of exercising the Participant’s Option. The Participant may specify any whole percentage of his or her Compensation not exceeding $5,000 during any Offering Period (appropriately increased or reduced in the case of any Offering Period longer or shorter than six months). Payroll deductions shall begin with the first regular payroll period ending on or after the First Day of the Offering and end with the last regular payroll period ending on or before the Last Day (or, if earlier, upon the termination of the Participant’s employment).
The Option Price shall be equal to 85% of the Closing Price of a share of Common Stock on the Last Day of the Offering (or on the last trading day preceding the Last Day if it is not a trading day).
Each Participant in an Offering shall be considered to have exercised his or her Option on the Last Day of the Offering so as to purchase the maximum whole number of Option Shares. The Option Shares issuable upon the Participant’s exercise shall be credited to his or her Account as of the Last Day and considered to be issued and outstanding shares. Fractional shares shall not be issued, and any amounts remaining credited to a Participant’s Account after the Participant’s exercise of his or her Option shall be added to the aggregate Compensation credited to the Participant’s Account during the next Offering in which he or she participates.
Stericycle, Inc. - 2017 Proxy Statement 55
6.7 | Nontransferability of Options |
No Participant in an Offering may sell, pledge, transfer or otherwise dispose of his or her Option under any circumstances.
6.8 | Cancellation of Options |
In the event that the employment of a Participant in an Offering terminates prior to the Last Day of the Offering for any reason (whether as a result of his or her resignation, death or otherwise), the Participant’s Option shall be cancelled as of the date of the Participant’s termination of employment. All Compensation credited to a Participant’s Account as of his or her termination shall be refunded without interest no later than 30 days after the Participant’s termination.
6.9 | Election To Cease Participation |
A Participant may elect to cease participation in an Offering effective at any time prior to the Last Day of the Offering and receive a refund of all Compensation credited to his or her Account; provided, however, that if an election to cease participation is received less than 30 days prior to the Last Day of an Offering (including an Offering ending on December 31, 2016), such election shall not be given effect for the then current Offering but shall instead be given effect for the next following Offering. The Participant’s election shall serve to cancel the Participant’s Option and terminate his or her participation in both the current Offering (or the next following Offering, if applicable pursuant to the preceding sentence) and all subsequent Offerings (subject, in the case of a subsequent Offering, to participation by re-enrollment pursuant to Paragraph 6.3). Subject to the foregoing provisions of this Section 6.9, an election to cease participation in an Offering shall be made in the manner and within the time prior to the Last Day of the Offering that the Plan Administrator specifies; provided, however, that no such election may be made effective retroactively.
A Participant shall possess all of the rights and privileges of a stockholder with respect to the Option Shares credited to his or her Account.
No interest shall accrue on any Compensation credited to a Participant’s Account. After the close of each Offering, a report shall be sent to each Participant (or made available to the Participant through his or her E*Trade account) stating the entries made to his or her Account, the number of Option Shares purchased, and the applicable Option Price.
6.12 | Continuing Participation |
A Participant’s enrollment agreement pursuant to Paragraph 6.3 shall remain in effect indefinitely (for both the Offering in respect of which it was initially filed and all subsequent Offerings) unless:
(a) | the Participant changes the percentage of Compensation that he or she elects to have withheld, with effect for the next Offering and all subsequent Offerings, in the manner and within the time prior to the First Day of the next Offering that the Plan Administrator specifies; or | | | | (b)Adjusted EPS | the Participant elects to cease participation in the current Offering pursuant to Paragraph 6.9. | Year Ended December 31, 2018 (Loss) Earnings Per Share | | U.S. GAAP EPS | | | $(2.91 | ) | Adjustments: | | | | | Business Transformation | | | 0.71 | | Intangible Amortization | | | 1.12 | | Acquisition and Integration | | | 0.09 | | Operational Optimization | | | 0.26 | | Divestitures | | | 0.18 | | Litigation, Settlements and Regulatory Compliance | | | 0.85 | | Impairment | | | 3.62 | | Other | | | 0.29 | | Capital Allocation | | | 0.14 | | U.S. Tax Reform | | | 0.10 | | Adjusted EPS | | | $ 4.45 | |
6.13 | | | | | LimitationsStericycle, Inc. - 2019 Proxy Statement | | | 63 | |
Notwithstanding any other provision
2019PROXY STATEMENT Stericycle’s Global Sustainability Highlights Stericycle provides essential sustainability services that help protect communities from harmful wastes, enable recycling and alternative use opportunities, and lead to greater consumer safety and satisfaction. Here is a sample of this Plan:the global annual impact we made in 2018 to protect what matters: (a) | No Option shall be granted to any Eligible Employee for a number of shares of Common Stock greater than the number of shares determined by dividing (i) $25,000 by (ii) the Closing Price of a share of Common Stock on the First Day of the Offering (or on the first trading day following the First Day if it is not a trading day), rounding the quotient down to the nearest whole share. | | | | | |  | | (b)Medical Waste Management 1.8 BILLION POUNDS of Medical Waste Safely Treated | |  | | Secure Information Destruction No Option shall be granted to any Eligible Employee that would permit his or her rights to purchase shares 1.5 BILLION POUNDS
of Common Stock under this Plan and all other employee stock purchase plans of the Company or any Subsidiary to accrue at a rate exceeding $25,000 of the fair market value of such shares (determined at the time that the Option is granted) during any calendar year in which the Option is outstanding. Any Option granted under this Plan shall be deemed to be modified to the extent necessary in order to satisfy the requirements of this Paragraph 6.13(a) and Section 423(b)(8) of the Internal Revenue Code. Paper Recycled | | | | |  | | Pharmaceutical Waste Disposal 85 MILLION POUNDS of Drugs Safely Disposed | |  | | Hazardous Waste Service 1.2 BILLION POUNDS of RCRA Wastes Properly Managed | (c) | No Option shall be granted to any Eligible Employee if, immediately after the Option is granted, he or she would own (or would be deemed to own, applying the rules | | |  | | Sharps Management 56 MILLION POUNDS of Section 423(b)(3) Plastic Diverted from Landfills | |  | | Sustainable Solutions 84 MILLION POUNDS of the Internal Revenue Code) stock possessing 5% or more Wastes Diverted from Landfills | | | | |  | | Maritime Solutions 83 MILLION POUNDS of the voting power or value of all classes of stock of the Company or any Subsidiary.Maritime Wastes Diverted from Landfills | | | | |
Learn more about our sustainability efforts at stericycle.com/about-us/sustainability.
28161 N. Keith Drive Lake Forest, IL 60045 800-643-0240 | stericycle.com 2019 Stericycle, Inc. - 2017 Proxy Statement 56 All rights reserved.
| | | | | 
STERICYCLE, INC. 28161 NORTH KEITH DRIVE LAKE FOREST, IL 60045 | | | | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Daylight Time on May 21, 2019. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. | | | | VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Daylight Time on May 21, 2019. Have your proxy card in hand when you call and then follow the instructions. | | | | VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | E72384-P17486 KEEP THIS PORTION FOR YOUR RECORDS | | DETACH AND RETURN THIS PORTION ONLY | Article 7 | Miscellaneous ProvisionsTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
7.1 | Capitalization Adjustments |
The aggregate number of shares of Common Stock for which Options may be granted under the Plan, the aggregate number of Option Shares in respect of each outstanding Option, and the exercise price of each outstanding Option may be adjusted by the Plan Administrator as it considers appropriate in the event of changes in the number of outstanding shares of Common Stock by reason of stock dividends, stock splits, recapitalizations, reorganizations and the like. Adjustments under this Paragraph 7.1 shall be made in the Plan Administrator’s discretion, and its decisions shall be final and binding.
7.2 | Amendment and Termination |
The Board may amend, suspend or terminate this Plan at any time. The Company’s stockholders shall be required to approve any amendment that would increase the number of Option Shares which may be granted under this Plan. If this Plan is terminated, the provisions of this Plan shall continue to apply to Options granted and Option Shares issued prior to termination, and no amendment, suspension or termination of the Plan shall adversely affect the rights of the holder of any outstanding Option without his or her consent.
7.3 | No Right To Employment |
Nothing in this Plan or in any Offering shall confer on any person the right to continue in the employ of the Company or a Subsidiary or limit the right of the Company or the Subsidiary to terminate his or her employment.
Notices required or permitted under this Plan shall be considered to have been duly given if sent by certified or registered mail addressed to the Plan Administrator at the Company’s principal office or to any other person at his or her address as it appears on the Company’s payroll or other records.
If any provision of this Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions, and the Plan shall be construed and administered as if the illegal or invalid provision had not been included.
This Plan shall be governed in accordance with the laws of the State of Illinois.
The Committee may adopt, amend and terminate one or more sub-plans to the Plan to permit employees in a country other than the United States to participate in the Plan on the terms described in the applicable sub-plan, in compliance with that country’s securities, tax and other laws.
Stericycle, Inc. - 2017 Proxy Statement 57
EXHIBIT B | Stericycle, Inc. 2017 Long-Term Incentive Plan |
Stericycle, Inc. (the “Company”) has established the Stericycle, Inc. 2017 Long-Term Incentive Plan (the “Plan”) to (a) attract and retain employees, directors and other persons providing services to the Company and its Subsidiaries (as defined herein); (b) advance the interests of the Company and its stockholders by providing employees, directors and other persons providing services to the Company and its Subsidiaries, upon whose judgment, initiative and efforts the Company largely depend, with appropriate incentives to perform in a superior manner and achieve long-range goals, and (c) to further align the interests of Participants’ (as defined herein) with those of the Company’s stockholders, and to thereby promote the long-term financial interests of the Company and the Subsidiaries and long-term stockholder return.
(a) | Annual Incentive Planmeans the Stericycle, Inc. Annual Incentive Plan, or a successor thereto. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STERICYCLE, INC. | | (b) | Award means an Option, SAR, Full Value Award or Cash Incentive Award granted under the Plan. | | | (c) | Award Agreement means a written or electronic agreement between the Company and a Participant incorporating the terms of an Award to the Participant. | | | (d) | Board means the Company’s Board of Directors. | | | (e) | Cash Incentive Award means an Award described in subsection 7.1(b). | | | (f) | Cause means the termination of employment or other services for (i) gross negligence, (ii) personal dishonesty, (iii) incompetence, (iv) willful misconduct, (v) any breach of fiduciary duty involving personal profit, (vi) intentional failure to perform stated duties, (vii) the willful violation of any law, rule or regulation (other than traffic violations or similar offenses), (viii) the material breach of an employment agreement or any restrictive covenant agreement (or the restrictive covenant provisions of any other plan of the Company or any Subsidiary); or (ix) a material violation of a material written policy of the Company or any Subsidiary, violation of which would be grounds for immediate dismissal under applicable Company or Subsidiary policy. | | | (g) | Change of Control means the first to occur of the following: | | | | (i) | any Person directly or indirectly acquires or otherwise becomes entitled to vote Common Stock having 51% or more of the voting power in elections for directors (other than pursuant to a transaction described in clause (iii)(z)); or | | | | | | (ii) | there shall have been a change in the composition of the Board within a 24-month period such that a majority of the Board does not consist of directors who were serving at the beginning of such period together with directors whose initial nomination for election by the Company’s stockholders or, if earlier, initial appointment to the Board was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 24-month period together with the directors who were previously so approved (either by a specific vote of approval or by approval of the Company’s proxy statement in which such individual was named as a nominee for election as a director); or | | | | | | (iii) | the consummation of a merger or consolidation of the Company with any other corporation or other entity other than (x) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five (75%) of the total voting power of the securities of the Company or the surviving entity outstanding immediately after such merger or consolidation, (y) a merger or consolidation effected to implement a recapitalization of the Company in which no Person acquires more than fifty percent (50%) of the total voting power of the Company’s then outstanding securities, or (z)(1) a merger or consolidation as a result of which the Company becomes a direct or indirect wholly-owned subsidiary of a holding company, and (2)(A) the direct or indirect holders of the voting securities of such holding company immediately following the transaction are substantially the same as the holders of the Company’s voting securities immediately prior to the transaction, or (B) immediately following the transaction no Person (other than a holding company satisfying the requirements of this clause (iii)(z)) is the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the voting securities of such holding company; or | | | | | | (iv) | the Company sells all or a substantial portion of the consolidated assets of the Company and its Subsidiaries, and the Company does not own stock in the purchaser having more than 75% of the voting power in elections for directors; or |
Stericycle, Inc. - 2017 Proxy Statement 58
| (v) | the stockholders of the Company approve a plan of complete liquidation of the Company. |
| As used in this definition, a “Person” means any “person” as that term is used in Sections 13(d) and 14(d) of the Exchange Act, together with all of that person’s “affiliates” and “associates” as those terms are defined in Rule 12b-2 under the Exchange Act. Notwithstanding the foregoing, in the case of any individual who is eligible to participate in the Executive Plan, the definition of “Change in Control” for purposes of the Plan and Awards issued hereunder shall be the same as the definition of Change in Control as set forth in the Executive Plan. | | | (h) | Code means the Internal Revenue Code of 1986, as amended. | | | (i) | Committee is defined in subsection 3.1. | | | (j) | Common Stock means the Company’s common stock, par value $.01 per share. | | | (k) | Company means Stericycle, Inc., a Delaware corporation. | | | (l) | Disability means that an individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. Whether an individual has a “Disability” shall be determined in a manner that is consistent with Code Section 22(e)(3). | | | (m) | Effective Date is defined in subsection 9.1. | | | (n) | Eligible Person means any officer, director or other employee of the Company or a Subsidiary, individuals who are expected to become officers, employees, directors of the Company or a Subsidiary, Non-Employee Directors and individuals who are expected to become Non-Employee Directors (but effective no earlier than the date on which the individual begins to provide services to the Company or a Subsidiary). | | | (o) | Exchange Act means the Securities Exchange Act of 1934, as amended. | | | (p) | Executive Plan means the Stericycle, Inc. Executive Severance and Change in Control Plan. | | | (q) | Exercise Price is defined in subsection 6.3. | | | (r) | Expiration Date is defined in subsection 6.9. | | | (s) | Fair Market Value means, as of any date, the value of a share of Common Stock determined in accordance with the following rules: |
| (i) | If the Common Stock is at the time listed or admitted to trading on any stock exchange, then the Fair Market Value shall be the last reported sales price of a share of Common Stock on such date on the principal exchange on which the Common Stock is then listed or admitted to trading or, if no such sale is reported on that date, on the last preceding date on which a sale was so reported. | | | | | | (ii) | If the Common Stock is not at the time listed or admitted to trading on a stock exchange, the Fair Market Value shall be the closing average of the closing bid and asked price of a share of Common Stock on the date in question in the over-the-counter market, as such price is reported in a publication of general circulation selected by the Committee and regularly reporting the market price of Common Stock in such market. | | | | | | (iii) | If the Common Stock is not listed or admitted to trading on any stock exchange or traded in the over-the-counter market, the Fair Market Value shall be as determined by the Committee in good faith. |
(t) | Full Value Award means an Award described in subsection 7.1(a). | | | (u) | Grant Date means, in respect of grants under the Annual Incentive Plan (or any grant to a Non-Employee Director), the date that the Committee grants the Award or any later date that the Committee specifies as the effective date of the Award. In the case of grants to employees other than grants under the Annual Incentive Plan, the first business day of the month following the employee’s date of hire. | | | (v) | ISO means an incentive stock option described in Code Section 422. | | | (w) | Non-Employee Director means a director of the Company who is not an employee of the Company or any Subsidiary. | | | (x) | NQSO means an Option that is not intended to be an ISO. | | | (y) | Option means an Award pursuant to Section 6 that entitles the Participant to purchase shares of Common Stock at an Exercise Price established by the Committee. An Option may be an ISO or a NQSO. | | | (z) | Participant is defined in Section 5. | | | (aa) | Performance-Based Compensation has the meaning set forth in subsection 7.4. | | | (bb) | Performance Criteria means one or more of the following criteria: |
| • | earnings (e.g., earnings before income taxes, or “EBIT”; earnings before income taxes and amortization, or “EBITA”; earnings before interest, taxes, depreciation and amortization, or “EBITDA”, earnings per share, or “EPS”), | | | | | | • | revenues | | | | | | • | income (e.g. income from operations, net operating income, operating income, net income) | | | | | | • | internal rate of return | | | | | | • | total return to stockholders | | | | | | • | financial return ratios (e.g., return on investment, or “ROI”; return on invested capital, or “ROIC”; return on equity, or “ROE”; return on assets, or “ROA”, cash flows, cash flow return on investment, free cash flow) | | | | | | • | market share | | | | | • | capital expenditures | | | | | • | reduction of indebtedness | | | | | • | cost improvement or containment | | | | | • | expense management | | | | | • | economic value added | | | | | • | stock price | | | | | • | profit | | | | | • | margin | | | | | • | operating expenses | | | | | • | implementation or completion of significant projects or processes | | | | | • | economic value created | | | | | • | cost targets, reductions and savings, productivity and efficiencies |
Stericycle, Inc. - 2017 Proxy Statement 59
| • | strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation and other legal and compliance matters, information technology, and goals relating to contributions, dispositions, acquisitions, development and development related activity, capital markets activity and credit ratings, joint ventures and other transactions, and budget comparisons | | | | | • | personal professional objectives, including any of the foregoing performance targets, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation and reorganization of joint ventures, and the completion of other corporate transactions. | | | | | | | | Where applicable, the performance targets based on Performance Criteria may be expressed in termsThe Board of attaining a specified level of the particular goal or the attainment of a percentage increase or decrease in the particular criteria,Directors recommends you vote FOR all nominees for director, FOR Items 2 and may be applied to one or more of the Company, a Subsidiary, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. The performance targets based on Performance Criteria may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur),3, and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Each of the foregoing Performance Criteria shall be determined in accordance with generally accepted accounting principles or other objective standards established by the Committee that satisfy the requirements of Code Section 162(m) and shall be subject to certification by the Committee (including, if applicable, in accordance with Code Section 162(m)) and the performance targets that are based upon the Performance Criteria may be based on adjusted Performance Criteria, which adjustments shall be established and determined by the Committee in an objective manner as and to the extent permitted by Code Section 162(m).AGAINST Item 4. |
(cc) | Plan means this Stericycle, Inc. 2017 Long-Term Incentive Plan, as the same may be amended from time to time. | | | | | | | | | | | (dd)1. | SAR or stock appreciation right means an Award pursuant to Section 6 that entitles the Participant to receive, in cash or in shares | Election of Common Stock (as determined in accordance with the terms of the Plan), value equal to (or otherwise based on) the excess of: (i) the Fair Market Value of a specified number of shares of Common Stock at the time of exercise; over (ii) an Exercise Price established by the Committee.Directors | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (ee) | Subsidiary means any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent voting or profits interest is owned, directly or indirectly, by the Company (or by any entity that is a successor to the Company), and any other business venture designated by the Committee in which the Company (or any entity that is a successor to the Company) has a significant interest, as determined in the discretion of the Committee; provided, however, that except for options and SARs designated as intended to be subject to Code Section 409A, options and SARs shall not be granted to employees or directors of Subsidiaries unless the ownership of the Subsidiary satisfies Treas. Reg. § 1.409A-1(b)(5)(iii). | 1a. Robert S. Murley | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | For purposes of applying the Plan to an ISO, the term “Subsidiary” means a subsidiary determined in accordance with Code Section 424(f). | | | | Against | | | | Abstain | | | | | (ff) | Substitute Award means an Award granted or shares of Common Stock issued by the Company in assumption of, or in substitution or exchange for, an award previously granted, or the right or obligation to make a future award, in all cases by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. In no event shall the issuance of Substitute Awards change the terms of such previously granted awards such that the change, if applied to a current Award, would be prohibited under the provisions of subsection 6.8. | 1b. Cindy J. Miller | | ☐ | | ☐ | | ☐ | | | | | | 1i. Kay G. Priestly | | | ☐ | | | | ☐ | | | | ☐ | | | | | (gg) | Termination Date means, in the case of an employee, the date on which he or she ceases to be an employee of the Company and its Subsidiaries and, in the case of a Non-Employee Director, the date on which the Non-Employee Director’s service as a Non-Employee Director ceases, in any case regardless of the reason for the termination; provided that a “Termination Date” shall not be considered to have occurred (i) during the period in which the reason for the cessation of services is a leave of absence approved by the Company or a Subsidiary which was the recipient of the Participant’s services or (ii) in the case of a transfer of employment from the Company to a Subsidiary or from a Subsidiary to the Company. In the case of an employee who ceases to be an employee and immediately becomes a Non-Employee Director, the Termination Date shall not occur until the date on which the individual’s service as a Non-Employee Director terminates and, in the case of a Non-Employee Director who ceases to be a Non-Employee Director and immediately becomes an employee, the date on which the individual’s service as an employee terminates. In any event, with respect to any Award that is subject to Code Section 409A, the term “Termination Date” means a “separation from service” within the meaning of Code Section 409A. |
3.1 | Committee. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the “Committee”) in accordance with this Section 3. Unless the Board designates a different committee, the Compensation Committee of the Board of Directors shall serve as the Committee (as long as all of the members of the Compensation Committee otherwise qualify under this subsection 3.1). So long as the Company is subject to Section 16 of the Exchange Act, the Committee shall be selected by the Board and shall consist of not fewer than two members of the Board or such greater number as may be required for compliance with Rule 16b-3 issued under |
Stericycle, Inc. - 2017 Proxy Statement 60
| | the Exchange Act and shall be comprised of persons who are independent for purposes of applicable stock exchange listing requirements. Any Award granted under the Plan which is intended to constitute Performance-Based Compensation (including Options and SARs) shall be granted by a Committee consisting solely of two or more “outside directors” within the meaning of Code Section 162(m) and applicable regulations. Notwithstanding any other provision of the Plan to the contrary, with respect to any Awards to Non-Employee Directors, the Committee shall be the Board.1c. Brian P. Anderson | | ☐ | | ☐ | | ☐ | | | | | | 1j. Mike S. Zafirovski | | | ☐ | | | | ☐ | | | | ☐ | | | | | | | 1d. Lynn D. Bleil 1e. Thomas F. Chen 1f. J. Joel Hackney, Jr. 1g. Veronica M. Hagen 1h. Stephen C. Hooley | | ☐ ☐ ☐ ☐ ☐ | | ☐ ☐ ☐ ☐ ☐ | | ☐ ☐ ☐ ☐ ☐ | | | | | | 2. Advisory vote to approve executive compensation | | | ☐ | | | | ☐ | | | | ☐ | | 3.2 | Authority. The authority to manage and control the operation and administration | | | | | | | 3. Ratification of the Plan shallappointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019 | | | ☐ | | | | ☐ | | | | ☐ | | | | | | | | | | 4. Stockholder proposal entitled Special Shareholder Meeting Improvement | | | ☐ | | | | ☐ | | | | ☐ | | | | | | | | | | NOTE: This proxy will be vestedvoted in the Committee, subject tobest judgment of the following:proxies in respect of any other business that properly comes before the Annual Meeting. | | | | | | | | | | | | | | | | |
| | (a) | Subject to the provisions of the Plan, the Committee will have the authority and discretion to (i) select Eligible Persons who will receive Awards under the Plan, (ii) determine the time | | | | | | | | | | | | For address changes, mark here. (see reverse for instructions) | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or times of receipt of Awards, (iii) determine the types of Awards and the number of shares of Common Stock coveredother fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by the Awards, (iv) establish the terms, conditions, performance targets, restrictions, and other provisions of Awards, (v) modify the terms of, cancel or suspend Awards, (vi) reissue or repurchase Awards, and (vii) accelerate the exercisability or vesting of any Award. In making such Award determinations, the Committee may take into account the nature of services rendered by the respective individual, the individual’s present and potential contribution to the Company’s or a Subsidiary’s success and such other factors as the Committee deems relevant.authorized officer. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (b) | Subject to the provisions of the Plan, the Committee will have the authority and discretion to determine the extent to which Awards under the Plan will be structured to conform to the requirements applicable to Performance-Based Compensation, and to take such action, establish such procedures, and impose such restrictions at the time such Awards are granted as the Committee determines to be necessary or appropriate to conform to such requirements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (c) | Subject to the provisions of the Plan, the Committee will have the authority and discretion to conclusively interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan and to make all other determinations that may be necessary or advisable for the administration of the Plan. | | | | | | | | | | | | (d) | Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons. |
| | Awards under the Plan need not be uniform in respect of different Eligible Persons, whether or not similarly situated. The Committee may consider such factors as it deems relevant in selecting Eligible Persons for Awards and in determining their Awards. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3.3Signature [PLEASE SIGN WITHIN BOX] | Procedures. The members of the Committee shall elect a chairman, and the Committee shall meet as necessary at the call of the chairman or any two members of the Committee. A majority of the members of the Committee shall constitute a quorum, and all actions of the Committee at a meeting at which a quorum is present shall be taken by majority vote. A member of the Committee may participate in any meeting of the Committee by a conference telephone call or other means that enable all persons participating in the meeting to hear one another, and participation in this manner shall constitute his or her presence in person at the meeting. The Committee also may act by the unanimous written consent of its members. | | Date | | | | | | | | Signature (Joint Owners) | | | | Date | | | | | | | | | | | | | | | | | | | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice, Proxy Statement and Annual Report are available atwww.proxyvote.com. 3.4 | Delegation by Committee. Except to the extent prohibited by applicable law or the rules of any stock exchange on which the Common Stock is listed, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. | | | — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — | | | 3.5 | Information to be Furnished to Committee. The Company and the Subsidiaries shall furnish the Committee such data and information as may be required for it to discharge its duties. The records of the Company and the Subsidiaries as to an Eligible Person’s or Participant’s employment or provision of services, termination of employment or cessation of the provision of services, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee consider desirable to carry out the terms of the Plan. | | | 3.6 | Limitation on Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his or her own fraud or willful misconduct; nor shall the Company or any Subsidiary be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Company or Subsidiary. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Company against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.E72385-P17486 |
STERICYCLE, INC. 2019 ANNUAL MEETING OF STOCKHOLDERS Wednesday, May 22, 2019 at 8:30 a.m. Central Daylight Time Loews Chicago O’Hare Hotel 5300 N. River Road Rosemont, Illinois 60018 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS I or we hereby appoint each of Brian P. Anderson, Lynn D. Bleil and Mike S. Zafirovski (the “proxies”) as my or our proxy, each with the power to appoint his or her substitute, and authorize each of them acting alone to vote all of the shares of common stock, par value $.01 per share, of Stericycle, Inc. - 2017 (the “Company”) held of record by me or us on March 28, 2019 at the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, May 22, 2019 at 8:30 a.m. Central Daylight Time, at the Loews Chicago O’Hare Hotel, 5300 N. River Road, Rosemont, Illinois 60018, and at any adjournment of the Annual Meeting. If properly completed and returned, this Proxy Statement 61will be voted as directed. If no direction is given, this Proxy will be voted in accordance with the recommendations of the Company’s Board of Directors, i.e., FOR each of the 10 nominees for election as a director (Item 1), FOR the advisory vote to approve executive compensation (Item 2), FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019 (Item 3), and AGAINST the stockholder proposal entitled Special Shareholder Meeting Improvement (Item 4). This Proxy will be voted in the best judgment of the proxies in respect of any other business that properly comes before the Annual Meeting. Section 4 | Common Stock Reserved and Limitations |
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE 4.1 | Shares Reserved Under the Plan. The shares of Common Stock for which Awards may be granted under the Plan shall be subject to the following: | | | | | | | |
| | (a) | The shares of Common Stock with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares (to the extent permitted by law), including shares purchased in the open market or in private transactions. | | | | | | (b) | Subject to the following provisions of this subsection 4.1 and the provisions of subsection 4.2, the maximum number of shares of Common Stock that may be delivered to Participants and their beneficiaries under the Plan shall be equal to 1,500,000. For purposes of applying the limitations of this subsection 4.1(b), each share of Common Stock delivered pursuant to an Award shall be counted as covering one share of Common Stock, and shall reduce the number of shares of Common Stock available for delivery under this subsection 4.1(b) by one share. | | Address changes/comments: | | | | | | (c) | Substitute Awards shall not reduce the number of shares of Common Stock that may be issued under the Plan or that may be covered by Awards granted to any one Participant during any period pursuant to subsection 4.1(h). | | | | | | | | | | | | | (d) | Except as expressly provided by the terms of this Plan, the issuance by the Company of stock of any class, or securities convertible into shares of stock of any class, for cash or property or for labor or services, either upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of stock or obligations of the Company convertible into such stock or other securities, shall not affect, and no adjustment by reason thereof, shall be made with respect to Awards then outstanding hereunder. | | | | | | | | | | | | | (e) | To the extent provided by the Plan, an Award Agreement or other governing arrangement under the Plan, any Award may be settled in cash rather than Common Stock. To the extent any shares of Common Stock covered by an Award are not delivered to a Participant or beneficiary because the Award is forfeited or canceled, or the shares of Common Stock are not delivered because the Award is settled in cash or used to satisfy the applicable tax withholding obligation, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. | | | | | (f) | If the Exercise Price of any Option granted under the Plan is satisfied by tendering shares of Common Stock to the Company (by either actual delivery or by attestation, including net exercise), only the number of shares of Common Stock issued net of the shares of Common Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. | | | | | (g) | Subject to the terms and conditions of the Plan, the maximum number of shares of Common Stock that may be delivered to Participants and their beneficiaries with respect to ISOs under the Plan shall be 1,500,000; provided, however, that to the extent that shares not delivered must be counted against this limit as a condition of satisfying the rules applicable to ISOs, such rules shall apply to the limit on ISOs granted under the Plan. | | | | | (h) | Subject to subsection 4.2, the following additional maximums are imposed under the Plan: |
| (i) | The maximum number of shares of Common Stock that may be covered by Awards granted to any one Participant during any one calendar-year period pursuant to Section 6 (relating to Options and SARs) shall be 250,000 shares if such awards are intended to constitute Performance-Based Compensation. For purposes of this subsection 4.1(h), if an Option is in tandem with an SAR, such that the exercise of the Option or SAR with respect to a share of Common Stock cancels the tandem SAR or Option right, respectively, with respect to such share, the tandem Option and SAR rights with respect to each share of Common Stock shall be counted as covering only one share of Common Stock for purposes of applying the limitations of this subsection 4.1(h). For purposes of the Plan, it will be assumed that the grant of any Option or SAR is intended to constitute Performance-Based Compensation unless the Committee specified otherwise. | | | | | (ii) | For Full Value Awards that are intended to be Performance-Based Compensation, no more than 250,000 shares of Common Stock may be subject to such Awards granted to any one individual during any one-calendar-year period (regardless of when such shares are deliverable). | | | | | (iii) | For Cash Incentive Awards that are intended to be Performance-Based Compensation, the maximum amount payable to any Participant with respect to any twelve (12) month performance period shall equal $3,000,000 (pro rated for performance periods that are greater or lesser than twelve (12) months). | | | | | (iv) | In no event shall the dollar value of the Award granted to any Non-Employee Director for any calendar year (determined as of the date of grant) exceed $750,000. |
| If an Award is denominated in Common Stock but an equivalent amount of cash is delivered in lieu of delivery of shares of Common Stock, the limits of this subsection 4.1(h) shall be applied based on the methodology used by the Committee to convert the number of shares of Common Stock into cash. If the Awards are denominated in cash but an equivalent amount of stock is delivered in lieu of delivery of cash, the limits of this subsection 4.1(h) shall be applied based on the methodology used by the Committee to convert the amount of cash into shares of Common Stock. If delivery of Common Stock or cash is deferred until after the Common |
Stericycle, Inc. - 2017 Proxy Statement 62
| Stock or cash has been earned, any adjustment in the amount delivered to reflect actual or deemed investment experience after the date the Common Stock or cash is earned shall be disregarded. | | | 4.2 | Capitalization Adjustments. In the event of a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, exchange of shares, sale of assets or subsidiaries, combination, or other corporate transaction that affects the Common Stock such that the Committee determines, in its sole discretion, that an adjustment is warranted in order to preserve the benefits or prevent the enlargement of benefits of Awards under the Plan, the Committee shall, in the manner it determines equitable in its sole discretion, (a) adjust the number and kind of shares which may be delivered under the Plan (including adjustments to the number and kind of shares that may be granted to an individual during any specified time as described in subsection 4.1); (b) adjust the number and kind of shares subject to outstanding Awards; (c) adjust the Exercise Price of outstanding Options and SARs; and (d) make any other adjustments that the Committee determines to be equitable (which may include, without limitation, (i) replacement of Awards with other awards which the Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (ii) cancellation of the Award in return for cash payment of the current value of the Award, determined as though the Award is fully vested at the time of payment, provided that in the case of an Option or SAR, the amount of such payment may be the excess of value of the shares of Common Stock subject to the Option or SAR at the time of the transaction over the exercise price). |
For purposes of(If you noted any Address Changes and/or Comments above, please mark the Plan, a “Participant” is any person to whom an Award is granted under the Plan. Subject to the terms and conditions of the Plan, the Committee shall determine and designate, from time to time, from among the Eligible Persons those persons who will be granted one or more Awards under the Plan and, subject to the terms and conditions of the Plan, a Participant may be granted any Award permitted under the provisions of the Plan and more than one Award may be granted to a Participant. Except as otherwise agreed by the Company and the Participant, or except as otherwise provided in the Plan, an Award under the Plan shall not affect any previous Award under the Plan or an award under any other plan maintained by the Company or the Subsidiaries.
Section 6 | Options and SARs |
6.1 | Eligibility. The Committee shall designate the Participants to whom Options or SARs are to be granted under this Section 6 and shall determine the number of shares of Common Stock subject to each such Option or SAR and the other terms and conditions thereof, not inconsistent with the Plan. Without limiting the generality of the foregoing, the Committee may not grant dividends or dividend equivalents (current or deferred) with respect to any Option or SAR granted under the Plan. ISOs may only be granted to employees of the Company or a Subsidiary. | | | 6.2 | Limits on ISOs. If the Committee grants ISOs, then to the extent that the aggregate fair market value of shares of Common Stock with respect to which ISOs are exercisable for the first time by any individual during any calendar year (under all plans of the Company and all Subsidiaries) exceeds $100,000, such Options shall be treated as NQSOs to the extent required by Code Section 422. Any Option that is intended to constitute an ISO shall satisfy any other requirements of Code Section 422 and, to the extent such Option does not satisfy such requirements, the Option shall be treated as a NQSO. | | | 6.3 | Exercise Price. The “Exercise Price” of each Option or SAR granted under this Section 6 shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted; provided, however, that the Exercise Price shall not be less than the Fair Market Value of a share of Common Stock on the date of grant (or, if greater, the par value of a share of Common Stock on such date). Notwithstanding the foregoing, Options and SARs granted under the Plan in replacement for awards under plans and arrangements of the Company or a Subsidiary that are assumed in business combinations may provide for Exercise Prices that are less than the Fair Market Value of the Common Stock at the time of the replacement grants, if the Committee determines that such Exercise Price is appropriate to preserve the economic benefit of the award. | | | 6.4 | Exercise/Vesting. Except as otherwise expressly provided in the Plan, an Option or SAR granted under the Plan shall be exercisable in accordance with the following: |
| (a) | The terms and conditions relating to exercise and vesting of an Option or SAR shall be established by the Committee to the extent not inconsistent with the Plan and may include, without limitation, conditions relating to completion of a specified period of service, achievement of performance standards prior to exercise or the achievement of stock ownership guidelines by the Participant. | | | | | (b) | No Option or SAR may be exercised by a Participant prior to the date on which it is exercisable (or vested) or after the Expiration Date thereof. |
6.5 | Payment of Option Exercise Price. The payment of the Exercise Price of an Option granted under this Section 6 shall be subject to the following: |
| (a) | Subject to the following provisions of this subsection 6.5, the full Exercise Price for shares of Common Stock purchased upon the exercise of any Option shall be paid |
Stericycle, Inc. - 2017 Proxy Statement 63
| | at the time of such exercise (except that, in the case of an exercise arrangement approved by the Committee and described in subsection 6.5(c), payment may be made as soon as practicable after the exercise). | | | | | (b) | The Exercise Price shall be payable in cash or by tendering (including by way of a net exercise), by either actual delivery of shares or by attestation, shares of Common Stock acceptable to the Committee, and valued at Fair Market Value as of the day of exercise, or in any combination thereof, as determined by the Committee; provided, however, that shares of Common Stock may not be used to pay any portion of the Exercise Price unless the holder thereof has good title, free and clear of all liens and encumbrances. | | | | | (c) | The Committee may permit a Participant to elect to pay the Exercise Price upon the exercise of an Option by irrevocably authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise. |
6.6 | Post-Exercise Limitations. The Committee, in its discretion, may impose such restrictions on shares of Common Stock acquired pursuant to the exercise of an Option as it determines to be desirable, including, without limitation, restrictions relating to disposition of the shares and forfeiture restrictions based on service, performance, Common Stock ownership by the Participant, conformity with the Company’s recoupment or clawback policies, compliance with restrictive covenants and such other factors as the Committee determines to be appropriate. | | | 6.7 | Tandem Grants of Options and SARS. An Option may but need not be in tandem with an SAR, and an SAR may but need not be in tandem with an Option (in either case, regardless of whether the original award was granted under this Plan or another plan or arrangement). If an Option is in tandem with an SAR, the Exercise Price of both the Option and SAR shall be the same, and the exercise of the corresponding tandem SAR or Option shall cancel the corresponding tandem SAR or Option with respect to such share. If an SAR is in tandem with an Option but is granted after the grant of the Option, or if an Option is in tandem with an SAR but is granted after the grant of the SAR, the later granted tandem Award shall have the same Exercise Price as the earlier granted Award, but in no event less than the Fair Market Value of a share of Common Stock at the time of such grant. | | | 6.8 | No Repricing. Except for either adjustments pursuant to subsection 4.2 (relating to capitalization adjustments), or reductions of the Exercise Price approved by the Company’s stockholders, the Exercise Price for any outstanding Option or SAR may not be decreased after the date of grant nor may an outstanding Option or SAR granted under the Plan be surrendered to the Company as consideration for the grant of a replacement Option or SAR with a lower Exercise Price or a Full Value Award. Except as approved by the Company’s stockholders, in no event shall any Option or SAR granted under the Plan be surrendered to the Company in consideration for a cash payment if, at the time of such surrender, the Exercise Price of the Option or SAR is greater than the then current Fair Market Value of a share of Common Stock. | | | 6.9 | Expiration Date. The “Expiration Date” with respect to an Option or SAR means the date established as the Expiration Date by the Committee at the time of the grant (as the same may be modified in accordance with the terms of the Plan); provided, however, that the Expiration Date with respect to any Option or SAR shall not be later than the earliest to occur of the ten-year anniversary of the date on which the Option or SAR is granted or the following dates, unless the following dates are determined otherwise by the Committee: |
| (a) | if the Participant has not accepted the Award by such date, the ninetieth (90th) day following the Grant Date; | | | | | (b) | if the Participant’s Termination Date occurs by reason of death or Disability, the first anniversary of the Termination Date; | | | | | (c) | if the Participant’s Termination Date occurs for any reason other than death, Disability, or Cause, the ninetieth (90th) day after the Termination Date; or | | | | | (d) | if the Participant’s Termination Date occurs for reasons of Cause, the Termination Date. |
Section 7 | Full Value Awards and Cash Incentive Awards |
| (a) | A “Full Value Award” is a grant of one or more shares of Common Stock or a right to receive one or more shares of Common Stock in the future (including restricted stock, restricted stock units, deferred stock units, performance shares and performance-based restricted stock units). Such grants may in consideration of a Participant’s previously performed services or surrender of other compensation that may be due, contingent on the achievement of performance or other objectives (including completion of service) during a specified period subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant or achievement of performance or other objectives, and/ or may be subject such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to dividend or dividend equivalent rights and deferred payment or settlement. Such grants may be made under other arrangements that are treated as subplans of the Plan and, in such case, shall be treated as granted as the grant of an Award under the Plan. Notwithstanding the foregoing, no dividends or dividend equivalent rights will be paid or settled on performance-based awards that have not been earned based on the performance criteria established. | | | | | (b) | A “Cash Incentive Award” is the grant of a right to receive a payment of cash (or in the discretion of the Committee, shares of Common Stock having value equivalent to the cash otherwise payable) that is |
Stericycle, Inc. - 2017 Proxy Statement 64
| | contingent on achievement of performance objectives over a specified period established by the Committee. The grant of Cash Incentive Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to deferred payment. |
7.2 | Terms and Conditions. The Committee shall determine the time or times at which each Full Value Award or Cash Incentive Award becomes vested or earned and all other terms and conditions of a Full Value Award or Cash Incentive Award. Except as provided by the Committee or as required for the Award to constitute Performance-Based Compensation (if applicable), each Full Value Award held by an employee of the Company or a Subsidiary shall become fully vested as of his or her Termination Date if the employee’s termination of employment occurs by reason of his or her death or Disability. | | | 7.3 | Restrictions on Full Value Awards. Except for Full Value Awards that are granted (i) in lieu of other compensation, (ii) as a form of payment of earned performance awards or other incentive compensation, (iii) to new hires, or (iv) as retention awards outside the United States, if the right to become vested in a Full Value Award granted to an employee is conditioned on the completion of a specified period of service with the Company and the Subsidiaries, without achievement of performance targets or other performance objectives (whether or not related to Performance Measures) being required as a condition of vesting, then the required period of service for full vesting of the Full Value Award shall be not less than three years, subject to pro rated vesting over the applicable minimum service period and to acceleration of vesting, to the extent permitted by the Committee, in the event of the Participant’s death, disability, retirement, change in control or involuntary termination). Awards to Non-Employee Directors are not subject to this subsection 7.3. | | | 7.4 | Performance-Based Compensation. The Committee may designate a Full Value Award or Cash Incentive Award granted to any Participant as “Performance-Based Compensation” within the meaning of Code Section 162(m) and regulations thereunder. To the extent required by Code Section 162(m), any Full Value Award designated as Performance-Based Compensation shall be conditioned on the achievement of one or more performance targets as determined by the Committee and the following additional requirements shall apply: |
| (a) | The performance targets established for the performance period established by the Committee shall be objective (as that term is described in regulations under Code Section 162(m)), and shall be established in writing by the Committee not later than ninety (90) days after the beginning of the performance period (but in no event after 25% of the performance period has elapsed), and while the outcome as to the performance targets is substantially uncertain. Where applicable, the performance targets based on Performance Criteria may be expressed in terms of attaining a specified level of the particular goal or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company, a Subsidiary, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. | | | | | (b) | A Participant otherwise entitled to receive a Full Value Award for any performance period shall not receive a settlement or payment of the Award until the Committee has determined and certified that the applicable performance target(s) have been attained. To the extent that the Committee exercises discretion in making the determination required by this subsection 7.4(b), such exercise of discretion may not result in an increase in the amount of the payment. | | | | | (c) | If a Participant’s employment terminates because of death or disability, or if a Change of Control occurs prior to the Participant’s Termination Date, the Participant’s Full Value Award may, to the extent provided by the Committee, become vested without regard to whether the Award would be Performance-Based Compensation. |
| Nothing in this subsection 7.4 shall preclude the Committee from granting Full Value Awards under the Plan that are not intended to be Performance-Based Compensation. To the extent that the provisions of this subsection 7.4 reflect the requirements applicable to Performance-Based Compensation, such provisions shall not apply to the portion of the Award, if any, that is not intended to constitute Performance-Based Compensation. |
Section 8 | Change of Control |
Except as provided by the Committee, upon a Change of Control, all outstanding Awards shall become fully vested and exercisable, and all restrictionscorresponding box on the shares underlying Full Value Awards shall lapse.
Section 9 | Miscellaneous Provisions |
9.1 | Effective Date, Duration and Effect on Prior Awards. This Plan shall be effective as of March 31, 2017 provided that it is approved by the Company’s stockholders as of such date (which date shall be referred to as the “Effective Date”reverse side.). The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Awards under it are outstanding; provided, however, that no new Awards shall be made under the Plan on or after the tenth anniversary of the Effective Date. Awards granted under any prior plans, whether before or after the Effective Date, shall be subject to the terms and conditions of the applicable prior plan. | | | 9.2 | Award Agreement. Each Award under the Plan shall be evidenced by an Award Agreement which shall be subject to and incorporate the terms of the Plan. Except as otherwise expressly provided in the Award Agreement, an Award shall |
Stericycle, Inc.(Continued and to be signed on reverse side.) - 2017 Proxy Statement 65
| be automatically forfeited on the ninetieth day following the Grant Date if, as of such ninetieth day, it has not been accepted by the Participant in accordance with procedures established by the Committee. | | | 9.3 | Liability for Cash Payments. Subject to the provisions of this Section 9, each Subsidiary shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such payment is attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee. | | | 9.4 | Tax Withholding. All Awards and other payments under the Plan are subject to withholding of all applicable taxes, which withholding obligations may be satisfied, with the consent of the Committee, through the surrender of Common Stock which the Participant already owns or to which a Participant is otherwise entitled under the Plan; provided, however, previously-owned Common Stock that has been held by the Participant or Common Stock to which the Participant is entitled under the Plan may only be used to satisfy the minimum tax withholding required by applicable law (or other rates that will not have a negative accounting impact). | | | 9.5 | Transferability. Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution, and shall not be subject to execution, attachment or similar process. To the extent that a Participant who receives an Award under the Plan has the right to exercise such Award, the Award may be exercised during the lifetime of the Participant only by the Participant. Notwithstanding the foregoing, Awards under the Plan may be transferred in accordance with the following: |
| (a) | Options and SARs may be transferred by an employee (i) if the transferee is a revocable trust that the employee established for estate planning reasons (in respect of which the employee is treated as the owner for federal income tax purposes); or (ii) the transferee is (A) the spouse of the employee or a child, step-child, grandchild, parent, sibling or child of a sibling of the employee (each an “eligible transferee”), (B) a custodian for an eligible transferee under any Uniform Transfers to Minors Act or Uniform Gifts to Minors Act or (C) a trust for the primary benefit of one or more eligible transferees; provided, however, that transfers pursuant to this clause (ii) shall be subject to any restrictions and requirements that the Committee considers appropriate (for example, the transferee’s written agreement to be bound by the terms of the Plan and the underlying Award Agreement). | | | | | (b) | Pursuant to the terms of a qualified domestic relations order. | | | | | (c) | To the extent permitted by the Committee or as set forth in the Award Agreement. |
| In no event shall an ISO be transferable to the extent that such transferability would violate the requirements applicable to such option under Code Section 422. | | | 9.6 | Limitation of Implied Rights. Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Company and any Subsidiary. Nothing contained in the Plan shall constitute a guarantee by the Company or any Subsidiary that the assets of such companies shall be sufficient to pay any benefits to any person. | | | | The Plan does not constitute a contract of employment or continued service, and selection as a Participant will not give any employee the right to be retained in the employ or service of the Company or any Subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any right as a stockholder of the Company prior to the date on which he or she fulfills all service requirements and other conditions for receipt of such rights and shares of Common Stock are registered in his or her name. | | | 9.7 | Limit on Distribution. Distribution of Common Stock or other amounts under the Plan shall be subject to the following: |
| (a) | Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Common Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity. | | | | | (b) | In the case of a Participant who is subject to Section 16(a) and 16(b) of the Exchange Act, the Committee may, at any time, add such conditions and limitations to any Award to such Participant, or any feature of any such Award, as the Committee, in its sole discretion, deems necessary or desirable to comply with Section 16(a) or 16(b) and the rules and regulations thereunder or to obtain any exemption therefrom. | | | | | (c) | To the extent that the Plan provides for issuance of certificates to reflect the transfer of Common Stock, the transfer of such Common Stock may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange on which the Common Stock is listed. |
9.8 | Recoupment/Forfeiture. Notwithstanding any other provision of the Plan or any Award Agreement to the contrary, unless otherwise specified by the Committee, (a) any awards under the Plan and any shares of Common Stock issued pursuant to the Plan shall be subject to the Company’s compensation recovery, clawback, and recoupment policies as in effect from time to time, and (b) all of a Participant’s Awards under the Plan shall be forfeited in the event the Participant breaches the restrictive covenant provisions of any employment agreement or any restrictive covenant agreement (or the restrictive covenant provisions of any other plan of the Company or any Subsidiary). | | | 9.9 | Notices. Notices required or permitted under this Plan shall be considered to have been duly given if sent by certified or registered mail addressed to the Committee at the Company’s principal office or to any other person at his or her address as it appears on the Company’s payroll or other records. Any notice required under the Plan (other than a notice of election) may be waived by the person entitled to notice. |
Stericycle, Inc. - 2017 Proxy Statement 66
9.10 | Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the applicable Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require. | | | 9.11 | Foreign Jurisdictions. Notwithstanding any other provisions of the Plan to the contrary, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws and customary business practices in other countries in which the Company or any Subsidiary operates or has employees, the Committee shall have the power and authority to (i) determine which Participants employed outside the United States or subject to non-United States tax laws are eligible to participate in the Plan, (ii) modify the terms and conditions of Awards granted to or held by such Participants, (iii) establish subplans, modify exercise procedures and other terms and procedures relating to Awards granted or held by such Participants to the extent such actions may be necessary or advisable, and (iv) take such other actions as the Committee may deem necessary or appropriate so that the value and other benefits of an Award to such a Participant, as affected by foreign tax laws and other applicable restrictions, shall be comparable to the value of such an Award to a Participant who is resident or employed in the United States. An Award may be modified under this subsection 9.11 in a manner that is inconsistent with the express terms of the Plan, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) of the Exchange Act for the Participant whose Award is modified. The foregoing provisions of this subsection 9.11 shall not be applied to increase the share limitations of subsection 4.1 or to otherwise change any provision of the Plan that would otherwise require the approval of the Company’s stockholders. | | | 9.12 | Severability. If any provision of this Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions, and the Plan shall be construed and administered as if the illegal or invalid provision had not been included. | | | 9.13 | Governing Law. This Plan and all Award Agreements shall be governed in accordance with the laws of the State of Illinois; provided, however that, Delaware law shall apply to the extent applicable to the issuance of Common Stock or other corporate law matters. | | | 9.14 | Action by the Company or Subsidiary. Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution of its board of directors or governing body or by action of one or more members of the board or governing body (including a committee of the board or governing body) who are duly authorized to act for the board or, in the case of any Subsidiary that is a partnership, by action of its general partner or a person or persons authorized by the general partner, or (except to the extent prohibited by applicable law or the rules of any stock exchange on which the Common Stock is listed) by a duly authorized officer of the Company. | | | 9.15 | Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. | | | 9.16 | Amendment and Termination. The Board may, at any time, amend, suspend or terminate the Plan, and the Board or the Committee may amend any Agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board (or the Committee, if applicable); provided, however, that adjustments pursuant to subsection 4.2 shall not be subject to the foregoing limitations of this subsection 9.16. Notwithstanding the foregoing, the Company’s stockholders shall be required to approve (a) any amendment that would materially increase the number of shares of Common Stock for which Awards may be granted or that would increase the number of shares of Common Stock for which ISOs may be granted, (b) any amendment to subsection 6.8 (relating to Option and SAR repricing), (c) any amendment to the limitations set forth in subsection 4.1(h), (d) any changes to the Performance Criteria to the extent applicable to Awards intended to constitute Performance-Based Compensation, and (e) any change for which such approval is required by law or the rules of any stock exchange on which the Common Stock is listed. It is the intention of the Company that, to the extent that any provisions of this Plan or any Awards granted hereunder are subject to Code Section 409A, the Plan and the Awards comply with the requirements of Code Section 409A and that the Board shall have the authority to amend the Plan as it deems necessary or desirable to conform to Code Section 409A. Notwithstanding the foregoing, the Company does not guarantee that Awards under the Plan will comply with Code Section 409A and the Committee is under no obligation to make any changes to any Award to cause such compliance. |
Stericycle, Inc. - 2017 Proxy Statement 67
| | |
|
|
|
|
|
