Exhibit 10.4(a)
EMPLOYMENT STATUS AND CONSULTING AGREEMENT
This EMPLOYMENT STATUS AND CONSULTING AGREEMENT (the "Agreement") is
entered into as of this 5th day of November, 2003 by and between Covanta Energy
Corporation, a Delaware corporation (together with all its subsidiaries, the
"Company"), and Xxxxx Xxxxxx (the "Executive").
WITNESSETH:
WHEREAS, the Company filed on September 8, 2003 a draft Plan of
Reorganization and related documents, stating its intention to: (i) separate the
international component of the Company's independent power production businesses
into a separate business, Covanta Power International Holdings, Inc. ("CPIH")
for financial purposes; (ii) sell its geothermal assets in order to provide
liquidity for the Company's exit from bankruptcy; and (iii) further streamline
its domestic operations, primarily to be comprised of the waste-to-energy
business, thereby reducing costs wherever not directly applicable to the
on-going operations of the Company following emergence from bankruptcy; and
WHEREAS, Executive, having been employed by the Company in excess of
seventeen years, has acquired an extensive background in the waste-to-energy
business through, among other things, the negotiation of the numerous contracts
underlying the Company's waste-to-energy business, the development of extensive
relationships with the Company's client communities and in the waste-to-energy
business generally and the assembly of the Company's current management team
which is responsible for managing the Company's core waste-to-energy business;
and
WHEREAS, the Company has determined that the Executive's role and
position should be changed such that (a) Executive will resign as President and
Chief Executive Officer ("CEO") of the Company, (b) Executive will remain a
member of the Board of Directors of the Company ("Board Member") until the
effective date (the "Effective Date") of the Company's Plan of Reorganization
(the "Plan," which term shall include any amendments and any subsequent Plan of
Reorganization filed with and approved by the Bankruptcy Court in connection
with the Company's ongoing bankruptcy proceedings), (c) the Executive will be
retained as a consultant to the Company for a period ending on the second
anniversary of his resignation so that the Company may be strengthened through
continued exposure to the critical knowledge and insight of the waste-to-energy
business that the Executive possesses, and (d) Executive will further agree to
the extensive non-competition and non-solicitation restrictions outlined herein,
and the Executive desires to serve in such capacities, and agree to such
restrictions, on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein and for other good and valuable
consideration, the Company and the Executive hereby agree as follows:
1. Term, Position and Responsibilities.
(a) Term of Services. Upon the date that each of (i) approval of this
Agreement by the court of competent jurisdiction, (ii) execution hereof by both
parties hereto, and (iii) payment of all amounts to Executive set forth in
paragraphs 2(a) and 4(c) below (such date, the "Resignation Date"), Executive
shall resign as CEO of the Company, and the Company shall thereafter immediately
be deemed to have accepted such resignation and shall engage the Executive as a
consultant to the Company for a term ending on the second anniversary of the
Resignation Date (the "Expiration Date" such consulting service period being
referred to herein as the "Services Period"), on the terms and subject to the
conditions of this Agreement. The Executive shall remain a member of the Board
of Directors of the Company until the Effective Date. In the event that the
Company terminates the Executive's engagement as a Consultant prior to the
Expiration Date for any reason "Without Cause" (as defined in the Covanta Energy
Corporation Key Employee Severance Plan, which defined term is incorporated
herein, except that a termination due to the Executive's death or disability
shall be considered "Without Cause") or if the Company removes Executive as a
member of the Board of Directors prior to the Effective Date for any reason
Without Cause, Executive will be entitled to receive as of the date of
termination all of the unpaid compensation (set forth in Section 2 below), the
employee benefits and perquisites (set forth in Section 3 below) and the
benefits from the other agreements (set forth in Section 4 below), in the
amounts and to the same extent as if such termination had not occurred. It is
hereby agreed that the Executive's resignation pursuant to this agreement shall
be an "Eligible Termination of Employment" as defined in the Covanta Energy
Corporation Key Employee Severance Plan and a "resignation for Mutual Benefit"
within the meaning of the Covanta Energy Corporation Long-Term Incentive Plan,
but that his continued service as Board Member shall continue his qualification
under the Covanta Energy Corporation Key Employee Retention Bonus Plan. It is
also agreed that neither Executive's role as Board Member nor the Executive's
engagement as consultant, nor both taken together, constitutes a reemployment of
the Executive triggering the "Clawback" Requirement contained in Section 7(b) of
the Long-Term Incentive Plan. Notwithstanding anything herein to the contrary,
on and after the Effective Date, Executive's sole relationship with the Company
shall be as consultant, subject to the terms and conditions hereof.
(b) Position and Responsibilities. The Executive shall continue to
serve as Board Member of the Company and its affiliates (collectively, the
"Company Group") until the Effective Date and as consultant to the Company with
respect to the waste-to-energy business during the Services Period. During the
Services Period, the Executive shall have the duties and responsibilities that
are customarily assigned to individuals serving in such position or positions as
he may then hold and such other duties and responsibilities directly relating to
his consulting service as the Board specifies from time to time including,
without limitation, prior to the Effective Date, taking all steps necessary and
desirable to achieve the most expeditious and beneficial recovery for creditors,
with respect to the entire Services Period, providing, as the Company may from
time to time reasonably request, consulting services to the Company regarding
its waste-to-energy business with respect to all relevant matters within his
knowledge and interacting on behalf of the Company with client communities in
order to maintain and further develop positive relations with such client
communities. During the Services Period, the Executive shall comply with all
policies and procedures of the Company.
2. Compensation.
(a) Board Member and Consulting Fee. For the services to be performed
by the Executive during the Services Period and expressly in consideration of
the covenants contained in Section 6, (i) Executive shall continue to qualify as
a Tier I Employee under the Covanta Energy Group Key Employee Retention Bonus
Plan and (ii) the Company shall pay to the Executive, in cash, a sum of
$1,750,000 (the "Consulting Fee"), of which amount $1,000,000 shall be payable
no later than the Resignation Date and the remaining amount of the Consulting
Fee (i.e. $750,000) shall be payable pursuant to section 4(e) hereof.
3. Benefits.
(a) Participation in Employee Benefit Plans. During the Services
Period, other than as explicitly provided in this Agreement, the Executive shall
not be eligible to participate in any of the employee benefit plans and programs
maintained by the Company Group.
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(b) SERP Benefit. On the Expiration Date, the Company shall pay to the
Executive, in a lump sum, his vested benefits under the Supplementary Benefit
Plan of Xxxxx Projects, Inc., in an amount determined as of October 31, 2003.
(c) Medical, Dental and Life Insurance Benefits. For the period
commencing on the Resignation Date and ending on the fourth anniversary thereof,
the Executive (as well as his eligible dependents) shall continue to be eligible
to receive family coverage pursuant to the medical, dental and life insurance
benefit programs maintained by the Company Group from time to time for the
Company's executives, in accordance with the terms and conditions thereof as in
effect from time to time; provided that the Executive will be considered an
executive of the Company for purposes of determining eligibility under such
programs.
(d) Business Expenses. During the Services Period, the Company shall
reimburse the Executive for all reasonable, ordinary and necessary expenses
incurred by the Executive in the performance of the Executive's duties
hereunder, provided that the Executive accounts to the Company for such expenses
in a manner reasonably prescribed by the Company.
(e) Outplacement Services. At the Executive's request, the Company
shall provide the Executive outplacement services selected by the Executive in
an amount reasonable and customary for executives of a rank and status similar
to the Executive.
(f) Director and Officer Insurance. The Company jointly and severally
agree to continue to maintain at no expense to Executive directors' and
officers' liability and fiduciary insurance covering the Executive, to the
extent commercially available on the same basis and terms as the Company
provides for its active executives and directors (including so called "Side A:
Executive Liability Coverage"), until such time as suits against the Executive
with respect to his employment with, or services as a director to, the Company
are no longer permitted by law, with such period not to exceed more than six
years from the Effective Date. Such policy shall provide notice from the insurer
to Executive if insurer intends to cancel or not renew said policy.
4. Other Agreements.
(a) 2003 Annual Bonus. With respect to calendar year 2003, the Company
shall pay to the Executive the incentive bonus for which Executive was entitled
as if the Executive served as CEO for the full year 2003, based upon the
Company's Annual Incentive Program, at a 100% target, on the date on which the
Company pays annual bonuses to its other executives.
(b) Retention Bonus. So long as Executive continues ready and willing
to serve as Board Member until the Effective Date, the Company shall pay to the
Executive a cash retention payment equal to $156,646, payable on the Effective
Date under the terms and conditions of the Company's Key Employee Retention
Bonus Plan.
(c) Severance Payment. The Company shall pay to the Executive on the
Resignation Date severance of $1,287,500.00 in full settlement and satisfaction
of the Executive and the Company's rights and obligations with respect to
severance under the Company's Key Employee Severance Plan.
(d) LTIP Award. The Company shall pay to the Executive on the
Effective Date the amount of $2,055,000.00, calculated as of the date hereof as
an Alternative Transaction, in full settlement and satisfaction of the
Executive's and the Company's rights and obligations with respect to payments
under the Company's Long-Term Incentive Plan.
(e) Remaining Consulting Fee. For the services to be performed by the
Executive during the Services Period and expressly in consideration of the
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covenants contained in Section 6, the Company shall pay to the Executive on the
Effective Date the balance of the Consulting Fee (i.e. $750,000).
(f) Corporate Indemnities. The Company jointly and severally agree
to provide the Executive indemnification rights to the greatest extent permitted
by applicable law and at a level at least as favorable to that which the
Executive is currently entitled including, without limitation, the
indemnification rights to which the Executive is currently entitled under
Section 20 of the Company's Certificate of Incorporation and the indemnification
rights to which he is entitled by reason of his service as a fiduciary, at the
Company's request, to or with respect to any current or contemplated employee
benefit plan of the Company.
(g) No Other Benefits. Except as specifically set forth in this
Section 4, the Executive shall not be entitled to receive any payments or
benefits under any such plan, policy, program or practice providing any bonus or
incentive compensation or severance compensation or benefits (and the provisions
of this Section 4 shall supersede the provisions of any such plan, policy,
program or practice), except that Executive shall remain fully entitled to any
vested benefits under any tax-qualified plans maintained or contributed to by
the Company Group or Section 4980B of the Code, the Covanta Energy Pension Plan
and the Covanta Energy Savings Plan and shall receive on the Resignation Date
his vested benefits under the Covanta Energy Select Plan.
5. Confidential Information/Intellectual
Property/Cooperation/NonDisparagement.
(a) Confidential Information. Executive agrees that, except otherwise
permitted or directed by the Company, he will not appropriate for his own use,
disclose, divulge, furnish or make available to any person any confidential or
proprietary information concerning the Company Group, including without
limitation any confidential or proprietary information concerning the
operations, plans or methods of doing business of the Company Group (the
"Information"); provided, that the term "Information" shall not include such
information which is or becomes generally available to the public other than as
a result of unauthorized or improper disclosure by the Executive.
Notwithstanding the foregoing, the Executive may disclose Information to the
extent he is compelled to do so by lawful service of process, subpoena, court
order, or as he is otherwise compelled to do by law or the rules or regulations
of any regulatory body to which he is subject, including full and complete
disclosure in response thereto, in which event he agrees to provide the Company
with a copy of the documents seeking disclosure of such information promptly
upon receipt of such documents and prior to their disclosure of any such
information, so that the Company may, upon notice to the Executive, take such
action as the Company deems appropriate in relation to such subpoena or request
and the Executive may not disclose any such information until the Company has
had the opportunity to take such action.
(b) Intellectual Property. Executive agrees that all right, title and
interest to all works of whatever nature generated in the course of his
employment with the Company Group resides with the Company Group. The Executive
agrees that he will return to the Company, not later than the Expiration Date,
all property, in whatever form (including computer files and other electronic
data), of the Company Group in his possession, including without limitation, all
copies (in whatever form) of all files or other information pertaining to the
Company Group, its officers, directors, shareholders or customers, and any
business or business opportunity of the Company Group.
(c) Cooperation. The Executive agrees to reasonably cooperate
(including attending meetings) with respect to any claim, arbitral hearing,
lawsuit, action or governmental or internal investigation relating to the
business of the Company Group prior to the Expiration Date. The Executive agrees
to provide full and complete disclosure in response to any inquiry in connection
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with any such matters. The Company agrees to reimburse the Executive for his
reasonable expenses incurred in connection with such cooperation.
(d) Non-Disparagement. The Executive shall not intentionally make any
public statements, encourage others to make statements or release information
intended to disparage or defame the Company Group or any of its directors or
officers. The Company shall cause its senior executives not to intentionally
make, or cause or encourage others to make, any public statements or release
information intended to disparage or defame the Executive's reputation.
Notwithstanding the foregoing, nothing in this Section 5(e) shall prohibit any
person from making truthful statements when required by order of a court or
other body having jurisdiction or as required by law.
6. Covenant Not to Compete/Non-Solicitation.
(a) So long as the Company is not in default of a material obligation
hereunder, the Executive agrees not to engage in any aspect of the Company
Business (as hereinafter defined) other than as a consultant to the Company
prior to the third anniversary of the Resignation Date (the "Restricted
Period").
(b) The Executive shall be deemed to be engaging in Company Business
if he:
(i) directly or indirectly, whether or not for compensation,
participates in the ownership, management, operation or control
of any Competitor (as hereinafter defined) or is employed by or
performs consulting services for any Competitor;
(ii) directly or indirectly, whether or not for compensation, is
employed by or performs consulting services for any client
communities of a Company Business other than as contemplated
herein;
(iii) offers employment to any employee of the Company Group or
attempts to solicit or hire or assist any other person or entity
in soliciting or hiring any such employee to leave or cease their
employment relationship with the Company Group for any reason
whatsoever.
(c) For purposes of this Section 6:
(i) "Company Business" shall mean the development, design,
construction, ownership and/or operation of waste-to-energy
facilities and the operation of existing water facilities
(including, without limitation, treatment, purification,
collection, and/or distribution of water and wastewater) in the
domestic United States.
(ii) A "Competitor" is any corporation, firm, partnership,
proprietorship or other entity that engages in any Company
Business.
7. Company Property.
The Executive hereby agrees to return to the Company and to cease
using any property of the Company Group, including without limitation, security
key cards, corporate credit cards, telephone calling cards or home office
equipment provided by the Company Group and to return such property no later
than the Expiration Date.
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8. Reasonableness.
The Executive acknowledges that the restrictions set forth in this
Agreement are necessary to prevent the use and disclosure of Information and to
otherwise protect the legitimate business interests of the Company Group. The
Executive further acknowledges that all of the restrictions in this Agreement
are reasonable in all respects, including without limitation duration, territory
and scope of activity. The Executive agrees that the existence of any claim or
cause of action by him against the Company Group, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants and restrictions set forth in this Agreement, except
the covenants and restrictions set forth in Section 6 above, as provided in
Section 6(a). Furthermore, Executive acknowledges the significant sums to be
paid hereunder for agreeing to and complying with such restrictions.
9. Irreparable Harm; Injunctive Relief.
The parties hereto hereby declare that it is impossible to measure in
money the damages that will accrue to the Company Group in the event that the
Executive breaches any of the restrictive covenants provided in Sections 5 and 6
of this Agreement. In the event that the Executive breaches any such restrictive
covenant, the Company shall be entitled to an injunction, a restraining order or
such other equitable relief, including, but not limited to, specific performance
(without the requirement to post bond) restraining such Executive from violating
such restrictive covenant. If the Company shall institute any action or
proceeding to enforce the restrictive covenant, such Executive hereby waives the
claim or defense that the Company has an adequate remedy at law and agrees not
to assert in any such action or proceeding the claim or defense that the Company
has an adequate remedy at law. The foregoing shall not prejudice the Company's
right to require such Executive to account for and pay over to the Company, and
such Executive hereby agrees to account for and pay over, the compensation,
earnings, profits, monies, accruals or other benefits derived or received by
such Executive as a result of any transaction constituting a breach of any of
the restrictive covenants provided in Sections 5 and 6 of this Agreement, and
the parties hereby agree that the Company shall be entitled to an equitable
accounting of all such compensation, earnings, profits, monies, accruals and
other benefits. The parties hereby agree that the Restricted Period shall be
extended by any period during which the Employee is found to be in violation of,
or to have violated, Section 6 of this Agreement.
10. Court's Right to Modify Restrictions.
The parties acknowledge and agree that (i) each of the restrictive
covenants contained in Sections 5 and 6 of this Agreement shall be construed as
a separate covenant with respect to each geographic area and each activity to
which it applies, (ii) if, in any judicial proceeding, a court shall deem any of
the restrictive covenants invalid, illegal or unenforceable because its scope is
considered excessive, such restrictive covenant shall be modified so that the
scope of the restrictive covenant is reduced only to the minimum extent
necessary to render the modified covenant valid, legal and enforceable, and
(iii) if any restrictive covenant (or portion thereof) is deemed invalid,
illegal or unenforceable in any jurisdiction, as to that jurisdiction such
restrictive covenant (or portion thereof) shall be ineffective to the extent of
such invalidity, illegality or unenforceability, without affecting in any way
the remaining restrictive covenants (or portion thereof) in such jurisdiction or
rendering that or any other restrictive covenant (or portion thereof) invalid,
illegal, or unenforceable in any other jurisdiction.
11. Mutual Release of Claims.
Notwithstanding anything in this Agreement to the contrary, upon the
Effective Date, as a condition to the receipt of the payments and benefits
described herein and the provision of consulting services pursuant hereto, the
parties shall each be required to execute a Mutual Release of Claims Agreement
in the form attached hereto as Exhibit A and such Mutual Release of Claims
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Agreement shall have become effective and irrevocable in accordance with its
terms.
12. Miscellaneous.
(a) Integration. This Agreement constitutes the entire understanding
of the Company and the Executive with respect to the subject matter hereof and
supersedes all prior understandings, written or oral, including without
limitation the Employment Agreement between the Executive and the Company dated
as of October 1, 1998 and as amended November 26, 2001 (these were employment,
not consulting agreements). A failure of the Company or the Executive to insist
on strict compliance with any provision of this Agreement shall not be deemed a
waiver of such provision or any other provision hereof. In the event that any
provision of this Agreement is determined to be so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is enforceable.
(b) Binding Effect; Assignment, This Agreement shall be binding on and
inure to the benefit of the Company and its successors and permitted assigns.
This Agreement shall also be binding on and inure to the benefit of Executive
and his heirs, executors, administrators and legal representatives. This
Agreement shall not be assignable by any party hereto without the prior written
consent of the other parties hereto, except as provided pursuant to this Section
12(b). The Company may effect such an assignment without prior written approval
of the Executive upon the transfer of all or substantially all of its business
and/or assets (by whatever means).
(c) Choice of Law. This Agreement shall be construed, enforced and
interpreted in accordance with and governed by the laws of the State of New
Jersey, without regard to its choice of law provisions.
(d) Successor. The rights and obligations of the Company under this
Agreement shall be binding on and inure to the benefit of the Company, its
successors and assigns.
(e) Taxes. The Company may withhold from any payments made under this
Agreement all applicable taxes, including but not limited to income, employment
and social insurance taxes, as shall be required by law.
(f) Modification. This Agreement may only be modified, amended or
revised by a writing signed by both parties and approved by the bankruptcy court
so long as such court has jurisdiction over this Agreement and the matters
herein.
(g) Severability. It is the intent of the parties that the provisions
of this Agreement be enforced to the fullest extent permissible under applicable
law. If any provision of this Agreement shall be adjudged by any court of
competent jurisdiction to be invalid or unenforceable, such judgment shall not
invalidate any other provision of this Agreement. The parties agree that if a
court of competent jurisdiction adjudges any provision of this Agreement to be
invalid or unenforceable, such court shall modify such provision so that it is
enforceable to the extent permitted by applicable law and consistent with the
parties' intent.
(h) Notices. Any notice or other communication required or permitted
to be delivered under this Agreement shall be (i) in writing, (ii) delivered
personally, by courier service or by certified or registered mail, first-class
postage prepaid and return receipt requested, (iii) deemed to have been received
on the date of delivery or, if so mailed, on the third business day after the
mailing thereof, and (iv) addressed as follows (or to such other address as the
party entitled to notice shall hereafter designate in accordance with the terms
hereof):
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(i) If to the Company, to it at:
General Counsel
Covanta Energy Corporation
00 Xxxx Xxxx
Xxxxxxxxx, XX 00000
(ii) if to Executive, to him at his residential address as currently
on file with the Company.
Copies of any notices or other communications given under this
Agreement shall also be given to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: A. Xxxxxxx Xxxxx, Esq.
(i) Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
counterpart, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same Agreement.
(j) Headings. The headings in this Agreement are included for
convenience only and shall not constitute a part of this Agreement nor shall
they affect its meaning, construction or effect.
(k) Opportunity for Review. The Executive agrees and acknowledges that
his execution of this Agreement is completely voluntary and that he has been
advised to consult with an attorney prior to executing this Agreement to ensure
that he fully and thoroughly understands its legal significance.
IN WITNESS WHEREOF, the Company has duly executed this Agreement by
its authorized representatives and Executive has hereunto set his hand, in each
case effective as of the date first above written.
COVANTA ENERGY CORPORATION
By: /s/ Xxxx Xxxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
EXECUTIVE:
/s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
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