1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
WASTE MANAGEMENT, INC. (the "Company"), and XXXXXX X. XXXX, XX. (the
"Executive") hereby enter into this EMPLOYMENT AGREEMENT ("Agreement") dated as
of May 10, 2000 (the "Effective Date"), as follows:
1. EMPLOYMENT.
The Company shall employ Executive, and Executive shall be employed by the
Company upon the terms and subject to the conditions set forth in this
Agreement.
2. TERM OF EMPLOYMENT.
The period of Executive's employment under this Agreement shall commence on May
22, 2000, and be for a continuously renewing (on a daily basis) three (3) year
term, without any further action by either the Company or Executive, unless
Executive's employment is terminated in accordance with Section 5 below. The
date on which Executive commences employment with the Company shall be referred
to as the "Commencement Date" and the period during which Executive is employed
hereunder shall be referred to as the "Employment Period".
3. DUTIES AND RESPONSIBILITIES.
(a) Executive shall serve as Senior Vice President-People. In such
capacity, Executive shall perform such duties and have the power,
authority and functions commensurate with such positions in similarly
sized public companies and such other authority and functions
consistent with such positions as may be assigned to Executive from
time to time by the Chief Executive Officer, President, or the Board of
Directors.
(b) Executive shall devote substantially all of his working time, attention
and energies to the business of the Company, and affiliated entities.
Executive may make and manage his personal investments (provided such
investments in other activities do not violate, in any material
respect, the provisions of Section 8 of this Agreement), be involved in
charitable and professional activities and, with the consent of the
Board, serve on boards of other for profit entities, provided such
activities do not materially interfere with the performance of his
duties hereunder.
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate of THREE HUNDRED FIFTY
THOUSAND DOLLARS ($350,000.00) per year or such higher rate as may be
determined from time to time by the Company ("Base Salary"). Such Base
Salary shall be paid in accordance with the Company's standard payroll
practice for its executive officers. Once increased, Base Salary shall
not be reduced.
Page 1 of 19
2
(b) ANNUAL BONUS. During the Employment Period, Executive will be entitled
to participate in an annual incentive compensation plan of the Company.
The Executive's target annual bonus will be seventy-five percent (75%)
of his Base Salary as in effect for such year (the "Target Bonus"), and
his actual annual bonus may range from 0% to 200% (2 times Target
Bonus), and will be determined based upon achievement of performance
goals (initially seventy percent [70%] financial [return on capital
investments and EBITDA] and thirty percent [30%] personal, but may be
tied to other metrics as may be established from time to time by the
Compensation Committee of the Board) as approved by the Compensation
Committee of the Board, from time to time. The bonus for the year 2000
is guaranteed to be a minimum of $262,500.000, and will be paid at the
same time annual bonus are paid to other executives of the Company in
2001.
(c) STOCK OPTIONS. Subject to the approval of the Compensation Committee of
the Board of Directors, Executive shall be granted an initial stock
option grant for TWO HUNDRED THOUSAND (200,000) shares of the Company's
common stock, effective as of the Effective Date. The exercise price
shall be the fair market value on such date, and the option shall vest
in equal installments of twenty-five percent (25%) on each of the first
four (4) anniversaries of the Commencement Date. Executive shall be
eligible to be considered for stock option grants under the Company's
annual stock option award program as administered by, and at the
discretion of, the Compensation Committee of the Board of Directors,
beginning in 2001.
(d) BENEFIT PLANS AND VACATION. Executive shall be eligible to participate
in or receive benefits under any pension plan, profit sharing plan,
medical and dental benefits plan, life insurance plan, short-term and
long-term disability plans, or any other health, welfare or fringe
benefit plan, generally made available by the Company to its executive
officers at a level commensurate with his position. During the
Employment Period, Executive shall be entitled to vacation each year in
accordance with the Company's policies in effect from time to time, but
in no event less than four (4) weeks paid vacation per calendar year.
The Executive shall also be entitled to such periods of sick leave as
is customarily provided by the Company for its senior executive
employees. Executive shall be eligible to participate in the Company's
401(k) Plan after 90 days of employment.
(e) EXPENSE REIMBURSEMENT. The Company shall promptly reimburse Executive
for the ordinary and necessary business expenses incurred by Executive
in the performance of the duties hereunder in accordance with the
Company's customary practices applicable to its executive officers.
(f) SIGN-ON BONUS. Within thirty (30) days after the Commencement Date,
the Company will pay Executive a sign-on bonus in the amount of ONE
HUNDRED FIFTY THOUSAND DOLLARS ($150,000).
(g) EXECUTIVE DEFERRAL PLAN. Executive shall be entitled to participate in
the Company's "Executive Deferral Plan", and any replacement plan or
arrangement, all to the extent maintained or instituted by the Company,
and covering its principal executive officers, at a level commensurate
with his position.
Page 2 of 19
3
(h) RELOCATION. The Company shall promptly reimburse Executive (on a fully
grossed up basis for any amounts taxable to Executive), for reasonable
and customary costs incurred in connection with the relocation of his
principal residence to the Houston, Texas area at a level commensurate
with Executive's position and the type of relocation benefits provided
by public companies of similar size to their executives, which shall in
any event include the purchase by the Company (or a relocation company)
of such residence at its fair market value if not sold within 90 days
from the Commencement Date, any real estate commissions incurred in
connection with the sale of such residence and any points on a loan for
a new home. In addition, the Company shall provide Executive temporary
housing in the Houston area for up to six (6) months from the
Commencement Date.
(i) OTHER PERQUISITES. Executive shall be entitled to the following
benefits:
1. Auto Allowance in the amount of one thousand ($1,000)
dollars per month; and
2. Financial Planning Services at actual cost, and not to
exceed ten thousand ($10,000) dollars annually.
3. An Annual Physical Examination on a program designated by
the Company.
5. TERMINATION OF EMPLOYMENT.
Executive's employment hereunder may be terminated under the following
circumstances:
(a) DEATH. Executive's employment hereunder shall terminate upon
Executive's death.
(b) TOTAL DISABILITY. The Company may terminate Executive's employment
hereunder upon Executive becoming "Totally Disabled". For purposes of
this Agreement, Executive shall be "Totally Disabled" if Executive has
been physically or mentally incapacitated so as to render Executive
incapable of performing Executive's material usual and customary duties
under this Agreement for six (6) consecutive months (such consecutive
absence not being deemed interrupted by Executive's return to service
for less than 10 consecutive business days if absent thereafter for the
same illness or disability). Any such termination shall be upon thirty
(30) days written notice given at any time thereafter while Executive
remains Totally Disabled, provided that a termination for Total
Disability hereunder shall not be effective if Executive returns to
full performance of his duties within such thirty (30) day period.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
Executive's employment hereunder for "Cause" at any time within ninety
(90) days after the Chairman of the Audit or Governance Committee of
the Board has knowledge thereof.
(i) For purposes of this Agreement, the term "Cause" shall be
limited to (1) willful misconduct by Executive with regard to
the Company which has a material
Page 3 of 19
4
adverse effect on the Company; (2) the willful refusal of
Executive to attempt to follow the proper written direction of
the Chief Executive Officer, the President, or the Board of
Directors, provided that the foregoing refusal shall not be
"Cause" if Executive in good faith believes that such
direction is illegal, unethical or immoral and promptly so
notifies the Board; (3) substantial and continuing willful
refusal by the Executive to attempt to perform the duties
required of him hereunder (other than any such failure
resulting from incapacity due to physical or mental illness)
after a written demand for substantial performance is
delivered to the Executive by the Chief Executive Officer, the
President, or the Board of Directors, which specifically
identifies the manner in which it is believed that the
Executive has substantially and continually refused to attempt
to perform his duties hereunder; or (4) the Executive being
convicted of a felony (other than a felony involving a traffic
violation or as a result of vicarious liability). For purposes
of this paragraph, no act, or failure to act, on Executive's
part shall be considered "willful" unless done or omitted to
be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interests
of the Company.
(ii) A Notice of Termination for Cause shall mean a notice that
shall indicate the specific termination provision in Section
5(c)(i) relied upon and shall set forth in reasonable detail
the facts and circumstances which provide for a basis for
termination for Cause. Further, a Notification for Cause shall
be required to include a copy of a resolution duly adopted by
at least two-thirds (2/3rds) of the entire membership of the
Board at a meeting of the Board which was called for the
purpose of considering such termination and which Executive
and his representative had the right to attend and address the
Board, finding that, in the good faith of the Board, Executive
engaged in conduct set forth in the definition of Cause herein
and specifying the particulars thereof in reasonable detail.
The date of termination for a termination for Cause shall be
the date indicated in the Notice of Termination. Any purported
termination for Cause which is held by a court or arbitrator
not to have been based on the grounds set forth in this
Agreement or not to have followed the procedures set forth in
this Agreement shall be deemed a termination by the Company
without Cause.
(d) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate employment
hereunder with or without Good Reason at any time upon written notice
to the Company.
(i) A Termination for Good Reason means a termination by Executive
by written notice given within ninety (90) days after the
occurrence of the Good Reason event, unless such circumstances
are fully corrected prior to the date of termination specified
in the Notice of Termination for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean the occurrence or
failure to cause the occurrence, as the case may be, without
Executive's express written consent, of any of the following
circumstances: (1) any material diminution of Executive's
positions, duties or responsibilities hereunder (except in
each case in
Page 4 of 19
5
connection with the termination of Executive's employment for
Cause or Total Disability or as a result of Executive's death,
or temporarily as a result of Executive's illness or other
absence), provided that a change in reporting structure shall
not constitute Good Reason under any circumstances as long as
Executive reports to the Chief Executive Officer, the
President, the Chief Operating Officer, or an Executive Vice
President; further provided that if the Company becomes a
fifty percent or more subsidiary of any other entity,
Executive shall be deemed to have a material diminution of his
position unless he is also Senior Vice President of the
ultimate parent entity; (2) removal of, or the non-re-election
of, the Executive from officer positions with the Company
specified herein or removal of the Executive from any of his
then officer positions; (3) requiring Executive's principal
place of business to be located other than in Houston, Texas;
(4) a failure by the Company (I) to continue any bonus plan,
program or arrangement in which Executive is entitled to
participate (the "Bonus Plans"), provided that any such Bonus
Plans may be modified at the Company's discretion from time to
time but shall be deemed terminated if (x) any such plan does
not remain substantially in the form in effect prior to such
modification and (y) if plans providing Executive with
substantially similar benefits are not substituted therefor
("Substitute Plans"), or (II) to continue Executive as a
participant in the Bonus Plans and Substitute Plans on at
least the same basis as to potential amount of the bonus as
Executive participated in prior to any change in such plans or
awards, in accordance with the Bonus Plans and the Substitute
Plans; (5) any material breach by the Company of any provision
of this Agreement, including without limitation Section 10
hereof; or (6) failure of any successor to the Company
(whether direct or indirect and whether by merger,
acquisition, consolidation or otherwise) to assume in a
writing delivered to Executive upon the assignee becoming
such, the obligations of the Company hereunder.
(ii) A Notice of Termination for Good Reason shall mean a notice
that shall indicate the specific termination provision relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for Termination for
Good Reason. The failure by Executive to set forth in the
Notice of Termination for Good Reason any facts or
circumstances which contribute to the showing of Good Reason
shall not waive any right of Executive hereunder or preclude
Executive from asserting such fact or circumstance in
enforcing his rights hereunder. The Notice of Termination for
Good Reason shall provide for a date of termination not less
than ten (10) nor more than sixty (60) days after the date
such Notice of Termination for Good Reason is given, provided
that in the case of the events set forth in Sections
5(d)(i)(1) or (2) the date may be five (5) days after the
giving of such notice.
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate
Executive's employment hereunder without Cause at any time upon written
notice to Executive.
Page 5 of 19
6
(f) EFFECT OF TERMINATION. Upon any termination of employment, Executive
shall immediately resign from all Board memberships and other positions
with the Company or any of its subsidiaries held by him at such time.
6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.
In the event that Executive's employment hereunder is terminated, Executive
shall be entitled to the following compensation and benefits upon such
termination:
(a) Termination by Reason of Death. In the event that Executive's
employment is terminated by reason of Executive's death, the Company
shall pay the following amounts to Executive's beneficiary or estate:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of death, any accrued but unpaid expenses required to
be reimbursed under this Agreement, any vacation accrued to
the date of termination, any earned but unpaid bonuses for any
prior period, and, to the extent not otherwise paid, a
pro-rata "bonus" or incentive compensation payment to the
extent payments are awarded to senior executives of the
Company and paid at the same time as senior executives are
paid.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those referred
to in Section 4(d) hereof), as determined and paid in
accordance with the terms of such plans, policies and
arrangements.
(iii) An amount equal to the Base Salary (at the rate in effect as
of the date of Executive's death) which would have been
payable to Executive if Executive had continued in employment
for two additional years. Said payments will be paid to
Executive's estate or beneficiary at the same time and in the
same manner as such compensation would have been paid if
Executive had remained in active employment.
(iv) As of the date of termination by reason of Executive's death,
stock options awarded to Executive shall be fully vested and
Executive's estate or beneficiary shall have up to one (1)
year from the date of death to exercise all such options,
provided that in no event will any option be exercisable
beyond its term.
(v) As otherwise specifically provided herein.
(b) TERMINATION BY REASON OF TOTAL DISABILITY. In the event that
Executive's employment is terminated by reason of Executive's Total
Disability as determined in accordance with Section 5(b), the Company
shall pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of
Page 6 of 19
7
termination, any accrued but unpaid expenses required to be
reimbursed under this Agreement, any vacation accrued to the
date of termination and any earned but unpaid bonuses for any
prior period. Executive shall also be eligible for a pro-rata
bonus or incentive compensation payment to the extent such
awards are made to senior executives of the Company for the
year in which Executive is terminated, and to the extent not
otherwise paid to the Executive.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those referred
to in Section 4(d) hereof) shall be determined and paid in
accordance with the terms of such plans, policies and
arrangements.
(iii) An amount equal to the Base Salary (at the rate in effect as
of the date of Executive's Total Disability) which would have
been payable to Executive if Executive had continued in active
employment for two years following termination of employment,
less any payments under any long-term disability plan or
arrangement paid for by the Company. Payment shall be made at
the same time and in the same manner as such compensation
would have been paid if Executive had remained in active
employment until the end of such period.
(iv) As of the date of termination by reason of Executive's Total
Disability, Executive shall be fully vested in all stock
option awards, and Executive shall have up to one (1) year
from the date of termination by reason of Total Disability to
exercise all such options; provided that in no event will any
option be exercisable beyond its term.
(v) As otherwise specifically provided herein.
(c) TERMINATION FOR CAUSE. In the event that Executive's employment is
terminated by the Company for Cause, the Company shall pay the
following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those referred
to in Section 4(d) hereof up to the date of termination) shall
be determined and paid in accordance with the terms of such
plans, policies and arrangements.
(iii) As otherwise specifically provided herein.
Page 7 of 19
8
Any options, restricted stock or other awards that have not
vested prior to the date of such termination of employment
shall be cancelled to the extent not then vested, and any
options held by Executive shall be cancelled, whether or not
then vested.
(d) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that Executive
voluntarily terminates employment other than for Good Reason, the
Company shall pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those referred
to in Section 4(d) hereof up to the date of termination) shall
be determined and paid in accordance with the terms of such
plans, policies and arrangements.
(iii) As otherwise specifically provided herein.
Any options, restricted stock or other awards that have not vested
prior to the date of such termination of employment shall be cancelled
to the extent not then vested, and Executive shall have 90 days
following termination of employment to exercise any previously vested
options; provided that in no event will any option be exercisable
beyond its term.
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE; TERMINATION BY EXECUTIVE FOR
GOOD REASON. In the event that Executive's employment is terminated by
the Company for reasons other than death, Total Disability or Cause, or
Executive terminates his employment for Good Reason, the Company shall
pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements referred to in Section
4(d) hereof shall be determined and paid in accordance with
the terms of such plans, policies and arrangements.
(iii) An amount equal to two times the sum of Executive's Base
Salary plus his Target Annual Bonus (in each case as then in
effect), of which one-half shall be paid in a lump sum within
ten (10) days after such termination and one-half shall be
paid during the two (2) year period beginning on the date of
Executive's termination and shall be paid at the same time and
in the same manner as Base Salary would
Page 8 of 19
9
have been paid if Executive had remained in active employment
until the end of such period.
(iv) The Company at its expense will continue for Executive and
Executive's spouse and dependents, all health benefit plans,
programs or arrangements, whether group or individual, and
also including deferred compensation, disability, automobile,
and other benefit plans, in which Executive was entitled to
participate at any time during the twelve-month period prior
to the date of termination, until the earliest to occur of (A)
two years after the date of termination; (B) Executive's death
(provided that benefits payable to Executive's beneficiaries
shall not terminate upon Executive's death); or (C) with
respect to any particular plan, program or arrangement, the
date Executive becomes covered by a comparable benefit by a
subsequent employer. In the event that Executive's continued
participation in any such plan, program, or arrangement of the
Company is prohibited, the Company will arrange to provide
Executive with benefits substantially similar to those which
Executive would have been entitled to receive under such plan,
program, or arrangement, for such period on a basis which
provides Executive with no additional after tax cost.
(v) Except to the extent prohibited by law, and except as
otherwise provided herein, Executive will be 100% vested in
all benefits, awards, and grants accrued but unpaid as of the
date of termination under any pension plan, profit sharing
plan, supplemental and/or incentive compensation plans in
which Executive was a participant as of the date of
termination. Executive shall also be eligible for a bonus or
incentive compensation payment, at the same time, on the same
basis, and to the same extent payments are made to senior
executives of the Company, pro-rated for the fiscal year in
which the Executive is terminated.
(vi) Executive shall continue to vest in all stock option awards or
restricted stock awards over the two (2) year period
commencing on the date of such termination. Executive shall
have two (2) years and six (6) months after the date of
termination to exercise all options to the extent then vested,
provided that in no event will any option be exercisable
beyond its term.
(vii) As otherwise specifically provided herein.
(f) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this
Agreement, under the terms of any incentive compensation, employee
benefit, or fringe benefit plan applicable to Executive at the time of
Executive's termination or resignation of employment, Executive shall
have no right to receive any other compensation, or to participate in
any other plan, arrangement or benefit, with respect to future periods
after such termination or resignation.
(g) NO MITIGATION; NO SET-OFF. In the event of any termination of
employment hereunder, Executive shall be under no obligation to seek
other employment and there shall be no
Page 9 of 19
10
offset against any amounts due Executive under this Agreement on
account of any remuneration attributable to any subsequent employment
that Executive may obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or other right
which the Company may have against the Executive or others, except upon
obtaining by the Company of a final unappealable judgment against
Executive.
7. RESIGNATION BY EXECUTIVE FOR GOOD REASON AND COMPENSATION PAYABLE
FOLLOWING CHANGE IN CONTROL.
(a) RESIGNATION FOR GOOD REASON FOLLOWING CHANGE IN CONTROL. In the event a
"Change in Control" occurs and Executive terminates his employment for
Good Reason thereafter, or the Company terminates Executive's
employment other than for Cause or such termination for Good Reason or
without Cause occurs in contemplation of such Change in Control (any
termination within six (6) months prior to such Change in Control being
presumed to be in contemplation unless rebutted by clear and
demonstrable evidence to the contrary), the Company shall pay the
following amounts to Executive:
(i) The payments and benefits provided for in Section 6(e), except
that the amount shall be paid in a lump-sum.
(ii) Executive will be 100% vested in all benefits, awards, and
grants (including stock option grants and stock awards; all of
such stock options exercisable for two (2) years following
Termination, provided that in no event will any option be
exercisable beyond its term) accrued but unpaid as of the date
of termination under any non-qualified pension plan,
supplemental and/or incentive compensation or bonus plans, in
which Executive was a participant as of the date of
termination. Executive shall also receive a bonus or incentive
compensation payment (the "bonus payment"), payable at 100% of
the maximum bonus available to Executive, pro-rated as of the
effective date of the termination. The bonus payment shall be
payable within five (5) days after the effective date of
Employee's termination. Except as may be provided under this
Section 7 or under the terms of any incentive compensation,
employee benefit, or fringe benefit plan applicable to
Executive at the time of Executive's resignation from
employment, Executive shall have no right to receive any other
compensation, or to participate in any other plan, arrangement
or benefit, with respect to future periods after such
resignation or termination.
(b) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(i) In the event that the Executive shall become entitled to
payments and/or benefits provided by this Agreement or any
other amounts in the "nature of compensation" (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any
Page 10 of 19
11
person affiliated with the Company or such person) as a result
of such change in ownership or effective control (collectively
the "Company Payments"), and such Company Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code (and any similar tax that may hereafter be imposed
by any taxing authority) the Company shall pay to the
Executive at the time specified in subsection (iv) below an
additional amount (the "Gross-up Payment") such that the net
amount retained by the Executive, after deduction of any
Excise Tax on the Company Payments and any U.S. federal,
state, and for local income or payroll tax upon the Gross-up
Payment provided for by this Section 7(b), but before
deduction for any U.S. federal, state, and local income or
payroll tax on the Company Payments, shall be equal to the
Company Payments.
(ii) For purposes of determining whether any of the Company
Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "parachute payments" in excess of the
"base amount" (as defined under Code Section 280G[b][3] of the
Code) shall be treated as subject to the Excise Tax, unless
and except to the extent that, in the opinion of the Company's
independent certified public accountants appointed prior to
any change in ownership (as defined under Code Section
280G[b][2]) or tax counsel selected by such accountants (the
"Accountants") such Total Payments (in whole or in part)
either do not constitute "parachute payments," represent
reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in excess of the
"base amount" or are otherwise not subject to the Excise Tax,
and (y) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code.
(iii) For purposes of determining the amount of the Gross-up
Payment, the Executive shall be deemed to pay U.S. federal
income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year.
In the event that the Excise Tax is subsequently determined by
the Accountants to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, the
Executive shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined,
the portion of the prior Gross-up Payment attributable to such
reduction (plus the portion of the Gross-up Payment
attributable to the Excise Tax and U.S. federal, state and
local income tax imposed on the portion of the Gross-up
Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state
and local income tax deduction),
Page 11 of 19
12
plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. Notwithstanding
the foregoing, in the event any portion of the Gross-up
Payment to be refunded to the Company has been paid to any
U.S. federal, state and local tax authority, repayment thereof
(and related amounts) shall not be required until actual
refund or credit of such portion has been made to the
Executive, and interest payable to the Company shall not
exceed the interest received or credited to the Executive by
such tax authority for the period it held such portion. The
Executive and the Company shall mutually agree upon the course
of action to be pursued (and the method of allocating the
expense thereof) if the Executive's claim for refund or credit
is denied.
In the event that the Excise Tax is later determined by the
Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time
of the Gross-up Payment), the Company shall make an additional
Gross-up Payment in respect of such excess (plus any interest
or penalties payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(iv) The Gross-up Payment or portion thereof provided for in
subsection (iii) above shall be paid not later than the
thirtieth (30th) day following an event occurring which
subjects the Executive to the Excise Tax; provided, however,
that if the amount of such Gross-up Payment or portion thereof
cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as
determined in good faith by the Accountant, of the minimum
amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code), subject to further
payments pursuant to subsection (iii) hereof, as soon as the
amount thereof can reasonably be determined, but in no event
later than the ninetieth day after the occurrence of the event
subjecting the Executive to the Excise Tax. In the event that
the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on
the fifth day after demand by the Company (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(v) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise
Tax, the Executive shall permit the Company to control issues
related to the Excise Tax (at its expense), provided that such
issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues.
In the event the issues are interrelated, the Executive and
the Company shall in good faith cooperate so as not to
jeopardize resolution of either issue, but if the parties
cannot agree the Executive shall make the final determination
with regard to the issues. In the event of any conference with
any taxing authority as to the Excise Tax or associated income
taxes, the Executive shall permit the representative of the
Company to accompany
Page 12 of 19
13
the Executive, and the Executive and the Executive's
representative shall cooperate with the Company and its
representative.
(vi) The Company shall be responsible for all charges of the
Accountant.
(vii) The Company and the Executive shall promptly deliver to each
other copies of any written communications, and summaries of
any verbal communications, with any taxing authority regarding
the Excise Tax covered by this Section 7(b).
(c) CHANGE IN CONTROL. For purposes of this Agreement, "Change in Control"
means the occurrence of any of the following events:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities
acquired directly from the Company or its Affiliates)
representing twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding voting
securities;
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on the Commencement Date, constitute the Board and any
new director (other than a director whose initial assumption
of office is in connection with an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or
nomination for election by the Company's stockholders was
approved or recommended by a vote of the at least two-thirds
(2/3rds) of the directors then still in office who either were
directors on the Commencement Date or whose appointment,
election or nomination for election was previously so approved
or recommended;
(iii) there is a consummated merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any
other corporation, other than (A) 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 or parent entity) more than
fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving or parent equity
outstanding immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person, directly or indirectly, acquired twenty-five
percent (25%) or more of the combined voting power of the
Company's then outstanding securities (not including in the
securities beneficially owned by such person any securities
acquired directly from the Company or its Affiliates); or
Page 13 of 19
14
(iv) the stock holders of the Company approve a plan of complete
liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (or any transaction
having a similar effect), other than a sale or disposition by
the Company of all or substantially all of the Company's
assets to an entity, at least fifty percent (50%) of the
combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
For purposes of this Section 7(c), the following terms shall have the
following meanings:
(i) "Affiliate" shall mean an affiliate of the Company, as defined
in Rule 12b-2 promulgated under Section 12 of the Securities
Exchange Act of 1934, as amended from time to time (the
"Exchange Act");
(ii) "Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act;
(iii) "Person" shall have the meaning set forth in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof, except that such term shall not include (1)
the Company, (2) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, (3)
an underwriter temporarily holding securities pursuant to an
offering of such securities or (4) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
shares of Common Stock of the Company.
8. RESTRICTIVE COVENANTS.
(a) COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times
during Executive's period of employment with the Company, and for two
(2) years thereafter, Executive will not engage in, assist, or have any
active interest or involvement, whether as an employee, agent,
consultant, creditor, advisor, officer, director, stockholder
(excluding holding of less than 3% of the stock of a public company),
partner, proprietor or any type of principal whatsoever in any person,
firm, or business entity which, directly or indirectly, is materially
engaged in the waste management business competitive with that
conducted and carried on by the Company, without the Company's specific
written consent to do so. "Material" shall mean more than five (5%)
percent of their revenue is generated from the waste management
business; provided that the revenues within Executive's area of
responsibility or authority are more than 10% composed of revenues from
the waste disposal business.
(b) NON-SOLICITATION. Executive covenants and agrees that at all times
during Executive's period of employment with the Company, and for a
period of two (2) years after the Termination thereof, whether such
termination is voluntary or involuntary by wrongful
Page 14 of 19
15
discharge, or otherwise, Executive will not directly and personally
knowingly (i) induce any customers of the Company or corporations
affiliated with the Company to patronize any similar business which
competes with any material business of the Company; (ii) after his
termination of employment, request or advise any customers of the
Company or corporations affiliated with the Company to withdraw,
curtail or cancel such customer's business with the Company; or (iii)
after his termination of employment, individually or through any
person, firm, association or corporation with which he is now, or may
hereafter become associated, solicit, entice or induce any then
employee of the Company, or any subsidiary of the Company, to leave the
employ of the Company, or such other corporation, to accept employment
with, or compensation from the Executive, or any person, firm,
association or corporation with which Executive is affiliated without
prior written consent of the Company. The foregoing shall not prevent
Executive from serving as a reference for employees.
(c) PROTECTED INFORMATION. Executive recognizes and acknowledges that
Executive has had and will continue to have access to various
confidential or proprietary information concerning the Company and
corporations affiliated with the Company of a special and unique value
which may include, without limitation, (i) books and records relating
to operation, finance, accounting, sales, personnel and management,
(ii) policies and matters relating particularly to operations such as
customer service requirements, costs of providing service and
equipment, operating costs and pricing matters, and (iii) various trade
or business secrets, including customer lists, route sheets, business
opportunities, marketing or business diversification plans, business
development and bidding techniques, methods and processes, financial
data and the like, to the extent not generally known in the industry
(collectively, the "Protected Information"). Executive therefore
covenants and agrees that Executive will not at any time, either while
employed by the Company or afterwards, knowingly make any independent
use of, or knowingly disclose to any other person or organization
(except as authorized by the Company) any of the Protected Information,
provided that (i) while employed by the Company, Executive may in good
faith make disclosures he believes desirable, provided that are
authorized by the Company or otherwise in accordance with Company
policy, and (ii) Executive may comply with legal process.
9. ENFORCEMENT OF COVENANTS.
(a) RIGHT TO INJUNCTION. Executive acknowledges that a breach of the
covenants set forth in Section 8 hereof will cause irreparable damage
to the Company with respect to which the Company's remedy at law for
damages may be inadequate. Therefore, in the event of breach or
threatened breach of the covenants set forth in this section by
Executive, Executive and the Company agree that the Company shall be
entitled to the following particular forms of relief, in addition to
remedies otherwise available to it at law or equity; injunctions, both
preliminary and permanent, enjoining or restraining such breach or
threatened breach and Executive hereby consents to the issuance thereof
forthwith and without bond by any court of competent jurisdiction.
Page 15 of 19
16
(b) SEPARABILITY OF COVENANTS. The covenants contained in Section 8 hereof
constitute a series of separate covenants, one for each applicable
State in the United States and the District of Columbia, and one for
each applicable foreign country. If in any judicial proceeding, a court
shall hold that any of the covenants set forth in Section 8 exceed the
time, geographic, or occupational limitations permitted by applicable
laws, Executive and the Company agree that such provisions shall and
are hereby reformed to the maximum time, geographic, or occupational
limitations permitted by such laws. Further, in the event a court shall
hold unenforceable any of the separate covenants deemed included
herein, then such unenforceable covenant or covenants shall be deemed
eliminated from the provisions of this Agreement for the purpose of
such proceeding to the extent necessary to permit the remaining
separate covenants to be enforced in such proceeding.
Executive and the Company further agree that the covenants in Section 8
shall each be construed as a separate agreement independent of any
other provisions of this Agreement, and the existence of any claim or
cause of action by Executive against the Company whether predicated on
this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of any of the covenants of Section 8.
10. INDEMNIFICATION.
The Company shall indemnify and hold harmless Executive to the fullest extent
permitted by Delaware law for any action or inaction of Executive while serving
as an officer and director of the Company or, at the Company's request, as an
officer or director of any other entity or as a fiduciary of any benefit plan.
This provision includes the obligation and undertaking of the Executive to
reimburse the Company for any fees advanced by the Company on behalf of the
Executive should it later be determined that Executive was not entitled to have
such fees advanced by the Company under Delaware law. The Company shall cover
the Executive under directors and officers liability insurance both during and,
while potential liability exists, after the Employment Term in the same amount
and to the same extent as the Company covers its other officers and directors.
11. DISPUTES AND PAYMENT OF ATTORNEY'S FEES.
If at any time during the term of this Agreement or afterwards there should
arise any dispute as to the validity, interpretation or application of any term
or condition of this Agreement, the Company agrees, upon written demand by
Executive (and Executive shall be entitled upon application to any court of
competent jurisdiction, to the entry of a mandatory injunction, without the
necessity of posting any bond with respect thereto, compelling the Company) to
promptly provide sums sufficient to pay on a current basis (either directly or
by reimbursing Executive) Executive's costs and reasonable attorney's fees
(including expenses of investigation and disbursements for the fees and expenses
of experts, etc.) incurred by Executive in connection with any such dispute or
any litigation, provided that Executive shall repay any such amounts paid or
advanced if Executive is not the prevailing party with respect to at least one
material claim or issue in such dispute or litigation. The provisions of this
Section 11, without
Page 16 of 19
17
implication as to any other section hereof, shall survive the expiration or
termination of this Agreement and of Executive's employment hereunder.
12. WITHHOLDING OF TAXES.
The Company may withhold from any compensation and benefits payable under this
Agreement all applicable federal, state, local, or other taxes.
13. SOURCE OF PAYMENTS.
All payments provided under this Agreement, other than payments made pursuant to
a plan which provides otherwise, shall be paid from the general funds of the
Company, and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. Executive shall have no right,
title or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations hereunder. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor of the
Company.
14. ASSIGNMENT.
Except as otherwise provided in this Agreement, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, representatives, successors and assigns. This Agreement shall not be
assignable by Executive (but any payments due hereunder which would be payable
at a time after Executive's death shall be paid to Executive's designated
beneficiary or, if none, his estate) and shall be assignable by the Company only
to any financially solvent corporation or other entity resulting from the
reorganization, merger or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company's business or substantially all of its business or assets may be sold,
exchanged or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection
with any such reorganization, merger, consolidation, sale, exchange or transfer
in a writing delivered to Executive in a form reasonably acceptable to Executive
(the provisions of this sentence also being applicable to any successive such
transaction).
15. ENTIRE AGREEMENT; AMENDMENT.
This Agreement shall supersede any and all existing oral or written agreements,
representations, or warranties between Executive and the Company or any of its
subsidiaries or affiliated entities relating to the terms of Executive's
employment by the Company. It may not be amended except by a written agreement
signed by both parties.
Page 17 of 19
18
16. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Texas applicable to agreements made and to be performed in that
State, without regard to its conflict of laws provisions.
17. REQUIREMENT OF TIMELY PAYMENTS.
If any amounts which are required, or determined to be paid or payable, or
reimbursed or reimbursable, to Executive under this Agreement (or any other
plan, agreement, policy or arrangement with the Company) are not so paid
promptly at the times provided herein or therein, such amounts shall accrue
interest, compounded daily, at an 8% annual percentage rate, from the date such
amounts were required or determined to have been paid or payable, reimbursed or
reimbursable to Executive, until such amounts and any interest accrued thereon
are finally and fully paid, provided, however, that in no event shall the amount
of interest contracted for, charged or received hereunder, exceed the maximum
non-usurious amount of interest allowed by applicable law.
18. NOTICES.
Any notice, consent, request or other communication made or given in connection
with this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by registered or certified mail, return receipt
requested, or by facsimile or by hand delivery, to those listed below at their
following respective addresses or at such other address as each may specify by
notice to the others:
To the Company: Waste Management , Inc.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Corporate Secretary
To Executive: At the address for Executive set forth below.
19. MISCELLANEOUS.
(a) WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(b) SEPARABILITY. Subject to Section 9 hereof, if any term or provision of
this Agreement is declared illegal or unenforceable by any court of
competent jurisdiction and cannot be modified to be enforceable, such
term or provision shall immediately become null and void, leaving the
remainder of this Agreement in full force and effect.
Page 18 of 19
19
(c) HEADINGS. Section headings are used herein for convenience of
reference only and shall not affect the meaning of any provision of
this Agreement.
(d) RULES OF CONSTRUCTION. Whenever the context so requires, the use of
the singular shall be deemed to include the plural and vice versa.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, and such counterparts will together constitute but one
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
WASTE MANAGEMENT, INC.
By:/s/ Xxxxxxxx X'Xxxxxxx, III
------------------------------------
Name: Xxxxxxxx X'Xxxxxxx, III
Title: Sr. Vice President, General
Counsel & Secretary
Date: May 11, 2000
EXECUTIVE:
/s/ Xxxxxx X. Xxxx, Xx.
---------------------------------------
XXXXXX X. XXXX, XX.
Date: May 10, 2000
Address:
------------------------------
---------------------------------------
Page 19 of 19
