1
EXHIBIT 10.37
EMPLOYMENT AGREEMENT
WASTE MANAGEMENT, INC. (the "Company"), and XXXXXXX X. XXXXXXX (the "Executive")
hereby enter into this EMPLOYMENT AGREEMENT ("Agreement") dated as of February
16, 2000 (the "Agreement 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
March 13, 2000, or sooner at the option of the Executive, and be for a
continuously renewing (on a daily basis) five (5) 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 and Chief Financial
Officer reporting to the Chief Executive Officer of the Company. In
such capacities, 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 Board of Directors of the Company (the "Board").
(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 (which shall not unreasonably be withheld or delayed) serve on
boards of other for profit entities, provided such activities do not
materially interfere with the performance of his duties hereunder.
Service on the for profit boards that Executive is currently serving on
(Xxxx Brothers & Company, Yellow Corporation and Vision Technologies)
are hereby approved.
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate of five hundred thousand
($500,000) dollars 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.
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 sixty percent (60%) of his
Base Salary as in effect for such year (the "Target Bonus"), and his
actual annual bonus may range from 0% to 120% (two times target), and
will be determined based upon achievement of performance goals (seventy
percent (70%) financial (return on capital investments and EBITDA) and
thirty percent (30%) personal) as approved by the Compensation
Committee of the Board. The annual bonus will be paid within 30 days
following the Compensation Committee's first meeting following the year
end accounting close.
(c) SIGN-ON BONUS. Within thirty (30) days after the Commencement Date, the
Company will pay Executive a two hundred thousand ($200,000) dollar
sign-on bonus.
(d) FIRST BONUS GUARANTEED. The Company will pay to Executive a minimum
guaranteed bonus in the amount of two hundred thousand ($200,000)
dollars, to be paid within 30 days following the Compensation
Committee's first meeting following the year end accounting close in
2001.
(e) STOCK OPTIONS.
(i) As of the Agreement Date, Executive will be granted a ten-year
stock option award under the Company's Stock Incentive Plan to
purchase four hundred thousand (400,000) shares of common stock
of the Company ("Stock"). The exercise price shall be the fair
market value on the Agreement Date, and the options shall vest in
equal installments on each of the first four (4) anniversaries of
the Agreement Date.
(ii) At the February/March, 2001 meeting of the Compensation Committee
of the Board, Executive will, subject to approval by the
Compensation Committee, be granted a ten (10) year stock option
award under the Company's Stock Incentive Plan to purchase two
hundred thousand (200,000) shares of Stock. The exercise price
shall be the fair market value on the date the Compensation
Committee awards the options, and the options shall vest in equal
installments over four (4) years, commencing on the first
anniversary of the date of grant. Thereafter, Executive shall
participate in the Company's annual stock option award program as
administered by, and at the discretion of, the Compensation
Committee of the Board.
(f) OTHER COMPENSATION. Executive shall be entitled to participate in the
Company's "Executive Deferral Plan" and any incentive or supplemental
compensation plan, or arrangement maintained or instituted by the
Company, and covering its principal executive officers, at a level
commensurate with his positions and to receive additional compensation
from the Company in such form, and to such extent, if any, as the
Compensation Committee may in its sole discretion from time to time
specify.
(g) 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
Page 2 of 19
3
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
positions. All waiting periods for welfare and health plans shall be
waived, and pre-existing medical conditions for Executive and
Executive's family members will not be a basis for withholding medical
insurance benefits. 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.
(h) OTHER PERQUISITES. Executive shall be entitled to the following
benefits:
1. Auto Allowance in the amount of one thousand ($1,000) dollars per
month;
2. Financial Planning Services, including tax preparation, at actual
cost, and not to exceed fifteen thousand ($15,000) dollars
annually;
3. Club Dues and Assessments at actual cost, and not to exceed
twelve thousand ($12,000) dollars annually; and
4. An Annual Physical Examination on a program designated by the
Company.
(i) 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. In
addition the Company shall (i) pay for the reasonable costs, fees and
expenses incurred by Executive, his consultants or legal advisors in
connection with the negotiation and execution of this Agreement in an
amount not to exceed ten thousand ($10,000) dollars and (ii) reimburse
Executive (on a fully grossed up basis for any amounts taxable to
Executive) for reasonable 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 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.
(j) REPLACEMENT AWARD. In order to address certain forfeitures that
Executive will face upon termination of his employment with his prior
employer, Executive shall be awarded or receive the following:
Restricted Stock Award. Effective as of the Commencement Date, the
Company will grant Executive an award of restricted shares of the Company's
common stock (the "Stock") (valued at three hundred, eighty-five thousand
($385,000) dollars on the date of grant) under the Company's Stock Incentive
Plan that will vest in equal installments on each of the first four (4)
Page 3 of 19
4
anniversaries of the Commencement Date, subject (except as otherwise provided
herein) to Executive's continuous employment with the Company through the
applicable vesting date (the "Restricted Stock Grant"). The Restricted Stock
Grant shall be deemed outstanding shares for all purposes and Executive shall be
fully vested in any cash dividends paid therein (and non-cash dividends being
subject to the same forfeiture provisions as the underlying Restricted Stock
Grant shares).
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 adverse effect on the Company; (2) the
willful refusal of Executive to attempt to follow the proper
written direction of the Board, 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 Board 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
Page 4 of 19
5
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 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), the cessation
of Executive to report to the Chief Executive Officer of the
Company or the assignment to Executive of duties or
responsibilities that are inconsistent with Executive's then
position; 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 and Chief Financial Officer reporting to
the Chief Executive Officer 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 the Houston, Texas greater Metropolitan region; (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
Page 5 of 19
6
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 (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.
(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, a pro-rata "bonus" or incentive compensation payment to
the
Page 6 of 19
7
extent payments are awarded senior executives and paid at the
same time as senior executives are paid, and any vacation accrued
to the date of death.
(ii) Any benefits to which Executive may be entitled pursuant to the
plans, policies and arrangements (including those referred to in
Sections 4(f)-(h) 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.
(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 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 for the year in which Executive is
terminated.
(ii) Any benefits to which Executive may be entitled pursuant to the
plans, policies and arrangements (including those referred to in
Sections 4(f)-(h) 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
Page 7 of 19
8
(1) year from the date of termination by reason of Total
Disability to exercise all such options.
(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
Sections 4(f)-(h) hereof) 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
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
Sections 4(f)-(h) hereof) 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
and Executive shall have 90 days following termination of employment to
exercise any previously vested options (or, if earlier, until the
stated expiration thereof).
Page 8 of 19
9
(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 Sections 4(f)-(h)
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 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, pro-rated
for the fiscal year in which the Executive is terminated.
Page 9 of 19
10
(vi) As of the date of such termination of employment, the stock
options awarded to Executive pursuant to Section 4(e)(i) hereof
and the Restricted Stock Grant shall be fully vested. Executive
shall continue to vest in all other 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 vested options, unless by virtue of the particular
stock option award, the option grant expires on an earlier date.
(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 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 (A) the entire amount calculated pursuant to Section
6(e)(iii) shall be paid in a lump-sum and (B) the benefit
continuation period in Section 6(e)(iv) shall be three years.
(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 three (3) years following
Termination) 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
Page 10 of 19
11
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 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.
Page 11 of 19
12
(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), 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
Page 12 of 19
13
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 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
Page 13 of 19
14
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
(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
Page 14 of 19
15
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. Notwithstanding the foregoing, Executive
may be employed by or provide services to, an investment banking firm,
law firm or consulting firm that provides services to entities
described in the previous sentence, provided that Executive does not
personally represent or provide services to such entities.
(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 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, and (ii) Executive may
comply with legal process.
Page 15 of 19
16
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.
(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 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. 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)
Page 16 of 19
17
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 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: General Counsel
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.
(c) HEADINGS. Section headings are used herein for convenience of reference
only and shall not affect the meaning of any provision of this
Agreement.
Page 18 of 19
19
(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/ A. Xxxxxxx Xxxxx
--------------------------------------------
Name: A. Xxxxxxx Xxxxx
Title: Chairman, Chief Executive Officer and President
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxx
Social Security Number:
------------------------
Address: 0000 Xxx Xxxxxx
--------------------------------------
Xxxxxxxx, XX 00000
--------------------------------------
Page 19 of 19
