EXHIBIT 10.5
[Rust Letterhead]
PERSONAL AND CONFIDENTIAL
July 29, 1996
Xxxxx XxXxx
Rust Scaffold Builders Inc.
00000 Xxxxxxx Xxxxxxx
Xx. Xxxx, XX 00000
Re: Employment Security Agreement
Dear Xxxxx:
As you know, WMX Technologies, Inc. ("WMX") has announced certain
activities relative to realignment of our businesses. The Company recognizes
the uncertainty that accompanies this announcement and wishes to offer you this
Employment Security Agreement in appreciation of your past dedicated service
and to provide you with peace of mind.
In consideration for the payments and other security listed below, you
agree to continue your employment with the Company and provide your full
cooperation and assistance to the Company.
1. Term. The Term of the Agreement shall be until July 31, 1998.
2. Base Salary. Your current base salary will not be reduced during
the Term and will be subject to normal increases which are in the discretion of
management.
3. Guaranteed Minimum Bonus. Regardless of the amount of your earned
bonus under the Management Incentive Bonus Plan ("Plan") (i) if you remain
employed with the Company through December 31, 1996, the Company agrees to pay
you a minimum bonus equal to 50% of your target bonus under the 1996 Plan; (ii)
if you remain employed with the Company through December 31, 1997, the Company
agrees to pay you a minimum bonus equal to 50% of your target bonus under the
1997 Plan; and (iii) if you remain employed with the Company through the end of
the Term, the Company agrees to pay you a minimum bonus equal to 50% of your
target bonus under the 1998 Plan, pro-rated to the end of the Term. The 1997
and 1998 Plans will be on terms at least as favorable as the 1996 Plan.
4. Completion Bonus. If you remain employed with the Company through
the end of the Term, you will receive, in a single lump sum as soon as
practicable after the end of the Term, 35% of your 1996 Plan earned bonus and
35% of your 1997 Plan earned bonus.
5. Transaction Bonus. In the event of a sale of the Company during the
Term to an entity unrelated to any WMX affiliated company, if you remain
employed with the Company through the closing of the sale, the Company will pay
you a transaction bonus equal to two times your monthly base salary as soon as
reasonably practicable following the date of the closing. Payment of such bonus
will be subject to normal withholding.
6. Stock Options. Any otherwise exercisable stock options will remain
in effect, in accordance with the terms of the stock option plan under which
they were issued, during any period of employment with the Company and any
subsequent period during which you may be receiving severance pay. However, in
the event of a transaction involving the Company which under the terms of the
stock option plan would cause the options to terminate, the Company will use
its reasonable best efforts to cause the exercisability of the options to be
accelerated.
7. (a) Termination Without Cause. If you are terminated by the Company
without Cause prior to the end of the Term, the Company will pay you (i) an
amount equal to the greater of (a) the amount of the base salary remaining to
be paid during the Term, or (b) one year of continued base salary (payable in
the same manner as regular salary), measured by your base salary in effect on
the date of your termination, (ii) the bonus payment(s) (determined under
paragraph 3) for the balance of the Term, and (iii) the Completion Bonus to be
paid under paragraph 4, but determined on the basis of target bonus, as opposed
to earned bonus. The Company will also provide you with one year's continued
coverage under the Company's medical and dental plans at the rate applicable to
active employees. (The one year of continued salary and benefits is hereinafter
referred to as the "Severance Period".) Notwithstanding the forgoing, your
payments under this paragraph (a) can, at your election, be paid in a single
lump sum. If you are terminated by the Company without Cause prior to the
closing of the sale of the Company, the Company will pay you the Transaction
Bonus determined under paragraph 5.
(b) Severance. If you are terminated by the Company without Cause
after the expiration of the Term of this Agreement and for a period of two
years thereafter, you shall be entitled to receive severance equal to two weeks
of base salary for each year of service you have with the Company through the
date of your termination of employment.
2
(c) Cause. For purposes of this Agreement, Cause shall mean any act of
dishonesty or theft, willful misconduct, acts of gross negligence or the
willful and continued failure or your refusal to perform assigned duties (other
than caused by a disability, which for purposes of this Agreement shall mean
your total and permanent incapacity to perform the duties you were performing
immediately prior to the onset of such disability).
8. Survivor's Benefit. In the event of your death before the end of
the Term, or during the course of any applicable Severance Period, your spouse,
if any, shall receive the full (or, if your death occurs during any applicable
Severance Period, the remainder of the) one year of continued base salary and
medical and dental coverage set forth in paragraph 7 above. Further, your
spouse, if any, shall receive the Guaranteed Minimum Bonus due with respect to
the year of your death under paragraph 3 and the Completion Bonus set forth in
paragraph 4 above.
9. Affirmation. As further consideration for the payments and other
security set forth above, by signing this Agreement you agree to continue to
abide by the covenants and agreements set forth in Exhibit A attached hereto.
10. Assignment. You may not assign your rights or obligations
hereunder. The rights and obligations of the Company hereunder shall inure to
the benefit of and shall be binding upon its respective successors and assigns.
The Company shall use its reasonable best efforts to ensure that any purchaser
of the business of the Company offers the same or substantially equivalent
plans as the medical, dental and vehicle allowance plans currently offered by
the Company.
11. General Provisions. (a) This Agreement shall be subject to and
governed by the laws of the State of Illinois without regard to its choice of
law principles.
(b) Failure to insist upon strict compliance with any
provision(s) hereof shall not be deemed a waiver of such provision(s) or any
other provision hereof. If all or any part of this Agreement is declared by any
court or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any paragraph or a part of a paragraph so
declared to be unlawful or invalid shall, if possible, be construed in a manner
which will give effect to the terms of such paragraph or part of a paragraph to
the fullest extent possible while remaining lawful and valid.
(c) This Agreement shall not be altered, amended, or modified
except by written instrument executed by the Company and you. A waiver of any
term, covenant, agreement or condition contained in this Agreement shall not be
3
deemed a waiver of any other term, covenant, agreement or condition and any
waiver of any default in any such term, covenant, agreement or condition shall
not be deemed a waiver of any later default thereof or of any other term,
covenant, agreement or condition.
(d) The Company's obligation to pay amounts hereunder are
subject to its withholding obligations under applicable federal, state and
local laws.
RUST SCAFFOLD SERVICES INC.
By /s/ Xxxxxx Xxxxxxx
-------------------------
Xxxxxx X. Xxxxxxx,
Vice President
ACCEPTANCE
Xxxxxx to and accepted this 30th day of July, 1996.
By /s/ Xxxxx XxXxx
----------------------
Xxxxx XxXxx
4
EXHIBIT A
COVENANT NOT-TO-COMPETE.
(a) I agree that while I am employed by the Company, I will not,
directly or indirectly, compete with the business conducted by the Company.
(b) I agree that for a period of twelve (12) months after my voluntary
termination of employment with the Company or my termination by the Company for
Cause:
(i) I will not, within the Restricted Area, accept employment
with a competitor of the Company if such competitor provides or offers to
provide competitive products or services to persons who are or were customers
of the Company within the Restricted Area; and
(ii) I will not directly or indirectly sell, attempt to sell,
provide or attempt to provide any products or services (in competition with
those products or services which I sold or provided on behalf of the Company)
to any person:
(A) residing or located within the Restricted Area;
(B) who was a customer of the Company within the
Restricted Area during the last twelve (12) months of my employment; or
(C) to whom I sold, attempted to sell, provided or
attempted to provide such products or services during the last twelve (12)
months of my employment with the Company.
I agree that I will comply with the most restrictive of the provisions
specified in subsections (i) and (ii)(A) through (C) which is allowed by
applicable state law. The parties agree that if enforcement of this agreement
is sought, the enforcing court should select the most restrictive provisions
appropriate under applicable state law.
(c) I agree that while I am employed by the Company and for a period
of twelve (12) months after termination of my employment for any reason, with
or without Cause, I will not directly or indirectly hire, or attempt to hire
any employee of the Company nor will I encourage any employee of the Company to
terminate employment with the Company.
(d) "Restricted Area" is the geographic area serviced by any division
of the Company for which I performed duties during the last twelve (12) months
of my employment with the Company.
5
(e) I understand that if I am terminated by the Company for other than
Cause, I may go to work for a competitor, but all other provisions of the
Covenant shall apply.
6
AGREEMENT NOT-TO-USE CLASSIFIED INFORMATION.
I acknowledge that during the term of my employment, I will be making
use of, acquiring or adding to the Company's Classified Information. In order
to protect the Classified Information: I will not during the term of my
employment with the Company or thereafter, in any way utilize any of the
Classified Information except in connection with my employment by the Company.
I will not copy, reproduce or remove from the Company's premises the original
or any copies of the Classified Information and I will not disclose any of the
Classified Information to anyone.
7
1996 WMI MANAGEMENT INCENTIVE BONUS PLAN
PARTICIPANT SUMMARY
/H/ XXXXX XXXXX
STATE PRESIDENT
GROUP VICE PRESIDENT-OPERATIONS
o Target incentive award is 40% of December 31, 1996 base salary.
o Maximum incentive award potential is 200% of target award or 80% of
1996 base salary.
o To qualify for a bonus, an overall prequalification will be a year-end
performance evaluation of 2 or 3, with management reserving the right
to revoke or reduce any bonus otherwise payable under the plan for
serious non-compliance in any EMS pillar.
FINANCIAL MEASURES
BONUS PORTION %
CRITERIA TARGET MAX
WMX E.P.S 10% 20%
WMI CONSOLIDATED PRE-TAX 10% 20%
GROUP PRE-TAX 10% 20%
OPERATING UNIT PRE-TAX 50% 100%
OPERATING UNIT CASH FLOW 20% 40%
TOTAL 100% 200%
-------------------------------------------------------------------------------
NON-FINANCIAL MEASURES
EMS Pillar Reduction from Operating Unit Pre-Tax and Operating Unit Cash
Flow:
PEOPLE 10%
CUSTOMER 10%
ENVIRONMENT 10%
Participants must achieve primary measurables in each non-financial pillar,
(Customer, People, Environment). If primary measurables are not achieved, 10%
will be deducted, per pillar, from bonus otherwise payable for Operating Unit
Pre-Tax/Cash Flow results.
8
1996 WMI MANAGEMENT INCENTIVE BONUS PLAN
PARTICIPANT SUMMARY
1996 PLAN - GENERAL INFORMATION
o Financial calculation of pre-tax goal achieved must include the
accrual for all bonus payments which are anticipated to be achieved
under the respective bonus plans in the current year.
o In the event that a participant's target award level changes during
the plan year, the individual's award will be pro-rated based on the
time that he or she participated in each target award level category.
o 1996 bonus calculations will be made using December 31, 1996 base
salary.
o If a participant's employment is terminated (either voluntarily or
involuntarily) during the plan year for any reason, any incentive
bonus award otherwise earned will be forfeited.
o All awards will be paid in cash, minus applicable withholding and
taxes prior to February 7, 1997. Individuals must be on the active
payroll at the time of payout in order to be eligible for bonus award.
o The Company may, in its sole discretion, amend or terminate this plan
any time.
9
1996 WMI MANAGEMENT INCENTIVE BONUS PLAN
PARTICIPANT SUMMARY
BONUS CALCULATION
Bonus payouts due under the different financial criteria will be determined by
using the following matrices:
======================================= ========================================================
WMX E.P.S. WMX CONSOLIDATED PRE-TAX
10% of Bonus Target 10% of Bonus Target
======================================= ========================================================
To be provided following January % of Pre-tax % of Target
Board Meeting Achieved Portion Earned
95% 50%
96% 60%
97% 70%
98% 80%
99% 90%
--------------------------------------------------------
100% Target 100%
--------------------------------------------------------
102% 120%
104% 140%
106% 160%
108% 180%
110% 200%
========================================================
============================= ============================ ============================
GROUP CONSOLIDATED OPERATING UNIT OPERATING UNIT
PRE-TAX CASH FLOW PRE-TAX
10% of Bonus Target 20% of Bonus Target 50% of Bonus Target
============================= ============================ ============================
% of % of % of
Target % of Target % of Target
% of Pre-tax Portion Cash Flow Portion Cash Flow Portion
Achieved Earned Achieved Earned Achieved Earned
95% 50% 75% 25% 95% 50%
96% 60% 80% 40% 96% 60%
97% 70% 85% 55% 97% 70%
98% 80% 90% 70% 98% 80%
99% 90% 95% 85% 99% 90%
---------------------------- ---------------------------- ----------------------------
100% Target 100% 100% Target 100% 100% Target 100%
---------------------------- ---------------------------- ----------------------------
104% 120% 105% 120% 105% 120%
108% 140% 110% 140% 110% 140%
112% 160% 115% 160% 115% 160%
116% 180% 120% 180% 120% 180%
120% 200% 125% 200% 125% 200%
============================= ============================ ============================
Percentage of pre-tax profit goal achieved is not shown above, interpolate
between amounts to determine percentage of largest bonus earned.
10
1996 WMI MANAGEMENT INCENTIVE BONUS PLAN
INDIVIDUAL PARTICIPANT SUMMARY
NAME: _____________________ TITLE: ______________________________
1996 BASE SALARY: $____________ GROUP:________________________
NOTE: 1996 payout is based on base salary as of December 31, 1996.
40% $
-------------- -------------
Target Bonus % Target Bonus $
For 1996, incentive bonus payments will be calculated on the following
financial criteria:
FINANCIAL MEASURABLES (000's omitted)
BONUS PORTION 1996 BUDGET GOAL
% $
WMX E.P.S. 10% _________ Target
WMI Consolidated 10% _________ $_______________
Group Pre-Tax 10% _________ $_______________
Operating Unit Pre-Tax 50% _________ $_______________
Operating Unit Cash Flow 20% _________ $_______________
NON-FINANCIAL MEASURABLES
Overall performance on each non-financial pillar could reduce actual bonus paid
from Operating Unit Pre-Tax/Cash Flow by the following amounts:
PILLAR MAXIMUM REDUCTION
PEOPLE 10%
CUSTOMER 10%
ENVIRONMENT 10%
11
PARTICIPANT SUMMARY -- EMS PRIMARY MEASURABLES
1996 GOALS -- OPERATING UNIT LEVEL
====================================================================================================
ACTUAL
PEOPLE MEASURABLES PERFORMANCE POINTS
----------------------------------------------------------------------------------------------------
1. Attain Minimum Overall SFA Score.-- Goal = 71%
> 71% - Exceeds Expectations (3)
=69-71% - Meets Expectations (2)
< 69% - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------------
2. Attain Voluntary Turnover Level. -- Goal = 15%
> 14% - Exceeds Expectations (3)
=14-16% - Meets Expectations (2)
< 16% - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------------
3. Complete Required Training. -- Goal = 100%
= 100% - Meets Expectations (3)
< 100% - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------------
If less than six (6) points - deduct 10% from bonus. TOTAL
If equal to/greater than six (6) points - no deduction. POINTS
================
====================================================================================================
ACTUAL
CUSTOMER MEASURABLES PERFORMANCE POINTS
----------------------------------------------------------------------------------------------------
1. Attain Customer Satisfaction Index. -- Goal =
> - Exceeds Expectations (3)
= - Meets Expectations (2)
< - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------------
2. Attain Lost Long Term Customer Rate Goal. -- Goal =
> - Exceeds Expectations (3)
= - Meets Expectations (2)
< - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------------
3. Attain New Long Term Customer Growth Rate. -- Goal =
> - Exceeds Expectations (3)
= - Meets Expectations (2)
< - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------------
4. Attain Commercial Recycling Penetration Rate. -- Goal =
> - Exceeds Expectations (3)
= - Meets Expectations (2)
< - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------------
If less than eight (8) points - deduct 10% from bonus. TOTAL
If equal to/greater than eight (8) points - no deduction. POINTS
================
12
PARTICIPANT SUMMARY - EMS PRIMARY MEASURABLES
1996 GOALS - OPERATING UNIT LEVEL
==============================================================================================
ACTUAL
ENVIRONMENT MEASURABLES PERFORMANCE POINTS
----------------------------------------------------------------------------------------------
1. Reduce the number of serious accidents by 10%.
(If 1995 serious accidents equaled 0, maintaining
earns three (3), any increase results in one (1).
> 10% - Exceeds Expectations (3)
= 10% - Meets Expectations (2)
< 10% - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------
2. Reduce the number of (employee, including leased labor)
fatalities to 0.
= 0 fatalities - Meets Expectations (3)
> 0 fatalities - Does not meet Expectations (2)
----------------------------------------------------------------------------------------------
3. Improve average audit scores.
> 91% - Exceeds Expectations (3)
= 85-91% - Meets Expectations (2)
< 85% - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------
4. Reduce Overdue CARS issues
< 5% - Exceeds Expectations (3)
= 5-7% - Meets Expectations (2)
> 7% - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------
5. Number of Facility Permits reviewed (Landfill only).
= 100% - Meets Expectations (3)
< 100% - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------
6. Increase in-place density or compaction factor. (Landfill only)
> 7% - Exceeds Expectations (3)
= 5-7% - Meets Expectations (2)
< 5% - Does not meet Expectations (1)
----------------------------------------------------------------------------------------------
If less than twelve (12) points - deduct 10% from bonus. TOTAL
If equal to/greater than twelve (12) points - no deduction. POINTS
================
DEFINITIONS
Serious Accident: Any accident with exposure of $250,000.
Fatality: Any death, regardless of liability or financial exposure.
13
