EMPLOYMENT AGREEMENT
Exhibit 10.7
THIS EMPLOYMENT AGREEMENT (this “Agreement”), made this 5th day of October, 2004, by and between Covanta Projects, Inc., a Delaware corporation (the “Employer”), Covanta Energy Corporation, a Delaware corporation (the “Company”) and Xxxx Xxxxx, an individual (the “Executive”).
The Company is a Delaware corporation engaged in the business of owning and operating waste-to-energy facilities and independent power generation facilities. Executive has previously been employed by the Company in various capacities, and is currently serving as the Senior Vice President, Operations of the Company. The Company wishes to continue the employment of Executive as the Company’s Senior Vice President, Operations and Executive wishes to continue to be employed by the Company as the Company’s Senior Vice President, Operations on the terms and conditions set forth in this Agreement.
Executive acknowledges and understands that, during the course of his employment by the Company, Executive has become, and will continue to become, familiar with (as the case may be) certain confidential information of the Company, Employer and Xxxxxxxxx Holding Corporation (“Parent Company”) and their respective subsidiaries and affiliates (collectively, the “DHC Group”) which is exceptionally valuable to the DHC Group and vital to the success of the DHC Group’s business. The Parent Company, the Company and Executive desire to protect such confidential information from disclosure to third parties or use of such information to the detriment of any member of the DHC Group.
“Annual Bonus” shall have the meaning specified in Section 4.2 hereof.
“Average Bonus” shall mean the average Annual Bonus received by Executive during the two (2) full Employment Years preceding the date of termination.
“Base Compensation” shall mean the sum of Executive’s Base Salary plus Executive’s Target Bonus for the applicable Employment Year.
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“Base Salary” shall mean the annual rate of compensation set forth in Section 4.1, as such amount may be adjusted from time to time.
“Board” shall mean the Board of Directors of the Parent Company.
“Business” shall have the meaning specified in Section 8.1 hereof.
“Cause” shall mean that Executive has:
(a) been convicted of, or plead nolo contendere to, a felony or crime involving moral turpitude; or
(b) committed an act of personal dishonesty or fraud involving personal profit in connection with Executive’s employment by the Company; or
(c) committed a material breach of any material covenant, provision, term, condition, understanding or undertaking set forth in this Agreement, including, without limitation, the provisions contained in Sections 8.1, 8.2, 8.3 or 8.4 hereof; or
(d) committed an act which the Board of Directors of the Company has found to have involved willful misconduct or gross negligence on the part of Executive; or
(e) failed or refused to substantially perform the lawful duties of his employment in any material respect; or
(f) failed to comply with the lawful written rules and policies of the Company in any material respect;
provided, however, that no termination under clause (c), (d), (e) or (f) above shall be effective unless Executive shall have first received written notice describing in reasonable detail the basis for the termination and within fifteen (15) days following delivery of such notice Executive shall have failed to cure such alleged behavior constituting “cause”; provided, further, that this notice requirement prior to termination shall be applicable only if such behavior or breach is capable of being cured.
“Change in Control” shall mean the occurrence of any of the following events, each of which shall be determined independently of the others:
(a) any “Person” (as defined herein), other than a holder of at least 10% of the outstanding voting power of the Parent Company as of the date of this Agreement, becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of a majority of the stock of either the Company or the Parent Company entitled to vote in the election of directors of
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either the Company or the Parent Company. For purposes of this definition, the term “Person” is used as such term is used Sections 13(d) and 14(d) of the Exchange Act;
(b) the individuals who are “Continuing Directors” (as hereinafter defined) of the Parent Company cease to constitute a majority of the members of the Board. For purposes of this definition, “Continuing Directors” shall mean the members of the Board on the date of execution of this Agreement, provided that any person becoming a member of the Board subsequent to such date whose election or nomination for election was supported by at least a majority of the directors who then comprised the Continuing Directors shall be considered to be a Continuing Director;
(c) the stockholders of the Company or the Parent Company adopt and consummate a plan of complete or substantial liquidation or an agreement providing for the distribution of all or substantially all of the assets of the Company or the Parent Company;
(d) the Company or the Parent Company is a party to a merger, consolidation, other form of business combination or a sale of all or substantially all of its assets, with an unaffiliated third party, unless the business of the Company or the Parent Company following consummation of such merger, consolidation or other business combination is continued following any such transaction by a resulting entity (which may be, but need not be, the Company or the Parent Company, as the case may be) and the stockholders of the Company or the Parent Company immediately prior to such transaction hold, directly or indirectly, at least a majority of the voting power of the resulting entity; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company or the Parent Company (or similar transaction) shall not constitute a Change in Control; or
(e) there is a Change in Control of the Company or the Parent Company of a nature that is reported in response to item 5.01 of Current Report on Form 8-K or any similar item, schedule or form under the Exchange Act, as in effect at the time of the change, whether or not the Company or the Parent Company, as the case may be, is then subject to such reporting requirements;
provided, however, that for purposes of this Agreement a Change in Control shall not be deemed to occur if the Person or Persons deemed to have acquired control is or are a holder of at least 10% of the outstanding Voting Power of the Parent Company as of the date of this Agreement.
“Common Stock” shall have the meaning specified in Section 4.5 hereof.
“Company” shall have the meaning specified in the Background Section hereof.
“Compensation Committee” shall have the meaning specified in Section 2.1 hereof.
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“Confidential Information” shall have the meaning specified in Section 8.4 hereof.
“Covanta 2004 Cash Bonus Plan” shall have the meaning specified in Section 4.2 hereof.
“Customer” shall have the meaning specified in Section 8.3 hereof.
“DHC Group” shall have the meaning specified in the Background Section hereof.
“Disability” shall mean Executive’s inability, for a period of six (6) consecutive months, or a cumulative period of one hundred thirty (130) business days out of a period of twelve (12) consecutive months, to perform the essential duties of Executive’s position, even taking into account any reasonable accommodation required by law, due to a mental or physical impairment. The determination of whether Executive is suffering from a Disability shall be made by three (3) independent physicians, one chosen by a representative of Executive, one chosen by the Company and one chosen by the physicians chosen by Executive and the Company.
“Employees’ Plan” shall have the meaning specified in Section 4.5 hereof.
“Employer” shall have the meaning specified in the introductory paragraph of this Agreement.
“Employment Year” shall mean each twelve-month period commencing on January 1st of each applicable year, or part thereof, as the case may be, during which Executive was or is employed by the Company pursuant to this Agreement or prior to this Agreement.
“Good Reason” shall mean the resignation of Executive from employment with the Company following the occurrence of one or more of the events set forth in clauses (a) through (f) below without the prior written consent of Executive, provided that, in connection with any event or events specified in clauses (a) through (e) below, (i) Executive delivers written notice to the Company of his intention to resign from employment due to one or more of such events, which notice specifies in reasonable detail the circumstances claimed to provide the basis for such resignation, and (ii) such event or events are not cured by the Company within fifteen (15) days (or such longer reasonable period of time as is necessary to cure such event so long as the Company is diligently pursuing such cure) following delivery of such written notice:
(a) any reduction in Executive’s annual rate of Base Compensation other than a reduction in connection with a Board-approved redesign of the then current salary or bonus structure that affects all senior-level executives of the Company similarly;
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(b) any reduction in Executive’s annual rate of Base Compensation that exceeds ten percent (10%) of Executive’s highest annual Base Compensation for any Employment Year (measuring a change in the Target Bonus by the change in the dollar amount equivalent represented by the Target Bonus and not by amounts actually paid);
(c) any removal by the Company of Executive from his position indicated in Section 2.1 or the assignment to Executive of duties and responsibilities materially inconsistent and adverse with the duties indicated in Section 2.1, except in connection with (i) the reclassification or restructuring of Executive’s position on the Company’s senior management team in connection with the expansion or modification of the Company’s business, or (ii) the termination of Executive’s employment for Cause or Disability;
(d) a relocation of Executive’s principal business location to a location that is fifty (50) miles or more from the Company’s current principal business office located at 00 Xxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx;
(e) the Employer’s or the Company’s failure to comply with any of the material terms of this Agreement; or
(f) the occurrence of a Change of Control pursuant to which the Company or any successor company, as the case may be, does not agree, as of the date of such Change of Control, to assume this Agreement if the remainder of the Term of Employment is at least three (3) years or to renew this Agreement with Executive for at least three (3) years.
“Options” shall have the meaning specified in Section 4.5 hereof.
“Parent Company” have the meaning specified in the Background Section hereof.
“Performance Vesting Restricted Stock” shall have the meaning specified in Section 4.6(b) hereof.
“Post-Employment Period” shall have the following meaning:
(a) if Executive’s employment is terminated during the initial twenty-four (24) months of the Term of Employment, then the Post-Employment Period shall be twenty-four (24) months; or
(b) if Executive’s employment is terminated during the final thirty-six (36) months of the Term of Employment, then the Post-Employment Period shall be eighteen (18) months.
“Pro Rata Bonus” shall mean an amount equal to the product of the following: (i) the quotient obtained by dividing (x) the number of full calendar months Executive has been employed by the Company for the then current Employment Year, by (y) twelve (12); and (ii) that amount of
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the Annual Bonus that Executive would have been entitled to receive had he remained employed by the Company for the entire applicable Employment Year.
“Proceeding” shall have the meaning specified in Section 10.1 hereof.
“Restricted Period” shall have the following meaning:
(a) if Executive’s employment is terminated for any reason prior to the expiration of the Term of Employment, the term shall mean the period commencing on the date hereof and continuing for a period of time after the termination of employment with the Company for any reason equal to the Post-Employment Period, and with respect to Section 8.1 hereof only, less three (3) months;
(b) if Executive’s employment is continued after the expiration of this Agreement on an at-will basis as provided in Section 3 hereof, the term shall mean the period commencing on the date of expiration of this Agreement and continuing only during the period of Executive’s at-will employment by the Company, and not thereafter.
“Restricted Stock” shall have the meaning specified in Section 4.6 hereof.
“Subsidiary” shall mean any corporation in which the Company owns directly or indirectly fifty percent (50%) or more of the Voting Stock or fifty percent (50%) or more of the equity; or any other venture in which it owns either fifty percent (50%) or more of the voting rights or fifty percent (50%) or more of the equity.
“Target Bonus” shall have the meaning specified in Section 4.2 hereof.
“Term of Employment” shall have the meaning specified in Section 3 hereof.
“Time Vesting Restricted Stock” shall have the meaning specified in Section 4.6(a) hereof.
“Voting Stock” shall mean capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation.
“Without Cause” shall mean the termination by the Company of Executive’s employment for any reason other than as a result of Cause; provided, however, that to the extent requested by the Company, Executive shall remain in the active employment of the Company until the date of termination specified by the Company; provided, further, that such date of termination shall be no later than sixty (60) days after the delivery by the Company of written notice of termination to Executive.
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to receive an annual cash bonus from the Company (the “Annual Bonus”). For calendar year 2004, the Annual Bonus payable to Executive shall be based on the Company’s 2004 Cash Bonus Plan dated April 15, 2004 and approved by the Board (the “Covanta 2004 Cash Bonus Plan”). Thereafter, the Annual Bonus payable to Executive shall be based on the annual cash bonus program approved by the Board or the Compensation Committee thereof; provided, however, that Executive’s annual target bonus shall continue to be at least fifty percent (50%) of Executive’s Base Salary (the “Target Bonus”) for each subsequent Employment Year unless Executive receives written notice from the Board or the Compensation Committee thereof no later than March 1st of any applicable Employment Year that the Board or the Compensation Committee thereof has decided to reduce the Target Bonus.
4.5 Issuance of Options to Purchase Parent Company Common Stock. Upon approval of the 2004 Xxxxxxxxx Holding Corporation Equity Award Plan for Employees and Officers (the “Employees’ Plan”) by the stockholders of the Parent Company, the Parent Company shall grant to Executive options (the “Options”) to purchase an aggregate of 75,000 shares of common stock, par value $0.10 per share of Parent Company (“Common Stock”) at an exercise price equal to the fair market value per share of the Common Stock (such fair market value being the average of the high and low price on the trading date immediately prior to the date of the grant on the American Stock Exchange). The Options shall be restricted and non-transferable, as set forth in the Stock Option Agreement, in the form attached hereto as Exhibit A, and shall vest in accordance with the schedule set forth below. The term of the Options shall be for a period of ten (10) years following the date of the grant of the Options hereunder, and the Options shall be subject to such other terms and conditions not inconsistent with the terms of this Agreement as are set forth in the Stock Option Agreement to be executed by the Parent Company and Executive and as determined by the Compensation Committee. To the extent permitted by applicable law, the Options shall be incentive stock options in each year and, with respect to any Options that are vested, shall be exercisable for the applicable periods set forth in the Stock Option Agreement. Executive shall not be entitled to any rights with respect to the Common Stock underlying the Options, including the right to vote or receive dividends or distributions with respect to any of the Common Stock underlying the Options, until such Options (or any portion thereof) have been exercised. To the extent that Executive is employed by the Company as of each of the respective dates set forth below and in recognition of Executive’s employment by the Company prior to the execution of this Agreement, the Options shall vest as follows:
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(a) | 25,000 Options as of the close of business on February 28, 2006; | |||
(b) | 25,000 Options as of the close of business on February 28, 2007; and | |||
(c) | 25,000 Options as of the close of business on February 28, 2008. |
(i) 3,218 shares and representing one-third of the Time Vesting Restricted Stock, shall vest on February 28, 2005;
(ii) 3,219 shares and representing one-third of the Time Vesting Restricted Stock, shall vest on February 28, 2006; and
(iii) 3,219 shares and representing one-third of the Time Vesting Restricted Stock, shall vest on February 28, 2007.
(i) First Tranche Amount. The “First Tranche Amount” consisting of 3,218 shares and representing one-third of the Performance Vesting Restricted Stock, shall vest on February 28, 2005, pursuant to the satisfaction of
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performance based metric of operating cash flow of the Company as set forth in the Covanta 2004 Cash Bonus Plan.
(ii) Second Tranche Amount. The “Second Tranche Amount” consisting of 3,218 shares and representing one-third of the Performance Vesting Restricted Stock, shall vest on February 28, 2006, pursuant to the satisfaction of the applicable performance criteria and schedule determined by the Board or the Compensation Committee thereof; provided, however, that if the Board or the Compensation Committee thereof does not establish new criteria, then the performance criteria and schedule for awarding bonuses under the Company’s 2005 Cash Bonus Plan shall apply; and
(iii) Third Tranche Amount. The “Third Tranche Amount” consisting of 3,219 shares and representing one-third of the Performance Vesting Restricted Stock, shall vest on February 28, 2007, pursuant to the satisfaction of the applicable performance criteria and schedule determined by the Board or the Compensation Committee thereof; provided, however, that if the Board or the Compensation Committee thereof does not establish new criteria, then the performance criteria and schedule for awarding bonuses under the Company’s 2006 Cash Bonus Plan shall apply.
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Agreement, the Stock Option Agreement or the Restricted Stock Agreement.
4.10 Return and/or Forfeiture of Performance-Based Payments or Awards. Notwithstanding any other provision in this Agreement or in the Stock Option Agreement or Restricted Stock Agreement, in the event that pursuant to the terms or requirements of the Xxxxxxxx-Xxxxx Act of 2002 or of any applicable laws, rules or regulations promulgated by the Securities and Exchange Commission or any listing requirements of any stock exchange or stock market on which any securities of the Company or the Parent Company trade, from time to time, and in the event any bonus payment, stock award or other payment is based upon the satisfaction of financial performance metrics which are subsequently reversed due to a restatement or reclassification of financial results of the Company or the Parent Company, then any payments made or awards granted shall be returned and forfeited to the extent required and as provided by applicable laws, rules, regulations or listing requirements. This Section 4.10 shall survive any expiration or termination of this Agreement for any reason.
5.1 the Company will reimburse Executive for all reasonable and necessary out-of-pocket expenses for travel, lodging, meals, entertainment or any other similar expenses incurred by Executive in connection with the performance of Executive’s duties hereunder upon receipt of documentation therefor in accordance with the Company’s regular reimbursement procedures and practices in effect from time to time.
5.2 Executive will be eligible to participate in applicable Company benefit plans, programs and arrangements (including, without limitation, pension, profit sharing, 401(k) plans, and medical and life insurance programs) on the same terms as apply generally to other senior-level executives of the Company from time to time.
5.3 Executive shall be entitled to vacation in accordance with the Company’s generally applicable policies relating to vacations.
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(a) fifty percent (50%) of the aggregate amount due to Executive shall be paid to Executive on the effective date of termination of Executive’s employment with the Company; and
(b) fifty percent (50%) of the aggregate amount due to Executive shall be paid pro rata on a monthly basis to Executive over the duration of the Post-Employment Period;
provided, however, that all payments and continuation of benefits provided to Executive pursuant to this Section 6 shall be contingent upon Executive’s execution and delivery of a general release and waiver, substantially in the form provided on Exhibit C attached hereto; and provided, further, that notwithstanding any of the foregoing terms, in the event, and at the moment, that Executive violates any of his duties or obligations set forth in Sections 8.1, 8.2, 8.3 or 8.4 of this Agreement that continue after the termination of his employment, the terms of Sections 6.2(ii), 6.2(iii) and 6.3(b) will be of no force or effect and the Company’s obligations under those
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subsections to make severance payments or provide continued employee benefits will immediately cease.
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requirements of the Exchange Act, and then only to the extent of owning not more than two percent (2%) of the issued and outstanding securities of such corporation or other entity) or provide services to any business which renders services or sells products, or proposes to render services or sell products, that compete with the Business of the Parent Company, the Company or any of their respective subsidiaries within the United States and any foreign country in which the Parent Company, the Company or any of their respective subsidiaries conducts any aspect of the Business during the term of this Agreement. For purposes of this Agreement, the term “Business” shall mean the ownership and operation of waste-to-energy and independent power generation projects. Notwithstanding the foregoing, after termination of Executive’s employment for any reason, Executive shall be permitted to work for any business that owns and operates independent power generation projects so long as such business, as determined in the good faith judgment of the Board, does not compete with the Parent Company, the Company or any of their respective subsidiaries.
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manuals of any member of the DHC Group or which are licensed by any member of the DHC Group, any financial data or lists of actual or potential customers or suppliers (including contacts thereat) of the DHC Group, and any information regarding the contracts, marketing and sales plans, which is not generally known to the public through legitimate origins of the DHC Group. The Parent Company and the Company and Executive acknowledge and agree that such Confidential Information is extremely valuable to the Parent Company and the Company and shall be deemed to be a “trade secret.” In the event that any part of the Confidential Information becomes generally known to the public through legitimate origins (other than by the breach of this Agreement by Executive or by misappropriation), or is required to be disclosed by legal, administrative or judicial process (provided that Executive has provided to the Parent Company and the Company reasonable prior notice of such request and the Parent Company or the Company has had a reasonable opportunity, at its expense, to dispute, defend or limit such request for the Confidential Information), that part of the Confidential Information shall no longer be deemed Confidential Information for purposes of this Agreement, but Executive shall continue to be bound by the terms of this Agreement as to all other Confidential Information.
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and to the Inventions, and otherwise aid and assist the Company so that the Company can prepare and present applications for copyright or letters patent therefor and can secure such copyright or letters patent wherever possible, as well as reissues, renewals, and extensions thereof, and can obtain the record title to such copyright or patents so that the Company shall be the sole and absolute owner thereof in all countries in which it may desire to have copyright or patent protection. Executive will, at the Company’s request, execute any and all assignment, patent or copyright forms and the like, deemed reasonably necessary by the Company. The Company’s rights hereunder shall not be limited to this country but shall extend to any country in the world and shall attach to each Invention notwithstanding that it is perfected, improved, reduced to specific form or used after termination Executive’s employment. Executive agrees to lend such assistance as he may be able, at the Company’s request without charge in connection with any proceedings relating to such letters of patent, trade secrets, copyright or application thereof, as may be determined by the Company to be reasonably necessary. Executive shall not be entitled to any additional or special compensation or reimbursement regarding any and all such writings, inventions, improvements, processes, procedures and techniques.
8.9 Post-Termination Violations of this Agreement. In the event, and at the moment, that Executive violates any of his duties or obligations set forth in (i) Sections 8.1, 8.2, 8.3 or 8.4 of this Agreement that continue after any termination that occurs during the Term of Employment for any reason, or (ii) Sections 8.2, 8.3 or 8.4 of this Agreement that continue after any termination that occurs after the expiration of the Term of Employment, and notwithstanding any other provision in this Agreement, the Stock Option Agreement or the Restricted Stock
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Agreement to the contrary, (x) Executive shall immediately forfeit any right to exercise any unexercised Options that previously vested pursuant to the terms of this Agreement or the Stock Option Agreement, and (y) any unvested options, shares of restricted stock or other equity awards (including any unvested Options or shares of Restricted Stock) will immediately be cancelled and forfeited.
10.1 The Company shall indemnify Executive to the fullest extent provided by applicable law against all costs, expenses, liabilities and losses (including, without limitation, attorneys’ fees, judgments, fines, penalties, ERISA excise taxes, penalties and amounts paid in settlement) reasonably incurred by Executive in connection with any proceeding brought against Executive related to Executive’s employment with the Company (each, a “Proceeding”).
10.2 The Company shall advance to Executive all reasonable costs and expenses incurred in connection with any Proceeding within twenty (20) days after receipt by the Company of a written request for such advance. Such request shall include an itemized list of the costs and expenses and an undertaking by Executive to repay the amount of such advance if ultimately it shall be determined that he is not entitled to be indemnified against such costs and expenses.
10.3 Executive shall be entitled to indemnification under this Section 10 if Executive meets the standard of conduct specified under applicable law unless non-entitlement is determined by a court of competent jurisdiction. If Executive in fact meets the applicable standard of conduct, he shall be entitled to such indemnification whether or not the Company (whether by the Board, the stockholders, independent legal counsel or other party) determines that indemnification is proper because he has met such applicable standard of conduct. Neither the failure of the Company to have made such a determination nor a determination by the Company that Executive has not met such applicable standard of conduct, shall create a presumption in any litigation, arbitration or other proceeding commenced against Executive that Executive has not met the applicable standard of conduct.
10.4 The Company shall not settle any Proceeding or claim in any manner which would impose on Executive any penalty or limitation without Executive’s prior written consent.
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Neither the Company nor Executive will withhold consent to any proposed settlement unreasonably.
If to the Employer or the Company: | ||
Covanta Energy Corporation 00 Xxxx Xxxx Xxxxxxxxx, XX 00000 Attn: President and CEO Telephone Number: (000) 000-0000 Facsimile Number: (000) 000-0000 |
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With a copy to: | ||
Covanta Energy Corporation 00 Xxxx Xxxx Xxxxxxxxx, XX 00000 Attn: General Counsel Telephone Number: (000) 000-0000 Facsimile Number: (000) 000-0000 |
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And to: | ||
Xxxxx X. Xxxxx, Esq. Xxxx, Xxxxxx & Xxxxxxxxx LLP 0 Xxxxx XxXxxxx Xxxxxx Xxxxx 0000 Xxxxxxx, XX 00000 Telephone Number: 000-000-0000 Facsimile Number: 000-000-0000 |
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If to Executive: | ||
Xxxx Xxxxx |
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Telephone Number: | ||
With a copy to: | ||
Xxxxxxx X. Xxxxxxxxxx, Esq. Xxx Xxxxxxxxxx, LLP X.X. Xxx 000 000 Xxxxxxxxxxxx Xxxxx Xxxxx, XX 00000 Telephone Number: (000) 000-0000 Facsimile Number: (000) 000-0000 |
11.5 Governing Law. This Agreement shall be governed by and construed and in accordance with the internal laws of the State of Delaware without regard to conflicts of laws provisions thereof.
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this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.
EMPLOYER: | ||||
Covanta Projects, Inc. | ||||
By: | /s/ Xxxxxxx X. Xxxxxxx | |||
Xxxxxxx X. Xxxxxxx, President and CEO | ||||
COMPANY: | ||||
Covanta Energy Corporation | ||||
By: | /s/ Xxxxxxx X. Xxxxxxx | |||
Xxxxxxx X. Xxxxxxx, President and CEO | ||||
/s/ Xxxx Xxxxx | ||||
Xxxx Xxxxx, Individually |
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