EMPLOYMENT AGREEMENT
WASTE MANAGEMENT, INC. (the 'Company'), and DAVID HOPKINS (the 'Executive')
hereby enter into this EMPLOYMENT AGREEMENT ('Agreement') dated as of March 30,
2000, 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
April 17, 2000, and be for a continuously renewing (on a daily basis) three (3)
year term, without any further action by either the Company or Executive, unless
Executive's employment is terminated in accordance with Section 5 below. The
date on which Executive commences employment with the Company shall be referred
to as the 'Commencement Date' and the period during which Executive is employed
hereunder shall be referred to as the 'Employment Period'.
3. DUTIES AND RESPONSIBILITIES.
(a) Executive shall serve as Senior Vice President of the Company with
responsibility for the Southern Area operations, as designated from
time to time by the Chief Executive Officer or President of the
Company, or such other areas of operation as designated by the Chief
Executive Officer or President of the Company from time to time. 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 Chief Executive Officer, President, or the Board of
Directors.
(b) Executive shall devote substantially all of his working time, attention
and energies to the business of the Company, and affiliated entities.
Executive may make and manage his personal investments (provided such
investments in other activities do not violate, in any material
respect, the provisions of Section 8 of this Agreement), be involved in
charitable and professional activities and, with the consent of the
Board, serve on boards of other for profit entities, provided such
activities do not materially interfere with the performance of his
duties hereunder.
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate of FOUR HUNDRED THOUSAND
($400,000.00) 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.
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(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% (2 times target), and
will be determined based upon achievement of performance goals (seventy
percent (70%) financial (initially return on capital investments and
EBITDA, but may be tied to other metrics as may be established from
time to time by the Compensation Committee of the Board) and thirty
percent (30%) personal), all as approved by the Compensation Committee
of the Board from time to time.
(c) STOCK OPTIONS. Executive shall be granted a stock option for 100,000
shares of the Company's common stock following the meeting of the
Compensation Committee at the end of February, 2000, subject to the
approval of the Compensation Committee of the Board of Directors, under
the terms of the Company's 1993 Stock Incentive Plan. The exercise
price for this option will be the fair market value on the date the
option is granted by the Compensation Committee, and the option will
vest in equal installments of 25,000 shares over four (4) years
beginning on the first anniversary of the date of the grant of such
option. Thereafter, Executive shall be eligible to be considered for
stock option grants under the Company's annual stock option award
program as administered by, and at the discretion of, the Compensation
Committee of the Board of Directors.
(d) BENEFIT PLANS AND VACATION. Executive shall be eligible to participate
in or receive benefits under any pension plan, profit sharing plan,
medical and dental benefits plan, life insurance plan, short-term and
long-term disability plans, or any other health, welfare or fringe
benefit plan, generally made available by the Company to its executive
officers at a level commensurate with his position. During the
Employment Period, Executive shall be entitled to vacation each year in
accordance with the Company's policies in effect from time to time, but
in no event less than four (4) weeks paid vacation per calendar year.
The Executive shall also be entitled to such periods of sick leave as
is customarily provided by the Company for its senior executive
employees. Executive shall be eligible to participate in the Company's
401(k) Plan after 90 days of employment.
(e) OTHER PERQUISITES. Executive shall be entitled to the following
benefits:
1. Financial Planning Services at actual cost, not to exceed
Fifteen Thousand Dollars ($15,000.00) annually;
2. Club Dues and Assessments at actual costs, and not to exceed
Twelve Thousand Dollars ($12,000.00) annually.
3. An Annual Physical Examination on a program designated by
the Company.
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(f) OTHER BENEFITS. Executive shall be entitled to participate in the
Company's 'Executive Deferral Plan', as it presently exists or may be
modified in the future, for the Company's executive officers, at a
level commensurate with the Executive's position.
(g) OTHER INCENTIVES. Executive shall be eligible to (i) receive incentive
compensation for 1999 to the extent of the achievement of certain EBIT,
EBITDA and free cash flow goals, as previously established; and (ii)
continue his participation in the 'divestiture incentive program',
consisting of a 'retention incentive' and a 'divestiture sale
incentive'; all as detailed in the memos dated August 25, 1999,
September 22, 1999, and December 22, 1999, and the agreements of Steve
Miller and Ralph Whitworth interlineated by hand in those memos, with
no reduction or penalty for having transferred to a new Waste
Management executive position.
(h) 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.
(i) RELOCATION. The Company will reimburse Executive for reasonable and
necessary expenses incurred in connection with the relocation of his
principal residence from Houston, Texas to Atlanta, Georgia, as
follows:
(1) Reasonable costs of temporary housing in the Atlanta area
for up to ninety (90) days.
(2) Normal and customary expenses incurred in connection with
the sale of Executive's residence in Houston such as real
estate commissions, title insurance, escrow fees, and
reasonable attorneys fees.
(3) Reasonable costs to move Executive's household goods from
Houston to Atlanta.
(4) Normal and customary expenses incurred in connection with
the purchase by Executive of a new residence in Atlanta,
such as loan origination fees, mortgagee title insurance,
escrow fees, and reasonable attorneys fees, but not
including equity costs.
(5) If Executive is not able to sell his residence in Houston
within sixty (60) days after the date of this Agreement, at
Executive's option, Executive may elect to have the Company
(or a relocation company selected by the Company) purchase
Executive's home in Houston under the Company's relocation
program, which includes having the home appraised by two
appraisers selected by the Company.
5. TERMINATION OF EMPLOYMENT.
Executive's employment hereunder may be terminated under the following
circumstances:
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(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. Provided that Executive has not
tendered a timely 'Notice of Termination for Good Reason' in accordance
with Section 5(d) below in a situation where Good Reason exists, 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 Chief Executive
Officer, the President, or the Board of Directors, provided
that the foregoing refusal shall not be 'Cause' if Executive
in good faith believes that such direction is illegal,
unethical or immoral and promptly so notifies the Board; (3)
substantial and continuing willful refusal by the Executive
to attempt to perform the duties required of him hereunder
(other than any such failure resulting from incapacity due to
physical or mental illness) after a written demand for
substantial performance is delivered to the Executive by the
Chief Executive Officer, the President, or the Board of
Directors, which specifically identifies the manner in which
it is believed that the Executive has substantially and
continually refused to attempt to perform his duties
hereunder; or (4) the Executive being convicted of a felony
(other than a felony involving a traffic violation or as a
result of vicarious liability). For purposes of this
paragraph, no act, or failure to act, on Executive's part
shall be considered 'willful' unless done or omitted to be
done, by him not in good faith and without reasonable belief
that his action or omission was in the best interests of the
Company.
(ii) A Notice of Termination for Cause shall mean a notice that
shall indicate the specific termination provision in Section
5(c)(i) relied upon and shall set forth in reasonable detail
the facts and circumstances which provide for a basis for
termination for Cause. Further, a Notification for Cause
shall be required to
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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); provided that the change in the geographic area of
Executive's responsibility or the reassignment of Executive
to a different geographic area within the United States or
the change in reporting structure shall not constitute Good
Reason under any circumstances; further provided that if the
Company becomes a fifty percent or more subsidiary of any
other entity, Executive shall be deemed to have a material
diminution of his position unless he is also a Senior Vice
President of the ultimate parent entity; (2) removal of, or
the non-re-election of, the Executive from officer positions
with the Company specified herein; (3) requiring Executive's
principal place of business to be located other than in the
United States; (4) a failure by the Company (I) to continue
any bonus plan, program or arrangement in which Executive is
entitled to participate (the 'Bonus Plans'), provided that
any such Bonus Plans may be modified at the Company's
discretion from time to time but shall be deemed terminated
if (x) any such plan does not remain substantially in the
form in effect prior to such modification and (y) if plans
providing Executive with substantially similar benefits are
not substituted therefore ('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
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provision of this Agreement, including without limitation
Section 10 hereof; or (6) failure of any successor to the
Company (whether direct or indirect and whether by merger,
acquisition, consolidation or otherwise) to assume in a
writing delivered to Executive upon the assignee becoming
such, the obligations of the Company hereunder.
(ii) A Notice of Termination for Good Reason shall mean a notice
that shall indicate the specific termination provision relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for Termination for
Good Reason. The failure by Executive to set forth in the
Notice of Termination for Good Reason any facts or
circumstances which contribute to the showing of Good Reason
shall not waive any right of Executive hereunder or preclude
Executive from asserting such fact or circumstance in
enforcing his rights hereunder. The Notice of Termination for
Good Reason shall provide for a date of termination not less
than ten (10) nor more than sixty (60) days after the date
such Notice of Termination for Good Reason is given, provided
that in the case of the events set forth in Sections
5(d)(i)(1) or (2) the date may be five (5) days after the
giving of such notice.
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate
Executive's employment hereunder without Cause at any time upon written
notice to Executive.
(f) EFFECT OF TERMINATION. Upon any termination of employment, Executive
shall immediately resign from all Board memberships and other positions
with the Company or any of its subsidiaries held by him at such time.
6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.
In the event that Executive's employment hereunder is terminated, Executive
shall be entitled to the following compensation and benefits upon such
termination:
(a) TERMINATION BY REASON OF DEATH. In the event that Executive's
employment is terminated by reason of Executive's death, the Company
shall pay the following amounts to Executive's beneficiary or estate:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of death, any accrued but unpaid expenses required
to be reimbursed under this Agreement, any vacation accrued
to the date of termination, any earned but unpaid bonuses for
any prior period, and, to the extent not otherwise paid, a
pro-rata 'bonus' or incentive compensation payment to the
extent payments are awarded to senior executives of the
Company and paid at the same time as senior executives are
paid.
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(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those
referred to in Sections 4(d), (e) and (f) hereof), as
determined and paid in accordance with the terms of such
plans, policies and arrangements.
(iii) An amount equal to the Base Salary (at the rate in effect as
of the date of Executive's death) which would have been
payable to Executive if Executive had continued in employment
for two additional years. Said payments will be paid to
Executive's estate or beneficiary at the same time and in the
same manner as such compensation would have been paid if
Executive had remained in active employment.
(iv) As of the date of termination by reason of Executive's death,
stock options awarded to Executive shall be fully vested and
Executive's estate or beneficiary shall have up to one (1)
year from the date of death to exercise all such options,
provided that in no event will any option be exercisable
beyond its term.
(v) As otherwise specifically provided herein.
(b) TERMINATION BY REASON OF TOTAL DISABILITY. In the event that
Executive's employment is terminated by reason of Executive's Total
Disability as determined in accordance with Section 5(b), the Company
shall pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period. Executive shall also be
eligible for a pro-rata bonus or incentive compensation
payment to the extent such awards are made to senior
executives of the Company for the year in which Executive is
terminated, and to the extent not otherwise paid to the
Executive.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those
referred to in Sections 4(d), (e) and (f) 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.
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(iv) As of the date of termination by reason of Executive's Total
Disability, Executive shall be fully vested in all stock
option awards and Executive shall have up to one (1) year
from the date of termination by reason of Total Disability to
exercise all such options, provided that in no event will any
option be exercisable beyond its term.
(v) As otherwise specifically provided herein.
(c) TERMINATION FOR CAUSE. In the event that Executive's employment is
terminated by the Company for Cause, the Company shall pay the
following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those
referred to in Section 4(d), (e) and (f) hereof up to the
date of termination) shall be determined and paid in
accordance with the terms of such plans, policies and
arrangements.
(iii) As otherwise specifically provided herein.
Any options, restricted stock or other awards that have not vested
prior to the date of such termination of employment shall be cancelled
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(d), (e) and (f) hereof up to the
date of termination) shall be determined and paid in
accordance with the terms of such plans, policies and
arrangements.
(iii) As otherwise specifically provided herein.
Any options, restricted stock or other awards that have not vested
prior to the date of such termination of employment shall be cancelled
and Executive shall have 90 days following
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termination of employment to exercise any previously vested options,
provided that in no event will any option be exercisable beyond its
term.
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE; TERMINATION BY EXECUTIVE FOR
GOOD REASON. In the event that Executive's employment is terminated by
the Company for reasons other than death, Total Disability or Cause, or
Executive terminates his employment for Good Reason, the Company shall
pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements referred to in Sections
4(d) and (e) 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,
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supplemental and/or incentive compensation plans in which
Executive was a participant as of the date of termination.
Executive shall also be eligible for a bonus or incentive
compensation payment, at the same time, on the same basis,
and to the same extent payments are made to senior executives
of the Company, pro-rated for the fiscal year in which the
Executive is terminated.
(vi) Executive shall continue to vest in all stock option awards
or restricted stock awards over the two (2) year period
commencing on the date of such termination. Executive shall
have two (2) years and six (6) months after the date of
termination to exercise all options, provided that in no
event will any option be exercisable beyond its term.
(vii) As otherwise specifically provided herein.
(f) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this
Agreement, under the terms of any incentive compensation, employee
benefit, or fringe benefit plan applicable to Executive at the time of
Executive's termination or resignation of employment, Executive shall
have no right to receive any other compensation, or to participate in
any other plan, arrangement or benefit, with respect to future periods
after such termination or resignation.
(g) NO MITIGATION; NO SET-OFF. In the event of any termination of
employment hereunder, Executive shall be under no obligation to seek
other employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain.
The amounts payable hereunder shall not be subject to setoff,
counterclaim, recoupment, defense or other right which the Company may
have against the Executive or others, except upon obtaining by the
Company of a final unappealable judgment against Executive.
7. RESIGNATION BY EXECUTIVE FOR GOOD REASON AND COMPENSATION PAYABLE
FOLLOWING CHANGE IN CONTROL.
(a) RESIGNATION FOR GOOD REASON FOLLOWING CHANGE IN CONTROL. In the event a
'Change in Control' occurs and Executive terminates his employment for
Good Reason thereafter, or the Company terminates Executive's
employment other than for Cause or such termination for Good Reason or
without Cause occurs in contemplation of such Change in Control (any
termination within six (6) months prior to such Change in Control being
presumed to be in contemplation unless rebutted by clear and
demonstrable evidence to the contrary), the Company shall pay the
following amounts to Executive:
(i) The payments and benefits provided for in Section 6(e),
except that the severance amount which is calculated pursuant
to Section 6(e)(iii) will be paid in a lump-sum.
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(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, provided that in no event will any
option be exercisable beyond its term) accrued but unpaid as
of the date of termination under any non-qualified pension
plan, supplemental and/or incentive compensation or bonus
plans, in which Executive was a participant as of the date of
termination. Executive shall also receive a bonus or
incentive compensation payment (the 'bonus payment'), payable
at 100% of the maximum bonus available to Executive,
pro-rated as of the effective date of the termination. The
bonus payment shall be payable within five (5) days after the
effective date of Employee's termination. Except as may be
provided under this Section 7 or under the terms of any
incentive compensation, employee benefit, or fringe benefit
plan applicable to Executive at the time of Executive's
resignation from employment, Executive shall have no right to
receive any other compensation, or to participate in any
other plan, arrangement or benefit, with respect to future
periods after such resignation or termination.
(b) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(i) In the event that the Executive shall become entitled to
payments and/or benefits provided by this Agreement or any
other amounts in the 'nature of compensation' (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any 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
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accountants (the 'Accountants') such Total Payments (in whole
or in part) either do not constitute 'parachute payments,'
represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code
in excess of the 'base amount' or are otherwise not subject
to the Excise Tax, and (y) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Code.
(iii) For purposes of determining the amount of the Gross-up
Payment, the Executive shall be deemed to pay U.S. federal
income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality
of the Executive's residence for the calendar year in which
the Company Payment is to be made, net of the maximum
reduction in U.S. federal income taxes which could be
obtained from deduction of such state and local taxes if paid
in such year. In the event that the Excise Tax is
subsequently determined by the Accountants to be less than
the amount taken into account hereunder at the time the
Gross-up Payment is made, the Executive shall repay to the
Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior
Gross-up Payment attributable to such reduction (plus the
portion of the Gross-up Payment attributable to the Excise
Tax and U.S. federal, state and local income tax imposed on
the portion of the Gross-up Payment being repaid by the
Executive if such repayment results in a reduction in Excise
Tax or a U.S. federal, state and local income tax deduction),
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
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which subjects the Executive to the Excise Tax; provided,
however, that if the amount of such Gross-up Payment or
portion thereof cannot be finally determined on or before
such day, the Company shall pay to the Executive on such day
an estimate, as determined in good faith by the Accountant,
of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code), subject
to further payments pursuant to subsection (iii) hereof, as
soon as the amount thereof can reasonably be determined, but
in no event later than the ninetieth day after the occurrence
of the event subjecting the Executive to the Excise Tax. In
the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the
Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(v) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise
Tax, the Executive shall permit the Company to control issues
related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect
the Executive, but the Executive shall control any other
issues. In the event the issues are interrelated, the
Executive and the Company shall in good faith cooperate so as
not to jeopardize resolution of either issue, but if the
parties cannot agree the Executive shall make the final
determination with regard to the issues. In the event of any
conference with any taxing authority as to the Excise Tax or
associated income taxes, the Executive shall permit the
representative of the Company to accompany 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,
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including but not limited to a consent solicitation, relating
to the election of directors of the Company) whose
appointment or election by the Board or nomination for
election by the Company's stockholders was approved or
recommended by a vote of the at least two-thirds (2/3rds) of
the directors then still in office who either were directors
on the Commencement Date or whose appointment, election or
nomination for election was previously so approved or
recommended;
(iii) there is a consummated merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any
other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving or parent entity) more
than fifty percent (50%) of the combined voting power of the
voting securities of the Company or such surviving or parent
equity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person, directly or indirectly,
acquired twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding securities
(not including in the securities beneficially owned by such
person any securities acquired directly from the Company or
its Affiliates); or
(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
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securities or (4) a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
shares of Common Stock of the Company.
8. RESTRICTIVE COVENANTS.
(a) COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times
during Executive's period of employment with the Company, and for two
(2) years thereafter, Executive will not engage in, assist, or have any
active interest or involvement, whether as an employee, agent,
consultant, creditor, advisor, officer, director, stockholder
(excluding holding of less than 3% of the stock of a public company),
partner, proprietor or any type of principal whatsoever in any person,
firm, or business entity which, directly or indirectly, is materially
engaged in the waste management business competitive with that
conducted and carried on by the Company, without the Company's specific
written consent to do so. 'Material' shall mean more than five (5%)
percent of their revenue is generated from the waste management
business; provided that the revenues within Executive's area of
responsibility or authority are more than 10% composed of revenues from
the waste disposal business.
(b) NON-SOLICITATION. Executive covenants and agrees that at all times
during Executive's period of employment with the Company, and for a
period of two (2) years after the Termination thereof, whether such
termination is voluntary or involuntary by wrongful 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
Page 15 of 20
techniques, methods and processes, financial data and the like, to the
extent not generally known in the industry (collectively, the
'Protected Information'). Executive therefore covenants and agrees that
Executive will not at any time, either while employed by the Company or
afterwards, knowingly make any independent use of, or knowingly
disclose to any other person or organization (except as authorized by
the Company) any of the Protected Information, provided that (i) while
employed by the Company, Executive may in good faith make disclosures
he believes desirable, provided they are authorized by the Company or
otherwise in accordance with Company policy, and (ii) Executive may
comply with legal process.
9. ENFORCEMENT OF COVENANTS.
(a) RIGHT TO INJUNCTION. Executive acknowledges that a breach of the
covenants set forth in Section 8 hereof will cause irreparable damage
to the Company with respect to which the Company's remedy at law for
damages may be inadequate. Therefore, in the event of breach or
threatened breach of the covenants set forth in this section by
Executive, Executive and the Company agree that the Company shall be
entitled to the following particular forms of relief, in addition to
remedies otherwise available to it at law or equity; injunctions, both
preliminary and permanent, enjoining or restraining such breach or
threatened breach and Executive hereby consents to the issuance thereof
forthwith and without bond by any court of competent jurisdiction.
(b) SEPARABILITY OF COVENANTS. The covenants contained in Section 8 hereof
constitute a series of separate covenants, one for each applicable
State in the United States and the District of Columbia, and one for
each applicable foreign country. If in any judicial proceeding, a court
shall hold that any of the covenants set forth in Section 8 exceed the
time, geographic, or occupational limitations permitted by applicable
laws, Executive and the Company agree that such provisions shall and
are hereby reformed to the maximum time, geographic, or occupational
limitations permitted by such laws. Further, in the event a court shall
hold unenforceable any of the separate covenants deemed included
herein, then such unenforceable covenant or covenants shall be deemed
eliminated from the provisions of this Agreement for the purpose of
such proceeding to the extent necessary to permit the remaining
separate covenants to be enforced in such proceeding.
Executive and the Company further agree that the covenants in Section 8
shall each be construed as a separate agreement independent of any
other provisions of this Agreement, and the existence of any claim or
cause of action by Executive against the Company whether predicated on
this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of any of the covenants of Section 8.
10. INDEMNIFICATION.
The Company shall indemnify and hold harmless Executive to the fullest extent
permitted by Delaware law against any and all losses, costs, and expenses
(including attorney's fees) incurred
Page 16 of 20
by Executive arising from or related to Executive serving as an officer or
director of the Company or any of its affiliates, at the Company's request, or
any action or inaction of the Executive on behalf of the Company or its
affiliates while serving in such capacities. This provision includes the
obligation and undertaking of the Executive to reimburse the Company for any
fees advanced by the Company on behalf of the Executive should it later be
determined that Executive was not entitled to have such fees advanced by the
Company under Delaware law. The Company's obligation for the indemnity contained
herein shall survive the termination of this Agreement, and shall remain in
place for so long as Executive remains subject to any claim arising from his
services as an officer or director of the Company or any affiliate of the
Company, at the Company's request. Executive shall promptly notify the Company
of any claim against the Executive. The failure, however, of the Executive to so
notify the Company of the assertion of such claim shall not relieve the Company
of any obligation hereunder.
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 advance sums sufficient to pay on a current basis (either directly or
by reimbursing Executive) Executive's costs and reasonable attorney's fees
(including expenses of investigation and disbursements for the fees and expenses
of experts, etc.) incurred by Executive in connection with any such dispute or
any litigation, provided that Executive shall repay any such amounts paid or
advanced if Executive is not the prevailing party with respect to at least one
material claim or issue in such dispute or litigation. Under no circumstances
shall Executive be obligated to pay or reimburse the Company for any attorney's
fees, costs, or expenses incurred by the Company 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
Page 17 of 20
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 and any other matters covered hereby, including
without limitation, that certain Employment Agreement between the Company and
Executive dated January 1, 1999, as amended. It may not be amended except by a
written agreement signed by both parties.
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.
Page 18 of 20
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.
1001 Fannin, Suite 4000
Houston, Texas 77002
Attention: Corporate Secretary
To Executive: At the address for Executive set
forth below.
19. MISCELLANEOUS.
(a) WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(b) SEPARABILITY. Subject to Section 9 hereof, if any term or provision of
this Agreement is declared illegal or unenforceable by any court of
competent jurisdiction and cannot be modified to be enforceable, such
term or provision shall immediately become null and void, leaving the
remainder of this Agreement in full force and effect.
(c) HEADINGS. Section headings are used herein for convenience of reference
only and shall not affect the meaning of any provision of this
Agreement.
(d) RULES OF CONSTRUCTION. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, and such counterparts will together constitute but one
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
COMPANY:
WASTE MANAGEMENT, INC.
By: /s/ A. Maurice Myers
-----------------------------------------------
Name: A. Maurice Myers
Title: Chairman, Chief Executive Officer and President
Date: April 16, 2000
-----------------------------------------------
EXECUTIVE:
/s/ David R. Hopkins
--------------------------------------------------------
David Hopkins
Date: March 30, 2000
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Social Security Number:
--------------------------------
Address:
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Employment Agreement - Waste Management Inc. and David Hopkins
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