EMPLOYMENT AGREEMENT
WASTE MANAGEMENT, INC. (the 'Company'), and LAWRENCE O'DONNELL, III (the
'Executive') hereby enter into this EMPLOYMENT AGREEMENT ('Agreement') dated as
of January 21, 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
February 14, 2000, or sooner at the option of the Executive, and be for a
continuously renewing (on a daily basis) five (5) year term, without any further
action by either the Company or Executive, unless Executive's employment is
terminated in accordance with Section 5 below. The date on which Executive
commences employment with the Company shall be referred to as the 'Commencement
Date' and the period during which Executive is employed hereunder shall be
referred to as the 'Employment Period'.
3. DUTIES AND RESPONSIBILITIES.
(a) Executive shall serve as Senior Vice President and General Counsel, and
shall serve as Secretary to the Board of Directors of the Company (the
'Board'). In such capacities, Executive shall perform such duties and
have the power, authority and functions commensurate with such
positions in similarly sized public companies and such other authority
and functions consistent with such positions as may be assigned to
Executive from time to time by the Board.
(b) Executive shall devote substantially all of his working time, attention
and energies to the business of the Company, and affiliated entities.
Executive may make and manage his personal investments (provided such
investments in other activities do not violate, in any material
respect, the provisions of Section 8 of this Agreement), be involved in
charitable and professional activities and, with the consent of the
Board (which shall not unreasonably be withheld or delayed) serve on
boards of other for profit entities, provided such activities do not
materially interfere with the performance of his duties hereunder.
Service on the for profit boards that Executive is currently serving on
are hereby approved.
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate of four hundred seventy
thousand ($470,000) dollars per year or such higher rate as may be
determined from time to time by the Company ('Base Salary'). Such Base
Salary shall be paid in accordance with the Company's standard payroll
practice for its executive officers. Once increased, Base Salary shall
not be reduced.
(b) ANNUAL BONUS. During the Employment Period, Executive will be entitled
to participate in an annual incentive compensation plan of the Company.
The Executive's target annual bonus will be sixty percent (60%) of his
Base Salary as in effect for such year (the 'Target Bonus'), and his
actual annual bonus may range from 0% to 120% (two times target), and
will be determined based upon achievement of performance goals (seventy
percent [70%] financial [return on capital investments and EBITDA] and
thirty percent [30%] personal) as approved by the Compensation
Committee of the Board.
(c) SIGN-ON BONUS. Within thirty (30) days after the Commencement Date, the
Company will pay Executive a two hundred thousand ($200,000) dollar
sign-on bonus.
(d) FIRST BONUS GUARANTEED. The Company will pay to Executive a minimum
guaranteed bonus in the amount of one hundred eighty-eight thousand
($188,000) dollars, to be paid in 2001.
(e) STOCK OPTIONS.
(i) Effective as of the date of this Agreement, Executive will be
granted a ten-year stock option award under the Stock
Incentive Plan to purchase three hundred fifty thousand
(350,000) shares of Stock. The exercise price shall be the
fair market value on such date, and the options shall vest in
equal installments in each of the first four (4) anniversaries
of the date of this Agreement.
(ii) Following the February/March, 2001 meeting of the Compensation
Committee of the Board of Directors, Executive will be granted
a ten (10) year stock option award under the Stock Incentive
Plan to purchase one hundred seventy-five thousand (175,000)
shares of Stock. The exercise price shall be the fair market
value on the date the Compensation Committee meets to award
the options, and the options shall vest in equal installments
over five (5) years. Thereafter, Executive shall participate
in the Company's annual stock option award program as
administered by, and at the discretion of, the Compensation
Committee of the Board of Directors.
(f) REPLACEMENT AWARDS. In order to address certain forfeitures that
Executive will face upon termination of his employment with his prior
employer, Executive shall be awarded or receive the following:
Restricted Stock Award. Effective as of the Commencement Date, the
Company will grant Executive an award of restricted shares of the
Company's common stock (the 'Stock') (valued at three hundred
thousand [$300,000] dollars on the date of grant) under the Waste
Management, Inc. 1993 Stock Incentive Plan (the 'Stock Incentive
Plan') that will vest in equal installments on each of the first
four (4) anniversaries of the Commencement Date, subject (except
as otherwise provided herein) to Executive's continuous employment
with the Company through the applicable vesting date (the
'Restricted Stock Grant'). The Restricted Stock Grant shall be
deemed outstanding shares for all purposes and Executive shall be
fully vested in any cash dividends paid therein (and non cash
dividends being subject to the same forfeiture provisions as the
underlying Restricted Stock Grant shares).
Page 2 of 19
(g) OTHER COMPENSATION. Executive shall be entitled to participate in the
Company's 'Executive Deferral Plan' and any incentive or supplemental
compensation plan, or arrangement maintained or instituted by the
Company, and covering its principal executive officers, at a level
commensurate with his positions and to receive additional compensation
from the Company in such form, and to such extent, if any, as the
Compensation Committee may in its sole discretion from time to time
specify.
(h) 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 positions. All waiting
periods for welfare plans shall be waived, and pre-existing medical
conditions for Executive and Executive's family members will not be a
basis for withholding medical insurance benefits. During the Employment
Period, Executive shall be entitled to vacation each year in accordance
with the Company's policies in effect from time to time, but in no
event less than four (4) weeks paid vacation per calendar year. The
Executive shall also be entitled to such periods of sick leave as is
customarily provided by the Company for its senior executive employees.
Executive shall be eligible to participate in the Company's 401(k) Plan
after 90 days of employment.
(i) OTHER PERQUISITES. Executive shall be entitled to the following
benefits:
1. Auto Allowance in the amount of one thousand ($1,000) dollars
per month;
2. Financial Planning Services at actual cost, and not to exceed
fifteen thousand ($15,000) dollars annually;
3. Club Dues and Assessments at actual cost, and not to exceed
twelve thousand ($12,000) dollars annually; and
4. An Annual Physical Examination on a program designated by the
Company.
(j) EXPENSE REIMBURSEMENT. The Company shall promptly reimburse Executive
for the ordinary and necessary business expenses incurred by Executive
in the performance of the duties hereunder in accordance with the
Company's customary practices applicable to its executive officers. In
addition the Company shall (i) pay for the reasonable costs, fees and
expenses incurred by Executive, his consultants or legal advisors in
connection with the negotiation and execution of this Agreement in an
amount not to exceed ten thousand ($10,000) dollars.
Page 3 of 19
5. TERMINATION OF EMPLOYMENT.
Executive's employment hereunder may be terminated under the following
circumstances:
(a) DEATH. Executive's employment hereunder shall terminate upon
Executive's death.
(b) TOTAL DISABILITY. The Company may terminate Executive's employment
hereunder upon Executive becoming 'Totally Disabled'. For purposes of
this Agreement, Executive shall be 'Totally Disabled' if Executive has
been physically or mentally incapacitated so as to render Executive
incapable of performing Executive's material usual and customary duties
under this Agreement for six (6) consecutive months (such consecutive
absence not being deemed interrupted by Executive's return to service
for less than 10 consecutive business days if absent thereafter for the
same illness or disability). Any such termination shall be upon thirty
(30) days written notice given at any time thereafter while Executive
remains Totally Disabled, provided that a termination for Total
Disability hereunder shall not be effective if Executive returns to
full performance of his duties within such thirty (30) day period.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
Executive's employment hereunder for 'Cause' at any time within ninety
(90) days after the Chairman of the Audit or Governance Committee of
the Board has knowledge thereof.
(i) For purposes of this Agreement, the term 'Cause' shall be
limited to (1) willful misconduct by Executive with regard to
the Company which has a material adverse effect on the
Company; (2) the willful refusal of Executive to attempt to
follow the proper written direction of the Board, provided
that the foregoing refusal shall not be 'Cause' if Executive
in good faith believes that such direction is illegal,
unethical or immoral and promptly so notifies the Board; (3)
substantial and continuing willful refusal by the Executive to
attempt to perform the duties required of him hereunder (other
than any such failure resulting from incapacity due to
physical or mental illness) after a written demand for
substantial performance is delivered to the Executive by the
Board which specifically identifies the manner in which it is
believed that the Executive has substantially and continually
refused to attempt to perform his duties hereunder; or (4) the
Executive being convicted of a felony (other than a felony
involving a traffic violation or as a result of vicarious
liability). For purposes of this paragraph, no act, or failure
to act, on Executive's part shall be considered 'willful'
unless done 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
Page 4 of 19
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), or, the assignment to Executive of
duties or responsibilities that are inconsistent with
Executive's then position; provided that if the Company
becomes a fifty percent or more subsidiary of any other
entity, Executive shall be deemed to have a material
diminution of his position unless he is also Senior Vice
President and General Counsel, and Secretary to the Board of
the ultimate parent entity; (2) removal of, or the
non-re-election of, the Executive from officer positions with
the Company specified herein or removal of the Executive from
any of his then officer positions; (3) requiring Executive's
principal place of business to be located other than in the
Houston, Texas greater Metropolitan region; (4) a failure by
the Company (I) to continue any bonus plan, program or
arrangement in which Executive is entitled to participate (the
'Bonus Plans'), provided that any such Bonus Plans may be
modified at the Company's discretion from time to time but
shall be deemed terminated if (x) any such plan does not
remain substantially in the form in effect prior to such
modification and (y) if plans providing Executive with
substantially similar benefits are not substituted therefor
('Substitute Plans'), or (II) to continue Executive as a
participant in the Bonus Plans and Substitute Plans on at
least the same basis as to potential amount of the bonus as
Executive participated in prior to any change in such plans or
awards, in accordance with the Bonus Plans and the Substitute
Plans; (5) any material breach by the Company of any provision
of this Agreement, including without limitation Section 10
hereof; or (6) failure of any
Page 5 of 19
successor to the Company (whether direct or indirect and
whether by merger, acquisition, consolidation or otherwise) to
assume in a writing delivered to Executive upon the assignee
becoming such, the obligations of the Company hereunder.
(ii) A Notice of Termination for Good Reason shall mean a notice
that shall indicate the specific termination provision relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for Termination for
Good Reason. The failure by Executive to set forth in the
Notice of Termination for Good Reason any facts or
circumstances which contribute to the showing of Good Reason
shall not waive any right of Executive hereunder or preclude
Executive from asserting such fact or circumstance in
enforcing his rights hereunder. The Notice of Termination for
Good Reason shall provide for a date of termination not less
than ten (10) nor more than sixty (60) days after the date
such Notice of Termination for Good Reason is given, provided
that in the case of the events set forth in Sections (i)(1) or
(2) the date may be five (5) days after the giving of such
notice.
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate
Executive's employment hereunder without Cause at any time upon written
notice to Executive.
(f) EFFECT OF TERMINATION. Upon any termination of employment, Executive
shall immediately resign from all Board memberships and other positions
with the Company or any of its subsidiaries held by him at such time.
6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.
In the event that Executive's employment hereunder is terminated, Executive
shall be entitled to the following compensation and benefits upon such
termination:
(a) TERMINATION BY REASON OF DEATH. In the event that Executive's
employment is terminated by reason of Executive's death, the Company
shall pay the following amounts to Executive's beneficiary or estate:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of death, any accrued but unpaid expenses required to
be reimbursed under this Agreement, any vacation accrued to
the date of termination, any earned but unpaid bonuses for any
prior period, a pro-rata 'bonus' or incentive compensation
payment to the extent payments are awarded senior executives
and paid at the same time as senior executives are paid, and
any vacation accrued to the date of death.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those referred
to in Sections 4(g)-(i) hereof), as determined and paid in
accordance with the terms of such plans, policies and
arrangements.
Page 6 of 19
(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 and the Restricted Stock
Grant shall be fully vested and Executive's estate or
beneficiary shall have up to one (1) year from the date of
death to exercise all such options.
(v) As otherwise specifically provided herein.
(b) TERMINATION BY REASON OF TOTAL DISABILITY. In the event that
Executive's employment is terminated by reason of Executive's Total
Disability as determined in accordance with Section 5(b), the Company
shall pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period. Executive shall also be eligible
for a pro-rata bonus or incentive compensation payment to the
extent such awards are made to senior executives for the year
in which Executive is terminated.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those referred
to in Sections 4(g)-(i) hereof) shall be determined and paid
in accordance with the terms of such plans, policies and
arrangements.
(iii) An amount equal to the Base Salary (at the rate in effect as
of the date of Executive's Total Disability) which would have
been payable to Executive if Executive had continued in active
employment for two years following termination of employment,
less any payments under any long-term disability plan or
arrangement paid for by the Company. Payment shall be made at
the same time and in the same manner as such compensation
would have been paid if Executive had remained in active
employment until the end of such period.
(iv) As of the date of termination by reason of Executive's Total
Disability, Executive shall be fully vested in all stock
option awards and the Restricted Stock Grant and Executive
shall have up to one (1) year from the date of termination by
reason of Total Disability to exercise all such options.
(v) As otherwise specifically provided herein.
Page 7 of 19
(c) TERMINATION FOR CAUSE. In the event that Executive's employment is
terminated by the Company for Cause, the Company shall pay the
following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those referred
to in Sections 4(g)-(i) hereof) shall be determined and paid
in accordance with the terms of such plans, policies and
arrangements.
(iii) As otherwise specifically provided herein.
Any options, restricted stock or other awards that have not vested
prior to the date of such termination of employment shall be cancelled
and any options held by Executive shall be cancelled, whether or not
then vested.
(d) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that Executive
voluntarily terminates employment other than for Good Reason, the
Company shall pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to
the date of termination, any accrued but unpaid expenses
required to be reimbursed under this Agreement, any vacation
accrued to the date of termination and any earned but unpaid
bonuses for any prior period.
(ii) Any benefits to which Executive may be entitled pursuant to
the plans, policies and arrangements (including those referred
to in Sections 4(g)-(i) hereof) shall be determined and paid
in accordance with the terms of such plans, policies and
arrangements.
(iii) As otherwise specifically provided herein.
Any options, restricted stock or other awards that have not vested
prior to the date of such termination of employment shall be cancelled
and Executive shall have 90 days following termination of employment to
exercise any previously vested options (or, if earlier, until the
stated expiration thereof).
(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:
Page 8 of 19
(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(g)-(i) hereof shall be determined and paid in accordance
with the terms of such plans, policies and arrangements.
(iii) An amount equal to two times the sum of Executive's Base
Salary plus his Target Annual Bonus (in each case as then in
effect), of which one-half shall be paid in a lump sum within
ten (10) days after such termination and one-half shall be
paid during the two (2) year period beginning on the date of
Executive's termination and shall be paid at the same time and
in the same manner as Base Salary would have been paid if
Executive had remained in active employment until the end of
such period.
(iv) The Company at its expense will continue for Executive and
Executive's spouse and dependents, all health benefit plans,
programs or arrangements, whether group or individual, and
also including deferred compensation, disability, automobile,
and other benefit plans, in which Executive was entitled to
participate at any time during the twelve-month period prior
to the date of termination, until the earliest to occur of (A)
two years after the date of termination; (B) Executive's death
(provided that benefits payable to Executive's beneficiaries
shall not terminate upon Executive's death); or (C) with
respect to any particular plan, program or arrangement, the
date Executive becomes covered by a comparable benefit by a
subsequent employer. In the event that Executive's continued
participation in any such plan, program, or arrangement of the
Company is prohibited, the Company will arrange to provide
Executive with benefits substantially similar to those which
Executive would have been entitled to receive under such plan,
program, or arrangement, for such period on a basis which
provides Executive with no additional after tax cost.
(v) Except to the extent prohibited by law, and except as
otherwise provided herein, Executive will be 100% vested in
all benefits, awards, and grants accrued but unpaid as of the
date of termination under any pension plan, profit sharing
plan, supplemental and/or incentive compensation plans in
which Executive was a participant as of the date of
termination. Executive shall also be eligible for a bonus or
incentive compensation payment, at the same time, on the same
basis, and to the same extent payments are made to senior
executives, pro-rated for the fiscal year in which the
Executive is terminated.
(vi) As of the date of such termination of employment, the stock
options awarded to Executive pursuant to Section 4(e)(i)
hereof and the Restricted Stock Grant shall be fully vested.
Executive shall continue to vest in all other stock option
awards or restricted stock awards over the two (2) year period
commencing on the date of such termination. Executive shall
have two (2) years and six (6) months after the date of
termination to exercise all options, unless by virtue of the
particular stock option award, the option grant expires on an
earlier date.
(vii) As otherwise specifically provided herein.
Page 9 of 19
(f) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this
Agreement, under the terms of any incentive compensation, employee
benefit, or fringe benefit plan applicable to Executive at the time of
Executive's termination or resignation of employment, Executive shall
have no right to receive any other compensation, or to participate in
any other plan, arrangement or benefit, with respect to future periods
after such termination or resignation.
(g) NO MITIGATION; NO SET-OFF. In the event of any termination of
employment hereunder, Executive shall be under no obligation to seek
other employment and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that Executive may obtain.
The amounts payable hereunder shall not be subject to setoff,
counterclaim, recoupment, defense or other right which the Company may
have against the Executive or others, except upon obtaining by the
Company of a final unappealable judgment against Executive.
7. RESIGNATION BY EXECUTIVE FOR GOOD REASON AND COMPENSATION PAYABLE
FOLLOWING CHANGE IN CONTROL.
(a) RESIGNATION FOR GOOD REASON FOLLOWING CHANGE IN CONTROL. In the event a
'Change in Control' occurs and Executive terminates his employment for
Good Reason thereafter, or the Company terminates Executive's
employment other than for Cause or such termination for Good Reason or
without Cause occurs in contemplation of such Change in Control (any
termination within six (6) months prior to such Change in Control being
presumed to be in contemplation unless rebutted by clear and
demonstrable evidence to the contrary), the Company shall pay the
following amounts to Executive:
(i) The payments and benefits provided for in Section 6(e), except
that (A) the period with respect to which severance is
calculated pursuant to Section 6(e)(iii) will be three (3)
years and the amount shall be paid in a lump-sum and (B) the
benefit continuation period in Section 6(e)(iv) shall be three
years.
(ii) Executive will be 100% vested in all benefits, awards, and
grants (including stock option grants and stock awards, all of
such stock options exercisable for three (3) years following
Termination) accrued but unpaid as of the date of termination
under any non-qualified pension plan, supplemental and/or
incentive compensation or bonus plans, in which Executive was
a participant as of the date 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
Page 10 of 19
bonus payment shall be payable within five (5) days after the
effective date of Employee's termination. Except as may be
provided under this Section 7 or under the terms of any
incentive compensation, employee benefit, or fringe benefit
plan applicable to Executive at the time of Executive's
resignation from employment, Executive shall have no right to
receive any other compensation, or to participate in any other
plan, arrangement or benefit, with respect to future periods
after such resignation or termination.
(b) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(i) In the event that the Executive shall become entitled to
payments and/or benefits provided by this Agreement or any
other amounts in the 'nature of compensation' (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person) as a result of
such change in ownership or effective control (collectively
the 'Company Payments'), and such Company Payments will be
subject to the tax (the 'Excise Tax') imposed by Section 4999
of the Code (and any similar tax that may hereafter be imposed
by any taxing authority) the Company shall pay to the
Executive at the time specified in subsection (iv) below an
additional amount (the 'Gross-up Payment') such that the net
amount retained by the Executive, after deduction of any
Excise Tax on the Company Payments and any U.S. federal,
state, and for local income or payroll tax upon the Gross-up
Payment provided for by this Section 7(b), but before
deduction for any U.S. federal, state, and local income or
payroll tax on the Company Payments, shall be equal to the
Company Payments.
(ii) For purposes of determining whether any of the Company
Payments and Gross-up Payments (collectively the 'Total
Payments') will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
'parachute payments' within the meaning of Section 280G(b)(2)
of the Code, and all 'parachute payments' in excess of the
'base amount' (as defined under Code Section 280G[b][3] of the
Code) shall be treated as subject to the Excise Tax, unless
and except to the extent that, in the opinion of the Company's
independent certified public accountants appointed prior to
any change in ownership (as defined under Code Section
280G[b][2]) or tax counsel selected by such accountants (the
'Accountants') such Total Payments (in whole or in part)
either do not constitute 'parachute payments,' represent
reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in excess of the
'base amount' or are otherwise not subject to the Excise Tax,
and (y) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code.
(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
Page 11 of 19
U.S. federal income taxation in the calendar year in which the
Gross-up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state
and locality of the Executive's residence for the calendar
year in which the Company Payment is to be made, net of the
maximum reduction in U.S. federal income taxes which could be
obtained from deduction of such state and local taxes if paid
in such year. In the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount taken
into account hereunder at the time the Gross-up Payment is
made, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally
determined, the portion of the prior Gross-up Payment
attributable to such reduction (plus the portion of the
Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of
the Gross-up Payment being repaid by the Executive if such
repayment results in a reduction in Excise Tax or a U.S.
federal, state and local income tax deduction), plus interest
on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Gross-up Payment to
be refunded to the Company has been paid to any U.S. federal,
state and local tax authority, repayment thereof (and related
amounts) shall not be required until actual refund or credit
of such portion has been made to the Executive, and interest
payable to the Company shall not exceed the interest received
or credited to the Executive by such tax authority for the
period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued
(and the method of allocating the expense thereof) if the
Executive's claim for refund or credit is denied.
In the event that the Excise Tax is later determined by the
Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time
of the Gross-up Payment), the Company shall make an additional
Gross-up Payment in respect of such excess (plus any interest
or penalties payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(iv) The Gross-up Payment or portion thereof provided for in
subsection (iii) above shall be paid not later than the
thirtieth (30th) day following an event occurring which
subjects the Executive to the Excise Tax; provided, however,
that if the amount of such Gross-up Payment or portion thereof
cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as
determined in good faith by the Accountant, of the minimum
amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code), subject to further
payments pursuant to subsection (iii) hereof, as soon as the
amount thereof can reasonably be determined, but in no event
later than the ninetieth day after the occurrence of the event
subjecting the Executive to the Excise Tax. In the event that
the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company
Page 12 of 19
to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(v) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) with regard to the Excise
Tax, the Executive shall permit the Company to control issues
related to the Excise Tax (at its expense), provided that such
issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues.
In the event the issues are interrelated, the Executive and
the Company shall in good faith cooperate so as not to
jeopardize resolution of either issue, but if the parties
cannot agree the Executive shall make the final determination
with regard to the issues. In the event of any conference with
any taxing authority as to the Excise Tax or associated income
taxes, the Executive shall permit the representative of the
Company to accompany the Executive, and the Executive and the
Executive's representative shall cooperate with the Company
and its representative.
(vi) The Company shall be responsible for all charges of the
Accountant.
(vii) The Company and the Executive shall promptly deliver to each
other copies of any written communications, and summaries of
any verbal communications, with any taxing authority regarding
the Excise Tax covered by this Section 7(b).
(c) CHANGE IN CONTROL. For purposes of this Agreement, 'Change in Control'
means the occurrence of any of the following events:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities
acquired directly from the Company or its Affiliates)
representing twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding voting
securities;
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on the Commencement Date, constitute the Board and any
new director (other than a director whose initial assumption
of office is in connection with an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or
nomination for election by the Company's stockholders was
approved or recommended by a vote of the at least two-thirds
(2/3rds) of the directors then still in office who either were
directors on the Commencement Date or whose appointment,
election or nomination for election was previously so approved
or recommended;
(iii) there is a consummated merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any
other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the
Page 13 of 19
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent
entity) more than fifty percent (50%) of the combined voting
power of the voting securities of the Company or such
surviving or parent equity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person, directly or
indirectly, acquired twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding
securities (not including in the securities beneficially owned
by such person any securities acquired directly from the
Company or its Affiliates); or
(iv) the stock holders of the Company approve a plan of complete
liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (or any transaction
having a similar effect), other than a sale or disposition by
the Company of all or substantially all of the Company's
assets to an entity, at least fifty percent (50%) of the
combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
For purposes of this Section 7(c), the following terms shall have the
following meanings:
(i) 'Affiliate' shall mean an affiliate of the Company, as
defined in Rule 12b-2 promulgated under Section 12 of the
Securities Exchange Act of 1934, as amended from time to time
(the 'Exchange Act');
(ii) 'Beneficial Owner' shall have the meaning set forth in
Rule 13d-3 under the Exchange Act;
(iii) 'Person' shall have the meaning set forth in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not
include (1) the Company, (2) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, (3) an underwriter temporarily holding securities
pursuant to an offering of such securities or (4) a
corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of shares of Common Stock of the Company.
8. RESTRICTIVE COVENANTS.
(a) COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times
during Executive's period of employment with the Company, and for two
(2) years thereafter, Executive will not engage in, assist, or have any
active interest or involvement, whether as an employee, agent,
consultant, creditor, advisor, officer, director, stockholder
(excluding holding of less than 3% of the stock of a public company),
partner, proprietor or any type of principal whatsoever in any person,
firm, or business entity which, directly
Page 14 of 19
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. Notwithstanding
the foregoing, Executive may be employed by or provide services to, an
investment banking firm, law firm or consulting firm that provides
services to entities described in the previous sentence, provided that
Executive does not personally represent or provide services to such
entities.
(b) NON-SOLICITATION. Executive covenants and agrees that at all times
during Executive's period of employment with the Company, and for a
period of two (2) years after the Termination thereof, whether such
termination is voluntary or involuntary by wrongful discharge, or
otherwise, Executive will not directly and personally knowingly (i)
induce any customers of the Company or corporations affiliated with the
Company to patronize any similar business which competes with any
material business of the Company; (ii) after his termination of
employment, request or advise any customers of the Company or
corporations affiliated with the Company to withdraw, curtail or cancel
such customer's business with the Company; or (iii) after his
termination of employment, individually or through any person, firm,
association or corporation with which he is now, or may hereafter
become associated, solicit, entice or induce any then employee of the
Company, or any subsidiary of the Company, to leave the employ of the
Company, or such other corporation, to accept employment with, or
compensation from the Executive, or any person, firm, association or
corporation with which Executive is affiliated without prior written
consent of the Company. The foregoing shall not prevent Executive from
serving as a reference for employees.
(c) PROTECTED INFORMATION. Executive recognizes and acknowledges that
Executive has had and will continue to have access to various
confidential or proprietary information concerning the Company and
corporations affiliated with the Company of a special and unique value
which may include, without limitation, (i) books and records relating
to operation, finance, accounting, sales, personnel and management,
(ii) policies and matters relating particularly to operations such as
customer service requirements, costs of providing service and
equipment, operating costs and pricing matters, and (iii) various trade
or business secrets, including customer lists, route sheets, business
opportunities, marketing or business diversification plans, business
development and bidding techniques, methods and processes, financial
data and the like, to the extent not generally known in the industry
(collectively, the 'Protected Information'). Executive therefore
covenants and agrees that Executive will not at any time, either while
employed by the Company or afterwards, knowingly make any independent
use of, or knowingly disclose to any other person or organization
(except as authorized by the Company) any of the Protected Information,
provided that (i) while employed by the Company, Executive may in good
faith make disclosures he believes desirable, and (ii) Executive may
comply with legal process.
Page 15 of 19
9. ENFORCEMENT OF COVENANTS.
(a) RIGHT TO INJUNCTION. Executive acknowledges that a breach of the
covenants set forth in Section 8 hereof will cause irreparable damage
to the Company with respect to which the Company's remedy at law for
damages may be inadequate. Therefore, in the event of breach or
threatened breach of the covenants set forth in this section by
Executive, Executive and the Company agree that the Company shall be
entitled to the following particular forms of relief, in addition to
remedies otherwise available to it at law or equity; injunctions, both
preliminary and permanent, enjoining or restraining such breach or
threatened breach and Executive hereby consents to the issuance thereof
forthwith and without bond by any court of competent jurisdiction.
(b) SEPARABILITY OF COVENANTS. The covenants contained in Section 8 hereof
constitute a series of separate covenants, one for each applicable
State in the United States and the District of Columbia, and one for
each applicable foreign country. If in any judicial proceeding, a court
shall hold that any of the covenants set forth in Section 8 exceed the
time, geographic, or occupational limitations permitted by applicable
laws, Executive and the Company agree that such provisions shall and
are hereby reformed to the maximum time, geographic, or occupational
limitations permitted by such laws. Further, in the event a court shall
hold unenforceable any of the separate covenants deemed included
herein, then such unenforceable covenant or covenants shall be deemed
eliminated from the provisions of this Agreement for the purpose of
such proceeding to the extent necessary to permit the remaining
separate covenants to be enforced in such proceeding.
Executive and the Company further agree that the covenants in Section 8
shall each be construed as a separate agreement independent of any
other provisions of this Agreement, and the existence of any claim or
cause of action by Executive against the Company whether predicated on
this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of any of the covenants of Section 8.
10. INDEMNIFICATION.
The Company shall indemnify and hold harmless Executive to the fullest extent
permitted by law for any action or inaction of Executive while serving as an
officer and director of the Company or, at the Company's request, as an officer
or director of any other entity or as a fiduciary of any benefit plan. The
Company shall cover the Executive under directors and officers liability
insurance both during and, while potential liability exists, after the
Employment Term in the same amount and to the same extent as the Company covers
its other officers and directors.
11. DISPUTES AND PAYMENT OF ATTORNEY'S FEES.
If at any time during the term of this Agreement or afterwards there should
arise any dispute as to the validity, interpretation or application of any term
or condition of this Agreement, the Company agrees, upon written demand by
Executive (and Executive shall be entitled upon application to any court of
competent jurisdiction, to the entry of a mandatory injunction, without the
necessity of posting any bond with respect thereto, compelling the Company) to
promptly
Page 16 of 19
provide sums sufficient to pay on a current basis (either directly or by
reimbursing Executive) Executive's costs and reasonable attorney's fees
(including expenses of investigation and disbursements for the fees and expenses
of experts, etc.) incurred by Executive in connection with any such dispute or
any litigation, provided that Executive shall repay any such amounts paid or
advanced if Executive is not the prevailing party with respect to at least one
material claim or issue in such dispute or litigation. The provisions of this
Section 11, without implication as to any other section hereof, shall survive
the expiration or termination of this Agreement and of Executive's employment
hereunder.
12. WITHHOLDING OF TAXES.
The Company may withhold from any compensation and benefits payable under this
Agreement all applicable federal, state, local, or other taxes.
13. SOURCE OF PAYMENTS.
All payments provided under this Agreement, other than payments made pursuant to
a plan which provides otherwise, shall be paid from the general funds of the
Company, and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. Executive shall have no right,
title or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations hereunder. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor of the
Company.
14. ASSIGNMENT.
Except as otherwise provided in this Agreement, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, representatives, successors and assigns. This Agreement shall not be
assignable by Executive (but any payments due hereunder which would be payable
at a time after Executive's death shall be paid to Executive's designated
beneficiary or, if none, his estate) and shall be assignable by the Company only
to any financially solvent corporation or other entity resulting from the
reorganization, merger or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company's business or substantially all of its business or assets may be sold,
exchanged or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection
with any such reorganization, merger, consolidation, sale, exchange or transfer
in a writing delivered to Executive in a form reasonably acceptable to Executive
(the provisions of this sentence also being applicable to any successive such
transaction).
15. ENTIRE AGREEMENT; AMENDMENT.
This Agreement shall supersede any and all existing oral or written agreements,
representations, or warranties between Executive and the Company or any of its
subsidiaries or affiliated entities relating to the terms of Executive's
employment by the Company. It may not be amended except by a written agreement
signed by both parties.
Page 17 of 19
16. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Texas applicable to agreements made and to be performed in that
State, without regard to its conflict of laws provisions.
17. REQUIREMENT OF TIMELY PAYMENTS.
If any amounts which are required, or determined to be paid or payable, or
reimbursed or reimbursable, to Executive under this Agreement (or any other
plan, agreement, policy or arrangement with the Company) are not so paid
promptly at the times provided herein or therein, such amounts shall accrue
interest, compounded daily, at an 8% annual percentage rate, from the date such
amounts were required or determined to have been paid or payable, reimbursed or
reimbursable to Executive, until such amounts and any interest accrued thereon
are finally and fully paid, provided, however, that in no event shall the amount
of interest contracted for, charged or received hereunder, exceed the maximum
non-usurious amount of interest allowed by applicable law.
18. NOTICES.
Any notice, consent, request or other communication made or given in connection
with this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by registered or certified mail, return receipt
requested, or by facsimile or by hand delivery, to those listed below at their
following respective addresses or at such other address as each may specify by
notice to the others:
To the Company: Waste Management, Inc.
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.
Page 18 of 19
(c) HEADINGS. Section headings are used herein for convenience of reference
only and shall not affect the meaning of any provision of this
Agreement.
(d) RULES OF CONSTRUCTION. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, and such counterparts will together constitute but one
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
WASTE MANAGEMENT, INC.
By: /s/ A. Maurice Myers
--------------------------------------------------------
Name: A. Maurice Myers
Title: Chairman, Chief Executive Officer and President
Date: January 21, 2000
------------------------------------------------------
EXECUTIVE
/s/ Lawrence O'Donnell, III
----------------------------------------------------------
Lawrence O'Donnell, III
Date: January 21, 2000
------------------------------------------------------
Social Security Number:
Address:
Page 19 of 19
Employment Agreement - Waste Management Inc. and Lawrence O'Donnell III
Was this helpful?