WASTE MANAGEMENT, INC.
Performance-Based Incentive Compensation Plan
(Amended and Restated as of January 1, 2001)
1. Purpose. The principal purpose of the Waste Management, Inc.
Performance-Based Incentive Compensation Plan (the "Plan") is to advance the
interests of Waste Management, Inc. (the "Company") by providing for annual or
other periodic bonuses for key employees of the Company and its subsidiaries who
are designated as participants in the Plan in the manner hereinafter provided,
so as to attract and retain such individuals, make their compensation
competitive with other opportunities and provide them with an incentive to
strive to achieve the Company's financial and other business objectives.
2. Administration. With respect to participation in the Plan by individuals
who are executive officers of the Company ("Key Participants"), the Plan shall
be administered by the Compensation Committee (the "Committee") of the Board of
Directors of the Company (the "Board"). With respect to participation in the
Plan by individuals who are not Key Participants, the Plan shall be administered
by a committee appointed by the Company's Chief Executive Officer, and all
references herein to the "Committee" shall be deemed to mean such committee as
to matters involving the participation in the Plan of such individuals who are
not Key Participants, provided, however, that in the event of a Change in
Control (as such term is defined in the Company's 1996 Stock Option Plan for
Non-Employee Directors, as may be amended from time to time) of the Company, the
Plan shall be administered by those members of the Committee, if any, and those
members of the Board, continuing as directors of the Company, but, if there are
no such continuing directors, decisions shall be made by the Committee as
constituted prior to the Change in Control. Any person serving on the Committee
shall be entitled to the full benefits of the indemnification provisions set
forth in Article X of the Company's By-Laws, including, without limitation, any
actions or failure to act by such persons administering this Plan following any
Change in Control.
3. Eligibility.
(a) Participants in the Plan for a calendar year (a "Plan Year") shall be
selected by the Committee at the beginning of such Plan Year from among the key
employees of the Company and its subsidiaries.
(b) Notwithstanding the foregoing, individuals who become eligible to
participate in the Plan after the beginning of a Plan Year shall, subject to
selection and approval by the Committee, be entitled to a bonus prorated to
reflect such participant's number of months of participation during the Plan
Year or for any longer period determined by the Committee.
(c) A participant whose employment terminates during the Plan Year shall
not be entitled to the payment of a bonus under the Plan, except, with respect
to a non-Key Participant, as the Committee may otherwise determine in its sole
discretion. The Committee, in its discretion, may also award all or part of a
target bonus to a Key
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Participant whose employment terminates due to his disability, death or other
circumstances of cessation of employment as determined appropriate by the
Committee.
4. Bonuses. (a) Each participant in the Plan shall be eligible to receive
such bonus, if any, for each Plan Year as may be payable pursuant to the
performance criteria described below. Except as provided in Section 7 below, the
Committee shall establish each Plan Year a "target bonus" for each participant
equal to a percentage of such participant's annual base salary as of the last
day of such Plan Year, and the maximum amount of a target bonus that may be
awarded to a participant for a Plan Year shall be 200% thereof or as limited by
Section 6(c).
(b) Participants shall have their bonuses, if any, determined on the basis
of the degree of achievement of performance goals which shall be established by
the Committee in writing, based on corporate objectives determined by the Board,
and which goals shall be stated in terms of the attainment of specified levels
of or percentage changes (as compared to a prior measurement period or the
current year's budget) in any one or more of the following measurements: the
Company's revenue, earnings per share of common stock (the "Common Stock"),
pretax income, cash flow from operations, total cash flow, return on equity,
return on capital, return on assets, net operating profits after taxes, economic
value added, total stockholder return, strategic growth, return on sales, or
other financial metrics or individual performance objectives which are measured
solely in terms of the attainment of quantitative targets related to the
Company's business, or any combination thereof. The Committee shall for each
Plan Year establish the performance goal or goals from among the foregoing to
apply to each participant and a formula or matrix prescribing the extent to
which such participant's target bonus shall be earned based upon the degree of
achievement of such performance goal or goals. Except as provided in Section 7
below, the Committee may also designate, with respect to a non-Key Participant,
any other factor or factors to serve as performance goals. The Committee may
determine that the bonus payable to any participant shall be based upon the
attainment of the above-specified performance goals but applied in whole or in
part to the results of a subsidiary, business unit, division or department of
the Company for which such participant has substantial management
responsibility.
(c) Except as provided in Section 7 below, a non-Key Participant whose
target bonus or performance goals are changed by the Committee during the Plan
Year to reflect a change in responsibilities or otherwise shall have his or her
bonus award, if any, based on the amount of base salary earned and the
performance goals applicable while in each target bonus category during the Plan
Year.
(d) The earnings per share of the Company's Common Stock for any year shall
be as determined by the Company's independent public accountants or a primary,
rather than fully-diluted, basis, and all other financial measurements which are
used as the performance goals set forth in this Section 4 (or as a component of
such performance goals) shall be determined in accordance with generally
accepted accounting principles, excluding as to both such earnings and other
measurements the effects of changes in
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accounting standards or methods and special, unusual or nonrecurring events as
determined appropriate by the Committee.
(e) Except as provided in Section 6 below, the Committee may, in its sole
discretion, (i) award or increase the amount of bonuses payable to one or more
non-Key Participants even though not earned in accordance with the performance
goals established pursuant to this Section 4, or (ii) decrease the amount of
bonuses otherwise payable to one or more participants even though earned in
accordance with the performance goals established pursuant to this Section 4.
5. Payment. Payment of bonuses for any Plan Year shall be made in cash as
soon as reasonably practicable after the end of such Plan Year.
6. Participation by Certain Officers. Notwithstanding any other provisions
of the Plan to the contrary, the following provisions shall be applicable to
participation in the Plan by Key Participants:
(a) Each such participant's target bonus under this Plan for such Plan Year
shall be based solely on achievement of one or more of the performance goals as
established by the Committee pursuant to Section 4 above.
(b) With respect to each such participant, no bonus shall be payable
hereunder except upon written certification by the Committee that the
performance goals have been satisfied to a particular extent and that any other
material terms and conditions precedent to payment of a bonus pursuant to the
Plan have been satisfied.
(c) The maximum bonus award payable to any such participant for any Plan
Year shall be $3,000,000.
7. Adjustments for Changes in Stock, Mergers, Etc. In the event of
dividends payable in Common Stock or in the case of the subdivision or
combination of Common Stock, appropriate revision shall be made in any earnings
per share criteria established by the Committee pursuant to Section 4 above. In
the event of a Change in Control (as such term is defined in the Company's 1996
Stock Option Plan for Non-Employee Directors, as may be amended from time to
time) of the Company (i) the Plan Year shall end as of the date of such Change
in Control, (ii) the Committee shall cause any bonus awards payable to
participants for the current Plan Year to be promptly calculated (without any
discretionary decrease pursuant to Section 4(e)(ii)) and (iii) the Company shall
pay such bonus awards to participants (determined as of the date of the Change
in Control without regard to any subsequent termination of employment) as
promptly as practicable following the Committee's determination, notwithstanding
any other Plan provision to the contrary. In calculating the amount, timing,
eligibility and other factors affecting bonuses payable to participant in
connection with the Change in Control, the Committee, as constituted prior to
the Change in Control, is authorized to take into consideration such factors as
the shortened Plan Year, seasonal fluctuations in results of the criteria
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established under Section 4(b) hereof and any other equitable adjustments to the
formulae or matrices established by the Committee pursuant to Section 4 as it
deems appropriate.
8. Participant's Interests. A participant's interest in any bonus awards
hereunder shall at all times be reflected on the Company's books as a general
unsecured and unfunded obligation to the Company subject to the terms and
conditions of the Plan. The Plan shall not give any person any right or security
interest in any asset of the Company or any fund in which any deferred payment
is deemed invested. Neither the Company, the Board nor the Committee shall be
responsible for the adequacy of the general assets of the Company to discharge
the payment of its obligations hereunder nor shall the Company be required to
reserve or set aside funds therefor.
9. Non-Alienation of Benefits: Beneficiary Designation. All rights and
benefits under the Plan are personal to the participant and neither the Plan nor
any right or interest of a participant or any other person arising under the
Plan is subject to voluntary or involuntary alienation, sale, transfer, or
assignment without the Committee's consent, which may be withheld in its
discretion. Subject to the foregoing, the Company shall establish such
procedures as it deems necessary for a participant to designate one or more
beneficiaries to whom any bonus payment the Committee determines to make and any
deferred amounts would be payable in the event of the participant's death.
Absent such a designation, payment shall be made to the participant's estate.
10. Withholding for Taxes. Notwithstanding any other provisions of this
Plan, the Company may withhold from any payment made by it under the Plan such
amount or amounts as may be required for purposes of complying with the tax
withholding or other provisions of the Code or the Social Security Act or any
state's income tax act or for purposes of paying any estate, inheritance or
other tax attributable to any amounts payable hereunder.
11. No Employment Rights. Nothing contained in the Plan shall confer upon
any participant any right to be continued in the employ of the Company or any of
its subsidiaries or interfere in any way with the right of the Company or any of
its subsidiaries to terminate a participant's employment at any time.
12. Gender and Number. Where the context admits, words denoting men include
women, the plural includes the singular, and the singular includes the plural.
13. Committee or Company Determinations Final. Each determination provided
for in the Plan shall be made by the Committee or the Company, as the case may
be, under such procedures as may from time to time be prescribed by the
Committee or the Company and shall be made in the sole discretion of the
Committee or the Company, as the case may be. As such determination shall be
conclusive on all parties.
14. Amendment or Termination. The Board may in its sole discretion
terminate or amend the Plan from time to time. No such termination or amendment
shall alter a participant's right to receive a distribution as awarded but
unpaid to such participant, as
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to which this Plan shall remain in effect following its termination until all
such amounts have been paid.
15. Successors. The Plan is binding on and will inure to the benefit of any
successor to the Company, whether by way of merger, consolidation, purchase or
otherwise.
16. Controlling Law. The Plan shall be construed in accordance with the
laws of the State of Texas.
Performance-Based Incentive Compensation Plan - Waste Management Inc.
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