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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1996 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _____________________
Commission file number 1-11016
ALLWASTE, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 74-2427167
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
5151 SAN FELIPE, SUITE 1600
HOUSTON, TEXAS 77056
(Address of Principal Executive Offices) (Zip Code)
(713) 623-8777
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE, INC.
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2014 NEW YORK STOCK EXCHANGE, INC.
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE, INC.
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Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the closing price of shares of Common Stock on the New
York Stock Exchange on November 1, 1996, was approximately $133.4 million.
The number of shares of Common Stock of the Registrant outstanding on
November 19, 1996 was 36,828,024.
DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT INCORPORATED AS TO
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Notice and Proxy Statement for the Annual Meeting of Part III: Items 10, 11, 12 and 13
Stockholders scheduled to be held January 17, 1997.
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FORM 10-K REPORT INDEX
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10-K PART AND ITEM NO. PAGE NO.
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PART I
Item 1. Business................................................ 1
Item 2. Properties.............................................. 7
Item 3. Legal Proceedings....................................... 7
Item 4. Submission of Matters to a Vote of Security Holders..... 8
PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters..................................... 9
Item 6. Selected Financial Data................................. 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 11
Item 8. Financial Statements and Supplementary Data............. 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 37
PART III
Item 10. Directors and Executive Officers of the Registrant...... 38
Item 11. Executive Compensation.................................. 38
Item 12. Security Ownership of Certain Beneficial Owners
and Management.......................................... 38
Item 13. Certain Relationships and Related Transactions.......... 38
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................. 39
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PART I
ITEM 1. BUSINESS
OVERVIEW
Allwaste, Inc. provides integrated industrial and environmental services
and acts as an outsourcing provider of on- site facility processes and
services, primarily in the United States, Canada and Mexico. Unless the
context otherwise requires, references to the "Company" or "Allwaste" refer to
Allwaste, Inc., a Delaware corporation incorporated on August 21, 1986, and its
subsidiaries, affiliates and predecessors.
The Company provides to its industrial and commercial customers a range of
industrial and environmental services, including: on-site industrial cleaning
and waste management services (including hydroblasting and gritblasting and
air- moving and liquid vacuuming); waste transportation and processing;
wastewater services; site remediation; maintenance services; turnaround and
outage services; container cleaning and repair services; emergency spill
response services; and other general plant support services.
With the completion of the sale of the Company's glass recycling
operations (effective September 1, 1995), the Company combined the prior
industry segments of environmental services and container services into a
single operation. The following table presents the percentage of total
revenues for each of the Company's principal service lines for each of the
fiscal years ended August 31, 1996, 1995 and 1994, excluding the Company's
discontinued glass recycling operations.
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1996 1995 1994
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Hydroblasting and gritblasting services 19% 18% 19%
Air-moving and liquid vacuuming services 18% 18% 19%
Excavation and site remediation services 13% 11% 9%
Other on-site industrial cleaning and waste management services 12% 12% 10%
Container services 11% 11% 13%
Transportation, roll-off and tank rental services 9% 12% 13%
Wastewater services and dewatering 7% 10% 9%
All other services 11% 8% 8%
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Total 100% 100% 100%
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While the Company has historically focused on achieving growth through
acquisitions, the Company has, in recent years, shifted its focus to emphasize
increased internal growth. See "Business Expansion Program." The Company has
focused on realizing increased internal growth primarily by developing new
outsourcing and co-sourcing opportunities with its customers and expanding the
number of service lines offered to customers by each of its operating locations
through its AllQuest Enterprises companies (as discussed below), providing
solution-oriented and preventive services that focus on improving customer
efficiency and profitability, transferring technology and knowledge among the
Company's various operating locations, implementing national marketing programs
that target major industries served by the Company, introducing services in new
geographic areas and developing services that address environmental concerns
associated with new products. The Company's ALLIES(R) program stresses
collaboration between the Company and its customers by focusing on creating
flexible and innovative solutions to a customer's problems and emphasizing the
Company's services as an economically-efficient outsourcing alternative that
can maximize a customer's competitive role in the emerging global market. See
" -- Marketing."
In recognition of the new outsourcing and co-sourcing opportunities with
its customers identified through its ALLIES(R) program, the Company created
AllQuest Enterprises, Inc. ("AllQuest Enterprises"). AllQuest Enterprises
enables the Company to expand the bundle of available service lines offered to
its customers by its operating locations and to create new outsourcing and
co-sourcing opportunities with its customers. AllQuest Enterprises is
comprised of the following early-stage companies: AllQuest Water Resources,
Inc.; AllQuest Technologies, Inc.; AllQuest Pipeline Services, Inc.; AllQuest
Energy Services, Inc.; Allies Staffing, Inc.; and AllQuest Capital, Inc. See "
- -- Business Services -- AllQuest Enterprises."
The Company's operations are subject to federal, state and local
governmental regulation. Because of the evolving and uncertain nature of these
often complex regulations, the Company cannot predict the effect, if any, that
the enactment, amendment, repeal or enforcement of applicable governmental
statutes or rules and regulations will have on the Company's operations. See "
- -- Government Regulation" and "Legal Proceedings -- Environmental Proceedings."
Legislation and governmental regulations relating to the protection of the
environment, both existing and future, may also require the Company to outlay
certain capital expenditures to purchase or replace certain equipment
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and to upgrade certain facilities. It is currently anticipated that such
capital expenditures, if any, will not have a material effect on the Company's
financial position or results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Unless the context indicates otherwise, all statistical and financial
information included in Items I, II and III of this Report is given as of
August 31, 1996 and excludes the Company's discontinued glass recycling
operations.
BUSINESS SERVICES
The largest component of the Company's business is the provision of
industrial cleaning and waste management services at customer facilities. The
Company provides industrial cleaning and waste management services from
approximately 96 locations in North America (six of which are in Canada) and is
currently providing such services under long-term contracts at customers'
facilities at an additional 11 locations in North America. The Company
provides a number of specialized services for the handling and processing of
solid, industrial and hazardous wastes, including hydroblasting and
gritblasting, air-moving and liquid vacuuming, dredging, dewatering and sludge
processing, sludge pumping, chemical cleaning and jet rodding.
HYDROBLASTING AND GRITBLASTING SERVICES. The Company's hydroblasting
services are performed using high-pressure pumps capable of achieving water
pressures of up to 35,000 pounds per square inch. Hydroblasting is an
effective method of removing hard deposits from surfaces, such as heat
exchangers, boilers, aboveground storage tanks and pipelines, that may be
unsuitable for other conventional cleaning techniques. Gritblasting, although
similar to hydroblasting, utilizes both abrasive and non-abrasive media to
clean surfaces. Gritblasting is often used to clean electrostatic
precipitators and boilers and prepare metal surfaces for protective coatings
and non-destructive testing.
AIR-MOVING AND LIQUID VACUUMING SERVICES. Air-moving is an efficient
method of removing and handling industrial wastes or salvageable materials
contained in customers' tanks, containers or other process configurations by
means of pneumatic conveyance or vacuuming with controlled air velocity. The
Company performs its air-moving services using truck and trailer-mounted
air-moving equipment. Typically, the Company's air-mover truck is driven onto
the customer's facility near the actual work site. The Company's employees
extend pipe and/or hose from the air-mover truck into the customer's tank,
container or other process configuration holding the waste or salvageable
material. The material is then conveyed into the air-mover truck or container
for transportation to a proper customer-designated disposal site.
EXCAVATION AND SITE REMEDIATION SERVICES. The Company's excavation and
site remediation services involve the use of heavy equipment such as bulldozers
and scrapers for the purpose of grading or otherwise restructuring existing
terrain. The Company primarily provides these services to industrial customers
for site preparation, construction and maintenance of industrial settlement
ponds and lagoons, including the periodic cleaning or remediation of such ponds
and lagoons. The Company also provides these services in connection with the
construction of landfills.
CONTAINER SERVICES. The Company conducts container services operations
from 33 locations (three of which are in Canada). The Company's container
services operations can be divided into three distinct components: cleaning,
inspection and repair. Over-the-highway tank-trailers, railcar tanks and
intermodal containers and intermediate bulk containers ("IBCs") require
thorough cleaning before shipping a new or different product. The Company also
inspects all cleaned containers, in accordance with applicable governmental
regulations, to insure no product or moisture remains in the cleaned container.
The Company provides repair services for tank-trailer units, intermodal
containers and IBCs. The Company believes that its container services business
is the largest non-carrier operation in the industry in terms of total revenues
and number of containers serviced.
TRANSPORTATION, ROLL-OFF AND TANK RENTAL SERVICES. The Company provides
both short and long-distance transportation of hazardous and non-hazardous
wastes from customer sites to customer-designated landfills, recycling and
reclamation facilities, and treatment, storage and disposal facilities. The
Company provides these transportation services primarily on a unit-price or
per-loaded mile basis. At certain locations, the Company owns air-tight,
water- tight roll-off containers of various sizes, which it utilizes to collect
and transport materials within the customer's facility or to
customer-designated disposal sites. The Company also operates liquid tank
transports equipped with vacuum pumps. Most of the Company's liquid tank
transports are certified for the transportation of hazardous materials.
WASTEWATER SERVICES AND DEWATERING. The Company currently operates, as
part of its container services group, four facilities that accept non-hazardous
commercial and industrial waste products, primarily from third parties. Waste
products received and treated at the Company's facilities include wastewaters,
sludges and hydrocarbon-bearing liquids. The Company processes a variety of
materials at these facilities, including solid waste landfill leachate,
restaurant grease-trap wastes, petroleum-contaminated wastewaters, commercial
sandtrap or sump wastes, food-processing wastewaters and a variety of
industrial wastewaters. The Company's dewatering services involve the use of
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centrifuges, filter presses and belt presses to separate liquids from solids, a
process typically utilized to minimize disposal volumes. These services are
frequently used to process the waste generated by tank cleaning or dredging
services.
ALLQUEST ENTERPRISES. Through its newly-created AllQuest Enterprises
companies, the Company has expanded the bundle of available service lines
offered to its customers by its operating locations and begun creating new
outsourcing and co-sourcing opportunities with its customers. The AllQuest
Enterprises companies currently consist of: AllQuest Water Resources, which is
exploring opportunities to own or jointly own water and wastewater facilities;
AllQuest Technologies, which provides advanced chemical cleaning technologies
and products, together with training and laboratory support, to the Company's
operating locations; AllQuest Pipeline Services, which provides various
services to the natural gas pipeline industry in North America; AllQuest Energy
Services, which provides technologies designed to improve the efficiency of
electrical and thermal systems within industrial facilities; Allies Staffing,
which provides temporary employees to the Company, the Company's customers and
third parties for short-term projects; and AllQuest Capital, which serves as a
vehicle for selected investments in industrial services companies.
CUSTOMERS
The Company provides industrial and environmental services to four primary
industry groups: the refining and petrochemical, electric power, pulp and
paper and automotive industries. All four of these industry groups utilize the
Company's on-site industrial services, including cleaning and waste management
services. The Company also provides extensive excavation, sludge dewatering
and transportation-related services to its petrochemical and refining and
electric power industry customers. The Company provides certain industrial
services to commercial businesses; steel, mining and manufacturing customers;
and governmental agencies and municipalities. The Company has customarily
provided tank-trailer cleaning services to contract carriers who own trucks
that have been used to transport hazardous and non- hazardous substances and
has been increasingly providing tank-trailer cleaning services to chemical
manufacturers. Chemical manufacturers represent the Company's primary customer
for its railcar tank cleaning and IBC cleaning services. No single customer
accounted for more than 10% of the Company's consolidated revenues for the
fiscal years ended August 31, 1996, 1995 and 1994, and the loss of any single
customer would not have a material adverse effect on the results of operations
or financial position of the Company taken as a whole.
The Company seeks to enter into master service agreements or
project-specific contracts with its industrial and environmental services
customers. Under these master service agreements, the customer issues purchase
orders for requested services, if any, on an as-needed basis. In the
alternative, the Company receives stand-alone purchase orders, pursuant to
which customers order services for a short-term project, with jobs typically
lasting from one to several days. The Company generally provides its industrial
services at prescribed rates, subject to negotiation with the customer, or
based on competitive bidding. The Company often provides excavation and site
remediation services under fixed-price, unit-price or time-and-materials based
contracts. The Company typically provides container services on a "first come,
first served" basis and maintains a published price list for its container
services.
MARKETING
The Company utilizes a combination of sales representatives, facility
managers and other designated management employees to solicit business from
industrial customers and tank transportation fleets. The Company has also
implemented national marketing programs designed to increase penetration of
three of the Company's largest customer groups: the petrochemical and refining,
electric power and pulp and paper industries. The Company provides a number of
complementary services from various operating locations to customers in certain
major industries. Through concentrated marketing of the full range of
industrial cleaning and waste management and transportation services to these
customers and focusing on broadening the scope of the services it can offer its
customers from a wide range of locations, the Company expects to increase its
penetration of these industries. Given the strict environmental rules and
regulations applicable to generators and transporters of hazardous wastes, in
marketing its container services, the Company emphasizes its state-of-the-art
wastewater pretreatment systems and computerized residual waste tracking
systems in order to alleviate customers' concerns regarding proper treatment of
wastes for which they are responsible. The Company also encourages customers to
utilize the Company's container services facilities as their dispatch locations
to minimize "dead-head" miles to and from the cleaning location.
The Company's Allwaste's Integrated Environmental Services (ALLIES(R))
program focuses on collaboration between the Company and its customers.
ALLIES(R) encourages the Company's operating managers to focus on creating
flexible and innovative solutions to a customer's problems and to stress the
Company's services as an economically-efficient outsourcing alternative that
can maximize a customer's competitive position in the emerging global market.
Because the Company believes that one of its chief advantages over its
competitors is the wide number of complementary service lines that it can offer
its customers, the Company intends for the ALLIES(R) program, with its emphasis
on the Company as a solution-oriented, customer-focused provider of industrial
and environmental services,
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to provide the Company with a stronger national identity. Rather than
competing solely on the basis of hourly rate, the Company's overall marketing
strategy, and the focus of the ALLIES(R) program, is to add value to its
customers, primarily through decreasing a customer's plant downtime through
higher levels of productivity; decreasing disposal costs by recovering,
recycling and/or minimizing waste volumes; and improving unit operating
efficiency by increasing heat transfer and unit run time and reducing
unscheduled downtime through preventive maintenance. The Company believes that
this focus has a positive effect on its customers' profitability, thereby
contributing to their competitive position.
COMPETITION
The industrial services industry is highly competitive and fragmented.
The Company believes that it is one of the largest industrial service companies
in North America in terms of total revenues, geographic coverage and depth of
service capability. The Company faces competition from local owner-operated
service contractors and from national and regionally-based companies that
perform a variety of industrial and environmental services. Competition for
industrial services is based primarily on hourly rates, productivity, safety,
innovative approaches and quality of service. The Company attempts to add value
through providing a safer and more efficient level of service to differentiate
itself from competitors.
The Company also experiences competition in providing container services
from independently-owned and operated facilities and certain large tank-trailer
transport companies that also operate tank cleaning facilities. Three large
tank-trailer transport companies have numerous cleaning facilities throughout
the United States and are also customers of the Company. The important
competitive factors in the Company's container services operations are
geographic location, efficient service, price and the ability to satisfy the
customers' concerns regarding proper waste disposal.
GOVERNMENT REGULATION
The Company provides its customers with services designed to increase
environmental protection by cleaning and removing materials or substances from
its customers' equipment or sites that must be properly handled, recycled, or
removed from the sites for ultimate disposal. The Company's customers are
subject to regulation under a complex and evolving system of local, state and
federal statutes, codes and regulations that govern the handling, processing,
use, treatment, storage, transportation and disposal of non-hazardous and
hazardous materials and wastes. A core component of the Company's business is
advising and assisting its customers in complying with this complex regulatory
system; thus, the central tenet of the Company's business philosophy is that
its operations will meet, and in most cases, exceed the requirements imposed by
this regulatory system. This commitment ensures that the Company's customers,
as well as the Company itself, are in full compliance with the environmental
regulatory system.
Although there are many statutory requirements that apply to the Company
and its customers, the principal regulatory schemes within which the Company
must operate are: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended ("CERCLA");
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
as amended ("RCRA"); the Hazardous Materials Transportation Uniform Safety Act,
49 App. U.S.C. Section 2001, et seq.; the regulations promulgated by the
United States Department of Transportation ("USDOT"); and the Occupational
Safety and Health Act, 29 U.S.C. Section 651, et. seq. (the "OSHA Act"). The
Company's wholly-owned Canadian subsidiaries are subject to similar Canadian
regulations.
CERCLA imposes, without regard to fault or negligence, liability on the
generators of hazardous materials, on the owners and operators of treatment,
storage and disposal sites and sites where hazardous materials are emitted,
released or discharged, either by accident or design, and on companies that
transport hazardous materials from generators to recycling, reclamation or
disposal sites. With the exception of certain of the container service
facilities, the Company generates hazardous wastes at its operating locations
in de minimis quantities and solely in connection with its business operations.
At certain of its container services locations, hazardous wastes may be
generated as a result of the Company's heel management program (discussed
below). The Company does not own or operate hazardous waste disposal sites.
Consequently, it has minimal potential liability under CERCLA with respect to
such issues. As a transporter of hazardous materials, however, the Company is
potentially responsible for the cleanup and remediation at any site to which it
transports hazardous materials. In addition, although the Company does not own
or operate any landfills, the Company does contract with, on behalf of its
customers, the owners and operators of non-hazardous (also known as solid
waste) and hazardous landfills. Under CERCLA, the Company is potentially
responsible as an "arranger for disposal" under these circumstances. To protect
against liability under CERCLA as either a transporter or an "arranger for
disposal", the Company works with its customers to ensure that such sites are
carefully selected prior to the use of such facilities and also attempts to
protect itself through its contractual relationship with its customers. The
Company's employees that are involved with the
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handling, processing or transportation of hazardous materials are required to
participate in approved safety and emergency response training under the OSHA
Act.
RCRA imposes liability on the owners and operators of facilities that are
used to store, treat or dispose of hazardous materials and imposes "cradle to
grave" liability on the generators of hazardous materials. The Company does
not own or operate any facility that requires a RCRA Part B permit, and
therefore, the Company is not subject to the jurisdiction of the most complex
and costly areas of compliance under RCRA. Since the Company generates only de
minimis quantities of hazardous materials at its operating locations, with the
exception of the container services locations discussed below, the Company's
potential liability under RCRA is limited. However, since waste materials are
recycled, reclaimed and stored at several of the Company's facilities, the
Company is required to comply with the RCRA regulations with respect to those
facilities. Most significantly, RCRA imposes a stringent set of regulations on
the identification, storage, treatment, transportation and disposal of wastes.
Thus, when handling, processing and transporting a customer's wastes, the
Company must carefully observe these regulations. To minimize potential
liability under RCRA, the Company works closely with its customers to ensure
that the wastes generated by the customer have been properly identified so that
such wastes can be appropriately handled, processed and transported and also
attempts to protect itself through its contractual relationship with its
customers.
With respect to the Company's container services operations, the Company
has potential liability under both CERCLA and RCRA as a generator, storer and
disposer of certain materials that the Company drains or melts from containers
("heels" as they are referred to in the industry). In some instances, the
Company may be considered to be the generator of those heels that may be
classified as hazardous wastes (within the meaning of applicable regulations).
The Company has instituted a heel management program to minimize this potential
liability under both CERCLA and RCRA. When an over- the-highway tank trailer,
railcar tank, intermodal container or IBC arrives at one of the Company's
container services facilities, the Company identifies the last substance hauled
in a given container and "empties" the container in accordance with applicable
governmental regulations. All such heels are collected in an approved manner,
labeled as hazardous wastes, if applicable, and manifested and transported by a
licensed waste transporter to an approved treatment, recycling or disposal
facility, all in accordance with applicable law. The container cleaning
procedures and the cleaning materials utilized depend largely on the
configuration of the container being cleaned and the last material transported
in such container. The Company's cleaning systems capture all water, chemical
and residue produced from preflushing, final rinsing and steaming. This
wastewater is pretreated and discharged into the sewer system in accordance
with local requirements. The Company then collects, labels and manifests all
solid residues generated by the pretreatment of wastewater and all contaminated
cleaning solvents and transports them to approved treatment, recycling or
disposal sites through a licensed waste transporter.
The Company's business depends, in part, on the issuance of permits from
state and federal agencies to allow the Company to transport hazardous
materials, to operate certain of the Company's equipment and to operate the
Company's container cleaning and wastewater pretreatment facilities. The
Company believes that it will be able to obtain and retain the applicable and
necessary permits from governmental authorities. The majority of these permits
are required to be renewed annually, and accordingly, such permits may be
subject to revocation, modification or denial. There can be no assurance that
the Company will receive necessary permits on a timely basis or that such
permits will not be revoked, modified or denied. The Company believes,
however, that it has sufficient duplicity of permits so that the loss of any
one permit or group of permits would not have a material adverse effect on the
Company's financial position or results of operations.
In connection with several of the Company's service lines, there are
significant, but often unforeseeable, inherent business risks that may
materially impact the Company's operations, including, but not limited to: (i)
the potential that the Company will handle, process, transport or dispose of
material that has been misidentified by its customer, resulting in
unanticipated exposure to hazardous wastes by the Company's employees and/or
disposal of such wastes at an unsuitable facility; (ii) the potential that in
connection with the handling, processing or transporting of material, the
Company's employees may inadvertently cause a release or emission of a
hazardous substance; (iii) the potential for governmental actions at the local,
state or federal level that impose unforeseen restrictions on the handling,
transportation or disposal of waste, which actions may result in declining
volumes of waste that may be handled, treated, or transported by the Company's
existing service lines; and (iv) the potential imposition of liability on the
Company for the historical use of a landfill, and the corresponding allocation
of responsibility on the Company for the costs of remediating such facilities.
The Company may not always be able to accurately assess significant
business risks related to regulatory compliance because of its inability to
predict the future enactment of additional environmental regulations or the
amendment, modification or repeal of existing statutes or regulations.
Frequently, public pressure causes local, state or federal regulators to act
precipitously, with the result that newly-enacted legislation or regulations
may contradict existing regulations. Consequently, although the Company makes
a significant effort to monitor and to participate in anticipated regulatory,
political and legal developments that may affect its operations, it is very
difficult for the Company to predict the enactment, amendment, repeal or
modification of applicable statutes, rules and regulations
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pertaining to the protection of the environment or the effect that such actions
will have on its financial position or results of operations.
The complexity of environmental regulations offers the Company vast
potential to provide expanded services to its customers, particularly with
respect to the Company's industrial cleaning and waste management and waste
minimization service lines. Under the current regulatory scheme, the Company's
customers are facing increasing restrictions on the generation, treatment,
processing and disposal of non-hazardous and hazardous materials. For example,
changes to the RCRA regulations have increased the types of materials that may
no longer be disposed in landfills, which has caused the Company's customers
to find alternative treatment methods for such materials. Similarly, changes
over the last few years in the RCRA regulations have resulted in the closure of
many landfills, which closures have increased the demand for the development of
a process that will minimize the types and amounts of materials required to be
disposed in landfills.
The Company may also experience increased business potential as a result
of the increasing scrutiny placed on companies that provide industrial and
environmental services. Many states have successfully enacted legislation that
allows the state permitting authorities to consider the "fitness" of a permit
applicant. Consequently, companies with a history of environmental violations
have been, and will likely continue to be, unable to renew the permits that
allow them to transport and/or operate as environmental service companies in
certain jurisdictions. The inability of the Company's competitors to withstand
similar scrutiny should offer the Company increased potential to attract new
customers in marketplaces affected by these statutes. Although there can be no
assurance that the Company will be able to successfully withstand scrutiny
under such "applicant fitness" statutes or regulations in the future or in all
jurisdictions that may enact such legislation, to date the Company has not
encountered any significant difficulty in meeting the requirements of these
statutes and has been able to obtain required permits notwithstanding the
increased level of scrutiny.
BUSINESS EXPANSION PROGRAM
The Company is seeking to expand its service capabilities through its six
operating groups and the AllQuest Enterprises companies, the addition of
selected service lines at existing locations, the establishment of
Company-owned start-up operations in strategic geographic marketplaces and the
acquisition of existing businesses. A major factor in the historical growth of
the Company has been its acquisition program; however, management expects an
important portion of future growth will be achieved through investment in
start-up operations and internal expansion of existing operations.
INTERNAL GROWTH. The Company has and will continue to open new facilities
with its own resources, equipment and personnel. The AllQuest Enterprises
ventures have expanded the bundle of service capabilities offered to customers
and have created opportunities for outsourcing and co-sourcing with the
Company's industrial customers. See " -- Business Services -- AllQuest
Enterprises." Additionally, the Company expects to continue to pursue
investment opportunities pursuant to which it would acquire minority ownership
or otherwise partner with other business entities to continue to expand its
service capabilities for its industrial customers. With respect to its on-site
industrial cleaning and waste management operations, the Company seeks to add
service lines to existing locations as customer demand dictates needs for such
additional services. The Company also seeks to expand its customers' awareness
of its service capabilities through national marketing programs targeted to
specific industry groups. See " -- Marketing." The Company expects to expand
its IBC service capacity and to upgrade its wastewater pretreatment
capabilities to handle additional third party waste streams.
ACQUISITIONS. The Company intends to continue pursuing opportunities to
acquire the stock or assets of suitable industrial and environmental service
businesses for consideration consisting of cash, convertible subordinated
notes, promissory notes, common stock of the Company (the "Common Stock") or a
combination thereof. The Company may supplement the acquisition of small local
companies or companies engaged in complementary service lines by acquiring
larger companies that would be attractive to the Company's customer base.
There can be no assurance that the Company will be able to successfully
complete any such acquisitions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". For additional information
regarding the Company's acquisitions, see Note 2 of Notes to Consolidated
Financial Statements.
INSURANCE AND BONDING
The Company maintains insurance coverage for normal business risks,
including workers' compensation for its employees and auto and general
liability insurance, including products and completed operations coverage.
Comprehensive insurance for environmental accidents and pollution occurring at
the Company's facilities has been expensive and difficult to obtain, and
certain policies purchased by the Company specifically exclude certain perils
and/or operations that could give cause for such claims. The Company has
obtained pollution liability coverage for
-6-
<PAGE> 9
specific locations within its operations. If the Company experiences
difficulty in obtaining adequate insurance coverage at reasonable rates in the
future, this could have a material adverse effect on the Company's financial
position or results of operations. To date, the Company has not incurred
material fines, penalties or liabilities for pollution, environmental damage or
toxic torts. However, a successful liability claim for which the Company is
only partially insured or completely uninsured could have a material adverse
effect on the Company's financial position and results of operations.
The Company cannot predict the future availability or cost of insurance.
The Company's total cost of property and casualty insurance, including workers'
compensation premiums, was $12.1 million, $14.8 million and $10.1 million for
the fiscal years ended August 31, 1996, 1995 and 1994, respectively. The
decreased cost in fiscal 1996 is primarily attributable to favorable loss
development of prior period claims, a continuation of the positive impact of
the Company's safety program on current operations and reductions in the fixed
costs associated with the Company's insurance program.
A substantial portion of the Company's current and prior year insurance
coverages are "high deductible" or retrospective policies in which the Company,
in many cases, is responsible for the payment of incurred claims up to
specified individual and aggregate limits, over which a third party insurer is
contractually liable for any additional payment of such claims. Accordingly,
the Company bears certain economic risks related to these coverages. On a
continual basis, and as of each balance sheet date, the Company records an
accrual equal to the estimated costs expected to result from incurred claims
plus an estimate of claims incurred but not reported as of such date based on
the best available information at such date. However, the nature of these
claims is such that actual development of the claims may vary significantly
from the estimated accruals. All changes in the accrual estimates are
accounted for on a prospective basis and can have a significant effect on the
Company's financial position or results of operations.
Certain of the Company's customers require the Company to post performance
bonds that are equivalent to the full amount of the contracts and guarantee
their completion. Although the Company has previously obtained bonds through
relationships with various sureties, there can be no assurance that these
relationships will continue or that the Company will not be forced to seek
alternative sources for bonding.
EMPLOYEES
As of August 31, 1996, the Company had a total of 3,772 full-time
employees. At 11 of the Company's field locations, the Company is, or is
anticipated to be, bound by collective bargaining agreements governing the
Company's relationship with its labor force at such locations. These
agreements apply to approximately 301 of the Company's employees and expire at
various times from 1996 to 1999, when they will need to be renegotiated in
accordance with applicable law. No prediction can be made as to the ultimate
outcome of such negotiations, although the Company's management knows of no
reason why agreements could not be reached. Additionally, management believes
that any failure to come to terms in such negotiations would not have a
material adverse effect on the Company's financial position or results of
operations. The Company believes its employee relations are good.
ITEM 2. PROPERTIES
More than half of the Company's operating locations in its industrial and
environmental services business are leased premises under written agreements
that expire at various times through 2004. The majority of the leases have
renewal options at the Company's option for six-month to fifteen-year periods.
The Company owns its industrial service facilities in 28 locations. Management
does not anticipate any major problems in negotiating new leases on expiration
of any existing leases. However, should any problems arise, management
believes that it will be able to obtain adequate facilities on terms acceptable
to the Company since these operations are all in industrial marketplaces.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of its operations, the Company can become involved in
a variety of legal disputes. Currently, the Company is a defendant in several
legal proceedings, including workers' compensation matters and minor business
disputes, the majority of which are being handled or are expected to be handled
by the Company's insurance carriers. The Company believes that a decision
adverse to the Company in any one or all of these proceedings would not have a
material effect on the Company's financial position or results of operations.
-7-
<PAGE> 10
ENVIRONMENTAL PROCEEDINGS
In November 1996, the West Virginia Department of Environmental Protection
(the "West Virginia DEP") issued a draft consent order against one of the
Company's subsidiaries, which order seeks to impose an aggregate of
approximately $229,000 in fines against the Company relating to a
transportation-related spill in West Virginia in November 1995. The Company
voluntarily remediated this spill in December 1995. The draft consent order
alleges that in remediating the spill, the Company did not comply with certain
technical West Virginia DEP remediation regulations relating to recordkeeping
and generator requirements. The Company believes that the West Virginia DEP
remediation regulations cited by the West Virginia DEP as the basis of this
draft consent order are not relevant in the context of an emergency spill
response. Therefore, the Company believes that it may be able to successfully
negotiate the imposition by the West Virginia DEP of significantly lower
penalties in the final consent order. The Company is actively negotiating the
draft consent order with the West Virginia DEP and does not believe that the
final consent order will have a material adverse effect on the Company's
results of operations or financial position.
While the Company's paramount goal is to conduct its operations in
compliance with all applicable statutes and regulations, in the normal course
of operations, the Company, as with all other companies engaged in the
industrial and environmental service business, has been and may continue to be
the subject of enforcement proceedings initiated by local, state and federal
regulatory authorities. In general, such proceedings allege technical
violations of licenses or permits under which the Company operates and often
are the result of either a misunderstanding with respect to the applicability
of a particular regulation or a difference in opinion between the Company and a
regulatory agency with respect to the interpretation of a regulation. These
enforcement proceedings can result in the imposition of fines and/or penalties
on the Company, and the agreement, by the Company, to change certain operating
practices and procedures to more closely comply with the interpretation of the
environmental regulations favored by the local, state or federal regulatory
agency. Although the Company's experience to date has been that such
proceedings have not had, either individually or in the aggregate, a material
adverse effect on the Company's financial position or results of operations,
there can be no assurance that a future proceeding will not have such a
material adverse effect.
Various subsidiaries of the Company have been identified as Potentially
Responsible Parties ("PRPs") at sites listed on the United States Environmental
Protection Agency's ("EPA") National Priorities List ("NPL"), which identifies
sites that have been selected for remedial activity by the EPA under CERCLA
(the NPL is sometimes referred to as the "Superfund List"). In addition,
various subsidiaries of the Company have been sent information requests by EPA,
seeking to determine whether or not such subsidiaries have been involved with
additional sites on the NPL. The Company's responsibility as a PRP, if any, at
these additional sites has not been determined. All NPL sites at which the
Company has been identified as a PRP, or for which the Company has been
requested to submit information, are disposal sites owned and operated by third
parties and are sites to which the Company is one of multiple parties
(sometimes in excess of one hundred) alleged to have transported material.
However, in instances in which a subsidiary of the Company has been formally
identified as a PRP, such subsidiaries have uniformly been identified as de
minimis contributors to such sites, and the Company's management anticipates
that its status at additional sites at which it may be named as a PRP in the
future, if any, would be similar. The Company's status as a de minimis
contributor will entitle its subsidiaries to consider settlements extended by
the EPA and/or those parties that have been identified as significant
contributors to such sites. Prior to accepting such a settlement, the
Company's management will review its subsidiary's role with respect to each
site, the amount and types of materials transported by the subsidiary to the
site, and the availability of indemnification protection from the subsidiary's
customers whose waste was sent to the site. As a result of this review, as
well as the Company's continual review of such exposures, the Company may elect
to accrue for an anticipated settlement of such Superfund proceeding. The
majority of Superfund proceedings involve several years of negotiation between
the group of parties identified as PRPs and EPA; therefore, the actual
expenditure for a PRP settlement occurs years, if not decades, after the use of
the NPL site and typically years after notification of potential liability as a
PRP. Based on the Company's prior experience at NPL sites, the Company's
management anticipates that it will accept de minimis settlements at any site
at which it is identified as a PRP. In addition, such settlements historically
have not had and it is anticipated that such settlements will not have a
material adverse effect on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended August 31, 1996.
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<PAGE> 11
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "ALW." The following table sets forth the range of high and low per
share sales prices for the Company's Common Stock for the Company's two most
recently completed fiscal years:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1995 --
First quarter ended November 30, 1994 $ 7.500 $ 5.875
Second quarter ended February 28, 1995 6.125 4.750
Third quarter ended May 31, 1995 6.375 5.125
Fourth quarter ended August 31, 1995 5.875 5.000
Fiscal 1996 --
First quarter ended November 30, 1995 $ 5.500 $ 4.125
Second quarter ended February 29, 1996 5.500 4.125
Third quarter ended May 31, 1996 4.625 3.875
Fourth quarter ended August 31, 1996 4.750 4.000
</TABLE>
According to the Company's transfer agent, on November 19, 1996, there
were 2,402 holders of record of the Company's Common Stock.
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. In addition,
the Company's credit facility prohibits the payment of cash dividends.
Recent Sales of Unregistered Securities
The Company did not sell any unregistered securities during the fourth
quarter of fiscal 1996.
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<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data below includes the accounts of all companies
acquired through August 31, 1996. These companies, all of which were acquired in
transactions accounted for as purchases during the past five years, are included
from their respective dates of acquisition. For all periods presented, the
selected financial data reflects the Company's former glass recycling operations
as a discontinued operation.
The Selected Financial Data should be read in conjunction with the
accompanying Consolidated Financial Statements and the related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
For the Years Ended August 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $382,165 $344,245 $286,861 $243,591 $182,214
Cost of operations 286,412 254,596 204,492 173,844 125,886
-------- -------- -------- -------- --------
Gross profit 95,753 89,649 82,369 69,747 56,328
Write-downs of operating equipment -- 6,908 -- -- --
Selling, general and administrative expenses 77,011 72,976 59,020 53,033 40,408
Interest expense (9,581) (8,785) (5,617) (4,798) (3,984)
Interest income and other income (expense),
net 3,401 (3,097) (818) 1,250 276
-------- -------- -------- -------- --------
Income (loss) from continuing operations
before income tax provision and minority
interest 12,562 (2,117) 16,914 13,166 12,212
Income tax provision (6,030) (2,170) (6,725) (5,465) (4,885)
Minority interest 82 408 407 -- --
-------- -------- -------- -------- --------
Income (loss) from continuing operations 6,614 (3,879) 10,596 7,701 7,327
Discontinued Operations
Income from discontinued operations, net of
applicable income taxes -- 2,773 2,501 2,464 4,218
Gain on sale of glass recycling operations,
net of applicable income taxes 3,764 -- -- -- --
-------- -------- -------- -------- --------
Net income (loss) $ 10,378 $ (1,106) $ 13,097 $ 10,165 $ 11,545
======== ======== ======== ======== ========
Net income (loss) per common share
Continuing operations $ .17 $ (.10) $ .29 $ .21 $ .21
Discontinued operations .10 .07 .07 .07 .12
-------- -------- -------- -------- --------
Net income (loss) per common share $ .27 $ (.03) $ .36 $ .28 $ .33
======== ======== ======== ======== ========
Weighted average common shares outstanding 39,055 38,805 36,852 36,307 35,330
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Working capital $ 18,742 $ 26,925 $ 25,579 $ 12,233 $ 14,692
Property and equipment, net 128,973 131,098 108,956 89,730 71,707
Total assets 337,187 372,233 309,263 259,965 196,001
Long-term obligations 132,467 172,948 134,630 101,041 72,865
Shareholders' equity 130,946 128,291 121,218 105,196 90,038
Cash dividends declared per common share -- -- -- -- --
</TABLE>
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<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For all periods presented, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" reflects the Company's former
glass recycling operations as a discontinued operation. For information
regarding acquisitions and divestitures made by the Company, refer to Notes 2
and 3, respectively, of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. Net cash provided by operating activities was $33.0
million and $38.1 million during fiscal 1996 and 1995, respectively. In fiscal
1996, net income was $10.4 million, which included $31.5 million in
depreciation and amortization, a gain of $3.8 million from the sale of the
Company's glass recycling operations and $1.1 million in gain on sales of
property and equipment. The Company reduced accounts receivable which provided
$4.5 million of cash. The Company achieved this reduction in accounts
receivable by lowering the Company's days sales outstanding through increased
collection efforts. The Company also reduced capital spending in fiscal 1996,
resulting in a decrease in accounts payable of $9.6 million.
Net working capital was $18.7 million at August 31, 1996, which was down
from $26.9 million at August 31, 1995. This decrease was primarily due to both
the previously discussed reduction in accounts receivable and increased current
income tax liability due to the Company's higher net income in fiscal 1996.
The Company's current ratio was 1.3 to 1 at August 31, 1996, which was down
slightly from 1.4 to 1 the prior year. The Company had uninvested cash of $2.4
million at August 31, 1996, which was significantly lower than the $4.0 million
of uninvested cash held by the Company at the end of fiscal 1995.
INVESTING ACTIVITIES. The Company generated cash of $12.0 million from its
investing activities in fiscal 1996, compared with using $68.4 million in fiscal
1995. On September 1, 1995, the Company sold its glass recycling operations for
consideration (as adjusted) consisting of: cash of $41.5 million, $8.0 million
of redeemable preferred stock and a $6.6 million subordinated note receivable.
The Company used the proceeds received in this transaction to reduce outstanding
debt. In fiscal 1995, the $68.4 million used in investing activities was
primarily attributable to capital expenditures of $47.2 million and cash
payments of $19.3 million, net of cash acquired, for the acquisition of
businesses.
During fiscal 1996, the Company purchased four businesses for $2.1 million
in cash, net of cash acquired, and promissory notes of $0.2 million. The
Company acquired 13 companies during fiscal 1995, which required $19.3 million
in cash, net of cash acquired, and debt of $6.4 million. Also, the Company
spent $3.0 million to purchase investments in fiscal 1996. The Company paid
$2.6 million of this $3.0 million to acquire a 10% interest in The Safe Seal
Company, Inc., which specializes in valve repair and leak sealing.
Capital expenditures during fiscal 1996 and fiscal 1995 were $27.5 million
and $47.2 million, respectively. The Company made capital expenditures in the
current year predominately to purchase operating equipment for expansion of
existing service lines and to replace older equipment. The Company was able to
reduce its capital spending in fiscal 1996 primarily due to increased monitoring
of equipment usage, transfers of underutilized owned equipment from lower
volume, lower margin locations to higher margin, higher volume locations and the
use of short-term equipment rentals. Also, the Company constructed a new
container services facility at a total cost of $3.7 million in fiscal 1995,
contributing to higher capital spending for fiscal 1995. Expenditures for
fiscal 1997 are anticipated to be approximately $25.0 million. The Company's
fiscal 1997 capital expenditure program will be funded from a combination of
cash flows from operating activities and through the utilization of the
Company's revolving credit facility.
FINANCING ACTIVITIES. In fiscal 1996, the Company used cash of $46.3
million in financing activities, compared with cash of $31.4 million provided
during 1995. The Company's total short-term and long-term debt decreased
significantly by $37.8 million to $128.1 million at August 31, 1996 from $165.9
million at August 31, 1995. Included in the aforementioned long-term debt, the
Company's revolving credit facility decreased by $32.3 million to $87.8 million
at August 31, 1996 from $120.1 million at the end of fiscal 1995. This
decrease enabled the Company to considerably reduce long-term debt as a
percentage of capitalization to 48% at August 31, 1996 from 56% at August 31,
1995. This was a significant decrease considering the use of $9.2 million to
repurchase shares of the Company's Common Stock. During the year ended August
31, 1996, the Company also repurchased $1.1 million of its convertible
subordinated debentures at 85% of their face value and paid $4.6 million on
other long-term borrowings that were predominantly associated with business
acquisitions from previous years.
In July 1995, the Board of Directors authorized the Company to repurchase,
over a two year period, up to 5,000,000 shares of the Company's Common Stock,
either on the open market or in privately negotiated transactions.
-11-
<PAGE> 14
During the year ended August 31, 1996, the Company spent $9.2 million to
repurchase 2,075,900 shares of its Common Stock at an average cost of $4.44
per share. Subsequent to August 31, 1996, the Company has repurchased
1,029,400 additional shares of its Common Stock at an average cost of $4.67 per
share. Future repurchases of the Company's Common Stock will be dependent upon
prevailing market conditions and other investment opportunities. Also, the
Company received $0.7 million in proceeds from issuance of shares of Common
Stock, predominantly from the exercise of options to purchase 164,600 shares of
Common Stock under the Company's Amended and Restated 1989 Replacement
Non-Qualified Stock Option Plan.
The Company's credit facility consists of a revolving credit agreement
with a group of banks. This agreement, as last amended in August 1996,
provides an unsecured $160 million revolving line of credit to the Company
through January 31, 1999, at which time any outstanding borrowings convert to a
term loan due in equal quarterly installments through January 31, 2003.
Available borrowing capacity under this agreement was $39.0 million at November
15, 1996. Borrowing availability is subject to the Company maintaining certain
minimum financial ratios as set forth in the agreement. The Company
anticipates that its credit facilities are adequate to fund its financing
needs.
Management believes it has adequate capital resources available from
internally generated funds, treasury shares and from the short-term and
long-term capital markets to meet anticipated working capital needs, planned
capital expenditures and to take advantage of new opportunities requiring
capital.
RESULTS OF OPERATIONS
OVERVIEW. Allwaste, Inc. provides integrated industrial and environmental
services and acts as an outsourcing provider of on-site facility processes and
services, primarily in the United States, Canada and Mexico. With the
completion of the sale of the Company's glass recycling operations in September
1995, the Company combined the prior industry segments of environmental
services and container services into a single operation.
Net income from continuing operations for fiscal 1996 was $6.6 million,
compared with a net loss of $3.9 million in fiscal 1995 and net income of $10.6
million in fiscal 1994. Net income (loss) per common share from continuing
operations was $.17, $(.10) and $.29 for fiscal 1996, 1995 and 1994,
respectively.
The following table identifies certain relationships with consolidated
revenue as percentages:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Revenue 100% 100% 100%
Costs and Expenses:
Cost of operations (74.9) (74.0) (71.3)
----- ----- -----
Gross profit 25.1 26.0 28.7
Write-downs of operating equipment -- (2.0) --
Selling, general and administrative
expenses (20.2) (21.2) (20.5)
Interest expense (2.5) (2.5) (2.0)
Interest income and other income
(expense), net 0.9 (0.9) (0.3)
----- ----- -----
Income (loss) from continuing
operations before income tax
provision and minority interest 3.3 (0.6) 5.9
Income taxes (1.6) (0.6) (2.3)
Minority interest 0.0 0.1 0.1
----- ----- -----
Net income (loss) from continuing
operations 1.7% (1.1%) 3.7%
===== ===== =====
</TABLE>
-12-
<PAGE> 15
1996 COMPARED WITH 1995. The Company's revenues for fiscal 1996 increased
to $382.2 million, compared with $344.2 million in fiscal 1995. Revenue growth
from acquisitions accounted for $22.3 million or 59% of this growth. Almost
half of this acquisition growth was attributable to a sewer restoration company
acquired in May 1995. The Company had internally generated revenue growth of
$15.7 million during fiscal 1996, which was primarily attributable to the
Company's excavation/remediation company located in Birmingham, Alabama. This
operation, the Company's largest, benefited from a significant increase in pulp
and paper and quarry work in fiscal 1996. Increased demand for the Company's
services by the offshore oil and gas exploration industry in the Gulf of Mexico
area also contributed to this internal revenue growth. Revenue growth was also
strong in the Company's facilities that serve the United States and Canadian
automobile industry. These increases in revenue were partly offset by the
decreases in revenue generated by the Company's facilities that service the
Pacific coast refining industries and by the Company's transportation services.
Gross operating profit increased to $95.8 million in fiscal 1996 from
$89.6 million in fiscal 1995. Gross operating profit as a percentage of gross
revenues decreased in fiscal 1996 to 25% from 26% in fiscal 1995. This
decrease was primarily attributable to a general softness in the market for the
Company's container cleaning and repair services and to the higher volume of
lower margin subcontract work, which was predominately attributable to the
Company's excavation and site remediation operations.
Selling, general and administrative ("SG&A") expenses decreased, as a
percentage of revenues, to 20% in fiscal 1996, from 21% in fiscal 1995, while
SG&A expenditures increased by $4.0 million to $77.0 million. Incremental SG&A
expense of $5.3 million relates to acquisitions of businesses and start-up
operations subsequent to 1994. SG&A relating to existing locations decreased
$2.6 million. The Company adopted a cost reduction initiative in the first half
of fiscal 1996. This plan focused on the improvement of profitability, the
creation of shareholder value and enhanced efforts to provide more
cost-effective, value-added services to the Company's large industrial customer
base. Elements of the plan included a work force reduction of approximately 170
employees nationwide, a consolidation of 11 field offices and the realignment of
certain management functions. In conjunction with this plan, the Company
recorded a restructuring charge of $1.3 million which was related to employee
severance costs, outplacement assistance, office consolidation and other related
costs.
Interest expense increased $0.8 million to $9.6 million in fiscal 1996
compared with $8.8 million in fiscal 1995 as a result of higher debt levels in
the first half of fiscal 1996.
Interest income and other income (expense), net was $3.4 million in fiscal
1996 compared to ($3.1) million in fiscal 1995. The income was primarily
related to interest and dividends of $1.3 million earned on the subordinated
note receivable and preferred stock acquired in the sale of the Company's glass
recycling operations. Also, the Company recognized income from gain on sales
of property and equipment and dividends earned on the investment in The Safe
Seal Company, Inc.
The Company's effective income tax rate for the year ended August 31, 1996
was 48%. The effective tax rate was higher than the statutory federal rate of
35% primarily due to the effect of the nondeductibility of a portion of meal
and entertainment expenses, the nondeductible amortization of a portion of the
Company's goodwill, state income taxes and Canadian earnings which are taxed at
a higher statutory rate.
1995 COMPARED WITH 1994. Revenues for fiscal 1995 increased 20% to $344.2
million, compared with $286.9 million in fiscal 1994, and approximately 57% of
this revenue growth was internally generated. This internally generated growth
of $32.6 million was primarily attributable to higher levels of service work
provided to the refining and petrochemical industries in the Southeastern
United States and to increased activity in the oil and gas exploration and
production industry in the Gulf of Mexico which was partially offset by
decreased activity in the refining industry in the Pacific coast region. This
growth also reflected increased market penetration of the Louisiana pulp and
paper industry, a significant public works contract in Alabama and increased
wastewater pretreatment revenue. Revenue growth from acquisitions of $24.8
million in fiscal 1995 resulted from the companies acquired during fiscal 1994
and 1995.
Gross profit, as a percentage of revenues, decreased by 3% to 26% of
revenues in fiscal 1995 compared with 29% in fiscal 1994. This decrease was
due to higher volumes of lower-margin subcontract and disposal revenues and a
significant loss on a governmental transportation project. Lower volumes and
lower prices in the Pacific coast refinery market and the nonrecurrence of high
margin spill response work resulting from the severe earthquake in southern
California in January 1994 also adversely affected gross margins.
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<PAGE> 16
During fiscal 1995, the Company recorded write-downs in recognition of the
permanent impairment of certain operating assets totaling $6.9 million. The
affected assets included certain operating equipment in Mexico and California,
a wastewater pretreatment facility, equipment relating to two small businesses
which were exited and various owned facilities.
The Company's SG&A expenses, as a percentage of revenue, remained constant
at 21% of gross revenues for fiscal years 1995 and 1994. SG&A expenses
increased 24% to $73.0 million in fiscal 1995 from $59.0 million in fiscal
1994. Approximately 30% of this increase was attributable to incremental
expenses relating to acquisitions completed subsequent to fiscal 1993. A
significant part of the remaining increase is attributable to higher bad debt
expenses, the write-off of unrealizable organizational costs relating to a
realignment of the Company's Mexico joint ventures and higher legal and
professional fees. The Company also increased its staffing during this time
period to support its sales, safety and compliance programs and to maintain
strong financial systems and controls. These increases in SG&A were partially
offset by lower costs relating to the Company's management incentive
compensation plans.
Interest expense increased $3.2 million from fiscal 1994 to fiscal 1995.
The primary reason for the increase was higher average debt levels at higher
average interest rates which were required to fund the previously discussed
acquisitions and capital expenditures in fiscal 1995.
Interest income and other income (expense), net in fiscal 1995 is
primarily attributable to $1.0 million in allowances provided for a note
receivable and the write-off of the Company's remaining investment of $2.0
million in previously-owned businesses. Also, the Company settled a lawsuit
for $0.6 million related to its previously discontinued asbestos abatement
business.
The Company's effective tax rate was 40% for the year ended August 31,
1994. The effective tax rate was higher than the statutory federal rate of 35%
primarily due to the effects of nondeductible amortization of goodwill, state
income taxes and Canadian earnings which are taxed at a higher statutory rate.
In fiscal 1995, the Company recorded a tax provision of $2.2 million despite a
pretax loss of $2.1 million. The provision was attributable to the
nondeductibility of the above mentioned items, nondeductible meals and
entertainment expenses and valuation allowances relating to the Company's
Mexico joint ventures.
FLUCTUATIONS IN RESULTS OF OPERATIONS.
Certain customers have varying levels of demand for the Company's services
based on the time of the year. Most of the Company's service lines tend to be
slowest in the winter months (the Company's second quarter). Services provided
to electric utility customers are typically performed in the fall and spring
when demand for electricity is reduced and maintenance work can be performed
more efficiently. Likewise, services provided to refining and petrochemical
customers tend to be greater in the fall and spring when most planned
turnarounds at customer plants occur. See also Note 15 of Notes to
Consolidated Financial Statements for quarterly financial data. In addition,
the Company's acquisition program can affect not only future results and rates
of growth but also previously reported results because of restatements if
acquisitions are accounted for as poolings-of-interests.
The impact of inflation on the Company has been minimal.
ENVIRONMENTAL PROCEEDINGS
In November 1996, the West Virginia Department of Environmental Protection
(the "West Virginia DEP") issued a draft consent order against one of the
Company's subsidiaries, which order seeks to impose an aggregate of
approximately $229,000 in fines against the Company relating to a
transportation-related spill in West Virginia in November 1995. The Company
voluntarily remediated this spill in December 1995. The draft consent order
alleges that in remediating the spill, the Company did not comply with certain
technical West Virginia DEP remediation regulations relating to recordkeeping
and generator requirements. The Company believes that the West Virginia DEP
remediation regulations cited by the West Virginia DEP as the basis of this
draft consent order are not relevant in the context of an emergency spill
response. Therefore, the Company believes that it may be able to successfully
negotiate the imposition by the West Virginia DEP of significantly lower
penalties in the final consent order. The Company is actively negotiating the
draft consent order with the West Virginia DEP and does not believe that the
final consent order will have a material adverse effect on the Company's
results of operations or financial position.
-14-
<PAGE> 17
NEW FINANCIAL ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" which is effective for years beginning after December
15, 1995 (fiscal 1997 for the Company). This statement established criteria
for recognizing, measuring and disclosing impairments of long-lived assets,
identifiable intangibles and goodwill. The Company will adopt SFAS No. 121 in
the first quarter of fiscal year 1997; however, management does not expect that
the adoption will have a material effect on the Company's financial position or
results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" which is effective for years
beginning after December 15, 1995 (fiscal 1997 for the Company). This
statement allows entities to choose between a new fair value based method of
accounting for employee stock options or similar equity instruments and the
current intrinsic value-based method of accounting prescribed by Accounting
Principles Board Opinion No. 25. Entities electing to remain with the
accounting in APB Opinion No. 25 must make pro forma disclosures of net income
and earnings per share as if the fair value method of accounting had been
applied. The Company expects to continue accounting for employee stock options
and similar equity instruments in accordance with APB Opinion No. 25. The pro
forma effect for fiscal 1996 has not yet been determined.
OUTLOOK FOR 1997
The Company has clearly defined the industrial customer as the focus of
its business strategy. The Company's fiscal 1996 sale of its glass recycling
operations has allowed it to narrow its focus on providing services to the
industrial customer and provide additional capital for expansion of this core
business and developing opportunities independently or through partnering
arrangements in the areas of water and wastewater management, energy services,
contract labor services and, through its investment in The Safe Seal Company,
Inc., leak sealing and valve restoration services. The Company will continue
to evaluate its complement of services offered and allocate capital
accordingly.
While the Company has historically focused on achieving growth through
acquisitions, the Company has, in recent years, shifted its focus to emphasize
increased internal growth. The Company has focused on realizing increased
internal growth primarily by developing new outsourcing and co-sourcing
opportunities with its customers and expanding the number of service lines
offered to customers by each of its operating locations, providing
solution-oriented and preventive services that focus on improving customer
efficiency and profitability, transferring technology and knowledge among the
Company's various operating locations, implementing national marketing programs
that target major industries served by the Company, introducing services in new
geographic areas and developing services that address environmental concerns
associated with new products. The Company's ALLIES(R) program stresses
collaboration between the Company and its customers by focusing on creating
flexible and innovative solutions to a customer's problems and emphasizing the
Company's services as an economically-efficient outsourcing alternative that
can maximize a customer's competitive role in the emerging global market. In
recognition of the new outsourcing and co-sourcing opportunities with its
customers identified through this program, the Company created AllQuest
Enterprises, Inc. ("AllQuest Enterprises"). AllQuest Enterprises enables the
Company to expand the bundle of available service lines offered to its
customers by its operating locations and to create new outsourcing and
co-sourcing opportunities with its customers. AllQuest Enterprises is
comprised of the following early-stage start-up companies: AllQuest Water
Resources, Inc.; AllQuest Technologies, Inc.; AllQuest Pipeline Services, Inc.;
AllQuest Energy Services, Inc.; Allies Staffing, Inc.; and AllQuest Capital,
Inc.
The Company is also focusing on cost control and gross margin expansion
through fiscal 1997. The Company intends to implement selected price increases
when market conditions permit and as a by-product of value-added selling
efforts. The Company anticipates savings resulting from the restructuring in
fiscal 1996 and ongoing cost-reduction initiatives to positively affect its
results of operations in fiscal 1997.
A significant amount of the Company's revenues from its services are
generated on an as needed basis or from irregularly scheduled customer
turnarounds and outages. The Company is also affected by business cycles
experienced by its industrial customer bases and by changes in environmental
laws and regulations or by changes in the interpretation or enforcement of such
laws and regulations. The Company's customers have a significant capacity in
the short-term to defer industrial cleaning, maintenance and disposal services.
Deferrals can occur either due to a reduction in maintenance or capital funds,
customer budget restraints or, conversely, increased demand for a customer's
products that make it impractical to perform cleaning and maintenance on
anticipated schedules. These factors make it difficult to predict, from year
to year, the demand for the Company's services.
-15-
<PAGE> 18
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain sections of this Report, specifically the section captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," may include "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 relating to management's
current expectations regarding the future results of operations or financial
condition of the Company. These forward-looking statements may be identified
by the use of forward-looking terminology such as "may," "will," "believe,"
"anticipate," "should," or comparable terms or the negative thereof. These
statements are based solely on data currently available, which data is subject
to change as a result of changes in conditions and should not therefore be
viewed as assurance regarding the Company's future performance. These
statements involve risks and uncertainties that could cause the actual results
to differ materially from those described in the statements. In addition to the
risks and uncertainties specifically described in the section captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Outlook for Fiscal 1997," these forward-looking statements may also
be affected by the following risks and uncertainties: the effect of economic
and market conditions; the impact of costs, insurance recoveries and
governmental, judicial and other third party interpretation and determination in
connection with legal and environmental proceedings; and the impact of current,
pending or future legislation or regulations (collectively, the "Cautionary
Statements"). Although the Company believes that the expectations reflected in
any forward-looking statements contained herein are reasonable, it can give no
assurance that such expectations will prove to have been correct. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements contained herein.
-16-
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Allwaste, Inc.:
We have audited the accompanying Consolidated Balance Sheets of Allwaste, Inc.
(a Delaware corporation) and subsidiaries as of August 31, 1996 and 1995, and
the related Consolidated Statements of Operations, Shareholders' Equity and
Cash Flows for each of the three years in the period ended August 31, 1996.
These Consolidated Financial Statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these Consolidated
Financial Statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Consolidated Financial Statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the Consolidated
Financial Statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the Consolidated Financial Statements referred to above present
fairly, in all material respects, the financial position of Allwaste, Inc. and
subsidiaries as of August 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
November 15, 1996
-17-
<PAGE> 20
ALLWASTE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
August 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,436 $ 4,029
Receivables, net of allowance for doubtful accounts 75,114 80,065
Prepaid expenses 3,796 3,609
Deferred taxes and other current assets 11,170 10,216
--------- ---------
Total current assets 92,516 97,919
--------- ---------
INVESTMENTS 11,030 --
PROPERTY AND EQUIPMENT, at cost 248,280 230,291
Less -- Accumulated depreciation (119,307) (99,193)
--------- ---------
128,973 131,098
--------- ---------
GOODWILL, net of accumulated amortization 88,032 88,122
NOTES RECEIVABLE 13,517 4,893
OTHER ASSETS 3,119 4,050
NET ASSETS OF DISCONTINUED OPERATIONS -- 46,151
--------- ---------
Total assets $ 337,187 $ 372,233
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 19,250 $ 28,737
Accrued liabilities:
Payroll and related benefits 9,911 8,282
Workers' compensation insurance 14,751 11,686
Other insurance 6,381 5,550
Income taxes and other current liabilities 17,232 13,368
Current maturities of long-term and convertible subordinated debt 6,249 3,371
--------- ---------
Total current liabilities 73,774 70,994
--------- ---------
LONG-TERM DEBT, net of current maturities 87,971 120,535
CONVERTIBLE SUBORDINATED DEBT, net of current maturities 33,924 41,972
DEFERRED INCOME TAXES AND OTHER LIABILITIES 10,572 10,441
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock, 500,000 shares authorized, none issued or outstanding -- --
Common Stock, $.01 par value, 100,000,000 shares authorized,
39,799,029 and 39,609,429 shares issued in 1996 and 1995, respectively 398 396
Additional paid-in capital 55,699 54,958
Retained earnings 84,163 73,999
--------- ---------
140,260 129,353
Less:
Treasury Stock, at cost, 1,945,805 and 250,000 shares in 1996
and 1995, respectively (8,561) (1,062)
Unearned compensation related to outstanding restricted Common Stock (753) --
--------- ---------
Total shareholders' equity 130,946 128,291
--------- ---------
Total liabilities and shareholders' equity $ 337,187 $ 372,233
========= =========
</TABLE>
The accompanying notes are an integral part of these
Consolidated Financial Statements.
-18-
<PAGE> 21
ALLWASTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Years Ended August 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUES $ 382,165 $ 344,245 $ 286,861
COST OF OPERATIONS 286,412 254,596 204,492
--------- --------- ---------
Gross profit 95,753 89,649 82,369
WRITE-DOWNS OF OPERATING EQUIPMENT -- 6,908 --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 77,011 72,976 59,020
INTEREST EXPENSE (9,581) (8,785) (5,617)
INTEREST INCOME 1,041 402 484
OTHER INCOME (EXPENSE), net 2,360 (3,499) (1,302)
--------- --------- ---------
Income (loss) from continuing operations before
income tax provision and minority interest 12,562 (2,117) 16,914
INCOME TAX PROVISION (6,030) (2,170) (6,725)
MINORITY INTEREST, net of taxes 82 408 407
--------- --------- ---------
Income (loss) from continuing operations 6,614 (3,879) 10,596
Discontinued Operations
Income from discontinued operations, net of applicable
income taxes -- 2,773 2,501
Gain on sale of glass recycling operations, net of
applicable income taxes 3,764 -- --
--------- --------- ---------
Net income (loss) $ 10,378 $ (1,106) $ 13,097
========= ========= =========
NET INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ .17 $ (.10) $ .29
Discontinued operations .10 .07 .07
--------- --------- ---------
Net income (loss) per common share $ .27 $ (.03) $ .36
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
Consolidated Financial Statements.
-19-
<PAGE> 22
ALLWASTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock
------------------
Number Additional Share-
of Paid-In Retained Treasury Unearned holders'
Shares Amount Capital Earnings Stock Compensation Equity
------ --------- ---------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 31, 1993 36,740 $ 367 $ 43,097 $ 61,732 $ -- $ -- $ 105,196
Net income -- -- -- 13,097 -- -- 13,097
Issuance of Common Stock for
purchased businesses 934 9 4,093 -- -- -- 4,102
Issuance of Common Stock
pursuant to stock option plans
and related tax benefits 67 -- 292 -- -- -- 292
Treasury Stock acquired in lawsuit
settlement -- -- -- -- (1,062) -- (1,062)
Change in cumulative
translation adjustment -- -- -- (407) -- -- (407)
------ --------- --------- --------- --------- --------- ---------
BALANCE, AUGUST 31, 1994 37,741 376 47,482 74,422 (1,062) -- 121,218
Net loss -- -- -- (1,106) -- -- (1,106)
Issuance of Common Stock for
acquired businesses 1,432 15 5,079 810 -- -- 5,904
Issuance of Common Stock
pursuant to stock option plans
and related tax benefits 436 5 2,397 -- -- -- 2,402
Change in cumulative
translation adjustment -- -- -- (127) -- -- (127)
------ --------- --------- --------- --------- --------- ---------
BALANCE, AUGUST 31, 1995 39,609 396 54,958 73,999 (1,062) -- 128,291
Net income -- -- -- 10,378 -- -- 10,378
Issuance of Common Stock for
previously acquired business 25 -- 128 -- -- -- 128
Issuance of Common Stock
pursuant to stock option plans
and related tax benefits 165 2 638 -- -- -- 640
Issuance of treasury shares -- -- (25) -- 1,714 (925) 764
Compensation expense -- -- -- -- -- 172 172
Purchase of Treasury Stock -- -- -- -- (9,213) -- (9,213)
Change in cumulative
translation adjustment -- -- -- (214) -- -- (214)
------ --------- --------- --------- --------- --------- ---------
BALANCE, AUGUST 31, 1996 39,799 $ 398 $ 55,699 $ 84,163 $ (8,561) $ (753) $ 130,946
====== ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
Consolidated Financial Statements.
-20-
<PAGE> 23
ALLWASTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Years Ended August 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,378 $ (1,106) $ 13,097
Reconciliation of net income (loss) to cash provided by operating
activities:
Depreciation 28,639 25,715 20,635
Amortization 2,909 2,611 2,824
Write-downs of operating equipment -- 6,908 --
Gain on sale of glass recycling operations, net of taxes (3,764) -- --
Allowances on notes receivable -- 1,000 790
Write-downs of investments -- 1,950 950
Amortization of unearned compensation - restricted stock 172 -- --
Gain on purchases of convertible subordinated debentures (153) -- --
Gain on sales of property and equipment (1,081) (777) (146)
Equity in losses of unconsolidated partnership -- -- 2,805
Gain on sale of Common Stock investment -- -- (2,688)
Common Stock received in lawsuit settlement -- -- (1,062)
Change in assets and liabilities, net of effect of acquisitions
accounted for as purchases:
Receivables 4,545 (10,787) (9,412)
Prepaid expenses, deferred taxes
and other current assets (112) (2,309) (2,556)
Notes receivable and other assets (1,602) 722 (3,310)
Accounts payable (9,556) 8,278 (13)
Accrued liabilities 2,187 7,170 (2,067)
Deferred income taxes and other liabilities 366 (1,259) 1,521
-------- -------- --------
Cash provided by operating activities 32,928 38,116 21,368
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of glass recycling operations 41,500 -- --
Additions to property and equipment (27,541) (47,193) (34,145)
Proceeds from sales of property and equipment 3,249 2,394 2,112
Purchase of investments (3,030) -- --
Payments for acquisitions accounted for as purchases, net
of cash acquired of $123, $1,337 and $241 (2,145) (19,320) (7,468)
Proceeds from sale of investment in marketable security -- -- 2,982
Cash used in discontinued operations -- (4,233) (7,013)
-------- -------- --------
Cash provided by (used in) investing activities 12,033 (68,352) (43,532)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuances of Common Stock 665 2,279 292
Net increase (decrease) in revolving credit facility (32,309) 35,670 32,910
Net decrease in other long term borrowings (4,575) (6,577) (10,469)
Purchases of convertible subordinated debentures (908) -- --
Purchases of Treasury Stock (9,213) -- --
-------- -------- --------
Cash provided by (used in) financing activities (46,340) 31,372 22,733
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES (214) (127) (407)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,593) 1,009 162
CASH AND CASH EQUIVALENTS, beginning of year 4,029 3,020 2,858
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year $ 2,436 $ 4,029 $ 3,020
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
Consolidated Financial Statements.
-21-
<PAGE> 24
ALLWASTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
Description of business
Allwaste, Inc. ("Allwaste" or the "Company") provides integrated
industrial and environmental services and acts as an outsourcing provider of
on-site facility processes and services, primarily in the United States, Canada
and Mexico. The Company, through its operating subsidiaries and affiliates,
provides to its industrial and commercial customers a range of industrial and
environmental services, including: on-site industrial and waste management
services (including hydroblasting and gritblasting and air-moving and liquid
vacuuming); waste transportation and processing; wastewater services; site
remediation; maintenance services; turnaround and outage services; container
cleaning and repair services; emergency spill response services; and other
general plant support services.
Principles of consolidation and basis of presentation
The Consolidated Financial Statements include the accounts of Allwaste,
Inc. and all of its wholly-owned and majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. For all periods presented, the Consolidated Financial
Statements and Notes to Consolidated Financial Statements reflect the Company's
glass recycling operations as a discontinued operation, as discussed in Note 3.
Additionally, certain prior year amounts have been reclassified to conform with
the fiscal 1996 presentation.
Revenue recognition
Revenues are recorded as services are performed. Revenues derived from
services provided under fixed-price contracts are recognized on a
percentage-of-completion basis, using the cost-to-cost method. If it is
determined that a contract may result in a loss, a provision for the loss is
accrued at that time.
Property and equipment
Property and equipment are carried at cost and depreciated over the
estimated useful life of the asset using the straight-line method. The costs
of major improvements are capitalized. Expenditures for maintenance, repairs
and minor improvements are expensed as incurred. When property and equipment
are sold or retired, the cost and related accumulated depreciation are removed
and the resulting gain or loss is included in results of operations.
Interest paid in connection with the construction of major facilities and
equipment is capitalized. The capitalized interest is recorded as a part of
the related asset and is depreciated over the asset's estimated useful life.
Capitalized interest related primarily to expansions and improvements at
container service facilities was $0.1 million, $0.3 million and $0.1 million
for the years ended August 31, 1996, 1995 and 1994, respectively.
Goodwill
Goodwill represents the excess of the aggregate purchase price over the
net tangible and identifiable intangible assets of acquired businesses
accounted for under the purchase method of accounting and is amortized on a
straight-line basis over a period of 40 years. Subsequent to purchase, the
Company continually evaluates whether events or circumstances have occurred
that indicate the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be recoverable.
When factors indicate that goodwill should be evaluated for possible
impairment, the Company uses an estimate of the acquired business' undiscounted
future cash flows compared to the carrying value of goodwill to determine
whether goodwill is deemed to be impaired. Management believes there have been
no events or circumstances which warrant revision to the remaining useful life
or which affect the recoverability of the Company's recorded goodwill.
Accumulated amortization of goodwill as of August 31, 1996 and 1995 was $9.1
million and $6.6 million, respectively.
Income taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes". Under
SFAS No. 109, the Company provides deferred income taxes for the tax effects of
temporary differences between the financial reporting and income tax bases of
the Company's assets and liabilities.
-22-
<PAGE> 25
Environmental expenditures
Environmental expenditures are expensed or capitalized based upon their
future economic benefit. Costs which improve a property, as compared with the
condition of the property when originally constructed or acquired, and costs
which prevent future environmental contamination are capitalized. Costs
related to environmental damage resulting from operating activities subsequent
to acquisition are expensed. Liabilities for these expenditures are recorded
when it is probable that obligations have been incurred and the amounts can be
reasonably estimated.
Minority interest
The Company owns an aggregate 60% joint venture interest in each of two
companies in Mexico, and a Mexican company owns the remaining 40% interest in
each entity. One of the companies performs various industrial services,
including site remediation and aboveground storage tank cleaning services. The
primary operations of the other company are underground storage tank testing
services.
For financial reporting purposes, the joint ventures' assets and
liabilities are consolidated with those of the Company. The Mexican company's
minority interests, $0.5 million and $0.4 million at August 31, 1996 and 1995,
respectively, are included in the Company's Consolidated Balance Sheets in
deferred income taxes and other liabilities. The joint venture experienced
pre-tax losses of $0.3 million, $1.2 million and $0.9 million in fiscal 1996,
1995 and 1994, respectively.
Per share amounts
Per share amounts are calculated based on the weighted average number of
common and common equivalent shares outstanding for each year (see Note 13).
Foreign currency translation
The Company's Canadian and Mexican subsidiaries maintain their books and
records in Canadian dollars and Mexican pesos, respectively. Assets and
liabilities of these operations are translated into United States ("U.S.")
dollars at the exchange rate in effect at the end of each accounting period;
and, income and expense accounts are translated at the average exchange rate
prevailing during the respective period. Gains and losses resulting from such
translation are included in retained earnings. Gains and losses from
transactions in foreign currencies are credited or charged to operations
currently and are not material.
Investment activity
In September 1995, the Company sold its glass recycling operations to
Strategic Holdings, Inc. ("SHI"), a company formed by Equus II Incorporated
("Equus"). As partial consideration for the sale, the Company received $8.0
million of redeemable Series A preferred stock. The stock is redeemable by SHI
beginning in 2002. This investment is recorded using the cost method and is
included in investments in the accompanying Consolidated Balance Sheets (See
Note 3).
In October 1995, the Company acquired a 10% interest in The Safe Seal
Company, Inc. ("Safe Seal") which specializes in valve repair and leak sealing.
This $2.6 million investment consists of 20,000 shares of redeemable Class A
preferred stock, 422,000 shares of common stock and warrants to purchase common
shares and is recorded using the cost method.
For most of fiscal 1994, the Company owned a 40% interest in a wastewater
pretreatment facility and recorded such investment using the equity method of
accounting. Prior to increasing its ownership interest in late fiscal 1994 to
100%, the Company's equity in losses of this partnership was $1.8 million for
the year ended August 31, 1994 and were included in other income (expense), net
in the accompanying Consolidated Statements of Operations. Additionally, in
fiscal 1994, the Company recorded $1.0 million in losses relating to its
investment in this facility which is recorded in other income (expense), net in
the accompanying Consolidated Statements of Operations.
The Company acquired 181,000 shares of Sanifill, Inc. ("Sanifill"), a
publicly traded corporation involved in the collection and disposal of solid
waste, pursuant to a private offering in 1989 at an average cost of $1.62 per
share. In November 1993, the Company sold all of its shares of Sanifill. The
sale resulted in a pretax gain for fiscal year 1994 of $2.7 million which is
reflected in other income (expense), net in the accompanying Consolidated
Statements of Operations.
-23-
<PAGE> 26
Fiscal 1995 special charges
During fiscal 1995, the Company recorded special charges of $11.9 million.
Such charges include $6.9 million of charges classified as write-downs of
operating equipment in the accompanying Consolidated Statements of Operations.
These write-downs related to the permanent impairment of certain operating
equipment in Mexico and California, a wastewater pretreatment facility,
equipment relating to two small businesses exited and various owned facilities
held for sale. Included in SG&A expenses in the accompanying Consolidated
Statements of Operations are $1.1 million of charges primarily representing the
write-off of organizational expenses relating to the Mexico joint ventures.
The Consolidated Statements of Operations also reflect $0.6 million in interest
expense relating to the write-off of previously unamortized loan costs in
connection with the bank amendment to the revolving credit facility completed
in August 1995. Other income (expenses), net in the accompanying Consolidated
Statements of Operations reflects $3.6 million in charges relating to an
allowance provided for a note receivable and the write-off of the Company's
remaining investment in IAM/Environmental, Inc. ("IAM") and another
previously-owned business, as well as the settlement of a lawsuit related to
the previously discontinued asbestos abatement business. The write-off related
to IAM of $2.0 million reduced the Company's carrying value in this investment
to zero. Certain of the charges relating to the Mexico joint venture are
partially offset by the minority interest effect of such charges.
Cash flow reporting
Highly liquid debt instruments with an original maturity of three months
or less are considered to be cash equivalents. Cash payments for interest
during the years ended August 31, 1996, 1995 and 1994 were $9.6 million, $10.0
million and $6.3 million, respectively, and cash payments for income taxes
during the years ended August 31, 1996, 1995 and 1994 were $4.9 million, $4.5
million and $8.4 million, respectively.
New financial accounting standards
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" which is effective for years beginning after December
15, 1995 (fiscal 1997 for the Company). This statement established criteria
for recognizing, measuring and disclosing impairments of long-lived assets,
identifiable intangibles and goodwill. The Company will adopt SFAS No. 121 in
the first quarter of fiscal year 1997; however, management does not expect that
the adoption will have a material effect on the Company's financial position or
results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" which is effective for years
beginning after December 15, 1995 (fiscal 1997 for the Company). This
statement allows entities to choose between a new fair value based method of
accounting for employee stock options or similar equity instruments and the
current intrinsic value-based method of accounting prescribed by Accounting
Principles Board Opinion No. 25. Entities electing to remain with the
accounting in APB Opinion No. 25 must make pro forma disclosures of net income
and earnings per share as if the fair value method of accounting had been
applied. The Company expects to continue accounting for employee stock options
and similar equity instruments in accordance with APB Opinion No. 25. The pro
forma effect for fiscal 1996 has not yet been determined.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the Company's estimates.
(2) ACQUISITIONS --
Under the purchase method of accounting, the results of acquired
businesses are included with the Company's results from their respective
acquisition dates. The following table summarizes the Company's business
acquisitions accounted for under the purchase method (dollars in thousands):
<TABLE>
<CAPTION>
Businesses Cash and Convertible Shares of Total
Purchased Promissory Notes Subordinated Notes Common Stock Consideration
---------- ---------------- ------------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Fiscal 1996 4 $ 2,445 $ -- -- $ 2,445
Fiscal 1995 13 23,231 4,985 1,426,096 36,766
Fiscal 1994 9 7,875 534 934,290 12,511
</TABLE>
-24-
<PAGE> 27
The allocations of the purchase price to the fair market value of the net
assets acquired in the fiscal 1996 acquisitions are based on preliminary
estimates of fair market value and may be revised when additional information
concerning asset and liability valuations is obtained.
As an integral part of each of the above acquisitions, all former
shareholders signed non-compete agreements and key management entered into
agreements with the Company to continue managing these businesses.
In connection with two acquisitions made prior to fiscal 1996, the Company
agreed to make contingent payments to the former owners over periods up to five
years based on formulas in the respective acquisition agreements. At the
Company's option, these payments may be made in either cash or common stock of
the Company. At August 31, 1996, the maximum aggregate amount of contingent
payments was $3.2 million. In management's opinion, based on the current
performance levels of the individual acquisitions involved, the ultimate
settlement of these contingent payment obligations is likely to be
substantially less than the $3.2 million maximum aggregate. Approximately $0.3
million in contingent payments were made during 1996. Amounts earned under the
terms of these agreements are recorded as additional goodwill and amortized
over the remaining amortization period.
(3) DISCONTINUED OPERATIONS --
In September 1995, the Company sold its glass recycling operations to SHI,
a company formed by Equus. In October 1996, the Company and Equus finalized an
agreement with respect to certain post-closing issues which were unresolved on
the date of the sales transaction. The total consideration, as adjusted, was
$56.1 million, including $41.5 million in cash, $8.0 million of redeemable
Series A preferred stock redeemable beginning in 2002, and a $6.6 million
subordinated note receivable due in 2002. The redeemable Series A preferred
stock dividend is $.065 per share for the period prior to September 1, 1996 and
$.06 per share thereafter. The subordinated note receivable interest rate is
11% for the period prior to September 1, 1996 and 10.5% thereafter. The
agreement also provided that all dividends and interest due prior to August 31,
1997 will not be paid when due, but "paid in kind" in the form of two 8.036%
subordinated notes issued September 30, 1996 and June 30, 1997 in the amounts of
$1.3 million and $0.9 million, respectively. Principal on these two notes will
be due on November 30, 2002. At August 31, 1996, the Company had accrued $0.5
million for dividends and $0.8 million for interest which is reflected in other
income (expense) in the accompanying Consolidated Statements of Operations. The
Company also received warrants to purchase shares of SHI common stock, providing
the Company the right to own up to approximately 33% of the outstanding stock of
SHI. The Company may receive additional consideration in the form of an
adjustment to the purchase price in the event that Equus' internal rate of
return, as defined, exceeds certain predetermined targets. The amount of such
additional consideration, if any, is not presently determinable. The Company
recorded a gain on the sale of its glass recycling operations of $3.8 million,
net of estimated applicable income taxes of $1.6 million, in the first quarter
of fiscal 1996. Revenues of the glass recycling operations, net of intercompany
sales, were $70.0 million and $63.2 million for the fiscal years ended August
31, 1995 and 1994, respectively.
The net assets of the glass recycling operations consisted of the
following as of August 31, 1995 (in thousands):
<TABLE>
<S> <C>
Net working capital $ 7,726
Property and equipment, net 21,335
Goodwill and other assets 19,264
Long-term debt 440
Deferred income taxes and other 1,734
</TABLE>
Income from discontinued operations in the Consolidated Statements of
Operations is presented net of allocated interest expense of $1.6 million and
$1.0 million and net of applicable income taxes of $1.8 million and $1.6
million for fiscal years 1995 and 1994, respectively. The interest was
allocated based upon the net assets of the glass recycling operations in
relation to the Company's consolidated net assets plus general corporate debt.
-25-
<PAGE> 28
(4) RECEIVABLES --
Receivables included in current assets consisted of the following (in
thousands):
<TABLE>
<CAPTION>
August 31,
------------------------
1996 1995
------- -------
<S> <C> <C>
Trade accounts $76,378 $80,619
Employees 567 996
Other 489 2,133
------- -------
77,434 83,748
Less -- Allowance for doubtful accounts (2,320) (3,683)
------- -------
$75,114 $80,065
======= =======
</TABLE>
Notes receivable recorded as non-current assets consisted of the following
(in thousands):
<TABLE>
<CAPTION>
August 31,
------------------------
1996 1995
------- -------
<S> <C> <C>
Notes receivable from employees $ 2,702 $ 2,483
Notes receivable from sale of discontinued
asbestos abatement operation 2,888 2,888
Notes receivable from sale of discontinued
glass recycling operations:
Subordinated note receivable 6,610 --
Accrued interest and dividends 1,285 --
Notes receivable from sale of other businesses 350 790
Other 682 522
------- -------
14,517 6,683
Less -- Loss reserves (1,000) (1,790)
------- -------
$13,517 $ 4,893
======= =======
</TABLE>
(5) PROPERTY AND EQUIPMENT--
The principal categories and estimated useful lives of property and
equipment were as follows (dollars in thousands):
<TABLE>
<CAPTION>
August 31,
Estimated --------------------------
Useful Lives 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
Land $ 6,412 $ 6,226
Building and improvements 10 - 30 years 34,421 28,127
Service equipment and related vehicles 2 - 20 years 188,309 178,162
Other 3 - 10 years 19,138 17,776
---------- ----------
248,280 230,291
Less: accumulated depreciation (119,307) (99,193)
---------- ----------
Property and equipment, net $ 128,973 $ 131,098
========== ==========
</TABLE>
-26-
<PAGE> 29
(6) DEBT --
Long-term debt
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
August 31,
---------------------
1996 1995
------- --------
<S> <C> <C>
Revolving credit agreement $87,770 $120,079
Notes payable to individuals in connection with
acquisitions of businesses (see Note 2), banks and
financial institutions, weighted average interest
rate of 8.4% at August 31, 1996, payable in
various installments through 1999 385 1,142
------- --------
88,155 121,221
Less -- Current maturities (184) (686)
------- --------
$87,971 $120,535
======= ========
</TABLE>
Revolving credit agreement
In December 1993, the Company entered into a revolving credit agreement
with a group of banks. This agreement, as amended most recently in August
1996, provides an unsecured $160 million revolving credit line to the Company
through January 31, 1999, at which time any outstanding borrowings convert to a
term loan due in equal quarterly installments through January 31, 2003.
Interest on outstanding borrowings is charged, at the Company's option, at the
banks' prime rate (8 1/4% at August 31, 1996), adjusted Eurodollar Rate or the
banks' reserve adjusted certificate of deposit rate (CD rate) plus 0% to 1.625%
as determined by the calculation of the debt to cash flow ratio (as defined).
A commitment fee of .25% is payable on the unused portion of the line. Three
of the banks participating in the revolving credit agreement have also extended
to the Company uncommitted, short-term lines of credit with interest rates
which may be more favorable to the Company than those available under the
revolving credit agreement. As of August 31, 1996, the Company had $87.8
million outstanding under the revolving credit agreement and the uncommitted
lines of credit and had utilized $30.1 million of the facility for letters of
credit to secure certain insurance obligations and performance bonds. Under
the terms of the agreement, the Company must maintain a minimum fixed charge
coverage ratio (as defined) and certain other minimum financial ratios.
Borrowing availability is subject to the Company meeting minimum leverage and
other ratios. Management believes it is in compliance with all applicable
covenants under the revolving credit agreement as of August 31, 1996. As of
November 15, 1996, available borrowing capacity, as defined under the
agreement, was $39.0 million. The credit agreement prohibits the payment of
cash dividends.
Maturities of long-term debt outstanding at August 31, 1996 are as follows
(in thousands):
For the year ending August 31 --
<TABLE>
<S> <C> <C>
1997 $ 184
1998 191
1999 10,982
2000 21,943
2001 21,943
Thereafter 32,912
-------
$88,155
=======
</TABLE>
In August 1996, the Company purchased a three year interest rate cap
agreement of 7.0% on $30,000,000 from two of the banks which participate in the
Company's revolving credit agreement. Quarterly payments under the agreement
are based on the difference between a floating rate based on a three-month
LIBOR and the cap rate. The cost was $0.3 million and is being amortized over
the term of the agreement.
-27-
<PAGE> 30
Convertible subordinated debt
Convertible Subordinated Debentures
In June 1989, the Company completed a public offering of $30.0 million of
7.25% Convertible Subordinated Debentures due June 1, 2014 (the "Debentures");
net proceeds to the Company were $28.7 million. Direct offering costs related
to the Debentures are included in other assets in the accompanying Consolidated
Balance Sheets and are being amortized over the term of the Debentures. The
Debentures are convertible by the holder, at any time, into shares of the
Company's Common Stock at a price of $11.94 per share and are redeemable for
cash at the option of the Company. The Debentures provide for annual mandatory
sinking fund payments equal to 5% of the aggregate principal amount of the
Debentures issued, commencing June 1, 1999. Interest is payable semi-annually,
on June 1 and December 1. In fiscal 1996, the Company repurchased $1.1 million
of these Debentures at 85% of face value. The related gain of $0.2 million was
included in interest expense in the accompanying Consolidated Statements of
Operations.
In October 1994, the Company entered into an interest rate swap agreement
through June 1997 to potentially lower the overall cost of borrowings. The
agreement modified the $30.0 million of 7.25% fixed rate debt to LIBOR plus
.24% debt, which was reset quarterly. On May 31, 1995, the Company terminated
the agreement and is amortizing the $0.5 million received as a reduction of
interest expense on a straight-line basis over the remaining term of the
original swap.
Convertible Subordinated Notes
At August 31, 1996, the Company had outstanding $11.1 million of
convertible subordinated notes to former owners of certain acquired businesses
(the "Notes") which were issued as partial consideration of the acquisition
purchase price. The Notes bear interest, payable quarterly, at a weighted
average rate of 6.2% and are convertible by the holder into shares of the
Company's Common Stock at a weighted average price of $7.24 per share. The
Notes are redeemable for cash or the Company's Common Stock at the option of
the Company at any time after one year of issuance.
Maturities of the Notes outstanding at August 31, 1996 are as follows (in
thousands):
For the year ending August 31 --
<TABLE>
<S> <C>
1997 $ 6,065
1998 4,985
--------
$ 11,050
========
</TABLE>
(7) INCOME TAXES --
The Company and its U.S. subsidiaries file a consolidated federal income
tax return. Acquired entities file appropriate tax returns through their
respective acquisition dates (absent certain administrative elections) and,
thereafter, are included in the Company's consolidated return. Foreign income
taxes consist primarily of Canadian federal and provincial taxes attributable
to the Company's Canadian subsidiaries.
Foreign pretax book income (loss) net of certain intercompany interest
expense and other items was $0.5 million (consisting of a Mexican loss of $0.2
million and Canadian income of $0.7 million,) ($0.4 million) and $1.2 million
for the years ended August 31, 1996, 1995 and 1994, respectively.
Federal, state and foreign income tax provisions (benefits) are as follows
(in thousands):
<TABLE>
<CAPTION>
For the Years Ended August 31,
-------------------------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Federal --
Current $ 4,941 $ 6,536 $ 1,327
Deferred 706 (6,260) 3,819
-------- ------ ------
5,647 276 5,146
-------- ------ ------
State --
Current 1,034 1,494 584
Deferred (448) (430) 179
-------- ------- ------
586 1,064 763
-------- ------ ------
</TABLE>
-28-
<PAGE> 31
<TABLE>
<S> <C> <C> <C>
Foreign --
Current 290 667 840
Deferred (493) 163 (24)
------ -------- -------
(203) 830 816
------ -------- -------
$6,030 $ 2,170 $ 6,725
====== ======== =======
</TABLE>
The differences in the income taxes provided and the amount determined by
applying the U.S. federal statutory rate to income before income taxes are
summarized as follows:
<TABLE>
<CAPTION>
For the Years Ended August 31,
-----------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax at statutory rate 35% 35% 35%
Effect of valuation allowance 1 (55) --
State income taxes, net of benefit for federal
deduction 3 (33) 3
Effect of meals and entertainment limitation 4 (21) --
Effect of other nondeductible amortization
of goodwill 4 (16) 2
Effect of other nondeductible expenses 1 (7) --
Foreign income taxes at higher rates -- (3) 1
Other -- (3) (1)
------ ------ ------
48% (103)% 40%
====== ====== ======
</TABLE>
Deferred income tax expense results principally from the use of different
capital recovery and revenue and expense recognition methods for tax and
financial accounting purposes. The sources of these temporary differences and
related tax effect were as follows (in thousands):
<TABLE>
<CAPTION>
For the Years Ended August 31,
-------------------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Depreciation and amortization $2,417 $ 901 $1,361
Accruals and reserves not deductible
until paid 1,031 (5,186) 1,926
Write-downs of assets -- (1,580) --
Sale of certain leasing operations (141) (305) (222)
Sale of glass recycling operations (2,932) -- --
Other, net (610) (357) 909
------ ------- ------
Total deferred income
tax provision (benefit) $ (235) $(6,527) $ 3,974
====== ======= =======
</TABLE>
Deferred tax assets and liabilities are determined based on the estimated
future tax effects of differences between the financial statement and tax bases
of assets and liabilities. On the accompanying Consolidated Balance Sheets,
current and non-current deferred tax assets and liabilities are netted within
each tax jurisdiction. The following table sets forth the gross deferred tax
assets (liabilities) recorded as of August 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Current deferred tax assets $ 8,681 $ 8,512
Non-current deferred tax assets 3,383 5,003
Valuation allowance (1,230) (1,156)
---------- ----------
Total deferred tax assets 10,834 12,359
---------- ----------
Non-current deferred tax liabilities (13,238) (14,998)
---------- ----------
Net deferred tax liabilities $ (2,404) $ (2,639)
========== ==========
</TABLE>
-29-
<PAGE> 32
The Company is required to record valuation allowances for deferred tax
assets which management believes it is more likely than not that the tax asset
will not be realized. Accordingly, the Company established valuation
allowances against certain deferred tax assets: primarily those attributable to
the Company's net operating losses of its joint ventures in Mexico.
Prepaid income taxes of $0.7 and $1.2 million are included in prepaid
expenses at August 31, 1996 and 1995, respectively.
(8) SHAREHOLDERS' EQUITY --
Preferred Stock
The Company can issue up to 500,000 shares of Preferred Stock, none of
which are issued or outstanding. The Board of Directors is authorized to
provide for the issuance of the Preferred Stock in series, to establish the
number of shares to be included in each such series and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof. This includes, among
other things, any voting rights, conversion privileges, dividend rates,
redemption rights, sinking fund provisions and liquidation rights which shall
be superior to the Common Stock. No holder of Preferred Stock will have
preemptive rights.
Stock option plans
In January 1995, the Company's stockholders approved the Amended and
Restated 1989 Replacement Non-Qualified Stock Option Plan (the "Plan"), which
increased the number of shares issuable under the Plan from 3,000,000 shares to
4,500,000 shares. Under the Plan and notwithstanding certain restrictions
placed upon grants of options to persons subject to Section 16(a) of the
Securities Exchange Act of 1934, through August 31, 1999, all forfeited,
expired and exercised options automatically become available for grants of new
options under the Plan; therefore, the number of granted option shares plus
those remaining available for grant shall remain constant at 4,500,000 through
such date. Stock options are granted under the Plan at an exercise price which
equals the fair market value of the Common Stock on the date of grant or on the
date which marks the occurrence of the event pursuant to which the options are
granted.
In July 1996, the compensation committee of the Board of Directors
approved a stock option exchange offer program (the "Exchange Program"),
pursuant to which all holders of stock options under the Plan were offered the
opportunity to exchange existing outstanding option grants for new option
grants with a new exercise price of $4.81 per share, a new eight-year term and
a new four-year vesting schedule. Options to purchase an aggregate of
2,251,961 shares of Common Stock (of which, options to purchase an aggregate of
287,526 shares were initially granted during fiscal 1996) were exchanged under
the Exchange Program.
At August 31, 1996, options to purchase 3,419,878 shares were outstanding
under the Plan at prices ranging from $3.88 to $6.75 per share, of which
options to purchase 404,568 shares were exercisable. Subsequent to August 31,
1996, options to purchase an additional 949,950 shares were granted under the
Plan at the per share exercise price of $4.25.
In October 1992, the Company's Board of Directors adopted a supplemental
option plan ("Supplemental Plan") to enable the Company to fulfill obligations
to former employees. A total of 1,500,000 shares are issuable under the
amended Supplemental Plan. At August 31, 1996, options to purchase 1,018,812
shares were outstanding under the Supplemental Plan at prices ranging from
$4.00 to $10.88 per share, of which options to purchase 689,818 shares were
exercisable. Subsequent to August 31, 1996, there were no options granted
under the Supplemental Plan.
The following table summarizes aggregate stock option activity of both the
Company's stock option plans for each of the three years ended August 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Options outstanding, beginning of year 4,220,271 3,422,925 3,153,791
Granted 2,440,601 1,895,400 871,740
Exercised (164,600) (430,526) (66,377)
Forfeited and canceled (2,057,587) (667,528) (536,229)
------------- ------------ ------------
Options outstanding, end of year 4,438,685 4,220,271 3,422,925
============= ============ ============
</TABLE>
-30-
<PAGE> 33
<TABLE>
<S> <C> <C> <C>
Option prices per share:
Granted $ 4.00 - 6.50 $ 4.00 - 6.25 $ 4.00- 6.75
Exercised $ 0.50 - 4.25 $ 4.00 - 5.88 $ 4.00- 5.63
Forfeited and canceled $ 4.00 - 10.88 $ 4.00 - 12.19 $ 4.00-12.19
</TABLE>
Treasury Stock
In July 1995, the Board of Directors of the Company approved a Stock
Repurchase Plan which authorizes management of the Company to repurchase up to
5,000,000 shares of Common Stock, either on the open market or in privately
negotiated transactions, at prevailing market prices over a two year period.
As of August 31, 1996, 2,075,900 shares of Common Stock had been repurchased
under the plan at an average price of $4.44 per share. During fiscal 1996, the
Company used 380,095 of these treasury shares for incentive plans, employment
agreements and various other uses. Subsequent to August 31, 1996, the Company
has repurchased 1,029,400 additional shares of its Common Stock at an average
cost of $4.67 per share. Future repurchases of the Company's Common Stock will
be dependent on prevailing market conditions and other investment
opportunities.
In October 1993, the Company reached a settlement of a lawsuit with a
former owner of an acquired business and other parties. In exchange for a full
and complete release of all claims against the parties, the Company received
$1.0 million in cash and 250,000 shares of the Company's Common Stock. This
transaction resulted in a gain of $1.4 million, net of related fiscal 1994
legal expenses, which is reflected in other income (expense), net in the
Consolidated Statements of Operations.
Stockholder Rights Plan
The Company's Stockholder Rights Plan (the "Rights Plan"), adopted in
August 1996, is designed to deter coercive or unfair takeover tactics and to
prevent a person or group from gaining control of the Company without offering
a fair price to all stockholders.
All stockholders of record on August 15, 1996 were issued, for each share
of Common Stock held, one "right" entitling them to purchase from the Company
one-thousandth of a share of Series One Junior Participating Preferred Stock of
the Company at an exercise price of $20 (the "Rights"). The Rights are
distributable on the earlier of: 10 days (the "Shares Acquisition Date") after
a public announcement that a person or group has acquired beneficial ownership
of 15% or more of the Company's Common Stock (an "Acquiring Person") or 10
business days after a person or group commences a tender or exchange offer upon
consummation of which such person or group would, if successful, beneficially
own 20% or more of the Company's outstanding Common Stock.
The Company will generally be entitled to redeem the Rights in full, at
$.01 per Right, at any time until close of business up to 10 days following the
Shares Acquisition Date. The Rights will expire on August 5, 2006, unless
redeemed earlier by the Company's Board of Directors.
If a person (and its affiliates) becomes the beneficial owner of 20% or
more of the outstanding shares of the Common Stock (a "Flip-In Triggering
Event"), each Right (other than those Rights held by an Acquiring Person or its
transferees, which Rights are void) becomes exercisable for shares of the
Company's Common Stock having a value of twice the exercise price of such
Rights. Alternatively, in the event the Company is involved in a merger or
other business combination in which the Company would not be the surviving
corporation or its Common Stock is changed or converted, or it sells 50% or
more of its assets or earning power to another person or group, each Right
would entitle the holder to purchase, at the Right's then current exercise
price, common shares of such other person or group having a value of twice the
exercise price of the Right.
(9) COMMITMENTS AND CONTINGENCIES --
Lease commitments
The Company has entered into various operating lease agreements, primarily
for office space, service facilities and service equipment utilized for
operations. Minimum annual rental payments under noncancellable operating
leases as of August 31, 1996 were as follows (in thousands):
-31-
<PAGE> 34
For the year ending August 31 --
<TABLE>
<S> <C>
1997 $ 5,324
1998 4,528
1999 3,385
2000 2,268
2001 1,400
Thereafter 4,444
---------
$ 21,349
=========
</TABLE>
Rental expense under operating leases was $16.0 million, $15.1 million and
$11.8 million for the years ended August 31, 1996, 1995 and 1994, respectively.
These amounts include a service facility leased from the Company's Chairman of
the Board of Directors, for which rental expense was $0.1 million for each of
the years ended August 31, 1996, 1995 and 1994.
Legal matters
In the normal course of its operations, the Company can become involved in
a variety of legal disputes. Currently, the Company is a defendant in several
legal proceedings, including workers' compensation matters and minor business
disputes, the majority of which are being handled or are expected to be handled
by the Company's insurance carriers. As a company that handles and transports
hazardous waste, the Company is involved in various administrative and court
proceedings under environmental laws and regulations relating to permit
applications, operating authorities and alleged liabilities related to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended. Management of the Company believes that a decision adverse to the
Company in any one or in all of these proceedings would not have a material
effect on the financial position or the results of operations of the Company.
Insurance
The Company maintains workers' compensation insurance for its employees
and other coverages for normal business risks. A substantial portion of the
Company's current and prior year insurance coverages are "high deductible" or
retrospective policies in which the Company, in many cases, is responsible for
the payment of incurred claims up to specified individual and aggregate limits,
over which a third party insurer is contractually liable for any additional
payment of such claims. Accordingly, the Company bears significant economic
risks related to these coverages. On a continual basis, and as of each balance
sheet date, the Company records an accrual equal to the estimated costs
expected to result from incurred claims plus an estimate of claims incurred but
not reported as of such date based on the best available information at such
date. However, the nature of these claims is such that actual development of
the claims may vary significantly from the estimated accruals. All changes in
the accrual estimates are accounted for on a prospective basis and can have a
significant impact on the Company's financial position or results of
operations.
Insurance for environmental accidents and pollution has historically been
expensive and difficult to obtain. The Company currently maintains insurance
for environmental accidents and pollution relating to the performance of
services at certain customer locations. To date, the Company has not incurred
material fines, penalties or liabilities for pollution, environmental damage or
toxic torts. However, in the event a claim is successful against the Company
for pollution or toxic tort liability for which the Company is only partially
insured or completely uninsured, there could be a material adverse effect on
the Company's financial position or results of operations.
Environmental Proceedings
In November 1996, the West Virginia Department of Environmental Protection
(the "West Virginia DEP") issued a draft consent order against one of the
Company's subsidiaries, which order seeks to impose an aggregate of
approximately $229,000 in fines against the Company relating to a
transportation-related spill in West Virginia in November 1995. The Company
voluntarily remediated this spill in December 1995. The draft consent order
alleges that in remediating the spill, the Company did not comply with certain
technical West Virginia DEP remediation regulations relating to recordkeeping
and generator requirements. The Company believes that the West Virginia DEP
remediation regulations cited by the West Virginia DEP as the basis of this
draft consent order are not relevant in the context of an emergency spill
response. Therefore, the Company believes that it may be able to successfully
negotiate the imposition by the West Virginia DEP of significantly lower
penalties in the final consent order. The Company is actively negotiating the
draft consent order with the West Virginia DEP and does not believe that the
final consent order will have a material adverse effect on the Company's
results of operations or financial position.
-32-
<PAGE> 35
Other matters
In August 1995, the Company entered into an agreement with Resource
Recovery Techniques of Arizona, Inc. ("RRT"), a start-up operation that was in
the process of constructing a wastewater treatment facility located in Phoenix,
Arizona (the "Facility"). As part of the agreement, the Company caused the
issuance of a Letter of Credit in the amount of $4.2 million for the benefit of
holders of tax exempt bonds (the "Bonds") issued to finance the construction of
the Facility. The Letter of Credit is subject to draw under the terms of a
certain Trust Indenture and Reimbursement Agreement executed in connection with
the issuance of the Bonds. As consideration, the Company was issued warrants,
with 10 year terms, to purchase 10% of the common stock of RRT and upon the
occurrence of certain conditions, an additional 15% of the common stock of RRT.
(10) RETIREMENT PLANS --
Effective October 1, 1990, the Company established a defined contribution
employee benefit plan, the Allwaste Retirement Savings Plan, which covered
substantially all full-time non-union U.S. employees having at least one year
of service. On July 1, 1995, the Company adopted the Allwaste Employee
Retirement Plan (the "Retirement Plan"), which amended and restated the
Allwaste Retirement Savings Plan. Eligible employees may contribute up to 15%
of their compensation, subject to certain Internal Revenue Code limitations.
The Company matches 50% of each participant's contributions up to 3% of
eligible compensation. Retirement Plan participants may select among six
investment options, one of which is the Company's Common Stock. At August 31,
1996, the Retirement Plan held 626,723 shares of the Company's Common Stock
(market value of $2.6 million) which represented 24.3% of the Retirement Plan's
assets. In addition to the Plan, the Company maintains three other defined
contribution employee benefit plans which cover a small group of union
employees. Defined contribution expense related to all plans for the Company
was $0.8 million, $0.6 million and $0.5 million for fiscal years 1996, 1995 and
1994, respectively.
(11) INCENTIVE PLANS --
On October 26, 1995, the Company's Board of Directors adopted a limited
single-purpose incentive plan (the "Incentive Plan") for certain key employees
("Participants") of the Company. Under this plan, each Participant that
purchased shares of the Company's Common Stock, based on a designated
percentage of the Participant's annual salary (the "Qualifying Shares"), was
granted a number of shares of restricted Common Stock equal to two times the
number of Qualifying Shares purchased by the Participant. On completion of the
purchases by a Participant, the Compensation Committee, in exercise of its
discretion and under the Company's Amended and Restated 1989 Replacement
Non-qualified Stock Option Plan, granted to such Participant an option to
purchase a number of shares of Common Stock equal to four times the number of
Qualifying Shares purchased by the Participant. Shares of Common Stock issued
under this Incentive Plan are treasury shares. At August 31, 1996, 203,366
shares of restricted Common Stock and options to purchase 423,464 shares of
Common Stock have been granted to Participants. Additionally, 3,460 shares of
restricted Common Stock were earned and not yet issued. The Company does not
contemplate that any additional restricted shares will be issued under the
Incentive Plan or that any options to purchase shares of Common Stock will be
granted under the Plan in relation to purchases of Qualifying Shares pursuant to
the Incentive Plan.
The value of restricted shares awarded under this Incentive Plan during
fiscal 1996 was $0.9 million. These amounts were recorded as unearned
compensation related to outstanding restricted stock and are shown as a separate
component of Shareholders' Equity. Unearned compensation is being amortized to
expense over a predominately four year vesting period and amounted to $0.2
million for the year ended August 31, 1996.
During fiscal 1996, the Company adopted an Interim Management Bonus Plan
("Interim Plan") for eligible personnel, as defined. Under this Interim Plan,
eligible personnel may receive bonus payments contingent upon the Company
meeting or exceeding certain predetermined earnings levels, as determined by
the Compensation Committee of the Board of Directors, and individual
performance. At August 31, 1996, compensation earned and recorded in operating
expense was $1.0 million.
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS --
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to do so.
-33-
<PAGE> 36
The Company's notes receivable are estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
Long-term investments are based on the carrying value of the asset.
The Company's long-term debt and convertible subordinated debt are
estimated based on quotations obtained from broker-dealers who make markets in
these and similar securities. The bank credit facilities are based on floating
interest rates and, as such, the carrying amount is a reasonable estimate of
fair value.
Letters of credit are based on the face amount of the related obligations
and performance bonds.
Interest rate cap agreements are based on quotes from the market makers of
these instruments and represent the amounts that the Company would expect to
receive to terminate the agreements.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
August 31,
---------------------------------------------------------
1996 1995
----------------------- -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Notes receivable $ 13,517 $ 13,120 $ 4,893 $ 4,428
Long-term investments 11,030 11,030 -- --
Long-term debt and convertible
subordinated debentures 128,144 123,064 165,878 162,126
Letters of credit -- 30,090 -- 25,072
Interest Rate Cap Agreement 270 377 -- --
</TABLE>
(13) NET INCOME (LOSS) PER COMMON SHARE --
Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of shares of Common Stock and equivalents
outstanding during the year as shown below (in thousands, except per share
data):
<TABLE>
<CAPTION>
For the Years Ended August 31,
--------------------------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Income (loss) from continuing operations,
net of income taxes $ 6,614 $(3,879) $10,596
Discontinued Operations
Income from discontinued operations, net of
applicable income taxes -- 2,773 2,501
Gain on sale of glass recycling operations, net of
applicable income taxes 3,764 -- --
-------- ------- -------
Net income (loss) $ 10,378 $(1,106) $13,097
======== ======= =======
Shares outstanding, beginning
of year 39,609 37,741 36,740
Weighted average number of
common shares outstanding:
Stock options, treasury stock method 63 290 188
Purchased companies,
including earnouts 25 816 132
Exercise of stock options 113 208 4
</TABLE>
-34-
<PAGE> 37
<TABLE>
<S> <C> <C> <C>
Treasury stock and other, net (755) (250) (212)
-------- ------- -------
Total weighted average common
shares outstanding 39,055 38,805 36,852
======== ======= =======
Net income (loss) per common share:
Continuing operations $ .17 (.10) $ .29
Discontinued operations .10 .07 .07
-------- ------- -------
Net income (loss) per common share $ .27 $ (.03) $ .36
======== ======= =======
</TABLE>
Fully diluted net income per common share is not presented for any period
as it is not materially different from the above primary calculations.
Common stock equivalents include stock options to purchase Common Stock.
The convertible subordinated debt is not a common stock equivalent and does not
have a material dilutive effect on net income (loss) per common share for any
of the three years presented.
(14) BUSINESS OPERATIONS AND GEOGRAPHIC INFORMATION --
The primary business of the Company involves the provision of on-site
industrial cleaning and waste management services (including hydroblasting and
gritblasting and air moving and liquid vacuuming), waste transportation and
processing, wastewater services, site remediation, maintenance services,
turnaround and outage services, container cleaning and repair services,
emergency spill response services and other general plant support services to
the industrial customer. The Company's operations are located in the United
States, Canada and Mexico, as summarized below (in thousands):
<TABLE>
<CAPTION>
United
States Canada Mexico Total
------- ------ ------ -----
<S> <C> <C> <C> <C>
1996 --
Revenues $347,484 $ 32,952 $ 1,729 $382,165
Operating income (loss) 16,978 2,120 (356) 18,742
Total assets 320,222 16,522 443 337,187
1995 --
Revenues $322,644 $ 20,484 $ 1,117 $344,245
Operating income (loss) 11,253 1,375 (2,863) 9,765
Total assets 359,507 12,257 469 372,233
1994 --
Revenues $263,210 $ 22,611 $ 1,040 $286,861
Operating income (loss) 22,165 2,690 (1,506) 23,349
Total assets 297,063 9,578 2,622 309,263
</TABLE>
(15) QUARTERLY FINANCIAL DATA (UNAUDITED) --
The table below sets forth consolidated operating results by fiscal
quarter for the years ended August 31, 1996 and 1995, excluding the Company's
discontinued glass recycling operations (in thousands, except per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1996 --
Revenues $ 99,798 $ 88,278 $ 98,731 $ 95,358
Gross profit 26,744 18,659 25,621 24,729
Net income (loss)
Continuing operations 2,715 (1,357) 2,583 2,673
Discontinued operations 3,764 -- -- --
-------- -------- -------- --------
$ 6,479 $ (1,357) $ 2,583 $ 2,673
======== ======== ======== ========
</TABLE>
-35-
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C>
Net income (loss) per common share
Continuing operations $ .07 $ (.03) $ .07 $ .07
Discontinued operations .09 -- -- --
----------- --------- ---------- -- -------------
$ .16 $ (.03) $ .07 $ .07
=========== ========== =========== =============
1995 --
Revenues $ 82,591 $ 78,433 $ 86,638 $ 96,583
Gross profit 22,846 20,903 23,384 22,516
Net income (loss)
Continuing operations 2,926 1,507 2,170 (10,482)
Discontinued operations 794 825 872 282
----------- --------- ----------- -------------
$ 3,720 $ 2,332 $ 3,042 $(10,200)
=========== ========= =========== =============
Net income (loss) per common share
Continuing operations $ .08 $ .04 $ .06 $ (.27)
Discontinued operations .02 .02 .02 .01
----------- --------- ---------- -------------
$ .10 $ .06 $ .08 $ (.26)
=========== ========= ========== =============
</TABLE>
Due to changes in weighted average common shares outstanding, the sum of
the quarterly per share amounts for fiscal 1996 and 1995 do not equal earnings
(loss) per share for the respective years.
-36-
<PAGE> 39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-37-
<PAGE> 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The above items will be included in the Company's proxy statement to be
filed within 120 days after the close of the fiscal year end in connection with
the 1997 Annual Stockholders' Meeting.
-38-
<PAGE> 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS.
Report of Independent Public Accountants
Consolidated Balance Sheets as of August 31, 1996 and 1995
Consolidated Statements of Operations for the years ended August 31, 1996,
1995 and 1994
Consolidated Statements of Shareholders' Equity for the years ended August
31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended August 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULE.
Report of Independent Public Accountants on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is provided in the Consolidated Financial Statements
or notes thereto.
3. EXHIBITS.
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. EXHIBIT INDEX NUMBER *
------- ------------- ----------
<S> <C> <C> <C>
3.1 -- Amended and Restated Certificate of Incorporation of Allwaste, Inc.
("Allwaste") effective February 22, 1990. (Exhibit 3.1 to the Allwaste
Quarterly Report on Form 10-Q (File No. 0-15217) for the fiscal quarter ended
February 28, 1990 is hereby incorporated by reference.)
3.2 -- Corrected Bylaws of Allwaste (Exhibit 3.2 to the Allwaste Annual Report on Form
10-K (File No. 1-11008) for the fiscal year ended August 31, 1992, filed
November 27, 1992 (the "1992 10-K"), is hereby incorporated by reference.)
3.3 -- Certificate of Designation of Series One Junior Participating Preferred Stock
of Allwaste, Inc., effective November 19, 1996. (Filed herewith.)
4.1 -- Specimen Common Stock certificate (Exhibit 4.1 to the Allwaste Quarterly Report
on Form 10-Q (File No. 1-11016) for the fiscal quarter ended February 29, 1996
(the "February 10-Q") is hereby incorporated by reference.)
4.2 -- Specimen debenture certificate (Exhibit 4.2 to the 1992 10-K is hereby
incorporated by reference.)
4.3 -- Form of Indenture between Allwaste and Texas Commerce Trust Company of New York
dated June 1, 1989, relating to certain debentures of Allwaste. (Exhibit 4.1
to the Allwaste Quarterly Report on Form 10-Q (File No. 0-15217) for the fiscal
quarter ended May 31, 1989 is hereby incorporated by reference.)
4.4 -- Stockholder Rights Agreement dated August 5, 1996, between Allwaste and
American Stock Transfer & Trust Company as Rights Agent. (Exhibit 1 to the
Allwaste, Inc. Registration Statement on Form 8-A, filed November 14, 1996, is
hereby incorporated by reference.)
</TABLE>
-39-
<PAGE> 42
<TABLE>
<S> <C> <C>
10.1 -- Employment Agreement dated October 23, 1986, between R.L. Nelson, Jr. and
Allwaste. (Exhibit 10.1 to the Allwaste Annual Report on Form 10-K (File No.
1-11008) for the fiscal year ended August 31, 1994, filed November 29, 1994
(the "1994 10-K"), is hereby incorporated by reference.)
10.2 -- Employment Agreement dated October 17, 1994, between Robert M. Chiste and
Allwaste. (Exhibit 10.6 to the 1994 10-K is hereby incorporated by reference.)
10.3 -- Allwaste Amended and Restated 1989 Replacement Non-Qualified Stock Option Plan.
(Exhibit A to the Allwaste proxy statement relating to its 1995 annual meeting
of stockholders, filed December 20, 1994, is hereby incorporated by reference.)
10.4 -- Allwaste, Inc. Target 2000: One, Two, Four Plan. (Exhibit 10.4 to the
Allwaste Quarterly Report on Form 10-Q (File No. 1-11008) for the fiscal
quarter ended February 29, 1996 (the "February 10-Q") is hereby incorporated by
reference.)
10.5 -- Allwaste Employee Retirement Plan. (Exhibit 4.3 to the Post-Effective
Amendment No. 1 to Registration Statement on Form S-8 (File No. 33-37684),
filed August 7, 1995, is hereby incorporated by reference.)
10.6 -- Credit Agreement dated as of November 30, 1993, as amended, by and among
Allwaste, Inc., a Delaware corporation, the Financial Institutions signatory
thereto, and Texas Commerce Bank National Association, a national banking
association, as Agent. (Exhibit 10.10 to the 1994 10-K is hereby incorporated
by reference.)
10.7 -- Agreement and First Amendment to Credit Agreement dated January 21, 1994, by and
among Allwaste, the Financial Institutions signatory thereto, and Texas Commerce
Bank National Association, a national banking association, as Agent. (Exhibit
10.7 to the February 10-Q is hereby incorporated by reference.)
10.8 -- Agreement and Second Amendment to Credit Agreement dated March 20, 1994, by and
among Allwaste, the Financial Institutions signatory thereto, and Texas Commerce
Bank National Association, a national banking association, as Agent. (Exhibit
10.8 to the February 10-Q is hereby incorporated by reference.)
10.9 -- Agreement and Third Amendment to Credit Agreement dated May 31, 1994, by and
among Allwaste, the Financial Institutions signatory thereto, and Texas Commerce
Bank National Association, a national banking association, as Agent. (Exhibit
10.9 to the February 10-Q is hereby incorporated by reference.)
10.10 -- Agreement and Fourth Amendment to Credit Agreement dated October 18, 1994, by
and among Allwaste, the Financial Institutions signatory thereto, and Texas
Commerce Bank National Association, a national banking association, as Agent.
(Exhibit 10.10 to the February 10-Q is hereby incorporated by reference.)
10.11 -- Agreement and Fifth Amendment to Credit Agreement dated August 31, 1995, by and
among Allwaste, the Financial Institutions signatory thereto, and Texas Commerce
Bank National Association, a national banking association, as Agent. (Exhibit
10.11 to the February 10-Q is hereby incorporated by reference.)
</TABLE>
-40-
<PAGE> 43
<TABLE>
<S> <C> <C>
10.12 -- First Amendment to Employment Agreement dated as of October 26, 1995, between
Robert M. Chiste and Allwaste. (Exhibit 10.6 to the Allwaste Annual Report on
Form 10-K (File No. 1-11016) for the fiscal year ended August 31, 1995, filed
November 30, 1995 (the "1995 Form 10-K") is hereby incorporated by reference.)
10.13 -- Agreement and Sixth Amendment to Credit Agreement dated February 29, 1996, by
and among Allwaste, the financial institutions signatory thereto and Texas
Commerce Bank National Association, a national banking association, as Agent.
(Exhibit 10.13 to the Allwaste Quarterly Report on Form 10-Q (File No. 1-11016)
for the fiscal quarter ended May 31, 1996 (the "May 10-Q") is hereby
incorporated by reference.)
10.14 -- Agreement and Seventh Amendment to Credit Agreement dated August 1, 1996, by
and among Allwaste, the financial institutions signatory thereto and Texas
Commerce Bank National Association, a national banking association, as Agent.
(Filed herewith.)
10.15 -- First Amendment to Employment Agreement dated November 11, 1996, between R. L.
Nelson, Jr. and Allwaste. (Filed herewith.)
10.16 -- Second Amendment to Employment Agreement dated October 25, 1996, between Robert
M. Chiste and Allwaste. (Filed herewith).
10.17 -- First Amendment to Employment Agreement dated November 11, 1996, between
William L. Fiedler and Allwaste. (Filed herewith.)
10.18 -- Employment Agreement dated November 11, 1996, between David E. Fanta and
Allwaste. (Filed herewith.)
10.19 -- Employment Agreement dated November 11, 1996, between T. Wayne Wren, Jr. and
Allwaste. (Filed herewith.)
10.20 -- Employment Agreement dated November 11, 1996, between James E. Rief and
Allwaste. (Filed herewith.)
10.21 -- Employment Agreement dated November 11, 1996, between Michael W. Ramirez and
Allwaste. (Filed herewith.)
10.22 -- Executive Severance Agreement dated November 11, 1996, between R. L. Nelson,
Jr. and Allwaste. (Filed herewith.)
10.23 -- Executive Severance Agreement dated November 11, 1996, between Robert M. Chiste
and Allwaste. (Filed herewith.)
10.24 -- Executive Severance Agreement dated November 11, 1996, between David E. Fanta
and Allwaste. (Filed herewith.)
10.25 -- Executive Severance Agreement dated November 11, 1996, between T. Wayne Wren,
Jr. and Allwaste. (Filed herewith.)
10.26 -- Executive Severance Agreement dated November 11, 1996, between James E. Rief
and Allwaste. (Filed herewith.)
10.27 -- Executive Severance Agreement dated November 11, 1996, between William L.
Fiedler and Allwaste. (Filed herewith.)
10.28 -- Executive Severance Agreement dated November 11, 1996, between Michael W.
Ramirez and Allwaste. (Filed herewith.)
10.29 -- 1996 Interim Management Bonus Plan. (Filed herewith.)
10.30 -- Third Amendment to Employment Agreement dated November 11, 1996, between Robert
M. Chiste and Allwaste. (Filed herewith.)
10.31 -- Allwaste EVA Incentive Compensation Plan. (Filed herewith.)
</TABLE>
-41-
<PAGE> 44
<TABLE>
<S> <C> <C>
11.1 -- Calculation of Net Income Per Common Share. (See Note 11 of Notes to
Consolidated Financial Statements of Allwaste, Inc. and Subsidiaries.)
21.1 -- Subsidiaries of Allwaste, Inc. (Filed herewith.)
23.1 -- Consent of Arthur Andersen LLP to incorporation by reference of the report in
this Form 10-K into the Allwaste, Inc. previously filed Form S-4 and S-8
Registration Statements. (Filed herewith.)
27.1 -- Financial Data Schedule. (Filed herewith.)
</TABLE>
_______________
* This information appears only in the manually signed and sequentially
numbered original.
(b) REPORTS ON FORM 8-K.
None.
-42-
<PAGE> 45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To Allwaste, Inc.:
We have audited in accordance with generally accepted auditing standards, the
Consolidated Financial Statements of Allwaste, Inc. and subsidiaries included in
this Form 10-K, and have issued our report thereon dated November 15, 1996. Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Part IV, Item 14 (a)(2) for
Allwaste, Inc. and subsidiaries is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
November 15, 1996
-43-
<PAGE> 46
SCHEDULE II
ALLWASTE, INC. AND SUBSIDIARIES (1)
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
------------------------------
Balance, Charged to Acquisitions Balance,
Beginning Costs and Accounted for Deductions End of
Description of Year Expenses as Purchases (2) Year
- -------------------------------- --------- ---------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts Receivable
YEAR ENDED AUGUST 31, 1994: $ 2,475 $ 1,355 $ 46 $(1,226) $ 2,650
YEAR ENDED AUGUST 31, 1995: $ 2,650 $ 2,900 $ 89 $(1,956) $ 3,683
YEAR ENDED AUGUST 31, 1996: $ 3,683 $ 2,962 $ 1 $(4,326) $ 2,320
Allowance for Doubtful
Notes Receivable
YEAR ENDED AUGUST 31, 1994: $ -- $ 790 $ -- $ -- $ 790
YEAR ENDED AUGUST 31, 1995: $ 790 $ 1,000 $ -- $ -- $ 1,790
YEAR ENDED AUGUST 31, 1996: $ 1,790 $ -- $ -- $ (790) $ 1,000
</TABLE>
- -----------
(1) Restated to exclude the discontinued glass recycling operations; see
Note 3 of Notes to Consolidated Financial Statements.
(2) Uncollectible accounts written off, net of recoveries on accounts
previously written off.
-44-
<PAGE> 47
SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Allwaste, Inc., has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
-----------------------------------
Robert M. Chiste, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant, Allwaste, Inc., and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Chiste President and Chief Executive Officer (Principal November 22, 1996
- ------------------------------- Executive Officer); Director
Robert M. Chiste
/s/ T. Wayne Wren, Jr. Senior Vice President - Chief Financial Officer November 22, 1996
- ------------------------------- and Treasurer (Principal Financial Officer)
T. Wayne Wren, Jr.
/s/ Michael W. Ramirez Vice President - Controller (Principal Accounting November 22, 1996
- ------------------------------- Officer)
Michael W. Ramirez
/s/ R. L. Nelson, Jr. Chairman of the Board November 22, 1996
- -------------------------------
R.L. Nelson, Jr.
/s/ Michael A. Baker Director November 22, 1996
- -------------------------------
Michael A. Baker
/s/ John U. Clarke Director November 22, 1996
- -------------------------------
John U. Clarke
/s/ William E. Haynes Director November 22, 1996
- -------------------------------
William E. Haynes
/s/ Robert L. Knauss Director November 22, 1996
- -------------------------------
Robert L. Knauss
/s/ Frank A. Rossi Director November 22, 1996
- -------------------------------
Frank A. Rossi
/s/ Thomas J. Tierney Director November 22, 1996
- -------------------------------
Thomas J. Tierney
/s/ T. Michael Young Director November 22, 1996
- -------------------------------
T. Michael Young
</TABLE>
-45-
<PAGE> 48
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NO. EXHIBIT INDEX NUMBER *
------- ------------- ----------
<S> <C> <C> <C>
3.1 -- Amended and Restated Certificate of Incorporation of Allwaste, Inc.
("Allwaste") effective February 22, 1990. (Exhibit 3.1 to the Allwaste
Quarterly Report on Form 10-Q (File No. 0-15217) for the fiscal quarter ended
February 28, 1990 is hereby incorporated by reference.)
3.2 -- Corrected Bylaws of Allwaste (Exhibit 3.2 to the Allwaste Annual Report on Form
10-K (File No. 1-11008) for the fiscal year ended August 31, 1992, filed
November 27, 1992 (the "1992 10-K"), is hereby incorporated by reference.)
3.3 -- Certificate of Designation of Series One Junior Participating Preferred Stock
of Allwaste, Inc., effective November 19, 1996. (Filed herewith.)
4.1 -- Specimen Common Stock certificate (Exhibit 4.1 to the Allwaste Quarterly Report on
Form 10-Q (File No. 1-11016) for the fiscal quarter ended February 29, 1996
(the "February 10-Q") is hereby incorporated by reference.)
4.2 -- Specimen debenture certificate (Exhibit 4.2 to the 1992 10-K is hereby
incorporated by reference.)
4.3 -- Form of Indenture between Allwaste and Texas Commerce Trust Company of New York
dated June 1, 1989, relating to certain debentures of Allwaste. (Exhibit 4.1
to the Allwaste Quarterly Report on Form 10-Q (File No. 0-15217) for the fiscal
quarter ended May 31, 1989 is hereby incorporated by reference.)
4.4 -- Stockholder Rights Agreement dated August 5, 1996, between Allwaste and
American Stock Transfer & Trust Company as Rights Agent. (Exhibit 1 to the
Allwaste, Inc. Registration Statement on Form 8-A, filed November 14, 1996, is
hereby incorporated by reference.)
10.1 -- Employment Agreement dated October 23, 1986, between R.L. Nelson, Jr. and
Allwaste. (Exhibit 10.1 to the Allwaste Annual Report on Form 10-K (File No.
1-11008) for the fiscal year ended August 31, 1994, filed November 29, 1994
(the "1994 10-K"), is hereby incorporated by reference.)
10.2 -- Employment Agreement dated October 17, 1994, between Robert M. Chiste and
Allwaste. (Exhibit 10.6 to the 1994 10-K is hereby incorporated by reference.)
10.3 -- Allwaste Amended and Restated 1989 Replacement Non-Qualified Stock Option Plan.
(Exhibit A to the Allwaste proxy statement relating to its 1995 annual meeting
of stockholders, filed December 20, 1994, is hereby incorporated by reference.)
10.4 -- Allwaste, Inc. Target 2000: One, Two, Four Plan. (Exhibit 10.4 to the
Allwaste Quarterly Report on Form 10-Q (File No. 1-11008) for the fiscal
quarter ended February 29, 1996 (the "February 10-Q") is hereby incorporated by
reference.)
10.5 -- Allwaste Employee Retirement Plan. (Exhibit 4.3 to the Post-Effective
Amendment No. 1 to Registration Statement on Form S-8 (File No. 33-37684),
filed August 7, 1995, is hereby incorporated by reference.)
10.6 -- Credit Agreement dated as of November 30, 1993, as amended, by and among
Allwaste, Inc., a Delaware corporation, the Financial Institutions signatory
thereto, and Texas Commerce Bank National Association, a national banking
association, as Agent. (Exhibit 10.10 to the 1994 10-K is hereby incorporated
by reference.)
10.7 -- Agreement and First Amendment to Credit Agreement dated January 21, 1994, by and
among Allwaste, the Financial Institutions signatory thereto, and Texas Commerce
Bank National Association, a national banking association, as Agent. (Exhibit
10.7 to the February 10-Q is hereby incorporated by reference.)
10.8 -- Agreement and Second Amendment to Credit Agreement dated March 20, 1994, by and
among Allwaste, the Financial Institutions signatory thereto, and Texas Commerce
Bank National Association, a national banking association, as Agent. (Exhibit
10.8 to the February 10-Q is hereby incorporated by reference.)
10.9 -- Agreement and Third Amendment to Credit Agreement dated May 31, 1994, by and
among Allwaste, the Financial Institutions signatory thereto, and Texas Commerce
Bank National Association, a national banking association, as Agent. (Exhibit
10.9 to the February 10-Q is hereby incorporated by reference.)
10.10 -- Agreement and Fourth Amendment to Credit Agreement dated October 18, 1994, by
and among Allwaste, the Financial Institutions signatory thereto, and Texas
Commerce Bank National Association, a national banking association, as Agent.
(Exhibit 10.10 to the February 10-Q is hereby incorporated by reference.)
10.11 -- Agreement and Fifth Amendment to Credit Agreement dated August 31, 1995, by and
among Allwaste, the Financial Institutions signatory thereto, and Texas Commerce
Bank National Association, a national banking association, as Agent. (Exhibit
10.11 to the February 10-Q is hereby incorporated by reference.)
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C>
10.12 -- First Amendment to Employment Agreement dated as of October 26, 1995, between
Robert M. Chiste and Allwaste. (Exhibit 10.6 to the Allwaste Annual Report on
Form 10-K (File No. 1-11016) for the fiscal year ended August 31, 1995, filed
November 30, 1995 (the "1995 Form 10-K") is hereby incorporated by reference.)
10.13 -- Agreement and Sixth Amendment to Credit Agreement dated February 29, 1996, by
and among Allwaste, the financial institutions signatory thereto and Texas
Commerce Bank National Association, a national banking association, as Agent.
(Exhibit 10.13 to the Allwaste Quarterly Report on Form 10-Q (File No. 1-11016)
for the fiscal quarter ended May 31, 1996 (the "May 10-Q") is hereby
incorporated by reference.)
10.14 -- Agreement and Seventh Amendment to Credit Agreement dated August 1, 1996, by
and among Allwaste, the financial institutions signatory thereto and Texas
Commerce Bank National Association, a national banking association, as Agent.
(Filed herewith.)
10.15 -- First Amendment to Employment Agreement dated November 11, 1996, between R. L.
Nelson, Jr. and Allwaste. (Filed herewith.)
10.16 -- Second Amendment to Employment Agreement dated October 25, 1996, between Robert
M. Chiste and Allwaste. (Filed herewith).
10.17 -- First Amendment to Employment Agreement dated November 11, 1996, between
William L. Fiedler and Allwaste. (Filed herewith.)
10.18 -- Employment Agreement dated November 11, 1996, between David E. Fanta and
Allwaste. (Filed herewith.)
10.19 -- Employment Agreement dated November 11, 1996, between T. Wayne Wren, Jr. and
Allwaste. (Filed herewith.)
10.20 -- Employment Agreement dated November 11, 1996, between James E. Rief and
Allwaste. (Filed herewith.)
10.21 -- Employment Agreement dated November 11, 1996, between Michael W. Ramirez and
Allwaste. (Filed herewith.)
10.22 -- Executive Severance Agreement dated November 11, 1996, between R. L. Nelson,
Jr. and Allwaste. (Filed herewith.)
10.23 -- Executive Severance Agreement dated November 11, 1996, between Robert M. Chiste
and Allwaste. (Filed herewith.)
10.24 -- Executive Severance Agreement dated November 11, 1996, between David E. Fanta
and Allwaste. (Filed herewith.)
10.25 -- Executive Severance Agreement dated November 11, 1996, between T. Wayne Wren,
Jr. and Allwaste. (Filed herewith.)
10.26 -- Executive Severance Agreement dated November 11, 1996, between James E. Rief
and Allwaste. (Filed herewith.)
10.27 -- Executive Severance Agreement dated November 11, 1996, between William L.
Fiedler and Allwaste. (Filed herewith.)
10.28 -- Executive Severance Agreement dated November 11, 1996, between Michael W.
Ramirez and Allwaste. (Filed herewith.)
10.29 -- 1996 Interim Management Bonus Plan. (Filed herewith.)
10.30 -- Third Amendment to Employment Agreement dated November 11, 1996, between Robert
M. Chiste and Allwaste. (Filed herewith.)
10.31 -- Allwaste EVA Incentive Compensation Plan. (Filed herewith.)
11.1 -- Calculation of Net Income Per Common Share. (See Note 11 of Notes to
Consolidated Financial Statements of Allwaste, Inc. and Subsidiaries.)
21.1 -- Subsidiaries of Allwaste, Inc. (Filed herewith.)
23.1 -- Consent of Arthur Andersen LLP to incorporation by reference of the report in
this Form 10-K into the Allwaste, Inc. previously filed Form S-4 and S-8
Registration Statements. (Filed herewith.)
27.1 -- Financial Data Schedule. (Filed herewith.)
</TABLE>
_______________
* This information appears only in the manually signed and sequentially
numbered original.
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF DESIGNATION
OF
SERIES ONE JUNIOR PARTICIPATING PREFERRED STOCK
of
ALLWASTE, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
ALLWASTE, INC., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), DOES HEREBY CERTIFY that, at a meeting
of the Company's Board of Directors duly called and held on August 2, 1996 at
which a quorum was present and acting throughout, the following resolutions
were adopted pursuant to Section 151 of the Delaware General Corporation Law
(the "Delaware Act"):
WHEREAS, Article FOURTH of the Company's Amended and Restated
Certificate of Incorporation (the "Charter"), authorizes a total of 100,500,000
shares of capital stock, consisting of 500,000 shares of preferred stock, par
value $0.01 per share (the "Preferred Stock"), issuable form time to time in
one or more series, and 100,000,000 shares of common stock, par value $0.01 per
share (the "Common Stock"), issuable from time to time; and
WHEREAS, in accordance with Section 151 of the Delaware Act and
pursuant to Article FOURTH of the Charter, the Company's Board of Directors is
authorized to fix the designations, powers, preferences and relative,
participating, optional or other special rights, if any, and qualifications,
limitations or restrictions thereof, of any wholly unissued series of Preferred
Stock, and to fix the number of shares constituting such series, and to
increase or decrease the number of shares of any such series (but not below the
number of shares thereof then outstanding); and
WHEREAS, it is the desire of the Board of Directors of this
Corporation, in accordance with the authority conferred upon it as described
above, to issue a series of Preferred Stock and to fix the rights, preferences,
restrictions and other matters relating thereto;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does
hereby establish a series of Preferred Stock of this Company and does hereby
fix and determine the rights, preferences, restrictions and other matters
relating to said series of Preferred Stock, as follows:
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SECTION 1. Designation and Amount.
The shares of such series shall be designated as "Series One Junior
Participating Preferred Stock" ("Series One Preferred Stock") and the number of
shares constituting such series shall be 100,000. Such number of shares may be
adjusted by appropriate action of the Board of Directors.
SECTION 2. Dividends and Distributions.
(a) Subject to the provisions for adjustment hereinafter
set forth, the holders of shares of Series One Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, (i) cash dividends in an amount per
share (rounded to the nearest cent) equal to 1000 times the aggregate per share
amount of all cash dividends contemporaneously declared on the Common Stock,
and (ii) a preferential cash dividend ("Preferential Dividends"), if any, on
the tenth day of March, June, September and December of each year (each a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series One Preferred Stock, in an amount equal to $10.00 per share of Series
One Preferred Stock less the per share amount of all cash dividends declared on
the Series One Preferred Stock pursuant to clause (i) of this sentence since
the immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series One Preferred Stock. In the event the
Company shall, at any time after the issuance of any share or fraction of a
share of Series One Preferred Stock, make any distribution on the shares of
Common Stock, whether by way of a dividend or a reclassification of stock, a
recapitalization, reorganization or partial liquidation of the Company or
otherwise, which is payable in cash or any debt security, debt instrument,
real or personal property or any other property (other than cash dividends
subject to the immediately preceding sentence and other than a distribution of
shares of Common Stock or other capital stock of the Company and other than a
distribution of rights or warrants to acquire any such share, including any
debt security convertible into or exchangeable for any such share, at a price
less than the Current Market Price (as hereinafter defined) of such share),
then and in each such event the Company shall simultaneously pay on each then
outstanding share of Series One Preferred Stock a distribution, in like kind,
of 1000 times (subject to the provisions for adjustment hereinafter set forth)
such distribution paid on a share of Common Stock. The dividends and
distributions on the Series One Preferred Stock to which holders thereof are
entitled pursuant to clause (i) of the first sentence of this paragraph and
pursuant to the second sentence of this paragraph are hereinafter referred to
as "Participating Dividends" and the multiple of such cash and non-cash
dividends on the Common Stock applicable to the determination of the
Participating Dividends, which shall be 1000 initially but shall be adjusted
from time to time as hereinafter provided, is hereinafter referred to as the
"Dividend Multiple." In the event the Company shall at any time after August
15, 1996 declare or pay any dividend or make any distribution on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then in each
such case the Dividend Multiple thereafter applicable to the determination of
the amount of Participating Dividends which holders of shares of Series One
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<PAGE> 3
Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction, of which
the numerator is the number of shares of Common Stock outstanding immediately
after such event and of which the denominator is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(b) The Company shall declare each Participating Dividend
at the same time it declares any cash or non-cash dividend or distribution on
the Common Stock in respect of which a Participating Dividend is required to be
paid. No cash or non-cash dividend or distribution on the Common Stock in
respect of which a Participating Dividend is required to be paid shall be paid
or set aside for payment on the Common Stock unless a Participating Dividend in
respect of such dividend or distribution on the Common Stock shall be
simultaneously paid, or set aside for payment, on the Series One Preferred
Stock.
(c) Preferential Dividends shall begin to accrue on
outstanding shares of Series One Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issuance of any shares of Series One
Preferred Stock. Accrued but unpaid Preferential Dividends shall cumulate but
shall not bear interest. Preferential Dividends paid on the shares of Series
One Preferred Stock in an amount less then the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
SECTION 3. Voting Rights.
The holders of shares of Series One Preferred Stock shall have the
following voting rights:
(a) Subject to the provisions for adjustment hereinafter
set forth, each share of Series One Preferred Stock shall entitle the holder
thereof to 1000 votes on all matters submitted to a vote of the stockholders of
the Company. The number of votes which a holder of Series One Preferred Stock
is entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the
event the Company shall at any time after August 15, 1996 declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse split of the
outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such case the Vote Multiple thereafter applicable to
the determination of the number of votes per share to which holders of shares
of Series One Preferred Stock shall be entitled after such event shall be the
Vote Multiple immediately prior to such event multiplied by a fraction, of
which the numerator is the number of shares of Common Stock outstanding
immediately after such event and of which the denominator is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the
holder of shares of Series One Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Company.
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<PAGE> 4
(c) In the event that the Preferential Dividends accrued
on the Series One Preferred Stock for six or more quarterly dividend periods,
whether consecutive or not, shall not have been declared and paid or set apart
for payment, the holders of record of preferred stock of the Company of all
series (including the Series One Preferred Stock), other than any series in
respect of which the right is expressly withheld by the Charter or the
authorizing resolutions included in the Certificate of Designation therefor,
shall have the right, at the next meeting of stockholders called for the
election of directors, to elect two members to the Board of Directors, which
directors shall be in addition to the number required by the Company's bylaws
as in effect prior to such event, to serve until the next annual meeting of the
stockholders and until their successors are elected and qualified or their
earlier resignation, removal or incapacity or until such earlier time as all
accrued and unpaid Preferential Dividends upon the outstanding shares of Series
One Preferred Stock shall have been paid (or set aside for payment) in full.
The holders of shares of Series One Preferred Stock shall continue to have the
right to elect directors as provided by the immediately preceding sentence
until all accrued and unpaid Preferential Dividends upon the outstanding shares
of Series One Preferred Stock shall have been paid (or set aside for payment)
in full. Such directors may be removed and replaced by such stockholders, and
vacancies in such directorships may be filled only by such stockholders (or by
the remaining director elected by such stockholders, if there be one) in the
manner permitted by law; provided, however, that any such action by
stockholders shall be taken at a meeting of stockholders and shall not be taken
by written consent thereof.
(d) Except as otherwise required by law or set forth
herein, holders of Series One Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for the
taking of any corporate action.
SECTION 4. Certain Restrictions.
(a) Whenever Preferential Dividends or Participating
Dividends are in arrears or the Company shall be in default of payment thereof,
thereafter and until all accrued and unpaid Preferential Dividends and
Participating Dividends, whether or not declared, on shares of Series One
Preferred Stock outstanding shall have been paid or set aside for payment in
full, and in addition to any and all other rights which any holder of shares of
Series One Preferred Stock may have in such circumstances, the Company shall
not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to, the
Series One Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity as to
dividends with the Series One Preferred Stock, unless dividends are
paid ratably on the Series One Preferred Stock and all such parity
stock
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<PAGE> 5
on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
(iii) except as permitted by sub-clause (iv) of
this Section 4(a), redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up), with the
Series One Preferred Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Company ranking junior
(both as to dividends and upon liquidation, dissolution or winding up)
to the Series One Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series One Preferred Stock, or any shares
of stock ranking on a parity with the Series One Preferred Stock
(either as to dividends or upon liquidation, dissolution or winding
up), except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, in accordance with Section 4(a),
purchase or otherwise acquire such shares at such time and in such manner.
(c) The Company shall not issue any shares of Series One
Preferred Stock except upon exercise of rights issued pursuant to that certain
Rights Agreement dated as of August 5, 1996, between the Company and American
Stock Transfer & Trust Company, a copy of which is on file with the Secretary
of the Company at its principal executive office and shall be made available to
stockholders of record without charge upon written request therefor addressed
to the Secretary. Notwithstanding the foregoing sentence, nothing contained in
the provisions hereof shall prohibit or restrict the Company from issuing for
any purpose any series of preferred stock with rights and privileges similar
to, different from, or greater than, those of the Series One Preferred Stock.
SECTION 5. Reacquired Shares.
Any shares of Series One Preferred Stock purchased or otherwise
acquired by the Company in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. The Company shall cause all such shares
upon their retirement and cancellation to become authorized but unissued shares
of Preferred Stock, without designation as to series, and such shares may be
reissued as part of a new series of Preferred Stock to be created by resolution
or resolutions of the Board of Directors.
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<PAGE> 6
SECTION 6. Liquidation, Dissolution or Winding Up.
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the Company, no distribution shall be made (i) to the holders of shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series One Preferred Stock unless the holders
of shares of Series One Preferred Stock shall have received, subject to
adjustment as hereinafter provided, (A) $10.00 per share plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, or (B) if greater than the amount
specified in clause (i)(A) of this sentence, the amount equal to 1000 times the
aggregate amount to be distributed per share holders of Common Stock, or (ii)
to the holders of stock ranking on a parity upon liquidation, dissolution or
winding up with the Series One Preferred Stock, unless simultaneously therewith
distributions are made ratably on the Series One Preferred Stock and all other
shares of such parity stock in proportion to the total amounts to which the
holders of shares of Series One Preferred Stock are entitled under clause
(i)(A) of this sentence and to which the holders of such parity shares are
entitled, in each case upon such liquidation, dissolution or winding up. The
amount to which holders of Series One Preferred Stock may be entitled upon
liquidation, dissolution or winding up of the Company pursuant to clause (i)(B)
of the immediately preceding sentence is hereinafter referred to as the
"Participating Liquidation Amount" and the multiple of the amount to be
distributed to holders of shares of Common Stock upon the liquidation,
dissolution or winding up of the Company applicable pursuant to such clause to
the determination of the Participating Liquidation Amount, as such multiple may
be adjusted from time to time as hereinafter provided, is hereinafter referred
to as the "Liquidation Multiple." In the event the Company shall at any time
after August 15, 1996 declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Common Stock into
a greater or lesser number of shares of Common Stock, then in each such case the
Liquidation Multiple thereafter applicable to the determination of the
Participating Liquidation Amount to which holders of Series One Preferred Stock
shall be entitled after such event shall be the Liquidation Multiple applicable
immediately prior to such event multiplied by a fraction, of which the numerator
is the number of shares of Common Stock outstanding immediately after such event
and of which the denominator is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 7. Certain Reclassifications and Other Events.
(a) In the event that holders of shares of Common Stock
of the Company receive after August 15, 1996 in respect of their shares of
Common Stock any share of capital stock of the Company (other than any share of
Common Stock), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise ("Transaction"),
then and in each such event the dividend rights, voting rights and rights upon
the liquidation, dissolution or winding up of the Company of the shares of
Series One Preferred Stock shall be adjusted so that after such event the
holders of Series One Preferred Stock shall be entitled, in respect of each
share of Series One Preferred Stock held, in addition to such rights in respect
thereof to which such holder was entitled immediately prior to such adjustment,
to (i) such additional dividends as equal the
A-6
<PAGE> 7
Dividend Multiple in effect immediately prior to such Transaction multiplied by
the additional dividends which the holder of a share of Common Stock shall be
entitled to receive by virtue of the receipt in the transaction of such capital
stock, (ii) such additional voting rights as equal the Vote Multiple in effect
immediately prior to such Transaction multiplied by the additional voting rights
which the holder of a share of Common Stock shall be entitled to receive by
virtue of the receipt in the transaction of such capital stock and (iii) such
additional distributions upon liquidation, dissolution or winding up of the
Company as equal the Liquidation Multiple in effect immediately prior to such
transaction multiplied by the additional amount which the holder of a share of
Common Stock shall be entitled to receive upon liquidation, dissolution or
winding up of the Company by virtue of the receipt in the Transaction of such
capital stock, as the case may be, all as provided by the terms of such capital
stock.
(b) In the event that holders of shares of Common Stock of
the Company receive after August 15, 1996 in respect of their shares of Common
Stock any right or warrant to purchase Common Stock (including as such a right,
for all purposes of this paragraph, any security convertible into or
exchangeable for Common Stock) at a purchase price per share less than the
Current Market Price of a share of Common Stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights, voting rights
and rights upon the liquidation, dissolution or winding up of the Company of the
shares of Series One Preferred Stock shall each be adjusted so that after such
event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple
shall each be the product of the Dividend Multiple, the Vote Multiple and the
Liquidation Multiple, as the case may be, in effect immediately prior to such
event multiplied by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock which could be
acquired upon exercise in full of all such rights or warrants and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the number of shares
of Common Stock which could be purchased, at the Current Market Price of the
Common Stock at the time of such issuance, by the maximum aggregate
consideration payable upon exercise in full of all such rights or warrants.
(c) In the event that holders of shares of Common Stock of the
Company receive after August 15, 1996 in respect of their shares of Common Stock
any right or warrant to purchase capital stock of the Company (other than shares
of Common Stock), including as such a right, for all purposes of this paragraph,
any security convertible into or exchangeable for capital stock of the Company
(other than Common Stock), at a purchase price per share less than the Current
Market Price of such shares of capital stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights, voting rights
and rights upon liquidation, dissolution or winding up of the Company of the
shares of Series One Preferred Stock shall each be adjusted so that after such
event each holder of a share of Series One Preferred Stock shall be entitled, in
respect of each share of Series One Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior to
such event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock shall be
entitled upon exercise of such
A-7
<PAGE> 8
right or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction (as hereinafter
defined) and (ii) such additional voting rights as equal the Vote Multiple in
effect immediately prior to such event multiplied, first, by the additional
voting rights to which the holder of a share of Common Stock shall be entitled
upon exercise of such right or warrant by virtue of the capital stock which
could be acquired upon such exercise and multiplied again by the Discount
Fraction and (iii) such additional distributions upon liquidation, dissolution
or winding up of the Company as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the additional amount
which the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Company upon exercise of such
right or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction. For purposes of
this paragraph, the "Discount Fraction" shall be a fraction, of which the
numerator shall be the difference between the Current Market Price of a share
of the capital stock subject to a right or warrant distributed to holders of
shares of Common Stock as contemplated by this paragraph immediately after the
distribution thereof and the purchase price per share for such share of capital
stock pursuant to such right or warrant and of which the denominator shall be
the Current Market Price of a share of such capital stock immediately after the
distribution of such right or warrant.
(d) For purposes of this Section 7, the "Current Market Price"
of a share of capital stock of the Company (including a share of Common Stock)
on any date shall be deemed to be the average of the daily closing prices per
share thereof over the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that, in the event
that such Current Market Price of any such share of capital stock is determined
during a period which includes any date that is within 30 Trading Days after the
ex-dividend date for (i) a dividend or distribution on stock payable in shares
of such stock or securities convertible into shares of such stock, or (ii) any
subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then, and in each such case, the Current Market
Price shall be appropriately adjusted by the Board of Directors of the Company
to reflect the Current Market Price of such stock to take into account
ex-dividend trading. The closing price for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares are listed or admitted to trading or,
if the shares are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or if on any such date the shares
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
shares selected by the Board of Directors of the Company. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which the shares are listed or admitted to trading is open for the transaction
of business or, if the shares are not
A-8
<PAGE> 9
listed or admitted to trading on any national securities exchange, a day on
which the New York Stock Exchange or such other national securities exchange as
may be selected by the Board of Directors of the Company is open. If the shares
are not publicly held or not so listed or traded on any day within the period of
30 Trading Days applicable to the determination of Current Market Price thereof
as aforesaid, "Current Market Price" shall mean the fair market value thereof
per share as determined in good faith by the Board of Directors of the Company.
In either case referred to in the foregoing sentence, the determination of
Current Market Price shall be described in a statement filed with the Secretary
of the Company.
SECTION 8. Consolidation, Merger, Etc.
In case the Company shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each outstanding share of Series One Preferred
Stock shall at the same time be similarly exchanged for or changed into the
aggregate amount of stock, securities, cash and/or other property (payable in
like kind), as the case may be, for which or into which each share of Common
Stock is changed or exchanged multiplied by the highest of the Vote Multiple,
the Dividend Multiple or the Liquidation Multiple in effect immediately prior to
such event.
SECTION 9. Effective Time of Adjustments.
(a) Adjustments to the Series One Preferred Stock required by
the provisions hereof shall be effective as of the time at which the event
required such adjustments occurs.
(b) The Company shall give prompt written notice to each
holder of a share of Series One Preferred Stock of the effect of any adjustment
to the voting rights, dividend rights or rights upon liquidation, dissolution
or winding up of the Company of such shares required by the provisions hereof.
Notwithstanding the foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment.
SECTION 10. No Redemption.
The shares of Series One Preferred Stock shall not be redeemable at the option
of the Company or any holder thereof. Notwithstanding the foregoing sentence
of this Section, the Company may acquire shares of Series One Preferred Stock
in any other manner permitted by law, the provisions hereof and the Charter.
SECTION 11. Ranking.
Unless otherwise provided in the Charter or a Certificate of Designation
relating to a subsequent series of Preferred Stock, the Series One Preferred
Stock shall rank junior to all other
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<PAGE> 10
series of the Preferred Stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up and senior to
the Common Stock.
SECTION 12. Amendment.
The provisions hereof and of the Charter shall not be amended in any
manner which would materially affect the rights, privileges or powers of the
Series One Preferred Stock without, in addition to any other vote of
stockholders required by law, the affirmative vote of the holders of two-thirds
or more of the outstanding shares of Series One Preferred Stock, voting
together as a single class.
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<PAGE> 11
IN WITNESS WHEREOF, we have executed and subscribed this Certificate of
Designation and do affirm the foregoing as true under the penalties of perjury
this 14th day of November, 1996.
/s/ ROBERT M. CHISTE
---------------------------------------
Robert M. Chiste
President and Chief Executive Officer
/s/ W. FIEDLER
---------------------------------------
William L. Fiedler
Vice President and Corporate Secretary
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<PAGE> 1
EXHIBIT 10.14
AGREEMENT AND SEVENTH AMENDMENT TO CREDIT AGREEMENT
(August 1, 1996)
THIS AGREEMENT AND SEVENTH AMENDMENT TO CREDIT AGREEMENT (this
"Amendment") is made and entered into as of August 1, 1996 by and among
ALLWASTE, INC. (the "Company"), a Delaware corporation, EACH OF THE FINANCIAL
INSTITUTIONS SIGNATORY HERETO (individually, a "Bank" and collectively, the
"Banks"), TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("TCB"), a national banking
association acting as agent for the Banks (in such capacity, together with its
successors in such capacity, the "Agent"), and NATIONSBANK OF TEXAS, N.A., a
national banking association, as co-agent under the Credit Agreement (as
defined hereinafter) (in such capacity, the "Co-Agent").
RECITALS:
A. The Company, the Agent and the Banks have entered into a
Credit Agreement dated as of November 30, 1993 (which such Credit Agreement, as
the same may have heretofore been amended, modified, supplemented and restated
from time to time, is hereinafter called the "Credit Agreement").
B. The Company, the Agent, the Co-Agent and the Banks now desire
to amend the Credit Agreement in certain respects as provided hereinbelow.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and for other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto do hereby agree as follows:
1. Net Worth Covenant Amended. Section 5.3(b) of the Credit
Agreement is hereby amended in its entirety to be and read as follows:
"(b) have at all times a NET WORTH equal to (1) $113,291,000 plus (2)
the Net Worth Floor Adjustment;"
2. Rate Hedging Agreement Approved. The Agent and the Banks
hereby ratify and confirm that each of them in advance approved, and each of
them does now acknowledge and approve, the Rate Hedging Agreement into which
the Company has entered with TCB and NationsBank ___________ in the form of a
"Cap" on $30,000,000 for three (3) years at 7% on a 3-month LIBOR basis, all as
is required pursuant to Section 6.1(n) of the Credit Agreement.
3. Limitation on Investments Amended. Section 6.7(j) of the
Credit Agreement is hereby amended by deleting the amount "$10,000,000" where
it appears therein and substituting therefor the amount "$15,000,000."
4. Release of Guaranty of Hydrowash Recycling Systems, Inc. The
Agent and the Banks hereby acknowledge and consent to the sale by the Company
of the Stock of Hydrowash Recycling Systems, Inc. ("Hydrowash"), a Texas
corporation, on January 17, 1996 for the consideration of $350,000 to
<PAGE> 2
the original owners of Hydrowash Recycling Systems, Inc. and, further, the
Agent and the Banks do hereby agree that Hydrowash is released from its
liabilities under the Guaranties effective as of the date of such sale.
5. Delivery of Certificates of Existence, Good Standing, Etc.
With respect to each Guarantor, the Company hereby agrees to deliver to the
Agent, within thirty (30) days after the date hereof, certificates from the
appropriate public officials of each of the states where such Guarantor is
incorporated and conducts its business as to the continued existence, good
standing and authority to do business in those states.
6. Conditions. No part of this Amendment shall become effective
until the Company shall have delivered (or shall have caused to be delivered)
to the Agent each of the following, in Proper Form:
(a) a certificate from the Secretary of State or other appropriate
public official of the State of Delaware as to the continued
existence and good standing of the Company in the State of
Delaware;
(b) a certificate from the Secretary of State or other appropriate
public official of the State of Texas as to the qualification
of the Company to do business in the State of Texas;
(c) a certificate from the Office of the Comptroller of the State
of Texas as to the good standing of the Company in the State
of Texas;
(d) a legal opinion from the general counsel for the Company and
the Current Guarantors acceptable to the Agent in its sole and
absolute discretion;
(e) certificates dated as of the date hereof of the Secretary or
any Assistant Secretary of the Company and each of the
Guarantors as of the date hereof, and such other documents and
information as the Banks may request;
(f) a Consent, in Proper Form, executed by of all of the
Guarantors to the execution and delivery of this Amendment and
such other related matters as the Banks may reasonably
require;
(g) a Notice of Entire Agreement and Release of Claims executed by
the Company and each of the Guarantors as of the date hereof,
and
(h) the amendment fee payable to each Bank as provided in Section
2.16 of the Credit Agreement.
7. Representations True; No Default. The Company represents and
warrants that the representations and warranties contained in Section 4 of the
Credit Agreement and in the other Loan Documents are true and correct in all
material respects on and as of the date hereof as though made on and as of such
date. The Company hereby certifies that no Default or Event of Default under
the Credit Agreement or any of the other Loan Documents has occurred and is
continuing as of the date hereof.
<PAGE> 3
8. Ratification. Except as expressly amended hereby, the Credit
Agreement and the other Loan Documents shall remain in full force and effect.
In the event of any conflict between this Amendment and the Credit Agreement or
any of the other Loan Documents (or any earlier modification of any of them),
this Amendment shall control. The Credit Agreement, as hereby amended, and all
rights and powers created thereby or thereunder and under the other Loan
Documents are in all respects ratified and confirmed and remain in full force
and effect.
9. Definitions and References. Terms used herein which are
defined in the Credit Agreement or in the other Loan Documents shall have the
meanings therein ascribed to them. The term "Credit Agreement" as used in the
Credit Agreement, the other Loan Documents or any other instrument, document or
writing furnished to the Agent, the Co-Agent or any of the Banks by the Company
shall mean the Credit Agreement as hereby amended.
10. Miscellaneous. This Amendment (a) shall be binding upon and
inure to the benefit of the Company, the Banks, the Agent, the Co-Agent and
their respective successors, assigns, receivers and trustees (provided,
however, that the Company shall not assign its rights hereunder without the
prior written consent of the Agent); (b) may be modified or amended only by a
writing signed by each party; (c) SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF
AMERICA; (d) may be executed in several counterparts, and by the parties hereto
on separate counterparts, and each counterpart, when so executed and delivered,
shall constitute an original agreement, and all such separate counterparts
shall constitute but one and the same agreement; and (e) together with the
other Loan Documents, embodies the entire agreement and understanding between
the parties with respect to the subject matter hereof and supersedes all prior
agreements, consents and understandings relating to such subject matter. The
headings herein shall be accorded no significance in interpreting this
Amendment.
IN WITNESS WHEREOF, the Company, the Banks, the Agent and the Co-Agent
have caused this Amendment to be signed by their respective duly authorized
officers, effective as of the date which first appears hereinabove.
ALLWASTE, INC.,
a Delaware corporation
By: /s/ T. Wayne Wren, Jr.
-----------------------------------
T. Wayne Wren, Senior Vice President
ATTEST:
/s/ William L. Fiedler
- -----------------------------
William L. Fiedler, Secretary
Attachments:
<PAGE> 4
Schedule I - Non-guaranteeing Subsidiaries
and Dormant Subsidiaries
<PAGE> 5
TEXAS COMMERCE BANK,
NATIONAL ASSOCIATION,
a national banking association,
as a Bank and as Agent
By: /s/ C. D. Karges
-----------------------------
C. D. Karges,
Senior Vice President
<PAGE> 6
NATIONSBANK OF TEXAS, N.A., a national
banking association, as a
Bank and as Co-Agent
By: /s/ Forest Scott Sinehuff
-----------------------------
Name: Forest Scott Sinehuff
--------------------------
Title: Senior Vice President
-------------------------
<PAGE> 7
BANK OF AMERICA TEXAS, N.A.,
a national banking association
By: /s/ Victor N. Tekell
---------------------------------
Victor N. Tekell, Vice President
<PAGE> 8
FIRST INTERSTATE BANK OF TEXAS, N.A,
a national banking association
By: /s/ Christopher King
--------------------------------
Name: Christopher King
-----------------------------
Title: Assistant Vice President
----------------------------
<PAGE> 9
THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. Ashby
----------------------------------
Name: F.C.H. Ashby
--------------------------------
Title: Senior Manager Loan Operations
-------------------------------
<PAGE> 10
COMERICA BANK-TEXAS,
a Texas banking association
By: /s/ Eric Lundquist
----------------------------
Name: Eric Lundquist
--------------------------
Title: Assistant Vice President
-------------------------
<PAGE> 11
LTCB TRUST COMPANY,
a New York Trust Company
By: /s/ John J. Sullivan
--------------------------------
Name: John J. Sullivan
------------------------------
Title: Executive Vice President
-----------------------------
<PAGE> 12
ABN AMRO BANK N.V., HOUSTON AGENCY
By: ABN AMRO North America, Inc.
As Agent
By: /s/ Laurie C. Tuzo
-------------------------------
Name: Laurie C. Tuzo
-----------------------------
Title: Vice President and Director
-----------------------------
By: /s/ Lila Jordan
-------------------------------
Name: Lila Jordan
-----------------------------
Title: Vice President and Director
----------------------------
<PAGE> 13
SCHEDULE I
NON-GUARANTORS:
Allwaste Asbestos Abatement of New England, Inc.
Allwaste Environmental Services/North Central, Inc. (ILLINOIS CORP-FOR UNION
PURPOSES ONLY)
Allwaste of Canada Ltd.
Allwaste Servicios Industriales de Control Ecologico S.A. de C.V.
Allwaste Tank Services S.A. de C.V.
Caligo de Mexico, S.A. de C.V.
Caligo Reinigungsges m.b.H.
<PAGE> 1
EXHIBIT 10.15
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "Amendment") is made
and entered into as of this 11th day of November, 1996, by and between
Allwaste, Inc., a Delaware corporation (the "Company"), and R. L. Nelson, Jr.
(the "Employee").
WHEREAS, the Company and the Employee are parties to an Employment
Agreement dated October 23, 1986 (the "Agreement") which is attached hereto as
Addendum 1 and is incorporated herein in its entirety by reference, pursuant to
which the Employee has performed certain services to the Company; and
WHEREAS, the Company and the Employee desire to amend the Agreement as
provided herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises and representations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged herein,
the Company and the Employee agree as follows:
1. The following recitals are hereby added as a preface to the body of
the Agreement:
The following statements are true and correct:
As of the date of this Agreement, the Company,
through its wholly-owned subsidiaries, is engaged in the
business of providing industrial and environmental services.
The Employee is or will be employed by the Company in
a confidential relationship pursuant to which the Employee, in
the course of his employment with the Company, will have
access to and will become aware of and familiar with certain
business, technical and other confidential information
pertaining to the Company's specific manner of doing business
and its future plans with respect thereto, including, without
limitation, information relating to pricing, customers,
suppliers, methods, techniques, processes, products, services
and know-how of the Company (collectively, the "CONFIDENTIAL
INFORMATION"), which Confidential Information has been or will
be established by and maintained at great expense to the
Company and is proprietary to and constitutes the trade
secrets and valuable goodwill of the Company.
The Employee recognizes that the Company's business
is dependent on such Confidential Information and that
disclosure of any of the Company's Confidential Information by
the Employee would have a detrimental effect on the Company's
Page 1 of 8 Pages
<PAGE> 2
business. The protection of its Confidential Information is
of critical importance to the Company.
The Company will sustain great loss and damage if,
during the term of this Agreement and for a period of two (2)
years immediately following termination of this Agreement for
any reason, the Employee should violate any provision of
Section 3 of this Agreement. The parties acknowledge that
monetary damages for any such loss would be extremely
difficult to measure.
2. Subparagraph 1(a) of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
(a) EMPLOYMENT. The Company hereby employs
Employee as its Chairman of the Board. The Company's
President or Board of Directors may request that the Employee
serve in various capacities for the Company's subsidiaries;
however, in connection with such service, the Employee shall
not be requested to undertake duties and responsibilities that
are substantially different than those assigned to the
Employee as a result of his primary position with the Company
or that are unreasonable (or inconsistent with those given to
similarly-situated employees) considering the skills and
expertise of the Employee and the condition of the Company.
The Employee hereby accepts this employment under the terms
and provisions herein contained and agrees to devote his full
time, attention and efforts to promote and further the
business and services of the Company. The Employee shall
faithfully adhere to, execute and fulfill all policies
(written and unwritten) established by the Company.
3. Section 2 of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
(a) BASE SALARY. The base salary payable to the
Employee under this Agreement shall be $250,000 during the
fiscal year beginning September 1, 1996 and ending August 31,
1997 and shall be $200,000 during the fiscal year beginning
September 1, 1997 and ending August 31, 1998, payable in equal
bi-weekly installments or on any other periodic basis
consistent with the Company's payroll procedures, which amount
may be increased or decreased from time to time at the
discretion of the Compensation Committee of the Company's
Board of Directors.
Page 2 of 8 Pages
<PAGE> 3
(b) ADDITIONAL COMPENSATION. The Employee is
eligible to receive additional compensation from the Company
as described below:
(i) The Employee shall be eligible to
participate in the Company's supplemental executive
retirement plan, as it may be in effect from time to
time.
(ii) Subject to the rules and regulations
applicable thereto and to the extent that his
position, tenure, salary, age, health and other
qualifications make him eligible to so participate,
the Employee shall be entitled to participate in the
Company's employee benefit programs.
(iii) The Employee shall be entitled to
receive stock option grants as and when authorized by
the Compensation Committee of the Company's Board of
Directors.
(iv) The Employee shall be entitled to
receive no less than three (3) weeks of vacation time
per year.
(v) The Employee shall be entitled to
receive such other executive perquisites from the
Company as are customary, including, without
limitation, club membership dues and personal
financial and tax planning and tax preparation
services, together with reimbursement for all
expenses reasonably incurred in the performance of
his duties, subject to submission of appropriate
documentation in accordance with the Company's
expense reimbursement policy in effect from time to
time.
4. Section 6 of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
6. TERM; TERMINATION; COMPENSATION AND OTHER RIGHTS ON
TERMINATION.
The term of this Agreement shall begin on the date of this
Agreement and, unless terminated as herein provided, continue until
August 31, 1998.
(a) TERMINATION AS A RESULT OF THE EMPLOYEE'S DEATH.
(1) This Agreement will terminate
automatically on the death of the Employee.
Page 3 of 8 Pages
<PAGE> 4
(2) Compensation and Benefits. The Company
shall pay to the Employee's beneficiary an amount
equal to accrued compensation owing to the Employee
on the date of his death (including, without
limitation, salary, pro rata bonus (if any and
subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred
compensation and accrued vacation pay), together with
applicable death benefits, if any. In accordance
with the Company's Amended and Restated 1989
Replacement Non-Qualified Stock Option Plan (as the
same may be amended from time to time, the "Option
Plan"), the Employee's beneficiary shall be entitled
to exercise all exercisable stock options held by the
Employee as of the date of death until the earlier of
(i) the one-year period following the date of death
or (ii) the date the option would otherwise expire.
(b) TERMINATION BY THE COMPANY ON ACCOUNT OF DISABILITY.
(1) If, as a result of the Employee's
inability to perform his duties under this Agreement
(with or without reasonable accomodation) because of
illness, physical or mental disability, or other
incapacity which continues for an uninterrupted
period in excess of three (3) months or a cumulative
period of six (6) months in any twelve (12) month
period, and if, within thirty (30) days after the
Company has given the Employee written notice of the
Company's intention to terminate the Employee's
employment hereunder as a result of such incapacity,
the Employee shall not have returned to the full-time
performance of his duties hereunder, then the Company
may thereafter terminate the Employee's employment on
account of "DISABILITY"; provided, however, such
termination shall not by itself alter or impair the
Employee's rights as a "disabled employee" or
otherwise under any of the Company's employee benefit
plans.
(2) Compensation and Benefits. The Company
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, without limitation, salary,
pro rata bonus (if any and subject to the terms and
conditions of any applicable bonus or incentive
compensation plans), deferred compensation and
accrued vacation pay). Subject to approval by the
Compensation Committee of the Company's Board of
Directors, the Company shall cause all stock options
held by the Employee to be regranted under the
Company's 1992 Limited Non-Qualified Stock Option
Plan (the "1992 Plan") so that such options continue
to vest and remain exercisable for a period of twelve
months following the date of
Page 4 of 8 Pages
<PAGE> 5
termination Whenever compensation is payable to the
Employee hereunder during a period in which he is
partially or totally disabled, and such Disability
would (except for the provisions hereof) entitle the
Employee to Disability income or salary continuation
payments from the Company according to the terms of
any plan or program presently maintained or hereafter
established by the Company, the Disability income or
salary continuation paid to the Employee pursuant to
any such plan or program shall be considered a
portion of the payment to be made to the Employee
pursuant to this Section 6(b)(2) and shall not be in
addition hereto. If Disability income is payable
directly to the Employee by an insurance company
under the terms of an insurance policy paid for by
the Company, the amounts paid to the Employee by such
insurance company shall be considered a portion of
the payment to be made to the Employee pursuant to
this Section 6(b)(2) and shall not be in addition
hereto.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(1) The Company may at any time during the
term of this Agreement, in its sole discretion,
terminate the Employee's employment with the Company
for "Cause." For purposes of this Agreement, the
following shall constitute "CAUSE": (1) the Employee
willfully and continually fails to perform
substantially the Employee's duties with the Company
(other than any such failure resulting from the
Employee's incapacity due to physical or mental
illness), which failure continues unabated after a
written demand for substantial performance is
delivered to the Employee by the President or the
Chairman of the Board that specifically identifies
the manner in which the President or the Board
believes that the Employee has not substantially
performed the Employee's duties; (2) the Employee
willfully engages in gross misconduct that is
materially and demonstrably injurious to the Company;
or (3) the Employee is convicted of a felony crime by
a court of competent jurisdiction.
For purposes of this Section 6(c), an act or
failure to act on the Employee's part shall be
considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without
reasonable belief that the Employee's action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not
be deemed to have been terminated by the Company for
Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than a
majority of the entire membership of the Board, at a
meeting of the Board called and held for the purpose
(after reasonable notice to the Employee and an
opportunity for the Employee,
Page 5 of 8 Pages
<PAGE> 6
together with the Employee's counsel, to be heard
before the Board), finding that, in the good faith
opinion of the Board, the Employee was guilty of
conduct set forth in clauses (a) or (b) of the second
sentence of this Section 6(c) and specifying the
particulars thereof in reasonable detail.
(2) Compensation and Benefits. The Company
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, salary and accrued vacation
pay). In accordance with the Company's Option Plan,
the Employee shall be entitled to exercise all
exercisable stock options held by the Employee as of
the date of termination until the expiration of the
three-month period following such date of
termination.
(d) TERMINATION BY THE EMPLOYEE.
(1) At any time after the execution of this
Agreement, the Employee may elect to terminate this
Agreement and the Employee's employment hereunder.
(2) Compensation and Benefits. In the event
the Employee terminates this Agreement for any
reason, the Employee shall be entitled to receive an
amount equal to accrued compensation owing to the
Employee as of the date of termination (including,
without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any
applicable bonus or incentive compensation plans),
deferred compensation and accrued vacation pay). In
accordance with the Company's Option Plan, the
Employee shall be entitled to exercise all
exercisable stock options held by the Employee as of
the date of termination until the expiration of the
three-month period following such date of
termination.
(e) TERMINATION BY THE COMPANY FOR OTHER THAN CAUSE.
(1) At any time after the execution of
this Agreement, the Company may, without Cause, elect
to terminate this Agreement and the Employee's
employment hereunder; provided, however, that in the
event that severance benefits are triggered by a
Change in Control under any Executive Severance
Agreement between the Company and the Employee, the
compensation and benefits otherwise payable to the
Employee under this Section 6(e) shall be null and
void.
Page 6 of 8 Pages
<PAGE> 7
(2) Compensation and Benefits. In the
event the Company elects to terminate this Agreement
pursuant to this Section 6(e), the Employee shall be
entitled to receive his base monthly salary for the
period from the date of such termination through
August 31, 1998 (the "Severance Period"), payable in
accordance with the Company's customary payroll
procedures, as severance. In addition, the Company
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, without limitation, salary,
pro rata bonus (if any and subject to the terms and
conditions of any applicable bonus or incentive
compensation plans), deferred compensation and
accrued vacation pay). Subject to the approval of the
Compensation Committee, the Company shall cause all
stock options held by the Employee to be regranted
under the Company's 1992 Limited Non-Qualified Stock
Option Plan (the "1992 Plan") so that such options
continue to vest and shall remain exercisable until
three months following the earlier of the date of
final vesting of any such option grant or the final
date of the Severance Period. The Company shall also
pay to the Employee an amount equal to (a) the amount
of the monthly premium payment to continue coverage
for the Employee and the Employee's eligible
dependents under the Company's health insurance plan
under COBRA, multiplied by (b) the number of months
of the Severance Period. Further, the Employee shall
be credited with an additional 12 months of service
credit under the Company's Supplemental Executive
Retirement Plan (the "SERP").
(f) SURVIVING OBLIGATIONS FOLLOWING TERMINATION.
(1) In the event of termination of this
Agreement for any reason provided in this Section 6
herein or if Employee resigns prior to the expiration
of the term of this Agreement, all rights and
obligations of the Company and the Employee under
this Agreement shall cease immediately, except that
Employee's obligations under Sections 3, 4, 5 and 7
herein shall survive such termination, and except as
otherwise provided in this Section 6, the Employee
shall thereafter have no right to receive any
compensation hereunder.
5. The following Section 13 shall be added to the Agreement as follows:
13. ASSIGNMENT; BINDING EFFECT.
The Employee understands that he has been selected
for employment by the Company on the basis of his personal
qualifications, experience and skills. The
Page 7 of 8 Pages
<PAGE> 8
Employee, therefore, agrees that he cannot assign his rights
and obligations hereunder or delegate his duties hereunder.
Subject to the preceding two sentences, this Agreement shall
be binding on and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. It is
further understood and agreed that the Company may be merged
or consolidated with another entity and that any such entity
shall automatically succeed to the rights, powers and
responsibilities of the Company hereunder.
6. This Amendment shall be governed by and construed in accordance with
the laws of the State of Texas.
7. The Agreement, as amended by this Amendment, supersedes any and all
other agreements, either oral or in writing, between Company and the Employee
with respect to the employment of the Employee by the Company and contains all
of the representations, covenants and agreements between the Company and the
Employee with respect to such employment. The Agreement, as amended hereby,
may not be later modified except by a further writing signed by the Company and
the Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
8. Except as modified by this Amendment, all other terms of the Agreement
shall continue in full force and effect without modification.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Employment Agreement in duplicate originals, effective as of November 11, 1996.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
--------------------------------------
Robert M. Chiste
President and Chief Executive Officer
R. L. NELSON, JR.
/s/ R. L. Nelson, Jr.
------------------------------
R. L. Nelson, Jr.
Page 8 of 8 Pages
<PAGE> 1
EXHIBIT 10.16
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement (the "Second Amendment")
is made and entered into as of this 25th day of October, 1996, by and between
Allwaste, Inc., a Delaware corporation (the "Company"), and Robert M. Chiste
(the "Employee").
WHEREAS, the Company and the Employee are parties to an Employment
Agreement dated October 17, 1994, as amended by that certain First Amendment to
Employment Agreement dated October 26, 1995 (the "First Amendment") (as
amended, the "Agreement"), which is attached hereto as Addendum 1 and is
incorporated herein in its entirety by reference, pursuant to which the
Employee has performed certain services to the Company; and
WHEREAS, the Company and the Employee desire to amend the Agreement to
extend the vesting schedule of the shares of restricted stock granted to the
Employee pursuant to the Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises and representations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged herein,
the Company and the Employee agree as follows:
1. Subparagraph 2(b)(ii) of the Agreement (as amended by
paragraph 1 of the First Amendment) is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
(ii) In addition to the bonus described in subparagraph
2(b)(i) hereof, the Employee shall be entitled to receive
126,316 shares (the "Shares") of the Company's common stock,
par value $.01 per share (the "Common Stock"), such Shares to
vest cumulatively as follows: 31,579 of the Shares shall vest
on January 1, 1997; 31,579 of the Shares shall vest on January
1, 1998; 31,579 of the Shares shall vest on January 1, 1999;
and the remainder, 31,579 of the Shares, shall vest on January
1, 2000. The Employee acknowledges that such shares shall be
restricted shares, subject to forfeiture as provided in the
Restricted Stock Agreement attached hereto as Exhibit A and
incorporated herein in its entirety by reference.
2. Except as modified by this Second Amendment, all other terms
of the Agreement shall continue in full force and effect without modification.
IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Employment Agreement in duplicate originals, effective as of October 25, 1996.
ALLWASTE, INC.
By: /s/ William L. Fiedler
-----------------------------------
William L. Fiedler
Vice President, General
Counsel and Secretary
/s/ Robert M. Chiste
------------------------------------
Robert M. Chiste
<PAGE> 1
EXHIBIT 10.17
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "Amendment") is made
and entered into as of this 11th day of November, 1996, by and between
Allwaste, Inc., a Delaware corporation (the "Company"), and William L. Fiedler
(the "Employee").
WHEREAS, the Company and the Employee are parties to an Employment
Agreement dated February 11, 1994 (the "Agreement") which is attached hereto as
Addendum 1 and is incorporated herein in its entirety by reference, pursuant to
which the Employee has performed certain services to the Company; and
WHEREAS, the Company and the Employee desire to amend the Agreement as
provided herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises and representations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged herein,
the Company and the Employee agree as follows:
1. The following recitals are hereby added as a preface to the body of
the Agreement:
The following statements are true and correct:
As of the date of this Agreement, the Company,
through its wholly-owned subsidiaries, is engaged in the
business of providing industrial and environmental services.
The Employee is or will be employed by the Company in
a confidential relationship pursuant to which the Employee, in
the course of his employment with the Company, will have
access to and will become aware of and familiar with certain
business, technical and other confidential information
pertaining to the Company's specific manner of doing business
and its future plans with respect thereto, including, without
limitation, information relating to pricing, customers,
suppliers, methods, techniques, processes, products, services
and know-how of the Company (collectively, the "CONFIDENTIAL
INFORMATION"), which Confidential Information has been or will
be established by and maintained at great expense to the
Company and is proprietary to and constitutes the trade
secrets and valuable goodwill of the Company.
The Employee recognizes that the Company's business
is dependent on such Confidential Information and that
disclosure of any of the Company's Confidential Information by
the Employee would have a detrimental effect on the Company's
Page 1 of 8 Pages
<PAGE> 2
business. The protection of its Confidential Information is
of critical importance to the Company.
The Company will sustain great loss and damage if,
during the term of this Agreement and for a period of two (2)
years immediately following termination of this Agreement for
any reason, the Employee should violate any provision of
Section 3 of this Agreement. The parties acknowledge that
monetary damages for any such loss would be extremely
difficult to measure.
2. Subparagraph 1(a) of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
(a) EMPLOYMENT. The Company hereby employs
Employee as its Vice President, General Counsel, Secretary and
Corporate Compliance Officer. The Company's President or
Board of Directors may request that the Employee serve in
various capacities for the Company's subsidiaries; however, in
connection with such service, the Employee shall not be
requested to undertake duties and responsibilities that are
substantially different than those assigned to the Employee as
a result of his primary position with the Company or that are
unreasonable (or inconsistent with those given to
similarly-situated employees) considering the skills and
expertise of the Employee and the condition of the Company.
The Employee hereby accepts this employment under the terms
and provisions herein contained and agrees to devote his full
time, attention and efforts to promote and further the
business and services of the Company. The Employee shall
faithfully adhere to, execute and fulfill all policies
(written and unwritten) established by the Company.
3. Section 2 of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
(a) BASE SALARY. The base salary payable to the
Employee under this Agreement shall be $145,000 per year,
payable in equal bi-weekly installments or on any other
periodic basis consistent with the Company's payroll
procedures, which amount may be increased from time to time.
(b) ADDITIONAL COMPENSATION. The Employee is
eligible to receive additional compensation from the Company
as described below:
(i) The Employee shall be eligible to
participate in the Company's incentive bonus plan,
deferred compensation plan and supplemental executive
retirement plan, as each may be in effect from time
to time.
Page 2 of 8 Pages
<PAGE> 3
(ii) Subject to the rules and regulations
applicable thereto and to the extent that his
position, tenure, salary, age, health and other
qualifications make him eligible to so participate,
the Employee shall be entitled to participate in the
Company's employee benefit programs.
(iii) The Employee shall be entitled to
receive stock option grants as and when authorized by
the Compensation Committee of the Company's Board of
Directors.
(iv) The Employee shall be entitled to
receive no less than three (3) weeks of vacation time
per year.
(v) The Employee shall be entitled to
receive such other executive perquisites from the
Company as are customary, including, without
limitation, club membership dues and personal
financial and tax planning and tax preparation
services, together with reimbursement for all
expenses reasonably incurred in the performance of
his duties, subject to submission of appropriate
documentation in accordance with the Company's
expense reimbursement policy in effect from time to
time.
4. Section 6 of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
6. TERM; TERMINATION; COMPENSATION AND OTHER RIGHTS ON
TERMINATION.
The term of this Agreement shall begin on the date of this
Agreement and, unless terminated as herein provided, continue for a
term of five (5) years and thereafter on a year-to-year basis on the
same terms and conditions contained herein.
(a) TERMINATION AS A RESULT OF THE EMPLOYEE'S DEATH.
(1) This Agreement will terminate
automatically on the death of the Employee.
(2) Compensation and Benefits. The Company
shall pay to the Employee's beneficiary an amount
equal to accrued compensation owing to the Employee
on the date of his death (including, without
limitation, salary, pro rata bonus (if any and
subject to the terms and conditions of any applicable
Page 3 of 8 Pages
<PAGE> 4
bonus or incentive compensation plans), deferred
compensation and accrued vacation pay), together with
applicable death benefits, if any. In accordance
with the Company's Amended and Restated 1989
Replacement Non-Qualified Stock Option Plan (as the
same may be amended from time to time, the "Option
Plan"), the Employee's beneficiary shall be entitled
to exercise all exercisable stock options held by the
Employee as of the date of death until the earlier of
(i) the one-year period following the date of death
or (ii) the date the option would otherwise expire.
(b) TERMINATION BY THE COMPANY ON ACCOUNT OF DISABILITY.
(1) If, as a result of the Employee's
inability to perform his duties under this Agreement
(with or without reasonable accomodation) because of
illness, physical or mental disability, or other
incapacity which continues for an uninterrupted
period in excess of three (3) months or a cumulative
period of six (6) months in any twelve (12) month
period, and if, within thirty (30) days after the
Company has given the Employee written notice of the
Company's intention to terminate the Employee's
employment hereunder as a result of such incapacity,
the Employee shall not have returned to the full-time
performance of his duties hereunder, then the Company
may thereafter terminate the Employee's employment on
account of "DISABILITY"; provided, however, such
termination shall not by itself alter or impair the
Employee's rights as a "disabled employee" or
otherwise under any of the Company's employee benefit
plans.
(2) Compensation and Benefits. The Company
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, without limitation, salary,
pro rata bonus (if any and subject to the terms and
conditions of any applicable bonus or incentive
compensation plans), deferred compensation and
accrued vacation pay). Subject to approval by the
Compensation Committee of the Company's Board of
Directors, the Company shall cause all stock options
held by the Employee to be regranted under the
Company's 1992 Limited Non-Qualified Stock Option
Plan (the "1992 Plan") so that such options continue
to vest and remain exercisable for a period of twelve
months following the date of termination. Whenever
compensation is payable to the Employee hereunder
during a period in which he is partially or totally
disabled, and such Disability would (except for the
provisions hereof) entitle the Employee to Disability
income or salary continuation payments from the
Company according to the terms of any plan or program
presently maintained or hereafter established by
Page 4 of 8 Pages
<PAGE> 5
the Company, the Disability income or salary
continuation paid to the Employee pursuant to any
such plan or program shall be considered a portion of
the payment to be made to the Employee pursuant to
this Section 6(b)(2) and shall not be in addition
hereto. If Disability income is payable directly to
the Employee by an insurance company under the terms
of an insurance policy paid for by the Company, the
amounts paid to the Employee by such insurance
company shall be considered a portion of the payment
to be made to the Employee pursuant to this Section
6(b)(2) and shall not be in addition hereto.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(1) The Company may at any time during the
term of this Agreement, in its sole discretion,
terminate the Employee's employment with the Company
for "Cause." For purposes of this Agreement, the
following shall constitute "CAUSE": (1) the Employee
willfully and continually fails to perform
substantially the Employee's duties with the Company
(other than any such failure resulting from the
Employee's incapacity due to physical or mental
illness), which failure continues unabated after a
written demand for substantial performance is
delivered to the Employee by the President or the
Chairman of the Board that specifically identifies
the manner in which the President or the Board
believes that the Employee has not substantially
performed the Employee's duties; (2) the Employee
willfully engages in gross misconduct that is
materially and demonstrably injurious to the Company;
or (3) the Employee is convicted of a felony crime by
a court of competent jurisdiction.
For purposes of this Section 6(c), an act or
failure to act on the Employee's part shall be
considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without
reasonable belief that the Employee's action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not
be deemed to have been terminated by the Company for
Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than a
majority of the entire membership of the Board, at a
meeting of the Board called and held for the purpose
(after reasonable notice to the Employee and an
opportunity for the Employee, together with the
Employee's counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board,
the Employee was guilty of conduct set forth in
clauses (a) or (b) of the second sentence of this
Section 6(c) and specifying the particulars thereof
in reasonable detail.
Page 5 of 8 Pages
<PAGE> 6
(2) Compensation and Benefits. The Company
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, salary and accrued vacation
pay). In accordance with the Company's Option Plan,
the Employee shall be entitled to exercise all
exercisable stock options held by the Employee as of
the date of termination until the expiration of the
three-month period following such date of
termination.
(d) TERMINATION BY THE EMPLOYEE.
(1) At any time after the execution of this
Agreement, the Employee may elect to terminate this
Agreement and the Employee's employment hereunder.
(2) Compensation and Benefits. In the event
the Employee terminates this Agreement for any
reason, the Employee shall be entitled to receive an
amount equal to accrued compensation owing to the
Employee as of the date of termination (including,
without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any
applicable bonus or incentive compensation plans),
deferred compensation and accrued vacation pay). In
accordance with the Company's Option Plan, the
Employee shall be entitled to exercise all
exercisable stock options held by the Employee as of
the date of termination until the expiration of the
three-month period following such date of
termination.
(e) TERMINATION BY THE COMPANY FOR OTHER THAN CAUSE.
(1) At any time after the execution of
this Agreement, the Company may, without Cause, elect
to terminate this Agreement and the Employee's
employment hereunder; provided, however, that in the
event that severance benefits are triggered by a
Change in Control under any Executive Severance
Agreement between the Company and the Employee, the
compensation and benefits otherwise payable to the
Employee under this Section 6(e) shall be null and
void.
(2) Compensation and Benefits. In the
event the Company elects to terminate this Agreement
pursuant to this Section 6(e), the Employee shall be
entitled to receive his base monthly salary for 12
months (the "Severance Period"), payable in
accordance with the Company's customary payroll
procedures, as severance. In addition, the Company
Page 6 of 8 Pages
<PAGE> 7
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, without limitation, salary,
pro rata bonus (if any and subject to the terms and
conditions of any applicable bonus or incentive
compensation plans), deferred compensation and
accrued vacation pay). Subject to the approval of the
Compensation Committee, the Company shall cause all
stock options held by the Employee to be regranted
under the Company's 1992 Limited Non-Qualified Stock
Option Plan (the "1992 Plan") so that such options
continue to vest and shall remain exercisable until
three months following the earlier of the date of
final vesting of any such option grant or the final
date of the Severance Period. The Company shall also
pay to the Employee an amount equal to (a) the amount
of the monthly premium payment to continue coverage
for the Employee and the Employee's eligible
dependents under the Company's health insurance plan
under COBRA, multiplied by (b) 12 months. Further,
the Employee shall be credited with an additional 12
months of service credit under the Company's
Supplemental Executive Retirement Plan (the "SERP").
(f) SURVIVING OBLIGATIONS FOLLOWING TERMINATION.
(1) In the event of termination of this
Agreement for any reason provided in this Section 6
herein or if Employee resigns prior to the expiration
of the term of this Agreement, all rights and
obligations of the Company and the Employee under
this Agreement shall cease immediately, except that
Employee's obligations under Sections 3, 4, 5 and 7
herein shall survive such termination, and except as
otherwise provided in this Section 6, the Employee
shall thereafter have no right to receive any
compensation hereunder.
5. The following Section 13 shall be added to the Agreement as follows:
13. ASSIGNMENT; BINDING EFFECT.
The Employee understands that he has been selected
for employment by the Company on the basis of his personal
qualifications, experience and skills. The Employee,
therefore, agrees that he cannot assign his rights and
obligations hereunder or delegate his duties hereunder.
Subject to the preceding two sentences, this Agreement shall
be binding on and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. It is
further understood and agreed that the Company may be merged
or consolidated with another entity
Page 7 of 8 Pages
<PAGE> 8
and that any such entity shall automatically succeed to the
rights, powers and responsibilities of the Company hereunder.
6. This Amendment shall be governed by and construed in accordance with
the laws of the State of Texas.
7. The Agreement, as amended by this Amendment, supersedes any and all
other agreements, either oral or in writing, between Company and the Employee
with respect to the employment of the Employee by the Company and contains all
of the representations, covenants and agreements between the Company and the
Employee with respect to such employment. The Agreement, as amended hereby,
may not be later modified except by a further writing signed by the Company and
the Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
8. Except as modified by this Amendment, all other terms of the Agreement
shall continue in full force and effect without modification.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Employment Agreement in duplicate originals, effective as of November 11, 1996.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
-------------------------------------------
Robert M. Chiste
President and Chief Executive Officer
WILLIAM L. FIEDLER
/s/ William L. Fiedler
----------------------------------------------
William L. Fiedler
Page 8 of 8 Pages
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT") between ALLWASTE, INC., a
Delaware corporation (the "COMPANY"), and DAVID E. FANTA (the "EMPLOYEE") is
hereby entered into effective as of the 11th day of November, 1996.
RECITALS:
The following statements are true and correct:
As of the date of this Agreement, the Company, through its
wholly-owned subsidiaries, is engaged in the business of providing industrial
and environmental services.
The Employee is or will be employed by the Company in a confidential
relationship pursuant to which the Employee, in the course of his employment
with the Company, will have access to and will become aware of and familiar
with certain business, technical and other confidential information pertaining
to the Company's specific manner of doing business and its future plans with
respect thereto, including, without limitation, information relating to
pricing, customers, suppliers, methods, techniques, processes, products,
services and know-how of the Company (collectively, the "CONFIDENTIAL
INFORMATION"), which Confidential Information has been or will be established
by and maintained at great expense to the Company and is proprietary to and
constitutes the trade secrets and valuable goodwill of the Company.
The Employee recognizes that the Company's business is dependent on
such Confidential Information and that disclosure of any of the Company's
Confidential Information by the Employee would have a detrimental effect on the
Company's business. The protection of its Confidential Information is of
critical importance to the Company.
The Company will sustain great loss and damage if, during the term of
this Agreement and for a period of two (2) years immediately following
termination of this Agreement for any reason, the Employee should violate any
provision of Section 3 of this Agreement. The parties acknowledge that
monetary damages for any such loss would be extremely difficult to measure.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. EMPLOYMENT AND RESPONSIBILITIES.
(a) EMPLOYMENT. The Company hereby employs Employee as
its Senior Vice President of Operations. The Company's President or
Board of Directors may request that the Employee serve in various
capacities for the Company's subsidiaries; however, in connection with
such service, the Employee shall not be requested to undertake duties
and responsibilities that are substantially different than those
assigned to the Employee as a result of his primary position with the
Company or that are unreasonable (or inconsistent with those given to
<PAGE> 2
similarly-situated employees) considering the skills and expertise of
the Employee and the condition of the Company . The Employee hereby
accepts this employment under the terms and provisions herein
contained and agrees to devote his full time, attention and efforts to
promote and further the business and services of the Company. The
Employee shall faithfully adhere to, execute and fulfill all policies
(written and unwritten) established by the Company.
(b) AUTHORITY. The Employee shall have authority
commensurate with the authority normally accorded his position. All
actions of the Employee shall be in conformance with all policies of
the Company in effect and consistent with the Company's policy manual.
(c) AFFILIATES. The Employee may from time to time be
required to perform services for divisions, subsidiaries or affiliates
of the Company, in which event the terms and conditions of this
Agreement shall apply as if such affiliated company were a party to
this Agreement.
(d) SOLE EMPLOYMENT. The Employee shall not, during the
term of his employment hereunder, be engaged in any other business
activity pursued for gain, profit or other pecuniary advantage if such
activity interferes with Employee's duties and responsibilities
hereunder. This shall not, however, be construed as prohibiting the
Employee from engaging in other activities and making personal
investments which do not conflict with his responsibilities to the
Company.
2. COMPENSATION.
For all services rendered by the Employee to the Company, the
Company shall compensate the Employee as follows:
(a) BASE SALARY. The base salary payable to the Employee
under this Agreement shall be $202,500 per year, payable in equal
bi-weekly installments or on any other periodic basis consistent with
the Company's payroll procedures, which amount may be increased from
time to time.
(b) ADDITIONAL COMPENSATION. The Employee is eligible to
receive additional compensation from the Company as described below:
(i) The Employee shall be eligible to participate
in the Company's incentive bonus plan, deferred compensation
plan and supplemental executive retirement plan, as each may
be in effect from time to time.
(ii) Subject to the rules and regulations
applicable thereto and to the extent that his position,
tenure, salary, age, health and other qualifications make him
eligible to so participate, the Employee shall be entitled to
participate in the Company's employee benefit programs.
Page 2 of 10
<PAGE> 3
(iii) The Employee shall be entitled to receive
stock option grants as and when authorized by the Compensation
Committee of the Company's Board of Directors.
(iv) The Employee shall be entitled to receive no
less than three (3) weeks of vacation time per year.
(v) The Employee shall be entitled to receive
such other executive perquisites from the Company as are
customary, including, without limitation, club membership dues
and personal financial and tax planning and tax preparation
services, together with reimbursement for all expenses
reasonably incurred in the performance of his duties, subject
to submission of appropriate documentation in accordance with
the Company's expense reimbursement policy in effect from time
to time.
3. NONCOMPETITION AGREEMENT.
(a) During the term of this Agreement and for a period of
two (2) years immediately following the termination of this Agreement,
the Employee shall not, for any reason whatsoever, directly or
indirectly, for himself or on behalf of, or in conjunction with, any
other person, persons, company, partnership, corporation or business
of whatever nature: (1) call on any customer of the Company, past or
present, including, but not limited to, any customers obtained for the
Company by the Employee, for the purpose of soliciting or selling any
products or services in competition with those of the Company; (2)
call on any employee of the Company for the purpose or with the intent
of enticing them away from or out of the employ of the Company for any
reason whatever; or (3) establish, enter into, be employed by or for,
advise, consult with or become an owner in or a part of, any company,
partnership, corporation or other business entity or venture, or in
any way engage in business for himself or for others, in competition
with the Company within 100 miles of the home office of the Company or
its subsidiaries having a permanent and known facility wherein the
Employee has served.
(b) These covenants on the part of the Employee shall be
construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the
Employee against the Company, whether predicated on this Agreement or
otherwise, shall not preclude the Company's enforcement of this
covenant. In the event of a breach or threatened breach by the
Employee of his obligations under this Section 3, the Employee
acknowledges that the Company will not have an adequate remedy at law
and shall be entitled to such equitable and injunctive relief as may
be available to restrain the Employee from the violation of the
provisions hereof. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available for such breach
or threatened breach, including the recovery of damages from the
Employee.
Page 3 of 10
<PAGE> 4
(c) It is agreed by the parties that the covenants set
forth in this Section 3 impose a reasonable restraint on the Employee
in light of the activities and business of the Company on the date of
execution of this Agreement and in light of the future plans of the
Company. It is the intent of the parties that such covenants be
construed and enforced in light of the activities and business of the
Company on the date of termination of the Employee's employment with
the Company.
(d) The covenants in this Section 3 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth herein are unreasonable,
then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable and
the Agreement shall thereby be reformed.
(e) All of the covenants set forth in this Section 3
shall be construed as an agreement independent of any other provision
of this Agreement, and the existence of any claim or cause of action
of the Employee against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. It is agreed by the
parties that the two-year period stated at the beginning of this
Section 3, during which the agreements and covenants of the Employee
contained herein shall be effective, shall be computed by excluding
from such computation any time during which the Employee is in
violation of any provision of this Section 3 and any time during which
there is pending in any court of competent jurisdiction any action
(including any appeal from any final judgment) brought by any person,
whether or not a party to this Agreement, in which action, the Company
seeks to enforce the agreements and covenants of the Employee or in
which any person contests the validity of such agreement and covenants
or their enforceability or seeks to avoid their performance or
enforcement.
4. RETURN OF COMPANY PROPERTY.
All products, records, designs, patents, plans, manuals,
"field guides," memoranda, lists and other property delivered to the
Employee by or on behalf of the Company or by its customers
(including, without limitation, customers obtained for the Company by
the Employee), together with all correspondence with customers or
representatives, reports, charts, records, data and advertising
materials compiled or collected by the Employee, which pertain to the
business of the Company (including, without limitation, all such
reports, charts, records, data and other materials contained in
computer files, disks, magnetic tape and other such media), shall be
and remain the property of the Company and be subject at all times to
its discretion and control. All such property shall be delivered
promptly to the Company without request on the date the Employee is no
longer employed by the Company.
Page 4 of 10
<PAGE> 5
5. INVENTIONS.
The Employee shall disclose promptly to the Company any and
all conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
the Employee solely or jointly with others during the period of
employment and which are related to the business or activities of the
Company or which the Employee conceives as a result of his employment
by the Company. Further, the Employee hereby assigns and agrees to
assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, the Employee shall execute
any and all applications, assignments or other instruments which the
Company shall deem necessary to apply for and obtain letters patent of
the United States or any foreign country or to otherwise protect the
Company's interest therein. These obligations shall continue beyond
the end of employment with respect to inventions, improvements and
valuable discoveries, whether patentable or not, conceived, made or
acquired by the Employee during the period of employment and shall be
binding on the Employee's assigns, executors, administrators and other
legal representatives.
6. TERM
The term of this Agreement shall begin on the date of this
Agreement and, unless terminated as herein provided, continue for a
term of five (5) years and thereafter on a year-to-year basis on the
same terms and conditions contained herein.
7. TERMINATION; COMPENSATION AND OTHER RIGHTS ON TERMINATION.
(a) TERMINATION AS A RESULT OF THE EMPLOYEE'S DEATH.
(1) This Agreement will terminate automatically on
the death of the Employee.
(2) Compensation and Benefits. The Company shall pay
to the Employee's beneficiary an amount equal to accrued
compensation owing to the Employee on the date of his death
(including, without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred compensation
and accrued vacation pay), together with applicable death
benefits, if any. In accordance with the Company's Amended
and Restated 1989 Replacement Non-Qualified Stock Option Plan
(as the same may be amended from time to time, the "Option
Plan"), the Employee's beneficiary shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of death until the earlier of (i) the one-year
period following the date of death or (ii) the date the option
would otherwise expire.
Page 5 of 10
<PAGE> 6
(b) TERMINATION BY THE COMPANY ON ACCOUNT OF DISABILITY.
(1) If, as a result of the Employee's inability to
perform his duties under this Agreement (with or without
reasonable accomodation) because of illness, physical or
mental disability, or other incapacity which continues for an
uninterrupted period in excess of three (3) months or a
cumulative period of six (6) months in any twelve (12) month
period, and if, within thirty (30) days after the Company has
given the Employee written notice of the Company's intention
to terminate the Employee's employment hereunder as a result
of such incapacity, the Employee shall not have returned to
the full- time performance of his duties hereunder, then the
Company may thereafter terminate the Employee's employment on
account of "DISABILITY"; provided, however, such termination
shall not by itself alter or impair the Employee's rights as a
"disabled employee" or otherwise under any of the Company's
employee benefit plans.
(2) Compensation and Benefits. The Company shall
pay to the Employee an amount equal to accrued compensation
owing to the Employee as of the date of termination
(including, without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred compensation
and accrued vacation pay). Subject to approval by the
Compensation Committee of the Company's Board of Directors,
the Company shall cause all stock options held by the Employee
to be regranted under the Company's 1992 Limited Non-Qualified
Stock Option Plan (the "1992 Plan") so that such options
continue to vest and remain exercisable for a period of twelve
months following the date of termination. Whenever
compensation is payable to the Employee hereunder during a
period in which he is partially or totally disabled, and such
Disability would (except for the provisions hereof) entitle
the Employee to Disability income or salary continuation
payments from the Company according to the terms of any plan
or program presently maintained or hereafter established by
the Company, the Disability income or salary continuation paid
to the Employee pursuant to any such plan or program shall be
considered a portion of the payment to be made to the Employee
pursuant to this Section 7(b)(2) and shall not be in addition
hereto. If Disability income is payable directly to the
Employee by an insurance company under the terms of an
insurance policy paid for by the Company, the amounts paid to
the Employee by such insurance company shall be considered a
portion of the payment to be made to the Employee pursuant to
this Section 7(b)(2) and shall not be in addition hereto.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(1) The Company may at any time during the term of
this Agreement, in its sole discretion, terminate the
Employee's employment with the Company for "Cause." For
purposes of this Agreement, the following shall constitute
"CAUSE": (1) the Employee willfully and continually fails to
perform substantially the Employee's duties with the Company
(other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), which failure
continues unabated after a
Page 6 of 10
<PAGE> 7
written demand for substantial performance is delivered to the
Employee by the President or the Chairman of the Board that
specifically identifies the manner in which the President or
the Board believes that the Employee has not substantially
performed the Employee's duties; (2) the Employee willfully
engages in gross misconduct that is materially and
demonstrably injurious to the Company; or (3) the Employee is
convicted of a felony crime by a court of competent
jurisdiction.
For purposes of this Section 7(c), an act or failure
to act on the Employee's part shall be considered "willful" if
done or omitted to be done by the Employee otherwise than in
good faith and without reasonable belief that the Employee's
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be
deemed to have been terminated by the Company for Cause unless
and until the Company shall have delivered to the Employee a
copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the
Board, at a meeting of the Board called and held for the
purpose (after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's
counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Employee was guilty of
conduct set forth in clauses (a) or (b) of the second sentence
of this Section 7(c) and specifying the particulars thereof in
reasonable detail.
(2) Compensation and Benefits. The Company shall pay
to the Employee an amount equal to accrued compensation owing
to the Employee as of the date of termination (including,
salary and accrued vacation pay). In accordance with the
Company's Option Plan, the Employee shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of termination until the expiration of the
three-month period following such date of termination.
(d) TERMINATION BY THE EMPLOYEE.
(1) At any time after the execution of this
Agreement, the Employee may elect to terminate this Agreement
and the Employee's employment hereunder.
(2) Compensation and Benefits. In the event the
Employee terminates this Agreement for any reason, the
Employee shall be entitled to receive an amount equal to
accrued compensation owing to the Employee as of the date of
termination (including, without limitation, salary, pro rata
bonus (if any and subject to the terms and conditions of any
applicable bonus or incentive compensation plans), deferred
compensation and accrued vacation pay). In accordance with
the Company's Option Plan, the Employee shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of termination until the expiration of the
three-month period following such date of termination.
Page 7 of 10
<PAGE> 8
(e) TERMINATION BY THE COMPANY FOR OTHER THAN CAUSE.
(1) At any time after the execution of this
Agreement, the Company may, without Cause, elect to terminate
this Agreement and the Employee's employment hereunder;
provided, however, that in the event that severance benefits
are triggered by a Change in Control under any Executive
Severance Agreement between the Company and the Employee, the
compensation and benefits otherwise payable to the Employee
under this Section 7(e) shall be null and void.
(2) Compensation and Benefits. In the event the
Company elects to terminate this Agreement pursuant to this
Section 7(e), the Employee shall be entitled to receive his
base monthly salary for 18 months (the "Severance Period"),
payable in accordance with the Company's customary payroll
procedures, as severance. In addition, the Company shall pay
to the Employee an amount equal to accrued compensation owing
to the Employee as of the date of termination (including,
without limitation, salary, pro rata bonus (if any and subject
to the terms and conditions of any applicable bonus or
incentive compensation plans), deferred compensation and
accrued vacation pay). Subject to the approval of the
Compensation Committee, the Company shall cause all stock
options held by the Employee to be regranted under the
Company's 1992 Plan so that such options continue to vest in
accordance with the terms of the original grants during the
Severance Period and shall remain exercisable until three
months following the earlier of the date of final vesting of
any such option grant or the final date of the Severance
Period. The Company shall also pay to the Employee an amount
equal to (a) the amount of the monthly premium payment to
continue coverage for the Employee and the Employee's eligible
dependents under the Company's health insurance plan under
COBRA, multiplied by (b) 18 months. Further, the Employee
shall be credited with an additional 18 months of service
credit under the Company's Supplemental Executive Retirement
Plan (the "SERP").
(f) SURVIVING OBLIGATIONS FOLLOWING TERMINATION.
(1) In the event of termination of this Agreement
for any reason provided in this Section 7 herein or if
Employee resigns prior to the expiration of the term of this
Agreement, all rights and obligations of the Company and the
Employee under this Agreement shall cease immediately, except
that Employee's obligations under Sections 3, 4, 5 and 8
herein shall survive such termination, and except as otherwise
provided in this Section 7, the Employee shall thereafter have
no right to receive any compensation hereunder.
8. TRADE SECRETS.
The Employee agrees that he will not, during or after the term
of his employment with the Company, disclose the Company's
distributors or customers or any other trade secrets of the Company
whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
Page 8 of 10
<PAGE> 9
9. COMPLETE AGREEMENT.
This Agreement supersedes any and all other agreements, either
oral or in writing, between Company and the Employee with respect to
the employment of the Employee by the Company and contains all of the
representations, covenants and agreements between the Company and the
Employee with respect to such employment. This written Agreement may
not be later modified except by a further writing signed by the
Company and the Employee, and no term of this Agreement may be waived
except by writing signed by the party waiving the benefit of such
term.
10. NO WAIVER.
No waiver by the parties hereto of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to
be a waiver of any subsequent default or breach of the same or any
other term, condition or covenant contained herein.
11. SEVERABILITY.
The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect
the validity and enforceability of the other provisions hereof. If
any provision of this Agreement is unenforceable for any reason
whatsoever, such provision shall be appropriately limited and given
effect to the extent that it may be enforceable.
12. GOVERNING LAW; PLACE OF PERFORMANCE.
This Agreement shall in all respects be construed according to
the laws of the State of Texas.
13. ATTORNEYS' FEES AND COSTS.
If any action at law or in equity is brought to enforce or
interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which it may be
entitled.
14. ASSIGNMENT; BINDING EFFECT.
The Employee understands that he has been selected for
employment by the Company on the basis of his personal qualifications,
experience and skills. The Employee, therefore, agrees that he cannot
assign his rights and obligations hereunder or delegate his duties
hereunder. Subject to the preceding two sentences, this Agreement
shall be binding on and inure to the benefit of the parties hereto and
their respective heirs, successors and assigns. It is further
understood and agreed that the Company may be merged or consolidated
with another
Page 9 of 10
<PAGE> 10
entity and that any such entity shall automatically succeed to the
rights, powers and responsibilities of the Company hereunder.
WITNESS, this Employment Agreement has been executed as of the date
first hereinabove written.
ALLWASTE, INC. EMPLOYEE
By:/s/ Robert M.Chiste /s/ David E. Fanta
---------------------------------- -----------------------------------
Robert M. Chiste David E. Fanta
President and Chief
Executive Officer
Social Security No.
Date: November 11, 1996 ----------------
------------------------------- Home Address:
27 Dumfries
-----------------------------------
Sugar Land, Texas 77479
-----------------------------------
- -------------------------------------
Witness Signature Date: November 11, 1996
-----------------------------
-----------------------------------
Witness Signature
Page 10 of 10
<PAGE> 1
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT") between ALLWASTE, INC., a
Delaware corporation (the "COMPANY"), and T. WAYNE WREN (the "EMPLOYEE") is
hereby entered into effective as of the 11th day of November, 1996.
RECITALS:
The following statements are true and correct:
As of the date of this Agreement, the Company, through its
wholly-owned subsidiaries, is engaged in the business of providing industrial
and environmental services.
The Employee is or will be employed by the Company in a confidential
relationship pursuant to which the Employee, in the course of his employment
with the Company, will have access to and will become aware of and familiar
with certain business, technical and other confidential information pertaining
to the Company's specific manner of doing business and its future plans with
respect thereto, including, without limitation, information relating to
pricing, customers, suppliers, methods, techniques, processes, products,
services and know-how of the Company (collectively, the "CONFIDENTIAL
INFORMATION"), which Confidential Information has been or will be established
by and maintained at great expense to the Company and is proprietary to and
constitutes the trade secrets and valuable goodwill of the Company.
The Employee recognizes that the Company's business is dependent on
such Confidential Information and that disclosure of any of the Company's
Confidential Information by the Employee would have a detrimental effect on the
Company's business. The protection of its Confidential Information is of
critical importance to the Company.
The Company will sustain great loss and damage if, during the term of
this Agreement and for a period of two (2) years immediately following
termination of this Agreement for any reason, the Employee should violate any
provision of Section 3 of this Agreement. The parties acknowledge that
monetary damages for any such loss would be extremely difficult to measure.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. EMPLOYMENT AND RESPONSIBILITIES.
(a) EMPLOYMENT. The Company hereby employs Employee as
its Senior Vice President -- Chief Financial Officer and Treasurer.
The Company's President or Board of Directors may request that the
Employee serve in various capacities for the Company's subsidiaries;
however, in connection with such service, the Employee shall not be
requested to undertake duties and responsibilities that are
substantially different than those assigned to the Employee as a
result of his primary position with the Company or that are
unreasonable (or
<PAGE> 2
inconsistent with those given to similarly-situated employees)
considering the skills and expertise of the Employee and the condition
of the Company . The Employee hereby accepts this employment under
the terms and provisions herein contained and agrees to devote his
full time, attention and efforts to promote and further the business
and services of the Company. The Employee shall faithfully adhere to,
execute and fulfill all policies (written and unwritten) established
by the Company.
(b) AUTHORITY. The Employee shall have authority
commensurate with the authority normally accorded his position. All
actions of the Employee shall be in conformance with all policies of
the Company in effect and consistent with the Company's policy manual.
(c) AFFILIATES. The Employee may from time to time be
required to perform services for divisions, subsidiaries or affiliates
of the Company, in which event the terms and conditions of this
Agreement shall apply as if such affiliated company were a party to
this Agreement.
(d) SOLE EMPLOYMENT. The Employee shall not, during the
term of his employment hereunder, be engaged in any other business
activity pursued for gain, profit or other pecuniary advantage if such
activity interferes with Employee's duties and responsibilities
hereunder. This shall not, however, be construed as prohibiting the
Employee from engaging in other activities and making personal
investments which do not conflict with his responsibilities to the
Company.
2. COMPENSATION.
For all services rendered by the Employee to the Company, the
Company shall compensate the Employee as follows:
(a) BASE SALARY. The base salary payable to the Employee
under this Agreement shall be $185,000 per year, payable in equal bi-
weekly installments or on any other periodic basis consistent with the
Company's payroll procedures, which amount may be increased from time
to time.
(b) ADDITIONAL COMPENSATION. The Employee is eligible to
receive additional compensation from the Company as described below:
(i) The Employee shall be eligible to participate
in the Company's incentive bonus plan, deferred compensation
plan and supplemental executive retirement plan, as each may
be in effect from time to time.
(ii) Subject to the rules and regulations
applicable thereto and to the extent that his position,
tenure, salary, age, health and other qualifications make him
eligible to so participate, the Employee shall be entitled to
participate in the Company's employee benefit programs.
Page 2 of 10
<PAGE> 3
(iii) The Employee shall be entitled to receive
stock option grants as and when authorized by the Compensation
Committee of the Company's Board of Directors.
(iv) The Employee shall be entitled to receive no
less than three (3) weeks of vacation time per year.
(v) The Employee shall be entitled to receive
such other executive perquisites from the Company as are
customary, including, without limitation, club membership dues
and personal financial and tax planning and tax preparation
services, together with reimbursement for all expenses
reasonably incurred in the performance of his duties, subject
to submission of appropriate documentation in accordance with
the Company's expense reimbursement policy in effect from time
to time.
3. NONCOMPETITION AGREEMENT.
(a) During the term of this Agreement and for a period of
two (2) years immediately following the termination of this Agreement,
the Employee shall not, for any reason whatsoever, directly or
indirectly, for himself or on behalf of, or in conjunction with, any
other person, persons, company, partnership, corporation or business
of whatever nature: (1) call on any customer of the Company, past or
present, including, but not limited to, any customers obtained for the
Company by the Employee, for the purpose of soliciting or selling any
products or services in competition with those of the Company; (2)
call on any employee of the Company for the purpose or with the intent
of enticing them away from or out of the employ of the Company for any
reason whatever; or (3) establish, enter into, be employed by or for,
advise, consult with or become an owner in or a part of, any company,
partnership, corporation or other business entity or venture, or in
any way engage in business for himself or for others, in competition
with the Company within 100 miles of the home office of the Company or
its subsidiaries having a permanent and known facility wherein the
Employee has served.
(b) These covenants on the part of the Employee shall be
construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the
Employee against the Company, whether predicated on this Agreement or
otherwise, shall not preclude the Company's enforcement of this
covenant. In the event of a breach or threatened breach by the
Employee of his obligations under this Section 3, the Employee
acknowledges that the Company will not have an adequate remedy at law
and shall be entitled to such equitable and injunctive relief as may
be available to restrain the Employee from the violation of the
provisions hereof. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available for such breach
or threatened breach, including the recovery of damages from the
Employee.
Page 3 of 10
<PAGE> 4
(c) It is agreed by the parties that the covenants set
forth in this Section 3 impose a reasonable restraint on the Employee
in light of the activities and business of the Company on the date of
execution of this Agreement and in light of the future plans of the
Company. It is the intent of the parties that such covenants be
construed and enforced in light of the activities and business of the
Company on the date of termination of the Employee's employment with
the Company.
(d) The covenants in this Section 3 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth herein are unreasonable,
then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable and
the Agreement shall thereby be reformed.
(e) All of the covenants set forth in this Section 3
shall be construed as an agreement independent of any other provision
of this Agreement, and the existence of any claim or cause of action
of the Employee against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. It is agreed by the
parties that the two- year period stated at the beginning of this
Section 3, during which the agreements and covenants of the Employee
contained herein shall be effective, shall be computed by excluding
from such computation any time during which the Employee is in
violation of any provision of this Section 3 and any time during which
there is pending in any court of competent jurisdiction any action
(including any appeal from any final judgment) brought by any person,
whether or not a party to this Agreement, in which action, the Company
seeks to enforce the agreements and covenants of the Employee or in
which any person contests the validity of such agreement and covenants
or their enforceability or seeks to avoid their performance or
enforcement.
4. RETURN OF COMPANY PROPERTY.
All products, records, designs, patents, plans, manuals,
"field guides," memoranda, lists and other property delivered to the
Employee by or on behalf of the Company or by its customers
(including, without limitation, customers obtained for the Company by
the Employee), together with all correspondence with customers or
representatives, reports, charts, records, data and advertising
materials compiled or collected by the Employee, which pertain to the
business of the Company (including, without limitation, all such
reports, charts, records, data and other materials contained in
computer files, disks, magnetic tape and other such media), shall be
and remain the property of the Company and be subject at all times to
its discretion and control. All such property shall be delivered
promptly to the Company without request on the date the Employee is no
longer employed by the Company.
Page 4 of 10
<PAGE> 5
5. INVENTIONS.
The Employee shall disclose promptly to the Company any and
all conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
the Employee solely or jointly with others during the period of
employment and which are related to the business or activities of the
Company or which the Employee conceives as a result of his employment
by the Company. Further, the Employee hereby assigns and agrees to
assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, the Employee shall execute
any and all applications, assignments or other instruments which the
Company shall deem necessary to apply for and obtain letters patent of
the United States or any foreign country or to otherwise protect the
Company's interest therein. These obligations shall continue beyond
the end of employment with respect to inventions, improvements and
valuable discoveries, whether patentable or not, conceived, made or
acquired by the Employee during the period of employment and shall be
binding on the Employee's assigns, executors, administrators and other
legal representatives.
6. TERM.
The term of this Agreement shall begin on the date of this
Agreement and, unless terminated as herein provided, continue for a
term of five (5) years and thereafter on a year-to-year basis on the
same terms and conditions contained herein.
7. TERMINATION; COMPENSATION AND OTHER RIGHTS ON TERMINATION.
(a) TERMINATION AS A RESULT OF THE EMPLOYEE'S DEATH.
(1) This Agreement will terminate automatically on
the death of the Employee.
(2) Compensation and Benefits. The Company shall pay
to the Employee's beneficiary an amount equal to accrued
compensation owing to the Employee on the date of his death
(including, without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred compensation
and accrued vacation pay), together with applicable death
benefits, if any. In accordance with the Company's Amended
and Restated 1989 Replacement Non-Qualified Stock Option Plan
(as the same may be amended from time to time, the "Option
Plan"), the Employee's beneficiary shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of death until the earlier of (i) the one-year
period following the date of death or (ii) the date the option
would otherwise expire.
Page 5 of 10
<PAGE> 6
(b) TERMINATION BY THE COMPANY ON ACCOUNT OF DISABILITY.
(1) If, as a result of the Employee's inability to
perform his duties under this Agreement (with or without
reasonable accomodation) because of illness, physical or
mental disability, or other incapacity which continues for an
uninterrupted period in excess of three (3) months or a
cumulative period of six (6) months in any twelve (12) month
period, and if, within thirty (30) days after the Company has
given the Employee written notice of the Company's intention
to terminate the Employee's employment hereunder as a result
of such incapacity, the Employee shall not have returned to
the full-time performance of his duties hereunder, then the
Company may thereafter terminate the Employee's employment on
account of "DISABILITY"; provided, however, such termination
shall not by itself alter or impair the Employee's rights as a
"disabled employee" or otherwise under any of the Company's
employee benefit plans.
(2) Compensation and Benefits. The Company shall
pay to the Employee an amount equal to accrued compensation
owing to the Employee as of the date of termination
(including, without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred compensation
and accrued vacation pay). Subject to approval by the
Compensation Committee of the Company's Board of Directors,
the Company shall cause all stock options held by the Employee
to be regranted under the Company's 1992 Limited Non-Qualified
Stock Option Plan (the "1992 Plan") so that such options
continue to vest and remain exercisable for a period of twelve
months following the date of termination. Whenever
compensation is payable to the Employee hereunder during a
period in which he is partially or totally disabled, and such
Disability would (except for the provisions hereof) entitle
the Employee to Disability income or salary continuation
payments from the Company according to the terms of any plan
or program presently maintained or hereafter established by
the Company, the Disability income or salary continuation paid
to the Employee pursuant to any such plan or program shall be
considered a portion of the payment to be made to the Employee
pursuant to this Section 7(b)(2) and shall not be in addition
hereto. If Disability income is payable directly to the
Employee by an insurance company under the terms of an
insurance policy paid for by the Company, the amounts paid to
the Employee by such insurance company shall be considered a
portion of the payment to be made to the Employee pursuant to
this Section 7(b)(2) and shall not be in addition hereto.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(1) The Company may at any time during the term of
this Agreement, in its sole discretion, terminate the
Employee's employment with the Company for "Cause." For
purposes of this Agreement, the following shall constitute
"CAUSE": (1) the Employee willfully and continually fails to
perform substantially the Employee's duties with the Company
(other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), which failure
continues unabated after a
Page 6 of 10
<PAGE> 7
written demand for substantial performance is delivered to the
Employee by the President or the Chairman of the Board that
specifically identifies the manner in which the President or
the Board believes that the Employee has not substantially
performed the Employee's duties; (2) the Employee willfully
engages in gross misconduct that is materially and
demonstrably injurious to the Company; or (3) the Employee is
convicted of a felony crime by a court of competent
jurisdiction.
For purposes of this Section 7(c), an act or failure
to act on the Employee's part shall be considered "willful" if
done or omitted to be done by the Employee otherwise than in
good faith and without reasonable belief that the Employee's
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be
deemed to have been terminated by the Company for Cause unless
and until the Company shall have delivered to the Employee a
copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the
Board, at a meeting of the Board called and held for the
purpose (after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's
counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Employee was guilty of
conduct set forth in clauses (a) or (b) of the second sentence
of this Section 7(c) and specifying the particulars thereof in
reasonable detail.
(2) Compensation and Benefits. The Company shall pay
to the Employee an amount equal to accrued compensation owing
to the Employee as of the date of termination (including,
salary and accrued vacation pay). In accordance with the
Company's Option Plan, the Employee shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of termination until the expiration of the three-
month period following such date of termination.
(d) TERMINATION BY THE EMPLOYEE.
(1) At any time after the execution of this
Agreement, the Employee may elect to terminate this Agreement
and the Employee's employment hereunder.
(2) Compensation and Benefits. In the event the
Employee terminates this Agreement for any reason, the
Employee shall be entitled to receive an amount equal to
accrued compensation owing to the Employee as of the date of
termination (including, without limitation, salary, pro rata
bonus (if any and subject to the terms and conditions of any
applicable bonus or incentive compensation plans), deferred
compensation and accrued vacation pay). In accordance with
the Company's Option Plan, the Employee shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of termination until the expiration of the three-
month period following such date of termination.
Page 7 of 10
<PAGE> 8
(e) TERMINATION BY THE COMPANY FOR OTHER THAN CAUSE.
(1) At any time after the execution of this
Agreement, the Company may, without Cause, elect to terminate
this Agreement and the Employee's employment hereunder;
provided, however, that in the event that severance benefits
are triggered by a Change in Control under any Executive
Severance Agreement between the Company and the Employee, the
compensation and benefits otherwise payable to the Employee
under this Section 7(e) shall be null and void.
(2) Compensation and Benefits. In the event the
Company elects to terminate this Agreement pursuant to this
Section 7(e), the Employee shall be entitled to receive his
base monthly salary for 18 months (the "Severance Period"),
payable in accordance with the Company's customary payroll
procedures, as severance. In addition, the Company shall pay
to the Employee an amount equal to accrued compensation owing
to the Employee as of the date of termination (including,
without limitation, salary, pro rata bonus (if any and subject
to the terms and conditions of any applicable bonus or
incentive compensation plans), deferred compensation and
accrued vacation pay). Subject to the approval of the
Compensation Committee, the Company shall cause all stock
options held by the Employee to be regranted under the
Company's 1992 Plan so that such options continue to vest in
accordance with the terms of the original grants during the
Severance Period and shall remain exercisable until three
months following the earlier of the date of final vesting of
any such option grant or the final date of the Severance
Period. The Company shall also pay to the Employee an amount
equal to (a) the amount of the monthly premium payment to
continue coverage for the Employee and the Employee's eligible
dependents under the Company's health insurance plan under
COBRA, multiplied by (b) 18 months. Further, the Employee
shall be credited with an additional 18 months of service
credit under the Company's Supplemental Executive Retirement
Plan (the "SERP").
(f) SURVIVING OBLIGATIONS FOLLOWING TERMINATION.
(1) In the event of termination of this Agreement
for any reason provided in this Section 7 herein or if
Employee resigns prior to the expiration of the term of this
Agreement, all rights and obligations of the Company and the
Employee under this Agreement shall cease immediately, except
that Employee's obligations under Sections 3, 4, 5 and 8
herein shall survive such termination, and except as otherwise
provided in this Section 7, the Employee shall thereafter have
no right to receive any compensation hereunder.
8. TRADE SECRETS.
The Employee agrees that he will not, during or after the term
of his employment with the Company, disclose the Company's distributors or
customers or any other trade secrets of the Company whether in existence or
proposed, to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever.
Page 8 of 10
<PAGE> 9
9. COMPLETE AGREEMENT.
This Agreement supersedes any and all other agreements, either
oral or in writing, between Company and the Employee with respect to the
employment of the Employee by the Company and contains all of the
representations, covenants and agreements between the Company and the Employee
with respect to such employment. This written Agreement may not be later
modified except by a further writing signed by the Company and the Employee,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term.
10. NO WAIVER.
No waiver by the parties hereto of any default or breach of
any term, condition or covenant of this Agreement shall be deemed to be a
waiver of any subsequent default or breach of the same or any other term,
condition or covenant contained herein.
11. SEVERABILITY.
The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not affect the
validity and enforceability of the other provisions hereof. If any provision
of this Agreement is unenforceable for any reason whatsoever, such provision
shall be appropriately limited and given effect to the extent that it may be
enforceable.
12. GOVERNING LAW; PLACE OF PERFORMANCE.
This Agreement shall in all respects be construed according to
the laws of the State of Texas.
13. ATTORNEYS' FEES AND COSTS.
If any action at law or in equity is brought to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which it may be entitled.
14. ASSIGNMENT; BINDING EFFECT.
The Employee understands that he has been selected for
employment by the Company on the basis of his personal qualifications,
experience and skills. The Employee, therefore, agrees that he cannot assign
his rights and obligations hereunder or delegate his duties hereunder. Subject
to the preceding two sentences, this Agreement shall be binding on and inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns. It is further understood and agreed that the Company may be merged or
consolidated with another
Page 9 of 10
<PAGE> 10
entity and that any such entity shall automatically succeed to the rights,
powers and responsibilities of the Company hereunder.
WITNESS, this Employment Agreement has been executed as of the date
first hereinabove written.
ALLWASTE, INC. EMPLOYEE
By: /s/ Robert M. Chiste /s/ T. Wayne Wren, Jr.
----------------------- ------------------------------------
Robert M. Chiste T. Wayne Wren, Jr.
President and Social Security No.
Chief Executive Officer -------------------
Date: November 11, 1996 Home Address:
-----------------------
11311 Williamsburg
Houston, Texas 77024
- -----------------------------
Witness Signature Date: November 11, 1996
------------------------------
------------------------------------
Witness Signature
Page 10 of 10
<PAGE> 1
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT") between ALLWASTE, INC., a
Delaware corporation (the "COMPANY"), and JAMES E. RIEF (the "EMPLOYEE") is
hereby entered into effective as of the 11th day of November, 1996.
RECITALS:
The following statements are true and correct:
As of the date of this Agreement, the Company, through its
wholly-owned subsidiaries, is engaged in the business of providing industrial
and environmental services.
The Employee is or will be employed by the Company in a confidential
relationship pursuant to which the Employee, in the course of his employment
with the Company, will have access to and will become aware of and familiar
with certain business, technical and other confidential information pertaining
to the Company's specific manner of doing business and its future plans with
respect thereto, including, without limitation, information relating to
pricing, customers, suppliers, methods, techniques, processes, products,
services and know-how of the Company (collectively, the "CONFIDENTIAL
INFORMATION"), which Confidential Information has been or will be established
by and maintained at great expense to the Company and is proprietary to and
constitutes the trade secrets and valuable goodwill of the Company.
The Employee recognizes that the Company's business is dependent on
such Confidential Information and that disclosure of any of the Company's
Confidential Information by the Employee would have a detrimental effect on the
Company's business. The protection of its Confidential Information is of
critical importance to the Company.
The Company will sustain great loss and damage if, during the term of
this Agreement and for a period of two (2) years immediately following
termination of this Agreement for any reason, the Employee should violate any
provision of Section 3 of this Agreement. The parties acknowledge that
monetary damages for any such loss would be extremely difficult to measure.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. EMPLOYMENT AND RESPONSIBILITIES.
(a) EMPLOYMENT. The Company hereby employs Employee as
its Senior Vice President -- Technology & Administration. The
Company's President or Board of Directors may request that the
Employee serve in various capacities for the Company's subsidiaries;
however, in connection with such service, the Employee shall not be
requested to undertake duties and responsibilities that are
substantially different than those assigned to the Employee as a
result of his primary position with the Company or that are
unreasonable (or inconsistent with
<PAGE> 2
those given to similarly-situated employees) considering the skills
and expertise of the Employee and the condition of the Company . The
Employee hereby accepts this employment under the terms and provisions
herein contained and agrees to devote his full time, attention and
efforts to promote and further the business and services of the
Company. The Employee shall faithfully adhere to, execute and fulfill
all policies (written and unwritten) established by the Company.
(b) AUTHORITY. The Employee shall have authority
commensurate with the authority normally accorded his position. All
actions of the Employee shall be in conformance with all policies of
the Company in effect and consistent with the Company's policy manual.
(c) AFFILIATES. The Employee may from time to time be
required to perform services for divisions, subsidiaries or affiliates
of the Company, in which event the terms and conditions of this
Agreement shall apply as if such affiliated company were a party to
this Agreement.
(d) SOLE EMPLOYMENT. The Employee shall not, during the
term of his employment hereunder, be engaged in any other business
activity pursued for gain, profit or other pecuniary advantage if such
activity interferes with Employee's duties and responsibilities
hereunder. This shall not, however, be construed as prohibiting the
Employee from engaging in other activities and making personal
investments which do not conflict with his responsibilities to the
Company.
2. COMPENSATION.
For all services rendered by the Employee to the Company, the Company
shall compensate the Employee as follows:
(a) BASE SALARY. The base salary payable to the Employee
under this Agreement shall be $160,000 per year, payable in equal bi-
weekly installments or on any other periodic basis consistent with the
Company's payroll procedures, which amount may be increased from time
to time.
(b) ADDITIONAL COMPENSATION. The Employee is eligible to
receive additional compensation from the Company as described below:
(i) The Employee shall be eligible to participate
in the Company's incentive bonus plan, deferred compensation
plan and supplemental executive retirement plan, as each may
be in effect from time to time.
(ii) Subject to the rules and regulations
applicable thereto and to the extent that his position,
tenure, salary, age, health and other qualifications make him
eligible to so participate, the Employee shall be entitled to
participate in the Company's employee benefit programs.
Page 2 of 10
<PAGE> 3
(iii) The Employee shall be entitled to receive
stock option grants as and when authorized by the Compensation
Committee of the Company's Board of Directors.
(iv) The Employee shall be entitled to receive no
less than three (3) weeks of vacation time per year.
(v) The Employee shall be entitled to receive
such other executive perquisites from the Company as are
customary, including, without limitation, club membership dues
and personal financial and tax planning and tax preparation
services, together with reimbursement for all expenses
reasonably incurred in the performance of his duties, subject
to submission of appropriate documentation in accordance with
the Company's expense reimbursement policy in effect from time
to time.
3. NONCOMPETITION AGREEMENT.
(a) During the term of this Agreement and for a period of
two (2) years immediately following the termination of this Agreement,
the Employee shall not, for any reason whatsoever, directly or
indirectly, for himself or on behalf of, or in conjunction with, any
other person, persons, company, partnership, corporation or business
of whatever nature: (1) call on any customer of the Company, past or
present, including, but not limited to, any customers obtained for the
Company by the Employee, for the purpose of soliciting or selling any
products or services in competition with those of the Company; (2)
call on any employee of the Company for the purpose or with the intent
of enticing them away from or out of the employ of the Company for any
reason whatever; or (3) establish, enter into, be employed by or for,
advise, consult with or become an owner in or a part of, any company,
partnership, corporation or other business entity or venture, or in
any way engage in business for himself or for others, in competition
with the Company within 100 miles of the home office of the Company or
its subsidiaries having a permanent and known facility wherein the
Employee has served.
(b) These covenants on the part of the Employee shall be
construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the
Employee against the Company, whether predicated on this Agreement or
otherwise, shall not preclude the Company's enforcement of this
covenant. In the event of a breach or threatened breach by the
Employee of his obligations under this Section 3, the Employee
acknowledges that the Company will not have an adequate remedy at law
and shall be entitled to such equitable and injunctive relief as may
be available to restrain the Employee from the violation of the
provisions hereof. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available for such breach
or threatened breach, including the recovery of damages from the
Employee.
Page 3 of 10
<PAGE> 4
(c) It is agreed by the parties that the covenants set
forth in this Section 3 impose a reasonable restraint on the Employee
in light of the activities and business of the Company on the date of
execution of this Agreement and in light of the future plans of the
Company. It is the intent of the parties that such covenants be
construed and enforced in light of the activities and business of the
Company on the date of termination of the Employee's employment with
the Company.
(d) The covenants in this Section 3 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth herein are unreasonable,
then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable and
the Agreement shall thereby be reformed.
(e) All of the covenants set forth in this Section 3
shall be construed as an agreement independent of any other provision
of this Agreement, and the existence of any claim or cause of action
of the Employee against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. It is agreed by the
parties that the two- year period stated at the beginning of this
Section 3, during which the agreements and covenants of the Employee
contained herein shall be effective, shall be computed by excluding
from such computation any time during which the Employee is in
violation of any provision of this Section 3 and any time during which
there is pending in any court of competent jurisdiction any action
(including any appeal from any final judgment) brought by any person,
whether or not a party to this Agreement, in which action, the Company
seeks to enforce the agreements and covenants of the Employee or in
which any person contests the validity of such agreement and covenants
or their enforceability or seeks to avoid their performance or
enforcement.
4. RETURN OF COMPANY PROPERTY.
All products, records, designs, patents, plans, manuals, "field
guides," memoranda, lists and other property delivered to the Employee by or on
behalf of the Company or by its customers (including, without limitation,
customers obtained for the Company by the Employee), together with all
correspondence with customers or representatives, reports, charts, records,
data and advertising materials compiled or collected by the Employee, which
pertain to the business of the Company (including, without limitation, all such
reports, charts, records, data and other materials contained in computer files,
disks, magnetic tape and other such media), shall be and remain the property of
the Company and be subject at all times to its discretion and control. All
such property shall be delivered promptly to the Company without request on the
date the Employee is no longer employed by the Company.
Page 4 of 10
<PAGE> 5
5. INVENTIONS.
The Employee shall disclose promptly to the Company any and all
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by the Employee solely
or jointly with others during the period of employment and which are related to
the business or activities of the Company or which the Employee conceives as a
result of his employment by the Company. Further, the Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, the Employee shall execute any and
all applications, assignments or other instruments which the Company shall deem
necessary to apply for and obtain letters patent of the United States or any
foreign country or to otherwise protect the Company's interest therein. These
obligations shall continue beyond the end of employment with respect to
inventions, improvements and valuable discoveries, whether patentable or not,
conceived, made or acquired by the Employee during the period of employment and
shall be binding on the Employee's assigns, executors, administrators and other
legal representatives.
6. TERM.
The term of this Agreement shall begin on the date of this Agreement
and, unless terminated as herein provided, continue for a term of five (5)
years and thereafter on a year-to-year basis on the same terms and conditions
contained herein.
7. TERMINATION; COMPENSATION AND OTHER RIGHTS ON TERMINATION.
(a) TERMINATION AS A RESULT OF THE EMPLOYEE'S DEATH.
(1) This Agreement will terminate automatically on
the death of the Employee.
(2) Compensation and Benefits. The Company shall pay to the
Employee's beneficiary an amount equal to accrued compensation owing to
the Employee on the date of his death (including, without limitation,
salary, pro rata bonus (if any and subject to the terms and conditions
of any applicable bonus or incentive compensation plans), deferred
compensation and accrued vacation pay), together with applicable death
benefits, if any. In accordance with the Company's Amended and
Restated 1989 Replacement Non-Qualified Stock Option Plan (as the same
may be amended from time to time, the "Option Plan"), the Employee's
beneficiary shall be entitled to exercise all exercisable stock options
held by the Employee as of the date of death until the earlier of (i)
the one-year period following the date of death or (ii) the date the
option would otherwise expire.
Page 5 of 10
<PAGE> 6
(b) TERMINATION BY THE COMPANY ON ACCOUNT OF DISABILITY.
(1) If, as a result of the Employee's inability to
perform his duties under this Agreement (with or without
reasonable accomodation) because of illness, physical or
mental disability, or other incapacity which continues for an
uninterrupted period in excess of three (3) months or a
cumulative period of six (6) months in any twelve (12) month
period, and if, within thirty (30) days after the Company has
given the Employee written notice of the Company's intention
to terminate the Employee's employment hereunder as a result
of such incapacity, the Employee shall not have returned to
the full-time performance of his duties hereunder, then the
Company may thereafter terminate the Employee's employment on
account of "DISABILITY"; provided, however, such termination
shall not by itself alter or impair the Employee's rights as a
"disabled employee" or otherwise under any of the Company's
employee benefit plans.
(2) Compensation and Benefits. The Company shall
pay to the Employee an amount equal to accrued compensation
owing to the Employee as of the date of termination
(including, without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred compensation
and accrued vacation pay). Subject to approval by the
Compensation Committee of the Company's Board of Directors,
the Company shall cause all stock options held by the Employee
to be regranted under the Company's 1992 Limited Non-Qualified
Stock Option Plan (the "1992 Plan") so that such options
continue to vest and remain exercisable for a period of twelve
months following the date of termination. Whenever
compensation is payable to the Employee hereunder during a
period in which he is partially or totally disabled, and such
Disability would (except for the provisions hereof) entitle
the Employee to Disability income or salary continuation
payments from the Company according to the terms of any plan
or program presently maintained or hereafter established by
the Company, the Disability income or salary continuation paid
to the Employee pursuant to any such plan or program shall be
considered a portion of the payment to be made to the Employee
pursuant to this Section 7(b)(2) and shall not be in addition
hereto. If Disability income is payable directly to the
Employee by an insurance company under the terms of an
insurance policy paid for by the Company, the amounts paid to
the Employee by such insurance company shall be considered a
portion of the payment to be made to the Employee pursuant to
this Section 7(b)(2) and shall not be in addition hereto.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(1) The Company may at any time during the term of
this Agreement, in its sole discretion, terminate the
Employee's employment with the Company for "Cause." For
purposes of this Agreement, the following shall constitute
"CAUSE": (1) the Employee willfully and continually fails to
perform substantially the Employee's duties with the Company
(other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), which failure
continues unabated after a
Page 6 of 10
<PAGE> 7
written demand for substantial performance is delivered to the
Employee by the President or the Chairman of the Board that
specifically identifies the manner in which the President or
the Board believes that the Employee has not substantially
performed the Employee's duties; (2) the Employee willfully
engages in gross misconduct that is materially and
demonstrably injurious to the Company; or (3) the Employee is
convicted of a felony crime by a court of competent
jurisdiction.
For purposes of this Section 7(c), an act or failure
to act on the Employee's part shall be considered "willful" if
done or omitted to be done by the Employee otherwise than in
good faith and without reasonable belief that the Employee's
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be
deemed to have been terminated by the Company for Cause unless
and until the Company shall have delivered to the Employee a
copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the
Board, at a meeting of the Board called and held for the
purpose (after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's
counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Employee was guilty of
conduct set forth in clauses (a) or (b) of the second sentence
of this Section 7(c) and specifying the particulars thereof in
reasonable detail.
(2) Compensation and Benefits. The Company shall pay
to the Employee an amount equal to accrued compensation owing
to the Employee as of the date of termination (including,
salary and accrued vacation pay). In accordance with the
Company's Option Plan, the Employee shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of termination until the expiration of the three-
month period following such date of termination.
(d) TERMINATION BY THE EMPLOYEE.
(1) At any time after the execution of this
Agreement, the Employee may elect to terminate this Agreement
and the Employee's employment hereunder.
(2) Compensation and Benefits. In the event the
Employee terminates this Agreement for any reason, the
Employee shall be entitled to receive an amount equal to
accrued compensation owing to the Employee as of the date of
termination (including, without limitation, salary, pro rata
bonus (if any and subject to the terms and conditions of any
applicable bonus or incentive compensation plans), deferred
compensation and accrued vacation pay). In accordance with
the Company's Option Plan, the Employee shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of termination until the expiration of the three-
month period following such date of termination.
Page 7 of 10
<PAGE> 8
(e) TERMINATION BY THE COMPANY FOR OTHER THAN CAUSE.
(1) At any time after the execution of this
Agreement, the Company may, without Cause, elect to terminate
this Agreement and the Employee's employment hereunder;
provided, however, that in the event that severance benefits
are triggered by a Change in Control under any Executive
Severance Agreement between the Company and the Employee, the
compensation and benefits otherwise payable to the Employee
under this Section 7(e) shall be null and void.
(2) Compensation and Benefits. In the event the
Company elects to terminate this Agreement pursuant to this
Section 7(e), the Employee shall be entitled to receive his
base monthly salary for 18 months (the "Severance Period"),
payable in accordance with the Company's customary payroll
procedures, as severance. In addition, the Company shall pay
to the Employee an amount equal to accrued compensation owing
to the Employee as of the date of termination (including,
without limitation, salary, pro rata bonus (if any and subject
to the terms and conditions of any applicable bonus or
incentive compensation plans), deferred compensation and
accrued vacation pay). Subject to the approval of the
Compensation Committee, the Company shall cause all stock
options held by the Employee to be regranted under the
Company's 1992 Plan so that such options continue to vest in
accordance with the terms of the original grants during the
Severance Period and shall remain exercisable until three
months following the earlier of the date of final vesting of
any such option grant or the final date of the Severance
Period. The Company shall also pay to the Employee an amount
equal to (a) the amount of the monthly premium payment to
continue coverage for the Employee and the Employee's eligible
dependents under the Company's health insurance plan under
COBRA, multiplied by (b) 18 months. Further, the Employee
shall be credited with an additional 18 months of service
credit under the Company's Supplemental Executive Retirement
Plan (the "SERP").
(f) SURVIVING OBLIGATIONS FOLLOWING TERMINATION.
(1) In the event of termination of this Agreement
for any reason provided in this Section 7 herein or if
Employee resigns prior to the expiration of the term of this
Agreement, all rights and obligations of the Company and the
Employee under this Agreement shall cease immediately, except
that Employee's obligations under Sections 3, 4, 5 and 8
herein shall survive such termination, and except as otherwise
provided in this Section 7, the Employee shall thereafter have
no right to receive any compensation hereunder.
8. TRADE SECRETS.
The Employee agrees that he will not, during or after the term of his
employment with the Company, disclose the Company's distributors or customers
or any other trade secrets of the Company whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or
purpose whatsoever.
Page 8 of 10
<PAGE> 9
9. COMPLETE AGREEMENT.
This Agreement supersedes any and all other agreements, either oral or
in writing, between Company and the Employee with respect to the employment of
the Employee by the Company and contains all of the representations, covenants
and agreements between the Company and the Employee with respect to such
employment. This written Agreement may not be later modified except by a
further writing signed by the Company and the Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
10. NO WAIVER.
No waiver by the parties hereto of any default or breach of any term,
condition or covenant of this Agreement shall be deemed to be a waiver of any
subsequent default or breach of the same or any other term, condition or
covenant contained herein.
11. SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
and enforceability of the other provisions hereof. If any provision of this
Agreement is unenforceable for any reason whatsoever, such provision shall be
appropriately limited and given effect to the extent that it may be
enforceable.
12. GOVERNING LAW; PLACE OF PERFORMANCE.
This Agreement shall in all respects be construed according to the
laws of the State of Texas.
13. ATTORNEYS' FEES AND COSTS.
If any action at law or in equity is brought to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which it may be entitled.
14. ASSIGNMENT; BINDING EFFECT.
The Employee understands that he has been selected for employment by
the Company on the basis of his personal qualifications, experience and skills.
The Employee, therefore, agrees that he cannot assign his rights and
obligations hereunder or delegate his duties hereunder. Subject to the
preceding two sentences, this Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns. It is further understood and agreed that the Company may be merged or
consolidated with another
Page 9 of 10
<PAGE> 10
entity and that any such entity shall automatically succeed to the rights,
powers and responsibilities of the Company hereunder.
WITNESS, this Employment Agreement has been executed as of the date
first hereinabove written.
ALLWASTE, INC. EMPLOYEE
By: /s/ Robert M. Chiste /s/ James E. Rief
-------------------------- ----------------------------------
Robert M. Chiste James E. Rief
President and Social Security No.
Chief Executive Officer ---------------
Date: November 11, 1996
--------------------- Home Address:
1414 Kelliwood Oaks
----------------------------------
Katy, Texas 77450
- --------------------------- ----------------------------------
Witness Signature
Date: November 11, 1996
----------------------------
----------------------------------
Witness Signature
Page 10 of 10
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT") between ALLWASTE, INC., a
Delaware corporation (the "COMPANY"), and MICHAEL W. RAMIREZ (the "EMPLOYEE")
is hereby entered into effective as of the 11th day of November, 1996.
RECITALS:
The following statements are true and correct:
As of the date of this Agreement, the Company, through its
wholly-owned subsidiaries, is engaged in the business of providing industrial
and environmental services.
The Employee is or will be employed by the Company in a confidential
relationship pursuant to which the Employee, in the course of his employment
with the Company, will have access to and will become aware of and familiar
with certain business, technical and other confidential information pertaining
to the Company's specific manner of doing business and its future plans with
respect thereto, including, without limitation, information relating to
pricing, customers, suppliers, methods, techniques, processes, products,
services and know-how of the Company (collectively, the "CONFIDENTIAL
INFORMATION"), which Confidential Information has been or will be established
by and maintained at great expense to the Company and is proprietary to and
constitutes the trade secrets and valuable goodwill of the Company.
The Employee recognizes that the Company's business is dependent on
such Confidential Information and that disclosure of any of the Company's
Confidential Information by the Employee would have a detrimental effect on the
Company's business. The protection of its Confidential Information is of
critical importance to the Company.
The Company will sustain great loss and damage if, during the term of
this Agreement and for a period of two (2) years immediately following
termination of this Agreement for any reason, the Employee should violate any
provision of Section 3 of this Agreement. The parties acknowledge that
monetary damages for any such loss would be extremely difficult to measure.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. EMPLOYMENT AND RESPONSIBILITIES.
(a) EMPLOYMENT. The Company hereby employs Employee as
its Vice President -- Controller. The Company's President or Board of
Directors may request that the Employee serve in various capacities
for the Company's subsidiaries; however, in connection with such
service, the Employee shall not be requested to undertake duties and
responsibilities that are substantially different than those assigned
to the Employee as a result of his primary position with the Company
or that are unreasonable (or inconsistent with those given to
similarly-
<PAGE> 2
situated employees) considering the skills and expertise of
the Employee and the condition of the Company . The Employee hereby
accepts this employment under the terms and provisions herein contained
and agrees to devote his full time, attention and efforts to promote
and further the business and services of the Company. The Employee
shall faithfully adhere to, execute and fulfill all policies (written
and unwritten) established by the Company.
(b) AUTHORITY. The Employee shall have authority
commensurate with the authority normally accorded his position. All
actions of the Employee shall be in conformance with all policies of
the Company in effect and consistent with the Company's policy manual.
(c) AFFILIATES. The Employee may from time to time be
required to perform services for divisions, subsidiaries or affiliates
of the Company, in which event the terms and conditions of this
Agreement shall apply as if such affiliated company were a party to
this Agreement.
(d) SOLE EMPLOYMENT. The Employee shall not, during the
term of his employment hereunder, be engaged in any other business
activity pursued for gain, profit or other pecuniary advantage if such
activity interferes with Employee's duties and responsibilities
hereunder. This shall not, however, be construed as prohibiting the
Employee from engaging in other activities and making personal
investments which do not conflict with his responsibilities to the
Company.
2. COMPENSATION.
For all services rendered by the Employee to the Company, the Company
shall compensate the Employee as follows:
(a) BASE SALARY. The base salary payable to the Employee
under this Agreement shall be $110,000 per year, payable in equal bi-
weekly installments or on any other periodic basis consistent with the
Company's payroll procedures, which amount may be increased from time
to time.
(b) ADDITIONAL COMPENSATION. The Employee is eligible to
receive additional compensation from the Company as described below:
(i) The Employee shall be eligible to participate
in the Company's incentive bonus plan, deferred compensation
plan and supplemental executive retirement plan, as each may
be in effect from time to time.
(ii) Subject to the rules and regulations
applicable thereto and to the extent that his position,
tenure, salary, age, health and other qualifications make him
eligible to so participate, the Employee shall be entitled to
participate in the Company's employee benefit programs.
Page 2 of 10
<PAGE> 3
(iii) The Employee shall be entitled to receive
stock option grants as and when authorized by the Compensation
Committee of the Company's Board of Directors.
(iv) The Employee shall be entitled to receive no
less than three (3) weeks of vacation time per year.
(v) The Employee shall be entitled to receive
such other executive perquisites from the Company as are
customary, including, without limitation, club membership dues
and personal financial and tax planning and tax preparation
services, together with reimbursement for all expenses
reasonably incurred in the performance of his duties, subject
to submission of appropriate documentation in accordance with
the Company's expense reimbursement policy in effect from time
to time.
3. NONCOMPETITION AGREEMENT.
(a) During the term of this Agreement and for a period of
two (2) years immediately following the termination of this Agreement,
the Employee shall not, for any reason whatsoever, directly or
indirectly, for himself or on behalf of, or in conjunction with, any
other person, persons, company, partnership, corporation or business
of whatever nature: (1) call on any customer of the Company, past or
present, including, but not limited to, any customers obtained for the
Company by the Employee, for the purpose of soliciting or selling any
products or services in competition with those of the Company; (2)
call on any employee of the Company for the purpose or with the intent
of enticing them away from or out of the employ of the Company for any
reason whatever; or (3) establish, enter into, be employed by or for,
advise, consult with or become an owner in or a part of, any company,
partnership, corporation or other business entity or venture, or in
any way engage in business for himself or for others, in competition
with the Company within 100 miles of the home office of the Company or
its subsidiaries having a permanent and known facility wherein the
Employee has served.
(b) These covenants on the part of the Employee shall be
construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the
Employee against the Company, whether predicated on this Agreement or
otherwise, shall not preclude the Company's enforcement of this
covenant. In the event of a breach or threatened breach by the
Employee of his obligations under this Section 3, the Employee
acknowledges that the Company will not have an adequate remedy at law
and shall be entitled to such equitable and injunctive relief as may
be available to restrain the Employee from the violation of the
provisions hereof. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available for such breach
or threatened breach, including the recovery of damages from the
Employee.
Page 3 of 10
<PAGE> 4
(c) It is agreed by the parties that the covenants set
forth in this Section 3 impose a reasonable restraint on the Employee
in light of the activities and business of the Company on the date of
execution of this Agreement and in light of the future plans of the
Company. It is the intent of the parties that such covenants be
construed and enforced in light of the activities and business of the
Company on the date of termination of the Employee's employment with
the Company.
(d) The covenants in this Section 3 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth herein are unreasonable,
then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable and
the Agreement shall thereby be reformed.
(e) All of the covenants set forth in this Section 3
shall be construed as an agreement independent of any other provision
of this Agreement, and the existence of any claim or cause of action
of the Employee against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. It is agreed by the
parties that the two-year period stated at the beginning of this
Section 3, during which the agreements and covenants of the Employee
contained herein shall be effective, shall be computed by excluding
from such computation any time during which the Employee is in
violation of any provision of this Section 3 and any time during which
there is pending in any court of competent jurisdiction any action
(including any appeal from any final judgment) brought by any person,
whether or not a party to this Agreement, in which action, the Company
seeks to enforce the agreements and covenants of the Employee or in
which any person contests the validity of such agreement and covenants
or their enforceability or seeks to avoid their performance or
enforcement.
4. RETURN OF COMPANY PROPERTY.
All products, records, designs, patents, plans, manuals, "field
guides," memoranda, lists and other property delivered to the Employee by or on
behalf of the Company or by its customers (including, without limitation,
customers obtained for the Company by the Employee), together with all
correspondence with customers or representatives, reports, charts, records,
data and advertising materials compiled or collected by the Employee, which
pertain to the business of the Company (including, without limitation, all such
reports, charts, records, data and other materials contained in computer files,
disks, magnetic tape and other such media), shall be and remain the property of
the Company and be subject at all times to its discretion and control. All
such property shall be delivered promptly to the Company without request on the
date the Employee is no longer employed by the Company.
Page 4 of 10
<PAGE> 5
5. INVENTIONS.
The Employee shall disclose promptly to the Company any and all
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by the Employee solely
or jointly with others during the period of employment and which are related to
the business or activities of the Company or which the Employee conceives as a
result of his employment by the Company. Further, the Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, the Employee shall execute any and
all applications, assignments or other instruments which the Company shall deem
necessary to apply for and obtain letters patent of the United States or any
foreign country or to otherwise protect the Company's interest therein. These
obligations shall continue beyond the end of employment with respect to
inventions, improvements and valuable discoveries, whether patentable or not,
conceived, made or acquired by the Employee during the period of employment and
shall be binding on the Employee's assigns, executors, administrators and other
legal representatives.
6. TERM.
The term of this Agreement shall begin on the date of this Agreement
and, unless terminated as herein provided, continue for a term of five (5)
years and thereafter on a year-to-year basis on the same terms and conditions
contained herein.
7. TERMINATION; COMPENSATION AND OTHER RIGHTS ON TERMINATION.
(a) TERMINATION AS A RESULT OF THE EMPLOYEE'S DEATH.
(1) This Agreement will terminate automatically on
the death of the Employee.
(2) Compensation and Benefits. The Company shall pay
to the Employee's beneficiary an amount equal to accrued
compensation owing to the Employee on the date of his death
(including, without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred compensation
and accrued vacation pay), together with applicable death
benefits, if any. In accordance with the Company's Amended
and Restated 1989 Replacement Non-Qualified Stock Option Plan
(as the same may be amended from time to time, the "Option
Plan"), the Employee's beneficiary shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of death until the earlier of (i) the one-year
period following the date of death or (ii) the date the option
would otherwise expire.
Page 5 of 10
<PAGE> 6
(b) TERMINATION BY THE COMPANY ON ACCOUNT OF DISABILITY.
(1) If, as a result of the Employee's inability to
perform his duties under this Agreement (with or without
reasonable accomodation) because of illness, physical or
mental disability, or other incapacity which continues for an
uninterrupted period in excess of three (3) months or a
cumulative period of six (6) months in any twelve (12) month
period, and if, within thirty (30) days after the Company has
given the Employee written notice of the Company's intention
to terminate the Employee's employment hereunder as a result
of such incapacity, the Employee shall not have returned to
the full-time performance of his duties hereunder, then the
Company may thereafter terminate the Employee's employment on
account of "DISABILITY"; provided, however, such termination
shall not by itself alter or impair the Employee's rights as a
"disabled employee" or otherwise under any of the Company's
employee benefit plans.
(2) Compensation and Benefits. The Company shall
pay to the Employee an amount equal to accrued compensation
owing to the Employee as of the date of termination
(including, without limitation, salary, pro rata bonus (if any
and subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred compensation
and accrued vacation pay). Subject to approval by the
Compensation Committee of the Company's Board of Directors,
the Company shall cause all stock options held by the Employee
to be regranted under the Company's 1992 Limited Non-Qualified
Stock Option Plan (the "1992 Plan") so that such options
continue to vest and remain exercisable for a period of twelve
months following the date of termination. Whenever
compensation is payable to the Employee hereunder during a
period in which he is partially or totally disabled, and such
Disability would (except for the provisions hereof) entitle
the Employee to Disability income or salary continuation
payments from the Company according to the terms of any plan
or program presently maintained or hereafter established by
the Company, the Disability income or salary continuation paid
to the Employee pursuant to any such plan or program shall be
considered a portion of the payment to be made to the Employee
pursuant to this Section 7(b)(2) and shall not be in addition
hereto. If Disability income is payable directly to the
Employee by an insurance company under the terms of an
insurance policy paid for by the Company, the amounts paid to
the Employee by such insurance company shall be considered a
portion of the payment to be made to the Employee pursuant to
this Section 7(b)(2) and shall not be in addition hereto.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(1) The Company may at any time during the term of
this Agreement, in its sole discretion, terminate the
Employee's employment with the Company for "CAUSE." For
purposes of this Agreement, the following shall constitute
"CAUSE": (1) the Employee willfully and continually fails to
perform substantially the Employee's duties with the Company
(other than any such failure resulting from the Employee's
incapacity due to physical or mental illness), which failure
continues unabated after a
Page 6 of 10
<PAGE> 7
written demand for substantial performance is delivered to the
Employee by the President or the Chairman of the Board that
specifically identifies the manner in which the President or
the Board believes that the Employee has not substantially
performed the Employee's duties; (2) the Employee willfully
engages in gross misconduct that is materially and
demonstrably injurious to the Company; or (3) the Employee is
convicted of a felony crime by a court of competent
jurisdiction.
For purposes of this Section 7(c), an act or failure
to act on the Employee's part shall be considered "willful" if
done or omitted to be done by the Employee otherwise than in
good faith and without reasonable belief that the Employee's
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be
deemed to have been terminated by the Company for Cause unless
and until the Company shall have delivered to the Employee a
copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the
Board, at a meeting of the Board called and held for the
purpose (after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee's
counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, the Employee was guilty of
conduct set forth in clauses (a) or (b) of the second sentence
of this Section 7(c) and specifying the particulars thereof in
reasonable detail.
(2) Compensation and Benefits. The Company shall pay
to the Employee an amount equal to accrued compensation owing
to the Employee as of the date of termination (including,
salary and accrued vacation pay). In accordance with the
Company's Option Plan, the Employee shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of termination until the expiration of the three-
month period following such date of termination.
(d) TERMINATION BY THE EMPLOYEE.
(1) At any time after the execution of this
Agreement, the Employee may elect to terminate this Agreement
and the Employee's employment hereunder.
(2) Compensation and Benefits. In the event the
Employee terminates this Agreement for any reason, the
Employee shall be entitled to receive an amount equal to
accrued compensation owing to the Employee as of the date of
termination (including, without limitation, salary, pro rata
bonus (if any and subject to the terms and conditions of any
applicable bonus or incentive compensation plans), deferred
compensation and accrued vacation pay). In accordance with
the Company's Option Plan, the Employee shall be entitled to
exercise all exercisable stock options held by the Employee as
of the date of termination until the expiration of the three-
month period following such date of termination.
Page 7 of 10
<PAGE> 8
(e) TERMINATION BY THE COMPANY FOR OTHER THAN CAUSE.
(1) At any time after the execution of this
Agreement, the Company may, without Cause, elect to terminate
this Agreement and the Employee's employment hereunder;
provided, however, that in the event that severance benefits
are triggered by a Change in Control under any Executive
Severance Agreement between the Company and the Employee, the
compensation and benefits otherwise payable to the Employee
under this Section 7(e) shall be null and void.
(2) Compensation and Benefits. In the event the
Company elects to terminate this Agreement pursuant to this
Section 7(e), the Employee shall be entitled to receive his
base monthly salary for 12 months (the "Severance Period"),
payable in accordance with the Company's customary payroll
procedures, as severance. In addition, the Company shall pay
to the Employee an amount equal to accrued compensation owing
to the Employee as of the date of termination (including,
without limitation, salary, pro rata bonus (if any and subject
to the terms and conditions of any applicable bonus or
incentive compensation plans), deferred compensation and
accrued vacation pay). Subject to the approval of the
Compensation Committee, the Company shall cause all stock
options held by the Employee to be regranted under the
Company's 1992 Plan so that such options continue to vest in
accordance with the terms of the original grants during the
Severance Period and shall remain exercisable until three
months following the earlier of the date of final vesting of
any such option grant or the final date of the Severance
Period. The Company shall also pay to the Employee an amount
equal to (a) the amount of the monthly premium payment to
continue coverage for the Employee and the Employee's eligible
dependents under the Company's health insurance plan under
COBRA, multiplied by (b) 12 months. Further, the Employee
shall be credited with an additional 12 months of service
credit under the Company's Supplemental Executive Retirement
Plan (the "SERP").
(f) SURVIVING OBLIGATIONS FOLLOWING TERMINATION.
(1) In the event of termination of this Agreement
for any reason provided in this Section 7 herein or if
Employee resigns prior to the expiration of the term of this
Agreement, all rights and obligations of the Company and the
Employee under this Agreement shall cease immediately, except
that Employee's obligations under Sections 3, 4, 5 and 8
herein shall survive such termination, and except as otherwise
provided in this Section 7, the Employee shall thereafter have
no right to receive any compensation hereunder.
8. TRADE SECRETS.
The Employee agrees that he will not, during or after the term of his
employment with the Company, disclose the Company's distributors or customers
or any other trade secrets of the Company whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or
purpose whatsoever.
Page 8 of 10
<PAGE> 9
9. COMPLETE AGREEMENT.
This Agreement supersedes any and all other agreements, either oral or
in writing, between Company and the Employee with respect to the employment of
the Employee by the Company and contains all of the representations, covenants
and agreements between the Company and the Employee with respect to such
employment. This written Agreement may not be later modified except by a
further writing signed by the Company and the Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
10. NO WAIVER.
No waiver by the parties hereto of any default or breach of any term,
condition or covenant of this Agreement shall be deemed to be a waiver of any
subsequent default or breach of the same or any other term, condition or
covenant contained herein.
11. SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
and enforceability of the other provisions hereof. If any provision of this
Agreement is unenforceable for any reason whatsoever, such provision shall be
appropriately limited and given effect to the extent that it may be
enforceable.
12. GOVERNING LAW; PLACE OF PERFORMANCE.
This Agreement shall in all respects be construed according to the
laws of the State of Texas.
13. ATTORNEYS' FEES AND COSTS.
If any action at law or in equity is brought to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which it may be entitled.
14. ASSIGNMENT; BINDING EFFECT.
The Employee understands that he has been selected for employment by
the Company on the basis of his personal qualifications, experience and skills.
The Employee, therefore, agrees that he cannot assign his rights and
obligations hereunder or delegate his duties hereunder. Subject to the
preceding two sentences, this Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns. It is further understood and agreed that the Company may be merged or
consolidated with another
Page 9 of 10
<PAGE> 10
entity and that any such entity shall automatically succeed to the rights,
powers and responsibilities of the Company hereunder.
WITNESS, this Employment Agreement has been executed as of the date
first hereinabove written.
ALLWASTE, INC. EMPLOYEE
By: /s/ Robert M. Chiste /s/ Michael W. Ramirez
----------------------- ------------------------------------------
Robert M. Chiste Michael W. Ramirez
President and Social Security No.
Chief Executive Officer ----------------------
Date: November 11, 1996
--------------------- Home Address:
3146 Confederate South Drive
------------------------------------------
Missouri City, Texas 77459
- ----------------------- ------------------------------------------
Witness Signature
Date: November 11, 1996
------------------------------------
------------------------------------------
Witness Signature
Page 10 of 10
<PAGE> 1
EXHIBIT 10.22
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "AGREEMENT"), by and between
ALLWASTE, INC., a Delaware corporation (the "COMPANY"), and R. L. NELSON, JR.
(the "EMPLOYEE"), is entered into effective as of the 11th day of November,
1996.
W I T N E S S E T H:
WHEREAS, the Employee is a key employee of the Company, and the
Employee's experience and knowledge of the affairs of the Company are extremely
valuable to the Company; and
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement dated October 23, 1986 governing the Employee's employment
with the Company, which Employment Agreement has been amended by that certain
First Amendment to Employment Agreement dated November 11, 1996 (as amended,
the "EMPLOYMENT AGREEMENT"); and
WHEREAS, the Board of Directors of the Company (the "BOARD") believes
it imperative that the Company be able to rely on the Employee to continue his
services to the Company without concern that the Employee may be distracted by
the personal uncertainties and risks created by the possibility of a change in
control; and
WHEREAS, the Company is entering into this Agreement with the Employee
in order to ensure the Employee's continued services, dedication and
objectivity during such period as the Company may be susceptible to a change in
control and to define the nature and terms of the Employee's severance benefits
following a Change in Control (as defined in Section 9 below).
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Employee
hereby agree as follows.
SECTION 1. TERM. This Agreement shall commence on the date hereof
and shall continue until the expiration or termination of the Employment
Agreement, and to the extent that the Employment Agreement is renewed for
successive one-year periods, this Agreement shall be similarly renewed.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not alter or impair any rights of the Employee (or the
Employee's estate or beneficiaries) that have arisen under this Agreement prior
to such termination.
<PAGE> 2
SECTION 2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL.
2.1 GENERAL.
(a) If a Change in Control occurs while the Employee is employed by
the Company and if during the Protected Period (as defined in paragraph (b)
below) the Employee's employment is terminated, whether by the Company or by
the Employee, then the Employee shall be entitled to the benefits specified in
Sections 3.3, 4 and 5 hereof, unless such termination is (i) due to the
Employee's death, (ii) by the Company on account of the Employee's Disability
as provided in Section 2.2 below, (iii) by the Company for Cause as provided in
Section 2.3 below, or (iv) by the Employee for other than Good Reason as
provided in Section 2.4 below, in which event the Employee shall not be
entitled to any benefits under this Agreement except as specified in Sections
3.1 and 3.2 hereof.
(b) For purposes of this Agreement, the "PROTECTED PERIOD" shall
mean the period of time beginning with a Change in Control and ending 18 months
following such Change in Control; provided, however, if the Employee's
employment with the Company terminates for any reason other than a termination
by the Company for Cause (as defined in Section 2.3 below) prior to, but within
six months of, the date on which a Change in Control occurs, then, for all
purposes of this Agreement: (A) the Employee shall be deemed to have continued
employment with the Company until the date of the Change in Control and then
terminated his employment on such date for Good Reason, and (B) the Protected
Period shall be deemed to have commenced immediately prior to the Employee's
actual termination of employment.
2.2. TERMINATION BY COMPANY ON ACCOUNT OF DISABILITY.
If a Change in Control occurs while the Employee is employed by the
Company and if, as a result of the Employee's illness, physical or mental
disability, or other incapacity which continues for an uninterrupted period in
excess of three (3) months or a cumulative period of six (6) months in any
twelve (12) month period during the Protected Period, and if, within 30 days
after the Company has given the Employee written notice of the Company's
intention to terminate the Employee on account of such incapacity, the Employee
shall not have returned to the full-time performance of the Employee's duties,
then the Company may thereafter terminate the Employee's employment on account
of "DISABILITY"; provided, however, such termination shall not by itself alter
or impair the Employee's rights as a "disabled employee" or otherwise under any
of the Company's employee benefit plans.
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<PAGE> 3
2.3 TERMINATION BY COMPANY FOR CAUSE.
If a Change in Control occurs while the Employee is employed by the
Company, the Company may, at any time during the Protected Period, terminate
the Employee's employment for Cause. For purposes of this Agreement, the
Company shall have "CAUSE" to terminate the Employee's employment hereunder
only if: (a) the Employee willfully and continually fails to perform
substantially the Employee's duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), which failure continues unabated after a demand for substantial
performance is delivered to the Employee by the Board that specifically
identifies the manner in which the Board believes that the Employee has not
substantially performed the Employee's duties, or (b) the Employee willfully
engages in gross misconduct that is materially and demonstrably injurious to
the Company. For purposes of this Section 2.3, an act or failure to act on the
Employee's part shall be considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without reasonable belief that
the Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated by the Company for Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
the Board, at a meeting of the Board called and held for the purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Employee was guilty of conduct set
forth in clauses (a) or (b) of the second sentence of this Section 2.3 and
specifying the particulars thereof in reasonable detail.
2.4. TERMINATION BY EMPLOYEE FOR GOOD REASON.
If a Change in Control occurs while the Employee is employed by the
Company, the Employee may terminate the Employee's employment for Good Reason
at any time during the Protected Period. For purposes of this Agreement "GOOD
REASON" shall mean any of the following:
(a) The Employee is assigned any duties materially
inconsistent with, or diminished from, the Employee's positions,
duties, responsibilities and status with the Company immediately prior
to the commencement of the Protected Period, or the Employee's status,
reporting responsibilities, titles or offices are materially
diminished from those in effect immediately prior to the commencement
of the Protected Period, or the Employee is removed from or is not
re-elected or appointed to any of such responsibilities, titles,
offices or positions, or the Employee's duties and responsibilities
are materially increased without a corresponding increase in the
Employee's compensation (such increase in compensation to be
satisfactory to the Employee, in the Employee's sole reasonable
judgment), except in each case in connection with the termination of
the Employee's employment by the Company for Cause or on account of
Disability, or as a result of the Employee's death, or by the
3
<PAGE> 4
Employee for other than Good Reason; provided, however, that Good
Reason shall not be triggered under this subsection (a) by an
insubstantial action not taken in bad faith and which is remedied by
the Company promptly after receipt of written notice from the
Employee; or
(b) The Employee's annual rate of base salary is reduced
from that in effect immediately prior to the commencement of the
Protected Period or as the same may be increased from time to time
thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction, is referred to hereinafter as
the "ANNUAL BASE SALARY"); provided, however, with respect to a
termination of employment prior to a Change in Control that is deemed
to have occurred on the date of the Change in Control, "Annual Base
Salary" shall be the Employee's annual rate of base salary as in
effect immediately prior to the Employee's actual date of termination,
but disregarding any reduction therein made within 30 days of the
Employee's actual termination date; or
(c) The Company fails to continue in effect any benefit
or compensation plan, including, but not limited to, the Company's
annual bonus plan, qualified retirement plan, executive life insurance
plan and/or health and accident plan, in which the Employee is
participating immediately prior to the commencement of the Protected
Period, or plans providing, in the sole reasonable judgment of the
Employee, the Employee with substantially similar benefits, or the
Company takes any action that would adversely affect the Employee's
participation in or reduce the Employee's benefits under any of such
plans (excluding any such action by the Company that is required by
law); or
(d) The Company's principal executive offices are
relocated at any time following a Change in Control more than 35 miles
from where such offices were located immediately prior to such Change
in Control; or
(e) The Company requires the Employee at any time
following a Change in Control to relocate more than 35 miles from
where the Company's principal executive offices were located
immediately prior to such Change in Control; or
(f) The Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated
in Section 7.1 hereof; or
(g) Any purported termination of the Employee's
employment by the Company that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2.5 below and, if
applicable, the procedures described in Section 2.3 above; or
(h) The amendment, modification or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
that was in effect
4
<PAGE> 5
immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect
Employee's rights to indemnification by the Company; or
(i) The Company shall violate or breach any obligation of
the Company in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in
the Bylaws of the Company and/or in the Employment Agreement or any
other separate agreement entered into between the Company and the
Employee) to indemnify the Employee against any claim, loss, expense
or liability sustained or incurred by the Employee by reason, in whole
or in part, of the fact that the Employee is or was an officer or
director of the Company; or
(j) The Company shall violate or breach any other
material obligation of the Company owing to the Employee in effect
immediately prior to the commencement of the Protected Period relating
to the Employee's employment with the Company, but only if such
violation or breach (if capable of being remedied) shall continue
unremedied for more than 15 days after written notice thereof is given
by the Employee to the Company; or
(k) The Board (or any nominating committee of the Board)
fails to recommend and support the Employee's re-election as a
director of the Company if the Employee is a director of the Company
immediately prior to the commencement of the Protected Period; or
(l) The Company shall fail to keep in force, for the
benefit of the Employee, directors' and officers' insurance policy
with coverage amounts and scope equal to the coverage amounts and
scope under such policy immediately prior to the commencement of the
Protected Period.
2.5. NOTICE OF TERMINATION.
Any termination by the Company pursuant to Section 2.2 or 2.3 above or
by the Employee pursuant to Section 2.4 above shall be communicated by written
Notice of Termination to the other party hereto; provided, however, that in the
case of events of Good Reason enumerated in subsections (f), (h), (i) or (l) of
Section 2.4 hereof, the Company shall have the obligation to provide the
Employee with written notice of the occurrence of any of such events and the
Employee shall then have the opportunity to provide the Company with Notice of
Termination if he so elects. The Employee shall retain the ability to
terminate his employment for Good Reason under subsections (f), (h), (i) or (l)
of Section 2.4 hereof, even if the Company fails to provide written notice of
the occurrence of any of the events specified in such subsections as provided
herein. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied on and, except in the case of the termination referred to in the last
subsection of Section 2.4 above, shall set forth in reasonable detail the
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<PAGE> 6
facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated. Any purported
termination of this Agreement not in compliance with the requirements of this
Section 2.5 or, if applicable, the procedures described in Section 2.3 above
shall be ineffective.
2.6. DATE OF TERMINATION. For purposes of this Agreement, "DATE OF
TERMINATION" shall mean: (a) if the Employee is terminated on account of
Disability pursuant to Section 2.2 above, 30 days after Notice of Termination
is given, provided that the Employee shall not have returned to the performance
of the Employee's duties on a full-time basis during such 30-day period; (b) if
the Employee's employment is terminated for Cause pursuant to Section 2.3
above, the date specified in the Notice of Termination; (c) with respect to a
termination of employment prior to a Change in Control that is deemed to have
occurred on the date of the Change in Control, the date of such Change in
Control; and (d) if the Employee's employment is terminated for any other
reason on or after a Change in Control, the date on which a Notice of
Termination is given; provided, however, in the event of any dispute or
controversy concerning the Employee's entitlement to payment under this
Agreement, solely for purposes of Section 3.3 below, concerning the timing of
the payment of amounts under this Agreement, the "Date of Termination" shall
mean the date of final resolution of such dispute or controversy.
SECTION 3. COMPENSATION DURING DISABILITY OR ON TERMINATION.
3.1. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee fails to
perform the Employee's normal duties as a result of Disability (as defined in
Section 2.2 hereof), the Employee shall continue during the period of
Disability to receive: (i) the Employee's full Annual Base Salary at the rate
then in effect, (ii) any awards, deferred and non-deferred, payable during such
period of disability under the Company's annual bonus plan, less any amounts
paid to the Employee during such period of Disability pursuant to the Company's
sick-leave or disability program until the Employee's employment is terminated
on account of Disability pursuant to Section 2.2 hereof, and (iii) all other
applicable perquisites, insurance and other employee benefits.
3.2. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee's employment
shall be terminated by the Company for Cause pursuant to Section 2.3 above, the
Company shall pay the Employee's earned but unpaid Annual Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to the Employee
under this Agreement, except those arising hereunder prior to the Date of
Termination.
3.3. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Company shall terminate
the Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during
the Protected Period, the Employee shall terminate the Employee's employment
for Good Reason in accordance with
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<PAGE> 7
Section 2.4 hereof, then, subject to Section 5 below and the following
provisions of this Section 3.3, the Company shall pay to the Employee, in a
single lump sum by certified or bank cashier's check within five days of such
Date of Termination, the sum of the amounts specified in clauses (a), (b) and
(c) below:
(a) an amount equal to 3 times the Annual Base Salary;
(b) an amount equal to that portion of the Annual Base
Salary earned, but not paid, and vacation earned, but not taken, in
each case, to the Date of Termination, and all other amounts
previously deferred by the Employee or earned but not paid as of such
date under all Company incentive or deferred compensation plans or
programs; and
(c) an amount equal to (i) the amount of the maximum
monthly premium payment that may be charged to continue coverage for
the Employee and the Employee's eligible dependents under the
Company's health insurance plan under COBRA, multiplied by (ii) 36
months.
Further, if a Change in Control occurs while the Employee is employed by the
Company and if, during the Protected Period, the Company shall terminate the
Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during the
Protected Period, the Employee shall terminate the Employee's employment for
Good Reason in accordance with Section 2.4 hereof, then, subject to Section 5
below, the Employee shall be credited with an additional 36 months of service
credit under the Company's Supplemental Executive Retirement Plan (the "SERP").
SECTION 4. ACCELERATION OF OPTION AND RESTRICTED STOCK GRANTS ON
A CHANGE IN CONTROL.
4.1. For purposes hereof, the term "ACCELERATION DATE" shall mean
the earliest date on which any of the following events shall first have
occurred: (i) the acquisition described in clause (a) of the definition of
Change in Control set forth in Section 9 hereof; (ii) the change in the
composition of the Board of Directors described in clause (b) of such
definition; (iii) the stockholder approval or adoption described in clauses (c)
or (d) of such definition; or (iv) the commencement date of any tender offer
subject to the terms of Section 14(d)(1) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), or exchange offer subject to the terms
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any other
offer or series of offers to purchase for cash, or to exchange for securities
of a person other than the Company, 30% or more of the Company's Common Stock
by any "person" or "group" of persons (as such terms are used on January 1,
1996 in Rule 13d of the Exchange Act) other than an offer or offers by the
Company or by employee benefit plan(s) sponsored by the Company ("TENDER
OFFER").
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4.2. If an Acceleration Date occurs while the Employee holds
outstanding options under the Company's stock option plan(s), then from and
after the Acceleration Date, all options held by the Employee shall be
immediately exercisable in full.
4.3. If an Acceleration Date occurs while any shares of restricted
stock issued by the Company to the Employee (including those granted under the
Company's Target 2000: One, Two, Four Plan) remain subject to restrictions
and/or performance or other criteria relating thereto (the "RESTRICTIONS"),
then from and after the Acceleration Date: (i) all such Restrictions shall
lapse and be deemed satisfied in full, as applicable; and (ii) no later than
the fifth day following the Acceleration Date, the Company shall cause
unrestricted shares of stock to be delivered to the Employee.
SECTION 5. GROSS-UP OF PARACHUTE PAYMENTS.
5.1. To provide the Employee with adequate protection in connection
with his ongoing employment with the Company, this Agreement provides the
Employee with various benefits in the event of termination of the Employee's
employment with the Company during the Protected Period. If the Employee's
employment is terminated following a "change in control" of the Company, within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "CODE"), a portion of those benefits could be characterized as "excess
parachute payments" within the meaning of Section 280G of the Code. The
parties hereto acknowledge that the protections set forth in this Section 5 are
important, and it is agreed that the Employee should not have to bear the
burden of any excise tax that might be levied under Section 4999 of the Code,
in the event that a portion of the benefits payable to the Employee pursuant to
this Agreement are treated as an excess parachute payment. The parties,
therefore, have agreed as set forth in this Section 5.
5.2. Anything in this Agreement to the contrary notwithstanding, if
it shall be determined that any payment or distribution by the Company or any
other person to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (a "PAYMENT") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), then the Company shall pay an additional payment (a "GROSS-UP
PAYMENT") in an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
5.3. Subject to the provisions of Section 5.4 below, all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at
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<PAGE> 9
such determination, shall be made by an independent public accounting firm with
a national reputation that is selected by the Employee (the "ACCOUNTING FIRM")
which shall provide detailed supporting calculations both to the Company and to
the Employee within 15 business days after the receipt of notice from the
Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change in control of
the Company, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. The
Company shall indemnify and hold harmless the Employee, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed on the Employee as a result of such payment of fees and
expenses. Any Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding on the Company and the Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments may not have been made by the Company which should have been made
("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Section 5.4 below
and the Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Employee.
5.4. The Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claim) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Employee is
informed in writing of such claim (or threatened lien) and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due or such tax lien would be
imposed). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim (or threatened
lien), the Employee shall:
(a) give the Company any information reasonably requested
by the Company relating to such claim (or threatened lien);
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<PAGE> 10
(b) take such action in connection with contesting such
claim (or threatened lien) as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(d) permit the Company to participate in any proceedings
relating to such claim (or threatened lien);
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Subsection 5.4, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employee shall
determine (but in no event shall the Company permit or direct the Employee to
allow a tax lien to be imposed on the Employee's property); provided, further,
that if the Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Employee,
on an interest-free basis, and shall indemnify and hold the Employee harmless
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further,
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. In addition, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder, and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
5.5. If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 5.4, the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 5.4 above) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Employee of an amount advanced by the Company pursuant to
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<PAGE> 11
Section 5.4 above, a determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Employee in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
SECTION 6. NO MITIGATION OF DAMAGES.
The provisions of this Agreement are not intended to, nor shall they
be construed to, require that the Employee seek or accept other employment
following a termination of employment and, amounts payable and benefits
provided under this Agreement to the Employee shall not be reduced by the
Employee's acceptance of (or failure to seek or accept) employment with another
person. The Company's obligations to make the payments and provide the
benefits required for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, rights or action that the Company may have
against the Employee or others.
SECTION 7. SUCCESSORS; BINDING AGREEMENT.
7.1. The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated the Employee's employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 7.1 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
7.2. This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts would still be payable to the Employee
hereunder if the Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee or other designee or, if none, to
the Employee's estate.
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<PAGE> 12
SECTION 8. NOTICE. For the purpose of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, registered and return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address
as either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only on
receipt.
If to the Company:
Allwaste, Inc.
5151 San Felipe, Suite 1600
Houston, Texas 77056
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to Employee:
R. L. Nelson, Jr.
5520 Woodway
Houston, Texas 77056
SECTION 9. CHANGE IN CONTROL.
For purposes of this Agreement, a "CHANGE IN CONTROL" shall be deemed
to have occurred on, and shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (1) the then
outstanding shares of Common Stock of the Company (the "OUTSTANDING
COMPANY COMMON STOCK") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following such reorganization, merger
or consolidation, the conditions described in clauses (1), (2) and (3)
of paragraph (c) of this Section 9 are satisfied; or
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<PAGE> 13
(b) Individuals who, as of the date hereof, constitute
the entire Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either (1) an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or
more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trust(s)) of the Company
and/or its subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all
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<PAGE> 14
or substantially all of the assets of the Company, other than to a
corporation, with respect to which immediately following such sale or
other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company and/or
its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (C) at least a majority of the members
of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company.
SECTION 10. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement includes employment with any entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of all outstanding equity interests, it being
understood that for purposes of clause (a) of Section 2.4 hereof, "Good Reason"
shall be construed to refer to each of the Employee's positions, duties,
responsibilities (reporting and other), status, titles and offices with the
Company and each of its subsidiaries.
SECTION 11. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee and by the Chairman of the
Compensation Committee of the Board or other authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
SECTION 12. VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. The invalidity or unenforceability of any
provisions of this Agreement shall not
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affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
SECTION 14. DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 15. CORPORATE APPROVAL. This Agreement has been
approved by the Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
SECTION 16. DISPUTE RESOLUTION.
16.1. In the event a dispute shall arise between the parties as to
whether the provisions of this Agreement have been complied with (a "DISPUTE"),
the parties agree to resolve such Dispute in accordance with the following
procedure:
(a) A meeting shall be held promptly between the parties,
attended by (in the case of the Company) one or more individuals with
decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
(b) If, within 10 days after such meeting, the parties
have not succeeded in negotiating a resolution of the Dispute, the
parties agree to submit the Dispute to mediation in accordance with
the Commercial Mediation Rules of the American Arbitration
Association.
(c) The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the
American Arbitration Association if they have been unable to agree on
such appointment within 10 days following the 10-day period referred
to in clause (b) above.
(d) On appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating
thereto for 15 days.
(e) If the parties are not successful in resolving the
Dispute through mediation within such 15-day period, the parties agree
that the Dispute shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association.
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(f) The fees and expenses of the mediator/arbitrators
shall be borne solely by the non-prevailing party or, in the event
there is no clear prevailing party, shall be borne by the Company.
(g) If any dispute shall arise under this Agreement
involving termination of the Employee's employment with the Company or
involving the failure or refusal of the Company to fully perform in
accordance with the terms hereof, the Company shall reimburse the
Employee, on a current basis, for all legal fees and expenses, if any,
incurred by the Employee in connection with such dispute, together
with interest thereon at the prevailing legal rate of interest, such
interest to accrue from the date of Notice of Termination through the
date of payment thereof; provided, however, that in the event the
resolution of such dispute in accordance with this Section 16 includes
a finding denying, in total, the Employee's claims in such dispute,
the Employee shall be required to reimburse the Company, over a period
determined by the Employee but not to exceed 12 months from the date
of such resolution, for all sums advanced to the Employee with respect
to such dispute pursuant to this clause (g).
(h) Except as provided above, each party shall pay its
own costs and expenses (including, without limitation, reasonable
attorneys' fees) relating to any mediation/arbitration proceeding
conducted under this Section 16.
(i) All mediation/arbitration conferences and hearings
will be held in Houston, Texas.
16.2. In the event there is any disputed question of law involved in
any arbitration proceeding, such as the proper legal interpretation of any
provision of this Agreement, the arbitrators shall make separate and distinct
findings of all facts material to the disputed question of law to be decided
and, on the basis of the facts so found, express their conclusion of the
question of law. The facts so found shall be conclusive and binding on the
parties, but any legal conclusion reached by the arbitrators from such facts
may be submitted by either party to a court of law for final determination by
initiation of a civil action in the proper state or Federal court sitting in
Harris County, Texas. Such action, to be valid, must be commenced within 20
days after receipt of the arbitrators' decision. If no such civil action is
commenced within such 20-day period, the legal conclusion reached by the
arbitrators shall be conclusive and binding on the parties. Any such civil
action shall be submitted, heard and determined solely on the basis of the
facts found by the arbitrators. Neither of the parties shall, or shall be
entitled to, submit any additional or different facts for consideration by the
court. In the event any civil action is commenced under this Section 16.2, the
party who prevails or substantially prevails (as determined by the court) in
such civil action shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys' fees incurred in connection with such action
and on appeal.
16.3. Except as limited by Section 16.2 above, the parties agree
that judgment on the award rendered by the arbitrators may be entered in any
court of competent jurisdiction.
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<PAGE> 17
In the event legal proceedings are commenced to enforce the rights awarded in
an arbitration proceeding, the party who prevails or substantially prevails in
such legal proceeding shall be entitled to recover from the other party all
costs, expenses and reasonable attorneys' fees incurred in connection with such
legal proceeding and on appeal.
16.4. Except as provided above, no legal action may be brought by
either party with respect to any Dispute. All Disputes shall be determined
only in accordance with the procedures set forth above.
SECTION 17. NO OTHER SEVERANCE BENEFITS. In the event the Employee
becomes entitled to severance payments under Section 3.3 of this Agreement,
then the amounts payable under this Agreement to the Employee shall be in lieu
of, and not in addition to, any similar severance amounts to which the Employee
may otherwise be entitled under a severance plan or program of the Company or
any employment contract or agreement with the Company.
IN WITNESS WHEREOF, the Company and the Employee have entered into
this Agreement as of the day and year first above written.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
-------------------------------------------
Robert M. Chiste
President and Chief Executive Officer
EMPLOYEE
/s/ R. L. Nelson, Jr.
----------------------------------------------
R. L. Nelson, Jr.
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EXHIBIT 10.23
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "AGREEMENT"), by and between
ALLWASTE, INC., a Delaware corporation (the "COMPANY"), and ROBERT M. CHISTE
(the "EMPLOYEE"), is entered into effective as of the 11th day of November,
1996.
W I T N E S S E T H:
WHEREAS, the Employee is a key employee of the Company, and the
Employee's experience and knowledge of the affairs of the Company are extremely
valuable to the Company; and
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement dated October 17, 1994 governing the Employee's employment
with the Company, which Employment Agreement has been amended by that certain
First Amendment to Employment Agreement dated October 26, 1995, that certain
Second Amendment to Employment Agreement dated October 25, 1996, and that
certain Third Amendment to Employment Agreement dated November 11, 1996 (as
amended, the "EMPLOYMENT AGREEMENT"); and
WHEREAS, the Board of Directors of the Company (the "BOARD") believes
it imperative that the Company be able to rely on the Employee to continue his
services to the Company without concern that the Employee may be distracted by
the personal uncertainties and risks created by the possibility of a change in
control; and
WHEREAS, the Company is entering into this Agreement with the Employee
in order to ensure the Employee's continued services, dedication and
objectivity during such period as the Company may be susceptible to a change in
control and to define the nature and terms of the Employee's severance benefits
following a Change in Control (as defined in Section 9 below).
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Employee
hereby agree as follows.
SECTION 1. TERM. This Agreement shall commence on the date hereof
and shall continue until the expiration or termination of the Employment
Agreement, and to the extent that the Employment Agreement is renewed for
successive one-year periods, this Agreement shall be similarly renewed.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not alter or impair any rights of the Employee (or the
Employee's estate or beneficiaries) that have arisen under this Agreement prior
to such termination.
<PAGE> 2
SECTION 2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL.
2.1 GENERAL.
(a) If a Change in Control occurs while the Employee is employed by
the Company and if during the Protected Period (as defined in paragraph (b)
below) the Employee's employment is terminated, whether by the Company or by
the Employee, then the Employee shall be entitled to the benefits specified in
Sections 3.3, 4 and 5 hereof, unless such termination is (i) due to the
Employee's death, (ii) by the Company on account of the Employee's Disability
as provided in Section 2.2 below, (iii) by the Company for Cause as provided in
Section 2.3 below, or (iv) by the Employee for other than Good Reason as
provided in Section 2.4 below, in which event the Employee shall not be
entitled to any benefits under this Agreement except as specified in Sections
3.1 and 3.2 hereof.
(b) For purposes of this Agreement, the "PROTECTED PERIOD" shall
mean the period of time beginning with a Change in Control and ending 18 months
following such Change in Control; provided, however, if the Employee's
employment with the Company terminates for any reason other than a termination
by the Company for Cause (as defined in Section 2.3 below) prior to, but within
six months of, the date on which a Change in Control occurs, then, for all
purposes of this Agreement: (A) the Employee shall be deemed to have continued
employment with the Company until the date of the Change in Control and then
terminated his employment on such date for Good Reason, and (B) the Protected
Period shall be deemed to have commenced immediately prior to the Employee's
actual termination of employment.
2.2. TERMINATION BY COMPANY ON ACCOUNT OF DISABILITY.
If a Change in Control occurs while the Employee is employed by the
Company and if, as a result of the Employee's illness, physical or mental
disability, or other incapacity which continues for an uninterrupted period in
excess of three (3) months or a cumulative period of six (6) months in any
twelve (12) month period during the Protected Period, and if, within 30 days
after the Company has given the Employee written notice of the Company's
intention to terminate the Employee on account of such incapacity, the Employee
shall not have returned to the full-time performance of the Employee's duties,
then the Company may thereafter terminate the Employee's employment on account
of "DISABILITY"; provided, however, such termination shall not by itself alter
or impair the Employee's rights as a "disabled employee" or otherwise under any
of the Company's employee benefit plans.
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2.3 TERMINATION BY COMPANY FOR CAUSE.
If a Change in Control occurs while the Employee is employed by the
Company, the Company may, at any time during the Protected Period, terminate
the Employee's employment for Cause. For purposes of this Agreement, the
Company shall have "CAUSE" to terminate the Employee's employment hereunder
only if: (a) the Employee willfully and continually fails to perform
substantially the Employee's duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), which failure continues unabated after a demand for substantial
performance is delivered to the Employee by the Board that specifically
identifies the manner in which the Board believes that the Employee has not
substantially performed the Employee's duties, or (b) the Employee willfully
engages in gross misconduct that is materially and demonstrably injurious to
the Company. For purposes of this Section 2.3, an act or failure to act on the
Employee's part shall be considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without reasonable belief that
the Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated by the Company for Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
the Board, at a meeting of the Board called and held for the purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Employee was guilty of conduct set
forth in clauses (a) or (b) of the second sentence of this Section 2.3 and
specifying the particulars thereof in reasonable detail.
2.4. TERMINATION BY EMPLOYEE FOR GOOD REASON.
If a Change in Control occurs while the Employee is employed by the
Company, the Employee may terminate the Employee's employment for Good Reason
at any time during the Protected Period. For purposes of this Agreement "GOOD
REASON" shall mean any of the following:
(a) The Employee is assigned any duties materially
inconsistent with, or diminished from, the Employee's positions,
duties, responsibilities and status with the Company immediately prior
to the commencement of the Protected Period, or the Employee's status,
reporting responsibilities, titles or offices are materially
diminished from those in effect immediately prior to the commencement
of the Protected Period, or the Employee is removed from or is not
re-elected or appointed to any of such responsibilities, titles,
offices or positions, or the Employee's duties and responsibilities
are materially increased without a corresponding increase in the
Employee's compensation (such increase in compensation to be
satisfactory to the Employee, in the Employee's sole reasonable
judgment), except in each case in connection with the termination of
the Employee's employment by the Company for Cause or on account of
Disability, or as a result of the Employee's death, or by the
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Employee for other than Good Reason; provided, however, that Good
Reason shall not be triggered under this subsection (a) by an
insubstantial action not taken in bad faith and which is remedied by
the Company promptly after receipt of written notice from the
Employee; or
(b) The Employee's annual rate of base salary is reduced
from that in effect immediately prior to the commencement of the
Protected Period or as the same may be increased from time to time
thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction, is referred to hereinafter as
the "ANNUAL BASE SALARY"); provided, however, with respect to a
termination of employment prior to a Change in Control that is deemed
to have occurred on the date of the Change in Control, "Annual Base
Salary" shall be the Employee's annual rate of base salary as in
effect immediately prior to the Employee's actual date of termination,
but disregarding any reduction therein made within 30 days of the
Employee's actual termination date; or
(c) The Company fails to continue in effect any benefit
or compensation plan, including, but not limited to, the Company's
annual bonus plan, qualified retirement plan, executive life insurance
plan and/or health and accident plan, in which the Employee is
participating immediately prior to the commencement of the Protected
Period, or plans providing, in the sole reasonable judgment of the
Employee, the Employee with substantially similar benefits, or the
Company takes any action that would adversely affect the Employee's
participation in or reduce the Employee's benefits under any of such
plans (excluding any such action by the Company that is required by
law); or
(d) The Company's principal executive offices are
relocated at any time following a Change in Control more than 35 miles
from where such offices were located immediately prior to such Change
in Control; or
(e) The Company requires the Employee at any time
following a Change in Control to relocate more than 35 miles from
where the Company's principal executive offices were located
immediately prior to such Change in Control; or
(f) The Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated
in Section 7.1 hereof; or
(g) Any purported termination of the Employee's
employment by the Company that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2.5 below and, if
applicable, the procedures described in Section 2.3 above; or
(h) The amendment, modification or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
that was in effect
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immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect
Employee's rights to indemnification by the Company; or
(i) The Company shall violate or breach any obligation of
the Company in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in
the Bylaws of the Company and/or in the Employment Agreement or any
other separate agreement entered into between the Company and the
Employee) to indemnify the Employee against any claim, loss, expense
or liability sustained or incurred by the Employee by reason, in whole
or in part, of the fact that the Employee is or was an officer or
director of the Company; or
(j) The Company shall violate or breach any other
material obligation of the Company owing to the Employee in effect
immediately prior to the commencement of the Protected Period relating
to the Employee's employment with the Company, but only if such
violation or breach (if capable of being remedied) shall continue
unremedied for more than 15 days after written notice thereof is given
by the Employee to the Company; or
(k) The Board (or any nominating committee of the Board)
fails to recommend and support the Employee's re-election as a
director of the Company if the Employee is a director of the Company
immediately prior to the commencement of the Protected Period; or
(l) The Company shall fail to keep in force, for the
benefit of the Employee, directors' and officers' insurance policy
with coverage amounts and scope equal to the coverage amounts and
scope under such policy immediately prior to the commencement of the
Protected Period.
2.5. NOTICE OF TERMINATION.
Any termination by the Company pursuant to Section 2.2 or 2.3 above or
by the Employee pursuant to Section 2.4 above shall be communicated by written
Notice of Termination to the other party hereto; provided, however, that in the
case of events of Good Reason enumerated in subsections (f), (h), (i) or (l) of
Section 2.4 hereof, the Company shall have the obligation to provide the
Employee with written notice of the occurrence of any of such events and the
Employee shall then have the opportunity to provide the Company with Notice of
Termination if he so elects. The Employee shall retain the ability to
terminate his employment for Good Reason under subsections (f), (h), (i) or (l)
of Section 2.4 hereof, even if the Company fails to provide written notice of
the occurrence of any of the events specified in such subsections as provided
herein. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied on and, except in the case of the termination referred to in the last
subsection of Section 2.4 above, shall set forth in reasonable detail the
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facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated. Any purported
termination of this Agreement not in compliance with the requirements of this
Section 2.5 or, if applicable, the procedures described in Section 2.3 above
shall be ineffective.
2.6. DATE OF TERMINATION. For purposes of this Agreement, "DATE OF
TERMINATION" shall mean: (a) if the Employee is terminated on account of
Disability pursuant to Section 2.2 above, 30 days after Notice of Termination
is given, provided that the Employee shall not have returned to the performance
of the Employee's duties on a full-time basis during such 30-day period; (b) if
the Employee's employment is terminated for Cause pursuant to Section 2.3
above, the date specified in the Notice of Termination; (c) with respect to a
termination of employment prior to a Change in Control that is deemed to have
occurred on the date of the Change in Control, the date of such Change in
Control; and (d) if the Employee's employment is terminated for any other
reason on or after a Change in Control, the date on which a Notice of
Termination is given; provided, however, in the event of any dispute or
controversy concerning the Employee's entitlement to payment under this
Agreement, solely for purposes of Section 3.3 below, concerning the timing of
the payment of amounts under this Agreement, the "Date of Termination" shall
mean the date of final resolution of such dispute or controversy.
SECTION 3. COMPENSATION DURING DISABILITY OR ON TERMINATION.
3.1. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee fails to
perform the Employee's normal duties as a result of Disability (as defined in
Section 2.2 hereof), the Employee shall continue during the period of
Disability to receive: (i) the Employee's full Annual Base Salary at the rate
then in effect, (ii) any awards, deferred and non-deferred, payable during such
period of disability under the Company's annual bonus plan, less any amounts
paid to the Employee during such period of Disability pursuant to the Company's
sick-leave or disability program until the Employee's employment is terminated
on account of Disability pursuant to Section 2.2 hereof, and (iii) all other
applicable perquisites, insurance and other employee benefits.
3.2. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee's employment
shall be terminated by the Company for Cause pursuant to Section 2.3 above, the
Company shall pay the Employee's earned but unpaid Annual Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to the Employee
under this Agreement, except those arising hereunder prior to the Date of
Termination.
3.3. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Company shall terminate
the Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during
the Protected Period, the Employee shall terminate the Employee's employment
for Good Reason in accordance with
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Section 2.4 hereof, then, subject to Section 5 below and the following
provisions of this Section 3.3, the Company shall pay to the Employee, in a
single lump sum by certified or bank cashier's check within five days of such
Date of Termination, the sum of the amounts specified in clauses (a), (b) and
(c) below:
(a) an amount equal to 3 times the sum of (i) the Annual
Base Salary and (ii) an annual target bonus of 90% of the Annual Base
Salary;
(b) an amount equal to that portion of the Annual Base
Salary earned, but not paid, and vacation earned, but not taken, in
each case, to the Date of Termination, and all other amounts
previously deferred by the Employee or earned but not paid as of such
date under all Company incentive or deferred compensation plans or
programs; and
(c) an amount equal to (i) the amount of the maximum
monthly premium payment that may be charged to continue coverage for
the Employee and the Employee's eligible dependents under the
Company's health insurance plan under COBRA, multiplied by (ii) 36
months.
Further, if a Change in Control occurs while the Employee is employed by the
Company and if, during the Protected Period, the Company shall terminate the
Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during the
Protected Period, the Employee shall terminate the Employee's employment for
Good Reason in accordance with Section 2.4 hereof, then, subject to Section 5
below, the Employee shall be credited with an additional 36 months of service
credit under the Company's Supplemental Executive Retirement Plan (the "SERP").
SECTION 4. ACCELERATION OF OPTION AND RESTRICTED STOCK GRANTS ON
A CHANGE IN CONTROL.
4.1. For purposes hereof, the term "ACCELERATION DATE" shall mean
the earliest date on which any of the following events shall first have
occurred: (i) the acquisition described in clause (a) of the definition of
Change in Control set forth in Section 9 hereof; (ii) the change in the
composition of the Board of Directors described in clause (b) of such
definition; (iii) the stockholder approval or adoption described in clauses (c)
or (d) of such definition; or (iv) the commencement date of any tender offer
subject to the terms of Section 14(d)(1) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), or exchange offer subject to the terms
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any other
offer or series of offers to purchase for cash, or to exchange for securities
of a person other than the Company, 30% or more of the Company's Common Stock
by any "person" or "group" of persons (as such terms are used on January 1,
1996 in Rule 13d of the Exchange Act) other than an offer or offers by the
Company or by employee benefit plan(s) sponsored by the Company ("TENDER
OFFER").
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4.2. If an Acceleration Date occurs while the Employee holds
outstanding options under the Company's stock option plan(s), then from and
after the Acceleration Date, all options held by the Employee shall be
immediately exercisable in full.
4.3. If an Acceleration Date occurs while any shares of restricted
stock issued by the Company to the Employee (including those granted under the
Company's Target 2000: One, Two, Four Plan) remain subject to restrictions
and/or performance or other criteria relating thereto (the "RESTRICTIONS"),
then from and after the Acceleration Date: (i) all such Restrictions shall
lapse and be deemed satisfied in full, as applicable; and (ii) no later than
the fifth day following the Acceleration Date, the Company shall cause
unrestricted shares of stock to be delivered to the Employee.
SECTION 5. GROSS-UP OF PARACHUTE PAYMENTS.
5.1. To provide the Employee with adequate protection in connection
with his ongoing employment with the Company, this Agreement provides the
Employee with various benefits in the event of termination of the Employee's
employment with the Company during the Protected Period. If the Employee's
employment is terminated following a "change in control" of the Company, within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "CODE"), a portion of those benefits could be characterized as "excess
parachute payments" within the meaning of Section 280G of the Code. The
parties hereto acknowledge that the protections set forth in this Section 5 are
important, and it is agreed that the Employee should not have to bear the
burden of any excise tax that might be levied under Section 4999 of the Code,
in the event that a portion of the benefits payable to the Employee pursuant to
this Agreement are treated as an excess parachute payment. The parties,
therefore, have agreed as set forth in this Section 5.
5.2. Anything in this Agreement to the contrary notwithstanding, if
it shall be determined that any payment or distribution by the Company or any
other person to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (a "PAYMENT") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), then the Company shall pay an additional payment (a "GROSS-UP
PAYMENT") in an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
5.3. Subject to the provisions of Section 5.4 below, all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at
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such determination, shall be made by an independent public accounting firm with
a national reputation that is selected by the Employee (the "ACCOUNTING FIRM")
which shall provide detailed supporting calculations both to the Company and to
the Employee within 15 business days after the receipt of notice from the
Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change in control of
the Company, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. The
Company shall indemnify and hold harmless the Employee, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed on the Employee as a result of such payment of fees and
expenses. Any Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding on the Company and the Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments may not have been made by the Company which should have been made
("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Section 5.4 below
and the Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Employee.
5.4. The Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claim) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Employee is
informed in writing of such claim (or threatened lien) and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due or such tax lien would be
imposed). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim (or threatened
lien), the Employee shall:
(a) give the Company any information reasonably requested
by the Company relating to such claim (or threatened lien);
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(b) take such action in connection with contesting such
claim (or threatened lien) as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(d) permit the Company to participate in any proceedings
relating to such claim (or threatened lien);
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Subsection 5.4, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employee shall
determine (but in no event shall the Company permit or direct the Employee to
allow a tax lien to be imposed on the Employee's property); provided, further,
that if the Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Employee,
on an interest-free basis, and shall indemnify and hold the Employee harmless
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further,
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. In addition, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder, and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
5.5. If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 5.4, the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 5.4 above) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Employee of an amount advanced by the Company pursuant to
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Section 5.4 above, a determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Employee in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
SECTION 6. NO MITIGATION OF DAMAGES.
The provisions of this Agreement are not intended to, nor shall they
be construed to, require that the Employee seek or accept other employment
following a termination of employment and, amounts payable and benefits
provided under this Agreement to the Employee shall not be reduced by the
Employee's acceptance of (or failure to seek or accept) employment with another
person. The Company's obligations to make the payments and provide the
benefits required for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, rights or action that the Company may have
against the Employee or others.
SECTION 7. SUCCESSORS; BINDING AGREEMENT.
7.1. The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated the Employee's employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 7.1 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
7.2. This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts would still be payable to the Employee
hereunder if the Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee or other designee or, if none, to
the Employee's estate.
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SECTION 8. NOTICE. For the purpose of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, registered and return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address
as either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only on
receipt.
If to the Company:
Allwaste, Inc.
5151 San Felipe, Suite 1600
Houston, Texas 77056
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to Employee:
Robert M. Chiste
15834 Hidden Cove
Houston, Texas 77079
SECTION 9. CHANGE IN CONTROL.
For purposes of this Agreement, a "CHANGE IN CONTROL" shall be deemed
to have occurred on, and shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (1) the then
outstanding shares of Common Stock of the Company (the "OUTSTANDING
COMPANY COMMON STOCK") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following such reorganization, merger
or consolidation, the conditions described in clauses (1), (2) and (3)
of paragraph (c) of this Section 9 are satisfied; or
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(b) Individuals who, as of the date hereof, constitute
the entire Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either (1) an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or
more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trust(s)) of the Company
and/or its subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all
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or substantially all of the assets of the Company, other than to a
corporation, with respect to which immediately following such sale or
other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company and/or
its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (C) at least a majority of the members
of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company.
SECTION 10. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement includes employment with any entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of all outstanding equity interests, it being
understood that for purposes of clause (a) of Section 2.4 hereof, "Good Reason"
shall be construed to refer to each of the Employee's positions, duties,
responsibilities (reporting and other), status, titles and offices with the
Company and each of its subsidiaries.
SECTION 11. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee and by the Chairman of the
Compensation Committee of the Board or other authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
SECTION 12. VALIDITY. THE INTERPRETATION, CONSTRUCTION AND PERFORM-
ANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE PRINCIPLE
OF CONFLICTS OF LAWS. The invalidity or unenforceability of any provisions of
this Agreement shall not
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affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
SECTION 14. DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 15. CORPORATE APPROVAL. This Agreement has been
approved by the Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
SECTION 16. DISPUTE RESOLUTION.
16.1. In the event a dispute shall arise between the parties as to
whether the provisions of this Agreement have been complied with (a "DISPUTE"),
the parties agree to resolve such Dispute in accordance with the following
procedure:
(a) A meeting shall be held promptly between the parties,
attended by (in the case of the Company) one or more individuals with
decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
(b) If, within 10 days after such meeting, the parties
have not succeeded in negotiating a resolution of the Dispute, the
parties agree to submit the Dispute to mediation in accordance with
the Commercial Mediation Rules of the American Arbitration
Association.
(c) The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the
American Arbitration Association if they have been unable to agree on
such appointment within 10 days following the 10-day period referred
to in clause (b) above.
(d) On appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating
thereto for 15 days.
(e) If the parties are not successful in resolving the
Dispute through mediation within such 15-day period, the parties agree
that the Dispute shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association.
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(f) The fees and expenses of the mediator/arbitrators
shall be borne solely by the non-prevailing party or, in the event
there is no clear prevailing party, shall be borne by the Company.
(g) If any dispute shall arise under this Agreement
involving termination of the Employee's employment with the Company or
involving the failure or refusal of the Company to fully perform in
accordance with the terms hereof, the Company shall reimburse the
Employee, on a current basis, for all legal fees and expenses, if any,
incurred by the Employee in connection with such dispute, together
with interest thereon at the prevailing legal rate of interest, such
interest to accrue from the date of Notice of Termination through the
date of payment thereof; provided, however, that in the event the
resolution of such dispute in accordance with this Section 16 includes
a finding denying, in total, the Employee's claims in such dispute,
the Employee shall be required to reimburse the Company, over a period
determined by the Employee but not to exceed 12 months from the date
of such resolution, for all sums advanced to the Employee with respect
to such dispute pursuant to this clause (g).
(h) Except as provided above, each party shall pay its
own costs and expenses (including, without limitation, reasonable
attorneys' fees) relating to any mediation/arbitration proceeding
conducted under this Section 16.
(i) All mediation/arbitration conferences and hearings
will be held in Houston, Texas.
16.2. In the event there is any disputed question of law involved in
any arbitration proceeding, such as the proper legal interpretation of any
provision of this Agreement, the arbitrators shall make separate and distinct
findings of all facts material to the disputed question of law to be decided
and, on the basis of the facts so found, express their conclusion of the
question of law. The facts so found shall be conclusive and binding on the
parties, but any legal conclusion reached by the arbitrators from such facts
may be submitted by either party to a court of law for final determination by
initiation of a civil action in the proper state or Federal court sitting in
Harris County, Texas. Such action, to be valid, must be commenced within 20
days after receipt of the arbitrators' decision. If no such civil action is
commenced within such 20-day period, the legal conclusion reached by the
arbitrators shall be conclusive and binding on the parties. Any such civil
action shall be submitted, heard and determined solely on the basis of the
facts found by the arbitrators. Neither of the parties shall, or shall be
entitled to, submit any additional or different facts for consideration by the
court. In the event any civil action is commenced under this Section 16.2, the
party who prevails or substantially prevails (as determined by the court) in
such civil action shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys' fees incurred in connection with such action
and on appeal.
16.3. Except as limited by Section 16.2 above, the parties agree
that judgment on the award rendered by the arbitrators may be entered in any
court of competent jurisdiction.
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<PAGE> 17
In the event legal proceedings are commenced to enforce the rights awarded in
an arbitration proceeding, the party who prevails or substantially prevails in
such legal proceeding shall be entitled to recover from the other party all
costs, expenses and reasonable attorneys' fees incurred in connection with such
legal proceeding and on appeal.
16.4. Except as provided above, no legal action may be brought by
either party with respect to any Dispute. All Disputes shall be determined only
in accordance with the procedures set forth above.
SECTION 17. NO OTHER SEVERANCE BENEFITS. In the event the Employee
becomes entitled to severance payments under Section 3.3 of this Agreement,
then the amounts payable under this Agreement to the Employee shall be in lieu
of, and not in addition to, any similar severance amounts to which the Employee
may otherwise be entitled under a severance plan or program of the Company or
any employment contract or agreement with the Company.
IN WITNESS WHEREOF, the Company and the Employee have entered into
this Agreement as of the day and year first above written.
ALLWASTE, INC.
By: /s/ William L. Fiedler
------------------------------
William L. Fiedler
Vice President, General
Counsel, Secretary and
Corporate Compliance Officer
EMPLOYEE
/s/ Robert M. Chiste
----------------------------------
Robert M. Chiste
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<PAGE> 1
EXHIBIT 10.24
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "AGREEMENT"), by and between
ALLWASTE, INC., a Delaware corporation (the "COMPANY"), and DAVID E. FANTA
(the "EMPLOYEE"), is entered into effective as of the 11th day of November,
1996.
W I T N E S S E T H:
WHEREAS, the Employee is a key employee of the Company, and the
Employee's experience and knowledge of the affairs of the Company are extremely
valuable to the Company; and
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement dated November 11, 1996 governing the Employee's
employment with the Company (the "EMPLOYMENT AGREEMENT"); and
WHEREAS, the Board of Directors of the Company (the "BOARD") believes
it imperative that the Company be able to rely on the Employee to continue his
services to the Company without concern that the Employee may be distracted by
the personal uncertainties and risks created by the possibility of a change in
control; and
WHEREAS, the Company is entering into this Agreement with the Employee
in order to ensure the Employee's continued services, dedication and
objectivity during such period as the Company may be susceptible to a change in
control and to define the nature and terms of the Employee's severance benefits
following a Change in Control (as defined in Section 9 below).
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Employee
hereby agree as follows.
SECTION 1. TERM. This Agreement shall commence on the date hereof
and shall continue until the expiration or termination of the Employment
Agreement, and to the extent that the Employment Agreement is renewed for
successive one-year periods, this Agreement shall be similarly renewed.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not alter or impair any rights of the Employee (or the
Employee's estate or beneficiaries) that have arisen under this Agreement prior
to such termination.
<PAGE> 2
SECTION 2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL.
2.1 GENERAL.
(a) If a Change in Control occurs while the Employee is employed by
the Company and if during the Protected Period (as defined in paragraph (b)
below) the Employee's employment is terminated, whether by the Company or by
the Employee, then the Employee shall be entitled to the benefits specified in
Sections 3.3, 4 and 5 hereof, unless such termination is (i) due to the
Employee's death, (ii) by the Company on account of the Employee's Disability
as provided in Section 2.2 below, (iii) by the Company for Cause as provided in
Section 2.3 below, or (iv) by the Employee for other than Good Reason as
provided in Section 2.4 below, in which event the Employee shall not be
entitled to any benefits under this Agreement except as specified in Sections
3.1 and 3.2 hereof.
(b) For purposes of this Agreement, the "PROTECTED PERIOD" shall
mean the period of time beginning with a Change in Control and ending 18 months
following such Change in Control; provided, however, if the Employee's
employment with the Company terminates for any reason other than a termination
by the Company for Cause (as defined in Section 2.3 below) prior to, but within
six months of, the date on which a Change in Control occurs, then, for all
purposes of this Agreement: (A) the Employee shall be deemed to have continued
employment with the Company until the date of the Change in Control and then
terminated his employment on such date for Good Reason, and (B) the Protected
Period shall be deemed to have commenced immediately prior to the Employee's
actual termination of employment.
2.2. TERMINATION BY COMPANY ON ACCOUNT OF DISABILITY.
If a Change in Control occurs while the Employee is employed by the
Company and if, as a result of the Employee's illness, physical or mental
disability, or other incapacity which continues for an uninterrupted period in
excess of three (3) months or a cumulative period of six (6) months in any
twelve (12) month period during the Protected Period, and if, within 30 days
after the Company has given the Employee written notice of the Company's
intention to terminate the Employee on account of such incapacity, the Employee
shall not have returned to the full-time performance of the Employee's duties,
then the Company may thereafter terminate the Employee's employment on account
of "DISABILITY"; provided, however, such termination shall not by itself alter
or impair the Employee's rights as a "disabled employee" or otherwise under any
of the Company's employee benefit plans.
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<PAGE> 3
2.3 TERMINATION BY COMPANY FOR CAUSE.
If a Change in Control occurs while the Employee is employed by the
Company, the Company may, at any time during the Protected Period, terminate
the Employee's employment for Cause. For purposes of this Agreement, the
Company shall have "CAUSE" to terminate the Employee's employment hereunder
only if: (a) the Employee willfully and continually fails to perform
substantially the Employee's duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), which failure continues unabated after a demand for substantial
performance is delivered to the Employee by the Board that specifically
identifies the manner in which the Board believes that the Employee has not
substantially performed the Employee's duties, or (b) the Employee willfully
engages in gross misconduct that is materially and demonstrably injurious to
the Company. For purposes of this Section 2.3, an act or failure to act on the
Employee's part shall be considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without reasonable belief that
the Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated by the Company for Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
the Board, at a meeting of the Board called and held for the purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Employee was guilty of conduct set
forth in clauses (a) or (b) of the second sentence of this Section 2.3 and
specifying the particulars thereof in reasonable detail.
2.4. TERMINATION BY EMPLOYEE FOR GOOD REASON.
If a Change in Control occurs while the Employee is employed by the
Company, the Employee may terminate the Employee's employment for Good Reason
at any time during the Protected Period. For purposes of this Agreement "GOOD
REASON" shall mean any of the following:
(a) The Employee is assigned any duties materially
inconsistent with, or diminished from, the Employee's positions,
duties, responsibilities and status with the Company immediately prior
to the commencement of the Protected Period, or the Employee's status,
reporting responsibilities, titles or offices are materially
diminished from those in effect immediately prior to the commencement
of the Protected Period, or the Employee is removed from or is not
re-elected or appointed to any of such responsibilities, titles,
offices or positions, or the Employee's duties and responsibilities
are materially increased without a corresponding increase in the
Employee's compensation (such increase in compensation to be
satisfactory to the Employee, in the Employee's sole reasonable
judgment), except in each case in connection with the termination of
the Employee's employment by the Company for Cause or on account of
Disability, or as a result of the Employee's death, or by the
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<PAGE> 4
Employee for other than Good Reason; provided, however, that Good
Reason shall not be triggered under this subsection (a) by an
insubstantial action not taken in bad faith and which is remedied by
the Company promptly after receipt of written notice from the
Employee; or
(b) The Employee's annual rate of base salary is reduced
from that in effect immediately prior to the commencement of the
Protected Period or as the same may be increased from time to time
thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction, is referred to hereinafter as
the "ANNUAL BASE SALARY"); provided, however, with respect to a
termination of employment prior to a Change in Control that is deemed
to have occurred on the date of the Change in Control, "Annual Base
Salary" shall be the Employee's annual rate of base salary as in
effect immediately prior to the Employee's actual date of termination,
but disregarding any reduction therein made within 30 days of the
Employee's actual termination date; or
(c) The Company fails to continue in effect any benefit
or compensation plan, including, but not limited to, the Company's
annual bonus plan, qualified retirement plan, executive life insurance
plan and/or health and accident plan, in which the Employee is
participating immediately prior to the commencement of the Protected
Period, or plans providing, in the sole reasonable judgment of the
Employee, the Employee with substantially similar benefits, or the
Company takes any action that would adversely affect the Employee's
participation in or reduce the Employee's benefits under any of such
plans (excluding any such action by the Company that is required by
law); or
(d) The Company's principal executive offices are
relocated at any time following a Change in Control more than 35 miles
from where such offices were located immediately prior to such Change
in Control; or
(e) The Company requires the Employee at any time
following a Change in Control to relocate more than 35 miles from
where the Company's principal executive offices were located
immediately prior to such Change in Control; or
(f) The Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated
in Section 7.1 hereof; or
(g) Any purported termination of the Employee's
employment by the Company that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2.5 below and, if
applicable, the procedures described in Section 2.3 above; or
(h) The amendment, modification or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
that was in effect
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<PAGE> 5
immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect
Employee's rights to indemnification by the Company; or
(i) The Company shall violate or breach any obligation of
the Company in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in
the Bylaws of the Company and/or in the Employment Agreement or any
other separate agreement entered into between the Company and the
Employee) to indemnify the Employee against any claim, loss, expense
or liability sustained or incurred by the Employee by reason, in whole
or in part, of the fact that the Employee is or was an officer or
director of the Company; or
(j) The Company shall violate or breach any other
material obligation of the Company owing to the Employee in effect
immediately prior to the commencement of the Protected Period relating
to the Employee's employment with the Company, but only if such
violation or breach (if capable of being remedied) shall continue
unremedied for more than 15 days after written notice thereof is given
by the Employee to the Company; or
(k) The Board (or any nominating committee of the Board)
fails to recommend and support the Employee's re-election as a
director of the Company if the Employee is a director of the Company
immediately prior to the commencement of the Protected Period; or
(l) The Company shall fail to keep in force, for the
benefit of the Employee, directors' and officers' insurance policy
with coverage amounts and scope equal to the coverage amounts and
scope under such policy immediately prior to the commencement of the
Protected Period.
2.5. NOTICE OF TERMINATION.
Any termination by the Company pursuant to Section 2.2 or 2.3 above or
by the Employee pursuant to Section 2.4 above shall be communicated by written
Notice of Termination to the other party hereto; provided, however, that in the
case of events of Good Reason enumerated in subsections (f), (h), (i) or (l) of
Section 2.4 hereof, the Company shall have the obligation to provide the
Employee with written notice of the occurrence of any of such events and the
Employee shall then have the opportunity to provide the Company with Notice of
Termination if he so elects. The Employee shall retain the ability to
terminate his employment for Good Reason under subsections (f), (h), (i) or (l)
of Section 2.4 hereof, even if the Company fails to provide written notice of
the occurrence of any of the events specified in such subsections as provided
herein. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied on and, except in the case of the termination referred to in the last
subsection of Section 2.4 above, shall set forth in reasonable detail the
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<PAGE> 6
facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated. Any purported
termination of this Agreement not in compliance with the requirements of this
Section 2.5 or, if applicable, the procedures described in Section 2.3 above
shall be ineffective.
2.6. DATE OF TERMINATION. For purposes of this Agreement, "DATE OF
TERMINATION" shall mean: (a) if the Employee is terminated on account of
Disability pursuant to Section 2.2 above, 30 days after Notice of Termination
is given, provided that the Employee shall not have returned to the performance
of the Employee's duties on a full-time basis during such 30-day period; (b) if
the Employee's employment is terminated for Cause pursuant to Section 2.3
above, the date specified in the Notice of Termination; (c) with respect to a
termination of employment prior to a Change in Control that is deemed to have
occurred on the date of the Change in Control, the date of such Change in
Control; and (d) if the Employee's employment is terminated for any other
reason on or after a Change in Control, the date on which a Notice of
Termination is given; provided, however, in the event of any dispute or
controversy concerning the Employee's entitlement to payment under this
Agreement, solely for purposes of Section 3.3 below, concerning the timing of
the payment of amounts under this Agreement, the "Date of Termination" shall
mean the date of final resolution of such dispute or controversy.
SECTION 3. COMPENSATION DURING DISABILITY OR ON TERMINATION.
3.1. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee fails to
perform the Employee's normal duties as a result of Disability (as defined in
Section 2.2 hereof), the Employee shall continue during the period of
Disability to receive: (i) the Employee's full Annual Base Salary at the rate
then in effect, (ii) any awards, deferred and non-deferred, payable during such
period of disability under the Company's annual bonus plan, less any amounts
paid to the Employee during such period of Disability pursuant to the Company's
sick-leave or disability program until the Employee's employment is terminated
on account of Disability pursuant to Section 2.2 hereof, and (iii) all other
applicable perquisites, insurance and other employee benefits.
3.2. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee's employment
shall be terminated by the Company for Cause pursuant to Section 2.3 above, the
Company shall pay the Employee's earned but unpaid Annual Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to the Employee
under this Agreement, except those arising hereunder prior to the Date of
Termination.
3.3. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Company shall terminate
the Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during
the Protected Period, the Employee shall terminate the Employee's employment
for Good Reason in accordance with
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<PAGE> 7
Section 2.4 hereof, then, subject to Section 5 below and the following
provisions of this Section 3.3, the Company shall pay to the Employee, in a
single lump sum by certified or bank cashier's check within five days of such
Date of Termination, the sum of the amounts specified in clauses (a), (b) and
(c) below:
(a) an amount equal to 3 times the sum of (i) the Annual
Base Salary and (ii) an annual target bonus of 75% of the Annual Base
Salary;
(b) an amount equal to that portion of the Annual Base
Salary earned, but not paid, and vacation earned, but not taken, in
each case, to the Date of Termination, and all other amounts
previously deferred by the Employee or earned but not paid as of such
date under all Company incentive or deferred compensation plans or
programs; and
(c) an amount equal to (i) the amount of the maximum
monthly premium payment that may be charged to continue coverage for
the Employee and the Employee's eligible dependents under the
Company's health insurance plan under COBRA, multiplied by (ii) 36
months.
Further, if a Change in Control occurs while the Employee is employed by the
Company and if, during the Protected Period, the Company shall terminate the
Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during the
Protected Period, the Employee shall terminate the Employee's employment for
Good Reason in accordance with Section 2.4 hereof, then, subject to Section 5
below, the Employee shall be credited with an additional 36 months of service
credit under the Company's Supplemental Executive Retirement Plan (the "SERP").
SECTION 4. ACCELERATION OF OPTION AND RESTRICTED STOCK GRANTS ON
A CHANGE IN CONTROL.
4.1. For purposes hereof, the term "ACCELERATION DATE" shall mean
the earliest date on which any of the following events shall first have
occurred: (i) the acquisition described in clause (a) of the definition of
Change in Control set forth in Section 9 hereof; (ii) the change in the
composition of the Board of Directors described in clause (b) of such
definition; (iii) the stockholder approval or adoption described in clauses (c)
or (d) of such definition; or (iv) the commencement date of any tender offer
subject to the terms of Section 14(d)(1) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), or exchange offer subject to the terms
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any other
offer or series of offers to purchase for cash, or to exchange for securities
of a person other than the Company, 30% or more of the Company's Common Stock
by any "person" or "group" of persons (as such terms are used on January 1,
1996 in Rule 13d of the Exchange Act) other than an offer or offers by the
Company or by employee benefit plan(s) sponsored by the Company ("TENDER
OFFER").
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<PAGE> 8
4.2. If an Acceleration Date occurs while the Employee holds
outstanding options under the Company's stock option plan(s), then from and
after the Acceleration Date, all options held by the Employee shall be
immediately exercisable in full.
4.3. If an Acceleration Date occurs while any shares of restricted
stock issued by the Company to the Employee (including those granted under the
Company's Target 2000: One, Two, Four Plan) remain subject to restrictions
and/or performance or other criteria relating thereto (the "RESTRICTIONS"),
then from and after the Acceleration Date: (i) all such Restrictions shall
lapse and be deemed satisfied in full, as applicable; and (ii) no later than
the fifth day following the Acceleration Date, the Company shall cause
unrestricted shares of stock to be delivered to the Employee.
SECTION 5. GROSS-UP OF PARACHUTE PAYMENTS.
5.1. To provide the Employee with adequate protection in connection
with his ongoing employment with the Company, this Agreement provides the
Employee with various benefits in the event of termination of the Employee's
employment with the Company during the Protected Period. If the Employee's
employment is terminated following a "change in control" of the Company, within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "CODE"), a portion of those benefits could be characterized as "excess
parachute payments" within the meaning of Section 280G of the Code. The
parties hereto acknowledge that the protections set forth in this Section 5 are
important, and it is agreed that the Employee should not have to bear the
burden of any excise tax that might be levied under Section 4999 of the Code,
in the event that a portion of the benefits payable to the Employee pursuant to
this Agreement are treated as an excess parachute payment. The parties,
therefore, have agreed as set forth in this Section 5.
5.2. Anything in this Agreement to the contrary notwithstanding, if
it shall be determined that any payment or distribution by the Company or any
other person to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (a "PAYMENT") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), then the Company shall pay an additional payment (a "GROSS-UP
PAYMENT") in an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
5.3. Subject to the provisions of Section 5.4 below, all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at
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such determination, shall be made by an independent public accounting firm with
a national reputation that is selected by the Employee (the "ACCOUNTING FIRM")
which shall provide detailed supporting calculations both to the Company and to
the Employee within 15 business days after the receipt of notice from the
Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change in control of
the Company, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. The
Company shall indemnify and hold harmless the Employee, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed on the Employee as a result of such payment of fees and
expenses. Any Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding on the Company and the Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments may not have been made by the Company which should have been made
("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Section 5.4 below
and the Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Employee.
5.4. The Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claim) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Employee is
informed in writing of such claim (or threatened lien) and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due or such tax lien would be
imposed). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim (or threatened
lien), the Employee shall:
(a) give the Company any information reasonably requested
by the Company relating to such claim (or threatened lien);
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<PAGE> 10
(b) take such action in connection with contesting such
claim (or threatened lien) as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(d) permit the Company to participate in any proceedings
relating to such claim (or threatened lien);
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Subsection 5.4, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employee shall
determine (but in no event shall the Company permit or direct the Employee to
allow a tax lien to be imposed on the Employee's property); provided, further,
that if the Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Employee,
on an interest-free basis, and shall indemnify and hold the Employee harmless
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further,
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. In addition, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder, and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
5.5. If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 5.4, the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 5.4 above) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Employee of an amount advanced by the Company pursuant to
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<PAGE> 11
Section 5.4 above, a determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Employee in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
SECTION 6. NO MITIGATION OF DAMAGES.
The provisions of this Agreement are not intended to, nor shall they
be construed to, require that the Employee seek or accept other employment
following a termination of employment and, amounts payable and benefits
provided under this Agreement to the Employee shall not be reduced by the
Employee's acceptance of (or failure to seek or accept) employment with another
person. The Company's obligations to make the payments and provide the
benefits required for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, rights or action that the Company may have
against the Employee or others.
SECTION 7. SUCCESSORS; BINDING AGREEMENT.
7.1. The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated the Employee's employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 7.1 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
7.2. This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts would still be payable to the Employee
hereunder if the Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee or other designee or, if none, to
the Employee's estate.
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<PAGE> 12
SECTION 8. NOTICE. For the purpose of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, registered and return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address
as either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only on
receipt.
If to the Company:
Allwaste, Inc.
5151 San Felipe, Suite 1600
Houston, Texas 77056
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to Employee:
David E. Fanta
27 Dumfries
Sugar Land, Texas 77479
SECTION 9. CHANGE IN CONTROL.
For purposes of this Agreement, a "CHANGE IN CONTROL" shall be deemed
to have occurred on, and shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (1) the then
outstanding shares of Common Stock of the Company (the "OUTSTANDING
COMPANY COMMON STOCK") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following such reorganization, merger
or consolidation, the conditions described in clauses (1), (2) and (3)
of paragraph (c) of this Section 9 are satisfied; or
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<PAGE> 13
(b) Individuals who, as of the date hereof, constitute
the entire Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either (1) an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or
more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trust(s)) of the Company
and/or its subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all
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<PAGE> 14
or substantially all of the assets of the Company, other than to a
corporation, with respect to which immediately following such sale or
other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company and/or
its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (C) at least a majority of the members
of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company.
SECTION 10. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement includes employment with any entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of all outstanding equity interests, it being
understood that for purposes of clause (a) of Section 2.4 hereof, "Good Reason"
shall be construed to refer to each of the Employee's positions, duties,
responsibilities (reporting and other), status, titles and offices with the
Company and each of its subsidiaries.
SECTION 11. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee and by the Chairman of the
Compensation Committee of the Board or other authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
SECTION 12. VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORM-ANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. The invalidity or unenforceability of any
provisions of this Agreement shall not
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<PAGE> 15
affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
SECTION 14. DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 15. CORPORATE APPROVAL. This Agreement has been
approved by the Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
SECTION 16. DISPUTE RESOLUTION.
16.1. In the event a dispute shall arise between the parties as to
whether the provisions of this Agreement have been complied with (a "DISPUTE"),
the parties agree to resolve such Dispute in accordance with the following
procedure:
(a) A meeting shall be held promptly between the parties,
attended by (in the case of the Company) one or more individuals with
decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
(b) If, within 10 days after such meeting, the parties
have not succeeded in negotiating a resolution of the Dispute, the
parties agree to submit the Dispute to mediation in accordance with
the Commercial Mediation Rules of the American Arbitration
Association.
(c) The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the
American Arbitration Association if they have been unable to agree on
such appointment within 10 days following the 10-day period referred
to in clause (b) above.
(d) On appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating
thereto for 15 days.
(e) If the parties are not successful in resolving the
Dispute through mediation within such 15-day period, the parties agree
that the Dispute shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association.
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(f) The fees and expenses of the mediator/arbitrators
shall be borne solely by the non-prevailing party or, in the event
there is no clear prevailing party, shall be borne by the Company.
(g) If any dispute shall arise under this Agreement
involving termination of the Employee's employment with the Company or
involving the failure or refusal of the Company to fully perform in
accordance with the terms hereof, the Company shall reimburse the
Employee, on a current basis, for all legal fees and expenses, if any,
incurred by the Employee in connection with such dispute, together
with interest thereon at the prevailing legal rate of interest, such
interest to accrue from the date of Notice of Termination through the
date of payment thereof; provided, however, that in the event the
resolution of such dispute in accordance with this Section 16 includes
a finding denying, in total, the Employee's claims in such dispute,
the Employee shall be required to reimburse the Company, over a period
determined by the Employee but not to exceed 12 months from the date
of such resolution, for all sums advanced to the Employee with respect
to such dispute pursuant to this clause (g).
(h) Except as provided above, each party shall pay its
own costs and expenses (including, without limitation, reasonable
attorneys' fees) relating to any mediation/arbitration proceeding
conducted under this Section 16.
(i) All mediation/arbitration conferences and hearings
will be held in Houston, Texas.
16.2. In the event there is any disputed question of law involved in
any arbitration proceeding, such as the proper legal interpretation of any
provision of this Agreement, the arbitrators shall make separate and distinct
findings of all facts material to the disputed question of law to be decided
and, on the basis of the facts so found, express their conclusion of the
question of law. The facts so found shall be conclusive and binding on the
parties, but any legal conclusion reached by the arbitrators from such facts
may be submitted by either party to a court of law for final determination by
initiation of a civil action in the proper state or Federal court sitting in
Harris County, Texas. Such action, to be valid, must be commenced within 20
days after receipt of the arbitrators' decision. If no such civil action is
commenced within such 20-day period, the legal conclusion reached by the
arbitrators shall be conclusive and binding on the parties. Any such civil
action shall be submitted, heard and determined solely on the basis of the
facts found by the arbitrators. Neither of the parties shall, or shall be
entitled to, submit any additional or different facts for consideration by the
court. In the event any civil action is commenced under this Section 16.2, the
party who prevails or substantially prevails (as determined by the court) in
such civil action shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys' fees incurred in connection with such action
and on appeal.
16.3. Except as limited by Section 16.2 above, the parties agree
that judgment on the award rendered by the arbitrators may be entered in any
court of competent jurisdiction.
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<PAGE> 17
In the event legal proceedings are commenced to enforce the rights awarded in
an arbitration proceeding, the party who prevails or substantially prevails in
such legal proceeding shall be entitled to recover from the other party all
costs, expenses and reasonable attorneys' fees incurred in connection with such
legal proceeding and on appeal.
16.4. Except as provided above, no legal action may be brought by
either party with respect to any Dispute. All Disputes shall be determined
only in accordance with the procedures set forth above.
SECTION 17. NO OTHER SEVERANCE BENEFITS. In the event the Employee
becomes entitled to severance payments under Section 3.3 of this Agreement,
then the amounts payable under this Agreement to the Employee shall be in lieu
of, and not in addition to, any similar severance amounts to which the Employee
may otherwise be entitled under a severance plan or program of the Company or
any employment contract or agreement with the Company.
IN WITNESS WHEREOF, the Company and the Employee have entered into
this Agreement as of the day and year first above written.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
-------------------------------------------
Robert M. Chiste
President and Chief Executive Officer
EMPLOYEE
/s/ David E. Fanta
----------------------------------------------
David E. Fanta
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<PAGE> 1
EXHIBIT 10.25
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "AGREEMENT"), by and between
ALLWASTE, INC., a Delaware corporation (the "COMPANY"), and T. WAYNE WREN, JR.
(the "EMPLOYEE"), is entered into effective as of the 11th day of November,
1996.
W I T N E S S E T H:
WHEREAS, the Employee is a key employee of the Company, and the
Employee's experience and knowledge of the affairs of the Company are extremely
valuable to the Company; and
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement dated November 11, 1996 governing the Employee's
employment with the Company (the "EMPLOYMENT AGREEMENT"); and
WHEREAS, the Board of Directors of the Company (the "BOARD") believes
it imperative that the Company be able to rely on the Employee to continue his
services to the Company without concern that the Employee may be distracted by
the personal uncertainties and risks created by the possibility of a change in
control; and
WHEREAS, the Company is entering into this Agreement with the Employee
in order to ensure the Employee's continued services, dedication and
objectivity during such period as the Company may be susceptible to a change in
control and to define the nature and terms of the Employee's severance benefits
following a Change in Control (as defined in Section 9 below).
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Employee
hereby agree as follows.
SECTION 1. TERM. This Agreement shall commence on the date hereof
and shall continue until the expiration or termination of the Employment
Agreement, and to the extent that the Employment Agreement is renewed for
successive one-year periods, this Agreement shall be similarly renewed.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not alter or impair any rights of the Employee (or the
Employee's estate or beneficiaries) that have arisen under this Agreement prior
to such termination.
<PAGE> 2
SECTION 2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL.
2.1 GENERAL.
(a) If a Change in Control occurs while the Employee is employed by
the Company and if during the Protected Period (as defined in paragraph (b)
below) the Employee's employment is terminated, whether by the Company or by
the Employee, then the Employee shall be entitled to the benefits specified in
Sections 3.3, 4 and 5 hereof, unless such termination is (i) due to the
Employee's death, (ii) by the Company on account of the Employee's Disability
as provided in Section 2.2 below, (iii) by the Company for Cause as provided in
Section 2.3 below, or (iv) by the Employee for other than Good Reason as
provided in Section 2.4 below, in which event the Employee shall not be
entitled to any benefits under this Agreement except as specified in Sections
3.1 and 3.2 hereof.
(b) For purposes of this Agreement, the "PROTECTED PERIOD" shall
mean the period of time beginning with a Change in Control and ending 18 months
following such Change in Control; provided, however, if the Employee's
employment with the Company terminates for any reason other than a termination
by the Company for Cause (as defined in Section 2.3 below) prior to, but within
six months of, the date on which a Change in Control occurs, then, for all
purposes of this Agreement: (A) the Employee shall be deemed to have continued
employment with the Company until the date of the Change in Control and then
terminated his employment on such date for Good Reason, and (B) the Protected
Period shall be deemed to have commenced immediately prior to the Employee's
actual termination of employment.
2.2. TERMINATION BY COMPANY ON ACCOUNT OF DISABILITY.
If a Change in Control occurs while the Employee is employed by the
Company and if, as a result of the Employee's illness, physical or mental
disability, or other incapacity which continues for an uninterrupted period in
excess of three (3) months or a cumulative period of six (6) months in any
twelve (12) month period during the Protected Period, and if, within 30 days
after the Company has given the Employee written notice of the Company's
intention to terminate the Employee on account of such incapacity, the Employee
shall not have returned to the full-time performance of the Employee's duties,
then the Company may thereafter terminate the Employee's employment on account
of "DISABILITY"; provided, however, such termination shall not by itself alter
or impair the Employee's rights as a "disabled employee" or otherwise under any
of the Company's employee benefit plans.
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<PAGE> 3
2.3 TERMINATION BY COMPANY FOR CAUSE.
If a Change in Control occurs while the Employee is employed by the
Company, the Company may, at any time during the Protected Period, terminate
the Employee's employment for Cause. For purposes of this Agreement, the
Company shall have "CAUSE" to terminate the Employee's employment hereunder
only if: (a) the Employee willfully and continually fails to perform
substantially the Employee's duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), which failure continues unabated after a demand for substantial
performance is delivered to the Employee by the Board that specifically
identifies the manner in which the Board believes that the Employee has not
substantially performed the Employee's duties, or (b) the Employee willfully
engages in gross misconduct that is materially and demonstrably injurious to
the Company. For purposes of this Section 2.3, an act or failure to act on the
Employee's part shall be considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without reasonable belief that
the Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated by the Company for Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
the Board, at a meeting of the Board called and held for the purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Employee was guilty of conduct set
forth in clauses (a) or (b) of the second sentence of this Section 2.3 and
specifying the particulars thereof in reasonable detail.
2.4. TERMINATION BY EMPLOYEE FOR GOOD REASON.
If a Change in Control occurs while the Employee is employed by the
Company, the Employee may terminate the Employee's employment for Good Reason
at any time during the Protected Period. For purposes of this Agreement "GOOD
REASON" shall mean any of the following:
(a) The Employee is assigned any duties materially
inconsistent with, or diminished from, the Employee's positions,
duties, responsibilities and status with the Company immediately prior
to the commencement of the Protected Period, or the Employee's status,
reporting responsibilities, titles or offices are materially
diminished from those in effect immediately prior to the commencement
of the Protected Period, or the Employee is removed from or is not
re-elected or appointed to any of such responsibilities, titles,
offices or positions, or the Employee's duties and responsibilities
are materially increased without a corresponding increase in the
Employee's compensation (such increase in compensation to be
satisfactory to the Employee, in the Employee's sole reasonable
judgment), except in each case in connection with the termination of
the Employee's employment by the Company for Cause or on account of
Disability, or as a result of the Employee's death, or by the
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<PAGE> 4
Employee for other than Good Reason; provided, however, that Good
Reason shall not be triggered under this subsection (a) by an
insubstantial action not taken in bad faith and which is remedied by
the Company promptly after receipt of written notice from the
Employee; or
(b) The Employee's annual rate of base salary is reduced
from that in effect immediately prior to the commencement of the
Protected Period or as the same may be increased from time to time
thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction, is referred to hereinafter as
the "ANNUAL BASE SALARY"); provided, however, with respect to a
termination of employment prior to a Change in Control that is deemed
to have occurred on the date of the Change in Control, "Annual Base
Salary" shall be the Employee's annual rate of base salary as in
effect immediately prior to the Employee's actual date of termination,
but disregarding any reduction therein made within 30 days of the
Employee's actual termination date; or
(c) The Company fails to continue in effect any benefit
or compensation plan, including, but not limited to, the Company's
annual bonus plan, qualified retirement plan, executive life insurance
plan and/or health and accident plan, in which the Employee is
participating immediately prior to the commencement of the Protected
Period, or plans providing, in the sole reasonable judgment of the
Employee, the Employee with substantially similar benefits, or the
Company takes any action that would adversely affect the Employee's
participation in or reduce the Employee's benefits under any of such
plans (excluding any such action by the Company that is required by
law); or
(d) The Company's principal executive offices are
relocated at any time following a Change in Control more than 35 miles
from where such offices were located immediately prior to such Change
in Control; or
(e) The Company requires the Employee at any time
following a Change in Control to relocate more than 35 miles from
where the Company's principal executive offices were located
immediately prior to such Change in Control; or
(f) The Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated
in Section 7.1 hereof; or
(g) Any purported termination of the Employee's
employment by the Company that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2.5 below and, if
applicable, the procedures described in Section 2.3 above; or
(h) The amendment, modification or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
that was in effect
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immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect
Employee's rights to indemnification by the Company; or
(i) The Company shall violate or breach any obligation of
the Company in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in
the Bylaws of the Company and/or in the Employment Agreement or any
other separate agreement entered into between the Company and the
Employee) to indemnify the Employee against any claim, loss, expense
or liability sustained or incurred by the Employee by reason, in whole
or in part, of the fact that the Employee is or was an officer or
director of the Company; or
(j) The Company shall violate or breach any other
material obligation of the Company owing to the Employee in effect
immediately prior to the commencement of the Protected Period relating
to the Employee's employment with the Company, but only if such
violation or breach (if capable of being remedied) shall continue
unremedied for more than 15 days after written notice thereof is given
by the Employee to the Company; or
(k) The Board (or any nominating committee of the Board)
fails to recommend and support the Employee's re-election as a
director of the Company if the Employee is a director of the Company
immediately prior to the commencement of the Protected Period; or
(l) The Company shall fail to keep in force, for the
benefit of the Employee, directors' and officers' insurance policy
with coverage amounts and scope equal to the coverage amounts and
scope under such policy immediately prior to the commencement of the
Protected Period.
2.5. NOTICE OF TERMINATION.
Any termination by the Company pursuant to Section 2.2 or 2.3 above or
by the Employee pursuant to Section 2.4 above shall be communicated by written
Notice of Termination to the other party hereto; provided, however, that in the
case of events of Good Reason enumerated in subsections (f), (h), (i) or (l) of
Section 2.4 hereof, the Company shall have the obligation to provide the
Employee with written notice of the occurrence of any of such events and the
Employee shall then have the opportunity to provide the Company with Notice of
Termination if he so elects. The Employee shall retain the ability to
terminate his employment for Good Reason under subsections (f), (h), (i) or (l)
of Section 2.4 hereof, even if the Company fails to provide written notice of
the occurrence of any of the events specified in such subsections as provided
herein. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied on and, except in the case of the termination referred to in the last
subsection of Section 2.4 above, shall set forth in reasonable detail the
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facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated. Any purported
termination of this Agreement not in compliance with the requirements of this
Section 2.5 or, if applicable, the procedures described in Section 2.3 above
shall be ineffective.
2.6. DATE OF TERMINATION. For purposes of this Agreement, "DATE OF
TERMINATION" shall mean: (a) if the Employee is terminated on account of
Disability pursuant to Section 2.2 above, 30 days after Notice of Termination
is given, provided that the Employee shall not have returned to the performance
of the Employee's duties on a full-time basis during such 30-day period; (b) if
the Employee's employment is terminated for Cause pursuant to Section 2.3
above, the date specified in the Notice of Termination; (c) with respect to a
termination of employment prior to a Change in Control that is deemed to have
occurred on the date of the Change in Control, the date of such Change in
Control; and (d) if the Employee's employment is terminated for any other
reason on or after a Change in Control, the date on which a Notice of
Termination is given; provided, however, in the event of any dispute or
controversy concerning the Employee's entitlement to payment under this
Agreement, solely for purposes of Section 3.3 below, concerning the timing of
the payment of amounts under this Agreement, the "Date of Termination" shall
mean the date of final resolution of such dispute or controversy.
SECTION 3. COMPENSATION DURING DISABILITY OR ON TERMINATION.
3.1. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee fails to
perform the Employee's normal duties as a result of Disability (as defined in
Section 2.2 hereof), the Employee shall continue during the period of
Disability to receive: (i) the Employee's full Annual Base Salary at the rate
then in effect, (ii) any awards, deferred and non-deferred, payable during such
period of disability under the Company's annual bonus plan, less any amounts
paid to the Employee during such period of Disability pursuant to the Company's
sick-leave or disability program until the Employee's employment is terminated
on account of Disability pursuant to Section 2.2 hereof, and (iii) all other
applicable perquisites, insurance and other employee benefits.
3.2. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee's employment
shall be terminated by the Company for Cause pursuant to Section 2.3 above, the
Company shall pay the Employee's earned but unpaid Annual Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to the Employee
under this Agreement, except those arising hereunder prior to the Date of
Termination.
3.3. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Company shall terminate
the Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during
the Protected Period, the Employee shall terminate the Employee's employment
for Good Reason in accordance with
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Section 2.4 hereof, then, subject to Section 5 below and the following
provisions of this Section 3.3, the Company shall pay to the Employee, in a
single lump sum by certified or bank cashier's check within five days of such
Date of Termination, the sum of the amounts specified in clauses (a), (b) and
(c) below:
(a) an amount equal to 2.5 times the sum of (i) the
Annual Base Salary and (ii) an annual target bonus of 75% of the
Annual Base Salary;
(b) an amount equal to that portion of the Annual Base
Salary earned, but not paid, and vacation earned, but not taken, in
each case, to the Date of Termination, and all other amounts
previously deferred by the Employee or earned but not paid as of such
date under all Company incentive or deferred compensation plans or
programs; and
(c) an amount equal to (i) the amount of the maximum
monthly premium payment that may be charged to continue coverage for
the Employee and the Employee's eligible dependents under the
Company's health insurance plan under COBRA, multiplied by (ii) 30
months.
Further, if a Change in Control occurs while the Employee is employed by the
Company and if, during the Protected Period, the Company shall terminate the
Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during the
Protected Period, the Employee shall terminate the Employee's employment for
Good Reason in accordance with Section 2.4 hereof, then, subject to Section 5
below, the Employee shall be credited with an additional 30 months of service
credit under the Company's Supplemental Executive Retirement Plan (the "SERP").
SECTION 4. ACCELERATION OF OPTION AND RESTRICTED STOCK GRANTS ON
A CHANGE IN CONTROL.
4.1. For purposes hereof, the term "ACCELERATION DATE" shall mean
the earliest date on which any of the following events shall first have
occurred: (i) the acquisition described in clause (a) of the definition of
Change in Control set forth in Section 9 hereof; (ii) the change in the
composition of the Board of Directors described in clause (b) of such
definition; (iii) the stockholder approval or adoption described in clauses (c)
or (d) of such definition; or (iv) the commencement date of any tender offer
subject to the terms of Section 14(d)(1) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), or exchange offer subject to the terms
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any other
offer or series of offers to purchase for cash, or to exchange for securities
of a person other than the Company, 30% or more of the Company's Common Stock
by any "person" or "group" of persons (as such terms are used on January 1,
1996 in Rule 13d of the Exchange Act) other than an offer or offers by the
Company or by employee benefit plan(s) sponsored by the Company ("TENDER
OFFER").
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4.2. If an Acceleration Date occurs while the Employee holds
outstanding options under the Company's stock option plan(s), then from and
after the Acceleration Date, all options held by the Employee shall be
immediately exercisable in full.
4.3. If an Acceleration Date occurs while any shares of restricted
stock issued by the Company to the Employee (including those granted under the
Company's Target 2000: One, Two, Four Plan) remain subject to restrictions
and/or performance or other criteria relating thereto (the "RESTRICTIONS"),
then from and after the Acceleration Date: (i) all such Restrictions shall
lapse and be deemed satisfied in full, as applicable; and (ii) no later than
the fifth day following the Acceleration Date, the Company shall cause
unrestricted shares of stock to be delivered to the Employee.
SECTION 5. GROSS-UP OF PARACHUTE PAYMENTS.
5.1. To provide the Employee with adequate protection in connection
with his ongoing employment with the Company, this Agreement provides the
Employee with various benefits in the event of termination of the Employee's
employment with the Company during the Protected Period. If the Employee's
employment is terminated following a "change in control" of the Company, within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "CODE"), a portion of those benefits could be characterized as "excess
parachute payments" within the meaning of Section 280G of the Code. The
parties hereto acknowledge that the protections set forth in this Section 5 are
important, and it is agreed that the Employee should not have to bear the
burden of any excise tax that might be levied under Section 4999 of the Code,
in the event that a portion of the benefits payable to the Employee pursuant to
this Agreement are treated as an excess parachute payment. The parties,
therefore, have agreed as set forth in this Section 5.
5.2. Anything in this Agreement to the contrary notwithstanding, if
it shall be determined that any payment or distribution by the Company or any
other person to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (a "PAYMENT") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), then the Company shall pay an additional payment (a "GROSS-UP
PAYMENT") in an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
5.3. Subject to the provisions of Section 5.4 below, all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at
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<PAGE> 9
such determination, shall be made by an independent public accounting firm with
a national reputation that is selected by the Employee (the "ACCOUNTING FIRM")
which shall provide detailed supporting calculations both to the Company and to
the Employee within 15 business days after the receipt of notice from the
Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change in control of
the Company, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. The
Company shall indemnify and hold harmless the Employee, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed on the Employee as a result of such payment of fees and
expenses. Any Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding on the Company and the Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments may not have been made by the Company which should have been made
("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Section 5.4 below
and the Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Employee.
5.4. The Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claim) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Employee is
informed in writing of such claim (or threatened lien) and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due or such tax lien would be
imposed). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim (or threatened
lien), the Employee shall:
(a) give the Company any information reasonably requested
by the Company relating to such claim (or threatened lien);
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<PAGE> 10
(b) take such action in connection with contesting such
claim (or threatened lien) as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(d) permit the Company to participate in any proceedings
relating to such claim (or threatened lien);
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Subsection 5.4, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employee shall
determine (but in no event shall the Company permit or direct the Employee to
allow a tax lien to be imposed on the Employee's property); provided, further,
that if the Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Employee,
on an interest-free basis, and shall indemnify and hold the Employee harmless
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further,
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. In addition, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder, and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
5.5. If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 5.4, the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 5.4 above) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Employee of an amount advanced by the Company pursuant to
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Section 5.4 above, a determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Employee in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
SECTION 6. NO MITIGATION OF DAMAGES.
The provisions of this Agreement are not intended to, nor shall they
be construed to, require that the Employee seek or accept other employment
following a termination of employment and, amounts payable and benefits
provided under this Agreement to the Employee shall not be reduced by the
Employee's acceptance of (or failure to seek or accept) employment with another
person. The Company's obligations to make the payments and provide the
benefits required for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, rights or action that the Company may have
against the Employee or others.
SECTION 7. SUCCESSORS; BINDING AGREEMENT.
7.1. The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated the Employee's employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 7.1 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
7.2. This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts would still be payable to the Employee
hereunder if the Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee or other designee or, if none, to
the Employee's estate.
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SECTION 8. NOTICE. For the purpose of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, registered and return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address
as either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only on
receipt.
If to the Company:
Allwaste, Inc.
5151 San Felipe, Suite 1600
Houston, Texas 77056
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to Employee:
T. Wayne Wren, Jr.
11311 Williamsburg
Houston, Texas 77024
SECTION 9. CHANGE IN CONTROL.
For purposes of this Agreement, a "CHANGE IN CONTROL" shall be deemed
to have occurred on, and shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (1) the then
outstanding shares of Common Stock of the Company (the "OUTSTANDING
COMPANY COMMON STOCK") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following such reorganization, merger
or consolidation, the conditions described in clauses (1), (2) and (3)
of paragraph (c) of this Section 9 are satisfied; or
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(b) Individuals who, as of the date hereof, constitute
the entire Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either (1) an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or
more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trust(s)) of the Company
and/or its subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all
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or substantially all of the assets of the Company, other than to a
corporation, with respect to which immediately following such sale or
other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company and/or
its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (C) at least a majority of the members
of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company.
SECTION 10. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement includes employment with any entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of all outstanding equity interests, it being
understood that for purposes of clause (a) of Section 2.4 hereof, "Good Reason"
shall be construed to refer to each of the Employee's positions, duties,
responsibilities (reporting and other), status, titles and offices with the
Company and each of its subsidiaries.
SECTION 11. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee and by the Chairman of the
Compensation Committee of the Board or other authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
SECTION 12. VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORM-ANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. The invalidity or unenforceability of any
provisions of this Agreement shall not
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affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
SECTION 14. DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 15. CORPORATE APPROVAL. This Agreement has been
approved by the Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
SECTION 16. DISPUTE RESOLUTION.
16.1. In the event a dispute shall arise between the parties as to
whether the provisions of this Agreement have been complied with (a "DISPUTE"),
the parties agree to resolve such Dispute in accordance with the following
procedure:
(a) A meeting shall be held promptly between the parties,
attended by (in the case of the Company) one or more individuals with
decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
(b) If, within 10 days after such meeting, the parties
have not succeeded in negotiating a resolution of the Dispute, the
parties agree to submit the Dispute to mediation in accordance with
the Commercial Mediation Rules of the American Arbitration
Association.
(c) The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the
American Arbitration Association if they have been unable to agree on
such appointment within 10 days following the 10-day period referred
to in clause (b) above.
(d) On appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating
thereto for 15 days.
(e) If the parties are not successful in resolving the
Dispute through mediation within such 15-day period, the parties agree
that the Dispute shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association.
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(f) The fees and expenses of the mediator/arbitrators
shall be borne solely by the non-prevailing party or, in the event
there is no clear prevailing party, shall be borne by the Company.
(g) If any dispute shall arise under this Agreement
involving termination of the Employee's employment with the Company or
involving the failure or refusal of the Company to fully perform in
accordance with the terms hereof, the Company shall reimburse the
Employee, on a current basis, for all legal fees and expenses, if any,
incurred by the Employee in connection with such dispute, together
with interest thereon at the prevailing legal rate of interest, such
interest to accrue from the date of Notice of Termination through the
date of payment thereof; provided, however, that in the event the
resolution of such dispute in accordance with this Section 16 includes
a finding denying, in total, the Employee's claims in such dispute,
the Employee shall be required to reimburse the Company, over a period
determined by the Employee but not to exceed 12 months from the date
of such resolution, for all sums advanced to the Employee with respect
to such dispute pursuant to this clause (g).
(h) Except as provided above, each party shall pay its
own costs and expenses (including, without limitation, reasonable
attorneys' fees) relating to any mediation/arbitration proceeding
conducted under this Section 16.
(i) All mediation/arbitration conferences and hearings
will be held in Houston, Texas.
16.2. In the event there is any disputed question of law involved in
any arbitration proceeding, such as the proper legal interpretation of any
provision of this Agreement, the arbitrators shall make separate and distinct
findings of all facts material to the disputed question of law to be decided
and, on the basis of the facts so found, express their conclusion of the
question of law. The facts so found shall be conclusive and binding on the
parties, but any legal conclusion reached by the arbitrators from such facts
may be submitted by either party to a court of law for final determination by
initiation of a civil action in the proper state or Federal court sitting in
Harris County, Texas. Such action, to be valid, must be commenced within 20
days after receipt of the arbitrators' decision. If no such civil action is
commenced within such 20-day period, the legal conclusion reached by the
arbitrators shall be conclusive and binding on the parties. Any such civil
action shall be submitted, heard and determined solely on the basis of the
facts found by the arbitrators. Neither of the parties shall, or shall be
entitled to, submit any additional or different facts for consideration by the
court. In the event any civil action is commenced under this Section 16.2, the
party who prevails or substantially prevails (as determined by the court) in
such civil action shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys' fees incurred in connection with such action
and on appeal.
16.3. Except as limited by Section 16.2 above, the parties agree
that judgment on the award rendered by the arbitrators may be entered in any
court of competent jurisdiction.
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In the event legal proceedings are commenced to enforce the rights awarded in
an arbitration proceeding, the party who prevails or substantially prevails in
such legal proceeding shall be entitled to recover from the other party all
costs, expenses and reasonable attorneys' fees incurred in connection with such
legal proceeding and on appeal.
16.4. Except as provided above, no legal action may be brought by
either party with respect to any Dispute. All Disputes shall be determined
only in accordance with the procedures set forth above.
SECTION 17. NO OTHER SEVERANCE BENEFITS. In the event the Employee
becomes entitled to severance payments under Section 3.3 of this Agreement,
then the amounts payable under this Agreement to the Employee shall be in lieu
of, and not in addition to, any similar severance amounts to which the Employee
may otherwise be entitled under a severance plan or program of the Company or
any employment contract or agreement with the Company.
IN WITNESS WHEREOF, the Company and the Employee have entered into
this Agreement as of the day and year first above written.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
-------------------------------------------
Robert M. Chiste
President and Chief Executive Officer
EMPLOYEE
/s/ T. Wayne Wren, Jr.
----------------------------------------------
T. Wayne Wren, Jr.
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<PAGE> 1
EXHIBIT 10.26
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "AGREEMENT"), by and between
ALLWASTE, INC., a Delaware corporation (the "COMPANY"), and JAMES E. RIEF (the
"EMPLOYEE"), is entered into effective as of the 11th day of November, 1996.
W I T N E S S E T H:
WHEREAS, the Employee is a key employee of the Company, and the
Employee's experience and knowledge of the affairs of the Company are extremely
valuable to the Company; and
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement dated November 11, 1996 governing the Employee's
employment with the Company (the "EMPLOYMENT AGREEMENT"); and
WHEREAS, the Board of Directors of the Company (the "BOARD") believes
it imperative that the Company be able to rely on the Employee to continue his
services to the Company without concern that the Employee may be distracted by
the personal uncertainties and risks created by the possibility of a change in
control; and
WHEREAS, the Company is entering into this Agreement with the Employee
in order to ensure the Employee's continued services, dedication and
objectivity during such period as the Company may be susceptible to a change in
control and to define the nature and terms of the Employee's severance benefits
following a Change in Control (as defined in Section 9 below).
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Employee
hereby agree as follows.
SECTION 1. TERM. This Agreement shall commence on the date hereof
and shall continue until the expiration or termination of the Employment
Agreement, and to the extent that the Employment Agreement is renewed for
successive one-year periods, this Agreement shall be similarly renewed.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not alter or impair any rights of the Employee (or the
Employee's estate or beneficiaries) that have arisen under this Agreement prior
to such termination.
<PAGE> 2
SECTION 2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL.
2.1 GENERAL.
(a) If a Change in Control occurs while the Employee is employed by
the Company and if during the Protected Period (as defined in paragraph (b)
below) the Employee's employment is terminated, whether by the Company or by
the Employee, then the Employee shall be entitled to the benefits specified in
Sections 3.3, 4 and 5 hereof, unless such termination is (i) due to the
Employee's death, (ii) by the Company on account of the Employee's Disability
as provided in Section 2.2 below, (iii) by the Company for Cause as provided in
Section 2.3 below, or (iv) by the Employee for other than Good Reason as
provided in Section 2.4 below, in which event the Employee shall not be
entitled to any benefits under this Agreement except as specified in Sections
3.1 and 3.2 hereof.
(b) For purposes of this Agreement, the "PROTECTED PERIOD" shall
mean the period of time beginning with a Change in Control and ending 18 months
following such Change in Control; provided, however, if the Employee's
employment with the Company terminates for any reason other than a termination
by the Company for Cause (as defined in Section 2.3 below) prior to, but within
six months of, the date on which a Change in Control occurs, then, for all
purposes of this Agreement: (A) the Employee shall be deemed to have continued
employment with the Company until the date of the Change in Control and then
terminated his employment on such date for Good Reason, and (B) the Protected
Period shall be deemed to have commenced immediately prior to the Employee's
actual termination of employment.
2.2. TERMINATION BY COMPANY ON ACCOUNT OF DISABILITY.
If a Change in Control occurs while the Employee is employed by the
Company and if, as a result of the Employee's illness, physical or mental
disability, or other incapacity which continues for an uninterrupted period in
excess of three (3) months or a cumulative period of six (6) months in any
twelve (12) month period during the Protected Period, and if, within 30 days
after the Company has given the Employee written notice of the Company's
intention to terminate the Employee on account of such incapacity, the Employee
shall not have returned to the full-time performance of the Employee's duties,
then the Company may thereafter terminate the Employee's employment on account
of "DISABILITY"; provided, however, such termination shall not by itself alter
or impair the Employee's rights as a "disabled employee" or otherwise under any
of the Company's employee benefit plans.
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<PAGE> 3
2.3 TERMINATION BY COMPANY FOR CAUSE.
If a Change in Control occurs while the Employee is employed by the
Company, the Company may, at any time during the Protected Period, terminate
the Employee's employment for Cause. For purposes of this Agreement, the
Company shall have "CAUSE" to terminate the Employee's employment hereunder
only if: (a) the Employee willfully and continually fails to perform
substantially the Employee's duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), which failure continues unabated after a demand for substantial
performance is delivered to the Employee by the Board that specifically
identifies the manner in which the Board believes that the Employee has not
substantially performed the Employee's duties, or (b) the Employee willfully
engages in gross misconduct that is materially and demonstrably injurious to
the Company. For purposes of this Section 2.3, an act or failure to act on the
Employee's part shall be considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without reasonable belief that
the Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated by the Company for Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
the Board, at a meeting of the Board called and held for the purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Employee was guilty of conduct set
forth in clauses (a) or (b) of the second sentence of this Section 2.3 and
specifying the particulars thereof in reasonable detail.
2.4. TERMINATION BY EMPLOYEE FOR GOOD REASON.
If a Change in Control occurs while the Employee is employed by the
Company, the Employee may terminate the Employee's employment for Good Reason
at any time during the Protected Period. For purposes of this Agreement "GOOD
REASON" shall mean any of the following:
(a) The Employee is assigned any duties materially
inconsistent with, or diminished from, the Employee's positions,
duties, responsibilities and status with the Company immediately prior
to the commencement of the Protected Period, or the Employee's status,
reporting responsibilities, titles or offices are materially
diminished from those in effect immediately prior to the commencement
of the Protected Period, or the Employee is removed from or is not
re-elected or appointed to any of such responsibilities, titles,
offices or positions, or the Employee's duties and responsibilities
are materially increased without a corresponding increase in the
Employee's compensation (such increase in compensation to be
satisfactory to the Employee, in the Employee's sole reasonable
judgment), except in each case in connection with the termination of
the Employee's employment by the Company for Cause or on account of
Disability, or as a result of the Employee's death, or by the
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<PAGE> 4
Employee for other than Good Reason; provided, however, that Good
Reason shall not be triggered under this subsection (a) by an
insubstantial action not taken in bad faith and which is remedied by
the Company promptly after receipt of written notice from the
Employee; or
(b) The Employee's annual rate of base salary is reduced
from that in effect immediately prior to the commencement of the
Protected Period or as the same may be increased from time to time
thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction, is referred to hereinafter as
the "ANNUAL BASE SALARY"); provided, however, with respect to a
termination of employment prior to a Change in Control that is deemed
to have occurred on the date of the Change in Control, "Annual Base
Salary" shall be the Employee's annual rate of base salary as in
effect immediately prior to the Employee's actual date of termination,
but disregarding any reduction therein made within 30 days of the
Employee's actual termination date; or
(c) The Company fails to continue in effect any benefit
or compensation plan, including, but not limited to, the Company's
annual bonus plan, qualified retirement plan, executive life insurance
plan and/or health and accident plan, in which the Employee is
participating immediately prior to the commencement of the Protected
Period, or plans providing, in the sole reasonable judgment of the
Employee, the Employee with substantially similar benefits, or the
Company takes any action that would adversely affect the Employee's
participation in or reduce the Employee's benefits under any of such
plans (excluding any such action by the Company that is required by
law); or
(d) The Company's principal executive offices are
relocated at any time following a Change in Control more than 35 miles
from where such offices were located immediately prior to such Change
in Control; or
(e) The Company requires the Employee at any time
following a Change in Control to relocate more than 35 miles from
where the Company's principal executive offices were located
immediately prior to such Change in Control; or
(f) The Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated
in Section 7.1 hereof; or
(g) Any purported termination of the Employee's
employment by the Company that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2.5 below and, if
applicable, the procedures described in Section 2.3 above; or
(h) The amendment, modification or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
that was in effect
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<PAGE> 5
immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect
Employee's rights to indemnification by the Company; or
(i) The Company shall violate or breach any obligation of
the Company in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in
the Bylaws of the Company and/or in the Employment Agreement or any
other separate agreement entered into between the Company and the
Employee) to indemnify the Employee against any claim, loss, expense
or liability sustained or incurred by the Employee by reason, in whole
or in part, of the fact that the Employee is or was an officer or
director of the Company; or
(j) The Company shall violate or breach any other
material obligation of the Company owing to the Employee in effect
immediately prior to the commencement of the Protected Period relating
to the Employee's employment with the Company, but only if such
violation or breach (if capable of being remedied) shall continue
unremedied for more than 15 days after written notice thereof is given
by the Employee to the Company; or
(k) The Board (or any nominating committee of the Board)
fails to recommend and support the Employee's re-election as a
director of the Company if the Employee is a director of the Company
immediately prior to the commencement of the Protected Period; or
(l) The Company shall fail to keep in force, for the
benefit of the Employee, directors' and officers' insurance policy
with coverage amounts and scope equal to the coverage amounts and
scope under such policy immediately prior to the commencement of the
Protected Period.
2.5. NOTICE OF TERMINATION.
Any termination by the Company pursuant to Section 2.2 or 2.3 above or
by the Employee pursuant to Section 2.4 above shall be communicated by written
Notice of Termination to the other party hereto; provided, however, that in the
case of events of Good Reason enumerated in subsections (f), (h), (i) or (l) of
Section 2.4 hereof, the Company shall have the obligation to provide the
Employee with written notice of the occurrence of any of such events and the
Employee shall then have the opportunity to provide the Company with Notice of
Termination if he so elects. The Employee shall retain the ability to
terminate his employment for Good Reason under subsections (f), (h), (i) or (l)
of Section 2.4 hereof, even if the Company fails to provide written notice of
the occurrence of any of the events specified in such subsections as provided
herein. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied on and, except in the case of the termination referred to in the last
subsection of Section 2.4 above, shall set forth in reasonable detail the
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<PAGE> 6
facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated. Any purported
termination of this Agreement not in compliance with the requirements of this
Section 2.5 or, if applicable, the procedures described in Section 2.3 above
shall be ineffective.
2.6. DATE OF TERMINATION. For purposes of this Agreement, "DATE OF
TERMINATION" shall mean: (a) if the Employee is terminated on account of
Disability pursuant to Section 2.2 above, 30 days after Notice of Termination
is given, provided that the Employee shall not have returned to the performance
of the Employee's duties on a full-time basis during such 30-day period; (b) if
the Employee's employment is terminated for Cause pursuant to Section 2.3
above, the date specified in the Notice of Termination; (c) with respect to a
termination of employment prior to a Change in Control that is deemed to have
occurred on the date of the Change in Control, the date of such Change in
Control; and (d) if the Employee's employment is terminated for any other
reason on or after a Change in Control, the date on which a Notice of
Termination is given; provided, however, in the event of any dispute or
controversy concerning the Employee's entitlement to payment under this
Agreement, solely for purposes of Section 3.3 below, concerning the timing of
the payment of amounts under this Agreement, the "Date of Termination" shall
mean the date of final resolution of such dispute or controversy.
SECTION 3. COMPENSATION DURING DISABILITY OR ON TERMINATION.
3.1. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee fails to
perform the Employee's normal duties as a result of Disability (as defined in
Section 2.2 hereof), the Employee shall continue during the period of
Disability to receive: (i) the Employee's full Annual Base Salary at the rate
then in effect, (ii) any awards, deferred and non-deferred, payable during such
period of disability under the Company's annual bonus plan, less any amounts
paid to the Employee during such period of Disability pursuant to the Company's
sick-leave or disability program until the Employee's employment is terminated
on account of Disability pursuant to Section 2.2 hereof, and (iii) all other
applicable perquisites, insurance and other employee benefits.
3.2. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee's employment
shall be terminated by the Company for Cause pursuant to Section 2.3 above, the
Company shall pay the Employee's earned but unpaid Annual Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to the Employee
under this Agreement, except those arising hereunder prior to the Date of
Termination.
3.3. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Company shall terminate
the Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during
the Protected Period, the Employee shall terminate the Employee's employment
for Good Reason in accordance with
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Section 2.4 hereof, then, subject to Section 5 below and the following
provisions of this Section 3.3, the Company shall pay to the Employee, in a
single lump sum by certified or bank cashier's check within five days of such
Date of Termination, the sum of the amounts specified in clauses (a), (b) and
(c) below:
(a) an amount equal to 2.5 times the sum of (i) the
Annual Base Salary and (ii) an annual target bonus of 75% of the
Annual Base Salary;
(b) an amount equal to that portion of the Annual Base
Salary earned, but not paid, and vacation earned, but not taken, in
each case, to the Date of Termination, and all other amounts
previously deferred by the Employee or earned but not paid as of such
date under all Company incentive or deferred compensation plans or
programs; and
(c) an amount equal to (i) the amount of the maximum
monthly premium payment that may be charged to continue coverage for
the Employee and the Employee's eligible dependents under the
Company's health insurance plan under COBRA, multiplied by (ii) 30
months.
Further, if a Change in Control occurs while the Employee is employed by the
Company and if, during the Protected Period, the Company shall terminate the
Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during the
Protected Period, the Employee shall terminate the Employee's employment for
Good Reason in accordance with Section 2.4 hereof, then, subject to Section 5
below, the Employee shall be credited with an additional 30 months of service
credit under the Company's Supplemental Executive Retirement Plan (the "SERP").
SECTION 4. ACCELERATION OF OPTION AND RESTRICTED STOCK GRANTS ON
A CHANGE IN CONTROL.
4.1. For purposes hereof, the term "ACCELERATION DATE" shall mean
the earliest date on which any of the following events shall first have
occurred: (i) the acquisition described in clause (a) of the definition of
Change in Control set forth in Section 9 hereof; (ii) the change in the
composition of the Board of Directors described in clause (b) of such
definition; (iii) the stockholder approval or adoption described in clauses (c)
or (d) of such definition; or (iv) the commencement date of any tender offer
subject to the terms of Section 14(d)(1) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), or exchange offer subject to the terms
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any other
offer or series of offers to purchase for cash, or to exchange for securities
of a person other than the Company, 30% or more of the Company's Common Stock
by any "person" or "group" of persons (as such terms are used on January 1,
1996 in Rule 13d of the Exchange Act) other than an offer or offers by the
Company or by employee benefit plan(s) sponsored by the Company ("TENDER
OFFER").
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<PAGE> 8
4.2. If an Acceleration Date occurs while the Employee holds
outstanding options under the Company's stock option plan(s), then from and
after the Acceleration Date, all options held by the Employee shall be
immediately exercisable in full.
4.3. If an Acceleration Date occurs while any shares of restricted
stock issued by the Company to the Employee (including those granted under the
Company's Target 2000: One, Two, Four Plan) remain subject to restrictions
and/or performance or other criteria relating thereto (the "RESTRICTIONS"),
then from and after the Acceleration Date: (i) all such Restrictions shall
lapse and be deemed satisfied in full, as applicable; and (ii) no later than
the fifth day following the Acceleration Date, the Company shall cause
unrestricted shares of stock to be delivered to the Employee.
SECTION 5. GROSS-UP OF PARACHUTE PAYMENTS.
5.1. To provide the Employee with adequate protection in connection
with his ongoing employment with the Company, this Agreement provides the
Employee with various benefits in the event of termination of the Employee's
employment with the Company during the Protected Period. If the Employee's
employment is terminated following a "change in control" of the Company, within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "CODE"), a portion of those benefits could be characterized as "excess
parachute payments" within the meaning of Section 280G of the Code. The
parties hereto acknowledge that the protections set forth in this Section 5 are
important, and it is agreed that the Employee should not have to bear the
burden of any excise tax that might be levied under Section 4999 of the Code,
in the event that a portion of the benefits payable to the Employee pursuant to
this Agreement are treated as an excess parachute payment. The parties,
therefore, have agreed as set forth in this Section 5.
5.2. Anything in this Agreement to the contrary notwithstanding, if
it shall be determined that any payment or distribution by the Company or any
other person to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (a "PAYMENT") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), then the Company shall pay an additional payment (a "GROSS-UP
PAYMENT") in an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
5.3. Subject to the provisions of Section 5.4 below, all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at
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<PAGE> 9
such determination, shall be made by an independent public accounting firm with
a national reputation that is selected by the Employee (the "ACCOUNTING FIRM")
which shall provide detailed supporting calculations both to the Company and to
the Employee within 15 business days after the receipt of notice from the
Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change in control of
the Company, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. The
Company shall indemnify and hold harmless the Employee, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed on the Employee as a result of such payment of fees and
expenses. Any Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding on the Company and the Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments may not have been made by the Company which should have been made
("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Section 5.4 below
and the Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Employee.
5.4. The Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claim) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Employee is
informed in writing of such claim (or threatened lien) and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due or such tax lien would be
imposed). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim (or threatened
lien), the Employee shall:
(a) give the Company any information reasonably requested
by the Company relating to such claim (or threatened lien);
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(b) take such action in connection with contesting such
claim (or threatened lien) as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(d) permit the Company to participate in any proceedings
relating to such claim (or threatened lien);
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Subsection 5.4, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employee shall
determine (but in no event shall the Company permit or direct the Employee to
allow a tax lien to be imposed on the Employee's property); provided, further,
that if the Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Employee,
on an interest-free basis, and shall indemnify and hold the Employee harmless
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further,
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. In addition, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder, and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
5.5. If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 5.4, the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 5.4 above) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Employee of an amount advanced by the Company pursuant to
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Section 5.4 above, a determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Employee in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
SECTION 6. NO MITIGATION OF DAMAGES.
The provisions of this Agreement are not intended to, nor shall they
be construed to, require that the Employee seek or accept other employment
following a termination of employment and, amounts payable and benefits
provided under this Agreement to the Employee shall not be reduced by the
Employee's acceptance of (or failure to seek or accept) employment with another
person. The Company's obligations to make the payments and provide the
benefits required for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, rights or action that the Company may have
against the Employee or others.
SECTION 7. SUCCESSORS; BINDING AGREEMENT.
7.1. The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated the Employee's employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 7.1 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
7.2. This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts would still be payable to the Employee
hereunder if the Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee or other designee or, if none, to
the Employee's estate.
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SECTION 8. NOTICE. For the purpose of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, registered and return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address
as either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only on
receipt.
If to the Company:
Allwaste, Inc.
5151 San Felipe, Suite 1600
Houston, Texas 77056
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to Employee:
James E. Rief
1414 Kelliwood Oaks
Katy, Texas 77450
SECTION 9. CHANGE IN CONTROL.
For purposes of this Agreement, a "CHANGE IN CONTROL" shall be deemed
to have occurred on, and shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (1) the then
outstanding shares of Common Stock of the Company (the "OUTSTANDING
COMPANY COMMON STOCK") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following such reorganization, merger
or consolidation, the conditions described in clauses (1), (2) and (3)
of paragraph (c) of this Section 9 are satisfied; or
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(b) Individuals who, as of the date hereof, constitute
the entire Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either (1) an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or
more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trust(s)) of the Company
and/or its subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all
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or substantially all of the assets of the Company, other than to a
corporation, with respect to which immediately following such sale or
other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company and/or
its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (C) at least a majority of the members
of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company.
SECTION 10. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement includes employment with any entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of all outstanding equity interests, it being
understood that for purposes of clause (a) of Section 2.4 hereof, "Good Reason"
shall be construed to refer to each of the Employee's positions, duties,
responsibilities (reporting and other), status, titles and offices with the
Company and each of its subsidiaries.
SECTION 11. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee and by the Chairman of the
Compensation Committee of the Board or other authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
SECTION 12. VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. The invalidity or unenforceability of any
provisions of this Agreement shall not
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affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
SECTION 14. DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 15. CORPORATE APPROVAL. This Agreement has been
approved by the Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
SECTION 16. DISPUTE RESOLUTION.
16.1. In the event a dispute shall arise between the parties as to
whether the provisions of this Agreement have been complied with (a "DISPUTE"),
the parties agree to resolve such Dispute in accordance with the following
procedure:
(a) A meeting shall be held promptly between the parties,
attended by (in the case of the Company) one or more individuals with
decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
(b) If, within 10 days after such meeting, the parties
have not succeeded in negotiating a resolution of the Dispute, the
parties agree to submit the Dispute to mediation in accordance with
the Commercial Mediation Rules of the American Arbitration
Association.
(c) The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the
American Arbitration Association if they have been unable to agree on
such appointment within 10 days following the 10-day period referred
to in clause (b) above.
(d) On appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating
thereto for 15 days.
(e) If the parties are not successful in resolving the
Dispute through mediation within such 15-day period, the parties agree
that the Dispute shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association.
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(f) The fees and expenses of the mediator/arbitrators
shall be borne solely by the non-prevailing party or, in the event
there is no clear prevailing party, shall be borne by the Company.
(g) If any dispute shall arise under this Agreement
involving termination of the Employee's employment with the Company or
involving the failure or refusal of the Company to fully perform in
accordance with the terms hereof, the Company shall reimburse the
Employee, on a current basis, for all legal fees and expenses, if any,
incurred by the Employee in connection with such dispute, together
with interest thereon at the prevailing legal rate of interest, such
interest to accrue from the date of Notice of Termination through the
date of payment thereof; provided, however, that in the event the
resolution of such dispute in accordance with this Section 16 includes
a finding denying, in total, the Employee's claims in such dispute,
the Employee shall be required to reimburse the Company, over a period
determined by the Employee but not to exceed 12 months from the date
of such resolution, for all sums advanced to the Employee with respect
to such dispute pursuant to this clause (g).
(h) Except as provided above, each party shall pay its
own costs and expenses (including, without limitation, reasonable
attorneys' fees) relating to any mediation/arbitration proceeding
conducted under this Section 16.
(i) All mediation/arbitration conferences and hearings
will be held in Houston, Texas.
16.2. In the event there is any disputed question of law involved in
any arbitration proceeding, such as the proper legal interpretation of any
provision of this Agreement, the arbitrators shall make separate and distinct
findings of all facts material to the disputed question of law to be decided
and, on the basis of the facts so found, express their conclusion of the
question of law. The facts so found shall be conclusive and binding on the
parties, but any legal conclusion reached by the arbitrators from such facts
may be submitted by either party to a court of law for final determination by
initiation of a civil action in the proper state or Federal court sitting in
Harris County, Texas. Such action, to be valid, must be commenced within 20
days after receipt of the arbitrators' decision. If no such civil action is
commenced within such 20-day period, the legal conclusion reached by the
arbitrators shall be conclusive and binding on the parties. Any such civil
action shall be submitted, heard and determined solely on the basis of the
facts found by the arbitrators. Neither of the parties shall, or shall be
entitled to, submit any additional or different facts for consideration by the
court. In the event any civil action is commenced under this Section 16.2, the
party who prevails or substantially prevails (as determined by the court) in
such civil action shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys' fees incurred in connection with such action
and on appeal.
16.3. Except as limited by Section 16.2 above, the parties agree
that judgment on the award rendered by the arbitrators may be entered in any
court of competent jurisdiction.
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In the event legal proceedings are commenced to enforce the rights awarded in
an arbitration proceeding, the party who prevails or substantially prevails in
such legal proceeding shall be entitled to recover from the other party all
costs, expenses and reasonable attorneys' fees incurred in connection with such
legal proceeding and on appeal.
16.4. Except as provided above, no legal action may be brought by
either party with respect to any Dispute. All Disputes shall be determined
only in accordance with the procedures set forth above.
SECTION 17. NO OTHER SEVERANCE BENEFITS. In the event the Employee
becomes entitled to severance payments under Section 3.3 of this Agreement,
then the amounts payable under this Agreement to the Employee shall be in lieu
of, and not in addition to, any similar severance amounts to which the Employee
may otherwise be entitled under a severance plan or program of the Company or
any employment contract or agreement with the Company.
IN WITNESS WHEREOF, the Company and the Employee have entered into
this Agreement as of the day and year first above written.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
--------------------------------------------
Robert M. Chiste
President and Chief Executive Officer
EMPLOYEE
/s/ James E. Rief
--------------------------------------------
James E. Rief
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EXHIBIT 10.27
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "AGREEMENT"), by and between
ALLWASTE, INC., a Delaware corporation (the "COMPANY"), and WILLIAM L. FIEDLER
(the "EMPLOYEE"), is entered into effective as of the 11th day of November,
1996.
W I T N E S S E T H:
WHEREAS, the Employee is a key employee of the Company, and the
Employee's experience and knowledge of the affairs of the Company are extremely
valuable to the Company; and
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement dated February 11, 1994 governing the Employee's
employment with the Company, which Employment Agreement has been amended by
that certain First Amendment to Employment Agreement dated November 11, 1996
(as amended, the "EMPLOYMENT AGREEMENT"); and
WHEREAS, the Board of Directors of the Company (the "BOARD") believes
it imperative that the Company be able to rely on the Employee to continue his
services to the Company without concern that the Employee may be distracted by
the personal uncertainties and risks created by the possibility of a change in
control; and
WHEREAS, the Company is entering into this Agreement with the Employee
in order to ensure the Employee's continued services, dedication and
objectivity during such period as the Company may be susceptible to a change in
control and to define the nature and terms of the Employee's severance benefits
following a Change in Control (as defined in Section 9 below).
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Employee
hereby agree as follows.
SECTION 1. TERM. This Agreement shall commence on the date hereof
and shall continue until the expiration or termination of the Employment
Agreement, and to the extent that the Employment Agreement is renewed for
successive one-year periods, this Agreement shall be similarly renewed.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not alter or impair any rights of the Employee (or the
Employee's estate or beneficiaries) that have arisen under this Agreement prior
to such termination.
<PAGE> 2
SECTION 2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL.
2.1 GENERAL.
(a) If a Change in Control occurs while the Employee is employed by
the Company and if during the Protected Period (as defined in paragraph (b)
below) the Employee's employment is terminated, whether by the Company or by
the Employee, then the Employee shall be entitled to the benefits specified in
Sections 3.3, 4 and 5 hereof, unless such termination is (i) due to the
Employee's death, (ii) by the Company on account of the Employee's Disability
as provided in Section 2.2 below, (iii) by the Company for Cause as provided in
Section 2.3 below, or (iv) by the Employee for other than Good Reason as
provided in Section 2.4 below, in which event the Employee shall not be
entitled to any benefits under this Agreement except as specified in Sections
3.1 and 3.2 hereof.
(b) For purposes of this Agreement, the "PROTECTED PERIOD" shall
mean the period of time beginning with a Change in Control and ending 18 months
following such Change in Control; provided, however, if the Employee's
employment with the Company terminates for any reason other than a termination
by the Company for Cause (as defined in Section 2.3 below) prior to, but within
six months of, the date on which a Change in Control occurs, then, for all
purposes of this Agreement: (A) the Employee shall be deemed to have continued
employment with the Company until the date of the Change in Control and then
terminated his employment on such date for Good Reason, and (B) the Protected
Period shall be deemed to have commenced immediately prior to the Employee's
actual termination of employment.
2.2. TERMINATION BY COMPANY ON ACCOUNT OF DISABILITY.
If a Change in Control occurs while the Employee is employed by the
Company and if, as a result of the Employee's illness, physical or mental
disability, or other incapacity which continues for an uninterrupted period in
excess of three (3) months or a cumulative period of six (6) months in any
twelve (12) month period during the Protected Period, and if, within 30 days
after the Company has given the Employee written notice of the Company's
intention to terminate the Employee on account of such incapacity, the Employee
shall not have returned to the full-time performance of the Employee's duties,
then the Company may thereafter terminate the Employee's employment on account
of "DISABILITY"; provided, however, such termination shall not by itself alter
or impair the Employee's rights as a "disabled employee" or otherwise under any
of the Company's employee benefit plans.
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2.3 TERMINATION BY COMPANY FOR CAUSE.
If a Change in Control occurs while the Employee is employed by the
Company, the Company may, at any time during the Protected Period, terminate
the Employee's employment for Cause. For purposes of this Agreement, the
Company shall have "CAUSE" to terminate the Employee's employment hereunder
only if: (a) the Employee willfully and continually fails to perform
substantially the Employee's duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), which failure continues unabated after a demand for substantial
performance is delivered to the Employee by the Board that specifically
identifies the manner in which the Board believes that the Employee has not
substantially performed the Employee's duties, or (b) the Employee willfully
engages in gross misconduct that is materially and demonstrably injurious to
the Company. For purposes of this Section 2.3, an act or failure to act on the
Employee's part shall be considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without reasonable belief that
the Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated by the Company for Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
the Board, at a meeting of the Board called and held for the purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Employee was guilty of conduct set
forth in clauses (a) or (b) of the second sentence of this Section 2.3 and
specifying the particulars thereof in reasonable detail.
2.4. TERMINATION BY EMPLOYEE FOR GOOD REASON.
If a Change in Control occurs while the Employee is employed by the
Company, the Employee may terminate the Employee's employment for Good Reason
at any time during the Protected Period. For purposes of this Agreement "GOOD
REASON" shall mean any of the following:
(a) The Employee is assigned any duties materially
inconsistent with, or diminished from, the Employee's positions,
duties, responsibilities and status with the Company immediately prior
to the commencement of the Protected Period, or the Employee's status,
reporting responsibilities, titles or offices are materially
diminished from those in effect immediately prior to the commencement
of the Protected Period, or the Employee is removed from or is not
re-elected or appointed to any of such responsibilities, titles,
offices or positions, or the Employee's duties and responsibilities
are materially increased without a corresponding increase in the
Employee's compensation (such increase in compensation to be
satisfactory to the Employee, in the Employee's sole reasonable
judgment), except in each case in connection with the termination of
the Employee's employment by the Company for Cause or on account of
Disability, or as a result of the Employee's death, or by the
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Employee for other than Good Reason; provided, however, that Good
Reason shall not be triggered under this subsection (a) by an
insubstantial action not taken in bad faith and which is remedied by
the Company promptly after receipt of written notice from the
Employee; or
(b) The Employee's annual rate of base salary is reduced
from that in effect immediately prior to the commencement of the
Protected Period or as the same may be increased from time to time
thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction, is referred to hereinafter as
the "ANNUAL BASE SALARY"); provided, however, with respect to a
termination of employment prior to a Change in Control that is deemed
to have occurred on the date of the Change in Control, "Annual Base
Salary" shall be the Employee's annual rate of base salary as in
effect immediately prior to the Employee's actual date of termination,
but disregarding any reduction therein made within 30 days of the
Employee's actual termination date; or
(c) The Company fails to continue in effect any benefit
or compensation plan, including, but not limited to, the Company's
annual bonus plan, qualified retirement plan, executive life insurance
plan and/or health and accident plan, in which the Employee is
participating immediately prior to the commencement of the Protected
Period, or plans providing, in the sole reasonable judgment of the
Employee, the Employee with substantially similar benefits, or the
Company takes any action that would adversely affect the Employee's
participation in or reduce the Employee's benefits under any of such
plans (excluding any such action by the Company that is required by
law); or
(d) The Company's principal executive offices are
relocated at any time following a Change in Control more than 35 miles
from where such offices were located immediately prior to such Change
in Control; or
(e) The Company requires the Employee at any time
following a Change in Control to relocate more than 35 miles from
where the Company's principal executive offices were located
immediately prior to such Change in Control; or
(f) The Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated
in Section 7.1 hereof; or
(g) Any purported termination of the Employee's
employment by the Company that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2.5 below and, if
applicable, the procedures described in Section 2.3 above; or
(h) The amendment, modification or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
that was in effect
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immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect
Employee's rights to indemnification by the Company; or
(i) The Company shall violate or breach any obligation of
the Company in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in
the Bylaws of the Company and/or in the Employment Agreement or any
other separate agreement entered into between the Company and the
Employee) to indemnify the Employee against any claim, loss, expense
or liability sustained or incurred by the Employee by reason, in whole
or in part, of the fact that the Employee is or was an officer or
director of the Company; or
(j) The Company shall violate or breach any other
material obligation of the Company owing to the Employee in effect
immediately prior to the commencement of the Protected Period relating
to the Employee's employment with the Company, but only if such
violation or breach (if capable of being remedied) shall continue
unremedied for more than 15 days after written notice thereof is given
by the Employee to the Company; or
(k) The Board (or any nominating committee of the Board)
fails to recommend and support the Employee's re-election as a
director of the Company if the Employee is a director of the Company
immediately prior to the commencement of the Protected Period; or
(l) The Company shall fail to keep in force, for the
benefit of the Employee, directors' and officers' insurance policy
with coverage amounts and scope equal to the coverage amounts and
scope under such policy immediately prior to the commencement of the
Protected Period.
2.5. NOTICE OF TERMINATION.
Any termination by the Company pursuant to Section 2.2 or 2.3 above or
by the Employee pursuant to Section 2.4 above shall be communicated by written
Notice of Termination to the other party hereto; provided, however, that in the
case of events of Good Reason enumerated in subsections (f), (h), (i) or (l) of
Section 2.4 hereof, the Company shall have the obligation to provide the
Employee with written notice of the occurrence of any of such events and the
Employee shall then have the opportunity to provide the Company with Notice of
Termination if he so elects. The Employee shall retain the ability to
terminate his employment for Good Reason under subsections (f), (h), (i) or (l)
of Section 2.4 hereof, even if the Company fails to provide written notice of
the occurrence of any of the events specified in such subsections as provided
herein. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied on and, except in the case of the termination referred to in the last
subsection of Section 2.4 above, shall set forth in reasonable detail the
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facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated. Any purported
termination of this Agreement not in compliance with the requirements of this
Section 2.5 or, if applicable, the procedures described in Section 2.3 above
shall be ineffective.
2.6. DATE OF TERMINATION. For purposes of this Agreement, "DATE OF
TERMINATION" shall mean: (a) if the Employee is terminated on account of
Disability pursuant to Section 2.2 above, 30 days after Notice of Termination
is given, provided that the Employee shall not have returned to the performance
of the Employee's duties on a full-time basis during such 30-day period; (b) if
the Employee's employment is terminated for Cause pursuant to Section 2.3
above, the date specified in the Notice of Termination; (c) with respect to a
termination of employment prior to a Change in Control that is deemed to have
occurred on the date of the Change in Control, the date of such Change in
Control; and (d) if the Employee's employment is terminated for any other
reason on or after a Change in Control, the date on which a Notice of
Termination is given; provided, however, in the event of any dispute or
controversy concerning the Employee's entitlement to payment under this
Agreement, solely for purposes of Section 3.3 below, concerning the timing of
the payment of amounts under this Agreement, the "Date of Termination" shall
mean the date of final resolution of such dispute or controversy.
SECTION 3. COMPENSATION DURING DISABILITY OR ON TERMINATION.
3.1. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee fails to
perform the Employee's normal duties as a result of Disability (as defined in
Section 2.2 hereof), the Employee shall continue during the period of
Disability to receive: (i) the Employee's full Annual Base Salary at the rate
then in effect, (ii) any awards, deferred and non-deferred, payable during such
period of disability under the Company's annual bonus plan, less any amounts
paid to the Employee during such period of Disability pursuant to the Company's
sick-leave or disability program until the Employee's employment is terminated
on account of Disability pursuant to Section 2.2 hereof, and (iii) all other
applicable perquisites, insurance and other employee benefits.
3.2. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee's employment
shall be terminated by the Company for Cause pursuant to Section 2.3 above, the
Company shall pay the Employee's earned but unpaid Annual Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to the Employee
under this Agreement, except those arising hereunder prior to the Date of
Termination.
3.3. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Company shall terminate
the Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during
the Protected Period, the Employee shall terminate the Employee's employment
for Good Reason in accordance with
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Section 2.4 hereof, then, subject to Section 5 below and the following
provisions of this Section 3.3, the Company shall pay to the Employee, in a
single lump sum by certified or bank cashier's check within five days of such
Date of Termination, the sum of the amounts specified in clauses (a), (b) and
(c) below:
(a) an amount equal to 2 times the sum of (i) the Annual
Base Salary and (ii) an annual target bonus of 60% of the Annual Base
Salary;
(b) an amount equal to that portion of the Annual Base
Salary earned, but not paid, and vacation earned, but not taken, in
each case, to the Date of Termination, and all other amounts
previously deferred by the Employee or earned but not paid as of such
date under all Company incentive or deferred compensation plans or
programs; and
(c) an amount equal to (i) the amount of the maximum
monthly premium payment that may be charged to continue coverage for
the Employee and the Employee's eligible dependents under the
Company's health insurance plan under COBRA, multiplied by (ii) 24
months.
Further, if a Change in Control occurs while the Employee is employed by the
Company and if, during the Protected Period, the Company shall terminate the
Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during the
Protected Period, the Employee shall terminate the Employee's employment for
Good Reason in accordance with Section 2.4 hereof, then, subject to Section 5
below, the Employee shall be credited with an additional 24 months of service
credit under the Company's Supplemental Executive Retirement Plan (the "SERP").
SECTION 4. ACCELERATION OF OPTION AND RESTRICTED STOCK GRANTS ON
A CHANGE IN CONTROL.
4.1. For purposes hereof, the term "ACCELERATION DATE" shall mean
the earliest date on which any of the following events shall first have
occurred: (i) the acquisition described in clause (a) of the definition of
Change in Control set forth in Section 9 hereof; (ii) the change in the
composition of the Board of Directors described in clause (b) of such
definition; (iii) the stockholder approval or adoption described in clauses (c)
or (d) of such definition; or (iv) the commencement date of any tender offer
subject to the terms of Section 14(d)(1) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), or exchange offer subject to the terms
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any other
offer or series of offers to purchase for cash, or to exchange for securities
of a person other than the Company, 30% or more of the Company's Common Stock
by any "person" or "group" of persons (as such terms are used on January 1,
1996 in Rule 13d of the Exchange Act) other than an offer or offers by the
Company or by employee benefit plan(s) sponsored by the Company ("TENDER
OFFER").
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4.2. If an Acceleration Date occurs while the Employee holds
outstanding options under the Company's stock option plan(s), then from and
after the Acceleration Date, all options held by the Employee shall be
immediately exercisable in full.
4.3. If an Acceleration Date occurs while any shares of restricted
stock issued by the Company to the Employee (including those granted under the
Company's Target 2000: One, Two, Four Plan) remain subject to restrictions
and/or performance or other criteria relating thereto (the "RESTRICTIONS"),
then from and after the Acceleration Date: (i) all such Restrictions shall
lapse and be deemed satisfied in full, as applicable; and (ii) no later than
the fifth day following the Acceleration Date, the Company shall cause
unrestricted shares of stock to be delivered to the Employee.
SECTION 5. GROSS-UP OF PARACHUTE PAYMENTS.
5.1. To provide the Employee with adequate protection in connection
with his ongoing employment with the Company, this Agreement provides the
Employee with various benefits in the event of termination of the Employee's
employment with the Company during the Protected Period. If the Employee's
employment is terminated following a "change in control" of the Company, within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "CODE"), a portion of those benefits could be characterized as "excess
parachute payments" within the meaning of Section 280G of the Code. The
parties hereto acknowledge that the protections set forth in this Section 5 are
important, and it is agreed that the Employee should not have to bear the
burden of any excise tax that might be levied under Section 4999 of the Code,
in the event that a portion of the benefits payable to the Employee pursuant to
this Agreement are treated as an excess parachute payment. The parties,
therefore, have agreed as set forth in this Section 5.
5.2. Anything in this Agreement to the contrary notwithstanding, if
it shall be determined that any payment or distribution by the Company or any
other person to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (a "PAYMENT") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), then the Company shall pay an additional payment (a "GROSS-UP
PAYMENT") in an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
5.3. Subject to the provisions of Section 5.4 below, all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at
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<PAGE> 9
such determination, shall be made by an independent public accounting firm with
a national reputation that is selected by the Employee (the "ACCOUNTING FIRM")
which shall provide detailed supporting calculations both to the Company and to
the Employee within 15 business days after the receipt of notice from the
Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change in control of
the Company, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. The
Company shall indemnify and hold harmless the Employee, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed on the Employee as a result of such payment of fees and
expenses. Any Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding on the Company and the Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments may not have been made by the Company which should have been made
("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Section 5.4 below
and the Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Employee.
5.4. The Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claim) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Employee is
informed in writing of such claim (or threatened lien) and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due or such tax lien would be
imposed). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim (or threatened
lien), the Employee shall:
(a) give the Company any information reasonably requested
by the Company relating to such claim (or threatened lien);
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<PAGE> 10
(b) take such action in connection with contesting such
claim (or threatened lien) as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(d) permit the Company to participate in any proceedings
relating to such claim (or threatened lien);
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Subsection 5.4, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employee shall
determine (but in no event shall the Company permit or direct the Employee to
allow a tax lien to be imposed on the Employee's property); provided, further,
that if the Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Employee,
on an interest-free basis, and shall indemnify and hold the Employee harmless
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further,
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. In addition, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder, and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
5.5. If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 5.4, the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 5.4 above) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Employee of an amount advanced by the Company pursuant to
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<PAGE> 11
Section 5.4 above, a determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Employee in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
SECTION 6. NO MITIGATION OF DAMAGES.
The provisions of this Agreement are not intended to, nor shall they
be construed to, require that the Employee seek or accept other employment
following a termination of employment and, amounts payable and benefits
provided under this Agreement to the Employee shall not be reduced by the
Employee's acceptance of (or failure to seek or accept) employment with another
person. The Company's obligations to make the payments and provide the
benefits required for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, rights or action that the Company may have
against the Employee or others.
SECTION 7. SUCCESSORS; BINDING AGREEMENT.
7.1. The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated the Employee's employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 7.1 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
7.2. This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts would still be payable to the Employee
hereunder if the Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee or other designee or, if none, to
the Employee's estate.
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SECTION 8. NOTICE. For the purpose of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, registered and return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address
as either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only on
receipt.
If to the Company:
Allwaste, Inc.
5151 San Felipe, Suite 1600
Houston, Texas 77056
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to Employee:
William L. Fiedler
3000 Bissonnet #8101
Houston, Texas 77005
SECTION 9. CHANGE IN CONTROL.
For purposes of this Agreement, a "CHANGE IN CONTROL" shall be deemed
to have occurred on, and shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (1) the then
outstanding shares of Common Stock of the Company (the "OUTSTANDING
COMPANY COMMON STOCK") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following such reorganization, merger
or consolidation, the conditions described in clauses (1), (2) and (3)
of paragraph (c) of this Section 9 are satisfied; or
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(b) Individuals who, as of the date hereof, constitute
the entire Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either (1) an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or
more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trust(s)) of the Company
and/or its subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all
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or substantially all of the assets of the Company, other than to a
corporation, with respect to which immediately following such sale or
other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company and/or
its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (C) at least a majority of the members
of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company.
SECTION 10. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement includes employment with any entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of all outstanding equity interests, it being
understood that for purposes of clause (a) of Section 2.4 hereof, "Good Reason"
shall be construed to refer to each of the Employee's positions, duties,
responsibilities (reporting and other), status, titles and offices with the
Company and each of its subsidiaries.
SECTION 11. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee and by the Chairman of the
Compensation Committee of the Board or other authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
SECTION 12. VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. The invalidity or unenforceability of any
provisions of this Agreement shall not
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affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
SECTION 14. DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 15. CORPORATE APPROVAL. This Agreement has been
approved by the Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
SECTION 16. DISPUTE RESOLUTION.
16.1. In the event a dispute shall arise between the parties as to
whether the provisions of this Agreement have been complied with (a "DISPUTE"),
the parties agree to resolve such Dispute in accordance with the following
procedure:
(a) A meeting shall be held promptly between the parties,
attended by (in the case of the Company) one or more individuals with
decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
(b) If, within 10 days after such meeting, the parties
have not succeeded in negotiating a resolution of the Dispute, the
parties agree to submit the Dispute to mediation in accordance with
the Commercial Mediation Rules of the American Arbitration
Association.
(c) The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the
American Arbitration Association if they have been unable to agree on
such appointment within 10 days following the 10-day period referred
to in clause (b) above.
(d) On appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating
thereto for 15 days.
(e) If the parties are not successful in resolving the
Dispute through mediation within such 15-day period, the parties agree
that the Dispute shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association.
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(f) The fees and expenses of the mediator/arbitrators
shall be borne solely by the non-prevailing party or, in the event
there is no clear prevailing party, shall be borne by the Company.
(g) If any dispute shall arise under this Agreement
involving termination of the Employee's employment with the Company or
involving the failure or refusal of the Company to fully perform in
accordance with the terms hereof, the Company shall reimburse the
Employee, on a current basis, for all legal fees and expenses, if any,
incurred by the Employee in connection with such dispute, together
with interest thereon at the prevailing legal rate of interest, such
interest to accrue from the date of Notice of Termination through the
date of payment thereof; provided, however, that in the event the
resolution of such dispute in accordance with this Section 16 includes
a finding denying, in total, the Employee's claims in such dispute,
the Employee shall be required to reimburse the Company, over a period
determined by the Employee but not to exceed 12 months from the date
of such resolution, for all sums advanced to the Employee with respect
to such dispute pursuant to this clause (g).
(h) Except as provided above, each party shall pay its
own costs and expenses (including, without limitation, reasonable
attorneys' fees) relating to any mediation/arbitration proceeding
conducted under this Section 16.
(i) All mediation/arbitration conferences and hearings
will be held in Houston, Texas.
16.2. In the event there is any disputed question of law involved in
any arbitration proceeding, such as the proper legal interpretation of any
provision of this Agreement, the arbitrators shall make separate and distinct
findings of all facts material to the disputed question of law to be decided
and, on the basis of the facts so found, express their conclusion of the
question of law. The facts so found shall be conclusive and binding on the
parties, but any legal conclusion reached by the arbitrators from such facts
may be submitted by either party to a court of law for final determination by
initiation of a civil action in the proper state or Federal court sitting in
Harris County, Texas. Such action, to be valid, must be commenced within 20
days after receipt of the arbitrators' decision. If no such civil action is
commenced within such 20-day period, the legal conclusion reached by the
arbitrators shall be conclusive and binding on the parties. Any such civil
action shall be submitted, heard and determined solely on the basis of the
facts found by the arbitrators. Neither of the parties shall, or shall be
entitled to, submit any additional or different facts for consideration by the
court. In the event any civil action is commenced under this Section 16.2, the
party who prevails or substantially prevails (as determined by the court) in
such civil action shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys' fees incurred in connection with such action
and on appeal.
16.3. Except as limited by Section 16.2 above, the parties agree
that judgment on the award rendered by the arbitrators may be entered in any
court of competent jurisdiction.
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In the event legal proceedings are commenced to enforce the rights awarded in
an arbitration proceeding, the party who prevails or substantially prevails in
such legal proceeding shall be entitled to recover from the other party all
costs, expenses and reasonable attorneys' fees incurred in connection with such
legal proceeding and on appeal.
16.4. Except as provided above, no legal action may be brought by
either party with respect to any Dispute. All Disputes shall be determined
only in accordance with the procedures set forth above.
SECTION 17. NO OTHER SEVERANCE BENEFITS. In the event the Employee
becomes entitled to severance payments under Section 3.3 of this Agreement,
then the amounts payable under this Agreement to the Employee shall be in lieu
of, and not in addition to, any similar severance amounts to which the Employee
may otherwise be entitled under a severance plan or program of the Company or
any employment contract or agreement with the Company.
IN WITNESS WHEREOF, the Company and the Employee have entered into
this Agreement as of the day and year first above written.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
-------------------------------------------
Robert M. Chiste
President and Chief Executive Officer
EMPLOYEE
/s/ William L. Fiedler
----------------------------------------------
William L. Fiedler
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EXHIBIT 10.28
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT (the "AGREEMENT"), by and between
ALLWASTE, INC., a Delaware corporation (the "COMPANY"), and MICHAEL W. RAMIREZ
(the "EMPLOYEE"), is entered into effective as of the 11th day of November,
1996.
W I T N E S S E T H:
WHEREAS, the Employee is a key employee of the Company, and the
Employee's experience and knowledge of the affairs of the Company are extremely
valuable to the Company; and
WHEREAS, the Company and the Employee have entered into that certain
Employment Agreement dated November 11, 1996 governing the Employee's
employment with the Company (the "EMPLOYMENT AGREEMENT"); and
WHEREAS, the Board of Directors of the Company (the "BOARD") believes
it imperative that the Company be able to rely on the Employee to continue his
services to the Company without concern that the Employee may be distracted by
the personal uncertainties and risks created by the possibility of a change in
control; and
WHEREAS, the Company is entering into this Agreement with the Employee
in order to ensure the Employee's continued services, dedication and
objectivity during such period as the Company may be susceptible to a change in
control and to define the nature and terms of the Employee's severance benefits
following a Change in Control (as defined in Section 9 below).
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and the Employee
hereby agree as follows.
SECTION 1. TERM. This Agreement shall commence on the date hereof
and shall continue until the expiration or termination of the Employment
Agreement, and to the extent that the Employment Agreement is renewed for
successive one-year periods, this Agreement shall be similarly renewed.
Notwithstanding any provision of this Agreement to the contrary, termination of
this Agreement shall not alter or impair any rights of the Employee (or the
Employee's estate or beneficiaries) that have arisen under this Agreement prior
to such termination.
<PAGE> 2
SECTION 2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL.
2.1 GENERAL.
(a) If a Change in Control occurs while the Employee is employed by
the Company and if during the Protected Period (as defined in paragraph (b)
below) the Employee's employment is terminated, whether by the Company or by
the Employee, then the Employee shall be entitled to the benefits specified in
Sections 3.3, 4 and 5 hereof, unless such termination is (i) due to the
Employee's death, (ii) by the Company on account of the Employee's Disability
as provided in Section 2.2 below, (iii) by the Company for Cause as provided in
Section 2.3 below, or (iv) by the Employee for other than Good Reason as
provided in Section 2.4 below, in which event the Employee shall not be
entitled to any benefits under this Agreement except as specified in Sections
3.1 and 3.2 hereof.
(b) For purposes of this Agreement, the "PROTECTED PERIOD" shall
mean the period of time beginning with a Change in Control and ending 18 months
following such Change in Control; provided, however, if the Employee's
employment with the Company terminates for any reason other than a termination
by the Company for Cause (as defined in Section 2.3 below) prior to, but within
six months of, the date on which a Change in Control occurs, then, for all
purposes of this Agreement: (A) the Employee shall be deemed to have continued
employment with the Company until the date of the Change in Control and then
terminated his employment on such date for Good Reason, and (B) the Protected
Period shall be deemed to have commenced immediately prior to the Employee's
actual termination of employment.
2.2. TERMINATION BY COMPANY ON ACCOUNT OF DISABILITY.
If a Change in Control occurs while the Employee is employed by the
Company and if, as a result of the Employee's illness, physical or mental
disability, or other incapacity which continues for an uninterrupted period in
excess of three (3) months or a cumulative period of six (6) months in any
twelve (12) month period during the Protected Period, and if, within 30 days
after the Company has given the Employee written notice of the Company's
intention to terminate the Employee on account of such incapacity, the Employee
shall not have returned to the full-time performance of the Employee's duties,
then the Company may thereafter terminate the Employee's employment on account
of "DISABILITY"; provided, however, such termination shall not by itself alter
or impair the Employee's rights as a "disabled employee" or otherwise under any
of the Company's employee benefit plans.
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<PAGE> 3
2.3 TERMINATION BY COMPANY FOR CAUSE.
If a Change in Control occurs while the Employee is employed by the
Company, the Company may, at any time during the Protected Period, terminate
the Employee's employment for Cause. For purposes of this Agreement, the
Company shall have "CAUSE" to terminate the Employee's employment hereunder
only if: (a) the Employee willfully and continually fails to perform
substantially the Employee's duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness), which failure continues unabated after a demand for substantial
performance is delivered to the Employee by the Board that specifically
identifies the manner in which the Board believes that the Employee has not
substantially performed the Employee's duties, or (b) the Employee willfully
engages in gross misconduct that is materially and demonstrably injurious to
the Company. For purposes of this Section 2.3, an act or failure to act on the
Employee's part shall be considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without reasonable belief that
the Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated by the Company for Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
the Board, at a meeting of the Board called and held for the purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), finding that, in
the good faith opinion of the Board, the Employee was guilty of conduct set
forth in clauses (a) or (b) of the second sentence of this Section 2.3 and
specifying the particulars thereof in reasonable detail.
2.4. TERMINATION BY EMPLOYEE FOR GOOD REASON.
If a Change in Control occurs while the Employee is employed by the
Company, the Employee may terminate the Employee's employment for Good Reason
at any time during the Protected Period. For purposes of this Agreement "GOOD
REASON" shall mean any of the following:
(a) The Employee is assigned any duties materially
inconsistent with, or diminished from, the Employee's positions,
duties, responsibilities and status with the Company immediately prior
to the commencement of the Protected Period, or the Employee's status,
reporting responsibilities, titles or offices are materially
diminished from those in effect immediately prior to the commencement
of the Protected Period, or the Employee is removed from or is not
re-elected or appointed to any of such responsibilities, titles,
offices or positions, or the Employee's duties and responsibilities
are materially increased without a corresponding increase in the
Employee's compensation (such increase in compensation to be
satisfactory to the Employee, in the Employee's sole reasonable
judgment), except in each case in connection with the termination of
the Employee's employment by the Company for Cause or on account of
Disability, or as a result of the Employee's death, or by the
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<PAGE> 4
Employee for other than Good Reason; provided, however, that Good
Reason shall not be triggered under this subsection (a) by an
insubstantial action not taken in bad faith and which is remedied by
the Company promptly after receipt of written notice from the
Employee; or
(b) The Employee's annual rate of base salary is reduced
from that in effect immediately prior to the commencement of the
Protected Period or as the same may be increased from time to time
thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction, is referred to hereinafter as
the "ANNUAL BASE SALARY"); provided, however, with respect to a
termination of employment prior to a Change in Control that is deemed
to have occurred on the date of the Change in Control, "Annual Base
Salary" shall be the Employee's annual rate of base salary as in
effect immediately prior to the Employee's actual date of termination,
but disregarding any reduction therein made within 30 days of the
Employee's actual termination date; or
(c) The Company fails to continue in effect any benefit
or compensation plan, including, but not limited to, the Company's
annual bonus plan, qualified retirement plan, executive life insurance
plan and/or health and accident plan, in which the Employee is
participating immediately prior to the commencement of the Protected
Period, or plans providing, in the sole reasonable judgment of the
Employee, the Employee with substantially similar benefits, or the
Company takes any action that would adversely affect the Employee's
participation in or reduce the Employee's benefits under any of such
plans (excluding any such action by the Company that is required by
law); or
(d) The Company's principal executive offices are
relocated at any time following a Change in Control more than 35 miles
from where such offices were located immediately prior to such Change
in Control; or
(e) The Company requires the Employee at any time
following a Change in Control to relocate more than 35 miles from
where the Company's principal executive offices were located
immediately prior to such Change in Control; or
(f) The Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated
in Section 7.1 hereof; or
(g) Any purported termination of the Employee's
employment by the Company that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2.5 below and, if
applicable, the procedures described in Section 2.3 above; or
(h) The amendment, modification or repeal of any
provision of the Certificate of Incorporation or Bylaws of the Company
that was in effect
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<PAGE> 5
immediately prior to the commencement of the Protected Period, if such
amendment, modification or repeal would materially adversely affect
Employee's rights to indemnification by the Company; or
(i) The Company shall violate or breach any obligation of
the Company in effect immediately prior to the commencement of the
Protected Period (regardless whether such obligation be set forth in
the Bylaws of the Company and/or in the Employment Agreement or any
other separate agreement entered into between the Company and the
Employee) to indemnify the Employee against any claim, loss, expense
or liability sustained or incurred by the Employee by reason, in whole
or in part, of the fact that the Employee is or was an officer or
director of the Company; or
(j) The Company shall violate or breach any other
material obligation of the Company owing to the Employee in effect
immediately prior to the commencement of the Protected Period relating
to the Employee's employment with the Company, but only if such
violation or breach (if capable of being remedied) shall continue
unremedied for more than 15 days after written notice thereof is given
by the Employee to the Company; or
(k) The Board (or any nominating committee of the Board)
fails to recommend and support the Employee's re-election as a
director of the Company if the Employee is a director of the Company
immediately prior to the commencement of the Protected Period; or
(l) The Company shall fail to keep in force, for the
benefit of the Employee, directors' and officers' insurance policy
with coverage amounts and scope equal to the coverage amounts and
scope under such policy immediately prior to the commencement of the
Protected Period.
2.5. NOTICE OF TERMINATION.
Any termination by the Company pursuant to Section 2.2 or 2.3 above or
by the Employee pursuant to Section 2.4 above shall be communicated by written
Notice of Termination to the other party hereto; provided, however, that in the
case of events of Good Reason enumerated in subsections (f), (h), (i) or (l) of
Section 2.4 hereof, the Company shall have the obligation to provide the
Employee with written notice of the occurrence of any of such events and the
Employee shall then have the opportunity to provide the Company with Notice of
Termination if he so elects. The Employee shall retain the ability to
terminate his employment for Good Reason under subsections (f), (h), (i) or (l)
of Section 2.4 hereof, even if the Company fails to provide written notice of
the occurrence of any of the events specified in such subsections as provided
herein. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a
notice that shall indicate the specific termination provision in this Agreement
relied on and, except in the case of the termination referred to in the last
subsection of Section 2.4 above, shall set forth in reasonable detail the
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<PAGE> 6
facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated. Any purported
termination of this Agreement not in compliance with the requirements of this
Section 2.5 or, if applicable, the procedures described in Section 2.3 above
shall be ineffective.
2.6. DATE OF TERMINATION. For purposes of this Agreement, "DATE OF
TERMINATION" shall mean: (a) if the Employee is terminated on account of
Disability pursuant to Section 2.2 above, 30 days after Notice of Termination
is given, provided that the Employee shall not have returned to the performance
of the Employee's duties on a full-time basis during such 30-day period; (b) if
the Employee's employment is terminated for Cause pursuant to Section 2.3
above, the date specified in the Notice of Termination; (c) with respect to a
termination of employment prior to a Change in Control that is deemed to have
occurred on the date of the Change in Control, the date of such Change in
Control; and (d) if the Employee's employment is terminated for any other
reason on or after a Change in Control, the date on which a Notice of
Termination is given; provided, however, in the event of any dispute or
controversy concerning the Employee's entitlement to payment under this
Agreement, solely for purposes of Section 3.3 below, concerning the timing of
the payment of amounts under this Agreement, the "Date of Termination" shall
mean the date of final resolution of such dispute or controversy.
SECTION 3. COMPENSATION DURING DISABILITY OR ON TERMINATION.
3.1. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee fails to
perform the Employee's normal duties as a result of Disability (as defined in
Section 2.2 hereof), the Employee shall continue during the period of
Disability to receive: (i) the Employee's full Annual Base Salary at the rate
then in effect, (ii) any awards, deferred and non-deferred, payable during such
period of disability under the Company's annual bonus plan, less any amounts
paid to the Employee during such period of Disability pursuant to the Company's
sick-leave or disability program until the Employee's employment is terminated
on account of Disability pursuant to Section 2.2 hereof, and (iii) all other
applicable perquisites, insurance and other employee benefits.
3.2. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Employee's employment
shall be terminated by the Company for Cause pursuant to Section 2.3 above, the
Company shall pay the Employee's earned but unpaid Annual Base Salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, and the Company shall have no further obligations to the Employee
under this Agreement, except those arising hereunder prior to the Date of
Termination.
3.3. If a Change in Control occurs while the Employee is employed
by the Company and if, during the Protected Period, the Company shall terminate
the Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during
the Protected Period, the Employee shall terminate the Employee's employment
for Good Reason in accordance with
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Section 2.4 hereof, then, subject to Section 5 below and the following
provisions of this Section 3.3, the Company shall pay to the Employee, in a
single lump sum by certified or bank cashier's check within five days of such
Date of Termination, the sum of the amounts specified in clauses (a), (b) and
(c) below:
(a) an amount equal to 2 times the sum of (i) the Annual
Base Salary and (ii) an annual target bonus of 60% of the Annual Base
Salary;
(b) an amount equal to that portion of the Annual Base
Salary earned, but not paid, and vacation earned, but not taken, in
each case, to the Date of Termination, and all other amounts
previously deferred by the Employee or earned but not paid as of such
date under all Company incentive or deferred compensation plans or
programs; and
(c) an amount equal to (i) the amount of the maximum
monthly premium payment that may be charged to continue coverage for
the Employee and the Employee's eligible dependents under the
Company's health insurance plan under COBRA, multiplied by (ii) 24
months.
Further, if a Change in Control occurs while the Employee is employed by the
Company and if, during the Protected Period, the Company shall terminate the
Employee other than pursuant to Sections 2.2 or 2.3 hereof or if, during the
Protected Period, the Employee shall terminate the Employee's employment for
Good Reason in accordance with Section 2.4 hereof, then, subject to Section 5
below, the Employee shall be credited with an additional 24 months of service
credit under the Company's Supplemental Executive Retirement Plan (the "SERP").
SECTION 4. ACCELERATION OF OPTION AND RESTRICTED STOCK GRANTS ON
A CHANGE IN CONTROL.
4.1. For purposes hereof, the term "ACCELERATION DATE" shall mean
the earliest date on which any of the following events shall first have
occurred: (i) the acquisition described in clause (a) of the definition of
Change in Control set forth in Section 9 hereof; (ii) the change in the
composition of the Board of Directors described in clause (b) of such
definition; (iii) the stockholder approval or adoption described in clauses (c)
or (d) of such definition; or (iv) the commencement date of any tender offer
subject to the terms of Section 14(d)(1) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), or exchange offer subject to the terms
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any other
offer or series of offers to purchase for cash, or to exchange for securities
of a person other than the Company, 30% or more of the Company's Common Stock
by any "person" or "group" of persons (as such terms are used on January 1,
1996 in Rule 13d of the Exchange Act) other than an offer or offers by the
Company or by employee benefit plan(s) sponsored by the Company ("TENDER
OFFER").
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<PAGE> 8
4.2. If an Acceleration Date occurs while the Employee holds
outstanding options under the Company's stock option plan(s), then from and
after the Acceleration Date, all options held by the Employee shall be
immediately exercisable in full.
4.3. If an Acceleration Date occurs while any shares of restricted
stock issued by the Company to the Employee (including those granted under the
Company's Target 2000: One, Two, Four Plan) remain subject to restrictions
and/or performance or other criteria relating thereto (the "RESTRICTIONS"),
then from and after the Acceleration Date: (i) all such Restrictions shall
lapse and be deemed satisfied in full, as applicable; and (ii) no later than
the fifth day following the Acceleration Date, the Company shall cause
unrestricted shares of stock to be delivered to the Employee.
SECTION 5. GROSS-UP OF PARACHUTE PAYMENTS.
5.1. To provide the Employee with adequate protection in connection
with his ongoing employment with the Company, this Agreement provides the
Employee with various benefits in the event of termination of the Employee's
employment with the Company during the Protected Period. If the Employee's
employment is terminated following a "change in control" of the Company, within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "CODE"), a portion of those benefits could be characterized as "excess
parachute payments" within the meaning of Section 280G of the Code. The
parties hereto acknowledge that the protections set forth in this Section 5 are
important, and it is agreed that the Employee should not have to bear the
burden of any excise tax that might be levied under Section 4999 of the Code,
in the event that a portion of the benefits payable to the Employee pursuant to
this Agreement are treated as an excess parachute payment. The parties,
therefore, have agreed as set forth in this Section 5.
5.2. Anything in this Agreement to the contrary notwithstanding, if
it shall be determined that any payment or distribution by the Company or any
other person to or for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (a "PAYMENT") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"EXCISE TAX"), then the Company shall pay an additional payment (a "GROSS-UP
PAYMENT") in an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments.
5.3. Subject to the provisions of Section 5.4 below, all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at
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<PAGE> 9
such determination, shall be made by an independent public accounting firm with
a national reputation that is selected by the Employee (the "ACCOUNTING FIRM")
which shall provide detailed supporting calculations both to the Company and to
the Employee within 15 business days after the receipt of notice from the
Employee that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change in control of
the Company, the Employee shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. The
Company shall indemnify and hold harmless the Employee, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties with respect
thereto) imposed on the Employee as a result of such payment of fees and
expenses. Any Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding on the Company and the Employee. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments may not have been made by the Company which should have been made
("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Section 5.4 below
and the Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Employee.
5.4. The Employee shall notify the Company in writing of any claim
(including any threatened tax lien related to or based on any such claim) by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Employee is
informed in writing of such claim (or threatened lien) and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due or such tax lien would be
imposed). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim (or threatened
lien), the Employee shall:
(a) give the Company any information reasonably requested
by the Company relating to such claim (or threatened lien);
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(b) take such action in connection with contesting such
claim (or threatened lien) as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order
effectively to contest such claim (or threatened lien); and
(d) permit the Company to participate in any proceedings
relating to such claim (or threatened lien);
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Subsection 5.4, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employee shall
determine (but in no event shall the Company permit or direct the Employee to
allow a tax lien to be imposed on the Employee's property); provided, further,
that if the Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Employee,
on an interest-free basis, and shall indemnify and hold the Employee harmless
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further,
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. In addition, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder, and
the Employee shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
5.5. If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 5.4, the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 5.4 above) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If after the receipt by the
Employee of an amount advanced by the Company pursuant to
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Section 5.4 above, a determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Employee in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
SECTION 6. NO MITIGATION OF DAMAGES.
The provisions of this Agreement are not intended to, nor shall they
be construed to, require that the Employee seek or accept other employment
following a termination of employment and, amounts payable and benefits
provided under this Agreement to the Employee shall not be reduced by the
Employee's acceptance of (or failure to seek or accept) employment with another
person. The Company's obligations to make the payments and provide the
benefits required for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, rights or action that the Company may have
against the Employee or others.
SECTION 7. SUCCESSORS; BINDING AGREEMENT.
7.1. The Company will require any successor, whether direct or
indirect, by purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required if no such succession had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated the Employee's employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 7.1 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
7.2. This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die while any amounts would still be payable to the Employee
hereunder if the Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Employee's devisee, legatee or other designee or, if none, to
the Employee's estate.
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SECTION 8. NOTICE. For the purpose of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, registered and return receipt requested, postage prepaid,
addressed to the respective addresses set forth below or to such other address
as either party shall have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only on
receipt.
If to the Company:
Allwaste, Inc.
5151 San Felipe, Suite 1600
Houston, Texas 77056
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to Employee:
Michael W. Ramirez
3146 Confederate South Drive
Missouri City, Texas 77459
SECTION 9. CHANGE IN CONTROL.
For purposes of this Agreement, a "CHANGE IN CONTROL" shall be deemed
to have occurred on, and shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (1) the then
outstanding shares of Common Stock of the Company (the "OUTSTANDING
COMPANY COMMON STOCK") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following such reorganization, merger
or consolidation, the conditions described in clauses (1), (2) and (3)
of paragraph (c) of this Section 9 are satisfied; or
12
<PAGE> 13
(b) Individuals who, as of the date hereof, constitute
the entire Board (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either (1) an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or
more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trust(s)) of the Company
and/or its subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all
13
<PAGE> 14
or substantially all of the assets of the Company, other than to a
corporation, with respect to which immediately following such sale or
other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company and/or
its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (C) at least a majority of the members
of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company.
SECTION 10. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement includes employment with any entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of all outstanding equity interests, it being
understood that for purposes of clause (a) of Section 2.4 hereof, "Good Reason"
shall be construed to refer to each of the Employee's positions, duties,
responsibilities (reporting and other), status, titles and offices with the
Company and each of its subsidiaries.
SECTION 11. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Employee and by the Chairman of the
Compensation Committee of the Board or other authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
SECTION 12. VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. The invalidity or unenforceability of any
provisions of this Agreement shall not
14
<PAGE> 15
affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
SECTION 14. DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 15. CORPORATE APPROVAL. This Agreement has been
approved by the Board of Directors, and has been duly executed and delivered by
Employee and on behalf of the Company by its duly authorized representative.
SECTION 16. DISPUTE RESOLUTION.
16.1. In the event a dispute shall arise between the parties as to
whether the provisions of this Agreement have been complied with (a "DISPUTE"),
the parties agree to resolve such Dispute in accordance with the following
procedure:
(a) A meeting shall be held promptly between the parties,
attended by (in the case of the Company) one or more individuals with
decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
(b) If, within 10 days after such meeting, the parties
have not succeeded in negotiating a resolution of the Dispute, the
parties agree to submit the Dispute to mediation in accordance with
the Commercial Mediation Rules of the American Arbitration
Association.
(c) The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the
American Arbitration Association if they have been unable to agree on
such appointment within 10 days following the 10-day period referred
to in clause (b) above.
(d) On appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating
thereto for 15 days.
(e) If the parties are not successful in resolving the
Dispute through mediation within such 15-day period, the parties agree
that the Dispute shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association.
15
<PAGE> 16
(f) The fees and expenses of the mediator/arbitrators
shall be borne solely by the non-prevailing party or, in the event
there is no clear prevailing party, shall be borne by the Company.
(g) If any dispute shall arise under this Agreement
involving termination of the Employee's employment with the Company or
involving the failure or refusal of the Company to fully perform in
accordance with the terms hereof, the Company shall reimburse the
Employee, on a current basis, for all legal fees and expenses, if any,
incurred by the Employee in connection with such dispute, together
with interest thereon at the prevailing legal rate of interest, such
interest to accrue from the date of Notice of Termination through the
date of payment thereof; provided, however, that in the event the
resolution of such dispute in accordance with this Section 16 includes
a finding denying, in total, the Employee's claims in such dispute,
the Employee shall be required to reimburse the Company, over a period
determined by the Employee but not to exceed 12 months from the date
of such resolution, for all sums advanced to the Employee with respect
to such dispute pursuant to this clause (g).
(h) Except as provided above, each party shall pay its
own costs and expenses (including, without limitation, reasonable
attorneys' fees) relating to any mediation/arbitration proceeding
conducted under this Section 16.
(i) All mediation/arbitration conferences and hearings
will be held in Houston, Texas.
16.2. In the event there is any disputed question of law involved in
any arbitration proceeding, such as the proper legal interpretation of any
provision of this Agreement, the arbitrators shall make separate and distinct
findings of all facts material to the disputed question of law to be decided
and, on the basis of the facts so found, express their conclusion of the
question of law. The facts so found shall be conclusive and binding on the
parties, but any legal conclusion reached by the arbitrators from such facts
may be submitted by either party to a court of law for final determination by
initiation of a civil action in the proper state or Federal court sitting in
Harris County, Texas. Such action, to be valid, must be commenced within 20
days after receipt of the arbitrators' decision. If no such civil action is
commenced within such 20-day period, the legal conclusion reached by the
arbitrators shall be conclusive and binding on the parties. Any such civil
action shall be submitted, heard and determined solely on the basis of the
facts found by the arbitrators. Neither of the parties shall, or shall be
entitled to, submit any additional or different facts for consideration by the
court. In the event any civil action is commenced under this Section 16.2, the
party who prevails or substantially prevails (as determined by the court) in
such civil action shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys' fees incurred in connection with such action
and on appeal.
16.3. Except as limited by Section 16.2 above, the parties agree
that judgment on the award rendered by the arbitrators may be entered in any
court of competent jurisdiction.
16
<PAGE> 17
In the event legal proceedings are commenced to enforce the rights awarded in
an arbitration proceeding, the party who prevails or substantially prevails in
such legal proceeding shall be entitled to recover from the other party all
costs, expenses and reasonable attorneys' fees incurred in connection with such
legal proceeding and on appeal.
16.4. Except as provided above, no legal action may be brought by
either party with respect to any Dispute. All Disputes shall be determined
only in accordance with the procedures set forth above.
SECTION 17. NO OTHER SEVERANCE BENEFITS. In the event the Employee
becomes entitled to severance payments under Section 3.3 of this Agreement,
then the amounts payable under this Agreement to the Employee shall be in lieu
of, and not in addition to, any similar severance amounts to which the Employee
may otherwise be entitled under a severance plan or program of the Company or
any employment contract or agreement with the Company.
IN WITNESS WHEREOF, the Company and the Employee have entered into
this Agreement as of the day and year first above written.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
-------------------------------------------
Robert M. Chiste
President and Chief Executive Officer
EMPLOYEE
/s/ Michael W. Ramirez
----------------------------------------------
Michael W. Ramirez
17
<PAGE> 1
EXHIBIT 10.29
ALLWASTE, INC.
INTERIM MANAGEMENT BONUS PLAN - FISCAL 1996
I. PURPOSE
To provide incentive to Company management for individual and company
performance.
II. DEFINITIONS
A. Eligible Personnel (Person)
Participating personnel shall be designated in writing at the
beginning of the fiscal year (or as soon thereafter as
practicable) and approved by the Chief Executive Officer
("CEO"); provided, however, that the Compensation Committee of
the Board of Directors shall select and approve the
participation of any person subject to Section 16 of the
Securities Exchange Act of 1934, as amended (a "Section 16
Insider"). Personnel may be added or deleted during the year
in accordance with the foregoing procedure.
B. Eligible Salary
The cumulative W-2 earnings from 9-1-95 through 8-31-96
derived from base salary. This excludes any and all earnings
not included in base salary, such as bonus, car allowance,
etc.
C. Current Plan Year
The Company's most recent fiscal year - (Fiscal 1996)
D. Plan Year Earnings per Share (EPS)
Consolidated EPS determined in accordance with generally
accepted accounting principles.
<PAGE> 2
III. BONUS POOL
The Bonus Pool is 80% of the following:
90% of the Eligible Salaries of all Category I Eligible
Personnel (i.e. 72%), plus
75% of the Eligible Salaries of all Category II Eligible
Personnel (i.e. 60%), plus
60% of the Eligible Salaries of all Category III Eligible
Personnel (i.e. 48%), plus
30% of the Eligible Salaries of all Category IV Eligible
Personnel (i.e. 24%), plus
20% of the Eligible Salaries of all Category V Eligible
Personnel (i.e. 16%).
The Participation Level of each Eligible Person shall be approved by
the CEO.
IV. EPS BONUS POOL
The EPS Bonus Pool is calculated by multiplying the Bonus Pool amount
by the Funding Percentage attributed to EPS. The percentage of the
EPS Bonus Pool funded is determined as follows:
<TABLE>
<CAPTION>
Total 1996 Funding
Earnings/Share Percentage
-------------- ----------
<S> <C> <C>
$ .25 25%
$ .27 40%
$ .29 55%
$ .31 70%
$ .33 85%
$. 35 100%
over $. 35 pro-rated
</TABLE>
V. BONUS AWARDS TO ELIGIBLE PERSONS
1. The EPS Bonus Pool makes up the First Component and will be
awarded to the Eligible Persons as follows:
First Component - 75% for Categories I, II and III and 50% for
Categories IV and V of the Bonus Pool will be allocated pro-rata in
accordance with the EPS and percentages outlined in (IV.) above.
<PAGE> 3
2. The Second Component is based on the following percentages of the
Bonus Pool:
Second Component - 25% for Categories I, II and III and 50% for
Categories IV and V of the Bonus Pool will be available to be
allocated to Eligible Personnel based upon individual performance. It
is not mandatory that all of the Bonus Pool available in the Second
Component be awarded to remaining Eligible Personnel. The CEO will
approve Second Component awards to all employees except Section 16
Insiders. The Compensation Committee will approve Second Component
allocations to Section 16 Insiders. Any amounts not awarded will not
be reallocated to other participants.
VI. APPROVAL, TIMING AND PAYMENT
A. The Interim Management Bonus Plan will become final after approval
by the Compensation Committee of the Board of Directors. Final
approval of Section 16 Insider participants rests with the
Compensation Committee.
B. Awards will be made by November 15, 1996. Fifty percent (50%) of
any amount awarded pursuant to Section V. in excess of $5,000 will be
deferred until November 15, 1997. The deferred amount will be
increased or decreased by a factor determined by the ratio of the
average closing price of ALW stock for the months of June, July, and
August 1997, to the average closing price of ALW stock for the months
of June, July, and August 1996.
C. Any Eligible Person tendering a resignation or whose employment is
terminated for cause prior to any payment date forfeits all unpaid
bonus. The Compensation Committee shall determine whether an
authorized leave of absence, sickness, disability or absence on
military or government service constitutes termination of the
employment relationship between the Company and employee. In the
event of an Eligible Person's death before the end of the Current Plan
Year, the Eligible Person shall be included in the bonus calculation
for the Current Plan Year. For the purpose of the Bonus Pool, death
will not be considered an event of termination of employment. The
Compensation Committee of the Board of Directors, in its sole
discretion, has the authority to amend this Interim Management Bonus
Plan or to change the participation herein at any time prior to the
awarding of bonuses as provided in this paragraph VI.B.
VII. MISCELLANEOUS
A. Non-Transferability
Interests under this Interim Management Bonus Plan shall not
be transferable by a participant except by will or the laws of
descent and distribution (or to a beneficiary designated in
accordance with procedures specified by the Company) or, if
then permitted under Rule 16 b-3, pursuant to a qualified
domestic relations order (as defined under the Internal
Revenue Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended).
<PAGE> 4
B. Compliance With Rule 16a-1(c)(3)(i)
It is the intent of the Company that interests under this Plan
not constitute "derivative securities" within the meaning of
Rule 16a-1(c) under the Securities Exchange Act of 1934, as
amended, by virtue of the exclusion under Rule 16a-1(c)(3)(i).
Accordingly, if any provisions of this Interim Management
Bonus Plan or any related document relating to a participant
who is a Section 16 Insider does not comply with the
requirements of the Rule 16a-1(c)(3)(i) exclusion, such
provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.
<PAGE> 1
EXHIBIT 10.30
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement (the "Amendment") is made
and entered into as of this 11th day of November, 1996, by and between
Allwaste, Inc., a Delaware corporation (the "Company"), and Robert M. Chiste
(the "Employee").
WHEREAS, the Company and the Employee are parties to an Employment
Agreement dated October 17, 1994 (the "Agreement") which is attached hereto as
Addendum 1 and is incorporated herein in its entirety by reference, pursuant to
which the Employee has performed certain services to the Company; and
WHEREAS, the Company and the Employee amended the Agreement pursuant
to that certain First Amendment to Employment Agreement dated October 26, 1995
(the "First Amendment") and that certain Second Amendment to Employment
Agreement dated October 25, 1996 (the "Second Amendment"); and
WHEREAS, the Company and the Employee desire to further amend the
Agreement as provided herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises and representations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged herein,
the Company and the Employee agree as follows:
1. Subparagraph 1(a) of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
(a) EMPLOYMENT. The Company hereby employs
Employee as its President and Chief Executive Officer. The
Board of Directors may request that the Employee serve in
various capacities for the Company's subsidiaries; however, in
connection with such service, the Employee shall not be
requested to undertake duties and responsibilities that are
substantially different than those assigned to the Employee as
a result of his primary position with the Company or that are
unreasonable (or inconsistent with those given to
similarly-situated employees) considering the skills and
expertise of the Employee and the condition of the Company.
The Employee hereby accepts this employment under the terms
and provisions herein contained and agrees to devote his full
time, attention and efforts to promote and further the
business and services of the Company. The Employee shall
faithfully adhere to, execute and fulfill all policies
(written and unwritten) established by the Company.
2. Section 2(a) of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
(a) BASE SALARY. The base salary payable to the Employee
under this Agreement shall be $325,000 per year, payable in
equal bi-weekly installments or
Page 1 of 6 Pages
<PAGE> 2
on any other periodic basis consistent with the Company's
payroll procedures, which amount may be increased from time to
time.
3. Subparagraph 2(b)(iv) of the Agreement is hereby amended by deleting
the subparagraph in its entirety and substituting the following in replacement
thereof:
(iv) The Employee shall be eligible to participate
in the Company's incentive bonus plan, deferred compensation
plan, and supplementary executive retirement plan, as each may
be in effect from time to time.
4. Section 6 of the Agreement is hereby amended by deleting the
subparagraph in its entirety and substituting the following in replacement
thereof:
6. TERM; TERMINATION; COMPENSATION AND OTHER RIGHTS ON
TERMINATION.
The term of this Agreement shall begin on the date of this
Agreement and, unless terminated as herein provided, continue for a
term of five (5) years and thereafter on a year-to-year basis on the
same terms and conditions contained herein.
(a) TERMINATION AS A RESULT OF THE EMPLOYEE'S DEATH.
(1) This Agreement will terminate
automatically on the death of the Employee.
(2) Compensation and Benefits. The Company
shall pay to the Employee's beneficiary an amount
equal to accrued compensation owing to the Employee
on the date of his death (including, without
limitation, salary, pro rata bonus (if any and
subject to the terms and conditions of any applicable
bonus or incentive compensation plans), deferred
compensation and accrued vacation pay), together with
applicable death benefits, if any. In accordance
with the Company's Amended and Restated 1989
Replacement Non-Qualified Stock Option Plan (as the
same may be amended from time to time, the "Option
Plan"), the Employee's beneficiary shall be entitled
to exercise all exercisable stock options held by the
Employee as of the date of death until the earlier of
(i) the one-year period following the date of death
or (ii) the date the option would otherwise expire.
(b) TERMINATION BY THE COMPANY ON ACCOUNT OF DISABILITY.
(1) If, as a result of the Employee's
inability to perform his duties under this Agreement
(with or without reasonable accomodation) because of
illness, physical or mental disability, or other
incapacity which continues for
Page 2 of 6 Pages
<PAGE> 3
an uninterrupted period in excess of three (3) months
or a cumulative period of six (6) months in any
twelve (12) month period, and if, within thirty (30)
days after the Company has given the Employee written
notice of the Company's intention to terminate the
Employee's employment hereunder as a result of such
incapacity, the Employee shall not have returned to
the full-time performance of his duties hereunder,
then the Company may thereafter terminate the
Employee's employment on account of "DISABILITY";
provided, however, such termination shall not by
itself alter or impair the Employee's rights as a
"disabled employee" or otherwise under any of the
Company's employee benefit plans.
(2) Compensation and Benefits. The Company
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, without limitation, salary,
pro rata bonus (if any and subject to the terms and
conditions of any applicable bonus or incentive
compensation plans), deferred compensation and
accrued vacation pay). Subject to approval by the
Compensation Committee, the Company shall cause all
stock options held by the Employee to be regranted
under the Company's 1992 Limited Non-Qualified Stock
Option Plan (the "1992 Plan") so that such options
continue to vest and remain exercisable for a period
of twelve months following the date of termination.
Whenever compensation is payable to the Employee
hereunder during a period in which he is partially or
totally disabled, and such Disability would (except
for the provisions hereof) entitle the Employee to
Disability income or salary continuation payments
from the Company according to the terms of any plan
or program presently maintained or hereafter
established by the Company, the Disability income or
salary continuation paid to the Employee pursuant to
any such plan or program shall be considered a
portion of the payment to be made to the Employee
pursuant to this Section 7(b)(2) and shall not be in
addition hereto. If Disability income is payable
directly to the Employee by an insurance company
under the terms of an insurance policy paid for by
the Company, the amounts paid to the Employee by such
insurance company shall be considered a portion of
the payment to be made to the Employee pursuant to
this Section 7(b)(2) and shall not be in addition
hereto.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(1) The Company may at any time during the
term of this Agreement, in its sole discretion,
terminate the Employee's employment with the Company
for "Cause." For purposes of this Agreement, the
following shall constitute "CAUSE": (1) the Employee
willfully and continually fails to perform
substantially the Employee's duties with the Company
(other than any such
Page 3 of 6 Pages
<PAGE> 4
failure resulting from the Employee's incapacity due
to physical or mental illness), which failure
continues unabated after a written demand for
substantial performance is delivered to the Employee
by the President or the Chairman of the Board that
specifically identifies the manner in which the
President or the Board believes that the Employee has
not substantially performed the Employee's duties;
(2) the Employee willfully engages in gross
misconduct that is materially and demonstrably
injurious to the Company; or (3) the Employee is
convicted of a felony crime by a court of competent
jurisdiction.
For purposes of this Section 6(c), an act or
failure to act on the Employee's part shall be
considered "willful" if done or omitted to be done by
the Employee otherwise than in good faith and without
reasonable belief that the Employee's action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Employee shall not
be deemed to have been terminated by the Company for
Cause unless and until the Company shall have
delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than a
majority of the entire membership of the Board, at a
meeting of the Board called and held for the purpose
(after reasonable notice to the Employee and an
opportunity for the Employee, together with the
Employee's counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board,
the Employee was guilty of conduct set forth in
clauses (a) or (b) of the second sentence of this
Section 7(c) and specifying the particulars thereof
in reasonable detail.
(2) Compensation and Benefits. The Company
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, salary and accrued vacation
pay). In accordance with the Company's Option Plan,
the Employee shall be entitled to exercise all
exercisable stock options held by the Employee as of
the date of termination until the expiration of the
three-month period following such date of
termination.
(d) TERMINATION BY THE EMPLOYEE.
(1) At any time after the execution of this
Agreement, the Employee may elect to terminate this
Agreement and the Employee's employment hereunder.
(2) Compensation and Benefits. In the event
the Employee terminates this Agreement for any
reason, the Employee shall be entitled to receive an
amount equal to accrued compensation owing to the
Employee as of the date of termination (including,
without limitation, salary, pro rata
Page 4 of 6 Pages
<PAGE> 5
bonus (if any and subject to the terms and conditions
of any applicable bonus or incentive compensation
plans), deferred compensation and accrued vacation
pay). In accordance with the Company's Option Plan,
the Employee shall be entitled to exercise all
exercisable stock options held by the Employee as of
the date of termination until the expiration of the
three-month period following such date of
termination.
(e) TERMINATION BY THE COMPANY FOR OTHER THAN CAUSE.
(1) At any time after the execution of
this Agreement, the Company may, without Cause, elect
to terminate this Agreement and the Employee's
employment hereunder.
(2) Compensation and Benefits. In the
event the Company elects to terminate this Agreement
pursuant to this Section 7(e), the Employee shall be
entitled to receive his monthly base salary for 24
months (the "Severance Period"), payable in
accordance with the Company's customary payroll
procedures, as severance. In addition, the Company
shall pay to the Employee an amount equal to accrued
compensation owing to the Employee as of the date of
termination (including, without limitation, salary,
pro rata bonus (if any and subject to the terms and
conditions of any applicable bonus or incentive
compensation plans), deferred compensation and
accrued vacation pay). Subject to the approval of
the Compensation Committee, the Company shall cause
all stock options held by the Employee to be
regranted under the Company's 1992 Plan so that such
options continue to vest in accordance with the terms
of the original grants during the Severance Period
and shall remain exercisable until three months
following the earlier of the date of final vesting of
any such option grant or the final date of the
Severance Period. The Company shall also pay to the
Employee an amount equal to (a) the amount of of the
monthly premium payment to continue coverage for the
Employee and the Employee's eligible dependents under
the Company's health insurance plan under COBRA,
multiplied by (b) 24 months. Further, the Employee
shall be credited with an additional 24 months of
service credit under the Company's Supplemental
Executive Retirement Plan.
(f) SURVIVING OBLIGATIONS FOLLOWING TERMINATION.
(1) In the event of termination of this
Agreement for any reason provided in this Section 6
herein or if Employee resigns prior to the expiration
of the term of this Agreement, all rights and
obligations of the Company and the Employee under
this Agreement shall cease immediately, except that
Employee's obligations under Sections 3, 4, 5 and 7
herein shall survive such
Page 5 of 6 Pages
<PAGE> 6
termination, and except as otherwise provided in this
Section 6, the Employee shall thereafter have no
right to receive any compensation hereunder.
5. This Amendment shall be governed by and construed in accordance with
the laws of the State of Texas.
6. The Agreement, as amended by the First Amendment and this Amendment,
supersedes any and all other agreements, either oral or in writing, between
Company and the Employee with respect to the employment of the Employee by the
Company and contains all of the representations, covenants and agreements
between the Company and the Employee with respect to such employment. The
Agreement, as amended, may not be later modified except by a further writing
signed by the Company and the Employee, and no term of this Agreement may be
waived except by writing signed by the party waiving the benefit of such term.
7. Except as modified by this Amendment, all other terms of the Agreement
shall continue in full force and effect without modification.
IN WITNESS WHEREOF, the parties have executed this Third Amendment to
Employment Agreement in duplicate originals, effective as of November 11, 1996.
ALLWASTE, INC.
By: /s/ William L. Fiedler
---------------------------------------------------
William L. Fiedler
Vice President, General Counsel, Secretary and
Corporate Compliance Officer
ROBERT M. CHISTE
/s/ Robert M. Chiste
------------------------------------------------------
Robert M. Chiste
Page 6 of 6 Pages
<PAGE> 1
EXHIBIT 10.31
[ALLWASTE LOGO]
EVA(R) INCENTIVE COMPENSATION PLAN
SUMMARY PLAN DOCUMENT AND
EXAMPLE CALCULATIONS
AREA/LOCATION PARTICIPANTS
OPERATING GROUP PARTICIPANTS
CORPORATE SUPPORT GROUP PARTICIPANTS
EVA is a registered trademark of Stern Stewart & Co.
<PAGE> 2
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
SUMMARY PLAN DOCUMENT
================================================================================
1. OBJECTIVES AND SUMMARY DESCRIPTION OF THE PLAN
The primary objectives of the Allwaste EVA Incentive Compensation Plan (the
"Plan") are to create a strong incentive for key Allwaste employees to
increase stockholder value and to maintain reasonable compensation risk
among Plan participants, at a reasonable cost to Allwaste stockholders.
Allwaste believes that the best method of motivating its key employees to
increase stockholder value is to give those employees a "share" of that
increase. The Plan gives key employees the ability to share in increases
in stockholder value by linking their incentive compensation to the
"Incremental EVA Improvement" (as defined below). Each Plan Participant
will have an account in an "Incentive Bank(s)" (as defined below), which
will ensure that cumulative incentives paid over time will be proportionate
to the cumulative Incremental EVA Improvement generated by Allwaste and its
Business Units (as defined below) and will encourage Allwaste's key
employees to balance short- and long-term decisions. The Plan will thus
directly align the interests of Allwaste's employees and stockholders.
The Plan, as broadly depicted in the chart below, achieves these
objectives by utilizing several key concepts, all of which are defined in
Section 2 of this Plan:
[CHART]
<PAGE> 3
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
2. DEFINITIONS
A. "ALLWASTE" shall mean Allwaste, Inc. or the Allwaste subsidiary or
affiliate that employs a Plan Participant.
B. "AREA/LOCATION" shall mean any of the Allwaste field locations or group
of locations (area).
C. "AREA/LOCATION FACTOR" shall mean, for a particular Area/Location, that
factor derived from an equally-weighted average of (i) such
Area/Location's prior year gross revenue divided by the aggregate prior
year gross revenue of all Area/Locations in the applicable Group for
such Area/Location (the "Consolidated Group"); (ii) such
Area/Location's prior year field payroll divided by the aggregate prior
year field payroll for the Consolidated Group; and (iii) such
Area/Location's prior year average capital divided by the aggregate
prior year average capital for the Consolidated Group. This factor may
be adjusted by the applicable Group Vice President, subject to review
by the Senior Vice President of Operations, to maintain equitable
allocations in the event of acquisition or divestiture, etc.
D. "AREA/LOCATION PARTICIPANTS" shall mean the general managers of each
Area/Location and such other Area/Location operating, support and sales
personnel as may be designated as Plan Participants by the Group Vice
Presidents and/or the Area/Location general managers.
E. "BUSINESS UNITS" shall mean Allwaste, and all of the Area/Locations and
Operating Groups comprising Allwaste, as the same may exist from time
to time.
F. "CAUSE" shall mean any of the following reasons (which reasons shall
not be exhaustive) for which Allwaste has terminated a Plan
Participant's employment: (i) the Participant consistently fails to
perform the duties of his/her position after receipt of written notice
of such failure; (ii) the Participant materially breaches a policy,
whether written or unwritten, that is generally enforced against other
employees, which breach causes or is likely to cause damage to
Allwaste; (iii) the Participant commits, or attempts to commit, a
willful action, specifically including, fraud with respect to the
business or affairs of Allwaste, that results in injury to the
financial condition or business reputation of Allwaste; (iv) the
Participant is convicted of a felony crime or other crime involving
fraud, theft or moral
================================================================================
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<PAGE> 4
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
turpitude; or (v) alcohol or drug abuse or illegal drug use by the
Participant.
G. "CHANGE IN CONTROL" shall have the meaning specified in Appendix A to
this Plan.
H. "CORPORATE SUPPORT GROUP PARTICIPANTS" shall mean the Allwaste, Inc.
officers and other key corporate support personnel designated as Plan
Participants from time to time by Allwaste's President and Chief
Executive Officer.
I. "EVA" shall mean "Economic Value Added," a fundamental measure of
corporate performance. EVA is the residual income that remains after
operating profits cover a predetermined return on the capital used in
the operation of the Business Units.
J. "INCENTIVE BANK" shall mean the accounting maintained for each Plan
Participant's cumulative Incentive Declarations under the Plan. All
Incentive Declarations maintained in a Plan Participant's Incentive
Bank shall not accrue interest and shall be subject to forfeiture, as
provided in Section 4(B).
K. "INCENTIVE DECLARATION" shall mean the share of Incentive Pool(s) added
to (subtracted from) a Plan Participant's Incentive Bank(s), calculated
as provided in Section 3(3).
L. "INCENTIVE PAYMENT" shall mean the payment of two-thirds of a
Participant's positive Incentive Bank balance made to such Participant
within three months after the end of a Plan Year, subject to Section
4(B).
M. "INCENTIVE POOL" shall mean, for each Business Unit, the percentage of
each dollar of Incremental EVA Improvement above (below) the Threshold
EVA Improvement that will be added to (subtracted from) the Incentive
Bank(s). The Incentive Pool(s) shall be calculated as provided in
Section 3(B).
N. "INCREMENTAL EVA IMPROVEMENT" shall mean, as of the end of the Plan
Year, the dollar amount of incremental improvement in EVA as measured
by subtracting the Threshold EVA Improvement from the actual EVA
Improvement for such Plan Year.
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<PAGE> 5
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
O. "OPERATING GROUP" shall mean the Central, Container, North, Northeast,
Pacific, Southeast and AllQuest Enterprises Groups of Allwaste, as the
same may be configured from time to time.
P. "OPERATING GROUP FACTOR" shall mean, for a particular Operating Group,
that factor derived from an equally-weighted average of (i) such
Consolidated Group's (as defined in Section 2(3)) prior year gross
revenue divided by the aggregate prior year gross revenue of all of the
participating Consolidated Groups; (ii) such Consolidated Group's prior
year field payroll divided by the aggregate prior year field payroll of
all of the participating Consolidated Groups; and (iii) such
Consolidated Group's prior year average capital divided by the
aggregate prior year average capital of all of the participating
Consolidated Groups. This factor may be adjusted by the Senior Vice
President of Operations, subject to review by the President and Chief
Executive Officer, to maintain equitable allocation among the
participating Operating Groups.
Q. "OPERATING GROUP PARTICIPANTS" shall mean the Group Vice Presidents and
the members of the Operating Group support staff designated as Plan
Participants by the Group Vice Presidents, subject to review by the
Senior Vice President of Operations.
R. "PLAN" shall mean this Allwaste EVA Incentive Compensation Plan, as the
same may be amended from time to time.
S. "PLAN PARTICIPANT" shall mean Corporate Support Group Participants,
Operating Group Participants and Area/Location Participants.
T. "PLAN YEAR" shall mean the period corresponding to Allwaste's fiscal
year, as the same may be amended from time to time.
U. "THRESHOLD EVA IMPROVEMENT" for Allwaste and each Operating Group will
be set as the estimate of investor expectations for Allwaste's
operating performance and will be derived from the relationship between
Allwaste's market capitalization, capital, and current actual EVA.
Threshold EVA Improvement for each Area/Location will be determined by
the applicable Group Vice President, subject to review by Allwaste's
Senior Vice President of Operations.
================================================================================
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<PAGE> 6
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
3. INCENTIVE DECLARATIONS AND PAYMENTS
A. PERFORMANCE MEASUREMENT
Incentive Declarations will be allocated to the Incentive Bank(s) for
each Plan Participant from the applicable Incentive Pool(s) (as
described below) based on the Incremental EVA Improvement during each
Plan Year.
o Incentive Declarations for Corporate Support Group Participants will
be based on the Incremental EVA Improvement for Allwaste.
o Incentive Declarations for Operating Group Participants will be
based on the Incremental EVA Improvement for Allwaste and for their
respective Operating Group.
o Incentive Declarations for Area/Location Participants will be based
on the Incremental EVA Improvement for their respective Operating
Group and respective Area/Location.
Incentive Declarations will be based on Incremental EVA Improvement
before deducting the incentive accrual. Any incentive bonuses or
compensation declared and/or paid based on any other plan (e.g., safety
plans) will be deducted before calculating Incremental EVA Improvement.
Certain bonuses paid for fiscal year 1996 may be considered in
determining Incremental EVA Improvement for fiscal year 1997.
B. INCENTIVE POOLS
Incentive Pools for a given Business Unit in a given Plan Year will be
calculated as follows:
1. AREA/LOCATION PARTICIPANTS INCENTIVE POOLS
Each Area/Location will have two Incentive Pools, calculated as
follows:
o 30% x Area/Location Incremental EVA Improvement AND
o 10% x applicable Operating Group Incremental EVA
Improvement x Area/Location Factor
================================================================================
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<PAGE> 7
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
2. OPERATING GROUP PARTICIPANTS INCENTIVE POOLS
Each Operating Group will have two Incentive Pools, calculated as
follows:
o 12% x Operating Group Incremental EVA Improvement AND
o 4% x Allwaste Incremental EVA Improvement x Operating Group
Factor
3. CORPORATE SUPPORT GROUP PARTICIPANTS INCENTIVE POOL
The Corporate Support Group will have a single Incentive Pool,
calculated as follows:
o 24% x Allwaste Incremental EVA Improvement
C. INCENTIVE DECLARATIONS
A Plan Participant's Incentive Declaration for each Plan Year will be
declared by multiplying their percentage allocation of the applicable
Incentive Pool(s) by the amount of such Incentive Pool(s). The
percentage allocations for each Area/Location Participant shall be
determined by the Area/Location Manager, subject to review of the
applicable Group Vice President. The percentage allocations for each
Operating Group Participant shall be determined by the applicable Group
Vice President, subject to review of Allwaste's Senior Vice President
of Operations. The percentage allocations for each Corporate Support
Group Participant shall be determined by the President and Chief
Executive Officer of Allwaste, except the allocation to the President
and Chief Executive Officer, which shall be subject to the review and
approval of the Compensation Committee of the Allwaste Board of
Directors. The distribution to the Incentive Bank(s) of an Incentive
Declaration shall under no circumstances exceed the total Incentive
Pool determined according to the above formula.
D. INCENTIVE BANKS/PAYMENTS
A Plan Participant's Incentive Declaration in a given Plan Year will be
added to (or subtracted from, as the case may be) such Participant's
Incentive Bank to determine the available Incentive Bank balance. It
is possible that the Incentive Bank balance may be negative.
================================================================================
Page 6
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<PAGE> 8
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
o 2/3 of any positive Incentive Bank balance will be paid as an
Incentive Payment to each Plan Participant within three months
following the end of the Plan Year, subject to the provisions of
Section 4(B) below.
o 1/3 of any positive Incentive Bank balance will be retained and
used as the beginning balance for the following year's Incentive
Declaration.
o 100% of any negative Incentive Bank balance will be carried forward
and used as the beginning balance for the following year's
Incentive Declaration.
Area/Location Participants will have separate Incentive Bank balances
and Incentive Payments for Area/Location Incentive Declarations and
Operating Group Incentive Declarations. Operating Group Participants
and Corporate Support Group Participants shall each have a single
Incentive Bank balance and Incentive Payment.
4. ADMINISTRATIVE REGULATIONS
A. NEW HIRES/TRANSFERS
1. NEW HIRES
A newly-hired Area/Location Participant who is an employee of Allwaste
for at least three months of a Plan Year may be eligible for an
Incentive Declaration in that Plan Year at the discretion of the
Area/Location general manager subject to review by the applicable Group
Vice President. A newly-hired Operating Group Participant who is an
employee of Allwaste for at least three months of a Plan Year may be
eligible for an Incentive Declaration in that Plan Year at the
discretion of the applicable Group Vice President, subject to review by
the Senior Vice President of Operations. A newly-hired Corporate
Support Group Participant who is an employee of Allwaste for at least
three months of a Plan Year may be eligible for an Incentive
Declaration in that Plan Year at the discretion of the President and
Chief Executive Officer of Allwaste.
Newly-hired Plan Participants with less than three months of service in
a Plan Year will not be eligible for an Incentive Declaration in that
Plan Year.
================================================================================
Page 7
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<PAGE> 9
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
2. TRANSFERS
A Plan Participant who is transferred from one Business Unit to another
Business Unit during a given Plan Year will receive Incentive
Declarations and Incentive Payments according to the following:
o The Incentive Declaration for the year of the transfer will be
determined according to the full year Incremental EVA Improvement
of both Business Units in which the Plan Participant worked during
the Plan Year, and prorated based on the number of months of
service in each such Business Unit.
o Any Incentive Bank balance(s), whether positive or negative, will
be carried forward and applied to future Incentive Declarations.
B. TERMINATIONS
1. CURRENT PLAN YEAR INCENTIVE PAYMENT
A Plan Participant whose employment with Allwaste terminates, for
whatever reason, before receipt of the Incentive Payment for a Plan
Year, will not be eligible to receive the Incentive Payment for
such Plan Year (even if an Incentive Declaration has been made or
determined at the time of termination).
2. INCENTIVE BANK BALANCES
a) If a Plan Participant's employment with Allwaste was
terminated as a result of his death or disability or by
Allwaste without Cause, any positive Incentive Bank
balance, as of the end of the previous Plan Year,
attributable to such terminated Plan Participant will be
paid in full at the time of termination.
b) If a Plan Participant voluntarily terminates his employment
with Allwaste, such Plan Participant shall thereby forfeit
all positive Incentive Bank balances that have not vested
(in accordance with the following paragraph) at the time
of termination.
c) Once a Plan Participant reaches the age of 55 and has been
employed by Allwaste for ten years, he will be vested in
50%
================================================================================
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<PAGE> 10
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
of his positive Incentive Bank balance for purposes of
distributions in connection with his retirement, and shall
vest in the remaining 50% of any positive Incentive Bank
balance at the rate of 10% per year until reaching the age
of 60, at which time he shall be fully-vested in any
positive Incentive Bank balance. The Plan Participant must
in all cases have completed the ten-year service
requirement before being entitled to receive any retirement
distribution of any positive Incentive Bank balances.
Vested Incentive Bank balances may increase or decrease as a
result of subsequent-year Incentive Declarations, and are
subject to forfeiture pursuant to the following paragraph.
d) If a Plan Participant is terminated by Allwaste for Cause,
such Plan Participant shall thereby forfeit all positive
Incentive Bank Balances, whether or not vested.
e) On a Change in Control (as defined in Appendix A), all
positive Incentive Bank balances will be paid to Plan
Participants.
5. MISCELLANEOUS
A. NO CONTRACT OF EMPLOYMENT. Allwaste intends that the Incentive
Declarations provided under this Plan be a part of each Plan
Participant's compensation package. Participation in this Plan does
not, however, constitute an agreement of the Participant to remain in
the employment of Allwaste or of Allwaste to continue to employ such
Plan Participant. Allwaste may, subject to other contractual
restrictions in a Plan Participant's employment agreement or otherwise,
terminate the employment of a Plan Participant at any time, with or
without Cause.
B. ADMINISTRATION; AMENDMENT AND TERMINATION OF PLAN. The Plan
will be administered by the Compensation Committee of the Allwaste
Board of Directors (the "Committee"). Decisions and determinations by
the Committee shall be final and binding on all parties. The Committee
shall have the authority to administer the Plan, make all
determinations regarding the construction and application of the Plan,
adopt and revise rules and regulations relating to the Plan and take
all other actions that it deems necessary and advisable for the
administration of the Plan. No
================================================================================
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<PAGE> 11
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN
================================================================================
member of the Committee shall be liable to any person for any action
taken or omitted in connection with the interpretation and
administration of this Plan. The Committee is expressly authorized to
appoint one or more individuals, who need not be members of the
Committee or the Board of Directors of Allwaste, to administer the Plan
and make all determinations with respect to the construction and
application of the Plan. Such agents shall serve at the discretion of
the Committee. The decisions taken by such agents taken within the
scope of their authority will have the same effect as decisions by the
Committee.
The Plan may be amended from time to time or terminated, with or
without notice to Plan Participants, by the Committee or by the
President and Chief Executive Officer of Allwaste.
C. TAXATION OF INCENTIVE PAYMENTS. Incentive Payments under this Plan will
be compensation subject to federal and state tax withholding
(including, without limitation, FICA withholding) in the calendar year
of payment of Incentive Payments to the Plan Participants.
D. EXAMPLE CALCULATION. The following is an illustrative, two-year
example of Incentive Pool Declarations and Individual Plan Participant
Incentive Payments.
================================================================================
Page 10
================================================================================
<PAGE> 12
EXAMPLE CALCULATIONS
AREA/LOCATION PARTICIPANTS
<PAGE> 13
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION
================================================================================
CALCULATION OF AREA/LOCATION INCENTIVE POOL DECLARATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSUMPTIONS (IN THOUSANDS)
--------------------------
AREA/LOCATION OPERATING GROUP
------------- ---------------
<S> <C> <C>
o Average Capital $ 5,000 $ 25,000
o Gross Revenue 10,000 42,000
o Field Payroll 1,000 4,000
o Prior Year Ending EVA 500 700
o Threshold EVA Improvement (200) (600)
o Area/Location Share 30% 10%
o Area/Location Factor * n/a 23%
- --------------------------------------------------------------------------------
AREA/LOCATION RESULTS OPERATING GROUP RESULTS
--------------------- -----------------------
YEAR 1
------
Year 1 Ending EVA $ 1,000 $ 2,000
- Prior Year Ending EVA 500 700
-------- --------
= EVA Improvement 500 1,300
- Threshold EVA Improvement (200) (600)
-------- --------
= Incremental EVA Improvement 700 1,900
x Area/Location Share 30% 10%
x Area/Location Factor n/a 23%
--------- -------
= INCENTIVE POOL DECLARATION $ 210 $ 43.7
----------------------------------------------------------------------------------
TOTAL YEAR 1 INCENTIVE POOL DECLARATION $253.7
----------------------------------------------------------------------------------
YEAR 2
------
Year 2 Ending EVA $ 1,200 $ 2,000
- Prior Year (Year 1) Ending EVA 1,000 2,000
-------- --------
= EVA Improvement 200 0
- Threshold EVA Improvement (200) (600)
-------- --------
= Incremental EVA Improvement 400 600
x Area/Location Share 30% 10%
x Area/Location Factor n/a 23%
---------- -------
= INCENTIVE POOL DECLARATION $ 120 $ 13.8
----------------------------------------------------------------------------------
TOTAL YEAR 2 INCENTIVE POOL DECLARATION $133.8
----------------------------------------------------------------------------------
* AREA/LOCATION FACTOR (assumed same for Years 1 & 2):
= {(Area/Location Revenue/Group Revenue) + (Area/Location Capital/Group Capital) + (Area/Location
Payroll/Group Payroll)} / 3
= {(10,000/42,000) + (5,000/25,000) + (1,000/4,000) } / 3
= 23%
</TABLE>
================================================================================
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<PAGE> 14
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION
================================================================================
YEAR 1
[CHART]
[CHART]
================================================================================
Page 12
================================================================================
<PAGE> 15
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION
================================================================================
CALCULATION OF AREA/LOCATION PLAN PARTICIPANT
INCENTIVE PAYMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSUMPTIONS
-----------
AREA/LOCATION OPERATING GROUP
------------- ---------------
<S> <C> <C>
o Beginning Incentive Bank Balances $ 8,000 $ 1,000
o Year 1 Incentive Pool Declaration 210,000 43,700
o Year 2 Incentive Pool Declaration 120,000 13,800
o Plan Participant Percentage Allocation 10% 10%
- -----------------------------------------------------------------------------------------------------------------------------
AREA/LOCATION POOL OPERATING GROUP POOL
------------------ --------------------
YEAR 1
------
Incentive Pool Declaration $ 210,000 $ 43,700
x Plan Participant Percentage Allocation 10% 10%
--------- ---------
= Plan Participant Incentive Declaration 21,000 4,370
+ Beginning Incentive Bank Balance 8,000 1,000
---------- ----------
= Available Incentive Bank 29,000 5,370
x Payout Percentage 67% 67%
--------- ---------
= INCENTIVE PAYMENT $ 19,333 $ 3,580
--------------------------------------------------------------------------------------
TOTAL YEAR 1 INCENTIVE PAYMENT $22,913
--------------------------------------------------------------------------------------
Ending Incentive Bank Balance $ 9,667 $ 1,790
YEAR 2
------
Incentive Pool Declaration $120,000 $ 13,800
x Plan Participant Percentage Allocation 10% 10%
-------- --------
= Plan Participant Incentive Declaration 12,000 1,380
+ Year 1 Ending Incentive Bank Balance 9,667 1,790
--------- ---------
= Available Incentive Bank 21,667 3,170
x Payout Percentage 67% 67%
-------- --------
= INCENTIVE PAYMENT $ 14,445 $ 2,113
---------------------------------------------------------------------------------------
TOTAL YEAR 2 INCENTIVE PAYMENT $16,558
---------------------------------------------------------------------------------------
Ending Incentive Bank Balance $ 7,222 $ 1,057
</TABLE>
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<PAGE> 16
EXAMPLE CALCULATIONS
OPERATING GROUP PARTICIPANTS
<PAGE> 17
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION
================================================================================
CALCULATION OF OPERATING GROUP INCENTIVE POOL DECLARATION
- --------------------------------------------------------------------------------
ASSUMPTIONS (IN THOUSANDS)
- --------------------------
<TABLE>
<CAPTION>
OPERATING GROUP ALLWASTE, INC.
--------------- --------------
<S> <C> <C>
o Average Capital $ 25,000 $150,000
o Gross Revenue 42,000 300,000
o Field Payroll 4,000 30,000
o Prior Year Ending EVA 700 (5,000)
o Threshold EVA Improvement (600) (1,500)
o Operating Group Share 12% 4%
o Year 1 Ending EVA 2,000 (2,000)
o Year 2 Ending EVA 2,000 (1,000)
o Operating Group Factor* n/a 15%
- ------------------------------------------------------------------------------------------------------------------------------
OPERATING
GROUP RESULTS ALLWASTE, INC.
------------- --------------
YEAR 1
------
Year 1 Ending EVA $ 2,000 $ (2,000)
- Prior Year Ending EVA 700 (5,000)
-------- ----------
= EVA Improvement 1,300 3,000
- Threshold EVA Improvement (600) (1,500)
-------- ----------
- Incremental EVA Improvement 1,900 4,500
x Operating Group Share 12% 4%
x Operating Group Factor n/a 15%
-------- --------
= INCENTIVE POOL DECLARATION $ 228 $ 27
--------------------------------------------------------------------------------
TOTAL YEAR 1 INCENTIVE POOL DECLARATION $255
--------------------------------------------------------------------------------
YEAR 2
------
Year 2 Ending EVA $ 2,000 $ (1,000)
- Prior Year (Year 1) Ending EVA 2,000 (2,000)
------- ---------
= EVA Improvement 0 1,000
- Threshold EVA Improvement (600) (1,500)
------- ---------
= Incremental EVA Improvement 600 2,500
x Operating Group Share 12% 4%
x Operating Group Factor n/a 15%
------- --------
= INCENTIVE POOL DECLARATION $ 72 $ 15
--------------------------------------------------------------------------------
TOTAL YEAR 2 INCENTIVE POOL DECLARATION $87
--------------------------------------------------------------------------------
* OPERATING GROUP FACTOR (assumed same for Years 1 & 2):
= {(Group Revenue/Allwaste Revenue) + (Group Capital/Allwaste Capital) + (Group Payroll/Allwaste
Payroll) / 3
= {(42,000/300,000) + (25,000/150,000) + (4,000/30,000) / 3
= 15%
</TABLE>
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<PAGE> 18
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION
================================================================================
YEAR 1
[CHART]
[CHART]
================================================================================
Page 15
================================================================================
<PAGE> 19
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION
================================================================================
CALCULATION OF OPERATING GROUP PLAN PARTICIPANT
INCENTIVE PAYMENT
- --------------------------------------------------------------------------------
ASSUMPTIONS
-----------
o Beginning Incentive Bank Balance $ 6,000
o Year 1 Incentive Pool Declaration (Operating Group + Allwaste) 255,000
o Year 2 Incentive Pool Declaration (Operating Group + Allwaste) 87,000
o Plan Participant Percentage Allocation 10%
- --------------------------------------------------------------------------------
YEAR 1
------ INCENTIVE
PAYMENT
---------
Incentive Pool Declaration $255,000
x Plan Participant Percentage Allocation 10%
--------
= Plan Participant Incentive Declaration 25,500
+ Beginning Incentive Bank Balance 6,000
--------
= Available Incentive Bank 31,500
x Payout Percentage 67%
--------
= INCENTIVE PAYMENT $ 21,000
========
Ending Incentive Bank Balance $ 10,500
YEAR 2
------
Incentive Pool Declaration 87,000
x Plan Participant Percentage Allocation 10%
--------
= Plan Participant Incentive Declaration 8,700
+ Year 1 Ending Incentive Bank Balance 10,500
--------
= Available Incentive Bank 19,200
x Payout Percentage 67%
--------
= INCENTIVE PAYMENT $ 12,800
========
Ending Incentive Bank Balance $ 6,400
================================================================================
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<PAGE> 20
EXAMPLE CALCULATIONS
CORPORATE SUPPORT GROUP PARTICIPANTS
<PAGE> 21
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION
================================================================================
CALCULATION OF CORPORATE SUPPORT GROUP INCENTIVE POOL DECLARATION
- --------------------------------------------------------------------------------
ASSUMPTIONS (IN THOUSANDS)
- -------------------------- ALLWASTE, INC.
--------------
o Prior Year Ending EVA $ (5,000)
o Threshold EVA Improvement (1,500)
o Year 1 Ending EVA (2,000)
o Year 2 Ending EVA (1,000)
- --------------------------------------------------------------------------------
ALLWASTE, INC. RESULTS
----------------------
YEAR 1
------
Year 1 Ending EVA $ (2,000)
- Prior Year Ending EVA (5,000)
---------
= EVA Improvement 3,000
- Threshold EVA Improvement (1,500)
---------
= Incremental EVA Improvement 4,500
x Corporate Support Group Share 24%
---------
= INCENTIVE POOL DECLARATION $ 1,080
=========
YEAR 2
------
Year 2 Ending EVA $ (1,000)
- Prior Year (Year 1) Ending EVA (2,000)
---------
= EVA Improvement 1,000
- Threshold EVA Improvement (1,500)
---------
= Incremental EVA Improvement 2,500
x Corporate Support Group Share 24%
--------
= INCENTIVE POOL DECLARATION $ 120
=========
YEAR 1
------
[CHART]
================================================================================
Page 17
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<PAGE> 22
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION
================================================================================
CALCULATION OF CORPORATE SUPPORT GROUP PLAN PARTICIPANT
INCENTIVE PAYMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSUMPTIONS
-----------
<S> <C>
o Beginning Incentive Bank Balances $ 5,000
o Year 1 Incentive Pool Declaration 1,080,000
o Year 2 Incentive Pool Declaration 600,000
o Plan Participant Percentage Allocation 2%
- --------------------------------------------------------------------------------
INCENTIVE PAYMENT
----------------
YEAR 1
------
Incentive Pool Declaration $ 1,080,000
x Plan Participant Percentage Allocation 2%
-----------
= Plan Participant Incentive Declaration 21,600
+ Beginning Incentive Bank Balance 5,000
-----------
= Available Incentive Bank 26,600
x Payout Percentage 67%
-----------
= INCENTIVE PAYMENT $ 17,733
===========
Ending Incentive Bank Balance $ 8,867
YEAR 2
------
Incentive Pool Declaration $ 600,000
x Plan Participant Percentage Allocation 2%
-----------
= Plan Participant Incentive Declaration 12,000
+ Year 1 Ending Incentive Bank Balance 8,867
-----------
= Available Incentive Bank 20,867
x Payout Percentage 67%
-----------
= INCENTIVE PAYMENT $ 13,911
===========
Ending Incentive Bank Balance $ 6,956
</TABLE>
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Page 18
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<PAGE> 23
APPENDIX A
<PAGE> 24
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN APPENDIX A
================================================================================
For purposes of the Allwaste EVA (R) Incentive Compensation Plan to which this
Appendix A is attached, a "CHANGE IN CONTROL" shall be deemed to have occured
on, and shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (1) the then
outstanding shares of Common Stock of the Company (the "OUTSTANDING
COMPANY COMMON STOCK") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "OUTSTANDING COMPANY
VOTING SECURITIES"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger
or consolidation, if, immediately following such reorganization,
meerger or consolidation, the conditions described in clauses
(1), (2) and (3) of paragraph (c) of this Section 8 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the
entire Board (the" INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided however, that
any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either (1) an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act), or an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board or (2) a plan or agreement to replace a majority of the
members of the Board then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a
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<PAGE> 25
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN APPENDIX A
================================================================================
corporation which as a result of such transaction owns the Company
through one or more subsidiaries) and the combined voting power of the
then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization,
merger or consolidation in substantially the same proportions as their
ownership immediately prior to such reorganization, merger or
consolidation, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (2) no Person
(excluding the Company, any employee benefit plans(s) (or related
trusts)) of the Company and/or its subsidiaries or any Person
beneficially owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, 30% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares
of common stock of the corporation resulting from such reorganization,
merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors, and (3) at least a majority of
the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which
immediately followoing such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitiled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who where the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (B) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company and/or its subsidiaries
or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, 30%
or
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<PAGE> 26
ALLWASTE
EVA INCENTIVE COMPENSATION PLAN APPENDIX A
================================================================================
more of the Outstanding Company Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares
of common stock of such corporation or the combined voting power of
the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors, and (C) at least a
majority of the members of the board of directors of such corporation
were members of the Incumbent Board at the time of the execution of the
initial agreement or action of the Board providing for such sale or
other disposition of assets of the Company.
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Page iii
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<PAGE> 1
EXHIBIT 21.1
ALLWASTE, INC.
SUBSIDIARIES AS OF NOVEMBER 19, 1996
<TABLE>
<CAPTION>
Jurisdiction of
Organization Names under which does Business
--------------- ----------------------------------------------
<S> <C> <C>
Ace/Allwaste Environmental Services of Indiana, Inc. Illinois
All Safety and Supply, Inc. Texas
Allies Staffing, Inc. Delaware Allies Staffing Group, Inc.
AllQuest Capital, Inc. Delaware
AllQuest Energy Services, Inc. Delaware
AllQuest Enterprises, Inc. Delaware Industrial Water Resources
AllQuest Pipeline Services, Inc. Delaware
AllQuest Technologies, Inc. Delaware
AllQuest Water Resources, Inc. Delaware
AllScaff, Inc. Tennessee
Allwaste Access Services, Inc. Colorado
Allwaste Asbestos Abatement Holdings, Inc. Delaware
Allwaste Asbestos Abatement of New England, Inc. Massachusetts
Allwaste Asbestos Abatement, Inc. Delaware
Allwaste Environmental Services of Atlanta, Inc. Georgia Allwaste Services of Cartersville;
Allwaste Services of South Georgia
Allwaste Environmental Services of Louisiana, Inc. Louisiana Roussel Environmental Services, Inc.
Impact
Allwaste Environmental Services of Missouri, Inc. Delaware
Allwaste Environmental Services of Ohio, Inc. Ohio
Allwaste Environmental Services of Oklahoma, Inc. Oklahoma
Allwaste Environmental Services of Texas, Inc. Texas Impact
Enviroganics
Allwaste Dredging Services
Allwaste Services of Tyler
Allwaste Scaffold Services
Allwaste Impact
J. King
Allwaste Plant Access Services
Tex Blast Sandblasting
Allwaste Environmental Services, Inc. Delaware
Allwaste Environmental Services/Central Florida, Inc. Delaware
Allwaste Environmental Services/North Atlantic, Inc. Delaware
Allwaste Environmental Services/North Central, Inc. Iowa EIS Maintenance
Environmental and Industrial Services Corp.
AES/North Central
Allwaste Environmental Services/North Central, Inc. Illinois
Allwaste Environmental Services/South Central, Inc. Colorado
Allwaste Environmental Services/Southwest, Inc. Arizona Western Hydrovac, Inc.
Allwaste Environmental Services/West Coast, Inc. California Cleaning & Pumping Specialists
CPS-Allwaste
Allwaste of Southern California
Allwaste of Northern California
Allwaste Processing and Services
CPC/Allwaste, Inc.
Allwaste Explosive Services, Inc. Colorado Yenter Environmental Services
Yenter Environmental Safety Services
Allwaste Intermountain Plant Services, Inc. Delaware
Allwaste Mid-Atlantic, Inc. Delaware
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Jurisdiction of
Organization Names under which does Business
--------------- ----------------------------------------------
<S> <C> <C>
Allwaste of Canada, Ltd. Ontario Caligo
Allwaste Services of London
Allwaste Services of Windsor
Allwaste of Hawaii, Ltd. Hawaii P&S Pacific
Allwaste Railcar Cleaning, Inc. Delaware
Allwaste Recovery Systems, Inc. Georgia Allwaste Recovery Systems of Baton Rouge, Inc.
Allwaste Recovery Systems of Dallas, Inc.
Allwaste Recovery Systems of Denver, Inc.
Allwaste Services of Charlotte, Inc. North Carolina
Allwaste Services of El Paso, Inc. Delaware
Allwaste Services of Mobile, Inc. Alabama
Allwaste Servicios Industriales de Control Ecologico Mexico
S.A. de C.V.
Allwaste Tank Cleaning, Inc. Georgia Allwaste Container Services
Allwaste Tank Services, Inc.
Allwaste Tank Services S.A. de C.V. Mexico
Allwaste Texquisition, Inc. Texas
Allwaste Transportation and Remediation, Inc. California
Allwaste/NAL, Inc. Arizona North American Locating
Allwaste/Whiting, Inc. Delaware
ALRC, Inc. Delaware
APLC, Inc. Delaware
AWI/Ellwood Acquisition, Inc. Delaware
BEC/Allwaste, Inc. Alabama
Caligo de Mexico, S.A. de C.V. Mexico
Caligo Reclamation Ltd. Ontario
Caligo Reinigungsges m.b.H. Austria
Caligo, Ltd. Pennsylvania
Clean America, Inc. Maryland Allwaste Environmental Services/Chesapeake, Inc.
Allwaste Environmental Services/Delaware Valley,
Inc.
Allwaste Mid-Atlantic
Clean America, Inc. of Maryland
Industrial Construction Services Co., Inc. Alabama
J. D. Meagher/Allwaste, Inc. Maryland
James & Luther Services, Inc. Delaware
Jesco Industrial Services, Inc. Kentucky
Madsen/Barr-Allwaste, Inc. Delaware
Oil Recycling, Incorporated North Dakota
Oneida Asbestos Abatement, Inc. Delaware
Oneida Asbestos Removal, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K, of our report dated November 15, 1996, in the
Allwaste, Inc. previously-filed Form S-4 Registration Statement File Nos.
33-44129 and 33-56715 and Form S-8 Registration Statement File Nos. 33-46048,
33-37684, 33-55210, 33-61639, 33-61641, 33-34774, 33,44220 and 33-65451. It
should be noted that we have not audited any financial statements of the company
subsequent to August 31, 1996 or performed any audit procedures subsequent to
the date of our report.
ARTHUR ANDERSEN LLP
Houston, Texas
November 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 2,436
<SECURITIES> 0
<RECEIVABLES> 77,434
<ALLOWANCES> (2,320)
<INVENTORY> 1,793
<CURRENT-ASSETS> 92,516
<PP&E> 248,280
<DEPRECIATION> (119,307)
<TOTAL-ASSETS> 337,187
<CURRENT-LIABILITIES> 73,774
<BONDS> 121,895
<COMMON> 398
0
0
<OTHER-SE> 130,548
<TOTAL-LIABILITY-AND-EQUITY> 337,187
<SALES> 382,165
<TOTAL-REVENUES> 382,165
<CGS> 286,412
<TOTAL-COSTS> 286,412
<OTHER-EXPENSES> 77,011
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,581
<INCOME-PRETAX> 12,644
<INCOME-TAX> 6,030
<INCOME-CONTINUING> 6,614
<DISCONTINUED> 3,764
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,378
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
