-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DPycRegMnOOEXfHjZtO17gTMvvQ6/eFtZlCPS9zlTtJA8ckDYuvMZ/hRhneu79fC hnWo/+40LiP8Opd8YCIrDg== 0000950129-96-003189.txt : 19961202 0000950129-96-003189.hdr.sgml : 19961202 ACCESSION NUMBER: 0000950129-96-003189 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961126 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLWASTE INC CENTRAL INDEX KEY: 0000804742 STANDARD INDUSTRIAL CLASSIFICATION: SANITARY SERVICES [4950] IRS NUMBER: 742427167 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11016 FILM NUMBER: 96672858 BUSINESS ADDRESS: STREET 1: 5151 SAN FELIPE STE 1600 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136238777 MAIL ADDRESS: STREET 1: 5151 SAN FELIPE STREET 2: SUITE 1600 CITY: HOUSTON STATE: TX ZIP: 77056 10-K 1 ALLWASTE, INC. - FORM 10-K - 08/31/96 1 ================================================================================ 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:
Name of each exchange Title of each class on which registered -------------------- ----------------------- 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.
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 . --- --- 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. ----- 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
DOCUMENT INCORPORATED AS TO -------- ------------------ 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.
================================================================================ 2 FORM 10-K REPORT INDEX
10-K PART AND ITEM NO. PAGE NO. - ---------------------- -------- 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
3 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.
1996 1995 1994 ---- ---- ---- 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% --- --- --- Total 100% 100% 100% === === ===
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 -1- 4 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 -2- 5 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, -3- 6 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 -4- 7 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 -5- 8 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- 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- 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. -8- 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:
HIGH LOW ---- --- 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
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. -9- 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."
For the Years Ended August 31, -------------------------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- (in thousands, except per share amounts) 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 -- -- -- -- --
-10- 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- 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:
FISCAL YEAR ---------------------------------- 1996 1995 1994 ------ ------ ------ 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% ===== ===== =====
-12- 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. -13- 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- 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- 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- 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- 20 ALLWASTE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARES)
August 31, ---------------------- 1996 1995 --------- --------- 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 ========= =========
The accompanying notes are an integral part of these Consolidated Financial Statements. -18- 21 ALLWASTE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Years Ended August 31, ----------------------------------- 1996 1995 1994 --------- --------- --------- 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 ========= ========= =========
The accompanying notes are an integral part of these Consolidated Financial Statements. -19- 22 ALLWASTE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS)
Common Stock ------------------ Number Additional Share- of Paid-In Retained Treasury Unearned holders' Shares Amount Capital Earnings Stock Compensation Equity ------ --------- ---------- --------- --------- ------------ --------- 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 ====== ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these Consolidated Financial Statements. -20- 23 ALLWASTE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
For the Years Ended August 31, -------------------------------- 1996 1995 1994 -------- -------- -------- 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 ======== ======== ========
The accompanying notes are an integral part of these Consolidated Financial Statements. -21- 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- 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- 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):
Businesses Cash and Convertible Shares of Total Purchased Promissory Notes Subordinated Notes Common Stock Consideration ---------- ---------------- ------------------ ------------ ------------- 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
-24- 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): 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
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- 28 (4) RECEIVABLES -- Receivables included in current assets consisted of the following (in thousands):
August 31, ------------------------ 1996 1995 ------- ------- 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 ======= =======
Notes receivable recorded as non-current assets consisted of the following (in thousands):
August 31, ------------------------ 1996 1995 ------- ------- 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 ======= =======
(5) PROPERTY AND EQUIPMENT-- The principal categories and estimated useful lives of property and equipment were as follows (dollars in thousands):
August 31, Estimated -------------------------- Useful Lives 1996 1995 ------------ ---------- ---------- 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 ========== ==========
-26- 29 (6) DEBT -- Long-term debt Long-term debt consisted of the following (in thousands):
August 31, --------------------- 1996 1995 ------- -------- 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 ======= ========
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 -- 1997 $ 184 1998 191 1999 10,982 2000 21,943 2001 21,943 Thereafter 32,912 ------- $88,155 =======
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- 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 -- 1997 $ 6,065 1998 4,985 -------- $ 11,050 ========
(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):
For the Years Ended August 31, ------------------------------------------- 1996 1995 1994 -------- -------- ------- 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 -------- ------ ------
-28- 31 Foreign -- Current 290 667 840 Deferred (493) 163 (24) ------ -------- ------- (203) 830 816 ------ -------- ------- $6,030 $ 2,170 $ 6,725 ====== ======== =======
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:
For the Years Ended August 31, ----------------------------------------- 1996 1995 1994 --------- --------- --------- 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% ====== ====== ======
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):
For the Years Ended August 31, ------------------------------------------- 1996 1995 1994 -------- -------- --------- 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 ====== ======= =======
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):
1996 1995 ------------ ---------- 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) ========== ==========
-29- 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:
1996 1995 1994 ------------- ------------ ------------ 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 ============= ============ ============
-30- 33 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
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- 34 For the year ending August 31 -- 1997 $ 5,324 1998 4,528 1999 3,385 2000 2,268 2001 1,400 Thereafter 4,444 --------- $ 21,349 =========
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- 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- 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):
August 31, --------------------------------------------------------- 1996 1995 ----------------------- ----------------------- Carrying Fair Carrying Fair Amount Value Amount Value ---------- --------- ---------- -------- 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 -- --
(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):
For the Years Ended August 31, -------------------------------------------- 1996 1995 1994 -------- ------- ------- 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
-34- 37 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 ======== ======= =======
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):
United States Canada Mexico Total ------- ------ ------ ----- 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
(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):
First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- 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 ======== ======== ======== ========
-35- 38 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) =========== ========= ========== =============
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- 39 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -37- 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- 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.
SEQUENTIAL EXHIBIT PAGE NO. EXHIBIT INDEX NUMBER * ------- ------------- ---------- 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.)
-39- 42 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.)
-40- 43 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.)
-41- 44 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.)
_______________ * This information appears only in the manually signed and sequentially numbered original. (b) REPORTS ON FORM 8-K. None. -42- 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- 46 SCHEDULE II ALLWASTE, INC. AND SUBSIDIARIES (1) VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
Additions ------------------------------ Balance, Charged to Acquisitions Balance, Beginning Costs and Accounted for Deductions End of Description of Year Expenses as Purchases (2) Year - -------------------------------- --------- ---------- ------------- ---------- -------- 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
- ----------- (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- 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.
SIGNATURE TITLE DATE --------- ----- ---- /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
-45- 48 INDEX TO EXHIBITS
SEQUENTIAL EXHIBIT PAGE NO. EXHIBIT INDEX NUMBER * ------- ------------- ---------- 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.)
49 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.)
_______________ * This information appears only in the manually signed and sequentially numbered original. EX-3.3 2 CERTIFICATE OF DESIGNATION 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: A-1 2 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 A-2 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. A-3 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 A-4 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. A-5 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 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 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 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 A-9 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. A-10 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 A-11 EX-10.14 3 AGREEMENT & AMEND. #7 TO CREDIT AGREEMENT - 8/1/96 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 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. 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: 4 Schedule I - Non-guaranteeing Subsidiaries and Dormant Subsidiaries 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 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 ------------------------- 7 BANK OF AMERICA TEXAS, N.A., a national banking association By: /s/ Victor N. Tekell --------------------------------- Victor N. Tekell, Vice President 8 FIRST INTERSTATE BANK OF TEXAS, N.A, a national banking association By: /s/ Christopher King -------------------------------- Name: Christopher King ----------------------------- Title: Assistant Vice President ---------------------------- 9 THE BANK OF NOVA SCOTIA By: /s/ F. C. H. Ashby ---------------------------------- Name: F.C.H. Ashby -------------------------------- Title: Senior Manager Loan Operations ------------------------------- 10 COMERICA BANK-TEXAS, a Texas banking association By: /s/ Eric Lundquist ---------------------------- Name: Eric Lundquist -------------------------- Title: Assistant Vice President ------------------------- 11 LTCB TRUST COMPANY, a New York Trust Company By: /s/ John J. Sullivan -------------------------------- Name: John J. Sullivan ------------------------------ Title: Executive Vice President ----------------------------- 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 ---------------------------- 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. EX-10.15 4 AMEND. #1 TO EMPLOYMENT AGREEMENT-R.L. NELSON, JR. 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 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 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 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 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 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 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 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 EX-10.16 5 AMEND. #2 TO EMPLOYMENT AGREEMENT-ROBERT M. CHISTE 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 EX-10.17 6 AMEND. #1 TO EMPLOYMENT AGREEMENT-WILLIAM FIEDLER 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 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 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 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 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 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 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 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 EX-10.18 7 EMPLOYMENT AGREEMENT - DAVID E. FANTA 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 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 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 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 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 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 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 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 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 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 EX-10.19 8 EMPLOYEMENT AGREEMENT - T. WAYNE WREN, JR. 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 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 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 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 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 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 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 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 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 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 EX-10.20 9 EMPLOYMENT AGREEMENT - JAMES E. RIEF 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 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 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 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 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 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 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 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 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 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 EX-10.21 10 EMPLOYMENT AGREEMENT - MICHAEL W. RAMIREZ 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- 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 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 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 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 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 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 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 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 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 EX-10.22 11 EXECUTIVE SEVERANCE AGREEMENT - R.L. NELSON, JR. 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. 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. 2 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 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 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 5 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 6 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"). 7 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 8 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); 9 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 10 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. 11 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 12 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 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 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 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 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. 17 EX-10.23 12 EXECUTIVE SEVERANCE AGREEMENT - ROBERT M. CHISTE 1 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. 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. 2 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 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 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 5 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 6 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 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"). 7 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 8 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); 9 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 10 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. 11 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: 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 12 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 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 14 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 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 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 17 EX-10.24 13 EXECUTIVE SEVERANCE AGREEMENT - DAVID E. FANTA 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. 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. 2 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 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 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 5 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 6 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"). 7 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 8 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); 9 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 10 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. 11 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 12 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 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 14 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 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 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 17 EX-10.25 14 EXECUTIVE SEVERANCE AGREEMENT - T. WAYNE WREN 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. 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. 2 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 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 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 5 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 6 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 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"). 7 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 8 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); 9 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 10 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. 11 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: 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 12 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 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 14 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 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 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/ T. Wayne Wren, Jr. ---------------------------------------------- T. Wayne Wren, Jr. 17 EX-10.26 15 EXECUTIVE SEVERANCE AGREEMENT - JAMES E. RIEF 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. 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. 2 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 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 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 5 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 6 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 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"). 7 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 8 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); 9 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 10 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. 11 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: 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 12 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 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 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 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 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/ James E. Rief -------------------------------------------- James E. Rief 17 EX-10.27 16 EXECUTIVE SEVERANCE AGREEMENT - WILLIAM L. FIEDLER 1 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. 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. 2 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 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 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 5 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 6 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 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"). 7 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 8 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); 9 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 10 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. 11 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: 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 12 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 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 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 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 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/ William L. Fiedler ---------------------------------------------- William L. Fiedler 17 EX-10.28 17 EXECUTIVE SEVERANCE AGREEMENT - MICHAEL W. RAMIREZ 1 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. 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. 2 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 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 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 5 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 6 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 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"). 7 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 8 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); 9 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 10 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. 11 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: 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 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 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 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 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 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 EX-10.29 18 1996 INTERIM MANAGEMENT BONUS PLAN 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. 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:
Total 1996 Funding Earnings/Share Percentage -------------- ---------- $ .25 25% $ .27 40% $ .29 55% $ .31 70% $ .33 85% $. 35 100% over $. 35 pro-rated
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. 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). 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. EX-10.30 19 AMEND. #3 TO EMPLOYMENT AGREEMENT-ROBERT M. CHISTE 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 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 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 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 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 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 EX-10.31 20 ALLWASTE EVA INCENTIVE COMPENSATION PLAN 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. 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] 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 ================================================================================ Page 2 ================================================================================ 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. ================================================================================ Page 3 ================================================================================ 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. ================================================================================ Page 4 ================================================================================ 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 ================================================================================ Page 5 ================================================================================ 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 ================================================================================ 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 ================================================================================ 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% ================================================================================ Page 8 ================================================================================ 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 ================================================================================ Page 9 ================================================================================ 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 ================================================================================ 12 EXAMPLE CALCULATIONS AREA/LOCATION PARTICIPANTS 13 ALLWASTE EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION ================================================================================ CALCULATION OF AREA/LOCATION INCENTIVE POOL DECLARATION - --------------------------------------------------------------------------------
ASSUMPTIONS (IN THOUSANDS) -------------------------- AREA/LOCATION OPERATING GROUP ------------- --------------- 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%
================================================================================ Page 11 ================================================================================ 14 ALLWASTE EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION ================================================================================ YEAR 1 [CHART] [CHART] ================================================================================ Page 12 ================================================================================ 15 ALLWASTE EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION ================================================================================ CALCULATION OF AREA/LOCATION PLAN PARTICIPANT INCENTIVE PAYMENT - --------------------------------------------------------------------------------
ASSUMPTIONS ----------- AREA/LOCATION OPERATING GROUP ------------- --------------- 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
================================================================================ Page 13 ================================================================================ 16 EXAMPLE CALCULATIONS OPERATING GROUP PARTICIPANTS 17 ALLWASTE EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION ================================================================================ CALCULATION OF OPERATING GROUP INCENTIVE POOL DECLARATION - -------------------------------------------------------------------------------- ASSUMPTIONS (IN THOUSANDS) - --------------------------
OPERATING GROUP ALLWASTE, INC. --------------- -------------- 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%
================================================================================ Page 14 ================================================================================ 18 ALLWASTE EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION ================================================================================ YEAR 1 [CHART] [CHART] ================================================================================ Page 15 ================================================================================ 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 ================================================================================ Page 16 ================================================================================ 20 EXAMPLE CALCULATIONS CORPORATE SUPPORT GROUP PARTICIPANTS 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 ================================================================================ 22 ALLWASTE EVA INCENTIVE COMPENSATION PLAN EXAMPLE CALCULATION ================================================================================ CALCULATION OF CORPORATE SUPPORT GROUP PLAN PARTICIPANT INCENTIVE PAYMENT - --------------------------------------------------------------------------------
ASSUMPTIONS ----------- 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
================================================================================ Page 18 ================================================================================ 23 APPENDIX A 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 ================================================================================ Page i ================================================================================ 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 ================================================================================ Page ii ================================================================================ 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. ================================================================================ Page iii ================================================================================ EX-21.1 21 SUBSIDIARIES OF ALLWASTE, INC. 1 EXHIBIT 21.1 ALLWASTE, INC. SUBSIDIARIES AS OF NOVEMBER 19, 1996
Jurisdiction of Organization Names under which does Business --------------- ---------------------------------------------- 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
2
Jurisdiction of Organization Names under which does Business --------------- ---------------------------------------------- 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
EX-23.1 22 CONSENT OF ARTHUR ANDERSEN LLP 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 EX-27 23 FINANCIAL DATA SCHEDULE
5 12-MOS AUG-31-1996 AUG-31-1996 2,436 0 77,434 (2,320) 1,793 92,516 248,280 (119,307) 337,187 73,774 121,895 398 0 0 130,548 337,187 382,165 382,165 286,412 286,412 77,011 0 9,581 12,644 6,030 6,614 3,764 0 0 10,378 .27 .27
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