Document:

EX-10.1 Hulligan Employment Agreement

 

Exhibit 10.1

WASTE SERVICES, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is dated as of August 23, 2007 by and between WASTE
SERVICES, INC., a Delaware corporation (the “Company”) and WILLIAM P. HULLIGAN (the “Executive”):

WHEREAS, the Company desires to employ Executive in an executive capacity and Executive desires to
enter into the Company’s employ upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

	1.	 	EMPLOYMENT.

The Company shall employ Executive, and Executive shall be employed by the Company, upon the terms
and subject to the conditions set forth in this Agreement, effective as of August 23, 2007 (the
“Effective Date”); provided, however that as a condition to effectiveness of this Agreement, the
Company and Executive shall have entered into an Indemnification Agreement substantially in the
form of Exhibit A attached hereto.

	2.	 	TERM OF EMPLOYMENT.

The period of Executive’s employment under this Agreement (the “Employment Term”) shall begin on
the Effective Date and shall continue until Executive’s employment is terminated in accordance with
Section 5 below.

	3.	 	DUTIES AND RESPONSIBILITIES.
	 
	(a)	 	Executive shall serve as Executive Vice President, U.S. Operations of the Company and shall
report to the Chief Executive Officer of the Company. In such capacity, Executive shall have
responsibility and authority and shall perform the duties necessary to carry out those
responsibilities and exercise that authority, as may be assigned to Executive from time to
time by the Chief Executive Officer and/or by the Board of Directors of the Company (the
“Board of Directors”) or a duly authorized committee thereof.
	 
	(b)	 	During the Employment Term, Executive shall devote his full time and attention during normal
business hours to the affairs of the Company and use his best efforts to perform faithfully
and efficiently his duties and responsibilities; provided, however, that subject to the
limitations of Section 8 hereof and to the prior approval of the Chief Executive Officer of
the Company, Executive may serve on corporate, industry, civic or charitable Boards or
committees as long as such activities do not interfere with the performance of Executive’s
responsibilities to the Company. Executive agrees to act at all times in the best interests
of the Company and to take no action or make any statement, oral or written, which could
reasonably be expected by Executive to injure the Company’s business, financial condition,
results of operations, prospects, interests or reputation.

 

 

	(c)	 	Executive agrees to comply at all times during the Employment Term with all applicable
policies, rules, codes and regulations of the Company in effect from time to time, including,
without limitation, all applicable codes of ethics or conduct and all policies regarding
trading in the Company’s common stock.
	 
	4.	 	COMPENSATION AND BENEFITS.
	 
	(a)	 	BASE SALARY. During the Employment Term, the Company shall pay Executive a base salary at
the annual rate of $300,000, or such higher rate as may be determined from time to time by the
Board of Directors or a duly authorized committee thereof (such amount, as increased from time
to time, the “Base Salary”). Such Base Salary shall be paid on the Company’s regular pay days
in accordance with the Company’s standard payroll practice for executive officers, subject
only to such payroll and withholding deductions as may be required by law and other deductions
applied generally to employees of the Company for insurance and other employee benefit plans.
For all purposes under this Agreement, Executive’s Base Salary shall include any amount which
is deferred under any nonqualified plan or arrangement of the Company.
	 
	(b)	 	INCENTIVE COMPENSATION.

	 	(i)	 	ANNUAL CASH BONUS. In addition to the Base Salary, Executive shall be eligible
for an annual cash bonus (either pursuant to a bonus or incentive plan or program of
the Company or otherwise) for each fiscal year during the Employment Term. Executive’s
target annual cash bonus will be equal to 100% (the “Target Bonus Rate”) of his Base
Salary in effect at the beginning of the relevant fiscal year. The amount of the
annual cash bonus, which may be higher or lower than the Target Bonus Rate, shall be
determined by the Board of Directors or a duly authorized committee thereof based upon
applicable corporate and individual performance targets established by the Board of
Directors or such committee in its sole discretion (the “Annual Bonus”). For all
purposes under this Agreement, Executive’s Annual Bonus shall include any amount which
is deferred under any nonqualified plan or arrangement of the Company.
	 
	 	(ii)	 	LONG-TERM OR SUPPLEMENTAL INCENTIVE COMPENSATION. Executive shall be eligible
to participate in any supplemental and/or long-term incentive compensation plans or
programs (which may consist of stock options, restricted stock, long-term cash awards
or other forms of long-term or supplemental incentive compensation) generally made
available to full-time senior executive officers of the Company.

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	(c)	 	BENEFIT PLANS. Executive shall be eligible to participate in and receive benefits under all
retirement, health and welfare benefit plans, programs and arrangements which are from time to
time available to full-time senior executive officers of the Company in accordance with the
terms and conditions of such plans, programs and arrangements in effect from time to time.
Such benefit plans, programs and arrangements will include family medical, family dental and
family vision benefit plans and short-term and long-term disability plans, and may include,
without limitation, life insurance plans, accidental
death insurance plans, travel accident insurance plans, savings and retirement plans and pension
plans (all such benefit plans, the “Benefit Plans”). At his option, Executive may pay directly
the premiums for coverage under the above-mentioned disability plans and have the Company pay
to him, as additional income, an amount equal to the amount of those premiums. Executive
agrees to submit to a physical examination from time to time as requested by the Company to
facilitate Executive’s participation in one or more Benefit Plans. The Company may terminate
or reduce benefits under any such plans, programs or arrangements to the extent such
reductions apply uniformly to all full-time senior executive officers of the Company, and
Executive’s benefits shall be reduced or terminated accordingly. The Company’s obligations
under this Section 4(c) are expressly conditioned on Executive and his family dependents
taking all reasonable actions (including but not limited to enrolling in all health and
welfare benefit programs, plans and arrangements which are from time to time available to the
Company’s full-time senior executive officers as and when Executive and his family dependents
become eligible to participate in such programs, plans and arrangements) and providing all
information as the Company shall reasonably request and as is necessary for the Company to
fulfill such obligations.
	 
	(d)	 	VACATION. In addition to normal statutory holidays recognized by the Company, Executive shall
be entitled to the greater of (a) four weeks of paid vacation for each fiscal year during the
Employment Term and (b) such other amount of paid vacation as may be afforded executive
officers under the Company’s policies in effect from time to time (“Vacation Time”).
	 
	(e)	 	EXPENSE REIMBURSEMENT. The Company shall promptly reimburse Executive for travel and other
out-of-pocket expenses incident to his position in accordance with the Company’s customary
practices applicable to full-time senior executive officers. To the extent that these expense
reimbursements are reportable as taxable income, they will be grossed up to include the tax
due on them.
	 
	(f)	 	REIMBURSEMENT OF CERTAIN TAX EXPENSES. The Company shall, upon written demand by Executive
accompanied by supporting invoices, promptly reimburse Executive for all costs and expenses
(including reasonable legal, accounting and other advisory fees) incurred by Executive to (i)
determine, in any tax year of Executive, the tax consequences to Executive of any amount
payable (or reimbursable) under Section 7 hereof, or (ii) prepare responses to an Internal
Revenue Service audit of, and to otherwise defend, his personal income tax return for any year
during the Employment Term or to defend himself in any administrative proceeding or civil
litigation relating to any such tax return, in each case that is occasioned by or related to
any audit by the Internal Revenue Service of the Company’s income tax returns; provided,
however, in no event shall the Company be required to reimburse Executive for costs and
expenses in excess of seventy-five thousand United States dollars ($75,000 USD) in any given
fiscal year pursuant to this Section 4(e).
	 
	(g)	 	FRINGE BENEFITS AND PERQUISITES. Executive shall be eligible to participate in and receive
benefits under all fringe benefit plans, practices, policies and programs of the Company to
the same extent, and subject to the same terms and conditions, as those arrangements are made
available to full-time senior executive officers of the Company.

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	5.	 	TERMINATION OF EMPLOYMENT.

Executive’s employment under this Agreement may be terminated under any of the circumstances set
forth in this Section 5. Upon termination, Executive (or his beneficiaries or estate as the case
may be) shall be entitled to receive the compensation and benefits described in Section 6 and, if
applicable, Section 7 below.

	(a)	 	DEATH. Executive’s employment hereunder shall terminate automatically upon Executive’s
death.
	 
	(b)	 	TOTAL DISABILITY. The Company may terminate Executive’s employment hereunder, by written
notice to Executive delivered in accordance with Sections 5(g) and 16 hereof, upon a
determination pursuant to this Section 5(b) that Executive is “Totally Disabled.” For
purposes of this Agreement, for the purposes of this provision, “Totally Disabled” shall have
the same meaning as it has under the long-term disability policy covering Executive pursuant
to paragraph 4(c) herein. Executive’s receipt of disability benefits under the Company’s
long-term disability plan shall be deemed conclusive evidence of Total Disability for purposes
of this Agreement.
	 
	(c)	 	TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate Executive’s employment
hereunder for “Cause” at any time, by written notice to Executive delivered in accordance with
Sections 5(g) and 15 hereof.

	 	(i)	 	For purposes of this Agreement, the term “Cause” shall mean any of the
following: (A) conviction of a crime (including conviction on a nolo contendre plea)
involving the commission by Executive of a felony or of a misdemeanor involving, in the
good faith judgment of the Board of Directors, fraud, dishonesty or moral turpitude;
(B) Executive’s deliberate and continual refusal to perform the duties and
responsibilities assigned to Executive under this Agreement (other than as a result of
vacation permitted under this Agreement, sickness, illness or injury); (C) fraud or
embezzlement by Executive, determined in accordance with the Company’s normal, internal
investigative procedures consistently applied; (D) gross misconduct or gross negligence
by Executive in connection with the business of the Company or an Affiliate (as defined
herein) unless Executive reasonably believed, in good faith, that his acts or omissions
were in or not opposed to the best interests of the Company (without intent of
Executive to gain therefrom, directly or indirectly, a profit to which he was not
legally entitled); or (E) any material breach by Executive of any of the provisions of
Section 8 of this Agreement or of any provisions of the Confidentiality and Proprietary
Information Agreement (as defined herein); provided, however, that the occurrence of an
act or omission covered by clauses (B), (D) or (E) of this paragraph 5(c)(i) shall not
constitute “Cause” if Executive remedies such act or omission within ten (10) business
days after delivery by the Company of written notice to Executive in accordance with
Section 15 hereof specifying in reasonable detail the facts and circumstances believed
by the Company to constitute such “Cause.”

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	 	(ii)	 	Any determination of Cause under this Agreement shall be made by resolution
duly adopted by the affirmative vote of at least two-thirds of the members of the Board
of Directors (not including Executive if Executive is a member of the Board of
Directors) at a meeting of the Board of Directors called and held for that purpose;
provided that Executive shall have been given written notice of such meeting by
certified mail at least ten (10) business days prior to the meeting and shall have been
given the opportunity to be heard by the Board of Directors before such resolution is
passed. The failure by the Company to follow the procedures set forth in this Section
5(c)(ii) shall result in the termination of the Executive’s employment being deemed to
be a termination by the Company without Cause.

	(d)	 	TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may terminate his employment hereunder
for Good Reason after delivery by Executive of written notice to the Company in accordance
with Sections 5(g) and 15 hereof within sixty (60) days after the occurrence of a Good Reason
Event (as hereinafter defined). For purposes of this Agreement, “Good Reason” means the
occurrence of any of the following events (each a “Good Reason Event”) without Executive’s
written consent during the Employment Term:

	 	(i)	 	A change in Executive’s responsibilities or titles or any other action by the
Company which represents a material diminution of Executive’s position, status or
authority, except in connection with or as a result of the termination of Executive’s
employment pursuant to any provision of this Section 5 (a “Diminution”); provided,
however that such Dimunition shall not constitute “Good Reason” or a “Good Reason
Event” if the Company remedies such Dimunition within ten (10) business days after
delivery by Executive of written notice to the Company in accordance with Section 15
hereof specifying in reasonable detail the facts and circumstances believed by
Executive to constitute such Dimunition.
	 
	 	(ii)	 	A reduction by the Company in Executive’s Base Salary.
	 
	 	(iii)	 	A material breach by the Company of Section 4(c) hereof; provided, however
that such a breach shall not constitute “Good Reason” or a “Good Reason Event” if the
Company remedies such breach within ten (10) business days after delivery by Executive
of written notice to the Company in accordance with Section 15 hereof specifying in
reasonable detail the facts and circumstances believed by Executive to constitute a
material breach of Section 4(c).
	 
	 	(iv)	 	The failure by the Company to pay Executive any material amount of his Base
Salary, or any material amount of other compensation, that is due and payable under
this Agreement within ten (10) business days after Executive makes written demand for
such amount.
	 
	 	(v)	 	The failure by the Company to enter into a written agreement with any entity
that purchases all or substantially all of the assets of the Company or any entity into
which the Company is merged (each a “Successor”) pursuant to which such
Successor agrees to assume all of the obligations of the Company under this Agreement at and
effective as of the closing of such sale of assets or merger.

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	(e)	 	VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate his employment hereunder without
Good Reason at any time during the Employment Term after providing thirty (30) days’ written
notice to the Company delivered in accordance with Sections 5(g) and 15 hereof.
	 
	(f)	 	TERMINATION BY THE COMPANY WITHOUT CAUSE. At any time during the Employment Term, the
Company may terminate Executive’s employment hereunder without Cause by written notice to
Executive delivered in accordance with Sections 5(g) and 15 hereof. For purposes of this
Agreement, Executive’s employment will be deemed to have been terminated “Without Cause” if
Executive is terminated by the Company for any reason other than Death pursuant to Section
5(a), Total Disability pursuant to Section 5(b), or Cause pursuant to Section 5(c).
	 
	(g)	 	NOTICE OF TERMINATION. Any termination of Executive’s employment by the Company for Cause
pursuant to Section 5(c), without Cause pursuant to Section 5(f), or as a result of
Executive’s Total Disability pursuant to Section 5(b), or by Executive for Good Reason
pursuant to Section 5(d), shall be communicated by Notice of Termination to the other party
hereto given in accordance with this Agreement. For purposes of this Agreement, a “Notice of
Termination” means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive’s employment under the provision so
indicated, and (iii) specifies the effective date of termination, if such date is other than
the date of receipt of such notice (which effective date shall not be (A) less than ten (10)
business days after the giving of such notice in the case of termination by Executive for Good
Reason or (B) more than 15 days after the giving of such notice in all other cases). Any
voluntary termination of Executive’s employment by Executive pursuant to Section 5(e) shall be
communicated by written notice to the Company specifying (i) that Executive wishes to
terminate his employment with the Company pursuant to Section 5(e) hereof and (ii) indicating
the effective date of termination (which effective date shall not be less than 30 days after
the giving of such notice).

	6.	 	COMPENSATION AND BENEFITS FOLLOWING TERMINATION OF EMPLOYMENT.

In the event that Executive’s employment hereunder is terminated, Executive shall be entitled to
the following compensation and benefits upon such termination:

	(a)	 	COMPENSATION AND BENEFITS PAYABLE FOLLOWING TERMINATION FOR ANY REASON. The following
compensation and benefits shall be payable upon termination of Executive’s employment under
this Agreement for any reason:

	 	(i)	 	Executive or his beneficiaries or estate shall be entitled to receive, within
fourteen (14) days after the effective date of termination, any accrued but unpaid Base
Salary for services rendered by Executive to the Company prior to the date of termination, any accrued but unpaid expenses required to be reimbursed under this Agreement, and
cash compensation (at a rate per day equal to the Base Salary divided by the number of
business days in the relevant year) for any accrued Vacation Time that remained unused by the
Executive at the time of termination; and

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	 	(ii)	 	Any earned benefits to which Executive (or his beneficiaries or estate) may be
entitled pursuant to the plans, policies and arrangements referred to in Sections 4(b),
4(c) and 4(g) hereof shall be determined and paid in accordance with the terms of such
plans, policies and arrangements. In the case of compensation previously deferred by
Executive, all amounts previously deferred and not yet paid by the Company shall be
paid to Executive (or his beneficiaries or estate) within fourteen (14) days after the
effective date of termination unless such payment is inconsistent with the terms of any
payment election made by Executive with respect to such deferred compensation.

	(b)	 	TERMINATION BY REASON OF DEATH. In the event that Executive’s employment is terminated by
reason of Executive’s death, the Company shall pay Executive’s estate the following
compensation and benefits in addition to the compensation and benefits provided for in Section
6(a) above:

	 	(i)	 	Executive’s estate shall be entitled to be paid:

	 	(A)	 	Executive’s Base Salary at the rate in effect immediately prior
to Executive’s date of death on the Company’s regular pay days for a period of
two (2) years from the effective date of termination as if his employment had
continued until the end of such two (2)-year period; and
	 
	 	(B)	 	an aggregate amount equal to two (2) times the average of the
Annual Bonuses paid to Executive in the two (2) most recently completed fiscal
years preceding the effective date of termination, without regard to whether
the payment of all or any portion of such Annual Bonus has been deferred (such
average being hereinafter referred to as the “Bonus Average”), which shall be
paid in equal installments on the Company’s regular pay days over the course of
twenty-four (24) months from the effective date of termination;
provided, however, that if at the time of termination Executive has not been employed by
the Company for two fiscal years, the Bonus Average shall be deemed for all
purposes of this Agreement to equal Executive’s Target Bonus Rate multiplied by
his Base Salary at the rate in effect immediately prior to the effective date
of termination. The Company may purchase insurance to cover all or any part of
the obligations set forth in this Section 6(b)(i) and Executive agrees to
submit to a physical examination from time to time to facilitate the
procurement or renewal of such insurance. Any proceeds of such insurance paid
to Executive or his beneficiaries or estate shall be considered a portion of
the payments required to be made to Executive pursuant to this Section 6(b)(i)
and shall not be in addition thereto.

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	 	(ii)	 	Executive’s dependents shall be entitled to continue to receive medical, dental
and vision insurance coverage at least equal in type and amount to that made available
to dependents of full-time senior executives of the Company immediately prior to
Executive’s death for a period of two (2) years from the effective date of termination,
or until Executive’s dependents become eligible for substantially equivalent
employer-provided health insurance benefits from any other person or business entity,
whichever occurs first. In the event that participation in any such plan, program or
arrangement of the Company is prohibited, the Company will arrange to provide benefits
substantially similar to those benefits which Executive’s dependents would have been
entitled to receive under such plan, program or arrangement for such period.
	 
	 	(iii)	 	All of Executive’s then outstanding options to purchase shares of the
Company’s common stock shall be vested and exercisable in accordance with the terms of
the stock option plan of the Company pursuant to which such options were granted (the
“Governing Stock Option Plan”) as then in effect.

	(c)	 	TERMINATION BY REASON OF TOTAL DISABILITY. In the event that Executive’s employment is
terminated by reason of Executive’s Total Disability pursuant to Section 5(b) hereof, the
Company shall pay Executive the following compensation and benefits in addition to the
compensation and benefits provided for in Section 6(a) above:

	 	(i)	 	Subject to Section 6(c)(ii) below, Executive shall be entitled to be paid:

	 	(A)	 	his Base Salary at the rate in effect immediately prior to the
effective date of termination on the Company’s regular pay days for a period of
two (2) years from the effective date of termination as if his employment had
continued until the end of such two (2) year period; and
	 
	 	(B)	 	an aggregate amount equal to two (2) times the Bonus Average,
which shall be paid in equal installments on the Company’s regular pay days
over the course of twenty-four (24) months from the effective date of
termination.

	 	(ii)	 	Whenever compensation is payable to Executive under Section 6(c)(i) during a
period in which he is partially or totally disabled, and such disability would (except
for the provisions hereof) entitle Executive 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 Executive pursuant to any such plan or program shall be
considered a portion of the payments required to be made to Executive pursuant to this
Section 6(c) and shall not be in addition thereto. If disability income is payable
directly to Executive by an insurance company under the terms of an insurance policy
paid for by the Company, the amounts paid to Executive by such insurance company shall
be considered a portion of the payment to be made to Executive pursuant to this Section
6(c) and shall not be in addition thereto.

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	 	(iii)	 	Executive and his dependents shall be entitled to continue to receive medical,
dental and vision insurance coverage at least equal in type and amount to that made
available to full-time senior executives of the Company immediately prior to the
effective date of termination for a period of two (2) years from the effective date of
termination, or until Executive becomes eligible for substantially equivalent
employer-provided health insurance benefits from any other person or business entity,
whichever occurs first. In the event that participation in any such plan, program, or
arrangement of the Company is prohibited, the Company will arrange to provide benefits
substantially similar to those benefits which Executive would have been entitled to
receive under such plan, program, or arrangement, for such period.
	 
	 	(iv)	 	All of Executive’s then outstanding options to purchase shares of the Company’s
common stock shall be vested and exercisable in accordance with the terms of the
Governing Stock Option Plan, as then in effect.

	(d)	 	TERMINATION FOR CAUSE. In the event that Executive’s employment is terminated by the Company
for Cause pursuant to Section 5(c) hereof, the Company shall not be obligated to make any
payments to Executive under this Agreement on or following the effective date of termination,
other than the compensation and benefits provided for in Section 6(a) above.
	 
	(e)	 	VOLUNTARY TERMINATION BY EXECUTIVE. In the event that Executive terminates his employment
without Good Reason pursuant to Section 5(e) hereof, the Company shall not be obligated to
make any payments to Executive under this Agreement on or following the date of termination,
other than the compensation and benefits provided for in Section 6(a) above.
	 
	(f)	 	TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON. In the event that
Executive’s employment is terminated by the Company without Cause pursuant to Section 5(f)
hereof or by Executive for Good Reason pursuant to Section 5(d) hereof, the Company shall pay
to Executive the following compensation and benefits in addition to the compensation and
benefits provided for in Section 6(a) above:

	 	(i)	 	Executive shall be entitled to be paid:

	 	(A)	 	his Base Salary at the rate in effect immediately prior to the
effective date of termination on the Company’s regular pay days for a period of
two (2) years from the effective date of termination as if his employment had
continued until the end of such two (2) year period; and
	 
	 	(B)	 	an aggregate amount equal to two (2) times the Bonus Average,
which shall be paid in equal installments on the Company’s regular pay days
over the course of twenty-four (24) months from the effective date of
termination.

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	 	(ii)	 	Executive and his dependents shall be entitled to continue to receive medical,
dental and vision insurance coverage at least equal in type and amount to that made
available to full-time senior executives of the Company immediately prior to the
effective date of termination for a period of two (2) years from the effective date of
termination, or until Executive becomes eligible for substantially equivalent
employer-provided health insurance benefits from any other person or business entity,
whichever occurs first. In the event that participation in any such plan, program or
arrangement of the Company is prohibited, the Company will arrange to provide benefits
substantially similar to those benefits which Executive would have been entitled to
receive under such plan, program or arrangement for such period.
	 
	 	(iii)	 	All of Executive’s then outstanding options to purchase shares of the
Company’s common stock shall be vested and exercisable in accordance with the terms of
the Governing Stock Option Plan, as then in effect;

	 	 	provided, however, that if the Company terminates Executive’s employment without Cause or
Executive terminates his employment with the Company for Good Reason within the one-year
period preceding, or within the two-year period following, a “Change of Control”, Executive
shall be paid the compensation and benefits provided for in Section 7 hereof rather than the
compensation and benefits provided for in this Section 6(f).
	 
	(g)	 	NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this Agreement or under
the terms of any Compensation Plans or Benefit Plans in effect and applicable to Executive on
the effective date of termination, Executive shall have no right to receive any other
compensation, or to participate in any other plan, arrangement or benefit after such
termination and all other obligations of the Company and rights of Executive under this
Agreement shall terminate effective as of the effective date of termination.
	 
	7.	 	CHANGE OF CONTROL.
	 
	(a)	 	RESIGNATION FOLLOWING CHANGE OF CONTROL. If (i) the Company terminates Executive’s
employment without Cause or Executive terminates his employment with the Company for Good
Reason and (ii) a “Change of Control” has occurred within the two-year period preceding, or
within the one-year period following, the effective date of termination, Executive shall be
entitled to the compensation described in this Section 7 in addition to the compensation and
benefits provided for in Section 6(a) above and in lieu of the compensation and benefits
provided for in Section 6(f) above:

	 	(i)	 	a lump sum amount equal to two (2) times the sum of (A) and (B) below:

	 	(A)	 	his Base Salary at the rate in effect immediately prior to the
effective date of termination; and
	 
	 	(B)	 	the Bonus Average.

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	 	(ii)	 	Executive and his dependents shall be entitled to continue to receive medical,
dental and vision insurance coverage at least equal in type and amount to that made
available to full-time senior executives of the Company immediately prior to the
effective date of termination for a period of two (2) years from the effective date of
termination, or until Executive becomes eligible for employer-provided health insurance
benefits from any other person or business entity (whether or not those health
insurance benefits are comparable to the health insurance benefits provided by the
Company), whichever occurs first. In the event that participation in any such plan,
program, or arrangement of the Company is prohibited, the Company will arrange to
provide benefits substantially similar to those benefits which Executive would have
been entitled to receive under such plan, program, or arrangement, for such period.
	 
	 	(iii)	 	All of Executive’s then outstanding options to pursuant shares of the
Company’s common stock shall be vested and exercisable in accordance with the terms of
the Governing Stock Option Plan as then in effect.

	(b)	 	DEFINITION OF CHANGE OF CONTROL. For purposes of this Agreement, a “Change of Control” shall
be deemed to have occurred upon the happening of any of the following:

	 	(i)	 	the sale or lease of all or substantially all of the assets of the Company to
any other person or entity other than a direct or indirect wholly-owned subsidiary or
parent of the Company;
	 
	 	(ii)	 	a merger, amalgamation, consolidation or other reorganization of the Company
with any other entity (other than a direct or indirect wholly-owned subsidiary or
parent of the Company) in which the Company is not the surviving entity or becomes
owned entirely by another entity, unless at least 50% of the outstanding voting
securities of the surviving or parent corporation, as the case may be, immediately
following such transaction are beneficially held by the same persons and/or entities
that beneficially held the outstanding voting securities of the Company immediately
prior to such transaction, and such outstanding voting securities are beneficially held
by such persons and/or entities in the same proportion as such persons and/or entities
beneficially held the outstanding voting securities of the Company immediately prior to
such transaction;
	 
	 	(iii)	 	the acquisition of beneficial ownership, as such term is defined in the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) in a single
transaction or series of related transactions (by tender offer or otherwise), of more
than 50% of the voting securities of the Company by a single person or entity (other
than the Company or any affiliate (as such term is defined in Rule 12b-2 under the
Exchange Act) of the Company (each an “Affiliate”), a trustee or any other fiduciary or
committee of any employee benefit plan of the Company, or any corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of the stock of the Company) or “group” within the
meaning of Section 13(d)(3) of the Exchange Act, whether through the acquisition of previously issued and outstanding voting
securities or of voting securities that have not been previously issued, or any
combination thereof;

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	 	(iv)	 	the voluntary or involuntary dissolution, liquidation or winding up of the
Company, or the adoption of any resolution with respect thereto; or
	 
	 	(v)	 	the individuals who constituted the Board of Directors as of the Effective Date
(the “Incumbent Board”) ceasing for any reason to constitute at least a majority of the
Board of Directors; provided, that any person becoming a director whose election or
nomination for election was approved by a majority of the members of the Incumbent
Board shall be considered, for purposes of this Agreement, a member of the Incumbent
Board; and provided further that, notwithstanding anything herein to the contrary, a
Change of Control shall not be deemed to have occurred in connection with (i) any
public offering of the common stock of the Company for cash; (ii) any transaction with
an entity or group that includes, is affiliated with or is wholly or partially
controlled by, one or more executive officers of the Company in office immediately
prior to the transaction that would otherwise constitute a Change of Control; (iii) any
capital raising transaction (including any investment by one or more private equity
funds) for the purpose of financing acquisitions specifically identified by the Board
of Directors of the Company; or (iv) the U.S. Reorganization Transaction.

	(c)	 	CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. In the event that any portion of the payments or
benefits provided to Executive under this Agreement or pursuant to any other plan, arrangement
or agreement between Executive and the Company or any Affiliate thereof (collectively, “Total
Payments”) would be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code
or any similar tax that may hereafter be imposed, then Executive shall be entitled to receive
an additional payment (the “Gross-up Payment”) in an amount which, when combined with the net
amount of the Total Payments retained by Executive after giving effect to the application of
the Excise Tax and all other applicable taxes on the Total Payments (including any interest or
penalties imposed with respect to such taxes), will result in receipt by Executive of a
Gross-up Payment equal to the Excise Tax imposed upon the Total Payments.

	 	(i)	 	Determination by Accounting Firm. Subject to the provisions of Section
7(c)(ii) below, all determinations required to be made under this Section 7(c),
including whether a Gross-up Payment is required, the amount of the Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be made by
the Company’s independent auditors or such other certified public accounting firm
reasonably acceptable to Executive as may be designated by the Company (the “Accounting
Firm”). The Accounting Firm shall provide detailed calculations supporting the
Gross-up Payment to the Company and Executive. All fees and expenses of the Accounting
Firm shall be paid solely by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 7(c), shall be paid by the Company to Executive not later than the due
date for the payment of any Excise Tax. Any determination by the Accounting Firm shall
be
binding upon the Company and Executive. As a result of the 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 which will not have been made by
the Company should have been made (“Underpayment”), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its remedies
pursuant to Section 7(c)(ii) and Executive 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
Executive’s benefit.

-12-

 

	 	(ii)	 	The Company’s Right to Contest Excise Tax. Executive agrees to notify the
Company in writing of any 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 ten (10) business days after
Executive is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which Executive 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).
If the Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive agrees to:

	 	(A)	 	give the Company any information reasonably requested by the
Company relating to such claim,
	 
	 	(B)	 	take such action in connection with contesting such claim 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 to
effectively contest such claim, and
	 
	 	(D)	 	permit the Company to participate in any proceedings relating
to such claim;

-13-

 

	 	 	 	provided, however, that the Company agrees to bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive 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 Section
7(c)(ii), 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 Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner, and
Executive 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 Company shall determine; provided, however,
that if the Company directs Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to Executive, on an interest-free
basis, and shall indemnify and hold Executive 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 Executive’s taxable year with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, 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 Executive 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.
	 
	 	(iii)	 	Repayment to the Company. If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 7(c)(ii), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall promptly pay to the
Company the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). Executive shall be entitled to deduct from any
payment made to the Company pursuant to the previous sentence the amount of any taxes
that Executive previously paid on the amount of such payment. If, after the receipt by
Executive of an amount advanced by the Company pursuant to Section 7(c)(ii), a
determination is made that Executive is not entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty (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.

	(d)	 	Notwithstanding anything herein to the contrary, to the extent that Executive has received
payments of Base Salary pursuant to Section 6(f)(i) hereof at a time when a “Change of
Control” occurs, such payments shall be deducted from the lump sum payment required to be made
to Executive pursuant to Section 7(a)(i) hereof.

-14-

 

	 
	8.	 	RESTRICTIVE COVENANTS

	(a)	 	COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times during Executive’s
employment with the Company, and during the Non-Compete Period (as defined below), Executive
will not, acting alone or in conjunction with others, without the prior written consent of the
Company, directly or indirectly, engage or participate in, assist, render services to or for,
or have any active interest or involvement in, whether as an employee, principal, agent,
consultant, creditor, lender, advisor, employer, officer, director, stockholder (excluding
holdings by Executive of up to 3% of the voting stock of
any corporation subject to the periodic reporting requirements of the Exchange Act), partner,
proprietor or in any other individual or representative capacity in or with, any person,
entity or business which competes, directly or indirectly, with the Company or any Affiliate
in any of the business areas or territories in which the Company or any Affiliate then
conducts business or with any development opportunity being pursued by the Company during the
Non-Compete Period. (b) NON-SOLICITATION. Executive covenants and agrees that at all times
during Executive’s employment with the Company, and during the Non-Compete Period, Executive
will not, without the prior written consent of the Company, directly or indirectly (i) induce,
solicit or entice any customer of the Company or any customer of any Affiliate to patronize
any person, business or entity which competes, directly or indirectly, with the Company or
such Affiliate in any of the business areas or territories in which the Company or such
Affiliate then conducts business; (ii) canvass, solicit or accept any business from any
customer of the Company or any customer of any Affiliate (other than in connection with the
performance by Executive of his duties and responsibilities for the Company in accordance with
this Agreement) in any of the business areas or territories in which the Company or any
Affiliate of the Company then conducts business; (iii) request or advise any customer of the
Company or any customer of any Affiliate to withdraw, curtail or cancel such customer’s
business with the Company or such Affiliate in any of the business areas or territories in
which the Company or any Affiliate of the Company then conducts business; (iv) contact,
communicate with or solicit any prospect that the Company is actively pursuing or any prospect
that any Affiliate is actively pursuing (other than in connection with the performance by
Executive of his duties for the Company in accordance with this Agreement); (v) disclose to
any other person, entity or business the names or addresses of any customer or acquisition
prospect of the Company or any customer or acquisition prospect of any Affiliate (other than
as required in connection with the performance by Executive of his duties for the Company in
accordance with this Agreement); (vi) cause, solicit, entice or induce any employee of the
Company or any employee of any Affiliate to leave the employ of the Company or such Affiliate,
or to accept employment with, or compensation from, Executive or any person, entity or
business (other than the Company or any Affiliate) with which Executive is affiliated or by
whom Executive is employed; or (vii) use any customer lists or customer leads, mail, telephone
numbers, printed material or other information obtained from the Company or any Affiliate or
any employee of any of the foregoing (other than in connection with the performance by
Executive of his duties for the Company in accordance with this Agreement).
	 
	(c)	 	NON-DISPARAGEMENT.

	 	(i)	 	Executive covenants and agrees that Executive shall not engage in any pattern
of conduct that involves the making or publishing of written or oral statements or
remarks (including, without limitation, the repetition or distribution of derogatory
rumors, allegations, negative reports or comments) which are disparaging, deleterious
or damaging to the integrity, reputation or good will of the Company or any Affiliate
or any member of management of the Company or any Affiliate.
	 
	 	(ii)	 	The Company covenants and agrees that it shall not engage in any pattern of
conduct that involves the making or publishing of written or oral statements or
remarks (including, without limitation, the repetition or distribution of derogatory rumors,
allegations, negative reports or comments) which are disparaging, deleterious or
damaging to the integrity or reputation of Executive.

-15-

 

	(d)	 	PROTECTED INFORMATION. Executive recognizes and acknowledges that Executive has had and will
continue to have access to various confidential and proprietary information concerning the
Company and its Affiliates which is of a special and unique value. As a condition to
commencement of Executive’s employment hereunder, Executive shall execute a Confidentiality
and Proprietary Rights Agreement in substantially the form of Exhibit C attached hereto (the
“Confidentiality and Proprietary Rights Agreement”). Any breach by Executive of the
Confidentiality and Proprietary Rights Agreement shall be considered a breach of this
Agreement.

	(e)	 	NON-COMPETE PERIOD. For purposes of this Agreement, the term “Non-Compete Period” shall have
the following meanings:

	 	(i)	 	in the event (A) Executive’s employment hereunder is terminated by the Company
without Cause pursuant to Section 5(f), or by Executive for Good Reason pursuant to
Section 5(d), and (B) a Change of Control did not occur within the two-year period
preceding, and does not occur within the one-year period following, the effective date
of termination, the Non-Compete Period shall mean the period beginning on the effective
date of termination and ending on the second anniversary of the effective date of
termination;
	 
	 	(ii)	 	in the event that (A) Executive’s employment hereunder is terminated by the
Company without Cause pursuant to Section 5(f), or by Executive for Good Reason
pursuant to Section 5(d), and (B) a Change of Control occurred within the two-year
period preceding the effective date of termination, there shall be no Non-Compete
Period;
	 
	 	(iii)	 	in the event (A) Executive’s employment hereunder is terminated by the Company
without Cause pursuant to Section 5(f), or by Executive for Good Reason pursuant to
Section 5(d), and (B) a “Change of Control” occurs within the one-year period following
the effective date of termination, the Non-Compete Period shall mean the period
beginning on the effective date of termination and ending on the effective date of the
“Change of Control”;
	 
	 	(iv)	 	in the event Executive’s employment hereunder is terminated by Executive
voluntarily pursuant to Section 5(e), or by the Company with Cause pursuant to Section
5(c), the Non-Compete Period shall mean the period beginning on the effective date of
termination and ending on the first anniversary of the effective date of termination;
and
	 
	 	(v)	 	in the event Executive’s employment hereunder is terminated by the Company upon
Death of Executive pursuant to Section 5(a), or upon the Total Disability of Executive
pursuant to Section 5(b), there shall be no Non-Compete Period.

-16-

 

	9.	 	ENFORCEMENT OF COVENANTS.
	 
	(a)	 	TERMINATION OF EMPLOYMENT AND FORFEITURE OF COMPENSATION. Notwithstanding anything in this
Agreement to the contrary, in the event that the Board of Directors or a duly authorized
committee thereof determines in its good faith judgment that Executive has violated Sections
8(a) or 8(b) hereof, the Company shall have the right to suspend or terminate any or all
remaining payments or benefits payable pursuant to Section 6 and/or 7 of this Agreement. Such
suspension or termination of benefits shall be in addition to and shall not limit any and all
other rights and remedies that the Company may have against Executive.
	 
	(b)	 	RIGHT TO INJUNCTION. Executive acknowledges that a breach of the covenants set forth in
Section 8 hereof will cause irreparable damage to the Company with respect to which the
Company’s remedy at law for damages will be inadequate. Therefore, in the event of a breach
of the covenants set forth in Section 8 by Executive or if the Company has reasonable grounds
to believe that a breach by Executive of the covenants set forth in Section 8 is imminent,
Executive and the Company agree that the Company shall be entitled to the following particular
forms of relief, in addition to remedies otherwise available to it at law or in equity; (i)
injunctions, both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach and Executive hereby consents to the issuance thereof forthwith and
without bond by any court of competent jurisdiction; and, in the event the Company prevails on
the merits after all available appeals have been exhausted (ii) recovery of all reasonable
sums expended and costs, including reasonable attorney’s fees, incurred by the Company to
enforce the covenants set forth in Section 8.
	 
	(c)	 	SEPARABILITY OF COVENANTS. The covenants contained in Section 8 hereof constitute a series
of separate covenants, one for each applicable State in the United States and the District of
Columbia, and one for each province and Territory in Canada. If in any judicial proceeding, a
court shall hold that any of the covenants set forth in Section 8 exceed the time, geographic,
or occupational limitations permitted by applicable laws, Executive and the Company agree that
such provisions shall and are hereby reformed to the maximum time, geographic, or occupational
limitations permitted by such laws. Further, in the event a court shall hold unenforceable
any of the separate covenants deemed included herein, then such unenforceable covenant or
covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of
such proceeding to the extent necessary to permit the remaining separate covenants to be
enforced in such proceeding. Executive and the Company further agree that the covenants in
Section 8 shall each be construed as a separate agreement independent of any other provisions
of this Agreement, and the existence of any claim or cause of action by Executive against the
Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of any of the covenants of Section 8.
	 
	10.	 	MITIGATION OF DAMAGES; ATTORNEY’S FEES

                    (a) Executive shall not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment.

-17-

 

                    (b) If any legal action is filed by either party to enforce or interpret any of the provisions
of this Agreement, the non-prevailing party shall pay to the prevailing party, in addition to any
other amounts awarded in the action, all reasonable attorney’s fees and other fees and costs
incurred by the prevailing party in connection with such legal action, the amount of which shall be
fixed by the court hearing such action and made a part of any judgment rendered.

	11.	 	WITHHOLDING OF TAXES.

The Company may withhold all legally required taxes from any compensation and benefits payable
under this Agreement.

	12.	 	ASSIGNMENT.

Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective heirs, representatives, successors and
permitted assigns. The rights, benefits and obligations of Executive under this Agreement are
personal to Executive and no such right, benefit or obligation shall be subject to voluntary or
involuntary alienation, assignment or transfer; provided,
however, that nothing in this Section 12
shall preclude Executive from designating a beneficiary or beneficiaries to receive any benefit
payable on his death. The Company shall require any Successor (whether by purchase of all or
substantially all of the assets of the Company, merger of the Company into another entity, or
otherwise) to assume and agree to perform this Agreement in the same manner and to the same extent
that the Company would have been required to perform if no such succession had taken place. Upon
any such assignment, all references herein to the Company shall be deemed to refer to such
assignee.

	13.	 	ENTIRE AGREEMENT; AMENDMENT.

This Agreement, together with all schedules, exhibits and other documents referred to herein, shall
supersede any and all existing oral or written agreements, representations, or warranties between
Executive and the Company relating to the terms of Executive’s employment by the Company. This
Agreement may not be amended, nor any provision waived, except by a written instrument signed by
the party against whom such amendment or waiver is sought to be enforced.

	14.	 	GOVERNING LAW; JURISDICTION.

This Agreement shall be governed by and construed in accordance with the internal substantive laws
of the State of Delaware, without giving effect to the conflict of law principles thereof. The
parties agree that all disputes, legal actions, suits and proceedings arising out of or relating to
this Agreement or Executive’s employment with the Company must be brought exclusively in a federal
district court or state court of competent jurisdiction located in the State of Delaware. Each
party hereby irrevocably consents and submits to the exclusive jurisdiction of such courts. No
legal action, suit or proceeding with respect to this Agreement or Executive’s employment with the
Company may be brought in any other forum. Each party hereby irrevocably waives all claims of
immunity from jurisdiction and any right to object on the basis that any dispute, action,
suit or proceeding brought in any such court has been brought in an improper or inconvenient forum
or venue.

-18-

 

	15.	 	NOTICES.

Any notice, consent, request or other communication made or given in connection with this Agreement
shall be in writing and shall be deemed to have been duly given if delivered personally, mailed by
registered or certified mail (return receipt requested), or by confirmed facsimile to those listed
below at their following respective addresses or at such other address as each may specify by
notice to the others:

	 	 	To the Company or Capital:

	 	 	 	1122 International Blvd., Suite 601
Burlington, Ontario L7L 6Z8
Attention:  General Counsel

	 	 	To Executive: At the address for Executive set forth on the signature page below.

	16.	 	MISCELLANEOUS.
	 
	(a)	 	WAIVER. The failure of a party to insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver thereof or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of this Agreement.
The waiver by any party hereto of a breach of any provision of this Agreement shall neither
operate nor be construed as a general waiver or as a specific waiver of any subsequent breach
by any party, unless otherwise expressly provided in such waiver.
	 
	(b)	 	SEPARABILITY. Subject to Section 9 hereof, if any term or provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to be invalid,
illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be
enforceable, such term or provision shall immediately become null and void, leaving the
remainder of this Agreement in full force and effect.
	 
	(c)	 	HEADINGS. Section headings are used herein for convenience of reference only and shall not
affect the meaning of any provision of this Agreement.
	 
	(d)	 	RULES OF CONSTRUCTION. Whenever the context so requires, the use of the singular shall be
deemed to include the plural and vice versa.
	 
	(e)	 	COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, and such counterparts will together constitute but
one Agreement.
	 
	(f)	 	Intentionally omitted.

-19-

 

	(g)	 	RELEASE. Notwithstanding anything herein to the contrary, the Company shall not be required
to make any of the payments, or provide any of the benefits, to the Executive pursuant to
Sections 6 or 7 hereof unless and until Executive executes and delivers a release of all
claims arising out of this Executive Employment Agreement through the date of the release, but
excluding claims for indemnification from the Company under the Indemnification Agreement
attached hereto as Exhibit A, local, state or federal statutory or constitutional claims, or
other claims not arising under this Executive Employment Agreement.
	 
	(h)	 	SURVIVAL. Notwithstanding anything in this Agreement to the contrary, the provisions of
Sections 8, 9, 10, 14, 15 and 16 shall survive any termination of Executive’s employment in
accordance with their respective terms.

[SIGNATURE PAGES TO FOLLOW]

-20-

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year
first above written.

	 	 	 	 	 
	THE COMPANY:

WASTE SERVICES, INC.

 	 	 
	By:  	 	 	 
	 	Name:  	David Sutherland-Yoest 	 	 
	 	Title:  	Chairman and Chief Executive Officer 	 	 
	 
	Date:
August                    ,
2007 

	 	 
	 
	EXECUTIVE:

 	 	 
	By:  	 	 	 
	 	William P. Hulligan 	 	 
	 
	Date: August                    , 2007 	 

-21-EX-10.1 Clendenin Separation and Release Agreement

 

EXHIBIT 10.1

SEPARATION AND RELEASE AGREEMENT

     THIS SEPARATION AND RELEASE AGREEMENT (the “Agreement”) is entered into as of October 29,
2007, by and between Gregory Clendenin (the “Employee”) and Sunair Southeast Pest Holdings, Inc., a
Florida corporation (the “Company”).

WITNESSETH:

     WHEREAS, the Employee was employed by the Company to serve as the Chief Executive Officer of
the Company and Middleton Pest Control, Inc. (“Middleton”), a wholly-owned subsidiary of the
Company, pursuant to an employment agreement dated June 7, 2005 (the “Employment Agreement”);

     WHEREAS, the Employee has decided to retire and has resigned from all positions that he holds
with the Company as an executive officer and employee effective of October 29, 2007 and will
receive compensation pursuant to the terms and conditions contained herein;

     NOW, THEREFORE, Employee and the Company, intending to be legally bound hereby and in
consideration of the promises contained herein, do hereby agree as follows:

     1. RESIGNATION. The Employee agrees to resign (i) from his position as the Chief
Executive Officer of the Company, (ii) from his position as the Chief Executive Officer of
Middleton and (iii) from any other positions that he holds with the Company, Middleton or any other
affiliated companies (“Affiliated Companies”) of the Company or Middleton, effective as of the end
of the business day on Monday, October 29, 2007 (the “Resignation Date”). The Employee acknowledges
and agrees that after the Resignation Date, he will not have the authority to represent or bind the
Company, Middleton or any affiliated companies as an officer or employee.

2. TERMINATION OF EMPLOYMENT AGREEMENT AND OPTIONS. 

          2.1 Employee acknowledges and agrees that this Agreement shall serve to terminate his
employment agreement (“Employment Agreement”) with the Company dated June 7, 2005, except as
described herein, and this Agreement sets forth all of the compensation payable to him effective
as of the date of this Agreement.

          2.2 The Employee acknowledges and agrees that except for certain compensation earned in
October, 2007, but not yet paid, the Company has paid him all wages and any other compensation that
is payable to him under his Employment Agreement, including but not limited to all salary payments,
bonuses, incentive compensation, reimbursement for his business expenses and vacation pay, to which
he is entitled under the Employment Agreement or otherwise in connection with his employment with
the Company. The Employee further acknowledges that, except as described in this Agreement, his
eligibility to participate in any of the Company’s benefit programs, including, but not limited to,
participation in (a) the Company’s bonus plan, described in Section 3(b) and Exhibit A of the
Employment Agreement, (b) employee benefits plans, such as 401(k), savings, pension, shared and
deferred compensation plans and (c) health insurance benefits, such as medical, dental,
hospitalization,
disability, life insurance and other plans offered to the Company’s executives, have been
terminated as a result of the termination of the Employment Agreement.

1

 

          2.3 The Employee agrees that he will have until October 29, 2008, to exercise any vested
options (“Vested Options”) that have been granted to him by Sunair Services Corporation, a Florida
corporation (“Sunair”), the parent of the Company, during the term of his employment with the
Company. The Employee acknowledges and agrees that the only Vested Options that he owns as of the
date of this Agreement are as follows: options to purchase 23,812 shares of Sunair’s common stock
at an exercise price of $ 11.40 per share. The Employee agrees that any of the Vested Options,
listed in this Section 2.2, which the Employee has not exercised by October 29, 2008 will be deemed
to be cancelled, null and void at the end of the business day.

          2.4 The Company and the Employee acknowledge the termination of the Employment Agreement,
except for the covenants and obligations set forth in Sections 7 through 12 of the Employment
Agreement, which by their terms survive the termination of the Employment Agreement and are
incorporated herein by reference. The Employee acknowledges and agrees that he will comply with
the obligations and covenants set forth in Sections 7 through 12 of the Employment Agreement for
the applicable time periods set forth in the Employment Agreement. The Employee acknowledges that
his covenants and obligations set forth in the Stock Purchase Agreement (“Stock Purchase
Agreement”) dated June 7, 2005 by and among the Company, the Employee, Charles P. Steinmetz and
certain trusts associated with the Employee and Charles P. Steinmetz, which by their terms survive
the closing of the Stock Purchase Agreement, including but not limited to Section 7(d) of the Stock
Purchase Agreement (the “Applicable Provisions”), continue to apply to him and will remain in
effect until June 6, 2010. The Employee agrees that the Applicable Provisions of the Stock
Purchase Agreement are incorporated into this Agreement by reference.

          2.5 The Company and the Employee have agreed to enter into a consulting agreement (“Consulting
Agreement”) for a period of twelve months after the Resignation Date pursuant to which the Employee
will provide consulting services to the Company and the Affiliated Companies in areas of his
expertise and on matters in which he was involved while employed by the Company.

3. SEVERANCE PAYMENTS.

          3.1 Severance Payment. In consideration of the covenants set forth herein, the Company
agrees to pay the Employee a severance payment equal to an aggregate of $91,500.00, which
represents (a) a severance payment of $76,500.00 and (b) twelve months of COBRA reimbursement
payments, which is equal to $15,000.00, to be paid over a six-month period, in accordance with the
Company’s normal payroll practices beginning on November 16, 2007, and ending on May 16, 2008. All
compensation payable to the Employee hereunder is stated in gross amounts and shall be subject to
all applicable withholding taxes, other normal payroll and any other amounts required by law to be
withheld.

          3.2 Benefits. The Company will provide the Employee with information regarding any
benefits which may be converted to individual coverage and/or coverage which includes his spouse in
accordance with Consolidated Omnibus Budget Reconciliation Act

2

 

           (“COBRA”) regulations. Employee acknowledges and agrees that he will not be entitled to any
perquisites, benefits or other compensation whatsoever after the Resignation Date, except as
described in this Agreement.

          3.3 Compliance with Obligations. The Company’s obligations to make payments to the
Employee under this Agreement is conditioned upon the Employee’s compliance with all of his
covenants and obligations contained in (a) this Agreement, including but not limited to Sections 7
through 12 of the Employment Agreement and the Applicable Provisions of the Stock Purchase
Agreement, which are incorporated by reference into this Agreement and Mutual Release (b) the
Consulting Agreement.

     4. WAIVER AND RELEASE. For good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the Employee, including the payments to the Employee as
described in Section 3, Employee hereby agrees that his separation of employment from the Company
was not due in any way to age or any other type of discrimination or any wrongful act of the
Company, and Employee and his Releasors, as hereinafter defined, do hereby voluntarily and fully
release and forever discharge the Company, Middleton, Sunair, any Affiliated Companies, together
with their respective past and current predecessors, successors, shareholders, officers, directors,
employees, attorneys, trustees, insurers, representatives, contractors, representatives, related
organizations, affiliates and subsidiaries (collectively, the “Released Parties”), jointly and
individually, from any and all claims, demands, debts, causes of action, claims for relief, and
damages, of whatever kind or nature, known or unknown, developed or undeveloped, which Employee
had, now has or may hereinafter have from the beginning of the world to the date hereof, including,
without limitation, all claims and all rights which the Employee may have under Title VII of the
Civil Rights Act of 1964; the Equal Employment Opportunity Act of 1972; the Civil Rights Act of
1991; the Age Discrimination and Employment Act of 1967; the Employee Retirement Security Act 42
U.S.C. ss. 1981; the Older Workers’ Benefit Protection Act; the Americans with Disabilities Act;
the Family Medical Leave Act of 1993; the Equal Pay Act; the Fair Labor Standards Act; and any and
all other federal and state statutes which regulate employment; and the laws of contracts, tort and
other subjects.

     5. RELEASED PARTIES AND NO ADMISSION OF LIABILITY. For purposes of paragraph 4,
“Releasors” shall mean, collectively, the spouse of the Employee and the Employee’s dependents,
heirs, executors administrators and assigns, past and present and each of them and their trustees,
directors, officers, agents, attorneys, insurers, employees, stockholders, representatives,
successors, assigns and all persons acting by, through, under or in connection with them, past and
present. Execution of this Agreement and payment of the payments specified in paragraph 3 of this
Agreement does not constitute an admission by any Released Party of any violation of any civil
rights or other employment discrimination statute, or any other legal statute, provision,
regulation, ordinance, order or action under common law. Rather, this Agreement expresses the
intention of the parties to resolve all possible issues and other claims related to or arising out
of Employee’s employment by the Company without the time and expense of litigation.

     6. GOVERNING LAW. The law of the State of Florida shall govern the validity of this
Agreement, the construction of its terms and the interpretation of the rights and duties of the
parties. This Agreement and the Consulting Agreement constitute the entire agreement and

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understanding between the Employee and the Company regarding the Employee’s resignation from
employment with the Company. Any agreement to amend or modify the terms and conditions of this
Agreement must be in writing and executed by the parties hereto. This Agreement may be specifically
enforced in judicial proceedings and may be used as evidence in a subsequent proceeding in which a
breach is alleged.

     7. CONFIDENTIALITY. The Employee agrees that he will keep confidential all information
regarding the Company, its business operations and this Agreement, including, but not limited to,
information about pricing, customers, current and former employees and will not disclose such
information to anyone unless such information is published and becomes public knowledge (other than
through or by the Employee on his behalf), (ii) required by legal process in formal legal
proceeding or (iii) to the extent necessary to report income to the appropriate taxing authorities.
The provisions of this paragraph are in addition to, and not in lieu of, any other obligations of
confidentiality entered into by the Employee and the Company, Middleton and/or any Affiliated
Companies.

     8. NON-DISPARAGEMENT. (a) The Employee agrees that he will not directly or
indirectly, individually or in concert with others for a period of five years from the date of this
Agreement, (i) disparage, interfere with or attempt to interfere with, the reputation, goodwill,
services or business of the Company or any of the Affiliated Companies and/or the stockholders,
directors, officers, employees, agents or representatives of the Company or any Affiliated
Companies or (ii) engage in any conduct, take any actions or make any statements (oral or written)
to the public, future employers, customers, vendors, the investment community, the media, current,
former or future employees or the Company or any Affiliated Company, or any other third party
whatsoever that is calculated to have, or reasonably likely or possibly having, the effect of
undermining, disparaging or otherwise reflecting negatively or could reasonably be considered to
undermine, disparage or reflect negatively, on the Company or the Affiliated Companies or the
reputation, goodwill, services and business of the Company or the Affiliated Companies.

          (b) The Company agrees that it will not directly or indirectly, individually or in concert
with others for a period of five years from the date of this Agreement, (i) disparage, interfere
with or attempt to interfere with, the reputation, goodwill, services or business of the Employee
or (ii) engage in any conduct, take any actions or make any statements (oral or written) to the
public, future employers, customers, vendors, the investment community, the media, current, former
or future employees or the Company or any Affiliated Company, or any other third party whatsoever
that is calculated to have, or reasonably likely or possibly having, the effect of undermining,
disparaging or otherwise reflecting negatively or could reasonably be considered to undermine,
disparage or reflect negatively, on the Employee or the reputation, goodwill, services and business
of the Employee.

     9. KNOWING AND VOLUNTARY SETTLEMENT. IN EXECUTING THIS AGREEMENT, EMPLOYEE HEREBY
REPRESENTS THAT HE HAS BEEN AFFORDED A REASONABLE OPPORTUNITY TO CONSIDER THIS AGREEMENT; THAT HE
HAS COMPLETELY AND CAREFULLY READ THIS AGREEMENT; THAT HE HAS BEEN ADVISED BY THE COMPANY TO
CONSULT WITH AN ATTORNEY OF HIS OWN CHOICE PRIOR TO EXECUTING THIS AGREEMENT,

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AND RELIED ON THE LEGAL ADVICE OF HIS ATTORNEY; THAT HE HAD THE OPPORTUNITY TO HAVE AN
ATTORNEY EXPLAIN TO HIM THE TERMS OF THIS AGREEMENT; THAT HE KNOWS AND UNDERSTANDS THE CONTENTS OF
THIS AGREEMENT; THAT THE TERMS OF THIS AGREEMENT ARE SATISFACTORY TO AND FULLY UNDERSTOOD AND
VOLUNTARILY ACCEPTED BY HIM.

     10. EFFECT OF SETTLEMENT AND INTERPRETATION. The Company and Employee intend this
Agreement to be legally binding upon and inure to the benefit of each of them and their respective
heirs, administrators, executors, successors and assigns. The language of this Agreement shall be
construed as a whole, according to its fair meaning and intent and not strictly for or against any
party hereto, regardless of who drafted or was principally responsible for drafting this Agreement.
The recitals contained at the beginning of this Agreement are expressly made a part of this
Agreement. Headings are for convenience only and should not be used in interpreting this
Agreement.

     11. SEVERABILITY AND JURY WAIVER. Should any provision of this Agreement be declared
illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be
enforceable, including the general release language, such provision shall immediately become null
and void, leaving the remainder of the Agreement in full force and effect. However, if any portion
of the general release language is ruled to be unenforceable for any reason, the Company may
request that all or a portion of the consideration paid to the Employee pursuant to paragraph 3 of
this Agreement be repaid by the Employee. The Company and the Employee each knowingly,
intentionally, and irrevocably waive any and all rights to a jury trial for any litigation or legal
proceeding in any way relating to or arising out of this Agreement or the Employment Agreement.

[Signature Page Follows]

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     IN WITNESS WHEREOF, the aforesaid parties have hereunto set their hands and seals as of the
day below written.

	 	 	 	 	 
	 	SUNAIR SOUTHEAST PEST HOLDINGS, INC.

 	 
	 	By:  	/s/  John J. Hayes
 	 
	 	 	Name:  	John J. Hayes 	 
	 	 	Title:  	President 	 
	 

	 	 	 	 	 
	 	EMPLOYEE

 	 
	 	/s/ Gregory Clendenin
 	 
	 	Gregory Clendenin 	 
	 	 	 
	 

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