Document:

exv10w10

 

Exhibit 10.10

RESTRICTED STOCK UNIT AWARD AGREEMENT

     This Restricted Stock Unit Award Agreement (“Agreement”) is entered into effective as of
January 26, 2007 (the “Grant Date”), by and between Waste Management, Inc., a Delaware
corporation (together with its Subsidiaries and Affiliates, the “Company”), and «Full_NameFirst»
(the “Employee”), pursuant to the Waste Management, Inc. 2004 Stock Incentive Plan (the “Plan”).
Employee and the Company agree to execute such further instruments and to take such further action
as may reasonably be necessary to carry out the intent of this Agreement.

     1.
Award. The Company hereby grants to Employee «M___Units» Restricted Stock Units.
Restricted Stock Units are notational units of measurement denominated in shares of common stock of
Waste Management, Inc., $.01 par value (“Common Stock”). Each Restricted Stock Unit represents a
hypothetical share of Common Stock, subject to the conditions and restrictions on transferability
set forth below and in the Plan. The Restricted Stock Units will be credited to Employee in an
unfunded bookkeeping account established for Employee.

     2.
Vesting of Restricted Stock Units. The period of time between the Grant Date and
the vesting of Restricted Stock Units (and the termination of restriction thereon) will be referred
to herein as the “Restriction Period.” During the Restriction Period, the Restricted Stock Units
will be subject to the restrictions as set forth herein. Unless timely deferred by Employee in
accordance with Section 5, upon vesting, each Restricted Stock Unit will be converted into one
share of Company Common Stock and Employee will be issued shares of Common Stock equal to the
number of Restricted Stock Units held, free of any restrictions. Except as otherwise provided
herein, the vesting of such Restricted Stock Units and any Dividend Equivalents relating
thereto shall occur only if Employee is an employee of the Company on the date of vesting and
has continuously been so employed since the Grant Date.

          (a)General Vesting Schedule. The Restricted Stock Units granted pursuant to
this Agreement shall vest in their entirety on the third (3rd) anniversary of the
Grant Date, unless earlier vested or forfeited pursuant to the terms of this Agreement.

                    (b)Accelerated Vesting of Restricted Stock Units.

                    (i) Acceleration on Death or Disability. Upon Termination of
Employment from the Company by reason of Employee’s death or disability (as
determined by the Committee), or upon Employee’s disability prior to a Termination
of Employment (as determined by the Committee and within the meaning of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”)) all
Restricted Stock Units that are not vested at that time immediately will become
vested in full.

                    (ii) Pro-rated Vesting upon Involuntary Termination by the Company or
Retirement by Employee. Upon either an involuntary Termination of Employment
without Cause by the Company or a qualifying Retirement by Employee, Employee will
be entitled to have vested under this award (including the amount of Restricted
Stock Units that have already vested at that time) the amount of Restricted Stock

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Units equivalent to the total Restricted Stock Units granted under this
Agreement multiplied by the fraction which has as its numerator the total number of
days that Employee was employed by the Company during the period beginning on the
Grant Date and ending on the date of Termination of Employment, and has as its
denominator 1,096 (being the number of calendar days in Restriction Period).

                    (iii) Possible Acceleration upon Change in Control or Certain Terminations
Following Change in Control. If there is a Change in Control of Waste
Management, Inc., all outstanding but unvested Restricted Stock Units that are not
vested will become immediately vested in full, unless the successor entity assumes
all awards granted under the Plan and converts the awards to equivalent grants in
the successor effective as of the Change in Control. Provided, however, even if the
successor entity so assumes and converts all awards granted under the Plan, if the
successor entity terminates Employee’s employment during the Window Period without
Cause (as each term is defined in Section 16 below), or due to Employee’s death or
disability, then all outstanding but unvested Restricted Stock Units (or its
equivalent grant in the successor entity) will become immediately vested in full as
of such termination.

          3. Forfeitures of Restricted Stock Units. Upon Termination of Employment from the
Company for any reason other than as described in Section 2, Employee shall immediately forfeit all
unvested Restricted Stock Units, without the payment of any consideration or further consideration
by the Company. Upon forfeiture, neither Employee nor any successors, heirs, assigns, or legal
representatives of Employee shall thereafter have any further rights or interest in the unvested
Restricted Stock Units or certificates therefor.

          4. Restrictions on Transfer Before Vesting.

          (a) Absent prior written consent of the Committee, the Restricted Stock Units granted
hereunder to Employee may not be sold, assigned, transferred, pledged or otherwise
encumbered, whether voluntarily or involuntarily, by operation of law or otherwise, from the
Grant Date until such shares have become vested and not subject to deferral.

          (b) Consistent with the foregoing, except as contemplated by Section 10, no right or
benefit under this Agreement shall be subject to transfer, anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, whether voluntary, involuntary, by operation of
law or otherwise, and any attempt to transfer, anticipate, alienate, sell, assign, pledge,
encumber or charge the same shall be void. No right or benefit hereunder shall in any
manner be liable for or subject to any debts, contracts, liabilities or torts of the person
entitled to such benefits. If Employee or his or her Beneficiary hereunder shall attempt to
transfer, anticipate, alienate, assign, sell, pledge, encumber or charge any right or
benefit hereunder, other than as contemplated by Section 10, or if any creditor shall
attempt to subject the same to a writ of
garnishment, attachment, execution, sequestration, or any other form of process or
involuntary lien or seizure, then such attempt shall have no effect and shall be void.

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          5. Elective Deferrals Prior to Vesting.

          (a) The Committee may establish procedures pursuant to which Employee may elect to
defer, until a time or times later than the vesting of a Restricted Stock Unit, receipt of
all or a portion of the shares of Common Stock deliverable in respect of a Restricted Stock
Unit, all on such terms and conditions as the Committee (or its designee) shall determine in
its sole discretion. The Committee further retains the authority and discretion to modify
and/or terminate existing deferral elections, procedures and distribution options. If any
such deferrals are permitted for Employee, then notwithstanding any provision of this
Agreement or the Plan to the contrary, an Employee who elects such deferral shall not have
any rights as a stockholder with respect to any such deferred shares of Common Stock unless
and until the date the deferral expires and certificates representing such shares are
required to be delivered to Employee.

          (b) Notwithstanding any provision to the contrary in this Agreement, if deferral of
Restricted Stock Units is permitted, each provision of this Agreement shall be interpreted
to permit the deferral of compensation only as allowed in compliance with the requirements
of Section 409A of the Internal Revenue Code and any provision that would conflict with such
requirements shall not be valid or enforceable. Employee acknowledges, without limitation,
and consents that application of Section 409A of the Internal Revenue Code to this Agreement
may require additional delay of payments otherwise payable under this Agreement. Employee
and the Company further hereby agree to execute such further instruments and take such
further action as reasonably may be necessary to comply with Section 409A of the Internal
Revenue Code.

          6. Rights as a Stockholder. Employee will have no rights as a stockholder with regard
to the Restricted Stock Units prior to vesting. However, the Company will pay Dividend Equivalents
on unvested Restricted Stock Units, in the form of cash at such time as dividends are paid on the
Company’s outstanding shares of Common Stock; provided that, for Restricted Stock Units that are
subject to a valid deferral election of Employee pursuant to Section 5, the Company will pay
Dividend Equivalents in the form of additional deferred Restricted Stock Units, credited to
Employee’s deferral account effective as of such time as dividends are paid on the Company’s
outstanding shares of Common Stock, but not distributable until such time as directed by Employee’s
deferral election.

          7. Taxes. To the extent that the vesting or receipt of the Restricted Stock Units or
Dividend Equivalents or the lapse of any restrictions results in a taxable event to Employee for
federal or state tax purposes, Employee shall deliver to the Company at the time of such receipt or
lapse, as the case may be, such amount of money or shares of Common Stock received upon vesting of

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Restricted Stock Units or other shares of Common Stock owned by employee, at Employee’s election,
as the Company may require to meet its obligation under applicable tax laws or regulations, and, if
Employee fails to do so, the Company is authorized to withhold from the shares of Common Stock
deliverable as a result of the vesting of the Restricted Stock Units or from any cash or other form
of remuneration then or thereafter payable to Employee an amount equivalent to any tax required to
be withheld by reasons of such resulting taxation.

          8. Changes in Capital Structure. If the outstanding shares of Common Stock or other
securities of Waste Management, Inc., or both, shall at any time be changed or exchanged by
declaration of a stock dividend, stock split, combination of shares, or recapitalization, the
number and kind of Restricted Stock Units shall be appropriately and equitably adjusted so as to
maintain the proportionate number of shares.

          9. Compliance With Securities Laws. The Company will not be required to deliver any
shares of Common Stock pursuant to this Agreement if, in the opinion of counsel for the Company,
such issuance would violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations. Prior to the issuance of any shares pursuant to this Agreement,
the Company may require that Employee (or Employee’s legal representative upon Employee’s death or
disability) enter into such written representations, warranties and agreements as the Company may
reasonably request in order to comply with applicable securities laws or with this Agreement.

          10. Assignment. The Restricted Stock Units are not transferable (either voluntarily
or involuntarily), other than pursuant to a domestic relations order. Employee may designate a
beneficiary or beneficiaries (the “Beneficiary”) to whom the Restricted Stock Units will pass upon
Employee’s death and may change such designation from time to time by filing a written designation
of Beneficiary on such form as may be prescribed by the Company; provided that no such designation
shall be effective until filed with the Company. Employee may change his or her Beneficiary
without the consent of any prior Beneficiary by filing a new designation with the Company; provided
that no such designation shall be effective prior to receipt by the Company. Following Employee’s
death, the Restricted Stock Units will pass to the designated Beneficiary and such person will be
deemed Employee for purposes of any applicable provisions of this Agreement. If no such
designation is made or if the designated Beneficiary does not survive Employee’s death, the
Restricted Stock Units shall pass by will or, if none, then by the laws of descent and
distribution.

          11. Successors and Assigns.

               (a) This Agreement shall bind and inure to the benefit of and be enforceable by
Employee, the Company and their respective permitted successors or assigns (including
personal representatives, heirs and legatees), except that Employee may not assign any
rights or obligations under this Agreement except to the extent, and in the manner,
expressly permitted herein.

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               (b) The Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company that assumes all Awards granted under the Plan as contemplated by
Section 2(b)(iii) to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no such
succession had taken place, subject to the vesting rights under Section 2(b)(iii).

          12. Limitation of Rights. Nothing in this Agreement or the Plan may be construed
to:

               (a) give Employee any right to be awarded any further Restricted Stock Units (or other
form of stock incentive awards) other than in the sole discretion of the Committee;

               (b) give Employee or any other person any interest in any fund or in any specified
asset or assets of the Company (other than the Restricted Stock Units and applicable Common
Stock following the vesting of such Restricted Stock Units); or

               (c) confer upon Employee the right to continue in the employment or service of the
Company.

               13. Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Texas, without reference to principles of conflict of laws.

               14. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

               15. No Waiver. The failure of Employee or the Company to insist upon strict
compliance with any provision of this Agreement or the failure to assert any right Employee or the
Company may have under this Agreement shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.

               16. Definitions. Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings set forth in the Plan. Certain other terms used herein have
definitions given to them in the first place in which they are used. In addition, the following
terms shall have the meanings set forth in this Section 16.

               (a) “Board” means the Board of Directors of Waste Management, Inc.

               (b) “Cause” means any of the following: (i) willful or deliberate and continual refusal
to materially perform Employee’s employment duties reasonably requested by the Company after
receipt of written notice to Employee of such failure to perform, specifying such failure
(other than as a result of Employee’s sickness, illness, injury, death or disability)
and Employee fails to cure such nonperformance within ten (10) days of receipt of said

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written notice; (ii) breach of any statutory or common law duty of loyalty to the Company;
(iii) Employee has been convicted of, or pleaded nolo contendre to, any felony; (iv)
Employee willfully or intentionally caused material injury to the Company, its property, or
its assets; (v) Employee disclosed to unauthorized person(s) proprietary or confidential
information of the Company that causes a material injury to the Company; (vi) any material
violation or a repeated and willful violation of the Company’s policies or procedures,
including but not limited to, the Company’s Code of Business Conduct and Ethics (or any
successor policy) then in effect.

(c) “Change in Control” means the first to occur on or after the Grant Date of any of
the following events:

               (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company’s then outstanding voting securities;

               (ii) the following individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who, on the Grant Date, constitute
the Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest, including but
not limited to a consent solicitation relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for election by
the Company’s stockholders was approved or recommended by a vote of at least
two-thirds (2/3rds) of the directors then still in office who either were directors
on the Grant Date or whose appointment, election or nomination for election was
previously so approved or recommended (the “Incumbent Board”);

               (iii) there is a consummated merger or consolidation of the Company with any
other corporation, other than (1) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving or parent entity) more than fifty percent (50%)
of the combined voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person,
directly or indirectly, acquired twenty-five percent (25%) or more of the combined
voting power of the Company’s then outstanding securities; or

               (iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets
(or

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any transaction having a similar effect), other than a sale or disposition by
the Company of all or substantially all of the Company’s assets to an entity, at
least fifty percent (50%) of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.

               For purposes of this definition, the following terms shall have the following
meanings:

               (A) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3
under the Exchange Act;

               (B) “Exchange Act” means the Securities and Exchange Act of 1934, as
amended from time to time;

               (C) “Person” shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (1) the Company, (2) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, (3) an employee benefit plan of the Company, (4) an underwriter
temporarily holding securities pursuant to an offering of such securities or
(5) a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of shares
of Common Stock.

     This definition of Change in Control will be modified if and to the extent necessary to
ensure compliance with the requirements of Section 409A of the Code, and Employee and the
Company agree to execute such further instruments and take such further action as reasonably
may be necessary to comply with Section 409A of the Code.

     (d) “Committee” means the Management Development and Compensation Committee of the
Board or such other committee of the Board as the Board may designate from time to time.

     (e) “Dividend Equivalent” means an amount of cash equal to all dividends and other
distributions (or the economic equivalent thereof) that are payable by the Company on one
share of Common Stock to stockholders of record, which, in the discretion of the Committee,
may be awarded (a) in connection with any Award under the Plan while such Award is
outstanding or otherwise subject to a Restriction Period and on a like number of shares of
Common Stock under such Award or (b) singly.

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     (f)      “Retirement” means the voluntary resignation of employment by Employee, after
Employee: (i) has attained the age of 55 or greater; (ii) has a sum of age plus full years
of Service with the Company equal to 65 or greater; and, (iii) has completed at least 5
consecutive full years of Service with the Company during the 5 year period immediately
preceding the resignation.

     (g)      “Service” is measured from Employee’s original date of hire by the Company, except
as provided below. In the case of a break of employment by Employee from the Company of one
year or more in length, Employee’s service before the break of employment shall not be
included in his or her Service hereunder. In the case of service with an entity acquired by
the Company, Employee’s service with such entity shall be considered Service hereunder, so
long as Employee remained continuously employed with such predecessor company(ies) and the
Company. In the case of a break of employment between a predecessor company and the Company
of any length, Employee’s Service shall be measured from the original date of hire by the
Company and shall not include any service with any predecessor company.

     (h)      “Termination of Employment” means the termination of Employee’s employment with the
Company. Temporary absences from employment because of illness, vacation or leave of
absence and transfers among Waste Management, Inc. and its Subsidiaries and Affiliates will
not be considered a Termination of Employment. Any questions as to whether and when there
has been a Termination of Employment, and the cause of such termination, shall be determined
by the Committee, and its determination will be final.

     (i)       “Window Period” means the period commencing on the date six months immediately
prior to the date on which a Change in Control first occurs and ending the second
anniversary of the date on which a Change in Control occurs.

17. Entire Agreement.

     (a) Employee hereby acknowledges that he or she has received, reviewed and accepted the
terms and conditions applicable to this Agreement. Employee hereby accepts such terms and
conditions, subject to the provisions of the Plan and administrative interpretations
thereof. Employee further agrees that such terms and conditions will control this
Agreement, notwithstanding any provisions in any employment agreement or in any prior
awards.

     (b) Employee hereby acknowledges that he or she is to consult with and rely upon only
Employee’s own tax, legal, and financial advisors regarding the consequences and risks of
this Agreement and the award of Restricted Stock Units.

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     (c) This Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal representatives.
The captions of this Agreement are not part of the provisions hereof and shall have no force
or effect.

     18. Electronic Delivery. The Company may, in its sole discretion, deliver any
documents related to the Restricted Stock Units awarded under this Agreement or the Plan by
electronic means or request Employee’s consent to participate in the administration of this
Agreement and the Plan by electronic means. Employee hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through an on-line or electronic system
established and maintained by the Company or another third party designated by the Company.

     19. Counterparts. This Agreement may be executed in counterparts, which together
shall constitute one and the same original.

     IN WITNESS WHEREOF, Waste Management, Inc. has caused this Agreement to be duly executed by
one of its officers thereunto duly authorized, which execution may be facsimile, engraved or
printed, which shall be deemed an original, and Employee has executed this Agreement, effective as
of the day and year first above written.

	 	 	 	 	 
	 	WASTE MANAGEMENT, INC.

 	 
	 	By:  	 	 
	 	 	David P. Steiner 	 
	 	 	Chief
Executive Officer 	 
	 
	 	EMPLOYEE
 	 
	 	 	 	 

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Exhibit 10.11

PERFORMANCE SHARE UNIT AWARD AGREEMENT

     This Performance Share Unit Award Agreement (“Agreement”) is entered into effective as of
January 26, 2007 the “Grant Date”), by and between Waste Management, Inc., a Delaware corporation
(together with its Subsidiaries and Affiliates, the “Company”), and «Full_NameFirst» (the
“Employee”), pursuant to the Waste Management, Inc. 2004 Stock Incentive Plan (the “Plan”).
Employee and the Company agree to execute such further instruments and to take such further action
as may reasonably be necessary to carry out the intent of this Agreement.

     1. Grant. In accordance with the terms of the Plan, the Company hereby grants to
Employee a Performance Share Unit Award (the “Award”) subject to the terms and conditions set forth
herein. Performance Share Units are notational units of measurement denominated in shares of
common stock of Waste Management, Inc., $.01 par value, (“Common Stock”), subject to the conditions
and restrictions on transferability set forth below and in the Plan.

     2. Performance Vesting Requirement.

     (a) The “Performance Period” for this Award shall be the 36-month period commencing on
January 1, 2007 and ending on December 31, 2009. The Award shall be subject to performance
vesting requirements based upon the achievement of the Performance Target specified below,
subject to certification of the degree of achievement of such Performance Target by the
Committee pursuant to Section 7 of the Plan.

     (b) The measurement tool for determining level of achievement shall be the average
Return on Invested Capital (“ROIC”) for the 36-month period beginning January 1, 2007 and
ending December 31, 2009. ROIC is defined to mean (i) the Company’s average “as reported”
Net Operating Profit After Taxes (“NOPAT”) for the Performance Period, divided by (ii) the
Company’s average Invested Capital for the Performance Period. For purposes of this
Agreement, the average ROIC for the Performance Period will be calculated using the
following equation:

 (2007 NOPAT + 2008 NOPAT + 2009 NOPAT) 

(2007 Invested Capital + 2008 Invested Capital + 2009 Invested Capital)

     3. Determining Number of Performance Share Units Earned.

     (a) The “Target Award” for Employee under this Agreement is «M___Units» Performance
Share Units. The actual number of Performance Share Units earned by Employee will be
determined as described below, based upon the actual achievement of ROIC for the
Performance Period. The “Threshold ROIC” is the minimum ROIC that must be achieved to
qualify for any Award; “Target

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ROIC” is the expected achievement in ROIC; and “Maximum ROIC” is the maximum ROIC that
could be achieved that would result in an increase in the number of Performance Share Units
earned under this Award. These targets will be announced to Employee by March 15, 2007,
following calculation of year-end financial reporting for 2006. Subject to adjustment
pursuant to Subsection 3(b), 3(c) and 3(d), each such percentage correlates to a number of
Performance Share Units that may be earned under this Award, as follows:

	 	 	 
	Average ROIC Achieved During	 	Resulting Performance Share Units
	Performance Period	 	Earned
	Threshold ROIC

	 	50% of Target Award
	Target ROIC

	 	100% of Target Award
	Maximum ROIC

	 	200% of Target Award

     (b) In the event that the Company’s actual performance does not meet the Threshold
ROIC, no Performance Shares Units shall be earned under this Award.

     (c) If the Company’s actual ROIC for the Performance Period is between Threshold ROIC
and Target ROIC, the number of Performance Share Units earned shall be equal to the sum of
(i) the Performance Shares Units for achievement of Threshold ROIC plus (ii) the number of
Performance Shares determined under the following formula:

(TAS
– TS) x (AP – TP)

                      TAP -TP

TAS = Performance Share Units earned for achievement of the Target ROIC.

TS = Performance Share Units earned for achievement of the Threshold ROIC.

AP = The percent payment earned based on actual ROIC performance.

TP = The percent payment earned based on Threshold ROIC performance.

TAP = The percent payment earned based on Target ROIC performance.

     (d) If the Company’s actual ROIC for the Performance Period is between Target ROIC and
Maximum ROIC, the number of Performance Share Units earned shall be equal to the sum of (i)
the Performance Share Units earned for achievement of Target ROIC plus (ii) the number of
Performance Share Units determined under the following formula:

(MS
– TAS) x (AP – TAP)

                        MP-TAP

MS = Performance Share Units earned for achievement of the Maximum ROIC.

TAS = Performance Share Units earned for achievement of the Target ROIC.

AP = The percent payment earned based on actual ROIC performance

TAP = The percent payment earned based on Target ROIC performance.

MP = The percent payment earned based on Maximum ROIC performance.

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     4. Timing and Form of Payout. Except as hereinafter provided, after the end of the
Performance Period, Employee shall be entitled to receive his total number of Performance Shares
Units determined under Section 3 and Dividend Equivalents under Section 10. Unless timely deferred
by Employee in accordance with Section 11, upon vesting, each Performance Share Unit will be
settled by payment of one share of Common Stock, free of any restrictions. Payment of such shares
of Common Stock shall be made as soon as administratively feasible after the Committee certifies
the actual performance of the Company during the Performance Period.

     5. Termination of Employment Due to Death or Disability. Upon Termination of
Employment from the Company by reason of Employee’s death or disability (as determined by the
Committee), or upon Employee’s disability prior to a Termination of Employment (as determined by
the Committee and within the meaning of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Internal Revenue Code”)) Employee (or in the case of Employee’s death, Employee’s
beneficiary) shall be entitled to receive the Performance Share Units Employee would have been
entitled to under Section 3 if he had remained employed until the last day of the Performance
Period. Unless further deferred pursuant to Employee’s deferral election, the delivery of shares
of Common Stock in satisfaction of such Performance Share Units shall be made as soon as
administratively feasible after the end of the Performance Period.

     6. Involuntary Termination of Employment Without Cause by the Company or Retirement by
Employee. Upon either an involuntary Termination of Employment from the Company without Cause
by the Company or a qualifying Retirement by Employee, Employee shall be entitled to receive the
Performance Share Units and related Dividend Equivalents that Employee would have been entitled to
under Section 3 if he or she had remained employed until the last day of the Performance Period,
multiplied by the fraction which has as its numerator the total number of days that Employee was
employed by the Company during the Performance Period and has as it denominator 1,096 (being the
number of calendar days in the Performance Period). Unless further deferred pursuant to Employee’s
deferral election, the delivery of shares of Common Stock in satisfaction of such Performance Share
Units shall be made as soon as administratively feasible after the end of the Performance Period.

     7. Termination of Employment for Any Other Reason. Except as provided in Sections 5
and 6, Employee must be an employee of the Company continuously from the date of this Award until
the last day of the Performance Period to be entitled to receive any shares of Common Stock with
respect to any Performance Share Units he may have earned hereunder.

     8. Acceleration upon Change in Control. Notwithstanding anything to the contrary, if
there is a Change in Control of Waste Management, Inc. prior to the
end of the Performance Period, Employee will be entitled to immediately receive both (a) and (b), as
follows:

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     (a) the Performance Share Units that he would have otherwise received based upon
achievement of ROIC after reducing the Performance Period so that it ends on the last day
of the quarter preceding the Change in Control (the “Early Measurement Date”) and making
adjustments to Target ROIC so as to be equal to the ROIC budgeted for that period and
appropriate adjustments to Threshold ROIC and Maximum ROIC so that they bear the same ratio
to the Threshold ROIC and Maximum ROIC amounts above as the revised Target ROIC amount bear
to the Target ROIC amount above, converted into a cash payment equivalent to the number of
Performance Share Units earned under this Section 8 multiplied by the closing price of the
Common Stock on the Early Measurement Date; and

     (b) as a substitute award for the lost opportunity to earn Performance Stock Units for
the entire length of the original Performance Period:

     (i) if the successor entity was a publicly traded company as of the Early
Measurement Date, an award of restricted stock units in the successor entity equal
to the number of shares of common stock of the successor entity that could have
been purchased on the Early Measurement Date with an amount of cash equal to the
product of the following equation:

 TAP x EMD x CP

1096-EMD

TAP = the number of Performance Share Units that could be earned for achievement of
the original Target ROIC specified in Section 3(a)

EMD = the number of days occurring from the Grant Date to the Early Measurement
Date 

CP = the closing price of a share of Common Stock of Waste Management, Inc. on the
Early Measurement Date

Any restricted stock units in the successor entity awarded under this Section
8(b)(i) will vest completely on or before December 31, 2009, provided that Employee
remain continuously employed with the successor entity until such date. The
foregoing notwithstanding, if there is an involuntary Termination of Employee for
reason other than Cause during the Window Period, Employee will become immediately
vested in full in the restricted stock units in the successor entity awarded
pursuant to this Section 8(b)(i).

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     (ii) if the successor entity was not a publicly traded company as of the Early
Measurement Date, a cash payment equal to the product of the following equation:

TAP x EMD__ x CP

1096-EMD

TAP = the number of Performance Share Units that could be earned for achievement of
the original Target ROIC specified in Section 3(a)

EMD = the number of days occurring from the Grant Date to the Early Measurement
Date

CP = the closing price of a share of Common Stock of Waste Management, Inc. on the
Early Measurement Date

Any cash payment calculated under this Section 8(b)(ii) will be paid to Employee on
December 31, 2009, provided that Employee remain continuously employed with the
successor entity until such date. The foregoing notwithstanding, if there is an
involuntary Termination of Employee for reason other than Cause during the Window
Period, Employee will be paid by the successor entity the amount determined
pursuant to this Section 8(b)(ii).

     9. Forfeiture of Award. Upon Termination of Employment from the Company for any
reason other than death, retirement, disability, involuntary termination by the Company without
Cause, or Change in Control, Employee shall immediately forfeit the Award, without the payment of
any consideration or further consideration by the Company. Upon forfeiture, neither Employee nor
any successors, heirs, assigns, or legal representatives of Employee shall thereafter have any
further rights or interest in the unvested portion of the Award.

     10. Dividend Equivalents. No Dividend Equivalents will be paid on the Performance
Share Units until such time as: (i) the Performance Period has ended; (ii) Employee has vested in
the Award, and; (iii) the number of Performance Share Units earned under this Award has been
certified by the Committee based on the actual performance of the Company during the Performance
Period. Reasonably promptly after all such events have occurred, the Company will pay Employee a
lump-sum cash amount in payment of Dividend Equivalents based on the number of Performance Share
Units earned under the Award multiplied by the per share quarterly dividend payments made to
shareholders of Company’s Common Stock during the Performance Period (without any interest or
compounding). Notwithstanding the foregoing, any accumulated and unpaid Dividend Equivalents
attributable to Performance Share Units that are cancelled or forfeited will not be paid and are
immediately forfeited upon cancellation of the Performance Share Units. Following the end of the
Performance Period, Dividend Equivalents will also be paid on vested Performance Share Units for
which a valid deferral election has been made pursuant to Section 11. With respect to validly
deferred

-5-

 

and vested Performance Share Units, the Company will pay Dividend Equivalents in cash at such
times as dividends are paid on the Company’s outstanding shares of Common Stock.

     11. Elective Deferrals.

     (a) The Committee may establish procedures pursuant to which Employee may elect to
defer, until a time or times later than the vesting of a Performance Share Unit, receipt of
all or a portion of the shares of Common Stock deliverable in respect of a Performance
Share Unit, all on such terms and conditions as the Committee (or its designee) shall
determine in its sole discretion If any such deferrals are permitted for Employee, then
notwithstanding any provision of this Agreement or the Plan to the contrary, an Employee
who elects such deferral shall not have any rights as a stockholder with respect to any
such deferred shares of Common Stock unless and until the date the deferral expires and
certificates representing such shares are required to be delivered to Employee. The
foregoing notwithstanding, no deferrals of Dividend Equivalents related to any Performance
Share Units under this Award will be permitted. Moreover, the Committee further retains
the authority and discretion to modify and/or terminate existing deferral elections,
procedures and distribution options.

     (b) Notwithstanding any provision to the contrary in this Agreement, if deferral of
Performance Share Units is permitted, each provision of this Agreement shall be interpreted
to permit the deferral of compensation only as allowed in compliance with the requirements
of Section 409A of the Internal Revenue Code and any provision that would conflict with
such requirements shall not be valid or enforceable. Employee acknowledges, without
limitation, and consents that application of Section 409A of the Internal Revenue Code to
this Agreement may require additional delay of payments otherwise payable under this
Agreement. Employee and the Company further hereby agree to execute such further
instruments and take such further action as reasonably may be necessary to comply with
Section 409A of the Internal Revenue Code.

     12. Restrictions on Transfer.

     (a) Absent prior written consent of the Committee, the Award granted hereunder to
Employee may not be sold, assigned, transferred, pledged or otherwise encumbered, whether
voluntarily or involuntarily, by operation of law or otherwise; provided, however, that the
transfer of any shares of Common Stock with respect to the Performance Share Units earned
hereunder shall not be restricted by virtue of this Agreement.

     (b) Consistent with the foregoing, except as contemplated by Section 13, no right or
benefit under this Agreement shall be subject to transfer, anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, whether

-6-

 

voluntary, involuntary, by operation of law or otherwise, and any attempt to transfer,
anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No
right or benefit hereunder shall in any manner be liable for or subject to any debts,
contracts, liabilities or torts of the person entitled to such benefits. If Employee or
his Beneficiary hereunder shall attempt to transfer, anticipate, alienate, assign, sell,
pledge, encumber or charge any right or benefit hereunder, other than as contemplated by
Section 13, or if any creditor shall attempt to subject the same to a writ of garnishment,
attachment, execution sequestration, or any other form of process or involuntary lien or
seizure, then such attempt shall have no effect and shall be void.

     13. Assignment and Transfers. Prior to the end of the Performance Period and the
delivery of the Common Stock with respect to any Performance Share Units earned, the Award is not
transferable (either voluntarily or involuntarily), other than pursuant to a domestic relations
order. Employee may designate a beneficiary or beneficiaries (the “Beneficiary”) to whom the
Performance Share Units will pass upon Employee’s death and may change such designation from time
to time by filing a written designation of beneficiary on such form as may be prescribed by the
Company, provided that no such designation shall be effective until filed with the Company.
Following Employee’s death, the Performance Share Units will pass to the designated Beneficiary and
such person will be deemed Employee for purposes of any applicable provisions of this Agreement.
If no such designation is made or if the designated Beneficiary does not survive Employee’s death,
the Performance Share Units shall pass by will or, if none, then by the laws of descent and
distribution.

     14. Withholding Tax. To the extent that the receipt of this Award, vesting, or the
delivery of the Common Stock with respect to any Performance Share Units earned results in a
taxable event to Employee for federal or state tax purposes, Employee shall deliver to the Company
at the time of such receipt, such amount of money or shares of Common Stock earned or owned by
Employee, at Employee’s election, as the Company may require to meet its obligation under
applicable tax laws or regulations, and, if Employee fails to do so, the Company is authorized to
withhold from any cash or other form of remuneration then or thereafter payable to Employee any tax
required to be withheld by reasons of such resulting taxation.

     15. Changes in Capital Structure. If the outstanding shares of Common Stock or other
securities of Waste Management, Inc., or both, shall at any time be changed or exchanged by
declaration of a stock dividend, stock split, combination of shares, or recapitalization, the
number of Performance Share Units shall be appropriately and equitably adjusted so as to maintain
the proportionate number of shares. 

     16. Compliance with Securities Laws. The Company will not be required to deliver any
shares of Common Stock pursuant to this Agreement, if, in the opinion of counsel for the Company,
such issuance would violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations. Prior to the issuance of

-7-

 

any shares pursuant to this Agreement, the Company may require that Employee (or Employee’s legal
representative upon Employee’s death or disability) enter into such written representations,
warranties and agreements as the Company may reasonably request in order to comply with applicable
securities laws or with this Agreement.

     17. Employee to Have no Rights as a Stockholder. Employee shall have no rights as a
stockholder with respect to any shares of Common Stock subject to this Award prior to the date on
which he or she is recorded as the holder of such shares of Common Stock on the records of the
Company.

     18. Successors and Assigns.

     (a) This Agreement shall bind and inure to the benefit of and be enforceable by
Employee, the Company and their respective permitted successors or assigns (including
personal representatives, heirs and legatees), except that Employee may not assign any
rights or obligations under this Agreement except to the extent, and in the manner,
expressly permitted herein.

     (b) The Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it if no such
succession had taken place.

     19. Limitation of Rights. Nothing in this Agreement or the Plan may be construed
to:

     (a) give Employee any right to be awarded any further Performance Share Units (or
other form of stock incentive awards) other than in the sole discretion of the Committee;

     (b) give Employee or any other person any interest in any fund or in any specified
asset or assets of the Company (other than the Award and applicable Common Stock following
the vesting of such Award); or

     (c) confer upon Employee the right to continue in the employment or service of the
Company.

     20. Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Texas, without reference to principles of conflict of laws.

     21. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

-8-

 

     22. No Waiver. The failure of Employee or the Company to insist upon strict
compliance with any provision of this Agreement or the failure to assert any right Employee or the
Company may have under this Agreement shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.

     23. Definitions. Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings set forth in the Plan. Certain other terms used herein have
definitions given to them in the first place in which they are used. In addition, the following
terms shall have the meanings set forth in this Section 23.

     (a) “Board” means the Board of Directors of Waste Management, Inc.

     (b) “Cause” means any of the following: (i) willful or deliberate and continual
refusal to materially perform Employee’s employment duties reasonably requested by the
Company after receipt of written notice to Employee of such failure to perform, specifying
such failure (other than as a result of Employee’s sickness, illness, injury, death or
disability) and Employee fails to cure such nonperformance within ten (10) days of receipt
of said written notice; (ii) breach of any statutory or common law duty of loyalty to the
Company; (iii) Employee has been convicted of, or pleaded nolo contendre to, any felony;
(iv) Employee willfully or intentionally caused material injury to the Company, its
property, or its assets; (v) Employee disclosed to unauthorized person(s) proprietary or
confidential information of the Company that causes a material injury to the Company; (vi)
any material violation or a repeated and willful violation of the Company’s policies or
procedures, including but not limited to, the Company’s Code of Business Conduct and Ethics
(or any successor policy) then in effect.

     (c) “Change in Control” means the first to occur on or after the Grant Date of any of
the following events:

     (i) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company’s then outstanding voting securities;

     (ii) the following individuals cease for any reason to constitute a majority
of the number of directors then serving: individuals who, on the Grant Date,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation relating to the
election of directors of the Company) whose appointment or election by the Board or
nomination for election by the Company’s stockholders was approved or recommended
by a vote of at least two-thirds (2/3rds) of the directors then still in office who
either were directors on the Grant Date or whose appointment, election or
nomination for election was previously so approved or recommended (the “Incumbent
Board”);

-9-

 

     (iii) there is a consummated merger or consolidation of the Company with any
other corporation, other than (1) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving or parent entity) more than fifty percent (50%)
of the combined voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person,
directly or indirectly, acquired twenty-five percent (25%) or more of the combined
voting power of the Company’s then outstanding securities; or

     (iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or there is consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets (or any transaction
having a similar effect), other than a sale or disposition by the Company of all or
substantially all of the Company’s assets to an entity, at least fifty percent
(50%) of the combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.

     For purposes of this definition, the following terms shall have the following
meanings:

     (A) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3
under the Exchange Act;

     (B) “Exchange Act” means the Securities and Exchange Act of 1934, as
amended from time to time;

     (C) “Person” shall have the meaning set forth in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (1) the Company, (2) a
trustee or other fiduciary holding securities under an employee benefit
plan of the Company, (3) an employee benefit plan of the Company, (4) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (5) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of shares of Common Stock.

-10-

 

     This definition of Change in Control will be modified if and to the extent necessary
to ensure compliance with the requirements of Section 409A of the Internal Revenue Code,
and Employee and the Company agree to execute such further instruments and take such
further action as reasonably may be necessary to comply with Section 409A of the Internal
Revenue Code.

     (d) “Committee” means the Management Development and Compensation Committee of the
Board or such other committee of the Board as the Board may designate from time to time.

     (e) “Depreciation and Amortization Costs and Expenses” has the meaning assigned in
Item 6 of the Form 10-K filed with the Securities and Exchange Commission by Waste
Management, Inc. on February 20, 2004, and, for purposes of this Award, shall be calculated
in accordance with the accounting pronouncements, polices and classifications used in that
Form 10-K.

     (f) “Dividend Equivalent” means an amount of cash equal to all dividends and other
distributions (or the economic equivalent thereof) that are payable by the Company on one
share of Common Stock to stockholders of record.

     (g) “EBIT” means the sum of Operating Revenue, less Operating Costs and Expenses, less
Selling, General and Administrative Costs and Expenses, less Depreciation and Amortization
Costs and Expenses.

     (h) “Goodwill” means the excess of the cost of an acquired company over the sum of the
fair market value of its identifiable individual assets less the liabilities. For purposes
of calculation of this Award, the value of Goodwill shall be the balance of such as
reported by Waste Management, Inc. as of December 31 for each applicable year.

     (i) “Invested Capital” means economic resources that are expected to help generate
future cash inflows or help reduce future cash outflows. Invested Capital is equivalent to
current maturities of long term debt, plus long term debt, plus shareholders equity, less
cash and less Goodwill. For purposes of calculation of this Award, the value of Invested
Capital shall be the balance of such as reported by Waste Management, Inc. as of December
31 for each applicable year.

     (j) “Net Operating Profit After Taxes” or “NOPAT” means the product of EBIT multiplied
by the sum of 1 minus the Tax Rate.

     (k) “Operating Costs and Expenses” has the meaning assigned in Item 6 of the Form 10-K
filed with the Securities and Exchange Commission by Waste Management, Inc. on February 20,
2004, exclusive of Depreciation and Amortization, and, for purposes of this Award,
Operating Costs and Expenses shall be calculated in accordance with the accounting pronouncements, policies and
classifications used in that Form 10-K.

-11-

 

     (l) “Operating Revenue” has the meaning assigned in Item 6 of the Form 10-K filed with
the Securities and Exchange Commission by Waste Management, Inc. on February 20, 2004, and,
for purposes of this Award, Operating Revenue shall be calculated in accordance with the
accounting pronouncements, polices and classifications used in that Form 10-K.

     (m) “Retirement” means the voluntary resignation of employment by Employee, after
Employee: (i) has attained the age of 55 or greater; (ii) has a sum of age plus full years
of Service with the Company equal to 65 or greater; and, (iii) has completed at least 5
consecutive full years of Service with the Company during the 5 year period immediately
preceding the resignation.

     (n) “Selling, General and Administrative Costs and Expenses” has the meaning assigned
in Item 6 of the Form 10-K filed with the Securities and Exchange Commission by Waste
Management, Inc. on February 20, 2004, and, for purposes of this Award, Selling, General
and Administrative Costs and Expenses shall be calculated in accordance with the accounting
pronouncements, polices and classifications used in that Form 10-K.

     (o) “Service” is measured from Employee’s original date of hire by the Company, except
as provided below. In the case of a break of employment by Employee from the Company of
one year or more in length, Employee’s service before the break of employment shall not be
included in his or her Service hereunder. In the case of service with an entity acquired
by the Company, Employee’s service with such entity shall be considered Service hereunder,
so long as Employee remained continuously employed with such predecessor company(ies) and
the Company. In the case of a break of employment between a predecessor company and the
Company of any length, Employee’s Service shall be measured from the original date of hire
by the Company and shall not include any service with any predecessor company.

     (p) “Tax Rate” is equal to 38.8%, and shall be assumed to remain constant for the
Performance Period.

     (q) “Termination of Employment” means the termination of Employee’s employment with
the Company. Temporary absences from employment because of illness, vacation or leave of
absence and transfers among Waste Management, Inc. and its Subsidiaries and Affiliates will
not be considered a Termination of Employment. Any questions as to whether and when there
has been a Termination of Employment, and the cause of such termination, shall be
determined by the Committee, and its determination will be final.

-12-

 

     (r) “Window Period” means the period commencing on the date occurring six (6) months
immediately prior to the date on which a Change in Control first occurs and ending the
second anniversary of the date on which a Change in Control occurs.

     24. Entire Agreement.

     (a) Employee hereby acknowledges that he has received, reviewed and accepted the terms
and conditions applicable to this Agreement. Employee hereby accepts such terms and
conditions, subject to the provisions of the Plan and administrative interpretations
thereof. Employee further agrees that such terms and conditions will control this
Agreement, notwithstanding any provisions in any employment agreement or in any prior
awards.

     (b) Employee hereby acknowledges that he is to consult with and rely upon only
Employee’s own tax, legal, and financial advisors regarding the consequences and risks of
this Agreement and the award of Performance Share Units.

     (c) This Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal representatives.
The captions of this Agreement are not part of the provisions hereof and shall have no
force or effect.

     25. Electronic Delivery. The Company may, in its sole discretion, deliver any
documents related to the Performance Share Units awarded under this Agreement or the Plan by
electronic means or request Employee’s consent to participate in the administration of this
Agreement and the Plan by electronic means. Employee hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through an on-line or electronic system
established and maintained by the Company or another third party designated by the Company.

     26. Counterparts. This Agreement may be executed in counterparts, which together
shall constitute one and the same original.

-13-

 

     IN WITNESS WHEREOF, Waste Management, Inc. has caused this Agreement to be duly executed by
one of its officers thereunto duly authorized, which execution may be facsimile, engraved or
printed, which shall be deemed an original, and Employee has executed this Agreement, effective as
of the day and year first above written.

	 	 	 	 	 
	 	WASTE MANAGEMENT, INC.

 	 
	 	By:  	 	 
	 	 	David P. Steiner 	 
	 	 	Chief
Executive Officer 	 
	 
	 	EMPLOYEE
 	 
	 	 	 	 

-14-

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