Document:

exv10w01

 

Exhibit 10.01

EXECUTIVE EMPLOYMENT AGREEMENT

     ALLIED WASTE INDUSTRIES, INC., a Delaware corporation (“Company”) and JOHN J. ZILLMER
(“Executive”) enter into this Executive Employment Agreement (“Agreement”) effective May 27, 2005
(“Effective Date”), to set forth the terms and conditions of Executive’s employment. The parties
agree as follows:

     1. Certain Definitions and Understandings. As used in this Agreement, the following terms have
the meanings prescribed below:

          Annual Incentive Compensation is defined in Section 4.2.

          Base Salary is defined in Section 4.1.

          Beneficial Owner is defined in Rule 13(d)-3 under the Exchange Act; provided, however, and
without limitation, that any individual, corporation, partnership, group, association or other
person or entity that has the right to acquire any Voting Stock at any time in the future, whether
such right is (a) contingent or absolute, or (b) exercisable presently or at any time in the
future, pursuant to any agreement or understanding or upon the exercise or conversion of rights,
options or warrants, or otherwise, shall be the Beneficial Owner of such Voting Stock.

          Board of Directors (or Board) means the Company’s Board of Directors.

          Cash Termination Excise Tax is defined in Section 6.7(a).

          Cash Termination Payment is defined in Section 6.7(a).

          Cause is defined in Section 5.3.

          Change in Control of the Company means one of the following: (a) the Company merges or
consolidates, or agrees to merge or to consolidate, with any other corporation (other than a
wholly-owned direct or indirect subsidiary of the Company) and is not the surviving corporation (or
survives as a subsidiary of another corporation), (b) the Company sells, or agrees to sell, all or
substantially all of its assets to any other person or entity, (c) the Company is dissolved, (d)
any third person or entity (other than Apollo Advisors, L.P., The Blackstone Group L.P., or a
trustee or committee of any qualified employee benefit plan of the Company) together with its
Affiliates shall become (by tender offer or otherwise), directly or indirectly, the Beneficial
Owner of at least 30% of the Voting Stock of the Company, or (e) the individuals who constitute the
Board of Directors of the Company as of the Effective Date (“Incumbent Board”) shall cease 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 the purposes of this Agreement, a member of
the Incumbent Board.

 

 

          Change in Control Date is defined in Section 6.5.

          Code means the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated by the Internal Revenue Service thereunder.

          Common Stock means the Company’s common stock, par value $.01 per share.

          Company means Allied Waste Industries, Inc., a Delaware corporation.

          Compensation Plans is defined in Section 4.6.

          Confidential Information is defined in Section 7.2.

          Continuing Obligations is defined in Section 3.

          Date of Termination means the earliest to occur of (a) the date of the Executive’s death, (b)
the date specified in the Notice of Termination, in accordance with Section 5.8, or (c) the last
day of the initial or successive Term during which a notice of non-renewal is timely provided in
accordance with Section 3.

          Disability means an illness or other disability which prevents the Executive from discharging
the essential functions of his responsibilities under this Agreement, with or without a reasonable
accommodation, for a period of 180 consecutive calendar days, or an aggregate of 180 calendar days
in any calendar year, during the Term, all as determined in good faith by the Board of Directors
(or a committee thereof).

          Effective Date means May 27, 2005.

          Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Securities and Exchange Commission thereunder.

          Executive means John J. Zillmer (or, as applicable, his heirs).

          Good Reason is defined in Section 5.5.

          LTIP means the Company’s Long-Term Incentive Plan.

          Non-Renewal is defined in Section 3.

          Notice of Termination is defined in Section 5.8.

          Paid Leave is defined in Section 4.3.

          Retirement is defined in Section 5.7.

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          Share Price has the same meaning as “Fair Market Value” as that term is defined in the
Company’s 1991 Incentive Stock Plan, as amended.

          Targeted Annual Incentive Compensation is defined in Section 4.2.

          Term is defined in Section 3.

          Threshold Share Price means (a) in the case of the one (1) year period following the Effective
Date, a Share Price of $16 or more, or (b) in the case of subsequent years, a Share Price which is
at least fifteen percent (15%) greater than the Threshold Share Price for the preceding one (1)
year period.

          Unrestricted Payments means those payments to which the Executive is entitled under Sections
6.2(a)(1), 6.3(a)(1), 6.4(a), 6.5(a)(1), 6.6(a), 6.6(b), and 6.6(c) of this Agreement.

          Voting Stock means all outstanding shares of capital stock of the Company entitled to vote
generally in an election of directors; provided, however, that if the Company has shares of Voting
Stock entitled to more or less than one (1) vote per share, each reference to a proportion of the
issued and outstanding shares of Voting Stock shall be deemed to refer to the proportion of the
aggregate votes entitled to be cast by the issued and outstanding shares of Voting Stock.

          Welfare Plans is defined in Section 4.7.

          Without Cause is defined in Section 5.4.

          In addition, throughout this Agreement, the parties have defined certain words and intend for
those definitions to apply whenever the parties have used a defined word in this Agreement. One of
the defined terms is “Company” which means Allied Waste Industries, Inc. However, the parties
expect that some or all of the Company’s obligations under this Agreement will be fulfilled through
its parent, subsidiary, related, or successor companies or businesses (which will be called
“Affiliates” in this Agreement). Accordingly, Executive acknowledges that the discharge of any
obligation of the Company under this Agreement, which may be through the acts of one or more
Affiliates, discharges any such obligation of the Company. Moreover, the obligations Executive
assumes under this Agreement will be owed to the Company and to its Affiliates. Accordingly, the
parties expressly intend for the Affiliates to be third-party beneficiaries of the promises made
and obligations assumed by Executive in this Agreement.

     2. General Duties of Company and Executive.

          2.1 The Company will employ the Executive as its Chief Executive Officer. The Executive
shall also serve as the Chairman of the Company’s Board of Directors, subject to appointment as a
director by the Board of Directors and subsequent re-election as a director by the Company’s
stockholders, and subject to election as Chairman and subsequent re-election to that position by
the Board of Directors. The Executive’s authority, duties and responsibilities shall be those
assigned by the Company’s Board of Directors (or a committee thereof) and agreed to by the
Executive. The Executive shall devote reasonable time and attention during normal business hours

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to the affairs of the Company and use his best efforts to perform faithfully and efficiently
his duties and responsibilities. The Executive may (a) serve on corporate, civic or charitable
boards or committees, (b) deliver lectures, fulfill speaking engagements or teach at educational
institutions, and (c) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive’s duties and responsibilities.

          2.2 The Executive agrees and acknowledges that he owes a fiduciary duty of loyalty, fidelity
and allegiance to act at all times in the best interests of the Company and to do no act and to
make no statement, oral or written, which would injure the Company’s business, its interests or its
reputation. The Executive also agrees that he shall not knowingly become involved in a conflict of
interest with the Company and, upon discovery of any such conflict, that he will inform the Company
of the conflict and will not allow the conflict to continue.

          2.3 The Executive agrees to comply at all times with all applicable policies, rules and
regulations of the Company, including but not limited to, the Company’s Code of Ethics and the
Company’s policies regarding trading in Common Stock, stock ownership and retention guidelines, and
reimbursement of expenses, as each is in effect from time to time.

     3. Term. The initial “Term” of this Agreement shall be a period of two (2) years, beginning on
the Effective Date and ending on the second anniversary of the Effective Date. Thereafter, this
Agreement shall automatically renew for successive one (1) year Terms; provided, however, that if
either party delivers a Notice of Termination to the other party, in accordance with Sections 5.8
and 11.1, at least ninety (90) days in advance of the end of the initial Term (or of any successive
Term) of such party’s intent not to renew this Agreement, this Agreement shall end on the last day
of the initial Term (or of the successive Term) during which the Notice of Termination is timely
delivered. A termination of this Agreement as a consequence of such notification shall be deemed a
termination for “Non-Renewal”. Notwithstanding the foregoing, either party may terminate this
Agreement pursuant to Section 5 of this Agreement, in which case the Term shall end on the date
specified in the Notice of Termination (or on the Executive’s date of death if termination is due
to the Executive’s death). Neither the termination of this Agreement nor the consequent end of the
Term shall affect the Company’s obligations under Section 6 of this Agreement or the Executive’s
obligations under Sections 7 through 11 of this Agreement (or under Section 2.3 with respect to the
Company’s policies regarding trading in Common Stock) (collectively, “Continuing Obligations”).

     4. Compensation and Benefits.

          4.1 Base Salary. As compensation for services to the Company during the Term, the Company
shall pay to the Executive until the Date of Termination a base salary at the annual rate of Eight
Hundred and Fifty Thousand Dollars ($850,000.00), or such higher rate as may be determined from
time to time in the discretion of the Board of Directors (or a committee thereof) (“Base Salary”).
Base Salary shall be payable in equal bi-weekly installments or in accordance with the Company’s
established policy, subject only to such payroll and withholding deductions as may be required by
law and other deductions that are either applied generally to employees of the Company for
insurance and other employee benefit plans or which are authorized by the Executive.

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For all purposes under this Agreement, the Executive’s Base Salary shall include any portion
thereof which is deferred under any nonqualified plan or arrangement.

          4.2 Annual Incentive Compensation. In addition to Base Salary, the Executive shall be
eligible to be awarded, for each fiscal year during the Term until the Date of Termination, annual
cash incentive compensation (either pursuant to an incentive plan or program of the Company or
otherwise) in an amount to be determined by the Board of Directors (or a committee thereof) in its
sole discretion (“Annual Incentive Compensation”). “Targeted Annual Incentive Compensation”, earned
upon the achievement of one hundred percent (100%) of the annual target goals for the Executive,
shall be one hundred and fifteen percent (115%) of the Executive’s Base Salary (pro-rated for the
2005 calendar year, based on the number of full calendar months since the Effective Date), unless
otherwise determined by the Board of Directors (or a committee thereof) in its sole discretion.
The Executive’s actual Annual Incentive Compensation may range from zero percent (0%) to the
maximum percentage of the Executive’s Base Salary permitted by the terms of the Company’s annual
incentive compensation plan(s), as amended from time to time. All such Annual Incentive
Compensation shall be payable at a time to be determined by the Board of Directors (or a committee
thereof) in its sole discretion. For all purposes under this Agreement, the Executive’s Annual
Incentive Compensation shall include any portion thereof which is deferred under any nonqualified
plan or arrangement.

          4.3 Paid Leave. Commencing on the Effective Date and continuing until the Date of
Termination, for each full calendar year in which the Executive is employed under this Agreement,
the Executive shall be entitled to four (4) weeks Paid Leave during the year without any reduction
in the Compensation to which he is entitled under this Section 4. For any partial calendar year
during which the Executive is employed under this Agreement, he will be entitled to a prorated
amount of this Paid Leave, based on the number of weeks worked in the calendar year and pursuant to
the Company’s then current paid leave policy. Because the Company intends for this Paid Leave to be
used by the Executive, so that he benefits from having time away from his customary employment
duties, the Executive must use the Paid Leave provided under this Section 4.3, for each calendar
year, during the relevant calendar year for which it is provided. If the Executive does not use
all of the Paid Leave to which he is entitled in any calendar year, he will forfeit this benefit at
the end of that calendar year and shall have no right to take more than four weeks of Paid Leave in
the following or any subsequent calendar year or to be otherwise compensated for not having
utilized the Paid Leave.

          4.4 Automobile Allowance. Commencing on the Effective Date and continuing until the Date of
Termination, the Executive shall receive an automobile allowance of Six Hundred Dollars ($600.00)
per month (“Automobile Allowance”). The Board of Directors (or a committee thereof), in its
discretion, may increase the Automobile Allowance based upon relevant circumstances.

          4.5 Club Membership Dues. Commencing on the Effective Date and continuing until the Date of
Termination, the Executive shall receive an allowance for monthly membership dues (i.e., the
regular membership fee, and not incidental or ancillary charges such as food, beverages, rentals,
coaching, training, supplies, therapy, spa, etc.) for a club or organization of Executive’s choice
in the amount of Six Hundred Dollars ($600.00) per month (“Club

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Allowance”). The Executive will not be entitled to this Club Allowance if the Company
determines that membership in the relevant club or organization would violate the letter or spirit
of any Company policy.

          4.6
Incentive, Savings, Retirement and Stock Plans. As of the Effective Date, the Executive
shall be granted options to acquire up to One Million (1,000,000) shares of Common Stock, and One
Hundred Thousand (100,000) restricted shares of Common Stock, subject to the terms of the Company’s
1991 Incentive Stock Plan, as amended, and of the instruments evidencing the grants. In addition,
the Executive shall be entitled to participate in and be eligible to receive benefits under all
executive incentive, savings, retirement, deferral, and stock (including any stock option,
restricted stock, restricted stock units, phantom stock and other stock rights and interests,
including derivative interests) plans and programs currently maintained or hereinafter established
by the Company for the benefit of its similarly-situated executive officers (collectively
“Compensation Plans”). The Executive’s participation in the Compensation Plans shall be governed by
the terms and conditions of those plans. Subject to the terms of the Company’s stock ownership and
retention guidelines, as adopted and/or amended by the Board of Directors (or a committee thereof)
from time to time, the Executive is expected to retain fifty percent (50%) of the shares received
upon the exercise of any options or the vesting of any restricted stock (after netting such shares
for the purpose of satisfying the Executive’s income and payroll tax obligations incurred as the
result of any exercise or vesting event), until such time as he has accumulated stock with a value
of at least three (3) times the Executive’s Base Salary. For purposes of the preceding sentence,
“Base Salary” shall be (a) during the first year of the Term, the Executive’s Base Salary as of the
Effective Date, and (b) during each successive year during the Term, the Executive’s Base Salary as
of the first day of such successive Term. The Executive shall participate in the 2003-2005,
2004-2006, and 2005-2007 performance cycles under the Company’s Long-Term Incentive Plan (“LTIP”),
on a pro-rated basis (based on the number of full calendar months remaining in each of the
performance cycles as of the Effective Date).

          4.7
Welfare Plans. The Executive shall be eligible to participate in and shall receive all
benefits under each welfare benefit plan of the Company currently maintained or subsequently
established by the Company for the benefit of its similarly-situated executive officers. Such
welfare benefit plans may include medical, dental, vision, disability, group life, accidental death
and travel accident insurance plans and programs (collectively “Welfare Plans”). The Executive’s
participation in the Welfare Plans shall be governed by the terms and conditions of those plans.

          4.8
Reimbursement of Expenses. The Executive may from time to time during the Term incur
various business expenses customarily incurred by persons holding positions of like responsibility,
including, without limitation, travel, entertainment and similar expenses incurred for the benefit
of the Company. The Company shall reimburse the Executive for all legitimate expenses incurred on
the Company’s behalf, upon the Company’s receipt of proper documentation for such expenses,
provided that reimbursement of the expenses would not violate the letter or spirit of any Company
policy regarding the reimbursement of such expenses.

          4.9
Relocation Expense Allowance. The Company shall pay the Executive an allowance of Three
Hundred Thousand Dollars ($300,000.00) to assist the Executive in relocating

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from his current home in Pennsylvania to the Phoenix-Scottsdale metropolitan area. This
payment will be made in one lump sum within fifteen (15) business days of the Effective Date.

          4.10 Indemnification and Insurance. At all times during the term of this Agreement, and for
such additional periods as are provided for in this Agreement, the Executive shall be covered under
the Company’s directors’ and officers’ liability insurance, if any, and under a separate Indemnity
Agreement with the Company.

     5. Termination. In addition to a termination of this Agreement due to Non-Renewal, as
provided in Section 3, this Agreement may be terminated as follows:

          5.1 Death. This Agreement shall terminate automatically upon the death of the Executive.

          5.2 Disability. The Company may terminate this Agreement, upon written notice to the
Executive delivered in accordance with Sections 5.8 and 11.1, upon the Disability of the Executive.

          5.3 Cause. The Company may terminate this Agreement, upon written notice to the Executive
delivered in accordance with Sections 5.8 and 11.1, for Cause. For purposes of this Agreement,
“Cause” means (a) the Executive is convicted of, or pleads guilty or nolo contendere to, (i) a
felony, or (ii) any other crime involving the Company, (b) the Board of Directors makes a
reasonable, good faith determination that the Executive has breached any material term of this
Agreement, (c) the Board of Directors makes a reasonable, good faith determination that the
Executive has violated any applicable policies, rules, or regulations of the Company, including but
not limited to, the Company’s Code of Ethics and the Company’s policies regarding trading of Common
Stock and reimbursement of expenses, (d) the Board of Directors determines that the Executive
engaged in (i) willful or deliberate conduct, the result of which exposes the Company to actual or
potential financial or other injury, (ii) fraud, (iii) misappropriation of tangible or intangible
property or funds of the Company, or (iv) embezzlement of Company funds, (e) the Board of Directors
determines that the Executive willfully or deliberately failed or refused to perform his assigned
duties, as reasonably requested by the Company, and failed to cure his nonperformance within thirty
(30) days of receipt of a written notice from the Board of Directors setting forth in reasonable
detail the facts and circumstances of his nonperformance, or (f) the Executive breached any
statutory or common law duty of loyalty to the Company. For purposes of this Section 5.1, a
determination by the Board of Directors is evidenced by a resolution, duly adopted by at least
two-thirds (2/3) of the entire membership of the Board at a meeting called and held for the purpose
of considering the termination of the Executive’s employment for Cause, at which the Executive and
his representative have the right to attend and address the Board, finding that, in the good faith
belief of the Board, the Executive engaged in conduct described in this Section 5.1 and specifying
the particulars thereof in reasonable detail. No determination by the Board of Directors will
prevent the Executive from contesting such determination through arbitration, as provided in
Section 11.9 of the Agreement.

          5.4
Without Cause. The Company may terminate this Agreement Without Cause, upon written
notice to the Executive delivered in accordance with Sections 5.8 and 11.1.

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For purposes of this Agreement, the Executive will be deemed to have been terminated “Without
Cause” if the Executive is terminated by the Company for any reason other than Cause, Disability,
Non-Renewal, or death.

          5.5 Good Reason. The Executive may terminate this Agreement for Good Reason, upon written
notice to the Company delivered in accordance with Sections 5.8 and 11.1. For purposes of this
Agreement, “Good Reason” means (a) the assignment to the Executive of any duties that are
materially inconsistent with the Executive’s duties or responsibilities as contemplated in this
Agreement, (b) any other action by the Company which results in a material diminishment in the
Executive’s position (including status, offices, titles and reporting requirements), authority,
duties or responsibilities (provided, however, that a temporary diminishment, whether material or
not, due to the Executive’s illness or injury, will not constitute grounds for a termination for
Good Reason by the Executive), (c) any material breach by the Company of any of the provisions of
this Agreement, (d) requiring the Executive to relocate permanently to any office or location,
except in the Phoenix-Scottsdale metropolitan area or any other location to which the majority of
the Company’s executive officers are relocated, without his consent, (e) any material reduction, or
attempted material reduction, at any time during the Term, of the Base Salary or in the aggregate
of the compensation or benefits described in Article 4 of this Agreement (provided, however, that
any change in the targeted percentage for purposes of determining the Executive’s Annual Incentive
Compensation, any change in the Company’s reimbursement policies, or any change in any Compensation
Plans or Welfare Plans, which affects a majority of the similarly situated executive officers
covered by those policies or plans, shall not be considered “Good Reason”), or (f) the Company’s
failure to comply, or the Company’s preventing or impeding the Executive from compliance, with any
legal obligation which would subject the Executive to any civil or criminal liability.

          5.6 Without Good Reason. The Executive may terminate this Agreement Without Good Reason, upon
written notice to the Company delivered in accordance with Sections 5.8 and 11.1. For purposes of
this Agreement, the Executive will be deemed to have terminated “Without Good Reason” if the
Executive terminates this Agreement for any reason other than Good Reason or Non-Renewal, or if
this Agreement is terminated due to the Executive’s death or Retirement.

          5.7 Retirement. The Executive may terminate this Agreement upon Retirement, upon written
notice to the Company delivered in accordance with Sections 5.8 and 11.1. For purposes of this
Agreement, “Retirement” means the Executive’s bona fide retirement from the Company, as determined
in good faith by the Board of Directors (or a committee thereof).

          5.8 Notice of Termination. Any termination of this Agreement by the Company for Cause,
Without Cause or as a result of the Executive’s Disability, or by the Executive for Good Reason or
Without Good Reason or upon Retirement, or by either the Company or the Executive for Non-Renewal,
shall be communicated by a Notice of Termination to the other party. A “Notice of Termination”
means a written notice which (a) indicates the specific termination provision in this Agreement
relied upon and (b) if the termination is by the Company for Cause or by the Executive for Good
Reason, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated.

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The Notice of Termination must specify the Date of Termination. In the case of a termination
by either the Company or the Executive for Non-Renewal, the Date of Termination will be the last
day of the initial or successor Term during which the notice is timely provided in accordance with
Section 3. In the case of a termination by the Company for Cause or due to the Executive’s
Disability or by the Executive for Good Reason or due to Retirement, the Date of Termination may be
as early as the date notice is given but no later than thirty (30) calendar days after notice is
given, unless otherwise agreed to in writing by both parties. In the case of a termination by the
Company Without Cause or by the Executive Without Good Reason, the Date of Termination may be as
early as fourteen (14) calendar days after notice is given but no later than sixty (60) calendar
days after notice is given, unless otherwise agreed to by the parties in writing. The Notice of
Termination shall also conform with the provisions of Section 11.1.

     6. Obligations of Company Upon Termination.

          6.1 Cause, Without Good Reason, Non-Renewal by Executive. If this Agreement is terminated
either by the Company for Cause or by the Executive Without Good Reason or due to Non-Renewal, the
Company shall pay to the Executive, in a lump sum cash payment within thirty (30) days after the
Date of Termination, the aggregate of (a) any unpaid portion of the Executive’s Base Salary (as in
effect on the Date of Termination) owed as of the Date of Termination, and (b) any accrued but
unpaid Paid Leave as of the Date of Termination. The Company also shall promptly pay or reimburse
to the Executive any costs and expenses (and moving and relocation expenses, if otherwise agreed to
by the Company in writing) paid or incurred by the Executive which would have been payable under
Section 4.8 of this Agreement if the Executive’s employment had not terminated.

          All other obligations of the Company and rights of the Executive hereunder shall terminate
effective as of the Date of Termination; provided, however, that the Executive’s rights under any
Compensation Plan or Welfare Plan shall be governed by the terms and provisions of each such plan
and are not necessarily severed on the Date of Termination.

          6.2 Death or Disability. If this Agreement is terminated as a result of the Executive’s
death or Disability:

               (a) The Company shall pay to the Executive (or to his estate, in the event the Executive is
deceased) the following amounts:

          (1) any unpaid portion of the Executive’s Base Salary (as in effect on the Date of
Termination) owed as of the Date of Termination, any unpaid portion of the Annual Incentive
Compensation previously awarded to the Executive, and any accrued but unpaid Paid Leave as
of the Date of Termination, in a lump sum cash payment within thirty (30) days after the
Date of Termination; and

          (2) an amount equal to two (2) times the sum of the Executive’s Base Salary (as in
effect on the Date of Termination) plus the Executive’s Target Annual Incentive Compensation
for the fiscal year during which the Date of Termination occurs, in bi-weekly installments
over a two (2) year period following the Executive’s Date of

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Termination. The Company may, to the extent feasible, purchase insurance to cover all
or any part of the obligation contemplated in the foregoing sentence, and the Executive
agrees to submit to a physical examination and otherwise cooperate with the Company to
facilitate the procurement of such insurance.

               (b) The Company shall, promptly upon submission by the Executive (or his estate) of supporting
documentation, pay or reimburse to the Executive any costs and expenses (and moving and relocation
expenses, if otherwise agreed to by the Company in writing) paid or incurred by the Executive which
would have been payable under Section 4.8 of this Agreement if the Executive’s employment had not
terminated.

               (c) The Company shall continue providing medical, dental, and/or vision coverage to the
Executive and/or the Executive’s spouse and dependents, at least equal to that which would have
been provided to him under Section 4.7 if the Executive’s employment had not terminated, if such
coverage continues to be available to the Company, until the earlier of (1) the date the Executive
becomes eligible for any comparable medical, dental, or vision coverage provided by any other
employer, (2) the date the Executive becomes eligible for Medicare or any similar
government-sponsored or provided health care program (whether or not such coverage is equivalent to
that provided by the Company), or (3) the fifth anniversary of the Executive’s Date of Termination.

               (d) Whenever compensation is payable to the Executive under this Agreement during a period in
which he is partially or totally disabled, and such disability would (except for the provisions of
this Agreement) entitle the 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 the Executive pursuant to any
such plan or program shall be considered a portion of (and not in addition to) the payment to be
made to the Executive pursuant to this Section 6.2. If disability income is payable directly to the
Executive by an insurance company under the terms of an insurance policy paid for by the Company,
the amounts paid to the Executive by such insurance company shall be considered a portion of the
payment (and not in addition to the payment) to be made to the Executive pursuant to this Section
6.2.

               (e) All other obligations of the Company and rights of the Executive hereunder shall terminate
effective as of the Date of Termination; provided, however, that except as otherwise specifically
modified by the terms of this Agreement the Executive’s rights under the Compensation Plans and
Welfare Plans shall be governed by the terms and provisions of those Plans and are not necessarily
severed on the Date of Termination.

               (f) The Executive (or the Executive’s estate, as the case may be) shall continue to vest and,
if applicable, continue to be permitted to exercise, all of the rights and interests awarded to the
Executive under the Company’s stock plans, as if the Executive were still employed by the Company,
for a period of two (2) years following the Date of Termination (or, if less, for the remainder of
the stated terms of the rights or interests). Notwithstanding any contrary provision of the LTIP,
the Executive’s Awards for the Performance Cycles (as defined in the LTIP)

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in effect as of the Date of Termination shall be prorated in the manner described in Section
8(a) of the LTIP.

               (g) The Executive (or the Executive’s estate, as the case may be) shall continue to be covered
under the Company’s directors’ and officers’ liability insurance, if any, and under his separate
Indemnity Agreement with the Company, as if the Executive’s employment had not terminated, for a
period of ten (10) years following his Date of Termination (or, in the case of the Indemnity
Agreement, for such longer term as may be provided for in the Indemnity Agreement).

          6.3 Good Reason; Without Cause. If this Agreement is terminated either by the Executive for
Good Reason or by the Company Without Cause (other than in connection with a Change in Control as
described in Section 6.5):

               (a) The Company shall pay to the Executive the following amounts:

          (1) any unpaid portion of the Executive’s Base Salary (as in effect on the Date of
Termination) owed as of the Date of Termination, any unpaid portion of the Annual Incentive
Compensation previously awarded to the Executive, and any accrued but unpaid Paid Leave as
of the Date of Termination, in a lump sum cash payment within thirty (30) days after the
Date of Termination; and

          (2) an amount equal to two (2) times the sum of the Executive’s Base Salary (as in
effect on the Date of Termination) plus the Executive’s Target Annual Incentive Compensation
for the fiscal year during which the Date of Termination occurs, in bi-weekly installments
over a two (2) year period following the Executive’s Date of Termination.

               (b) The Company shall promptly pay or reimburse to the Executive any costs and expenses (and
moving and relocation expenses, if otherwise agreed to by the Company in writing) paid or incurred
by the Executive which would have been payable under Section 4.8 of this Agreement if the
Executive’s employment had not terminated.

               (c) The Company shall continue providing medical, dental, and/or vision coverage to the
Executive and/or the Executive’s spouse and dependents, at least equal to that which would have
been provided to the Executive under Section 4.7 if the Executive’s employment had not terminated,
until the earlier of (1) the date the Executive becomes eligible for any comparable medical,
dental, or vision coverage provided by any other employer, (2) the date the Executive becomes
eligible for Medicare or any similar government-sponsored or provided health care program (whether
or not such coverage is equivalent to that provided by the Company), or (3) the fifth anniversary
of the Executive’s Date of Termination.

               (d) The Executive (or the Executive’s estate, as the case may be) shall continue to vest and,
if applicable, continue to be permitted to exercise, all of the rights and interests awarded to the
Executive under the Company’s stock plans, as if the Executive were still employed by the Company,
for a period of two (2) years following the Date of Termination (or, if

11

 

less, for the remainder of the stated terms of the rights and interests). Notwithstanding any
contrary provision of the LTIP, the Executive’s Awards for the Performance Cycles (as defined in
the LTIP) in effect as of the Date of Termination shall be prorated in the manner described in
Section 8(a) of the LTIP.

               (e) The Executive shall continue to be covered under the Company’s directors’ and officers’
liability insurance, if any, and under his separate Indemnity Agreement with the Company, as if the
Executive’s employment had not terminated, for a period of ten (10) years following his Date of
Termination (or, in the case of the Indemnity Agreement, for such longer term as may be provided
for in the Indemnity Agreement).

               (f) All other obligations of the Company and rights of the Executive hereunder shall terminate
effective as of the Date of Termination; provided, however, that except as otherwise specifically
modified by the terms of this Agreement the Executive’s rights under the Compensation Plans and
Welfare Plans shall be governed by the terms and provisions of these Plans and are not necessarily
severed on the Date of Termination.

               (g) The Company shall (through an agency of Company’s choosing) provide outplacement services
to the Executive for a period of one (1) year following the Date of Termination, provided that the
cost of such services shall not exceed $50,000 or such higher amount as may be approved by the
Board of Directors (or a committee thereof).

          6.4 Retirement. If this Agreement is terminated by the Executive due to Retirement:

               (a) The Company shall pay to the Executive, in a lump sum cash payment within thirty (30) days
after the Date of Termination, the aggregate of the following amounts: (1) any unpaid portion of
the Executive’s Base Salary (as in effect on the Date of Termination) owed as of the Date of
Termination; (2) any unpaid portion of the Annual Incentive Compensation previously awarded to the
Executive; and (3) any accrued but unpaid Paid Leave as of the Date of Termination.

               (b) The Company shall promptly pay or reimburse to the Executive any costs and expenses (and
moving and relocation expenses, if otherwise agreed to by the Company in writing) paid or incurred
by the Executive which would have been payable under Section 4.8 of this Agreement if the
Executive’s employment had not terminated.

               (c) The Company shall continue providing medical, dental, and/or vision coverage to the
Executive and/or the Executive’s family, at least equal to that which would have been provided to
the Executive under Section 4.7 if the Executive’s employment had not terminated, until the earlier
of (1) the date the Executive becomes eligible for any comparable medical, dental, or vision
coverage provided by any other employer, or (2) the date the Executive becomes eligible for
Medicare or any similar government-sponsored or provided health care program (whether or not such
coverage is equivalent to that provided by the Company). Following the date on which the Executive
becomes eligible for coverage under Medicare, the Executive may, at his election, continue to be
covered under the Company’s health coverage, if available, provided

12

 

that the Executive pays all applicable premiums charged by the Company or its third-party
provider(s).

               (d) The Company shall pay to the Executive, in equal bi-weekly installments over a period of
ten (10) years, beginning with the next bi-weekly payroll period following the Date of Termination,
retirement payments, as provided below:

          (1) If, as of the Date of Termination, the Executive has completed at least ten (10)
years of service with the Company, the Executive is entitled to retirement payments for each
year during the ten (10) year payment period equal to the product of sixty percent (60%) of
the Executive’s average Base Salary during the three (3) consecutive full calendar years of
employment immediately preceding the Date of Termination. For purposes of this Section
6.4(d), years of service include all twelve (12) consecutive month periods of employment
with the Company, beginning with the Executive’s initial date of employment with the
Company.

          (2) At the election of the Executive, the actuarial equivalent of the Executive’s
retirement payments (determined by utilizing reasonable actuarial assumptions) may be paid
over a period longer than ten (10) years.

          (3) In the event of the Executive’s death prior to the payment of all of the retirement
payments determined under this Section 6.4(d), the balance of the payments shall be made to
the Executive’s surviving spouse, if any, or to any other beneficiary named by the Executive
in writing.

          (4) In addition to the cessation provisions set forth in Section 6.8, any remaining
retirement payments shall immediately cease in the event the Executive works for a
competitor (as determined by the Company in its sole discretion), or becomes employed by any
other employer without the prior written consent of the Company. Notwithstanding the
foregoing, with the prior written consent of the Company, the Executive may be employed by
an entity which is not deemed by the Company to be in competition with the Company, in a
capacity in which the economic value of his total compensation is comparable to his total
compensation while employed by the Company, and receive retirement benefits which are
reduced proportionately by the compensation received by the Executive in the new position.
Also with the prior written consent of the Company, the Executive may be employed by an
entity which is not deemed by the Company to be in competition with the Company, in a
capacity in which his total compensation is materially less than his total compensation
while employed by the Company, in which case there would be no reduction in retirement
benefits.

               (e) The Executive (or the Executive’s estate, as the case may be) shall continue to vest and,
if applicable, continue to be permitted to exercise, all of the rights and interests awarded to the
Executive under the Company’s stock plans, for a period of two (2) years following the Date of
Termination (or, if less, for the remainder of the stated terms of the rights and interests).

13

 

               (f) The Executive shall continue to be covered under the Company’s directors’ and officers’
liability insurance, if any, and under his separate Indemnity Agreement with the Company, as if the
Executive’s employment had not terminated, for a period of ten (10) years following his Date of
Termination (or, in the case of the Indemnity Agreement, for such longer term as may be provided
for in the Indemnity Agreement).

               (g) All other obligations of the Company and rights of the Executive hereunder shall terminate
effective as of the Date of Termination; provided, however, that except as otherwise specifically
modified by the terms of this Agreement the Executive’s rights under the Compensation Plans and
Welfare Plans shall be governed by the terms and provisions of these Plans and are not necessarily
severed on the Date of Termination. In addition, the Executive shall continue to be eligible to
make deferrals under any deferred compensation plan maintained by the Company, and under the LTIP,
in accordance with the terms of those plans.

               (h) Except as otherwise provided in this Section 6.4(h), the payments and benefits provided
under this Section 6.4 shall be in lieu of any payments to which the Executive may have otherwise
been entitled under the terms of Section 6.2, 6.3 or 6.5, and vice versa. In the event a Change in
Control occurs coincident with or following the commencement of the Executive’s retirement payments
under this Section 6.4, the payment of any remaining retirement payments to which the Executive is
entitled under this Section 6.4 shall be accelerated and paid in a lump sum cash payment within a
reasonable period of time following the Change in Control. In the event the Executive becomes
eligible for payments under the terms of Section 6.5 following the date on which the Executive
becomes entitled to deferred maximum retirement payments under this Section 6.4 but prior to the
commencement of the retirement payments, the Executive shall receive payments under the terms of
Section 6.5 in lieu of the deferred retirement payments or any other payments to which the
Executive may have otherwise been entitled under the terms of this Section 6.4.

          6.5 Change in Control. If this Agreement is terminated either by the Executive for Good Reason
or by the Company Without Cause, and the termination occurs within the six (6) month period
preceding, or the twelve (12) month period following, the date on which the Change in Control
occurs (“Change in Control Date”):

               (a) As reasonable compensation for services rendered by the Executive to the Company prior to
the Date of Termination, the Company shall pay to the Executive, in a lump sum cash payment within
thirty (30) days after the later to occur of the Date of Termination or the Change in Control Date,
the aggregate of the following amounts:

          (1) any unpaid portion of the Executive’s Base Salary (as in effect on the Date of
Termination) owed as of the Date of Termination, any unpaid portion of the Annual Incentive
Compensation previously awarded to the Executive, and any accrued but unpaid Paid Leave as
of the Date of Termination; and

          (2) an amount equal to three (3) times the sum of the Executive’s Base Salary (as in
effect on the Date of Termination) plus the Executive’s Target Annual Incentive Compensation
for the fiscal year during which the Date of Termination occurs.

14

 

               (b) The Company shall promptly pay or reimburse to the Executive any costs and expenses (and
moving and relocation expenses, if otherwise agreed to by the Company in writing) paid or incurred
by the Executive which would have been payable under Section 4.8 of this Agreement if the
Executive’s employment had not terminated.

               (c) The Company shall continue providing medical, dental, and/or vision coverage to the
Executive and/or the Executive’s family, at least equal to that which would have been provided to
the Executive under Section 4.7 if the Executive’s employment had not terminated, until the earlier
of (1) the date the Executive becomes eligible for any comparable medical, dental, or vision
coverage provided by any other employer, or (2) the date the Executive becomes eligible for
Medicare or any similar government-sponsored or provided health care program (whether or not such
coverage is equivalent to that provided by the Company).

               (d) As reasonable compensation for services provided by the Executive to the Company prior to
the Date of Termination, the Company shall (through an agency of Company’s choosing) provide
outplacement services to the Executive for a period of one (1) year following the later of the Date
of Termination or the Change in Control Date, provided that the cost of such services shall not
exceed $50,000 or such higher amount as may be approved by the Board of Directors (or a committee
thereof).

               (e) The Executive (or the Executive’s estate, as the case may be) shall become fully and
immediately vested as of the Date of Termination and, if applicable, continue to be permitted to
exercise, all of the rights and interests awarded to the Executive under the Company’s stock plans,
as if the Executive were still employed by the Company, for a period of two (2) years following the
Date of Termination (or, if less, for the remainder of the stated terms of the rights and
interests).

               (f) The Executive shall continue to be covered under the Company’s directors’ and officers’
liability insurance, if any, and under his separate Indemnity Agreement with the Company, as if the
Executive’s employment had not terminated, for a period of ten (10) years following his Date of
Termination (or, in the case of the Indemnity Agreement, for such longer term as may be provided
for in the Indemnity Agreement).

               (g) All other obligations of the Company and rights of the Executive hereunder shall terminate
effective as of the Date of Termination; provided, however, that except as otherwise specifically
modified by the terms of this Agreement the Executive’s rights under the Compensation Plans and
Welfare Plans shall be governed by the terms and provisions of these Plans and are not necessarily
severed on the Date of Termination.

          6.6
Termination Due to Non-Renewal by Company. If this Agreement is terminated by the Company
due to Non-Renewal, the Company shall pay to the Executive, in a lump sum cash payment within
thirty (30) days following the Executive’s Date of Termination, the aggregate of (a) any unpaid
portion of the Executive’s Base Salary owed as of the Date of Termination, (b) any unpaid portion
of the Annual Incentive Compensation previously awarded to the Executive, and (c) any accrued but
unpaid Paid Leave as of the Date of Termination. The

15

 

Company also shall promptly pay or reimburse to the Executive any costs and expenses (and
moving and relocation expenses, if otherwise agreed to by the Company in writing) paid or incurred
by the Executive which would have been payable under Section 4.8 of this Agreement if the
Executive’s employment had not terminated.

          The Company shall also pay to the Executive, in bi-weekly installments over the one-year
period following the Date of Termination, an amount equal to one (1) times the sum of the
Executive’s Base Salary plus the Executive’s Annual Incentive Bonus earned by the Executive during
the last year of his Term.

          The Executive (or the Executive’s estate, as the case may be) shall continue to vest and, if
applicable, continue to be permitted to exercise, all of the rights and interests awarded to the
Executive under the Company’s stock plans, as if the Executive were still employed by the Company,
for a period of one (1) year following the Date of Termination (or, if less, for the remainder of
the stated terms of the rights and interests).

          All other obligations of the Company and rights of the Executive hereunder shall terminate
effective as of the Date of Termination; provided, however, that the Executive’s rights under any
Compensation Plan or Welfare Plan shall be governed by the terms and provisions of each such plan
and are not necessarily severed on the Date of Termination.

          6.7 Cash Termination Excise Tax Payments.

               (a) In the event that (1) the closing stock price of the Company on the date of the Change in
Control equals or exceeds the Threshold Share Price, and (2) it is determined that the payment made
under Section 6.4(h) or Section 6.5(a)(2) (“Cash Termination Payment”), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code (the “Code”) (such excise tax is
hereinafter collectively referred to as the “Cash Termination Excise Tax”), then the Executive
shall be entitled to receive the payment described in Section 6.7(b) below.

               (b) The Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”)
such that the net amount retained by the Executive, after deduction of any excise tax on the Cash
Termination Payment and any federal, state, and local income and employment taxes and excise tax
upon the Gross-Up Payment, shall be equal to the Cash Termination Payment. The Gross-Up Payment,
if any, shall be paid to the Executive, or, at the discretion of the Company, to governmental
authorities on the Executive’s behalf, as soon as practicable following the payment of the
Executive’s Cash Termination Payment, but, in any event, not later than five (5) business days
immediately following the payment of the Executive’s Cash Termination Payment.

               (c) Subject to the provisions of Section 6.7(d), all determinations required to be made under
this Section 6.7, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by tax counsel appointed by the Company (the “Tax Counsel”). All fees and expenses of the Tax
Counsel shall be borne solely by the Company. As a

16

 

result of the uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Tax Counsel hereunder, it is possible that Gross-Up Payments, which
will not have been made by the Company, should have been made (“Underpayment”). In the event that
it is ultimately determined in accordance with the procedures set forth in Section 6.7(d) that the
Executive is required to make a payment of any excise tax, the Tax Counsel shall determine the
amount of the Underpayment that has occurred, and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive.

               (d) The Executive shall notify the Company in writing of any claims 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 30 days after the
Executive actually receives notice 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. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the date on which he
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 the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the Executive shall:

          (1) give the Company any information reasonably requested by the Company relating to
such claim;

          (2) 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 selected by the Company and
reasonably acceptable to the Executive;

          (3) cooperate with the Company in good faith in order to effectively contest such
claim; and

          (4) if the Company elects not to assume and control the defense of such claim, permit
the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and shall indemnify and
hold the 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 6.7(d), the
Company shall have the right, at its sole option, to assume the defense of and control all
proceedings in connection with such contest, in which case it may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing authority in respect
of such claim and may either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the 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 the Executive to pay such claim and sue for a refund, the Company shall advance the

17

 

amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold
the 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 the taxable year of the Executive with
respect to which such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s right to assume the defense of and control the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and the
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.

               (e) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 6.7(d), the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company’s complying with the requirements of Section 6.7(d))
promptly pay to the Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6.7(d), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim, and the Company does not notify the
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.

          6.8 Payments Contingent on Executive’s Release of Company, Compliance with Continuing
Obligations, and Certain Other Contingencies. All of the payments and benefits to which the
Executive would otherwise be entitled under Sections 6.2, 6.3, 6.4, 6.5, 6.6, or 6.7, except the
Unrestricted Payments, shall be contingent on (a) the Executive’s delivery to the Company of a
signed and enforceable release of all claims against the Company, in a form specified by the
Company, except that no such release shall be required in the event that the Company fails to
tender such release to the Executive for his signature within thirty (30) days of his Date of
Termination, and (b) the Executive’s compliance with the Continuing Obligations. In addition, if
the Executive fails to comply with the Continuing Obligations, then the Company shall have the
right, upon notice to the Executive (describing such failure to comply in reasonable detail) to
terminate all of the payments and benefits described in the preceding sentence, other than the
Unrestricted Payments, and to recover from the Executive (i) any and all payments made or benefits
paid to or for the benefit of the Executive, other than the Unrestricted Payments, that the Company
paid to or for the benefit of the Executive or to which the Executive otherwise would not have been
entitled if the Company had terminated the Executive for Cause as of the date of termination of
this Agreement, and (ii) any and all proceeds realized by the Executive subsequent to the date of
termination of this Agreement upon vesting, exercise, or sale of Common Stock granted or issued to
the Executive under the Company’s Compensation Plans. Furthermore, if the Company becomes aware,
subsequent to the Date of Termination, that the Executive was engaged in conduct during the Term
that, had the Company been aware of such conduct, would have permitted the Company to terminate
this Agreement during the Term for Cause, then the Company shall have the right, upon notice to the
Executive (describing such conduct in reasonable detail), (A) to terminate all payments and
benefits, other than the Unrestricted Payments, then remaining

18

 

payable to or for the benefit of the Executive under Sections 6.2, 6.3, 6.4, 6.5, 6.6, or 6.7
(including but not limited to continued vesting or payment of any unvested or unexercised awards
under the Company’s Compensation Plans), and (B) to recover from the Executive (1) any and all
payments made or benefits paid to or for the benefit of the Executive, including all or any portion
of the Unrestricted Payments, that the Company would not have been obligated to pay to or for the
benefit of the Executive or to which the Executive otherwise would not have been entitled if the
Company had terminated the Executive for Cause as a result of such conduct at or promptly after the
time on which such conduct first occurred, and (2) any and all proceeds realized by the Executive
subsequent to the date on which such conduct first occurred upon vesting, exercise, or sale of
Common Stock granted or issued to the Executive under the Company’s Compensation Plans. The
Executive shall repay to the Company all amounts due under the preceding sentences promptly upon
demand for such payment by the Company.

     7. Executive’s Confidentiality Obligation.

          7.1 The Executive hereby acknowledges, understands and agrees that all Confidential
Information is the exclusive and confidential property of the Company and its Affiliates which
shall at all times be regarded, treated and protected as such in accordance with this Article 7.
The Executive acknowledges that all such Confidential Information is in the nature of a trade
secret.

          7.2 For purposes of this Agreement, “Confidential Information” means information, not
generally known to the public, that is used in the business of the Company and (a) is proprietary
to, about or created by the Company, (b) gives the Company some competitive business advantage or
the opportunity of obtaining such advantage or the disclosure of which is likely to be detrimental
to the interests of the Company, (c) is designated as Confidential Information by the Company, is
known by the Executive to be considered confidential by the Company, or from all the relevant
circumstances should reasonably be assumed by the Executive to be confidential and proprietary to
the Company, or (d) is not generally known by non-Company personnel. Such Confidential Information
includes, without limitation, the following types of information and other information of a similar
nature (whether or not reduced to writing or designed as confidential):

               (a) Internal personnel and financial information of the Company, information about vendors
that is not generally known but is known to the Company as a result of the Company’s relationship
with the vendor (including vendor characteristics, services, prices, lists and agreements),
purchasing and internal cost information, internal service and operational manuals, and the manner
and methods of conducting the business of the Company;

               (b) Marketing and development plans, price and cost data, price and fee amounts, pricing and
billing policies, quoting procedures, marketing techniques, forecasts and forecast assumptions and
volumes, and future plans and potential strategies (including, without limitation, all information
relating to any acquisition prospect and the identity of any key contact within the organization of
any acquisition prospect) of the Company which have been or are being discussed;

19

 

               (c) Names of customers and their representatives, contracts (including their contents and
parties), customer services, and the type, quantity, specifications and content of products and
services purchased, leased, licensed or received by customers of the Company;

               (d) Confidential and proprietary information provided to the Company by any actual or
potential customer, government agency or other third party (including businesses, consultants and
other entities and individuals);

               (e) Any non-public information about the Company’s landfill development plans, landfill
capacity, and the status of the permitting process with respect to any aspect of the Company’s
business; and

               (f) Any non-public information about the existence or status of any governmental
investigation, charge, or lawsuit, the status or the position of the Company regarding the value of
any claim or charge (whether filed by the government or a third party), the Company’s interest in
resolving any such claim or charge; or any non-public information regarding the Company’s
compliance with federal, state or local laws.

          7.3 As a consequence of the Executive’s acquisition or anticipated acquisition of
Confidential Information, the Executive shall occupy a position of trust and confidence with
respect to the affairs and business of the Company. In view of the foregoing, and of the
consideration to be provided to the Executive, the Executive agrees that it is reasonable and
necessary that the Executive make each of the following covenants:

               (a) At any time during the Term and thereafter, the Executive shall not disclose Confidential
Information to any person or entity, either inside or outside of the Company, other than as
necessary in carrying out his duties and responsibilities as set forth in Article 2, without first
obtaining the Company’s prior written consent (unless such disclosure is compelled pursuant to
court orders or subpoena, and at which time the Executive shall give notice of such proceedings to
the Company);

               (b) At any time during the Term and thereafter, the Executive shall not use, copy or transfer
Confidential Information other than as necessary in carrying out his duties and responsibilities as
set forth in Article 2, without first obtaining the Company’s prior written consent; and

               (c) On the Date of Termination, the Executive shall promptly deliver to the Company (or its
designee) all written materials, records and documents made by the Executive or which came into his
possession prior to or during the Term concerning the business or affairs of the Company,
including, without limitation, all materials containing Confidential Information.

          7.4 The Executive acknowledges and agrees that the use of the term “Company” in this Article 7
means both the Company and its Affiliates.

     8. Disclosure of Information, Ideas, Concepts, Improvements, Discoveries and Inventions.
Consistent with the Executive’s fiduciary duties to the Company, the Executive agrees

20

 

that during his employment by the Company, the Executive shall promptly disclose in writing to
the Company all information, ideas, concepts, improvements, discoveries and inventions, which are
conceived, developed, made or acquired by the Executive, either individually or jointly with
others, and which relate to the business, products or services of the Company, irrespective of
whether the Executive used the Company’s time or facilities and irrespective of whether such
information, idea, concept, improvement, discovery or invention was conceived, developed,
discovered or acquired by the Executive on the job, at home, or elsewhere. This obligation extends
to all types of information, ideas and concepts, including, information, ideas and concepts
relating to new types of services, corporate opportunities, acquisition prospects, the identity of
key representatives within acquisition prospect organizations, prospective names or service marks
for the Company’s business activities, and the like. The Executive acknowledges and agrees that
the use of the term “Company” in this Article 8 means both the Company and its Affiliates.

     9. Ownership of Information, Ideas, Concepts, Improvements, Discoveries and all Original Works
of Authorship.

          9.1 All information, ideas, concepts, improvements, and discoveries which are conceived,
made, developed or acquired by the Executive or which are disclosed or made known to the Executive,
individually or in conjunction with others, during the Executive’s employment by the Company and
which relate to the business, products or services of the Company (including, without limitation,
all such information relating to corporate opportunities, research, financial and sales data,
pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the
identity of customers or their requirements, the identity of key contacts within the customers’
organizations or within the organization of acquisition prospects, marketing and merchandising
techniques, and prospective names and service marks) are and shall be the sole and exclusive
property of the Company. Furthermore, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts, improvements, and
discoveries are and shall be the sole and exclusive property of the Company.

          9.2 In particular, the Executive hereby specifically sells, assigns, transfers and conveys to
the Company all of his worldwide right, title and interest in and to all such information, ideas,
concepts, improvements, and discoveries, and any United States or foreign applications therefore.
The Executive shall assist the Company and its nominee at all times and in all manners, during the
Term and thereafter, in the protection of such information, ideas, concepts, improvements, or
discoveries.

          9.3 In the event the Executive individually, or jointly with others, creates, during the Term
(whether the initial or any successive Term), any original work of authorship fixed in any tangible
medium of expression which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models,
manuals, brochures or the like) relating to the Company’s business products or services, the
Company shall be deemed the author of such work if the work is prepared by the Executive within the
scope of his employment; or, if the work is not prepared by the Executive within the scope of his
employment but is specially ordered by the Company as a contribution to a collective work, as a
part of a motion picture or other audiovisual work, as a translation, as a supplementary

21

 

work, as a compilation or as an instructional text, then the work shall be considered to be a work
made for hire, and the Company shall be the author of such work. If such work is neither prepared
by the Executive within the scope of his employment nor a work specially ordered and deemed to be a
work made for hire, then the Executive hereby agrees to sell, transfer, assign and convey, and by
these presents, does sell, transfer, assign and convey, to the Company all of the Executive’s
worldwide right, title and interest in and to such work and all rights of copyright therein. The
Executive agrees to assist the Company, at all times, during the Term and thereafter, in the
protection of the Company’s worldwide right, title and interest in and to such work and all rights
of copyright therein, which assistance shall include, but shall not be limited to, the execution of
all documents requested by the Company or its nominee and the execution of all lawful oaths and
applications for registration of copyright in the United States and foreign countries.

          9.4 The Executive acknowledges and agrees that the use of the term “Company” in this Article 9
means both the Company and its Affiliates.

     10. Executive’s Non-Competition and Non-Solicitation Obligations

          10.1 For purposes of this Article 10:

               (a) “Company” means both the Company and its Affiliates.

               (b) “Competitor” means any company that provides Non-hazardous Solid Waste Management services
in any state in which the Company does business. “Principal Competitor” means Waste Management,
Inc., Republic Services, Inc., Capital Environmental Resource, Inc., Onyx, Waste Industries USA,
Inc., Waste Connections, Inc., or Casella Waste Systems, Inc. (or their predecessors and
successors, subsidiaries, or affiliate operations), or any other public or private business
(including their predecessors and successors, subsidiaries, or affiliate operations) conducting
Non-hazardous Solid Waste Management in three (3) or more states in which the Company does
business.

               (c) For purposes of Section 10.3(c) and (d), “Rendering Services” means any of the following
activities, whether done directly or through others, whether done in person or through telephonic,
electronic, or some other means of communication, and whether done as a principal, director,
officer, agent, employee, contractor or consultant: (1) performing any kind of services or duties
related to Non-hazardous Solid Waste Management; (2) managing, selling, marketing or brokering
Non-hazardous Solid Waste Management services; (3) developing, managing or otherwise handling data
or information concerning potential or actual acquisitions of businesses that engage in
Non-hazardous Solid Waste Management; (4) participating in any decision, or developing or
implementing any strategy, to acquire such businesses; (5) formulating, reviewing or implementing
marketing, sales, financial or operational strategies related to Non-hazardous Solid Waste
Management; (6) conducting or reviewing cost benefit analysis on actual or proposed projects
related to Non-hazardous Solid Waste Management; or (7) performing any functions that are the same
as, or substantially similar to, the duties Executive performed under Section 2 of this Agreement.

22

 

               (d) For purposes of Section 10.3(e), “Rendering Services” means any of the following
activities, whether done directly or through others, whether done in person or through telephonic,
electronic, or some other means of communication, and whether done as a principal, director,
officer, agent, employee, contractor or consultant: (1) managing, selling, marketing or brokering
portable toilet, street sweeping or other services then provided by the Company; (2) formulating,
reviewing or implementing marketing, sales, financial or operational strategies related to portable
toilet, street sweeping or other services then provided by the Company; (3) conducting or reviewing
cost benefit analysis on actual or proposed projects related to portable toilet, street sweeping or
other services then provided by the Company; or (4) performing any functions that are the same as,
or substantially similar to, the duties Executive performed under Section 2 of this Agreement

               (e) “Contact” means any direct or indirect interaction between the Executive and any customer,
potential customer or acquisition prospect which takes place in an effort to further a business
relationship, whether done directly or through others, whether in person or through telephonic,
electronic, or some other means of communication, and whether done as a principal, director,
officer, agent, employee, contractor or consultant.

               (f) “Non-hazardous Solid Waste Management” means the collection, hauling, disposal or
recycling of non-hazardous refuse.

               (g) “Facility” means any office, transfer station, hauling operation, landfill, or recycling
center of the Company.

          10.2 Prohibition on Competition and Solicitation During Employment.

               (a) At no time during the Term (whether the initial or any successive Term) will the
Executive, directly or indirectly, provide service as a principal, director, officer, agent,
employee, consultant or contractor in or to any business that conducts Non-hazardous Solid Waste
Management operations or provides portable toilet, street sweeping or any other services that the
Company provides.

               (b) At no time during the Term (whether the initial or any successive Term) will the Executive
directly or indirectly (1) induce, entice or solicit any employee of the Company to leave his or
her employment, (2) Contact, communicate or solicit any customer, potential customer, or
acquisition prospect of the Company for the purpose of ending or avoiding a business relationship,
or (3) use any information regarding actual or potential customers or acquisition targets of the
Company for any purpose other than in performing his duties under this Agreement.

          10.3 Prohibition Against Competition After Employment.

               (a) The Executive agrees that, after the Date of Termination, he will not compete with the
Company to the extent, and subject to the express limitations, provided in this Section 10.3. At
no time during the Term will the Executive, directly or indirectly, provide service as a principal,
director, officer, agent, employee, consultant or contractor in or to any business that

23

 

conducts Non-hazardous Solid Waste Management operations or provides portable toilet, street
sweeping or any other services that the Company provides.

               (b) The Executive’s obligation not to compete with the Company will end three (3) years after
the Date of Termination. If a court concludes that three (3) years is an unreasonable time for
that obligation, the Executive’s obligation to not compete with the Company will end two (2) years
after the Date of Termination.

               (c) During the Executive’s employment as Chief Executive Officer, he will be the most senior
executive officer of the Company, with detailed knowledge of, and active participation in, all
significant management and operational issues. Moreover, as Chief Executive Officer, he will
possess Confidential Information regarding the Company’s operations across the nation, not just in
any particular geographic area around where his office is or will be located. Confidential
Information the Executive may be given about the Company’s strategic plans, its acquisition
targets, and cost and profit margins in various markets, for example, will not be limited to the
area around the corporate office or any other particular geographic area of the country. Thus, the
scope of Executive’s obligation to not compete with the Company cannot reasonably be limited to a
particular geographic area. Executive’s employment with any business that provides Non-hazardous
Solid Waste Management Services, regardless of location, is likely to harm the Company’s business
interests. Accordingly, Executive agrees that he will not Render Services to any Competitor or
any Principal Competitor that are: (i) rendered in a state in which the Company does business; or
(ii) directed at achieving, or intended to achieve, a result in any such state.

               (d) The parties acknowledge that they have chosen Arizona law to apply to this Agreement (see
Section 11.6) and that Arizona courts have not addressed under what circumstances, and to what
extent, restrictive covenants that apply to a multi-state area are enforceable. Thus, the parties
wish to include Section 10.3(d) as a back-up to the restrictions in Section 10.3(c) in the event a
court concludes that those restrictions are not reasonably limited and severs the applicable
portions of Section 103.(c) under Arizona’s “blue pencil” rule. Accordingly, Executive will not
Render Services to any Competitor or Principal Competitor that are: (i) rendered within forty (40)
miles of any Facility; or (ii) directed at achieving, or intended to achieve, a result within forty
(40) miles of any Facility. Executive acknowledges that the restrictions in this Section 10.3(d)
are separate and apart from the restrictions in Section 10.3(c) above.

               (e) Additionally, Executive will not Render Services to any business providing portable toilet
street sweeping or other services within forty (40) miles of any Facility at which the same or
similar services are provided.

               (f) The non-compete restrictions in this Section 10.3 are expressly intended to preclude the
Executive from physically working in a geographic area that is not covered by the applicable
restriction (i.e., working in a state in which the Company is not conducting business) but where
the Executive’s responsibilities would include any management, oversight or analysis of a business
unit in a geographic area covered by the applicable restriction.

          10.4 Prohibition Against Solicitation After Employment.

24

 

               (a) The Executive agrees that, after the Date of Termination, he will limit his activities
relating to the customers, potential customers, acquisition prospects, and employees of the Company
to the extent, and subject to the express limitations, provided in this Section 10.4.

               (b) The Executive’s obligations under this Section 10.4 will end three (3) years after the
Date of Termination. If a court concludes that three (3) years is an unreasonable time for those
obligations, Executive’s obligations under this Section 10.4 will end two (2) years after the Date
of Termination.

               (c) The Executive will not Contact customers, potential customers, or acquisition prospects of
the Company for any purpose related to providing Non-hazardous Solid Waste Management services in
any state in which the Company does business. In the event a court concludes that this particular
restriction is not reasonably limited, the Executive will not Contact customers, potential
customers or acquisition prospects of the Company for any purpose related to providing
Non-hazardous Solid Waste Management services within forty (40) miles of any Facility.

               (d) Additionally, the Executive will not Contact customers, potential customers or acquisition
prospects of the Company for any purpose related to providing portable toilet, street sweeping or
other services within forty (40) miles of any Facility at which the same or similar services are
provided.

               (e) The Executive will not solicit any employee or consultant of the Company to work for any
other person or to leave his or her employment. The Executive will not, directly or indirectly, be
involved in the recruiting and/or hiring (whether that involvement is in the nature of serving as a
reference or as a decision-maker) of any person employed or retained as a consultant by the
Company.

               (f) In the event a court concludes that the restrictions in Section 10.4(e) are not reasonably
limited, Executive will not: (i) solicit any employee or consultant of the Company who, directly
or indirectly, reported to Executive at any time during the Term, where the solicitation is to
encourage the employee or consultant to work for any other person or entity, or to leave his or her
employment; or (ii) be involved in the recruiting and/or hiring (whether that involvement is in the
nature of serving as a reference or as a decision-maker) of any such employee or consultant.

          10.5 Other Provisions.

               (a) The Executive acknowledges and agrees that a violation of the promises he has made under
this Article 10 is likely to cause irreparable harm to the Company and justify the grant of
injunctive relief. Additionally, to provide the Company with the protections it has bargained for
in this Article 10, any period of time in which the Executive has been in breach of the provisions
in this Article 10 will extend, by that amount of time, the time for which he should be precluded
from further breaching the promises made in this Article 10, provided that the

25

 

Company does not unreasonably delay in bringing appropriate legal action after discovery of any
such breach by Executive.

               (b) If the applicable temporal or geographic limitations agreed to by the parties in this
Section 10 are found by a court to be overly broad, the parties expressly authorize the judge
before whom any dispute is brought to impose the broadest temporal and geographic limitations
permissible under the law, so as to effectuate the parties’ intent and ensure that the Company
obtains the protections it sought and for which it provided material consideration in this
Agreement.

     11. Miscellaneous.

          11.1 Notices. All notices and other communications required or permitted under this Agreement
shall be in writing and shall be deemed to have been given when delivered by hand or mailed by
registered or certified mail, return receipt requested, as follows (provided that notice of a
change of address shall be deemed given only when received):

If to the Company:

          Allied Waste Industries, Inc.

          15880 North Greenway Hayden Loop, Suite 100

          Scottsdale, Arizona 85260

          Attn: Executive Vice-President and General Counsel

If to the Executive:

          John J. Zillmer

                                                  

                                                  

or to such other names or addresses as the Company or the Executive, as the case may be, shall
designate by notice to the other party in the manner specified in this Section 11.1.

          11.2 Waiver of Breach. The waiver by any party of a breach of any provision of this Agreement
shall neither operate nor be construed as a waiver of any subsequent breach by any party. No breach
shall be deemed waived unless the waiver is in a writing signed by the non-breaching party.

          11.3 Assignment. This Agreement shall be binding upon and inure to the benefit of the
Company, its Affiliates, successors, legal representatives and assigns, and upon the Executive, his
heirs, executors, administrators, legal representatives and assigns; provided, however, the
Executive agrees that his rights and obligations hereunder are personal to him and may not be
assigned without the express written consent of the Company.

          11.4 Entire Agreement, No Oral Amendments. This Agreement, together with any schedule or
exhibit attached hereto and any document, policy, rule or regulation referred to herein,

26

 

replaces and merges all previous agreements and discussions relating to the same or similar subject
matter between the Executive and the Company and constitutes the entire agreement between the
Executive and the Company with respect to the subject matter of this Agreement. This Agreement may
not be modified in any respect by any verbal statement, representation or agreement made by any
employee, officer, or representative of the Company or by any written agreement unless signed by an
officer of the Company who is expressly authorized by the Company to execute such document.

          11.5 Enforceability. If any provision of this Agreement or application thereof to anyone or
under any circumstances shall be determined to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions or applications of this Agreement which can
be given effect without the invalid or unenforceable provision or application.

          11.6 Jurisdiction, Venue. The laws of the State of Arizona shall govern the interpretation,
validity and effect of this Agreement without regard to the place of execution or the place for
performance thereof, and the Company and the Executive agree that the courts situated in Maricopa
County, Arizona shall have personal jurisdiction over the Company and the Executive to hear all
disputes arising under this Agreement. This Agreement is to be at least partially performed in
Maricopa County, Arizona, and as such, the Company and the Executive agree that venue shall be
proper with the courts in Maricopa County, Arizona to hear such disputes. In the event either party
is not able to effect service of process upon the other party with respect to such disputes, the
Company and the Executive expressly agree that the Secretary of State for the State of Arizona
shall be an agent of the Company and/or the Executive to receive service of process on behalf of
the Company and/or the Executive with respect to such disputes.

          11.7 Injunctive Relief. The Company and the Executive agree that a breach of any term of this
Agreement by the Executive would cause irreparable damage to the Company and that, in the event of
such breach, the Company shall have, in addition to any and all remedies of law, the right to any
injunction, specific performance and other equitable relief to prevent or to redress the violation
of the Executive’s obligations under this Agreement.

          11.8 Withholding. All payments made pursuant to this Agreement shall be net of payroll and
withholding deductions as may be required by law and other deductions that are either applied
generally to employees of the Company for insurance and other employee benefit plans or authorized
by Executive.

          11.9 Arbitration. With the sole exception of any breach by the Executive of the obligations
he assumed under Sections 10.1, 10.2, 10.3, 10.4 and/or 10.5 of this Agreement (the breach of which
permit the Company to obtain judicial relief due to the exigent circumstances presented by such a
breach), all other alleged breaches of this Agreement, or any other dispute between the parties to
this Agreement arising out of or in connection with the Executive’s employment with the Company
will be settled by binding arbitration to the fullest extent permitted by law. This Agreement to
arbitrate applies to any claim for relief of any nature, including but not limited to claims of
wrongful discharge under statutory law and common law; employment discrimination based on federal,
state or local statute, ordinance, or governmental regulations, including discrimination prohibited
by: (a) Title VII of the Civil Rights Act of 1964, as amended,

27

 

(b) the Age Discrimination in Employment Act, (c) the Americans with Disabilities Act, (d) the Fair
Labor Standards Act, and (e) claims of retaliatory discharge or other acts of retaliation;
compensation disputes; tortuous conduct; allegedly contractual violations; ERISA violations; and
other statutory and common law claims and disputes, regardless of whether the statue was enacted or
whether the common law doctrine was recognized at the time this Agreement was signed.

          The parties to this Agreement understand that they are agreeing to substitute one legitimate
dispute resolution forum (arbitration) for another (litigation) because of the mutual advantages
this forum offers, and are waiving their right to have their disputes (except as to breaches of
Sections 10.1, 10.2, 10.3, 10.4 and/or 10.5 of this Agreement) resolved in court. This
substitution involves no surrender, by either party, of any substantive statutory or common law
benefit, protection, or defense.

          The arbitration proceeding shall be conducted in Maricopa County, Arizona, in accordance with
the National Rules for the Resolution of Employment Disputes (National Rules) of the American
Arbitration Association (AAA) in effect at the time a demand for arbitration is made.

          One arbitrator shall be used and he or she shall be chosen by mutual agreement of the parties
to this Agreement. If, within thirty (30) days after the Executive notifies the Company of an
arbitrable dispute, no arbitrator has been chosen, an arbitrator shall be chosen by the AAA
pursuant to its National Rules. The arbitrator shall coordinate and, as appropriate, limit all
pre-arbitration discovery. However, the parties to this Agreement will have the right to obtain
discovery through appropriate decision and award, stating the reasons for the award. The decision
and award shall be exclusive, final, and binding on both parties to this Agreement, their heirs,
executors, administrators, successors, and assigns.

          The Company will pay all costs and expenses of the arbitration, except for the filing fees and
costs that would have been required had the proceeding been initiated and maintained in the
Maricopa County Superior Court, which fees and costs the Executive will pay. Each party shall pay
their own attorneys’ fees and expenses throughout the arbitration proceeding. However, the
arbitrator may award the successful party its attorneys’ fees and expenses at the conclusion of the
arbitration (and any other relief provided by law).

28

 

	 	 	 	 	 
	Dated: May 27, 2005. 	ALLIED WASTE INDUSTRIES, INC.

 	 
	 	By  	 	 
	 	Title  	 	 
	 	 	“Company” 	 
	 

Dated: May 27, 2005.

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	John J. Zillmer 	 
	 	 	“Executive” 	 
	 

29exv10w02

 

Exhibit 10.02

ALLIED WASTE INDUSTRIES, INC.

NONQUALIFIED STOCK OPTION AGREEMENT

(Under the Amended and Restated

1991 Incentive Stock Plan)

     THIS OPTION AGREEMENT (“Agreement”) dated May 27, 2005 (the “Date of Grant”), between ALLIED
WASTE INDUSTRIES, INC., a Delaware corporation (the “Company”), and JOHN J. ZILLMER (“Optionee”):

R E C I T A L S:

     The Company has adopted the Allied Waste Industries, Inc. 1991 Incentive Stock Plan, as most
recently amended and restated effective February 5, 2004 and as subsequently amended (the “Plan”),
all of the terms and provisions of which are incorporated herein by reference and made a part of
this Agreement. All capitalized terms used but not defined in this Agreement have the meanings
given to them in the Plan.

     The Management Development/Compensation Committee of the Board of Directors (the “Committee”)
has determined that it would be in the best interests of the Company and its stockholders to grant
the option provided for herein (the “Option”) to Optionee pursuant to the Plan, as an inducement to
serve as an employee of the Company and to provide Optionee with a proprietary interest in the
future of the Company.

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
hereto agree as follows:

     1. Grant of the Option. The Company hereby grants to Optionee the right and option to
purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of
1,000,000 shares of the presently authorized but unissued common stock, par value $.01 per share,
of the Company (the “Stock”). The purchase price of the Stock subject to this Option shall be the
closing sales price per share, as reported on the New York Stock Exchange, on the date of this
Agreement.

     2. Exercise of Option.

          (a) Subject to Sections 2(b) and 2(f) hereof, the Option may be exercised in whole or in part,
at any time or from time to time during the period commencing twelve months after the Date of Grant
and ending ten years from the Date of Grant. The Option is not transferable or assignable by the
Optionee except to the following persons or entities (“permitted transferees”): (1) by will or the
laws of descent and distribution, or pursuant to a Qualified Domestic Relations Order; (2) without
consideration, to certain members of the Optionee’s family or household, as described in Sections
6(c)(vi)(A) and (B) of the Plan (“family members”); (3) without consideration, to trusts for the
benefit of the Optionee’s family members, as described in Section 6(c)(vi)(C) of the Plan; (4)
without consideration, to a private foundation as described in Section 6(c)(vi)(D) of the Plan; or
(5) without consideration, to any entity whose

 

 

voting interests are the Optionee’s family members, as described in Section 6(c)(vi) of the
Plan. During the Optionee’s lifetime, the Option shall be exercisable only by the Optionee, a
broker-dealer acting on his behalf pursuant to Section 6(c)(iv) of the Plan, or any permitted
transferee.

          (b) Each Option awarded to Optionee under this Grant may be exercised only to the extent it
has become vested and nonforfeitable. This Option shall vest and become exercisable as follows:
200,000 shares of the Stock covered by the Option shall become fully vested on May 27, 2006, and,
as of the 27th day of each calendar month thereafter, an additional 16,667 of the shares of Stock
covered by the Option shall become fully vested until all 1,000,000 shares are fully vested.
Except as otherwise provided in any written employment agreement between Optionee and Company, if
Optionee’s employment with the Company terminates for any or no reason, any portion of the Option
not vested as of the time of Optionee’s termination of employment shall be forfeited as of the date
of Optionee’s termination of employment. To the extent vested but not exercised, this Option shall
accumulate and remain exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date on which the Option expires.

          (c) This Option may be exercised by written notice of intent to exercise the Option with
respect to any or all of the shares of Stock covered by the Option, delivered to the Company at its
principal office. Such notice shall be accompanied by this Agreement and shall specify the number
of shares of Stock with respect to which this Option is being exercised. Such notice shall also be
accompanied by payment in full to the Company, at its principal office, of the option price for the
shares of Stock with respect to which this Option is then being exercised. The payment of the
option price shall be made (i) in cash or by certified check, bank draft, or postal or express
money order payable to the order of the Company or, (ii) with the consent of the Committee, in
whole or in part in Stock which has been owned by the Optionee for at least six months prior to the
effective date of exercise and valued at its Fair Market Value on the effective date of exercise,
(iii) with the consent of the Committee, in the form of a “cashless exercise”, as described in the
Plan, or (iv) with the consent of the Committee, in any combination of the foregoing. Any payment
in shares of Stock shall be effected by delivery of such shares to the Secretary of the Company,
duly endorsed in blank or accompanied by stock powers duly executed in blank, together with any
other documents or evidence as the Secretary shall require from time to time. The effective date of
exercise will be the date established by the Secretary, which shall be as soon as administratively
possible (but not later than five business days) after the Secretary receives the written notice, a
copy of this Agreement, and payment from Optionee.

          (d) This Option may not be exercised prior to the registration of the Stock with the
Securities and Exchange Commission and any applicable state agencies. However, this condition may
be waived by the Committee if it determines that such registration is not necessary in order to
legally issue shares of Stock to Optionee.

          (e) Upon the Company’s determination that this Option has been validly exercised as to any
shares of Stock, the Secretary of the Company shall issue a certificate or certificates to the
Optionee or permitted transferee for the number of shares set forth in his written notice.
However, the Company shall not be liable to the Optionee for damages relating to any delays in
issuing the certificate(s) to him, any loss of the certificate(s), or any mistakes or errors in the
issuance of the certificate(s) or in the certificate(s) themselves.

2

 

          (f) Except as otherwise provided in any written employment agreement between Optionee and
Company, this Option shall not be exercisable after the earliest of the following dates (1) the
expiration of ten years from the Date of Grant; (2) one month after the termination of the
employment of Optionee for any reason other than Cause, Disability, death or Retirement; (3) one
year after the termination of the employment of Optionee by reason of Disability, death or
Retirement; or (4) the date of actual termination of the employment of Optionee, if Optionee is
terminated for Cause.

     3. Term of Employment. This Option does not grant to Optionee any right to continue
serving as an employee of the Company.

     4. Notices; Deliveries. Any notice of delivery required to be given under the terms
of this Agreement shall be addressed to the Company, in care of its Secretary, at its principal
office at 15880 N. Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260, and any notice or
delivery to be given to Optionee shall be addressed to him at the address given by him beneath his
signature hereto or such other address as either party hereto may hereafter designate in writing to
the other. Any such notice or delivery shall be deemed to have been duly given when addressed as
aforesaid, registered or certified mail, and deposited (postage or registration or certification
fee prepaid) in a post office or branch post office regularly maintained by the United States.

     5. Disputes. As a condition of the granting of this Option, Optionee and his heirs
and successors agree that any dispute or disagreement which may arise hereunder shall be determined
by the Committee in its sole discretion and judgment, and that any such determination and any
interpretation by the Committee of the terms of the Option shall be final and shall be binding and
conclusive, for all purposes, upon the Company, Optionee, his heirs and personal representatives,
and all permitted transferees.

     6. Legend on Certificates. The certificate(s) representing the shares of Stock
purchased upon the exercise of this Option will be stamped or otherwise imprinted with a legend in
such form as the Company or its counsel may require with respect to any applicable restrictions on
the sale or transfer of such shares and the stock transfer records of the Company will reflect
stop-transfer instructions with respect to such shares.

     7. Options Subject to Plan. This Option is subject to the terms and provisions of the
Plan. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail
under all circumstances.

     8. Miscellaneous.

          (a) All decisions of the Committee with respect to any questions arising under the Plan or
under this Agreement shall be conclusive.

          (b) Nothing herein contained shall affect Optionee’s right to participate in and receive
benefits from and in accordance with the then current provisions of any employee pension, welfare,
or fringe benefit plan or program of the Company.

3

 

          (c) Optionee agrees to make appropriate arrangements with the Company for the satisfaction of
any applicable federal, state or local income tax withholding or similar requirements, including
the payment to the Company at the time of exercise of this Option of all such taxes and the
satisfaction of all such requirements.

          (d) Whenever the term “Optionee” is used herein under circumstances applicable to any other
person or persons to whom this Option, in accordance with the provisions of this Agreement, may be
transferred, the word “Optionee” shall be deemed to include such person or persons.

          (e) If any provision of this Agreement or of the Plan would disqualify the Agreement or the
Plan under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, or would not otherwise
comply with Rule 16b-3, such provision shall be construed or deemed amended to conform to Rule
16b-3 to the extent permitted by applicable law and deemed advisable by the Company’s Board of
Directors.

          (f) Notwithstanding any of the other provisions of this Agreement or of the Plan, Optionee
agrees that he will not exercise this Option, and that the Company will not be obligated to issue
any of the Stock pursuant to this Agreement, if the exercise of the Option or the issuance of such
shares of Stock would constitute a violation by Optionee or by the Company of any provision of any
law or regulation of any governmental authority or national securities exchange. Upon the
acquisition of any Stock pursuant to the exercise of this Option, Optionee will 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.

          (g) This Agreement shall be binding upon and inure to the benefit of any successor or
successors of the Company.

          (h) The interpretation, performance and enforcement of this Agreement shall be governed by the
laws of the State of Arizona.

     IN WITNESS WHEREOF, the Company has, as of the date and place first above written, caused this
Agreement to be executed on its behalf by its Chairman, President or any Vice President, and
Optionee has hereunder set his hand as of the date and place first above written, which date is the
Date of Grant of this Option.

	 	 	 	 	 	 	 
	ALLIED WASTE INDUSTRIES, INC.	 	 	 	OPTIONEE
	 	 	 	 	 
	 
	 	 	 	 	 	 
	By

	 	 
	 	 
	 	 
	

	 	 	 	 	 	John J. Zillmer
	 
	 	 	 	 	 	 
	Title

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	 

4

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