PERFORMANCE SHARE UNIT AWARD
AGREEMENT
This Performance
Share Unit Award Agreement (“Agreement”) is entered
into effective as of January 26, 2007 the “Grant
Date”), by and between Waste Management, Inc., a Delaware
corporation (together with its Subsidiaries and Affiliates, the
“Company”), and «Full_NameFirst» (the
“Employee”), pursuant to the Waste Management, Inc.
2004 Stock Incentive Plan (the “Plan”). Employee and
the Company agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the
intent of this Agreement.
1.
Grant. In accordance with the terms of the Plan, the Company
hereby grants to Employee a Performance Share Unit Award (the
“Award”) subject to the terms and conditions set forth
herein. Performance Share Units are notational units of measurement
denominated in shares of common stock of Waste Management, Inc.,
$.01 par value, (“Common Stock”), subject to the
conditions and restrictions on transferability set forth below and
in the Plan.
2.
Performance Vesting Requirement .
(a) The
“Performance Period” for this Award shall be the
36-month period commencing on January 1, 2007 and ending on
December 31, 2009. The Award shall be subject to performance
vesting requirements based upon the achievement of the Performance
Target specified below, subject to certification of the degree of
achievement of such Performance Target by the Committee pursuant to
Section 7 of the Plan.
(b) The
measurement tool for determining level of achievement shall be the
average Return on Invested Capital (“ROIC”) for the
36-month period beginning January 1, 2007 and ending
December 31, 2009. ROIC is defined to mean (i) the
Company’s average “as reported” Net Operating
Profit After Taxes (“NOPAT”) for the Performance
Period, divided by (ii) the Company’s average Invested
Capital for the Performance Period. For purposes of this Agreement,
the average ROIC for the Performance Period will be calculated
using the following equation:
(2007 NOPAT + 2008 NOPAT + 2009
NOPAT)
(2007 Invested Capital + 2008 Invested Capital + 2009 Invested
Capital)
3.
Determining Number of Performance Share Units Earned
.
(a) The
“Target Award” for Employee under this Agreement is
«M___Units» Performance Share Units. The actual number of
Performance Share Units earned by Employee will be determined as
described below, based upon the actual achievement of ROIC for the
Performance Period. The “Threshold ROIC” is the minimum
ROIC that must be achieved to qualify for any Award;
“Target
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ROIC” is
the expected achievement in ROIC; and “Maximum ROIC” is
the maximum ROIC that could be achieved that would result in an
increase in the number of Performance Share Units earned under this
Award. These targets will be announced to Employee by
March 15, 2007, following calculation of year-end financial
reporting for 2006. Subject to adjustment pursuant to Subsection
3(b), 3(c) and 3(d), each such percentage correlates to a number of
Performance Share Units that may be earned under this Award, as
follows:
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Average ROIC Achieved
During
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Resulting Performance Share
Units
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Performance Period
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Earned
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50% of Target Award
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100% of Target Award
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200% of Target Award
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(b) In the
event that the Company’s actual performance does not meet the
Threshold ROIC, no Performance Shares Units shall be earned under
this Award.
(c) If the
Company’s actual ROIC for the Performance Period is between
Threshold ROIC and Target ROIC, the number of Performance Share
Units earned shall be equal to the sum of (i) the Performance
Shares Units for achievement of Threshold ROIC plus (ii) the
number of Performance Shares determined under the following
formula:
(TAS – TS) x ( AP
– TP )
TAP -TP
TAS =
Performance Share Units earned for achievement of the Target
ROIC.
TS = Performance Share Units earned for achievement of the
Threshold ROIC.
AP = The percent payment earned based on actual ROIC
performance.
TP = The percent payment earned based on Threshold ROIC
performance.
TAP = The percent payment earned based on Target ROIC
performance.
(d) If the
Company’s actual ROIC for the Performance Period is between
Target ROIC and Maximum ROIC, the number of Performance Share Units
earned shall be equal to the sum of (i) the Performance Share Units
earned for achievement of Target ROIC plus (ii) the number of
Performance Share Units determined under the following
formula:
(MS – TAS) x (AP –
TAP)
MP-TAP
MS =
Performance Share Units earned for achievement of the Maximum
ROIC.
TAS = Performance Share Units earned for achievement of the Target
ROIC.
AP = The percent payment earned based on actual ROIC
performance
TAP = The percent payment earned based on Target ROIC
performance.
MP = The percent payment earned based on Maximum ROIC
performance.
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4. Timing
and Form of Payout . Except as hereinafter provided, after the
end of the Performance Period, Employee shall be entitled to
receive his total number of Performance Shares Units determined
under Section 3 and Dividend Equivalents under
Section 10. Unless timely deferred by Employee in accordance
with Section 11, upon vesting, each Performance Share Unit
will be settled by payment of one share of Common Stock, free of
any restrictions. Payment of such shares of Common Stock shall be
made as soon as administratively feasible after the Committee
certifies the actual performance of the Company during the
Performance Period.
5.
Termination of Employment Due to Death or Disability . Upon
Termination of Employment from the Company by reason of
Employee’s death or disability (as determined by the
Committee), or upon Employee’s disability prior to a
Termination of Employment (as determined by the Committee and
within the meaning of Section 409A of the Internal Revenue
Code of 1986, as amended (the “Internal Revenue Code”))
Employee (or in the case of Employee’s death,
Employee’s beneficiary) shall be entitled to receive the
Performance Share Units Employee would have been entitled to under
Section 3 if he had remained employed until the last day of
the Performance Period. Unless further deferred pursuant to
Employee’s deferral election, the delivery of shares of
Common Stock in satisfaction of such Performance Share Units shall
be made as soon as administratively feasible after the end of the
Performance Period.
6.
Involuntary Termination of Employment Without Cause by the
Company or Retirement by Employee . Upon either an involuntary
Termination of Employment from the Company without Cause by the
Company or a qualifying Retirement by Employee, Employee shall be
entitled to receive the Performance Share Units and related
Dividend Equivalents that Employee would have been entitled to
under Section 3 if he or she had remained employed until the
last day of the Performance Period, multiplied by the fraction
which has as its numerator the total number of days that Employee
was employed by the Company during the Performance Period and has
as it denominator 1,096 (being the number of calendar days in the
Performance Period). Unless further deferred pursuant to
Employee’s deferral election, the delivery of shares of
Common Stock in satisfaction of such Performance Share Units shall
be made as soon as administratively feasible after the end of the
Performance Period.
7.
Termination of Employment for Any Other Reason. Except as
provided in Sections 5 and 6, Employee must be an employee of
the Company continuously from the date of this Award until the last
day of the Performance Period to be entitled to receive any shares
of Common Stock with respect to any Performance Share Units he may
have earned hereunder.
8.
Acceleration upon Change in Control. Notwithstanding
anything to the contrary, if there is a Change in Control of Waste
Management, Inc. prior to the end of the Performance Period,
Employee will be entitled to immediately receive both (a) and
(b), as follows:
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(a) the
Performance Share Units that he would have otherwise received based
upon achievement of ROIC after reducing the Performance Period so
that it ends on the last day of the quarter preceding the Change in
Control (the “Early Measurement Date”) and making
adjustments to Target ROIC so as to be equal to the ROIC budgeted
for that period and appropriate adjustments to Threshold ROIC and
Maximum ROIC so that they bear the same ratio to the Threshold ROIC
and Maximum ROIC amounts above as the revised Target ROIC amount
bear to the Target ROIC amount above, converted into a cash payment
equivalent to the number of Performance Share Units earned under
this Section 8 multiplied by the closing price of the Common
Stock on the Early Measurement Date; and
(b) as a
substitute award for the lost opportunity to earn Performance Stock
Units for the entire length of the original Performance
Period:
(i) if the
successor entity was a publicly traded company as of the Early
Measurement Date, an award of restricted stock units in the
successor entity equal to the number of shares of common stock of
the successor entity that could have been purchased on the Early
Measurement Date with an amount of cash equal to the product of the
following equation:
TAP = the
number of Performance Share Units that could be earned for
achievement of the original Target ROIC specified in Section
3(a)
EMD = the number of days occurring from the Grant Date to the Early
Measurement Date
CP = the closing price of a share of Common Stock of Waste
Management, Inc. on the Early Measurement Date
Any restricted
stock units in the successor entity awarded under this Section
8(b)(i) will vest completely on or before December 31, 2009,
provided that Employee remain continuously employed with the
successor entity until such date. The foregoing notwithstanding, if
there is an involuntary Termination of Employee for reason other
than Cause during the Window Period, Employee will become
immediately vested in full in the restricted stock units in the
successor entity awarded pursuant to this
Section 8(b)(i).
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(ii) if the
successor entity was not a publicly traded company as of the Early
Measurement Date, a cash payment equal to the product of the
following equation:
TAP x EMD__ x
CP
1096-EMD
TAP = the
number of Performance Share Units that could be earned for
achievement of the original Target ROIC specified in Section
3(a)
EMD = the number of days occurring from the Grant Date to the Early
Measurement Date
CP = the closing price of a share of Common Stock of Waste
Management, Inc. on the Early Measurement Date
Any cash
payment calculated under this Section 8(b)(ii) will be paid to
Employee on December 31, 2009, provided that Employee remain
continuously employed with the successor entity until such date.
The foregoing notwithstanding, if there is an involuntary
Termination of Employee for reason other than Cause during the
Window Period, Employee will be paid by the successor entity the
amount determined pursuant to this
Section 8(b)(ii).
9.
Forfeiture of Award. Upon Termination of Employment from the
Company for any reason other than death, retirement, disability,
involuntary termination by the Company without Cause, or Change in
Control, Employee shall immediately forfeit the Award, without the
payment of any consideration or further consideration by the
Company. Upon forfeiture, neither Employee nor any successors,
heirs, assigns, or legal representatives of Employee shall
thereafter have any further rights or interest in the unvested
portion of the Award.
10.
Dividend Equivalents . No Dividend Equivalents will be paid
on the Performance Share Units until such time as: (i) the
Performance Period has ended; (ii) Employee has vested in the
Award, and; (iii) the number of Performance Share Units earned
under this Award has been certified by the Committee based on the
actual performance of the Company during the Performance Period.
Reasonably promptly after all such events have occurred, the
Company will pay Employee a lump-sum cash amount in payment of
Dividend Equivalents based on the number of Performance Share Units
earned under the Award multiplied by the per share quarterly
dividend payments made to shareholders of Company’s Common
Stock during the Performance Period (without any interest or
compounding). Notwithstanding the foregoing, any accumulated and
unpaid Dividend Equivalents attributable to Performance Share Units
that are cancelled or forfeited will not be paid and are
immediately forfeited upon cancellation of the Performance Share
Units. Following the end of the Performance Period, Dividend
Equivalents will also be paid on vested Performance Share Units for
which a valid deferral election has been made pursuant to
Section 11. With respect to validly deferred
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and vested
Performance Share Units, the Company will pay Dividend Equivalents
in cash at such times as dividends are paid on the Company’s
outstanding shares of Common Stock.
(a) The Committee
may establish procedures pursuant to which Employee may elect to
defer, until a time or times later than the vesting of a
Performance Share Unit, receipt of all or a portion of the shares
of Common Stock deliverable in respect of a Performance Share Unit,
all on such terms and conditions as the Committee (or its designee)
shall determine in its sole discretion If any such deferrals are
permitted for Employee, then notwithstanding any provision of this
Agreement or the Plan to the contrary, an Employee who elects such
deferral
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