EXHIBIT 10.20
WCA WASTE CORPORATION
MANAGEMENT INCENTIVE PLAN
I. BACKGROUND AND OBJECTIVES
The overall executive compensation strategy of WCA Waste Corporation ("WCA" or
"the Company") is to provide key executives with total direct pay opportunity
that generally is competitive with similar waste management companies. The two
primary elements of the WCA cash compensation program are base salary and the
Management Incentive Plan (the "MIP" or the "Plan"). WCA base salaries generally
are competitive with industry standards and are used to reward an executive's
sustained job performance over time. The MIP rewards annual performance and is
described in detail in this document.
The MIP for WCA provides annual incentive compensation opportunity for key
executives for achieving critical financial goals of WCA and individual
performance achievement. The following provisions hereof define MIP eligibility,
the size of potential award opportunities, performance measurement, form and
timing of award payments, administrative guidelines and definitions for ongoing
MIP management.
II. ELIGIBILITY
MIP award eligibility will be approved by the Compensation Committee of the WCA
Board of Directors (the "Compensation Committee") at the beginning of each
performance/award period. Generally, MIP participants will be selected from key
executives who primarily are responsible for the annual growth and profitability
of WCA, i.e., generally senior vice presidents and above. The number of eligible
MIP participants is expected to vary from year to year, as WCA expands and as
the Company's compensation strategy and programs are refined.
III. AWARD OPPORTUNITIES
At the beginning of each fiscal year, each participant in the MIP will be
assigned a targeted award opportunity, expressed as a percent of salary, that
can decrease to zero, based on performance achievement. MIP award opportunities
may be redefined from time to time, as
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modifications are made in WCA's executive compensation strategy. For 2005, the
MIP targeted award opportunity for the CEO and COO will be 100% of salary, with
80% of salary targets for two additional senior officer participants.
Within 2 1/2 months after the end of each fiscal year, each participant's salary
rate at the end of the prior fiscal year (just ended) will be multiplied by the
actual MIP award percentage earned to determine the dollar value of the award
for the prior performance cycle.
IV. PERFORMANCE MEASURES
The MIP will provide annual incentive pay at risk, with potential MIP awards
tied to WCA goal achievement and individual executive performance. When MIP
performance goals are met, the MIP awards plus base salary will approximate
total cash pay near the 75th percentile of the market ranges for most plan
participants.
The two primary performance measures for 2005 will be:
- TARGETED EBITDA GROWTH, WEIGHTED 40%; AND
- TARGETED EPS GROWTH, WEIGHTED 40%.
The Compensation Committee and the senior officers of WCA jointly will set MIP
performance targets at the beginning of each fiscal year. Performance goals for
MIP awards may be equal to or exceed the goals in the WCA business plan. MIP
performance goals may be adjusted by the Compensation Committee during the year,
if a major change occurs in the Company's capital structure, e.g., a major
acquisition.
In addition to the MIP targets, the Compensation Committee and the senior
officers of WCA jointly will establish a minimum acceptable performance goals,
i.e., the performance levels below which no incentive will be paid. MIP awards
will be interpolated for actual performance falling between the minimum
acceptable and targeted goals. Prior to fiscal year end, the WCA senior officers
and Compensation Committee jointly will establish appropriate MIP goals for the
next fiscal year, in support of the new WCA business plan.
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Exhibit 1 presents the performance matrix for calculating MIP awards for 2005.
This performance matrix may be revised in the future, as the Company's business
strategy and performance focus of WCA changes.
V. INDIVIDUAL PERFORMANCE MEASURES
After 80% of each MIP award has been determined based on overall WCA
performance, the final 20% will be based on individual performance
contributions. Individual performance contributions will be measured in light of
two to three written goals established at the beginning of each year, plus any
other significant personal contributions made during the year. Sample MIP
calculations covering both corporate and individual MIP performance adjustments
are shown in Exhibit 2.
VI. FORM AND TIMING OF ANNUAL AWARD COMPONENTS
MIP awards will be paid in a lump sum in cash annually within 2 1/2 months after
year-end; provided, however, the Company shall deduct from all MIP awards
payable under this Plan any taxes required to be withheld by the Federal or any
state or local government. No participant shall be permitted to elect to defer
all or any portion of his/her award relating to any relevant measurement period
hereunder.
All awards payable under this Plan shall be the obligation of the Company. If
the Company determines that any person entitled to payments under this Plan is
physically or mentally incompetent to receive or properly receipt for such
payments, the Company shall make such payments to the legal guardian or other
personal representative of such person for the use and benefit of such person.
If the Company for any reason is unable to determine with reasonable certainty
the proper person to pay pursuant to the terms of the immediately preceding
sentence, the Company shall pay any amounts due hereunder into a court of
competent jurisdiction in an interpleader proceeding for purposes of being
directed by such court as to the proper disposition of any such amounts due
hereunder. Any such payments so made by the Company, to the extent of the
amounts thereof, shall fully discharge the Company's obligations hereunder.
Should the participant die prior to receiving all amounts due under this Plan,
any unpaid amounts due hereunder shall be made to the participant's spouse, if
such spouse survives the participant,
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or, if there is no surviving spouse, to the legal representative of the
participant's estate, or if no administration is had on the estate, to the
person or persons to whom participant's property shall pass by applicable laws
of descent and distribution.
VII. ADMINISTRATIVE GUIDELINES AND DEFINITIONS
The MIP shall be administered by the Compensation Committee. The Compensation
Committee shall have such authority and powers and may consult with WCA's CEO or
such other person or persons as it shall deem necessary or advisable to
facilitate the intent and purpose of the MIP. All decisions made by the
Compensation Committee shall be final and binding.
- Employee Termination - A participant must be an employee of the
Company on the final day of the measurement period.
- New Hires - Newly hired participants shall earn MIP awards on a
pro-rata basis, based on their date of employment.
- Base Salary Rate - Base salary for MIP award calculations shall be
the annualized base rate in effect at the end of the performance
cycle for which the award is paid.
- Support Documentation - The WCA CFO shall be responsible for
maintaining all necessary support documentation regarding
performance and bonus calculations under the MIP.
VIII. MISCELLANEOUS
(a) RIGHTS OF PARTICIPANTS. Nothing in this Plan shall be construed to:
(i) Give the participant any rights whatsoever with respect to any
MIP award until such award becomes vested, nonforfeitable and
distributable in accordance with the terms of this Plan;
(ii) Limit in any way the right of the Company to terminate the
participant's employment by the Company at any time;
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(iii) Give the participant or any other person any interest in any
fund or in any specific asset or assets of the Company;
(iv) Give the participant or any other person any interest or right
other than those of any unsecured general creditor of the
Company; or
(v) Be evidence of any agreement or understanding, express or
implied, that the Company will employ the participant in any
particular position or at any particular rate of remuneration.
(b) NONALIENATION OF BENEFITS. No right or benefit under this Plan shall
be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate,
sell, assign, pledge, encumber, or charge the same will be void. No
right to interest hereunder shall in any manner be liable for or
subject to any debts, contracts, liabilities, or torts of the person
entitled to such right or interest.
(c) PREREQUISITES TO BENEFITS. Neither the participant, nor any person
claiming through the participant, shall have any right or interest
in this Plan, or any MIP award hereunder, unless and until all the
terms, conditions, and provisions of this Plan which affect the
participant or such other person shall have been complied with as
specified herein.
(d) SECTION 162m COMPLIANCE. Should any participant in the Plan be or
become a "covered employee" as such term is defined in section
1.162-27(c)(2) of the Treasury Regulations, then notwithstanding
anything herein to the contrary, with respect to any action taken
under the Plan by the Compensation Committee in respect of any such
covered employee, the Compensation Committee shall be comprised
solely of two or more "outside directors" of the Company as such
term is defined in section 1.162-27(e)(3) of the Treasury
Regulations, the material terms of the Plan shall be disclosed to
and approved by the stockholders of the Company prior to the payment
of any MIP awards and the Plan shall, in all other respects, meet
the requirements of section 162(m) of the Code and the regulations
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promulgated pursuant thereto, prior to any payments hereunder. In
furtherance of the above provisions of this Section VIII(d), the
Compensation Committee shall bifurcate the Plan so as to restrict,
limit or condition the use or application of any provision of the
Plan to participants who are covered employees without so
restricting, limiting or conditioning the Plan with respect to other
participants, unless the Compensation Committee, in its sole
discretion, determines to apply such restrictions, limitations or
conditions to participants who are not covered employees.
(e) BONUS ARRANGEMENT. This Plan is intended to be a bonus program that
is designed to provide an on-going, pecuniary incentive for the
participant to produce the participant's best efforts to increase
the value of the Company. This Plan is not intended to provide
retirement income or to defer the receipt of payments hereunder to
the termination of the participant's covered employment or beyond.
This Plan is strictly an incentive bonus program (as described in
U.S. Department of Labor Regulation Section 2510.3-2(c) or any
successor thereto), and not a pension or welfare benefit plan that
is subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). All interpretations and determinations
hereunder shall be made on a basis consistent with the status of the
Plan as a bonus program.
(f) AMENDMENT. This Plan may be modified or terminated by the Company at
any time; provided, however, that no such modification or
termination shall affect any right to any MIP awards that are vested
at the time of such modification or termination except with the
written consent of the affected participant.
(g) POWERS OF THE COMPANY. The existence of outstanding and unpaid
contingent interests under the Plan shall not affect in any way the
right or power of the Company to make or authorize any adjustments,
recapitalization, reorganization or other changes in the Company's
capital structure or in its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, common or
preferred stock, if applicable, or the dissolution or liquidation of
the
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Company, or any sale or transfer of all or any part of its assets or
business, or any other act or proceeding, whether of a similar
character or otherwise.
(h) WAIVER. A waiver by the Company, or the participant, of any of the
terms or conditions contained in the Plan shall not be construed as
a general waiver by such party of any other terms or conditions
contained in this Plan.
(i) SEPARABILITY. If any provision or provisions of this Plan shall be
found to be invalid, illegal, or unenforceable in any respect, such
invalid, illegal, or unenforceable provision shall be severed from
this Plan and shall not affect the validity, legality and
enforceability of the remainder of this Plan.
(j) GENDER, TENSE AND HEADINGS. Whenever the context requires, words of
the masculine gender used herein shall include the feminine and
neuter, and words used in singular shall include plural. Headings of
Articles and Sections, as used herein, are inserted solely for
convenience and reference and constitute no part of this Plan.
(k) GOVERNING LAW. This Plan shall be subject to and governed by the
laws of the State of Texas and, to the extent applicable, the laws
of the United States.
(l) NOTICE. Any notice required or permitted to be given under this Plan
shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the Compensation Committee, the
Company, participant or beneficiary, as applicable, at the address
last furnished by such person. Such notice shall be deemed given as
of the date of delivery or, if delivery is made by mail, as of the
dates shown on the postmark on the receipts for registration or
certification.
(m) EFFECTIVE DATE. This Plan is effective as of January 1, 2005 and any
amendment of this Plan shall be effective as of the date provided
therein.
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EXHIBIT 1
WCA CORPORATION
MANAGEMENT INCENTIVE PLAN
AWARD OPPORTUNITY VS CORPORATE PERFORMANCE
% TARGETED % CEO/COO BASE % BASE SALARY
GOAL ACHIEVED SALARY EARNED EARNED BELOW COO
- ------------------ -------------- ----------------
100% OR ABOVE 100% OF SALARY 80% OF SALARY
99% 95% 76%
98% 90% 72%
97% 85% 68%
96% 80% 64%
95% 75% 60%
94% 70% 56%
93% 65% 52%
92% 60% 48%
91% 55% 44%
90% 50% 40%
89% 45% 36%
88% 40% 32%
87% 35% 28%
86% 30% 24%
85% 25% 20%
<85% OF TARGET 0% OF SALARY 0% OF SALARY
Exhibit 1-1
EXHIBIT 2
WCA CORPORATION
MANAGEMENT INCENTIVE PLAN
SAMPLE AWARD CALCULATION
ASSUMPTIONS:
CEO's salary is $300,000.
Targeted MIP award is 100% of salary or $300,000.
EBITDA growth is 90% of target and EPS Growth is 92% of target.
Individual performance rating is "3 of 4 individual goals accomplished",
providing an additional 15% of salary award based on corporate performance
achievement.
CALCULATIONS:
Current Salary: $ 300,000
Incentive Target: x 1.00
-----------
$ 300,000
Exhibit 2-1
A. EBITDA GROWTH PERFORMANCE COMPONENT:
Incentive Target: $ 300,000
EBITDA Adjustment: x .50
-----------------
Unweighted EBITDA Component: $ 150,000
Weighting of EBITDA Component: x .40
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WEIGHTED EBITDA COMPONENT: $ 60,000
B. EPS GROWTH PERFORMANCE COMPONENT:
Incentive Target: $ 300,000
EPS Adjustment: x .60
-----------------
Unweighted EPS Component: $ 180,000
Weighting of EPS Component: x .40
------------------
WEIGHTED ROIC COMPONENT: $ 72,000
D. INDIVIDUAL PERFORMANCE COMPONENT:
Incentive Target: $ 300,000
EBITDA Adjustment: x .75
-----------------
Unweighted EBITDA Component: $ 225,000
Weighting of EBITDA Component: x .20
------------------
WEIGHTED EBITDA COMPONENT: $ 45,000
-----------------
TOTAL MIP AWARD ADJUSTED FOR CORPORATE & INDIVIDUAL PERFORMANCE: $ 177,000
Exhibit 2-2