-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EybZtFqV461xCvHJAjNf2cgeFRjcy5Dh/+EKSVn7Dg9xTqJCD4ezNb5joKP1GW5v Dd33+4a3M29PA0nE/tnsMA== 0001072613-04-001369.txt : 20040723 0001072613-04-001369.hdr.sgml : 20040723 20040722140843 ACCESSION NUMBER: 0001072613-04-001369 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASTE CONNECTIONS INC/DE CENTRAL INDEX KEY: 0001057058 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 943283464 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31507 FILM NUMBER: 04926167 BUSINESS ADDRESS: STREET 1: 35 IRON POINT CIRCLE STREET 2: SUITE 200 CITY: FOLSOM STATE: CA ZIP: 95630 BUSINESS PHONE: 9166088200 MAIL ADDRESS: STREET 1: 35 IRON POINT CIRCLE STREET 2: SUITE 200 CITY: FOLSOM STATE: CA ZIP: 95630-3155 10-Q 1 form10-q_12804.txt FORM 10-Q FOR PERIOD ENDED 6/30/04 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________ COMMISSION FILE NUMBER 0-23981 WASTE CONNECTIONS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 94-3283464 (I.R.S. EMPLOYER IDENTIFICATION NO.) 35 IRON POINT CIRCLE, SUITE 200, FOLSOM, CA 95630 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (916) 608-8200 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock: As of July 15, 2004: 47,993,677 shares of common stock ================================================================================ PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - December 31, 2003 and June 30, 2004 Condensed Consolidated Statements of Income for the three and six months ended June 30, 2003 and 2004 Condensed Consolidated Statement of Stockholders' Equity and Comprehensive Income for the six months ended June 30, 2004 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2004 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures PART II - OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures PART I - FINANCIAL INFORMATION Item 1. Financial Statements Waste Connections, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share amounts)
December 31, June 30, ASSETS 2003 2004 ----------- ----------- Current assets: Cash and equivalents $ 5,276 $ 5,569 Accounts receivable, less allowance for doubtful accounts of $2,570 and $2,267 at December 31, 2003 and June 30, 2004, respectively 72,474 75,965 Prepaid expenses and other current assets 11,270 10,590 ----------- ----------- Total current assets 89,020 92,124 Property and equipment, net 613,225 629,127 Goodwill, net 590,054 603,141 Intangible assets, net 64,784 69,008 Restricted cash 17,734 13,994 Other assets, net 21,135 21,037 ----------- ----------- $ 1,395,952 $ 1,428,431 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 38,682 $ 40,499 Accrued liabilities 31,920 31,563 Deferred revenue 23,738 25,560 Current portion of long-term debt and notes payable 9,740 8,624 ----------- ----------- Total current liabilities 104,080 106,246 Long-term debt and notes payable 601,891 467,425 Other long-term liabilities 8,400 8,003 Deferred income taxes 120,162 130,200 ----------- ----------- Total liabilities 834,533 711,874 Commitments and contingencies Minority interests 23,925 23,682 Stockholders' equity: Commonstock: $0.01 par value; 50,000,000 and 100,000,000 shares authorized at December 31, 2003 and June 30, 2004, respectively; 43,000,182 and 47,978,277 shares issued and outstanding at December 31, 2003 and June 30, 2004, respectively 430 480 Additional paid-in capital 348,003 467,024 Deferred stock compensation (436) (2,176) Retained earnings 189,094 224,467 Accumulated other comprehensive income 403 3,080 ----------- ----------- Total stockholders' equity 537,494 692,875 ----------- ----------- $ 1,395,952 $ 1,428,431 =========== ===========
See accompanying notes 1 Waste Connections, Inc. Condensed Consolidated Statements of Income (Unaudited) (In thousands, except share and per share amounts)
Three months ended Six months ended June 30, June 30, -------- -------- 2003 2004 2003 2004 ------------ ------------ ------------ ------------ Revenues $ 138,883 $ 160,561 $ 267,337 $ 309,820 Operating expenses: Cost of operations 77,427 90,889 149,248 175,952 Selling, general and administrative 13,179 15,445 26,060 31,040 Depreciation and amortization 11,282 13,851 21,862 27,295 ------------ ------------ ------------ ------------ Operating income 36,995 40,376 70,167 75,533 Interest expense (7,786) (5,174) (15,836) (11,998) Other expense (205) (1,572) (167) (1,496) ------------ ------------ ------------ ------------ Income before income tax provision and minority interests 29,004 33,630 54,164 62,039 Minority interests (2,593) (3,054) (4,875) (5,685) ------------ ------------ ------------ ------------ Income before income tax provision 26,411 30,576 49,289 56,354 Income tax provision (9,772) (11,405) (18,237) (20,981) ------------ ------------ ------------ ------------ Income before cumulative effect of change in accounting principle 16,639 19,171 31,052 35,373 Cumulative effect of change in accounting principle, net of tax expense of $166 -- -- 282 -- ------------ ------------ ------------ ------------ Net income $ 16,639 $ 19,171 $ 31,334 $ 35,373 ============ ============ ============ ============ Basic earnings per common share: Income before cumulative effect of change in accounting principle $ 0.39 $ 0.40 $ 0.73 $ 0.78 Cumulative effect of change in accounting principle -- -- 0.01 -- ------------ ------------ ------------ ------------ Net income per common share $ 0.39 $ 0.40 $ 0.74 $ 0.78 ============ ============ ============ ============ Diluted earnings per common share: Income before cumulative effect of change in accounting principle $ 0.37 $ 0.39 $ 0.69 $ 0.75 Cumulative effect of change in accounting principle -- -- 0.01 -- ------------ ------------ ------------ ------------ Net income per common share $ 0.37 $ 0.39 $ 0.70 $ 0.75 ============ ============ ============ ============ Shares used in the per share calculations: Basic 42,397,502 47,425,227 42,260,726 45,233,354 ============ ============ ============ ============ Diluted 49,199,573 49,443,469 49,093,940 49,692,267 ============ ============ ============ ============
See accompanying notes. 2 WASTE CONNECTIONS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME Six Months Ended June 30, 2004 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
STOCKHOLDERS' EQUITY ------------------------------------------------------------------ ACCUMULATED COMMON STOCK ADDITIONAL OTHER COMPREHENSIVE ------------------------------ PAID-IN COMPREHENSIVE INCOME SHARES AMOUNT CAPITAL INCOME ============ ------------ ------------ ------------ ------------ Balances at December 31, 2003 43,000,182 $ 430 $ 348,003 $ 403 Issuance of common stock warrants to consultants -- -- 172 -- Conversion of 2006 Notes, net of issuance costs of $1,729 4,876,968 49 121,870 -- Vesting of restricted stock 7,394 -- -- -- Cancellation of unvested restricted stock -- -- (143) -- Issuance of unvested restricted stock -- -- 2,242 -- Amortization of deferred stock compensation -- -- -- -- Exercise of stock options and warrants, including tax benefit of $3,419 1,123,870 11 22,780 -- Repurchase of common stock (1,030,137) (10) (27,900) -- Net income $ 35,373 -- -- -- -- Changes in fair value of interest rate swaps, net of $1,572 of tax effect 2,677 -- -- -- 2,677 ------------ Comprehensive income $ 38,050 -- -- -- -- ============ ------------ ------------ ------------ ------------ Balances at June 30, 2004 47,978,277 $ 480 $ 467,024 $ 3,080 ============ ============ ============ ============= STOCKHOLDERS' EQUITY ----------------------------------------------- DEFERRED STOCK RETAINED COMPENSATION EARNINGS TOTAL ------------ ------------ ------------ Balances at December 31, 2003 $ (436) $ 189,094 $ 537,494 Issuance of common stock warrants to consultants -- -- 172 Conversion of 2006 Notes, net of issuance costs of $1,729 -- -- 121,919 Vesting of restricted stock -- -- -- Cancellation of unvested restricted stock 49 -- (94) Issuance of unvested restricted stock (2,242) -- -- Amortization of deferred stock compensation 453 -- 453 Exercise of stock options and warrants, including tax benefit of $3,419 -- -- 22,791 Repurchase of common stock -- -- (27,910) Net income -- 35,373 35,373 Changes in fair value of interest rate swaps, net of $1,572 of tax effect -- -- 2,677 Comprehensive income -- -- -- ------------ ------------ ------------ Balances at June 30, 2004 $ (2,176) $ 224,467 $ 692,875 ============ ============= ============
3 Waste Connections, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands)
Six months ended June 30, 2003 2004 ------------ ------------ Cash flows from operating activities: Net income $ 31,334 $ 35,373 Adjustments to reconcile net income to net cash provided by operating activities: Loss (gain) on disposal of assets 219 (92) Depreciation 21,198 26,054 Amortization of intangibles 664 1,241 Deferred income taxes 9,118 9,896 Minority interests 4,875 5,685 Cumulative effect of change in accounting principle (448) -- Amortization of debt issuance costs 1,182 1,388 Stock-based compensation 55 453 Interest income on restricted cash (189) (153) Closure and post-closure accretion 214 205 Net change in operating assets and liabilities, net of acquisitions 5,512 4,098 ------------ ------------ Net cash provided by operating activities 73,734 84,148 ------------ ------------ Cash flows from investing activities: Payments for acquisitions, net of cash acquired (21,074) (12,373) Capital expenditures for property and equipment (30,772) (33,895) Proceeds from disposal of assets 526 752 Net change in other assets (1,719) 3,949 ------------ ------------ Net cash used in investing activities (53,039) (41,567) ------------ ------------ Cash flows from financing activities: Proceeds from long-term debt 27,000 107,500 Principal payments on notes payable and long-term debt (48,153) (134,960) Distributions to minority interest holders (4,606) (5,929) Proceeds from option and warrant exercises 7,050 19,278 Payments for repurchase of common stock -- (27,910) Debt issuance costs (53) (267) ------------ ------------ Net cash used in financing activities (18,762) (42,288) ------------ ------------ Net increase in cash and equivalents 1,933 293 Cash and equivalents at beginning of period 4,067 5,276 ------------ ------------ Cash and equivalents at end of period $ 6,000 $ 5,569 ============ ============ Non-cash financing activity: Liabilities assumed and notes payable issued to sellers of businesses acquired $ 1,294 $ 15,619
See accompanying notes. 4 WASTE CONNECTIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands, except share, per share and per ton amounts) 1. BASIS OF PRESENTATION AND SUMMARY The accompanying condensed consolidated financial statements relate to Waste Connections, Inc. and its subsidiaries (the "Company") as of June 30, 2004 and for the three and six month periods ended June 30, 2003 and 2004. The consolidated financial statements of the Company include the accounts of Waste Connections, Inc. and its wholly-owned and majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Operating results for the three and six month periods ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. The Company's consolidated balance sheet as of June 30, 2004, the consolidated statements of income for the three and six months ended June 30, 2003 and 2004, and the consolidated statements of cash flows for the six months ended June 30, 2003 and 2004 are unaudited. In the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's financial position, results of operations, and cash flows for the periods presented. The consolidated financial statements presented herein should be read in conjunction with the Company's 2003 annual report on Form 10-K. In preparing the Company's financial statements, several estimates and assumptions are made that affect the accounting for and recognition of assets, liabilities, revenues and expenses. These estimates and assumptions must be made because certain of the information that is used in the preparation of the Company's financial statements is dependent on future events, cannot be calculated with a high degree of precision from data available or is simply not capable of being readily calculated based on generally accepted methodologies. In some cases, these estimates are particularly difficult to determine and the Company must exercise significant judgment. The most difficult, subjective and complex estimates and the assumptions that deal with the greatest amount of uncertainty are related to the Company's accounting for landfills and asset impairments. One additional area that involves estimation is when the Company estimates the amount of potential exposure it may have with respect to litigation, claims and assessments in accordance with SFAS No. 5, Accounting for Contingencies. Actual results for all estimates could differ materially from the estimates and assumptions that the Company uses in the preparation of its financial statements. 2. ADOPTION OF NEW ACCOUNTING STANDARDS FIN 46 In January 2003, the FASB issued Interpretation No. 46 ("FIN 46") which was subsequently amended in December 2003. FIN 46 requires that unconsolidated variable interest entities be consolidated by their primary beneficiaries. A primary beneficiary is the party that absorbs a majority of the entity's expected losses or residual benefits. FIN 46 applies to variable interest entities created after January 31, 2003 and to existing variable interest entities beginning after June 15, 2003. The Company fully adopted FIN 46 on March 31, 2004 and this adoption did not have a material impact on the Company's financial statements. 5 3. STOCK SPLIT On May 26, 2004, the Company announced that its Board of Directors had declared a three-for-two stock split of its common stock, in the form of a 50% stock dividend to stockholders of record on June 10, 2004. Shares resulting from the split were distributed on June 24, 2004 (payment date). Shares, share price, per share amounts, common stock at par value and capital in excess of par value have been restated to reflect the effect of the stock split for all periods presented in this Form 10-Q. As a result of the stock split, fractional shares equal to 837 whole shares were repurchased at a price of $23. 4. STOCK-BASED COMPENSATION As permitted under the provisions of SFAS No. 123, the Company has elected to account for stock-based compensation using the intrinsic value method prescribed by APB 25. Under the intrinsic value method, compensation cost is the excess, if any, of the quoted market price or fair value of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement using a Black-Scholes option pricing model. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The following table summarizes the Company's pro forma net income and pro forma basic and diluted earnings per share for the three and six months ended June 30, 2003 and 2004:
Three months ended Six months ended June 30, June 30, ------------------------ ------------------------ 2003 2004 2003 2004 --------- --------- --------- --------- Net income, as reported $ 16,639 $ 19,171 $ 31,334 $ 35,373 Add: stock-based employee compensation expense included in reported net income, net of related tax effects -- 159 35 285 Deduct: total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects (1,816) (2,024) (3,467) (4,254) ----------------------------------------------------- Pro forma net income $ 14,823 $ 17,306 $ 27,902 $ 31,404 ===================================================== Earnings per share: Basic - as reported $ 0.39 $ 0.40 $ 0.74 $ 0.78 Basic - pro forma $ 0.35 $ 0.36 $ 0.66 $ 0.69 Diluted - as reported $ 0.37 $ 0.39 $ 0.70 $ 0.75 Diluted - pro forma $ 0.33 $ 0.36 $ 0.63 $ 0.67
5. LANDFILL ACCOUNTING At June 30, 2004, the Company owned 21 landfills, and operated, but did not own, five landfills under life-of-site operating contracts and eight landfills under operating contracts with finite terms. The Company also owns two Subtitle D landfill sites that are permitted for operation, but not constructed as of June 30, 2004. The contract for one landfill operating under a limited term, from which the Company generated approximately $0.7 million of annualized revenues, expired on June 30, 2004. The Company's landfills have site costs with a net book value of $388,856 at June 30, 2004. With the exception of two owned landfills that only accept construction and demolition waste, all landfills that the Company owns or operates are Subtitle D landfills. For the Company's eight landfills 6 operated under contracts with finite terms, the owner of the property, generally a municipality, usually owns the permit and is generally responsible for closure and post-closure obligations. The Company is responsible for all closure and post-closure liabilities for four of the five operating landfills that it operates under life-of-site operating contracts. Many of the Company's existing landfills have the potential for expanded disposal capacity beyond the amount currently permitted. The Company's internal and third-party engineers perform surveys at least annually to estimate the disposal capacity at its landfills. The Company's landfill depletion rates are based on the remaining disposal capacity, considering both permitted and deemed permitted airspace, at its owned landfills and landfills operated under life-of-site operating contracts. Deemed permitted airspace consists of additional disposal capacity being pursued through means of an expansion. Deemed permitted airspace that meets certain internal criteria is included in the estimate of total landfill airspace. The Company's internal criteria to determine when deemed permitted airspace may be included as disposal capacity are as follows: (1) The land where the expansion is being sought is contiguous to the current disposal site, and the Company either owns it or the property is under option, purchase, operating or other agreements; (2) Total development costs, final capping costs, and closure/post-closure costs have been determined; (3) Internal personnel have performed a financial analysis of the proposed expansion site and have determined that it has a positive financial and operational impact; (4) Internal or external personnel are actively working to obtain the necessary approvals to obtain the landfill expansion permit; (5) The Company considers it probable that the expansion will be achieved. For a pursued expansion to be considered probable, there must be no significant known technical, legal, community, business, or political restrictions or similar issues existing that could impair the success of the expansion; and (6) The land where the expansion is being sought has the proper zoning or proper zoning can readily be obtained. The Company is currently seeking to expand permitted capacity at seven of its owned landfills and four landfills that it operates under life-of-site operating contracts, and considers the achievement of these expansions to be probable. Although the Company cannot be certain that all future expansions will be permitted as designed, the average remaining life, when considering remaining permitted capacity, probable expansion capacity and projected annual disposal volume, of the Company's owned landfills and landfills operated under life-of-site operating contracts is 58 years, with lives ranging from 3 to 263 years. The Company uses the units-of-production method to calculate the depletion rate at the landfills it owns and the landfills it operates under life-of-site operating contracts. This methodology divides the costs associated with acquiring, permitting and developing the entire landfill by the total remaining disposal capacity of that landfill. The resulting per unit depletion rate is applied to each ton of waste disposed at the landfill and is recorded as expense for that period. During the six months ended June 30, 2003 and 2004, the Company expensed approximately $6,123 and $7,440, respectively, or an average of $2.30 and $2.35 per ton consumed, respectively, related to landfill depletion. The Company reserves for closure and post-closure maintenance obligations at the landfills it owns and certain landfills it operates under life-of-site operating contracts. Final capping costs are included in the calculation of closure and post-closure liabilities. The Company calculates the net present value of its closure and post-closure commitments recorded in 2004 assuming a 2.5% inflation rate and a 7.5% discount rate. The resulting closure and post-closure obligation is recorded on the balance sheet as an addition to site costs and amortized to depletion expense as the landfill's airspace is consumed. During the six months ended June 30, 2003 and 2004, the Company expensed approximately $287 and $205, respectively, or an average of $0.08 and $0.06 per ton consumed, respectively, related to closure and post-closure accretion expense. 7 The following is a reconciliation of the Company's closure and post-closure liability balance from December 31, 2003 to June 30, 2004: Closure and post-closure liability at December 31, 2003 $ 5,479 Changes resulting from adjustments to the timing or amount of undiscounted cash flows (880) Liabilities incurred 213 Accretion expense 205 -------- Closure and post-closure liability at June 30, 2004 $ 5,017 ======== At June 30, 2004, $12,167 of the Company's restricted cash balance was for purposes of settling future closure and post-closure liabilities. 6. ACQUISITIONS During the six months ended June 30, 2004, the Company acquired seven non-hazardous solid waste collection and disposal businesses. Aggregate consideration for the acquisitions consisted of $10,384 in cash (net of cash acquired), $4,346 in notes payable to sellers, common stock warrants valued at $172, and the assumption of debt totaling $11,179. The results of operations of the acquired businesses have been included in the Company's consolidated financial statements from their respective acquisition dates. The purchase prices have been allocated to the identified intangible assets and tangible assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition, with any residual amounts allocated to goodwill. The purchase price allocations are considered preliminary until the Company is no longer waiting for information that it has arranged to obtain and that is known to be available or obtainable. Although the time required to obtain the necessary information will vary with circumstances specific to an individual acquisition, the "allocation period" for finalizing purchase price allocations generally does not exceed one year from the consummation of a business combination. As of June 30, 2004, the Company had eight acquisitions for which purchase price allocations were preliminary, mainly as a result of pending working capital valuations. The Company believes the potential changes to its preliminary purchase price allocations will not have a material impact on its financial condition, results of operations or cash flows. A summary of the preliminary purchase price allocations for the acquisitions consummated in the six months ended June 30, 2004 is as follows: Acquired assets: Accounts receivable $ 1,109 Prepaid expenses and other current assets 60 Property and equipment 9,387 Goodwill 13,087 Long-term franchise agreements and contracts 5,087 Other intangibles 259 Non-competition agreements 118 Assumed liabilities: Accounts payable (1,421) Accrued liabilities (1,540) Deferred taxes (143) Debt and other liabilities assumed (15,619) --------- Total cash consideration, net $ 10,384 ========= 8 During the six months ended June 30, 2004, the Company paid $2,161 of acquisition-related liabilities accrued at December 31, 2003. The seven acquisitions acquired in the six months ended June 30, 2004 were not significant to the Company's results of operations. Goodwill and long-term franchise agreements, contracts, and other intangibles acquired in the six months ended June 30, 2004 totaling $12,121 and $5,094, respectively, are expected to be deductible for tax purposes. 7. INTANGIBLE ASSETS Intangible assets, exclusive of goodwill, consist of the following as of June 30, 2004:
Gross Carrying Accumulated Net Carrying Amount Amortization Amount -------------- -------------- -------------- Amortizable intangible assets: Long-term franchise agreements and contracts $ 51,732 $ (2,845) $ 48,887 Non-competition agreements 4,104 (2,837) 1,267 Other, net 2,675 (1,023) 1,652 ---------- ---------- ---------- 58,511 (6,705) 51,806 Nonamortized intangible assets: Indefinite-lived intangible assets 17,202 -- 17,202 ---------- ---------- ---------- Intangible assets, exclusive of goodwill $ 75,713 $ (6,705) $ 69,008 ========== ========== ==========
The weighted-average amortization periods for long-term franchise agreements, non-competition agreements and other intangibles acquired during the six months ended June 30, 2004 are 21.4 years, 5 years and 10 years, respectively. Estimated future amortization expense of amortizable intangible assets for the next five years is as follows: For the year ended December 31, 2004 $ 2,409 For the year ended December 31, 2005 2,318 For the year ended December 31, 2006 2,119 For the year ended December 31, 2007 1,923 For the year ended December 31, 2008 1,726 8. LONG-TERM DEBT The Company has entered into interest rate swap agreements to hedge risk associated with fluctuations in interest rates. The interest rate swap agreements have a notional amount of $250,000, expire in 2007, and effectively fix the interest rate on the notional amount at an average interest rate of 2.55%, plus applicable margin. These interest rate swap agreements are effective as cash flow hedges for a portion of the Company's variable rate debt and the Company applies hedge accounting pursuant to SFAS No. 133 to account for these instruments. The notional amounts and all other significant terms of the swap agreements are closely matched to the provisions and terms of the variable rate debt being hedged. In March 2004, the Company refinanced the senior secured term loan portion of its credit facility in order to reduce the effective borrowing cost. The applicable margin on the senior secured term loan was reduced by 25 basis points; all other terms remained consistent. In addition, the Company increased the amount outstanding under the senior secured term loan from $175,000 to $200,000, resulting in an increase in the size of the credit facility to $600,000. 9 In April 2004, the Company redeemed its $150,000 aggregate principal amount 5.5% Convertible Subordinated Notes due 2006. Holders of the notes chose to convert a total of $123,648 principal amount of the notes into 4,876,968 shares of Waste Connections common stock at a price of approximately $25.35 per share, or approximately 39.443 shares per $1 principal amount of notes, plus cash in lieu of fractional shares. The Company redeemed the balance of $26,352 principal amount of the notes with proceeds from its credit facility at a redemption price of $1.022 per $1 principal amount of the notes. All holders of the notes also received accrued interest of $0.0275 per $1 principal amount of notes. As a result of the redemption, the Company recognized $1,478 of pre-tax expense ($1,125 net of taxes) in April 2004. On July 15, 2004, the Company completed an exchange offer with respect to its $175,000 aggregate principal amount Floating Rate Convertible Subordinated Notes due 2022 (the "2022 Notes"). As of that date, holders of $172,022 principal amount of old 2022 Notes had tendered their notes in exchange for an equal principal amount of the Company's new 2022 Notes. The Company offered to exchange $1 in principal amount of new 2022 Notes for each $1 in principal amount of its old 2022 Notes accepted for exchange. Through the exchange offer, the Company updated certain features of the old 2022 Notes with terms that are now prevalent in the convertible note market, including net share settle and dividend protection provisions. The initial conversion price of the new 2022 Notes is $32.26 per share, which is equal to approximately 30.9981 shares per $1 in principal amount of new 2022 New Notes, and reflects the Company's three-for-two split of its common stock in June 2004. Holders of $2,978 principal amount of old 2002 Notes had not tendered their notes in exchange for new 2022 Notes as of that date, and, as a result, their notes will remain subject to the provisions of the Indenture governing the old 2022 Notes, except in the case of any such holders complying with the guaranteed delivery procedures outlined in the exchange offer. 9. DILUTED EARNINGS PER SHARE CALCULATION The following table sets forth the numerator and denominator used in the computation of diluted earnings per common share:
Three months ended Six months ended June 30, June 30, ------------------------- ------------------------- 2003 2004 2003 2004 ----------- ----------- ----------- ----------- Numerator: Net income for basic earnings per share $ 16,639 $ 19,171 $ 31,334 $ 35,373 Interest expense on convertible subordinated notes due 2006, net of tax effects 1,476 231 2,951 1,707 ----------------------------------------------------- Net income for diluted earnings per share $ 18,115 $ 19,402 $ 34,285 $ 37,080 ===================================================== Denominator: Basic shares outstanding 42,397,502 47,425,227 42,260,726 45,233,354 Dilutive effect of convertible subordinated notes due 2006 5,917,163 910,333 5,917,163 3,413,748 Dilutive effect of options and warrants 880,865 1,086,709 909,767 1,027,839 Dilutive effect of restricted stock 4,043 21,200 6,284 17,326 ----------------------------------------------------- Diluted shares outstanding 49,199,573 49,443,469 49,093,940 49,692,267 =====================================================
As of June 30, 2004, all outstanding stock options and warrants were included in the computation of diluted income per share, as they were all dilutive. 10 10. COMPREHENSIVE INCOME Comprehensive income includes changes in the fair value of interest rate swaps that qualify for hedge accounting. The difference between net income and comprehensive income for the three and six months ended June 30, 2003 and 2004 is as follows:
Three months ended Six months ended June 30, June 30, ---------------------------------------------- 2003 2004 2003 2004 ---------------------------------------------- Net income $ 16,639 $ 19,171 $ 31,334 $ 35,373 Unrealized gain on interest rate swaps, net of tax expense of $119 and $2,660 for the three months ended June 30, 2003 and 2004, respectively, and $703 and $1,572 for the six months ended June 30, 2003 and 2004, respectively 203 4,529 1,112 2,677 ---------------------------------------------- Comprehensive income $ 16,842 $ 23,700 $ 32,446 $ 38,050 ============================================== The components of other comprehensive income and related tax effects for the three and six months ended June 30, 2003 and 2004 are as follows: Three months ended June 30, 2003 ------------------------------------------ Gross Tax effect Net of tax ------------------------------------------ Amounts reclassified into earnings $ 1,603 $ 593 $ 1,010 Changes in fair value of interest rate swaps (1,281) (474) (807) ------------------------------------------ $ 322 $ 119 $ 203 ========================================== Three months ended June 30, 2004 ------------------------------------------ Gross Tax effect Net of tax ------------------------------------------ Amounts reclassified into earnings $ 889 $ 329 $ 560 Changes in fair value of interest rate swaps 6,300 2,331 3,969 ------------------------------------------ $ 7,189 $ 2,660 $ 4,529 ========================================== Six months ended June 30, 2003 ------------------------------------------ Gross Tax effect Net of tax ------------------------------------------ Amounts reclassified into earnings $ 3,108 $ 1,150 $ 1,958 Changes in fair value of interest rate swaps (1,293) (447) (846) ------------------------------------------ $ 1,815 $ 703 $ 1,112 ========================================== Six months ended June 30, 2004 ------------------------------------------ Gross Tax effect Net of tax ------------------------------------------ Amounts reclassified into earnings $ 1,366 $ 506 $ 860 Changes in fair value of interest rate swaps 2,883 1,066 1,817 ------------------------------------------ $ 4,249 $ 1,572 $ 2,677 ==========================================
11. SHARE REPURCHASE PROGRAM On May 3, 2004, the Company announced that its Board of Directors had authorized a common stock repurchase program for the repurchase of up to $200 million of common stock over a two-year period. Under the program, stock repurchases may be made in the open market or in privately negotiated transactions from time to time at management's discretion. The timing and amounts of any repurchases will depend on many factors, including the Company's capital structure, the market price of the common stock and overall market conditions. As of June 30, 2004, the Company had repurchased 1,029,300 shares of its common stock under this program at a cost of $27,887. 11 12. COMMITMENTS AND CONTINGENCIES The Company owns undeveloped property in Harper County, Kansas where it is seeking permits to construct and operate a municipal solid waste landfill. In 2002, the Company received a special use permit from Harper County for zoning the landfill and in 2003 it received a draft permit from the Kansas Department of Health and Environment to construct and operate the landfill. In July 2003, the District Court of Harper County invalidated the previously issued zoning permit. The Company has appealed the District Court's decision to invalidate the zoning permit. The Court of Appeal heard oral arguments over our appeal on June 16, 2004. The Kansas Department of Health and Environment has notified the Company that it will not issue a final permit to construct and operate the landfill until the zoning matter is resolved. At June 30, 2004, the Company had $4,209 of capitalized expenditures related to this landfill development project. Based on the advice of counsel, the Company believes that it will prevail in this matter and does not believe that an impairment of the capitalized expenditures exists. If the Company does not prevail on appeal, however, it will be required to expense in a future period the $4,209 of capitalized expenditures, less the recoverable value of the undeveloped property and other amounts recovered, which would likely have a material adverse effect on its reported income for that period. The Company is primarily self-insured for automobile liability, general liability and workers' compensation claims as a result of its high deductible programs. The Company is a party to various claims and suits pending for alleged damages to persons and property and alleged liabilities occurring during the normal operations of the solid waste management business. On October 31, 2003, the Company's subsidiary, Waste Connections of Nebraska, Inc., was named as a defendant in the case of KAREN COLLERAN, CONSERVATOR OF THE ESTATE OF ROBERT ROONEY V. WASTE CONNECTIONS OF NEBRASKA, INC. The plaintiff seeks recovery for damages allegedly suffered by Father Robert Rooney when the bicycle he was riding collided with one of the Company's garbage trucks in Valley County, Nebraska. The complaint alleges that Father Rooney suffered serious bodily injury, including traumatic brain injury. The plaintiff seeks recovery of past medical expenses of approximately $430 and an unspecified amount for future medical expenses, home healthcare, past pain and suffering, future pain and suffering, lost income, loss of earning capacity, and permanent injury and disability. The Company's primary defense is that the plaintiff is not entitled to any damages under Nebraska law because the negligence of Father Rooney was equal to or greater than any negligence on the part of the Company's driver, and the Company intends to defend this case vigorously. This case is in the early stages of discovery and the Company has not accrued any potential loss as of June 30, 2004; however, an adverse outcome in this case coupled with a significant award to the plaintiff could have a material adverse effect on the Company's reported income in the period incurred. Additionally, the Company is party to various legal proceedings in the ordinary course of business and as a result of the extensive governmental regulation of the solid waste industry. The Company's management does not believe that these proceedings, either individually or in the aggregate, are likely to have a material adverse effect on its business, financial condition, operating results or cash flows. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS Certain information contained in this Quarterly Report on Form 10-Q, including, without limitation, information appearing under this Part I, Item 2, includes statements that are forward-looking in nature. These statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "should" or "anticipates" or the negative thereof or comparable terminology, or by discussions of strategy. Our business and operations are subject to a variety of risks and uncertainties and, consequently, actual results may differ materially from those projected by any forward-looking statements in this Quarterly Report on Form 10-Q. Factors that could cause actual results to differ from those projected include, but are not limited to, the following: (1) difficulties in making acquisitions, acquiring exclusive contracts and generating internal growth may cause our growth to be slower than expected; (2) our growth and future financial performance depend significantly on our ability to integrate acquired businesses into our organization and operations; (3) our acquisitions may not be successful, resulting in changes in strategy, operating losses or a loss on sale of the business acquired; (4) we compete for acquisition candidates with other purchasers, some of which have greater financial resources than we do, and these other purchasers may be able to offer more favorable acquisition terms, thus limiting our ability to grow through acquisition; (5) timing of acquisitions may cause fluctuations in our quarterly results, which may cause our stock price to decline; (6) rapid growth may strain our management, operational, financial and other resources; (7) we may be unable to compete effectively with governmental service providers and larger and better capitalized companies, which may result in reduced revenues and lower profits; and (8) we may lose contracts through competitive bidding, early termination or governmental action, which would cause our revenues to decline. These risks and uncertainties, as well as others, are discussed in greater detail in our other filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. The following discussion should be read in conjunction with the unaudited financial statements and notes thereto included elsewhere herein. OVERVIEW Waste Connections, Inc. is an integrated solid waste services company that provides solid waste collection, transfer, disposal and recycling services in mostly secondary markets in the Western and Southern U.S. As of June 30, 2004, we served more than one million commercial, industrial and residential customers from a network of operations in 23 states: Alabama, Arizona, California, Colorado, Georgia, Illinois, Iowa, Kansas, Kentucky, Minnesota, Mississippi, Montana, Nebraska, New Mexico, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Utah, Washington, and Wyoming. As of that date, we owned 104 collection operations and operated or owned 33 transfer stations, operated or owned 33 Subtitle D landfills, owned two construction and demolition landfills and operated or owned 26 recycling facilities. We also owned two Subtitle D landfill sites that are permitted for operation, but not constructed as of June 30, 2004. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements. As described by the Securities and Exchange Commission, critical accounting estimates and assumptions are those that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on our financial condition or operating performance. There were no significant changes to our critical accounting estimates and assumptions in the six months ended June 30, 2004. Refer to our Annual Report on Form 10-K for a complete description of our critical accounting estimates and assumptions. 13 GENERAL Our revenues consist mainly of fees we charge customers for solid waste collection, transfer, disposal and recycling services. Our collection business also generates revenues from the sale of recyclable commodities, which have significant variability. A large part of our collection revenues comes from providing commercial, industrial and residential services. We frequently perform these services under service agreements, municipal contracts or franchise agreements with governmental entities. Our existing franchise agreements and all of our existing municipal contracts give us the exclusive right to provide specified waste services in the specified territory during the contract term. These exclusive arrangements are awarded, at least initially, on a competitive bid basis and subsequently on a bid or negotiated basis. We also provide residential collection services on a subscription basis with individual households. More than 50% of our revenues for the six months ended June 30, 2004 were derived from market areas where services are provided predominantly under exclusive franchise agreements, long-term municipal contracts and governmental certificates. Governmental certificates grant us perpetual and exclusive collection rights in the covered areas. Contracts with counties and municipalities and governmental certificates provide relatively consistent cash flow during the terms of the contracts. Because we bill most residential customers quarterly, subscription agreements also provide a stable source of revenues for us. We charge transfer station and landfill customers a tipping fee on a per ton and/or per yard basis for disposing of their solid waste at the transfer stations and landfill facilities. Many of our transfer and landfill customers have entered into one to ten year disposal contracts with us, most of which provide for annual indexed price increases. We typically determine the prices of our solid waste services by the collection frequency and level of service, route density, volume, weight and type of waste collected, type of equipment and containers furnished, the distance to the disposal or processing facility, the cost of disposal or processing, and prices charged by competitors for similar services. The terms of our contracts sometimes limit our ability to pass on price increases. Long-term solid waste collection contracts often contain a formula, generally based on a published price index, that automatically adjusts fees to cover increases in some, but not all, operating costs, or that limit increases to less than 100% of the increase in the applicable price index. Cost of operations includes labor and benefits, tipping fees paid to third-party disposal facilities, equipment maintenance, workers' compensation, vehicle insurance, claims expense, third-party transportation expense, fuel, the cost of materials we purchase for recycling, district and state taxes and host community fees and royalties. Our single largest cost is labor, followed by third-party disposal, cost of vehicle maintenance, taxes and fees and fuel. We use a number of programs to reduce overall cost of operations, including increasing the use of automated routes to reduce labor and workers' compensation exposure, comprehensive maintenance and health and safety programs, and increasing the use of transfer stations to further enhance internalization rates. Our high-deductible insurance covers automobile liability, general liability, workers' compensation claims, automobile collision and employee group health claims. If we experience insurance claims or costs above or below our historically evaluated levels, our estimates could be materially affected. Selling, general and administrative ("SG&A") expenses include management, sales force, clerical and administrative employee compensation and benefits, legal, accounting and other professional services, bad debt expense, and rent expense for our corporate headquarters. Depreciation expense includes depreciation of fixed assets over their estimated useful lives using the straight-line method. Depletion expense includes depletion of landfill site costs and total future development costs as remaining airspace of the landfill is consumed. Remaining airspace at our landfills includes both permitted and deemed permitted airspace. Amortization expense includes the amortization of definite-lived intangible assets, consisting primarily of long-term franchise agreements and contracts, customer lists, and non-competition agreements, over their estimated useful lives using the straight-line method. Goodwill and indefinite-lived intangible assets, consisting primarily of certain perpetual rights to provide solid waste collection and transportation services in specified territories, are not amortized. At June 30, 2004, we had 285.6 million tons of permitted remaining airspace capacity and 83.3 million tons of deemed probable expansion airspace capacity at our 26 owned and operated landfills and landfills operated under 14 life-of-site operating contracts. We do not measure remaining airspace capacity at the eight landfills we operate under contracts with finite terms. Based on remaining permitted capacity as of June 30, 2004, and projected annual disposal volumes, the average remaining landfill life for our owned landfills and landfills operated under life-of-site operating contracts is approximately 45 years. The operating contracts for which the contracted term is not the life of the landfill have expiration dates from 2004 to 2013. The disposal tonnage that we received in the six months ended June 30, 2003 and 2004 at all of our landfills owned or operated during the respective period is shown below (tons in thousands):
June 30, 2003 June 30, 2004 ----------------------- ----------------------- Number of Total Number of Total Sites Tons Sites Tons --------- --------- --------- --------- Owned landfills or landfills operated under life-of-site contracts 23 2,660 26 3,169 Operated landfills under limited term operating agreements 7 366 9 494 --------- --------- --------- --------- 30 3,026 35 3,663 --------- --------- --------- ---------
We capitalize some third-party expenditures related to pending acquisitions or development projects, such as legal, engineering and interest expenses. We expense indirect acquisition costs, such as executive and corporate overhead, public relations and other corporate services, as we incur them. We charge against net income any unamortized capitalized expenditures and advances (net of any portion that we believe we may recover, through sale or otherwise) that may become impaired, such as those that relate to any operation that is permanently shut down and any pending acquisition or landfill development project that we believe will not be completed. We routinely evaluate all capitalized costs, and expense those related to projects that we believe are not likely to succeed. At June 30, 2004, we had $0.1 million in capitalized expenditures relating to pending acquisitions. We own undeveloped property in Harper County, Kansas, where we are seeking permits to construct and operate a municipal solid waste landfill. In 2002, we received a special use permit from Harper County for zoning the landfill and in 2003 we received a draft permit from the Kansas Department of Health and Environment to construct and operate the landfill. In July 2003, the District Court of Harper County invalidated the previously issued zoning permit. We have appealed the District Court's decision to invalidate the zoning permit. The Kansas Department of Health and Environment has notified us that it will not issue a final permit to construct and operate the landfill until the zoning matter is resolved. At June 30, 2004, we had $4.2 million of capitalized expenditures related to this landfill development project. Based on the advice of counsel, we believe that we will prevail in this matter and do not believe that an impairment of the capitalized expenditures exists. If we do not prevail on appeal, however, we will be required to expense in a future period the $4.2 million of capitalized expenditures, less the recoverable value of the undeveloped property and other amounts recovered, which would likely have a material adverse effect on our reported income for that period. We periodically evaluate acquired assets for potential impairment indicators. If any impairment indicators are present, a test of recoverability is performed by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If the carrying values are in excess of undiscounted expected future cash flows, impairment is measured by comparing the fair value of the asset to its carrying value. If the fair value of an asset is determined to be less than the carrying amount of the asset or asset group, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs. As of June 30, 2004, there have been no adjustments to the carrying amounts of intangibles, including goodwill, resulting from these evaluations. As of June 30, 2004, goodwill and other intangible assets represented 47.1% of total assets and 97.0% of stockholders' equity. NEW ACCOUNTING PRONOUNCEMENTS For a description of the new accounting standards that affect us, see Note 2 to our Condensed Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q. 15 RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2004 The following table sets forth items in our consolidated statements of income as a percentage of revenues for the periods indicated.
Three months ended Six months ended June 30, June 30, ----------------------- ----------------------- 2003 2004 2003 2004 -------- -------- -------- -------- Revenues 100.0% 100.0% 100.0% 100.0% Cost of operations 55.8 56.6 55.8 56.8 Selling, general and administrative expenses 9.5 9.6 9.8 10.0 Depreciation and amortization expense 8.1 8.7 8.2 8.8 -------- -------- -------- -------- Operating income 26.6 25.1 26.2 24.4 Interest expense, net (5.6) (3.2) (5.9) (3.9) Other expense (0.1) (1.0) (0.1) (0.5) Minority interests (1.9) (1.9) (1.8) (1.8) Income tax expense (7.0) (7.1) (6.8) (6.8) Cumulative effect of change in accounting principle -- -- 0.1 -- -------- -------- -------- -------- Net income 12.0% 11.9% 11.7% 11.4% ======== ======== ======== ========
REVENUES. Total revenues increased $21.7 million, or 15.6%, to $160.6 million for the three months ended June 30, 2004, from $138.9 million for the three months ended June 30, 2003. Acquisitions closed subsequent to June 30, 2003 increased revenues approximately $15.1 million. Increases in recyclable commodity prices increased revenues by $1.2 million, and increased prices charged to our customers and volume changes in our existing business resulted in a net revenue increase of approximately $5.4 million. The volume increase was partially offset by exiting the roll-off business at our Georgia operations. Revenues for the six months ended June 30, 2004 increased $42.5 million, or 15.9%, to $309.8 million from $267.3 million for the six months ended June 30, 2003. Acquisitions closed subsequent to June 30, 2003, and the full-period inclusion of revenues from acquisitions closed during the six months ended June 30, 2003, increased revenues approximately $30.7 million. Increases in recyclable commodity prices increased revenues by $2.1 million, and increased prices charged to our customers and volume changes in our existing business resulted in a net revenue increase of $9.7 million. The volume increase was partially offset by exiting the roll-off business at our Georgia operations and the loss of certain municipal contracts that expired subsequent to June 30, 2003, and were not renewed. COST OF OPERATIONS. Total cost of operations increased $13.5 million, or 17.4%, to $90.9 million for the three months ended June 30, 2004, from $77.4 million for the three months ended June 30, 2003. Cost of operations for the six months ended June 30, 2004, increased $26.8 million, or 17.9%, to $176.0 million from $149.2 million for the six months ended June 30, 2003. The increases were primarily attributable to operating costs associated with acquisitions closed subsequent to June 30, 2003, increases in medical expenses for our self-insured employee health plans, higher fuel costs and increased expenses associated with higher collection volumes. Cost of operations as a percentage of revenues increased 0.8 percentage points to 56.6% for the three months ended June 30, 2004, from 55.8% for the three months ended June 30, 2003. Cost of operations as a percentage of revenues for the six months ended June 30, 2004, increased 1.0 percentage point to 56.8% from 55.8% for the six months ended June 30, 2003. The increases as a percentage of revenues were primarily attributable to companies acquired subsequent to June 30, 2003, having operating margins below our company average associated with a higher mix of collection volumes, higher labor and other operating costs, increased fuel costs, increased medical 16 expenses resulting from a higher volume of claims and an increase in the number of claims reaching our per claim deductible limits for our self-insured employee health plans. SG&A. SG&A expenses increased $2.2 million, or 17.2%, to $15.4 million for the three months ended June 30, 2004, from $13.2 million for the three months ended June 30, 2003. SG&A expenses for the six months ended June 30, 2004 increased $4.9 million, or 19.1%, to $31.0 million from $26.1 million for the six months ended June 30, 2003. Our SG&A expenses for the three and six months ended June 30, 2004, increased from the prior year periods as a result of additional personnel from acquisitions closed subsequent to June 30, 2003, increased accounting expenses related to new corporate governance requirements, increased management information system expenses, increased employee bonus and stock compensation expense recognized in the three months ended June 30, 2004, and increased payroll tax expenses resulting from an increase in exercises of stock options during the first six months of 2004, partially offset by a decline in bad debt expense due to improved customer collections. SG&A expenses as a percentage of revenues for the three months ended June 30, 2004, increased 0.1 percentage points to 9.6% from 9.5% for the three months ended June 30, 2003. SG&A as a percentage of revenues for the six months ended June 30, 2004, increased 0.2 percentage points to 10.0% from 9.8% for the six months ended June 30, 2003. The increases were primarily due to increased employee bonus and stock compensation expense and increased payroll tax expenses resulting from increases in exercises of stock options, partially offset by a decline in bad debt expense due to improved customer collections. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased $2.6 million, or 22.8%, to $13.9 million for the three months ended June 30, 2004, from $11.3 million for the three months ended June 30, 2003. Depreciation and amortization expense for the six months ended June 30, 2004, increased $5.4 million, or 24.9%, to $27.3 million from $21.9 million for the six months ended June 30, 2003. The increases were primarily attributable to depreciation and depletion associated with acquisitions closed subsequent to June 30, 2003, increased depreciation expense resulting from new equipment acquired to support our base operations, increased amortization expense associated with intangible assets acquired in acquisitions closed subsequent to June 30, 2003, and increased depletion expense resulting from higher volumes at our landfill operations. Depreciation and amortization expense as a percentage of revenues increased 0.6 percentage points to 8.7% for the three months ended June 30, 2004, from 8.1% for the three months ended June 30, 2003. Depreciation and amortization expense as a percentage of revenues for the six months ended June 30, 2004, increased 0.6 percentage points to 8.8% from 8.2% for the six months ended June 30, 2003. The increases in depreciation and amortization as a percentage of revenues were the result of depreciation expense associated with new equipment acquired subsequent to June 30, 2003, which replaced older equipment with lower depreciation costs, increased amortization expense associated with intangible assets acquired in acquisitions closed subsequent to June 30, 2003. OPERATING INCOME. Operating income increased $3.4 million, or 9.1%, to $40.4 million for the three months ended June 30, 2004, from $37.0 million for the three months ended June 30, 2003. Operating income for the six months ended June 30, 2004 increased $5.3 million, or 7.6%, to $75.5 million from $70.2 million for the six months ended June 30, 2003. The increases were primarily attributable to the growth in revenues, partially offset by increased operating costs, recurring SG&A expenses to support the revenue growth, increases in employee bonus and stock compensation expense and increased depreciation and amortization expenses. Operating income as a percentage of revenues decreased 1.5 percentage points to 25.1% for the three months ended June 30, 2004, from 26.6% for the three months ended June 30, 2003. Operating income as a percentage of revenues for the six months ended June 30, 2004, decreased 1.8 percentage points to 24.4% from 26.2% for the six months ended June 30, 2003. The decreases were due to the aforementioned percentage of revenue increases in cost of operations, SG&A expenses, and depreciation and amortization expenses. INTEREST EXPENSE. Interest expense decreased $2.6 million, or 33.5%, to $5.2 million for the three months ended June 30, 2004, from $7.8 million for the three months ended June 30, 2003. Interest expense for the six months ended June 30, 2004, decreased $3.8 million, or 24.2%, to $12.0 million from $15.8 million for the six months ended June 30, 2003. The decreases were attributable to declines in our total outstanding debt balances and a decrease in the effective interest rate of our aggregate debt balance, due primarily to the expiration of two interest rate swap agreements in late 2003 that required fixed interest payments in excess of our variable rate borrowing cost. 17 The decrease in our total outstanding debt balance was primarily due to the redemption of our $150 million aggregate principal amount, 5.5% Convertible Subordinated Notes due 2006, which resulted in $123.6 million of the outstanding note principal being converted into our common stock, partially offset by additional borrowings to fund acquisitions and repurchases of our common stock. OTHER EXPENSE. Other expense increased to $1.6 million for the three months ended June 30, 2004, from $0.2 million for the three months ended June 30, 2003. Other expense increased to $1.5 million for the six months ended June 30, 2004, from $0.2 million for the six months ended June 30, 2003. Other expense in the three and six months ended June 30, 2004, includes $1.5 million of costs associated with the redemption of our $150 million 5.5% Convertible Subordinated Notes due 2006. These redemption costs included early redemption premium payments and the write-off of a portion of the unamortized debt issuance costs. The remaining components of other expense in 2003 and 2004 were net losses incurred on the disposal of certain assets. MINORITY INTERESTS. Minority interests increased $0.5 million, or 17.8%, to $3.1 million for the three months ended June 30, 2004, from $2.6 million for the three months ended June 30, 2003. Minority interest increased $0.8 million, or 16.6%, to $5.7 million for the six months ended June 30, 2004, from $4.9 million for the six months ended June 30, 2003. The increases in minority interests were due to increased earnings by our majority-owned subsidiaries. PROVISION FOR INCOME TAXES. Income taxes increased $1.6 million, or 16.7%, to $11.4 million for the three months ended June 30, 2004, from $9.8 million for the three months ended June 30, 2003. Income taxes increased $2.8 million, or 15.0%, to $21.0 million for the six months ended June 30, 2004, from $18.2 million for the six months ended June 30, 2003. These increases were due to increased pre-tax earnings and an increase in our effective tax rate. Our effective tax rates for the three and six months ended June 30, 2004 were 37.3% and 37.2%, respectively, an increase from 37.0% in the prior year periods. The increase in our effective tax rate was due to the recognition of non-tax deductible expenses in 2004, partially offset by the reversal of certain tax contingencies that expired in the current year periods. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. Cumulative effect of change in accounting principle for the six months ended June 30, 2003, consisted of a $0.3 million gain, net of tax effects, resulting from our adoption of SFAS No. 143 on January 1, 2003. Our adoption of SFAS No. 143 required us to record a cumulative change in accounting for landfill closure and post-closure obligations retroactively to the date of the acquisition of each landfill. NET INCOME. Net income increased $2.6 million, or 15.2%, to $19.2 million for the three months ended June 30, 2004, from $16.6 million for the three months ended June 30, 2003. Net income increased $4.1 million, or 12.9% to $35.4 million for the six months ended June 30, 2004, from $31.3 million for the six months ended June 30, 2004. The increases were primarily attributable to increased operating income and decreased interest expense, partially offset by increased minority interest expense, other expense and income tax expense. LIQUIDITY AND CAPITAL RESOURCES Our business is capital intensive. Our capital requirements include fleet and containers, facilities, and expenditures for landfill cell construction, landfill development and landfill closure activities in the future. We plan to meet our capital needs through various financing sources, including internally generated funds, debt and equity financings. As of June 30, 2004, we had a working capital deficit of $14.1 million, including cash and equivalents of $5.6 million. Our strategy in managing our working capital is generally to apply the cash generated from our operations that remains after satisfying our working capital and capital expenditure requirements to reduce our indebtedness under our credit facility and to minimize our cash balances. In October 2003, we entered into a new credit facility to increase the maximum borrowings available to us to $575 million. This new credit facility consisted of a $400 million senior secured revolving credit facility with a syndicate of banks for which Fleet National Bank acts as agent and a $175 million senior secured term loan. In March 2004, we refinanced the senior secured term loan portion of our credit facility in order to reduce the effective borrowing cost. The applicable margin on the senior secured term loan was reduced by 25 basis points; all other terms 18 remained consistent. In addition, we increased the amount outstanding under the senior secured term loan from $175 million to $200 million, resulting in an increase in the size of the facility to $600 million. The senior secured revolving credit facility matures in October 2008. The senior secured term loan requires annual principal payments equal to 1% of the initial term loan amount with all remaining outstanding amounts due October 2010. Under the new credit facility, there is no maximum amount of stand-by letters of credit that can be issued; however, the issuance of stand-by letters of credit reduces the amount of total borrowings available. We are able to increase the maximum borrowings under the new credit facility to $675 million, although no existing lender will have any obligation to increase its commitment, provided that no event of default, defined in the new credit facility, has occurred. The borrowings under the new credit facility bear interest at a rate per annum equal to, at our discretion, either the Fleet National Bank Base Rate plus applicable margin, or the LIBOR rate plus applicable margin. The applicable margin under the revolving credit facility varies depending on our leverage ratio. At June 30, 2004, the applicable margin on the term loan was 25 basis points in the case of loans based on the Base Rate and 175 basis points in the case of loans based on the LIBOR rate. Virtually all of our assets, including our interest in the equity securities of our subsidiaries, secure our obligations under the new credit facility. The new credit facility places certain business, financial and operating restrictions on us relating to, among other things, additional indebtedness, investments, acquisitions, asset sales, mergers, dividends, distributions, and repurchases and redemption of capital stock. The new credit facility also requires that we maintain specified financial ratios and balances. As of June 30, 2004, we were in compliance with all applicable covenants in our outstanding credit facility. The credit facility also requires the lenders' approval of acquisitions in certain circumstances. We use the credit facility for acquisitions, capital expenditures, working capital, standby letters of credit and general corporate purposes. The $16.0 million increase in outstanding borrowings under our credit facility in 2004 was primarily due to our cash redemption of a portion of our $150 million aggregate principal amount, 5.5% Convertible Subordinated Notes due 2006 and our repurchase of outstanding common stock, offset by cash generated from operations and the proceeds from stock option exercises. If we are unable to incur additional indebtedness under our credit facility or obtain additional capital through future debt or equity financings, our rate of growth through acquisitions may decline. As of June 30, 2004, we had the following contractual obligations (in thousands):
Principal Payments Due by Period -------------------------------- Less Than Recorded Obligations Total 1 Year 2 to 3 Years 4 to 5 Years Over 5 Years - -------------------- ------------ ------------ ------------ ------------ ------------ Long-term debt (1) $ 476,050 $ 8,624 $ 15,622 $ 65,838 $ 385,966 -------------------------------------------------------------------------------- Total contractual cash obligations $ 476,050 $ 8,624 $ 15,622 $ 65,838 $ 385,966 ================================================================================
(1) Long-term debt payments include $44 million in principal payments due 2008 related to our senior secured revolving credit facility and $198 million in principal payments due 2010 related to our senior secured term loan, both under our credit facility. As of June 30, 2004, our credit facility allowed us to borrow up to $600 million.
Amount of Commitment Expiration Per Period ------------------------------------------ Less Than Unrecorded Obligations Total 1 Year 2 to 3 Years 4 to 5 Years Over 5 Years - ---------------------- ------------ ------------ ------------ ------------ ------------ Operating leases (2) $ 27,102 $ 3,994 $ 6,289 $ 4,628 $ 12,191 Unconditional purchase obligations(2) 15,735 10,235 5,500 -- -- -------------------------------------------------------------------------------- Total commercial commitments $ 42,837 $ 14,229 $ 11,789 $ 4,628 $ 12,191 ================================================================================
(2) We are party to operating lease agreements and unconditional purchase obligations. These lease agreements and purchase obligations are established in the ordinary course of our business and are designed to provide us with access to facilities and products at competitive, market-driven prices. These arrangements have not materially affected our financial position, results of operations or liquidity during the three or six months ended June 30, 2004, nor are they expected to have a material impact on our future financial position, results of operations or liquidity. 19 We are party to stand-by letters of credit and financial surety bonds. These stand-by letters of credit and financial surety bonds are generally established to support our financial assurance needs and landfill operations. These arrangements have not materially affected our financial position, results of operations or liquidity during the six months ended June 30, 2004, nor are they expected to have a material impact on our future financial position, results of operations or liquidity. The minority interest holders of one of our majority-owned subsidiaries have a currently exercisable option (the "put option") to require us to complete the acquisition of this majority-owned subsidiary by purchasing their minority ownership interests for fair market value. The put option calculates the fair market value of the subsidiary based on its current operating income before depreciation and amortization, as defined in the put option agreement. The put option does not have a stated termination date. At June 30, 2004, the minority interest holders' pro rata share of the subsidiary's fair market value is estimated to be worth between $69 million and $83 million. Because the put option is required at fair market value, no amounts have been accrued relative to the put option. For the six months ended June 30, 2004, net cash provided by operating activities was $84.1 million. Of this amount, $4.1 million was provided by working capital for the period. The primary components of the reconciliation of net income to net cash provided by operations for the six months ended June 30, 2004, consist of non-cash expenses including $27.3 million of depreciation and amortization, $5.7 million of minority interest expense, $1.4 million of debt issuance cost amortization, and the deferral of $9.9 million of income tax expense resulting from temporary differences between the recognition of income and expenses for financial reporting and income tax purposes. For the six months ended June 30, 2004, net cash used in investing activities was $41.6 million. Of this amount, $12.4 million was used to fund the cash portion of acquisitions and to pay a portion of acquisition costs that were included as a component of accrued liabilities at December 31, 2003. Cash used for capital expenditures was $33.9 million, which was primarily for investments in fixed assets, consisting of trucks, containers, other equipment and landfill development. Cash provided by investing activities included $3.9 million of net draws of restricted cash. For the six months ended June 30, 2004, net cash used in financing activities was $42.3 million, which included $19.3 million of proceeds from stock option and warrant exercises, less $27.5 million of net payments under our various debt arrangements, $27.9 million to repurchase shares of our common stock, $5.9 million of cash distributions to minority interest holders and $0.3 million of debt issuance costs, primarily related to our amended credit facility. We made approximately $33.9 million in capital expenditures for property and equipment during the six months ended June 30, 2004. We expect to make capital expenditures of approximately $70.0 million in 2004 in connection with our existing business. We intend to fund our planned 2004 capital expenditures principally through existing cash, internally generated funds, and borrowings under our existing credit facility. In addition, we may make substantial additional capital expenditures in acquiring solid waste collection and disposal businesses. If we acquire additional landfill disposal facilities, we may also have to make significant expenditures to bring them into compliance with applicable regulatory requirements, obtain permits or expand our available disposal capacity. We cannot currently determine the amount of these expenditures because they will depend on the number, nature, condition and permitted status of any acquired landfill disposal facilities. We believe that our credit facility and the funds we expect to generate from operations will provide adequate cash to fund our working capital and other cash needs for the foreseeable future. From time to time we evaluate our existing operations and their strategic importance to us. If we determine that a given operating unit does not have future strategic importance, we may sell or otherwise dispose of those operations. Although we believe our operations would not be impaired by such dispositions, we could incur losses as a result. SEASONALITY Based on historic trends, we expect our operating results to vary seasonally, with revenues typically lowest in the first quarter, higher in the second and third quarters and lower in the fourth quarter than in the second and third quarters. We expect the fluctuation in our revenues between our highest and lowest quarters to be approximately 10% to 12%. This seasonality reflects the lower volume of solid waste generated during the late fall, winter and 20 early spring months because of decreased construction and demolition activities during the winter months in the U.S. In addition, some of our operating costs may be higher in the winter months. Adverse winter weather conditions slow waste collection activities, resulting in higher labor and operational costs. Greater precipitation in the winter increases the weight of collected waste, resulting in higher disposal costs, which are calculated on a per ton basis. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, we are exposed to market risk, including changes in interest rates and certain commodity prices. We use hedge agreements to manage a portion of our risks related to interest rates. While we are exposed to credit risk in the event of non-performance by counterparties to our hedge agreements, in all cases such counterparties are highly rated financial institutions and we do not anticipate non-performance. We do not hold or issue derivative financial instruments for trading purposes. We monitor our hedge positions by regularly evaluating the positions at market and by performing sensitivity analyses. In May 2003, we entered into two forward-starting interest rate swap agreements. Each interest rate swap agreement has a notional amount of $87.5 million and effectively fixed the interest rate on the notional amount at interest rates ranging from 2.67% to 2.68%, plus applicable margin. The effective date of the swap agreements was February 2004 and each swap agreement expires in February 2007. In March 2004, we entered into two additional three-year interest rate swap agreements. Each interest rate swap agreement has a notional amount of $37.5 million and effectively fixed the interest rate on the notional amount at an interest rate of 2.25%, plus applicable margin. We have performed sensitivity analyses to determine how market rate changes will affect the fair value of our market risk sensitive hedge positions and all other debt. Such an analysis is inherently limited in that it reflects a singular, hypothetical set of assumptions. Actual market movements may vary significantly from our assumptions. Fair value sensitivity is not necessarily indicative of the ultimate cash flow or earnings effect we would recognize from the assumed market rate movements. We are exposed to cash flow risk due to changes in interest rates with respect to the net floating rate balances owed at June 30, 2003 and 2004, of $249.4 million and $202.4 million, respectively, including floating rate debt under our credit facility, our 2022 Notes, various floating rate notes payable to third parties and floating rate municipal bond obligations, offset by our debt effectively fixed under interest rate swap agreements. A one percentage point increase in interest rates on our variable-rate debt as of June 30, 2003 and 2004, would decrease our annual pre-tax income by approximately $2.5 million and $2.0 million, respectively. All of our remaining debt instruments are at fixed rates, or effectively fixed under the interest rate swap agreements described above; therefore, changes in market interest rates under these instruments would not significantly impact our cash flows or results of operations. We market a variety of recyclable materials, including cardboard, office paper, plastic containers, glass bottles and ferrous and aluminum metals. We own and operate 26 recycling processing facilities and sell other collected recyclable materials to third parties for processing before resale. We often share the profits from our resale of recycled materials with other parties to our recycling contracts. For example, certain of our municipal recycling contracts in Washington, negotiated before we acquired those businesses, specify benchmark resale prices for recycled commodities. If the prices we actually receive for the processed recycled commodities collected under the contract exceed the prices specified in the contract, we share the excess with the municipality, after recovering any previous shortfalls resulting from actual market prices falling below the prices specified in the contract. To reduce our exposure to commodity price risk with respect to recycled materials, we have adopted a pricing strategy of charging collection and processing fees for recycling volume collected from third parties. Although there can be no assurance of market recoveries, in the event of a decline, because of the provisions within certain of our contracts that pass commodity risk along to the customers, we believe, given historical trends and fluctuations in the recycling commodities market, that a 10% decrease in average recycled commodity prices from the prices that were in effect at June 30, 2004 would not materially affect our cash flows or pre-tax income. 21 ITEM 4. CONTROLS AND PROCEDURES Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of June 30, 2004. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported as and when required. During the quarter ended June 30, 2004, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date they were evaluated in connection with the preparation of this quarterly report on Form 10-Q. 22 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We own undeveloped property in Harper County, Kansas, where we are seeking permits to construct and operate a municipal solid waste landfill. In 2002, we received a special use permit from Harper County for zoning the landfill and in 2003 we received a draft permit from the Kansas Department of Health and Environment to construct and operate the landfill. In July 2003, the District Court of Harper County invalidated the previously issued zoning permit. We have appealed the District Court's decision to invalidate the zoning permit. The Court of Appeal heard oral arguments over our appeal on June 16, 2004. The Kansas Department of Health and Environment has notified us that it will not issue a final permit to construct and operate the landfill until the zoning matter is resolved. At June 30, 2004, we had $4.2 million of capitalized expenditures related to this landfill development project. Based on the advice of counsel, we believe that we will prevail in this matter and do not believe that an impairment of the capitalized expenditures exists. If we do not prevail on appeal, however, we will be required to expense in a future period the $4.2 million of capitalized expenditures, less the recoverable value of the undeveloped property and other amounts recovered, which would likely have a material adverse effect on our reported income for that period. We are primarily self-insured for automobile liability, general liability and workers' compensation claims as a result of our high deductible programs. We are a party to various claims and suits pending for alleged damages to persons and property and alleged liabilities occurring during the normal operations of our solid waste management business. On October 31, 2003, our subsidiary, Waste Connections of Nebraska, Inc. was named as a defendant in the case of KAREN COLLERAN, CONSERVATOR OF THE ESTATE OF ROBERT ROONEY V. WASTE CONNECTIONS OF NEBRASKA, INC. The plaintiff seeks recovery for damages allegedly suffered by Father Robert Rooney when the bicycle he was riding collided with one of our garbage trucks in Valley County, Nebraska. The complaint alleges that Father Rooney suffered serious bodily injury, including traumatic brain injury. The plaintiff seeks recovery of past medical expenses of approximately $430,000 and an unspecified amount for future medical expenses and home healthcare, past pain and suffering, future pain and suffering, lost income, loss of earning capacity, and permanent injury and disability. Our primary defense is that the plaintiff is not entitled to any damages under Nebraska law because the negligence of Father Rooney was equal to or greater than any negligence on the part of our driver, and we intend to defend this case vigorously on these and other grounds. This case is in the early stages of discovery, and we have not accrued any potential loss as of June 30, 2004; however, an adverse outcome in this case coupled with a significant award to the plaintiff could have a material adverse effect on our reported income in the period incurred. Additionally, we are a party to various legal proceedings resulting from the ordinary course of business and the extensive governmental regulation of the solid waste industry. Our management does not believe that these proceedings, either individually or in the aggregate, are likely to have a material adverse effect on our business, financial condition, operating results or cash flows. 23 ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES On May 3, 2004, we announced that our Board of Directors had authorized a common stock repurchase program for the repurchase of up to $200 million of our common stock over a two-year period. Under the program, we may repurchase stock in the open market or in privately negotiated transactions from time to time at management's discretion. The timing and amounts of any repurchases will depend on many factors, including our capital structure, the market price of our common stock and overall market conditions. The table below reflects repurchases we have made as of June 30, 2004: (In thousands, except share and per share amounts; amounts below reflect our three-for-two split of our common stock in June 2004):
Total Number Maximum of Shares Approximate Dollar Total Number Average Purchased as Value of Shares that of Shares Price Paid Part of Publicly May Yet Be Purchased Period Purchased Per Share Announced Program Under the Program - ------------------------------------------------------------------------------------------------------------------------ 4/1/04 - 4/30/04 283,350 (1) $ 27.17 -- N/A 5/1/04 - 5/31/04 682,950 (2) 26.95 637,950 $ 182,806 6/1/04 - 6/30/04 63,000 27.99 63,000 181,042 -------------------------------------------------------------------------------------------------- Total 1,029,300 $ 27.07 700,950 $ 181,042
(1) These shares were purchased in open market transactions other than through a publicly announced program. This program was approved by our Board of Directors on February 25, 2004 and authorized us to repurchase up to approximately $45 million of our common stock from time to time. (2) Under the program described in footnote 1 above, 45,000 shares of common stock were purchased in open market transactions on May 3, 2004. 24 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Amounts below reflect our three-for-two split of our common stock in June 2004.) Our annual meeting of stockholders was held on May 26, 2004. Ron J. Mittelstaedt was elected as a Class III director by the votes indicated below: Total Votes For: 39,840,939 Total Votes Withheld: 1,634,452 The term for Mr. Mittelstaedt will run until the date of our annual meeting of stockholders in 2007 and until a successor has been duly elected and qualified. Continuing in office as Class I directors, whose term runs until the annual meeting of stockholders in 2005 and until their successors have been duly elected and qualified, were Eugene V. Dupreau and Robert H. Davis. Continuing in office as Class II directors, whose term runs until the annual meeting of stockholders in 2006 and until their successors have been duly elected and qualified, were Michael W. Harlan and William J. Razzouk. The following proposal was adopted at the annual meeting by the votes indicated below: To approve the amendment of our Amended and Restated Certificate of Incorporation to (a) increase the authorized number of shares of common stock from 50,000,000 to 100,000,000 shares and (b) delete references to the Series A Preferred Stock which converted to common stock upon the completion of our initial public offering. Total Votes For: 39,084,540 Total Votes Against: 2,373,661 Total Votes Abstained: 17,190 The following proposal was adopted at the annual meeting by the votes indicated below: To approve the 2004 Equity Incentive Plan. Total Votes For: 24,081,675 Total Votes Against: 13,864,513 Total Votes Abstained: 52,461 Total Broker No-Vote: 3,476,742 The following proposal was adopted at the annual meeting by the votes indicated below: To ratify the appointment of Ernst & Young LLP as our independent auditors for Waste Connections for the year 2004. Total Votes For: 40,916,919 Total Votes Against: 547,117 Total Votes Abstained: 11,355 25 ITEM 5. OTHER INFORMATION (a) In accordance with Rule 416(b) promulgated under the Securities Act of 1933, as amended (the "Securities Act"), the number of shares of our common stock registered for sale under the Securities Act by the following Registration Statements on Form S-8 has been deemed to be increased to include the shares of common stock issued in connection with our three-for-two stock split in the form of a 50% stock dividend effected on June 24, 2004 (the "Stock Split"), to the extent issued with respect to shares designated by such registration statements but unsold as of the date of the Stock Split: Registration Statement on Form S-8 (Reg. No. 333-102413) filed with the SEC on January 8, 2003; Registration Statement on Form S-8 (Reg. No. 333-90810) filed with the SEC on June 19, 2002; Registration Statement on Form S-8 (Reg. No. 333-83172) filed with the SEC on February 21, 2002; Registration Statement on Form S-8 (Reg. No. 333-42096) filed with the SEC on July 24, 2000; Registration Statement on Form S-8 (Reg. No. 333-72113) filed with the SEC on February 10, 1999; and Registration Statement on Form S-8 (Reg. No. 333-63407) filed with the SEC on September 15, 1998. (b) On July 20, 2004, our Board of Directors approved amendments to our Amended and Restated Bylaws that, among other things, affect the advance notice procedures by which stockholders may recommend nominees for our board of directors, as described in the Proxy Statement for our annual stockholders meeting held on May 26, 2004. As a result of such amendments, in order to be considered for inclusion in our proxy materials for future annual meetings of stockholders, notice of a stockholder's nomination of a person for election to the Board must be received by the Secretary of Waste Connections at our principal executive offices no later than the close of business (California time) on the one hundred twentieth (120th) day prior to the date which is the same month and day as the date of our proxy statement released to stockholders in connection with the previous year's annual meeting. To be considered timely, stockholder proposals submitted after this deadline must be delivered to or mailed and received at our principal executive offices no later than the close of business (California time) on the ninetieth (90th) day prior to the meeting of stockholders. The amendments to our Amended and Restated Bylaws did not otherwise materially change the procedures governing stockholder nominations of candidates for our Board of Directors described therein and in our most recent Proxy Statement. 26 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: EXHIBIT NUMBER DESCRIPTION OF EXHIBITS -------------- ----------------------- 3.1 (r) Amended and Restated Certificate of Incorporation of the Registrant, in effect as of the date hereof 3.2 Amended and Restated Bylaws of the Registrant, in effect as of the date hereof 4.1 (a) Form of Common Stock Certificate 4.2 (h) Form of Note for the Registrant's 5.5% Convertible Subordinated Notes due April 15, 2006 4.3 (h) (+) Indenture between the Registrant, as Issuer, and State Street Bank and Trust Company, as Trustee, dated as of April 4, 2001 4.4 (h) (+) Purchase Agreement between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated March 30, 2001 4.5 (h) (+) Registration Rights Agreement between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated as of April 4, 2001 4.6 (i) Form of Note for the Registrant's Floating Rate Convertible Subordinated Notes Due 2022 4.7 (i) (+) Indenture between the Registrant, as Issuer, and State Street Bank and Trust Company of California, N.A., as Trustee, dated as of April 30, 2002 4.8 (i) (+) Purchase Agreement between the Registrant and Deutsche Bank Securities Inc., dated April 26, 2002 4.9 (i) (+) Registration Rights Agreement between the Registrant and Deutsche Bank Securities Inc., dated as of April 30, 2002 4.10 (r) Form of Note for the Registrant's new Floating Rate Convertible Subordinated Notes Due 2022 4.11 (r) (+) Form of Indenture between the Registrant, as Issuer, and U.S. Bank National Association, as Trustee 10.1 (d) Second Amended and Restated 1997 Stock Option Plan 10.2 (a) Form of Option Agreement 10.3 (a) Form of Warrant Agreement 10.4 (a) Form of Stock Purchase Agreement dated as of September 30, 1997 10.5 (c) Form of Third Amended and Restated Investors' Rights Agreement, dated as of December 31, 1998 10.6 (e) Second Amended Employment Agreement between the Registrant and Darrell Chambliss, dated as of June 1, 2000 10.7 (e) Second Amended Employment Agreement between the Registrant and Michael Foos, dated as of June 1, 2000 10.8 (a) Employment Agreement between the Registrant and Steven Bouck, dated as of February 1, 1998 10.9 (a) Employment Agreement between the Registrant and Eugene V. Dupreau, dated as of February 23, 1998 10.10 (a) Form of Indemnification Agreement entered into by the Registrant and each of its directors and officers 27 EXHIBIT NUMBER DESCRIPTION OF EXHIBITS -------------- ----------------------- 10.11 (b) (+) Loan Agreement, dated as of June 1, 1998, between Madera Disposal Systems, Inc. and the California Pollution Control Financing Authority 10.12 (b) Employment Agreement between the Registrant and David M. Hall, dated as of July 8, 1998 10.13 (g) Employment Agreement between the Registrant and James M. Little, dated as of September 13, 1999 10.14 (g) Employment Agreement between the Registrant and Jerri L. Hunt, dated as of October 25, 1999 10.15 (j) Employment Agreement between the Registrant and Kenneth O. Rose, dated as of May 1, 2002 10.16 (j) Employment Agreement between the Registrant and Robert D. Evans, dated as of May 10, 2002 10.17 (k) 2002 Senior Management Equity Incentive Plan 10.18 (k) 2002 Stock Option Plan 10.19 (l) 2002 Restricted Stock Plan 10.20 (m) Consultant Incentive Plan 10.21 (n) Employment Agreement between the Registrant and David G. Eddie, dated as of May 15, 2001 10.22 (n) Employment Agreement between the Registrant and Worthing F. Jackman, dated as of April 11, 2003 10.23 (o) Amended and Restated Revolving Credit and Term Loan Agreement dated as of October 22, 2003 10.24 (p) Refinancing Facility Amendment to Amended and Restated Revolving Credit and Term Loan Agreement dated as of March 2, 2004 10.25 (q) Second Amended and Restated Employment Agreement between the Registrant and Ronald J. Mittelstaedt, dated March 1, 2004 10.26 Amendment No. 2 to Amended and Restated Revolving Credit and Term Loan Agreement, dated May 4, 2004 10.27 Nonqualified Deferred Compensation Plan, dated July 1, 2004 10.28 2004 Equity Incentive Plan, as amended and restated July 20, 2004 31.1 Certification of President and Chief Executive Officer 31.2 Certification of Chief Financial Officer 32 Certificate of Chief Executive Officer and Chief Financial Officer (a) Incorporated by reference to the exhibits filed with the Registrant's Registration Statement on Form S-1, Registration No. 333-48029. (b) Incorporated by reference to the exhibits filed with the Registrant's Registration Statement on Form S-4, Registration No. 333-59199. (c) Incorporated by reference to the exhibits filed with the Registrant's Registration Statement on Form S-4, Registration No. 333-65615. (d) Incorporated by reference to the exhibit filed with the Registrant's Form S-8, filed on July 24, 2000. 28 (e) Incorporated by reference to the exhibit filed with the Registrant's Form 10-Q filed on November 14, 2000. (f) Incorporated by reference to the exhibit filed with the Registrant's Form 10-Q filed on August 7, 2000. (g) Incorporated by reference to the exhibit filed with the Registrant's Form 10-K filed on March 13, 2000. (h) Incorporated by reference to the exhibit filed with the Registrant's Form S-3 filed on June 5, 2001. (i) Incorporated by reference to the exhibit filed with the Registrant's Form S-3 filed on July 29, 2002. (j) Incorporated by reference to the exhibit filed with the Registrant's Form 10-Q filed on August 13, 2002. (k) Incorporated by reference to the exhibit filed with the Registrant's Form S-8 filed on February 21, 2002. (l) Incorporated by reference to the exhibit filed with the Registrant's Form S-8 filed on June 19, 2002. (m) Incorporated by reference to the exhibit filed with the Registrant's Form S-8 filed on January 8, 2003. (n) Incorporated by reference to the exhibit filed with the Registrant's Form 10-Q filed on August 13, 2003. (o) Incorporated by reference to the exhibit filed with the Registrant's Form 8-K filed on October 23, 2003. (p) Incorporated by reference to the exhibit filed with the Registrant's Form 10-K filed on March 12, 2004. (q) Incorporated by reference to the exhibit filed with the Registrant's Form 10-Q filed on April 22, 2004. (r) Incorporated by reference to the exhibit filed with the Registrant's Form T-3 filed on June 16, 2004. (+) Filed without exhibits and schedules (to be provided supplementally on request of the Commission). (b) Reports on Form 8-K: On April 15, 2004, we filed a report on Form 8-K announcing the completion of the redemption of our $150 million aggregate principal amount, 5.5% Convertible Subordinated Notes due 2006. On April 22, 2004, we filed a report on Form 8-K announcing the results of our earnings for the first quarter of 2004. On April 22, 2004, we filed a report on Form 8-K providing estimates for certain components of our results of operations for the second quarter of 2004. 29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WASTE CONNECTIONS, INC. BY: /s/ Ronald J. Mittelstaedt ------------------------------------- Date: July 22, 2004 Ronald J. Mittelstaedt, President and Chief Executive Officer BY: /s/ Steven F. Bouck ------------------------------------- Date: July 22, 2004 Steven F. Bouck, Executive Vice President and Chief Financial Officer 30 EX-3.2 2 exh3-2_12804.txt BYLAWS EXHIBIT 3.2 ----------- AMENDED AND RESTATED BYLAWS OF WASTE CONNECTIONS, INC. (ADOPTED JULY 20, 2004) ARTICLE I OFFICES Section 1. Registered Office. The registered office of Waste Connections, Inc. (the "Corporation") shall be fixed in the Corporation's certificate of incorporation, as the same may be amended from time to time. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as its Board of Directors (the "Board" or the "Board of Directors") may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. All meetings of the stockholders shall be held at the principal office of the Corporation in Folsom, California, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be designated by the Board of Directors. Section 2. Annual Meetings. Annual meetings of stockholders shall be held on the fourth Wednesday of May in each year, if not a legal holiday and if a legal holiday, then on the next secular day following, at 10:00A.M., or at such other date and time as shall be designated from time to time by the Board of Directors. At each annual meeting, stockholders shall elect directors in accordance with the Corporation's certificate of incorporation and these bylaws, and shall transact other business as may properly be brought before the meeting. Section 3. Special Meetings. Subject to the rights, if any, of holders of any class or series of Preferred Stock then outstanding, stockholders are not permitted to call a special meeting of 1 stockholders or to require the Board of Directors or officers of the Corporation to call such a special meeting. A special meeting of stockholders may only be called by a majority of the Board of Directors, by the President or by the Chairman of the Board. The business permitted to be conducted at a special meeting of stockholders shall be limited to matters properly brought before the meeting by or at the direction of the Board of Directors. Any action required or permitted to be taken by the stockholders must be taken at a duly called and convened annual meeting or special meeting of stockholders and cannot be taken by consent in writing. Section 4. Notice of Stockholders' Meetings. All notices of meetings of stockholders shall be sent or otherwise given in accordance with Section 5, below, not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Section 5. Manner of Giving Notice; Affidavit of Notice. Notice of any meeting of stockholders shall be given: (a) if mailed, when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the Corporation's records; or (b) if electronically transmitted, as provided in Section 232 of the General Corporation Law of Delaware. An affidavit of the Secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein. Section 6. Quorum. The holders of a majority of the shares entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. Section 7. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence (or election not to preside) by the President, or in his absence (or election not to preside) by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence (or election not to so act) the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 8. Conduct of Meetings. The Board of Directors may adopt such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such 2 rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. Section 9. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors; provided, however, that the following procedures shall not apply to the nomination of persons for election as Directors by vote of any class or series of preferred stock of the Corporation. Nominations of persons for election to the Board of Directors of the Corporation at the annual meeting may be made at such meeting by or at the direction of the Board of Directors, by any committee appointed by the Board of Directors or by any holder of common stock of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 9. Such nominations, other than those made by or at the direction of the Board of Directors or by any committee appointed by the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be considered for inclusion in the Corporation's proxy materials, notice of a stockholder's nomination of a person for election to the Board must be received by the Secretary of the Corporation at the principal executive offices of the Corporation no later than the close of business (California time) on the one hundred twentieth (120th) day prior to the date which is the same month and day as the date of the Corporation's proxy statement released to stockholders in connection with the previous year's annual meeting. To be considered timely, stockholder proposals submitted after this deadline must be delivered to or mailed and received at the principal executive offices of the Corporation no later than the close of business (California time) on the ninetieth (90th) day prior to the meeting of stockholders. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address, phone number and email address of the person, (ii) the principal occupation or employment of the person, (iii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to the rules and regulations of the Securities and Exchange Commission under Section 14 of the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice (i) the name and record address, phone number and email address of the stockholder, (ii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder and (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder. Such notice shall be accompanied by the 3 executed consent of each nominee to serve as a Director if so elected. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a Director of the Corporation. No person shall be eligible for election as a Director of the Corporation by the holders of common stock of the Corporation unless nominated in accordance with the procedures set forth herein. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine that a nomination was not made in accordance with the foregoing procedure and, if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 10. Advance Notification of Business to be Transacted at Stockholder Meetings. To be properly brought before the annual or any special meeting of stockholders, business must be either (a) specified in the notice of meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors or any committee appointed by the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before an annual meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before any annual meeting of stockholders by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be considered for inclusion in the Corporation's proxy materials, notice of stockholder proposals must be received by the Secretary of the Corporation at the principal executive offices of the Corporation no later than the close of business (California time) on the one hundred twentieth (120th) day prior to the date which is the same month and day as the date of the Corporation's proxy statement released to stockholders in connection with the previous year's annual meeting. To be considered timely, stockholder proposals submitted after this deadline must be delivered to or mailed and received at the principal executive offices of the Corporation no later than the close of business (California time) on the ninetieth (90th) day prior to the meeting of stockholders. Such stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class, series and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. No business shall be conducted at the annual or any special meeting of stockholders unless it is properly brought before the meeting in accordance with the procedures set forth in this Section 10, provided, however, that nothing in this Section 10 shall be deemed to preclude discussion by any stockholder of any business properly brought before the meeting in accordance with the procedures set forth in this Section 10. The officer of the Corporation presiding at the meeting shall, if the facts warrant, determine that business was not properly brought before the meeting in accordance with the provisions of this Section 10 and, if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 11. Compliance with Securities and Exchange Act of 1934. Notwithstanding any other provision of these bylaws, the Corporation shall be under no obligation to include any 4 stockholder proposal in its proxy statement materials or otherwise present any such proposal to stockholders at a special or annual meeting of stockholders if the Board of Directors reasonably believes that the proponents thereof have not complied with Sections 13 and 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and the Corporation shall not be required to include in its proxy statement material to stockholders any stockholder proposal not required to be included in its proxy material to stockholders in accordance with such Act, rules or regulations. Section 12. Adjournment of Meetings. If a quorum shall not be present or represented at any meeting of the stockholders, then either (a) the chairperson of the meeting or (b) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place if any thereof, and the means of remote communications if any by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 13. Voting. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 14, below, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the General Corporation Law of Delaware. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder. Except as otherwise provided by statute or by the certificate of incorporation, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Section 14. Record Date for Stockholder Notice; Voting; Giving Consents. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not be more than sixty (60) nor less than ten 5 (10) days before the date of such meeting, nor more than sixty (60) days prior to any other such action. If the Board does not so fix a record date: (a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed. (c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 15. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the General Corporation Law of Delaware. Section 16. List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the Corporation's principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of 6 any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. ARTICLE III DIRECTORS Section 1. Number of Directors. The number of Directors which shall constitute the entire Board of Directors shall be as set forth in the Corporation's certificate of incorporation. Section 2. Term of Office. Subject to the provisions of the Corporation's certificate of incorporation, each Director, including a Director elected to fill a vacancy, shall hold office until such Director's successor is elected and qualified or the earlier resignation or removal of such Director. Section 3. Place of Meetings of the Board of Directors. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 4. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or the Secretary or by resolution of the Board of Directors. Unless waived, notice of the time and place of special meetings shall be delivered to each Director either (a) personally (by hand, courier or telephone), (b) by electronic mail, (c) by facsimile transmission, or (d) by first-class mail, postage prepaid, delivered or addressed to a Director in accordance with that Director's contact information as it is shown on the records of the Corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting (ten (10) days in the case of a Director whose address as shown on the records of the Corporation is outside of the United State of America). If the notice to a Director is delivered in any other manner it shall be delivered (which shall for this purpose mean received by the Director) at least twenty four (24) hours before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation's principal executive office) or the purpose of the meeting. Section 6. Quorum. At all meetings of the Board, a majority of the entire Board shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law or the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present 7 thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. Section 7. Action Without A Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board. Written consents representing actions taken by the Board may be executed by telex, telecopy or other facsimile transmission, and such facsimile shall be valid and binding to the same extent as if it were an original. Section 8. Meetings by Conference Telephone. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 9. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by a chairman chosen at the meeting. Section 10. Committees of Directors. The Board of Directors may, by resolution passed by a majority of the whole Board, establish one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided by resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided that no such committee shall have power or authority in reference to (a) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporation Law of Delaware to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. 8 Section 11. Meetings and Actions of Committees. Meetings and actions of committees of the Board authorized by Section 10, above, shall be governed by, and held and taken in accordance with, the provisions of: (a) Section 3 (place of meetings); (b) Section 4 (regular meetings); (c) Section 5 (special meetings); (d) Section 6 (quorum); (e) Section 7 (action without a meeting); (f) Section 8 (meetings by conference telephone); and (g) Article VIII, Section 8 (waiver of notice); with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. Section 12. Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. ARTICLE IV OFFICERS Section 1. Officers. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chief Executive Officer, President, Secretary and Chief Financial Officer. The Board of Directors may also appoint a Chairman of the Board and one or more Vice Presidents, any one or more of which may be designated Executive Vice President or Senior Vice President, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person, unless the certificate or incorporation or these bylaws otherwise provide. Section 2. Appointment of Officers. The Board of Directors shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of 9 Sections 3 and 5 below, subject to the rights, if any, of an officer under any contract of employment. Section 3. Subordinate Officers. The Board may appoint, or empower the Chief Executive Officer or, in his absence, the President, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine. Section 4. Term of Office; Removal and Resignation of Officers. Each officer of the Corporation shall hold office until his successor is chosen and qualifies, or until his resignation or removal. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board. Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. Section 5. Vacancies in Offices. Any vacancy occurring in any office of the Corporation shall be filled by the Board, or by the Chief Executive Officer or the President as provided in Section 3, above. Section 6. Officers' Salaries. The salaries of all officers and agents of the Corporation shall be fixed by or pursuant to the authority of the Board of Directors. Section 7. Chairman of the Board. The Chairman of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board or as may be prescribed by these bylaws. If there is no Chief Executive Officer or President, then the Chairman of the Board shall also be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 8, below. Section 8. Chief Executive Officer. Subject to such supervisory powers, if any, as the Board may give to the Chairman of the Board, the Chief Executive Officer, if any, shall, subject to the control of the Board, have general supervision, direction, and control of the business and affairs of the Corporation and shall report directly to the Board. All other officers, officials, employees and agents shall report directly or indirectly to the Chief Executive Officer. The Chief Executive Officer shall see that all orders and resolutions of the Board are carried into effect. The Chief Executive Officer shall serve as chairperson of and preside at all meetings of the stockholders. In the absence of a Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the Board. 10 Section 9. President. In the absence or disability of the Chief Executive Officer, the President shall perform all the duties of the Chief Executive Officer. When acting as the Chief Executive Officer, the President shall have all the powers of, and be subject to all the restrictions upon, the Chief Executive Officer. The President shall have such other powers and perform such other duties as from time to time may be prescribed for him by the Board, these bylaws, the Chief Executive Officer or the Chairman of the Board. Section 10. Vice Presidents. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board or, if not ranked, a Vice President designated by the Board, shall perform all the duties of the President. When acting as the President, the appropriate Vice President shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board, these bylaws, the Chairman of the Board, the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President. Section 11. Secretary. The Secretary shall keep or cause to be kept, at the principal executive office of the Corporation or such other place as the Board may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show: (a) the time and place of each meeting; (b) whether regular or special (and, if special, how authorized and the notice given); (c) the names of those present at directors' meetings or committee meetings; (d) the number of shares present or represented at stockholders' meetings; and (e) the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation's transfer agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share register showing: (i) the names of all stockholders and their addresses; (ii) the number and classes of shares held by each: (iii) the number and date of certificates evidencing such shares; and (iv) the number and date of cancellation of every certificate surrendered for cancellation. 11 The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board required to be given by law or by these bylaws. The Secretary shall keep the seal of the Corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board or by these bylaws. Section 12. Chief Financial Officer. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The Chief Financial Officer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositories as the Board may designate. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board, shall render to the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President and directors, whenever they request it, an account of all his or her transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall have other powers and perform such other duties as may be prescribed by the Board or these bylaws. Section 13. Representation of Shares of Other Corporations. The Chairman of the Board, President, any Vice President, or the Secretary of this Corporation, or any other person authorized by the Board or the President or a Vice President, is authorized to vote, represent, and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. Section 14. Authority and Duties of Officers. In addition to the foregoing authority and duties, all officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board or the stockholders. ARTICLE V STOCK CERTIFICATES Section 1. Stock Certificates. The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman of the Board, or the President or any Vice President, and by the Chief Financial Officer or the Secretary of the Corporation representing the number of shares registered in certificate form. Any or all of 12 the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 2. Classes or Series of Stock. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences or rights shall be set forth in full or summarized on the face or back of any certificate that the Corporation shall issue to represent shares of such class or series of stock; provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu thereof, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights may be set forth on the face or back of each certificate that the Corporation shall issue to represent shares of such class or series of stock. Section 3. Lost Certificates. Except as provided in this Section 3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. Section 4. Transfer of Stock. Subject to applicable law, on surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction on its books. Section 5. Stockholders of Record. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. 13 ARTICLE VI INDEMNIFICATION (a) Third Party Actions. The Corporation shall indemnify any officer or director of the Corporation, and shall have the power to indemnify any employee or agent of the Corporation, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person's conduct was unlawful. The Corporation shall be required to indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of the Corporation. (b) Derivative Actions. The Corporation shall indemnify any officer or director of the Corporation, and shall have the power to indemnify any employee or agent of the Corporation, who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. The Corporation shall be required to indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of the Corporation. (c) Successful Actions. To the extent that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this Article VI, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. 14 (d) Standard of Conduct. Any indemnification under subsections (a) and (b) of this Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this Article VI. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (b) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (c) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (d) by the stockholders. (e) Advance Payment of Expenses. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VI. Such expenses (including attorneys' fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate. (f) Non-Exclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. (g) Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under this Article VI. Any indemnification under this Article VI shall be net of any payment received by the indemnified party by directors' and officers' insurance carriers, or others. (h) Definition of the "Corporation". For purposes of this Article VI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, 15 partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article VI with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. (i) Other Definitions. For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VI. (j) Survival. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (k) Jurisdiction. The Delaware Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this Article VI or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine the Corporation's obligation to advance expenses (including attorneys' fees). ARTICLE VII AMENDMENTS These bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the Corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. ARTICLE VIII GENERAL PROVISIONS Section 1. Dividends. Subject to applicable law and the certificate of incorporation, dividends on the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting and may be paid in cash, shares of the capital stock or other property. 16 Section 2. Payment of Dividends. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, for equalizing dividends, for repairing or maintaining any property of the Corporation or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it is created. Section 3. Contracts. Except as otherwise provided in these bylaws or by law or as otherwise directed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, or the Secretary shall be authorized to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages, and other instruments, either for the Corporation's own account or in a fiduciary or other capacity, and the seal of the Corporation, if appropriate, shall be affixed thereto by any such officer. The Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, or the President or, if designated by the Board of Directors or any such officer, any Vice President or the Secretary, may authorize any other officer, employee, or agent to execute and deliver, in the name and on behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, and other instruments, either for the Corporation's own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto. The grant of such authority by the Board of Directors or any such officer may be general or confined to specific conditions. Subject to the foregoing provisions, the Board of Directors may authorize any officer, officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 4. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors. Section 6. Seal. The Corporation may adopt a corporate seal, which shall be adopted and may be altered by the Board, and which may have inscribed thereon the name of the Corporation, the year of its organization and the words "Incorporated, Delaware", or which may have inscribed thereon any other words, including but not limited to the words "Corporate Seal" as the officers may designate. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced, or otherwise. Section 7. Entire Board. As used in these bylaws, "entire Board of Directors" means the total number of Directors which the Corporation would have if there were no vacancies in the Board of Directors. 17 Section 8. Waiver of Notice. Whenever any notice is required by law, the certificate of incorporation or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws. Section 9. Severability. Any determination that any provision of these bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these bylaws. Section 10. Pronouns. All pronouns used in these bylaws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. 18 CERTIFICATE OF SECRETARY The undersigned, Secretary of Waste Connections, Inc., a Delaware corporation, hereby certifies that the foregoing is a full, true and correct copy of the Amended and Restated Bylaws of said corporation, as amended and in full force and effect at the date of this Certificate. WITNESS the signature of the undersigned and the seal of the Corporation this July 20, 2004. [SEAL] ______________________________ Robert D. Evans, Secretary of Waste Connections, Inc. EX-10.26 3 exh10-26_12804.txt AMENDED REVOLVING CREDIT AGREEMENT EXHIBIT 10.26 ------------- AMENDMENT NO. 2 TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT This AMENDMENT NO. 2 TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT (this "Amendment") dated as of May 4, 2004, is by and among WASTE CONNECTIONS, INC., a Delaware corporation (the "Parent"), its Subsidiaries (together with the Parent, collectively the "Borrowers"), such banks or other financial institutions which may become a party to the Credit Agreement (as defined herein) (the "Lenders"), and FLEET NATIONAL BANK as Administrative Agent for the Lenders (the "Administrative Agent"). WHEREAS, the Borrowers, the Lenders and the Administrative Agent are parties to an Amended and Restated Revolving Credit and Term Loan Agreement dated as of October 22, 2003 (as amended and in effect from time to time, the "Credit Agreement"), pursuant to which the Lenders have agreed, upon certain terms and conditions, to make loans and otherwise extend credit to the Borrowers; WHEREAS, the Borrowers, Lenders and the Administrative Agent have agreed, on the terms and conditions set forth herein, to amend certain provisions of the Credit Agreement; and WHEREAS, capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Administrative Agent hereby agree as follows: SS.1. AMENDMENTS TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.1 of the Credit Agreement is hereby amended by deleting the definitions of "Convertible Subordinated Notes", "Permitted Debt Offering", "2022 Convertible Subordinated Notes" and "2022 Note Indenture" in their entirety and substituting the following new definitions in proper alphabetical order in lieu thereof: "Convertible Subordinated Notes. Collectively, (a) the 2006 Convertible Subordinated Notes and (b) the 2022 Convertible Subordinated Notes or any replacement of the 2022 Convertible Subordinated Notes effectuated in accordance with ss.8.11 herein. Permitted Debt Offering. Any issuance of Indebtedness by the Parent (other than an issuance of Subordinated Debt made in connection with the prepayment, purchase or replacement of the 2022 Convertible Subordinated Notes effectuated in accordance with ss.8.11 herein), provided that such Indebtedness (a) is unsecured, (b) is issued pursuant to documentation containing market terms, and (c) does not exceed $200,000,000 in the aggregate. 2022 Convertible Subordinated Notes. The Floating Rate Convertible Subordinated Notes due 2022 issued by the Parent pursuant to the Indenture, dated as of April 30, 2002 between the Parent and State Street Bank & Trust Company of California, N.A., as trustee, in an aggregate principal amount not to exceed $175,000,000 plus interest as provided for in the 2022 Notes Indenture, as such Convertible Subordinated Notes may be amended, supplemented or otherwise modified or replaced from time to time in accordance with ss.8.11 herein. 2022 Notes Indenture. The Indenture dated as of April 30, 2002, between the Parent State Street Bank & Trust Company of California, N.A., as trustee, with respect to the 2022 Convertible Subordinated Notes, as such Indenture may be amended, supplemented or otherwise modified or replaced from time to time in accordance with ss.8.11 herein." SS.2. AMENDMENTS TO SECTION 8.1 OF THE CREDIT AGREEMENT. Section 8.1(g) of the Credit Agreement is hereby amended by deleting such Section in its entirety and substituting the following new Section 8.1(g) in proper numerical order in lieu thereof: "(g) the Convertible Subordinated Notes and any Subordinated Debt issued in connection with the prepayment, purchase or replacement of the 2022 Convertible Subordinated Notes effectuated in accordance with ss.8.11 herein, provided, (i) the Subsidiaries are not guarantors of the Convertible Subordinated Notes and (ii) the Obligations of the Borrowers under this Credit Agreement and the obligations of the Borrowers under any Swap Contracts with the Lenders shall be Designated Senior Indebtedness as defined in the Indentures;" SS.3. AMENDMENTS TO SECTION 8.6 OF THE CREDIT AGREEMENT. Section 8.6 of the Credit Agreement is hereby amended by deleting such Section in its entirety and substituting the following new Section 8.6 in proper numerical order in lieu thereof: "SS.8.6 RESTRICTED PAYMENTS AND REDEMPTIONS. The Borrowers shall not redeem, convert, retire or otherwise acquire shares of any class of its capital stock, or make any Restricted Payments, except that (a) the Borrowers may make Distributions to another Borrower, (b) the Borrowers may prepay or purchase the Convertible Subordinated Notes in whole or in part with proceeds of Subordinated Debt, (c) the Parent may make Distributions and/or purchase shares of its capital stock and/or prepay or purchase the 2022 Convertible Subordinated Notes in an annual aggregate amount not to exceed $50,000,000 plus one hundred percent (100%) of the cash proceeds received by the Parent from the exercise of stock options after January 1, 2003, (d) the Parent may, in addition to its rights granted pursuant to clause (c) above, purchase shares of its capital stock in an aggregate amount not to exceed $100,000,000, and (e) the Parent may, in addition to its rights granted pursuant to clauses (c) and (d) above, purchase shares of its capital stock in an amount not to exceed fifty percent (50%) of the Net Financing Proceeds from a Permitted Debt Offering which is in the form of convertible subordinated notes, provided that an amount equal to fifty percent (50%) of the Net Financing Proceeds from such Permitted Debt Offering is simultaneously applied PRO RATA to reduce outstanding Loans hereunder. Any Term Loan Lender may decline to accept any payments due to such Term Loan Lender pursuant to clause (e) above in which case such declined payments shall be used to repay the Revolving Credit Loans (but not reduce the Total Revolving Credit Commitment) on a PRO RATA basis in accordance with each Lender's Commitment Percentage. In addition, the Borrowers shall not effect or permit any change in or amendment to any document or instrument pertaining to the terms of any Borrower's (other than the Parent's) capital stock. Notwithstanding the foregoing, no Borrower shall make any Distribution and/or purchase any shares of its capital stock under this ss.8.6 if (i) a Default or Event of Default exists or would be created by the making of such Distribution or by the purchase of such capital stock, as the case may be, or (ii) with respect to Distributions and/or purchases of shares of its capital stock made under clauses (c) through (e) above, the Leverage Ratio taking into account such Distribution and/or such purchase would exceed 3.75 to 1.00." SS.4. AMENDMENTS TO SECTION 8.11 OF THE CREDIT AGREEMENT. Section 8.11 of the Credit Agreement is hereby amended by deleting such Section in its entirety and substituting the following new Section 8.11 in proper numerical order in lieu thereof: "SS.8.11 SUBORDINATED DEBT. No Borrower will amend, supplement or otherwise modify the terms of any of the Subordinated Debt or any of the documents evidencing such Subordinated Debt or prepay, redeem or purchase any of the Subordinated Debt without the consent of the Required Lenders; provided, however, so long as no Default or Event of Default has occurred and is continuing, or would be created thereby, the Borrowers shall be permitted to (i) make regularly scheduled -2- payments of interest on the Subordinated Debt, (ii) make regularly scheduled payments of principal on the 2006 Convertible Subordinated Notes, (iii) prepay the Convertible Subordinated Notes with proceeds of Subordinated Debt, (iv) purchase the Convertible Subordinated Notes, in whole or in part, with proceeds of Subordinated Debt, and (v) amend, supplement or otherwise modify the 2022 Convertible Subordinated Notes and the 2022 Notes Indenture or replace the 2022 Convertible Subordinated Notes with proceeds of Subordinated Debt, provided, that any such amendment, supplement or modification thereto or replacement thereof shall (a) provide for a maturity date which extends beyond the Revolving Credit Maturity Date and the Term Loan Maturity Date and (b) otherwise not change, alter or modify any material terms of such Convertible Subordinated Notes in any manner which adversely affects the Lenders." SS.5. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective upon the Administrative Agent's receipt of a counterpart signature page to this Amendment duly executed and delivered by each of the Borrowers, the Administrative Agent and the Required Lenders. SS.6. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers represents and warrants as follows: (a) Each of the representations and warranties of the Borrowers contained in the Credit Agreement or in any document or instrument delivered pursuant to or in connection with the Credit Agreement shall be true as of the date as of which they were made and are true and correct in all material respects as of the date hereof with the same effect as if made on and as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and changes occurring in the ordinary course of business which singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date). (b) No Default or Event of Default under the Credit Agreement has occurred and is continuing. SS.7. RATIFICATION, ETC. Except as expressly amended hereby, the Credit Agreement, the other Loan Documents and all documents, instruments and agreements related thereto are hereby ratified and confirmed in all respects and shall continue in full force and effect. Each Borrower hereby affirms all of its Obligations under the Credit Agreement and under each of the other Loan Documents to which it is a party and hereby affirms its absolute and unconditional promise to pay to the Lenders the Loans and all other amounts due under the Credit Agreement (as amended hereby) and the other Loan Documents. Each Borrower hereby confirms that the Obligations are and remain secured pursuant to the Security Documents and pursuant to all other instruments and documents executed and delivered by such Borrower as security for the Obligations. This Amendment and the Credit Agreement shall hereafter be read and construed together as a single document, and all references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended by this Amendment. SS.8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SS.9. DELIVERY BY FACSIMILE OR OTHER ELECTRONIC TRANSMISSION. This Amendment, to the extent signeD and delivered by means of a facsimile machine or other electronic transmission in which the actual signature is evident, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto, each other party hereto or thereto shall re-execute original forms hereof and deliver them to all other parties. No party hereto shall raise the -3- use of a facsimile machine or other electronic transmission in which the actual signature is evident to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or other electronic transmission in which the actual signature is evident as a defense to the formation of a contract and each party forever waives such defense. SS.10. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by differenT parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which counterparts taken together shall be deemed to constitute one and the same instrument. SS.11. MISCELLANEOUS. The captions in this Amendment are for convenience of reference only and shalL not define or limit the provisions hereof. The Borrowers agree to pay to the Administrative Agent, on demand by the Administrative Agent, all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent in connection with the preparation of this Amendment, including reasonable legal fees. [REMAINDER OF PAGE INTENTIONALLY BLANK] -4- IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as of the date first set forth above. THE BORROWERS: - -------------- WASTE CONNECTIONS, INC. AMERICAN DISPOSAL COMPANY, INC. AMERICAN SANITARY SERVICE, INC. ARROW SANITARY SERVICE, INC. BANDON DISPOSAL & RECYCLING, INC. BUTLER COUNTY LANDFILL, INC. CAMINO REAL ENVIRONMENTAL CENTER, INC. CITY SANITATION, INC. COASTAL ROLLOFF SERVICE COLD CANYON LAND FILL, INC. COMMUNITY REFUSE DISPOSAL INC. CORRAL DE PIEDRA LAND COMPANY CURRY TRANSFER & RECYCLING, INC. D. M. DISPOSAL CO., INC. DENVER REGIONAL LANDFILL, INC. ENVIRONMENTAL TRUST COMPANY ETC OF GEORGIA, INC. FINNEY COUNTY LANDFILL, INC. G & P DEVELOPMENT, INC. ISLAND DISPOSAL, INC. J BAR J LAND, INC. LEALCO, INC. LES' COUNTY SANITARY, INC. LES' SANITARY SERVICE, INC. MADERA DISPOSAL SYSTEMS, INC. MAMMOTH DISPOSAL COMPANY MANAGEMENT ENVIRONMENTAL NATIONAL, INC. MASON COUNTY GARBAGE CO., INC. MILLENNIUM WASTE INCORPORATED MISSION COUNTRY DISPOSAL MORRO BAY GARBAGE SERVICE MURREY'S DISPOSAL COMPANY, INC. NEBRASKA ECOLOGY SYSTEMS, INC. NOBLES COUNTY LANDFILL, INC. NORTH BEND SANITATION SERVICE, INC. By: --------------------------------------------- Name: Ron Mittelstaedt Title: President and Chief Executive Officer NORTHERN PLAINS DISPOSAL, INC. OKLAHOMA CITY WASTE DISPOSAL, INC. OKLAHOMA LANDFILL HOLDINGS, INC. OSAGE LANDFILL, INC. RED CARPET LANDFILL, INC. RH FINANCIAL CORPORATION RHINO SOLID WASTE, INC. SAN LUIS GARBAGE COMPANY SCOTT SOLID WASTE DISPOSAL COMPANY SOUTH COUNTY SANITARY SERVICE, INC. SOUTHERN PLAINS DISPOSAL, INC. TACOMA RECYCLING COMPANY, INC. TENNESSEE WASTE MOVERS, INC. WASCO COUNTY LANDFILL, INC. WASTE CONNECTIONS MANAGEMENT SERVICES, INC. WASTE CONNECTIONS OF ALABAMA, INC. WASTE CONNECTIONS OF ARIZONA, INC. WASTE CONNECTIONS OF ARKANSAS, INC. WASTE CONNECTIONS OF CALIFORNIA, INC. (F/K/A AMADOR DISPOSAL SERVICE, INC.) WASTE CONNECTIONS OF COLORADO, INC. WASTE CONNECTIONS OF ILLINOIS, INC. WASTE CONNECTIONS OF IOWA, INC. (F/K/A WHALEY WASTE SYSTEMS INC.) WASTE CONNECTIONS OF KANSAS, INC. WASTE CONNECTIONS OF KENTUCKY, INC. WASTE CONNECTIONS OF MINNESOTA, INC. (F/K/A RITTER'S SANITARY SERVICE, INC.) WASTE CONNECTIONS OF MISSISSIPPI, INC. (F/K/A LIBERTY WASTE SERVICES OF MISSISSIPPI HOLDINGS, INC.) WASTE CONNECTIONS OF MISSOURI, INC. WASTE CONNECTIONS OF MONTANA, INC. WASTE CONNECTIONS OF NEBRASKA, INC. WASTE CONNECTIONS OF NEW MEXICO, INC. WASTE CONNECTIONS OF OKLAHOMA, INC. (F/K/A B & B SANITATION, INC.) WASTE CONNECTIONS OF OREGON, INC. (F/K/A SWEET HOME SANITATION SERVICE, INC.) WASTE CONNECTIONS OF SOUTH DAKOTA, INC.(F/K/A NOVAK ENTERPRISES, INC.) WASTE CONNECTIONS OF TENNESSEE, INC. (FKA LIBERTY WASTE SERVICES OF TENNESSEE HOLDINGS, INC.) WASTE CONNECTIONS OF THE CENTRAL VALLEY, INC. (F/K/A/ KINGSBURG DISPOSAL SERVICE, INC.) WASTE CONNECTIONS OF UTAH, INC. By: -------------------------------------------- Name: Ron Mittelstaedt Title: President and Chief Executive Officer WASTE CONNECTIONS OF WASHINGTON, INC. WASTE CONNECTIONS OF WYOMING, INC. WASTE CONNECTIONS TRANSPORTATION COMPANY, INC. WASTE SERVICES OF N.E. MISSISSIPPI, INC. WCI OF GEORGIA, INC. WEST COAST RECYCLING AND TRANSFER, INC. By: -------------------------------------------- Name: Ron Mittelstaedt Title: President and Chief Executive Officer CONTRACTORS WASTE SERVICES, INC. By: -------------------------------------------- Name: Ron Mittelstaedt Title: President and Chief Executive Officer COLUMBIA RESOURCE CO., L.P. FINLEY-BUTTES LIMITED PARTNERSHIP By: Management Environmental National, Inc., its General Partner By: ------------------------------------ Name: Ron Mittelstaedt Title: President and Chief Executive Officer EL PASO DISPOSAL, LP By: Waste Connections of Texas, LLC, its General Partner By: Waste Connections Management Services, Inc., its Manager By: ------------------------------------ Name: Ron Mittelstaedt Title: President and Chief Executive Officer SANTEK ENVIRONMENTAL OF MISSISSIPPI, L.L.C. WASTE SERVICES OF MISSISSIPPI, LLC By: Waste Connections, Inc., its Managing Member By: ------------------------------------ Name: Ron Mittelstaedt Title: President and Chief Executive Officer WASTE CONNECTIONS OF TEXAS, LLC By: Waste Connections Management Services, Inc., its Manager By: ------------------------------------ Name: Ron Mittelstaedt Title: President and Chief Executive Officer SCOTT WASTE SERVICES, LLC By: Waste Connections, Inc., its Manager By: ------------------------------------ Name: Ron Mittelstaedt Title: President and Chief Executive Officer ADMINISTRATIVE AGENT: - --------------------- FLEET NATIONAL BANK, as Administrative Agent By: ---------------------------------------- Name: Title: LENDERS: - -------- [INSERT INSTITUTION NAME] By: -------------------------------------------- Name: Title: EX-10.27 4 exh10-27_12804.txt NONQUALIFIED DEFERRED COMPENSATION PLAN WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN EFFECTIVE JULY 1, 2004 COPYRIGHT (C) 2004 BY CLARK CONSULTING, INC. EXECUTIVE BENEFITS PRACTICE ALL RIGHTS RESERVED WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS.....................................................1 ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY..............................6 2.1 SELECTION BY COMMITTEE..........................................6 2.2 ENROLLMENT AND ELIGIBILITY REQUIREMENTS; COMMENCEMENT OF PARTICIPATION................................................6 2.3 TERMINATION OF A PARTICIPANT'S ELIGIBILITY......................7 ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY CONTRIBUTION AMOUNTS/COMPANY RESTORATION MATCHING AMOUNTS/VESTING/CREDITING/TAXES............7 3.1 MINIMUM DEFERRALS...............................................7 3.2 MAXIMUM DEFERRAL................................................8 3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM......................8 3.4 WITHHOLDING AND CREDITING OF ANNUAL DEFERRAL AMOUNTS............8 3.5 COMPANY CONTRIBUTION AMOUNT.....................................9 3.6 COMPANY RESTORATION MATCHING AMOUNT.............................9 3.7 CREDITING OF AMOUNTS AFTER BENEFIT DISTRIBUTION.................9 3.8 VESTING.........................................................9 3.9 CREDITING/DEBITING OF ACCOUNT BALANCES..........................9 3.10 FICA AND OTHER TAXES...........................................11 ARTICLE 4 SCHEDULED DISTRIBUTION; UNFORESEEABLE FINANCIAL EMERGENCIES;...11 4.1 SCHEDULED DISTRIBUTION.........................................11 4.2 POSTPONING SCHEDULED DISTRIBUTIONS.............................12 4.3 OTHER BENEFITS TAKE PRECEDENCE OVER SCHEDULED DISTRIBUTIONS....12 4.4 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES....................................................12 ARTICLE 5 CHANGE IN CONTROL BENEFIT......................................13 5.1 CHANGE IN CONTROL BENEFIT......................................13 5.2 PAYMENT OF CHANGE IN CONTROL BENEFIT...........................13 ARTICLE 6 RETIREMENT BENEFIT.............................................14 6.1 RETIREMENT BENEFIT.............................................14 6.2 PAYMENT OF RETIREMENT BENEFIT..................................14 ARTICLE 7 TERMINATION BENEFIT............................................14 7.1 TERMINATION BENEFIT............................................14 7.2 PAYMENT OF TERMINATION BENEFIT.................................14 -i- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ ARTICLE 8 DISABILITY BENEFIT.............................................14 8.1 DISABILITY BENEFIT.............................................14 8.1 PAYMENT OF DISABILITY BENEFIT..................................14 ARTICLE 9 DEATH BENEFIT..................................................14 9.1 DEATH BENEFIT..................................................14 9.2 PAYMENT OF DEATH BENEFIT.......................................15 ARTICLE 10 BENEFICIARY DESIGNATION........................................15 10.1 BENEFICIARY....................................................15 10.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT...............15 10.3 ACKNOWLEDGEMENT................................................15 10.4 NO BENEFICIARY DESIGNATION.....................................15 10.5 DOUBT AS TO BENEFICIARY........................................15 10.6 DISCHARGE OF OBLIGATIONS.......................................15 ARTICLE 11 TERMINATION OF PLAN, AMENDMENT OR MODIFICATION.................16 11.1 TERMINATION OF PLAN............................................16 11.2 AMENDMENT......................................................16 11.3 PLAN AGREEMENT.................................................16 11.4 EFFECT OF PAYMENT..............................................16 ARTICLE 12 ADMINISTRATION.................................................16 12.1 COMMITTEE DUTIES...............................................16 12.2 ADMINISTRATION UPON CHANGE IN CONTROL..........................16 12.3 AGENTS.........................................................17 12.4 BINDING EFFECT OF DECISIONS....................................17 12.5 INDEMNITY OF COMMITTEE.........................................17 12.6 EMPLOYER INFORMATION...........................................17 ARTICLE 13 OTHER BENEFITS AND AGREEMENTS..................................18 13.1 COORDINATION WITH OTHER BENEFITS...............................18 ARTICLE 14 CLAIMS PROCEDURES..............................................18 14.1 PRESENTATION OF CLAIM..........................................18 14.2 NOTIFICATION OF DECISION.......................................18 14.3 REVIEW OF A DENIED CLAIM.......................................19 14.4 DECISION ON REVIEW.............................................19 14.5 LEGAL ACTION...................................................19 -ii- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ ARTICLE 15 TRUST..........................................................20 15.1 ESTABLISHMENT OF THE TRUST.....................................20 15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST....................20 15.3 DISTRIBUTIONS FROM THE TRUST...................................20 ARTICLE 16 MISCELLANEOUS..................................................20 16.1 STATUS OF PLAN.................................................20 16.2 UNSECURED GENERAL CREDITOR.....................................20 16.3 EMPLOYER'S LIABILITY...........................................20 16.4 NONASSIGNABILITY...............................................20 16.5 NOT A CONTRACT OF EMPLOYMENT...................................21 16.6 FURNISHING INFORMATION.........................................21 16.7 TERMS..........................................................21 16.8 CAPTIONS.......................................................21 16.9 GOVERNING LAW..................................................21 16.10 NOTICE.........................................................21 16.11 SUCCESSORS.....................................................22 16.12 SPOUSE'S INTEREST..............................................22 16.13 VALIDITY.......................................................22 16.14 INCOMPETENT....................................................22 16.15 COURT ORDER....................................................22 16.16 DEDUCTION LIMITATION ON BENEFIT PAYMENTS.......................22 16.17 INSURANCE......................................................23 -iii- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN Effective July 1, 2004 PURPOSE ------- The purpose of this Plan is to provide specified benefits to a select group of management or highly compensated Employees and Directors who contribute materially to the continued growth, development and future business success of Waste Connections, Inc., a Delaware corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE 1 DEFINITIONS ----------- For the purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" shall mean, with respect to a Participant, an entry on the records of the Employer equal to the sum of (i) the Deferral Account balance, (ii) the Company Contribution Account balance, and (iii) the Company Restoration Matching Account balance. The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. 1.2 "Annual Deferral Amount" shall mean that portion of a Participant's Base Salary, Bonus, Commissions, Director Fees and LTIP Amounts that a Participant defers in accordance with Article 3 for any one Plan Year, without regard to whether such amounts are withheld and credited during such Plan Year. In the event of a Participant's Retirement, Disability, death or Termination of Employment prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.3 "Annual Installment Method" shall be an annual installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: (i) for the first annual installment, the Participant's vested Account Balance shall be calculated as of the close of business on or around the last day of the six-month period immediately following the date on which the Participant Retires, as determined by the Committee in its sole discretion, and (ii) for remaining annual installments, the Participant's vested Account Balance shall be calculated on every anniversary of such calculation date, as applicable. Each annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a ten (10) year Annual Installment Method for the Retirement Benefit, the first payment shall be 1/10 of the vested Account Balance, calculated as described in this definition. The following year, the payment shall be 1/9 of the vested Account Balance, calculated as described in this definition. 1.4 "Base Salary" shall mean the annual cash compensation relating to services performed during any calendar year, excluding distributions from nonqualified deferred compensation plans, bonuses, commissions, - -------------------------------------------------------------------------------- -1- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, director fees and other fees, and automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee's gross income). Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or nonqualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee. 1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 10, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.6 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.7 "Benefit Distribution Date" shall mean the date that triggers distribution of a Participant's vested Account Balance. A Participant's Benefit Distribution Date shall be determined upon the occurrence of any one of the following: (a) If the Participant Retires, his or her Benefit Distribution Date shall be the last day of the six-month period immediately following the date on which the Participant Retires; or (b) If the Participant experiences a Termination of Employment, his or her Benefit Distribution Date shall be the last day of the six-month period immediately following the date on which the Participant experiences a Termination of Employment; or (c) The date on which the Committee is provided with proof that is satisfactory to the Committee of the Participant's death, if the Participant dies prior to the complete distribution of his or her vested Account Balance; or (d) The date on which the Participant becomes Disabled; or (e) The date on which the Company experiences a Change in Control, as determined by the Committee in its sole discretion, if (i) the Participant has elected to receive a Change in Control Benefit, as set forth in Section 5.2 below, and (ii) if a Change in Control occurs prior to the Participant's Termination of Employment, Retirement, death or Disability. 1.8 "Board" shall mean the board of directors of the Company. 1.9 "Bonus" shall mean any compensation, in addition to Base Salary, Commissions and LTIP Amounts, earned by a Participant for services rendered during a Plan Year, under any Employer's annual bonus and cash incentive plans. - -------------------------------------------------------------------------------- -2- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ 1.10 "Change in Control" shall mean: (a) Any reorganization, liquidation or consolidation of the Company, or any merger or other business combination of the Company with any other corporation, other than any such merger or other combination that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction; (b) During any period of not more than two consecutive years, not including any period prior to the adoption of this Plan, individuals who, at the beginning of such period constitute the board of directors of the Company, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section 1.10) whose election by the board of directors or nomination for election by the Company's stockholders was approved by a vote of at least a majority of the directors then still in office, who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) Any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or (d) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 ("Exchange Act")) shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the Company's outstanding voting securities (except that for purposes of this definition, "person" shall not include any person (or any person that controls, is controlled by or is under common control with such person) who is a trustee or other fiduciary holding securities under any employee benefit plan of the Company, or a corporation that is owned directly or indirectly by the stockholders of the Company in substantially the same percentage as their ownership of the Company). A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction. 1.11 "Change in Control Benefit" shall have the meaning set forth in Article 5. 1.12 "Claimant" shall have the meaning set forth in Section 14.1. 1.13 "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. 1.14 "Commissions" shall mean the cash commissions earned by a Participant from any Employer for services rendered during a Plan Year, excluding Bonus, LTIP Amounts or other additional incentives or awards earned by the Participant. 1.15 "Committee" shall mean the committee described in Article 12. - -------------------------------------------------------------------------------- -3- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ 1.16 "Company" shall mean Waste Connections, Inc., a Delaware corporation, and any successor to all or substantially all of the Company's assets or business. 1.17 "Company Contribution Account" shall mean (i) the sum of the Participant's Company Contribution Amounts, plus (ii) amounts credited or debited to the Participant's Company Contribution Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Contribution Account. 1.18 "Company Contribution Amount" shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5. 1.19 "Company Restoration Matching Account" shall mean (i) the sum of all of a Participant's Company Restoration Matching Amounts, plus (ii) amounts credited or debited to the Participant's Company Restoration Matching Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Restoration Matching Account. 1.20 "Company Restoration Matching Amount" shall mean, for any one Plan Year, the amount determined in accordance with Section 3.6. 1.21 "Death Benefit" shall mean the benefit set forth in Article 9. 1.22 "Deduction Limitation" shall mean the limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan, as set forth in Section 16.16. 1.23 "Deferral Account" shall mean (i) the sum of all of a Participant's Annual Deferral Amounts, plus (ii) amounts credited or debited to the Participant's Deferral Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account. 1.24 "Director" shall mean any member of the board of directors of any Employer. 1.25 "Director Fees" shall mean the annual fees earned by a Director from any Employer, including retainer fees and meetings fees, as compensation for serving on the board of directors. 1.26 "Disability" or "Disabled" shall mean that a Participant is disabled, in accordance with (i) the requirements of Section 223(d) of the Social Security Act, or (ii) the Waste Connections, Inc. Long-Term Disability Plan. 1.27 "Disability Benefit" shall mean the benefit set forth in Article 8. 1.28 "Election Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. 1.29 "Employee" shall mean a person who is an employee of any Employer. 1.30 "Employer(s)" shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor. 1.31 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. - -------------------------------------------------------------------------------- -4- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ 1.32 "First Plan Year" shall mean the period beginning July 1, 2004 and ending December 31, 2004. 1.33 "LTIP Amounts" shall mean any portion of the compensation attributable to a Plan Year that is earned by a Participant as an Employee under any Employer's long-term incentive plan or any other long-term incentive arrangement designated by the Committee. 1.34 "Participant" shall mean any Employee or Director (i) who is selected to participate in the Plan, (ii) who submits an executed Plan Agreement, Election Form and Beneficiary Designation Form, which are accepted by the Committee, and (iii) whose Plan Agreement has not terminated. 1.35 "Plan" shall mean the Waste Connections, Inc. Nonqualified Deferred Compensation Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time. 1.36 "Plan Agreement" shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant's Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant. 1.37 "Plan Year" shall, except for the First Plan Year, mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year. 1.38 "Retirement", "Retire(s)" or "Retired" shall mean, with respect to an Employee, severance from employment from all Employers for any reason other than a leave of absence, death or Disability on or after the Employee's attainment of age fifty-five (55) with five (5) Years of Service; and shall mean with respect to a Director who is not an Employee, severance of his or her directorships with all Employers on or after the Director's attainment of age fifty-five (55). If a Participant is both an Employee and a Director, Retirement shall not occur until he or she Retires as both an Employee and a Director. 1.39 "Retirement Benefit" shall mean the benefit set forth in Article 6. 1.40 "Scheduled Distribution" shall mean the distribution set forth in Section 4.1. 1.41 "Terminate the Plan", "Termination of the Plan" shall mean a determination by an Employer's board of directors that (i) all of its Participants shall no longer be eligible to participate in the Plan, (ii) all deferral elections for such Participants shall terminate, and (iii) such Participants shall no longer be eligible to receive company contributions under this Plan. 1.42 "Termination Benefit" shall mean the benefit set forth in Article 7. 1.43 "Termination of Employment" shall mean the severing of employment with all Employers, or service as a Director of all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability, death or an authorized leave of absence. If a Participant is both an Employee and a Director, a Termination of Employment shall occur only upon the termination of the last position held; provided, however, that - -------------------------------------------------------------------------------- -5- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ such a Participant may elect, at least three years before Termination of Employment and in accordance with the policies and procedures established by the Committee, to be treated for purposes of this Plan as having experienced a Termination of Employment at the time he or she ceases employment with an Employer as an Employee. 1.44 "Trust" shall mean one or more trusts established by the Company in accordance with Article 15. 1.45 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant, the Participant's spouse, or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. 1.46 "Years of Service" shall mean for an Employee, the total number of full years in which a Participant has been employed by one or more Employers. For purposes of this definition, a year of employment shall be a 365 day period (or 366 day period in the case of a leap year) that, for the first year, commences on the Employee's date of hiring and that, for any subsequent year, commences on an anniversary of that date. The Committee shall make a determination as to whether any partial year of employment shall be counted as a Year of Service. ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY ---------------------------------- 2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a select group of management and highly compensated Employees and Directors of the Employer, as determined by the Committee in its sole discretion. From that group, the Committee shall select, in its sole discretion, Employees and Directors to participate in the Plan. 2.2 ENROLLMENT AND ELIGIBILITY REQUIREMENTS; COMMENCEMENT OF PARTICIPATION. (a) As a condition to participation, each Employee or Director who is eligible to participate in the Plan effective as of the first day of a Plan Year and elects to participate in the Plan, shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, prior to the first day of such Plan Year, or such other earlier deadline as may be established by the Committee in its sole discretion. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary. (b) As a condition to participation, each Employee or Director who becomes eligible to participate in the Plan effective after the first day of a Plan Year and elects to participate in the Plan, or each Employee or Director who is selected to participate for the First Plan Year of the Plan itself and elects to participate in the Plan, shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, all within thirty (30) days after such Employee's or Director's eligibility to participate in the Plan becomes effective. In addition, the Committee shall establish from time - -------------------------------------------------------------------------------- -6- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ to time such other enrollment requirements as it determines in its sole discretion are necessary. (c) Each Employee or Director who is eligible to participate in the Plan shall commence participation in the Plan on the date that the Committee determines, in its sole discretion, that the Employee or Director has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period. Notwithstanding the foregoing, the Committee shall process such Participant's deferral election as soon as administratively practicable after such deferral election is submitted to and accepted by the Committee. (d) If an Employee or a Director fails to meet all requirements contained in this Section 2.2 within the period required, that Employee or Director shall not be eligible to participate in the Plan during such Plan Year. 2.3 TERMINATION OF A PARTICIPANT'S ELIGIBILITY. If the Committee determines that a Participant is no longer eligible to participate in the Plan, the Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant's membership status changes, (ii) prevent the Participant from making future deferral elections, and/or (iii) take further action that the Committee deems appropriate. Notwithstanding the foregoing, in the event of a Termination of the Plan, the termination of the affected Participants' eligibility for participation in the Plan shall not be governed by this Section 2.3, but rather shall be governed by Section 1.41 and Section 11.1. ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY CONTRIBUTION AMOUNTS/ COMPANY RESTORATION MATCHING AMOUNTS/ VESTING/CREDITING/TAXES ------------------------------------------------------------- 3.1 MINIMUM DEFERRALS. (A) ANNUAL DEFERRAL AMOUNT. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Salary, Bonus, Commissions, LTIP Amounts and/or Director Fees in the following minimum amounts for each deferral elected: ------------------------ ------------------------ DEFERRAL MINIMUM AMOUNT ------------------------ ------------------------ Base Salary, Bonus, $2,000 aggregate Commissions and/or LTIP Amounts ------------------------ ------------------------ Director Fees $2,000 ------------------------ ------------------------ If an election is made for less than the stated minimum amounts, or if no election is made, the amount deferred shall be zero. (B) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the First Plan Year of the Plan itself, the minimum Annual Deferral Amount shall be an amount equal to the - -------------------------------------------------------------------------------- -7- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12. 3.2 MAXIMUM DEFERRAL. (A) ANNUAL DEFERRAL AMOUNT. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Salary, Bonus, Commissions, LTIP Amounts and/or Director Fees up to the following maximum percentages for each deferral elected: ------------------------------- -------------------------------- DEFERRAL MAXIMUM PERCENTAGE ------------------------------- -------------------------------- Base Salary 80% ------------------------------- -------------------------------- Bonus 100% ------------------------------- -------------------------------- Commissions 100% ------------------------------- -------------------------------- LTIP Amounts 100% ------------------------------- -------------------------------- Director Fees 100% ------------------------------- -------------------------------- (B) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, the maximum Annual Deferral Amount shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant submits a Plan Agreement and Election Form to the Committee for acceptance. 3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM. (A) FIRST PLAN YEAR. In connection with a Participant's commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee. (B) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering a new Election Form to the Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made. If no such Election Form is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero for that Plan Year. 3.4 WITHHOLDING AND CREDITING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Base Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Salary. The Bonus, Commissions, LTIP Amounts and/or Director Fees portion of the Annual Deferral Amount shall be withheld at the time the Bonus, Commissions, LTIP Amounts or Director Fees are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. Annual Deferral Amounts shall be credited to a Participant's Deferral Account at the time such amounts would otherwise have been paid to the Participant. - -------------------------------------------------------------------------------- -8- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ 3.5 COMPANY CONTRIBUTION AMOUNT. (a) For each Plan Year, an Employer may be required to credit amounts to a Participant's Company Contribution Account in accordance with employment or other agreements entered into between the Participant and the Employer. Such amounts shall be credited on the date or dates prescribed by such agreements. (b) For each Plan Year, an Employer, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant's Company Contribution Account under this Plan, which amount shall be for that Participant the Company Contribution Amount for that Plan Year. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive a Company Contribution Amount for that Plan Year. The Company Contribution Amount described in this Section 3.5(b), if any, shall be credited on a date or dates to be determined by the Committee, in its sole discretion. 3.6 COMPANY RESTORATION MATCHING AMOUNT. A Participant's Company Restoration Matching Amount for any Plan Year shall be an amount determined by the Committee, in its sole discretion, to make up for certain limits applicable to the 401(k) Plan or other qualified plan for such Plan Year, as identified by the Committee, or for such other purposes as determined by the Committee in its sole discretion. The amount so credited to a Participant under this Plan for any Plan Year (i) may be smaller or larger than the amount credited to any other Participant, and (ii) may differ from the amount credited to such Participant in the preceding Plan Year. The Participant's Company Restoration Matching Account, if any, shall be credited on a date or dates to be determined by the Committee, in its sole discretion. 3.7 CREDITING OF AMOUNTS AFTER BENEFIT DISTRIBUTION. Notwithstanding any provision in this Plan to the contrary, should the complete distribution of a Participant's vested Account Balance occur prior to the date on which any portion of (i) the Annual Deferral Amount that a Participant has elected to defer in accordance with Section 3.3, (ii) the Company Contribution Amount, or (iii) the Company Restoration Matching Amount, would otherwise be credited to the Participant's Account Balance, such amounts shall not be credited to the Participant's Account Balance, but shall be paid to the Participant in a manner determined by the Committee, in its sole discretion. 3.8 VESTING. A Participant shall at all times be 100% vested in his or her Deferral Account, Company Contribution Account and Company Restoration Matching Account. 3.9 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following rules: (a) MEASUREMENT FUNDS. The Participant may elect one or more of the measurement funds selected by the Committee, in its sole discretion, which are based on certain mutual funds (the "Measurement Funds"), for the purpose of crediting or debiting additional amounts to his or her Account Balance. As necessary, the Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund. Each such action will take effect as of the first day of the first calendar quarter that begins at least thirty (30) days after the day on which the - -------------------------------------------------------------------------------- -9- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ Committee gives Participants advance written notice of such change, or if necessary to comply with applicable tax law, including but not limited to guidance issued after the effective date of this Plan, such other date designated by the Committee, in its sole discretion. (b) ELECTION OF MEASUREMENT FUNDS. A Participant, in connection with his or her initial deferral election in accordance with Section 3.3(a) above, shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.9(a) above) to be used to determine the amounts to be credited or debited to his or her Account Balance. If a Participant does not elect any of the Measurement Funds as described in the previous sentence, the Participant's Account Balance shall automatically be allocated into the lowest-risk Measurement Fund, as determined by the Committee, in its sole discretion. The Participant may (but is not required to) elect, by submitting an Election Form to the Committee that is accepted by the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the amounts to be credited or debited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund. If an election is made in accordance with the previous sentence, it shall apply as of the first business day deemed reasonably practicable by the Committee, in its sole discretion, and shall continue thereafter for each subsequent day in which the Participant participates in the Plan, unless changed in accordance with the previous sentence. (c) PROPORTIONATE ALLOCATION. In making any election described in Section 3.9(b) above, the Participant shall specify on the Election Form, in increments of one percent (1%), the percentage of his or her Account Balance or Measurement Fund, as applicable, to be allocated/reallocated. (d) CREDITING OR DEBITING METHOD. The performance of each Measurement Fund (either positive or negative) will be determined by the Committee, in its sole discretion, on a daily basis based on the manner in which such Participant's Account Balance has been hypothetically allocated among the Measurement Funds by the Participant. (e) NO ACTUAL INVESTMENT. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant's election of any such Measurement Fund, the allocation of his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Company or the Trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the investments on which the Measurement Funds are based, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company. - -------------------------------------------------------------------------------- -10- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ 3.10 FICA AND OTHER TAXES. (a) ANNUAL DEFERRAL AMOUNTS. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Salary, Bonus, Commissions and/or LTIP Amounts that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.10. (b) COMPANY RESTORATION MATCHING ACCOUNT AND COMPANY CONTRIBUTION ACCOUNT. When a Participant becomes vested in a portion of his or her Company Restoration Matching Account and/or Company Contribution Account, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Salary, Bonus, Commissions and/or LTIP Amounts that is not deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Company Restoration Matching Amount and/or Company Contribution Amount. If necessary, the Committee may reduce the vested portion of the Participant's Company Restoration Matching Account or Company Contribution Account, as applicable, in order to comply with this Section 3.10. (c) DISTRIBUTIONS. The Participant's Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust. ARTICLE 4 SCHEDULED DISTRIBUTION; UNFORESEEABLE FINANCIAL EMERGENCIES ----------------------------------------------------------- 4.1 SCHEDULED DISTRIBUTION. In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a Scheduled Distribution, in the form of a lump sum payment, from the Plan with respect to all or a portion of (i) the Annual Deferral Amount, (ii) the Company Contribution Amount, and (iii) the Company Restoration Matching Amount. The Scheduled Distribution shall be a lump sum payment in an amount that is equal to the portion of the Annual Deferral Amount, the vested portion of the Company Contribution Amount and the vested portion of the Company Restoration Matching Amount that the Participant elected to have distributed as a Scheduled Distribution, plus amounts credited or debited in the manner provided in Section 3.9 above on that amount, calculated as of the close of business on or around the date on which the Scheduled Distribution becomes payable, as determined by the Committee in its sole discretion. Subject to the other terms and conditions of this Plan, each Scheduled Distribution elected shall be paid out during a sixty (60) day period commencing immediately after the first day of any Plan Year designated by the Participant. The Plan Year designated by the Participant must be at least three (3) Plan Years after the end of the Plan Year to which the Participant's deferral election described in Section 3.3 relates. By way of example, if a Scheduled Distribution is elected for Annual Deferral Amounts, Company Contribution Amounts, and Company Restoration - -------------------------------------------------------------------------------- -11- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ Matching Amounts that are earned and/or contributed in the Plan Year commencing January 1, 2004, the Scheduled Distribution would become payable during a sixty (60) day period commencing January 1, 2008. Notwithstanding the language set forth above, the Committee shall, in its sole discretion, adjust the amount distributable as a Scheduled Distribution if any portion of the Company Contribution Amount or Company Restoration Matching Amount is unvested on the Scheduled Distribution Date. 4.2 POSTPONING SCHEDULED DISTRIBUTIONS. A Participant may elect to postpone any lump sum distribution described in Section 4.1 above, and have such amount paid out during a sixty (60) day period commencing immediately after an allowable alternative distribution date designated by the Participant in accordance with this Section 4.2. In order to make this election, the Participant must submit a new Scheduled Distribution Election Form to the Committee in accordance with the following criteria: (a) Such Scheduled Distribution Election Form must be submitted to and accepted by the Committee at least twelve (12) months prior to the Participant's previously designated Scheduled Distribution Date; and (b) The new Scheduled Distribution Date selected by the Participant must be the first day of a Plan Year, and must be at least five (5) years after the previously designated Scheduled Distribution Date. (c) The election of the new Scheduled Distribution Date shall have no effect until at least twelve (12) months after the date on which the election is made. 4.3 OTHER BENEFITS TAKE PRECEDENCE OVER SCHEDULED DISTRIBUTIONS. Should a Benefit Distribution Date occur that triggers a benefit under Articles 5, 6, 7, 8, or 9, any Annual Deferral Amount, Company Contribution Amount and/or Company Restoration Matching Amount, plus amounts credited or debited thereon, that are subject to a Scheduled Distribution election under Section 4.1 shall not be paid in accordance with Section 4.1, but shall be paid in accordance with the other applicable Article. 4.4 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. (a) If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to suspend deferrals of Base Salary, Bonus, Commissions, Director Fees, and LTIP Amounts to the extent deemed necessary by the Committee to satisfy the Unforeseeable Financial Emergency, plus amounts reasonably necessary to pay taxes reasonably anticipated as a result of the distribution. If suspension of deferrals is not sufficient to satisfy the Participant's Unforeseeable Financial Emergency, or if suspension of deferrals is not required under applicable tax law, the Participant may further petition the Committee to receive a partial or full payout from the Plan. The Participant shall only receive a payout from the Plan to the extent such payout is deemed necessary by the Committee to satisfy the Participant's Unforeseeable Financial Emergency. (b) The payout shall not exceed the lesser of (i) the Participant's vested Account Balance, calculated as of the close of business on or around the date on which the amount becomes payable, as - -------------------------------------------------------------------------------- -12- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ determined by the Committee in its sole discretion, or (ii) the amount necessary to satisfy the Unforeseeable Financial Emergency, plus amounts reasonably necessary to pay taxes reasonably anticipated as a result of the distribution. Notwithstanding the foregoing, a Participant may not receive a payout from the Plan to the extent that the Unforeseeable Financial Emergency is or may be relieved (A) through reimbursement or compensation by insurance or otherwise, (B) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship or (C) by suspension of deferrals under this Plan, if the Committee, in its sole discretion, determines that suspension is required by applicable tax law. (c) If the Committee, in its sole discretion, approves a Participant's petition for suspension, the Participant's deferrals under this Plan shall be suspended as of the date of such approval. If the Committee, in its sole discretion, approves a Participant's petition for suspension and payout, the Participant's deferrals under this Plan shall be suspended as of the date of such approval and the Participant shall receive a payout from the Plan within sixty (60) days of the date of such approval. (d) Notwithstanding the foregoing, the Committee shall interpret all provisions relating to suspension and/or payout under this Section 4.4 in a manner that is consistent with applicable tax law, including but not limited to guidance issued after the effective date of this Plan. ARTICLE 5 CHANGE IN CONTROL BENEFIT ------------------------- 5.1 CHANGE IN CONTROL BENEFIT. The Participant will receive a Change in Control Benefit, which shall be equal to the Participant's vested Account Balance, calculated as of the close of business on or around the Participant's Benefit Distribution Date, as selected by the Committee in its sole discretion. 5.2 PAYMENT OF CHANGE IN CONTROL BENEFIT. A Participant, in connection with his or her commencement of participation in the Plan, shall irrevocably elect on an Election Form whether to (i) receive a Change in Control Benefit, or (ii) have his or her Account Balance remain in the Plan upon the occurrence of a Change in Control and to have his or her Account Balance remain subject to the terms and conditions of the Plan. If a Participant does not make any election with respect to the payment of the Change in Control Benefit, then such Participant shall be deemed to have elected to receive a Change in Control Benefit upon the occurrence of a Change in Control. The Change in Control Benefit, if any, shall be paid to the Participant in a lump sum no later than sixty (60) days after the Participant's Benefit Distribution Date. Notwithstanding the foregoing, the Committee shall interpret all provisions in this Plan relating to a Change in Control Benefit in a manner that is consistent with applicable tax law, including but not limited to guidance issued after the effective date of this Plan. - -------------------------------------------------------------------------------- -13- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ ARTICLE 6 RETIREMENT BENEFIT ------------------ 6.1 RETIREMENT BENEFIT. A Participant who Retires shall receive, as a Retirement Benefit, his or her vested Account Balance, calculated as of the close of business on or around the Participant's Benefit Distribution Date, as determined by the Committee in its sole discretion. 6.2 PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum or pursuant to an Annual Installment Method of up to 15 years. If a Participant does not make any election with respect to the payment of the Retirement Benefit in connection with his or her commencement of participation in the Plan, then such Participant shall be deemed to have elected to receive the Retirement Benefit in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the Participant's Benefit Distribution Date. Remaining installments, if any, shall be paid no later than sixty (60) days after each anniversary of the Participant's Benefit Distribution Date. ARTICLE 7 TERMINATION BENEFIT ------------------- 7.1 TERMINATION BENEFIT. A Participant who experiences a Termination of Employment shall receive, as a Termination Benefit, his or her vested Account Balance, calculated as of the close of business on or around the Participant's Benefit Distribution Date, as determined by the Committee in its sole discretion. 7.2 PAYMENT OF TERMINATION BENEFIT. The Termination Benefit shall be paid to the Participant in a lump sum payment no later than sixty (60) days after the Participant's Benefit Distribution Date. ARTICLE 8 DISABILITY BENEFIT ------------------ 8.1 DISABILITY BENEFIT. Upon a Participant's Disability, the Participant shall receive a Disability Benefit, which shall be equal to the Participant's vested Account Balance, calculated as of the close of business on or around the Participant's Benefit Distribution Date, as selected by the Committee in its sole discretion. 8.2 PAYMENT OF DISABILITY BENEFIT. The Disability Benefit shall be paid to the Participant in a lump sum payment no later than sixty (60) days after the Participant's Benefit Distribution Date. ARTICLE 9 DEATH BENEFIT ------------- 9.1 DEATH BENEFIT. The Participant's Beneficiary(ies) shall receive a Death Benefit upon the Participant's death which will be equal to the Participant's vested Account Balance, calculated as of the close of business on or around the Participant's Benefit Distribution Date, as selected by the Committee in its sole discretion. - -------------------------------------------------------------------------------- -14- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ 9.2 PAYMENT OF DEATH BENEFIT. The Death Benefit shall be paid to the Participant's Beneficiary(ies) in a lump sum payment no later than sixty (60) days after the Participant's Benefit Distribution Date. ARTICLE 10 BENEFICIARY DESIGNATION ----------------------- 10.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates. 10.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, the Committee may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Committee, executed by such Participant's spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death. 10.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent. 10.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 10.1, 10.2 and 10.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate. 10.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant's Employer to withhold such payments until this matter is resolved to the Committee's satisfaction. 10.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. - -------------------------------------------------------------------------------- -15- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ ARTICLE 11 TERMINATION OF PLAN, AMENDMENT OR MODIFICATION ---------------------------------------------- 11.1 TERMINATION OF PLAN. Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, each Employer reserves the right to Terminate the Plan (as defined in Section 1.41). Following a Termination of the Plan, Participant Account Balances shall remain in the Plan until the Participant becomes eligible for the benefits provided in Articles 4, 5, 6, 7, 8 or 9 in accordance with the provisions of those Articles. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination. 11.2 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to that Employer. Notwithstanding the foregoing, (i) no amendment or modification shall be effective to decrease the value of a Participant's vested Account Balance in existence at the time the amendment or modification is made, (ii) no amendment or modification shall be effective to change a deferral election or distribution election of a Participant that has been submitted to, and accepted by the Committee, prior to the time the amendment or modification is made without the consent of the Participant, and (iii) no amendment or modification of this Section 11.2 or Section 12.2 of the Plan shall be effective. 11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant's Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the written consent of the Participant. 11.4 EFFECT OF PAYMENT. The full payment of the Participant's vested Account Balance under Articles 4, 5, 6, 7, 8, or 9 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan, and the Participant's Plan Agreement shall terminate. ARTICLE 12 ADMINISTRATION -------------- 12.1 COMMITTEE DUTIES. Except as otherwise provided in this Article 12, this Plan shall be administered by a Committee, which shall consist of the Board, or such committee as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself, but shall not be prohibited from voting or acting on any matter in which such individual's interest is affected in the same manner as other Participants generally. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company. 12.2 ADMINISTRATION UPON CHANGE IN CONTROL. For purposes of this Plan, the Committee shall be the "Administrator" at all times prior to the occurrence of a Change in Control. Within one hundred and twenty (120) - -------------------------------------------------------------------------------- -16- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ days following a Change in Control, an independent third party "Administrator" may be selected by the individual who, immediately prior to the Change in Control, was the Company's Chief Executive Officer or, if not so identified, the Company's highest ranking officer (the "Ex-CEO"), and approved by the Trustee. The Committee, as constituted prior to the Change in Control, shall continue to be the Administrator until the earlier of (i) the date on which such independent third party is selected and approved, or (ii) the expiration of the one hundred and twenty (120) day period following the Change in Control. If an independent third party is not selected within one hundred and twenty (120) days of such Change in Control, the Committee, as described in Section 12.1 above, shall be the Administrator. The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. Upon and after the occurrence of a Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney's fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator on all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change in Control, the Administrator may be terminated (and a replacement appointed) by the Trustee only with the approval of the Ex-CEO. Upon and after a Change in Control, the Administrator may not be terminated by the Company. 12.3 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. 12.4 BINDING EFFECT OF DECISIONS. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 12.5 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator. 12.6 EMPLOYER INFORMATION. To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the compensation of its - -------------------------------------------------------------------------------- -17- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require. ARTICLE 13 OTHER BENEFITS AND AGREEMENTS ----------------------------- 13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant's Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. ARTICLE 14 CLAIMS PROCEDURES ----------------- 14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within a reasonable time, but no later than ninety (90) days after receiving the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. The Committee shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; - -------------------------------------------------------------------------------- -18- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; (iv) an explanation of the claim review procedure set forth in Section 14.3 below; and (v) a statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. 14.3 REVIEW OF A DENIED CLAIM. On or before sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. The Claimant (or the Claimant's duly authorized representative): (a) may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 14.4 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and no later than sixty (60) days after the Committee receives the Claimant's written request for a review of the denial of the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. In rendering its decision, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant's claim for benefits; and (d) a statement of the Claimant's right to bring a civil action under ERISA Section 502(a). 14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. - -------------------------------------------------------------------------------- -19- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ ARTICLE 15 TRUST ----- 15.1 ESTABLISHMENT OF THE TRUST. In order to provide assets from which to fulfill the obligations of the Participants and their beneficiaries under the Plan, the Company shall establish a trust by a trust agreement with a third party, the trustee, to which each Employer may, in its discretion, contribute cash or other property, including securities issued by the Company, to provide for the benefit payments under the Plan, (the "Trust"). 15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan. 15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under this Plan. ARTICLE 16 MISCELLANEOUS ------------- 16.1 STATUS OF PLAN. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that "is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. 16.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any specific property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 16.3 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement. 16.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in - -------------------------------------------------------------------------------- -20- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 16.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, either as an Employee or a Director, or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 16.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 16.7 TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 16.8 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 16.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Delaware without regard to its conflicts of laws principles. Venue shall lie in Wilmington, Delaware. 16.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Waste Connections, Inc. Attn: Jerri Hunt, Vice President of Human Resources and Risk Management 35 Iron Point Circle Suite 200 Folsom, CA 95630 -------------------------------------------------------- -------------------------------------------------------- Copy to: Steven Bouck, Chief Financial Officer and Executive Vice President (at same address) -------------------------------------------------------- Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. - -------------------------------------------------------------------------------- -21- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 16.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's designated Beneficiaries. 16.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 16.13 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 16.14 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 16.15 COURT ORDER. The Committee is authorized to comply with any court order in any action in which the Plan or the Committee has been named as a party, including any action involving a determination of the rights or interests in a Participant's benefits under the Plan. Notwithstanding the foregoing, the Committee shall interpret this provision in a manner that is consistent with applicable tax law, including but not limited to guidance issued after the effective date of this Plan. 16.16 DEDUCTION LIMITATION ON BENEFIT PAYMENTS. If an Employer determines in good faith that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.9 above, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant's death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m). - -------------------------------------------------------------------------------- -22- WASTE CONNECTIONS, INC. NONQUALIFIED DEFERRED COMPENSATION PLAN MASTER PLAN DOCUMENT ================================================================================ 16.17 INSURANCE. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance. IN WITNESS WHEREOF, the Company has signed this Plan document as of _____, 2004. "Company" Waste Connections, Inc., a Delaware corporation By: -------------------------------------------- Title: ------------------------------------------ - -------------------------------------------------------------------------------- -23- EX-10.28 5 exh10-28_12804.txt 2004 EQUITY INCENTIVE PLAN EXHIBIT 10.28 ------------- WASTE CONNECTIONS, INC. 2004 EQUITY INCENTIVE PLAN AS AMENDED AND RESTATED JULY 20, 2004 1. PURPOSE. The purpose of the Plan is to provide a means for the Company and any Subsidiary, through the grant of Nonqualified Stock Options and/or Restricted Stock or Restricted Stock Units to selected Employees (including officers), Directors and Consultants, to attract and retain persons of ability as Employees, Directors and Consultants, and to motivate such persons to exert their best efforts on behalf of the Company and any Subsidiary. 2. DEFINITIONS. (A) "BOARD" means the Company's Board of Directors. (B) "CHANGE IN CONTROL" means: (I) any reorganization, liquidation or consolidation of the Company, or any merger or other business combination of the Company with any other corporation, other than any such merger or other combination that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction; (II) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or (III) a transaction or series of related transactions in which any "person" (as defined in Section 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the Company's outstanding voting securities (except that for purposes of this definition, "person" shall not include any person (or any person that controls, is controlled by or is under common control with such person) who as of the date of an Option Agreement or a Restricted Stock or Restricted Stock Unit Agreement owns ten percent (10%) or more of the total voting power represented by the outstanding voting securities of the Company, or a trustee or other fiduciary holding securities under any employee benefit plan of the Company, or a corporation that is owned directly or indirectly by the stockholders of the Company in substantially the same percentage as their ownership of the Company). A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction. (C) "CODE" means the Internal Revenue Code of 1986, as amended from time to time. (D) "COMMITTEE" means a committee appointed by the Board in accordance with Section 4(b) of the Plan. (E) "COMPANY" means Waste Connections, Inc., a Delaware corporation. (F) "CONSULTANT" means any person, including an advisor, engaged by the Company or a Subsidiary to render consulting services and who is compensated for such services; provided that the term "Consultant" shall not include Directors. (G) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the individual's employment as an Employee or relationship as a Consultant is not interrupted or terminated, or, in the case of a Director who is not an Employee, the term means the Director remains a Director of the Company. The Board, in its sole discretion, may determine whether Continuous Status as an Employee, Director or Consultant shall be considered interrupted in the case of (i) any leave of absence approved by the Board, including sick leave, military leave or any other personal leave, or (ii) transfers between locations of the Company or between the Company and a Subsidiary or their successors. (H) "DIRECTOR" means a member of the Company's Board. (I) "DISABILITY" means permanent and total disability within the meaning of Section 422(c)(6) of the Code. (J) "EMPLOYEE" means any person employed by the Company or any Subsidiary of the Company. Any officer of the Company or a Subsidiary is an Employee. A Director is not an Employee unless he or she has an employment relationship with the Company or a Subsidiary in addition to being a Director. Service as a Consultant shall not be sufficient to constitute "employment" by the Company. (K) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (L) "FAIR MARKET VALUE" means, as of any date, the value of Stock determined as follows: (I) If the Stock is listed on any established stock exchange or a national market system, including without limitation the New York Stock Exchange, its Fair Market Value shall be the closing sales price for the Stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the market trading day of the date of determination, or, if the date of determination is not a market trading day, the last market trading day prior to the date of determination, in each case as reported in The Wall Street Journal or such other sources as the Board deems reliable; (II) If the Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Stock on the market trading day of the date of determination, or, if the date of determination is not a market trading day, the last market trading day prior to the date of determination; or 2 (III) In absence of an established market for the Stock, the Fair Market Value thereof shall be determined in good faith by the Board." (M) "NONQUALIFIED STOCK OPTIONS" means Options that are not intended to qualify as incentive stock options within the meaning of Section 422 of the Code. (N) "OPTION AGREEMENT" means a written certificate or agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan that apply to Options. (O) "OPTIONEE" means an Employee, Director or Consultant who holds an outstanding Option. (P) "OPTIONS" means Nonqualified Stock Options. (Q) "PLAN" means this Waste Connections, Inc. 2004 Equity Incentive Plan. (R) "RESTRICTED STOCK" means Stock awarded under the Plan in accordance with the terms and conditions set forth in Section 6. (S) "RESTRICTED STOCK AGREEMENT" means a written certificate or award agreement between the Company and a Restricted Stock Participant evidencing a Restricted Stock Award. Each Restricted Stock Agreement shall be subject to the terms and conditions of the Plan that apply to Restricted Stock. (T) "RESTRICTED STOCK AWARD" means shares of Restricted Stock awarded pursuant to the terms and conditions of the Plan. (U) "RESTRICTED STOCK PARTICIPANT" means an Employee, Director or Consultant who holds an outstanding Restricted Stock Award. (V) "RESTRICTED STOCK UNIT" means a contractual right to receive Stock under the Plan upon the attainment of designated performance milestones or the completion of a specified period of employment or service with the Corporation or any Subsidiary or upon a specified date or dates following the attainment of such milestones or the completion of such service period. (W) "RESTRICTED STOCK UNIT AGREEMENT" means a written agreement between the Company and a Restricted Stock Unit Participant evidencing a Restricted Stock Unit Award. Each Restricted Stock Unit Agreement shall be subject to the terms and conditions of the Plan that apply to Restricted Stock Units. (X) "RESTRICTED STOCK UNIT AWARD" means an award of Restricted Stock Units made pursuant to the terms and conditions of the Plan. (Y) "RESTRICTED STOCK UNIT PARTICIPANT" means an Employee, Director or Consultant who holds an outstanding Restricted Stock Unit Award. 3 (Z) "RESTRICTION PERIOD" means a time period, which may or may not be based on performance goals and/or the satisfaction of vesting provisions (which may depend on the Continuous Status as an Employee, Director or Consultant of the applicable Restricted Stock Participant), that applies to, and is established or specified by the Board at the time of, each Restricted Stock Award. (AA) "RULE 16B-3" means Rule 16b-3 under the Exchange Act or any successor to Rule 16b-3, as amended from time to time. (BB) "SECURITIES ACT" means the Securities Act of 1933, as amended. (CC) "STOCK" means the Common Stock of the Company. (DD) "SUBSIDIARY" means any corporation that at the time an Option or a Restricted Stock or Restricted Stock Unit Award is granted under the Plan qualifies as a subsidiary of the Company under the definition of "subsidiary corporation" contained in Section 424(f) of the Code, or any similar provision hereafter enacted. 3. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 9 for changes in Stock, the Stock that may be sold pursuant to Options shall not exceed 2,250,000 shares, minus the number of shares delivered pursuant to Restricted Stock or Restricted Stock Unit Awards. The Stock that may be delivered pursuant to Restricted Stock or Restricted Stock Unit Awards shall not exceed 450,000 shares. The Company shall reserve for Options 2,250,000 shares, of which up to 450,000 may be delivered pursuant to Restricted Stock or Restricted Stock Unit Awards, each number of shares subject to adjustment as provided in Section 9. If any Option for any reason terminates, expires or is cancelled without having been exercised in full, the Stock not purchased under such Option shall revert to and again become available for issuance under the Plan. Shares of Stock that are issued pursuant to Restricted Stock or Restricted Stock Unit Awards may be either authorized and unissued shares (which will not be subject to preemptive rights) or previously issued shares acquired by the Company or any Subsidiary. Any shares of Stock subject to a Restricted Stock Award that are forfeited shall revert to and again become available for issuance under the Plan. If any Restricted Stock Unit Award terminates or is cancelled for any reason before all the shares of Stock subject to such award vest and become issuable, the shares of Stock which do not vest and become issuable under that Restricted Stock Unit Award shall revert to and again become available for issuance under the Plan. 4. ADMINISTRATION. (A) Board's Power and Responsibilities. The Plan shall be administered by the Board or, at the election of the Board, by a Committee, as provided in subsection (b), or, as to certain functions, by an officer of the Company, as provided in subsection (c). Subject to the Plan, the Board shall: (I) determine and designate from time to time those Employees, Directors and Consultants to whom Options, Restricted Stock Awards and/or Restricted Stock Unit Awards are to be granted; 4 (II) authorize the granting of Options, Restricted Stock Awards and Restricted Stock Unit Awards; (III) determine the number of shares subject to each Option, the exercise price of each Option, the time or times when and the manner in which each Option shall be exercisable, and the duration of the exercise period; (IV) determine the number of shares of Stock to be included in any Restricted Stock Award, the Restriction Period for such Award, and the vesting schedule of such Award over the Restriction Period; (V) determine the number of shares of Stock to be subject to any Restricted Stock Unit Award, the vesting schedule for those shares of Stock and the date or dates on which the shares of Stock which vest under the Award are actually to be issued; (VI) construe and interpret the Plan and each Option, Restricted Stock and Restricted Stock Unit Agreement, and establish, amend and revoke rules and regulations for the Plan's administration, and correct any defect, omission or inconsistency in the Plan or any Option, Restricted Stock or Restricted Stock Unit Agreement in a manner and to the extent it deems necessary or expedient to make the Plan fully effective; (VII) adopt such procedures and subplans and grant Options and Restricted Stock and Restricted Stock Unit Awards on such terms and conditions as the Board determines necessary or appropriate to permit participation in the Plan by individuals otherwise eligible to so participate who are foreign nationals or employed outside of the United States, or otherwise to conform to applicable requirements or practices of jurisdictions outside of the United States; (VIII) prescribe and approve the form and content of certificates and agreements for use under the Plan; (IX) establish and administer any terms, conditions, performance criteria, restrictions, limitations, forfeiture, vesting schedule, and other provisions of or relating to any Option or any Restricted Stock or Restricted Stock Unit Award; (X) grant waivers of terms, conditions, restrictions and limitations under the Plan or applicable to any Option or Restricted Stock or Restricted Stock Unit Award, or accelerate the vesting of any Option or any Restricted Stock or Restricted Stock Unit Award or the issuance of vested Stock under any Restricted Stock Unit Award; (XI) amend or adjust the terms and conditions of any outstanding Option or any Restricted Stock or Restricted Stock Unit Award and/or adjust the number and/or class of shares of Stock subject to any outstanding Option or any outstanding Restricted Stock or Restricted Stock Unit Award, provided that no such amendment or adjustment shall reduce the exercise price of any Option to a price lower than the Fair Market Value of the Stock covered by such Option on the date the Option was granted; (XII) at any time and from time to time after the granting of an Option or a Restricted Stock or Restricted Stock Unit Award, specify such additional terms, conditions and 5 restrictions with respect to any such Option or any such Restricted Stock or Restricted Stock Unit Award as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws or rules, including, but not limited to, terms, restrictions and conditions for compliance with applicable securities laws and methods of withholding or providing for the payment of required taxes; (XIII) offer to buy out a Restricted Stock or Restricted Stock Unit Award previously granted, based on such terms and conditions as the Board shall establish with and communicate to the Restricted Stock or Restricted Stock Unit Participant at the time such offer is made; (XIV) to the extent permitted under the applicable Restricted Stock Agreement, permit the transfer of a Restricted Stock Award by one other than the Restricted Stock Participant who received the grant of such Restricted Stock Award; and (XV) take any and all other actions it deems necessary for the purposes of the Plan. The Board shall have full discretionary authority in all matters related to the discharge of its responsibilities and the exercise of its authority under the Plan. Decisions and actions by the Board with respect to the Plan and any Option Agreement or any Restricted Stock or Restricted Stock Unit Agreement shall be final, conclusive and binding on all persons having or claiming to have any right or interest in or under the Plan and/or any Option Agreement or Restricted Stock or Restricted Stock Unit Agreement. (B) Authority to Delegate to Committee. The Board may delegate administration of the Plan to a Committee of the Board. The Committee shall consist of not less than two members appointed by the Board. Subject to the foregoing, the Board may from time to time increase the size of the Committee and appoint additional members, remove members (with or without cause) and appoint new members in substitution therefor, or fill vacancies, however caused. If the Board delegates administration of the Plan to a Committee, the Committee shall have the same powers theretofore possessed by the Board with respect to the administration of the Plan (and references in this Plan to the Board shall apply to the Committee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. (C) Authority to Delegate to Officers. The Board may delegate administration of Sections 4(a)(i) through 4(a)(v) above to the Chief Executive Officer of the Company; provided, however, that such officer may not grant Options, Restricted Stock Awards and Restricted Stock Unit Awards covering more than 1,000,000 shares of Stock in the aggregate. (D) Ten Year Grant Period. Notwithstanding the foregoing, no Option or any Restricted Stock or Restricted Stock Unit Award shall be granted after the expiration of ten years from the effective date of the Plan specified in Section 15 below. (E) Modification of Terms and Conditions through Employment or Consulting Agreements. Notwithstanding the provisions of any Option Agreement or any Restricted Stock 6 or Restricted Stock Unit Agreement, any modifications to the terms and conditions of any Option or any Restricted Stock or Restricted Stock Unit Award permitted by Section 4(a) with respect to any Employee or Consultant may be effected by including the modification in an employment or consulting agreement between the Company or a Subsidiary and the Optionee or the Restricted Stock or Restricted Stock Unit Participant. 5. TERMS AND CONDITIONS OF OPTIONS. Each Option granted shall be evidenced by an Option Agreement in substantially the form attached hereto as Annex A or such other form as may be approved by the Board. Each Option Agreement shall include the following terms and conditions and such other terms and conditions as the Board may deem appropriate: (A) Option Term. Each Option Agreement shall specify the term for which the Option thereunder is granted and shall provide that such Option shall expire at the end of such term. The Board may extend such term; provided that the term of any Option, including any such extensions, shall not exceed five years from the date of grant. (B) Exercise Price. Each Option Agreement shall specify the exercise price per share, as determined by the Board at the time the Option is granted, which exercise price shall in no event be less than the Fair Market Value when the Option is granted. (C) Vesting. Each Option Agreement shall specify when it is exercisable. The total number of shares of Stock subject to an Option may, but need not, be allotted in periodic installments (which may, but need not, be equal). An Option Agreement may provide that from time to time during each of such installment periods, the Option may become exercisable ("vest") with respect to some or all of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period or any prior period as to which the Option shall have become vested but shall not have been fully exercised. An Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board deems appropriate. (D) Payment of Purchase Price on Exercise. Each Option Agreement shall provide that the purchase price of the shares as to which such Option may be exercised shall be paid to the Company at the time of exercise either (i) in cash, or (ii) in the absolute discretion of the Board (which discretion may be exercised in a particular case without regard to any other case or cases), at the time of the grant or thereafter, (A) by the withholding of shares of Stock issuable on exercise of the Option or the delivery to the Company of other Stock owned by the Optionee, provided in either case that the Optionee has owned shares of Stock equal in number to the shares so withheld for a period sufficient to avoid a charge to the Company's reported earnings, (B) subject to compliance with applicable law, according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of Stock) with the person to whom the Option is granted or to whom the Option is transferred pursuant to Section 5(e), (C) by delivery of a properly executed notice together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the Stock being acquired upon the exercise of the Option, including, without limitation, through an exercise complying with the provisions of Regulation T 7 as promulgated from time to time by the Board of Governors of the Federal Reserve System (a "cashless exercise"), or (D) in any other form or combination of forms of legal consideration that may be acceptable to the Board. In the case of any deferred payment arrangement, interest shall be payable at least annually and shall be charged at the minimum rate necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement, or if less, the maximum rate permitted by law. (E) Transferability. An Option shall not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of by the Optionee during his or her lifetime, whether by operation of law or otherwise, other than by will or the laws of descent and distribution applicable to the Optionee, and shall not be made subject to execution, attachment or similar process; provided that the Board may in its discretion at the time of approval of the grant of an Option or thereafter permit an Optionee to transfer an Option to a trust or other entity established by the Optionee for estate planning purposes, and may permit further transferability or impose conditions or limitations on any permitted transferability. Otherwise, during the lifetime of an Optionee, an Option shall be exercisable only by such Optionee. In the event any Option is to be exercised by the executors, administrators, heirs or distributees of the estate of a deceased Optionee, or such an Optionee's beneficiary, in any such case pursuant to the terms and conditions of the Plan and the applicable Option Agreement and in accordance with such terms and conditions as may be specified from time to time by the Board, the Company shall be under no obligation to issue Stock thereunder unless and until the Board is satisfied that the person to receive such Stock is the duly appointed legal representative of the deceased Optionee's estate or the proper legatee or distributee thereof or the named beneficiary of such Optionee. (F) Exercise of Option After Death of Optionee. If an Optionee dies (i) while an Employee, Director or Consultant, or (ii) within three months after termination of the Optionee's Continuous Status as an Employee, Director or Consultant because of his or her Disability or retirement, his or her Options may be exercised (to the extent that the Optionee was entitled to do so on the date of death or termination) by the Optionee's estate or by a person who shall have acquired the right to exercise the Options by bequest or inheritance, but only within the period ending on the earlier of (A) one year after the Optionee's death (or such shorter or longer period specified in the Option Agreement, which period shall not be less than six months), or (B) the expiration date specified in the Option Agreement. If, after the Optionee's death, the Optionee's estate or the person who acquired the right to exercise the Optionee's Options does not exercise the Options within the time specified herein, the Options shall terminate and the shares covered by such Options shall revert to and again become available for issuance under the Plan. (G) Exercise of Option After Termination of Optionee's Continuous Status as an Employee, Director or Consultant as a Result of Disability or Retirement. If an Optionee's Continuous Status as an Employee, Director or Consultant terminates as a result of the Optionee's Disability or retirement, and the Optionee does not die within the following three months, the Optionee may exercise his or her Options (to the extent that the Optionee was entitled to exercise them on the date of termination), but only within the period ending on the earlier of (i) six months after Disability or retirement (or such longer period specified in the Option Agreement), and (ii) the expiration of the term set forth in the Option Agreement. If, 8 after termination, the Optionee does not exercise his or her Options within the time specified herein, the Options shall terminate, and the shares covered by such Options shall revert to and again become available for issuance under the Plan. (H) No Exercise of Option After Termination of Optionee's Continuous Status as an Employee, Director or Consultant Other Than as a Result of Death, Disability or Retirement. If an Optionee's Continuous Status as an Employee, Director or Consultant terminates other than as a result of the Optionee's death, Disability or retirement, all right of the Optionee to exercise his or her Options shall terminate on the date of termination of such Continuous Status as an Employee, Director or Consultant. The Options shall terminate on such termination date, and the shares covered by such Options shall revert to and again become available for issuance under the Plan. (I) Exceptions. Notwithstanding subsections (f), (g) and (h), the Board shall have the authority to extend the expiration date of any outstanding Option in circumstances in which it deems such action to be appropriate, provided that no such extension shall extend the term of an Option beyond the expiration date of the term of such Option as set forth in the Option Agreement. (J) Company's Repurchase Right or Option Shares. Each Option Agreement may, but is not required to, include provisions whereby the Company shall have the right to repurchase any and all shares acquired by an Optionee on exercise of any Option granted under the Plan, at such price and on such other terms and conditions as the Board may approve and as may be set forth in the Option Agreement. Such right shall be exercisable by the Company after termination of an Optionee's Continuous Status as an Employee, Director or Consultant, whenever such termination may occur and whether such termination is voluntary or involuntary, with cause or without cause, without regard to the reason therefor, if any. 6. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. (A) Restricted Stock Award Agreement. Each Restricted Stock Award shall be evidenced by a Restricted Stock Agreement in substantially the form attached hereto as Annex B or such other form as may be approved by the Board. Each Restricted Stock Agreement shall be executed by the Company and the Restricted Stock Participant to whom such Restricted Stock Award has been granted, unless the Restricted Stock Agreement provides otherwise; two or more Restricted Stock Awards granted to a single Restricted Stock Participant may, however, be combined in a single Restricted Stock Agreement. A Restricted Stock Agreement shall not be a precondition to the granting of a Restricted Stock Award; no person shall have any rights under any Restricted Stock Award, however, unless and until the Restricted Stock Participant to whom the Restricted Stock Award shall have been granted (i) shall have executed and delivered to the Company a Restricted Stock Agreement or other instrument evidencing the Restricted Stock Award, unless such Restricted Stock Agreement provides otherwise, (ii) has satisfied the applicable federal, state, local and/or foreign income and employment withholding tax liability with respect to the shares of Stock which vest or become issuable under the Restricted Stock Award, and (iii) has otherwise complied with the applicable terms and conditions of the Restricted Stock Award. 9 (B) Restricted Stock Awards Subject to Plan. All Restricted Stock Awards under the Plan shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Board shall determine and which are set forth in the applicable Restricted Stock Agreement. (I) The Restricted Stock subject to a Restricted Stock Award shall entitle the Restricted Stock Participant to receive shares of Restricted Stock, which vest over the Restriction Period. The Board shall have the discretionary authority to authorize Restricted Stock Awards and determine the Restriction Period for each such award. (II) Subject to the terms and restrictions of this Section 6 or the applicable Restricted Stock Agreement or as otherwise determined by the Board, upon delivery of Restricted Stock to a Restricted Stock Participant, or upon creation of a book entry evidencing a Restricted Stock Participant's ownership of shares of Restricted Stock, pursuant to Section 6(f), the Restricted Stock Participant shall have all of the rights of a stockholder with respect to such shares. (C) Cash Payment. The Board may make any such Restricted Stock Award without the requirement of any cash payment from the Restricted Stock Participant to whom such Restricted Stock Award is made, or may require a cash payment from such a Restricted Stock Participant in an amount no greater than the aggregate Fair Market Value of the Restricted Stock as of the date of grant in exchange for, or as a condition precedent to, the completion of such Restricted Stock Award and the issuance of such shares of Restricted Stock. (D) Transferability. During the Restriction Period stated in the Restricted Stock Agreement, the Restricted Stock Participant who receives a Restricted Stock Award shall not be permitted to sell, transfer, pledge, assign, encumber or otherwise dispose of such Restricted Stock whether by operation of law or otherwise and shall not be made subject to execution, attachment or similar process. Any attempt by such Restricted Stock Participant to do so shall constitute the immediate and automatic forfeiture of such Restricted Stock Award. Notwithstanding the foregoing, the Restricted Stock Agreement may permit the payment or distribution of a Restricted Stock Participant's Award (or any portion thereof) after his or her death to the beneficiary most recently named by such Restricted Stock Participant in a written designation thereof filed with the Company, or, in lieu of any such surviving beneficiary, as designated by the Restricted Stock Participant by will or by the laws of descent and distribution. In the event any Restricted Stock Award is to be paid or distributed to the executors, administrators, heirs or distributees of the estate of a deceased Restricted Stock Participant, or such a Restricted Stock Participant's beneficiary, in any such case pursuant to the terms and conditions of the Plan and the applicable Restricted Stock Agreement and in accordance with such terms and conditions as may be specified from time to time by the Board, the Company shall be under no obligation to issue Stock thereunder unless and until the Board is satisfied that each person to receive such Stock is the duly appointed legal representative of the deceased Restricted Stock Participant's estate or the proper legatee or distributee thereof or the named beneficiary of such Restricted Stock Participant. (E) Forfeiture of Restricted Stock. If, during the Restriction Period, the Restricted Stock Participant's Continuous Status as an Employee, Director or Consultant terminates for any 10 reason, all of such Restricted Stock Participant's shares of Restricted Stock as to which the Restriction Period has not yet expired shall be forfeited and revert to the Plan, unless the Board has provided otherwise in the Restricted Stock Agreement or in an employment or consulting agreement with the Restricted Stock Participant, or the Board, in its discretion, otherwise determines to waive such forfeiture. (F) Receipt of Stock Certificates. Each Restricted Stock Participant who receives a Restricted Stock Award shall be issued one or more stock certificates in respect of such shares of Restricted Stock. Any such stock certificates for shares of Restricted Stock shall be registered in the name of the Restricted Stock Participant but shall be appropriately legended and returned to the Company or its agent by the recipient, together with a stock power or other appropriate instrument of transfer, endorsed in blank by the recipient. Notwithstanding anything in the foregoing to the contrary, in lieu of the issuance of certificates for any shares of Restricted Stock during the applicable Restriction Period, a "book entry" (i.e., a computerized or manual entry) may be made in the records of the Company, or its designated agent, as the Board, in its discretion, may deem appropriate, to evidence the ownership of such shares of Restricted Stock in the name of the applicable Restricted Stock Participant. Such records of the Company or such agent shall, absent manifest error, be binding on all Restricted Stock Participants hereunder. The holding of shares of Restricted Stock by the Company or its agent, or the use of book entries to evidence the ownership of shares of Restricted Stock, in accordance with this Section 6(f), shall not affect the rights of Restricted Stock Participants as owners of their shares of Restricted Stock, nor affect the Restriction Period applicable to such shares under the Plan or the Restricted Stock Agreement. (G) Dividends. A Restricted Stock Participant who holds outstanding shares of Restricted Stock shall not be entitled to any dividends paid thereon, other than dividends in the form of the Company's stock. (H) Expiration of Restriction Period. A Restricted Stock Participant's shares of Restricted Stock shall become free of the foregoing restrictions on the earlier of a Change in Control or the expiration of the applicable Restriction Period, and the Company shall, subject to Sections 8(a) and 8(b), then deliver stock certificates evidencing such Stock to such Restricted Stock Participant. Such certificates shall be freely transferable, subject to any market black-out periods which may be imposed by the Company from time to time or insider trading policies to which the Restricted Stock Participant may at the time be subject. (I) Substitution of Restricted Stock Awards. The Board may accept the surrender of outstanding shares of Restricted Stock (to the extent that the Restriction Period or other restrictions applicable to such shares have not yet lapsed) and grant new Restricted Stock Awards in substitution for such Restricted Stock. 7. TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARDS. (A) Restricted Stock Unit Award Agreement. Each Restricted Stock Unit Award shall be evidenced by a Restricted Stock Unit Agreement in substantially the form attached hereto as Annex C or such other form as may be approved by the Board. Each Restricted Stock Unit Agreement shall be executed by the Company and the Restricted Stock Unit Participant to whom 11 such Restricted Stock Unit Award has been granted, unless the Restricted Stock Unit Agreement provides otherwise; two or more Restricted Stock Unit Awards granted to a single Restricted Stock Unit Participant may, however, be combined in a single Restricted Stock Unit Agreement. A Restricted Stock Unit Agreement shall not be a precondition to the granting of a Restricted Stock Unit Award; however, no person shall be entitled to receive any shares of Stock pursuant to a Restricted Stock Unit Award unless and until the Restricted Stock Unit Participant to whom the Restricted Stock Unit Award shall have been granted (i) shall have executed and delivered to the Company a Restricted Stock Unit Agreement or other instrument evidencing the Restricted Stock Unit Award, unless such Restricted Stock Unit Agreement provides otherwise, (ii) has satisfied the applicable federal, state, local and/or foreign income and employment withholding tax liability with respect to the shares of Stock which vest or become issuable under the Restricted Stock Unit Award and (iii) has otherwise complied with all the other applicable terms and conditions of the Restricted Stock Unit Award. (B) Restricted Stock Unit Awards Subject to Plan. All Restricted Stock Unit Awards under the Plan shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Board shall determine and which are set forth in the applicable Restricted Stock Unit Agreement. (I) The Restricted Stock Units subject to a Restricted Stock Unit Award shall entitle the Restricted Stock Unit Participant to receive the shares of Stock underlying those Units upon the attainment of designated performance goals or the satisfaction of specified employment or service requirements or upon the expiration of a designated time period following the attainment of such goals or the satisfaction of the applicable service period. The Board shall have the discretionary authority to determine the performance milestones or service period required for the vesting of the Restricted Stock Units and the date or dates when the shares of Stock which vest under those Restricted Stock Units are actually to be issued. The Board may alternatively provide the Restricted Stock Unit Participant with the right to elect the issue date or dates for the shares of Stock which vest under his or her Restricted Stock Unit Award. The issuance of vested shares under the Restricted Stock Unit Award may be deferred to a date following the termination of the Restricted Stock Unit Participant's employment or service with the Company and its Subsidiaries. (II) The Restricted Stock Unit Participant shall not have any stockholder rights with respect to the shares of Stock subject to his or her Restricted Stock Unit Award until that Award vests and the shares of Stock are actually issued thereunder. However, dividend-equivalent units may, in the sole discretion of the Board, be paid or credited, either in cash or in actual or phantom shares of Stock, on one or more outstanding Restricted Stock Units, subject to such terms and conditions as the Board may deem appropriate. (III) An outstanding Restricted Stock Unit Award shall automatically terminate, and no shares of Stock shall actually be issued in satisfaction of that Award, if the performance goals or service requirements established for such Award are not attained or satisfied. The Board, however, shall have the discretionary authority to issue vested shares of Stock under one or more outstanding Restricted Stock Unit Awards as to which the designated performance goals or service requirements have not been attained or satisfied. 12 (IV) Service requirements for the vesting of Restricted Stock Unit Awards may include service as an Employee, Consultant or non-employee Director. (C) No Cash Payment. Restricted Stock Unit Awards shall not require any cash payment from the Restricted Stock Unit Participant to whom such Restricted Stock Unit Award is made, either at the time such Award is made or at the time any shares of Stock become issuable under that Award. However, the issuance of such shares shall be subject to the Restricted Stock Unit Participant's satisfaction of all applicable federal, state, local and/or foreign income and employment withholding taxes. (D) Transferability. The Restricted Stock Unit Participant who receives a Restricted Stock Unit Award shall not be permitted to sell, transfer, pledge, assign, encumber or otherwise dispose of his or her interest in such Award or the underlying shares of Stock, whether by operation of law or otherwise, and such Award shall not be made subject to execution, attachment or similar process. Any attempt by such Restricted Stock Unit Participant to do so shall constitute the immediate and automatic forfeiture of such Restricted Stock Unit Award. Notwithstanding the foregoing, any shares of Stock which vest under the Restricted Stock Unit Agreement but which remain unissued at the time of the Restricted Stock Unit Participant's death shall be issued to the beneficiary most recently named by such Restricted Stock Unit Participant in a written designation thereof filed with the Company, or, in lieu of any such surviving beneficiary, as designated by the Restricted Stock Unit Participant by will or by the laws of descent and distribution. In the event such vested shares of Stock are to be issued to the executors, administrators, heirs or distributees of the estate of a deceased Restricted Stock Unit Participant, or his or her designated beneficiary, in any such case pursuant to the terms and conditions of the Plan and the applicable Restricted Stock Unit Agreement and in accordance with such terms and conditions as may be specified from time to time by the Board, the Company shall be under no obligation to effect such issuance unless and until the Board is satisfied that each person to receive such Stock is the duly appointed legal representative of the deceased Restricted Stock Unit Participant's estate or the proper legatee or distributee thereof or the named beneficiary of such Restricted Stock Unit Participant. (E) Forfeiture of Restricted Stock Units. If the Restricted Stock Unit Participant's Continuous Status as an Employee, Director or Consultant terminates for any reason, all of the Restricted Stock Units subject to his or her outstanding Restricted Stock Unit Awards shall, to the extent not vested at that time, be forfeited, and no shares of Stock shall be issued pursuant to those forfeited Restricted Stock Units, unless the Board has provided in the Restricted Stock Unit Agreement or in an employment or consulting agreement with the Restricted Stock Unit Participant that no such forfeiture shall occur, or the Board, in its sole discretion, otherwise determines to waive such forfeiture. (F) Issuance of Stock Certificates. Each Restricted Stock Unit Participant who becomes entitled to an issuance of shares of Stock following the vesting of his or her Restricted Stock Unit Award shall, subject to Sections 8(a) and 8(b), be issued one or more stock certificates for those shares. Subject to such Sections 8(a) and 8(b), each such stock certificate shall be registered in the name of the Restricted Stock Unit Participant and shall be freely transferable, subject to any market black-out periods which may be imposed by the Company from time to time 13 or insider trading policies to which the Restricted Stock Unit Participant may at the time be subject. 8. CONDITIONS ON EXERCISE OF OPTIONS AND ISSUANCE OF SHARES. (A) Securities Law Compliance. The Plan, the grant of Options and Restricted Stock or Restricted Stock Unit Awards thereunder, the exercise of Options thereunder and the obligation of the Company to issue shares of Stock on the exercise of Options, at the expiration of the applicable Restriction Period for Restricted Stock or upon the occurrence of the designated issuance date for shares of Stock subject to vested Restricted Stock Units, shall be subject to all applicable Federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required, in the opinion of the Board. Options may not be exercised, Restricted Stock and Restricted Stock Unit Awards may not be granted, and shares of Stock may not be issued if any such action would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. No Option may be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. No Stock may be issued in connection with a Restricted Stock or Restricted Stock Unit Award unless (i) a registration statement under the Securities Act shall at the time of issuance of the Stock be in effect with respect to the shares of Stock to be issued or (ii) in the opinion of legal counsel to the Company, the shares of Stock to be issued on expiration of the applicable Restriction Period or upon the designated issuance date for vested Restricted Stock Units may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of any Option and the issuance of any Stock in connection with a Restricted Stock or Restricted Stock Unit Award, the Company may require the Optionee or the Restricted Stock or Restricted Stock Unit Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. (B) Investment Representations. The Company may require any Optionee or a Restricted Stock or Restricted Stock Unit Participant, or any person to whom an Option or Restricted Stock or Restricted Stock Unit Award is transferred, as a condition of exercising such Option or receiving shares of Stock pursuant to such Restricted Stock or Restricted Stock Unit Award, to (A) give written assurances satisfactory to the Company as to such person's knowledge and experience in financial and business matters or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option or receiving such Stock, and (B) to give written assurances satisfactory to the Company stating that such person is acquiring the 14 Stock for such person's own account and not with any present intention of selling or otherwise distributing the Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall not apply if (1) the issuance of the Stock has been registered under a then currently effective registration statement under the Securities Act, or (2) counsel for the Company determines as to any particular requirement that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, with the advice of its counsel, place such legends on stock certificates issued under the Plan as the Company deems necessary or appropriate to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Stock. 9. ADJUSTMENTS ON CERTAIN EVENTS. (A) No Effect on Powers of Board or Shareholders. The existence of the Plan and any Options or any Restricted Stock or Restricted Stock Unit Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the capital structure or business of the Company or any of its subsidiaries, any merger or consolidation of the Company or a subsidiary of the Company, any issue of debt, preferred or prior preference stock ahead of or affecting Stock, the authorization or issuance of additional shares of Stock, the dissolution or liquidation of the Company or its subsidiaries, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding. (B) Changes in Control. (I) Options. Each Option Agreement shall provide that in the event that the Company is subject to a Change in Control: (A) immediately prior thereto all outstanding Options shall be automatically accelerated and become immediately exercisable as to all of the shares of Stock covered thereby, notwithstanding anything to the contrary in the Plan or the Option Agreement; and (B) the Board may, in its discretion, and on such terms and conditions as it deems appropriate, by resolution adopted by the Board or by the terms of any agreement of sale, merger or consolidation giving rise to the Change in Control, provide that, without Optionee's consent, the shares subject to an Option may (1) continue as an immediately exercisable Option of the Company (if the Company is the surviving corporation), (2) be assumed as immediately exercisable Options by the surviving corporation or its parent, (3) be substituted by immediately exercisable options granted by the surviving corporation or its parent with substantially the same terms for the Option, or (4) be cancelled after payment to the Optionee of an amount in cash or other consideration delivered to stockholders of the Company in the transaction resulting in a Change in Control of the Company equal to the total number of shares subject to the Option multiplied by the remainder of (i) the amount per share to be received by holders of the Company's Stock in the sale, merger or consolidation, minus (ii) the exercise price per share of the shares subject to the Option. 15 (II) Restricted Stock Awards. Each Restricted Stock Agreement shall provide that, immediately prior to a Change in Control, all restrictions imposed by the Board on any outstanding Restricted Stock Award shall be automatically canceled, the Restriction Period applicable to all outstanding Restricted Stock Awards shall immediately terminate, and such Restricted Stock Awards shall be fully vested, subject to the Restricted Stock Participant's satisfaction of all applicable federal, state, local and/or foreign income and employment withholding taxes. Any applicable performance goals shall be deemed achieved at not less than the target level, notwithstanding anything to the contrary in the Plan or the Restricted Stock Agreement. (III) Restricted Stock Unit Awards. Each Restricted Stock Unit Agreement shall provide that, immediately upon a Change in Control, the Restricted Stock Units subject to such Agreement shall automatically vest in full, and the shares subject to those vested Restricted Stock Units shall be issued, notwithstanding any deferred issuance date otherwise in effect at the time for such shares, subject to the Restricted Stock Unit Participant's satisfaction of all applicable federal, state, local and/or foreign income and employment withholding taxes. Accordingly, all performance milestones or service requirements in effect for those Restricted Stock Units shall be deemed to have been fully achieved or completed, notwithstanding anything to the contrary in the Plan or the Restricted Stock Unit Agreement. (C) Adjustment Of Shares. The aggregate number, class and kind of shares of stock available for issuance under the Plan, the aggregate number, class and kind of shares of stock as to which Restricted Stock or Restricted Stock Unit Awards may be granted, the limitation set forth in Section 4(c) on the number of shares of Stock that may be issued by a single officer under the Plan, the number, class and kind of shares under each outstanding Restricted Stock or Restricted Stock Unit Award, the exercise price of each Option and the number of shares purchasable on exercise of such Option shall be appropriately adjusted by the Board in its discretion to preserve the benefits or potential benefits intended to be made available under the Plan or with respect to any outstanding Options or any outstanding Restricted Stock or Restricted Stock Unit Awards or otherwise necessary to reflect any such change, if the Company shall (i) pay a dividend in, or make a distribution of, shares of Stock (or securities convertible into, exchangeable for or otherwise entitling a holder thereof to receive Stock), or evidences of indebtedness or other property or assets, on outstanding Stock, (ii) subdivide the outstanding shares of Stock into a greater number of shares, (iii) combine the outstanding shares of Stock into a smaller number of shares or (iv) issue any shares of its capital stock in a reclassification of the Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the resulting corporation). An adjustment made pursuant to this Section 9(c) shall, in the case of a dividend or distribution, be made as of the record date therefor and, in the case of a subdivision, combination or reclassification, be made as of the effective date thereof. In case of any adjustment pursuant to this Section 9(c) with respect to an Option, the total number of shares and the number of shares or other units of such other securities purchasable on exercise of the Option immediately prior thereto shall be adjusted so that the Optionee shall be entitled to receive at the same aggregate purchase price the number of shares of Stock and the number of shares or other units of such other securities that the Optionee would have owned or would have been entitled to receive immediately following the occurrence of any of the events described above had the Option been exercised in full immediately prior to the occurrence (or applicable record date) of such event. If, as a result of any adjustment pursuant to 16 this Section 9(c), the Optionee shall become entitled to receive shares of two or more classes or series of securities of the Company, the Board shall equitably determine the allocation of the adjusted exercise price between or among shares or other units of such classes or series and shall notify the Optionee of such allocation. Any new or additional shares or securities received by a Restricted Stock Participant shall be subject to the same terms and conditions, including the Restriction Period, as related to the original Restricted Stock Award. (D) Receipt of Assets Other Than Stock. If at any time, as a result of an adjustment made pursuant to this Section 9, an Optionee or a Restricted Stock or Restricted Stock Unit Participant shall become entitled to receive any shares of capital stock or shares or other units of other securities or property or assets other than Stock, the number of such other shares or units so receivable on any exercise of the Option or expiration of the Restriction Period or the designated issuance date for the securities subject to vested Restricted Stock Units shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Stock in this Section 9, and the provisions of this Plan with respect to the shares of Stock shall apply, with necessary changes in points of detail, on like terms to any such other shares or units. (E) Fractional Shares. All calculations under this Section 9 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be, but in no event shall the Company be obligated to issue any fractional share. (F) Inability to Prevent Acts Described in Section 9; Uniformity of Actions Not Required. No Optionee and no Restricted Stock or Restricted Stock Unit Participant shall have or be deemed to have any right to prevent the consummation of the acts described in this Section 9 affecting the number of shares of Stock subject to any Option or any Restricted Stock or Restricted Stock Unit Award held by the Optionee or the Restricted Stock or Restricted Stock Unit Participant. Any actions or determinations by the Board under this Section 9 need not be uniform as to all outstanding Options or outstanding Restricted Stock or Restricted Stock Unit Awards, and need not treat all Optionees or all Restricted Stock or Restricted Stock Unit Participants identically. 10. TAX WITHHOLDING OBLIGATIONS. (A) General Authorization. The Company is authorized to take whatever actions are necessary and proper to satisfy all obligations of Optionees and Restricted Stock and Restricted Stock Unit Participants (including, for purposes of this Section 10, any other person entitled to exercise an Option or receive shares of Stock pursuant to a Restricted Stock or Restricted Stock Unit Award under the Plan) for the payment of all federal, state, local and/or foreign taxes in connection with any Option grant or exercise, any Restricted Stock Award or any Stock issuance pursuant to a vested Restricted Stock Unit Award (including, but not limited to, actions pursuant to the following Section 10(b)). (B) Withholding Requirement and Procedure. (I) Options. Whenever the Company proposes or is required to issue or transfer shares of Stock with respect to an Option, the Company shall have the right to require 17 the grantee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for such shares, including, for each Optionee who is an Employee, the employee portion of the FICA (Social Security and Medicare) taxes. Alternatively, the Company may issue or transfer such shares net of the number of shares sufficient to satisfy the withholding tax requirements. For withholding tax purposes, the shares of Stock shall be valued on the date the withholding obligation is incurred. (II) Restricted Stock. Each Restricted Stock Participant shall, no later than the date as of which the value of the Restricted Stock Award first becomes includible in the gross income of the Restricted Stock Participant for income tax purposes, pay to the Company in cash, or make arrangements satisfactory to the Company regarding payment to the Company of, any taxes of any kind required by law to be withheld with respect to the Stock or other property subject to such Restricted Stock Award, including, for each Restricted Stock Participant who is an Employee, the employee portion of the FICA (Social Security and Medicare) taxes applicable to the shares of Stock or other property. No Stock shall be delivered to a Restricted Stock Participant with respect to a Restricted Stock Award until such payment or arrangement has been made. The Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Restricted Stock Participant. Notwithstanding the above, the Board may, in its discretion and pursuant to procedures approved by the Board, permit the Restricted Stock Participant to elect withholding by the Company of Stock or other property otherwise deliverable to such Restricted Stock Participant pursuant to his or her Restricted Stock Award, provided, however, that the amount of any Stock so withheld shall not exceed the amount necessary to satisfy the Company's required tax withholding obligations using the minimum statutory withholding rates for federal, state and/or local tax purposes, including payroll taxes, that are applicable to supplemental taxable income in full or partial satisfaction of such tax obligations, based on the Fair Market Value of the Stock on the payment date. (C) Section 83(b) Election. If a Restricted Stock Participant makes an election under Code Section 83(b), or any successor section thereto, to be taxed with respect to a Restricted Stock Award as of the date of transfer of the Restricted Stock rather than as of the date or dates on which the Restricted Stock Participant would otherwise be taxable under Code Section 83(a), such Restricted Stock Participant shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service. Neither the Company nor any of its affiliates shall have any liability or responsibility relating to or arising out of the filing or not filing of any such election or any defects in its construction. (D) Restricted Stock Units. Each Restricted Stock Unit Participant shall comply with the following tax withholding requirements: (I) INCOME TAXES. The Restricted Stock Unit Participant shall no later than the date as of which the shares of Stock which vest under his or her vested Restricted Stock Unit Award first becomes includible in his or her gross income for income tax purposes, pay to the Company in cash, or make arrangements satisfactory to the Company regarding payment to the Company of, any income taxes required by law to be withheld with respect to the Stock or other property issuable pursuant to such vested Restricted Stock Unit Award. 18 (II) EMPLOYMENT TAXES. Any Restricted Stock Unit Participant who is an Employee shall be liable for the payment of the employee portion of the FICA (Social Security and Medicare) taxes applicable to the shares of Stock subject to his or her Restricted Stock Unit Award at the time those shares vest. The FICA taxes shall be based upon the Fair Market Value of the shares of Stock on the date those shares vest under the Restricted Stock Unit Award. No Stock shall be delivered to a Restricted Stock Unit Participant with respect to a Restricted Stock Unit Award until such income and employment withholding taxes have been collected. The Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Restricted Stock Unit Participant. Notwithstanding the above, the Board may, in its discretion and pursuant to procedures approved by the Board, permit the Restricted Stock Unit Participant to satisfy the federal and state income withholding taxes applicable to the issued shares of Stock, together with any FICA withholding taxes due at the time of such Stock issuance, by having the Company withhold shares of Stock (based on the Fair Market Value of the Stock on the issuance date) or other property otherwise deliverable to such Restricted Stock Unit Participant in settlement of his or her vested Restricted Stock Unit Award, provided, however, that the amount of any Stock so withheld shall not exceed the amount necessary to satisfy the Company's required income tax withholding obligations using the minimum statutory withholding rates for federal, state and/or local tax purposes, that are applicable to supplemental taxable income 11. AMENDMENT, TERMINATION OR SUSPENSION OF THE PLAN. (A) Amendment, Termination or Suspension of Plan. The Board may, at any time and with or without prior notice, amend, alter, suspend, or terminate the Plan, retroactively or otherwise, for any reason; provided, however, that unless otherwise required by law or specifically provided herein, no such amendment, alteration, suspension, or termination shall be made that would materially impair the previously accrued rights of any Optionee or any Restricted Stock or Restricted Stock Unit Participant with respect to his or her Option or his or her Restricted Stock or Restricted Stock Unit Award without his or her written consent. (B) Amendment of Options and Restricted Stock and Restricted Stock Unit Awards. The Board may amend the terms of any Option or any Restricted Stock or Restricted Stock Unit Award previously granted, including any Option Agreement or any Restricted Stock or Restricted Stock Unit Agreement, retroactively or prospectively, but no such amendment shall materially impair the previously accrued rights of any Optionee or any Restricted Stock or Restricted Stock Unit Participant with respect to any such Option or any Restricted Stock or Restricted Stock Unit Award without his or her written consent. (C) Automatic Termination of Plan. Unless sooner terminated, the Plan shall terminate on the date that the aggregate the total number of shares of Stock subject to the Plan have been issued pursuant to the Plan's provisions, and no shares covered by a Restricted Stock Award are any longer subject to any Restriction Period. 19 12. RIGHTS OF EMPLOYEES, DIRECTORS, CONSULTANTS AND OTHER PERSONS. Neither this Plan nor any Options or Restricted Stock or Restricted Stock Unit Awards shall confer on any Optionee, Restricted Stock or Restricted Stock Unit Participant or other person: (A) Any rights or claims under the Plan except in accordance with the provisions of the Plan and the applicable agreement; (B) Any right with respect to continuation of employment by the Company or any Subsidiary or engagement as a Consultant or Director, nor shall they interfere in any way with the right of the Company or any Subsidiary that employs or engages an Optionee or a Restricted Stock or Restricted Stock Unit Participant to terminate that person's employment or engagement at any time with or without cause. (C) Any right to be selected to participate in the Plan or to be granted an Option or a Restricted Stock or Restricted Stock Unit Award; or (D) Any right to receive any bonus, whether payable in cash or in Stock, or in any combination thereof, from the Company or its subsidiaries, nor be construed as limiting in any way the right of the Company or its subsidiaries to determine, in its sole discretion, whether or not it shall pay any employee or consultant bonus, and, if so paid, the amount thereof and the manner of such payment. 13. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT. So long as a class of the Company's equity securities is registered under Section 12 of the Exchange Act, the Company intends that the Plan shall comply in all respects with Rule 16b-3. If during such time any provision of this Plan is found not to be in compliance with Rule 16b-3, that provision shall be deemed to have been amended or deleted as and to the extent necessary to comply with Rule 16b-3, and the remaining provisions of the Plan shall continue in full force and effect without change. All transactions under the Plan during such time shall be executed in accordance with the requirements of Section 16 of the Exchange Act and the applicable regulations promulgated thereunder. 14. LIMITATION OF LIABILITY AND INDEMNIFICATION. (A) Contractual Liability Limitation. Any liability of the Company or its subsidiaries to any Optionee or any Restricted Stock or Restricted Stock Unit Participant with respect to any Option or any Restricted Stock or Restricted Stock Unit Award shall be based solely on contractual obligations created by the Plan and the Option Agreements and the Restricted Stock or Restricted Stock Unit Agreements outstanding thereunder. (B) Indemnification. In addition to such other rights of indemnification as they may have as Directors or officers, Directors and officers to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any 20 action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. 15. MISCELLANEOUS (A) Effective Date. The effective date of the Plan shall be the date the Plan is approved by the stockholders of the Company or such later date as shall be determined by the Board. (B) Acceptance of Terms and Conditions of Plan. By accepting any benefit under the Plan, each Optionee and each Restricted Stock or Restricted Stock Unit Participant and each person claiming under or through such Optionee or such Restricted Stock or Restricted Stock Unit Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Company, the Board or the Committee, in any case in accordance with the terms and conditions of the Plan. (C) No Effect on Other Arrangements. Neither the adoption of the Plan nor anything contained herein shall affect any other compensation or incentive plans or arrangements of the Company or its subsidiaries, or prevent or limit the right of the Company or any subsidiary to establish any other forms of incentives or compensation for their Employees, Directors or Consultants or grant or assume restricted stock or other rights otherwise than under the Plan. (D) Choice of Law. The Plan shall be governed by and construed in accordance with the laws of the State of California, without regard to such state's conflict of law provisions, and, in any event, except as superseded by applicable Federal law. 21 ANNEX A ------- NONQUALIFIED STOCK OPTION AGREEMENT ----------------------------------- Dear ____________: Waste Connections, Inc. (the "Company"), pursuant to its 2004 Equity Incentive Plan (the "Plan"), has granted to you an option to purchase shares of the common stock of the Company ("Stock"). This option is not intended to qualify and will not be treated as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The grant under this Nonqualified Stock Option Agreement (the "Agreement") is in connection with and in furtherance of the Company's compensatory benefit plan for participation of the Company's Employees, Directors and Consultants. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Plan. The option granted hereunder is subject to and governed by the following terms and conditions: 1. AWARD DATE: . 2. NUMBER OF SHARES SUBJECT TO OPTION: . 3. VESTING SCHEDULE. Subject to the limitations herein and in the Plan, this option shall become exercisable (vest) as follows: Number of Shares Date of Earliest Exercise (Installment) (Vesting) The installments provided for are cumulative. Each such installment that becomes exercisable shall remain exercisable until expiration or earlier termination of the option. 4. EXERCISE PRICE. (a) The exercise price of this option is $______________ per share. (b) Payment of the exercise price per share is due in full in cash (including check) on exercise of all or any part of each installment that has become exercisable by you; provided that, if at the time of exercise the Stock is publicly traded and quoted regularly in the WALL STREET JOURNAL, payment of the exercise price, to the extent permitted by the Company and applicable statutes and regulations, may be made by having the Company withhold shares of Stock issuable on such exercise, by delivering shares of Stock already owned by you, by cashless exercise described in Section 5(d) of the Plan and complying with its provisions, or by delivering a combination of such forms of payment. Such Stock (i) shall be valued at its Fair Market Value at the close of business on the date of exercise, (ii) if originally acquired from the Company, 1 must have been held for the period required to avoid a charge to the Company's reported earnings, and (iii) must be owned free and clear of any liens, claims, encumbrances or security interests. 5. PARTIAL OR EARLY EXERCISE. (a) Subject to the provisions of this Agreement, you may elect at any time during your Continuous Status as an Employee, Director or Consultant to exercise this option as to any part or all of the shares subject to this option at any time during the term hereof, including, without limitation, a time prior to the date of earliest exercise (vesting) stated in paragraph 3 hereof; provided that: (i) a partial exercise of this option shall be deemed to cover first vested shares and then unvested shares next vesting; (ii) any shares so purchased that shall not have vested as of the date of exercise shall be subject to the purchase option in favor of the Company as described in the Early Exercise Stock Purchase Agreement available from the Company; and (iii) you shall enter into an Early Exercise Stock Purchase Agreement in the form available from the Company with a vesting schedule that will result in the same vesting as if no early exercise had occurred. (b) The election provided in this paragraph 5 to purchase shares on the exercise of this option prior to the vesting dates shall cease on termination of your Continuous Status as an Employee, Director or Consultant and may not be exercised from or after the date thereof. 6. FRACTIONAL SHARES. This option may not be exercised for any number of shares that would require the issuance of anything other than whole shares. 7. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary herein, this option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, this option may not be exercised unless (a) a registration statement under the Securities Act shall at the time of exercise of the option be in effect with respect to the shares issuable upon exercise of the option or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of any option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 2 8. TERM. The term of this option commences on the date hereof and, unless sooner terminated as set forth below or in the Plan, terminates on ________________ (which date shall be no more than five years from the award date in Section 1 of this Agreement). In no event may this option be exercised on or after the date on which it terminates. This option shall terminate prior to the expiration of its term on the date of termination of your Continuous Status as an Employee, Director or Consultant for any reason or for no reason, unless: (a) such termination is due to your retirement or Disability and you do not die within the three months after such termination, in which event the option shall terminate on the earlier of the termination date set forth above or six months after such termination of your Continuous Status as an Employee, Director or Consultant; or (b) such termination is due to your death, or such termination is due to your retirement or Disability and you die within three months after such termination, in which event the option shall terminate on the earlier of the termination date set forth above or the first anniversary of your death. Notwithstanding any of the foregoing provisions to the contrary however, this option may be exercised following termination of your Continuous Status as an Employee, Director or Consultant only as to that number of shares as to which it shall have been exercisable under Section 2 of this Agreement on the date of such termination. 9. CONDITIONS ON EXERCISE. (a) This option may be exercised, to the extent specified above, by delivering a notice of exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require pursuant to Section 7 of the Plan. (b) By exercising this option you agree that the Company (or a representative of the underwriters) may, in connection with an underwritten registration of the offering of any securities of the Company under the Exchange Act, require that you not sell or otherwise transfer or dispose of any shares of Stock or other securities of the Company during such period (not to exceed 180 days) following the effective date (the "Effective Date") of the registration statement of the Company filed under the Exchange Act as may be requested by the Company or the representative of the underwriters. For purposes of this restriction, you will be deemed to own securities which (A) are owned directly or indirectly by you, including securities held for your benefit by nominees, custodians, brokers or pledgees, (B) may be acquired by you within sixty days of the Effective Date, (C) are owned directly or indirectly, by or for your brothers or sisters (whether by whole or half blood), spouse, ancestors and lineal descendants, or (D) are owned, directly or indirectly, by or for a corporation, partnership, estate or trust of which you are a shareholder, partner or beneficiary, but only to the extent of your proportionate interest therein as a shareholder, partner or beneficiary thereof. You further agree that the Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such period. 10. ADJUSTMENTS ON CERTAIN EVENTS. (a) In the event that the Company is subject to a Change in Control: 3 (i) immediately prior thereto this option shall be automatically accelerated and become immediately exercisable as to all of the shares of Stock covered hereby, notwithstanding anything to the contrary in the Plan or this Agreement; and (ii) the Board may, in its discretion, and on such terms and conditions as it deems appropriate, by resolution adopted by the Board or by the terms of any agreement of sale, merger or consolidation giving rise to the Change in Control, provide that, without Optionee's consent, the shares subject to this option may (A) continue as an immediately exercisable option of the Company (if the Company is the surviving corporation), (B) be assumed as immediately exercisable options by the surviving corporation or its parent, (C) be substituted by immediately exercisable options granted by the surviving corporation or its parent with substantially the same terms for this option, or (D) be cancelled after payment to Optionee of an amount in cash or other consideration delivered to stockholders of the Company in the transaction resulting in a Change in Control of the Company equal to the total number of shares subject to this option multiplied by the remainder of (1) the amount per share to be received by holders of the Company's Stock in the sale, merger or consolidation, minus (2) the exercise price per share of the shares subject to this option. (b) The exercise price shall be subject to adjustment from time to time in the event that the Company shall (i) pay a dividend in, or make a distribution of, shares of Stock (or securities convertible into, exchangeable for or otherwise entitling a holder thereof to receive Stock), or evidences of indebtedness or other property or assets, on outstanding Stock, (ii) subdivide the outstanding shares of Stock into a greater number of shares, (iii) combine the outstanding shares of Stock into a smaller number of shares or (iv) issue any shares of its capital stock in a reclassification of the Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the resulting corporation). An adjustment made pursuant to this Section 10(b) shall, in the case of a dividend or distribution, be made as of the record date therefor and, in the case of a subdivision, combination or reclassification, be made as of the effective date thereof. In any such case, the total number of shares and the number of shares or other units of such other securities purchasable on exercise of the option immediately prior thereto shall be adjusted so that the Optionee shall be entitled to receive at the same aggregate purchase price the number of shares of Stock and the number of shares or other units of such other securities that the Optionee would have owned or would have been entitled to receive immediately following the occurrence of any of the events described above had the option been exercised in full immediately prior to the occurrence (or applicable record date) of such event. If, as a result of any adjustment pursuant to this Section 10(b), the Optionee shall become entitled to receive shares of two or more classes or series of securities of the Company, the Board shall equitably determine the allocation of the adjusted exercise price between or among shares or other units of such classes or series and shall notify the Optionee of such allocation. (c) If at any time, as a result of an adjustment made pursuant to this Section 10, the Optionee shall become entitled to receive any shares of capital stock or shares or other units of other securities or property or assets other than Stock, the number of such other shares or units so receivable on any exercise of the option shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Stock in this Section 10, and the provisions of this Agreement with respect to the shares of Stock shall apply, with necessary changes in points of detail, on like terms to any such other shares or units. 4 (d) All calculations under this Section 10 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be, but in no event shall the Company be obligated to issue any fractional share on any exercise of the option. 11. NON-TRANSFERABILITY. This option is generally not transferable, except by will or by the laws of descent and distribution, unless the Company expressly permits a transfer, such as to a trust or other entity for estate planning purposes. Unless the Company approves such a transfer, this option is exercisable during your life only by you. 12. RIGHTS OF OPTIONEE. This Agreement is not an employment contract and nothing in this Agreement shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company, or of the Company to continue your employment with the Company. If this option is granted to you in connection with your performance of services as a Consultant, references to employment, Employee and similar terms shall be deemed to include the performance of services as a Consultant; provided that no rights as an Employee shall arise by reason of the use of such terms. 13. TAX WITHHOLDING OBLIGATIONS. Whenever the Company proposes or is required to issue or transfer shares of Stock to you with respect to an Option, the Company shall have the right to require you to remit to the Company an amount sufficient to satisfy any Federal, state or local withholding tax requirements, including your applicable share of any employment taxes, prior to the delivery of any certificate or certificates for such shares. Alternatively, the Company may issue or transfer such shares net of the number of shares sufficient to satisfy the withholding tax requirements. For withholding tax purposes, the shares of Stock shall be valued on the date the withholding obligation is incurred. 14. NOTICE. Any notice or other communication to be given under or in connection with this Agreement or the Plan shall be given in writing and shall be deemed effectively given on receipt or, in the case of notices from the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the address specified below or at such other address as you may hereafter designate by notice to the Company. 15. AGREEMENT SUBJECT TO PLAN. This Agreement is subject to all provisions of the Plan, a copy of which is attached hereto and made a part of this Agreement, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of the Plan shall control. WASTE CONNECTIONS, INC. By ____________________________ Duly authorized on behalf of the Board of Directors ATTACHMENTS: Waste Connections, Inc. 2004 Equity Incentive Plan Notice of Exercise 5 The undersigned: (a) Acknowledges receipt of the foregoing Nonqualified Stock Option Agreement and the attachments referenced therein and understands that all rights and liabilities with respect to the option granted under the Agreement are set forth in such Agreement and the Plan; and (b) Acknowledges that as of the date of grant set forth in such Agreement, the Agreement sets forth the entire understanding between the undersigned optionee and the Company and its Subsidiaries regarding the acquisition of Stock pursuant to the option and supersedes all prior oral and written agreements on that subject with the exception of (i) the options, if any, previously granted and delivered to the undersigned under stock option plans of the Company, and (ii) the following agreements only: NONE: _____________ (Initial) OTHER: ________________________ ________________________ ________________________ OPTIONEE Address:________________________ ________________________ 6 NOTICE OF EXERCISE ------------------ Waste Connections, Inc. 35 Iron Circle, Suite 200 Folsom, CA 95630-8589 Date of Exercise: __________ Ladies and Gentlemen: This constitutes notice under my Nonqualified Stock Option Agreement that I elect to purchase the number of shares of Common Stock ("Stock") of Waste Connections, Inc. (the "Company") for the price set forth below. Option Agreement dated: _______________________ Number of shares as to which option is exercised: _______________________ Certificates to be issued in name of: _______________________ Total exercise price: $______________________ Cash payment delivered herewith: $______________________ Value of __________ shares of _________________ common stock delivered herewith:1 $______________________ By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Waste Connections, Inc. 2004 Equity Incentive Plan or the Option Agreement, and (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option. I hereby represent, warrant and agree with respect to the shares of Stock of the Company that I am acquiring by this exercise of the option (the "Shares") that, if required by the Company (or a representative of the underwriters) in connection with an underwritten registration of the offering of any securities of the Company under the Securities Act, I will not sell or otherwise transfer or dispose of any shares of Stock or other securities of the Company during such period (not to exceed 180 days) following the effective date of the registration statement of the Company filed under the Securities Act (the "Effective Date") as may be requested by the Company or the representative of the underwriters. For purposes of this restriction, I will be deemed to own securities that (i) are owned, directly or indirectly by me, including securities - ------------------ 1 Shares must meet the public trading requirements set forth in the Option Agreement. Shares must be valued in accordance with the terms of the option being exercised, must have been owned for the minimum period required in the Option Agreement, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate from certificate. 7 held for my benefit by nominees, custodians, brokers or pledgees; (ii) may be acquired by me within sixty days of the Effective Date; (iii) are owned directly or indirectly, by or for my brothers or sisters (whether by whole or half blood), spouse, ancestors and lineal descendants; or (iv) are owned, directly or indirectly, by or for a corporation, partnership, estate or trust of which I am a shareholder, partner or beneficiary, but only to the extent of my proportionate interest therein as a shareholder, partner or beneficiary thereof. I further agree that the Company may impose stop-transfer instructions with respect to securities subject to this restriction until the end of such period. Very truly yours, 8 ANNEX B ------- RESTRICTED STOCK AGREEMENT -------------------------- Dear ______________________: Waste Connections, Inc. (the "Company"), pursuant to its 2004 Equity Incentive Plan (the "Plan") has granted to you an award of Restricted Stock ("Award") in shares of common stock of the Company ("Stock"). The Restricted Stock will be issued to you subject to restrictions on transfer and otherwise, which will lapse over the Restricted Period, provided that you maintain Continuous Status as an Employee, Director or Consultant. The grant under this Restricted Stock Agreement (the "Agreement") is in connection with and in furtherance of the Company's compensatory benefit plan for participation of the Company's Employees, Directors and Consultants. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Plan. The Award granted hereunder is subject to and governed by the following terms and conditions: 1. AWARD DATE: ________________. 2. NUMBER OF SHARES SUBJECT TO AWARD: ______________. 3. PURCHASE PRICE. The purchase price for each share of Stock awarded by this Agreement is $ _______________. 4. VESTING SCHEDULE. The Award of Restricted Stock shall be deemed non-forfeitable and such Stock shall no longer be considered Restricted Stock on the earlier of a Change in Control or the expiration of the Restriction Period on the following dates with respect to the following percentages of the total shares of Restricted Stock awarded, and the Company shall, within a reasonable time and subject to Section 5, deliver stock certificates evidencing such Stock to you: (A) SCHEDULE OF EXPIRATION OF RESTRICTION PERIOD. The overall restriction period, which begins on the date of the grant of the Award and ends on the ________ anniversary of the grant of the Award (the "Restriction Period"), expires in _____ equal phases:
Restriction Period Expires with Respect to the Following Percentage of Total Shares of Date Restricted Stock Awarded - -------------------------------------------------------- ------------------------------------------- On grant 0% As of ____________, 20__ (first anniversary of grant) __% [As of ____________, 20__ (second anniversary of grant)] [__%] [As of ____________, 20__ (third anniversary of grant)] [__%] [As of ____________, 20__ (fourth anniversary of grant)] [__%]
1 (B) FORFEITURE OF RESTRICTED STOCK. If, during the Restriction Period, your Continuous Status as an Employee, Director or Consultant terminates for any reason, you will forfeit any shares of Restricted Stock as to which the Restriction Period has not yet expired. 5. CONDITIONS ON AWARDS. Notwithstanding anything to the contrary herein: (A) SECURITIES LAW COMPLIANCE. Awards may not be granted and shares of stock may not be issued if either such action would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system on which the Stock may then be listed. In addition, no Stock may be issued unless (a) a registration statement under the Securities Act shall at the time of issuance of the Stock be in effect with respect to the shares of Stock to be issued or (b) in the opinion of legal counsel to the Company, the shares of Stock to be issued on expiration of the applicable Restriction Period may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the issuance of any Stock, the Company may require you to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. (B) INVESTMENT REPRESENTATION. The Company may require you, or any person to whom an Award is transferred, as a condition of receiving shares of Stock pursuant to such Award, to (A) give written assurances satisfactory to the Company as to your knowledge and experience in financial and business matters or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that you are capable of evaluating, alone or together with the purchaser representative, the merits and risks of receiving such Stock, and (B) to give written assurances satisfactory to the Company stating that you are acquiring the Stock for your own account and not with any present intention of selling or otherwise distributing the Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall not apply if (1) the issuance of the Stock has been registered under a then currently effective registration statement under the Securities Act, or (2) counsel for the Company determines as to any particular requirement that such requirement need not be met in the circumstances under the then applicable securities laws. 6. NON-TRANSFERABILITY OF AWARD. During the Restriction Period stated herein, you shall not sell, transfer, pledge, assign, encumber or otherwise dispose of the Restricted Stock whether by operation of law or otherwise and shall not make such Restricted Stock subject to execution, attachment or similar process. Any attempt by you to do so shall constitute the immediate and automatic forfeiture of such Award. Notwithstanding the foregoing, you may designate the payment or distribution of the Award (or any portion thereof) after your death to the beneficiary most recently named by you in a written designation thereof filed with the Company, or, in lieu of any such surviving beneficiary, as designated by you by will or by the laws of descent and distribution. In the event any Award is to be paid or distributed to the executors, administrators, heirs or distributees of your estate, or to your beneficiary, in any such case pursuant to the terms and conditions of the Plan and in accordance with such terms and 2 conditions as may be specified from time to time by the Committee, the Company shall be under no obligation to issue Stock thereunder unless and until the Committee is satisfied that the person or persons to receive such Stock is the duly appointed legal representative of your estate or the proper legatee or distributee thereof or your named beneficiary. 7. ADJUSTMENTS ON CERTAIN EVENTS. (A) CHANGES IN CONTROL. Immediately prior to a Change in Control, all restrictions imposed by the Committee on any outstanding Award shall be immediately automatically canceled, the Restriction Period shall immediately terminate and the Award shall be fully vested, notwithstanding anything to the contrary in the Plan or the Agreement. (B) ADJUSTMENT OF SHARES. The number, class and kind of shares under the Award shall be appropriately adjusted by the Committee in its discretion to preserve the benefits or potential benefits intended to be made available under the Plan or with respect to the Award or otherwise necessary to reflect any such change, if the Company shall (i) pay a dividend in, or make a distribution of, shares of Stock (or securities convertible into, exchangeable for or otherwise entitling a holder thereof to receive Stock), or evidences of indebtedness or other property or assets, on outstanding Stock, (ii) subdivide the outstanding shares of Stock into a greater number of shares, (iii) combine the outstanding shares of Stock into a smaller number of shares or (iv) issue any shares of its capital stock in a reclassification of the Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the resulting corporation). An adjustment made pursuant to this Section 7(b) shall, in the case of a dividend or distribution, be made as of the record date therefor and, in the case of a subdivision, combination or reclassification, be made as of the effective date thereof. Any new or additional shares or securities that you receive are subject to the same terms and conditions, including the Restriction Period, as related to the original Award. (C) RECEIPT OF ASSETS OTHER THAN STOCK. If at any time, as a result of an adjustment made pursuant to this Section 7, you shall become entitled to receive any shares of capital stock or shares or other units of other securities or property or assets other than Stock, the number of such other shares or units so receivable on expiration of the Restriction Period shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Stock in this Section 7, and the provisions of this Agreement with respect to the shares of Stock shall apply, with necessary changes in points of detail, on like terms to any such other shares or units. (D) FRACTIONAL SHARES. All calculations under this Section 7 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be, but in no event shall the Company be obligated to issue any fractional share. (E) INABILITY TO PREVENT ACTS DESCRIBED IN SECTION 7; UNIFORMITY OF ACTIONS NOT REQUIRED. No Restricted Stock Participant shall have or be deemed to have any right to prevent the consummation of the acts described in this Section 7 affecting the number of shares of Stock subject to any Award held by the Restricted Stock Participant. Any actions or determinations by the Committee under this Section 7 need not be uniform as to all outstanding Awards, and need not treat all Restricted Stock Participants identically. 3 8. RIGHTS OF RESTRICTED STOCK PARTICIPANT. This Plan and the Awards shall not confer on you or any other person: (A) Any rights or claims under the Plan except in accordance with the provisions of the Plan and the applicable agreement; (B) Any right with respect to continuation of employment or a consulting or directorship arrangement with the Company or any Subsidiary, nor shall they interfere in any way with the right of the Company or any Subsidiary that employs you or engages you as a consultant or director to terminate your employment or consulting or directorship arrangement at any time with or without cause; (C) Any right to be selected to participate in the Plan or to be granted an Award; or (D) Any right to receive any bonus, whether payable in cash or in Stock, or in any combination thereof, from the Company or its subsidiaries, nor be construed as limiting in any way the right of the Company or its subsidiaries to determine, in its sole discretion, whether or not it shall pay any employee, consultant or director bonuses, and, if so paid, the amount thereof and the manner of such payment. 9. TAX WITHHOLDING OBLIGATIONS. (A) WITHHOLDING REQUIREMENT AND PROCEDURE. You shall (and in no event shall Stock be delivered to you with respect to an Award until), no later than the date as of which the value of the Award first becomes includible in your gross income for income tax purposes, pay to the Company in cash, or make arrangements satisfactory to the Company, as determined in the Committee's discretion, regarding payment to the Company of, any taxes of any kind required by law to be withheld with respect to the Stock or other property subject to such Award, including your applicable share of any employment taxes, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to you. Notwithstanding the above, the Committee may, in its discretion and pursuant to procedures approved by the Committee, permit you to elect withholding by the Company of Stock or other property otherwise deliverable to you pursuant to your Award, provided, however, that the amount of any Stock so withheld shall not exceed the amount necessary to satisfy the Company's required tax withholding obligations using the minimum statutory withholding rates for Federal, state and/or local tax purposes, including payroll taxes, that are applicable to supplemental taxable income in full or partial satisfaction of such tax obligations, based on the Fair Market Value of the Stock on the payment date. (B) SECTION 83(B) ELECTION. If you make an election under Code Section 83(b), or any successor section thereto, to be taxed with respect to an Award as of the date of transfer of the Restricted Stock rather than as of the date or dates on which you would otherwise be taxable under Code Section 83(a), you shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service. Neither the Company nor any of its affiliates shall have any liability or responsibility relating to or arising out of the filing or not filing of any such election or any defects in its construction. 10. NOTICE. Any notice or other communication to be given under or in connection with this Agreement or the Plan shall be given in writing and shall be deemed effectively given 4 on receipt or, in the case of notices from the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the address specified below or at such other address as you may hereafter designate by notice to the Company. 11. AGREEMENT SUBJECT TO PLAN. This Agreement is subject to all provisions of the Plan, a copy of which is attached hereto and made a part of this Agreement, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of the Plan shall control. WASTE CONNECTIONS, INC. By __________________________________ Ronald J. Mittelstaedt President and Chief Executive Officer ATTACHMENT: Waste Connections, Inc. 2004 Equity Incentive Plan 5 The undersigned: (a) Acknowledges receipt of the foregoing Restricted Stock Award Agreement and the attachments referenced therein and understands that all rights and liabilities with respect to the Award granted under the Agreement are set forth in such Agreement and the Plan; and (b) Acknowledges that as of the date of the Award set forth in such Agreement, the Agreement sets forth the entire understanding between the undersigned participant and the Company and it Subsidiaries regarding the acquisition of Stock pursuant to the Award and supersedes all prior oral and written agreements on that subject. _______________________________________ RESTRICTED STOCK PARTICIPANT Address:_______________________________ _______________________________________ 6 ANNEX C ------- RESTRICTED STOCK UNIT AGREEMENT ------------------------------- Dear _______________: Waste Connections, Inc. (the "Company") has awarded you Restricted Stock Units under the Company's 2004 Equity Incentive Plan (the "Plan"). The units will entitle you to receive shares of the Company's common stock in a series of installments over your period of continued service with the Company. Each Restricted Stock Unit represents the right to receive one share of the Company's common stock ("Common Stock") on the vesting date of that unit. Unlike a typical stock option program, the shares will be issued to you as a bonus for your continued service over the vesting period, without any cash payment required from you. However, you must pay the applicable income and employment withholding taxes (described below) when due. The award (the "Award") under this Restricted Stock Unit Agreement (the "Agreement") is in connection with and in furtherance of the Company's compensatory benefit plan for participation of the Company's Employees, Directors and Consultants. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Plan. The Award granted hereunder is subject to and governed by the following terms and conditions: 1. AWARD DATE: __________________. 2. NUMBER OF SHARES SUBJECT TO AWARD: _________ shares of the Company's common stock (the "Shares"). 3. VESTING SCHEDULE: The Shares will vest and become issuable in a series of four (4) successive equal annual installments upon your completion of each year of Continuous Status as an Employee, Director or Consultant over the four (4) year period measured from the Award Date. However, no Shares which vest in accordance with such schedule will actually be issued until you satisfy all applicable income and employment withholding taxes. 4. FORFEITABILITY: Should your Continuous Status as an Employee, Director or Consultant cease for any reason prior to vesting in one or more Shares subject to your Award, then your Award will be cancelled with respect to those unvested Shares and the number of your Restricted Stock Units will be reduced accordingly, and you will cease to have any right or entitlement to receive any Shares under those cancelled units. 5. TRANSFERABILITY: Prior to your actual receipt of the Shares in which you vest under your Award, you may not transfer any interest in your Award or the underlying Shares or pledge or otherwise hedge the sale of those Shares, including (without limitation) any short sale, put or call option or any other instrument tied to the value of those Shares. Any attempt by you to do so will result in an immediate forfeiture of the Restricted Stock Units awarded to you hereunder. However, your right to receive any Shares which have vested under your Restricted Stock Units but which remain unissued at the time of your death may be transferred pursuant to the provisions of your will or the laws of inheritance or to your designated beneficiary following your death. In 1 the event the Shares which vest hereunder are to be issued to the executors, administrators, heirs or distributees of your estate or to your designated beneficiary, the Company shall be under no obligation to effect such issuance unless and until the Committee is satisfied that the person to receive those Shares is the duly appointed legal representative of your estate or the proper legatee or distributee thereof or your named beneficiary. Any Shares issued to you pursuant to the terms of this Agreement may not be sold or transferred in contravention of (i) any market black-out periods the Company may impose from time to time or (ii) the Company's insider trading policies to the extent applicable to you. 6. ADJUSTMENTS. The number, class and kind of securities subject to your Restricted Stock Units hereunder shall be appropriately adjusted by the Committee in its discretion to preserve the benefits or potential benefits intended to be made available under the Plan or with respect to those Restricted Stock Units or as otherwise necessary to reflect any such change, if the Company shall (i) pay a dividend in, or make a distribution of, shares of Common Stock (or securities convertible into, exchangeable for or otherwise entitling a holder thereof to receive such Common Stock), or evidences of indebtedness or other property or assets, on the outstanding Common Stock, (ii) subdivide the outstanding shares of Common Stock into a greater number of shares, (iii) combine the outstanding shares of Common Stock into a smaller number of shares or (iv) issue any shares of its capital stock in a reclassification of such Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the resulting corporation). An adjustment made pursuant to this Section 6 shall, in the case of a dividend or distribution, be made as of the record date therefor and, in the case of a subdivision, combination or reclassification, be made as of the effective date thereof. 7. FEDERAL INCOME TAXATION: You will recognize ordinary income for federal income tax purposes on the date the Shares subject to your Award vest, and you must satisfy the income tax withholding obligation applicable to that income. The amount of your taxable income will be equal to the closing selling price per share of Common Stock on the New York Stock Exchange on the vesting date times the number of Shares which vest on that date. 8. FICA TAXES: You will be liable for the payment of the employee share of the FICA (Social Security and Medicare) taxes applicable to the Shares subject to your Award at the time those shares vest. FICA taxes will be based on the closing selling price of the shares on the New York Stock Exchange on the date those Shares vest under your Award. 9. WITHHOLDING TAXES: You must pay all applicable federal and state income and employment withholding taxes when due. Those taxes will be deducted from your paycheck on the pay day coincident with or next following the date on which such liability arises, unless you elect to satisfy your withholding tax liability through either of the following alternatives: - the delivery of your separate check payable to the Company or, - the use the proceeds from a same-date sale of the Shares issued to you, provided such a sale is permissible under the Company's trading policies governing your sale of Company shares and you are not at the time an executive officer subject to the short-swing trading restrictions of the federal securities laws. 2 Notwithstanding the above, the Committee may, in its discretion and pursuant to procedures approved by the Committee, permit you to satisfy the federal, state and/or local income and employment withholding taxes applicable to the Shares which vest under your Award by having the Company withhold a portion of those vested Shares with a Fair Market Value (measured as of the vesting date) equal to such withholding tax liability; PROVIDED, HOWEVER, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy the Company's required tax withholding obligations using the minimum statutory withholding rates for federal, state and/or local tax purposes, including payroll taxes, that are applicable to supplemental taxable income. 10. STOCKHOLDER RIGHTS: You will not have any stockholder rights, including voting rights and actual dividend rights, with respect to the Shares subject to your Award until you become the record holder of those Shares following their actual issuance to you and your satisfaction of the applicable withholding taxes. 11. [OPTIONAL PROVISION] DIVIDEND EQUIVALENT RIGHTS: Should a regular cash dividend be declared on the Common Stock at a time when unissued shares of such Common Stock are subject to your Award, then the number of Shares at that time subject to your Award will automatically be increased by an amount determined in accordance with the following formula, rounded down to the nearest whole share: X = (A x B)/C, where X = the additional number of Shares which will become subject to your Award by reason of the cash dividend; A = the number of unissued Shares subject to this Award as of the record date for such dividend; B = the per Share amount of the cash dividend; and C = the closing selling price per share of Common Stock on the Nasdaq National Market on the payment date of such dividend. The additional Shares resulting from such calculation will be subject to the same terms and conditions as the unissued Shares to which they relate under your Award. 12. CHANGE IN CONTROL In the event of a Change in Control, the vesting of the Shares subject to your Award will accelerate in full immediately upon such Change in Control and the shares subject to your Award shall be issued, subject to your satisfaction of all applicable federal, state, local and/or foreign income and employment withholding taxes. 13. SECURITIES LAW COMPLIANCE. No Shares will be issued pursuant to your Award if such issuance would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system on which the Common Stock may then be listed. In addition, no Shares will be issued unless (a) a 3 registration statement under the Securities Act is in effect at that time with respect to the Shares to be issued or (b) in the opinion of legal counsel to the Company, those Shares may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance of any Shares hereunder shall relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority shall not have been obtained. As a condition to the issuance of any Shares, the Company may require you to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 14. NOTICE. Any notice or other communication to be given under or in connection with this Agreement or the Plan shall be given in writing and shall be deemed effectively given on receipt or, in the case of notices from the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the address specified below or at such other address as you may hereafter designate by notice to the Company. 15. REMAINING TERMS. The remaining terms and conditions of your Award are governed by the Plan, and your Award is also subject to all interpretations, amendments, rules and regulations which may from time to time be adopted under the Plan. The official prospectus summarizing the principal features of the Plan is available for review on the Company's website at http://www.wasteconnections.com. Please review the plan prospectus carefully so that you fully understand your rights and benefits under your Award and the limitations, restrictions and vesting provisions applicable to the Award. In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of the Plan shall be controlling. 16. LIMITATIONS: Nothing in this Agreement or the Plan shall confer on you or any other person: (A) Any rights or claims under the Plan except in accordance with the provisions of the Plan and the applicable agreement; (B) Any right with respect to continuation of employment or a consulting or directorship arrangement with the Company or any Subsidiary, nor shall they interfere in any way with the right of the Company or any Subsidiary that employs you or engages you as a consultant or director to terminate your employment or consulting or directorship arrangement at any time, with or without cause; (C) Any right to be selected to participate in the Plan or to be granted an Award; or (D) Any right to receive any bonus, whether payable in cash or in Common Stock, or in any combination thereof, from the Company or its Subsidiaries, nor be construed as limiting in any way the right of the Company or its Subsidiaries to determine, in its sole discretion, whether or not it shall pay any employee, consultant or director bonuses, and, if so paid, the amount thereof and the manner of such payment. 4 Please execute the Acknowledgment section below to indicate your acceptance of the terms and conditions of your Award. WASTE CONNECTIONS, INC. BY: ______________________________________ TITLE: ___________________________________ ACKNOWLEDGMENT -------------- I hereby acknowledge and accept the foregoing terms and conditions of the restricted stock unit award evidenced hereby. I further acknowledge and agree that the foregoing sets forth the entire understanding between the Company and me regarding my entitlement to receive the shares of the Company's common stock subject to such award and supersedes all prior oral and written agreements on that subject. SIGNATURE: PRINTED NAME: _____________________________ DATED: , 2004 EXHIBIT I --------- PROSPECTUS FOR 2004 EQUITY INCENTIVE PLAN 1 EX-31.1 6 exh31-1_12804.txt 302 CERTIFICATION OF THE PRESIDENT EXHIBIT 31.1 ------------ CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Ronald J. Mittelstaedt, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Waste Connections, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the three months ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: July 22, 2004 /s/ Ronald J. Mittelstaedt ------------------------------------- Ronald J. Mittelstaedt, President and Chief Executive Officer EX-31.2 7 exh31-2_12804.txt 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 31.2 ------------ CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Steven F. Bouck, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Waste Connections, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the three months ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: July 22, 2004 /s/ Steven F. Bouck ---------------------------- Steven F. Bouck, Executive Vice President and Chief Financial Officer EX-32 8 exh32_12804.txt 906 CERTIFICATIONS OF PRESIDENT & C. F.O. EXHIBIT 32 ---------- CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) The undersigned, Ronald J. Mittelstaedt and Steven F. Bouck, being the duly elected and acting Chief Executive Officer and Chief Financial Officer, respectively, of Waste Connections, Inc., a Delaware corporation (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The quarterly report of the Company on Form 10-Q for the quarter ended June 30, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: July 22, 2004 By: /s/ Ronald J. Mittelstaedt ------------------------------------- Ronald J. Mittelstaedt, President and Chief Executive Officer Date: July 22, 2004 By: /s/ Steven F. Bouck ------------------------------------- Steven F. Bouck, Executive Vice President and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Waste Connections, Inc. and will be retained by Waste Connections, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----