SECOND AMENDED AND
RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND
RESTATED EMPLOYMENT AGREEMENT is effective as of the effective time
of the merger of Allied Waste Industries, Inc., a Delaware
corporation into RS Merger Wedge, Inc., a Delaware corporation and
wholly-owned subsidiary of Republic Services, Inc., a Delaware
corporation (the “Merger”) pursuant to the Agreement
& Plan of Merger dated as of June 22, 2008 (the
“Effective Time”), by and between Republic Services,
Inc. (the “Company”) and JAMES E. O’CONNOR
(“Employee”).
Employee and the
Company are parties to that Employment Agreement dated as of
October 25, 2000, as amended by Amendment Number One, dated as
of January 31, 2003, and Amendment Number Two, dated as of
October 10, 2006 and that Amended and Restated Employment
Agreement dated as of February 21, 2007 (the “2007
Employment Agreement, and collectively the Existing Employment
Agreement”).
As of the date
hereof, Employee continues to be an employee of the Company and is
considered a valued employee such that the Company desires to
retain in accordance with the terms of the Existing Employment
Agreement.
For making changes
to the Existing Employment Agreement, including in connection with
the Merger, Employee and the Company desire to enter into this
Second Amended and Restated Employment Agreement (this
“Agreement”).
In consideration
of the premises set forth above, the mutual representations,
warranties, covenants and agreements contained in this Agreement
and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
(a)
Retention . The Company agrees to employ and/or continue the
employment of Employee as its Chairman and Chief Executive Officer,
and Employee agrees to accept such employment, subject to the terms
and conditions of this Agreement. The Company also agrees that
Employee shall continue to serve on the Company’s Board of
Directors until the next annual meeting of stockholders of the
Company, and that he shall be nominated for election to the Board
at each annual meeting of the stockholders of the Company as long
as this Agreement remains in effect.
(b)
Employment Period . This Agreement shall commence on the
Effective Time and, unless terminated in accordance with the terms
of this Agreement shall continue in effect on a rolling three-year
basis, such that at any time during the term of this Agreement
there will be three years remaining (the “Employment
Period”). Notwithstanding the evergreen nature of
the
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Employment
Period, the Company may terminate Employee at any time in
accordance with the provisions of Section 3 of this
Agreement.
(c)
Duties and Responsibilities . During the Employment Period,
Employee shall serve as Chairman and Chief Executive Officer and
shall have such authority and responsibility and perform such
duties as may be assigned to him from time to time at the direction
of the Board of Directors of the Company, and in the absence of
such assignment, such duties as are customary to Employee’s
office and as are necessary or appropriate to the business and
operations of the Company. During the Employment Period,
Employee’s employment shall be full time and Employee shall
perform his duties honestly, diligently, in good faith and in the
best interests of the Company and shall use his best efforts to
promote the interests of the Company. All executive officers of the
Company (except for the Chairman and the Vice Chairman) shall
report to the Chief Executive Officer, and Employee shall in such
capacity have the authority and responsibility to assign
appropriate duties to such other executive officers as are
necessary or appropriate for the business and operations of the
Company.
(d)
Other Activities . Except upon the prior written consent of
the Company, Employee, during the Employment Period, will not
accept any other employment. Employee shall be permitted to engage
in any non-competitive businesses, not-for-profit organizations and
other ventures, such as passive real estate investments, serving on
charitable and civic boards and organizations, and similar
activities, so long as such activities do not materially interfere
with or detract from the performance of Employee’s duties or
constitute a breach of any of the provisions contained in
Section 7 of this Agreement.
(a)
Base Salary and Adjusted Salary . In consideration for
Employee’s services hereunder and the restrictive covenants
contained herein, Employee shall be paid an annual base salary (the
“Base Salary”) of $1,100,000, payable in accordance
with the Company’s customary payroll practices. With respect
to the 2008 Fiscal Year, Base Salary shall be prorated by
multiplying the Base Salary by a fraction, the numerator of which
is the number of days from the Effective Time to December 31,
and the denominator of which is 365. With respect to any Fiscal
Year during which Employee is employed by the Company for less than
the entire Fiscal Year, the Base Salary shall be prorated for the
period during which the Employee is so employed. Notwithstanding
the foregoing, Employee’s annual Base Salary may be
increased, but not decreased (taking into account prior increases)
without Employee’s consent at anytime and from time to time
to levels greater than the levels set forth in the preceding
sentence at the discretion of the Board of Directors of the Company
to reflect merit or other increases. The term “Fiscal
Year” as used herein shall mean each period of twelve
(12) calendar months commencing on January 1st of each
calendar year during the Employment Period and expiring on
December 31st of such year.
(b)
Annual Awards . In addition to the Base Salary, Employee
shall be eligible to receive Annual Awards in an amount equal to a
target of 130% of the Employee’s Base Salary in effect for
the Performance Period with respect to which such Annual Award is
granted, as established pursuant to the terms of the
Company’s Executive Incentive Plan, as amended
(the
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“Executive Incentive Plan”). The
Annual Award shall be based on the achievement of such Performance
Goals as are established by the Compensation Committee of the Board
of Directors pursuant to the Executive Incentive Plan. The
achievement of said Performance Goals shall be determined by the
Compensation Committee of the Board of Directors. Except as
otherwise provided in Sections 3 and 25, with respect to any
Fiscal Year during which Employee is employed by the Company for
less than the entire Fiscal Year, the Annual Award shall be
prorated for the period during which Employee was so employed. The
Annual Award shall be payable within sixty (60) days after the
end of the Company’s Fiscal Year. To the extent of any
conflict between the provisions of this Agreement and the Executive
Incentive Plan, the terms of this Agreement shall
control.
(c)
Merit and Other Bonuses . Employee shall be entitled to such
other bonuses as may be determined by the Board of Directors of the
Company or by a committee of the Board of Directors as determined
by the Board of Directors, in its sole discretion.
(d)
Existing Stock Options and Shares of Restricted Stock . The
Company has issued to Employee options to purchase shares of the
Company’s Common Stock pursuant to the terms of various
Option Agreements and the terms of the Company’s 2007 Stock
Incentive Plan and 2007 Stock Incentive Plan (the
“Outstanding Option Grants”). The Company has also
granted to Employee restricted shares of the Company’s Common
Stock pursuant to the terms of various Executive Restricted Stock
Agreements and the terms of the Company’s 1998 Stock
Incentive Plan (the “Outstanding Restricted Stock
Grants”). The options issued or to be issued under the
Outstanding Option Grants shall continue to be subject to the terms
of the Option Agreements, except to the extent otherwise provided
for in this Agreement. The shares of restricted stock granted or to
be granted under the Outstanding Restricted Stock Grants shall
continue to be subject to the terms of the Executive Restricted
Stock Agreements, except to the extent otherwise provided for in
this Agreement.
(e)
Other Stock Options . Employee shall be entitled to
participate and receive option grants under the 2007 Stock
Incentive Plan and such other incentive or stock option plans as
may be in effect from time-to-time, as determined by the Board of
Directors of the Company.
(f)
Other Compensation Programs . Employee shall be entitled to
participate in the Company’s incentive and deferred
compensation programs and such other programs as are established
and maintained for the benefit of the Company’s employees or
executive officers, subject to the provisions of such plans or
programs.
(g)
Health Insurance . The Company shall pay for
Employee’s and his family’s health insurance including
without limitation comprehensive major medical and hospitalization
coverage including dental and optical coverage under all group
medical plans from time to time in effect for the benefit of the
Company’s employees or executive officers.
(h)
Life Insurance . The Company shall purchase and maintain in
effect one or more term insurance policies on the life of Employee
in an aggregate amount not less than two times
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his Base Salary
in effect from time to time during the term of employment. The
beneficiary of such policy shall be the person or persons who
Employee designates in writing to the Company.
(i)
Disability Insurance . The Company shall pay for Employee to
participate in the Company’s disability insurance in effect
from time to time. The Company shall pay for the maximum coverage
commercially available. To the extent the Company does not have a
disability insurance plan or other retirement plan, then the
Company shall arrange, at its expense, for Employee to participate
in such plan.
(j)
Other Benefits . During the term of this Agreement, Employee
shall also be entitled to participate in any other health insurance
programs, life insurance programs, disability programs, stock
option plans, bonus plans, pension plans and other fringe benefit
plans and programs as are from time to time established and
maintained for the benefit of the Company’s employees or
executive officers, subject to the provisions of such plans and
programs.
(k)
Expenses . Employee shall be reimbursed for all
out-of-pocket expenses reasonably incurred by him on behalf of or
in connection with the business of the Company, pursuant to the
normal standards and guidelines followed from time to time by the
Company. Notwithstanding anything herein to the contrary or
otherwise, except to the extent any expense or reimbursement
described in this Section 2(k) does not constitute a
“deferral of compensation” within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), any expense or reimbursement described in
this Section 2(k) shall meet the following requirements:
(i) the amount of expenses eligible for reimbursement provided
to Employee during any calendar year will not affect the amount of
expenses eligible for reimbursement or in-kind benefits provided to
Employee in any other calendar year, (ii) the reimbursements
for expenses for which Employee is entitled to be reimbursed shall
be made on or before the last day of the calendar year following
the calendar year in which the applicable expense is incurred,
(iii) the right to payment or reimbursement on in-kind
benefits hereunder may not be liquidated or exchanged for any other
benefit, and (iv) the reimbursements shall be made pursuant to
objectively determinable and nondiscretionary Company policies and
procedures regarding such reimbursement of expenses.
(l)
Long Term Awards . On April 26, 2001, the Board of
Directors adopted the Republic Services, Inc. Long Term Incentive
Plan, effective January 1, 2001 to provide for long term
incentive cash grants for specific employees of the Company,
including Employee. Effective January 1, 2003, the Long Term
Incentive Plan was amended, restated and renamed the Executive
Incentive Plan to provide not only for long term incentive cash
grants but also to include the Annual Awards referred to above.
Employee has participated in the Long Term Incentive Plan and the
Executive Incentive Plan since inception, and Employee shall be
entitled to continue to participate in the Executive Incentive Plan
(or any successor plan maintained by the Company) for purposes of
receiving Long Term Awards pursuant to the terms of this Agreement
and the Executive Incentive Plan (or such successor
plan).
(m)
Synergy Incentive Plan . A schedule of the maximum award
that the Employee is eligible to receive under the Synergy
Incentive Plan is attached as Schedule 2(m), subject to
shareholder approval of amendments to the Executive Incentive Plan,
and provided
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Employee has
waived his right to terminate for Good Reason pursuant to
Section 3(c)(vi) or he has not terminated employment and
7 days has elapsed after the 2009 Annual Meeting of
Shareholders (the “Acceptance Date”). Awards under the
Synergy Incentive Plan shall not be considered Annual Awards, Long
Term Awards, or equity awards or otherwise taken into account for
purposes of Sections 3, 4 or 25 of this Agreement, but
instead, such awards shall be governed by the terms of the Synergy
Incentive Plan.
(n)
Insurance. At all times during the term of this Agreement,
and for such additional periods as are provided for in this
Agreement, the Employee shall be covered under the Company’s
directors’ and officers’ liability
insurance.
(o)
Deferred Compensation Credits . The Company shall credit
$2,250,000 to Employee’s Annual Account as part of the
Company Contribution Account pursuant to the Company’s
Deferred Compensation Plan (“Additional Company Contribution
Account”) on January 1, 2010, provided that Employee is
employed on such date (“Grant Date”). The Additional
Company Contribution Account, as adjusted under the Deferred
Compensation Plan shall be immediately vested on the Grant Date and
the Employee shall receive the Additional Company Contribution
Account, as adjusted, in accordance with the terms of the Deferred
Compensation Plan.
(a)
For Cause . The Company shall have the right to terminate
this Agreement and to discharge Employee for Cause (as defined
below), at any time during the term of this Agreement. Termination
for Cause shall mean, during the term of this Agreement,
(i) Employee’s willful and continued failure to
substantially perform his duties after he has received written
notice from the Company identifying the actions or omissions
constituting willful and continued failure to perform,
(ii) Employee’s conduct that would constitute a crime
under federal or state law, (iii) Employee’s actions or
omissions that constitute fraud, dishonesty or gross misconduct,
(iv) Employee’s breach of any fiduciary duty that causes
material injury to the Company, (v) Employee’s breach of
any duty causing material injury to the Company,
(vi) Employee’s inability to perform his material duties
to the reasonable satisfaction of the Company due to alcohol or
other substance abuse, or (vii) any violation of the
Company’s policies or procedures involving discrimination,
harassment, substance abuse or work place violence. Any termination
for Cause pursuant to this Section shall be given to Employee in
writing and shall set forth in detail all acts or omissions upon
which the Company is relying to terminate the Employee for
Cause.
Upon
any determination by the Company that Cause exists to terminate
Employee, the Company shall cause a special meeting of the Board of
Directors to be called and held at a time mutually convenient to
the Board of Directors and Employee, but in no event later than ten
(10) business days after Employee’s receipt of the
notice that the Company intends to terminate Employee for Cause.
Employee shall have the right to appear before such special meeting
of the Board of Directors with legal counsel of his choosing to
refute such allegations and shall have a reasonable period of time
to cure any actions or omissions which provide the Company with a
basis to terminate Employee for Cause (provided that such cure
period shall not exceed 30 days). A
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majority of the
members of the Board of Directors must affirm that Cause exists to
terminate Employee. In the event the Company terminates Employee
for Cause, the Company shall only be obligated to continue to pay
in the ordinary and normal course of its business to Employee his
Base Salary plus accrued but unused vacation time through the
termination date and the Company shall have no further obligations
to Employee under this Agreement from and after the date of
termination.
(b)
Resignation by Employee Without Good Reason . If Employee
shall resign or otherwise terminate his employment with the Company
at anytime during the term of this Agreement, other than for Good
Reason (as defined below), Employee shall only be entitled to
receive his accrued and unpaid Base Salary and unused vacation time
through the termination date, and the Company shall have no further
obligations under this Agreement from and after the date of
resignation.
(c)
Termination by Company Without Cause and by Employee For Good
Reason . At any time during the term of this Agreement,
(i) the Company shall have the right to terminate this
Agreement and to discharge Employee without Cause effective upon
delivery of written notice to Employee, and (ii) Employee
shall have the right to terminate this Agreement for Good Reason
effective upon delivery of written notice to the Company. For
purposes of this Agreement, “Good Reason” shall mean:
(i) the Company has materially reduced the duties and
responsibilities of Employee to a level not appropriate for an
officer of a publicly-traded company holding the position provided
for in Section 1(a), (ii) the Company has breached any
material provision of this Agreement and has not cured such breach
within 30 days of receipt of written notice of such breach
from Employee, (iii) Company has reduced Employee’s annual
Salary by more than 10% from the prior Fiscal Year (nothing in this
clause implies that the Company may reduce Employee’s Salary
below the levels provided for in Section 2(a)), (iv) the
Company has terminated Employee’s participation in one or
more of the Company’s sponsored benefit or incentive plans
and no other executive officer has had his participation
terminated, (v) a failure by the Company (1) to continue
any bonus plan, program or arrangement in which Employee is
entitled to participate (“Bonus Plans”), provided that
any such Bonus Plans may be modified at the Company’s
discretion from time to time but shall be deemed terminated if
(x) any such plan does not remain substantially in the form in
effect prior to such modification and (y) if plans providing
Employee with substantially similar benefits are not substituted
therefor (“Substitute Plans”), or (2) to continue
Employee as a participant in the Bonus Plans and Substitute Plans
on at least a basis which is substantially the same as to potential
amount of the bonus Employee participated in prior to any change in
such plans or awards, in accordance with the Bonus Plans and the
Substitute Plans (a plan shall be considered to be on a basis
substantially the same as another if the potential amount payable
thereunder is at least 90% of the potential amount payable under
the other plan), (vi) Employee’s office is relocated by
the Company to a location which is not located within the Florida
counties of Miami-Dade, Broward or Palm Beach, or (vii) the
Company’s termination without Cause of the continuation of
the Employment Period provided in this Agreement; provided that
(vi) shall continue to apply for 7 days after the 2009
Annual Meeting of Shareholders of the Company irrespective of
whether the Employee relocates to the Arizona county of Maricopa,
and thereafter the Arizona county of Maricopa shall be substituted
for the Florida counties of Miami-Dade, Broward or Palm Beach
in
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such Section.
Notwithstanding the foregoing, the Employee’s termination of
employment pursuant to this Agreement (other than with respect to
(vi) up to 7 days after the 2009 Annual Meeting of
Shareholders of the Company) shall not be effective unless
(i) the Employee delivers a written notice setting forth the
details of the occurrence giving rise to the claim of termination
for Good Reason within a period not to exceed 90 days of its
initial existence and (ii) the Company fails to cure the same
within a thirty (30) day period. Upon any such termination by
the Company without Cause, or by Employee for Good Reason,
(i) the Company shall pay to Employee all of Employee’s
accrued but unpaid Base Salary and accrued but unused vacation time
through the date of termination in a lump sum within sixty
(60) days of termination; (ii) the Company shall pay to
Employee Base Salary for three (3) years from the date of
termination when and as Base Salary would have been due and payable
hereunder but for such termination; (iii) the Company shall
continue to pay or provide for Employee all health benefits in
which Employee was entitled to participate at any time during the
12-month period prior to the date of termination, until the
earliest to occur of the third anniversary of the date of
termination, Employee’s death, or the date on which Employee
becomes covered by a comparable health benefit plan by a subsequent
employer; provided, however, that in the event that
Employee’s continued participation in any health benefit plan
of the Company is prohibited, the Company will arrange to provide
Employee with benefits substantially similar to those which
Employee would have been entitled to receive under such plan for
such period on a basis which provides Employee with no additional
after tax cost; (iv) all stock option grants or restricted
stock grants, whether or not part of the Outstanding Option Grant
or any options issued during the term of this Agreement, will
immediately vest and any such options will remain exercisable for
the lesser of the unexpired term of the option without regard to
the termination of Employee’s employment or three
(3) years from the date of termination of employment;
(v) all Annual Awards shall vest and be paid on a prorated
basis in an amount equal to the Annual Awards payment that the
Compensation Committee of the Board of Directors determines would
have been paid to Employee pursuant to the Executive Incentive Plan
had Employee’s employment continued to the end of the
Performance Period, multiplied by a fraction, the numerator of
which is the number of completed months of employment during such
Performance Period and the denominator of which is the total number
of months in the Performance Period, within sixty (60) days
after the end of the Company’s Fiscal Year; (vi) all
Long Term Awards shall vest and be paid on a prorated basis in an
amount equal to (x) the maximum Long Term Awards that would
have been paid to Employee pursuant to the Executive Incentive Plan
had Employee’s employment continued to the end of the
Performance Periods established under the Executive Incentive Plan
for award periods beginning on or before January 1, 2009 and
(y) the Long Term Awards payment that the Compensation
Committee of the Board of Directors determines would have been paid
to Employee pursuant to the Executive Incentive Plan had
Employee’s employment continued to the end of the Performance
Period for award periods beginning after January 1, 2009, in each
case, multiplied by a fraction, the numerator of which is the
number of completed months of employment during such Performance
Period and the denominator of which is the total number of months
in the Performance Period, within sixty (60) days after the
end of the Company’s Fiscal Year in which the Performance
Period ends; and (vii) as of the termination date Employee
shall be paid, in accordance with the Deferred Compensation Plan
and any elections thereunder, the balance of all amounts credited
or eligible to be credited to Employee’s deferred
compensation account (including all Company contributions, whether
or not vested, other than the Additional Company Contribution
Account solely in the event that such termination occurs
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prior to the
Grant Date), plus, solely with respect to such termination prior to
the Acceptance Date, for all such amounts credited or eligible to
be credited to such account based upon Company’s performance
on or before December 31, 2006 ( herein referred to as the
“December 31, 2006 deferral amount”) whether or
not such amount is actually credited to such account prior to or
after such date, a gross up payment to reimburse Employee for all
income and other taxes imposed with respect to the payment of such
amounts and all income and other taxes arising as a result of said
gross up payment such that the payment of such December 31,
2006 deferral amount of Employee is made to Employee free of all
taxes thereon whatsoever (collectively, the foregoing consideration
payable to Employee shall be referred to herein as the
“Severance Payment”). In the event that such
termination by the Company without Cause or by the Employee for
Good Reason occurs within the first two years of the Merger and
before the Acceptance Date, (i) the Employee shall also
receive the product of three multiplied by the maximum amount of
the Annual and Long Term Awards that the Employee would have been
eligible for under the Executive Incentive Plan with respect to the
Fiscal Year in which such termination occurs, in a lump sum within
sixty (60) days of termination and (ii) Employee will not be
required to repay any Relocation Expenses pursuant to the
Relocation Plan (Level 4) which are paid or reimbursed in
connection with Employee’s relocation to Arizona. Other than
the Severance Payment and additional benefits described herein, the
Company shall have no further obligation to Employee except for the
obligations set forth in Sections 10 and 17 of this Agreement
after the date of such termination; provided, however, that
Employee shall only be entitled to continuation of the Severance
Payment as long as he is in compliance with the provisions of
Sections 7, 8, 10 and 11 of this Agreement.
(d)
Disability of Employee . This Agreement may be terminated by
the Company upon the Disability of Employee.
“Disability” shall mean any mental or physical illness,
condition, disability or incapacity which prevents Employee from
reasonably discharging his duties and responsibilities under this
Agreement for a period of 180 consecutive days. In the event that
any disagreement or dispute shall arise between the Company and
Employee as to whether Employee suffers from any Disability, then,
in such event, Employee shall submit to the physical or mental
examination of a physician licensed under the laws of the State of
Arizona, who is mutually agreeable to the Company and Employee, and
such physician shall determine whether Employee suffers from any
Disability. In the absence of fraud or bad faith, the determination
of such physician shall be final and binding upon the Company and
Employee. The entire cost of such examination shall be paid for
solely by the Company. In the event the Company has purchased
Disability insurance for Employee, Employee shall be deemed
disabled if he is completely (fully) disabled as defined by
the terms of the Disability policy. Disability shall not be deemed
to occur unless it constitutes a “disability,” as such
term is defined in Code Section 409A. In the event that at any
time during the term of this Agreement Employee shall suffer a
Disability and the Company terminates Employee’s employment
for such Disability, such Disability shall be considered to be a
termination by the Company without Cause or a termination by
Employee for Good Reason and the Severance Payment shall be paid to
Employee to the same extent and in the same manner as provided for
in paragraph (c) above, except that (i) to the extent any
Awards have been granted under the Executive Incentive Plan, but,
as of the date of such termination, have not been determined to be
earned pursuant to the terms of the Plan, Employee shall be paid,
within thirty (30) days following the date of Employee’s
termination due to his Disability, an amount with respect to
each
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such open Award
which is equal to the full target amount that the Compensation
Committee of the Board of Directors was authorized to cause to be
paid to Employee pursuant to the Executive Incentive Plan had his
or her employment continued through the end of the Performance
Period related to such Award and had all Performance Goals been
met, (ii) payments of Annual Salary shall be mitigated by
payments under Company-sponsored disability payments.
(e)
Death of Employee . If during the term of this Agreement
Employee shall die, then the employment of Employee by the Company
shall automatically terminate on the date of Employee’s
death. In such event, Employee’s death shall be considered to
be a termination by the Company without Cause or a
termin
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