AMENDED AND RESTATED EMPLOYMENT
AGREEMENT
This
AMENDED AND RESTATED EMPLOYMENT AGREEMENT by and between Republic
Services, Inc. (the “Company”) and JAMES E.
O’CONNOR (“Employee”) shall become effective upon
the date of the approval by the Company’s stockholders of the
Executive Incentive Plan (including the Synergy Incentive Plan)
proposed in the Company’s April 3, 2009 proxy statement
(the “Effective Date”); provided, however, that if
(a) prior to such date the Employee has notified the Company
of his intention to terminate his employment, or (b) the
Executive Incentive Plan (including the Synergy Incentive Plan) is
not approved on or before June 30, 2009, this Amended and
Restated Employment Agreement shall be null and void and the
Existing Employment Agreement (defined below) shall remain in full
force and effect.
Employee
and the Company are parties to that Employment Agreement that was
entered into in February 2009 and effective as of
December 5, 2008 (the “Existing Employment
Agreement”). The parties desire to revise the Existing
Employment Agreement by entering into this Amended and Restated
Employment Agreement (the “Agreement”).
As
of the Effective Date hereof, Employee continues to be an employee
of the Company and is considered a valued employee such that the
Company desires to retain him in accordance with the terms of the
Agreement set forth herein.
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 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 Date 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
Employment Period, the Company may terminate Employee at any time
in accordance with the provisions of Section 3 of this
Agreement.
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(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 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 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
“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
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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 1998 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 and 2007 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 his Base Salary in
effect from time to time during the term of employment.
The
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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 or 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).
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(m)
Synergy Incentive Plan . The Employee is eligible to receive
the maximum award under the Synergy Incentive Plan equal to
$15,000,000, subject to shareholder approval of the Executive
Incentive Plan. 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, except that
notwithstanding any provisions in the Synergy Incentive Plan or
this Agreement to the contrary, if Employee’s employment is
terminated by the Company without Cause or by the Employee for Good
Reason, or as a result of the Employee’s death or Disability,
Employee shall receive 100% of the Synergy Incentive Plan award
that Employee would have received if Employee remained employed
until the end of the measurement period (as defined in the Synergy
Incentive Plan), to be paid within ninety (90) days after the
end of the measurement period.
(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.
(p)
New Shares of Restricted Stock . As of the Effective Date,
the Company shall grant to Employee a number of shares of
Restricted Stock equal to $2,000,000 divided by the per share
closing price on the date of grant (rounded up to the next whole
share) which shall vest on the first anniversary of the grant date,
except to the extent otherwise provided for in this
Agreement.
(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 engaging in conduct that constitutes
willful gross misconduct with respect to his employment duties
which directly results in material economic harm to the Company,
(ii) Employee’s conviction of or a plea of guilty or
nolo contendere to a felony or a crime involving moral
turpitude which causes or will likely cause substantial economic
damage to the Company, or (iii) Employee’s failure
lasting at least thirty (30) consecutive calendar days to
discharge his duties under this Agreement due to willful gross
negligence or willful gross misconduct which causes or will likely
cause substantial economic damage to the Company, provided written
notice of the alleged failure was
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delivered to
Employee and he fails to commence any action to cure such alleged
failure within thirty (30) days.
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.
The notice shall set forth the specific factual allegations which
support the determination of 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). The members of the Board of Directors must affirm
that Cause exists to terminate Employee by a unanimous decision
(excluding the Employee) based upon information and without any
deference that the actions or inactions of the Employee constitute
Cause by clear and convincing evidence. Notwithstanding the
foregoing, no finding by the Board will prohibit Employee from
contesting such determination through appropriate legal
proceedings, provided that Employee’s sole remedy shall be to
sue for damages, not reinstatement, and damages shall be limited to
those that would be paid to Employee if he had been terminated
without Cause. 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 Base
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
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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), or (vi) Employee’s office is relocated
by the Company to a location which is not located within the
Arizona county of Maricopa. Notwithstanding the foregoing, the
Employee’s termination of employment pursuant to this
Agreement 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 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; (iii) all stock option grants or
restricted stock grants, whether or not part of the Outstanding
Option Grant or any options or grants 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; (iv) 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;
(v) all Long Term Awards shall vest and be paid on a prorated
basis in an amount equal to (x) the maximum Long
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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; (vi) 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, and the Additional Company Contribution
Account even though such termination occurs prior to the Grant
Date), plus, for all such amounts credited or eligible to be
credited to such account based upon Company’s performance on
or before December 31, 2006 whether or not such amount is actually
credited to such account prior to or after such date, a gross up
payment equal to the amount of $5,200,000 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 within sixty
(60) days after termination; and (vii) the Company shall
pay to Employee $4,800,000 in a lump sum within sixty
(60) days after termination (collectively, the foregoing
consideration payable to Employee shall be referred to herein as
the “Severance Payment”).
(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
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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 (other than the award
granted under the Synergy Incentive Plan) 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 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, and (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 termination by
Employee for Good Reason and the Severance Payment shall be paid to
Employee’s personal representative or estate to the same
extent and in the same manner as provided for in paragraph
(c) above without mitigation for any insurance policies or
other benefits held by Employee, except that to the extent any
Awards have been granted under the Executive Incentive Plan (other
than the award granted under the Synergy Incentive Plan), but, as
of the date of such termination, have not been determined to be
earned pursuant to the terms of the Executive Incentive Plan,
Employee’s beneficiary or estate shall be paid, within thirty
(30) days following the date of Employee’s death, an
amount with respect to each 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. Once such payments have been
made to Employee’s personal representative, beneficiary or
estate, as the case may be, the Company shall have no
furth
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