EX-10.9 Executive Incentive Plan



 




EXHIBIT 10.9


 





Republic Services, Inc.




Executive Incentive Plan




Introduction


     
On April 26, 2001, the Board of Directors adopted the
Republic Services, Inc. Long Term Incentive Plan, effective
January 1, 2001. Though designed in general to comply with
the requirements of “performance-based compensation”
for purposes of Code Section 162(m)(4), the Plan was not
submitted for shareholder approval. Effective January 1,
2003, the Long Term Incentive Plan has been amended, restated
and renamed the “Executive Incentive Plan” to provide
not only for awards designed to encourage and recognize long
term performance by participants, but also to include annual
awards previously made pursuant to the Company’s Corporate
Bonus Program. It is the intention of the Board of Directors to
submit the amended and restated Plan for shareholder approval.



1.          Purpose.


     
The purposes of the Plan are to promote the success of the
Company; to provide designated Executive Officers with an
opportunity to receive incentive compensation dependent upon
that success; and to attract, retain and motivate such
individuals.



2.          Definitions.


     
“Award” means an incentive award, either a Long
Term Award or an Annual Award made pursuant to the Plan.



			
	 	• 	
    Annual Award (formerly made pursuant to the Corporate Bonus
    Program) — is designed to recognize the annual
    contribution of Participants to the achievement of certain short
    term goals and objectives of the Company.
	 
	 	• 	
    Long Term Award — is designed to recognize the impact
    by Participants upon the achievement by the Company of longer
    term success in enhancing shareholder value.




     
“Award Formula” means one or more objective
formulas or standards established by the Committee for purposes
of determining an Award based on the level of performance with
respect to one or more Performance Goals. Award Formulas may
vary from Performance Period to Performance Period and from
Participant to Participant and may be established on a
stand-alone basis, in tandem or in the alternative. The Award
Formula for each Performance Period shall be established in
writing by the Committee.


     
“Award Schedule” means the Award Schedule
established pursuant to Section 4.1.


     
“Beneficiary” means the person(s) designated by
the Participant, in writing on a form provided by the Committee,
to receive payments under the Plan in the event of his or her
death while a Participant or, in the absence of such
designation, the Participant’s estate.


     
“Board of Directors” means the Board of
Directors of the Company.


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“Change of Control” means any change in control
of the Company of a nature which would be required to be
reported (i) in response to Item 6(e) of Schedule 14A
of Regulation 14A, as in effect on the date of this
Agreement, promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), (ii) in
response to Item 1 of the Current Report on Form 8-K,
as in effect on the date of this Agreement, promulgated under
the Exchange Act, or (iii) in any filing by the Company
with the Securities and Exchange Commission; provided, however,
that without limitation, a Change of Control of the Company
shall be deemed to have occurred if:



			
	 	(a)	
    Any “person” (as such term is defined in Sections
    13(d)(3) and Section 14(d)(3) of the Exchange Act), other
    than the Company, any majority-owned subsidiary of the Company,
    or any compensation plan of the Company or any majority-owned
    subsidiary of the Company, becomes the “beneficial
    owner” (as such term is defined in Rule 13d-3 of the
    Exchange Act), directly or indirectly, of securities of the
    Company representing fifty percent (50%) or more of the combined
    voting power of the Company;
	 
	 	(b)	
    During any period of three consecutive years during the term of
    this Agreement, the individuals who at the beginning of such
    period constitute the Board of Directors of the Company cease
    for any reason to constitute at least a majority of such Board
    of Directors, unless the election of each director who was not a
    director at the beginning of such period has been approved in
    advance by directors representing at least two-thirds of the
    directors then in office who were directors at the beginning of
    such period; or
	 
	 	(c)	
    The shareholders of the Company approve (1) a
    reorganization, merger, or consolidation with respect to which
    persons who were the shareholders of the Company immediately
    prior to such reorganization, merger, or consolidation do not
    immediately thereafter own more than 50% of the combined voting
    power entitled to vote generally in the election of the
    directors of the reorganized, merged or consolidated entity;
    (2) a liquidation or dissolution of the Company; or
    (3) the sale of all or substantially all of the assets of
    the Company or of a subsidiary of the Company that accounts for
    30% of the consolidated revenues of the Company, but not
    including a reorganization, merger or consolidation of the
    Company.




     
“Code” means the Internal Revenue Code of 1986,
as amended.


     
“Committee” means the Compensation Committee of
the Board of Directors. The Committee shall be composed of not
fewer than two directors, each of whom shall be an “outside
director” (within the meaning of Code Section 162(m)).


     
“Company” means Republic Services, Inc. and its
successors.


     
“Determination Period” means, with respect to a
Performance Period applicable to any Award under the Plan, the
period commencing with the first day of such Performance Period
and ending 90 days after the commencement of the
Performance Period.


     
“Disability” means disability as defined under
the Company’s long term disability plan or, if no such plan
is in force at the time, as determined by the Committee.


     
“Executive Officer” means a Person who is the
chief executive officer, chief operating officer, chief
financial officer, general counsel, controller, corporate vice
president, regional vice president, controller or manager, or
area president of the Company.


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“Participant” means an Executive Officer
selected from time to time by the Committee to participate in
the Plan.


     
“Performance Goal” means the level of
performance established by the Committee as the Performance Goal
with respect to a Performance Measure. Performance Goals may
vary from Performance Period to Performance Period and from
Participant to Participant and may be established on a
stand-alone basis, in tandem or in the alternative. Initially,
Performance Goals shall include minimum, target and maximum
performance levels.


     
“Performance Measure” means one or more of the
following selected by the Committee to measure Company and/or
business unit performance for a Performance Period: net income;
basic or diluted earnings per share; net revenues; gross profit;
free cash flow, income before income taxes; economic profit;
return on assets; return on funds employed and return on equity;
each as determined in accordance with generally accepted
accounting principles, where applicable, as consistently applied
by the Company and, if so determined by the Committee prior to
the expiration of the Determination Period, adjusted, to the
extent permitted under Section 162(m) of the Code, to omit
the effects of extraordinary items, the gain or loss on the
disposal of a business segment, unusual or infrequently
occurring events and transactions and cumulative effects of
changes in accounting principles. Performance Measures may vary
from Performance Period to Performance Period and from
Participant to Participant and may be established on a
stand-alone basis, in tandem or in the alternative. Initial
Performance Measures for Annual Awards and Long Term Awards are
set forth on Schedule A and Schedule B, respectively.


     
“Performance Period” means one or more periods
of time, as the Committee may designate, over which the
attainment of one or more Performance Goals will be measured for
the purpose of determining a Participant’s right to payment
in respect of an Award. Unless otherwise determined by the
Committee in advance, the Performance Period for an Annual Award
shall be one calendar year beginning January 1, 2003.
Unless otherwise determined by the Committee in advance, a
Performance Period for a Long Term Award shall be three calendar
years, with the first such Period beginning January 1, 2003.


     
“Plan” means the Republic Services, Inc.
Executive Incentive Plan, which combines the Long Term Incentive
Plan and the Corporate Bonus Program, both as amended and
restated, effective January 1, 2003. Prior to such date,
“Plan” means the Republic Services, Inc. Long Term
Incentive Plan (effective, January 1, 2001).


     
“Plan Year” means the calendar year.


     
“Retirement” means retirement at the
Company’s normal retirement age or early retirement with
the prior written approval of the Company.



3.          Participation.


     
3.1  Participants shall be selected by the Committee
from among the Executive Officers. The selection of an Executive
Officer as a Participant for a Performance Period shall not
entitle such individual to be selected as a Participant with
respect to any other Performance Period; provided, however, that
once an Executive Officer becomes a Participant, he shall
continue as a Participant until the Committee terminates his
participation or an event occurs under the Plan which causes
termination of participation.


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4.          Awards.


     
4.1  Award Schedules. With respect to each
Performance Period with respect to which an Award may be earned
by a Participant under the Plan, prior to the expiration of the
Determination Period the Committee shall establish in writing
for such Performance Period an Award Schedule for each
Participant. The Award Schedule shall set forth the applicable
Performance Period, Performance Measure(s), Performance Goal(s),
and Award Formula(s) and such other information as the Committee
may determine. Once established for a Plan Year, such items
shall not be amended or otherwise modified to the extent such
amendment or modification would cause the compensation payable
pursuant on the Award to fail to constitute performance- based
compensation under Code Section 162(m). Award Schedules may vary
from Performance Period to Performance Period and from
Participant to Participant.


     
4.2     Determination of Awards.
A Participant shall be eligible to receive payment in
respect of an Award only to the extent that the Performance
Goal(s) for such Award are achieved and the Award Formula as
applied against such Performance Goal(s) determines that all of
some portion of such Participant’s Award has been earned
for the Performance Period. As soon as practicable after the
close of each Performance Period, the Committee shall meet to
review and certify in writing whether, and to what extent, the
Performance Goals for the Performance Period have been achieved
and, if so, to calculate and certify in writing that amount of
the Award earned by each Participant for such Performance Period
based upon such Participant’s Award Formula. The Committee
shall then determine the actual amount of the Award to be paid
to each Participant and in so doing, may use negative discretion
to decrease, but not increase, the amount of the Award otherwise
payable to the Participant based upon such performance. Anything
in this plan to the contrary notwithstanding, the maximum Award
payable to any Participant with respect to each Plan Year (or
portion thereof) contained within a Performance Period shall be
$2,500,000.


     
4.3  Payment of Awards. Awards shall be paid in
a lump sum cash payment as soon as practicable after the amount
thereof has been determined and certified in accordance with
Section 4.2. The Committee may, subject to such terms and
conditions and within such limits as it may from time to time
establish, permit one or more Participants to defer the receipt
of amounts due under the Plan in a manner consistent with the
requirements of Code Section 162(m) so that any increase in
the amount of an Award that is deferred shall be based either on
a reasonable rate of interest or the performance of a
predetermined investment in accordance with Treasury
Regulation 1.162-27(e)(2)(iii)(B). If any Award which is
earned pursuant to this Section 4 is paid prior to the time
determined when the Award was initially granted, the amount of
such Award shall be reduced by an appropriate discount factor
determined by the Committee.


     
4.4  Change of Control. All Performance Goals
and other conditions to payment of Awards shall be deemed to be
achieved or fulfilled as of the time of a Change of Control. In
the event of a Change of Control, the Company shall promptly pay
each Participant 100% of the Participant’s Target Award (as
established in the applicable Award Schedules) for the
Performance Period in which the Change of Control occurs. In
addition, if at the time of a Change of Control there has been
no determination or payment of an Award for the preceding
Performance Period, the Company shall pay to each individual who
was a Participant with respect to such prior Performance Period
the full amount to which he or she would have been paid assuming
certification by the Committee of the performance for such
Performance Period and no reduction in Target


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Award payments for factors other than performance factors.
Payments under this Section 4.4 shall be made not later
than ten (10) days following the Change of Control.




5.          Termination
of Employment.


     
5.1  Termination of Employment. Except as
otherwise provided in Section 4.4 or Section 5.2:



			
	 	• 	
    A Participant who voluntarily terminates employment prior to the
    date of payment of an Award shall forfeit all right to or
    interest in any Award with respect to such Performance Period(s).
	 
	 	• 	
    A Participant whose employment is terminated without
    “cause” prior to the mid-point of the Performance
    Period shall forfeit all right to or interest in any Award with
    respect to such Performance Period. A Participant whose
    employment is terminated without “cause” after the
    mid-point of the Performance Period shall be entitled to be paid
    a pro-rated amount equal to the Award payment that the Committee
    determines would have been paid to the Participant pursuant to
    Section 4.3 had his or her employment continued to the end
    of the Performance Period, multiplied by a fraction, the
    numerator of which is the number of completed calendar months of
    employment during the Performance Period and the denominator of
    which is the total number of months in the Performance Period.
    The mid-point of a Performance Period (based upon a calendar
    year or years) shall be the applicable June 30 that
    represents the middle of such Period.
	 
	 	• 	
    A Participant whose employment is terminated for
    “cause” (Termination for Cause) prior to the date of
    payment of an award shall forfeit all right to or interest in
    any Award with respect to such Performance Period(s).




     
Termination for Cause shall mean, (i) Participant’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) Participant’s
conduct that would constitute a crime under federal or state
law, (iii) Participant’s actions or omissions that
constitute fraud, dishonesty or gross misconduct, (iv)
Participant’s breach of any fiduciary duty that causes
material injury to the Company, (v) Participant’s
breach of any duty causing material injury to the Company,
(vi) Participant’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 the Participant in writing and shall set forth
in detail all acts or omissions upon which the Company is
relying to terminate the Participant for Cause. With respect to
Participants other than the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and General Counsel
(the Executive Group), a determination of cause shall be made by
the Chief Executive Officer.


     
With respect to the Executive Group, any determination by the
Company that Cause exists to terminate the Participant, the
Company shall cause a special meeting of the Committee to be
called and held at a time mutually convenient to the Committee
and Participant, but in no event later than ten
(10) business days after Participant’s



receipt of the notice that the Company intends to terminate the
Participant for Cause. Participant shall have the right to
appear before such special meeting of the Committee



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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
the Participant for Cause (provided that such cure period shall
not exceed 30 days). A majority of the members of the
Committee must affirm that Cause exists to terminate the
Participant. No finding by the Committee will prevent the
Participant’s contesting such determination through
appropriate legal proceedings, provided that the
Participant’s sole remedy shall be to sue for damages, not
reinstatement, and damages shall be limited to those that would
be paid to the Participant if he had been terminated without
Cause.



     
5.2  Death, Disability or Retirement. In the
event that a Participant dies or his or her employment is
terminated by reason of Disability or Retirement after an Award
has been granted to the Participant but before it has been
determined to be earned pursuant to Section 4.2, there
shall be paid to the Participant (or, in the event of death, to
the Participant’s Beneficiary or estate) an amount equal to
the Award payment that the Committee determines would have been
paid to the Participant pursuant to Section 4.3 had his or
her employment continued, through the end of the Performance
Period. Payment of such an Award shall be made after the end of
the Performance Period to which it applies.



6.          Administration.


     
6.1  In General. The Committee shall have full
and complete authority, in its sole and absolute discretion,
(i) to exercise all of the powers granted to it under the
Plan, (ii) to construe, interpret and implement the Plan
and any related document, (iii) to prescribe, amend and
rescind rules relating to the Plan, (iv) to make all
determinations necessary or advisable in administering the Plan,
and (v) to correct any defect, supply any omission and
reconcile any inconsistency in the Plan. The Chief Executive
Officer of the Company may recommend to the Committee Executive
Officers for participation and target award levels for
Participants.


     
6.2  Determinations. The actions and
determinations of the Committee or others to whom authority is
delegated under the Plan on all matters relating to the Plan and
any Awards shall be final and conclusive. Such determinations
need not be uniform and may be made selectively among persons
who receive, or are eligible to receive, Awards under the Plan,
whether or not such persons are similarly situated.


     
6.3  Appointment of Experts. The Committee may
appoint such accountants, counsel, and other experts as it deems
necessary or desirable in connection with the administration of
the Plan.


     
6.4  Delegation. The Committee may delegate to
others the authority to execute and deliver such instruments and
documents, to do all such acts and things, and to take all such
other steps deemed necessary, advisable or convenient for the
effective administration of the Plan in accordance with its
terms and purposes, except that the Committee shall not delegate
any authority with respect to decisions regarding Plan
eligibility or the amount, timing or other material terms of
Awards.


     
6.5  Books and Records. The Committee and
others to whom the Committee has delegated such duties shall
keep a record of all their proceedings and actions and shall
maintain all such books of account, records and other data as
shall be necessary for the proper administration of the Plan.


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6.6  Payment of Expenses. The Company shall pay
all reasonable expenses of administering the Plan, including,
but not limited to, the payment of professional and expert fees.



7.          Miscellaneous.


     
7.1  Nonassignability. No Award shall be
assignable or transferable (including pursuant to a pledge or
security interest) other than by will or by the laws of descent
and distribution.


     
7.2  Withholding Taxes. Whenever payments under
the Plan are to be made or deferred, the Company will withhold
therefrom, or from any other amounts payable to or in respect of
the Participant, an amount sufficient to satisfy any applicable
governmental withholding tax requirements related thereto.


     
7.3  Amendment or Termination of the Plan. The
Plan may be amended or terminated by the Committee in any
respect except that (i) no amendment may be made after the
date on which an Executive Officer is selected as a Participant
for a Performance Period that would adversely affect the rights
of such Participant with respect to such Performance Period
without the consent of the affected Participant and (ii) no
amendment shall be effective without the approval of the
shareholders of the Company to increase the maximum Award
payable under the Plan or if, in the opinion of counsel to the
Company, such approval is necessary to satisfy the applicable
requirements of Code Section 162(m).


     
7.4  Other Payments or Awards. Nothing
contained in the Plan will be deemed in any way to limit or
restrict the Company from making any award or payment to any
person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.


     
7.5  Payments to Other Persons. If payments are
legally required to be made to any person other than the person
to whom any amount is payable under the Plan, such payments will
be made accordingly. Any such payment will be a complete
discharge of the liability of the Company under the Plan.


     
7.6  Unfunded Plan. Nothing in this Plan will
require the Company to purchase assets or place assets in a
trust or other entity to which contributions are made or
otherwise to segregate any assets for the purpose of satisfying
any obligations under the Plan. Participants will have no rights
under the Plan other than as unsecured general creditors of the
Company.


     
7.7  Limits of Liability. Neither the Company
nor any other person participating in any determination of any
question under the Plan, or in the interpretation,
administration or application of the Plan, will have any
liability to any party for any action taken or not taken in good
faith under the Plan.


     
7.8  No Right of Employment. Nothing in this
Plan will be construed as creating any contract of employment or
conferring upon any Participant any right to continue in the
employ or other service of the Company or limit in any way the
right of the Company to change such person’s compensation
or other benefits or to terminate the employment or other
service of such person with or without cause.


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7.9  Section Headings. The section
headings contained herein are for convenience only, and in the
event of any conflict, the text of the Plan, rather than the
section headings, will control.


     
7.10  Invalidity. If any term or provision
contained herein is to any extent invalid or unenforceable, such
term, or provision will be reformed so that it is valid, and
such invalidity or unenforceability will not affect any other
provision or part hereof.


     
7.11  Applicable Law. The Plan will be governed
by the laws of the State of Florida, as determined without
regard to the conflict of law principles thereof.


     
7.12  Effective Date/Term. The Plan, as amended
and restated effective January 1, 2003, shall be effective
only upon the approval by the shareholders of the Company in a
manner consistent with the shareholder approval requirements of
Code Section 162(m), and shall be effective for the Plan
Year in which such approval occurs and each of the next four
succeeding Plan Years unless sooner terminated by the Committee
in accordance with Section 7.3. For the fifth succeeding
Plan Year, the Plan shall remain in effect in accordance with
its terms unless amended or terminated by the Committee, and the
Committee shall make the determinations required by
Section 4 for such Plan Year, but the Plan shall be
submitted for re-approval by the shareholders of the Company at
the annual meeting of shareholders held during such fifth Plan
Year, and payment of all Awards under the Plan for such Plan
Year and any future Plan Years shall he contingent upon such
approval.


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SCHEDULE A



ANNUAL AWARDS


      
1.          Executive
Group — With respect to the Executive Group (any
person who, on the last day of the Corporation’s taxable
year, is the Chief Executive Officer (or is acting in such
capacity) and any other employee whose total compensation is
required to be reported to shareholders under the Securities
Exchange Act of 1934 as being among the Corporation’s four
highest compensated officers for the taxable year) shall be
eligible for Annual Awards in accordance with the following
criteria:



		
	 	
    A.          Subject
    to certain thresholds (percentage of targets achieved, an Annual
    Award shall be based upon achieving a Cash Flow target and
    Earnings Per Share target established by the Compensation
    Committee. Each target shall be weighted at 50%, and no Annual
    Award shall be payable unless at least one target is attained.
	 
	 	
    B.          If
    the Cash Flow target is met and the EPS target is exceeded, then
    the amount of the aggregate Annual Award may be increased from
    100% to a maximum of 200% based upon the extent to which the EPS
    target is exceeded.




     
2.          For
participants other than the Executive Group, Annual Awards shall
be established in a similar fashion by the Chief Executive
Officer.


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SCHEDULE B



LONG TERM AWARDS


      
Initially, the Performance Measure, for the purpose of Long Term
Awards, means the following criteria to measure Company
performance for a Performance Period:


     
(a)  Cash Flow Value Creation (CVC) — which is
calculated as follows:



			
	 	• 	
    Operating Cash Flow (defined as net income before extraordinary
    items and accounting changes, plus after-tax interest expense,
    plus depreciation, depletion and amortization)




             
minus



			
	 	• 	
    Capital Charge (defined as net average assets employed in the
    business, times the Company’s targeted weighted average
    cost of capital)




     
(b)  Return On Investment Capital
(ROIC) calculated as follows:



			
	 	• 	
    Net income before extraordinary items and accounting charges,
    plus after-tax interest expense




             
divided by



			
	 	• 	
    Average Net Assets (for any calendar year, defined as assets
    minus liabilities plus debt minus cash minus unrestricted cash
    equals Net Assets. Average Net Assets the sum of Net Assets for
    two sequential calendar years divided by two).




     
(c)  CVC and ROIC goals will be based on three-year
cumulative results and will be weighted equally and
independently (i.e., 50% of award based on CVC performance and
the other 50% of award based on ROIC performance) in determining
award payouts. Straight-line interpolation is used to determine
award payouts for performance achievement between specified
targets.


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