ROLLINS, INC.
1994 EMPLOYEE STOCK INCENTIVE PLAN
SECTION 1. Purpose; Definitions.
The purpose of the Rollins, Inc. 1994 Employee Stock Incentive Plan
(the "Plan") is to enable Rollins, Inc. (the "Company") to attract, retain and
reward directors and key employees of the Company and its Subsidiaries and
Affiliates, and strengthen the mutuality of interests between such persons and
the Company's shareholders, by offering such persons performance-based stock
incentives and/or other equity interests or equity-based incentives in the
Company, as well as performance-based incentives payable in cash.
For purposes of this Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a participating
employer under this Plan, provided that the Company directly or
indirectly owns at least 20% of the combined voting power of all
classes of stock of such entity or at least 50% of the ownership
interests in such entity.
(b) "Board" means the Board of Directors of the Company.
(c) "Book Value" means, at any given date, (i) the consolidated
stockholders' equity in the Company and its Subsidiaries, as shown on
the Company's consolidated balance sheet as of the end of the
immediately preceding fiscal year, subject to such adjustments as the
Committee shall in good faith specify at or after grant, divided by
(ii) the number of shares of Outstanding Stock as of such year-end date
(as adjusted by the Committee for subsequent events).
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(e) "Committee" means the Committee referred to in Section 2 of this
Plan. If at any time no Committee shall be in office, then the
functions of the Committee specified in this Plan may be exercised by
the Board or the Compensation Committee of the Board, as set forth in
Section 2 hereof.
(f) "Company" means Rollins, Inc., a corporation organized under the
laws of the State of Delaware, or any successor corporation.
(g) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan and shall in all
events be consistent with the definition of "disabled" provided in
Sections 422(c)(6) and 22(e)(3) of the Code.
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(h) "Disinterested Person" shall have the meaning set forth in Rule
16b-3 as promulgated by the Securities and Exchange Commission
("Commission")under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor definition adopted by the
Commission.
(i) "Early Retirement" means retirement with the express written
consent of the Committee (given for purposes of this Plan only at or
before the time of such retirement) from active employment with the
Company and/or any Subsidiary or Affiliate or pursuant to the early
retirement provisions of the applicable pension plan of such entity.
(j) "Fair Market Value" means, as of any given date, unless otherwise
determined by the Committee in good faith:
(i) if the Stock is listed on an established stock
exchange or exchanges, or traded on the NASDAQ National Market
System ("NASDAQ/NMS") the highest closing price of the Stock
as listed thereon on the applicable day, or if no sale of
Stock has been made on any exchange or on NASDAQ/NMS on that
date, on the next preceding day on which there was a sale of
Stock;
(ii) if the Stock is not listed on an established
stock exchange or NASDAQ/NMS but is instead traded
over-the-counter, the mean of the dealer "bid" and "ask"
prices of the Stock in the over-the-counter market on the
applicable day, as reported by the National Association of
Securities Dealers, Inc.;
(iii) if the Stock is not listed on any exchange or
traded over-the-counter, the value determined in good faith by
the Committee.
(k) "Incentive Stock Option" means any Stock Option designated as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
(l) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(m) "NormalRetirement" means retirement from active employment with the
Company and/or any Subsidiary or Affiliate on or after age 65.
(n) "Other Stock-Based Award" means an award under Section 7 below that
is valued in whole or in part by reference to, or is otherwise based
on, Stock.
(o) "Outstanding Stock" shall include all outstanding shares of Common
Stock, $1.00 par value, of the Company as well as the number of shares
of Common Stock into which then outstanding shares of capital stock of
the Company, of whatever
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class, are convertible as of the year-end immediately preceding the
date of calculation thereof (as adjusted by the Committee for certain
events).
(p) "Performance-Accelerated Restricted Stock" means Restricted Stock
which is subject to restrictions for a stated period of time based on
continued employment, with the opportunity for the restriction period
to be shortened based on the achievement of predetermined performance
goals.
(q) "Performance Stock" means Stock awarded under Section 7 below at
the end of a specified performance period, the amount of which is
determined by multiplying a performance factor times either (i) the
Fair Market Value of the Stock on the last day of the performance
period, or (ii) the difference between the Fair Market Value of the
Stock on the first and last days of the performance period; provided,
however, that at the discretion of the Committee, participants may
receive the value of Performance Stock in cash, as determined by
reference to the Fair Market Value on the date the amount of the award
is determined.
(r) "Performance Unit" means an award pursuant to Section 7 with a
starting value and an associated performance period, such that at the
end of the performance period participants receive an amount, payable
in either cash or Stock, at the discretion of the Committee, equal to
(i) the number of units earned based on a predetermined performance
schedule times the starting unit value, or (ii) the number of units
granted times the ending unit value based on a predetermined
performance schedule.
(s) "Plan" means this Rollins, Inc. 1994 Employee Stock Incentive Plan,
as hereafter amended from time to time.
(t) "Premium Stock Option" means any Stock Option with an exercise
price in excess of the Fair Market Value, as computed on the date of
grant of the Stock Option.
(u) "Retirement" means Normal or Early Retirement.
(v) "Restricted Stock" means Stock awarded under Section 7 below which
is (i) subject to restrictions for a stated period of time based on
continued employment, (ii) subject to restrictions which will only
lapse upon the achievement of predetermined performance goals, or (iii)
subject to a combination of the restrictions described in (i) and (ii)
above.
(w) "Stock" means the Common Stock, $1.00 par value per share, of the
Company.
(x) "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 below to receive an amount in either cash or
stock, equal to the difference between the Fair Market Value of the
Stock on the date of exercise and the Fair Market Value of the Stock on
the date of grant of the right.
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(y) "Stock Option" or "Option" means any option to purchase shares of
Stock granted pursuant to Section 5 below.
(z) "Subsidiary" means any corporation (other than the Company)in an
unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 100% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
SECTION 2. Administration.
This Plan shall be administered by a Committee of not less than two
Disinterested Persons, who shall be members of the Board and who shall serve at
the pleasure of the Board, such Committee to be designated by the Board. The
functions of the Committee specified in this Plan may be exercised by the Board
or by the Compensation Committee of the Board, however, if and to the extent
that no Committee meeting the requirements of this Section 2 has been designated
by the Board as having the authority to so administer this Plan and if a
resolution to such effect is adopted by the Board after due consideration of the
impact of such resolution upon the status of this Plan under Rule 16b-3
promulgated pursuant to the Exchange Act ("Rule 16b-3").
The Committee shall have full authority to grant, pursuant to the terms
of this Plan, to directors, officers and other key employees eligible under
Section 4: (i) Stock Options, including, without limitation, Incentive Stock
Options, Non-Qualified Stock Options and Premium Stock Options, (ii) Stock
Appreciation Rights and/or (iii) Other Stock-Based Awards, including, without
limitation, Restricted Stock, Performance-Accelerated Restricted Stock,
Performance Stock and Performance Units.
In particular, the Committee shall have the authority:
(i) subject to Section 4 hereof, to select the directors,
officers and other key employees of the Company or its Subsidiaries and
Affiliates to whom Stock Options, Stock Appreciation Rights and/or
Other Stock-Based Awards may from time to time be granted hereunder;
(ii) to determine whether and to what extent Stock Options,
Stock Appreciation Rights and/or Other Stock-Based Awards, or any
combination thereof, are to be granted hereunder to one or more
eligible employees;
(iii) to determine the number of shares of Stock to be covered
by each such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of this Plan, of any award granted hereunder (including,
but not limited to, the share price and any restriction or limitation,
or any vesting, acceleration or waiver of forfeiture
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restrictions regarding any Stock Option or other award and/or the
shares of Stock relating thereto, based in each case on such factors as
the Committee shall determine, in its sole discretion);
(v) to determine whether and under what circumstances Stock
Options, Stock Appreciation Rights, Performance Stock and Performance
Units may be settled in cash;
(vi) to determine whether, to what extent and under what
circumstances Stock Option grants and/or other awards under this Plan
and/or other cash awards made by the Company are to be made, and
operate, on a tandem basis vis-a-vis other awards under this Plan
and/or cash awards made outside of this Plan, or on an additive basis;
and
(vii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the
election of the participant (including providing for and determining
the amount (if any) of any deemed earnings on any deferred amount
during any deferral period).
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing this Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of this Plan and any
award issued under this Plan (and any agreements relating thereto); and to
otherwise supervise the administration of this Plan.
Except as otherwise specifically provided herein, all decisions made by
the Committee pursuant to the provisions of this Plan shall be made in the
Committee's sole discretion and shall be final and binding on all persons,
including the Company and all Plan participants.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under this Plan shall be 1,200,000 shares. Such shares may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
Subject to section 6(b)(iv) below, if any shares of Stock that have
been optioned hereunder cease to be subject to a Stock Option, or if any such
shares of Stock that are subject to any Other Stock-Based Award granted
hereunder are forfeited or any such award otherwise terminates without a payment
being made to the participant in the form of Stock, such shares shall again be
available for distribution in connection with future awards under this Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividends, stock split or other changes in corporate
structure affecting the Stock, and subject to Sections 5(k) and 5(m), such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under this Plan, in the number and option price of shares
subject to outstanding Options granted under this Plan and in the number of
shares subject to other outstanding awards granted under this Plan as may be
determined to be appropriate by the
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Committee, in its sole discretion, provided that the number of shares subject to
any award shall always be a whole number. Such adjusted option price shall be
used to determine the amount payable by the Company upon the exercise of any
Stock Appreciation Right associated with any Stock Option.
SECTION 4. Eligibility.
Directors, officers and other key employees of the Company or its
Subsidiaries and Affiliates (but excluding members of the Committee if a
Committee meeting the requirements of Section 2 is designated by the Board) who
are responsible for or contribute to the management, growth and/or profitability
of the business of the Company and/or its Subsidiaries and Affiliates are
eligible to be granted awards under this Plan. Notwithstanding the foregoing,
Incentive Stock Options may only be granted to employees of the Company and any
of its Subsidiaries or Affiliates that are a "subsidiary corporation" (within
the meaning of Section 424(f) of the Code). Furthermore, no director who is not
also an employee of the Company shall be eligible to receive Incentive Stock
Options.
SECTION 5. Stock Options.
Stock Options may be granted alone, in addition to or in tandem with
other awards granted under this Plan and/or cash awards made outside of this
Plan. Any Stock Option granted under this Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under this Plan may be of two types: (i)
Incentive Stock Options, and (ii) Non-Qualified Stock Options. Incentive Stock
Options and Non-Qualified Stock Options may be issued as Premium Stock Options
at the discretion of the Board.
Subject to the restrictions contained in Section 4 hereof concerning
the grant of Incentive Stock Options, the Committee shall have the authority to
grant to any optionee Incentive Stock Options, Non-Qualified Stock Options, or
both types of Stock Options (in each case with or without Stock Appreciation
Rights). To the extent that the Fair Market Value of the shares with respect to
which Incentive Stock Options first become exercisable by an optionee during any
calendar year (under the Plan and any other plans granting Incentive Stock
Options which are established by the Company or its Subsidiaries) exceeds
$100,000, such Options shall be treated as Non-Qualified Stock Options.
Options granted under this Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee
at the time of grant but shall be (i) not less than 100% (or, in the
case of an employee who owns stock possessing more than 10 percent of
the total combined voting power of all classes of capital stock of the
Company or of any of its subsidiary or parent corporations, not less
than 110%) of the
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Fair Market Value of the Stock at grant, in the case of Incentive Stock
Options, and (ii) not less than 90% of the Fair Market Value of the
Stock at grant, in the case of Non-Qualified Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Stock Option shall be exercised more than ten
years (or, in the case of an employee who owns stock possessing more
than 10 percent of the total combined voting power of all classes of
stock of the Company or any of its subsidiary or parent corporations,
more than five years) after the date the Option is granted.
(c) Exercisability. Stock Options shall be exercised at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at or after grant; provided, however, that,
except as provided in Section 5(f), 5(g), or 5(k), unless otherwise
determined by the Committee at or after grant, no Stock Option shall be
exercisable until at least one year after the granting of the Option.
If the Committee provides, in its sole discretion, that any Stock
Option is exercisable only in installments, the Committee may waive
such installment exercise provisions at any time at or after grant in
whole or in part, based on such factors as the Committee shall
determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever installment
exercise provisions or other restrictions apply under Section 5(c),
Stock Options may be exercised in whole or in part at any time during
the option period, by giving written notice of exercise to the Company
specifying the number of shares to be purchased; provided, however,
that if exercised in part, a Stock Option may not be exercised for
fewer than 100 shares, unless the remaining balance of the Stock Option
is less than 100 shares, in which case the Stock Option may be
exercised for the remaining balance.
Such notice shall be accompanied by payment in full of the
purchase price, either by cash or such instrument as the Committee may
accept. Payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee for a period of at
least six months, based, in each case, on the Fair Market Value of the
Stock on the date the option is exercised, unless it shall be
determined by the Committee, at or after grant, in its sole discretion,
that unrestricted Stock is not a permissible form of payment with
respect to any Stock Option or Options.
No shares of Stock shall be issued until full payment therefor
has been made. An optionee shall generally have the rights to dividends
or other rights of a shareholder with respect to shares subject to the
Stock Option when the optionee has given written notice of exercise,
has paid in full for such shares, and, if requested, has given the
representation described in Section 10(a).
(e) Non-Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee.
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(f) Termination by Death. Subject to Section 5(k), if an
optionee's employment by the Company and/or any Subsidiary or Affiliate
terminates by reason of death, any Stock Option held by such optionee
may thereafter be exercised to the extent such option was exercisable
at the time of death or on such accelerated basis as the Committee may
determine at or after grant (or as may be determined in accordance with
procedures established by the Committee), by the legal representative
of the estate or by the legatee of the optionee under the will of the
optionee, for a period of six months (or such other period as the
Committee may specify at grant) from the date of such death or until
the expiration of the stated term of such Stock Option, whichever
period is the shorter.
(g) Termination by Reason of Disability. Subject to Section
5(k), if an optionee's employment by the Company and/or any Subsidiary
or Affiliate terminates by reason of Disability, any Stock Option held
by such optionee may thereafter be exercised by the optionee or his/her
guardian, to the extent it was exercisable at the time of termination
or on such accelerated basis as the Committee may determine at or after
grant (or as may be determined in accordance with procedures
established by the Committee), for a period of one year (or such other
period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter; provided, however,
that, if the optionee dies within such one-year period (or such other
period as the Committee may specify at grant), any unexercised Stock
Option held by such optionee shall thereafter be exercisable only
pursuant to Section 5(f). In the event of termination of employment by
Disability, if a Stock Option theretofore designated as an Incentive
Stock Option is exercised more than one year after such termination of
employment, such Stock Option shall be treated as a Non-Qualified Stock
Option.
(h) Termination by Reason of Retirement. Subject to Section
5(k), if an optionee's employment by the Company and/or any Subsidiary
or Affiliate terminates by reason of Normal or Early Retirement, any
Stock Option held by such optionee may be exercised by the optionee, to
the extent it was exercisable at the time of such Retirement, for a
period of three months, less one day, (or such other period as the
Committee may specify at grant) from the date of such termination, or
the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that if the optionee dies
within such three-month, less one day, period (or such other period as
the Committee may specify at grant), any unexercised Stock Option held
by such optionee shall thereafter be exercisable only pursuant to
Section 5(f). In the event of termination of employment by Retirement,
if a Stock Option theretofore designated as an Incentive Stock Option
is exercised more than three (3) months after such termination of
employment, such Stock Option shall be treated as a Non-Qualified Stock
Option.
(i) Other Termination. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at
or after grant, if an optionee's employment by the Company and/or any
Subsidiary or Affiliate terminates for any reason other than death,
Disability or Normal or Early Retirement, as in the case of voluntary
8
resignation of employment by the optionee, the Stock Option shall
thereupon terminate and shall be immediately forfeited, regardless of
its vesting status.
(j) Buyout Provisions. The Committee may at any time offer to
buy out for a payment in cash or Stock a Stock Option previously
granted, based on such terms and conditions as the Committee shall
establish and communicate to the optionee at the time that such offer
is made.
(k) Certain Recapitalizations. In general, if the Company is
merged into or consolidated with another corporation under
circumstances in which the Company is not the surviving corporation, or
if the Company is liquidated, or sells or otherwise disposes of
substantially all of its assets to another corporation (any such
merger, consolidation, etc. being hereinafter referred to as a
"Non-Acquiring Transaction") while unexercised Options are outstanding
under this Plan, after the effective date of a Non-Acquiring
Transaction each holder of an outstanding Option shall be entitled,
upon exercise of such Option, to receive such stock or other securities
as the holders of the same class of stock as those shares subject to
the Option shall be entitled to receive in such Non-Acquiring
Transaction based upon the agreed upon conversion ratio or per share
distribution. However, in the discretion of the Board of Directors,
after giving due consideration to the impact on the optionee, if any,
pursuant to Rule 16b-3, any limitations on exercisability of Options
may be waived so that all Options, from and after a date prior to the
effective date of such Non-Acquiring Transaction shall be exercisable
in full. Furthermore, in the discretion of the Board of Directors, the
right to exercise may be given to each holder of an Option during a
30-day period preceding the effective date of such Non-Acquiring
Transaction. Any outstanding Options not exercised within such 30-day
period may be cancelled by the Board of Directors as of the effective
date of any such Non-Acquiring Transaction. To the extent that the
foregoing adjustments relate to stock or securities of the Company,
such adjustments shall be made by the Board of Directors, whose
determination in that respect shall be final, binding and conclusive.
The Committee need not treat all optionees and/or Options in the same
manner.
(l) Subdivision or Consolidation. Except as set forth in this
Plan, optionees shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spinoff of stock of another
corporation, and no issue by the Company of shares of stock of any
class shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares subject to the Stock
Option. The grant of any Stock Option pursuant to this Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or to transfer all or any part of its
business or assets.
(m) Fractional Shares. If any adjustment referred to herein
shall result in a fractional share for any optionee under any Stock
Option hereunder, such fraction shall
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be completely disregarded and the optionee shall only be entitled to
the whole number of shares resulting from such adjustment.
(n) Compliance with Section 422. Unless otherwise determined
by the Committee with the consent of the optionee, any Option granted
hereunder and designated as an Incentive Stock Option shall comply with
all relevant provisions of Section 422 of the Code; provided, however,
that to the extent that any such Option which is designated as an
Incentive Stock Option hereunder fails for any reason to comply with
the provisions of Section 422 it shall be treated as a Non-Qualified
Stock Option.
SECTION 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be
granted alone, in addition to or in tandem with all or part of any
other award granted under this Plan. In the case of a Non-Qualified
Stock Option, such tandem rights may be granted either at or after the
time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such tandem rights may be granted only at the time of the
grant of such Stock Option.
A Stock Appreciation Right or applicable portion thereof
granted in tandem with a given Stock Option shall terminate and no
longer be exercisable upon the termination or exercise of the related
Stock Option, subject to such provisions as the Committee may specify
at grant where a Stock Appreciation Right is granted with respect to
less than the full number of shares covered by a related Stock Option.
A Stock Appreciation Right may be exercised by an optionee,
subject to Section 6(b), in accordance with the procedures established
by the Committee for such purpose. Upon such exercise, the optionee
shall be entitled to receive an amount determined in the manner
prescribed in Section 6(b). Stock Options which were issued in tandem
with exercised Stock Appreciation Rights shall no longer be exercisable
to the extent that the related Stock Appreciation Rights have been
exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the
provisions of this Plan, as shall be determined from time to time by
the Committee, including the following:
(i)Except as set forth below, the term of each Stock
Appreciation Right shall be fixed by the Committee, but no
such Stock Appreciation Right shall be exercised more than ten
years after the date it is granted. Stock Appreciation Rights
granted in tandem with Stock Options shall be exercisable only
at such time or times and to the extent that the Stock Options
to which they relate shall be exercisable in accordance with
the provisions of Section 5 and this Section 6 whenever the
Fair Market Value of the Stock exceeds the option price per
share specified in the related Stock Option. The foregoing
notwithstanding, no Stock Appreciation Right granted hereunder
to a Plan participant who is subject to Section 16(b) of the
Exchange Act shall be exercisable during the first six months
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of its term, except that, with the exception of Stock
Appreciation Rights granted in tandem with Incentive Stock
Options, in the discretion of the Committee, after giving due
consideration to the impact on the participant, if any,
pursuant to Rule 16b-3, this special limitation may be waived
in the event of death or Disability of the optionee prior to
the expiration of the six-month period. The exercise of Stock
Appreciation Rights held by participants who are subject to
Section 16(b) of the Exchange Act shall comply with Rule
16b-3(e)(3) thereunder, or any successor provision, to the
extent applicable.
(ii)Stock Appreciation Rights shall be exercised at
such time or times and subject to such terms and conditions as
shall be determined by the Committee at or after grant;
provided, however, that, except as provided in Section 5(f),
5(g), or 5(k), as incorporated herein by Section 6(b)(vi)
below, unless otherwise determined by the Committee at or
after grant, no Stock Appreciation Right shall be exercisable
until at least one year after its date of grant. If the
Committee provides, in its sole discretion, that any Stock
Appreciation Right is exercisable only in installments, the
Committee may waive such installment exercise provisions at
any time at or after grant in whole or in part, based on such
factors as the Committee shall determine, in its sole
discretion. Upon the exercise of a Stock Appreciation Right, a
participant shall be entitled to receive an amount in cash
and/or shares of Stock equal in value to the excess of Fair
Market Value of the Stock on the date of exercise over the
Fair Market Value of the Stock on the date of grant multiplied
by the number of Stock Appreciation Rights exercised, with the
Committee having the right to determine the form of payment.
Subject to whatever installment exercise provisions or other
restrictions apply hereunder, Stock Appreciation Rights may be
exercised in whole or in part at any time during the term
thereof by giving written notice of exercise to the Company
specifying the number of rights to be exercised.
(iii) No Stock Appreciation Right shall be transferable by
a participant otherwise than by will or by the laws of descent
and distribution, and all Stock Appreciation Rights shall be
exercisable, during the participant's lifetime, only by the
participant.
(iv)Upon the exercise of a tandem Stock Appreciation
Right, the Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in
Section 3 of this Plan on the number of shares of Stock to be
issued under this Plan, but only to the extent of the number
of shares issued under the Stock Appreciation Right at the
time of exercise based on the value of the Stock Appreciation
Right at such time.
(v)Stock Appreciation Rights issued in tandem with
Incentive Stock Options shall contain such terms and
conditions as the Committee may determine to be necessary for
the qualification of the Incentive Stock Options.
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(vi)Sections 5(f)-(m) hereof shall apply equally to
all Stock Appreciation Rights granted pursuant to this Plan,
as if each reference therein to a "Stock Option" was instead a
reference to a "Stock Appreciation Right."
SECTION 7. Other Stock-Based Awards.
(a) Administration. Other awards of Stock and other awards
that are valued in whole or in part by reference to, or are otherwise
based on, Stock ("Other Stock-Based Awards"), including, without
limitation, Restricted Stock, Performance-Accelerated Restricted Stock,
Performance Stock, Performance Units and Stock awards or options valued
by reference to Book Value or Subsidiary performance, may be granted
either alone or in addition to or in tandem with Stock Options or Stock
Appreciation Rights granted under this Plan and/or cash awards made
outside of this Plan.
Subject to the provisions of this Plan, the Committee shall
have authority to determine the persons to whom and the time or times
at which such awards shall be made, the number of shares of Stock to be
awarded pursuant to such awards, and all other conditions of the
awards. The Committee may also provide for the grant of Stock upon the
completion of a specified performance period or event.
The provisions of Other Stock-Based Awards need not be the
same with respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made
pursuant to this Section 7 shall be subject to the following terms and
conditions:
(i) Subject to the provisions of this Plan and the
award agreement referred to in Section 7(b)(v) below, Other
Stock-Based Awards and shares subject to such awards made
under this Section 7 may not be sold, assigned, transferred,
pledged or otherwise encumbered, in the case of shares of
Stock, prior to the date on which the shares are issued, or,
if later, the date on which any applicable restriction,
performance or deferral period lapses, and in all other cases,
not at all.
(ii) Subject to the provisions of this Plan and the
award agreement and unless otherwise determined by the
Committee at grant, the recipient of an award under this
Section 7 shall be entitled to receive, currently or on a
deferred basis, as determined by the Committee, interest or
dividends or interest or dividend equivalents with respect to
the number of shares covered by the award, as determined at
the time of the award by the Committee, in its sole
discretion, and the Committee may provide that such amounts
(if any) shall be deemed to have been reinvested in additional
Stock or otherwise reinvested.
12
(iii) Any award under this Section 7 and any Stock
covered by any such award shall vest or be forfeited to the
extent so provided in the award agreement, as determined by
the Committee, in its sole discretion.
(iv) In the event of the participant's Retirement,
Disability or death, and in other instances, the Committee
may, in its sole discretion, waive in whole or in part any or
all of the remaining limitations, performance requirements or
restrictions imposed (if any) with respect to any or all of an
award under this Section 7 and/or accelerate the payment of
cash or Stock pursuant to any such award.
(v) Each award under this Section 7 shall be
confirmed by, and subject to the terms of, an agreement or
other instrument executed by the Company and by the
participant.
(vi) Stock (including securities convertible into
Stock) issued on a bonus basis under this Section 7 may be
issued for no cash consideration.
(vii) Other Stock-Based Awards, to the extent they
constitute derivative securities for purposes of Section 16 of
the Exchange Act, and are owned by persons who are subject to
Section 16(b) of the Exchange Act, shall be transferable only
when and to the extent a Stock Option would be transferable
under Section 5(e) of this Plan. The Committee may also take
into account other provisions contained in the Exchange Act or
which are promulgated pursuant thereto.
(viii) Unless otherwise determined by the Committee at
or after grant, if a participant's employment by the Company
and/or any Subsidiary or Affiliate terminates by reason of
death or Disability, a pro rata portion of the restrictions
pertaining to continued employment on any Restricted Stock
will lapse, based on the number of full months the participant
was employed during the restriction period divided by the
total number of months in the restriction period. All such pro
rata awards will be determined and distributed at such time as
awards are paid to other Plan participants.
(ix) Unless otherwise determined by the Committee at
or after grant, if a participant's employment by the Company
and/or any Subsidiary or Affiliate terminates by reason of
Normal Retirement, all of the restrictions pertaining to
continued employment on any Restricted Stock will lapse. Any
such award will be determined and distributed at such time as
awards are paid to other Plan participants.
(x) Unless otherwise determined by the Committee at
or after grant, if a participant's employment by the Company
and/or any Subsidiary or Affiliate terminates by reason of
death or Disability, the estate of the participant or the
participant, as applicable, will receive a pro rata portion of
the payment or Stock
13
the participant would have received for Performance Stock or
Performance Units, based on the number of full months in the
performance period prior to the participants's death or
Disability, divided by the total number of months in the
performance period. All such pro rata payments will be
determined and distributed at such time as awards are paid to
other Plan participants.
(xi) Unless otherwise determined by the Committee at
or after grant, if a participant's employment by the Company
and/or any Subsidiary or Affiliate terminates by reason of
Early Retirement and if such Early Retirement occurs before
age 65 and before completion of 10 years of service with the
Company and/or a Subsidiary or Affiliate subsequent to the
date of grant of Restricted Stock or Performance-Accelerated
Restricted Stock, all such Restricted Stock and
Performance-Accelerated Restricted Stock will be forfeited by
the participant. In addition, in the event of Normal or Early
Retirement before the end of the performance period for
Performance Stock or Performance Units, no awards will be paid
unless specifically approved by the Committee on a
case-by-case basis.
(xii) Unless otherwise determined by the
Committee (or pursuant to procedures established by the
Committee) at or after grant, if a participant's employment by
the Company and/or any Subsidiary or Affiliate terminates for
any reason other than death, Disability or Normal or Early
Retirement, as in the case of voluntary resignation of
employment by the participant, all Other Stock-Based Awards
shall be immediately forfeited.
(xiii) The Committee may at any time offer to buy
out for a payment in cash or Stock an Other Stock-Based Award
previously granted, based on such terms and conditions as the
Committee shall establish and communicate to the participant
at the time that such offer is made.
(xiv) Except as set forth in this Plan,
participants shall have no rights by reason of any subdivision
or consolidation of shares of stock of any class or the
payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger, or
consolidation or spinoff of stock of another corporation, and
no issue by the Company of shares of stock of any class shall
affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to any Other
Stock-Based Award. The grant of any Other Stock-Based Award
pursuant to this Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve,
liquidate or sell, or to transfer all or any part of its
business or assets.
14
SECTION 8. Amendments and Termination.
The Board may amend, alter, or discontinue this Plan, but, except as
otherwise provided herein, no amendment, alteration, or discontinuation shall be
made which would impair the rights of an optionee or participant under a Stock
Option, Stock Appreciation Right or Other Stock-Based Award theretofore granted,
without the optionee's or participant's consent, or which, without the approval
of the Company's stockholders, would:
(a) materially increase the benefits accruing to participants
under this Plan;
(b) materially increase the number of securities which may be
issued under this Plan; or
(c) materially modify the requirements as to eligibility for
participation in this Plan.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices.
Subject to the above provisions, the Board shall have broad authority
to amend this Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.
SECTION 9. Unfunded Status of Plan.
This Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
this Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder; provided, however, that, unless the Committee otherwise determines
with the consent of the affected participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of this Plan.
15
SECTION 10. General Provisions.
(a) The Company shall not be obligated to sell or issue any
shares pursuant to any Option unless the shares with respect to which
the Option is being exercised are at the time effectively registered or
exempt from registration under the Securities Act of 1933, as amended
(the "1933 Act"). The Company shall have no obligation to register
pursuant to the 1933 Act any shares of Stock issued pursuant to this
Plan. The Committee may require each person purchasing shares pursuant
to a Stock Option or other award under this Plan to represent to and
agree with the Company in writing that the optionee or participant is
acquiring the shares for investment and without a view to distribution
thereof. The certificates for such shares may include any legend which
the Committee deems appropriate to reflect any restrictions on
transfer.
All certificates for shares of Stock or other securities
delivered under this Plan shall be subject to such conditions,
stop-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the
Stock is then listed, and any applicable federal or state securities
law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required, and such
arrangements may be either generally applicable or applicable only in
specific cases.
(c) The adoption of this Plan shall not confer upon any
employee of the Company or of any Subsidiary or Affiliate any right to
continued employment with the Company or a Subsidiary or Affiliate, as
the case may be, nor shall it interfere in any way with the right of
the Company or a Subsidiary or Affiliate to terminate the employment of
any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includable in the gross income of the participant for federal income
tax purposes with respect to the exercise of any Option or Stock
Appreciation Right or any award under this Plan, the participant shall
pay to the Company, or make arrangements satisfactory to the Committee
regarding the payment of, any federal, state, or local taxes of any
kind required by law to be withheld with respect to such amount. The
obligations of the Company under this Plan shall be conditional on such
payment or arrangements, and the Company and its Subsidiaries or
Affiliates shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the
participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional types of Plan awards at the time of any
dividend payment shall only be
16
permissible if sufficient shares of Stock are available under Section 3
for such reinvestment, taking into account other Plan awards then
outstanding.
(f) This Plan and all awards made and actions taken hereunder
shall be governed by and construed in accordance with the Delaware
General Corporation Law, to the extent applicable, and in accordance
with the laws of the State of Georgia in all other respects.
(g) The value of awards made pursuant to this Plan shall not
be included as part of the definition of "cash compensation" in
connection with any other benefit offered by the Company.
SECTION 11. Effective Date of Plan.
This Plan shall be effective as of January 25, 1994.
SECTION 12. Term of Plan.
No Stock Option, Stock Appreciation Right or Other Stock-Based Award
shall be granted pursuant to this Plan on or after the tenth anniversary of the
effective date of this Plan, but awards granted prior to such tenth anniversary
may extend beyond that date.
17
ROLLINS, INC.
1994 EMPLOYEE STOCK INCENTIVE PLAN
January 25, 1994
18
TABLE OF CONTENTS
Page
----
SECTION 1................................................. Purpose; Definitions
..............................................................................1
SECTION 2........................................................Administration
..............................................................................4
SECTION 3.................................................Stock Subject to Plan
..............................................................................5
SECTION 4...........................................................Eligibility
..............................................................................6
SECTION 5.........................................................Stock Options
..............................................................................6
(a).............................................................Option Price
...........................................................................6
(b)..............................................................Option Term
...........................................................................7
(c)...........................................................Exercisability
...........................................................................7
(d).......................................................Method of Exercise
...........................................................................7
(e)...........................................Non-Transferability of Options
...........................................................................7
(f).....................................................Termination by Death
...........................................................................8
(g)......................................Termination by Reason of Disability
...........................................................................8
(h)......................................Termination by Reason of Retirement
...........................................................................8
(i)........................................................Other Termination
...........................................................................8
(j)........................................................Buyout Provisions
...........................................................................9
(k)................................................Certain Recapitalizations
...........................................................................9
(l).............................................Subdivision or Consolidation
...........................................................................9
(m)........................................................Fractional Shares
...........................................................................9
(n)..................................................Compliance with Section
..........................................................................10
SECTION 6.............................................Stock Appreciation Rights
..........................................................................10
(a).......................................................Grant and Exercise
..........................................................................10
(b).....................................................Terms and Conditions
..........................................................................10
SECTION 7..............................................Other Stock-Based Awards
..........................................................................12
(a)...........................................................Administration
..........................................................................12
(b).....................................................Terms and Conditions
..........................................................................12
SECTION 8............................................Amendments and Termination
..........................................................................15
SECTION 9...............................................Unfunded Status of Plan
..........................................................................15
SECTION 10...................................................General Provisions
..........................................................................16
SECTION 11...............................................Effective Date of Plan
..........................................................................17
SECTION 12.........................................................Term of Plan
..........................................................................17