EMPLOYEE INCENTIVE STOCK OPTION PLAN
ROLLINS, INC.
1. PURPOSE
This Employee Incentive Stock Option Plan (the "Plan") is intended as an
incentive and to encourage stock ownership by certain officers and other key
employees of Rollins, Inc. (the "Corporation"), or of its subsidiary
corporations (the "Subsidiary" or "Subsidiaries") as that term is defined in
section 425(f) of the Internal Revenue Code of 1954 (the "Code") so that they
may acquire or increase their proprietary interest in the Corporation, and to
reward them properly for meritorious or profit producing services to the
Corporation or the Subsidiaries. It is further intended that options issued
pursuant to this Plan shall constitute incentive stock options within the
meaning of Sec. 422A of the Code.
2. ADMINISTRATION.
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). The Committee shall consist of
not less than three members of the Corporation's Board of Directors. The Board
of Directors may from time to time remove members from or add members to the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board of Directors. The Committee shall select one of its members as Chairman
and shall hold meetings at such times and places as it may determine. The
action of a majority of the Committee at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee. Each Director while a member of the
Committee shall meet the definition of "disinterested person" contained in Rule
16B-3 of the Securities Exchange Commission. The Committee shall from time to
time at its discretion designate the key employees who shall be granted options
and the number of shares subject to such options.
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The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final. No member of the
Committee shall be liable for any act or omission of any other member of the
Committee or for any act or omission on the member's part, including, but not
limited to, the exercise of any power or discretion given the member under the
Plan, except those resulting from the member's own gross negligence or willful
misconduct.
3. ELIGIBILITY
The Persons who shall be eligible to receive options shall be such key
employees (including officers, whether or not they are Directors) of the
Corporation or its subsidiaries as the Committee shall select from time to time
("Optionee" or "Optionees"). An Optionee may hold more than one option, but
only on the terms and subject to the restrictions hereafter set forth.
4. STOCK
The Stock subject to the Options under the Plan shall be shares of the
Corporation's authorized and unissued or reacquired one dollar ($1.00) par value
voting common stock (the term "Shares" as used herein shall refer to the said
one dollar ($1.00) par value voting common stock of the Corporation, the term
"Shares" shall refer to shares which are subject to an option granted under the
Plan). The aggregate number of shares which may be issued pursuant to the
exercise of options under the Plan shall not exceed 800,000 shares. The
limitations established by each of the preceding sentences shall be subject to
adjustment as provided in Section 6(I) of the Plan.
In the event that any outstanding option under the Plan for any reason
expires or is terminated, the Shares allocable to the unexercised portion of
such option may again be subject to an option under the Plan.
5. ANNUAL LIMITATION.
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No Optionee shall be granted, in any calendar year, options to purchase
shares having an aggregate fair market value (determined at the date of grant of
such options) in excess of (i) $100,000 plus (ii) any unused carryover limit to
such year computed in accordance with section 422A of the Code.
6. TERMS AND CONDITIONS OF OPTION.
Options granted pursuant to the Plan shall be authorized by the Committee
and shall be evidenced by agreements in such form as the Committee shall from
time to time approve, which agreements shall contain specifically or be subject
to, the following terms and conditions:
(a) NUMBER OF SHARES. Each option shall state the number of Shares to
which it pertains.
(b) OPTION PRICE. Each option shall state the option price, which shall
be not less than 100% of the fair market value of the Shares subject to the
option; provided that options granted to Optionees owning more than 10% of the
voting stock of the Corporation shall have an option price of at least 110% of
the fair market value of the Shares subject to the Option. The "fair market
value" of the Shares subject to an option shall be the closing price of shares
of the Corporation as reported in THE WALL STREET JOURNAL for the trading day on
which the option is granted. If the option is not granted on a trading day,
"fair market value" shall be the closing price of the Shares on the trading day
immediately before the option is granted as reported in THE WALL STREET JOURNAL.
Subject to the foregoing, the Committee, in fixing the option price, shall have
full authority and discretion and be fully protected in doing so.
(c) MEDIUM AND TIME OF PAYMENT. The option price may be paid (i) in
United States Dollars in cash or by check or (ii) by transferring a number of
shares, valued as provided in Section 6(b) above, as of the date of transfer
having a value equal to the option price, or (iii) by part payment in cash or
check as provided in (i) above and by payment of the balance by transferring
shares to the Corporation as provided in (ii) above.
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(d) EXERCISE OF OPTION. Options shall be exercised by the delivery of
written notice to the Corporation setting forth the number of Shares with
respect to which the option is to be exercised, together with (i) cash,
certified check, bank draft or postal or express money order payable to the
order of the Corporation for the amount of the option price to be paid in cash
for such Shares, (ii) stock certificates duly endorsed for transfer to the
Corporation for shares of a value as determined under Section 6(b) equal to the
amount of the option price not paid in cash, and specifying the address to which
the certificates for such Shares are to be mailed. Such notice may be delivered
in person to a member of the Committee, or the Treasurer of the Corporation, or
may be sent by registered mail, return receipt requested, to a member of the
Committee, or the Treasurer of the Corporation, in which case delivery shall be
deemed made on the date such notice is deposited in the mail. As promptly as
practicable after receipt of such notice and payment, the Corporation shall
deliver to the Optionee certificates for the number of Shares with respect to
which such option has been exercised, issued in the Optionee's name. Such
delivery shall be deemed effective for all purposes upon the deposit of such
certificates by the stock transfer agent of the Corporation in the United States
mail, addressed to the Optionee, at the address specified in the notice above
referenced.
(e) CONDITIONS TO EXERCISE OF OPTIONS.
(1) No option granted pursuant to this Plan shall be exercised in whole or
in part more than ten years after it is granted, and such option shall be
subject to such further terms and conditions as to its exercise as the Committee
may prescribe; provided, however, that options granted to Optionees owning more
than ten percent (10%) of the voting power of all classes of stock of the
Corporation shall be exercisable for a period of no longer than five years from
the date of grant.
(2) In order to exercise an option granted hereunder, in whole or in part,
all of the following conditions must be fulfilled at the time of exercise:
(X) The Optionee must be in the employ of the Corporation or one of
its Subsidiaries. However, any Optionee who is totally and permanently disabled
at the time of exercise of an option and who has ceased to work for the
Corporation or one of its Subsidiaries as a result of such disability shall not
be required to be employed by the
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Corporation at the time he exercises such option as long as he was employed by
the Corporation or one of its Subsidiaries within one year prior to the date of
exercise of such option. Permanent and total disability for such purposes shall
mean that such Optionee, at the time he ceased his employment by the
Corporation, was unable to engage in any substantial gainful activity by reason
of a medically determinable physical or mental impairment which could be
expected to result in death or which at such time could be expected to last for
a continuous period of not less than twelve (12) months. Such Optionee shall
furnish proof of his disability in form and substance satisfactory to the
Committee.
(Y) The Optionee shall have met any additional specific conditions
imposed by the Committee at the time of the granting of the option.
(f) PRIOR OUTSTANDING OPTION. No option (for purposes of this section
6(f) called "New Option") shall be exercisable while there is outstanding any
Incentive Stock Option (as defined in Sec. 422A of the Code), which Incentive
Stock Option was granted, before the granting of the New Option, to the person
to whom the New Option is granted, to purchase shares of the Corporation or of a
corporation which, at the time the New Option is granted, is a parent or
subsidiary corporation (as those terms are defined in Sec. 425 of the Code) of
the Corporation, or is a predecessor corporation of the Corporation or such
parent or subsidiary corporation. An Incentive Stock Option shall be treated as
outstanding until such option is exercised in full or expires by reason of a
lapse of time.
(g) TERMINATION OF EMPLOYMENT EXCEPT BY DEATH, DISABILITY OR RETIREMENT.
In the event that an Optionee shall cease to be employed by the Corporation or
any of its Subsidiaries for any reason other than his death, disability (as
defined in Section 6(e)(2)(X)), or retirement in good standing (as hereinafter
provided), such Optionee shall not have the right to exercise any unexercised
portion of an option previously granted to the Optionee under this Plan.
Whether authorized leave of absence or absence for military or governmental
service shall constitute termination of employment, for the purpose of the Plan,
shall be determined by the Committee, whose determination shall be final and
conclusive. If, before the date of expiration of the option, the Optionee shall
be retired in good standing from the employment of the Company under the
established rules of the
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Company, the option shall terminate on the earlier of such date of expiration or
one day less than three months after the date of such retirement, and the
Optionee shall have the right prior to such termination to exercise the option
only to the extent he was entitled to do so immediately prior to his retirement.
(h) DEATH OF OPTIONEE AND TRANSFER OF OPTION. If the Optionee shall die
while in the employ of the Corporation or a Subsidiary and shall not have fully
exercised an option granted under this Plan, such option may be exercised,
subject to paragraph 6 (e) (1), to the extent that the Optionee's right to
exercise such option had accrued pursuant to this Section 6 of the Plan at the
time of his death, by the executors or administrators of the Optionee or by any
person or persons who shall have acquired the option directly from the Optionee
by bequest or inheritance.
No option shall be transferable by the Optionee otherwise than by will or
under the laws of descent and distribution.
(i) RECAPITALIZATION. Subject to any required action by the stockholders,
the number of shares covered by each outstanding option, and the price per
Share thereof, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of the Corporation resulting from a subdivision
or consolidation of shares or the payment of a stock dividend (but only on the
shares) or any other increase or decrease in the number of issued shares
accomplished without receipt of consideration by the Corporation.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving corporation in any merger or consolidation, each
outstanding option shall pertain to and apply to the stock or securities to
which a holder of the same number of shares as those subject to the option would
have been entitled under the terms of the agreement of merger or consolidation.
In general, if the Corporation is merged into or consolidated with another
corporation under circumstances in which the Corporation is not the surviving
corporation, or if the Corporation is liquidated, or sells or otherwise
disposes of substantially all of its assets to another corporation (all
Transactions) while unexercised options are outstanding under the Plan, after
the effective date of a Non-Acquiring Transaction each holder of an outstanding
option shall be entitled, upon
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exercise of such option, to receive such 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, any limitations imposed pursuant to
paragraph 6(e)(2)(Y) hereof 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, and the right to exercise shall be given to each holder of
an option during a 30-day period may be cancelled by the Board of Directors as
of the effective date of any such Non-Acquiring Transaction.
In the event of a change in the shares of the Corporation as presently
constituted, which is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any such change shall be deemed to be the
shares within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Corporation, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive, provided
that each option granted pursuant to this Plan shall not be adjusted in a manner
that causes the option to fail to continue to qualify as an Incentive Stock
Option within the meaning of Sec. 422A of the Code.
Except as herinbefore expressly provided in this Section 6, the Optionee
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 Corporation 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 option.
The grant of any option pursuant to the Plan shall not affect in any way
the right or power of the Corporation to make adjustment, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part
of its business or assets; provided, however, that if any such adjustment
shall result in a fractional share for any Optionee under any
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option hereunder, such fraction shall be completely disregarded and Optionee
shall only be entitled to the whole number of shares resulting from such
adjustment.
(j) RIGHTS AS A STOCKHOLDER. An Optionee or transferee of an option shall
have no rights as a stockholder with respect to any Shares covered by his option
until the date of the issuance of a stock certificate to him for such Shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the such stock certificate is issued, except as
otherwise provided in Section 6 hereof.
(k) INVESTMENT PURPOSE. The Corporation 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 that time effectively registered or exempt
from registration under the Securities Act of 1933, as amended.
(viii) Optionee shall not sell, transfer, give or otherwise
convey any of the Shares acquired under this Plan for a period of two
years from the date of the issuance of such Shares to him pursuant to
the exercise of an option, except that this restriction may be
waived, in the sole discretion of the Committee, in cases of extreme
hardship. The certificates representing the Shares shall bear the
following legend reflecting the above-described restriction on the
transfer of the Shares:
"The shares represented by this certificate are acquired for
investment only and may not be sold, transferred, given or otherwise
conveyed for a period of two years from the date of issuance as set
forth on this certificate"; and
(ix) the purchase of Shares pursuant to the exercise of
an option shall be for investment purposes, and not with a view
to resale or distribution except that in the event the Shares
subject to such option are registered under the Securities Act of
1933, as amended, or in the event a resale of such Shares
without such registration would otherwise be permissible, such
condition shall be inoperative if in the opinion of counsel for
the Securities Act of 1933 or any other applicable law,
regulation, or rule of any governmental agency.
(1) OTHER PROVISIONS. Options authorized under the Plan shall contain
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such other provisions, including, without limitation, restrictions upon the
exercise of the option, as the committee or the Board of Directors of the
Corporation shall deem advisable subject to any limitation on the discretion of
the Board of Directors required by Rule 16B-3. Any such option agreement shall
contain such limitations and restrictions upon the exercise of the option as
shall be necessary in order that such option will be an Incentive Stock Option
as defined in Sec. 422A of the Code or to conform to any change in the law and
shall contain any provisions, restrictions or limitations which shall prevent
such option from being an Incentive Stock Option as aforesaid.
7. TERM OF PLAN.
Options may be granted pursuant to the Plan from time to time within a
period of ten years from the date the Plan is adopted by the Board of Directors
of the Corporation.
8. INDEMNIFICATION OF COMMITTEE.
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by the independent legal counsel selected
by the Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Committee member is
liable for gross negligence or willful misconduct in the performance of his
duties; provided that within sixty (60) days after institution of any
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such action, suit or proceeding a Committee member shall in writing offer the
Corporation the opportunity, at its own expense, to handle and defend the same.
9. AMENDMENT TO THE PLAN.
The Board of Directors of the Corporation may, insofar as permitted by law,
from time to time, with respect to any shares at the time not subject to
options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that, without approval of the stockholders, no such revision
or amendment shall change the number of shares subject to the Plan, change the
designation of the class of employees eligible to receive options, decrease the
price at which Options may be granted, remove the administration of the Plan
from the Committee, or render any member of the Committee eligible to receive an
option under the Plan while serving thereon. Furthermore, the Plan may not,
without the approval of the stockholders, be amended in any manner that will
cause options issued under it to fail to meet the requirements of Incentive
Stock Options as defined in Sec. 422A of the Code.
10. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Shares pursuant
to options will be used for general corporate purposes.
11. NO OBLIGATION TO EXERCISE OPTION.
The granting of an option shall impose no obligation upon the Optionee to
exercise such option.
12. APPROVAL OF STOCKHOLDERS.
The Plan shall not take effect until approved by the holders of a majority
of the
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outstanding shares which approval must occur within the period beginning twelve
months before and ending twelve months after the date the Plan is adopted by the
Board of Directors.
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