<PAGE> 1
As filed with the Securities and Exchange Commission on September 23, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
RURAL/METRO CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 86-0746929
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
8401 East Indian School Road
Scottsdale, Arizona 85251
(Address of Principal executive offices)(zip code)
RURAL/METRO CORPORATION
1992 Stock Option Plan
(Full Title of the Plan)
John B. Furman
President and Acting Chief Executive Officer
RURAL/METRO CORPORATION
8401 East Indian School Road, Scottsdale, Arizona 85251
(602) 994-3886
(Telephone number, including area code, of agent for service)
This Registration Statement shall become effective immediately upon filing with
the Securities and Exchange Commission, and sales of the registered securities
will begin as soon as reasonably practicable after such effective date.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES TO BE AMOUNT OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED SHARES TO BE OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE
REGISTERED(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 149,544 $ 29.00 $ 4,336,776.00 $ 1,279.35
Common Stock 9,438 $ 1.25 $ 11,797.50 $ 3.48
Common Stock 10,000 $ 34.50 $ 345,000.00 $ 101.78
Common Stock 21,000 $ 33.75 $ 708,750.00 $ 209.08
Common Stock 18,000 $ 33.375 $ 600,750.00 $ 177.22
Common Stock 20,000 $ 32.50 $ 650,000.00 $ 191.75
Common Stock 18,655 $ 32.56 $ 607,406.80 $ 179.19
Common Stock 526,500 $ 7.125 $ 3,751,312.50 $ 1,106.64
Common Stock 1,836,113 $ 9.0315(2) $16,582,854.00 $ 4,891.94
2,609,250 $27,594,646.00 $ 8,140.43
======= ============== ==========
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1992 Stock Option Plan by
reason of any stock dividend, stock split, recapitalization or any
other similar transaction without receipt of consideration which
results in an increase in the number of outstanding shares of Common
Stock of Rural/Metro Corporation.
(2) Calculated solely for purposes of this offering under Rules 457(c) and
457(h) of the Securities Act of 1933, as amended, on the basis of the
average of the high and low sales prices for shares of Common Stock of
Rural/Metro Corporation on September 16, 1998.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Rural/Metro Corporation (the "Registrant") hereby incorporates
by reference into this Registration Statement, pursuant to General Instruction E
to Form S-8, the contents of the Registration Statement on Form S-8 (No.
33-76526) filed with the Securities and Exchange Commission (the "Commission")
on March 16, 1994 and amendments thereto:
Item 6. Indemnification of Directors and Officers
The Company's amended and restated Bylaws require the Company
to indemnify its directors, officers, employees, and agents to the fullest
extent permitted by the Delaware General Corporation Law, including those
circumstances in which indemnification would otherwise be discretionary, except
that the Company will not be obligated to indemnify any such person (i) with
respect to proceedings, claims, or actions initiated or brought voluntarily by
any such person and not by way of defense; (ii) for any amounts paid in
settlement of an action indemnified against by the Company without the proper
written consent of the Company; or (iii) in connection with any event in which
the person did not act in good faith and in a manner reasonably believed to be
in, or not opposed to, the best interests of the Company. In addition, the
Company has entered or will enter into Indemnity Agreements with each of its
directors and officers providing for indemnification of and advancement of
expenses to the directors and officers to the fullest extent permitted by law
except (a) if and to the extent that payment is made to the indemnitee under an
insurance policy or otherwise; (b) if and to the extent that a claim is decided
adversely based on or attributable to the indemnitee gaining any personal profit
or advantage to which the indemnitee was not legally entitled; (c) if and to the
extent that the indemnifiable event constituted or arose out of the indemnitee's
willful misconduct or gross negligence; or (d) if and to the extent that the
proceeding is initiated by the indemnitee against the Company or any of its
officers or directors, unless the Company has consented to or joined in the
initiation of the proceeding. The Delaware General Corporation Law contains an
extensive indemnification provision that permits a corporation to indemnify any
person who is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The Company's Second Restated Certificate eliminates the
personal liability of the directors of the Company to the Company or its
stockholders for monetary damages for breach of their duty of care except to the
extent that such exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Law. The Delaware General Corporation Law
prohibits a corporation from eliminating or limiting the liability of a director
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (iii) for liability under
Section 174 of the Delaware General Corporation Law (relating to certain
unlawful dividends, stock purchases or stock redemptions); or (iv) for any
transaction from which the director derived any improper personal benefit.
II.2
<PAGE> 3
<TABLE>
<CAPTION>
Item 8. Exhibits
<S> <C> <C>
Sequential
Exhibit Number Exhibit Page No.
5 Opinion and consent of O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
10.5 Amended and Restated 1992 Stock Option Plan of
Registrant, amended through November 20, 1997.
10.6 Forms of Stock Option Agreements pursuant to the
Amended and Restated 1992 Stock Option Plan of
Registrant(1)
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of O'Connor, Cavanagh, Anderson, Killingsworth
& Beshears, P.A. is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II.3 of
this Registration Statement.
</TABLE>
(1) Incorporated by reference to the Registration Statement as Form S-1 of
the Registrant (Registration No. 33-76458) filed March 15, 1994 and
declared effective May 5, 1994.
Item 9. Undertakings
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
into the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers or
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II.3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Scottsdale, State of Arizona, on September 23, 1998.
RURAL/METRO CORPORATION
By /s/ Dean P. Hoffman
------------------------------------------------
Dean P. Hoffman
Vice President, Financial Services
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Mark E. Liebner
and Dean P. Hoffman, and each of them, as his true and lawful attorney-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-8 has been signed below by the following
persons and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<S> <C> <C>
/s/ John B. Furman President and Acting Chief Executive Officer September 22, 1998
- ------------------------------------- (Principal Executive Officer)
John B. Furman
/s/ Robert T. Edwards Executive Vice President and Director September 22, 1998
- -------------------------------------
Robert T. Edwards
/s/ Mark E. Liebner Senior Vice President, Chief Financial September 22, 1998
- ------------------------------------- Officer and Treasurer (Principal Financial
Mark E. Liebner Officer)
/s/ Robert E. Ramsey Senior Vice President and Director September 22, 1998
- -------------------------------------
Robert E. Ramsey
/s/ Dean P. Hoffman Vice President, Financial Services September 22, 1998
- ------------------------------------- (Principal Accounting Officer)
Dean P. Hoffman
/s/ James H. Bolin Director September 22, 1998
- -------------------------------------
James H. Bolin
</TABLE>
II.4
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Cor J. Clement Director September 22, 1998
- -------------------------------------
Cor J. Clement
/s/ Mary Anne Carpenter Director September 22, 1998
- -------------------------------------
Mary Anne Carpenter
/s/ Louis G. Jekel Director September 22, 1998
- -------------------------------------
Louis G. Jekel
/s/ William C. Turner Director September 22, 1998
- -------------------------------------
William C. Turner
/s/ Henry G. Walker Director September 22, 1998
- -------------------------------------
Henry G. Walker
/s/ Louis A. Witzeman Director September 22, 1998
- -------------------------------------
Louis A. Witzeman
</TABLE>
II.5
<PAGE> 6
<TABLE>
<CAPTION>
Exhibit Index
<S> <C> <C>
Exhibit Description
------- -----------
5 Opinion and consent of O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
10.5 Amended and Restated 1992 Stock Option Plan of
Registrant, amended through November 20, 1997.
10.6 Forms of Stock Option Agreements pursuant to the
Amended and Restated 1992 Stock Option Plan of
Registrant(1)
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of O'Connor, Cavanagh, Anderson, Killingsworth
& Beshears, P.A. is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II.3 of
this Registration Statement.
</TABLE>
(1) Incorporated by reference to the Registration Statement as Form S-1 of
the Registrant (Registration No. 33-76458) filed March 15, 1994 and
declared effective May 5, 1994.
<PAGE> 1
[LETTERHEAD OF O'CONNOR CAVANAGH]
EXHIBIT 5
September 23, 1998
Rural/Metro Corporation
8401 East Indian School Road
Phoenix, Arizona 85251
RE: REGISTRATION STATEMENT ON FORM S-8
RURAL/METRO CORPORATION
Gentlemen:
As legal counsel to Rural/Metro Corporation, a Delaware
corporation (the "Company"), we have assisted in the preparation of the
Company's Registration Statement on Form S-8 (the "Registration Statement") to
be filed with the Securities and Exchange Commission on or about September 23,
1998 in connection with the registration under the Securities Act of 1933, as
amended, of 2,609,250 shares of the Company's common stock, par value $0.01 per
share, (the "Common Stock") issuable pursuant to the Company's 1992 Stock Option
Plan (the "Stock Option Plan"). The shares of Common Stock issuable pursuant to
the Stock Option Plan are referred to as the "Shares." The facts, as we
understand them, are set forth in the Registration Statement.
With respect to the opinion set forth below, we have examined
originals, certified copies, or copies otherwise identified to our satisfaction
as being true copies, only of the following:
A. The Second Restated Certificate of Incorporation of
the Company, as filed with the Secretary of State of the State of Delaware as
amended through the date hereof;
B. The Bylaws of the Company, as amended through the
date hereof;
C. Resolutions of the Board of Directors of the Company
dated September 12, 1997, reserving an aggregate of 2,609,250 shares of the
Company's Common Stock for issuance pursuant to the Stock Option Plan; and
<PAGE> 2
[O'CONNOR CAVANAGH LOGO]
Rural/Metro Corporation
September 23, 1998
Page 2
D. The Registration Statement.
Subject to the assumptions that (i) the documents and
signatures examined by us are genuine and authentic and (ii) the persons
executing the documents examined by us have the legal capacity to execute such
documents, and subject to the further limitations and qualifications set forth
below, it is our opinion that the Shares, when issued and sold in accordance
with the terms of the Stock Option Plan, will be validly issued, fully paid and
nonassessable.
Please be advised that we are members of the State Bar of
Arizona, and our opinion is limited to the legality of matters under the laws of
the State of Arizona and the General Corporation Laws of the State of Delaware.
Further, our opinion is based solely upon existing laws, rules and regulations,
and we undertake no obligation to advise you of any changes that may be brought
to our attention after the date hereof.
We hereby expressly consent to any reference to our firm in
the Registration Statement, inclusion of this Opinion as an exhibit to the
Registration Statement, and to the filing of this Opinion with any other
appropriate governmental agency.
Very truly yours,
/s/ O'Connor, Cavanagh, Anderson,
Killingsworth, & Beshears
<PAGE> 1
EXHIBIT 10.5
RURAL/METRO CORPORATION
1992 STOCK OPTION PLAN
(AS AMENDED THROUGH SEPTEMBER 1997)
ARTICLE I
GENERAL
1.1 PURPOSE OF PLAN; TERM
(a) BACKGROUND. On November 6, 1992, the predecessor to
Rural/Metro Corporation, a Delaware corporation (the "Company"), adopted the
Rural/Metro Corporation Senior Management Stock Option Plan (the "Original
Plan"). Thereafter, the Original Plan was amended and restated (the "Amended and
Restated Plan") and the stockholders approved the Amended and Restated Plan. The
Amended and Restated Plan was subsequently assumed by the Company upon a merger
with the predecessor. On September 21, 1994, the Company's Board of Directors
(the "Board") adopted an Amended and Restated 1992 Stock Option Plan (as amended
through August 1994) whereby an Automatic Grant Program was added, additional
shares of Stock were authorized to be issued under the Plan, and certain other
technical changes were made. The Amended and Restated 1992 Stock Option Plan (as
amended through August 1994) was approved by the stockholders of the Company on
December 8, 1994 and shall be referred to herein as the "Revised 1994 Plan." On
October 17, 1995, the Board adopted an Amended and Restated 1992 Stock Option
Plan (as amended through October 1995) (referred to herein as the "Revised 1995
Plan") whereby the Automatic Grant Program was amended, additional shares of
stock were authorized to be issued under the Plan, and certain other technical
changes were made. The Revised 1995 Plan was approved by the stockholders of the
Company on December 8, 1995. On September 6, 1996, the Board adopted a newly
Amended and Restated 1992 Stock Option Plan (the "Revised 1996 Plan") whereby
certain technical changes were made. The Revised 1996 Plan was approved by the
stockholders of the Company on November 21, 1996. On September 12, 1997, the
Board adopted an Amended and Restated 1992 Stock Option Plan (as amended through
September 1997) (the "Revised 1997 Plan") whereby additional shares of stock
were authorized to be issued under the Plan. The Revised 1997 Plan was approved
by the stockholders of the Company on November 21, 1997. This Amended and
Restated Stock Option Plan shall be known as the Rural/Metro Corporation 1992
Stock Option Plan (the "Plan"). Any Options or Awards outstanding prior to the
adoption by the Board of the Revised 1997 Plan shall remain valid and unchanged.
(b) DEFINED TERMS. All initially capitalized terms used
hereby shall have the meaning set forth in Article V hereto.
(c) GENERAL PURPOSE. The Plan shall be divided into two
programs: the Discretionary Grant Program and the Automatic Grant Program.
(i) DISCRETIONARY GRANT PROGRAM. The purpose of
the Discretionary Grant Program is to further the interests of the Company and
its stockholders by encouraging key persons associated with the Company (or
Parent or Subsidiary Corporations) to acquire shares of the Company's Stock,
thereby acquiring a proprietary interest in its business and an increased
<PAGE> 2
personal interest in its continued success and progress. Such purpose shall be
accomplished by providing for the discretionary granting of options to acquire
the Company's Stock ("Discretionary Options"), the direct granting of the
Company's Stock ("Stock Awards"), the granting of stock appreciation rights
("SARs"), or the granting of other cash awards ("Cash Awards") (Stock Awards,
SARs and Cash Awards shall be collectively referred to herein as "Awards").
(ii) AUTOMATIC GRANT PROGRAM. The purpose of the
Automatic Grant Program is to promote the interests of the Company by providing
non-employee members of the Board the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Company and
to thereby have an increased personal interest in its continued success and
progress. Such purpose shall be accomplished by providing for the automatic
grant of options to acquire the Company's Stock ("Automatic Options").
(d) CHARACTER OF OPTIONS. Discretionary Options granted
under this Plan to employees of the Company (or Parent or Subsidiary
Corporations) that are intended to qualify as "incentive stock options" as
defined in Code section 422 ("Incentive Stock Options") will be specified in the
applicable stock option agreement. All other Options granted under this Plan
will be nonqualified options.
(e) RULE 16b-3 PLAN. With respect to persons subject to
Section 16 of the Securities Exchange Act of 1934, as amended ("1934 Act"), the
Plan is intended to comply with all applicable conditions of Rule 16b-3 (and all
subsequent revisions thereof) promulgated under the 1934 Act. To the extent any
provision of the Plan or action by a Plan Administrator fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by such Plan Administrator. In addition, the Board may amend the Plan
from time to time as it deems necessary in order to meet the requirements of any
amendments to Rule 16b-3 without the consent of the stockholders of the Company.
(f) DURATION OF PLAN. The term of the Plan is 10 years commencing on the date of
adoption of the Original Plan by the Board as specified in Section 1.1(a)
hereof. No Option or Award shall be granted under the Plan unless granted within
10 years of the adoption of the Plan by the Board, but Options or Awards
outstanding on that date shall not be terminated or otherwise affected by virtue
of the Plan's expiration.
(f) DURATION OF PLAN. The term of the Plan is 10 years
commencing on the date of adoption of the Original Plan by the Board as
specified in Section 1.1(a) hereof. No Option or Award shall be granted under
the Plan unless granted within 10 years of the adoption of the Plan by the
Board, but Options or Awards outstanding on that date shall not be terminated
or otherwise affected by virtue of the Plan's expiration.
1.2 STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN.
(a) DESCRIPTION OF STOCK AND MAXIMUM SHARES ALLOCATED.
The stock subject to the provisions of the Plan and issuable upon the grant of
Stock Awards or upon the exercise of SARs or Options granted under the Plan is
shares of the Company's common stock, $.01 par value per share (the "Stock"),
which may be either unissued or treasury shares, as the Board may from time to
time determine. Subject to adjustment as provided in Section 4.1 hereof, the
aggregate number of shares of Stock covered by the Plan and issuable thereunder
shall be 6,000,000 shares of Stock, which includes 65,750 shares of Stock
previously authorized under the Company's 1989 Stock Option Plan. Upon the
adoption of the Revised 1995 Plan by the Company's stockholders, the Company's
1989 Stock Option Plan was terminated such that no more options may be granted
under that plan.
2
<PAGE> 3
(b) CALCULATION OF AVAILABLE SHARES. For purposes of
calculating the maximum number of shares of Stock which may be issued under the
Plan: (i) the shares issued (including the shares, if any, withheld for tax
withholding requirements) upon exercise of an Option shall be counted and (ii)
the shares issued (including the shares, if any, withheld for tax withholding
requirements) as a result of a grant of a Stock Award or an exercise of an SAR
shall be counted.
(c) RESTORATION OF UNPURCHASED SHARES. If an Option or
SAR expires or terminates for any reason prior to its exercise in full and
before the term of the Plan expires, the shares of Stock subject to, but not
issued under, such Option or SAR shall, without further action or by or on
behalf of the Company, again be available under the Plan.
1.3 APPROVAL; AMENDMENTS.
(a) APPROVAL BY STOCKHOLDERS. The Revised 1997 Plan shall
be submitted to the stockholders of the Company for their approval at a regular
or special meeting to be held within 12 months after the adoption of the Revised
1997 Plan by the Board. Stockholder approval shall be evidenced by the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present in person or by proxy and voting at the meeting. The date
such stockholder approval has been obtained shall be referred to herein as the
"Effective Date."
(b) COMMENCEMENT OF PROGRAMS. The Automatic Grant Program
herein, shall commence immediately. The Discretionary Grant Program, as revised
herein, shall commence immediately subject to the terms set forth in Section
1.1(a).
(c) AMENDMENTS TO PLAN. The Board may, without action on
the part of the Company's stockholders, make such amendments to, changes in and
additions to the Plan as it may, from time to time, deem necessary or
appropriate and in the best interests of the Company; provided, the Board may
not, without the consent of the applicable Optionholder, take any action which
disqualifies any Discretionary Option previously granted under the Plan for
treatment as an Incentive Stock Option or which adversely affects or impairs the
rights of the Optionholder of any Discretionary Option outstanding under the
Plan, and further provided that, except as provided in Article IV hereof, the
Board may not, without the approval of the Company's stockholders, (i) increase
the aggregate number of shares of Stock subject to the Plan, (ii) reduce the
exercise price at which Discretionary Options may be granted or the exercise
price at which any outstanding Discretionary Option may be exercised, (iii)
extend the term of the Plan, (iv) change the class of persons eligible to
receive Discretionary Options or Awards under the Plan, or (v) materially
increase the benefits accruing to participants under the Plan. Notwithstanding
the foregoing, Discretionary Options or Awards may be granted under this Plan to
purchase shares of Stock in excess of the number of shares then available for
issuance under the Plan if (A) an amendment to increase the maximum number of
shares issuable under the Plan is adopted by the Board prior to the initial
grant of any such Option or Award and within one year thereafter such amendment
is approved by the Company's stockholders and (B) each such Discretionary Option
or Award granted is not to become exercisable or vested, in whole or in part, at
any time prior to the obtaining of such stockholder approval.
3
<PAGE> 4
ARTICLE II
DISCRETIONARY GRANT PROGRAM
2.1 PARTICIPANTS; ADMINISTRATION.
(a) ELIGIBILITY AND PARTICIPATION. Discretionary Options
and Awards may be granted only to persons ("Eligible Persons") who at the time
of grant are (i) key personnel (including officers and directors) of the Company
or Parent or Subsidiary Corporations, or (ii) consultants or independent
contractors who provide valuable services to the Company or Parent or Subsidiary
Corporations; provided that (1) Incentive Stock Options may only be granted to
key personnel of the Company (and its Parent or Subsidiary Corporations) who are
also employees of the Company (or its Parent or Subsidiary Corporations), and
(2) the maximum number of shares of stock with respect to which Options or SARs
may be granted to any employee during the term of the Plan shall not exceed 25
percent of the shares of stock covered by the Plan. A Plan Administrator shall
have full authority to determine which Eligible Persons in its administered
group are to receive Discretionary Option grants under the Plan, the number of
shares to be covered by each such grant, whether or not the granted
Discretionary Option is to be an Incentive Stock Option, the time or times at
which each such Discretionary Option is to become exercisable, and the maximum
term for which the Discretionary Option is to be outstanding. A Plan
Administrator shall also have full authority to determine which Eligible Persons
in such group are to receive Awards under the Discretionary Grant Program and
the conditions relating to such Award.
(b) GENERAL ADMINISTRATION. The Eligible Persons under
the Discretionary Grant Program shall be divided into two groups and there shall
be a separate administrator for each group. One group will be comprised of
Eligible Persons that are Affiliates. For purposes of this Plan, the term
"Affiliates" shall mean all "officers" (as that term is defined in Rule 16a-1(f)
promulgated under the 1934 Act) and directors of the Company and all persons who
own ten percent or more of the Company's issued and outstanding equity
securities. Initially, the power to administer the Discretionary Grant Program
with respect to Eligible Persons that are Affiliates shall be vested with the
Board. At any time, however, the Board may vest the power to administer the
Discretionary Grant Program with respect to Persons that are Affiliates
exclusively with a committee (the "Senior Committee") comprised of two or more
Non-Employee Directors which are appointed by the Board. The Senior Committee,
in its sole discretion, may require approval of the Board for specific grants of
Discretionary Options or Awards under the Discretionary Grant Program. The
administration of all Eligible Persons that are not Affiliates
("Non-Affiliates") shall be vested exclusively with the Board. The Board,
however, may at any time appoint a committee (the "Employee Committee") of two
or more persons who are members of the Board and delegate to such Employee
Committee the power to administer the Discretionary Grant Program with respect
to the Non-Affiliates. In addition, the Board may establish an additional
committee or committees of persons who are members of the Board and delegate to
such other committee or committees the power to administer all or a portion of
the Discretionary Grant program with respect to all or a portion of the Eligible
Persons. Members of the Senior Committee, Employee Committee or any other
committee allowed hereunder shall serve for such period of time as the Board may
determine and shall be subject to removal by the Board at any time. The Board
may at any time terminate all or a portion of the functions of the Senior
Committee, the Employee Committee, or any other
4
<PAGE> 5
committee allowed hereunder and reassume all or a portion of powers and
authority previously delegated to such committee. The Board in its discretion
may also require the members of the Senior Committee, the Employee Committee or
any other committee allowed hereunder to be "outside directors" as that term is
defined in any applicable regulations promulgated under Code section 162(m).
(c) PLAN ADMINISTRATORS. The Board, the Employee
Committee, Senior Committee, and/or any other committee allowed hereunder,
whichever is applicable, shall be each referred to herein as a "Plan
Administrator." Each Plan Administrator shall have the authority and discretion,
with respect to its administered group, to select which Eligible Persons shall
participate in the Discretionary Grant Program, to grant Discretionary Options
or Awards under the Discretionary Grant Program, to establish such rules and
regulations as they may deem appropriate with respect to the proper
administration of the Discretionary Grant Program and to make such
determinations under, and issue such interpretations of, the Discretionary Grant
Program and any outstanding Discretionary Option or Award as they may deem
necessary or advisable. Unless otherwise required by law or specified by the
Board with respect to any committee, decisions among the members of a Plan
Administrator shall be by majority vote. Decisions of a Plan Administrator shall
be final and binding on all parties who have an interest in the Discretionary
Grant Program or any outstanding Discretionary Option or Award.
(d) GUIDELINES FOR PARTICIPATION. In designating and
selecting Eligible Persons for participation in the Discretionary Grant Program,
a Plan Administrator shall consult with and give consideration to the
recommendations and criticisms submitted by appropriate managerial and executive
officers of the Company. A Plan Administrator also shall take into account the
duties and responsibilities of the Eligible Persons, their past, present and
potential contributions to the success of the Company and such other factors as
a Plan Administrator shall deem relevant in connection with accomplishing the
purpose of the Plan.
2.2 TERMS AND CONDITIONS OF OPTIONS
(a) ALLOTMENT OF SHARES. A Plan Administrator shall
determine the number of shares of Stock to be optioned from time to time and the
number of shares to be optioned to any Eligible Person (the "Optioned Shares").
The grant of a Discretionary Option to a person shall neither entitle such
person to, nor disqualify such person from, participation in any other grant of
Options or Stock Awards under this Plan or any other stock option plan of the
Company.
(b) EXERCISE PRICE. Upon the grant of any Discretionary
Option, a Plan Administrator shall specify the option price per share. If the
Discretionary Option is intended to qualify as an Incentive Stock Option under
the Code, the option price per share may not be less than 100 percent of the
fair market value per share of the stock on the date the Discretionary Option is
granted (110 percent if the Discretionary Option is granted to a stockholder who
at the time the Discretionary Option is granted owns or is deemed to own stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary Corporation). The
determination of the fair market value of the Stock shall be made in accordance
with the valuation provisions of Section 4.5 hereof.
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(c) INDIVIDUAL STOCK OPTION AGREEMENTS. Discretionary
Options granted under the Plan shall be evidenced by option agreements in such
form and content as a Plan Administrator from time to time approves, which
agreements shall substantially comply with and be subject to the terms of the
Plan, including the terms and conditions of this Section 2.2. As determined by a
Plan Administrator, each option agreement shall state (i) the total number of
shares to which it pertains, (ii) the exercise price for the shares covered by
the Option, (iii) the time at which the Options vest and become exercisable and
(iv) the Option's scheduled expiration date. The option agreements may contain
such other provisions or conditions as a Plan Administrator deems necessary or
appropriate to effectuate the sense and purpose of the Plan, including covenants
by the Optionholder not to compete and remedies for the Company in the event of
the breach of any such covenant.
(d) OPTION PERIOD. No Discretionary Option granted under
the Plan that is intended to be an Incentive Stock Option shall be exercisable
for a period in excess of 10 years from the date of its grant (five years if the
Discretionary Option is granted to a stockholder who at the time the
Discretionary Option is granted owns or is deemed to own stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or of any Parent or Subsidiary Corporation), subject to earlier
termination in the event of termination of employment, retirement or death of
the Optionholder. A Discretionary Option may be exercised in full or in part at
any time or from time to time during the term of the Discretionary Option or
provide for its exercise in stated installments at stated times during the
Option's term.
(e) VESTING; LIMITATIONS. The time at which the Optioned
Shares vest with respect to an Optionholder shall be in the discretion of that
Optionholder's Plan Administrator. Notwithstanding the foregoing, to the extent
a Discretionary Option is intended to qualify as an Incentive Stock Option, the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Stock for which one or more Options granted to any person under
this Plan (or any other option plan of the Company or any Parent or Subsidiary
Corporation) may for the first time become exercisable as Incentive Stock
Options during any one calendar year shall not exceed the sum of $100,000
(referred to herein as the "$100,000 Limitation"). To the extent that any person
holds two or more Options which become exercisable for the first time in the
same calendar year, the foregoing limitation on the exercisability as an
Incentive Stock Option shall be applied on the basis of the order in which such
Options are granted.
(f) NO FRACTIONAL SHARES. Options shall be exercisable
only for whole shares; no fractional shares will be issuable upon exercise of
any Discretionary Option granted under the Plan.
(g) METHOD OF EXERCISE. In order to exercise a
Discretionary Option with respect to any vested Optioned Shares, an Optionholder
(or in the case of an exercise after an Optionholder's death, such
Optionholder's executor, administrator, heir or legatee, as the case may be)
must take the following action:
(i) execute and deliver to the Company a written
notice of exercise signed in writing by the person exercising the Discretionary
Option specifying the number of shares of Stock with respect to which the
Discretionary Option is being exercised;
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(ii) pay the aggregate Option Price in one of the
alternate forms as set forth in Section 2.2(h) below; and
(iii) furnish appropriate documentation that the
person or persons exercising the Discretionary Option (if other than the
Optionholder) has the right to exercise such Option.
As soon as practicable after the Exercise Date, the Company shall mail or
deliver to or on behalf of the Optionholder (or any other person or persons
exercising this Discretionary Option in accordance herewith) a certificate or
certificates representing the Stock for which the Discretionary Option has been
exercised in accordance with the provisions of this Plan. In no event may any
Discretionary Option be exercised for any fractional shares.
(h) PAYMENT OF OPTION PRICE. The aggregate Option Price
shall be payable in one of the alternative forms specified below:
(i) Full payment in cash or check made payable
to the Company's order; or
(ii) Full payment in shares of Stock held for the
requisite period necessary to avoid a charge to the Company's reported earnings
and valued at fair market value on the Exercise Date (as determined in
accordance with Section 4.5 hereof); or
(iii) If a cashless exercise program has been
implemented by the Board, full payment through a sale and remittance procedure
pursuant to which the Optionholder (A) shall provide irrevocable written
instructions to a designated brokerage firm to effect the immediate sale of the
Optioned Shares to be purchased and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the Optioned Shares to be purchased, and
(B) shall concurrently provide written directives to the Company to deliver the
certificates for the Optioned Shares to be purchased directly to such brokerage
firm in order to complete the sale transaction.
(i) REPURCHASE RIGHT. The Plan Administrator may, in its
sole discretion, set forth other terms and conditions upon which the Company (or
its assigns) shall have the right to repurchase shares of Stock acquired by an
Optionholder pursuant to a Discretionary Option. Any repurchase right of the
Company shall be exercisable by the Company (or its assignees) upon such terms
and conditions as the Plan Administrator may specify in the Stock Repurchase
Agreement evidencing such right. The Plan Administrator may also in its
discretion establish as a term and condition of one or more Discretionary
Options granted under the Plan that the Company shall have a right of first
refusal with respect to any proposed sale or other disposition by the
Optionholder of any shares of Stock issued upon the exercise of such
Discretionary Options. Any such right of first refusal shall be exercisable by
the Company (or its assigns) in accordance with the terms and conditions set
forth in the Stock Repurchase Agreement.
(j) TERMINATION OF INCENTIVE STOCK OPTIONS.
(i) TERMINATION OF SERVICE. If any Optionholder
ceases to be in Service to the Company for a reason other than death, such
Optionholder (or such Optionholder's
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successors in the case of the Optionholder's death) may, within three months
after the date of termination of such Service, but in no event after the
Incentive Stock Option's stated expiration date, exercise some or all of the
Incentive Stock Options that the Optionholder was entitled to exercise on the
date the Optionholder's Service terminated; provided, that if Optionholder is
discharged for cause, then the Incentive Stock Option shall thereafter be void
for all purposes. "Cause" shall be limited to a termination of Service based
upon a finding by the Plan Administrator that the Optionholder (a) has been
convicted of a felony involving dishonesty, fraud, theft or embezzlement; (b)
has repeatedly failed or refused, after written notice from the Company, in a
material respect to follow reasonable policies or directives established by the
Company; (c) has willfully and persistently failed, after written notice from
the Company, to attend to material duties or obligations imposed upon him; (d)
has performed an act or failed to act, which, if he were prosecuted and
convicted, would constitute a felony involving $1,000 or more of money or
property of the Company; or (e) has misrepresented or concealed a material fact
for purposes of securing employment with the Company. Notwithstanding the
foregoing, if any Optionholder ceases to be in Service to the Company by reason
of permanent disability within the meaning of section 22(e)(3) of the Code (as
determined by the applicable Plan Administrator), the Optionholder shall have 12
months after the date of termination of Service, but in no event after the
stated expiration date of the Optionholder's Incentive Stock Options, to
exercise Incentive Stock Options that the Optionholder was entitled to exercise
on the date the Optionholder's Service terminated as a result of disability.
(ii) DEATH OF OPTIONHOLDER. If an Optionholder
dies while in the Company's Service, the Optionholder's vested Incentive Stock
Options on the date of death shall be exercisable within three months of such
death or until the stated expiration date of the Optionholder's Incentive Stock
Option, whichever occurs first, by the person or persons ("successors") to whom
the Optionholder's rights pass under a will or by the laws of descent and
distribution. As soon as practicable after receipt by the Company of the notice
of exercise and of payment in full of the Option Price as specified in Sections
2.2(g) and (h) hereof, a certificate or certificates representing the Optioned
Shares shall be registered in the name or names specified by the successors in
the written notice of exercise and shall be delivered to the successors.
(k) TERMINATION OF NONQUALIFIED OPTIONS. Any Options
which are not Incentive Stock Options and which are outstanding at the time an
Optionholder dies while in Service to the Company or otherwise ceases to be in
Service to the Company shall remain exercisable for such period of time
thereafter as determined by the Plan Administrator at the time of grant and set
forth in the documents evidencing such Options; provided, that no Option shall
be exercisable after the Option's stated expiration date, and provided further,
that if the Optionholder is discharged for Cause (as defined in Section
2.2(j)(i)), then the Option will thereafter be void for all purposes.
(l) OTHER PLAN PROVISIONS STILL APPLICABLE. If a
Discretionary Option is exercised upon the termination of Service or death of an
Optionholder under this Section 2.2, the other provisions of the Plan shall
still be applicable to such exercise, including the requirement that the
Optionholder or its successor may be required to enter into a Stock Repurchase
Agreement.
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(m) DEFINITION OF "SERVICE". For purposes of this Plan,
unless it is evidenced otherwise in the option agreement with the Optionholder,
the Optionholder shall be deemed to be in "Service" to the Company so long as
such individual renders continuous services on a periodic basis to the Company
(or to any Parent or Subsidiary Corporation) in the capacity of an employee,
director, or an independent consultant or advisor. In the discretion of a Plan
Administrator, an Optionholder shall be considered to be rendering continuous
services to the Company even if the type of services change, e.g., from employee
to independent consultant. The Optionholder shall be considered to be an
employee for so long as such individual remains in the employ of the Company or
one or more of its Parent or Subsidiary Corporations.
2.3 TERMS AND CONDITIONS OF STOCK AWARDS
(a) ELIGIBILITY. All Eligible Persons shall be eligible
to receive Stock Awards. The Plan Administrator of each administered group shall
determine the number of shares of Stock to be awarded from time to time to any
Eligible Person in such group. The grant of a Stock Award to a person shall
neither entitle such person to, nor disqualify such person from participation
in, any other grant of options or awards by the Company, whether under this Plan
or under any other stock option or award plan of the Company.
(b) AWARD FOR SERVICES RENDERED. Stock Awards shall be
granted in recognition of an Eligible Person's services to the Company. The
grantee of any such Stock Award shall not be required to pay any consideration
to the Company upon receipt of such Stock Award, except as may be required to
satisfy any applicable Delaware corporate law, employment tax, and/or income tax
withholding requirements.
(c) CONDITIONS TO AWARD. All Stock Awards shall be
subject to such terms, conditions, restrictions, or limitations as the
applicable Plan Administrator deems appropriate, including, by way of
illustration but not by way of limitation, restrictions on transferability,
requirements of continued employment, individual performance or the financial
performance of the Company, or payment by the recipient of any applicable
employment or withholding taxes. Such Plan Administrator may modify or
accelerate the termination of the restrictions applicable to any Stock Award
under the circumstances as it deems appropriate.
(d) AWARD AGREEMENTS. A Plan Administrator may require as
a condition to a Stock Award that the recipient of such Stock Award enter into
an award agreement in such form and content as that Plan Administrator from time
to time approves.
2.4 TERMS AND CONDITIONS OF SARS
(a) ELIGIBILITY. All Eligible Persons shall be eligible
to receive SARs. The Plan Administrator of each administered group shall
determine the SARs to be awarded from time to time to any Eligible Person in
such group. The grant of a SAR to a person shall neither entitle such person to,
nor disqualify such person from participation in, any other grant of options or
awards by the Company, whether under this Plan or under any other stock option
or award plan of the Company.
(b) AWARD OF SARS. Concurrently with or subsequent to the
grant of any Discretionary Option to purchase one or more shares of Stock, a
Plan Administrator may award
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to the Optionholder with respect to each share of Stock underlying the Option, a
related SAR permitting the Optionholder to be paid the appreciation on the Stock
underlying the Discretionary Option in lieu of exercising the Option. In
addition, a Plan Administrator may award to any Eligible Person an SAR
permitting the Eligible Person to be paid the appreciation on a designated
number of shares of the Stock, whether or not such Shares are actually issued.
(c) CONDITIONS TO SAR. All SARs shall be subject to such
terms, conditions, restrictions or limitations as the applicable Plan
Administrator deems appropriate, including, by way of illustration but not by
way of limitation, restrictions on transferability, requirements of continued
employment, individual performance, financial performance of the Company, or
payment by the recipient of any applicable employment or withholding taxes. Such
Plan Administrator may modify or accelerate the termination of the restrictions
applicable to any SAR under the circumstances as it deems appropriate.
(d) SAR AGREEMENTS. A Plan Administrator may require as a
condition to the grant of a SAR that the recipient of such SAR enter into a SAR
agreement in such form and content as that Plan Administrator from time to time
approves.
(e) EXERCISE. An Eligible Person who has been granted a
SAR may exercise such SAR subject to the conditions specified by the Plan
Administrator in the SAR agreement.
(f) AMOUNT OF PAYMENT. The amount of payment to which the
grantee of a SAR shall be entitled upon the exercise of each SAR shall be equal
to the amount, if any, by which the fair market value of the specified shares of
Stock on the exercise date exceeds the fair market value of the specified shares
of Stock on the date the Discretionary Option related to the SAR was granted or
became effective, or, if the SAR is not related to any Option, on the date the
SAR was granted or became effective.
(g) FORM OF PAYMENT. The SAR may be paid in either cash
or Stock, as determined in the discretion of the applicable Plan Administrator
and set forth in the SAR agreement. If the payment is in Stock, the number of
shares to be paid to the participant shall be determined by dividing the amount
of the payment determined pursuant to Section 2.4(f) by the fair market value of
a share of Stock on the exercise date of such SAR. As soon as practical after
exercise, the Company shall deliver to the SAR grantee a certificate or
certificates for such shares of Stock.
(h) TERMINATION OF EMPLOYMENT; DEATH. Section 2.2(j),
applicable to Incentive Stock Options, and Section 2.2(k), applicable to
nonqualified options, shall apply equally to the tandem SARs and if not issued
in tandem, Section 2.2(k) shall apply to the SARs.
2.5 OTHER CASH AWARDS
(a) IN GENERAL. The Plan Administrator of each
administered group shall have the discretion to make other awards of cash to
Eligible Persons in such group ("Cash Awards"). Such Cash Awards may relate to
existing Options or to the appreciation in the value of the Stock or other
Company securities.
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(b) CONDITIONS TO AWARD. All Cash Awards shall be subject
to such terms, conditions, restrictions or limitations as the applicable Plan
Administrator deems appropriate, and such Plan Administrator may require as a
condition to such Cash Award that the recipient of such Cash Award enter into an
award agreement in such form and content as the Plan Administrator from time to
time approves.
ARTICLE III
AUTOMATIC GRANT PROGRAM
3.1 ELIGIBLE PERSONS UNDER THE AUTOMATIC GRANT PROGRAM. The
persons eligible to participate in the Automatic Grant Program shall be limited
to Board members who are not employed by the Company, whether or not such
persons qualify as Non-Employee directors as defined herein ("Eligible
Directors"). Persons who are eligible under the Automatic Grant Program may also
be eligible to receive Discretionary Options or Awards under the Discretionary
Grant Program or option grants or direct stock issuances under other plans of
the Company.
3.2 TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS.
(a) AMOUNT AND DATE OF GRANT. During the term of this
Plan, Automatic Grants shall be made to each Eligible Director ("Optionholder")
as follows:
(i) ANNUAL GRANTS. Each year on the Annual Grant
Date an Automatic Option to acquire 2,500 shares of Stock shall be granted to
each Eligible Director (except that an Automatic Option to acquire 5,000 shares
of Stock shall be granted to the Chairman of the Board, assuming the Chairman of
the Board is an Eligible Director) for so long as there are shares of Stock
available under Section 1.2 hereof. The "Annual Grant Date" shall be the date of
the Company's annual stockholders meeting. Notwithstanding the foregoing, (i)
any Eligible Director whose term ended on the Annual Grant Date and who was not
re-elected on that date shall not be eligible to receive any automatic option
grants on that Annual Grant Date, and (ii) any Eligible Director that was
granted an Automatic Option under Section 3.2(a)(ii) hereof within 30 days of an
Annual Grant Date shall be ineligible to receive an Automatic Option grant
pursuant to this Section 3.2(a)(i) on such Annual Grant Date.
(ii) INITIAL NEW DIRECTOR GRANTS. On the Initial
Grant Date, every new member of the Board who is an Eligible Director and has
not previously received an Automatic Option grant under this Section 3.2(a)(ii)
shall be granted an Automatic Option to acquire 10,000 shares of Stock for so
long as there are shares of Stock available under Section 1.2 hereof. The
"Initial Grant Date" shall be the date that an Eligible Director is first
appointed or elected to the Board.
(iii) FORMULA GRANT. Each year on the Formula
Grant Date, an Automatic Option to acquire shares of Stock shall be granted to
each Eligible Director for so long as there are shares of Stock available under
Section 1.2 hereof. Each year, the number of shares of Stock that may be
acquired under the Automatic Option granted pursuant to this Section 3.2(a)(iii)
shall be an amount equal to 1,000 shares of Stock for each $.05 EPS Increase,
subject to a maximum of 5,000 shares of Stock to each Eligible Director. For
purposes of the
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foregoing, "EPS Increase" means the amount by which the earnings
per share, as reported in the audited financial statements of the Company for
the most recent fiscal year exceeds the earnings per share for the Company, as
calculated under its audited financial statements, for the previous fiscal year.
The "Formula Grant Date" shall be the later of the last day of the second
calendar month occurring after the close of any fiscal year or the seventh day
after the earnings of the Company have been publicly announced for any such
fiscal year. Any Eligible Director that was granted an Automatic Option under
Section 3.2(a)(ii) hereof within 30 days of a Formula Grant Date shall be
ineligible to receive an Automatic Option pursuant to this Section 3.2(a)(iii)
on such Formula Grant Date.
(b) EXERCISE PRICE. The exercise price per share of Stock
subject to each Automatic Option Grant shall be equal to 100 percent of the fair
market value per share of the Stock on the date the Automatic Option was granted
as determined in accordance with the valuation provisions of Section 4.5 hereof
(the "Option Price").
(c) VESTING. Each Automatic Option Grant (other than the
Formula Grant) shall become exercisable and vest one day before the next
succeeding stockholders' meeting that occurs after the applicable grant date
unless the next succeeding annual meeting occurs less than six months after the
applicable grant date, in which case the Automatic Grant shall become
exercisable and vest on the first anniversary of the applicable grant date. Each
Automatic Option Grant that is a Formula Grant shall become exercisable and vest
on the first anniversary of the applicable grant date. Each Automatic Option
shall only vest and become exercisable if the Optionholder has not ceased
serving as a Board member as of such vesting date.
(d) METHOD OF EXERCISE. In order to exercise an Automatic
Option with respect to any vested Optioned Shares, an Optionholder (or in the
case of an exercise after an Optionholder's death, such Optionholder's executor,
administrator, heir or legatee, as the case may be) must take the following
action:
(i) execute and deliver to the Company a written
notice of exercise signed in writing by the person exercising the Automatic
Option specifying the number of shares of Stock with respect to which the
Automatic Option is being exercised;
(ii) pay the aggregate Option Price in one of the
alternate forms as set forth in Section 3.2(e) below; and
(iii) furnish appropriate documentation that the
person or persons exercising the Automatic Option (if other than the
Optionholder) has the right to exercise such Option.
As soon as practicable after the Exercise Date, the Company shall mail or
deliver to or on behalf of the Optionholder (or any other person or persons
exercising the Automatic Option in accordance herewith) a certificate or
certificates representing the Stock for which the Automatic Option has been
exercised in accordance with the provisions of this Plan. In no event may any
Automatic Option be exercised for any fractional shares.
(e) PAYMENT OF OPTION PRICE. The aggregate Option Price
shall be payable in one of the alternative forms specified below:
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(i) full payment in cash or check made payable
to the Company's order; or
(ii) full payment in shares of Stock held for the
requisite period necessary to avoid a charge to the Company's reported earnings
and valued at fair market value on the Exercise Date (as determined in
accordance with Section 4.5 hereof); or
(iii) if a cashless exercise program has been
implemented by the Board, full payment through a sale and remittance procedure
pursuant to which the Optionholder (A) shall provide irrevocable written
instructions to a designated brokerage firm to effect the immediate sale of the
Optioned Shares to be purchased and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the Optioned Shares to be purchased and (B)
shall concurrently provide written directives to the Company to deliver the
certificates for the Optioned Shares to be purchased directly to such brokerage
firm in order to complete the sale transaction.
(f) TERM OF OPTION. Each Automatic Option shall expire on
the tenth anniversary of the date on which an Automatic Option Grant was made
("Expiration Date"). Except as provided in Article IV hereof, should an
Optionholder's service as a Board member cease prior to the Expiration Date for
any reason while an Automatic Option remains outstanding and unexercised, then
the Automatic Option term shall immediately end and the Automatic Option shall
cease to be outstanding in accordance with the following provisions:
(i) The Automatic Option shall immediately
terminate and cease to be outstanding for any Optioned Shares of Stock which
were not vested at the time of Optionholder's cessation of Board service.
(ii) Should an Optionholder cease, for any reason
other than death, to serve as a member of the Board, then the Optionholder shall
have a six month period measured from the date of such cessation of Board
service in which to exercise the Automatic Options which vested prior to the
time of such cessation of Board service. In no event, however, may any Automatic
Option be exercised after the Expiration Date of such Automatic Option.
(iii) Should an Optionholder die while serving as
a Board member or within six months after cessation of Board service, then the
personal representative of the Optionholder's estate (or the person or persons
to whom the Automatic Option is transferred pursuant to the Optionholder's will
or in accordance with the laws of descent and distribution) shall have a one
year period measured from the date of the Optionholder's cessation of Board
service in which to exercise the Automatic Options which vested prior to the
time of such cessation of Board service. In no event, however, may any Automatic
Option be exercised after the Expiration Date of such Automatic Option.
ARTICLE IV
MISCELLANEOUS
4.1 CAPITAL ADJUSTMENTS. The aggregate number of shares of Stock
subject to the Plan, the number of shares covered by outstanding Options and
Awards and the price per share stated in such Options and Awards, and the number
of Automatic Options to be granted pursuant
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to the Automatic Program, shall be proportionately adjusted for any increase or
decrease in the number of outstanding shares of Stock of the Company resulting
from a subdivision or consolidation of shares or any other capital adjustment or
the payment of a stock dividend or any other increase or decrease in the number
of such shares effected without the Company's receipt of consideration therefor
in money, services or property.
4.2 MERGERS, ETC. If the Company is the surviving corporation in
any merger or consolidation (not including a Corporate Transaction), any Option
or Award granted under the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to the Option or Award
would have been entitled prior to the merger or consolidation. Except as
provided in Section 4.3 hereof, a dissolution or liquidation of the Company
shall cause every Option or Award outstanding hereunder to terminate.
4.3 CORPORATE TRANSACTION. In the event of stockholder approval of
a Corporate Transaction, (a) all unvested Automatic Options shall automatically
accelerate and immediately vest so that each outstanding Automatic Option shall,
one week prior to the specified effective date for the Corporate Transaction,
become fully exercisable for all of the Optioned Shares and (b) the Plan
Administrator shall have the discretion and authority, exercisable at any time,
to provide for the automatic acceleration of one or more of the outstanding
Discretionary Options or Awards granted by it under the Plan. Upon the
consummation of the Corporate Transaction, all Options shall, to the extent not
previously exercised, terminate and cease to be outstanding.
4.4 CHANGE IN CONTROL.
(a) AUTOMATIC GRANT PROGRAM. In the event of a Change in
Control, all unvested Automatic Options shall automatically accelerate and
immediately vest so that each outstanding Automatic Option shall, immediately
prior to the effective date of such Change in Control, become fully exercisable
for all of the Optioned Shares. Thereafter, each Automatic Option shall remain
exercisable until the Expiration Date of such Automatic Option.
(b) DISCRETIONARY GRANT PROGRAM. In the event of a Change
in Control, a Plan Administrator shall have the discretion and authority,
exercisable at any time, whether before or after the Change in Control, to
provide for the automatic acceleration of one or more outstanding Discretionary
Options or Awards granted by it under the Plan upon the occurrence of such
Change in Control. A Plan Administrator may also impose limitations upon the
automatic acceleration of such Options or Awards to the extent it deems
appropriate. Any Options or Awards accelerated upon a Change in Control will
remain fully exercisable until the expiration or sooner termination of the
Option term.
(c) INCENTIVE STOCK OPTION LIMITS. The exercisability of
any Discretionary Options which are intended to qualify as Incentive Stock
Options and which are accelerated by the Plan Administrator in connection with a
pending Corporation Transaction or Change in Control shall, except as otherwise
provided in the discretion of the Plan Administrator and the Optionholder,
remain subject to the $100,000 Limitation and vest as quickly as possible
without violating the $100,000 Limitation.
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4.5 CALCULATION OF FAIR MARKET VALUE OF STOCK. The fair market
value of a share of Stock on any relevant date shall be determined in accordance
with the following provisions:
(i) If the Stock is not at the time listed or
admitted to trading on any stock exchange but is traded in the over-the-counter
market, the fair market value shall be the mean between the highest bid and
lowest asked prices (or, if such information is available, the closing selling
price) per share of Stock on the date in question in the over-the-counter
market, as such prices are reported by the National Association of Securities
Dealers through its Nasdaq system or any successor system. If there are no
reported bid and asked prices (or closing selling price) for the Stock on the
date in question, then the mean between the highest bid price and lowest asked
price (or the closing selling price) on the last preceding date for which such
quotations exist shall be determinative of fair market value.
(ii) If the Stock is at the time listed or
admitted to trading on any stock exchange, then the fair market value shall be
the closing selling price per share of Stock on the date in question on the
stock exchange determined by the Board to be the primary market for the Stock,
as such price is officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of Stock on such exchange on the date in
question, then the fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
(iii) If the Stock at the time is neither listed
nor admitted to trading on any stock exchange nor traded in the over-the-counter
market, then the fair market value shall be determined by the Board after taking
into account such factors as the Board shall deem appropriate, including one or
more independent professional appraisals.
4.6 USE OF PROCEEDS. The proceeds received by the Company from the
sale of Stock pursuant to the exercise of Options or Awards hereunder, if any,
shall be used for general corporate purposes.
4.7 CANCELLATION OF OPTIONS. Each Plan Administrator shall have
the authority to effect, at any time and from time to time, with the consent of
the affected Optionholders, the cancellation of any or all outstanding
Discretionary Options granted under the Plan by that Plan Administrator and to
grant in substitution therefore new Discretionary Options under the Plan
covering the same or different numbers of shares of Stock as long as such new
Discretionary Options have an exercise price per share of Stock no less than the
minimum exercise price as set forth in Section 2.2(b) hereof on the new grant
date.
4.8 REGULATORY APPROVALS. The implementation of the Plan, the
granting of any Option or Award hereunder, and the issuance of Stock upon the
exercise of any such Option or Award shall be subject to the procurement by the
Company of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the Options or Awards granted under it and the Stock
issued pursuant to it.
4.9 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have, the members of a Plan Administrator shall be
indemnified and held harmless by the Company, to the extent permitted under
applicable law, for, from and against all costs and
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expenses reasonably incurred by them in connection with any action, suit, legal
proceeding to which any member thereof may be a party by reason of any action
taken, failure to act under or in connection with the Plan or any rights granted
thereunder and against all amounts paid by them in settlement thereof or paid by
them in satisfaction of a judgment of any such action, suit or proceeding,
except a judgment based upon a finding of bad faith.
4.10 PLAN NOT EXCLUSIVE. This Plan is not intended to be the
exclusive means by which the Company may issue options or warrants to acquire
its Stock, stock awards or any other type of award. To the extent permitted by
applicable law, any such other option, warrants or awards may be issued by the
Company other than pursuant to this Plan without stockholder approval.
4.11 COMPANY RIGHTS. The grants of Options shall in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
4.12 PRIVILEGE OF STOCK OWNERSHIP. An Optionholder shall not have
any of the rights of a stockholder with respect to Optioned Shares until such
individual shall have exercised the Option and paid the Option Price for the
Optioned Shares. No adjustment will be made for dividends or other rights for
which the record date is prior to the date of such exercise and full payment for
such Optioned Shares.
4.13 ASSIGNMENT. The right to acquire Stock or other assets under
the Plan may not be assigned, encumbered or otherwise transferred by any
Optionholder except as specifically provided herein. Except as may be
specifically allowed by the Plan Administrator at the time of grant and set
forth in the documents evidencing a Discretionary Option or Award, no Option or
Award granted under the Plan or any of the rights and privileges conferred
thereby shall be assignable or transferable by an Optionholder or grantee other
than by will or the laws of descent and distribution, and such Option or Award
shall be exercisable during the Optionholder's or grantee's lifetime only by the
Optionholder or grantee. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Company and its successors or assigns, and the
Optionholders, the legal representatives of their respective estates, their
respective heirs or legatees and their permitted assignees.
4.14 SECURITIES RESTRICTIONS
(a) LEGEND ON CERTIFICATES. All certificates representing
shares of Stock issued upon exercise of Options or Awards granted under the Plan
shall be endorsed with a legend reading as follows:
The shares of Common Stock evidenced by this certificate have
been issued to the registered owner in reliance upon written
representations that these shares have been purchased solely
for investment. These shares may not be sold, transferred or
assigned unless in the opinion of the Company and its legal
counsel such sale, transfer or assignment will not be in
violation of the
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Securities Act of 1933, as amended, and the rules and
regulations thereunder.
(b) PRIVATE OFFERING FOR INVESTMENT ONLY. The Options and
Awards are and shall be made available only to a limited number of present and
future key personnel who have knowledge of the Company's financial condition,
management and its affairs. The Plan is not intended to provide additional
capital for the Company, but to encourage ownership of Stock among the Company's
key personnel. By the act of accepting an Option or Award, each grantee agrees
(i) that, any shares of Stock acquired will be solely for investment and not
with any intention to resell or redistribute those shares and (ii) such
intention will be confirmed by an appropriate certificate at the time the Stock
is acquired if requested by the Company. The neglect or failure to execute such
a certificate, however, shall not limit or negate the foregoing agreement.
(c) REGISTRATION STATEMENT. If a Registration Statement
covering the shares of Stock issuable upon exercise of Options granted under the
Plan is filed under the Securities Act of 1933, as amended, and is declared
effective by the Securities Exchange Commission, the provisions of Sections
4.14(a) and (b) shall terminate during the period of time that such Registration
Statement, as periodically amended, remains effective.
4.15 TAX WITHHOLDING.
(a) GENERAL. The Company's obligation to deliver Stock
upon the exercise of Options under the Plan shall be subject to the satisfaction
of all applicable federal, state and local income tax withholding requirements.
(b) SHARES TO PAY FOR WITHHOLDING. The Board may, in its
discretion and in accordance with the provisions of this Section 4.15(b) and
such supplemental rules as it may from time to time adopt, provide any or all
Optionholders with the right to use shares of Stock in satisfaction of all or
part of the federal, state and local income tax liabilities incurred by such
Optionholders in connection with the exercise of their Options ("Taxes"). Such
right may be provided to any such Optionholder in either or both of the
following formats:
(i) STOCK WITHHOLDING. The Optionholder of an
Option may be provided with the election, which may be subject to approval by
the Plan Administrator, to have the Company withhold, from the Stock otherwise
issuable upon the exercise of such Option, a portion of those shares of Stock
with an aggregate fair market value equal to the percentage (not to exceed 100
percent) of the applicable Taxes designated by the Optionholder.
(ii) STOCK DELIVERY. The Board may, in its
discretion, provide the Optionholder with the election to deliver to the
Company, at the time the Option is exercised, one or more shares of Stock
previously acquired by such individual (other than pursuant to the transaction
triggering the Taxes) with an aggregate fair market value equal to the
percentage (not to exceed 100 percent) of the taxes incurred in connection with
such Option exercise designated by the Optionholder.
4.16 GOVERNING LAW. The Plan shall be governed by and all questions
hereunder shall be determined in accordance with the laws of the State of
Arizona.
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ARTICLE V
DEFINITIONS
The following capitalized terms used in this Plan shall have the
meaning described below:
"AFFILIATES" shall mean all "executive officers" (as that term is
defined in Rule 16a-1(f) promulgated under the 1934 Act) and directors of the
Company and all persons who own ten percent or more of the Company's issued and
outstanding Stock.
"ANNUAL GRANT DATE" shall mean the date of the Company's annual
stockholder meeting.
"AUTOMATIC GRANT PROGRAM" shall mean that program set forth in Article
III of this Agreement pursuant to which Eligible Directors, as defined herein,
are automatically granted Options upon certain events.
"AUTOMATIC OPTION GRANT" shall mean those automatic option grants made
on the Annual Grant Date, on the Initial Grant Date, and on the Formula Grant
Date.
"AUTOMATIC OPTIONS" shall mean those Options granted pursuant to the
Automatic Grant Program.
"AWARD" shall mean a Stock Award, SAR or Cash Award.
"BOARD" shall mean the Board of Directors of the Company.
"CASH AWARD" shall mean an award to be paid in cash and granted under
Section 2.5 hereunder.
"CHANGE IN CONTROL" shall mean and include the following transactions
or situation:
(i) A sale, transfer, or other disposition by the Company
through a single transaction or a series of transactions of securities of the
Company representing 30 percent or more of the combined voting power of the
Company's then outstanding securities to any "Unrelated Person" or "Unrelated
Persons" acting in concert with one another. For purposes of this definition,
the term "Person" shall mean and include any individual, partnership, joint
venture, association, trust corporation, or other entity (including a "group" as
referred to in Section 13(d)(3) of the 1934 Act. For purposes of this
definition, the term "Unrelated Person" shall mean and include any Person other
than the Company, a wholly-owned subsidiary of the Company, or an employee
benefit plan of the Company.
(ii) A sale, transfer, or other disposition through a
single transaction or a series of transactions of all or substantially all of
the assets of the Company to an Unrelated Person or Unrelated Persons acting in
concert with one another.
(iii) A change in the ownership of the Company through a
single transaction or a series of transactions such that any unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the
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Company representing at least 30 percent of the combined voting power of the
Company's then outstanding securities. For purposes of this Section, the term
"Beneficial Owner" shall have the same meaning as given to that term in Rule
13d-3 promulgated under the 1934 Act, provided that any pledgee of voting
securities shall not be deemed to be the Beneficial Owner thereof prior to its
acquisition of voting rights with respect to such securities.
(iv) Any consolidation or merger of the Company with or
into an Unrelated Person, unless immediately after the consolidation or merger
the holders of the common stock of the Company immediately prior to the
consolidation or merger are the Beneficial Owners of securities of the surviving
corporation representing at least 50 percent of the combined voting power of the
surviving corporation's then outstanding securities.
(v) During any period of two years, individuals who, at
the beginning of such period, constituted the Board of Directors of the Company
cease, for any reason, to constitute at least a majority thereof, unless the
election or nomination for election of each new director was approved by the
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
(vi) Change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the 1934 Act, or any successor regulation of
similar import, regardless of whether the Company is subject to such reporting
requirement.
Notwithstanding any provision hereof to the contrary, the filing of a proceeding
for the reorganization of the Company under Chapter 11 of the General Bankruptcy
Code or any successor or other statute of similar import shall not be deemed to
be a Change of Control for purposes of this Plan.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall mean Rural/Metro Corporation, a Delaware corporation.
"CORPORATE TRANSACTION" shall mean (a) a merger or consolidation in
which the Company is not the surviving entity, except for a transaction the
principal purposes of which is to change the state in which the Company is
incorporated; (b) the sale, transfer of or other disposition of all or
substantially all of the assets of the Company and complete liquidation or
dissolution of the Company, or (c) any reverse merger in which the Company is
the surviving entity but in which the securities possessing more than 50 percent
of the total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger.
"DISCRETIONARY GRANT PROGRAM" shall mean the program described in
Article II of this Plan pursuant to which certain Eligible Directors are granted
Options or Awards in the discretion of the Plan Administrator.
"DISCRETIONARY OPTIONS" shall mean options granted under the
Discretionary Grant Program.
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"EFFECTIVE DATE" shall mean the date that the Plan has been approved by
the stockholders as required by Section 1.3(a) hereof.
"ELIGIBLE DIRECTOR" shall mean, with respect to the Automatic Grant
Program, those Board members who are not employed by the Company, whether or not
such members are Non-Employee Directors as defined herein.
"ELIGIBLE PERSONS" shall mean (a) with respect to the Discretionary
Grant Program, those persons who, at the time that the Discretionary Option or
Award is granted, are (i) key personnel (including officers and directors) of
the Company or Parent or Subsidiary Corporations, or (ii) consultants or
independent contractors who provide valuable services to the Company or Parent
or Subsidiary Corporations; and (b) with respect to the Automatic Grant Program,
the Eligible Directors.
"EMPLOYEE COMMITTEE" shall mean that committee appointed by the Board
to administer the Plan with respect to the Non-Affiliates and comprised of two
or more persons who are members of the Board.
"EPS INCREASE" shall have the meaning set forth in Section 3.2(a)(iii)
hereof.
"EXERCISE DATE" shall be the date on which written notice of the
exercise of an Option is delivered to the Company in accordance with the
requirements of the Plan.
"EXPIRATION DATE" shall be the 10-year anniversary of the date on which
an Automatic Option Grant was made.
"FORMULA GRANT DATE" shall have the meaning as set forth in Section
3.2(a)(iii) hereof.
"INCENTIVE STOCK OPTION" shall mean a Discretionary Option that is
intended to qualify as an "incentive stock option" under Code section 422.
"INITIAL GRANT DATE" shall mean the date that an Eligible Director is
first appointed or elected to the Board.
"NON-AFFILIATES" shall mean all persons who are not Affiliates.
"NON-EMPLOYEE DIRECTORS" shall mean those Directors who satisfy the
definition of "Non-Employee Director" under Rule 16b-3(b)(3)(i) promulgated
under the 1934 Act.
"$100,000 LIMITATION" shall mean the limitation pursuant to which the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Stock for which one or more Options granted to any person under
this Plan (or any other option plan of the Company or any Parent or Subsidiary
Corporation) may for the first time be exercisable as Incentive Stock Options
during any one calendar year shall not exceed the sum of $100,000.
"OPTIONHOLDER" shall mean an Eligible Person or Eligible Director to
whom Options have been granted.
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"OPTIONED SHARES" shall be those shares of Stock to be optioned from
time to time to any Eligible Director.
"OPTION PRICE" shall mean (i) with respect to Discretionary Options,
the exercise price per share as specified by the Plan Administrator pursuant to
Section 2.2(b) hereof, and (ii) with respect to Automatic Options, the exercise
price per share as specified by Section 3.2(b) hereof.
"OPTIONS" shall mean options to acquire Stock granted under the Plan.
"PARENT CORPORATION" shall mean any corporation in the unbroken chain
of corporations ending with the employer corporation, where, at each link of the
chain, the corporation and the link above owns at least 50 percent of the
combined total voting power of all classes of the stock in the corporation in
the link below.
"PLAN" shall mean this stock option plan for Rural/Metro Corporation.
"PLAN ADMINISTRATOR" shall mean (a) either the Board, the Senior
Committee, or any other committee, whichever is applicable, with respect to the
administration of the Discretionary Grant Program as it relates to Affiliates
and (b) either the Board, the Employee Committee, or any other committee,
whichever is applicable, with respect to the administration of the Discretionary
Grant Program as it relates to Non-Affiliates and with respect to the Automatic
Grant Program.
"SAR" shall mean stock appreciation rights granted pursuant to Section
2.4 hereunder.
"SENIOR COMMITTEE" shall mean that committee appointed by the Board to
administer the Discretionary Grant Program with respect to the Affiliates and
comprised of two or more Non-Employee Directors.
"SERVICE" shall have the meaning set forth in Section 2.2(n) hereof.
"STOCK" shall mean shares of the Company's common stock, $.01 par value
per share, which may be unissued or treasury shares, as the Board may from time
to time determine.
"STOCK AWARDS" shall mean Stock directly granted under the
Discretionary Grant Program.
"SUBSIDIARY CORPORATION" shall mean any corporation in the unbroken
chain of corporations starting with the employer corporation, where, at each
link of the chain, the corporation and the link above owns at least 50 percent
of the combined voting power of all classes of stock in the corporation below.
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EXECUTED as of the 12th day of September, 1997.
RURAL/METRO CORPORATION
By: /s/ Warren S. Rustand
-----------------------------
Name: Warren S. Rustand
-----------------------------
Its: Chief Executive Officer
-----------------------------
ATTESTED BY:
/s/ Louis G. Jekel
- -----------------------------
Secretary
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ARTHUR ANDERSEN LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated August 21, 1997
included in Rural/Metro Corporation's Form 10-K for the year ended June 30,
1997 and to all references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
September 3, 1998.
