UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 13, 2005
ROLLINS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-4422 51-0068479
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
2170 PIEDMONT ROAD, N.E., ATLANTA, GEORGIA 30324
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (404) 888-2000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Adoption of Nonqualified Deferred Compensation Plan.
On June 13, 2005, the Compensation Committee of Rollins, Inc. (the
"Company") approved the Rollins, Inc. Deferred Compensation Plan (the "Plan").
The Company intends the Plan to comply with the provisions of the American Jobs
Creation Act of 2004 (which added Section 409A ("Section 409A") to the Internal
Revenue Code and imposed new requirements on deferred compensation arrangements)
and other applicable law. The Company intends to amend the Plan as necessary to
comply with the requirements of forthcoming Treasury Department and Internal
Revenue Service guidance issued under Section 409A.
Participants. The Plan provides that employees eligible to participate in
the Plan include those who are both A) members of a group of management or
highly compensated employees (i.e., members of a "top-hat" group, for purposes
of the Employee Retirement Income Security Act of 1974, as amended) and B)
selected by the Committee administering the Plan (the "Committee"). All of the
executive officers of the Company who were named in the Summary Compensation
Table included in the Company's most recently filed proxy statement (the "Named
Executive Officers") are eligible.
Salary and Bonus Deferrals. The Plan provides that Participants may defer
up to 50% of their base salary and up to 100% of their annual bonus with respect
to any given Plan year, except that each such election is subject to a $2,000
per Plan year minimum. The Committee has discretion to establish different
maximum and/or minimum deferral amounts or percentages with respect to any given
Plan year. Deferral amounts may be reduced if necessary to allow the Company to
satisfy withholding and similar obligations. The Plan provides for Participants
to make deferral elections for base salary each year during particular
enrollment periods that end before the beginning of a Plan Year (or in such
other time and manner that complies with Section 409A and any regulatory or
other guidance issued thereunder). However, deferral elections for
"performance-based compensation" (as defined under Section 409A and any
regulatory or other guidance issued thereunder) must be made during particular
enrollment periods that end at least six months before the end of the
performance period with respect to which the compensation is earned.
Company Contributions. The Plan provides that the Company may make
discretionary credits to Participant accounts. The Company currently plans to
credit accounts of Participants of long service to the Company with certain
discretionary amounts ("Pension Plan Benefit Restoration Credits") in lieu of
benefits that previously accrued under the Company's "Retirement Income Plan."
The Retirement Income Plan is a qualified defined benefit pension plan under
which the Company ceased all future benefit accruals effective June 30, 2005.
The Company intends to make Pension Plan Benefit Restoration Credits under the
Plan for five years, with the first such credit being made in January 2007 for
those Participants who are employed for all of the 2006 Plan year. The amount of
the Pension Plan Benefit Restoration Credits will vary by formula based on the
Participants' ages and years of service with the Company. Only employees with
five full years of vested service on June 30, 2005 qualify for Pension Plan
Benefit Restoration Credits. The Company intends to make comparable payments on
behalf of certain employees (i.e., certain employees who do not participate in
the Plan) under the Company's 401(k) plan. The following Named Executive
Officers are expected to receive Pension Plan Benefit Restoration Credits, equal
to the percentage of their annual contribution as set forth below:
PENSION PLAN BENEFIT RESTORATION CREDITS
OF NAMED EXECUTIVE OFFICERS
PERCENTAGE OF ANNUAL SALARY
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NAME (UP TO A MAXIMUM ANNUAL SALARY OF $210,000)
-----------------------------------------------------------------------
Mr. Randall Rollins 3.0%
Mr. Gary Rollins 3.0%
Mr. Glen Rollins 1.5%
Mr. Michael Knottek 3.0%
Mr. Harry Cynkus 3.0%
The Company retains absolute discretion to reduce the amount of Pension Plan
Benefit Restoration Credits at any time for any reason, and may elect not to
make Pension Plan Benefit Restoration Credits at all. The Company currently
expects that the last Pension Plan Benefit Restoration Credits will be made with
respect to the 2010 Plan year.
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In addition to the Pension Plan Benefit Restoration Credits, the Company
may credit Participant accounts with discretionary amounts under the Plan in any
amount and at any time. The Company may, but is not obligated to, make
discretionary credits to Participants' accounts in order to restore the amount
of any matching contributions with respect to the previous plan year which the
Participant may have had forfeited from his 401(k) Plan in order to prevent the
Plan from violating certain 401(k) plan nondiscrimination testing requirements.
The Company has no other plans to credit any of the Named Executive
Officers with discretionary amounts.
Account Maintenance, Accounting and Earnings. The Plan provides for
Company-maintained bookkeeping accounts with respect to all Participant
deferrals and Company credits. The accounts are unfunded. Under the Plan, salary
and bonus deferrals and Pension Plan Benefit Restoration Credits are generally
100% vested, but any discretionary credits other than Pension Plan Benefit
Restoration Credits would be subject to vesting in accordance with the matching
contribution vesting schedule set forth in the Company 401(k) plan in which a
Participant participates. If a Participant participates in more than one Company
401(k) plan, such discretionary credits would vest in accordance with the 401(k)
plan's vesting schedule that would provide the Participant with the greatest
vested percentage.
Accounts will be credited with hypothetical earnings, and/or debited with
hypothetical losses, based on the performance of certain "Measurement Funds."
Participants select Measurement Funds from a list of particular investment
vehicles selected by the Committee and specify an allocation among them.
Currently, all Measurement Funds are third-party investment vehicles, and do not
include Company common stock. However, the Committee has the discretion to
discontinue, substitute, or add hypothetical investment vehicles to the list.
Subject to restrictions on the timing and number of permitted changes
established by the Committee, and other conditions specified in the Plan,
Participants may alter the allocation of their Measurement Funds periodically.
Account values are calculated as if the funds from deferrals and Company
credits had been converted into shares or other ownership units of selected
Measurement Funds by purchasing (or selling, where relevant) such shares or
units at the current purchase price of the relevant Measurement Fund at the time
of the Participant's selection. No such purchases or sales are actually made on
behalf of Participants, however, and Participants do not have any real or
beneficial ownership in the actual securities which a Measurement Fund tracks.
By participating in the Plan, Participants agree to indemnify the Company
against any losses related to: (i) the Measurement Funds made available; and
(ii) any discrepancy that might result between the Company's method of crediting
and debiting accounts and what an account balance might be had such amounts
actually been invested in the Measurement Funds.
Plan benefits are unsecured general obligations of the Company to the
Participants, and these obligations rank in parity with the Company's other
unsecured and unsubordinated indebtedness. Thus, deferrals of compensation and
Company contributions are recorded on the Company's balance sheet as pension
liabilities, and changes in the fair value of these liabilities are recorded as
compensation cost on the Company's statement of income.
The Company has established a "rabbi trust," which it intends to use to
voluntarily set aside amounts to indirectly fund any obligations under the Plan.
Trust assets cannot be used for any other purpose unless the Company becomes
insolvent, in which event, such assets may become subject to claims of the
Company's other creditors. Participants and their beneficiaries will have no
preferred claim on, or any beneficial ownership in, any assets of the trust.
Trust assets are marked to market and reported as "other assets" on the
Company's balance sheet. However, because the trust will be irrevocable, trust
assets will no longer be available to fund future operations by the Company.
There is no tax deduction available for amounts contributed to the trust or
earnings thereon, nor is there a deduction at the time compensation is deferred
under the Plan. However, the Company will generally be entitled to deduct
amounts distributed to a Participant when the Participant includes the amounts
distributed in his or her income for federal income tax purposes, which would
generally be expected to occur at the time the distribution is made.
While the Company expects the funds in the trust to be sufficient to
finance its liability to Participants under the Plan, there is no guarantee that
trust assets will always be sufficient to fund Plan benefits. To the extent that
the Company's obligations under the Plan exceed assets available under the
trust, the Company would be required to seek additional funding sources to fund
its liability under the Plan. The Company may decide to cease future funding of
the trust, or alter the way in which funds held thereby are invested, at any
time for any reason.
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Distributions. Generally, the Plan provides for distributions of any
deferred amounts upon the earliest to occur of a Participant's death,
disability, retirement or other termination of employment (a "Termination
Event"). However, for any deferrals of salary and bonus (but not Company
contributions), Participants would be entitled to designate a distribution date
which is prior to a Termination Event (an "In Service Distribution Date"). Any
designation of an In Service Distribution Date would have to be made at the time
of the deferral election.
Subject to certain requirements imposed by Section 409A, In Service
Distribution Dates could be extended to a later In Service Distribution Date.
However, any such extension would have to be for at least five years, and made
at least thirteen months before the unextended In Service Distribution Date. If
a Termination Event occurred before an In Service Distribution Date, all amounts
would be distributable upon the Termination Event, regardless of any In Service
Distribution Dates that may have been designated.
Generally, the Plan allows a Participant to elect to receive distributions
under the Plan in installments or lump-sum payments.
Material Relationships.
None of the Company's Named Executive Officers has any material
relationship with the Company or any of its affiliates apart from their
respective relationships as directors and/or employees of the Company and its
affiliates, ownership of Company and affiliate securities, and as otherwise
previously disclosed in the Company's last filed annual proxy statement and
periodic reports.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Rollins, Inc. has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROLLINS, INC.
Date: June 17, 2005 /s/ H.J. Cynkus
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Harry J. Cynkus
Chief Financial Officer and Treasurer
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