Exhibit 10.16(q)

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is made and entered into by and between
MICHAEL S. ZARRIELLO (“Executive”) and RURAL/METRO CORPORATION, its
subsidiaries, affiliates, joint ventures and partnerships (“Rural/Metro”). The
Effective Date of this Agreement is June 2, 2004.

 

R E C I T A L S

 

A. The Board of Directors of Rural/Metro believes it is in the best interests of
Rural/Metro to employ Executive as the Senior Vice President and Chief Financial
Officer of Rural/Metro. The Board of Directors believes that Executive is, and
is expected to continue to be, a key contributor to the success of Rural/Metro.
Due to Executive’s experience, Executive has particular skills and knowledge
that the Board of Directors believes is imperative to retain for the benefit of
Rural/Metro, its customers and all of its financial stakeholders.

 

B. Rural/Metro has decided to offer Executive an employment agreement, the terms
and provisions of which are set forth below. Rural/Metro and Executive each
desire to enter into this Agreement and, by doing so, mutually establish and
maintain a meaningful long-term commitment to each other based upon the terms
and provisions herein.

 

NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS:

 

1. POSITION AND DUTIES.

 

Executive will be employed as the Senior Vice President and Chief Financial
Officer of Rural/Metro and shall have a primary reporting relationship to the
Chief Executive Officer (“CEO”), with accountability to the Board of Directors
of Rural/Metro (the “Board”) generally acting through its Audit Committee (the
“Audit Committee”). Executive shall perform the duties of his position, as
determined by the CEO and the Board, in accordance with the policies, practices
and bylaws of Rural/Metro. For the duration of his employment, Executive shall
attend all meetings of the Board of Directors and Audit Committee as and when
requested by the Board of Directors or the Audit Committee. Executive shall
serve Rural/Metro faithfully, loyally, honestly and to the best of his ability.
Executive will devote his best efforts to the performance of his duties for, and
in the business and affairs of, Rural/Metro. Rural/Metro reserves the right, in
its sole discretion, to change or modify Executive’s position, title and duties
during the term of this Agreement, subject to Executive’s rights under Section
6.

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2. COMPENSATION.

 

A. Base Salary.

 

As of the Effective Date, Executive’s annual compensation will be Three Hundred
Four Thousand Five Hundred Dollars ($304,500) (“Base Salary”). Executive’s Base
Salary will be paid in substantially equal periodic installments in accordance
with Rural/Metro’s generally-applicable payroll practices. Executive’s Base
Salary will be reviewed at least annually in accordance with Rural/Metro’s
executive compensation review policies and practices.

 

3. MANAGEMENT INCENTIVE PROGRAM.

 

Executive shall be eligible to participate in the Rural/Metro Management
Incentive Program or any other incentive compensation program maintained by
Rural/Metro from time to time (“MIP”) and to receive such additional
compensation as may be provided by the MIP. As of the date of this Agreement,
the maximum potential incentive compensation (or bonus) to which Executive may
become entitled under the current Management Incentive Program is forty-five
percent of Executive’s Base Salary, which percentage may be adjusted at any time
by Rural/Metro subject to the limitations set forth in Section 6(A).
Notwithstanding anything to the contrary in the MIP regarding eligibility in the
event of termination of employment: (i) in the event Executive’s employment is
terminated without Cause as set forth in Section 5(B) of this Agreement, is
terminated for Good Reason as set forth in Section 6(A) of this Agreement, or is
terminated by reason of death or Disability as set forth in Section 7 of this
Agreement, then Executive shall be paid a pro-rata portion of the compensation
awarded (or to be awarded, as the case may be) pursuant to the MIP for the MIP
plan year in which such termination occurs, which pro-rata portion (a) shall be
calculated by dividing the annual MIP award amount (as determined pursuant to
the last sentence of this Section 3), if any, by 365 days and multiplying that
quotient by the number of days during the MIP plan year that Executive was
employed through the date of termination, and (b) shall be paid at such time as
is determined pursuant to the MIP; and (ii) in the event Executive’s employment
is terminated for Cause as set forth in Section 5(A) of this Agreement or is
terminated without Good Reason as set forth in Section 6(B) of this Agreement,
then Executive shall not be eligible to receive compensation awarded pursuant to
the MIP. In determining the partial-year MIP award (if any), it is intended that
(i) accomplishment of quantitative goals shall be evaluated based on full-year
financial performance; and (ii) accomplishment of so-called “soft” goals shall
be evaluated in good faith in a manner consistent with similar evaluations in
prior years based on Executive’s performance through the date of termination of
active employment. Notwithstanding the foregoing, Executive acknowledges the
discretionary nature of the MIP.

 

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4. TERM AND TERMINATION.

 

This Agreement will continue in full force and effect until it is terminated by
the parties. This Agreement may be terminated in any of the following ways: (a)
it may be renegotiated and replaced by a written agreement signed by both
parties; (b) Rural/Metro may elect to terminate this Agreement with or without
“Cause”, as defined below; (c) Executive may elect to terminate this Agreement
with or without “Good Reason”, as defined below; (d) either party may serve
notice on the other of its desire to terminate this Agreement at the end of the
“Initial Term” or any “Renewal Term”, or (e) this Agreement may terminate
automatically upon Executive’s death or Disability pursuant to Section 7.

 

The “Initial Term” of this Agreement shall expire by its terms three (3) years
from the Effective Date, unless sooner terminated in accordance with the
provisions of this Agreement. This Agreement will be renewed at the end of the
Initial Term for additional one-year periods (a “Renewal Term”), unless either
party serves notice of its desire not to renew this Agreement on the other. Such
notice must be given at least sixty (60) days before the end of the Initial Term
or the applicable Renewal Term.

 

If Rural/Metro notifies Executive of its desire not to renew this Agreement
pursuant to this Section 4 and at the time of such notification Rural/Metro does
not have “Cause” to terminate this Agreement pursuant to Section 5A, Executive
shall receive Severance Benefits pursuant to Section 8.

 

5. TERMINATION BY RURAL/METRO

 

A. Termination For Cause.

 

Rural/Metro may terminate this Agreement and Executive’s employment for Cause at
any time upon written notice. This means that Rural/Metro has the right to
terminate the employment relationship for Cause at any time should there be
Cause to do so.

 

For purposes of this Agreement, “Cause” shall be limited to discharge resulting
from a determination by an affirmative vote of 75% of the Board of Directors
then in office that Executive: (a) has been convicted of (or has pleaded guilty
or no contest to) a felony involving dishonesty, fraud, theft or embezzlement;
(b) has repeatedly failed or refused, in a material respect to follow reasonable
policies or directives established by Rural/Metro, if the failure or refusal has
not been cured within thirty (30) days after Rural/Metro has provided written
notice to Executive of the specific conduct constituting such failure or
refusal; (c) has willfully and persistently failed or refused to attend to
material duties or obligations imposed upon him under this Agreement, if the
failure or refusal has not been cured within thirty (30) days after Rural/Metro
has provided written notice to Executive of the specific conduct constituting
such failure or refusal; or (d) has misrepresented or concealed a material fact
for purposes of

 

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securing employment with Rural/Metro or this Employment Agreement. The existence
of “Cause” shall be determined by Rural/Metro’s Board of Directors acting in
good faith after prior notice to Executive and after providing Executive with an
opportunity to be heard in a meeting with the Board of Directors.

 

Because Executive is in a position which involves great responsibilities,
Rural/Metro is not required to utilize its progressive discipline policy. In
addition, no generally applicable grievance policy shall apply to grievances by
Executive regarding his employment relationship with Rural/Metro.

 

If this Agreement and Executive’s employment is terminated for Cause, Executive
shall receive no Severance Benefits.

 

B. Termination Without Cause.

 

Rural/Metro also may terminate this Agreement and Executive’s employment without
Cause at any time after providing Executive with sixty (60) days advance written
notice. In the event this Agreement and Executive’s employment are terminated by
Rural/Metro without Cause, Executive shall receive the Severance Benefits
pursuant to Section 8. Rural/Metro may place Executive on a paid administrative
leave, and bar or restrict Executive’s access to Rural/Metro facilities,
contemporaneously with or at any time following the delivery of the written
notice to Executive. For the avoidance of doubt, any action by Rural/Metro
pursuant to the foregoing sentence shall not constitute Good Reason or otherwise
constitute a breach of this Agreement by Rural/Metro, and the foregoing sentence
or any action by Rural/Metro pursuant thereto shall in no way limit or reduce
the rights of Rural/Metro as provided elsewhere herein.

 

6. TERMINATION BY EXECUTIVE.

 

Executive may terminate this Agreement and his employment with or without “Good
Reason” in accordance with the provisions of this Section 6.

 

A. Termination For Good Reason.

 

Executive may terminate this Agreement and his employment for “Good Reason” by
giving written notice to Rural/Metro within sixty (60) days, or such longer
period as may be agreed to in writing by Rural/Metro, of Executive’s receipt of
notice of the occurrence of any event constituting “Good Reason”, as described
below.

 

Executive shall have “Good Reason” to terminate this Agreement and his
employment upon the occurrence of any of the following events: (a) Executive is
assigned duties inconsistent with the positions, duties, responsibility and
status of the Senior Vice President and Chief Financial Officer of Rural/Metro;
(b) Executive is required to relocate to an employment location that is more
than fifty (50)

 

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miles from his current employment location (which the parties agree is
Rural/Metro’s present Scottsdale headquarters); (c) Executive’s Base Salary rate
is reduced to a level that is at least ten percent (10%) less than the salary
paid to Executive during the immediately prior calendar year, unless Executive
has agreed to said reduction or unless Rural/Metro makes an across-the-board
reduction that applies to all executives; or (d) the potential incentive
compensation (or bonus) to which Executive may become entitled under the MIP at
any level of performance by Executive or Rural/Metro is reduced by ten percent
(10%) or more as compared to the immediately prior year, unless Executive has
agreed to said reduction or unless Rural/Metro makes an across-the-board
reduction that applies to all executives. The following example (which is
provided solely as an example) illustrates the operation of subpart (d) of the
immediately preceding sentence: If Executive’s maximum potential incentive
compensation is reduced to 35% or less of Executive’s Base Salary in a year
immediately following a year in which Executive’s maximum potential incentive
compensation was 45% of Executive’s Base Salary, the reduction equals 10% or
more, and Employee would have Good Reason.

 

Notwithstanding the above provisions, Executive shall not have “Good Reason” to
terminate this Agreement and his employment if, within thirty (30) days of the
written notice of Good Reason provided to Rural/Metro by Executive, Rural/Metro
corrects, remedies or reverses any event which resulted in Good Reason.

 

If Executive terminates this Agreement and his employment for Good Reason,
Executive shall be entitled to receive Severance Benefits pursuant to Section 8.

 

B. Termination Without Good Reason.

 

Executive also may terminate this Agreement and his employment without Good
Reason at any time by giving sixty (60) days notice to Rural/Metro. If Executive
terminates this Agreement and his employment without Good Reason, Executive
shall not receive Severance Benefits pursuant to Section 8.

 

C. Administrative Leave.

 

Rural/Metro may place Executive on a paid administrative leave, and bar or
restrict Executive’s access to Rural/Metro facilities, contemporaneously with or
at any time following the delivery of the written notice of termination by
Executive pursuant to Section 6A or 6B. For the avoidance of doubt, any action
by Rural/Metro pursuant to the foregoing sentence shall not constitute Good
Reason or otherwise constitute a breach of this Agreement by Rural/Metro, and
the foregoing sentence or any action by Rural/Metro pursuant thereto shall in no
way limit or reduce the rights of Rural/Metro as provided elsewhere herein.

 

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7. DEATH OR DISABILITY.

 

This Agreement will terminate automatically on Executive’s death. Any
compensation or other amounts due to Executive for services rendered prior to
his death shall be paid to Executive’s surviving spouse, or if Executive does
not leave a surviving spouse, to Executive’s estate. If Executive is receiving
Severance Benefits or is entitled to payment of an MIP award pursuant to Section
3 at the time of his death, then any unpaid Base Salary component of Executive’s
Severance Benefits and MIP award shall be paid to Executive’s surviving spouse,
or if Executive does not leave a surviving spouse, to Executive’s estate, for
the balance of the Severance Period (as defined in Section 8) remaining at the
time of Executive’s death. In addition, if, at the time of his death, Executive
is receiving Severance Benefits that include the continuation of health,
medical, dental, vision or pharmaceutical insurance benefits (as described in
Section 8), and Executive’s surviving spouse and/or family member(s) is covered
by such health, medical, dental, vision or pharmaceutical insurance benefits
through Rural/Metro at the time of Executive’s death, then such coverage of
Executive’s surviving spouse and/or family member(s) shall continue throughout
the balance of the Severance Period. No other benefits shall be payable to
Executive’s heirs pursuant to this Agreement, but amounts may be payable
pursuant to any life insurance or other benefit plans maintained by Rural/Metro.

 

In the event Executive becomes “Disabled,” Executive’s employment hereunder and
Rural/Metro’s obligation to pay Executive’s Base Salary (less any amounts
payable to Executive pursuant to any long-term disability insurance policy paid
for by Rural/Metro) shall continue for a period of six (6) months from the date
as of which Executive is determined to have become Disabled, at which point,
Executive’s employment hereunder shall automatically cease and terminate.
Executive shall be considered “Disabled” or to be suffering from a “Disability”
for purposes of this Section 7 if Executive is unable, after any reasonable
accommodations required by the Americans with Disabilities Act or other
applicable law, to perform the essential functions of his position because of a
physical or mental impairment. In the absence of agreement between Rural/Metro
and Executive as to whether Executive is Disabled or suffering from a Disability
(and the date as of which Executive became Disabled), such determinations shall
be made by a licensed physician selected by Rural/Metro. If a licensed physician
selected by Executive disagrees with the determination of the physician selected
by Rural/Metro, the two physicians shall select a third physician. The decision
of the third physician concerning whether Executive is Disabled or suffering
from a Disability (and the date as of which Executive became Disabled) shall be
binding and conclusive on all interested parties.

 

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8. SEVERANCE BENEFITS.

 

If during the Initial Term or any Renewal Term, this Agreement and Executive’s
employment are terminated without Cause by Rural/Metro as set forth in Section
5B prior to the last day of the Initial Term or any Renewal Term, or if
Executive elects to terminate this Agreement for Good Reason as set forth in
Section 6A, Executive shall receive the “Severance Benefits” provided by this
Section. In addition, Executive also shall receive the Severance Benefits if his
employment is terminated due to Disability as set forth in Section 7 or due to
Rural/Metro’s non-renewal of this Agreement as set forth in Section 4.

 

The Severance Benefits shall begin immediately following the effective date of
termination of employment and, except as otherwise provided herein, will
continue to be payable for a period (the “Benefit Period”) of twenty-four (24)
months thereafter.

 

The Executive’s Severance Benefits shall consist of the continuation of
Executive’s then Base Salary for duration of the Benefit Period, less lawfully
required withholdings, and shall be paid in accordance with Rural/Metro’s
generally-applicable payroll practices. Such Severance Benefits shall be paid in
lieu of any accrued vacation time, but shall not be in lieu of any MIP award or
other incentive compensation due to Executive for services rendered prior to the
date of termination. The Severance Benefits also shall consist of the
continuation of any health, medical, dental, vision or pharmaceutical coverage
that Executive was participating in as of the last day of active employment.
These coverages shall be continued under COBRA beginning the first day of the
month following the effective termination date and shall continue for the
duration of the Benefit Period provided that Executive satisfactorily complies
with all COBRA election requirements. During the Benefit Period, Executive shall
continue to pay the same premiums paid as of the last day of active employment.
Executive’s life insurance coverage may be converted to an individual policy
within 30 days of the effective termination date. Upon conversion, the cost of
maintaining an individual policy resides with Executive. If a particular
insurance benefit may not be continued for any reason, Rural/Metro shall pay a
“Benefit Allowance” to the Executive. The “Benefit Allowance” will equal 145% of
the cost to Rural/Metro of providing the unavailable insurance benefit to a
similarly situated employee. The Benefit Allowance shall be paid on a monthly
basis or in a single lump sum. The cost of providing the unavailable benefit to
a similarly situated employee and whether the Benefit Allowance will be paid in
monthly installments or in a lump sum will be determined by Rural/Metro in the
exercise of its discretion.

 

If Executive voluntarily terminates this Agreement and his employment without
Good Reason prior to the end of the Initial Term or any Renewal Term, or if
Rural/Metro terminates the Agreement and Executive’s employment for Cause, no
Severance Benefits shall be paid to Executive. No Severance Benefits are payable
in the event of Executive’s death, except as expressly set forth in Section 7
above.

 

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Severance Benefits will cease if Executive elects to forgo future Severance
Benefits pursuant to Section 11G in order to avoid any further restrictions on
his ability to engage in a competing business or to solicit employees or
clients. If Executive makes an election pursuant to Section 11G, the Severance
Benefits will cease as of the effective date of the election.

 

Severance Benefits and Executive’s right to exercise any stock options also
shall immediately cease if Executive commits a material violation of any of the
terms of this Agreement relating to confidentiality and non-disclosure, as set
forth in Section 10, or the Covenant-Not-To-Compete, as set forth in Section 11.
Only material violations will result in the loss of Severance Benefits and the
ability to exercise stock options.

 

The payment of Severance Benefits shall not be affected by whether Executive
seeks or obtains other employment. Executive shall have no obligation to seek or
obtain other employment and Executive’s Severance Benefits shall not be impacted
by Executive’s failure to “mitigate.”

 

In order to receive the Severance Benefits, Executive must execute any release
reasonably requested by Rural/Metro of claims that Executive may have in
connection with his employment with Rural/Metro.

 

9. BENEFITS.

 

A. Benefit Plans, Insurance, Options, etc.

 

Executive will be entitled to participate in any benefit plans, including, but
not limited to, retirement plans, stock option plans, equity compensation or
incentive plans, disability plans, life insurance plans and health, medical,
dental, vision and pharmaceutical plans available to other Rural/Metro executive
employees, subject to any restrictions (including waiting periods) specified in
said plans. With respect to the determination of the amount of any such stock
option or other Equity (as defined in Section 8 above) awards next occurring
after the date of this Agreement, Rural/Metro shall, at such time as it can and
does consider Executive for an award under such plans, take into consideration
the fact that Executive did not receive stock options or other Equity at the
time he was hired or through the date of this Agreement due to the expiration
and non-replacement of Rural/Metro’s 1992 Stock Option Plan. During the term of
this Agreement and for a period of six years thereafter, Rural/Metro shall
maintain Directors and Officers insurance policy(ies) providing coverage
(subject to the terms of such policy) for the acts and omissions of Executive
during the term of his employment.

 

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B. Vacation.

 

Executive is entitled to four (4) weeks of paid vacation per calendar year, with
such vacation to be scheduled and taken in accordance with Rural/Metro’s
standard vacation policies. If Executive does not take the full vacation
available in any year, the unused vacation may not be carried over to the next
calendar year, and Executive will not be compensated for it.

 

10. CONFIDENTIALITY; NON-DISCLOSURE; OWNERSHIP OF WORK.

 

A. Confidentiality; Non-Disclosure.

 

During the course of his employment, Executive will become exposed to a
substantial amount of confidential and proprietary information, including, but
not limited to, financial information, annual reports, audited and unaudited
financial reports, operational budgets and strategies, methods of operation,
customer lists, strategic plans, business plans, marketing plans and strategies,
new business strategies, merger and acquisition strategies, management systems
programs, computer systems, personnel and compensation information and payroll
data, and other such reports, documents or information (collectively the
“Confidential and Proprietary Information”). In the event his employment is
terminated by either party for any reason, Executive promises that he will not,
retain, take with him or make any copies of such Confidential and Proprietary
Information in any form, format, or manner whatsoever (including computer
print-outs, computer tapes, floppy disks, CD-ROMs, etc.) nor will he disclose
the same in whole or in part to any person or entity, in any manner either
directly or indirectly. Excluded from this Agreement is information that (i) is
or becomes publicly known through no violation of this Agreement, (ii) is
lawfully received by the Executive from any third party without restriction on
disclosure or use, (iii) is required to be disclosed by law, or (iv) is
expressly approved in writing by Rural/Metro for release or other use by the
Executive. The provisions of this paragraph shall survive the termination of
this Agreement.

 

B. Ownership of Work, Materials and Documents.

 

All records, reports, notes, compilations, software, programs, designs and/or
other recorded or created matters, copies thereof or reproductions, in whatever
media form, relating to Rural/Metro’s trade secrets, operations, activities, or
business, made or received by Executive during any past, present or future
employment with Executive are and shall be works made for hire and are, or shall
become the exclusive property of Rural/Metro. Failure to return Rural/Metro’s
property, whether during the term of this Agreement or after its termination,
shall be a breach of this Agreement. The provisions of this paragraph shall
survive the termination of this Agreement.

 

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11. COVENANT-NOT-TO-COMPETE.

 

A. Interests to be Protected.

 

The parties acknowledge that during the term of his employment, Executive will
perform essential services for Rural/Metro, its employees and shareholders, and
for clients of Rural/Metro. Therefore, Executive will be given an opportunity to
meet, work with and develop close working relationships with Rural/Metro’s
clients on a first-hand basis and will gain valuable insight as to the clients’
operations, personnel and need for services. In addition, Executive will be
exposed to, have access to, and be required to work with, a considerable amount
of Rural/Metro’s Confidential and Proprietary Information.

 

The parties also expressly recognize and acknowledge that the personnel of
Rural/Metro have been trained by, and are valuable to Rural/Metro, and that if
Rural/Metro must hire new personnel or retrain existing personnel to fill
vacancies it will incur substantial expense in recruiting and training such
personnel. The parties expressly recognize that should Executive compete with
Rural/Metro in any manner whatsoever, it could seriously impair the goodwill and
diminish the value of Rural/Metro’s business.

 

The parties acknowledge that this covenant has an extended duration; however,
they agree that this covenant is reasonable and it is necessary for the
protection of Rural/Metro.

 

For these and other reasons, and the fact that there are many other employment
opportunities available to Executive if he should terminate, the parties are in
full and complete agreement that the following restrictive covenants (which
together are referred to as the “Covenant-Not-To-Compete”) are fair and
reasonable and are freely, voluntarily and knowingly entered into. Further, each
party has been given the opportunity to consult with independent legal counsel
before entering into this Agreement.

 

B. Devotion to Employment.

 

Executive shall devote substantially all his business time and efforts to the
performance of his duties on behalf of Rural/Metro. During his term of
employment, Executive shall not at any time or place or to any extent
whatsoever, either directly or indirectly, without the express written consent
of Rural/Metro, engage in any outside employment, or in any activity competitive
with or adverse to Rural/Metro’s business, practice or affairs, whether alone or
as partner, officer, director, employee, shareholder of any corporation or as a
trustee, fiduciary, consultant or other representative. This is not intended to
prohibit Executive from engaging in nonprofessional activities such as personal
investments or conducting to a reasonable extent private business affairs which
may include other boards of directors’

 

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activity, as long as they do not conflict with Rural/Metro. Participation to a
reasonable extent in civic, social or community activities is encouraged.
Notwithstanding anything herein to the contrary, any non-Rural/Metro activities
shall be conducted in compliance with Rural/Metro’s corporate governance
policies and other policies and procedures as in effect from time to time.

 

C. Non-Solicitation of Clients.

 

During the term of Executive’s employment with Rural/Metro and for a period,
after the termination of employment with Rural/Metro, equal to two (2) years
(the “Non-Compete Period”), regardless of who initiates the termination and for
whatever reason, Executive shall not directly or indirectly, for himself, or on
behalf of, or in conjunction with, any other person(s), company, partnership,
corporation, or governmental entity, in any manner whatsoever, call upon,
contact, encourage, handle or solicit client(s) of Rural/Metro with whom he has
worked as an employee of Rural/Metro at any time prior to termination, or at the
time of termination, for the purpose of soliciting or selling such customer the
same, similar, or related services that he provided on behalf of Rural/Metro.

 

D. Non-Solicitation of Employees.

 

During the term of Executive’s employment with Rural/Metro and for the
Non-Compete Period, regardless of who initiates the termination and for any
reason, Executive shall not knowingly, directly or indirectly, for himself, or
on behalf of, or in conjunction with, any other person(s), company, partnership,
corporation, or governmental entity, seek to hire, and/or hire any of
Rural/Metro’s personnel or employees for the purpose of having such employee
engage in services that are the same, similar or related to the services that
such employee provided for Rural/Metro.

 

E. Competing Business.

 

During the term of this Agreement and for the Non-Compete Period, regardless of
who initiates the termination and for any reason, Executive shall not, directly
or indirectly, for himself, or on behalf of, or in conjunction with, any other
person(s), company, partnership, corporation, or governmental entity, in any
manner whatsoever, engage in the same or similar business as Rural/Metro, which
would be in direct competition with any Rural/Metro line of business, in any
geographical service area where Rural/Metro is engaged in business, or was
considering engaging in business at any time prior to the termination or at the
time of the termination. For the purposes of this provision, the term
“competition” shall mean directly or indirectly engaging in or having a
substantial interest in a business or operation which is, or will be, performing
the same services provided by Rural/Metro.

 

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F. Extension of Period.

 

Executive agrees that the Non-Compete Period referred to in subsections C, D and
E shall be extended for a period of time equal to the duration of any breach of
this Agreement by Executive, but in no event longer than six (6) months.

 

G. Election to Shorten Period.

 

Executive may elect to shorten the Non-Compete Period referred to in subsections
C, D and E to any period of at least twelve (12) months, provided that Executive
is not in breach of such subsections at the time of such election. In order to
make this election, Executive must provide Rural/Metro with written notice at
least sixty (60) days prior to the expiration of the shortened period. As
provided in Section 8, if Executive makes this election, any Severance Benefits
provided by Section 8 will be discontinued as of the effective date of the
election.

 

H. Automatic Reduction of Period.

 

The Non-Compete Period referred to in subsections C, D and E shall be shortened
to twelve (12) months if Executive is not entitled to receive Severance Benefits
pursuant to Section 8 at the time of his termination of employment.

 

I. Judicial Amendment.

 

If the scope of any provision of this Agreement is found by the Court to be too
broad to permit enforcement to its full extent, then such provision shall be
enforced to the maximum extent permitted by law. The parties agree that the
scope of any provision of this Agreement may be modified by a judge in any
proceeding to enforce this Agreement, so that such provision can be enforced to
the maximum extent permitted by law. If any provision of this Agreement is found
to be invalid or unenforceable for any reason, it shall not affect the validity
of the remaining provisions of this Agreement.

 

J. Injunctive Relief, Damages and Forfeiture.

 

Due to the nature of Executive’s position with Rural/Metro, and with full
realization that a violation of Sections 10 and 11 will cause immediate and
irreparable injury and damage, which is not readily measurable, and to protect
Rural/Metro’s interests, Executive understands and agrees that in addition to
instituting legal proceedings to recover damages resulting from a breach of this
Agreement, Rural/Metro may seek to enforce this Agreement with an action for
injunctive relief, to cease or prevent any actual or threatened violation of
this Agreement on the part of Executive. Likewise, Executive can seek injunctive
relief for any action Executive may elect to bring relating to Sections 10 and
11.

 

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K. Survival.

 

The provisions of this Section 11 shall survive the termination of this
Agreement.

 

12. BUSINESS EXPENSES.

 

Rural/Metro will reimburse Executive for any and all necessary, customary, and
usual expenses, properly receipted in accordance with Rural/Metro’s policies,
incurred by Executive on behalf of Rural/Metro.

 

13. AMENDMENTS.

 

This Agreement, the Executive’s Indemnity Agreement, Stock Option Agreements (if
any), and the Executive’s Change of Control Agreement constitute the entire
agreement between the parties as to the subject matter hereof, and all prior
Employment Agreements are being terminated as of the Effective Date.
Accordingly, there are no side agreements or verbal agreements other than those
which are stated above. Any amendment, modification or change in this Agreement
must be done so in writing and signed by both parties. Nothing in this Agreement
is intended to alter or modify Executive’s Indemnity Agreement or Stock Option
Agreements (if any), which shall continue in full force and effect following the
execution of this Agreement.

 

14. SEVERABILITY.

 

In the event a court or arbitrator declares that any provision of this Agreement
is invalid or unenforceable, it shall not affect or invalidate any of the
remaining provisions. Further, the court shall have the authority to re-write
that portion of the Agreement it deems unenforceable, to make it enforceable.

 

15. GOVERNING LAW.

 

The law of the State of Arizona shall govern the interpretation and application
of all of the provisions of this Agreement.

 

16. DISPUTE RESOLUTION.

 

A. Mediation.

 

Any and all disputes arising under, pertaining to or touching upon this
Agreement or the statutory rights or obligations of either party hereto, shall,
if not settled by negotiation, be subject to non-binding mediation before an
independent mediator selected by the parties pursuant to Section 16D.
Notwithstanding the foregoing, either Executive or Rural/Metro may seek
preliminary judicial relief based upon a belief that such action may be
necessary to avoid irreparable damage during the pendency of

 

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the proceedings described in this Section 16. Any demand for mediation shall be
made in writing and served upon the other party to the dispute, by certified
mail, return receipt requested, at the business address of Rural/Metro, or at
the last known residence address of Executive, respectively. The demand shall
set forth with reasonable specificity the basis of the dispute and the relief
sought. The mediation hearing will occur at a time and place convenient (and
mutually agreeable) to the parties within thirty (30) days of the date of
selection or appointment of the mediator.

 

B. Arbitration.

 

In the event that the dispute is not settled through mediation, the parties
shall then proceed to binding arbitration before a single independent arbitrator
selected pursuant to Section 18D. The mediator shall not serve as arbitrator. TO
THE EXTENT ALLOWABLE UNDER APPLICABLE LAW, ALL DISPUTES INVOLVING ALLEGED
UNLAWFUL EMPLOYMENT DISCRIMINATION, BREACH OF CONTRACT OR POLICY, OR EMPLOYMENT
TORT COMMITTED BY RURAL/METRO OR A REPRESENTATIVE OF RURAL/METRO, INCLUDING
CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR PUBLIC
POLICY, SHALL BE RESOLVED PURSUANT TO THIS AGREEMENT AND THERE SHALL BE NO
RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL. The arbitration hearing shall
occur at a time and place convenient (and mutually agreeable to) the parties
within thirty (30) days of selection or appointment of the arbitrator. If
Rural/Metro has adopted a policy that is applicable to arbitrations with
executives, the arbitration shall be conducted in accordance with said policy to
the extent that the policy is consistent with this Agreement and the Federal
Arbitration Act, 9 U.S.C. §§ 1-16. If no such policy has been adopted, the
arbitration shall be governed by the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association (“AAA”) in effect on
the date of the first notice of demand for arbitration. The arbitrator shall
issue written findings of fact and conclusions of law, and an award, within
thirty (30) days of the date of the hearing unless the parties otherwise agree.

 

C. Damages.

 

In cases of breach of contract or policy, damages shall be limited to contract
damages. In cases of discrimination claims prohibited by statute, the arbitrator
may direct payment consistent with the applicable statute. In cases of
employment tort, the arbitrator may award punitive damages if proved by clear
and convincing evidence. The arbitrator may award fees to the prevailing party
and assess costs of the arbitration to the non-prevailing party. Issues of
procedure, arbitrability, or confirmation of award shall be governed by the
Federal Arbitration Act, 9 U.S.C. §§ 1-16, except that Court review of the
arbitrator’s award shall be that of an appellate court reviewing a decision of a
trial judge sitting without a jury.

 

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D. Selection of Mediators or Arbitrators.

 

The parties shall select the mediator or arbitrator from a panel list made
available by the AAA. If the parties are unable to agree to a mediator or
arbitrator within thirty (30) days of receipt of a demand for mediation or
arbitration, the mediator or arbitrator will be chosen by alternatively striking
from a list of five (5) mediators or arbitrators obtained by Rural/Metro from
AAA. Executive shall have the first strike.

 

17. MISCELLANEOUS.

 

A. Non-Waiver.

 

The failure in any one or more instances of a party to insist upon performance
of any of the terms, covenants or conditions of this Agreement, to exercise any
right or privilege conferred in this Agreement, or the waiver by said party of
any breach of any of the terms, covenants or conditions of this Agreement, shall
not be construed as a subsequent waiver of any such terms, covenants,
conditions, rights or privileges, but the same shall continue and remain in full
force and effect as if no such forbearance or waiver had occurred. No waiver
shall be effective unless it is in writing and signed by an authorized
representative of the waiving party.

 

B. Construction; Counterparts.

 

This Agreement shall be construed fairly as to both parties and not in favor of
or against either party, regardless of which party prepared the Agreement. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed to be an original, and all such counterparts shall constitute but one
instrument.

 

C. Notices.

 

All notices required or permitted to be given hereunder shall be deemed given
when delivered in person, or three (3) business days after being placed in the
hands of a courier service (e.g., DHL or Federal Express) prepaid or faxed
provided that a confirming copy is delivered forthwith as herein provided,
addressed, when to Executive, at the last known mailing address in Rural/Metro’s
human resources files, and, when to Rural/Metro, at the mailing address of the
corporate headquarters and to the attention of Rural/Metro’s Chief Executive
Officer, and/or to such other respective addresses and/or addressees as may be
designated by notice given in accordance with the provisions of this Section.

 

[Signature Page Immediately Follows]

 

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IN WITNESS WHEREOF, Rural/Metro and Executive have executed this Agreement.

 

EXECUTIVE

 

RURAL/METRO CORPORATION

/s/ Michael S. Zarriello

--------------------------------------------------------------------------------

 

By:

 

/s/ Jack Brucker

--------------------------------------------------------------------------------

Michael S. Zarriello

     

Jack Brucker

Senior Vice President and Chief Financial
Officer

     

Chief Executive Officer and President

   

By:

 

/s/ Mary Anne Carpenter

--------------------------------------------------------------------------------

       

Mary Anne Carpenter

       

Chair, Compensation Committee

 

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