<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
RURAL/METRO CORPORATION
(Name of Registrant as Specified In Its Charter)
DEAN P. HOFFMAN
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
RURAL/METRO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 20, 1997
The Annual Meeting of Stockholders of Rural/Metro Corporation, a
Delaware corporation (the "Company"), will be held at 10:00 a.m. (local time),
on November 20, 1997, at the offices of the Company, 8401 East Indian School
Road, Scottsdale, Arizona, for the following purposes:
1. To elect three directors for a three-year term expiring in 2000.
2. To approve an amendment to the Company's Second Restated Certificate
of Incorporation to increase the number of authorized shares of Common Stock,
par value $.01 per share, from 23,000,000 to 70,000,000 and to increase the
number of authorized shares of Preferred Stock, par value $.01 per share, from
2,000,000 to 5,000,000.
3. To approve an amendment to the Employee Stock Purchase Plan (the
"ESPP") to increase the shares of the Company's Common Stock that may be issued
pursuant to the ESPP from 150,000 to 450,000 shares.
4. To approve an amendment to the 1992 Stock Option Plan (the "1992
Plan") to increase the shares of the Company's Common Stock that may be issued
pursuant to the 1992 Plan from 3,390,750 to 6,000,000 shares.
5. To ratify the appointment of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ending June 30, 1998.
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on October 10,
1997 are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
To assure your representation at the meeting, however, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously has returned a
proxy.
Sincerely,
Louis G. Jekel
Secretary
Scottsdale, Arizona
October _____, 1997
<PAGE> 3
RURAL/METRO CORPORATION
8401 EAST INDIAN SCHOOL ROAD
SCOTTSDALE, ARIZONA 85251
PROXY STATEMENT
VOTING AND OTHER MATTERS
GENERAL
The enclosed proxy is solicited on behalf of Rural/Metro Corporation, a
Delaware corporation (the "Company"), by the Company's board of directors (the
"Board of Directors") for use at the Annual Meeting of Stockholders to be held
at 10:00 a.m. (local time), on November 20, 1997 (the "Meeting"), or at any
adjournment thereof, for the purposes set forth in this Proxy Statement and in
the accompanying Notice of Annual Meeting of Stockholders. The Meeting will be
held at the offices of the Company, 8401 East Indian School Road, Scottsdale,
Arizona.
These proxy solicitation materials were first mailed on or about
October ___, 1997, to all stockholders entitled to vote at the Meeting.
VOTING SECURITIES AND VOTING RIGHTS
Stockholders of record at the close of business on October 10, 1997
(the "Record Date"), are entitled to notice of and to vote at the Meeting. On
the Record Date, there were issued and outstanding 13,478,441 shares of the
Company's Common Stock, $0.01 par value per share (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of
the total number of shares of Common Stock outstanding constitutes a quorum for
the transaction of business at the Meeting. Each stockholder voting at the
Meeting, either in person or by proxy, may cast one vote per share of Common
Stock held on all matters to be voted on at the Meeting. Assuming that a quorum
is present, the affirmative vote of a majority of the shares of Common Stock of
the Company present in person or represented by proxy at the Meeting and
entitled to vote is required: (i) to elect three directors for a three-year term
expiring in 2000; (ii) to approve an amendment to the Company's Second Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock, par value $.01 per share, from 23,000,000 to 70,000,000 and to
increase the number of shares of authorized shares of Preferred Stock, par value
$.01 per share, from 2,000,000 to 5,000,000; (iii) to approve an amendment to
the Employee Stock Purchase Plan ("ESPP") to increase the shares of the
Company's Common Stock that may be issued pursuant to the ESPP from 150,000 to
450,000 shares; (iv) to approve an amendment to the 1992 Stock Option Plan (the
"1992 Plan"), to increase the shares of the Company's Common Stock that may be
issued pursuant to the 1992 Plan from 3,390,750 to 6,000,000 shares; and (v) to
ratify the appointment of Arthur Andersen LLP as the independent auditors of the
Company for the fiscal year ending June 30, 1998.
Votes cast by proxy or in person at the Meeting will be tabulated by
the election inspectors appointed for the Meeting and will determine whether a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
<PAGE> 4
VOTING OF PROXIES
When a proxy is properly executed and returned, the shares it
represents will be voted at the Meeting as directed. If no specification is
indicated, the shares will be voted: (i) "for" the election of the nominees set
forth in this Proxy Statement; (ii) "for" the amendment to the Company's Second
Restated Certificate of Incorporation; (iii) "for" the amendment to the ESPP;
(iv) "for" the amendment to the 1992 Plan; and (v) "for" the ratification of
the appointment of Arthur Andersen LLP as the independent auditors of the
Company for the fiscal year ending June 30, 1998.
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its
use by delivering to the Company written notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
SOLICITATION
The cost of this solicitation will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for expenses incurred in forwarding
solicitation materials to such beneficial owners. Proxies also may be solicited
by certain of the Company's directors and officers, personally or by telephone
or telegram, without additional compensation.
ANNUAL REPORT AND OTHER MATTERS
The 1997 Annual Report to Stockholders, which was mailed to
stockholders with or preceding this Proxy Statement, contains financial and
other information about the activities of the Company but is not incorporated
into this Proxy Statement and is not to be considered a part of these proxy
soliciting materials. The information contained in the "Report of the Human
Resource/Compensation/Organization Committee of the Board of Directors" below
and "Company Performance Graph" below shall not be deemed "filed" with the
Securities and Exchange Commission (the "SEC") or subject to Regulations 14A or
14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The Company will provide, without charge to each stockholder of record
as of the Record Date, a copy of the Company's annual report on Form 10-K for
the year ended June 30, 1997 as filed with the SEC. Any exhibits listed in the
Form 10-K report also will be furnished upon request at the actual expense
incurred by the Company in furnishing such exhibit. Any such requests should be
directed to the Company's Secretary at the Company's executive offices set forth
in this Proxy Statement.
2
<PAGE> 5
SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS, DIRECTORS
AND OFFICERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock on October 10, 1997 by: (i) each
director and each nominee for director; (ii) the Named Executive Officers (as
defined herein) set forth in the Summary Compensation Table under the section
entitled "EXECUTIVE COMPENSATION;" (iii) all directors and executive officers of
the Company as a group; and (iv) each person known by the Company to be the
beneficial owner of more than five percent of the Common Stock.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY
OWNED
NAME OF BENEFICIAL OWNER (1)(2)(3) PERCENT
- --------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Warren S. Rustand(4) ........................... 171,750 1.3%
James H. Bolin(5) .............................. 251,172 1.8
Cor J. Clement(6) .............................. 23,750 *
Robert T. Edwards(7) ........................... 173,946 1.3
Louis G. Jekel(8) .............................. 144,013 1.1
Robert E. Ramsey, Jr. .......................... 769,641 5.7
William C. Turner(9) ........................... 23,000 *
Louis A. Witzeman(10) .......................... 132,498 1.0
Henry G. Walker ................................ 0 *
John E. Stuart(11) ............................. 76,307 *
Mark E. Liebner(12) ............................ 178,284 1.3
Executive officers and directors as a group
(14 persons) ................................. 2,059,083 14.4%
5% STOCKHOLDERS:
ESOP(12) ....................................... 1,052,179 7.8%
</TABLE>
* Less than one percent
(1) Except as indicated, and subject to community property laws when
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes shares of Common Stock issuable to the identified person
pursuant to stock options that may be exercised within 60 days after
October 10, 1997. In calculating the percentage of ownership, such
shares are deemed to be outstanding for the purpose of computing the
percentage of shares of Common Stock owned by such person, but are not
deemed to be outstanding for the purpose of computing the percentage of
shares of Common Stock owned by any other stockholders.
(3) Excludes 29,298, 22,914, and 5,661 fully vested shares held by the ESOP
for the benefit of Messrs. Bolin, Edwards and Jekel, respectively, and
45, 1,030 and 235 shares held by the ESOP for the benefit of Messrs.
Rustand, Liebner and Stuart, respectively, that are 0%, 80% and 60%
vested, respectively. Such persons have sole voting power with respect
to the shares held in their account by the ESOP.
(4) Includes 143,750 shares of Common Stock issuable upon exercise of stock
options.
3
<PAGE> 6
(5) Includes 131,818 shares of Common Stock issuable upon exercise of stock
options and 119,354 shares held by the Bolin Revocable Trust UA dated
February 27, 1996, James H. Bolin and Sandra L. Bolin, Trustees.
(6) Includes 5,000 shares held by a partnership of which Mr. Clement is the
beneficial owner and 6,250 shares of Common Stock issuable upon
exercise of stock options.
(7) Includes 142,981 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 62,500 shares of Common Stock issuable upon exercise of stock
options and 81,336 shares held by a partnership of which Mr. Jekel is
the beneficial owner.
(9) Includes 15,000 shares of Common Stock issuable upon exercise of stock
options.
(10) Includes 29,562 shares held by the Louis A. Witzeman, Jr. Family
Investment Limited Partnership, of which 150 shares are held for the
benefit of other family members. Also includes 56,875 shares of Common
Stock issuable upon the exercise of stock options.
(11) Includes 53,042 shares of Common Stock issuable upon exercise of stock
options.
(12) Includes 117,014 shares of Common Stock issuable upon exercise of stock
options.
(13) The address of the Rural/Metro Corporation Employee Stock Ownership
Plan (the "ESOP") is c/o Rural/Metro Corporation, 8401 East Indian
School Road, Scottsdale, Arizona 85251.
PROPOSAL TO ELECT DIRECTORS
NOMINEES
The Company's Restated Certificate of Incorporation provides that the
number of directors shall be fixed from time to time by resolution of the Board
of Directors or stockholders. Presently, the number of directors is fixed at
nine and that number of directors is divided into three classes, with one class
standing for election each year for three-year terms. The Board of Directors has
nominated Warren S. Rustand, Cor J. Clement and Henry G. Walker for re-election
as Class III directors for three-year terms expiring in 2000 or until their
respective successors are elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for each of the nominees named above. In the event that any of
the nominees is unable or declines to serve as a director at the time of the
Meeting, the proxies will be voted for a nominee, if any, designated by the
current Board of Directors to fill the vacancy. It is not expected that any of
the nominees will be unable or will decline to serve as a director.
The Board of Directors recommends a vote "For" the nominees named
herein.
4
<PAGE> 7
The following table sets forth certain information regarding the
directors and nominees for directors of the Company:
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRES
---- --- -------- -------
<S> <C> <C> <C>
Warren S. Rustand 54 Chairman of the Board, Chief Executive Officer and 1997
Director (1)(2)(3)
Cor J. Clement 49 Vice Chairman of the Board and Director (5) 1997
James H. Bolin 45 President and Director (3) 1999
Robert T. Edwards 57 Executive Vice President and Director (3) 1998
Robert E. Ramsey, Jr. 51 Senior Vice President and Director 1998
Louis G. Jekel 56 Secretary and Director 1999
William C. Turner 68 Director (1)(2)(3)(4)(5) 1999
Louis A. Witzeman 72 Director (2)(4) 1998
Henry G. Walker 50 Director (1)(4)(5) 1997
</TABLE>
(1) Member of the Human Resource/Compensation/Organization Committee.
(2) Member of the Nominating Committee.
(3) Member of the Executive Committee.
(4) Member of the Audit Committee.
(5) Member of the Senior Committee.
In March 1995, the Board of Directors established an Office of Chief
Executive; it is currently comprised of three members, Mr. Rustand, Mr. Bolin,
and Mr. Edwards. The Office of Chief Executive oversees the operation and
management of the Company and develops and implements strategic and long-range
planning for the Company.
Warren S. Rustand has served as Chief Executive Officer of the Company
since August 1996, Chairman of the Board of Directors since May 1994, and a
member of the Board of Directors since August 1993. He also is member of the
Office of Chief Executive. Mr. Rustand has been Chairman and Chief Executive
Officer of The Cambridge Company, Ltd., a merchant banking and management
consulting firm, since 1987. He has served as Chairman of Health Partners of
Arizona, a managed care provider, since February 1996. Mr. Rustand is also
Chairman of an additional company and director of four companies, including
LucasVarity PLC, a New York Stock Exchange listed company. Mr. Rustand served as
appointments secretary to President Ford from 1974 to 1976, and as special
assistant to Mr. Ford while he was Vice President in 1973 and 1974.
Cor J. Clement has served as a member of the Board of Directors since
May 1992, and as Vice Chairman of the Board of Directors since August 1994. Mr.
Clement served as the President and Chief Executive Officer of NVD, an
international provider of security and industrial fire protection services
headquartered in the Netherlands, from February 1980 until January 1997.
5
<PAGE> 8
James H. Bolin has served as the President of the Company since March
1995 and a member of its Board of Directors since February 1981. He also is a
member of the Office of Chief Executive. Mr. Bolin served as Senior Vice
President-Ambulance Services of the Company from October 1991 until March 1995,
Chief Financial Officer from October 1988 through September 1991, Senior Vice
President-Finance from August 1986 through September 1988, and Vice
President-Finance from April 1981 through July 1986. Mr. Bolin also is the
Chairman and Treasurer of the Rural/Metro ESOP Administrative Committee. Mr.
Bolin is a certified public accountant. Mr. Bolin will retire from his full-time
duties as President effective January 1, 1998. He will remain with the Company
in a part-time capacity and as a member of the Company's Board of Directors.
Robert T. Edwards has served as Executive Vice President of the Company
since October 1995 and a member of the Board of Directors since May 1993. He
also is a member of the Office of Chief Executive. He served as Senior Vice
President-Fire Protection Services from August 1991 until October 1995. He
served as Vice President and General Manager of the Company's Maricopa County
operations from February 1989 to August 1991, and as Vice President from July
1986 until August 1991. From 1978 to July 1986, Mr. Edwards served in various
capacities with the Company.
Robert E. Ramsey, Jr. has served as Senior Vice President of the
Company and as a member of the Board of Directors since June 1997. Mr. Ramsey is
President and Chief Executive Officer of SW General, Inc. and affiliated
companies, which he founded in 1982. He is currently President of the Arizona
Ambulance Association. SW General, Inc. and affiliated companies were purchased
by the Company in June 1997.
Louis G. Jekel has served as Secretary of the Company and as a member
of the Board of Directors of the Company since 1968. Mr. Jekel directs the
Company's Wildland Fire Protection Operations with the State of Arizona and the
federal government. Mr. Jekel is also the Secretary of the Rural/Metro ESOP
Administrative Committee. Mr. Jekel is a partner in the law firm of Jekel &
Howard in Scottsdale, Arizona.
William C. Turner has been a member of the Board of Directors of the
Company since November 1993. Mr. Turner is currently Chairman and Chief
Executive of Argyle Atlantic Corporation, an international merchant banking and
management consulting firm; Chairman of the Avon International Advisory Council
for Avon Products, Inc.; a director of the Goodyear Tire & Rubber Company; a
director of Microtest, Inc. and a trustee and executive committee member of the
United States Council for International Business. Mr. Turner is also a former
United States Ambassador and permanent representative to the Organization for
Economic Cooperation and Development. Since returning to the United States from
his ambassador post in Paris, Mr. Turner has served on the boards of directors
and/or international advisory councils of ten major listed corporations.
Louis A. Witzeman is the founder of the Company. Mr. Witzeman has
served as a member of the Board of Directors since the Company's formation in
1948, currently serving as Chairman of the Board Emeritus. Mr. Witzeman served
as Chief Executive Officer of the Company until his retirement in 1980.
Henry G. Walker has been a member of the Board of Directors of the
Company since September 1997. Since April 1997, he has served as President and
Chief Executive Officer of the Sisters of Providence Health System, comprised of
hospitals, long-term care facilities, physician practices, managed care plans,
and other health and social services. From 1996 to March 1997, Mr. Walker served
as President and Chief Executive Officer of Health Partners of Arizona, a
state-wide managed care company. From 1992 to 1996, he served as President and
Chief Executive Officer of TMCare, a healthcare delivery system. Mr. Walker is a
member of the National Advisory Council of the Healthcare Forum.
Directors hold office until their successors have been elected and
qualified. All officers serve at the pleasure of the Board of Directors. There
are no family relationships among any of the directors or officers of the
Company.
6
<PAGE> 9
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's bylaws authorize the Board of Directors to appoint among
its members one or more committees composed of one or more directors. As of
October 1, 1997, the Board of Directors had appointed the following standing
committees: a Human Resource/Compensation/Organization Committee; a Nominating
Committee; an Executive Committee; an Audit Committee; and a Senior Committee.
The Human Resource/Compensation/Organization Committee. The Human
Resource/ Compensation/Organization Committee reviews and acts on matters
relating to compensation levels and benefit plans for key executives of the
Company. The Human Resource/Compensation/Organization Committee also reviews the
succession planning for key executive personnel, monitors employee relations
issues and oversees senior management structure. The Committee held three
formal meeting during the fiscal year ended June 30, 1997.
Nominating Committee. The Company's Nominating Committee met separately
at three formal meetings during the fiscal year ended June 30, 1997. The
Nominating Committee reviews credentials of existing and prospective directors
and selects classes of directors.
Executive Committee. The Company's Executive Committee met separately
at four formal meetings during the fiscal year ended June 30, 1997. The
Executive Committee acts as a liaison between management and the Board of
Directors. At times the Board of Directors empowers the Executive Committee to
take certain actions on behalf of the Board of Directors between regularly
scheduled meetings.
Audit Committee. The Company's Audit Committee met separately at one
formal meeting during the fiscal year ended June 30, 1997. The Audit Committee
reviews the annual financial statements and significant accounting issues and
the scope of the audit with the Company's independent auditors and is available
to discuss with the auditors any other audit related matters that may arise
during the year.
Senior Committee. The Senior Committee's function is to administer the
1992 Plan. The 1992 Plan requires that the Senior Committee be comprised of two
or more disinterested directors. The Senior Committee met separately at _______
formal meeting during the fiscal year ended June 30, 1997.
The Board of Directors of the Company held a total of six meetings
during the fiscal year ended June 30, 1997. No director attended fewer than
75% of the aggregate of (i) the total number of meetings of the Board of
Directors, and (ii) the total number of meetings held by all committees of the
Board on which such director was a member.
DIRECTOR COMPENSATION AND OTHER INFORMATION
Officers of the Company who serve on the Board of Directors receive no
additional compensation. The Company paid a director's fee in fiscal 1997 to Mr.
Clement of $45,000 plus reimbursement for expenses for each Board or committee
meeting attended. Messrs. Jekel and Witzeman receive compensation for consulting
services, which includes serving on the Board of Directors. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." The Company pays all of its other
non-employee Board members an annual retainer of $15,000 plus $1,000 for each
Board meeting attended, $500 for each Board meeting participated in
telephonically, $500 for each committee meeting attended, and $250 for each
committee meeting participated in telephonically. The Company also pays $2,500
annually to any non-employee chairman of each of the committees of the Board of
Directors. Under the terms of the Company's 1992 Plan, non-employee directors
receive (i) stock options to purchase 10,000 shares upon their first election to
the Board of Directors and options to purchase 2,500 shares at the meeting of
the Board of Directors held immediately after the annual meeting of stockholders
(except that the Chairman of the Board will receive stock options to acquire
5,000 shares), and (ii) each year each non-employee Board member will receive
stock options to acquire a number of shares equal to 1,000 shares for each $0.05
7
<PAGE> 10
increase in the Company's earnings per share over the previous fiscal year
(subject to a maximum of 5,000 shares of stock per non-employee Board member).
In fiscal 1997, the Company granted options to Messrs. Rustand, Bolin,
Edwards, Jekel, Turner, and Witzeman to purchase 22,500, 55,181, 49,230, 7,500,
7,500 and 7,500 shares of Common Stock, respectively, at exercise prices of
$32.25 to $36.25 per share.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth the total compensation received for
services rendered in all capacities to the Company for the fiscal years ended
June 30, 1995, 1996 and 1997 by the Company's Chief Executive Officer, and its
four most highly compensated officers whose aggregate cash compensation exceeded
$100,000 (together the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
---------------------------------------------------- ------------------------- -------
Restricted
Other Annual Stock Securities LTIP
Name and Compensation Award(s) Underlying Payouts
Principal Position Year Salary ($) Bonus($) ($)(1) ($)(2) Options (#) ($)
- ------------------ ---- ---------- -------- ------------ ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Warren Rustand(8) 1997 $386,000(4) $172,317(5) -- -- 22,500 --
Chief Executive Officer 1996 $306,250(6) $321,871 -- $660,000 250,000 --
James H. Bolin(8) 1997 $219,648 $ 26,358 -- -- 55,181 --
President 1996 $211,200 -- -- -- 32,500 --
1995 $180,303 $ 95,401 -- -- 27,500 --
Robert T. Edwards(8) 1997 $217,000 $ 21,766 -- -- 49,230 --
Executive Vice President 1996 $184,288 -- -- -- 27,500 --
1995 $170,000 $ 74,665 -- -- 27,500 --
John E. Stuart 1997 $171,092 $ 29,470 -- -- 18,750 --
Senior Vice President 1996 $180,730 $ 2,972 -- -- 10,000 --
1995 $173,250 $ 44,271 -- -- 27,500 --
Mark E. Liebner 1997 $163,474 $ 27,797 -- -- 34,763 --
Senior Vice President, Chief 1996 $157,736 -- -- -- 27,500 --
Financial Officer and Treasurer 1995 $144,200 $ 46,080 -- -- 25,000 --
<CAPTION>
All Other
Name and Compensation
Principal Position ($)(3)
- ------------------ ------------
<S> <C>
Warren Rustand(7) $105,000
Chief Executive Officer $105,000(7)
James H. Bolin(7) $ 3,000
President $ 3,000
$ 3,000
Robert T. Edwards(7) $ 3,000
Executive Vice President $ 3,000
$ 1,642
John E. Stuart $ 3,000
Senior Vice President $ 3,000
$ 3,000
Mark E. Liebner $ 3,000
Senior Vice President, Chief $ 3,000
Financial Officer and Treasurer $ 2,884
</TABLE>
(1) Other annual compensation did not exceed the lesser of $50,000 or 10% of
the total salary and bonus for any of the Named Executive Officers except
as noted.
8
<PAGE> 11
(2) Fair market value at October 17, 1995 based upon the closing price of the
Company's Common Stock of $24.00 per share. At June 30, 1997, Messrs.
Rustand, Bolin, Edwards, Stuart and Liebner held 27,500, 12,500, 12,500,
12,500 and 52,500 shares of Common Stock, respectively, subject to certain
transfer and forfeiture restrictions. The fair market value of such shares
at June 30, 1997 was $798,359, $362,891, $362,891, $362,891, and
$1,524,141, respectively. See "EXECUTIVE COMPENSATION -- EMPLOYMENT
AGREEMENTS AND STOCK GRANT AGREEMENTS."
(3) Unless otherwise indicated, consists of Company-matching contributions to
the Company's 401(k).
(4) Includes $100,000 in salary earned by Mr. Rustand in fiscal 1997 but
deferred to a future year.
(5) Includes $126,557 cash award made to Mr. Rustand in fiscal 1997 to pay the
tax liability in connection with the vesting of a previously awarded stock
grant.
(6) Includes $100,000 in salary earned by Mr. Rustand in fiscal 1996 but
deferred to a future year.
(7) The Company paid $105,000 and 102,000 in insurance premiums in each of
fiscal 1996 and fiscal 1997 pursuant to an agreement with Mr. Rustand to
assist in purchasing split dollar life insurance.
(8) Mr. Rustand became Chief Executive Officer of the Company in August 1996.
Messrs. Rustand, Bolin and Edwards were members of the Office of Chief
Executive during fiscal 1997.
OPTION GRANTS
The following table represents the options granted to the Named
Executive Officers in the last fiscal year and the value of such options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------- Potential Realizable
Percent Value at Assumed
Number of of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Exercise or Option Term(3)
Options Employees in Base Price Expiration ----------------------
Granted(#) Fiscal Year ($/Sh) Date 5%($) 10%($)
---------- ------------ ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Warren Rustand........................ 22,500(1) 2% $32.25 2006 $ 456,342 $1,156,459
James H. Bolin........................ 55,181(1) 6% $32.25 2006 $1,114,173 $2,836,204
Robert T. Edwards .................... 49,230(1) 5% $32.25 2006 $ 998,476 $2,530,333
John E. Stuart ....................... 18,750(1) 2% $32.25 2006 $ 380,285 $ 963,716
Mark E. Liebner....................... 34,763(1) 4% $32.25 2006 $ 705,050 $1,768,755
</TABLE>
(1) The options became exercisable in August 1997.
(2) Calculated from a base price equal to the exercise price of each option,
which was the fair market value of the Common Stock on the date of grant.
The amounts represent only certain assumed rates of appreciation. Actual
gains, if any, on stock option exercises and Common Stock holdings cannot
be predicted, and there can be no assurance that the gains set forth on
the table will be achieved.
9
<PAGE> 12
OPTION EXERCISES AND HOLDINGS
The following table represents certain information respecting the
options held by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at Fiscal Year-End (#) at Fiscal Year-End ($)(2)
Exercise Realized ------------------------------ -------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- -------- ----- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Warren S. Rustand......... -- -- 71,250 222,500 498,164 1,006,250
James H. Bolin............ 63,334 1,721,284 73,751 70,566 671,588 212,630
Robert T. Edwards......... 18,750 506,719 89,585 65,895 1,097,763 238,869
John E. Stuart............ 8,625 163,875 42,626 31,249 448,147 151,420
Mark E. Liebner........... -- -- 76,001 53,512 844,221 282,615
</TABLE>
(1) Calculated based on the market price at exercise multiplied by the number
of options exercised less the total exercise price of the options
exercised.
(2) Calculated based on $29.03125, which was the closing sales price of the
Common Stock as quoted on the Nasdaq National Market on June 30, 1997,
multiplied by the number of applicable shares in-the-money less the total
exercise price.
EMPLOYMENT AGREEMENTS AND STOCK GRANT AGREEMENTS
Employment agreements with Messrs. Rustand and Edwards expire in
December 1998. Mr. Stuart's and Mr. Liebner's employment agreements expire in
December 1997. Mr. Bolin's employment agreement will expire on January 1, 1998.
Mr. Bolin has entered into a consulting agreement which will become effective on
January 2, 1998 and expire on January 1, 2002. Subject to annual review of the
Human Resources/Compensation/ Organization Committee of the Board of Directors,
each agreement provides for a base salary (which currently are as follows: Mr.
Rustand, $314,600, Mr. Bolin, $250,000, Mr. Edwards, $250,000, Mr. Stuart,
$170,000, and Mr. Liebner, $175,000), and entitles the executive to participate
in stock option plans and other generally available benefit programs.
Each executive participates in the Company's management incentive
program that provides bonuses to executive officers and other members of
management based upon the Company achieving certain financial and operating
goals as well as the achievement of individual objectives established for each
participant. In addition, Mr. Rustand's employment agreement provides that he
will receive a credit of $100,000 per year in deferred compensation and
reimbursements for certain housing, travel, moving and other expenses incurred
in Phoenix and Tucson in connection with Mr. Rustand's employment with the
Company. In conjunction with his employment
10
<PAGE> 13
agreement, Mr. Rustand received (i) a grant of 27,500 shares of restricted stock
vesting over four and one-half years under the 1992 Plan pursuant to a
Restricted Stock Agreement together with a cash award as shares vest in an
amount sufficient to pay associated federal and state income taxes, and (ii) a
grant of options to purchase 250,000 shares of the Company's stock vesting over
five years under the 1992 Plan. The Company is required to assist in purchasing
a life insurance contract up to $2,000,000 pursuant to a split dollar life
insurance agreement.
Each employment agreement also provides that the executive will receive
his or her base salary plus certain benefits for two years (18 months for Mr.
Stuart and one year for Mr. Liebner) if the agreement is not renewed and for the
longer of the duration of the contract or two years (18 months for Mr. Stuart,
one year for Mr. Liebner) if the executive's employment is terminated without
cause or, in the case of Messrs. Rustand, Bolin, Edwards and Liebner, if such
persons terminate the agreement for good reason or should become disabled. In
addition, each agreement provides for the Company to indemnify the executive for
certain liabilities arising from actions taken within the scope of employment.
Each employment agreement contains restrictive covenants pursuant to which the
executive has agreed not to compete with the Company or to solicit any clients
or employees of the Company for a period of two years after the executive's
employment ceases.
Change of control agreements entered into by Messrs. Rustand, Bolin,
Edwards, Stuart and Liebner (the "Change of Control Agreements") provide that in
the event of a change of control and the surviving entity or individuals in
control do not offer such persons employment, terminate their employment, or
such persons terminate their employment for good reason, including a reduction
of their respective duties and/or salary or the surviving entity's failure to
assume their respective employment and change of control agreements, such
persons will receive two years' severance pay (18 months for Stuart) plus
certain benefits, including the acceleration of exercisability of their stock
options or the payment of the value of such stock options in the event they are
not accelerated or replaced with comparable options. For purposes of the Change
of Control Agreements, a "change of control" includes (i) the acquisition of
beneficial ownership by certain persons, acting alone or in concert with others,
of 30% or more of the combined voting power of the Company's then outstanding
voting securities; (ii) during any two-year period, Board members of the Company
at the beginning of such period cease to constitute at least a majority thereof
(except that any new Board member approved by at least two-thirds of the Board
members then still in office, who were directors at the beginning of such
period, is considered to be a member of the current Board); or (iii) approval by
the Company's shareholders of certain reorganizations, mergers, consolidations,
liquidations or sales of all or substantially all of the Company's assets. Mr.
Bolin's Change of Control Agreement will terminate on January 1, 1998.
In conjunction with their employment agreements, each of the Named
Executive Officers entered into a Conditional Stock Grant Agreement (the "Stock
Grant Agreement"). Each Stock Grant Agreement provided for the issuance of
shares of Common Stock subject to certain transfer and forfeiture restrictions
and restricts the executive from transferring any shares issued thereunder until
the lapse of the forfeiture restrictions. Each stock grant agreement also
provides for the forfeiture of all shares issued to the executive thereunder if
the executive leaves the employ of the Company for any reason within the
two-year period after the date of the agreement and for the forfeiture of
certain shares after such period if the executive violates the noncompetition or
nonsolicitation covenants contained in the executive's employment agreement.
Mr. Bolin's consulting agreement provides that he will be employed by
Rural/Metro as a special consultant and will serve the balance of his term on
the Board of Directors. The consulting agreement further provides for an annual
salary of $100,000. Payment of salary will continue for the term of the
agreement if Mr. Bolin is terminated without cause or if Mr. Bolin terminates
the agreement for good reason and will continue for 12 months if Mr. Bolin
should become disabled. The agreement will not alter or modify the Conditional
Stock Grant and Repurchase Agreement Mr. Bolin entered into on May 14, 1993, nor
will it alter or modify prior stock option agreements entered into by Mr. Bolin.
The agreement provides for the same non-compete and non-solicitation provisions
as contained in the employment agreements described above. The agreement
provides that in the event of a change in control, amounts due under the
agreement will be calculated and paid in one lump sum within thirty days of the
effective date of the change in control. Change in control is defined the same
as in the Change of Control Agreements discussed above.
EMPLOYEE STOCK OWNERSHIP PLAN
The ESOP is a tax-qualified employee stock ownership trust for the
benefit of current and former employees age 21 or over of the Company and its
subsidiaries. The ESOP was established in 1978 through the purchase from Louis
A. Witzeman, the Company's founder, of approximately 63% of the then outstanding
Common Stock of the Company in exchange for real estate and a note in the
principal amount of $728,000, with interest at 10% per annum, which note has
been paid in full. From time to time since the establishment of the ESOP, the
Company has contributed newly issued shares and treasury shares of Common Stock
and cash as employer contributions. The ESOP has used such cash contributions to
pay the note to Mr. Witzeman and to repurchase shares of Common Stock
distributed from the ESOP. Cash contributions of $298,500, $171,000, $30,000,
and 200,000 were made for the fiscal years
11
<PAGE> 14
ended June 30, 1992, 1993, 1995, and 1997, respectively. Stock contributions of
11,685, 4,364 and 5,300 shares were made for the fiscal years ended June 30,
1995, 1996, and 1997 respectively. As of June 30, 1997, there were 8,768
participants in the ESOP. Julian F. Weltsch is the Trustee of the ESOP. The
Company's ESOP Administrative Committee is responsible for directing the Trustee
in the general administration of the ESOP. With respect to the shares of Common
Stock of the Company held by the ESOP, the participants in the ESOP are
authorized to control how votes are cast by giving instructions to the Trustee.
Each participant may control the voting of such shares in the proportion which
the value of that participant's benefit in the ESOP fund bears to the total
value of all benefits therein. The ESOP permits any fully vested employee to
receive an in-service distribution of up to 50% of his or her account balance
while employed by the Company. An in-service distribution results in deferment
of the receipt of the balance of such employee's account until three years after
retirement or termination of employment. Participants in the ESOP otherwise may
only request distribution of their ESOP account balance in shares of Common
Stock under certain circumstances including termination of employment, early
retirement, retirement, death and disability. In fiscal 1997, 25,663 shares were
so distributed. In addition, upon completion of 10 plan years of service and
attainment of age 55, participants have the right to direct the investment of
25% of their accounts into other diversified investments. Each participant's
account vests 20% after three years of service and 20% each additional year
thereafter.
1989 STOCK OPTION PLAN
The 1989 Stock Option Plan (the "1989 Plan") provides for the granting
of nonqualified stock options. Options may be issued to key employees and
directors of the Company or its subsidiaries ("Eligible Persons"). There are
currently options outstanding to acquire 225,650 shares of the Company's Common
Stock under the 1989 Plan. No more options will be issued under the 1989 Plan.
The expiration date, maximum number of shares purchasable and the other
provisions of the Options, including vesting provisions, were established at the
time of grant. Options were granted for terms of up to 10 years and become
exercisable in whole or in one or more installments at such time as was
determined by the Plan Administrator upon the grant of the Options. Exercise
prices of Options shall be the fair market value of the Common Stock at the time
of the grant. In the event of a change in control of the Company, all options
will be terminated and the optionholder must be paid in cash the difference
between the fair market value of his or her options and their exercise price.
1992 STOCK OPTION PLAN
The 1992 Stock Option Plan (the "1992 Plan") provides for the granting
of options to acquire Common Stock of the Company, the direct granting of Common
Stock of the Company, the granting of stock appreciation rights, or the granting
of other cash awards. The 1992 Plan is more fully discussed at "PROPOSAL TO
AMEND THE COMPANY'S 1992 STOCK OPTION PLAN."
EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "ESPP") allows eligible employees
to purchase shares of Common Stock at a discount through periodic payroll
deductions. The ESPP is more fully discussed at "PROPOSAL TO AMEND THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN."
401(k) PLAN
The Company has a contributory retirement plan (the "401(k) Plan") for
the majority of its employees with at least one year of service. The 401(k) Plan
is designed to provide tax-deferred income to the Company's employees in
accordance with the provisions of Section 401(k) of the Internal Revenue Code of
1986, as amended (the "Code").
12
<PAGE> 15
The 401(k) Plan provides that each participant may contribute up to 12%
of his or her salary (not to exceed the statutory limit). The Company has
historically elected to make a fixed matching contribution to each participant's
account of up to 2% of total annual cash compensation received by respective
participants and a discretionary matching contribution in an amount equal to a
percentage determined by the Board of Directors of the contribution made by
participants. Discretionary matching contributions vest over a period of seven
years. All contributions by participants and fixed matching contributions of the
Company vest immediately. Under the terms of the 401(k) Plan, the Company also
may make discretionary profit sharing contributions. Profit sharing
contributions are allocated among participants based on their annual
compensation. Each participant has the right to direct the investment of his or
her funds among certain named plans.
Upon death, disability, retirement or the termination of employment,
participants may elect to receive periodic or lump sum payments. Additionally,
amounts may be withdrawn in cases of demonstrated hardship. Amounts contributed
to the 401(k) Plan by the Company for the Named Executive Officers are set forth
in the Summary Compensation Table under the caption "EXECUTIVE COMPENSATION."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1997, the Company's Human
Resource/Compensation/Organization Committee consisted of Mr. Rustand, the
Company's Chief Executive Officer and a director, and Messrs. Clement and
Turner, currently directors of the Company.
COMPLIANCE WITH SECTION 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on the Company's review of the copies of such forms
received by it during the fiscal year ended June 30, 1997, and written
representations that no other reports were required, the Company believes that
each person who, at any time during such fiscal year, was a director, officer or
beneficial owner of more than 10% of the Company's Common Stock complied with
all Section 16(a) filing requirements during such fiscal year or prior fiscal
years except that Mr. Clement, a director, filed a Form 4 late with respect to
a private sale of 1,000 shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid approximately $139,000 for the fiscal year ended June
30, 1997 for legal services to Jekel & Howard, attorneys at law, of which Mr.
Jekel is a principal. The Company believes that these services were provided on
terms no less favorable to the Company than could have been obtained from an
unrelated firm. Mr. Jekel is a participant in the Company's ESOP. Mr. Jekel also
receives $1,000 per month for services rendered to the Company and for serving
on the Board of Directors. Such services are terminable at will by the Company.
The Company paid approximately $55,000 for the year ended June 30, 1997
to Louis A. Witzeman under leases for five fire and ambulance stations. These
leases can be cancelled by the Company at any time. The Company believes that
these transactions are on terms no less favorable to the Company than could have
been obtained from unrelated third parties. Mr. Witzeman received $79,000 for
the fiscal year ended June 30, 1997 for fire protection and EMS advisory and
consulting services and for serving on the Board of Directors.
13
<PAGE> 16
All future transactions between the Company and its officers, directors
and principal stockholders will be on terms no less favorable to the Company
than could be obtained from unaffiliated persons and will require the approval
of the Company's independent directors.
REPORT OF THE HUMAN RESOURCE/COMPENSATION/ORGANIZATION COMMITTEE
OF THE BOARD OF DIRECTORS
GENERAL
The Human Resource/Compensation/Organization Committee of the Board of
Directors (the "Committee") administers the compensation programs for the
Company's executive officers. The Committee is composed exclusively of
independent, non-employee directors who are not eligible to participate in any
of management's programs.
The Committee presents the following report on the compensation for the
Company's executive officers for fiscal 1997.
OVERVIEW AND PHILOSOPHY
The Company's executive compensation programs are based on the belief
that the interests of executive officers should be directly aligned with those
of the stockholders. The programs are strongly oriented toward a
pay-for-performance philosophy that includes a significant percentage of
variable compensation, and results in executives accumulating significant equity
positions in the Company's Common Stock. The Committee has established the
following principles to guide development of the Company's compensation programs
and to provide a framework for compensation decisions:
- provide a total compensation package that will attract the best
talent to the Company, motivate individuals to perform at their
highest levels, reward outstanding performance, and retain
executives whose skills are critical for building long-term
stockholder value;
- establish annual incentives for senior management that are directly
tied to the overall financial performance of the Company; and
- implement longer-term incentives that focus executive officers on
managing from the perspective of an owner with an equity stake in
the business, principally by the granting of Company stock and
stock options.
COMPENSATION PROGRAMS AND PRACTICES
The Committee determines salary ranges and incentive award
opportunities for all corporate officers. The Company's management compensation
program consists of cash and equity based components.
Cash Component: Cash compensation is designed to fluctuate with Company
performance. In the years that the Company exhibits superior
performance cash compensation is designed to generally be above average
levels; when financial performance is below goal, cash compensation is
designed to be below average competitive levels. This is achieved
through the Management Incentive Plan (MIP), which is paid out
semi-annually only if predetermined quantitative and qualitative goals
are attained.
Base Pay: Base pay guidelines are established for Company
officers and managers based on their relative job content as
measured by the Hay Management Job Classification System.
Individual base pay within the guidelines is based on
sustained individual performance toward achieving the
14
<PAGE> 17
Company's goals. Annual modifications to base pay levels are
proposed by the President and approved by the Committee each
August. Base pay modifications for executive officers averaged
approximately 8% in fiscal 1997.
Management Incentive Plan: The MIP is an annual cash incentive
plan. At the beginning of each fiscal year, detailed
performance contracts are created between the Company and the
executive that document the executive's accountabilities, and
define levels of performance on those accountabilities. A
portion of the performance contract is weighted to the overall
financial performance of the Company, and a portion is
weighted to the executive's particular area of responsibility.
MIP opportunity for executive officers can be as high as 80%
of the base pay midpoint of the executive officer's pay range.
Equity-based Component: The Company has a long history of encouraging
employees to become stockholders. In 1978, the Company formed an
Employee Stock Ownership Plan (ESOP) for the benefit of all qualified
employees. Over 90% of the Company's full and part-time employees are
beneficiaries of the ESOP trust. In 1989, the Company implemented its
first stock option plan through which the Company could grant qualified
and non-qualified stock options to management employees. The Company
believes that equity-based compensation in the form of the ESOP and
stock options links the interests of management and stockholders by
focusing employees and management on increasing stockholder value. The
actual value of such equity-based compensation depends entirely on the
future appreciation of the Company's stock. The Senior Committee of the
Board grants stock options using criteria consistent with the level of
an executive's anticipated impact on the Company's goals and
objectives. A description of the Company's stock option plans is set
forth under "EXECUTIVE COMPENSATION -- 1989 STOCK OPTION PLAN" and
"PROPOSAL TO AMEND THE COMPANY'S 1992 STOCK OPTION PLAN." See
"EXECUTIVE COMPENSATION -- OPTION GRANTS" for options granted to
executive officers during fiscal 1997.
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND PRESIDENT
The Committee uses the same factors and criteria described above in
making compensation decisions regarding the Chief Executive Officer and the
President. Mr. Rustand and Mr. Bolin are compensated pursuant to the agreements
described under the section entitled "EXECUTIVE COMPENSATION - EMPLOYMENT
AGREEMENTS AND STOCK GRANT AGREEMENTS." During the fiscal year ended June 30,
1997, Mr. Rustand's base pay was $286,000. The cash portion of his MIP incentive
was approximately 16% of his cash compensation during the year. The Committee
believes that the MIP bonus was reasonable based on the Company's overall
performance in fiscal 1997. During the fiscal year ended June 30, 1997, Mr.
Bolin's base pay was $219,648. See the table under "EXECUTIVE COMPENSATION --
OPTION GRANTS" for information regarding options granted to Mr. Rustand and Mr.
Bolin in fiscal 1997.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993 and
effective in 1994, generally disallows a tax deduction to public companies for
compensation in excess of $1 million paid to each of the corporation's chief
executive officer and four other most highly compensated executive officers.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met.
15
<PAGE> 18
The Company currently intends to structure the performance-based
portion of the compensation of its executive officers in a manner that complies
with Section 162(m).
Members of the Human Resource/
Compensation/Organization Committee
Warren S. Rustand
Cor J. Clement
William C. Turner
COMPANY PERFORMANCE GRAPH
The following line graph compares cumulative total stockholder return,
assuming reinvestment of dividends, for: (i) the Common Stock; (ii) NASDAQ
Combined Composite Index; and (iii) the Russell 2000 Index. Because the Company
did not pay dividends on its Common Stock during the measurement period, the
calculation of the cumulative total stockholder return on the Common Stock did
not include dividends. The Russell 2000 Index is included because it is
comprised of publicly traded issuers with total market capitalization of between
$105,000,000 and $746,000,000, which is similar to the Company's total market
capitalization. Because of the small number of publicly traded companies in the
Company's peer group, the Company does not believe it can reasonably identify a
group of peer issuers. The graph assumes $100 was invested on July 16, 1993 (the
date on which the Company consummated its initial public offering and was
registered under Section 12 of the Exchange Act).
<TABLE>
<CAPTION>
7/16/93 6/30/94 6/30/95 6/30/96 6/30/97
<S> <C> <C> <C> <C>
Rural/Metro Corporation $100.00 $132.00 $178.00 $274.00 $232.00
NASD Combined Composite Index $100.00 $100.00 $132.00 $168.00 $205.00
Russell 2000 Index $100.00 $102.00 $120.00 $147.00 $168.00
</TABLE>
PROPOSAL TO AMEND AND RESTATE THE COMPANY'S SECOND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK AND TO ELIMINATE AUTHORITY TO
ISSUE SHARES OF CLASS A, B OR C PREFERRED STOCK
The Board of Directors has approved a proposal to amend the Company's
Second Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 23,000,000 to 70,000,000 and to increase
the number of authorized shares of Preferred Stock from 2,000,000 to 5,000,000.
The Board of Directors recommends a vote "for" the proposed amendment of the
Company's Restated Certificate of Incorporation. The full text of the Third
Restated Certificate of Incorporation as proposed to be amended is included as
Appendix A to this Proxy Statement as amended and restated in its entirety. If
approved by the stockholders, the proposed amendment will become effective upon
the filing of an amendment to the Company's Second Restated Certificate of
Incorporation with the Secretary of State of Delaware, which will occur as soon
as reasonably practicable.
The Board of Directors believes that it is in the Company's best
interests to increase the number of authorized shares of Common Stock in order
to have additional authorized but unissued shares available for issuance to meet
business needs as they arise. The Board of Directors believes that the
availability of such additional shares will provide the Company with the
flexibility to issue Common Stock for possible future financing, stock dividends
or distributions, acquisitions, stock option plans or other proper corporate
purposes which may be identified in the future by the Board of Directors,
without the possible expense and delay of a special stockholders' meeting. The
issuance of additional shares of Common Stock may have a dilutive effect on
earnings per share and, for persons who do not purchase additional shares to
maintain their pro rata interest in the Company, on such stockholders'
percentage voting power.
The Board of Directors believes that it is in the Company's best
interests to increase the number of authorized shares of Preferred Stock to
provide additional flexibility in connection with possible financings,
16
<PAGE> 19
acquisitions, other corporate purposes, and in certain circumstances, be used as
a means of discouraging, delaying, or preventing a change in control of the
Company. The Company's current Certificate of Incorporation permits the Company,
from time to time, to issue Preferred Stock in one or more series. The Board of
Directors, without further approval of the Stockholders, has the authority to
fix the rights and terms relating to dividends, conversion, voting, redemption,
liquidation preferences, sinking funds and any other rights, preferences,
privileges, and restrictions applicable to each such series of Preferred stock.
A purpose of authorizing the Board of Directors to determine such rights and
preferences is to eliminate delays associated with a Stockholder vote on
specific issuances. There currently are no outstanding shares of Preferred Stock
or any commitments or options or other rights currently outstanding for the
issuance of Preferred Stock. The Company has no present plan to issue shares of
its Preferred Stock.
The authorized shares of Common Stock in excess of those issued will be
available for issuance at such times and for such corporate purposes as the
Board of Directors may deem advisable, without further action by the Company's
stockholders, except as may be required by applicable law or by the rules of any
stock exchange or national securities association trading system on which the
securities may be listed or traded. Upon issuance, such shares will have the
same rights as the outstanding shares of Common Stock. Holders of Common Stock
have no preemptive rights.
The Company has no arrangements, agreements, understandings, or plans
at the present time for the issuance or use of the additional shares of Common
Stock proposed to be authorized. The Board of Directors does not intend to issue
any Common Stock except on terms which the Board of Directors deems to be in the
best interests of the Company and its then existing stockholders. Any future
issuance of Common Stock will be subject to the rights of holders of outstanding
shares of any Preferred Stock which the Company may issue in the future.
PROPOSAL TO AMEND THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved a proposal to amend the Company's
Employee Stock Purchase Plan (the "ESPP"), subject to approval by the Company's
Stockholders. The amendment to the ESPP will increase the number of shares of
Common Stock which may be issued pursuant to the ESPP from 150,000 to 450,000
Shares. The Board of Directors recommends a vote "For" the proposed amendment to
the ESPP.
The ESPP is intended to promote superior levels of performance from,
and to encourage stock ownership by, eligible employees of the Company by
increasing their interest in the success of the Company. The ESPP is designed to
meet this goal by offering financial incentives for employees to purchase Common
Stock of the Company, thereby increasing the interest of employees in pursuing
the long-term growth, profitability and financial success of the Company. The
Company believes the proposed amendment to increase the number of shares of
Common Stock which may be issued pursuant to the ESPP will further achieve this
goal.
EMPLOYEE STOCK PURCHASE PLAN
The Company has adopted an Employee Stock Purchase Plan (the "ESPP"),
which allows eligible employees of the Company to purchase shares of Common
Stock at semi-annual intervals through periodic payroll deductions under the
ESPP. The Board has reserved 150,000 shares of Common Stock for this purpose. If
the proposed amendment to the ESPP is approved by the stockholders, the number
of shares reserved for this purpose will be increased to 450,000. The purchase
price per share, in general, will be 85 percent of the closing stock price of
the Company's Common Stock on the participant's entry date into the offering
period and after January 1, 1998 will be the lower of (i) 85 percent of the
closing price of the Common Stock on the offering commencement date or (ii) 85
percent of the closing price of the Common Stock on the offering termination
date. The purchase price is to be paid through periodic payroll deductions not
to exceed 10 percent of the participant's earnings due each semi-annual period
of participation within the offering period. However, no participant may
purchase more than $25,000 worth of Common Stock annually.
17
<PAGE> 20
The purchase right of a participant will terminate automatically in the
event the participant ceases to be an employee of the Company, and any payroll
deductions collected from such individual during the semi-annual period in which
such termination occurs will be refunded. However, in the event of the
participant's disability or death, such payroll deduction may be applied to the
purchase of the Common Stock on the next semi-annual purchase date.
The ESPP provides for annual offerings through the end of July 2003.
PROPOSAL TO AMEND THE COMPANY'S 1992 STOCK OPTION PLAN
The Board of Directors has approved a proposal to amend the Company's
1992 Stock Option Plan, subject to approval by the Company's stockholders. The
amendment to the 1992 Plan will increase the number of shares of Common Stock
which may be issued pursuant to the 1992 Plan from 3,390,750 to 6,000,000
shares. The Board of Directors recommends a vote "For" the proposed amendment to
the 1992 Plan.
The 1992 Plan is intended to promote the interests of the Company by
providing key employees, non-employee members of the Board of Directors,
consultants and other independent contractors who provide valuable services to
the Company with the opportunity to acquire, or otherwise increase, their
proprietary interest in the Company as an incentive to remain in service to the
Company. Presently, the number of shares of Common Stock with respect to which
options may be issued under the 1992 Plan is 3,390,750. Through June 30, 1997,
the Company has granted options covering 2,407,305 shares of Common Stock
previously reserved for issuance under the 1992 Plan.
1992 STOCK OPTION PLAN
GENERAL
The 1992 Plan, as amended, is divided into two programs: the
Discretionary Grant Program and the Automatic Option Program. The Discretionary
Grant Program provides for the granting of options to acquire Common Stock of
the Company ("Options"), the direct granting of the Common Stock of the Company
("Stock Awards"), the granting of stock appreciation rights ("SARs"), or the
granting of other cash awards ("Cash Awards") (Stock Awards, SARs and Cash
Awards are collectively referred to herein as "Awards"). Options and Awards
under the 1992 Plan may be issued to executives, key employees, and others
providing valuable services to the Company and its subsidiaries. The Options
issued may be incentive stock options or nonqualified stock options. The Company
believes that the Discretionary Grant Program represents an important factor in
attracting and retaining executives and other key employees and constitutes a
significant part of the compensation program for employees. The Automatic Option
Program provides for the automatic grant of Options to acquire the Company's
Common Stock ("Automatic Options"). Automatic Options are granted to members of
the Company's Board of Directors who are not employed by the Company ("Eligible
Directors"). The Company believes that the Automatic Option Program promotes the
interests of the Company by providing such directors the opportunity to acquire
a proprietary interest, or otherwise increase their proprietary interest, in the
Company and an increased personal interest in its continued success and
progress.
If any change is made in the stock subject to the 1992 Plan, or subject
to any Option or SAR granted under the 1992 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, split-up, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
1992 Plan provides that appropriate adjustments will be made as to the maximum
number of shares subject to the 1992 Plan and the number of shares and exercise
price per share of stock subject to outstanding Options. An optionholder will
not have any of the rights of a stockholder with respect to optioned shares
until such holder exercises the Option.
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ELIGIBILITY AND ADMINISTRATION
Options and Awards may be granted only to persons ("Eligible Persons")
who at the time of grant are either (i) key personnel (including officers and
directors) of the Company or subsidiaries of the Company, or (ii) consultants
and independent contractors who provide valuable services to the Company or to
subsidiaries of the Company. Options that are incentive stock options may be
granted only to key personnel of the Company (and its subsidiaries) who are also
employees of the Company (or its subsidiaries).
The Eligible Persons under the Discretionary Grant Program are divided
into two groups, and there will be a separate administrator (each, a "Plan
Administrator") for each group. One group consists of Eligible Persons who are
executive officers and directors of the Company and all persons who own 10% or
more of the Company's issued and outstanding stock. The power to administer the
Discretionary Grant Program with respect to those persons may be vested either
with the Board of Directors or with a committee comprised of two or more
"Non-Employee Directors" (as such term is defined under Rule 16(b)(3)(i)
promulgated under the 1934 Act) who are appointed by the Board (the "Senior
Committee"). The Senior Committee, in its sole discretion, may require approval
of the Board of Directors for specific grants of Options or Awards under the
Discretionary Grant Program. If the proposed amended and restated 1992 Plan is
approved by the stockholders, members of the Senior Committee may participate in
the Discretionary Grant Program as permitted by the Rules. The second group
consists of Eligible Persons who are not executive officers or directors of the
Company and those who do not own 10% or more of the Company's issued and
outstanding stock. The power to administrate the Discretionary Grant Program
with respect to the second group of Eligible Persons may be vested exclusively
with the Board of Directors of the Company or with a committee of two or more
directors. Each Plan Administrator will determine (a) which of the Eligible
Persons in its group will be granted Options and Awards, (b) the amount and
timing of such grant, and (c) such other terms and conditions as may be imposed
by the Plan Administrator consistent with the 1992 Plan.
To the extent that granted Options are incentive stock options, the
terms and conditions of those Options must be consistent with the qualification
requirements set forth in the Internal Revenue Code of 1986, as amended (the
"Code"). 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 1992 Plan may not
exceed 25% of the shares of stock covered by the 1992 Plan.
EXERCISE OF OPTIONS
The expiration date, maximum number of shares purchasable and the other
provisions of the Options, including vesting provisions, are established at the
time of grant. Options may be granted for terms of up to 10 years. Options vest
and thereby become exercisable in whole or in one or more installments at such
time as may be determined by the Plan Administrator upon the grant of the
Options. However, a Plan Administrator has the discretion to provide for the
automatic acceleration of the vesting of any Options or Awards granted under the
Discretionary Grant Program in the event of a "Change in Control" (as defined in
the 1992 Plan).
The exercise prices of Options are determined by the Plan
Administrator, but if the option is intended to be an incentive stock option may
not be less than 100% (110% if the option is granted to a stockholder who at the
time the option is granted owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its
subsidiaries) of the fair market value of the Common Stock at the time of the
grant.
Options or awards granted pursuant to the Discretionary Grant Program
may be assigned, encumbered or otherwise transferred by the optionholder or
grantee if specifically allowed by the Plan Administrator upon the grant of such
Option or Award. If any optionholder ceases to be employed by the Company for a
reason other than death, such optionholder may, within three months after the
termination of such employment, exercise some or all of the
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vested incentive stock options held by such employee. However, termination for
cause terminates all Options held by such employee.
Under the 1992 Plan, Options which are not incentive stock options and
which are outstanding at the time an optionholder's service to the Company
terminates will remain exercisable for such period of time thereafter as
determined by the Plan Administrator at the time of grant of such Options.
However, if the optionholder is discharged for cause, all Options held by such
optionholder will terminate.
AWARDS
The Plan Administrators also may grant Awards to Eligible Persons under
the 1992 Plan. Awards may be granted in the form of SARs, Stock Awards or Cash
Awards. Through June 30, 1997, Stock Awards in the amount of 31,980 shares have
been granted under the 1992 Plan.
Awards granted in the form of SARs entitle the recipient to receive a
payment equal to the appreciation in market value of a stated number of shares
of Common Stock from the price stated in the award agreement to the market value
of the Common Stock on the date first exercised or surrendered. The Plan
Administrators may determine, consistent with the 1992 Plan, such terms,
conditions, restrictions and limitations, if any, on any SARs.
Awards granted in the form of Stock Awards entitle the recipient to
receive Common Stock directly. Awards granted in the form of cash entitle the
recipient to receive direct payments of cash depending on the market value or
the appreciation of the Common Stock or other securities of the Company. The
Plan Administrators may determine such other terms, conditions and limitations,
if any, on any Awards.
The 1992 Plan provides that it is not intended to be the exclusive
means by which the Company may issue options or warrants to acquire its Common
Stock, stock awards or any other type of award. To the extent permitted by
applicable law, the Company may issue any other options, warrants, or awards
other than pursuant to the 1992 Plan without stockholder approval.
TERMS AND CONDITIONS OF AUTOMATIC OPTIONS
The 1992 Plan provides that (i) each year at the meeting of the Board
of Directors held immediately after the annual meeting of stockholders, each
Eligible Director will be granted an Automatic Option to acquire 2,500 shares of
Common Stock (except that the Chairman of the Board will receive an Automatic
Option to acquire 5,000 shares if the chairman is an Eligible Director), and
(ii) each year each Eligible Director will receive an Automatic Option (the
"Formula Option") to acquire a number of shares equal to 1,000 shares for each
$0.05 EPS Increase, subject to a maximum of 5,000 shares of stock per Eligible
Director. For purposes of the foregoing, "EPS Increase" means the amount by
which earnings per share for the most recent fiscal year exceeds the earnings
per share for the previous fiscal year. Automatic Options (other than the
Formula Options) will vest one day prior to the next annual meeting of
stockholders after the applicable grant date unless the next annual meeting of
stockholders occurs less than six months after the applicable grant date, in
which case the Automatic Option will vest on the first anniversary of the
applicable grant date. Each Formula Option will vest on the first anniversary of
the applicable grant date.
The 1992 Plan will grant new Eligible Directors Automatic Options to
acquire 10,000 shares of Common Stock on the date of their first appointment or
election to the Board. Such Automatic Options granted to new Eligible Directors
vest one day prior to the next annual meeting of stockholders that occurs after
the applicable grant date unless the next annual meeting of stockholders occurs
less than six months after the applicable grant date, in which case the
Automatic Options become exercisable and vest on the first anniversary of the
applicable grant date. An Eligible Director is not eligible to receive the 2,500
share Automatic Option or the Formula Option if that grant date is within 30
days of such Eligible Director receiving the 10,000 share Automatic Option.
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The 1992 Plan provides that, in the event of a Change in Control, all
unvested Automatic Options will automatically accelerate and immediately vest so
that each outstanding Automatic Option will, immediately prior to the effective
date of such Change in Control, become fully exercisable.
The exercise price per share of stock subject to each Automatic Option
is equal to the 100% of the fair market value per share on the date of the grant
of the Automatic Option. Each Automatic Option expires on the tenth anniversary
of the date. Eligible Directors also may be eligible to receive Options or
Awards under the Discretionary Option Program or option grants or direct stock
issuances under any other plans of the Company. Cessation of service on the
Board terminates any Automatic Options for shares that were not vested at the
time of such cessation. Automatic Options are nontransferable other than by will
or the laws of descent and distribution on the death of the optionholder and,
during the lifetime of the optionholder, are exercisable only by such
optionholder.
DURATION AND MODIFICATION
The 1992 Plan will remain in force until November 5, 2002. The Board of
Directors of the Company at any time may amend the 1992 Plan except that,
without the approval by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of the Company, the Board of Directors may
not (i) increase, except in the case of certain organic changes to the Company,
the maximum number of shares of Common Stock subject to the 1992 Plan, (ii)
reduce the exercise price at which Options may be granted or the exercise price
for which any outstanding Option may be exercised, (iii) extend the term of the
1992 Plan, (iv) change the class of persons eligible to receive Options or
Awards under the 1992 Plan, or (v) materially increase the benefits accruing to
participants under the 1992 Plan. In addition, the Board may not, without the
consent of the optionholder, take any action that disqualifies any Option
previously granted under the 1992 Plan for treatment as an incentive stock
option or which adversely affects or impairs the rights of the optionholder of
any outstanding Option. Notwithstanding the foregoing, the Board of Directors
may amend the 1992 Plan from time to time as it deems necessary in order to meet
the requirements of any amendments to Rule 16b-3 under the 1934 Act without the
consent of the stockholders of the Company.
REASONS FOR AND EFFECT OF THE PROPOSED AMENDMENT AND RESTATEMENT
The Board of Directors believes that the approval of the proposed
amendment to the 1992 Plan is necessary to achieve the purposes of the 1992 Plan
and to promote the welfare of the Company and its stockholders generally. The
Board of Directors believes that the proposed amendment to the 1992 Plan will
aid the Company in attracting and retaining directors, officers and key
employees and motivating such persons to exert their best efforts on behalf of
the Company. In addition, the Company expects that the proposed amendments will
further strengthen the identity of interest of the directors, officers and key
employees with that of the stockholders.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
Certain options granted under the 1992 Plan will be intended to qualify
as incentive stock options under Code Section 422. Accordingly, there will be no
taxable income to an employee when an incentive stock option is granted to him
or her when that option is exercised. The amount by which the fair market value
of the shares at the time of exercise exceeds the option price generally will be
treated as an item of preference in computing the alternate minimum taxable
income of the optionholder. If an optionholder exercises an incentive stock
option and does not dispose of the shares within either two years after the date
of the grant of the option or one year after the date the shares were
transferred to the optionholder, any gain realized upon disposition will be
taxable to the optionholder as a capital gain. If the optionholder does not
satisfy the applicable holding periods, however, the difference between the
option price and the fair market value of the shares on the date of exercise of
the option will be taxed as ordinary income, and the balance of the gain, if
any, will be taxed as capital gain. If the shares are disposed of before the
expiration of the one-year or two-year periods and the amount realized is less
than the fair market value of the shares at the date of exercise, the employee's
ordinary income is limited to the amount realized
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less the option exercise price paid. The Company will be entitled to a tax
deduction only to the extent the optionholder has ordinary income upon the sale
or other disposition of the shares received when the option was exercised.
Certain other options issued under the 1992 Plan, including options
issued automatically to the non-employee members of the Board of Directors, will
be nonqualified options. The income tax consequences of nonqualified options
will be governed by Code Section 83. Under Code Section 83, the excess of the
fair market value of the shares of the Common Stock acquired pursuant to the
exercise of any option over the amount paid for such stock (hereinafter referred
to as "Excess Value") must be included in the gross income of the optionholder
in the first taxable year in which the Common Stock acquired by the optionholder
is not subject to a substantial risk of forfeiture. In calculating Excess Value,
fair market value will be determined on the date that the substantial risk of
forfeiture expires, unless a Section 83(b) election is made to include the
Excess Value in income immediately after the acquisition, in which case fair
market value will be determined on the date of the acquisition. Generally, the
Company will be entitled to a federal income tax deduction in the same taxable
year that the optionholder recognizes income. The Company will be required to
withhold income tax with respect to income reportable pursuant to Code Section
83 by an optionholder. The basis of the shares acquired by an optionholder will
be equal to the option price of those shares plus any income recognized pursuant
to Code Section 83. Subsequent sales of the acquired shares will produce capital
gain or loss. Such capital gain or loss will be long term if the stock has been
held for one year from the date of the substantial risk of forfeiture lapsed,
or, if a Section 83(b) election is made, one year from the date the shares were
acquired.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Andersen LLP, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending June 30, 1998 and recommends that
stockholders vote in favor of the ratification of such appointment. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its selection. The Board of Directors anticipates that representatives of Arthur
Andersen LLP will be present at the Meeting, will have the opportunity to make a
statement if they desire, and will be available to respond to appropriate
questions.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals that are intended to be presented by stockholders
at the annual meeting of stockholders of the Company for the fiscal year ending
June 30, 1998, to be included in the proxy statement and form of proxy relating
to such meeting, must be received by the Company no later than June, 1998.
Under the Company's bylaws, certain procedures are provided that a stockholder
must follow to nominate persons for election as a director or to introduce an
item of business at an annual meeting of stockholders. To be timely under these
procedures, notice of such nomination or business must be received by the
Company no later than: (i) 60 days prior to the annual meeting if such meeting
is to be held on a day that is between October 20, 1998 and November 20, 1998;
(ii) 90 days in advance of the annual meeting if the meeting is to be held on or
after November 20, 1998; or (iii) if the annual meeting is to be held on another
date, on or before the close of business on the 15th day following the date of
public disclosure of the date of such meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting.
If any other matters properly come before the Meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.
Dated: October ____, 1997
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APPENDIX A
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF
RURAL/METRO CORPORATION
1. The name of the corporation (which is hereinafter referred to as
the "Corporation") is RURAL/METRO CORPORATION.
2. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on April 26, 1993, under the name
RURAL/METRO CORPORATION, a Restated Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on May 21, 1993 and a Second
Restated Certificate of Incorporation was filed on January 15, 1995.
3. This Third Restated Certificate of Incorporation has been duly
proposed by resolutions adopted and declared advisable by the Board of Directors
of the Corporation, duly adopted by the stockholders of the Corporation at a
meeting duly called, and duly executed and acknowledged by the officers of the
Corporation in accordance with the provisions of Sections 103 and 245 of the
General Corporation Law of the State of Delaware and, restates and integrates
the provisions of the Restated Certificate of Incorporation of the Corporation
and, upon filing with the Secretary of State in accordance with Section 103,
shall thenceforth supersede the Second Restated Certificate of Incorporation and
all amendments thereto, and shall, as it may thereafter be amended in accordance
with its terms and applicable law, be the Certificate of Incorporation of the
Corporation.
4. The text of the Second Restated Certificate of Incorporation of
the Corporation is hereby amended and restated to read in its entirety as
follows:
ARTICLE I
NAME
The name of the Corporation is: Rural/Metro Corporation
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State
of Delaware is The Corporation Trust Center, 1209 Orange Street, Wilmington,
County of New Castle, Delaware 19801, and the name of the Corporation's
registered agent at that address is The Corporation Trust Company.
<PAGE> 26
ARTICLE III
BUSINESS
The purposes of the Corporation shall be to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (the "GCL").
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The total number of shares of stock that the Corporation shall have
the authority to issue is Seventy-five million (75,000,000), consisting of
Seventy million (70,000,000) shares of Common Stock, par value $.01 per share
("Common Stock") and Five million (5,000,000) shares of Preferred Stock, par
value $.01 per share ("Preferred Stock").
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation (the "Board") is hereby
authorized to provide for the issuance of shares of Preferred Stock in series
and, by filing a certificate pursuant to the GCL (hereinafter referred to as
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the Board with respect to
each series shall include, but not be limited to, determination of the
following:
A. the designation of the series, which may be by distinguishing
number, letter or title;
B. the number of shares of the series, which number the Board may
thereafter (except where otherwise provided in the Preferred Stock Designation)
increase or decrease (but not below the number of shares thereof then
outstanding);
C. whether dividends, if any, shall be cumulative or noncumulative
and the rights with respect to dividends of the series;
D. dates at which dividends, if any, shall be payable;
E. the redemption rights and price or prices, if any, for shares of
the series;
F. the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
G. the amounts payable on, and the preferences, if any, of shares of
the series in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation;
H. whether the shares of the series shall be convertible into shares
of any other class or series, or any other security, of the Corporation or any
other corporation, and, if so, the specification of such other class or series
of such other security, the conversion price or prices or rate or rates, any
adjustments thereof, the date or dates at which such shares shall be convertible
and all other terms and conditions upon which such conversion may be made;
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I. restrictions on the issuance of shares of the same series or of
any other class or series; and
J. the voting rights, if any, of the holders of shares of the
series.
The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof. The holders of shares of Common Stock
shall be entitled to one (1) vote for each such share upon all questions
presented generally to the stockholders.
The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or interest in,
such share on the part of any other person, whether or not the Corporation shall
have notice thereof, except as expressly provided by applicable law.
ARTICLE V
ELECTION OF DIRECTORS
A. The business and affairs of the Corporation shall be conducted
and managed by, or under the direction of, the Board. Subject to any rights to
elect directors set forth in any Preferred Stock Designation, the total number
of directors constituting the entire Board shall be not less than one (1) nor
more than fifteen (15), with the then-designated number of directors being fixed
from time to time by or pursuant to a resolution passed by the Board. Members of
the Board shall hold office until their successors are elected and qualified or
until their earlier death, resignation, disqualification or removal.
B. Unless and except to the extent that the Bylaws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
C. Except as otherwise provided for or fixed pursuant to the
provisions of Article IV of this Third Restated Certificate of Incorporation
relating to the rights of the holders of any series of Preferred Stock to elect
additional directors, and subject to the provisions hereof, newly created
directorships resulting from any increase in the authorized number of directors,
and any vacancies on the Board resulting from death, resignation,
disqualification, removal, or other cause, may be filled only by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board. No decrease in the number of directors constituting
the Board shall shorten the term of any incumbent director.
D. During any period when the holders of any series of Preferred
Stock have the right to elect additional directors as provided for or fixed
pursuant to the provisions of Article IV of this Third Restated Certificate of
Incorporation, then upon commencement and for the duration of the period during
which such right continues (1) the then otherwise total designated number of
directors of the Corporation shall automatically be increased by such specified
number of directors, and the holders of such Preferred Stock shall be entitled
to elect the additional directors so provided for or fixed pursuant to said
provisions, and (2) each such additional director shall serve until such
director's successor shall have been duly elected and qualified, or until such
director's right to hold such office terminates pursuant to said provisions,
whichever occurs earlier, subject to his or her earlier death, disqualification,
resignation or removal. Except as otherwise provided by the Board in the
resolution or resolutions establishing such series, whenever the holders of any
series of Preferred Stock having such right to elect additional directors are
divested of such right pursuant to
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the provisions of such stock, the terms of office of all such additional
directors elected by the holders of such stock, or elected to fill any vacancies
resulting from the death, resignation, disqualification or removal of such
additional directors, shall forthwith terminate and the total designated number
of directors of the Corporation shall be reduced accordingly.
E. Except for such additional directors, if any, as are elected by
the holders of any series of Preferred Stock as provided for or fixed pursuant
to the provisions of Article IV of this Third Restated Certificate of
Incorporation, any director may be removed from office with or without cause
only by: (1) the affirmative vote of sixty six and two-thirds percent (66 2/3%)
or more of the combined voting power of the then issued and outstanding shares
of capital stock of the Corporation entitled to vote in the election of
directors, voting together as a single class; or (2) the affirmative vote of
sixty six and two-thirds percent (66 2/3%) or more of the then serving directors
of the Corporation.
ARTICLE VI
MEETINGS OF STOCKHOLDERS
A. Meetings of stockholders of the Corporation may be held within or
without the State of Delaware, as the Bylaws of the Corporation may provide.
Except as otherwise provided for or fixed pursuant to the provisions of Article
IV of this Third Restated Certificate of Incorporation relating to the rights of
the holders of any series of Preferred Stock, special meetings of stockholders
of the Corporation may be called only by the Chairman of the Board, or the Board
pursuant to a resolution adopted by the Board. Special meetings of stockholders
may not be called by any other person or persons or in any other manner.
B. In addition to the powers conferred on the Board by this Third
Restated Certificate of Incorporation and by the GCL, and without limiting the
generality thereof, the Board is specifically authorized from time to time, by
resolution of the Board without additional authorization by the stockholders of
the Corporation, to adopt, amend or repeal the Bylaws of the Corporation, in
such form and with such terms as the Board may determine, including, without
limiting the generality of the foregoing, Bylaws relating to: (1) regulation of
the procedure for submission by stockholders of nominations of persons to be
elected to the Board; (2) regulation of the attendance at annual or special
meetings of the stockholders of persons other than holders of record or their
proxies; and (3) regulation of the business that may properly be brought by a
stockholder of the Corporation before an annual or special meeting of
stockholders of the Corporation.
ARTICLE VII
STOCKHOLDER CONSENT
No action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of stockholders
may be effected by written consent of stockholders in lieu of a meeting of
stockholders, unless the action to be effected by written consent of
stockholders and the taking of such action by such written consent have
expressly been approved in advance by the Board.
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ARTICLE VIII
LIMITATION OF LIABILITY
A director of the Corporation shall not be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the GCL.
Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to such
repeal or modification.
ARTICLE IX
BUSINESS COMBINATIONS; FAIR PRICE
A. In addition to any affirmative vote required by law or this Third
Restated Certificate of Incorporation, and except as otherwise expressly
provided in paragraph B of this Article IX:
1. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested
Stockholder (as hereinafter defined), or (b) any other corporation,
partnership or other entity (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would
be, an Affiliate (as hereinafter defined) of an Interested
Stockholder other than a merger enacted in accordance with Section
253 of the GCL or any successor thereof; or
2. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions)
to or with any Interested Stockholder, including all Affiliates of
the Interested Stockholder, of any assets of the Corporation or any
Subsidiary having an aggregate Fair Market Value (as hereinafter
defined) of ten million dollars ($10,000,000) or more; or
3. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder, including all Affiliates of the Interested Stockholder,
in exchange for cash, securities or other property (or a combination
thereof) having an aggregate Fair Market Value of ten million
dollars ($10,000,000) or more (other than on a pro rata basis to all
holders of Voting Stock of the same class held by the Interested
Stockholder pursuant to a stock split, stock dividend or
distribution of warrants or rights and other than in connection with
the exercise or conversion of securities exercisable for or
convertible into securities of the Corporation of any of its
subsidiaries which securities have been distributed pro rata to all
holders of Voting Stock); or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliates of an Interested
Stockholder; or
5. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with
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any of its Subsidiaries or any other transaction (whether or not an
Interested Stockholder is a party thereto) which has the effect,
directly or indirectly, of increasing the proportionate share by
more than one percent (1%) of the issued and outstanding shares of
any class of equity or convertible securities of the Corporation or
any Subsidiary which are directly or indirectly owned by any
Interested Stockholder or one or more Affiliates of the Interested
Stockholder;
shall require the affirmative vote of the holders of at least sixty six and
two-thirds percent (66 2/3%) of the voting power of the then issued and
outstanding Voting Stock, as hereinafter defined, voting together as a single
class, including the affirmative vote of the holders of at least sixty six and
two-thirds percent (66 2/3%) of the voting power of the then issued and
outstanding Voting Stock not Beneficially Owned directly or indirectly by an
Interested Stockholder or any Affiliate of any Interested Stockholder. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be permitted, by law or in any
agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article IX shall not be
applicable to any particular Business Combination (as hereinafter defined), and
such Business Combination shall require only such affirmative vote as is
required by law or any other provision of this Third Restated Certificate of
Incorporation, if the conditions specified in either of the following paragraph
1 or 2 are met:
1. the Business Combination shall have been approved by a
majority of the Continuing Directors (as hereinafter defined); or
2. all of the following price and procedural conditions shall
have been met:
(a) the aggregate amount of the cash and the Fair Market
Value (as hereinafter defined) as of the date of the consummation of
the Business Combination of consideration other than cash, to be
received per share by the holders of Common Stock in such Business
Combination, shall be at least equal to the highest of the
following:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Stockholder
for any shares of Common Stock acquired by it (A) within the
two (2) year period immediately prior to the first public
announcement of the proposal of such Business Combination (the
"Announcement Date"), or (B) in the transaction in which it
became an Interested Stockholder, whichever is higher;
(ii) the Fair Market Value per share of Common
Stock on the Announcement Date or on the date on which the
Interested Stockholder became an Interested Stockholder (the
"Determination Date"), whichever is higher; and
(iii) (if applicable) the price per share equal to
the Fair Market Value per share of Common Stock determined
pursuant to paragraph 2(a)(ii) above, multiplied by the ratio
of (A) the highest per share (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid
by the Interested Stockholder for any shares of Common Stock
acquired by it within the two (2) year period immediately
prior to the Announcement Date to (B) the Fair Market Value
per
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<PAGE> 31
share of Common Stock on the first day in such two (2) year
period upon which the Interested Stockholder acquired any
shares of Common Stock; and
(b) the aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business Combination
of consideration other than cash to be received per share by holders
of shares of any other class, other than Common Stock or Excluded
Preferred Stock, of issued and outstanding Voting Stock shall be at
least equal to the highest of the following (it being intended that
the requirements of this paragraph 2(b) shall be required to be met
with respect to every such class of issued and outstanding Voting
Stock, whether or not the Interested Stockholder has previously
acquired any shares of a particular class of Voting Stock):
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Stockholder
for any shares of such class of Voting Stock acquired by it
(A) within the two (2) year period immediately prior to the
Announcement Date, or (B) in the transaction in which it
became an Interested Stockholder, whichever is higher;
(ii) (if applicable) the highest preferential
amount per share to which the holders of shares of such class
of Voting Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation;
(iii) the Fair Market Value per share of such
class of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher; and
(iv) (if applicable) the price per share equal to
the Fair Market Value per share of such class of Voting Stock
determined pursuant to paragraph 2(b)(iii) above, multiplied
by the ratio of (A) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of
such class of Voting Stock acquired by it within the two (2)
year period immediately prior to the Announcement Date to (B)
the Fair Market Value per share of such class of Voting Stock
on the first day in such two (2) year period upon which the
Interested Stockholder acquired any shares of such class of
Voting Stock; and
(c) the consideration to be received by holders of a
particular class of issued and outstanding Voting Stock (including
Common Stock and other than Excluded Preferred Stock) shall be in
cash or in the same form as the Interested Stockholder has
previously paid for shares of such class of Voting Stock (if the
Interested Stockholder has paid for shares of any class of Voting
Stock with varying forms of consideration, the form of consideration
for such class of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class of Voting
Stock previously acquired by it); and
(d) after such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination: (i) there shall have been no failure to
declare and pay at the regular date therefor any full quarterly
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<PAGE> 32
dividends (whether or not cumulative) on any issued and outstanding
preferred stock, except as approved by a majority of the Continuing
Directors; (ii) there shall have been no reduction in the annual
rate of dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as approved by
a majority of the Continuing Directors; (iii) there shall have been
an increase in the annual rate of dividends as necessary fully to
reflect any recapitalization (including any reverse stock split),
reorganization or any similar reorganization which has the effect of
reducing the number of issued and outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is
approved by a majority of the Continuing Directors; and (iv) such
Interested Stockholder shall not have become the Beneficial Owner of
any additional Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested
Stockholder; and
(e) after such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not have
received the benefit, directly or indirectly (except proportionately
as a shareholder), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation of
or in connection with such Business Combination or otherwise; and
(f) a proxy or information statement describing the
proposed Business Combination and complying with the requirements of
the Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules
or regulations) shall be mailed to shareholders of the Corporation
at least thirty (30) days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is
required to be marked pursuant to such Act or subsequent
provisions).
C. For purposes of this Article IX the following terms shall have
the following meanings:
1. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on May 19,
1993.
2. "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations of the Securities
Exchange Act of 1934, as in effect on May 19, 1993. In addition, a Person shall
be the "Beneficial Owner" of any Voting Stock which such Person or any of its
Affiliates or Associates has: (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise; or (b) the right to
vote pursuant to any agreement, arrangement or understanding (but neither such
Person nor any such Affiliate or Associate shall be deemed to be the Beneficial
Owner of any shares of Voting Stock solely by reason of a revocable proxy
granted for a particular meeting of the stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to which shares
neither such Person nor any such Affiliate of Associate is otherwise deemed the
Beneficial Owner).
3. "Business Combination" shall mean any transaction described in
any one or more of clauses (1) through (5) of Section A of this Article IX.
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4. "Continuing Director" shall mean any member of the Board
who is unaffiliated with and is not the Interested Stockholder and was a member
of the Board prior to the time that the Interested Stockholder became an
Interested Stockholder, and any director who is thereafter chosen to fill any
vacancy on the Board or who is elected and who, in either event, is unaffiliated
with the Interested Stockholder and in connection with his or her initial
assumption of office is recommended for appointment or election by a majority of
Continuing Directors then on the Board.
5. "Excluded Preferred Stock" means any series of Preferred
Stock with respect to which a majority of the Continuing Directors have approved
a Preferred Stock Designation creating such series that expressly provides that
the provisions of this Article IX shall not apply.
6. "Fair Market Value" shall mean: (a) in the case of stock,
the highest closing sale price during the thirty (30) day period immediately
preceding the date in question of a share of such stock on the Composite Tape
for New York Stock Exchange listed stocks, or, if such stock is not quoted on
the composite tape, on the New York Stock Exchange, or, if such stock is not
listed on such exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the thirty
(30) day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in use
in its stead, or if no such quotations are available, the fair market value on
the date in question of a share of such stock as determined by the Board in
accordance with Section D of this Article IX; and (b) in the case of property
other than cash or stock, the fair market value of such property on the date in
question as determined by the Board in accordance with Section D of this Article
IX.
7. "Interested Stockholder" shall mean any Person to or which:
(a) itself, or along with its Affiliates, is the
Beneficial Owner, directly or indirectly, of more than fifteen
percent (15%) of the then issued and outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time
within the two (2) year period immediately prior to the date in
question was itself, or along with its Affiliates, the Beneficial
Owner, directly or indirectly, of fifteen percent (15%) or more of
the then issued and outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any
Voting Stock which was at any time within the two (2) year period
immediately prior to the date in question beneficially owned by an
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the Securities
Act of 1933.
For the purpose of determining whether a Person is an Interested
Stockholder pursuant to paragraph 7 of this Section C, the number of shares of
Voting Stock deemed to be issued and outstanding shall include shares deemed
owned through application of paragraph 2 of this Section C but shall not include
any other shares of Voting Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options or otherwise.
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<PAGE> 34
Notwithstanding anything to the contrary contained in this Third
Restated Certificate of Incorporation, for purposes of this Third Restated
Certificate of Incorporation, the term "Interested Stockholder" shall not, for
any purpose, include, and the provisions of Article IX(A) hereof shall not apply
to: (a) the Corporation or any Subsidiary; or (b) any employee stock ownership
plan of the Corporation or any Subsidiary.
8. In the event of any Business Combination in which the
Corporation survives, the phrase "other consideration to be received" as used in
paragraphs 2(a) and (b) and paragraph B of this Article IX shall include the
shares of Common Stock and/or the shares of any other class of issued and
outstanding Voting Stock retained by the holders of such shares.
9. "Person" shall mean any individual, firm, corporation,
partnership or other entity.
10. "Subsidiary" shall mean any corporation or other entity of
which the Corporation owns, directly or indirectly, securities that enable the
Corporation to elect a majority of the board of directors or other persons
performing similar functions of such corporation or entity or that otherwise
give to the Corporation the power to control such corporation or entity.
11. "Voting Stock" means all issued and outstanding shares of
capital stock of the Corporation that pursuant to or in accordance with this
Third Restated Certificate of Incorporation are entitled to vote generally in
the election of directors of the Corporation, and each reference herein, where
appropriate, to a percentage or portion of shares of Voting Stock shall refer to
such percentage or portion of the voting power of such shares entitled to vote.
The issued and outstanding shares of Voting Stock shall not include any shares
of Voting Stock that may be issuable pursuant to any agreement, or upon the
exercise or conversion of any rights, warrants or options or otherwise.
D. The Continuing Directors of the Corporation shall have the power
and duty to determine for the purposes of this Article IX, on the basis of
information known to them after reasonable inquiry, all facts necessary to
determine compliance with this Article IX, including, without limitation: (i)
whether a Person is an Interested Stockholder; (ii) the number of shares of
Voting Stock beneficially owned by any Person; (iii) whether a Person is an
Affiliate or Associate of another; (iv) whether the applicable conditions set
forth in paragraph 2 of paragraph B of this Article IX have been met with
respect to any Business Combination; (v) the Fair Market Value of stock or other
property in accordance with paragraph 6 of paragraph C of this Article IX; and
(vi) whether the assets which are the subject of any Business Combination have,
or the consideration to be received for the issuance or transfer of securities
by the Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of ten million dollars ($10,000,000) or more.
E. No Effect on Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Article IX shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
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<PAGE> 35
ARTICLE X
AMENDMENT OF CORPORATE DOCUMENTS
A. In addition to any affirmative vote required by applicable law
and in addition to any vote of the holders of any series of Preferred Stock
provided for or fixed pursuant to the provisions of Article IV of this Third
Restated Certificate of Incorporation, any alteration, amendment, repeal or
rescission (a "Change") of any provision of this Third Restated Certificate of
Incorporation must be approved by at least a majority of the then serving
directors and by the affirmative vote of the holders of at least a majority of
the combined voting power of the issued and outstanding shares of Voting Stock,
voting together as a single class; provided, however, that if any such Change
relates to Articles IV, V, VI, VII, VIII, IX, XI or XII hereof or to this
Article X, such Change must also be approved by the affirmative vote of the
holders of at least sixty six and two-thirds percent (66 2/3%) of the combined
voting power of the issued and outstanding shares of Voting Stock, voting
together as a single class.
Subject to the provisions hereof, the Corporation reserves the right
at any time, and from time to time, to amend, alter, repeal or rescind any
provision contained in this Third Restated Certificate of Incorporation in the
manner now or hereafter prescribed by law, and other provisions authorized by
the laws of the State of Delaware at the time in force may be added or inserted,
in the manner now or hereinafter prescribed by law; and all rights, preferences
and privileges of whatsoever nature conferred upon stockholders, directors or
any other persons whomsoever by and pursuant to this Third Restated Certificate
of Incorporation in its present form or as hereafter amended are granted subject
to the rights reserved in this Article X.
B. In addition to any affirmative vote required by law, any Change
of the Bylaws of the Corporation may be adopted either: (i) by the Board; or
(ii) by the stockholders by the affirmative vote of the holders of at least
sixty six and two-thirds percent (66 2/3%) of the combined voting power of the
issued and outstanding shares of Voting Stock, voting together as a single
class.
ARTICLE XI
BOARD CONSIDERATIONS UPON SIGNIFICANT EVENTS
The Board, when evaluating any (A) tender offer or invitation for
tenders, or proposal to make a tender offer or request or invitation for
tenders, by another party, for any equity security of the Corporation, or (B)
proposal or offer by another party to (1) merge or consolidate the Corporation
or any subsidiary with another corporation or other entity, (2) purchase or
otherwise acquire all or a substantial portion of the properties or assets of
the Corporation or any subsidiary, or sell or otherwise dispose of to the
Corporation or any subsidiary all or a substantial portion of the properties or
assets of such other party, or (3) liquidate, dissolve, reclassify the
securities of, declare an extraordinary dividend of, recapitalize or reorganize
the Corporation, shall take into account all factors that the Board deems
relevant, including, without limitation, to the extent so deemed relevant, the
potential impact on employees, customers, suppliers, partners, joint venturers
and other constituents of the Corporation and the communities in which the
Corporation operates.
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ARTICLE XII
STRUCTURE OF BOARD OF DIRECTORS
A. The Board (other than those directors elected by the holders of
any series of Preferred Stock provided for or fixed pursuant to the provisions
of Article IV hereof ("Preferred Stock Directors")) shall be divided into three
classes, as nearly equal in number as possible, designated Class I, Class II and
Class III. Class I directors shall initially serve until the 1995 meeting of
stockholders; Class II directors shall initially serve until the 1996 meeting of
stockholders; and Class III directors shall initially serve until the 1997
meeting of stockholders. Commencing with the annual meeting of stockholders in
1995, directors of each class, the term of which shall then expire, shall be
elected to hold office for a three-year term and until the election and
qualification of their respective successors in office. In case of any increase
or decrease, from time to time, in the number of directors (other than Preferred
Stock Directors), the number of directors in each class shall be apportioned as
nearly equal as possible.
B. Any director chosen to fill a vacancy or newly created
directorship shall hold office until the next election of the class for which
such director shall have been chosen and until his or her successor shall be
elected and qualified or until their earlier death, resignation,
disqualification or removal.
IN WITNESS WHEREOF, this Third Restated Certificate of Incorporation
has been signed this ____ day of ______________________, 1997.
RURAL/METRO CORPORATION
By:______________________________________
President
[SEAL]
Attest:
____________________
Secretary
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<PAGE> 37
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RURAL/METRO CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of RURAL/METRO CORPORATION, a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of the Company, each dated October --, 1997,
and hereby appoints James H. Bolin and Louis G. Jekel, and each of them, proxies
and attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the 1997 Annual
Meeting of Stockholders of the Company, to be held on November 20, 1997, at
10:00 a.m., local time, at the offices of the Company, 8401 East Indian School
Road, Scottsdale, Arizona, and at any adjournment or adjournments thereof, and
to vote all shares of Common Stock that the undersigned would be entitled to
vote if then and there personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS:
[ ] FOR the three nominees listed below, except as indicated
[ ] WITHHOLD AUTHORITY to vote for the three nominees listed below
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below:
Warren S. Rustand, Cor J. Clement and Henry G. Walker
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S SECOND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK, PAR VALUE $.01 PER SHARE, FROM 23,000,000 TO 70,000,000 AND TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK, PAR VALUE $.01
PER SHARE, FROM 2,000,000 TO 5,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN (THE
"ESPP") TO INCREASE THE SHARES OF THE COMPANY'S COMMON STOCK THAT MAY BE
ISSUED PURSUANT TO THE ESPP FROM 150,000 TO 450,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO APPROVE AN AMENDMENT TO THE 1992 STOCK OPTION PLAN (THE "1992
PLAN") TO INCREASE THE SHARES OF THE COMPANY'S COMMON STOCK THAT MAY BE
ISSUED PURSUANT TO THE 1992 PLAN FROM 3,390,750 TO 6,000,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued on reverse side)
<PAGE> 38
(Continued from reverse side)
5. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and upon such other matters that may properly come before the meeting or any
adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
FOR THE ELECTION OF DIRECTORS; FOR THE AMENDMENT TO THE SECOND RESTATED
CERTIFICATE OF INCORPORATION; FOR THE AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK
PURCHASE PLAN; FOR THE AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN; FOR
THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY; AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING.
A majority of such attorneys or
substitutes as shall be present and shall
act at said meeting or any adjournment or
adjournments thereof (or if only one
shall be present and act, then that one)
shall have and may exercise all of the
powers of said attorneys-in-fact
hereunder.
Date: -----------------------------, 1997
-----------------------------------------
Signature
-----------------------------------------
Signature
(This Proxy should be dated, signed by
the stockholder(s) exactly as his or her
name appears hereon, and returned
promptly in the enclosed envelope.
Persons signing in a fiduciary capacity
should so indicate. If shares are held by
joint tenants or as community property,
both stockholders should sign.)
