<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number 0-22056
RURAL/METRO CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 86-0746929
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8401 EAST INDIAN SCHOOL ROAD
SCOTTSDALE, ARIZONA
85251
(Address of principal executive offices)
(Zip Code)
(602) 994-3886
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
At February 9, 1998 there were 13,532,600 shares of Common Stock outstanding,
exclusive of treasury shares held by the Registrant.
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RURAL/METRO CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Statements
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
Item 2 (c). Changes in Securities 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
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RURAL/METRO CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
----------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,261 $ 3,398
Accounts receivable, net 149,926 106,978
Inventories 9,757 8,645
Prepaid expenses and other 9,651 7,162
--------- ---------
Total current assets 171,595 126,183
PROPERTY AND EQUIPMENT, net 82,634 70,645
INTANGIBLE ASSETS, net 187,051 160,282
OTHER ASSETS 10,542 6,956
--------- ---------
$ 451,822 $ 364,066
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,015 $ 4,359
Accrued liabilities 31,227 17,244
Current portion of long-term debt 16,435 9,814
--------- ---------
Total current liabilities 54,677 31,417
LONG-TERM DEBT, net of current portion 187,334 144,643
NON-REFUNDABLE SUBSCRIPTION INCOME 13,248 13,367
DEFERRED INCOME TAXES 12,836 10,772
OTHER LIABILITIES 2,270 4,059
--------- ---------
Total liabilities 270,365 204,258
--------- ---------
MINORITY INTEREST 8,490 --
--------- ---------
STOCKHOLDERS' EQUITY
Common stock 139 130
Additional paid-in capital 124,038 121,355
Retained earnings 50,487 40,334
Deferred compensation (458) (772)
Treasury stock (1,239) (1,239)
--------- ---------
Total stockholders' equity 172,967 159,808
--------- ---------
$ 451,822 $ 364,066
========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated balance sheets.
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RURAL/METRO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended December 31, Six months ended December 31,
------------------------------ -------------------------------
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
REVENUE
Ambulance services $ 89,769 $62,465 $167,367 $121,493
Fire protection services 11,351 10,349 22,563 20,654
Other 10,222 4,716 19,185 9,377
-------- ------- -------- --------
Total revenue 111,342 77,530 209,115 151,524
-------- ------- -------- --------
OPERATING EXPENSES
Payroll and employee benefits 58,269 41,867 110,504 82,501
Provision for doubtful accounts 15,612 10,404 28,826 20,159
Depreciation 4,712 2,918 8,813 5,651
Amortization of intangibles 1,681 1,110 3,145 2,200
Other operating expenses 18,869 13,757 35,282 26,947
-------- ------- -------- --------
Total expenses 99,143 70,056 186,570 137,458
-------- ------- -------- --------
OPERATING INCOME 12,199 7,474 22,545 14,066
Interest Expense, net 2,958 1,072 5,409 2,082
Other 130 -- 130 --
-------- ------- -------- --------
INCOME BEFORE INCOME TAXES 9,111 6,402 17,006 11,984
PROVISION FOR INCOME TAXES 3,687 2,631 6,924 4,914
-------- ------- -------- --------
NET INCOME $ 5,424 $ 3,771 $ 10,082 $ 7,070
======== ======= ======== ========
BASIC EARNINGS PER SHARE $ 0.40 $ 0.33 $ 0.76 $ 0.63
======== ======= ======== ========
DILUTED EARNINGS PER SHARE $ 0.38 $ 0.31 $ 0.73 $ 0.59
======== ======= ======== ========
AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC 13,482 11,296 13,196 11,213
AVERAGE NUMBER OF SHARES
OUTSTANDING - DILUTED 14,200 12,175 13,805 12,082
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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RURAL/METRO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended December 31,
--------------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 10,082 $ 7,070
Adjustments to reconcile net income to cash
used in operations --
Depreciation and amortization 11,958 7,851
Amortization of deferred compensation 314 327
Amortization of gain on sale of real estate (52) (52)
Provision for doubtful accounts 28,826 20,159
Undistributed earnings of minority shareholder 130 --
Change in assets and liabilities,
net of effect of businesses acquired --
Increase in accounts receivable (64,263) (34,355)
Increase in inventories (997) (746)
Increase in prepaid expenses and other (2,213) (310)
Increase (decrease) in accounts payable 905 (838)
Increase (decrease) in accrued liabilities and other 8,905 (3,605)
(Decrease) increase in nonrefundable subscription income (129) 149
Increase in deferred income taxes 516 870
-------- --------
Net cash used in operating activities (6,018) (3,480)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on revolving credit facilities, net 45,300 19,600
Repayment of debt and capital lease obligations (14,416) (6,488)
Issuance of common stock 2,317 6,371
-------- --------
Net cash provided by financing activities 33,201 19,483
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Cash paid for businesses acquired (9,824) (9,284)
Capital expenditures (14,909) (7,725)
(Increase) decrease in other assets (3,587) 21
-------- --------
Net cash used in investing activities (28,320) (16,988)
-------- --------
DECREASE IN CASH (1,137) (985)
CASH, beginning of period 3,398 1,388
-------- --------
CASH, end of period $ 2,261 $ 403
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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RURAL/METRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements.
(1) INTERIM RESULTS
In the opinion of management, the consolidated financial statements for
the three and six month periods ended December 31, 1997 and 1996 include
all adjustments, consisting only of normal recurring adjustments necessary
for a fair statement of the consolidated financial position and results of
operations for that period.
The results of operations for the three and six month periods ended
December 31, 1997 and 1996 are not necessarily indicative of the results
of operations for a full fiscal year.
(2) ACQUISITIONS
During the six months ended December 31, 1997, the Company purchased the
stock of ambulance service providers operating in Arizona and Georgia and
the assets of ambulance service providers operating in Alabama, Maryland,
New Jersey and South Carolina.
The acquisitions were accounted for as purchases in accordance with
Accounting Principles Board Opinion No. 16 (APB 16) and, accordingly, the
purchased assets and assumed liabilities were recorded at their estimated
fair values at each respective acquisition date.
The aggregate purchase price consisted of the following:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Cash $ 9,824
Rural/Metro common stock 325
Notes payable to sellers 6,470
Assumption of liabilities 13,889
-------
$30,508
=======
</TABLE>
During the six months ended December 31, 1997, subsidiaries of the Company
merged with and into ambulance service providers operating in Mississippi,
New Jersey, New York and Tennessee. The Company issued an aggregate of
641,009 shares of its common stock in exchange for all of the issued and
outstanding stock of the acquired companies. The transactions were
accounted for as poolings-of-interest in accordance with APB 16. The
acquisitions were not considered significant; accordingly, prior year
financial statements have not been restated.
The unaudited pro forma combined condensed statements of income for the
fiscal year ended June 30, 1997 and the six months ended December 31, 1997
give effect to the acquisitions as if each had been consummated as of the
beginning of each respective period.
The pro forma combined condensed financial statements do not purport to
represent what the Company's actual results of operations or financial
position would have been had such transactions in fact occurred on such
dates. The pro forma combined condensed statements of income also do not
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purport to project the results of operations of the Company for the
current year or for any future period.
RURAL/METRO CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED JUNE 30, 1997
AND FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JUNE 30, 1997 DECEMBER 31, 1997
---------------------------- -------------------------------
PROFORMA PROFORMA
HISTORICAL COMBINED HISTORICAL COMBINED
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenue $ 319,805 $ 427,067 $ 209,115 $ 223,957
Net income $ 12,720 $ 17,270 $ 10,082 $ 10,765
Earnings per share - basic $ 1.10 $ 1.30 $ 0.76 $ 0.80
Earnings per share - diluted $ 1.04 $ 1.23 $ 0.73 $ 0.76
</TABLE>
Pro forma adjustments include adjustments to: (i) reflect amortization of
the cost in excess of the fair value of net assets acquired; (ii) adjust
payroll and related expenses for the effect of certain former owners of
the acquired businesses not being employed by the Company and to reflect
the difference between the actual compensation paid to officers of the
businesses acquired and the lower level of aggregate compensation such
individuals would have received under the terms of employment agreements
executed between the Company and such individuals; (iii) adjust other
operating expenses to reflect the reduction of expenses related to certain
real estate and buildings not acquired and sellers' costs incurred in
connection with the sale of their respective businesses; (iv) adjust
interest expense to reflect interest expense related to debt issued in
connection with the acquisitions; and (v) adjust income taxes to reflect
the tax effect of the adjustments and the tax effect of treating all of
the acquisitions as if they had C corporation status.
The pro-forma combined condensed statements of income do not include the
effects of the pending acquisition of Emergencias Cardio Coronarias
(ECCO), as more fully described in "Liquidity and Capital Resources"
included in Management's Discussion and Analysis of Financial Condition
and Results of Operations.
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ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company derives its revenue primarily from fees charged for ambulance and
fire protection services. The Company provides ambulance services in response to
emergency medical calls ("911" emergency ambulance services) and non-emergency
transport services (general transport services) to patients on both a
fee-for-service basis and non-refundable subscription fee basis. Per transport
revenue depends on various factors, including the mix of rates between existing
markets and new markets and the mix of activity between "911" emergency
ambulance services and general transport services as well as other competitive
factors. Fire protection services are provided either under contracts with
municipalities or fire districts or on a non-refundable subscription fee basis
to individual homeowners or commercial property owners.
Ambulance service fees are recorded net of Medicare, Medicaid and other
reimbursement limitations and are recognized when services are provided.
Payments received from third-party payors represent a substantial portion of the
Company's ambulance service fee receipts. Provision for doubtful accounts is
made for the expected difference between ambulance service fees charged and
amounts actually collected. The Company's provision for doubtful accounts
generally is higher with respect to collections to be derived directly from
patients than for collections to be derived from third-party payors and
generally is higher for "911" emergency ambulance services than for general
ambulance transport services.
Because of the nature of the Company's ambulance services, it is necessary to
respond to a number of calls, primarily "911" emergency ambulance service calls,
which may not result in transports. Results of operations are discussed below on
the basis of actual transports since transports are more directly related to
revenue. Expenses associated with calls that do not result in transports are
included in operating expenses. The percentage of calls not resulting in
transports varies substantially depending upon the mix of general transport and
"911" emergency ambulance service calls in the Company's markets and is
generally higher in markets in which the calls are primarily "911" emergency
ambulance service calls. Rates in the Company's markets take into account the
anticipated number of calls that may not result in transports. The Company does
not separately account for expenses associated with calls that do not result in
transports.
Revenue generated under fire protection service contracts is recognized over the
term of the related contract. Subscription fees received in advance are deferred
and recognized over the term of the subscription agreement, which is generally
one year.
Other revenue consists primarily of fees associated with alternative
transportation, dispatch, fleet, billing and home health care services and is
recognized when the services are provided.
Other operating expenses consist primarily of rent and related occupancy
expenses, maintenance and repairs, insurance, fuel and supplies, travel and
professional fees.
THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1996
REVENUE
Total revenue increased $33.8 million, or 43.6%, from $77.5 million for the
three months ended December 31, 1996 to $111.3 million for the three months
ended December 31, 1997. Approximately $26.6 million of this increase resulted
from the acquisition of ambulance service providers during the last two quarters
of fiscal 1997 and the first two quarters of fiscal 1998. Ambulance service
revenue in markets served by the Company in both of the three month periods
ended December 31, 1996 and 1997 increased by 5.3%. Fire protection services
revenue increased by $1.1 million, or 10.7%, from $10.3 million for the three
months ended December 31, 1996 to $11.4 million for the three months ended
December 31, 1997. Other revenue increased by $5.5 million, or 117.0%, in the
three months ended December 31, 1997 compared to the three months ended December
31, 1996.
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Total ambulance transports increased by 84,000, or 38.7%, from 217,000 for the
three months ended December 31, 1996 to 301,000 for the three months ended
December 31, 1997. The acquisition of twenty-one ambulance service companies
during the last two quarters of fiscal 1997 and the first two quarters of fiscal
1998 accounted for these additional transports.
Fire protection services revenue increased due to revenue generated from new
fire protection contracts awarded to the Company through competitive bidding and
due to rate increases for fire protection services.
Other revenue increased primarily because of fees received for providing
billing, dispatch and other services pursuant to the Company's agreement with
San Diego Fire and Life Safety Services.
OPERATING EXPENSE
Payroll and employee benefit expenses increased $16.4 million, or 39.1%, from
$41.9 million for the three months ended December 31, 1996 to $58.3 million for
the three months ended December 31, 1997. This increase was primarily due to the
acquisition of twenty-one ambulance service providers during the last two
quarters of fiscal 1997 and the first two quarters of fiscal 1998.
Provision for doubtful accounts increased $5.2 million, or 50.0%, from $10.4
million for the three months ended December 31, 1996 to $15.6 million for the
three months ended December 31, 1997. Provision for doubtful accounts increased
from 13.4% of total revenue for the three months ended December 31, 1996 to
14.0% of total revenue for the three months ended December 31, 1997, reflecting
the effect of the acquisition of ambulance service providers during the second
half of fiscal 1997 and the first half of fiscal 1998 operating in markets with
a greater mix of "911" emergency activity.
Depreciation increased $1.8 million, or 62.1%, from $2.9 million for the three
months ended December 31, 1996 to $4.7 million for the three months ended
December 31, 1997, primarily as a result of depreciation expense on property and
equipment obtained through recent ambulance service acquisitions. Depreciation
increased from 3.8% of total revenue for the three months ended December 31,
1996 to 4.2% of total revenue for the three months ended December 31, 1997.
Amortization of intangibles increased by $0.6 million, or 54.6%, from $1.1
million for the three months ended December 31, 1996 to $1.7 million for the
three months ended December 31, 1997. This increase is primarily due to
increased intangible assets which are the result of recent acquisition activity.
Amortization of intangibles was 1.4% of total revenue for the three months ended
December 31, 1996 and 1997.
Other operating expenses increased approximately $5.1 million, or 37.0%, from
$13.8 million for the three months ended December 31, 1996 to $18.9 million for
the three months ended December 31, 1997, primarily due to increased expenses
associated with the operation of the twenty-one ambulance service providers
acquired during the last two quarters of fiscal 1997 and the first two quarters
of fiscal 1998. Other operating expenses decreased from 17.7% of total revenue
for the three months ended December 31, 1996 to 16.9% of total revenue for the
three months ended December 31, 1997 as a result of operational efficiencies.
Interest expense increased by $1.9 million from $1.1 million for the three
months ended December 31, 1996 to $3.0 million for the three months ended
December 31, 1997. This increase was caused by higher debt balances reflecting
increased borrowings on the Company's revolving credit facility.
The Company's effective tax rate decreased from 41.1% for the three months ended
December 31, 1996 to 40.5% for the three months ended December 31, 1997,
primarily the result of tax planning strategies implemented by the Company
during fiscal 1996.
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SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996
Revenue
Total revenue increased $57.6 million, or 38.0%, from $151.5 million for the six
months ended December 31, 1996 to $209.1 million for the six months ended
December 31, 1997. Approximately $42.6 million of this increase resulted from
the acquisition of ambulance service providers during the last two quarters of
fiscal 1997 and the first two quarters of fiscal 1998. Ambulance service revenue
in markets served by the Company in both of the six month periods ended December
31, 1996 and 1997 increased by 4.9%. Fire protection services revenue increased
by $1.9 million, or 9.2%, from $20.7 million for the six months ended December
31, 1996 to $22.6 million for the six months ended December 31, 1997. Other
revenue increased by $9.8 million, or 104.3%, in the six months ended December
31, 1997 compared to the six months ended December 31, 1996.
Total ambulance transports increased by 140,000, or 33.0%, from 424,000 for the
six months ended December 31, 1996 to 564,000 for the six months ended December
31, 1997. The acquisitions of twenty-one ambulance service companies during the
last two quarters of fiscal 1997 and the first two quarters of fiscal 1998
accounted for these additional transports.
Fire protection services revenue increased due to revenue generated from new
fire protection contracts awarded to the Company through competitive bidding and
due to rate increases for fire protection services.
Other revenue increased primarily because of fees received for providing
billing, dispatch and other services pursuant to the Company's agreement with
San Diego Fire and Life Safety Services.
OPERATING EXPENSES
Payroll and employee benefit expenses increased $28.0 million, or 33.9%, from
$82.5 million for the six months ended December 31, 1996 to $110.5 million for
the six months ended December 31, 1997. This increase was primarily due to the
acquisition of twenty-one ambulance service providers during the last two
quarters of fiscal 1997 and the first two quarters of fiscal year 1998.
Provision for doubtful accounts increased $8.6 million, or 42.6%, from $20.2
million for the six months ended December 31, 1996 to $28.8 million for the six
months ended December 31, 1997. Provision for doubtful accounts increased from
13.3% of total revenue for the six months ended December 31, 1996 to 13.8% of
total revenue for the six months ended December 31, 1997, reflecting the effect
of the acquisition of ambulance service providers during the second half of
fiscal 1997 and first half of fiscal 1998 operating in markets with a greater
mix of "911" emergency activity.
Depreciation increased $3.1 million, or 54.4%, from $5.7 million for the six
months ended December 31, 1996 to $8.8 million for the six months ended December
31, 1997, primarily as a result of depreciation expense on property and
equipment obtained through recent ambulance service acquisitions. Depreciation
increased from 3.7% of total revenue for the six months ended December 31, 1996
to 4.2% of total revenue for the six months ended December 31, 1997.
Amortization of intangibles increased by $0.9 million, or 40.9%, from $2.2
million for the six months ended December 31, 1996 to $3.1 million for the six
months ended December 31, 1997. This increase is primarily a result of
intangible assets recorded in recent acquisitions. Amortization of intangibles
was 1.5% of total revenue for the six months ended December 1996 and 1997.
Other operating expenses increased approximately $8.4 million, or 31.2%, from
$26.9 million for the six months ended December 31, 1996 to $35.3 million for
the six months ended December 31, 1997, primarily due to increased expenses
associated with the operation of twenty-one ambulance service providers acquired
during the last two quarters of fiscal 1997 and the first two quarters of fiscal
1998. Other operating expenses decreased from 17.8% of total revenue for the six
months ended December 31, 1996 to 16.9% of total revenue for the six months
ended December 31, 1997 as a result of operational efficiencies realized through
the integration of these acquired companies.
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Interest expense increased by $3.3 million from $2.1 million for the six months
ended December 31, 1996 to $5.4 million for the six months ended December 31,
1997. This increase was attributable to increased borrowings on the Company's
$200 million revolving credit facility.
The Company's effective tax rate decreased from 41.0% for the six months ended
December 31, 1996 to 40.7% for the six months ended December 31, 1997, primarily
the result of tax planning strategies implemented by the Company during fiscal
1996.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its cash requirements principally through
cash flow from operating activities, term and revolving indebtedness, capital
equipment lease financing, the sale of stock through an initial public offering
in July 1993, subsequent public stock offerings in May 1994 and April 1996, and
the on-going exercise of stock options.
During the six months ended December 31, 1997, the Company used cash flow from
operations of $6.0 million. This compares to cash flow used in operations of
$3.5 million for the six months ended December 31, 1996. This change resulted
primarily from increases in accounts receivable and inventories partially offset
by an increase in accrued liabilities.
During the six months ended December 31, 1997 the Company increased its
revolving credit facility from $175.0 million to $200.0 million. Approximately
$175.5 million was outstanding on the revolving credit facility at December 31,
1997. Availability on the facility was $21.3 million at December 31, 1997.
In November 1997, the Company entered into a $5.0 million term loan, which
matures on March 31, 1998. The Company used the proceeds from the loan to fund
acquisitions, capital expenditures and for general corporate purposes.
During the six months ended December 31, 1997, the Company purchased either all
the issued and outstanding stock or certain assets of nine ambulance service
providers with operations in Alabama, Arizona, Georgia, Maryland, Mississippi,
New Jersey, New York, South Carolina, Tennessee, Virginia, and the District of
Columbia. The combined purchase price of the operations accounted for as
purchases was $30.5 million. The Company paid cash of $9.8 million, issued notes
payable to sellers of $6.5 million, issued 659,191 shares of common stock to
sellers (641,009 shares were related to poolings-of-interest transactions and
the remaining shares were valued at $325,000), and assumed $13.9 million of
liabilities. The Company funded the cash portion of the acquisitions primarily
from the Company's revolving credit facility.
Subsequent to December 31, 1997, the Company agreed to purchase Emergencias
Cardio Coronarias (ECCO) in Argentina, the largest ambulance company in Latin
America. The purchase price is $35.0 million, comprised of cash and the
Company's common stock. The transaction is expected to close in the Company's
third quarter of fiscal year 1998. The acquisition is subject to several
customary conditions and a $2.5 million breakup fee in the event conditions are
satisfied and either party fails to close.
The Company expects that cash flow from operations and additional borrowing
capacity, either from existing or future debt facilities, will be sufficient to
meet its operating and capital needs for existing operations as well as to fund
certain service area expansions and acquisitions for the twelve months
subsequent to December 31, 1997. The Company is engaged in an active acquisition
program. In addition to using cash from operations, credit facilities, seller
notes payable and the issuance of common stock, the Company may seek to raise
additional capital through public or private debt or equity financing to fund
acquisitions. The availability and desirability of these capital sources will
depend upon prevailing market conditions, interest rates and the financial
condition of the Company. There can be no assurance such financing will be
available on favorable terms, if at all.
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RURAL/METRO CORPORATION AND SUBSIDIARIES
PART II -- OTHER INFORMATION
Item 2(c). Changes in Securities
Pursuant to a private placement under Section 4(2) of the
Securities Act, in October 1997, the Company issued 18,182
shares at $27.50 per share to the former shareholders of May
Medical Transport, Inc. ("May") in connection with Company's
acquisition of May.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
10.54 Third Amendment to Credit Agreement by and among
Registrant as guarantor, certain of its
subsidiaries as borrowers, First Union National
Bank (formerly known as First Union Bank of North
Carolina), as agent, and various lenders, dated
as of December 23, 1997.
10.55 Term Loan Agreement by and among Registrant, as
borrower, and First Union National Bank, as
lender, dated as of November 26, 1997.
27. Financial Data Schedules
(b) Reports on Form 8-K - none
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RURAL/METRO CORPORATION
Date: February 13, 1998 By /s/ Dean P. Hoffman
--------------------------
Dean P. Hoffman, Vice President
and Principal Accounting Officer
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EXHIBIT INDEX
10.54 Third Amendment to Credit Agreement by and among Registrant as
guarantor, certain of its subsidiaries as borrowers, First Union National
Bank (formerly known as First Union Bank of North Carolina), as agent,
and various lenders, dated as of December 23, 1997.
10.55 Term Loan Agreement by and among Registrant, as borrower, and
First Union National Bank, as lender, dated as of November 26, 1997.
27. Financial Data Schedules
<PAGE> 1
Ex. 10.54
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment") is
made and entered into as of this 23rd day of December, 1997 by and among
RURAL/METRO CORPORATION, a corporation organized under the laws of Delaware
("Rural/Metro" or the "Guarantor"), certain Subsidiaries of Rural/Metro
designated on the signature pages hereto (collectively, the "Borrowers" and,
together with Rural/Metro, the "Credit Parties"), the financial institutions who
are or may become party hereto (collectively, the "Lenders"), and FIRST UNION
NATIONAL BANK (formerly known as First Union National Bank of North Carolina), a
national banking association ("First Union"), as Agent for the Lenders (the
"Agent").
Statement of Purpose
The Lenders have previously agreed to extend certain credit facilities
to the Borrowers pursuant to the Credit Agreement dated as of September 29,
1995, by and among Rural/Metro, as Guarantor, the Borrowers, the Lenders, and
the Agent as amended by the First Amendment to Credit Agreement dated as of
December 20, 1996, the Second Amendment to Credit Agreement dated as of May 29,
1997 and as supplemented by various joinder agreements executed by the Credit
Parties (as so amended and supplemented and as may be further amended, restated
or otherwise modified, the "Credit Agreement").
The parties now desire to amend the Credit Agreement in order to
increase the Aggregate Commitment from $175,000,000 to $200,000,000 and to
reflect the revised Commitments of the Lenders on the terms and conditions set
forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Effect of Amendment. Except as expressly amended hereby, the Credit
Agreement and Loan Documents shall be and remain in full force and effect.
2. Capitalized Terms. All capitalized undefined terms used in this
Third Amendment shall have the meanings assigned thereto in the Credit
Agreement.
3. Modification of Credit Agreement. The Credit Agreement is hereby
modified as follows:
(a) Section 1.1 is hereby modified to delete the definition of
Aggregate Commitment therein and to insert the following in lieu thereof:
"'Aggregate Commitment' means the aggregate amount of
the Lenders' Commitments hereunder, as such amount may be
reduced at any time or from time to time pursuant to Section
2.5. The Aggregate Commitment as of the date of the Third
Amendment shall be Two Hundred Million Dollars ($200,000,000).
<PAGE> 2
(b) Section 1.1 is hereby modified to add in appropriate alphabetical
order the following defined term:
"'Third Amendment' means the Third Amendment to the
Credit Agreement dated as of December __, 1997 by and among
the Credit Parties, the Lenders and the Agent."
(c) Section 9.2 is hereby deleted in its entirety and the following
shall be substituted in lieu thereof:
" SECTION 9.2. Senior Debt Leverage Ratio. As of
March 31, 1998 and the end of any fiscal quarter thereafter,
permit the ratio of (a) the difference between (i) the
Consolidated Debt of Rural/Metro and its Subsidiaries less
(ii) the Consolidated Subordinated Debt of Rural/Metro and its
Subsidiaries as of such fiscal quarter end to (b) the product
of (i) Consolidated EBITDA for the period of two (2)
consecutive fiscal quarters ending on such fiscal quarter end
multiplied by (ii) two (2), to exceed 3.25 to 1.00.
(Notwithstanding the above, for purposes of determining the
Applicable Margin pursuant to Section 4.1(c) the Borrowers
shall be required to calculate the Senior Debt Leverage Ratio
pursuant to this Section for every fiscal quarter end.)"
(d) Schedule 1 shall be deleted in its entirety and Schedule 1 attached
hereto shall be substituted in lieu thereof.
4. Conditions. The effectiveness of the amendments set forth herein
shall be conditioned upon delivery to the Agent of the following items:
(a) Notes. The Borrowers shall issue and deliver to the Agent,
in exchange for the Notes outstanding, new Notes, payable to each
Lender in the amount of such Lender's respective Commitment as set
forth on Schedule 1 attached hereto.
(b) Officer's Certificate. The Agent shall have received a
certificate from the chief executive officer or chief financial officer
of Rural/Metro, on behalf of the Credit Parties, in form and substance
reasonably satisfactory to the Agent, to the effect that all
representations and warranties of the Credit Parties contained in the
Credit Agreement and the other Loan Documents are true, correct and
complete in all material respects; that the Credit Parties are not in
violation of any of the covenants contained in the Credit Agreement and
the other Loan Documents; that, after giving effect to the transactions
contemplated by this Third Amendment, no Default or Event of Default
has occurred and is continuing; and that the Credit Parties have
satisfied each of the closing conditions to be satisfied thereby.
2
<PAGE> 3
(c) Closing Certificate of each Credit Party. The Agent shall
have received a certificate of the secretary or assistant secretary of
each Credit Party certifying, as applicable, that (i) (A) the articles
of incorporation and bylaws of such Credit Party (or applicable
documentation in the case of any Credit Party organized as a
partnership or a limited liability company) delivered to the Agent on
September 29, 1995 (or, with respect to any Credit Party who joined the
Credit Agreement after the Closing Date, the date of the applicable
Joinder Agreement executed by such Credit Party) have not been
repealed, revoked, rescinded or amended in any respect or (B) that, if
such documents have not previously been provided to the Agent, such
documents are attached thereto and have not been repealed, revoked,
rescinded or amended in any respect; (ii) that attached thereto is a
true and complete copy of resolutions duly adopted by the Board of
Directors of such Credit Party or the general partner or member of such
Credit Party, as applicable, authorizing the transactions contemplated
herein, the additional borrowings by the Borrowers contemplated
hereunder and the execution, delivery and performance of this Third
Amendment and the other documents related thereto (collectively, the
"Third Amendment Documents") to which it is a party; and (iii) as to
the incumbency and genuineness of the signature of each officer of such
Credit Party or the general partner or member of such Credit Party, as
applicable executing Third Amendment Documents to which such Credit
Party is a party.
(d) Certificates of Good Standing. The Agent shall have
received short-form certificates as of a recent date of the good
standing of each Credit Party under the laws of their respective
jurisdictions of organization and such other jurisdictions requested by
the Agents.
(e) Opinions of Counsel. The Agent shall have received
favorable opinions of counsel to the Credit Parties addressed to the
Agent and the Lenders with respect to such Persons and the Loan
Documents, as modified by this Third Amendment, reasonably satisfactory
in form and substance to the Agent and the Lenders.
(f) Expenses of Agent's Counsel. Agent's counsel
shall have received payment for all outstanding reasonable fees and
expenses.
5. Representations and Warranties/No Default. By their execution
hereof, the Credit Parties hereby certify that each of the representations and
warranties set forth in the Credit Agreement and the other Loan Documents is
true and correct as of the date hereof as if fully set forth herein and that, as
of the date hereof, no Default or Event of Default has occurred and is
continuing.
6. Expenses. The Credit Parties shall pay all reasonable out-of-pocket
expenses of the Agent in connection with the preparation, execution and delivery
of this Third Amendment and the other Third Amendment Documents.
3
<PAGE> 4
7. Governing Law. This Third Amendment shall be governed by, construed
and enforced in accordance with the laws of the State of North Carolina without
reference to the conflicts or choice of law principles thereof.
8. Counterparts. This Third Amendment may be executed in separate
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same instrument.
[Signature Pages Follow]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be duly executed as of the date and year first above written.
BORROWERS:
THE AID AMBULANCE COMPANY, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
AID AMBULANCE AT VIGO COUNTY, INC.,
an Indiana corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
THE AID COMPANY, INC., an Indiana
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
AMBULANCE TRANSPORT SYSTEMS, INC., a
New Jersey corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 6
AMERICAN LIMOUSINE SERVICE, INC., an
Ohio corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
BEACON TRANSPORTATION, INC., a New York
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
CITY WIDE AMBULANCE SERVICE, INC., an
Ohio corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
CORNING AMBULANCE SERVICE INC., a New
York corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
DONLOCK, LTD., a Pennsylvania corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 7
E.M.S. VENTURES, INC., a Georgia corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
EMS VENTURES OF SOUTH CAROLINA, INC., a
South Carolina corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
EASTERN AMBULANCE SERVICE, INC., a
Nebraska corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
EASTERN PARAMEDICS, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
GOLD CROSS AMBULANCE SERVICES, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 8
GOLD CROSS AMBULANCE SERVICE OF PA.,
INC., an Ohio corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
KEEFE & KEEFE, INC., a New York corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
KEEFE & KEEFE AMBULETTE, LTD., a New
York corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
LASALLE AMBULANCE INC., a New York
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MEDI-CAB OF GEORGIA, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MEDICAL EMERGENCY DEVICES AND
SERVICES (MEDS), INC., an Arizona corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 9
MEDICAL TRANSPORTATION SERVICES, INC.,
a South Dakota corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MEDSTAR EMERGENCY MEDICAL SERVICES,
INC., a Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MERCURY AMBULANCE SERVICE, INC., a
Kentucky corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
METRO CARE CORP., an Ohio corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
METROPOLITAN FIRE DEPT., INC., an
Arizona corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 10
MULTI-CAB INC., a New Jersey corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MULTI-CARE, INC., a New Jersey corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MULTI-CARE INTERNATIONAL, INC., a New
Jersey corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MULTI-CARE MEDICAL CAR SERVICE, INC.,
a New Jersey corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MULTI-HEALTH CORP., a
Florida corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
MYERS AMBULANCE SERVICE, INC.,
an Indiana corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 11
NATIONAL AMBULANCE & OXYGEN
SERVICE, INC., a New York corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
NORTH MISS. AMBULANCE SERVICE, INC.,
a Mississippi corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
PHYSICIANS AMBULANCE SERVICE, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
PROFESSIONAL MEDICAL SERVICES, INC., an
Arkansas corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RMC CORPORATE CENTER, L.L.C., an Arizona
limited liability company
By: RURAL/METRO CORPORATION,
an Arizona corporation,
Its Member
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 12
RMC INSURANCE, LTD., a Barbados
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METROCOMMUNICATIONS SERVICES,
INC., a Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO INTERNATIONAL, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
R/M MANAGEMENT CO., INC., an Arizona
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL.METRO MID-ATLANTIC, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 13
R/M OF MISSISSIPPI, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF MISSISSIPPI, INC.,
a Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
R/M PARTNERS, INC., a Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO TEXAS HOLDINGS, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO CORPORATION, an Arizona
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 14
RURAL/METRO CORPORATION OF FLORIDA, a
Florida corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO CORPORATION OF
TENNESSEE, a Tennessee corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
R/M OF TENNESSEE G.P., INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
R/M OF TENNESSEE L.P., INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF TENNESSEE L.P., a Delaware
limited partnership
By: R/M OF TENNESSEE G.P., INC.,
a Delaware corporation,
Its General Partner
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 15
RURAL/METRO FIRE DEPT., INC., an
Arizona corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF ALABAMA, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF ARKANSAS, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF ARLINGTON, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 16
RURAL/METRO OF CALIFORNIA, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO CANADIAN HOLDINGS, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF CENTRAL ALABAMA, INC.,
a Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF CENTRAL OHIO, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF GEORGIA, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 17
RURAL/METRO OF INDIANA, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF INDIANA, L.P., a Delaware
limited partnership
By: THE AID AMBULANCE COMPANY, INC.,
a Delaware corporation,
Its General Partner
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF INDIANA II, L.P., a Delaware
limited partnership
By: THE AID AMBULANCE COMPANY, INC.,
a Delaware corporation,
Its General Partner
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF KENTUCKY, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 18
RURAL/METRO OF NEBRASKA, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF NEW YORK, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF NORTH FLORIDA, INC., a
Florida corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF OHIO, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF OREGON, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 19
RURAL/METRO OF ROCHESTER, INC., a New
York corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF SAN DIEGO, INC., a
California corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF SOUTH CAROLINA, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF SOUTH DAKOTA, INC., a
Delaware corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
RURAL/METRO OF TEXAS, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 20
RURAL/METRO OF TEXAS, L.P., a Delaware
limited partnership
By: R/M OF TEXAS G.P., INC.,
a Delaware corporation,
Its General Partner
By:__________________________________________
Name:______________________________________
Title:_____________________________________
R/M OF TEXAS G.P., INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
SIOUX FALLS AMBULANCE, INC., a South
Dakota corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
SOUTHWEST AMBULANCE OF CASA
GRANDE, INC., an Arizona corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
SOUTHWEST AMBULANCE OF
SOUTHEASTERN ARIZONA, INC., an Arizona
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 21
SOUTH GEORGIA EMERGENCY MEDICAL
SERVICES, INC., a Georgia corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
SOUTHWEST GENERAL SERVICES, INC., an
Arizona corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
SW GENERAL, INC., an Arizona corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
TOWNS AMBULANCE SERVICE, INC., a New
York corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
VALLEY FIRE SERVICE, INC., a Delaware
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 22
W & W LEASING COMPANY, INC., an Arizona
corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
THE WESTERN NEW YORK EMERGENCY
MEDICAL SERVICES TRAINING INSTITUTE
INC., a New York corporation
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 23
AGENT:
FIRST UNION NATIONAL BANK, as Agent
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 24
LENDERS:
FIRST UNION NATIONAL BANK, as Lender
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 25
FLEET BANK, N.A. (formerly known as Natwest
Bank N.A.)
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 26
THE FIRST NATIONAL BANK OF CHICAGO
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 27
ABN AMRO BANK N.V.
By:__________________________________________
Name:______________________________________
Title:_____________________________________
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 28
WELLS FARGO BANK, N.A. (formerly known as
First Interstate Bank of Arizona, N.A.
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 29
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 30
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 31
BANQUE PARIBAS
By:__________________________________________
Name:______________________________________
Title:_____________________________________
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 32
Confirmation of Subsidiary Guaranty
By execution of this Third Amendment, the undersigned hereby expressly
consents to the modifications and amendments set forth herein, and hereby
acknowledges, represents and agrees that its guaranty obligations set forth in
Article XI of the Credit Agreement remain in full force and effect.
RURAL/METRO CORPORATION, A
DELAWARE CORPORATION
By:__________________________________________
Name:______________________________________
Title:_____________________________________
<PAGE> 33
Schedule 1.1
<TABLE>
<CAPTION>
LENDER ADDRESS
------ COMMITMENT -------
AND
COMMITMENT
PERCENTAGE
----------
<S> <C> <C>
First Union National Bank $32,000,000 One First Union Center
16% 301 S. College St., TW-10
Charlotte, NC 28288-0608
Attn: Syndication Agency Services
Phone: (704) 383-0281
Fax: (704) 383-0288
Fleet Bank, N.A. $28,000,000 1185 Avenue of Americas
14% New York, NY 10036
Attn: Robert A. Isaksen, V.P.
Phone: (212) 819-5754
Fax: (212) 819-4110
The First National Bank of $24,000,000 777 South Figueroa St.
Chicago 12% 4th Floor
Los Angeles, CA 90017-5800
Attn: James B. Junker, V.P.
Phone: (213) 683-4948
Fax: (213) 683-4999
Banque Paribas $25,000,000 2029 Century Park East
12.5% Suite 3900
Los Angeles, CA 90067
Attn: Don Unrun, Asst. VP
Phone: (310) 551-7334
Fax: (310) 556-8759
ABN Amro Bank N.V. $21,000,000 LA International Branch
10.5% 300 S. Grand Avenue
Suite 1115
Los Angeles, CA 90071
Attn: Ellen M. Coleman,
VP and Director
Phone: (213) 687-2306
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
COMMITMENT
AND
COMMITMENT
LENDER PERCENTAGE ADDRESS
<S> <C> <C>
Fax: (213) 687-2061
The Long-Term Credit Bank of $14,000,000 Los Angeles Agency
Japan Limited 7% 444 S. Flower Street, Suite 3700
Los Angeles, CA 90071
Attn: Dennis Blank
Phone: (213) 689-6330
Fax: (213) 622-6908
Wells Fargo Bank $28,000,000 100 W. Washington
14% 4th Floor
Phoenix, AZ 85003
Attn: John Helms, VP
Phone: (602) 528-6633
Fax: (602) 229-4409
Bank of America National Trust $28,000,000 Commercial Banking Department
and Savings Association 14% 101 North 1st Avenue
13th Floor
Phoenix, AZ 85003
Attn: Ted Cunningham, VP
Phone: (602) 594-4361
Fax: (602) 594-2511
</TABLE>
<PAGE> 1
Ex. 10.55
TERM LOAN AGREEMENT
TERM LOAN AGREEMENT, dated as of the 26th day of November, 1997, by and
between RURAL/METRO CORPORATION, a corporation organized under the laws of
Delaware, as borrower (the "Borrower"), and FIRST UNION NATIONAL BANK, as lender
(the "Lender").
STATEMENT OF PURPOSE
The Borrower has requested, and the Lender has agreed to extend, a term
loan in a principal amount equal to $5,000,000 to the Borrower on the terms and
conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used herein and not defined
herein shall have the meanings assigned thereto in the Revolving Credit
Agreement (as defined below). In addition, the following terms when used in this
Agreement shall have the meanings assigned to them below:
"Agreement" means this Term Loan Agreement, as amended, restated,
supplemented or otherwise modified.
"Borrower" means Rural/Metro Corporation, a Delaware corporation, in
its capacity as borrower hereunder.
"Closing Date" means the date of this Agreement.
"Commitment" means the obligation of the Lender to make the Loan to the
Borrower hereunder in an aggregate principal amount of $5,000,000.
"Credit Facility" means the credit facility established pursuant to
Article II hereof.
"Default" means any of the events specified in Section 7.1 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Event of Default" means any of the events specified in Section 7.1;
provided, that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Interest Period" means a period of one month with respect to the
initial Interest Period and each successive Interest Period thereafter; provided
that (a) the initial Interest Period shall
<PAGE> 2
commence on the date of the initial advance of the Loan and, in the case of
immediately successive Interest Periods, each successive Interest Period shall
commence on the date on which the next preceding Interest Period expires, (b) if
any Interest Period would otherwise expire on a day that is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day (unless
the next succeeding Business Day falls in another calendar month in which case
the Interest Period shall end on the next preceding Business Day), (c) any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period, and (d) no Interest Period
shall extend beyond the Maturity Date.
"Lender" means First Union National Bank in its capacity as lender
hereunder.
"LIBOR" means the rate of interest determined on the basis of the rate
for deposits in Dollars for a period equal to the applicable Interest Period
commencing on the first day of such Interest Period appearing on Telerate Page
3750 as of 11:00 a.m. (London time) two (2) Business Days prior to the first day
of the applicable Interest Period. In the event that such rate does not appear
on Telerate Page 3750, "LIBOR" shall be determined by the Lender to be the rate
per annum at which deposits in Dollars are offered by leading reference banks in
the London interbank market to the Lender at approximately 11:00 a.m. (London
time) two (2) Business Days prior to the first day of the applicable Interest
Period for a period equal to such Interest Period and in an amount substantially
equal to the amount of the Loan.
"Loan" means the term loan made to the Borrower pursuant to Section
2.1.
"Loan Documents" means, collectively, this Agreement, the Note, and
each other document, instrument and agreement executed and delivered by the
Borrower in connection with this Agreement or otherwise referred to herein or
contemplated hereby, all as may be amended, restated, supplemented or otherwise
modified.
"Maturity Date" means the date which is one hundred twenty (120) days
from the Closing Date.
"Note" means the separate Term Note made by the Borrower payable to the
order of the Lender, substantially in the form of Exhibit A hereto, evidencing
the Credit Facility, and any amendments and modifications thereto, any
substitutes therefor, and any replacements, restatements, renewals or extensions
thereof, in whole or in part.
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loan, (b)
all payment and other obligations owing by the Borrower to the Lender under any
Hedging Agreement and (c) all other reasonable fees (including reasonable
attorney's fees), commissions, charges, indebtedness, loans, liabilities,
financial accommodations, obligations, covenants and duties owing by the
Borrower to the Lender pursuant to this Agreement or any other
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Loan Document, of every kind, nature and description, direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note, and
whether or not for the payment of money.
"Reserve Requirement" means the actual daily arithmetic reserve
requirement imposed on the Lender by the Board of Governors of the Federal
Reserve System (or any successor) under Regulation D on Eurocurrency liabilities
(as defined in Regulation D) of the Lender for the applicable Interest Period as
of the first day of such Interest Period, but subject to any changes in such
reserve requirement becoming effective during the Interest Period.
"Revolving Credit Agreement" means the Credit Agreement dated as of
September 29, 1995 (as amended by the First Amendment to Credit Agreement dated
as of December 20, 1996, as amended by the Second Amendment to Credit Agreement
dated as of May 28, 1997, and as further amended, restated, supplemented or
otherwise modified from time to time) by and among Rural/Metro Corporation, as
Guarantor, certain Subsidiaries thereof listed on the signature pages thereto,
as Initial Borrowers, any Additional Borrowers who may become party thereto, the
Lenders referred to therein, and First Union National Bank (f/k/a First Union
National Bank of North Carolina), as Agent for the Lenders.
SECTION 1.2. Miscellaneous.
(a) General. Unless otherwise specified, a reference in this Agreement
to a particular section, subsection, Schedule or Exhibit is a reference to that
section, subsection, schedule or Exhibit of this Agreement. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter. Any reference herein to "Charlotte time" shall refer to the
applicable time of day in Charlotte, North Carolina. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement.
(b) Revolving Credit Agreement. The terms and conditions of each
article, section or subsection of the Revolving Credit Agreement which are
incorporated in this Agreement by reference shall continue as such terms and
conditions are set forth in the Revolving Credit Agreement on the Closing Date
hereof irrespective of any termination of the Revolving Credit Agreement. A copy
of the Revolving Credit Agreement is attached hereto as Exhibit B.
ARTICLE II
CREDIT FACILITY
SECTION 2.1. Loan. Subject to the terms and conditions of this
Agreement, the Lender agrees to make the Loan to the Borrower in a principal
amount equal to the Commitment.
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SECTION 2.2. Repayment of the Loan. The Borrower shall repay the
principal amount of the Loan, together with all accrued and unpaid interest, in
a single installment due and payable in full on the Maturity Date.
SECTION 2.3. Term Note. The Loan and the obligation of the Borrower to
repay the Loan shall be evidenced by the Note executed by the Borrower payable
to the order of the Lender representing the Borrower's obligation to pay the
Commitment. The Note shall be dated the Closing Date and shall bear interest on
the unpaid principal amount thereof at the applicable interest rate per annum
specified in Section 2.7.
SECTION 2.4. Procedure for Advance of the Loan. Subject to the terms
and conditions of this Agreement, not later than 1:00 p.m. (Charlotte time) on
the Closing Date, the Lender will disburse the proceeds of the Loan in
immediately available funds by crediting such proceeds to a deposit account of
the Borrower maintained with the Lender.
SECTION 2.5. Use of Proceeds. The Borrower shall use the proceeds of
the Loan for working capital and general corporate requirements of the Borrower.
SECTION 2.6. Prepayment of the Loan. Provided the Lender receives at
least three (3) Business Days' prior notice thereof and Borrower
contemporaneously pays all unpaid interest accrued thereon, the Borrower may
from time to time prepay, at its option, any portion of the unpaid principal
balance of the Note but only upon the expiration of any Interest Period
therefor. Subject to the following sentence, any optional prepayment permitted
hereby shall be without premium or penalty and shall be applied in the manner
the Lender may elect in its sole and absolute discretion. Each prepayment
referred to herein shall be accompanied by such amounts as shall be necessary to
indemnify the Bank for any loss, cost or expense incurred by the Bank as set
forth in Section 2.11 hereof.
SECTION 2.7. Interest.
(a) Rate of Interest. Subject to Section 2.7(b), the Loan shall bear
interest on the unpaid principal balance outstanding from time to time at LIBOR
plus 1.625%.
(b) Default Rate of Interest. In the event of and so long as any
Default or Event of Default shall exist under any Loan Document, interest shall
be payable daily on the unpaid principal balance of the Note at a per annum rate
equal to the rate then applicable to the Note plus two percent (2%) per annum.
Interest shall continue to accrue on the Note after the filing by or against the
Borrower of any petition seeking any relief in bankruptcy or under any act or
law pertaining to insolvency or debtor relief, whether state, federal or
foreign.
(c) Interest Payment and Computation. Subject to prepayment and
acceleration of the Loan as provided herein and to the provisions of Article VII
hereof, interest on the unpaid principal balance of the Note shall be payable in
arrears on the Maturity Date. Interest and fees provided hereunder shall be
computed on the basis of a 360-day year and assessed for the actual number of
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days elapsed from the first day of the Interest Period applicable thereto to,
but not including, the last day thereof.
(d) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Note charged or
collected pursuant to the terms of this Agreement or pursuant to the Note exceed
the highest rate permissible under any Applicable Law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that the Lender has charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
Applicable Law and the Lender shall promptly refund to the Borrower any interest
received by the Lender in excess of the maximum lawful rate or shall apply such
excess to the principal balance of the Obligations. It is the intent hereof that
the Borrower not pay nor contract to pay, and that the Lender not receive nor
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by the Borrower under Applicable Law.
SECTION 2.8. Upfront Fee. In consideration of making the Loan under
this Agreement and in order to compensate the Lender for its obligations
hereunder, the Borrower shall pay to the Lender on the Closing Date an upfront
fee of $25,000. Such upfront fee shall be fully earned on the Closing Date and
shall not be refundable or rebatable by reason of prepayment, acceleration upon
Event of Default or any other circumstance and shall survive any termination of
this Agreement.
SECTION 2.9. Manner of Payment. Each payment (including prepayments) by
the Borrower on account of the principal of or interest on the Loan or of any
fee or other amounts payable to the Lender under this Agreement or the Note
shall be made not later than 1:00 p.m. (Charlotte time) on the date specified
for payment under this Agreement to the Lender, in immediately available funds
and shall be made without any set-off, counterclaim or deduction whatsoever. Any
payment received after such time but before 2:00 p.m. (Charlotte time) on such
day shall be deemed a payment on such date for the purposes of Section 8.1, but
for all other purposes shall be deemed to have been made on the next succeeding
Business Day. Subject to the definition of Interest Period, if any payment under
this Agreement or the Note shall be specified to be made upon a day which is not
a Business Day, it shall be made on the next succeeding day which is a Business
Day and such extension of time shall in such case be included in computing
interest, if any, in accordance with such payment.
SECTION 2.10. Changed Circumstances.
(a) Circumstances Affecting LIBOR Availability. If, with respect to any
Interest Period, the Lender shall determine that, by reason of circumstances
affecting the foreign exchange and interbank markets generally, deposits in
eurodollars in the applicable amounts are not being offered (through Telerate
Page 3750 or otherwise) for such Interest Period to the Lender, then the Lender
shall forthwith give notice thereof to the Borrower. Thereafter, until the
Lender notifies the Borrower that such circumstances no longer exist (which
notification shall be given promptly, but in
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any event within ten (10) days after the Lender obtains actual knowledge that
such circumstances no longer exist), the obligation of the Lender to make the
Loan bearing interest based on LIBOR shall be suspended, and the Loan shall bear
interest based on the Base Rate from and after the last day of the then current
Interest Period applicable to the Loan.
(b) Laws Affecting LIBOR Availability. If, after the date hereof, the
introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Lender with any request or directive (whether or
not having the force of law) of any such Governmental Authority, central bank or
comparable agency, shall make it unlawful or impossible for the Lender to honor
its obligations hereunder to make or maintain the Loan bearing interest based on
LIBOR, the Lender shall promptly give notice thereof to the Borrower.
Thereafter, until the Lender notifies the Borrower that such circumstances no
longer exist (which notification shall be given promptly, but in any event
within ten (10) days after the Lender obtains actual knowledge that such
circumstances no longer exist), (i) the obligation of the Lender to make the
Loan bearing interest based on LIBOR shall be suspended, and thereafter the Loan
shall bear interest based on the Base Rate from and after the last day of the
then current Interest Period applicable to the Loan and (ii) notwithstanding
clause (i) above, if the Lender may not lawfully continue to maintain the Loan
bearing interest based on LIBOR to the end of the then current Interest Period
applicable thereto, the interest rate applicable to the Loan shall immediately
be converted to the Base Rate.
(c) Increased Costs. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Lender
with any request or directive (whether or not having the force of law) of such
Governmental Authority, central bank or comparable agency:
(i) shall subject the Lender to any tax, duty or other charge
with respect to the Loan or the Note or shall change the basis of taxation of
payments to the Lender of the principal of or interest on the Loan or the Note
or any other amounts due under this Agreement in respect thereof (except for
changes in the rate of tax on the overall net income of the Lender); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System other than any change in the Reserve Requirements),
special deposit, insurance or capital or similar requirement against assets of,
deposits with or for the account of, or credit extended by the Lender or shall
impose on the Lender or the foreign exchange and interbank markets any other
condition affecting the Loan or the Note;
and the result of any of the foregoing is to increase the costs to the Lender of
maintaining the Loan bearing interest based on LIBOR or to reduce the yield or
amount of any sum received or receivable by the Lender under this Agreement or
under the Note in respect of a Loan bearing interest based on LIBOR, then the
Lender shall promptly notify the Borrower of such fact and demand compensation
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therefor and, within fifteen (15) days after such notice by the Lender, the
Borrower shall pay to the Lender such additional amount or amounts as will
compensate the Lender for such increased cost or reduction. The Lender will
promptly notify the Borrower of any event of which it has knowledge which will
entitle the Lender to compensation pursuant to this Section 2.10(c); provided,
that the Lender shall incur no liability whatsoever to the Borrower in the event
it fails to do so. The Lender shall supply the Borrower with a certificate
setting forth the basis for determining such additional amount or amounts
necessary to compensate the Lender.
(d) Reserve Requirements. In the event that the Lender shall determine
at any time that, by reason of Regulation D of the Board of Governors of the
Federal Reserve System (or any successor regulation), the Lender is required to
maintain Reserve Requirements during any period that the Loan bears interest
based on LIBOR, then the Lender shall promptly notify the Borrower by written
notice (or telephonic notice promptly confirmed in writing) specifying the
additional amounts reasonably determined by the Lender to be required to
indemnify the Lender against the cost of maintaining such Reserve Requirements
(such written notice to provide a computation of such additional amounts) and
the Borrower shall directly pay to the Lender such specified amounts as
additional interest hereunder.
SECTION 2.11. Indemnity. The Borrower hereby indemnifies the Lender
against any loss or expense actually incurred by the Lender in connection with
the Lender's obtaining, liquidating or employing deposits or other funds
acquired to effect, fund or maintain the Loan (a) as a consequence of any
failure by the Borrower to make any payment when due of any amount due hereunder
in connection with the Loan or (b) due to any payment or prepayment of any Loan
on a date other than the last day of the Interest Period therefor. The Lender's
calculations of any such loss or expense shall be furnished to the Borrower.
SECTION 2.12. Capital Requirements. If, after the date of this
Agreement, either (a) the introduction of, or any change in, or in the
interpretation of, any Applicable Law or (b) compliance with any guideline or
request from any central bank or comparable agency or other Governmental
Authority (whether or not having the force of law), has the effect of reducing
the rate of return on the capital of, or has affected the amount of capital
required to be maintained by, the Lender or any corporation controlling the
Lender as a consequence of, or with reference to its Commitment and other
commitments of this type, below the rate which the Lender or such other
corporation could have achieved but for such introduction, change or compliance,
then within fifteen (15) days after written demand by the Lender, the Borrower
shall pay to the Lender from time to time as specified by the Lender additional
amounts sufficient to compensate the Lender or other corporation for such
reduction. A certificate as to such amounts shall be submitted to the Borrower.
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SECTION 2.13. Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Note shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholding, and all liabilities with respect thereto excluding, in
the case of the Lender, income and franchise taxes (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under the
Note to the Lender, (A) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.13) the Lender receives an amount
equal to the amount such party would have received had no such deductions been
made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay
the full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law, and (D) the Borrower shall deliver to the Lender
evidence of such payment to the relevant taxing authority or other authority in
the manner provided in Section 2.13(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes (other than income,
franchise, excise and property taxes to which the Lender would have been subject
in the absence of this Agreement and the provision for security in connection
with the execution of this Agreement), levies of the United States or any state
or political subdivision thereof or any applicable foreign jurisdiction which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the Loan, the
other Loan Documents, or the perfection of any rights or security interest in
respect thereto (hereinafter referred to as "Other Taxes").
(c) Indemnity. The Borrower shall indemnify the Lender for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes and
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.13) paid by the Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto; provided, that this
indemnification shall not apply to any Taxes, Other Taxes or related liability
arising as the result of the gross negligence or willful misconduct of the
Lender. Such indemnification shall be made within thirty (30) days from the date
the Lender makes written demand therefor.
(d) Evidence of Payment. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes, the Borrower shall furnish to the Lender the
original or a certified copy of a receipt evidencing payment thereof or other
evidence of payment reasonably satisfactory to the Lender.
(e) Survival. Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.13 shall survive the payment in full of the
Obligations and the termination of the Commitment.
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ARTICLE III
CLOSING; CONDITIONS TO CLOSING AND INITIAL LOAN
SECTION 3.1. Closing. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street, Charlotte,
North Carolina at 10:00 a.m. on November 26, 1997, or on such other date as the
parties hereto shall mutually agree.
SECTION 3.2. Conditions to Closing and Initial Loan. The obligation of
the Lender to close this Agreement and to extend the Loan is subject to the
satisfaction of each of the following conditions:
(a) Loan Documents. The Loan Documents shall have been duly executed by
Borrower and delivered to the Lender.
(b) General Certificate. The Borrower shall have delivered to the
Lender a general certificate as to the due organization and authority of the
Borrower and the incumbency of its officers in form and substance satisfactory
to the Lender.
(c) Officer's Certificate. The Lender shall have received a certificate
from the chief executive officer or chief financial officer of the Borrower, in
form and substance satisfactory to the Lender, to the effect that all
representations and warranties of the Borrower contained in this Agreement and
the other Loan Documents are true, correct and complete; that the Borrower is
not in violation of any of the covenants contained in this Agreement and the
other Loan Documents; that, after giving effect to the transactions contemplated
by this Agreement, no Default or Event of Default has occurred and is
continuing; and that the Borrower has satisfied each of the closing conditions.
(d) Legal Opinion. The Lender shall have received the legal opinion of
counsel to the Borrower in form and substance acceptable to the Lender.
(e) Fees and Expenses. The Lender shall have received all fees, charges
and other expenses (including, without limitation, legal fees and expenses) due
in connection with the transactions contemplated hereby.
(f) Other Documents, Instruments and Assurances. The Lender shall have
received such other documents, instruments and assurances as may be deemed
reasonably necessary by the Lender or its counsel in connection with the
transactions contemplated hereby.
SECTION 3.3. Waiver of Conditions Precedent. If the Lender makes the
Loan or advance hereunder prior to the fulfillment of any of the conditions
precedent set forth in this Article III, the making of such Loan or advance
shall constitute only an extension of time for the fulfillment of such condition
and not a waiver thereof, and the Borrower shall thereafter use its best efforts
to fulfill each such condition promptly.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 4.1. Representations and Warranties. To induce the Lender to
enter into this Agreement and to extend the Loan, the Borrower hereby represents
and warrants to the Lender that each and every representation and warranty of
the Borrower set forth in Article VI of the Revolving Credit Agreement is true,
correct and complete in all material respects.
SECTION 4.2. Survival of Representations and Warranties, Etc. All
representations and warranties made under this Agreement shall be made or deemed
to be made at and as of the Closing Date, shall survive the Closing Date and
shall not be waived by the execution and delivery of this Agreement, any
investigation made by or on behalf of the Lender or any borrowing hereunder.
ARTICLE V
FINANCIAL INFORMATION AND NOTICES
Until the Loan has been finally and indefeasibly paid and satisfied in
full and the Commitment terminated, the Borrower will furnish or cause to be
furnished to the Lender each and every financial statement, certificate or other
document or instrument required to be delivered to the Lenders pursuant to
Article VII of the Revolving Credit Agreement. So long as the Lender is the
"Agent" under the Revolving Credit Agreement, the Borrower's furnishing of all
such financial statements, certificates and other documents or instruments to
the Agent which are required to be delivered to the Agent under the Revolving
Credit Agreement shall constitute delivery to the Lender under this Article V.
ARTICLE VI
COVENANTS
Until the Loan has been finally and indefeasibly paid and satisfied in
full and the Commitment terminated, the Borrower will, and will cause each of
its Subsidiaries to comply with each and every covenant and agreement set forth
in Articles VIII, IX, and X of the Revolving Credit Agreement.
ARTICLE VII
DEFAULT AND REMEDIES
SECTION 7.1. Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be
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effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any Governmental Authority or otherwise:
(a) Default in Payment. (i) The Borrower shall default in any payment
of principal of the Loan or the Note when and as due (whether at maturity, by
reason of acceleration or otherwise), (ii) the Borrower shall fail to make any
payment of interest on the Loan or the Note or any fee due hereunder within
three (3) Business Day after the same becomes due and payable or (iii) the
Borrower shall fail to make any payment of any other amount due hereunder or
under any other Loan Document within five (5) Business Days after written notice
that such amount has become due and payable has been given to the Borrower by
the Bank.
(b) Misrepresentation. Any representation or warranty made by the
Borrower under this Agreement, any Loan Document or any amendment hereto or
thereto, shall prove to be incorrect or misleading in any material respect as of
the date made.
(c) Cross-Default to Revolving Credit Agreement. An Event of Default
shall have occurred under the Revolving Credit Agreement.
SECTION 7.2. Remedies. Upon the occurrence of an Event of Default, the
Lender may, by notice to the Borrower:
(a) Acceleration; Termination of Credit Facility. Declare the principal
of and interest on the Loan and the Note at the time outstanding, and all other
amounts owed to the Lender under this Agreement or any of the other Loan
Documents and all other Obligations, to be forthwith due and payable, whereupon
the same shall immediately become due and payable without presentment, demand,
protest or other notice of any kind, all of which are expressly waived, anything
in this Agreement or the other Loan Documents to the contrary notwithstanding,
and terminate the Commitment; provided, that upon the occurrence of an Event of
Default specified in Section 12.1(g) or (h) of the Revolving Credit Agreement,
the Commitment shall be automatically terminated and all Obligations shall
automatically become due and payable.
(b) Rights of Collection. Exercise all of its other rights and remedies
under this Agreement, the other Loan Documents and Applicable Law, in order to
satisfy all of the Borrower's Obligations.
SECTION 7.3. Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Lender set forth in this Agreement
is not intended to be exhaustive and the exercise by the Lender of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder or under the Loan Documents or that may now or hereafter exist
in law or in equity or by suit or otherwise. No delay or failure to take action
on the part of the Lender in exercising any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude other or further exercise thereof or the
exercise of any other right, power or privilege or be construed to be a waiver
of any
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Event of Default. No course of dealing between the Borrower and the Lender or
its agents or employees shall be effective to change, modify or discharge any
provision of this Agreement or any of the other Loan Documents or to constitute
a waiver of any Event of Default.
SECTION 7.4. Set-off. Except to the extent prohibited by law, in
addition to any rights now or hereafter granted under Applicable Law and not by
way of limitation of any such rights, upon and after the occurrence of any Event
of Default and during the continuance thereof, the Lender and any assignee of
the Lender in accordance with this Agreement are hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and to apply any and all deposits (general or special, time or
demand, including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured, excluding government securities required
by Applicable Law to be held as security for worker's compensation and similar
claims) and any other indebtedness at any time held or owing by the Lender, or
any such assignee or participant to or for the credit or the account of the
Borrower against and on account of the Obligations irrespective of whether or
not (a) the Lender shall have made any demand under this Agreement or any of the
other Loan Documents or (b) the Lender shall have declared any or all of the
Obligations to be due and payable as permitted by Section 7.2.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the fifth (5th) Business Day following the date
sent by certified mail, return receipt requested. A telephonic notice to the
Lender as understood by the Lender will be deemed to be the controlling and
proper notice in the event of a discrepancy with or failure to receive a
confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
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If to the Borrower: Rural/Metro Corporation
8401 E. Indian School, Road
Scottsdale, Arizona 85251
Attention: Mark E. Liebner
Telephone: (602) 481-3229
Telecopy: (602) 481-3328
and
Attention: William R. Crowell
Telephone: (602) 481-3317
Telecopy: (602) 481-3279
With copies to: O'Connor, Cavanagh, Anderson,
Westover, Killingsworth & Beshears
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012-1656
Attention: John B. Furman
Telephone: (602) 263-2746
Telecopy: (602) 263-2900
and
Attention: Karl A. Freeburg
Telephone: (602) 263-2508
Telecopy: (602) 263-2900
If to the Lender: First Union National Bank
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency
Services
Telephone: (704) 383-0281
Telecopy: (704) 383-0288
SECTION 8.2. Expenses. The Borrower will pay all reasonable
out-of-pocket expenses of the Lender in connection with: (a) the preparation,
execution and delivery of this Agreement and each of the other Loan Documents,
whenever the same shall be executed and delivered, including all reasonable due
diligence expenses, reasonable appraiser's fees, reasonable search fees,
recording fees, taxes and reasonable fees and disbursements of counsel for the
Lender; (b) the preparation, execution and delivery of any waiver, amendment or
consent by the Lender relating to this Agreement or any of the other Loan
Documents including reasonable fees and disbursements of counsel for the Lender,
reasonable search fees, reasonable appraiser's fees, recording fees and taxes
imposed in connection therewith; and (c) consulting with one or more Persons,
including appraisers, accountants, engineers and attorneys, concerning or
related to the nature, scope or value of any right or remedy of the Lender
hereunder or under any of the other Loan Documents, including any review of
factual matters in connection therewith, which expenses shall include the
reasonable fees and disbursements of such Persons. In addition, the Borrower
will
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pay all reasonable out-of-pocket expenses of the Lender in connection with
prosecuting or defending any claim in any way arising out of, related to,
connected with, or enforcing any provision of, this Agreement or any of the
other Loan Documents, which expenses shall include the reasonable fees and
disbursements of counsel (including the allocated cost of in-house counsel) and
of experts and other consultants retained by the Lender.
SECTION 8.3. Governing Law. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS, UNLESS OTHERWISE EXPRESSLY SET FORTH THEREIN, SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
SECTION 8.4. Consent to Jurisdiction. The Borrower hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in connection with this Agreement, the Note and the
other Loan Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations. The Borrower hereby irrevocably
consents to the service of a summons and complaint and other process in any
action, claim or proceeding brought by the Lender in connection with this
Agreement, the Note or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations, on
behalf of itself or its property, by mailing of copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address for notice in
Section 8.1. Nothing in this Section 8.5 shall affect the right of the Lender to
serve legal process in any other manner permitted by Applicable Law or affect
the right of the Lender to bring any action or proceeding against the Borrower
or its properties in the courts of any other jurisdictions.
SECTION 8.5. Arbitration.
(a) Binding Arbitration. Upon demand of any party, whether made before
or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to the Note or any other
Loan Documents ("Disputes"), between or among parties to the Note or any other
Loan Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
Loan Documents executed in the future, or claims concerning any aspect of the
past, present or future relationships arising out of or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Charlotte, North Carolina. The expedited procedures set
forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for
14
<PAGE> 15
expedited procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted. The arbitrators shall be appointed as provided in the Arbitration
Rules.
(b) Preservation of Certain Remedies. Notwithstanding the preceding
binding arbitration provisions, the parties hereto and to the other Loan
Documents preserve, without diminution, certain remedies that such Persons may
employ or exercise freely, either alone or in conjunction with or during a
Dispute. Each such Person shall have and hereby reserves the right to proceed in
any court of proper jurisdiction or by self help to exercise or prosecute the
following remedies: (i) all rights to foreclose against any real or personal
property or other security by exercising a power of sale granted in the Loan
Documents or under applicable law or by judicial foreclosure and sale, (ii) all
rights of self help including peaceful occupation of property and collection of
rents, set off, and peaceful possession of property, (iii) obtaining provisional
or ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding, and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
SECTION 8.6. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER
PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE
NOTE OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 8.7. Reversal of Payments. To the extent the Borrower makes a
payment or payments to the Lender or the Lender receives any payment or proceeds
of the collateral which payments or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Lender.
SECTION 8.8. Injunctive Relief. The Borrower recognizes that, in the
event the Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy of law may prove to be
inadequate relief to the Lender. Therefore, the Borrower agrees that the Lender,
at the Lender's option, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
SECTION 8.9. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Lender, all future holders
of the Note, and their
15
<PAGE> 16
respective successors and assigns, except that the Borrower shall not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Lender.
SECTION 8.10. Performance of Duties. The Borrower's obligations under
this Agreement and each of the Loan Documents shall be performed by the Borrower
at its sole cost and expense.
SECTION 8.11. Indemnification. The Borrower agrees to reimburse the
Lender for all reasonable out-of-pocket costs and expenses, including all
reasonable counsel (including the allocated cost of in-house counsel),
appraisal, or other expert or consultant fees and disbursements incurred, and to
indemnify and hold the Lender harmless from and against all losses suffered by
the Lender in connection with (a) the exercise by the Lender of any right or
remedy granted to it under this Agreement or any of the other Loan Documents,
(b) any claim, and the prosecution or defense thereof, arising out of or in any
way connected with this Agreement or any of the other Loan Documents, and (c)
the collection or enforcement of the Obligations or any of them; provided, that
the Borrower shall not be obligated to reimburse the Lender for costs and
expenses, or indemnify the Lender for any loss, resulting from the gross
negligence or willful misconduct of the Lender.
SECTION 8.12. All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Lender and any Persons designated by the
Lender pursuant to any provisions of this Agreement or any of the other Loan
Documents shall be deemed coupled with an interest and shall be irrevocable so
long as any of the Obligations remain unpaid or unsatisfied or the Commitment
has not been terminated.
SECTION 8.13. Survival of Indemnities. Notwithstanding any termination
of this Agreement, the indemnities to which the Lender is entitled under the
provisions of this Article VIII and any other provision of this Agreement and
the Loan Documents shall continue in full force and effect and shall protect the
Lender against events arising after such termination as well as before.
SECTION 8.14. Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 8.15. Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 8.16. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
16
<PAGE> 17
SECTION 8.17. Term of Agreement. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 8.18. Independent Effect of Covenants. The Borrower expressly
acknowledges and agrees that each covenant contained herein and in Articles
VIII, IX and X of the Revolving Credit Agreement shall be given independent
effect. Accordingly, the Borrower and any other applicable Person shall not
engage in any transaction or other act otherwise permitted under any covenant
contained herein or in Articles VIII, IX and X of the Revolving Credit Agreement
if, before or after giving effect to such transaction or act, the Borrower or
any other applicable Person shall or would be in breach of any other covenant
contained herein or in Articles VIII, IX and X of the Revolving Credit
Agreement.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
RURAL/METRO CORPORATION
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
FIRST UNION NATIONAL BANK
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
18
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<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
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0
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<COMMON> 139
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