<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Rural/Metro Corporation
----------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE> 2
RURAL/METRO CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 19, 1998
------------------------
The Annual Meeting of Stockholders of Rural/Metro Corporation, a Delaware
corporation (the "Company"), will be held at 10:00 a.m. (local time), on
November 19, 1998, at the offices of the Company, 8401 East Indian School Road,
Scottsdale, Arizona, for the following purposes:
1. To elect three directors for a three-year term expiring in 2001.
2. To ratify the appointment of Arthur Andersen LLP as the
independent auditors of the Company for the fiscal year ending June 30,
1999.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on October 2, 1998 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person. To
assure your representation at the meeting, however, you are urged to mark, sign,
date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously has returned a
proxy.
Sincerely,
[Louis G. Jekel Signature]
Louis G. Jekel
Secretary
Scottsdale, Arizona
October 7, 1998
<PAGE> 3
RURAL/METRO CORPORATION
8401 EAST INDIAN SCHOOL ROAD
SCOTTSDALE, ARIZONA 85251
------------------------
PROXY STATEMENT
------------------------
VOTING AND OTHER MATTERS
GENERAL
The enclosed proxy is solicited on behalf of Rural/Metro Corporation, a
Delaware corporation (the "Company"), by the Company's board of directors (the
"Board of Directors") for use at the Annual Meeting of Stockholders to be held
at 10:00 a.m. (local time), on November 19, 1998 (the "Meeting"), or at any
adjournment thereof, for the purposes set forth in this Proxy Statement and in
the accompanying Notice of Annual Meeting of Stockholders. The Meeting will be
held at the offices of the Company, 8401 East Indian School Road, Scottsdale,
Arizona.
These proxy solicitation materials were first mailed on or about October 9,
1998, to all stockholders entitled to vote at the Meeting.
VOTING SECURITIES AND VOTING RIGHTS
Stockholders of record at the close of business on October 2, 1998 (the
"Record Date"), are entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding 14,465,621 shares of the
Company's Common Stock, $0.01 par value per share (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of the
total number of shares of Common Stock outstanding constitutes a quorum for the
transaction of business at the Meeting. Each stockholder voting at the Meeting,
either in person or by proxy, may cast one vote per share of Common Stock held
on all matters to be voted on at the Meeting. Assuming that a quorum is present,
the affirmative vote of a majority of the shares of Common Stock of the Company
present in person or represented by proxy at the Meeting and entitled to vote is
required: (i) to elect three directors for a three-year term expiring in 2001;
and (ii) to ratify the appointment of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ending June 30, 1999.
Votes cast by proxy or in person at the Meeting will be tabulated by the
election inspectors appointed for the Meeting and will determine whether a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
VOTING OF PROXIES
When a proxy is properly executed and returned, the shares it represents
will be voted at the Meeting as directed. If no specification is indicated, the
shares will be voted: (i) "for" the election of the nominees set forth in this
Proxy Statement; and (ii) "for" the ratification of the appointment of Arthur
Andersen LLP as the independent auditors of the Company for the fiscal year
ending June 30, 1999.
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its use
by delivering to the Company written notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
<PAGE> 4
SOLICITATION
The cost of this solicitation will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding solicitation
materials to such beneficial owners. Proxies also may be solicited by certain of
the Company's directors and officers, personally or by telephone or telegram,
without additional compensation.
ANNUAL REPORT AND OTHER MATTERS
The 1998 Annual Report to Stockholders, which was mailed to stockholders
with or preceding this Proxy Statement, contains financial and other information
about the activities of the Company but is not incorporated into this Proxy
Statement and is not to be considered a part of these proxy soliciting
materials. The information contained in the "Report of the Human
Resource/Compensation/Organization Committee of the Board of Directors" below
and "Company Performance Graph" below shall not be deemed "filed" with the
Securities and Exchange Commission (the "SEC") or subject to Regulations 14A or
14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The Company will provide, without charge to each stockholder of record as
of the Record Date, a copy of the Company's annual report on Form 10-K for the
year ended June 30, 1998 as filed with the SEC. Any exhibits listed in the Form
10-K report also will be furnished upon request at the actual expense incurred
by the Company in furnishing such exhibit. Any such requests should be directed
to the Company's Secretary at the Company's executive offices set forth in this
Proxy Statement.
2
<PAGE> 5
SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS, DIRECTORS AND OFFICERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock on October 2, 1998, except as
indicated, by: (i) each director and each nominee for director; (ii) the Named
Executive Officers (as defined herein) set forth in the Summary Compensation
Table under the section entitled "EXECUTIVE COMPENSATION;" (iii) all directors
and executive officers of the Company as a group; and (iv) each person known by
the Company to be the beneficial owner of more than five percent of the Common
Stock.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY
OWNED
NAME OF BENEFICIAL OWNER (1)(2)(3) PERCENT
- ------------------------ ------------ -------
<S> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
- -------------------------------------------
James H. Bolin(4)........................................... 290,918 2.0
Mary Anne Carpenter(5)...................................... 10,000 *
Cor J. Clement(6)........................................... 33,250 *
Robert T. Edwards(7)........................................ 201,894 1.4
Louis G. Jekel(8)........................................... 139,299 1.0
Robert E. Ramsey, Jr.(9).................................... 532,276 3.7
William C. Turner(10)....................................... 25,500 *
Louis A. Witzeman(11)....................................... 137,998 1.0
Henry G. Walker(12)......................................... 12,500 *
Mark E. Liebner(13)......................................... 211,066 *
William R. Crowell(14)...................................... 130,246 *
Warren S. Rustand(15)....................................... 195,249 1.3
William F. Gillis(16)....................................... 20,000 *
Executive officers and directors as a group (16 persons).... 2,113,812 13.5
5% STOCKHOLDERS:
- -----------------
ESOP(17).................................................... 905,150 6.3
William Blair & Company, L.L.C.(18)......................... 921,141 6.4
</TABLE>
- ---------------
* Less than 1%
(1) Except as indicated, and subject to community property laws when
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes shares of Common Stock issuable to the identified person pursuant
to stock options that may be exercised within 60 days after October 2,
1998. In calculating the percentage of ownership, such shares are deemed to
be outstanding for the purpose of computing the percentage of shares of
Common Stock owned by such person, but are not deemed to be outstanding for
the purpose of computing the percentage of shares of Common Stock owned by
any other stockholders.
(3) Excludes 22,914, 5,661, and 1,030 fully vested shares held by the ESOP for
the benefit of Messrs. Edwards, Jekel and Liebner, respectively, and 45 and
372 shares held by the ESOP for the benefit of Messrs. Rustand and Crowell,
respectively, that are 20% and 80% vested, respectively. Such persons have
sole voting power with respect to the shares held in their account by the
ESOP.
(4) Includes 159,735 shares of Common Stock issuable upon exercise of stock
options and 130,734 shares held by the Bolin Revocable Trust UA dated
February 27, 1996, James H. Bolin and Sandra L. Bolin, Trustees.
(5) Represents shares of Common Stock issuable upon exercise of stock options.
(6) Includes 8,750 shares of Common Stock issuable upon exercise of stock
options.
3
<PAGE> 6
(7) Includes 178,814 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 65,000 shares of Common Stock issuable upon exercise of stock
options; 3,175 shares held by the Louis G. Jekel Charitable Remainder Trust
UA dated March 1, 1996; and 71,124 shares held by a partnership of which
Mr. Jekel is the beneficial owner.
(9) Includes 25,000 shares of Common Stock issuable upon exercise of stock
options.
(10) Includes 17,500 shares of Common Stock issuable upon exercise of stock
options.
(11) Includes 29,562 shares held by the Louis A. Witzeman, Jr. Family Investment
Limited Partnership, of which 150 shares are held for the benefit of other
family members. Also includes 59,375 shares of Common Stock issuable upon
the exercise of stock options.
(12) Represents shares of Common Stock issuable upon exercise of stock options.
(13) Includes 149,347 shares of Common Stock issuable upon exercise of stock
options.
(14) Includes 108,060 shares of Common Stock issuable upon exercise of stock
options.
(15) Includes 166,250 shares of Common Stock issuable upon exercise of stock
options. Mr. Rustand was Chief Executive Officer and President of the
Company until his resignation in August 1998.
(16) Includes 20,000 shares of Common Stock issuable upon exercise of stock
options. Mr. Gillis was Senior Vice President until his resignation in June
1998.
(17) The address of the Rural/Metro Corporation Employee Stock Ownership Plan
(the "ESOP") is c/o Rural/Metro Corporation, 8401 East Indian School Road,
Scottsdale, Arizona 85251.
(18) In a filing on Schedule 13G, dated February 17, 1998, William Blair &
Company, L.L.C., 222 West Adams Street, Chicago, IL, 60606 reported sole
voting power with respect to 432,591 shares and sole dispositive power with
respect to 921,141 shares of Common Stock. William Blair & Company, L.L.C.,
subsequently advised the Company that all shares of the Common Stock are
held by individual and institutional clients for which William Blair &
Company, Investment Management Services, a department of William Blair &
Company, L.L.C., serves as investment adviser. William Blair & Company,
L.L.C., further advised the Company that William Blair & Company, L.L.C.,
is the owner of record and disclaim beneficial ownership of such shares.
PROPOSAL TO ELECT DIRECTORS
NOMINEES
The Company's Restated Certificate of Incorporation provides that the
number of directors shall be fixed from time to time by resolution of the Board
of Directors or stockholders. Presently, the number of directors is fixed at
eight and that number of directors is divided into three classes, with one class
standing for election each year for three-year terms. The Board of Directors has
nominated Mr. Ramsey, Mr. Witzeman, and Ms. Carpenter for re-election as Class I
directors for three-year terms expiring in 2001 or until their respective
successors are elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for each of the nominees named above. In the event that any of
the nominees is unable or declines to serve as a director at the time of the
Meeting, the proxies will be voted for a nominee, if any, designated by the
current Board of Directors to fill the vacancy. It is not expected that any of
the nominees will be unable or will decline to serve as a director.
The Board of Directors recommends a vote "FOR" the nominees named herein.
4
<PAGE> 7
The following table sets forth certain information regarding the directors
and nominees for directors of the Company:
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRES
- ---- --- -------- -------
<S> <C> <C> <C>
Cor J. Clement......................... 50 Vice Chairman of the Board and Director(1)(4) 2000
James H. Bolin......................... 46 Vice Chairman of the Board and Director(3) 1999
Robert E. Ramsey, Jr. ................. 52 Executive Vice President of the Company and 1998
Director
Louis G. Jekel......................... 57 Secretary and Director 1999
William C. Turner...................... 69 Director(1)(2)(3)(4) 1999
Henry G. Walker........................ 51 Director(1)(4) 2000
Mary Anne Carpenter.................... 53 Director(1)(4) 1998
Louis A. Witzeman...................... 73 Director(2)(4) 1998
</TABLE>
- ---------------
(1) Member of the Human Resource/Compensation/Organization Committee.
(2) Member of the Nominating Committee.
(3) Member of the Executive Committee.
(4) Member of the Audit Committee.
Cor J. Clement has served as Vice Chairman of the Board of Directors since
August 1994 and as a member of the Board of Directors since May 1992. Mr.
Clement served as the President and Chief Executive Officer of NVD, an
international provider of security and industrial fire protection services
headquartered in the Netherlands, from February 1980 until his retirement in
January 1997.
James H. Bolin has served as Vice Chairman of the Board of Directors since
January 1998 and as a member of the Board of Directors since February 1981. He
served as President of the Company from March 1995 until his retirement on
January 1, 1998. Mr. Bolin served as Senior Vice President -- Ambulance Services
of the Company from October 1991 until March 1995, Chief Financial Officer from
October 1988 through September 1991, Senior Vice President -- Finance from
August 1986 through September 1988, and Vice President -- Finance from April
1981 through July 1986. Mr. Bolin is a certified public accountant.
Robert E. Ramsey, Jr. has served as Executive Vice President since August
1998. He served as Senior Vice President of the Company from June 1997 until
August 1998 and as a member of the Board of Directors since June 1997. Mr.
Ramsey is President and Chief Executive Officer of SW General, Inc. and
affiliated companies, which he founded in 1982. SW General, Inc. and affiliated
companies were purchased by the Company in June 1997. He is currently President
of the Arizona Ambulance Association.
Louis G. Jekel has served as Secretary of the Company and as a member of
the Board of Directors of the Company since 1968. Mr. Jekel directs the
Company's Wildland Fire Protection Operations with the State of Arizona and the
federal government. Mr. Jekel is a partner in the law firm of Jekel & Howard in
Scottsdale, Arizona.
William C. Turner has been a member of the Board of Directors of the
Company since November 1993. Mr. Turner is currently Chairman and Chief
Executive of Argyle Atlantic Corporation, an international merchant banking and
management consulting firm; Chairman of the Avon International Advisory Council
for Avon Products, Inc.; a director of the Goodyear Tire & Rubber Company; a
director of Microtest, Inc.; and a trustee and executive committee member of the
United States Council for International Business. Mr. Turner is also a former
United States Ambassador and permanent representative to the Organization for
Economic Cooperation and Development. Since returning to the United States from
his ambassador post in Paris, Mr. Turner has served on the boards of directors
and/or international advisory councils of ten major listed corporations.
Henry G. Walker has been a member of the Board of Directors of the Company
since September 1997. Since April 1997, he has served as President and Chief
Executive Officer of the Sisters of Providence Health
5
<PAGE> 8
System, comprised of hospitals, long-term care facilities, physician practices,
managed care plans, and other health and social services. From 1996 to March
1997, Mr. Walker served as President and Chief Executive Officer of Health
Partners of Arizona, a state-wide managed care company. From 1992 to 1996, he
served as President and Chief Executive Officer of TMCare, a healthcare delivery
system. Mr. Walker is a member of the National Advisory Council of the
Healthcare Forum.
Mary Anne Carpenter has been a member of the Board of Directors of the
Company since January 1998. Since January 1993, Ms. Carpenter has served as
Executive Vice President and Executive Committee member of First Health Group
Corp., a publicly traded managed health care company. From October 1991 until
January 1993, Ms. Carpenter served as Senior Vice President, and from July 1986
through October 1991, as Vice President of First Health Group Corp. Ms.
Carpenter is a board member of the American Association of Health Plans and has
served on panels for several other national health care organizations.
Louis A. Witzeman is the founder of the Company. Mr. Witzeman has served as
a member of the Board of Directors since the Company's formation in 1948,
currently serving as Chairman of the Board Emeritus. Mr. Witzeman served as
Chief Executive Officer of the Company until his retirement in 1980.
Directors hold office until their successors have been elected and
qualified. All officers serve at the pleasure of the Board of Directors. There
are no family relationships among any of the directors or officers of the
Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's bylaws authorize the Board of Directors to appoint among its
members one or more committees composed of one or more directors. As of October
1, 1998 the Board of Directors had appointed the following standing committees:
a Human Resource/Compensation/Organization Committee; a Nominating Committee; an
Executive Committee; and an Audit Committee.
The Human Resource/Compensation/Organization Committee. The Human
Resource/Compensation/Organization Committee reviews and acts on matters
relating to compensation levels and benefit plans for key executives of the
Company. The Human Resource/Compensation/Organization Committee also reviews the
succession planning for key executive personnel, monitors employee relations
issues and oversees senior management structure. The Committee held four formal
meetings during the fiscal year ended June 30, 1998.
Nominating Committee. The Company's Nominating Committee met separately at
one formal meeting during the fiscal year ended June 30, 1998. The Nominating
Committee reviews credentials of existing and prospective directors and selects
classes of directors.
Executive Committee. The Company's Executive Committee met separately at
four formal meetings during the fiscal year ended June 30, 1998. The Executive
Committee acts as a liaison between management and the Board of Directors. At
times the Board of Directors empowers the Executive Committee to take certain
actions on behalf of the Board of Directors between regularly scheduled
meetings.
Audit Committee. The Company's Audit Committee met separately at three
formal meetings during the fiscal year ended June 30, 1998. The Audit Committee
reviews the annual financial statements and significant accounting issues and
the scope of the audit with the Company's independent auditors and is available
to discuss with the auditors any other audit related matters that may arise
during the year.
The Board of Directors of the Company held a total of 12 meetings during
the fiscal year ended June 30, 1998. Ms. Carpenter, who joined the Board in
January 1998, attended fewer than 75% of the aggregate of (i) the total number
of meetings of the Board of Directors, and (ii) the total number of meetings
held by all committees of the Board on which such director was a member.
DIRECTOR COMPENSATION AND OTHER INFORMATION
Officers of the Company who serve on the Board of Directors receive no
additional compensation. The Company paid a director's fee in fiscal 1998 to Mr.
Clement of $45,000 plus reimbursement for expenses for
6
<PAGE> 9
each Board or committee meeting attended. Messrs. Jekel and Witzeman receive
compensation for consulting services, which includes serving on the Board of
Directors. Companies owned by Mr. Ramsey received certain lease payments. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." Mr. Bolin receives
compensation pursuant to a consulting agreement. See "EXECUTIVE COMPENSATION --
Employment Agreements and Stock Grant Agreements." The Company pays all of its
other non-employee Board members an annual retainer of $15,000 plus $1,000 for
each Board meeting attended, $500 for each Board meeting participated in
telephonically, $500 for each committee meeting attended, and $250 for each
committee meeting participated in telephonically. The Company also pays $2,500
annually to any non-employee chairman of each of the committees of the Board of
Directors. Under the terms of the Company's 1992 Plan, non-employee directors
receive (i) stock options to purchase 10,000 shares upon their first election to
the Board of Directors and options to purchase 2,500 shares at the meeting of
the Board of Directors held immediately after the annual meeting of stockholders
(except that the Chairman of the Board will receive stock options to acquire
5,000 shares), and (ii) each year each non-employee Board member will receive
stock options to acquire a number of shares equal to 1,000 shares for each $0.05
increase in the Company's earnings per share over the previous fiscal year
(subject to a maximum of 5,000 shares of stock per non-employee Board member).
See "EXECUTIVE COMPENSATION -- 1992 Stock Option Plan."
In fiscal 1998, the Company granted options to Ms. Carpenter and to Messrs.
Rustand, Clement, Bolin, Ramsey, Jekel, Turner, Walker and Witzeman to purchase
10,000, 22,500, 2,500, 22,500, 20,000, 2,500, 2,500, 12,500 and 2,500 shares of
Common Stock, respectively, at exercise prices of $29.00 to $34.50 per share.
7
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth the total compensation received for services
rendered in all capacities to the Company for the fiscal years ended June 30,
1996, 1997, and 1998 by the Company's Chief Executive Officer, and its four most
highly compensated executive officers who were in office at June 30, 1998 and
one executive officer who was no longer with the Company at June 30, 1998 whose
aggregate cash compensation exceeded $100,000 (together the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------- ----------------------- -------
RESTRICTED
OTHER ANNUAL STOCK SECURITIES LTIP ALL OTHER
NAME AND COMPENSATION AWARD(S) UNDERLYING PAYOUTS COMPENSATION
PRINCIPAL POSITION AT YEAR-END YEAR SALARY($) BONUS($) ($)(1) ($)(2) OPTIONS(#) ($) ($)(3)
- ------------------------------ ---- --------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Warren S. Rustand 1998 $407,267(4) $145,125(5) -- -- 22,500 -- $108,200(6)(7)
Chief Executive Officer 1997 $386,000(8) $172,317(9) -- -- 22,500 -- $105,000(6)
and President(11)........... 1996 $306,250(10) $321,871 -- $660,000 250,000 -- $105,000(6)
Robert T. Edwards 1998 $245,068 -- -- -- 22,500 -- $ 3,200(7)
Executive Vice President.... 1997 $217,000 $ 21,766 -- -- 49,230 -- $ 3,000
1996 $184,288 -- -- -- 27,500 -- $ 3,000
Robert E. Ramsey, Jr.
Senior Vice President....... 1998 $201,154 -- -- -- 20,000 -- --
Mark E. Liebner
Senior Vice President, 1998 $192,706 -- -- -- 20,000 -- $ 3,200(7)
Chief Financial Officer 1997 $163,474 $ 27,797 -- -- 34,763 -- $ 3,000
and Treasurer............... 1996 $157,736 -- -- -- 27,500 -- $ 3,000
William R. Crowell 1998 $161,774 -- -- -- 20,000 -- $ 3,200(7)
Senior Vice President....... 1997 $151,105 $ 26,492 -- -- 30,851 -- $ 2,670
1996 $115,842 -- -- -- 25,000 -- $ 2,267
William F. Gillis
Former Senior Vice
President................... 1998 $263,462 -- -- -- 20,000 -- --
</TABLE>
- ---------------
(1) Other annual compensation did not exceed the lesser of $50,000 or 10% of
the total salary and bonus for any of the Named Executive Officers except
as noted.
(2) Fair market value at October 17, 1995 based upon the closing price of the
Company's Common Stock of $24.00 per share. At June 30, 1998, Messrs.
Rustand, Edwards, Liebner, and Crowell held 27,500, 4,166, 52,500 and 5,000
shares of Common Stock, respectively, subject to certain transfer and
forfeiture restrictions. The fair market value of such shares at June 30,
1998 was $357,500, $54,158, $682,500 and $65,000, respectively. See
"EXECUTIVE COMPENSATION -- Employment Agreements and Stock Grant
Agreements."
(3) Unless otherwise indicated, consists of Company-matching contributions to
the Company's 401(k) plan.
(4) Includes $100,000 in salary earned by Mr. Rustand in fiscal 1998 but
deferred to a future year.
(5) Includes a $145,125 cash award made to Mr. Rustand in fiscal 1998 to pay
the tax liability in connection with the vesting of a previously awarded
stock grant.
(6) The Company paid $105,000 in insurance premiums in each of fiscal 1996,
fiscal 1997 and fiscal 1998 pursuant to an agreement with Mr. Rustand to
assist in purchasing split dollar life insurance.
(7) Represents 449 shares of Common Stock contributed to the Company's 401(k)
plan on September 1, 1998 as a matching contribution by the Company.
(8) Includes $100,000 in salary earned by Mr. Rustand in fiscal 1997 but
deferred to a future year.
8
<PAGE> 11
(9) Includes a $126,557 cash award made to Mr. Rustand in fiscal 1997 to pay
the tax liability in connection with the vesting of a previously awarded
stock grant.
(10) Includes $100,000 in salary earned by Mr. Rustand in fiscal 1996 but
deferred to a future year.
(11) Mr. Rustand was Chief Executive Officer and President of the Company until
his resignation in August 1998.
(12) Mr. Edwards has announced his retirement as Executive Vice-President of the
Company effective January 1, 1999. Mr. Edwards will be engaged by the
Company as a special consultant through June 1999. See discussion at
"EXECUTIVE COMPENSATION -- Employment Agreements and Stock Grant
Agreements."
OPTION GRANTS
The following table represents the options granted to the Named Executive
Officers in the last fiscal year and the value of such options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
%
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
GRANTED(#) FISCAL YEAR ($/SH) DATE ($)(2)
---------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Warren S. Rustand............... 22,500(1) 2% $29.00 2007 $162,600
Robert T. Edwards............... 22,500(1) 2% $29.00 2007 $162,600
Robert E. Ramsey, Jr............ 20,000(1) 2% $29.00 2007 $144,600
Mark E. Liebner................. 20,000(1) 2% $29.00 2007 $144,600
William R. Crowell.............. 20,000(1) 2% $29.00 2007 $144,600
William F. Gillis............... 20,000(1) 2% $29.00 2007 $144,600
</TABLE>
- ---------------
(1) The options became exercisable upon their grant in September 1997.
(2) The hypothetical present value of the options at the date of grant was
determined using the Black-Scholes option pricing model. The Black-Scholes
model estimates the present value of an option by considering a number of
factors, including the grant price of the option, the volatility of the
Company's Common Stock, the dividend rate, the term of the option, the time
it is expected to be outstanding and interest rates. The Black-Scholes
values were calculated using the following assumptions: (i) a risk-free
interest rate of 5.11%; (ii) a dividend yield of 0.00%; (iii) an expected
life of the option after vesting of 1.32 years; and (iv) an expected
volatility of 46.65%.
OPTION EXERCISES AND HOLDINGS
The following table represents certain information respecting the options
held by the Named Executive Officers.
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<PAGE> 12
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Warren S. Rustand............. -- -- 166,250 150,000 -- --
Robert T. Edwards............. -- -- 165,481 12,499 $138,000 --
Robert E. Ramsey, Jr.......... -- -- 20,000 -- -- --
Mark E. Liebner............... -- -- 137,014 12,499 $ 93,000 --
William R. Crowell............ 4,166 $74,988 95,727 12,499 $ 10,332 --
William F. Gillis............. -- -- 20,000 -- -- --
</TABLE>
- ---------------
(1) Calculated based on the market price at exercise multiplied by the number of
options exercised less the total exercise price of the options exercised.
(2) Calculated based on $13.00, which was the closing sales price of the Common
Stock as quoted on the Nasdaq National Market on June 30, 1998, multiplied
by the number of applicable shares in-the-money less the total exercise
price.
EMPLOYMENT AGREEMENTS AND STOCK GRANT AGREEMENTS
In August 1998, John B. Furman became the Company's President and Acting
Chief Executive Officer. The Company entered into an employment agreement with
Mr. Furman for a one year term, renewable for one year periods thereafter.
Pursuant to Mr. Furman's employment agreement, he is to receive a base salary of
$292,500 and additional compensation of $100,000 during the first year of
employment. In connection with the agreement, the Company granted Mr. Furman
stock options to purchase 100,000 shares of the Company's Common Stock under the
1992 Plan. These stock options are fully vested and exerciseable on the date of
grant. Mr. Furman's employment agreement provides that upon any renewal of the
one year term under the agreement, the Company will grant Mr. Furman options to
purchase an additional 100,000 shares of the Company's Common Stock. Mr.
Furman's employment agreement provides that should the Company terminate his
employment agreement without cause, or should he terminate his employment
agreement for good reason, he will receive his base salary and additional
compensation for the remainder of the employment term, and $350,000 for one year
thereafter.
Employment agreements with Messrs. Liebner and Crowell expire in 1999, and
the employment agreement with Mr. Ramsey expires in 2002. Subject to annual
review of the Human Resources/ Compensation/Organization Committee of the Board
of Directors, each agreement provides for a base salary (which currently are as
follows: Mr. Ramsey, $200,000; Mr. Liebner $240,000; and Mr. Crowell, $210,000),
and entitles the executive to participate in stock option plans and other
generally available benefit programs.
Each executive participates in the Company's management incentive program
that provides bonuses to executive officers and other members of management
based upon the Company achieving certain financial and operating goals as well
as the achievement of individual objectives established for each participant.
Each employment agreement generally provides that each executive shall
receive certain severance benefits if: (i) the Company decides not to renew the
agreement for an additional term; (ii) the Company terminates the executive
without cause; (iii) the executive terminates the agreement for good reason; or
(iv) the executive becomes disabled and is unable to perform his duties.
If the Company decides not to renew the employment agreement, the executive
(except for Mr. Ramsey) will receive his base salary plus certain benefits for
one year (two years for Mr. Edwards). Mr. Ramsey's employment agreement does not
provide for a renewal term, and provides that he is not entitled to severance
benefits if he is terminated for any reason after June 2000. Should the Company
terminate the executive
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<PAGE> 13
without cause, the executive will receive his base salary plus certain benefits
for the greater of: (i) the remainder of the contract term; or (ii) one year
(two years for Mr. Edwards). If the executive terminates the agreement for good
reason, the agreement provides that the executive will receive his base salary
plus certain benefits for one year (two years for Mr. Edwards). Should the
executive become disabled and unable to perform his duties, the Company will
continue to pay the executive's salary for a period of six months (three months
for Mr. Ramsey and one year for Mr. Furman and Mr. Edwards).
In addition, each agreement provides for the Company to indemnify the
executive for certain liabilities arising from actions taken within the scope of
employment. Each employment agreement contains restrictive covenants pursuant to
which the executive has agreed not to compete with the Company or to solicit any
clients or employees of the Company for a period of two years (one year for Mr.
Furman) after the executive's employment ceases.
Mr. Bolin's employment agreement expired on January 1, 1998. See below for
a discussion of Mr. Bolin's consulting agreement entered into in March 1997. Mr.
Gillis resigned from the Company on June 1, 1998. Mr. Edwards' employment
agreement expires on December 30, 1998. See below for a discussion of a
consulting agreement to be entered into with Mr. Edwards effective January 1,
1999.
Change of control agreements entered into by Messrs. Furman, Bolin,
Edwards, Liebner, Crowell, and Gillis (the "Change of Control Agreements")
provide that in the event of a change of control and the surviving entity or
individuals in control do not offer such persons employment, terminate their
employment, or such persons terminate their employment for good reason, such
persons will receive two years' severance pay plus certain benefits, including
the acceleration of exercisability of their stock options or the payment of the
value of such stock options in the event they are not accelerated or replaced
with comparable options. For purposes of the Change of Control Agreements, "good
reason" includes a reduction of their respective duties and/or salary or the
surviving entity's failure to assume their respective employment and change of
control agreements. In the case of Mr. Liebner or Mr. Crowell, they are entitled
to receive benefits under the Change of Control Agreements if they elect to
terminate their employment for any or no reason within two years following a
change of control. For purposes of the Change of Control Agreements, a "change
of control" includes (i) the acquisition of beneficial ownership by certain
persons, acting alone or in concert with others, of 30% or more of the combined
voting power of the Company's then outstanding voting securities; (ii) during
any two-year period, Board members of the Company at the beginning of such
period cease to constitute at least a majority thereof (except that any new
Board member approved by at least two-thirds of the Board members then still in
office, who were directors at the beginning of such period, is considered to be
a member of the current Board); or (iii) approval by the Company's shareholders
of certain reorganizations, mergers, consolidations, liquidations or sales of
all or substantially all of the Company's assets. Mr. Bolin's Change of Control
Agreement terminated January 1, 1998 and Mr. Edwards' Change of Control
Agreement will terminate January 1, 1999.
In conjunction with their employment agreements, Messrs. Bolin, Edwards,
Liebner and Crowell entered into a Conditional Stock Grant Agreement (the "Stock
Grant Agreement"). Each Stock Grant Agreement provided for the issuance of
shares of Common Stock subject to certain transfer and forfeiture restrictions
and restricts the executive from transferring any shares issued thereunder until
the lapse of the forfeiture restrictions. Each stock grant agreement also
provides for the forfeiture of all shares issued to the executive thereunder if
the executive leaves the employ of the Company for any reason within the
two-year period after the date of the agreement and for the forfeiture of
certain shares after such period if the executive violates the noncompetition or
nonsolicitation covenants contained in the executive's employment agreement.
Mr. Rustand resigned as Chairman of the Board of Directors, President,
Chief Executive Officer and Director of the Company in August 1998. Upon his
resignation, the Company and Mr. Rustand entered into a Severance Agreement
dated August 24, 1998 (the "Severance Agreement.") Pursuant to the Severance
Agreement, Mr. Rustand will receive: (i) annual salary of $316,400 through
August 2000; (ii) deferred compensation pursuant to a Deferred Compensation
Agreement of approximately $65,000 for 1998; (iii) certain health, disability,
and other benefits through August 2000; and (iv) certain housing expenses
through January 1999. The Company will continue to pay the premiums through
August 2000 for a life
11
<PAGE> 14
insurance contract for $2,000,000 pursuant to a split dollar life insurance
agreement. In conjunction with the Severance Agreement, Mr. Rustand will have
until August 24, 2002 to exercise all of his issued and outstanding stock
options with the Company. The Company will waive any right under those stock
option agreements to repurchase shares acquired by Mr. Rustand upon exercise of
the stock options. The Restricted Stock granted to Mr. Rustand pursuant to the
Restricted Stock Agreement will continue to vest ratably through April 2000,
however, as the shares vest, the Company will not be obligated to pay any cash
award to Mr. Rustand in connection with his federal and state income tax
liability. The Severance Agreement also provides that Mr. Rustand will not, in
any manner whatsoever, engage in the same or similar business as the Company in
any geographical service area where the Company is engaged in business through
August 2000. The Company and Mr. Rustand executed a mutual release in connection
with his resignation. See "REPORT OF THE HUMAN
RESOURCE/COMPENSATION/ORGANIZATION COMMITTEE OF THE BOARD OF
DIRECTORS -- "Compensation of Chief Executive Officer" for a discussion of the
terms of Mr. Rustand's employment agreement and compensation for fiscal 1998.
Mr. Edwards' employment agreement will expire on December 31, 1998. Mr.
Edwards has announced his retirement as Executive Vice President of the Company
effective January 1, 1999. Pursuant to his employment agreement, Mr. Edwards is
entitled to receive an annual salary of $250,000 and certain health, disability,
and other benefits through December 2000. Mr. Edwards will have until June 2002
to exercise all of his issued and outstanding stock options with the Company.
Pursuant to his employment agreement, Mr. Edwards may not, in any manner
whatsoever, engage in the same or similar business as the Company in any
geographical service area where the Company is engaged in business through
December 2000. Mr. Edwards will be entering into a consulting agreement with the
Company for a six-month term, which will become effective on January 1, 1999.
Mr. Edwards' consulting agreement will provide that he will act as a special
consultant to the President of the Company for special assignments. Pursuant to
his consulting agreement, Mr. Edwards will receive a consulting fee of $3,500
per month. The consulting agreement will not alter or modify the Conditional
Stock Grant and Repurchase Agreement Mr. Edwards entered into on May 14, 1993.
The consulting agreement will provide for the same non-compete and
non-solicitation provisions as contained in the employment agreement described
above. The consulting agreement will provide that in the event of a change of
control, amounts due under the consulting agreement will be calculated and paid
in one lump sum within thirty days of the effective date of the change of
control. For purposes of the consulting agreement, a "change of control" will be
defined the same as in the Change of Control Agreements discussed above.
Mr. Bolin's consulting agreement provides that he will be engaged by the
Company as a special consultant through January 2002, and will serve the balance
of his term on the Board of Directors. The consulting agreement further provides
for an annual consulting fee of $118,000, and entitles Mr. Bolin to participate
in any benefit plans that the Company maintains for its employees. Payment of
the consulting fee will continue for the term of the consulting agreement if Mr.
Bolin is terminated without cause or if Mr. Bolin terminates the consulting
agreement for good reason and will continue for 12 months if Mr. Bolin should
become disabled. The consulting agreement will not alter or modify the
Conditional Stock Grant and Repurchase Agreement Mr. Bolin entered into on May
14, 1993, nor will it alter or modify several stock option agreements previously
entered into by Mr. Bolin. The consulting agreement provides for the same non-
compete and non-solicitation provisions as contained in the employment
agreements described above. The consulting agreement provides that in the event
of a change of control, amounts due under the consulting agreement will be
calculated and paid in one lump sum within thirty days of the effective date of
the change of control. Change of control is defined the same as in the Change of
Control Agreements discussed above.
EMPLOYEE STOCK OWNERSHIP PLAN
The ESOP is a tax-qualified employee stock ownership trust for the benefit
of current and former employees age 21 or over of the Company and its
subsidiaries. The ESOP was established in 1978 through the purchase from Louis
A. Witzeman, the Company's founder, of approximately 63% of the then outstanding
Common Stock of the Company in exchange for real estate and a note in the
principal amount of $728,000, with interest at 10% per annum, which note has
been paid in full. From time to time since the establishment of
12
<PAGE> 15
the ESOP, the Company has contributed newly issued shares and treasury shares of
Common Stock and cash as employer contributions. The ESOP has used such cash
contributions to pay the note to Mr. Witzeman and to repurchase shares of Common
Stock distributed from the ESOP. Cash contributions of $298,500, $171,000,
$30,000, and $200,000 were made for the fiscal years ended June 30, 1992, 1993,
1995, and 1997 respectively. Stock contributions of 11,685, 4,364, and 5,300
shares were made for the fiscal years ended June 30, 1995, 1996, and 1997
respectively. No contributions were made for the fiscal year ended June 30,
1998. As of June 30, 1998, there were approximately 12,000 participants in the
ESOP. Dean P. Hoffman and Barry Landon are the Trustees of the ESOP. The
Company's ESOP Advisory Committee is responsible for directing the Trustee in
the general administration of the ESOP. With respect to the shares of Common
Stock of the Company held by the ESOP, the participants in the ESOP are
authorized to control how votes are cast by giving instructions to the Trustee;
however, if and to the extent that the Trustee does not receive participant
instructions, the Trustee will vote the shares in accordance with instructions
from the Company's Advisory Committee. Each participant may control the voting
of such shares in the proportion that the value of that participant's benefit in
the ESOP fund bears to the total value of all benefits therein. The ESOP permits
any fully vested employee to receive an in-service distribution of up to 50% of
his or her account balance while employed by the Company. An in-service
distribution results in deferment of the receipt of the balance of such
employee's account until three years after the employee's termination of
employment other than as a result of the employee's retirement at the ESOP's
normal retirement age, disability, or death. Participants in the ESOP otherwise
may only request distribution of their ESOP account balance in shares of Common
Stock under certain circumstances including termination of employment, early
retirement, retirement, death and disability. In fiscal 1998, 45,779 shares were
so distributed. In addition, upon completion of 10 plan years of service and
attainment of age 55, participants have the right to direct the investment of
25% of their accounts into other diversified investments. Each participant's
account vests 20% after three years of service and 20% each additional year
thereafter.
1989 STOCK OPTION PLAN
The 1989 Stock Option Plan (the "1989 Plan") provides for the granting of
nonqualified stock options. Options may be issued to key employees and directors
of the Company or its subsidiaries ("Eligible Persons"). There are currently
options outstanding to acquire 142,625 shares of the Company's Common Stock
under the 1989 Plan. No more options will be issued under the 1989 Plan. The
expiration date, maximum number of shares purchasable and the other provisions
of the Options, including vesting provisions, were established at the time of
grant. Options were granted for terms of up to 10 years and become exercisable
in whole or in one or more installments at such time as was determined by the
Plan Administrator upon the grant of the Options. Exercise prices of Options
shall be the fair market value of the Common Stock at the time of the grant. In
the event of a change of control of the Company, all options will be terminated
and the optionholder must be paid in cash the difference between the fair market
value of his or her options and their exercise price.
1992 STOCK OPTION PLAN
General
The 1992 Plan, as amended, is divided into two programs: the Discretionary
Grant Program and the Automatic Option Program. The Discretionary Grant Program
provides for the granting of options to acquire Common Stock of the Company
("Options"), the direct granting of the Common Stock of the Company ("Stock
Awards"), the granting of stock appreciation rights ("SARs"), or the granting of
other cash awards ("Cash Awards") (Stock Awards, SARs and Cash Awards are
collectively referred to herein as "Awards"). Options and Awards under the 1992
Plan may be issued to executives, key employees, and others providing valuable
services to the Company and its subsidiaries. The Options issued may be
incentive stock options or nonqualified stock options. The Company believes that
the Discretionary Grant Program represents an important factor in attracting and
retaining executives and other key employees and constitutes a significant part
of the compensation program for employees. The Automatic Option Program provides
for the automatic grant of Options to acquire the Company's Common Stock
("Automatic Options"). Automatic Options are
13
<PAGE> 16
granted to members of the Company's Board of Directors who are not employed by
the Company ("Eligible Directors"). The Company believes that the Automatic
Option Program promotes the interests of the Company by providing such directors
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Company and an increased personal interest in its
continued success and progress.
If any change is made in the stock subject to the 1992 Plan, or subject to
any Option or SAR granted under the 1992 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, split-up, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
1992 Plan provides that appropriate adjustments will be made as to the maximum
number of shares subject to the 1992 Plan and the number of shares and exercise
price per share of stock subject to outstanding Options. An optionholder will
not have any of the rights of a stockholder with respect to optioned shares
until such holder exercises the Option.
Eligibility and Administration
Options and Awards may be granted only to persons ("Eligible Persons") who
at the time of grant are either (i) key personnel (including officers and
directors) of the Company or subsidiaries of the Company, or (ii) consultants
and independent contractors who provide valuable services to the Company or to
subsidiaries of the Company. Options that are incentive stock options may be
granted only to key personnel of the Company (and its subsidiaries) who are also
employees of the Company (or its subsidiaries).
The Eligible Persons under the Discretionary Grant Program are divided into
two groups, and there will be a separate administrator (a "Plan Administrator")
for each group. One group consists of Eligible Persons who are executive
officers and directors of the Company and all persons who own 10% or more of the
Company's issued and outstanding stock. The power to administer the
Discretionary Grant Program with respect to those persons may be vested either
with the Board of Directors or with a committee comprised of two or more
"Non-Employee Directors" (as such term is defined under Rule 16(b)(3)(i)
promulgated under the 1934 Act) who are appointed by the Board (the "Senior
Committee"). The Senior Committee, in its sole discretion, may require approval
of the Board of Directors for specific grants of Options or Awards under the
Discretionary Grant Program. Members of the Senior Committee may participate in
the Discretionary Grant Program as permitted by the Rules. The second group
consists of Eligible Persons who are not executive officers or directors of the
Company and those who do not own 10% or more of the Company's issued and
outstanding stock. The power to administer the Discretionary Grant Program with
respect to the second group of Eligible Persons may be vested exclusively with
the Board of Directors of the Company or with a committee of two or more
directors. Each Plan Administrator will determine (a) which of the Eligible
Persons in its group will be granted Options and Awards, (b) the amount and
timing of such grant, and (c) such other terms and conditions as may be imposed
by the Plan Administrator consistent with the 1992 Plan.
To the extent that granted Options are incentive stock options, the terms
and conditions of those Options must be consistent with the qualification
requirements set forth in the Internal Revenue Code of 1986, as amended (the
"Code"). The maximum number of shares of stock with respect to which Options or
Awards may be granted to any employee during the term of the 1992 Plan may not
exceed 25% of the shares of stock covered by the 1992 Plan.
Exercise of Options
The expiration date, maximum number of shares purchasable and the other
provisions of the Options, including vesting provisions, are established at the
time of grant. Options may be granted for terms of up to 10 years. Options vest
and thereby become exercisable in whole or in one or more installments at such
time as may be determined by the Plan Administrator upon the grant of the
Options. However, a Plan Administrator has the discretion to provide for the
automatic acceleration of the vesting of any Options or Awards granted under the
Discretionary Grant Program in the event of a "Change in Control" (as defined in
the 1992 Plan).
The exercise prices of Options are determined by the Plan Administrator,
but if the Option is intended to be an incentive stock option, it may not be
less than 100% (110% if the Option is granted to a stockholder who
14
<PAGE> 17
at the time the Option is granted owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of its
subsidiaries) of the fair market value of the Common Stock at the time of the
grant.
Options or Awards granted pursuant to the Discretionary Grant Program may
be assigned, encumbered or otherwise transferred by the optionholder or grantee
if specifically allowed by the Plan Administrator upon the grant of such Option
or Award. If any optionholder ceases to be employed by the Company for a reason
other than disability, such optionholder or the optionholder's successor may,
within three months after the termination of such employment, exercise some or
all of the vested incentive stock options held by such employee. If the
optionholder ceases to be employed due to disability, the three-month period is
extended to 12 months. However, termination for cause terminates all Options
held by such employee.
Under the 1992 Plan, Options which are not incentive stock options and
which are outstanding at the time an optionholder's service to the Company
terminates will remain exercisable for such period of time thereafter as
determined by the Plan Administrator. However, if the optionholder is discharged
for cause, all Options held by such optionholder will terminate.
Awards
The Plan Administrators also may grant Awards to Eligible Persons under the
1992 Plan. Awards may be granted in the form of SARs, Stock Awards or Cash
Awards. Through June 30, 1998, Stock Awards in the amount of 35,916 shares have
been granted under the 1992 Plan.
Awards granted in the form of SARs entitle the recipient to receive a
payment equal to the appreciation in market value of a stated number of shares
of Common Stock from the price stated in the award agreement to the market value
of the Common Stock on the date first exercised or surrendered. The Plan
Administrators may determine, consistent with the 1992 Plan, such terms,
conditions, restrictions and limitations, if any, on any SARs.
Awards granted in the form of Stock Awards entitle the recipient to receive
Common Stock directly. Awards granted in the form of cash entitle the recipient
to receive direct payments of cash depending on the market value or the
appreciation of the Common Stock or other securities of the Company. The Plan
Administrators may determine such other terms, conditions and limitations, if
any, on any Awards.
The 1992 Plan provides that it is not intended to be the exclusive means by
which the Company may issue options or warrants to acquire its Common Stock,
stock awards or any other type of award. To the extent permitted by applicable
law, the Company may issue any other options, warrants, or awards other than
pursuant to the 1992 Plan without stockholder approval.
Terms and Conditions of Automatic Options
The 1992 Plan provides that (i) each year at the meeting of the Board of
Directors held immediately after the annual meeting of stockholders, each
Eligible Director will be granted an Automatic Option to acquire 2,500 shares of
Common Stock (except that the Chairman of the Board will receive an Automatic
Option to acquire 5,000 shares if the chairman is an Eligible Director), and
(ii) each year each Eligible Director will receive an Automatic Option (the
"Formula Option") to acquire a number of shares equal to 1,000 shares for each
$0.05 EPS Increase, subject to a maximum of 5,000 shares of stock per Eligible
Director. For purposes of the foregoing, "EPS Increase" means the amount by
which earnings per share for the most recent fiscal year exceeds the earnings
per share for the previous fiscal year. Automatic Options (other than the
Formula Options) will vest one day prior to the next annual meeting of
stockholders after the applicable grant date unless the next annual meeting of
stockholders occurs less than six months after the applicable grant date, in
which case the Automatic Option will vest on the first anniversary of the
applicable grant date. Each Formula Option will vest on the first anniversary of
the applicable grant date.
The 1992 Plan will grant new Eligible Directors Automatic Options to
acquire 10,000 shares of Common Stock on the date of their first appointment or
election to the Board. Such Automatic Options granted to new Eligible Directors
vest one day prior to the next annual meeting of stockholders that occurs after
the
15
<PAGE> 18
applicable grant date unless the next annual meeting of stockholders occurs less
than six months after the applicable grant date, in which case the Automatic
Options become exercisable and vest on the first anniversary of the applicable
grant date. An Eligible Director is not eligible to receive the 2,500 share
Automatic Option or the Formula Option if that grant date is within 30 days of
such Eligible Director receiving the 10,000 share Automatic Option.
The 1992 Plan provides that, in the event of a Change in Control, all
unvested Automatic Options will automatically accelerate and immediately vest so
that each outstanding Automatic Option will, immediately prior to the effective
date of such Change in Control, become fully exercisable.
The exercise price per share of stock subject to each Automatic Option is
equal to the 100% of the fair market value per share on the date of the grant of
the Automatic Option. Each Automatic Option expires on the tenth anniversary of
the date. Eligible Directors also may be eligible to receive Options or Awards
under the Discretionary Option Program or option grants or direct stock
issuances under any other plans of the Company. Cessation of service on the
Board terminates any Automatic Options for shares that were not vested at the
time of such cessation. Automatic Options are nontransferable other than by will
or the laws of descent and distribution on the death of the optionholder and,
during the lifetime of the optionholder, are exercisable only by such
optionholder.
Duration and Modification
The 1992 Plan will remain in force until November 5, 2002. The Board of
Directors of the Company at any time may amend the 1992 Plan except that,
without the approval by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of the Company, the Board of Directors may
not (i) increase, except in the case of certain organic changes to the Company,
the maximum number of shares of Common Stock subject to the 1992 Plan, (ii)
reduce the exercise price at which Options may be granted or the exercise price
for which any outstanding Option may be exercised, (iii) extend the term of the
1992 Plan, (iv) change the class of persons eligible to receive Options or
Awards under the 1992 Plan, or (v) materially increase the benefits accruing to
participants under the 1992 Plan. In addition, the Board may not, without the
consent of the optionholder, take any action that disqualifies any Option
previously granted under the 1992 Plan for treatment as an incentive stock
option or which adversely affects or impairs the rights of the optionholder of
any outstanding Option. Notwithstanding the foregoing, the Board of Directors
may amend the 1992 Plan from time to time as it deems necessary in order to meet
the requirements of any amendments to Rule 16b-3 under the 1934 Act without the
consent of the stockholders of the Company.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
Certain options granted under the 1992 Plan will be intended to qualify as
incentive stock options under Code Section 422. Accordingly, there will be no
taxable income to an employee when an incentive stock option is granted to him
or her when that option is exercised. The amount by which the fair market value
of the shares at the time of exercise exceeds the option price generally will be
treated as an item of preference in computing the alternate minimum taxable
income of the optionholder. If an optionholder exercises an incentive stock
option and does not dispose of the shares within either two years after the date
of the grant of the option or one year after the date the shares were
transferred to the optionholder, any gain realized upon disposition will be
taxable to the optionholder as a capital gain. If the optionholder does not
satisfy the applicable holding periods, however, the difference between the
option price and the fair market value of the shares on the date of exercise of
the option will be taxed as ordinary income, and the balance of the gain, if
any, will be taxed as capital gain. If the shares are disposed of before the
expiration of the one-year or two-year periods and the amount realized is less
than the fair market value of the shares at the date of exercise, the employee's
ordinary income is limited to the amount realized less the option exercise price
paid. The Company will be entitled to a tax deduction only to the extent the
optionholder has ordinary income upon the sale or other disposition of the
shares received when the option was exercised.
Certain other options issued under the 1992 Plan, including options issued
automatically to the non-employee members of the Board of Directors, will be
nonqualified options. The income tax consequences of
16
<PAGE> 19
nonqualified options will be governed by Code Section 83. Under Code Section 83,
the excess of the fair market value of the shares of the Common Stock acquired
pursuant to the exercise of any option over the amount paid for such stock
(hereinafter referred to as "Excess Value") must be included in the gross income
of the optionholder in the first taxable year in which the Common Stock acquired
by the optionholder is not subject to a substantial risk of forfeiture. In
calculating Excess Value, fair market value will be determined on the date that
the substantial risk of forfeiture expires, unless a Section 83(b) election is
made to include the Excess Value in income immediately after the acquisition, in
which case fair market value will be determined on the date of the acquisition.
Generally, the Company will be entitled to a federal income tax deduction in the
same taxable year that the optionholder recognizes income. The Company will be
required to withhold income tax with respect to income reportable pursuant to
Code Section 83 by an optionholder. The basis of the shares acquired by an
optionholder will be equal to the option price of those shares plus any income
recognized pursuant to Code Section 83. Subsequent sales of the acquired shares
will produce capital gain or loss. Such capital gain or loss will be long term
if the stock has been held for one year from the date of the substantial risk of
forfeiture lapsed, or, if a Section 83(b) election is made, one year from the
date the shares were acquired.
EMPLOYEE STOCK PURCHASE PLAN
The Company has adopted an Employee Stock Purchase Plan (the "ESPP"), which
allows eligible employees of the Company to purchase shares of Common Stock at
semi-annual intervals through periodic payroll deductions under the ESPP. The
ESPP is intended to promote superior levels of performance from, and to
encourage stock ownership by, eligible employees of the Company by increasing
their interest in the success of the Company. The ESPP is designed to meet this
goal by offering financial incentives for employees to purchase Common Stock of
the Company, thereby increasing the interest of employees in pursuing the
long-term growth, profitability and financial success of the Company. The Board
has reserved 450,000 shares of Common Stock for this purpose. The purchase price
per share is the lower of (i) 85% of the closing price of the Company's Common
Stock on the offering commencement date, or (ii) 85% of the closing price of the
Company's Common Stock on the offering termination date. Prior to January 1,
1998, the purchase price per share, in general, was 85% of the closing stock
price of the Company's Common stock on the participant's entry date into the
offering period. The purchase price is to be paid through periodic payroll
deductions not to exceed 10% of the participant's earnings due each semi-annual
period of participation within the offering period. However, no participant may
purchase more than $25,000 worth of Common Stock annually.
The purchase right of a participant will terminate automatically in the
event the participant ceases to be an employee of the Company, and any payroll
deductions collected from such individual during the semi-annual period in which
such termination occurs will be refunded. However, in the event of the
participant's disability or death, such payroll deduction may be applied to the
purchase of the Common Stock on the next semi-annual purchase date.
The ESPP provides for annual offerings through the end of July 2003.
401(k) PLAN
The Company has a contributory retirement plan (the "401(k) Plan") for the
majority of its employees with at least one year of service. The 401(k) Plan is
designed to provide tax-deferred income to the Company's employees in accordance
with the provisions of Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code").
The 401(k) Plan provides that each participant may contribute up to 12% of
his or her salary (not to exceed the statutory limit). The Company has
historically elected to make a fixed matching contribution to each participant's
account of up to 2% of total annual cash compensation received by respective
participants and a discretionary matching contribution in an amount equal to a
percentage determined by the Board of Directors of the contribution made by
participants. Discretionary matching contributions vest over a period of seven
years. All contributions by participants and fixed matching contributions of the
Company vest immediately. Under the terms of the 401(k) Plan, the Company also
may make discretionary profit sharing contributions. Profit sharing
contributions are allocated among participants based on their annual compensa-
17
<PAGE> 20
tion. Each participant has the right to direct the investment of his or her
funds among certain named plans. Company contributions may be made in shares of
the Company's Common Stock.
Upon death, disability, retirement or the termination of employment,
participants may elect to receive periodic or lump sum payments. Additionally,
amounts may be withdrawn in cases of demonstrated hardship. Amounts contributed
to the 401(k) Plan by the Company for the Named Executive Officers are set forth
in the Summary Compensation Table under the caption "EXECUTIVE COMPENSATION."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1998, the Company's Human
Resource/Compensation/Organization Committee consisted of Mr. Rustand, the
Company's former Chief Executive Officer and former director, Messrs. Clement,
Turner, Walker, and Ms. Carpenter, currently directors of the Company.
COMPLIANCE WITH SECTION 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on the Company's review of the copies of such forms received
by it during the fiscal year ended June 30, 1998, and written representations
that no other reports were required, the Company believes that each person who,
at any time during such fiscal year, was a director, officer or beneficial owner
of more than 10% of the Company's Common Stock complied with all Section 16(a)
filing requirements during such fiscal year or prior fiscal years, except that
during fiscal year 1998, Mr. Ramsey filed four late Forms 4 covering eight
transactions, Mr. Edwards filed two late Forms 4 covering two transactions, Mr.
Clement filed one late Form 4 covering three transactions, Mr. Jekel filed one
late Form 4 covering one transaction, and John E. Stuart, a former Senior Vice
President of the Company, filed two late Forms 4 covering six transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid approximately $148,000 for the fiscal year ended June 30,
1998 for legal services to Jekel & Howard, attorneys at law, of which Mr. Jekel
is a principal. The Company believes that these services were provided on terms
no less favorable to the Company than could have been obtained from an unrelated
firm. Mr. Jekel is a participant in the Company's ESOP. Mr. Jekel also receives
$1,000 per month for services rendered to the Company and for serving on the
Board of Directors. Such services are terminable at will by the Company.
The Company paid approximately $50,000 for the year ended June 30, 1998 to
Louis A. Witzeman under leases for five fire and ambulance stations. These
leases can be cancelled by the Company at any time. The Company believes that
these transactions are on terms no less favorable to the Company than could have
been obtained from unrelated third parties. Mr. Witzeman received $102,000 for
the fiscal year ended June 30, 1998 for fire protection and EMS advisory and
consulting services and for serving on the Board of Directors. The Company also
provides Mr. Witzeman with an automobile for personal use.
The Company paid approximately $882,000 for the year ended June 30, 1998 to
companies owned by Robert E. Ramsey, Jr. under leases for various offices and
ambulances stations. The Company believes that these transactions are on terms
no less favorable to the Company than could have been obtained from unrelated
third parties.
All future transactions between the Company and its officers, directors and
principal stockholders are expected to be on terms no less favorable to the
Company than could be obtained from unaffiliated persons and will require the
approval of the Company's independent directors.
18
<PAGE> 21
REPORT OF THE HUMAN RESOURCE/COMPENSATION/ORGANIZATION
COMMITTEE OF THE BOARD OF DIRECTORS
GENERAL
The Human Resource/Compensation/Organization Committee of the Board of
Directors (the "Committee") administers the compensation programs for the
Company's executive officers. The Committee is composed exclusively of
independent, non-employee directors who are not eligible to participate in any
of management's programs.
The Committee presents the following report on the compensation for the
Company's executive officers for fiscal 1998.
OVERVIEW AND PHILOSOPHY
The Company's executive compensation programs are based on the belief that
the interests of executive officers should be directly aligned with those of the
stockholders. The programs are strongly oriented toward a pay-for-performance
philosophy that includes a significant percentage of variable compensation, and
results in executives accumulating significant equity positions in the Company's
Common Stock. The Committee has established the following principles to guide
development of the Company's compensation programs and to provide a framework
for compensation decisions:
- provide a total compensation package that will attract the best talent to
the Company, motivate individuals to perform at their highest levels,
reward outstanding performance, and retain executives whose skills are
critical for building long-term stockholder value;
- establish annual incentives for senior management that are directly tied
to the overall financial performance of the Company; and
- implement longer-term incentives that focus executive officers on
managing from the perspective of an owner with an equity stake in the
business, principally by the granting of Company stock and stock options.
COMPENSATION PROGRAMS AND PRACTICES
The Committee determines salary ranges and incentive award opportunities
for all corporate officers. The Company's management compensation program
consists of cash and equity based components.
Cash Component: Cash compensation is designed to fluctuate with Company
performance. In the years that the Company exhibits superior
performance, cash compensation is designed to generally be above average
levels; when financial performance is below goal, cash compensation is
designed to be below average competitive levels. This is achieved
through the Management Incentive Plan (MIP), which is paid out annually
only if predetermined quantitative and qualitative goals are attained.
Base Pay: Base pay guidelines are established for Company officers
and managers based on their relative job content. Individual base pay
within the guidelines is based on sustained individual performance
toward achieving the Company's goals. Annual modifications to base
pay levels are proposed by the President and approved by the
Committee each August. Base pay modifications for executive officers
averaged approximately 9% in fiscal 1998.
Management Incentive Plan: The MIP is an annual cash incentive plan.
At the beginning of each fiscal year, performance contracts are
created between the Company and the executive that document the
executive's accountabilities, and define levels of performance on
those accountabilities. A portion of the performance contract is
weighted to the overall financial performance of the Company, and a
portion is weighted to the executive's particular area of
responsibility. MIP opportunity for executive officers can be as high
as 80% of the base pay
19
<PAGE> 22
midpoint of the executive officer's pay range. During fiscal year
1998, the Company made no payments under the MIP.
Equity-based Component: The Company has a long history of encouraging
employees to become stockholders. In 1978, the Company formed an
Employee Stock Ownership Plan (ESOP) for the benefit of all qualified
employees. Over 90% of the Company's full and part-time employees are
beneficiaries of the ESOP trust. In 1989, the Company implemented its
first stock option plan through which the Company could grant qualified
and non-qualified stock options to management employees. The Company
believes that equity-based compensation in the form of the ESOP and
stock options links the interests of management and stockholders by
focusing employees and management on increasing stockholder value. The
actual value of such equity-based compensation depends entirely on the
future appreciation of the Company's stock. The Board grants stock
options using criteria consistent with the level of an executive's
anticipated impact on the Company's goals and objectives. A description
of the Company's stock option plans is set forth under "EXECUTIVE
COMPENSATION." See "EXECUTIVE COMPENSATION -- OPTION GRANTS" for options
granted to executive officers during fiscal 1998.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee uses the same factors and criteria described above in making
compensation decisions regarding the Chief Executive Officer. Mr. Rustand was
compensated pursuant to his employment agreement. During the fiscal year ended
June 30, 1998, Mr. Rustand's base pay was $314,600. His employment agreement
also provided for a credit of $100,000 per year in deferred compensation and
reimbursements for certain housing, travel, moving and other expenses incurred
in Phoenix and Tucson. In conjunction with his employment agreement, Mr. Rustand
received a grant of 27,500 shares of restricted stock vesting over four and
one-half years under the 1992 Plan pursuant to a Restricted Stock Agreement
together with a cash award as shares vest in an amount sufficient to pay
associated federal and state income taxes. During fiscal year 1998, 5,500 shares
vested pursuant to the Restricted Stock Agreement, and Mr. Rustand received a
cash award of $145,125 required to pay the associated federal and state income
taxes. The Company also pays the premiums on an insurance policy in the amount
of $2,000,000 pursuant to a split dollar life insurance agreement. The Company
did not make any payments to Mr. Rustand under the MIP during the year. See the
table under "EXECUTIVE COMPENSATION -- OPTION GRANTS" for information regarding
options granted to Mr. Rustand in fiscal 1998.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993 and effective
in 1994, generally disallows a tax deduction to public companies for
compensation in excess of $1 million paid to each of the corporation's chief
executive officer and four other most highly compensated executive officers.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met.
The Company currently intends to structure the performance-based portion of
the compensation of its executive officers in a manner that complies with
Section 162(m).
Members of the Human Resource/
Compensation/Organization Committee
Warren S. Rustand
Cor J. Clement
William C. Turner
Henry G. Walker
Mary Anne Carpenter
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<PAGE> 23
COMPANY PERFORMANCE GRAPH
The following line graph compares cumulative total stockholder return,
assuming reinvestment of dividends, for: (i) the Common Stock; (ii) NASDAQ
Combined Composite Index; and (iii) the Russell 2000 Index. Because the Company
did not pay dividends on its Common Stock during the measurement period, the
calculation of the cumulative total stockholder return on the Common Stock did
not include dividends. The Russell 2000 Index is included because it is
comprised of publicly traded issuers with total market capitalization of between
$222.0 million to $1.4 billion, which is similar to the Company's total average
market capitalization during the fiscal year ended June 30, 1998. Because of the
small number of publicly traded companies in the Company's peer group, the
Company does not believe it can reasonably identify a group of peer issuers. The
graph assumes $100 was invested on July 16, 1993 (the date on which the Company
consummated its initial public offering and was registered under Section 12 of
the Exchange Act).
<TABLE>
<CAPTION>
Rural/Metro NASD Combined
Corporation Composite Index Russell 2000 Index
<S> <C> <C> <C>
7/16/93 100 100 100
6/30/94 132 100 102
6/30/95 178 132 120
6/30/96 274 168 147
6/30/97 232 205 168
6/30/98 104 269 193
</TABLE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Andersen LLP, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending June 30, 1999 and recommends that
stockholders vote in favor of the ratification of such appointment. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its selection. The Board of Directors anticipates that representatives of Arthur
Andersen LLP will be present at the Meeting, will have the opportunity to make a
statement if they desire, and will be available to respond to appropriate
questions.
21
<PAGE> 24
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals that are intended to be presented by stockholders at
the annual meeting of stockholders of the Company for the fiscal year ending
June 30, 1999, to be included in the proxy statement and form of proxy relating
to such meeting, must be received by the Company no later than June 11, 1999.
Under the Company's bylaws, certain procedures are provided that a stockholder
must follow to nominate persons for election as a director or to introduce an
item of business at an annual meeting of stockholders. To be timely under these
procedures, notice of such nomination or business must be received by the
Company no later than: (i) 60 days prior to the annual meeting if such meeting
is to be held on a day that is between October 20, 1999 and November 19, 1999;
(ii) 90 days in advance of the annual meeting if the meeting is to be held on or
after November 19, 1999; or (iii) if the annual meeting is to be held on another
date, on or before the close of business on the 15th day following the date of
public disclosure of the date of such meeting.
Pursuant to Rule 14a-4 under the Exchange Act, the Company intends to
retain discretionary authority to vote proxies with respect to shareholder
proposals for which the proponent does not seek inclusion of the proposed matter
in the Company's proxy statement for the annual meeting to be held during
calendar 1999, except in circumstances where (i) the Company receives notice of
the proposed matter no later than August 25, 1999, and (ii) the proponent
complies with the other requirements set forth in Rule 14a-4.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting. If
any other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
Dated: October 7, 1998
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<PAGE> 25
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RURAL/METRO CORPORATION
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of RURAL/METRO CORPORATION, a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of the Company, each dated October 7, 1998, and
hereby appoints James H. Bolin and Louis G. Jekel, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1998 Annual Meeting
of Stockholders of the Company, to be held on November 19, 1998, at 10:00 a.m.,
local time, at the offices of the Company, 8401 East Indian School Road,
Scottsdale, Arizona, and at any adjournment or adjournments thereof, and to vote
all shares of Common Stock that the undersigned would be entitled to vote if
then and there personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS:
[ ] FOR the three nominees listed below, except as indicated
[ ] WITHHOLD AUTHORITY to vote for the three nominees listed below
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below:
Robert E. Ramsey, Jr., Mary Anne Carpenter, Louis A. Witzeman
(Continued on reverse side)
<PAGE> 26
(Continued from reverse side)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and upon such other matters that may properly come before the meeting or any
adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
FOR THE ELECTION OF DIRECTORS; FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR
ANDERSEN LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY; AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
A majority of such attorneys or
substitutes as shall be present and shall
act at said meeting or any adjournment or
adjournments thereof (or if only one
shall be present and act, then that one)
shall have and may exercise all of the
powers of said attorneys-in-fact
hereunder.
Date:
--------------------------------------------------------,
1998
-----------------------------------------
Signature
-----------------------------------------
Signature
(This Proxy should be dated, signed by
the stockholder(s) exactly as his or her
name appears hereon, and returned
promptly in the enclosed envelope.
Persons signing in a fiduciary capacity
should so indicate. If shares are held by
joint tenants or as community property,
both stockholders should sign.)
