<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:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
RURAL/METRO CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 13, 2000
------------------------
The Annual Meeting of Stockholders of Rural/Metro Corporation, a Delaware
corporation, will be held at 10:00 a.m. (local time), on December 13, 2000, at
our corporate headquarters at 8401 East Indian School Road, Scottsdale, Arizona,
for the following purposes:
1. To elect two directors for three-year terms expiring in 2003.
2. To approve an amendment to our Employee Stock Purchase Plan to increase
the number of shares of our common stock that may be purchased pursuant
to the plan from 450,000 to 1,150,000 shares.
3. To ratify the appointment of Arthur Andersen LLP as our independent
auditors for the fiscal year ending June 30, 2001.
4. 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 16, 2000
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,
/s/ Louis G. Jekel
Louis G. Jekel
Secretary
Scottsdale, Arizona
November 8, 2000
<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, by our board of directors for use at the Annual Meeting of
Stockholders to be held at 10:00 a.m. (local time), on December 13, 2000, 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 our corporate headquarters at 8401 East Indian School Road,
Scottsdale, Arizona.
These proxy solicitation materials were first mailed on or about November
10, 2000, to all stockholders entitled to vote at the meeting.
VOTING SECURITIES AND VOTING RIGHTS
Stockholders of record at the close of business on October 16, 2000, are
entitled to notice of and to vote at the meeting. On the record date, there were
issued and outstanding 14,626,336 shares of our 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 our common stock present in
person or represented by proxy at the meeting and entitled to vote is required
(i) to approve the amendment to our Employee Stock Purchase Plan to increase the
shares of our common stock that may be purchased pursuant to the plan and (ii)
to ratify the appointment of Arthur Andersen LLP as our independent auditors for
the fiscal year ending June 30, 2001. The two nominees for director receiving
the highest number of affirmative votes duly cast will be elected as directors
for three year terms expiring in 2003.
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, (ii) "for" approval of the amendment to the Employee Stock
Purchase Plan to increase the shares of our common stock that may be issued
pursuant to the plan, and (iii) "for" the ratification of the appointment of
Arthur Andersen LLP as our independent auditors for the fiscal year ending June
30, 2001.
<PAGE> 4
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its use
by delivering to us written notice of revocation or a duly executed proxy
bearing a later date or by attending the meeting and voting in person.
SOLICITATION
We will pay the costs of this solicitation. In addition, we may reimburse
brokerage firms and other persons representing beneficial owners of shares for
expenses incurred in forwarding solicitation materials to beneficial owners.
Proxies also may be solicited by certain of our directors and officers
personally by telephone, or e-mail without additional compensation.
ANNUAL REPORT AND OTHER MATTERS
The 2000 Annual Report to Stockholders, which was mailed to stockholders
with or preceding this proxy statement, contains financial and other information
about our activities, 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" and "Company Performance Graph" below shall
not be deemed "filed" with the Securities and Exchange Commission or subject to
Regulations 14A or 14C or to the liabilities of Section 18 of the Securities
Exchange Act of 1934.
WE WILL PROVIDE UPON WRITTEN REQUEST, WITHOUT CHARGE TO EACH STOCKHOLDER OF
RECORD AS OF THE RECORD DATE, A COPY OF OUR ANNUAL REPORT ON FORM 10-K/A FOR THE
YEAR ENDED JUNE 30, 2000 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
ANY EXHIBITS LISTED IN THE FORM 10-K/A REPORT ALSO WILL BE FURNISHED UPON
REQUEST AT THE ACTUAL EXPENSES WE INCUR IN FURNISHING SUCH EXHIBITS. ANY SUCH
REQUESTS SHOULD BE DIRECTED TO OUR SECRETARY AT OUR 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 our common stock on October 16, 2000 by (i) each
director; (ii) the executive officers set forth in the Summary Compensation
Table under the section entitled "Executive Compensation;" (iii) all of our
directors and executive officers as a group; and (iv) each person known by us to
be the beneficial owner of more than 5% of our common stock.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)(2)(3) PERCENT(2)
------------------------ -------------- ----------
<S> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Jack E. Brucker............................................. 124,000(4) *
Dr. Michel Sucher........................................... 153,005(5) 1.0
Robert B. Hillier........................................... 72,934(4) *
John S. Banas III........................................... 63,333(4) *
Cor J. Clement.............................................. 33,250(6) *
Louis G. Jekel.............................................. 149,299(7) 1.0
William C. Turner........................................... 35,500(8) *
Henry G. Walker............................................. 22,500(4) *
Mary Anne Carpenter......................................... 20,000(4) *
Louis A. Witzeman........................................... 154,648(9) 1.0
John B. Furman.............................................. 265,005(10) 1.8
Robert E. Ramsey............................................ 519,773(11) 3.5
Mark E. Liebner............................................. 247,499(12) 1.7
Executive officers and directors as a group (10 persons).... 828,469 5.4
5% STOCKHOLDERS:
ESOP........................................................ 848,330(13) 5.4
Mark S. Howells............................................. 1,000,000(14) 6.8
</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) The percentages shown are calculated based upon 14,626,336 shares of common
stock outstanding on October 16, 2000. The number and percentages shown
include the shares of common stock actually owned as of October 16, 2000
and the shares of common stock that the identified person or group had a
right to acquire within 60 days after October 16, 2000. In calculating the
percentage of ownership, 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 the following fully vested shares of common stock held by the ESOP
for the benefit of the following individuals: four shares for Mr. Brucker,
1,097 shares for Dr. Sucher, two shares for Mr. Hillier, 5,664 shares for
Mr. Jekel, 1,035 shares for Mr. Liebner, and four shares for Mr. Ramsey.
These persons have sole voting power with respect to the shares held in
their account by the ESOP.
(4) Represents shares of common stock issuable upon exercise of stock options.
3
<PAGE> 6
(5) Includes 118,920 shares of common stock issuable upon exercise of stock
options.
(6) Includes 21,250 shares of common stock issuable upon exercise of stock
options.
(7) Includes 75,000 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.
(8) Includes 27,500 shares of common stock issuable upon exercise of stock
options.
(9) Includes 36,062 shares held by the Louis A. Witzeman, Jr. Family Investment
Limited Partnership, of which 6,650 shares are held for the benefit of
other family members. Also includes 69,375 shares of common stock issuable
upon the exercise of stock options.
(10) Includes 263,005 shares of common stock issuable upon exercise of stock
options.
(11) Includes 26,250 shares of common stock issuable upon exercise of stock
options. Does not include 315,253 shares held by the Ramsey SW Revocable
Trust dated August 31, 1999, Robert L'Ecuyer, Trustee.
(12) Includes 185,780 shares of common stock issuable upon exercise of stock
options.
(13) Represents 848,330 shares of common stock owned by the Rural/Metro
Corporation Employee Stock Ownership Plan. Participants under the ESOP have
voting power as to shares allocated to their account and the ESOP trustee
has voting power as to unallocated shares and as to any shares for which
participants have chosen not to vote. The ESOP has sole dispositive power
over all of these shares of common stock. The address of the Rural/Metro
Corporation Employee Stock Ownership Plan is c/o Rural/Metro Corporation,
8401 East Indian School Road, Scottsdale, Arizona 85251.
(14) Represents 1,000,000 shares of common stock beneficially owned by Mark S.
Howells. Mr. Howells has sole voting and dispositive power of all of such
shares. The address of Mr. Howells is c/o Arizona Securities Group, 2390
East Camelback Road, Suite 203, Phoenix, Arizona 85016.
PROPOSAL TO ELECT DIRECTORS
NOMINEES
Our 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 seven 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. WALKER and MR. CLEMENT for re-election as Class III directors for three-year
terms expiring in 2003 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 either
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 above.
4
<PAGE> 7
The following table sets forth certain information regarding our directors
and nominees for director.
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRES
---- --- -------- -------
<S> <C> <C> <C>
Cor J. Clement............ 51 Chairman of the Board and Director (3) 2000
Jack E. Brucker........... 48 President, Chief Executive Officer, and Director 2001
Louis G. Jekel............ 58 Vice Chairman of the Board, Secretary, and Director 2002
Mary Anne Carpenter....... 54 Director (1)(4) 2001
William C. Turner......... 70 Director (1)(2)(3)(4) 2002
Henry G. Walker........... 52 Director (1)(3)(4) 2000
Louis A. Witzeman......... 74 Director (1)(2) 2001
</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 Chairman of our Board of Directors since
August 1998 and as a member of our Board of Directors since May 1992. Mr.
Clement served as Vice Chairman of the Board of Directors from August 1994 to
August 1998. 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.
JACK E. BRUCKER has served as our President and Chief Executive Officer and
has been a member of our Board of Directors since February 2000. Mr. Brucker
served as our Senior Vice President and Chief Operating Officer from December
1997 until February 2000. Mr. Brucker founded and served as President of Pacific
Holdings, a strategic consulting firm, from July 1989 until December 1997. Mr.
Brucker served as President of Pacific Precision Metals, a consumer products
company, from September 1987 until June 1989.
LOUIS G. JEKEL has served as our Secretary and as a member of our Board of
Directors since 1968 and as Vice Chairman of our Board of Directors since August
1998. Mr. Jekel directs our 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, Scottsdale, Arizona.
MARY ANNE CARPENTER has been a member of our Board of Directors 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.
WILLIAM C. TURNER has been a member of our Board of Directors since
November 1993. Mr. Turner is currently Chairman and Chief Executive of Argyle
Atlantic Corporation, an international merchant banking and management
consulting firm; a director of the Goodyear Tire & Rubber Company; a director of
Microtest, Inc.; a trustee and executive committee member of the United States
Council for International Business; and a Trustee and past Chairman of the
American Graduate School of International Management (Thunderbird). Mr. Turner
is also a former United States Ambassador and permanent representative to the
Organization for Economic Cooperation and Development.
HENRY G. WALKER has been a member of our Board of Directors since September
1997. Since April 1997, he has served as President and Chief Executive Officer
of the Sisters of Providence Health System, comprised of hospitals, long-term
care facilities, physician practices, managed care plans, and other health and
social services. From 1996 to March 1997, Mr. Walker served as President and
Chief Executive Officer of Health Partners of Arizona, a state-wide managed care
company. From 1992 to 1996, he served as President and Chief Executive Officer
of Health Partners of Southern Arizona, a healthcare delivery system. Mr. Walker
is a
5
<PAGE> 8
member of the National Advisory Council of the Healthcare Forum, and also serves
as a director of Consolidated Catholic Healthcare a private non-profit company.
LOUIS A. WITZEMAN is the founder of our company. Mr. Witzeman has served
as a member of our Board of Directors since our formation in 1948, currently
serving as Chairman of the Board Emeritus. Mr. Witzeman served as our Chief
Executive Officer 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 our directors or officers.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Our bylaws authorize the Board of Directors to appoint among its members
one or more committees composed of one or more directors. As of November 8, 2000
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 our key executives. 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 one formal meeting
during the fiscal year ended June 30, 2000.
Nominating Committee. The Nominating Committee reviews credentials of
existing and prospective directors and selects classes of directors. The
Nominating Committee did not meet during the fiscal year ended June 30, 2000.
Executive Committee. 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. The Executive Committee did not
meet during the fiscal year ended June 30, 2000.
Audit Committee. The Audit Committee reviews the annual financial
statements and significant accounting issues and the scope of the audit with our
independent auditors and is available to discuss with the auditors any other
audit related matters that may arise during the year. The Audit Committee met
separately at four formal meetings during the fiscal year ended June 30, 2000.
Our Board of Directors held a total of six meetings during the fiscal year
ended June 30, 2000. Ms. Carpenter and Mr. Walker 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 who serve on the Board of Directors receive no additional
compensation. We paid a director's fee in fiscal 2000 to Mr. Clement, our
Chairman of the Board of Directors, of $45,000 plus reimbursement for expenses
for each Board or committee meeting attended. We pay all other non-employee
Board members, with the exception of Mr. Witzeman, an annual retainer of
$15,000. Non-employee directors, with the exception of Mr. Jekel, also receive
$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. We also pay $2,500 annually to
any non-employee chairman of each of the committees of the Board of Directors.
Under the terms of our 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 receives stock options to acquire 5,000 shares), and
(ii) each year each non-employee Board member receives stock options to acquire
a number of shares equal to 1,000 shares for each $0.05 increase in our earnings
per share over the previous fiscal year, subject to a
6
<PAGE> 9
maximum of 5,000 shares of stock per non-employee Board member. See "Executive
Compensation -- 1992 Stock Option Plan."
Messrs. Jekel and Witzeman receive compensation for consulting services,
which includes serving on the Board of Directors. Companies owned by Mr. Ramsey,
a former director, received certain lease payments. See "Certain Relationships
and Related Transactions."
In fiscal 2000, we granted to the following individuals options to purchase
the following shares of common stock: 21,000 to Mr. Brucker, 122,500 to Mr.
Furman, 21,000 to Mr. Ramsey, 5,000 to Mr. Clement, and 2,500 to each of Messrs.
Jekel, Turner, Walker, Witzeman, and Ms. Carpenter. The options have exercise
prices ranging from $6.44 to $7.81 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 to us in all capacities for the fiscal years ended June 30, 1998, 1999,
and 2000 by our Chief Executive Officer and our three most highly compensated
executive officers who were in office at June 30, 2000. The table also sets
forth this information for our former Chief Executive Officer and two other
executive officers who were no longer with our company at June 30, 2000, whose
aggregate cash compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------
AWARDS
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
---------------------------- STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION AT YEAR-END YEAR ($)(1) ($) ($) (#) ($)(2)
--------------------------------------- ---- -------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Brucker...................... 2000 $314,246 $ -- $ -- 21,000 $ 3,200
Chief Executive Officer and 1999 $250,000 $25,000 $45,000(4) 39,000 $ 65,559(5)
President(3) 1998 $139,423 -- $ -- 21,000 $ 10,109(5)
Dr. Michel Sucher.................... 2000 $184,231 $ -- $ -- 12,500 $ 3,200
Senior Vice President and 1999 $175,000 $ -- $ -- 21,600 $ 3,200
Chief Medical Officer(6) 1998 $171,595 $29,837 $ -- 18,000 $ 3,200
Robert B. Hillier.................... 2000 $170,385 $ -- $ -- 12,500 $ 2,008
Senior Vice President and 1999 $137,500 $ -- $ -- 21,600 $ 2,600
Chief Administrative Officer(6) 1998 $ 87,500 $ -- $ -- 18,000 $ --
John S. Banas III.................... 2000 $126,438 $ -- $ -- 17,500 $ --
Senior Vice President and
General Counsel(6)
John B. Furman....................... 2000 $392,500 $ -- $ -- 122,500 $ --
Former Chief Executive Officer 1999 $239,270 $ -- $ -- 148,005 $ 80,769(8)
and President(7)
Robert E. Ramsey..................... 2000 $150,714 $ -- $ -- 21,000 $ 2,374
Former Executive 1999 $238,460 $ -- $ -- 41,250 $ --
Vice President(9) 1998 $201,154 $ -- $ -- 20,000 $ --
Mark E. Liebner...................... 2000 $262,154(11) $ -- $ -- 20,000 $106,282(12)
Former Senior Vice President, Chief 1999 $239,461 $ -- $ -- 33,600 $ 3,200
Financial Officer and Treasurer(10) 1998 $192,706 $ -- $ -- 20,000 $ 3,200(13)
</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 officers listed.
(2) Unless otherwise indicated, consists of company-matching contributions to
our 401(k) plan paid in cash.
(3) Mr. Brucker became our President and Chief Executive Officer in February
2000. From December 1997 until February 2000, Mr. Brucker served as our
Senior Vice President and Chief Operating Officer.
(4) Represents fair market value of restricted stock grants that vested in
December 1998.
(5) We paid Mr. Brucker $10,109 in fiscal 1998 and $62,359 in fiscal 1999 for
relocation costs, including moving expenses and closing costs on the sale
of his former residence.
(6) Dr. Sucher and Mr. Hillier became executive officers of our company during
February 2000. Mr. Hillier joined our company during October 1997, and Mr.
Banas joined our company in September 1999.
(7) Mr. Furman resigned as our Chief Executive Officer, President, and Director
in January 2000. We will continue to compensate Mr. Furman pursuant to the
terms of his employment agreement through January 2002.
(8) Represents additional compensation pursuant to an employment agreement with
Mr. Furman.
8
<PAGE> 11
(9) Mr. Ramsey resigned as our Executive Vice President and Director during
January 2000.
(10) Mr. Liebner resigned as our Senior Vice President -- Chief Financial
Officer & Treasurer during March 2000.
(11) Includes $73,846 paid to Mr. Liebner pursuant to his severance agreement.
(12) Represents forgiveness of a note receivable from Mr. Liebner in connection
with his resignation.
(13) Includes 449 shares of common stock contributed to our 401(k) plan on
September 1, 1998 as our matching contribution.
OPTION GRANTS
The following table represents the options granted to the listed officers
in the last fiscal year and the value of the options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
(#)(1) FISCAL YEAR ($/SH) DATE $(2)
---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Jack E. Brucker................. 21,000 3.1% $7.813 7/29/09 $ 70,547
Dr. Michael Sucher.............. 12,500 1.9% $7.813 7/29/09 $ 41,991
Robert B. Hillier............... 12,500 1.9% $7.813 7/29/09 $ 41,991
John S. Banas III............... 17,500 2.6% $7.688 9/20/09 $ 54,164
John B. Furman.................. 22,500 3.4% $7.813 7/29/09 $ 75,586
100,000(3) 15.0% $7.813 7/29/09 $261,030
Robert E. Ramsey................ 21,000(4) 3.1% $7.813 7/29/09 $ 70,547
Mark E. Liebner................. 20,000(5) 3.0% $7.813 7/29/09 $ 67,187
</TABLE>
---------------
(1) Except as otherwise indicated, all of the options vest and become
exercisable as follows: one-third at grant date in July 1999, one-third in
July 2000, and one-third in July 2001.
(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 exercise price of the option, the volatility of our
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: (a) a risk-free interest
rate of 6.26%; (b) a dividend yield of 0.00%; (c) an expected life of the
option after vesting of 2.35 years; and (d) an expected volatility of
67.51%.
(3) Mr. Furman resigned in January 2000. The options became exercisable upon
their grant in July 1999, and will remain exercisable through January 2003
pursuant to the terms of the options.
(4) Mr. Ramsey resigned in January 2000, and all of these options have expired
pursuant to the terms of the options.
(5) Mr. Liebner resigned in March 2000, and 13,333 of such options which were
unvested expired pursuant to the terms of the options. The remaining 6,667
options will remain exercisable through June 2001 unless previously
exercised.
9
<PAGE> 12
OPTION HOLDINGS
The following table represents certain information respecting the options
held by the listed officers as of June 30, 2000. None of the officers listed
exercised options during fiscal 2000.
FISCAL YEAR-END OPTIONS HELD
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT
FISCAL YEAR-END
(#)(1)
----------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Jack E. Brucker............................................. 62,334 18,666
Dr. Michel Sucher........................................... 86,420 11,666
Robert B. Hillier........................................... 40,434 11,666
John S. Banas III........................................... 9,166 8,334
John B. Furman.............................................. 250,339 20,166
Robert E. Ramsey............................................ 26,250 --
Mark E. Liebner............................................. 185,780 --
</TABLE>
---------------
(1) None of the unexercised options listed had any value at fiscal year-end,
because the exercise price of all of the options held by the listed officers
were greater than $1.63, which was the closing sales price of our common
stock as quoted on the Nasdaq National Market on June 30, 2000.
EMPLOYMENT AGREEMENTS
In February 2000, Jack E. Brucker became our President and Chief Executive
Officer. We entered into an employment agreement with Mr. Brucker for a two-year
term expiring February 2002, renewable for one-year periods thereafter. Under
Mr. Brucker's employment agreement, he is to receive a base salary of $436,000.
In connection with the agreement, during August 2000 we granted Mr. Brucker
stock options to purchase 200,000 shares of our common stock. The agreement
provides that 50,000 of the options will vest upon grant, and the remaining
options shall vest ratably each August thereafter through 2003. Mr. Brucker's
employment agreement provides that should we terminate his employment agreement
without cause, or should he terminate his employment agreement for good reason,
he will receive his base salary and other benefits provided by the agreement for
two years. In the event of such termination, if Mr. Brucker elects to solicit
clients, employees, or otherwise competes with us at any time following the
anniversary of his termination of employment, we will no longer be obligated to
pay Mr. Brucker any severance benefits.
Employment agreements with Dr. Sucher and Messrs. Hillier and Banas expire
in December 2000. 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: Dr. Sucher
$195,000; Mr. Hillier $200,000; and Mr. Banas, $180,000), and entitles the
executive to participate in stock option plans and other generally available
benefit programs. Each executive participates in our management incentive
program that provides bonuses to executive officers and other members of
management based upon our achieving certain financial and operating goals as
well as the achievement of individual objectives established for each
participant. Each employment agreement generally provides for each executive to
receive certain severance benefits if (i) we decide not to renew the agreement
for an additional term; (ii) we terminate 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.
Each of the employment agreements generally provides that if we decide not
to renew the employment agreement, the executive will receive his base salary
plus certain benefits for one year. Should we terminate the executive 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. If the
executive terminates the agreement for good
10
<PAGE> 13
reason, the agreement provides that the executive will receive his base salary
plus certain benefits for one year. Should the executive become disabled and
unable to perform his duties, we will continue to pay the executive's salary for
a period of six months.
In addition, each agreement provides for us 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 us or to solicit any of our clients or
employees of for a period of two years after the executive's employment ceases.
Change of control agreements entered into by Messrs. Brucker, Sucher,
Hillier, and Banas 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 one and one-half years' severance pay (two
years in the case of Mr. Brucker), 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. 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 our then outstanding voting securities; (ii) during any two-year
period, our Board members 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 our stockholders of certain reorganizations, mergers,
consolidations, liquidations, or sales of all or substantially all of our
assets. Mr. Furman's and Mr. Liebner's change of control agreements terminated
upon their resignation.
During January 2000, John Furman resigned as our President, Chief Executive
Officer, and Director. Pursuant to the terms of his employment agreement, we
will continue to compensate Mr. Furman his base salary of $420,000 through
January 2002. In connection with the agreement, during July 1999 we granted Mr.
Furman stock options to purchase 100,000 shares of our common stock. These stock
options were fully vested and exercisable on the date of grant, and will remain
exercisable through January 2003. In addition, any unvested options held by Mr.
Furman upon his resignation immediately vested and will remain exercisable
through January 2002.
Mr. Liebner resigned as our Senior Vice President, Chief Financial Officer,
and Treasurer in March 2000. We entered into a release and settlement agreement
with Mr. Liebner upon his resignation under which we will pay Mr. Liebner
$240,000 through March 2001. In connection with the agreement, Mr. Liebner
released our company from all claims that he may have against our company. In
conjunction with his employment with our company, Mr. Liebner entered into a
Conditional Stock Grant Agreement. The stock grant agreement provided for the
issuance of shares of common stock, subject to certain transfer and forfeiture
restrictions. The release and settlement agreement did not effect the terms of
the stock grant agreement.
We compensated Mr. Ramsey under an employment agreement with substantially
similar terms as those described above. Mr. Ramsey's base salary during fiscal
2000 was $257,800. Because this agreement was entered into as part of our
acquisition of his companies, the Southwest companies, the agreement did not
provide for a renewal term or severance benefits upon termination after June
2000. Mr. Ramsey resigned as our Executive Vice President in January 2000, and
pursuant to his employment agreement, we paid Mr. Ramsey his base salary through
June 2000.
EMPLOYEE STOCK OWNERSHIP PLAN
The ESOP is a tax-qualified employee stock ownership trust for the benefit
of our current and former employees age 21 or over. The ESOP was established in
1978 through the purchase from Louis A. Witzeman, our founder, of approximately
63% of our then outstanding common stock in exchange for real estate and a note
in the principal amount of $728,000, with interest at 10% per annum, which note
has been paid in full. From time to time since the establishment of the ESOP, we
have contributed newly issued shares and treasury
11
<PAGE> 14
shares of common stock and cash as employer contributions. The ESOP has used
these cash contributions to pay the note to Mr. Witzeman and to repurchase
shares of common stock distributed from the ESOP. No contributions were made for
the fiscal years ended June 30, 1998 and 1999. We contributed $250,000 to the
ESOP during fiscal year ended 2000. As of September 30, 2000, there were
approximately 5,300 participants in the ESOP.
David Stevens and Barry Landon are the Trustees of the ESOP. Our ESOP
Advisory Committee is responsible for directing the Trustee in the general
administration of the ESOP. With respect to the shares of our common stock 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 our 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 us. 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, or disability.
In fiscal 2000, 56,266 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.
In July 1999, our board of directors approved an amendment to "freeze" the
ESOP, effective June 30, 1999, with respect to all employees other than members
of collective bargaining agreements that include participation in the ESOP. All
participants' accounts were fully vested as of June 30, 1999. We do not intend
to make any contributions to the ESOP in the future.
1989 STOCK OPTION PLAN
The 1989 Stock Option Plan provides for the granting of nonqualified stock
options. Options may be issued to our key employees and directors. There are
currently outstanding options to acquire 139,000 shares of our common stock
under the 1989 Plan. No additional options will be granted 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 are equal to the fair market value of our common stock at the
time of the grant. In the event of a change of control of our 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 our common stock, the direct
granting of our common stock, the granting of stock appreciation rights, or
SARs, and the granting of other cash awards. Options and awards under the 1992
Plan may be issued to executives, key employees, and others providing valuable
services to us. The options issued may be incentive stock options or
nonqualified stock options. We believe 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 our common stock. Automatic options are granted to members of
our Board of Directors who are not employed by us. We believe that the Automatic
Option Program promotes our interests
12
<PAGE> 15
by providing such directors the opportunity to acquire a proprietary interest,
or otherwise increase their proprietary interest, in our company and an
increased personal interest in our 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 the holder exercises the option.
ELIGIBILITY AND ADMINISTRATION
Options and awards may be granted only to persons who at the time of grant
are either (i) our key personnel (including officers and directors), or (ii)
consultants and independent contractors who provide valuable services to us.
Options that are incentive stock options may be granted only to our key
personnel who are also our employees.
The eligible persons under the Discretionary Grant Program are divided into
two groups, and there will be a separate administrator for each group. One group
consists of eligible persons who are our executive officers and directors and
all persons who own 10% or more of our 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 the Senior Committee, a
committee comprised of two or more "Non-Employee Directors" (as that term is
defined in Rule 16(b)(3)(i) under the 1934 Act) who are appointed by the Board.
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 our executive officers or directors and those
who do not own 10% or more of our 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 our Board of Directors 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. 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 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 at the time
the option is granted owns stock possessing more than 10% of the total combined
voting power of all classes of our stock) of the fair market value of our common
stock at the time of the grant.
Options or awards granted under 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 the option or
award. If any optionholder ceases to be employed by us for a reason other than
disability
13
<PAGE> 16
or death, the optionholder or the optionholder's successor may, within three
months after the termination of employment, exercise some or all of the vested
incentive stock options held by the 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 the employee.
Under the 1992 Plan, options that are not incentive stock options and which
are outstanding at the time an optionholder's service to our company will
terminate three months after the date of termination of service, unless
otherwise determined by the plan administrator. If the service to our company
terminates by reason of the optionholder's permanent disability, however, the
options will terminate 12 months after the date of termination of service,
unless otherwise determined by the plan administrator. However, if the
optionholder is discharged for cause, all options held by the optionholder will
terminate immediately.
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, 2000, 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 our other securities. 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 we may issue options or warrants to acquire our common stock, stock
awards, or any other type of award. To the extent permitted by applicable law,
we may issue any other options, warrants, or awards other than under 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, or
Formula Option, to acquire a number of shares equal to 1,000 shares for each
$0.05 increase of earnings per share from the prior fiscal year, subject to a
maximum of 5,000 shares of stock per eligible director. 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 provides for the grant to new eligible directors of automatic
options to acquire 10,000 shares of common stock on the date of their first
appointment or election to the Board. The automatic options granted to new
eligible directors vest one day prior to the next annual meeting of stockholders
that occurs after the applicable grant date unless the next annual meeting of
stockholders occurs less than six months after the applicable grant date, in
which case the automatic options become exercisable and vest on the first
anniversary of the applicable grant date. An eligible director is not eligible
to receive the 2,500 share automatic option or the Formula Option if that grant
date is within 30 days of such eligible director receiving the 10,000 share
automatic option.
14
<PAGE> 17
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 become fully exercisable,
immediately prior to the effective date of such change in control.
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 of grant. Eligible directors also may be eligible to receive options or
awards under the Discretionary Grant Program or option grants or direct stock
issuances under any four other plans. 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. Our Board of
Directors 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 our common stock, the Board of Directors may not (i) increase, except in the
case of certain organic changes to our 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. Despite 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 our stockholders.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
Certain options granted under the 1992 Plan will be intended to qualify as
incentive stock options under Code Section 422. Accordingly, there will be no
taxable income to an employee when an incentive stock option is granted to him
or her when that option is exercised. The amount by which the fair market value
of the shares at the time of exercise exceeds the option price generally will be
treated as an item of preference in computing the alternate minimum taxable
income of the optionholder. If an optionholder exercises an incentive stock
option and does not dispose of the shares within either two years after the date
of the grant of the option or one year after the date the shares were
transferred to the optionholder, any gain realized upon disposition will be
taxable to the optionholder as a capital gain. If the optionholder does not
satisfy the applicable holding periods, however, the difference between the
option price and the fair market value of the shares on the date of exercise of
the option will be taxed as ordinary income, and the balance of the gain, if
any, will be taxed as capital gain. If the shares are disposed of before the
expiration of the one-year or two-year periods and the amount realized is less
than the fair market value of the shares at the date of exercise, the employee's
ordinary income is limited to the amount realized less the option exercise price
paid. We will be entitled to a tax deduction only to the extent the optionholder
has ordinary income upon the sale or other disposition of the shares received
when the option was exercised.
Certain other options issued under the 1992 Plan, including options issued
automatically to the non-employee members of the Board of Directors, will be
nonqualified options. The income tax consequences of nonqualified options will
be governed by Code Section 83. Under Code Section 83, the excess of the fair
market value of the shares of the common stock acquired pursuant to the exercise
of any option over the amount paid for such stock, or 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
15
<PAGE> 18
immediately after the acquisition, in which case fair market value will be
determined on the date of the acquisition. Generally, we will be entitled to a
federal income tax deduction in the same taxable year that the optionholder
recognizes income. We 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.
2000 NON-QUALIFIED STOCK OPTION PLAN
Under our 2000 Non-Qualified Stock Option Plan, which was approved by our
board of directors and was effective on August 11, 2000, 2,000,000 shares of
Common Stock are reserved for issuance upon exercise of stock options granted
under the plan. The plan is designed as a means to retain and motivate qualified
and competent persons who provide services to our company. Our board of
directors or a committee of outside directors appointed by our board will
administer and interpret the plan. The board of directors and the committee each
are authorized to grant options to all eligible employees, consultants, and
independent contractors of our company; provided, however, that our directors
and officers will not be eligible to receive options under the plan. In the
event of a change in the common stock due to a stock dividend or
recapitalization, the plan provides for appropriate adjustment in the number of
shares available for grant under the plan and the number of shares and the
exercise price per share under any option then outstanding under the plan, so
that the same percentage of our issued and outstanding shares shall remain
subject to being optioned under the plan or subject to purchase at the same
aggregate exercise price under any such outstanding option, as applicable.
Unless otherwise provided in any option, the committee or the board of directors
may change the option price and/or number of shares under any outstanding option
when, in their discretion, such adjustment becomes appropriate so as to preserve
but not increase benefits under the plan. The aggregate number of shares subject
to options granted to any one optionee under the plan may not exceed 2,000,000
subject to adjustment as described above.
The plan provides for the granting of only nonqualified stock options.
Options may generally be granted under the plan on such terms and at such prices
as determined by the committee or the board of directors. Each option is
exercisable after the period or periods specified in the option agreement, but
no option may become exercisable after the expiration of ten years from the date
of grant. The board of directors or committee may accelerate the exercisability
or vesting of any option or shares previously acquired by the exercise of any
options, and, in the event of a change in control (as defined in the plan),
unless otherwise provided in the option, each outstanding option will become
immediately exercisable in full. Nonqualified stock options granted under the
plan are not transferable unless the prior written consent of the committee or
the board of directors is obtained and such transfer does not violate Rule 16b-3
under the Securities Exchange Act of 1934. The committee or the board of
directors may permit the option price to be paid by
- cash,
- certified or official bank check,
- personal check if accepted by the committee or the board of directors,
- money order,
- shares of common stock that have been held for at least 6 months (or such
other shares as we determine will not cause us to recognize for financial
accounting purposes, a charge for compensation expense),
- withholding of shares of common stock,
- any cashless exercise procedure approved by the committee or the board of
directors,
- other consideration deemed appropriate by the committee or the board of
directors, or
16
<PAGE> 19
- a combination of the above.
The plan also authorizes us to make or guarantee loans to optionees to enable
them to exercise their options. Such loans must
- provide for recourse to the optionee,
- bear interest at the prime rate of our principal lender,
- be secured by the shares of common stock purchased, and
- contain such other terms as the committee or the board of directors in
its sole discretion shall reasonably require.
The board of directors or the committee has the authority to amend or
terminate the plan or any options, provided that no such action may
substantially impair the rights or benefits of the holder of any outstanding
option without the consent of such holder, and provided further that certain
amendments to the plan are subject to stockholder approval. Unless terminated
sooner, the plan will continue in effect until all options granted thereunder
have expired or been exercised.
EMPLOYEE STOCK PURCHASE PLAN
We have adopted an Employee Stock Purchase Plan, or ESPP, which allows our
eligible employees to purchase shares of common stock at semi-annual intervals
through periodic payroll deductions. The ESPP is intended to promote superior
levels of performance from, and to encourage stock ownership by, our eligible
employees by increasing their interest in our success. The ESPP is designed to
meet this goal by offering financial incentives for employees to purchase our
common stock, thereby increasing the interest of employees in pursuing our
long-term growth, profitability, and financial success. The Board of Directors
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 our common stock on
the offering commencement date, or (ii) 85% of the closing price of our common
stock on the offering termination date. 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. As of
October 25, 2000, we had issued 353,580 shares of common stock under the ESPP.
The purchase right of a participant will terminate automatically in the
event the participant ceases to be an employee of ours, 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. During
June 2000, our Board of Directors amended the ESPP to increase the number of
shares authorized for issuance from 450,000 to 1,150,000 shares, subject to
stockholder approval at the meeting. See "Proposal to Approve the Amendment to
the Employee Stock Purchase Plan."
401(k) PLAN
We have a 401(k) contributory retirement plan for the majority of our
employees. The 401(k) plan is designed to provide tax-deferred income to our
employees in accordance with the provisions of Section 401(k) of the Internal
Revenue Code.
The 401(k) plan provides that each participant may contribute up to 15% of
his or her salary, not to exceed the statutory limit. Matching contributions may
be made at the discretion of the Board of Directors. We have 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.
An additional discretionary matching contribution may also be made 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.
17
<PAGE> 20
All contributions by participants and our fixed matching contributions vest
immediately. Under the terms of the 401(k) plan, we also may make discretionary
profit sharing contributions. Profit sharing contributions are allocated among
participants based on their annual compensation. Each participant has the right
to direct the investment of his or her funds among certain named plans. Our
contributions may be made in shares of our 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
by us to the 401(k) plan for certain 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, 2000, our Human
Resource/Compensation/Organization Committee consisted of Messrs. Walker,
Turner, and Witzeman 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 our directors and officers, and
persons who own more than 10% of a registered class of our equity securities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than 10% stockholders are
required by Securities and Exchange Commission regulation to furnish us with
copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by us
during the fiscal year ended June 30, 2000, and written representations that no
other reports were required, we believe that each person who, at any time during
such fiscal year, was a director, officer or beneficial owner of more than 10%
of our common stock complied with all Section 16(a) filing requirements during
such fiscal year or prior fiscal years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We paid approximately $96,000 during the year ended June 30, 2000 for legal
services to Jekel & Howard, of which Mr. Jekel is a principal. Mr. Jekel is a
participant in our ESOP. We paid Mr. Jekel $32,000 during the year ended June
30, 2000 for additional services rendered in connection with our forestry fire
fighting services.
We paid approximately $46,000 during the year ended June 30, 2000 to Louis
A. Witzeman under leases for five fire and ambulance stations. These leases can
be cancelled by us at any time. Mr. Witzeman received $85,000 during the fiscal
year ended June 30, 2000 for fire protection and EMS advisory and consulting
services and for serving on the Board of Directors. We also provide Mr. Witzeman
with an automobile for personal use.
We engaged Mr. Bolin, our former President, as a special consultant to our
company through January 2002. The consulting agreement entitles Mr. Bolin to
participate in any benefit plans that we maintain for our employees. We paid Mr.
Bolin approximately $118,000 under this consulting agreement.
We engaged William R. Crowell, our former Senior Vice President, as a
consultant to our company through February 2001. Under the consulting agreement,
we will pay Mr. Crowell consulting fees of $75,000 in three equal monthly
installments on June 1, July 1, and August 1, 2000. Pursuant to the consulting
agreement, we also granted Mr. Crowell options to purchase 8,000 shares of
common stock.
We paid approximately $1,143,000 during the year ended June 30, 2000 to
companies owned by Robert E. Ramsey under leases for various offices, ambulance
stations, furniture, and equipment acquired in connection with the acquisition
of his companies.
18
<PAGE> 21
In connection with Mr. Liebner's resignation from our company in March
2000, we forgave a note receivable from Mr. Liebner in the amount of
approximately $123,500. We issued this note to Mr. Liebner in July 1998 in
connection with his income tax liability incurred from his stock grant
agreement.
We believe that all of the related party transactions listed above were
provided on terms no less favorable to us than could have been obtained from
unrelated firms or third parties. All future transactions between us and our
officers, directors, and principal stockholders are expected to be on terms no
less favorable to us than could be obtained from unaffiliated persons and will
require the approval of our independent directors.
19
<PAGE> 22
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 administers the compensation programs for our 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 our
executive officers for fiscal 2000.
OVERVIEW AND PHILOSOPHY
Our 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 our common
stock. The committee has established the following principles to guide
development of our compensation programs and to provide a framework for
compensation decisions:
- provide a total compensation package that will attract the best talent to
our 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 our 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 our stock and stock options.
COMPENSATION PROGRAMS AND PRACTICES
The committee determines salary ranges and incentive award opportunities
for all corporate officers. Our management compensation program consists of cash
and equity based components.
Cash Component: Cash compensation is designed to fluctuate with our
performance. In the years that we exhibit 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, or MIP, which is paid out annually only if
predetermined quantitative and qualitative goals are attained.
Base Pay: Base pay guidelines are established for our officers and
managers based on their relative job content. Individual base pay
within the guidelines is based on sustained individual performance
toward achieving our goals. Annual modifications to base pay levels
are proposed by the President and approved by the committee each
August. Base pay modifications, excluding promotions, for executive
officers averaged approximately 7% in fiscal 2000.
Management Incentive Plan: The MIP is an annual cash incentive plan.
At the beginning of each fiscal year, performance contracts are
created between us 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 our overall financial performance of the Company, and a portion is
weighted to the executive's particular area of responsibility. MIP
opportunity for executive officers can be as high as 80% of the base
pay midpoint of the executive officer's pay range.
Equity-based Component: We have a long history of encouraging
employees to become stockholders. In 1989, we implemented our first
stock option plan through which we could grant
20
<PAGE> 23
qualified and non-qualified stock options to management employees. In
1994, we implemented our Employee Stock Purchase Plan, whereby shares
of our common stock may be purchased through payroll deductions at
85% of its market value. We believe that equity-based compensation in
the form of 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 our stock. The Board
grants stock options using criteria consistent with the level of an
executive's anticipated impact on our goals and objectives. A
description of our stock option plans is set forth under "Executive
Compensation." See "Executive Compensation -- Option Grants" for
options granted to executive officers during fiscal 2000.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
We use the same factors and criteria described above in making compensation
decisions regarding our Chief Executive Officer. During fiscal 2000, Mr. Furman
was compensated pursuant to his employment agreement. Mr. Furman's base pay was
$395,000 from July through December 1999. Beginning January 2000, Mr. Furman's
base pay was increased to $420,000 per year. Mr. Furman resigned as our Chief
Executive Officer, President, and Director during January 2000, and we will
continue to pay Mr. Furman pursuant to the terms of his employment agreement
through January 2002. See the table under "Executive Compensation -- Option
Grants" for information regarding options granted to Mr. Furman during fiscal
2000.
Mr. Brucker became our Chief Executive Officer and President during
February 2000. During the year, Mr. Brucker was compensated pursuant to his
employment agreement. Mr. Brucker's base pay was $436,000. See the table under
"Executive Compensation -- Option Grants" for information regarding the options
granted to Mr. Brucker during fiscal 2000.
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.
We currently intend to structure the performance-based portion of the
compensation of our executive officers in a manner that complies with Section
162(m).
Members of the Human Resource/
Compensation/Organization Committee
Henry G. Walker
William C. Turner
Mary Anne Carpenter
Louis A. Witzeman
21
<PAGE> 24
COMPANY PERFORMANCE GRAPH
The following line graph compares cumulative total stockholder return,
assuming reinvestment of dividends, for: (i) our common stock; (ii) the NASDAQ
Combined Composite Index; and (iii) the NASDAQ Health Services Index. Because we
did not pay dividends on our common stock during the measurement period, the
calculation of the cumulative total stockholder return on the common stock did
not include dividends. Because of the small number of publicly traded companies
in our peer group, we do not believe we can reasonably identify a group of peer
issuers. The graph assumes $100 was invested on July 1, 1995.
We have selected the NASDAQ Health Services Index to compare with our total
stockholder return rather than the Russell 2000 Index, which was used for
comparison in prior years. Because the Russell 2000 is comprised of issuers with
total market capitalization of between $222.0 million to $1.4 billion, we no
longer believe that the Russell 2000 Index provides a meaningful comparison to
our company. We believe that the NASDAQ Health Services Index is more
appropriate for comparison to our company as the issuers that comprise that
index face similar healthcare industry issues as our company faces. For
comparison purposes, however, the following line graph also compares our
cumulative total stockholder return with the Russell 2000 Index during the
measurement period.
[Line Chart]
<TABLE>
<CAPTION>
NASDAQ HEALTH
RURAL/METRO NASDAQ COMBINED RUSSELL 2000 SERVICES
----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
6/30/95 100 100 100 100
6/30/96 154 127 122 153
6/30/97 130 154 140 141
6/30/98 58 203 161 137
6/30/99 43 288 161 130
6/30/00 7 425 182 102
</TABLE>
22
<PAGE> 25
PROPOSAL TO APPROVE THE AMENDMENT TO THE
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved a proposal to amend our Employee Stock
Purchase Plan, or ESPP, subject to approval by our stockholders. See "Executive
Compensation -- Employee Stock Purchase Plan" for a description of the material
terms of the ESPP.
The ESPP is intended to promote superior levels of performance from, and to
encourage stock ownership by, our eligible employees by increasing their
interest in our success. The ESPP is designed to meet this goal by offering
financial incentives for employees to purchase our common stock, thereby
increasing the interest of employees in pursuing our long-term growth,
profitability, and financial success. Presently, a total of 450,000 shares of
common stock may be issued under the ESPP. As of October 25, 2000, an aggregate
of 353,580 had been issued under the ESPP. The Board has determined that an
increase is necessary to provide a sufficient number of shares to enable our
company to continue to attract, retain, and motivate our employees by making
additional shares available for purchase under the ESPP. Accordingly, the Board
amended the ESPP to increase the number of shares of common stock that may be
issued under the ESPP from 450,000 to 1,150,000 shares. The Board of Directors
believes that it is in the best interests of our company to amend the ESPP.
Accordingly, the Board of Directors recommends a vote "FOR" the proposal to
amend the ESPP.
REASONS FOR AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that the approval of the proposed amendment
to the ESPP is necessary to achieve the purposes of the ESPP and to promote the
welfare of our company and our stockholders generally. The Board believes that
the proposed amendment to the ESPP will aid our company in attracting and
retaining officers and key employees and motivating such persons to exert their
best efforts on behalf of our company. In addition, we expect that the proposed
amendment will further strengthen the identity of interests of the officers and
key employees with that of the stockholders.
RATIFICATION BY STOCKHOLDERS OF THE AMENDMENT TO THE ESPP
Approval of the amendment to the ESPP will require the affirmative vote of
the holders of a majority of the outstanding shares of our common stock present
in person or by proxy at the meeting. In the event that the amendment to the
ESPP is not approved by the stockholders, the ESPP will remain in effect as
previously adopted.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Andersen LLP, independent
public accountants, to audit our consolidated financial statements for the
fiscal year ending June 30, 2001 and recommends that stockholders vote in favor
of the ratification of this appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection. The Board of
Directors anticipates that representatives of Arthur Andersen LLP will be
present at the meeting, will have the opportunity to make a statement if they
desire, and will be available to respond to appropriate questions.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals that are intended to be presented by stockholders at
our annual meeting of stockholders for the fiscal year ending June 30, 2001, to
be included in the proxy statement and form of proxy relating to such meeting,
must be received by us no later than July 13, 2001. Under the our 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 us no later than: (i) 60 days
prior to the annual meeting if such meeting is to be held on a day that is
between November 1, 2001 and November 30, 2001; (ii) 90 days in advance of the
annual meeting if the meeting is to be held on or after November 30, 2001; or
23
<PAGE> 26
(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, we intend to retain
discretionary authority to vote proxies with respect to stockholder proposals
for which the proponent does not seek inclusion of the proposed matter in our
proxy statement for the annual meeting to be held during calendar 2001, except
in circumstances where (i) we receive notice of the proposed matter no later
than September 26, 2001 and (ii) the proponent complies with the other
requirements set forth in Rule 14a-4.
OTHER MATTERS
We know 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: November 8, 2000
24
<PAGE> 27
APPENDIX A
(Not Part of Proxy Statement)
RURAL/METRO CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH JUNE 30, 2000)
ARTICLE I
PURPOSE
1.1 Name. This Stock Purchase Plan shall be known as the Rural/Metro
Employee Stock Purchase Plan (the "Plan").
1.2 Purpose. The Plan is intended to provide a method whereby employees of
Rural/Metro Corporation, a Delaware corporation (the "Company"), and one or more
of its Subsidiary Corporations will have an opportunity to acquire a proprietary
interest in the Company through the purchase of shares of the Common Stock of
the Company.
1.3 Qualification. It is the intention of the Company to have the Plan
qualify as an "employee stock purchase plan" under section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
ARTICLE II
DEFINITIONS
2.1 Base Pay. "Base Pay" shall mean the estimated annual compensation of
an Employee and (a) with respect to a salaried Employee, shall be based on such
Employee's current annual salary and (b) with respect to a hourly Employee,
shall be based on such Employee's RHE times such Employee's regular
straight-time hourly rate. Shift premium, bonuses, "skill-based" pay, and other
special payments, commissions (unless such commissions represent the primary
source of compensation, as determined by the Committee) and other marketing
incentive payments shall not be included in Base Pay. For purpose of the
foregoing, "RHE" for a full time Employee shall mean the sum of (i) 2080 and
(ii) 1.5 times the estimated number of overtime hours to be worked annually and
"RHE" for a part-time Employee shall mean 1040. If any Offering is a six month
Offering, the Base Pay shall be divided by one-half.
2.2 Committee. "Committee" shall mean the individuals described in Article
XI.
2.3 Employee. "Employee" shall mean any person who is customarily employed
on a full-time or part-time basis by the Company and is regularly scheduled to
work more than 20 hours per week.
2.4 Participating Company. "Participating Company" shall mean the Company
and such Subsidiary Corporations as may be designated from time to time by the
Board of Directors of the Company.
2.5 Stock. "Stock" shall mean the Common Stock of the Company, par value
one cent ($.01).
2.6 Subsidiary Corporation. "Subsidiary Corporation" shall mean any
present or future corporation which would be a "subsidiary corporation" of the
Company, as that term is defined in Code section 424.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Initial Eligibility. Any Employee who shall have completed 30 days of
continuous employment with a Participating Company and is employed by a
Participating Company on the date such Employee's participation in the Plan is
to become effective shall be eligible to participate in Offerings under the Plan
which commence on or after such 30 day employment period has concluded. Any
Corporation which becomes
A-1
<PAGE> 28
a Subsidiary Corporation after the initial Offering Commencement Date shall
become a Participating Company only upon the decision of the Board of Directors
of the Company to designate such Subsidiary Corporation as a Participating
Company and to extend the benefits of the Plan to its eligible Employees. For
any Subsidiary Corporation which becomes a Participating Company in the Plan
after July 1, 1994, a subsequent effective date shall be designated with respect
to its participation by the eligible Employees of such Participating Company.
3.2 Leave of Absence. For purposes of participation in the Plan, a person
on leave of absence shall be deemed to be an Employee for the first 90 days of
such leave of absence and such Employee's employment shall be deemed to have
terminated at the close of business on the 90th day of such leave of absence
unless such Employee shall have returned to regular full-time or part-time
employment (as the case may be) prior to the close of business on such 90th day.
Termination by a Participating Company of any Employee's leave of absence, other
than termination of such leave of absence on return to full time or part time
employment, shall terminate an Employee's employment for all purposes of the
Plan and shall terminate such Employee's participation in the Plan and right to
exercise any option.
3.3 Restrictions on Participation. Notwithstanding any provisions of the
Plan to the contrary, no Employee shall be granted an option to participate in
the Plan:
(a) if, immediately after the grant, such Employee would own stock,
and/or hold outstanding options to purchase stock, possessing five percent
or more of the total combined voting power or value of all classes of stock
of the Company (for purposes of this paragraph, the rules of section 424(d)
of the Code shall apply in determining stock ownership of any Employee); or
(b) which permits such Employee's rights to purchase stock under all
Employee stock purchase plans of the Company and all Participating
Companies to accrue at a rate which exceeds $25,000 in fair market value of
the stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding.
3.4 Commencement of Participation. An eligible Employee may become a
participant by completing the enrollment forms prescribed by the Committee
(including a purchase agreement and a payroll deduction authorization) and
filing such forms with the designated office of the Company prior to the
Offering Commencement Date for the next scheduled Offering (as such terms are
defined below). Payroll deductions for a participant shall commence on the next
scheduled Offering Commencement Date when such Employee's authorization for a
payroll deduction becomes effective and shall continue in effect for the term of
this Plan, except to the extent such payroll deduction is changed in accordance
with this Section 3.4 or terminated in accordance with Article VIII. The
participant may, at any time, increase or decrease the rate of the participant's
payroll deduction by filing the appropriate form with the designated office of
the Company. The new rate shall become effective as of the next applicable
Offering Commencement Date.
ARTICLE IV
OFFERINGS
4.1 Annual Offerings. The Plan will be implemented by up to 10 annual
offerings of the Company's Common Stock (the "Offerings") beginning on the 1st
day of July in each of the years 1994 through 2003, with each Offering
terminating on June 30 of the following year, provided, however, that each
annual Offering may, in the discretion of the Committee exercised prior to the
commencement thereof, be divided into two six-month Offerings commencing
respectively, on July 1 and January 1 and terminating six months thereafter. The
total number of shares issuable under the Plan shall be 1,150,000. As used in
the Plan, "Offering Commencement Date" means the January 1 or July 1, as the
case may be, on which the particular Offering begins and "Offering Termination
Date" means the June 30 or December 31 as the case may be, on which the
particular Offering terminates. Any decision of the Committee to adjust the
number of shares in an Offering must be made prior to the Offering Commencement
Date of that Offering.
A-2
<PAGE> 29
ARTICLE V
PAYROLL DEDUCTIONS
5.1 Percentage of Participation. At the time an Employee files
authorization for payroll deduction and becomes a participant in the Plan, the
Employee shall elect to have deductions made from the Employee's pay on each
payday during the time the Employee is a participant in an Offering. Such
deductions shall be an amount equal to the Employee's Participation Amount
divided by the number of payroll periods occurring during the Offering. An
Employee's "Participation Amount" shall equal the rate of 1, 2, 3, 4, 5, 6, 7,
8, 9 or 10 percent (as elected by the Employee) times such Employee's Base Pay
in effect at the Offering Commencement Date of such Offering; provided, however,
that prior to any Offering Commencement Date, the Committee shall have the
discretion to limit deductions to less than 10 percent (but no less than 5
percent) for any Offering.
5.2 Calculation of Base Pay. An Employee's Base Pay of the date of an
Offering and whether an Employee is "part-time" shall be determined in the
discretion of the Company based on the provisions of this Plan. In calculating
an Employee's normal weekly rate of pay under this Section 6.1, retroactive
adjustments occurring during an Offering which are retroactive to the last day
prior to the Commencement Date of that particular Offering shall be taken into
account. In addition, if a participant's Base Pay includes commissions, then the
Committee may set such Employee's Base Pay based upon averages and standards as
determined in the discretion of the Committee.
5.3 Participant's Account. All payroll deductions made for a participant
shall be credited to such Employee's account under the Plan. A participant may
not make any separate cash payment into such account except when on leave of
absence and then only as provided in Section 5.5.
5.4 Changes in Payroll Deductions. A participant may discontinue
participation in the Plan as provided in Article VIII, but no other change can
be made during an Offering and, specifically, a participant may not alter the
amount of such participant's payroll deductions for that Offering.
5.5 Leave of Absence. If a participant goes on a leave of absence, such
participant shall have the right to elect: (a) to withdraw the balance in such
participant's account pursuant to Section 8.1 hereof, or (b) to discontinue
contributions to the Plan but remain a participant in the Plan, or remain a
participant in the Plan during such leave of absence, authorizing deductions to
be made from payments by the Company to the participant during such leave of
absence and undertaking to make cash payments to the Plan at the end of each
payroll period to the extent that amounts payable by the Participating Company
to such participant are insufficient to meet such participant's authorized Plan
deductions.
ARTICLE VI
GRANTING OF OPTION
6.1 Number of Option Shares. On each Offering Commencement Date, a
participating Employee shall be deemed to have been granted an option to
purchase a maximum number of shares of the Stock of the Company equal to the
Participation Amount (as defined in Section 5.1 hereof) divided by the Option
Price of the stock of the Company on the applicable Offering Commencement Date,
determined as provided in Section 6.2 hereof.
6.2 Option Price. The Option Price of Stock purchased with payroll
deductions made during each Offering for a participant therein shall be 85
percent of the closing price of the Stock on the Offering Commencement Date or
the nearest prior business day on which trading occurred on the NASDAQ National
Market; provided, however, that for Offerings that commence on or after January
1, 1998, the Option Price shall be the lower of (a) 85 percent of the closing
price of the Stock on the Offering Commencement Date or the nearest prior
business day on which trading occurred on the NASDAQ National Market; or (b) 85
percent of the closing price of the Stock on the Offering Termination Date or
the nearest prior business day on which trading occurred on the NASDAQ National
Market.
A-3
<PAGE> 30
ARTICLE VII
EXERCISE OF OPTION
7.1 Automatic Exercise. Unless a participant gives written notice to the
Company as hereinafter provided, such participant's option for the purchase of
stock granted under Section 6.1 hereof will be deemed to have been exercised
automatically on the Offering Termination Date applicable to such Offering for
the purchase of the number of full shares of Stock which the accumulated payroll
deductions in such Employee's account at that time will purchase at the
applicable Option Price (but not in excess of the number of shares for which
options have been granted to the Employee pursuant to Section 6.1 hereof), and
any excess in such Employee's account at that time will be returned to the
participant.
7.2 Fractional Shares. Fractional shares will not be issued under the Plan
and any accumulated payroll deductions which would have been used to purchase
fractional shares will be, at the option of the Committee, either (a) returned
(without interest) to any Employee promptly following the termination of an
Offering, or (b) added to the Participation Amount and held for the purchase of
Stock in connection with the next Offering; provided, however, that such amount
(without interest) shall be refunded to any Employee who provides the Company
with a written request for a refund prior to the use of such amount to purchase
Stock at the end of the next Offering.
7.3 Transferability of Option. During a participant's lifetime, options
held by such participant shall be exercisable only by that participant.
7.4 Delivery of Stock. As promptly as practicable after the Offering
Termination Date of each Offering, the Company will deliver to each participant,
as appropriate, the Stock purchased upon exercise of such Employee's option. All
Stock delivered to each participant will contain a restriction stating that such
Stock is restricted from being transferred for a period of one year from the
date of issuance unless the Committee otherwise consents. It is not the
intention of the Committee to consent to transfers except in extraordinary
situations such as upon the death of a participant. The Committee may withhold
its consent to any such transfer in its absolute and sole arbitrary discretion.
Any transfer in violation of the legend placed on each such stock certificate
shall be void ab initio. In no event, however, shall stock be forfeited for
violation of the transfer restriction.
ARTICLE VIII
WITHDRAWAL
8.1 In General. At any time prior to the last five days of an Offering
period, a participant may withdraw payroll deductions credited to such
participant's account under the Plan by giving written notice to the designated
office of the Company, which withdrawal notice shall be in form and substance as
decided by the Committee. All of the participant's payroll deductions credited
to the participant's account will be paid to the participant promptly after
receipt of such participant's notice of withdrawal, and no further payroll
deductions will be made from the participant's pay during such Offering or
during any subsequent Offering unless an Employee re-enrolls as provided in
Section 8.2 hereof. The Company may, at its option, treat any attempt by a
participant to borrow on the security of such participant's accumulated payroll
deductions as an election to withdraw such deductions.
8.2 Effect on Subsequent Participation. A participant's withdrawal from
any Offering will not have any effect upon such Employee's eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company. In order to be eligible for a subsequent
Offering, however, a participant who has withdrawn from an Offering must satisfy
the requirements of Section 3.4 hereof prior to the Offering Commencement Date
of the next succeeding Offering.
8.3 Termination of Employment. Upon termination of the participant's
employment for any reason, including retirement (but excluding death or
permanent disablement while in the employ of the Company or continuation of a
leave of absence for a period beyond 90 days), the payroll deductions credited
to such Employee's account will be returned to the Employee, or, in the case of
the Employee's death subsequent to
A-4
<PAGE> 31
the termination of such Employee's employment, to the person or persons entitled
thereto under Section 12.1 hereof.
8.4 Termination of Employment Due to Death. Upon termination of the
participant's employment because of death or permanent disablement, the
participant or participant's beneficiary (as defined in Section 12.1 hereof)
shall have the right to elect, by written notice given to the designated office
of the Company prior to the earlier of the Offering Termination Date or the
expiration of a period of 60 days commencing with the termination of the
participant's employment, either:
(a) to withdraw all of the payroll deductions credited to the
participant's account under the Plan, or
(b) to exercise the participant's option on the next Offering
Termination Date and purchase the number of full shares of stock which the
accumulated payroll deductions in the participant's account at the date of
the participant's cessation of employment will purchase at the applicable
option price, and any excess in such account will be returned to said
beneficiary, without interest.
In the event that no such written notice of election shall be duly received by
the designated office of the Company, the beneficiary shall automatically be
deemed to have elected, pursuant to paragraph (b), to exercise the participant's
option.
8.5 Leave of Absence. A participant on leave of absence shall, subject to
the election made by such participant pursuant to Section 5.5 hereof, continue
to be a participant in the Plan so long as such participant is on continuous
leave of absence. A participant who has been on leave of absence for more than
90 days and who therefore is not an Employee for the purpose of the Plan shall
not be entitled to participate in any Offering commencing after the 90th day of
such leave of absence. Notwithstanding any other provisions of the Plan, unless
a participant on leave of absence returns to regular full time or part time
employment with the Company at the earlier of: (a) the termination of such leave
of absence or (b) three months from the 90th day of such leave of absence, such
participant's participation in the Plan shall terminate on whichever of such
dates first occurs.
ARTICLE IX
INTEREST
9.1 Payment of Interest. No interest will be paid or allowed on any money
paid into the Plan or credited to the account of any participant Employee
including any interest paid on any and all money which is distributed to an
Employee or such Employee's beneficiary pursuant to the provisions of Sections
8.1, 8.3, 8.4 and 10.1 hereof.
ARTICLE X
STOCK
10.1 Maximum Shares. The maximum number of shares which shall be issued
under the Plan, subject to adjustment upon changes in capitalization of the
Company as provided in Section 12.4 hereof, shall be 450,000 shares. If the
total number of shares for which options are exercised on any Offering
Termination Date in accordance with Article VI exceeds the maximum number of
shares for the applicable Offering, the Company shall make a pro rata allocation
of the shares available for delivery and distribution in as nearly a uniform
manner as shall be practicable and as the Committee shall determine to be
equitable, and the balance of payroll deductions credited to the account of each
participant under the Plan shall be returned to such participant as promptly as
possible.
10.2 Participant's Interest in Option Stock. The participant will have no
interest in stock covered by such Employee's option until such option has been
exercised.
10.3 Registration of Stock. Stock to be delivered to a participant under
the Plan will be registered in the name of the participant, or, if the
participant so directs by written notice to the designated office of the
A-5
<PAGE> 32
Company prior to the Offering Termination Date applicable thereto, in the names
of the participant and one such other person as may be designated by the
participant, in the form and manner permitted by applicable law.
10.4 Restrictions On Exercise. The Board of Directors may, in its
discretion, require as conditions to the exercise of any option that the shares
of Common Stock reserved for issuance upon the exercise of the option shall have
been duly listed, upon official notice of issuance, upon a stock exchange or the
NASDAQ National Market, and that either:
(a) a Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective, or
(b) the participant shall have represented at the time of purchase, in
form and substance satisfactory to the Company, that it is such Employee's
intention to purchase the shares for investment and not for resale or
distribution.
ARTICLE XI
ADMINISTRATION
11.1 Appointment of Committee. The Board of Directors shall appoint a
committee (the "Committee") to administer the Plan, which shall consist of no
fewer than two (2) members of the Board of Directors. Members of the Committee
who are Employees shall be eligible to purchase stock under the Plan.
11.2 Authority of Committee. Subject to the express provisions of the
Plan, the Committee shall have plenary authority in its discretion to interpret
and construe any and all provisions of the Plan, to adopt rules and regulations
for administering the Plan, and to make all other determinations deemed
necessary or advisable for administering the Plan. The Committee's determination
on the foregoing matters shall be conclusive. The Committee may delegate its
authority as it deems necessary.
11.3 Rules Governing the Administration of the Committee. The Board of
Directors may from time to time appoint members of the Committee in substitution
for or in addition to members previously appointed and may fill vacancies,
however caused, in the Committee. The Committee may select one of its members as
its Chairman and shall hold its meetings at such times and places as it shall
deem advisable and may hold telephonic meetings. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. The Committee may correct any defect or omission or
reconcile any inconsistency in the Plan, in the manner and to the extent it
shall deem desirable. Any decision or determination reduced to writing and
signed by a majority of the members of the Committee shall be as fully effective
as if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.
ARTICLE XII
MISCELLANEOUS
12.1 Designation of Beneficiary. A participant may file a written
designation of a beneficiary who is to receive any Stock and/or cash. Such
designation of beneficiary may be changed by the participant at any time by
written notice to the designated office of the Company. Upon the death of a
participant and upon receipt by the Company of proof of identity and existence
at the participant's death of a beneficiary validly designated by the
participant under the Plan, the Company shall deliver such Stock and/or cash to
such beneficiary. In the event of the death of a participant and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such participant's death, the Company shall deliver such Stock and/or cash to
the executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Stock and/or cash to the spouse
or to any one or more dependents of the participant as the Company may
designate. No
A-6
<PAGE> 33
beneficiary shall, prior to the death of the participant by whom he has been
designated, acquire any interest in the Stock or cash credited to the
participant under the Plan.
12.2 Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive Stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant other than by will or the
laws of descent and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds in accordance with Article VIII.
12.3 Use of Funds. All payroll deductions received or held by the Company
under this Plan may be used by the Company for any corporate purpose and the
Company shall not be obligated to segregate such payroll deductions.
12.4 Adjustment Upon Changes in Capitalization.
(a) If, while any options are outstanding, the outstanding shares of Common
Stock of the Company have increased, decreased, changed into, or been exchanged
for a different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization, reclassification, stock split (whether
or not effected in the form of a stock dividend), reverse stock split or similar
transaction, appropriate and proportionate adjustments may be made by the
Committee in the number and/or kind of shares which are subject to purchase
under outstanding options and on the option exercise price or prices applicable
to such outstanding options. In addition, in any such event, the number and/or
kind of shares which may be offered in the Offerings described in Article IV
hereof shall also be proportionately adjusted.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the holder of each option then outstanding under the Plan
will thereafter be entitled to receive at the next Offering Termination Date
upon the exercise of such option for each share as to which such option shall be
exercised, as nearly as reasonably may be determined, the cash, securities
and/or property which a holder of one share of the Company's Common Stock was
entitled to receive upon and at the time of such transaction. The Board of
Directors shall take such steps in connection with such transactions as the
Board shall deem necessary to assure that the provisions of this Section 12.4
shall thereafter be applicable, as nearly as reasonably may be determined, in
relation to the said cash, securities and/or property as to which such holder of
such option might thereafter be entitled to receive.
12.5 Amendment and Termination. The Board of Directors shall have complete
power and authority to terminate or amend the Plan; provided, however, that the
Board of Directors shall not, without the approval of the stockholders of the
Corporation (i) increase the maximum number of shares which may be issued under
the Plan (except pursuant to Section 12.4 hereof); or (ii) amend the
requirements as to the class of Employees eligible to purchase stock under the
Plan. No termination, modification, or amendment of the Plan may, without the
consent of an Employee then having an option under the Plan to purchase stock,
adversely affect the rights of such Employee under such option.
12.6 Effective Date. The original Plan was effective as of July 1, 1994
and was thereafter approved by the holders of the majority of the Common Stock
present and represented at the annual meeting of the shareholders held on
December 8, 1994.
12.7 No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any Employee or class of Employees to
purchase any shares under the Plan, or create in any Employee or class of
Employees any right with respect to continuation of employment by the Company,
and it shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an Employee's employment at any time.
12.8 Effect of Plan. The provisions of the Plan shall, in accordance with
its terms, be binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without limitation,
A-7
<PAGE> 34
such Employee's estate and the executors, administrators or trustees thereof,
heirs and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Employee.
12.9 Governing Law. The law of the State of Arizona will govern all
matters relating to this Plan except to the extent it is superseded by the laws
of the United States.
RURAL/METRO CORPORATION,
a Delaware corporation
By: /s/ JACK E. BRUCKER
------------------------------------
Its: Chief Executive Officer
Attest:
/s/ LOUIS G. JEKEL
--------------------------------------
Secretary
A-8
<PAGE> 35
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RURAL/METRO CORPORATION
2000 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 November
8, 2000, and hereby appoints Jack E. Brucker 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
2000 Annual Meeting of Stockholders of the Company, to be held on December 13,
2000, at 10:00 a.m., local time, at the Company's headquarters at 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.
1. ELECTION OF DIRECTORS:
[ ] FOR the two nominees listed below, except as indicated listed
below [ ] WITHHOLD AUTHORITY to vote for the two nominees
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below:
Henry G. Walker, Cor J. Clement
--------------------------------------------------------------------------------
2. PROPOSAL TO AMEND THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK THAT MAY BE PURCHASED PURSUANT TO THE PLAN.
<TABLE>
<S> <C> <C>
[ [ [
] FOR ] AGAINST ] ABSTAIN
</TABLE>
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 2001.
<TABLE>
<S> <C> <C>
[ [ [
] FOR ] AGAINST ] ABSTAIN
</TABLE>
and upon such other matters that may properly come before the meeting or any
adjournment or adjournments thereof.
(continued, and to be signed, on reverse side.)
<PAGE> 36
(continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, FOR THE ELECTION OF DIRECTORS; FOR THE PROPOSAL TO AMEND THE
COMPANY'S EMPLOYEE STOCK PURCHASE PLAN; FOR THE RATIFICATION OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY; AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
A majority of such attorneys or
substitutes as shall be present and
shall act at said meeting or any
adjournment or adjournments thereof
(or if only one shall be present and
act, then that one) shall have and
may exercise all of the powers of
said attorneys-in-fact hereunder
Date: , 2000
---------------------------------------------
--------------------------------------------------------
SIGNATURE
--------------------------------------------------------
SIGNATURE
(This Proxy should be dated, signed
by the stockholder(s) exactly as his
or 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.)
