-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BXDLKH6jCBww38SwwhCgf6g8+fcBCXH87izJEd154n97tujNkyxNRCbph274F/8Z vH5PdlNgPDpEcA1656DqOQ== 0000950153-96-000301.txt : 19960517 0000950153-96-000301.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950153-96-000301 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RURAL METRO CORP /DE/ CENTRAL INDEX KEY: 0000906326 STANDARD INDUSTRIAL CLASSIFICATION: LOCAL & SUBURBAN TRANSIT & INTERURBAN HWY PASSENGER TRAINS [4100] IRS NUMBER: 860746929 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22056 FILM NUMBER: 96565524 BUSINESS ADDRESS: STREET 1: 8401 EAST INDIAN SCHOOL RD CITY: SCOTTSDALE STATE: AZ ZIP: 85251 BUSINESS PHONE: 6029443886 10-Q 1 10-Q FOR PERIOD ENDED 3/31/96 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-22056 RURAL/METRO CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 86-0746929 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 8401 EAST INDIAN SCHOOL ROAD SCOTTSDALE, ARIZONA 85251 (Address of principal executive offices) (Zip Code) (602) 994-3886 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- At May 13, 1996 there were 10,830,981 shares of Common Stock outstanding, exclusive of treasury shares held by the Registrant. 2 RURAL/METRO CORPORATION INDEX TO QUARTERLY REPORT ON FORM 10-Q
Page ---- Part I. Financial Statements Item 1. Consolidated Financial Statements: Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Item 6a. Exhibits 13 Signatures 14
3 RURAL/METRO CORPORATION CONSOLIDATED BALANCE SHEETS MARCH 31, 1996 AND JUNE 30, 1995 (IN THOUSANDS)
March 31, June 30, 1996 1995 ---------- --------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,568 $ 900 Accounts receivable, net 62,626 41,090 Inventories 3,593 3,296 Prepaid expenses and other 6,319 3,466 --------- --------- Total current assets 75,106 48,752 PROPERTY AND EQUIPMENT, net 43,778 31,510 INTANGIBLE ASSETS, net 83,972 73,558 OTHER ASSETS 3,317 5,610 --------- --------- $ 206,173 $ 159,430 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,668 $ 5,048 Accrued expenses 10,637 8,969 Current portion of long-term debt 6,298 8,377 --------- --------- Total current liabilities 19,603 22,394 LONG-TERM DEBT, net of current portion 87,062 53,282 NON-REFUNDABLE SUBSCRIPTION INCOME 11,958 10,917 DEFERRED INCOME TAXES 7,667 4,957 OTHER LIABILITIES 2,154 2,232 --------- --------- Total liabilities 128,444 93,782 --------- --------- STOCKHOLDERS' EQUITY Preferred Stock --- --- Common stock 96 90 Additional paid-in capital 56,245 52,431 Retained earnings 24,373 15,912 Deferred compensation (1,746) (1,546) Treasury stock (1,239) (1,239) --------- --------- Total stockholders' equity 77,729 65,648 --------- --------- $ 206,173 $ 159,430 ========= =========
The accompanying notes are an integral part of these consolidated balance sheets. -3- 4 RURAL/METRO CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended March 31, Nine Months Ended March 31, ---------------------------- --------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- REVENUE Ambulance services $51,789 $33,159 $143,246 $ 87,566 Fire protection services 9,813 8,022 28,503 23,820 Other 3,382 2,605 9,837 8,630 ------- ------- -------- --------- Total revenue 64,984 43,786 181,586 120,016 ------- ------- -------- -------- OPERATING EXPENSES Payroll and employee benefits 34,596 23,393 98,198 64,498 Provision for doubtful accounts 8,138 5,522 22,445 15,356 Depreciation 2,571 1,636 7,063 4,593 Amortization of intangibles 888 495 2,574 1,312 Other operating expenses 12,016 8,475 34,378 23,740 ------- ------- -------- -------- Total expenses 58,209 39,521 164,658 109,499 ------- ------- -------- -------- OPERATING INCOME 6,775 4,265 16,928 10,517 INTEREST EXPENSE, net 1,706 771 4,136 1,837 ------- ------- -------- -------- INCOME BEFORE INCOME TAXES 5,069 3,494 12,792 8,680 PROVISION FOR INCOME TAXES 2,080 1,444 5,305 3,536 ------- ------- -------- -------- NET INCOME $ 2,989 $ 2,050 $ 7,487 $ 5,144 ======= ======= ======== ======== EARNINGS PER COMMON STOCK AND COMMON STOCK EQUIVALENT $0.31 $0.25 $0.79 $0.64 ===== ===== ===== ===== WEIGHTED AVERAGE NUMBER OF COMMON STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING 9,735 8,253 9,522 8,063
The accompanying notes are an integral part of these consolidated financial statements. -4- 5 RURAL/METRO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) (IN THOUSANDS)
1996 1995 -------- -------- CASH FLOW FROM OPERATING ACTIVITIES Net income $ 7,487 $ 5,144 Adjustments to reconcile net income to cash provided by (used in) operations -- Depreciation and amortization 9,637 5,905 Amortization of deferred compensation 459 320 Amortization of gain on sale of real estate (78) (78) Provision for doubtful accounts 22,445 15,356 Change in assets and liabilities, net of effect of businesses acquired -- Increase in accounts receivable (40,368) (27,102) Increase in inventories (279) (331) Decrease (increase) in prepaid expenses and other (1,673) 1,029 Increase (decrease) in accounts payable (2,865) 635 Increase in accrued expenses and other 307 256 Increase in nonrefundable subscription income 362 596 Increase (decrease) in deferred income taxes 1,837 (238) -------- -------- Net cash provided by (used in) operating activities (2,729) 1,492 -------- -------- CASH FLOW FROM FINANCING ACTIVITIES Borrowings on revolving credit facility, net 40,600 30,193 Repayment of debt and capital lease obligations (17,474) (7,010) Borrowings of debt 2,016 1,003 Issuance of common stock 2,070 688 -------- -------- Net cash provided by financing activities 27,212 24,874 -------- -------- CASH FLOW FROM INVESTING ACTIVITIES Capital expenditures (13,806) (7,977) Increase in other assets (122) --- Cash paid for businesses acquired (8,887) (27,380) -------- -------- Net cash used in investing activities (22,815) (35,357) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,668 (8,991) CASH AND CASH EQUIVALENTS, Beginning of period 900 9,849 -------- -------- CASH AND CASH EQUIVALENTS, End of period $ 2,568 $ 858 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. -5- 6 RURAL/METRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. (1) INTERIM RESULTS In the opinion of management, the consolidated financial statements for the three month and nine month periods ended March 31, 1996 and 1995 include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated financial position and results of operations for that period. The results of operations for the three month and nine month periods ended March 31, 1996 and 1995 are not necessarily indicative of the results of operations for a full fiscal year. (2) ACQUISITIONS During the nine months ended March 31, 1996 the Company purchased the stock of ambulance service providers operating in New York state and Alabama, the assets of ambulance service providers operating in Ohio, Texas, South Carolina and Georgia and the stock of a fire service company operating in Oregon. The acquisitions were accounted for as purchases in accordance with Accounting Principles Board Opinion No. 16 (APB16) and, accordingly, the purchased assets and assumed liabilities were recorded at their estimated fair values at each respective acquisition date. The aggregate purchase price consisted of the following:
(in thousands) Cash $ 8,887 Rural/Metro common stock 903 Notes payable to sellers 2,718 Assumption of liabilities 2,157 ------- $14,665 =======
The common stock has been valued based upon certain restrictions placed on its subsequent resale. During October 1995 and March 1996, subsidiaries of the Company merged with and into two ambulance service providers operating in Indiana and an ambulance service provider operating in Ohio. The Company issued an aggregate of 405,077 shares of its common stock in exchange for all of the issued and outstanding stock of the acquired companies. The transactions were accounted for as pooling-of-interests in accordance with APB16. The unaudited pro forma combined condensed statements of income for the fiscal year ended June 30, 1995 and the nine months ended March 31, 1996 give effect to the acquisitions as if each had been consummated as of the beginning of each respective period. The pro forma combined condensed financial statements do not purport to represent what the Company's actual results of operations or financial position would have been had such transactions in fact occurred on such dates. The pro forma combined condensed statements of income also do not purport to project the results of operations of the Company for the current year or for any future period. -6- 7 RURAL/METRO CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME FOR THE YEAR ENDED JUNE 30, 1995 AND FOR THE NINE MONTHS ENDED MARCH 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED JUNE 30, 1995 ------------------------- PROFORMA HISTORICAL COMBINED ---------- -------- Revenue $171,583 $236,588 Income before extraordinary item $ 7,593 $ 11,228 Earnings per share before extraordinary item $0.92 $1.15 NINE MONTHS ENDED MARCH 31, 1996 ------------------------- PROFORMA HISTORICAL COMBINED ---------- -------- Revenue $181,586 $194,227 Net income $ 7,487 $ 8,293 Earnings per share $0.79 $0.86
Pro forma adjustments include adjustments to: (i) reflect amortization of the cost in excess of the fair value of net assets acquired (ii) adjust payroll and related expenses for the effect of certain former owners of the acquired businesses not being employed by the Company and to reflect the difference between the actual compensation paid to officers of the businesses acquired and the lower level of aggregate compensation such individuals would have received under the terms of employment agreements executed by the Company and such individuals; (iii)adjust other operating expenses to reflect the reduction of expenses related to certain real estate and buildings not acquired and sellers' costs incurred in connection with the sale of their respective businesses; (iv) adjust interest expense to reflect interest expense related to debt issued in connection with the acquisitions; and, (v) adjust income taxes to reflect the tax effect of the adjustments and the tax effect of treating all of the acquisitions as if they had C corporation status. Subsequent to March 31, 1996, the Company purchased the assets of ambulance service providers operating in New York and the stock of an ambulance service provider operating in South Dakota. The aggregate purchase price was $4.1 million. The Company paid cash of $2.9 million, issued notes payable to sellers of $0.7 million, issued 3,464 shares of the Company's common stock valued at $0.1 million and assumed $0.4 million of liabilities. These transactions were accounted for as purchases in accordance with APB16. (3) CREDIT AGREEMENTS AND BORROWINGS During September 1995, the Company funded a fully underwritten credit agreement for a $125 million revolving credit facility. The Company used the proceeds from the facility to repay the Company's existing revolving credit facility and its notes payable. Approximately $75.5 million was outstanding on the credit facility at March 31, 1996. During April 1996, the Company issued 1,367,500 shares of its common stock in a public stock offering. The Company used the net proceeds of approximately $34.8 million to repay a portion of its revolving credit facility. -7- 8 ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company derives its revenue primarily from fees charged for ambulance and fire protection services. The Company provides ambulance services in response to emergency medical calls ("911" emergency ambulance services) and non-emergency transport services (general transport services) to patients on both a fee-for-service basis and non-refundable subscription fee basis. Per transport revenue depends on various factors, including the mix of rates between existing markets and new markets and the mix of activity between "911" emergency ambulance services and general transport services as well as other competitive factors. Fire protection services are provided either under contracts with municipalities or fire districts or on a non-refundable subscription fee basis to individual homeowners or commercial property owners. Ambulance service fees are recorded net of Medicare, Medicaid and other reimbursement limitations and are recognized when services are provided. Payments received from third-party payors represent a substantial portion of the Company's ambulance service fee receipts. Provision for doubtful accounts is made for the expected difference between ambulance services fees and amounts actually collected. The Company's provision for doubtful accounts generally is higher with respect to collections to be derived directly from patients than for collections to be derived from third-party payors and generally is higher for "911" emergency ambulance services than for general ambulance transport services. Because of the nature of the Company's ambulance services, it is necessary to respond to a number of calls, primarily "911" emergency ambulance service calls, which may not result in transports. Results of operations are discussed below on the basis of actual transports since transports are more directly related to revenue. Expenses associated with calls that do not result in transports are included in operating expenses. The percentage of calls not resulting in transports varies substantially depending upon the mix of general transport and "911" emergency ambulance service calls in the Company's markets and is generally higher in markets in which the calls are primarily "911" emergency ambulance service calls. Rates in the Company's markets take into account the anticipated number of calls that may not result in transports. The Company does not separately account for expenses associated with calls that do not result in transports. Revenue generated under fire protection services contracts is recognized over the life of the contract. Subscription fees received in advance are deferred and recognized over the term of the subscription agreement, which is generally one year. Other revenue consists primarily of fees associated with alternative transportation services and is recognized when the services are provided. Other operating expenses consist primarily of rent and related occupancy expenses, maintenance and repairs, insurance, fuel and supplies, travel and professional fees. THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995 REVENUE Total revenue increased $21.2 million, or 48.4%, from $43.8 million for the three months ended March 31, 1995 to $65.0 million for the three months ended March 31, 1996. Approximately $15.2 million of this increase resulted from the acquisition of ambulance service providers during the last quarter of fiscal 1995 and the first three quarters of fiscal 1996. Ambulance services revenue in markets served by the Company in both of the three month periods ended March 31, 1995 and 1996 increased by 10.2%. Fire protection services revenue increased by $1.8 million, or 22.5%, from $8.0 million for the three months ended March 31, 1995 to $9.8 million for the three months ended March 31, 1996. -8- 9 Total ambulance transports increased by 61,000, or 63.2%, from 122,000 for the three months ended March 31,1995 to 183,000 for the three months ended March 31, 1996. The acquisition of eleven ambulance service companies during the last quarter of fiscal 1995 and the first three quarters of fiscal 1996 accounted for 57,000 of these additional transports. Fire protection services revenue increased due to revenue generated from new fire protection contracts awarded to the Company through competitive bidding and due to rate increases for fire protection services. The increase also resulted from the acquisition of a fire service company during the first quarter of fiscal 1996. OPERATING EXPENSES Payroll and employee benefit expenses increased $11.2 million, or 47.9%, from $23.4 million for the three months ended March 31, 1995 to $34.6 million for the three months ended March 31, 1996. This increase was primarily due to the acquisition of eleven ambulance service providers during the last quarter of fiscal 1995 and the first three quarters of fiscal 1996. Provision for doubtful accounts increased $2.6 million, or 47.3%, from $5.5 million for the three months ended March 31, 1995 to $8.1 million for the three months ended March 31, 1996. Provision for doubtful accounts decreased from 12.6% of total revenue for the three months ended March 31, 1995 to 12.5% of total revenue for the three months ended March 31, 1996, reflecting the effect of the acquisition of ambulance service providers operating in markets with higher receivable collections as a result of a greater mix of general transport activity. Depreciation increased $0.9 million, or 56.3% from $1.6 million for the three months ended March 31, 1995 to $2.5 million for the three months ended March 31, 1996, primarily as a result of increased property and equipment from recent acquisition activity. Amortization of intangibles increased by $0.4 million, or 80.0%, from $0.5 million for the three months ended March 31, 1995 to $0.9 million for the three months ended March 31, 1996. This increase was the result of increased intangible assets caused by recent acquisition activity. Amortization of intangibles increased from 1.1% of total revenue for the three months ended March 31, 1995 to 1.4% for the three months ended March 31, 1996. Other operating expenses increased approximately $3.5 million, or 41.2%, from $8.5 million for the three months ended March 31, 1995 to $12.0 million for the three months ended March 31, 1996, primarily due to increased expenses associated with the operation of the eleven ambulance service providers acquired during the last quarter of fiscal 1995 and the first three quarters of fiscal 1996. Other operating expenses decreased from 19.4% of total revenue for the three months ended March 31, 1995 to 18.5% of total revenue for the three months ended March 31, 1996 as a result of operational efficiencies. Interest expense increased by $0.9 million from $0.8 million for the three months ended March 31, 1995 to $1.7 million for the three months ended March 31, 1996. This increase was caused by higher debt balances, reflecting increased borrowings on the Company's revolving credit facility. NINE MONTHS ENDED MARCH 31, 1996 COMPARED TO NINE MONTHS ENDED MARCH 31, 1995 REVENUE Total revenue increased $61.6 million, or 51.3%, from $120.0 million for the nine months ended March 31, 1995 to $181.6 million for the nine months ended March 31, 1996. Approximately $45.5 million of this increase resulted from the acquisition of ambulance service providers during the last quarter of fiscal 1995 and the first three quarters of fiscal 1996. Fire protection services revenue increased by $4.7 million and other revenue increased by $1.2 million. -9- 10 Total ambulance transports increased by 203,000, or 64.0%, from 317,000 for the nine months ended March 31, 1995 to 520,000 for the nine months ended March 31, 1996. The acquisition of eleven ambulance service companies during the last quarter of fiscal 1995 and the first three quarters of fiscal 1996 accounted for 188,000 of these additional transports. Fire protection services revenue increased due to revenue generated from new fire protection contracts awarded to the Company through competitive bidding and due to rate increases for fire protection services. The increase also resulted from the acquisition of a fire service company during the first quarter of fiscal 1996. OPERATING EXPENSES Payroll and employee benefit expenses increased $33.7 million, or 52.2%, from $64.5 million for the nine months ended March 31, 1995 to $98.2 million for the nine months ended March 31, 1996. This increase was primarily due to the acquisition of eleven ambulance service providers during the last quarter of fiscal 1995 and the first three quarters of fiscal year 1996. Provision for doubtful accounts increased $7.1 million, or 46.1%, from $15.4 million for the nine months ended March 31, 1995 to $22.5 million for the nine months ended March 31, 1996. Provision for doubtful accounts decreased from 12.8% of total revenue for the nine months ended March 31, 1995 to 12.4% of total revenue for the nine months ended March 31, 1996 reflecting the effect of the acquisition of ambulance service providers operating in markets with higher receivable collections as a result of a greater mix of general transport activity. Depreciation increased $2.5 million, or 54.3%, from $4.6 million for the nine months ended March 31, 1995 to $7.1 million for the nine months ended March 31, 1996, primarily due to increased property and equipment from recent acquisition activity. Amortization of intangibles increased by $1.3 million, from $1.3 million for the nine months ended March 31, 1995 to $2.6 million for the nine months ended March 31, 1996. This increase was the result of increased intangible assets caused by recent acquisition activity. Amortization of intangibles increased from 1.1% of total revenue for the nine months ended March 31, 1995 to 1.4% for the nine months ended March 31, 1996. Other operating expenses increased approximately $10.7 million, or 45.1% from $23.7 million for the nine months ended March 31, 1995 to $34.4 million for the nine months ended March 31, 1996, primarily due to increased expenses associated with the operation of the eleven ambulance service providers acquired during the last quarter of fiscal 1995 and the first three quarters of fiscal 1996. Other operating expenses decreased from 19.8% of total revenue for the nine months ended March 31, 1995 to 18.9% of total revenue for the nine months ended March 31, 1996 as a result of operational efficiencies. Interest expense increased by $2.3 million from $1.8 million for the nine months ended March 31, 1995 to $4.1 million for the nine months ended March 31, 1996. This increase was caused by higher debt balances, reflecting increased borrowings on the Company's revolving credit facility. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has financed its cash requirements principally through cash flow from operating activities, term and revolving indebtedness, capital equipment lease financing, and the sale of stock through an initial public offering in July 1993, subsequent public stock offerings in May 1994 and April 1996, and the on-going exercise of stock options previously issued. -10- 11 During the nine months ended March 31, 1996 the Company used cash flow of $2.7 million, compared with cash flow generated by operations of $1.5 million for the nine months ended March 31, 1995. During September 1995, the Company funded a fully underwritten credit agreement for a $125 million revolving credit facility. The Company used the proceeds from the facility to repay the Company's existing revolving credit facility and its notes payable. Approximately $75.5 million was outstanding on the credit facility at March 31, 1996. During the nine months ended March 31, 1996 the Company purchased the stock of ambulance service providers operating in New York state and Alabama, the assets of ambulance service providers operating in Ohio, Texas, South Carolina and Georgia and the stock of a fire service company operating in Oregon. The aggregate purchase price was $14.7 million. The Company paid cash of $8.9 million, issued notes payable to sellers totaling $2.7 million, issued 67,606 shares of Rural/Metro common stock valued at $0.9 million and assumed $2.2 million of liabilities. The cash portion of the acquisitions was funded through operating cash flow and through the Company's revolving credit facility. These transactions were accounted for as purchases in accordance with Accounting Principles Board Opinion No.16 (APB16). During October 1995 and March 1996, subsidiaries of the Company merged with and into two ambulance service providers operating in Indiana and an ambulance service provider operating in Ohio. The Company issued an aggregate of 405,077 shares of its common stock in exchange for all of the issued and outstanding stock of the acquired companies. The transactions were accounted for as pooling-of-interests in accordance with APB16. During August 1995, the Company registered for offer and sale up to 2,283,658 shares of common stock under a shelf registration statement. Approximately 337,000 shares included in this statement have been issued through April 1996 in connection with acquisitions. During April 1996, the Company issued 1,367,500 shares of its common stock in a public stock offering. The Company used the net proceeds of approximately $34.8 million to repay a portion of its revolving credit facility. Subsequent to March 31, 1996, the Company purchased the assets of ambulance service providers operating in New York and the stock of an ambulance service provider operating in South Dakota. The aggregate purchase price was $4.1 million. The Company paid cash of $2.9 million, issued notes payable to sellers of $0.7 million, issued 3,464 shares of the Company's common stock valued at $0.1 million and assumed $0.4 million of liabilities. These transactions were accounted for as purchases in accordance with APB16. The Company expects that cash flow from operations and additional borrowing capacity will be sufficient to meet its operating and capital needs for existing operations as well as to fund certain service area expansion and acquisitions for the twelve months subsequent to March 31, 1996. The Company is engaged in an active acquisition program. The Company intends to fund any acquisitions that it consummates through the use of cash from operations, credit facilities, seller notes payable and the issuance of common stock. In addition, the Company may seek to raise additional capital through public or private debt or equity financing. The availability of these capital sources will depend upon prevailing market conditions, interest rates and the financial condition of the Company. -11- 12 RURAL/METRO CORPORATION AND SUBSIDIARIES PART II -- OTHER INFORMATION Item 6a. Exhibits: 10.16(c) Form of Change of Control Agreement by and between Registrant and the following executive officers, dated as indicated: Executive Officer Date Signed ----------------- ----------- Warren S. Rustand November 3, 1995 James H. Bolin December 1, 1995 Robert T. Edwards December 1, 1995 Mark E. Liebner December 1, 1995 John E. Stuart December 1, 1995 10.16(d) Employment Agreement by and between Registrant and Warren S. Rustand dated November 3, 1995. 21. Subsidiaries 27. Financial Data Schedule -12- 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RURAL/METRO CORPORATION Date: May 15, 1996 By /s/ W. R. Crowell ------------------------------------ W. R. Crowell, Vice President and Principal Accounting Officer -13- EX-10.16(C) 2 CHANGE OF CONTROL AGREEMENT 1 EXHIBIT 10.16(c) December 1, 1995 [Full Name] c/o Rural/Metro Corporation 8401 East Indian School Road Scottsdale, Arizona 85251 CHANGE OF CONTROL AGREEMENT Dear [Given Name]: In order to allay the concerns of certain executives, our Board of Directors has decided to modify Section 9 of the Change of Control Agreement that Rural/Metro Corporation ("Rural/Metro") previously offered to you. Rather than preparing an amendment to the Change of Control Agreement, Rural/Metro has decided to replace the original Change of Control Agreement in its entirety with this Change of Control Agreement (the "Agreement"). This Agreement is identical to the original Agreement with the exception of the changes made in Sections 3, 9, and 20. Please bear in mind that these benefits are being offered only to a few, selected employees and we accordingly ask that you refrain from discussing this special program with others. Also, please note that the special benefits package described below will only be effective if you sign the extra copy of this Change of Control Agreement (the "Agreement") which is enclosed and return it to me on or before December 31, 1995. In this Agreement, Rural/Metro and its subsidiaries are collectively referred to as the "Company". 1. TERM OF AGREEMENT. This Agreement is effective immediately and will continue in effect as long as you are actively employed by Rural/Metro, unless you and Rural/Metro agree in writing to its termination. 2. SEVERANCE PAYMENT. If your employment with the Company is terminated without "Cause" (as defined in Section 8) within two years following a Change of Control, you will receive the "Severance Payment" described below. The Severance Payment also will be payable if you terminate your employment for "Good Reason" (as defined in Section 7) within two years following a Change of Control. The "Severance Payment" is a lump sum payment equal to the sum of: (a) 150% of your annualized base salary as of the day on which the Change of Control occurs; plus (b) 150% of an amount equal to the incentive compensation paid or payable to you pursuant to our Management Incentive Program on account of performance during the calendar year immediately preceding the calendar year in which the Change of Control occurs plus any other bonuses or incentive compensation paid or payable to you for such year; less (c) the full amount of any payments to which you may be entitled due to your termination pursuant to the terms of your "Employment Agreement" (as defined in Section 20), any applicable law, or otherwise. The Severance Payment will be paid in one lump sum within five days following your termination of employment. The Severance Payment will not be payable if your employment is terminated for Cause, if you terminate your employment without Good Reason, or if your employment is terminated by reason of your "Disability" (as defined in Section 10(d)) or your death. In addition, the Severance Payment will not be payable if your employment is terminated by you or the Company for any or no reason before a Change of Control occurs or more than two years after a Change of Control has occurred. 2 [Full Name] December 1, 1995 Page 2 In order to receive the Severance Payment, you must execute any release reasonably requested by Rural/Metro of claims that you may have pursuant to this Agreement (but not any other claims). The Severance Payment will be payable without regard to whether you look for or obtain alternative employment following your termination of employment with the Company. 3. ACCELERATION OF OR PAYMENT FOR OPTIONS. Except as otherwise noted below, if an agreement is entered into that will result in a Change of Control, before the Change of Control occurs the "Senior Committee" will accelerate the exercisability of any options you hold to acquire Company stock pursuant to the Rural/Metro Corporation 1992 Stock Option Plan (the "1992 Plan") that, pursuant to their terms, are not yet exercisable (the "Existing Options"). For this purpose, the "Senior Committee" is the "Senior Committee" established pursuant to the 1992 Plan. The Senior Committee will not be obligated to accelerate the exercisability of Existing Options (although it may if it so chooses) if any party to the agreement expressly indicates, in a writing addressed to the Senior Committee, that it intends to use pooling of interest accounting for all or any part of the transaction and the Senior Committee, based on the advice of its advisors, concludes (a) that pooling of interests accounting is available to such party for all or any portion of the transaction, and (b) that the availability of pooling of interests accounting will be jeopardized if the Senior Committee accelerates the exercisability of the Existing Options. If you are employed by the Company on the day on which a Change of Control occurs and at that time you hold any Existing Options that are not accelerated pursuant to the preceding paragraphs, you may be entitled to receive a special "Option Payment". The Option Payment will only be payable if all of the following conditions are met: (a) you are employed by the Company on the day on which the Change of Control occurs; (b) the exercisability of the Existing Options is not accelerated by action of the Senior Committee or otherwise on a basis that allows you to exercise your options prior to the Change of Control; (c) the Existing Options are not replaced by other options on the stock of the acquirer (the "Replacement Options"), which the Senior Committee, as constituted immediately prior to the Change of Control, in its discretion, determines to be comparable; and (d) Rural/Metro does not continue as a publicly held corporation required to be registered pursuant to the provisions of the Securities Exchange Act of 1934 following the Change of Control, or if Rural/Metro does continue as a registered publicly held corporation, the Senior Committee, as constituted immediately prior to the Change of Control, determines, in its discretion, that Rural/Metro has undergone a fundamental change such that the value of the Existing Options after the Change of Control is less than 75% of the value of the Existing Options prior to the Change of Control. While the Senior Committee has the discretion to determine whether Replacement Options are "comparable" to Existing Options for purposes of clause (c) of the preceding paragraph, it may not consider Replacement Options to be comparable to Existing Options unless, at a minimum, the Replacement Options are exercisable as rapidly as the Existing Options and the Replacement Options are structured to preserve the aggregate positive spread between the aggregate exercise price for the Existing Options and the aggregate "Deal Value" of the Rural/Metro stock subject to the Existing Options. For purposes of this Section, the "Deal Value" of the Rural/Metro stock is the value placed on the Rural/Metro stock by the parties for purposes of the transaction that results in the Change of Control. If no single transaction results in the Change of Control, or if the parties to such transaction do not expressly agree to a value to be 3 [Full Name] December 1, 1995 Page 3 assigned to the Rural/Metro stock for purposes of such transaction, the Deal Value of the Rural/Metro stock shall be the value that the Senior Committee determines to be the inherent value of the Rural/Metro stock as of the date on which the Change of Control occurs. For purposes of clause (d) of the third paragraph of this Section, the Senior Committee may use any option pricing model it chooses to compare the value of the Existing Options before and after the Change of Control. The Option Payment for each share of stock subject to an Existing Option will be an amount equal to the Deal Value of the Rural/Metro stock less the option price for such share as designated in the relevant option agreement. The Option Payment for all shares subject to an Existing Option shall be paid in one lump sum within 30 days following the occurrence of the last event that entitles you to receive the Option Payment. Any option for which an Option Payment is made will be automatically cancelled upon payment of the Option Payment. The Option Payment will only be made for "Existing Options". As a result, no Option Payment will be made with respect to an option that is exercisable prior to the day on which the Change of Control occurs, since the term "Existing Option" does not include exercisable options. Any determinations made in good faith by the Senior Committee for purposes of this Agreement shall be final and binding on all parties. 4. BENEFITS CONTINUATION. If your employment is terminated by the Company without Cause, or if you terminate your employment for Good Reason, within two years following a Change of Control, you will continue to receive life, disability, accident and group health insurance benefits substantially similar to those which you were receiving immediately prior to your termination of employment for a period of eighteen (18) months following your termination of employment. Such benefits shall be provided on substantially the same terms and conditions as they were provided prior to the Change of Control. The Company does not intend to provide duplicative benefits. As a result, benefits otherwise receivable pursuant to this Section shall be reduced or eliminated if and to the extent that you receive such benefits pursuant to your Employment Agreement. Benefits otherwise receivable pursuant to this Section also shall be reduced or eliminated if and to the extent that you receive comparable benefits from any other source (for example, another employer). 5. INCENTIVE COMPENSATION. If you are employed by the Company on the day on which a Change of Control occurs, the incentive compensation to which you will be entitled under the Management Incentive Program for the calendar year in which the Change of Control occurs will equal at least the "Minimum Incentive Compensation Amount". The "Minimum Incentive Compensation Amount" will equal the incentive compensation to which you would have been entitled if the year were to end on the day on which the Change of Control occurs, based upon performance up to that date. In measuring financial performance, financial results through the date of the Change of Control will be annualized. 4 [Full Name] December 1, 1995 Page 4 6. CHANGE OF CONTROL DEFINED. For purposes of this Agreement, the term Change of Control shall mean and include any one or more of the following transactions or situations: (a) A sale, transfer, or other disposition by Rural/Metro through a single transaction or a series of transactions of securities of Rural/Metro representing 30% or more of the combined voting power of Rural/Metro's then outstanding securities to any "Unrelated Person" or "Unrelated Persons" acting in concert with one another. For purposes of this Section, the term "Person" shall mean and include any individual, partnership, joint venture, association, trust, corporation, or other entity (including a "group" as referred to in Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Act")). For purposes of this Section, the term "Unrelated Person" shall mean and include any Person other than: Rural/Metro, a wholly-owned subsidiary of Rural/Metro, or an employee benefit plan of Rural/Metro. (b) A sale, transfer, or other disposition through a single transaction or a series of transactions of all or substantially all of the assets of Rural/Metro to an Unrelated Person or Unrelated Persons acting in concert with one another. (c) A change in the ownership of Rural/Metro through a single transaction or a series of transactions such that any Unrelated Person or Unrelated Persons acting in concert with one another become the "Beneficial Owner", directly or indirectly, of securities of Rural/Metro representing at least 30% of the combined voting power of Rural/Metro's then outstanding securities. For purposes of this Section, the term "Beneficial Owner" shall have the same meaning as given to that term in Rule 13d-3 promulgated under the Act, provided that any pledgee of voting securities shall not be deemed to be the Beneficial Owner thereof prior to its acquisition of voting rights with respect to such securities. (d) Any consolidation or merger of Rural/Metro with or into an Unrelated Person, unless immediately after the consolidation or merger the holders of the common stock of Rural/Metro immediately prior to the consolidation or merger are the Beneficial Owners of securities of the surviving corporation representing at least 50% of the combined voting power of the surviving corporation's then outstanding securities. (e) During any period of two (2) years, individuals who, at the beginning of such period, constituted the Board of Directors of Rural/Metro cease, for any reason, to constitute at least a majority thereof, unless the election or nomination for election of each new director was approved by the vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of such period. (f) A change in control of Rural/Metro of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act, or any successor regulation of similar import, regardless of whether Rural/Metro is subject to such reporting requirement. Notwithstanding any provision herein to the contrary, the filing of a proceeding for the reorganization of Rural/Metro under Chapter 11 of the Federal Bankruptcy Code or any successor or other statute of similar import shall not be deemed to be a Change of Control for purpose of this Agreement. 5 [Full Name] December 1, 1995 Page 5 7. GOOD REASON DEFINED. For purposes of this Agreement, "Good Reason" shall mean any one or more of the following: (a) The assignment to you of any duties which are inconsistent with, or the reduction of powers or functions associated with, your positions, duties, responsibilities and status with Rural/Metro, or a change in your reporting responsibilities, or in the conditions of your employment; provided that a single reduction by Rural/Metro of less than 10% (or aggregate reductions totalling less than 10%) in your base salary as in effect on the date hereof or as the same may be increased as provided in your Employment Agreement is permissible and shall not constitute "Good Reason". (b) The failure of Rural/Metro to cause any successor to expressly assume and agree to perform this Agreement pursuant to Section 11 hereof. (c) Any purported termination by Rural/Metro of your employment that is not effected by a Notice of Termination pursuant to Subsection 10 below and/or for grounds not constituting Cause. (d) Rural/Metro relieving you of your duties. (e) Rural/Metro requiring you to relocate, without your express written consent to an employment location which is more than 50 miles from your employment location on the date of the Change of Control. 8. CAUSE DEFINED. For purposes of this Agreement, the term "Cause" shall be given the meaning ascribed to such term in your Employment Agreement, as it may be amended from time to time. If no written Employment Agreement is in effect at the time of your termination of employment, "Cause" shall be given the meaning ascribed to it in the last written Employment Agreement that was in effect between you and the Company that included a definition of "Cause". 9. CEILING ON BENEFITS. The Internal Revenue Code (the "Code") places significant tax burdens on you and the Company if the total payments made to you due to a Change of Control exceed prescribed limits. For example, if your limit is $300,000 and the total payments exceed the limit by even $1.00, you are subject to an excise tax under Section 4999 of the Code of 20% of all amounts paid to you in excess of $100,000. If your limit is $300,000, you will not be subject to an excise tax if you receive exactly $300,000. If you receive $301,000, you will be subject to an excise tax of $40,000 (20% of $201,000). In order to avoid this excise tax and the related adverse tax consequences for the Company, by signing this Agreement, you will be agreeing that the present value of your "Total Payments" (as defined below) will not exceed an amount equal to two and ninety-nine hundredths (2.99) times your "Base Period Income" (as defined below). This is the maximum amount which you may receive without becoming subject to the excise tax imposed by Section 4999 of the Code or which the Company may pay without loss of deduction under Section 280G of the Code. "Base Period Income" is an amount equal to your "annualized includable compensation" for the "base period" as defined in Sections 280G(d)(1) and (2) of the Code and the regulations adopted thereunder. Generally, your "annualized includable compensation" is the average of your annual taxable income from the Company for the "base 6 [Full Name] December 1, 1995 Page 6 period", which is the five calendar years prior to the year in which the Change of Control occurs. These concepts are complicated and technical and all of the rules set forth in the applicable regulations apply for purposes of this Agreement. Your "Total Payments" include the sum of the Severance Payment and any other "payments in the nature of compensation" (as defined in Section 280G of the Code and the regulations adopted thereunder), including the Option Payment, to or for your benefit, the receipt of which is contingent on a Change of Control and to which Section 280G of the Code applies. If Rural/Metro believes that these rules will result in a reduction of the payments to which you are entitled under this Agreement, it will so notify you within 60 days following delivery of the "Notice of Termination" described in Section 10. You and Rural/Metro will then, at Rural/Metro's expense, retain legal counsel, certified public accountants, and/or a firm of recognized executive compensation consultants to provide an opinion or opinions concerning whether your Total Payments exceed the limit discussed above. Rural/Metro will select the legal counsel, certified public accountants and executive compensation consultants. If you do not accept one or more of the parties selected by Rural/Metro, you may provide Rural/Metro with the names of legal counsel, certified public accountants and/or executive compensation consultants acceptable to you. If Rural/Metro does not accept the party or parties selected by you, the legal counsel, certified public accountants and/or executive compensation consultants selected by you and Rural/Metro, respectively, will select the legal counsel, certified public accountants and/or executive compensation consultants to provide the opinions required. At a minimum, the opinions required by this Section must set forth (a) the amount of your Base Period Income, (b) the present value of the Total Payments and (c) the amount and present value of any excess parachute payments. If the opinions state that there would be an excess parachute payment, your payments under this Agreement will be reduced to the extent necessary to eliminate the excess. You will be allowed to choose the payment (i.e., the Severance Payment or the Option Payment) that should be reduced or eliminated, but the payment you choose to reduce or eliminate must be a payment determined by such counsel to be includable in Total Payments. You will make your decision in writing and deliver it to Rural/Metro within 30 days of your receipt of such opinions. If you fail to so notify Rural/Metro, it will decide which payments to reduce or eliminate. For purposes of determining whether your "Total Payments" exceed the limitation mentioned above, Rural/Metro and all legal counsel, certified public accountants, and executive compensation consultants will be bound to make certain assumptions. The first assumption that must be made is that, except as otherwise noted below, none of the amounts or benefits payable to you pursuant to the severance provisions of your Employment Agreement are contingent on a Change of Control. The only exception to this rule is that any increases in such amounts due to an amendment to your Employment Agreement that occurs within one (1) year of the Change of Control may be treated as contingent on the Change of Control. The second assumption that must be made is that the vesting of your stock grants under your Conditional Stock Grant and Repurchase Agreement is not in any way contingent on a Change of Control. If the legal counsel or certified public accountants selected to provide the opinions referred to above so requests in connection with the opinion required by this Section, a firm of recognized executive compensation 7 [Full Name] December 1, 1995 Page 7 consultants, selected by you and Rural/Metro pursuant to the procedures set forth above, shall provide an opinion, upon which such legal counsel or certified public accountants may rely, as to the reasonableness of any item of compensation as reasonable compensation for services rendered before or after the Change of Control. If Rural/Metro believes that your Total Payments will exceed the limitations of this Section, it will nonetheless make payments to you, at the times stated above, in the maximum amount that it believes may be paid without exceeding such limitations. The balance, if any, will then be paid after the opinions called for above have been received. If the Internal Revenue Service concludes in a final determination that the amounts paid to you exceed the limitations of this Section, as a general rule, the excess will be treated as a loan to you by Rural/Metro and shall be repayable on the 90th day following demand by Rural/Metro, together with interest at the "applicable federal rate" provided in Section 1274(d) of the Code. All or a portion of the excess will not be treated as a loan and you will not be required to return or repay it if both of the following conditions are met: (a) The excess is equal to or greater than $100,000; and (b) All or a portion of the excess is attributable to a determination by the IRS that amounts or benefits payable to you pursuant to the severance provisions of your Employment Agreement, or the value of all or a portion of the stock grant to which you are entitled pursuant to your Conditional Stock Grant and Repurchase Agreement, must be treated as being contingent on a Change of Control. If both of the conditions set forth in the preceding sentence are satisfied, you may retain the portion of the excess that is described in clause (b) of the preceding sentence. The balance of the excess will be treated as a loan and will be repayable as described above. If you are not required to return all or a portion of an excess payment pursuant to the preceding paragraph, Rural/Metro also will make a special cash payment to you equal to twenty percent (20%) of the amount by which your Total Payments exceed your Base Period Income, as determined prior to the making of the cash payment. In the event that the provisions of Sections 280G and 4999 of the Code are repealed without succession, this Section shall be of no further force or effect. 10. TERMINATION NOTICE AND PROCEDURE. Any termination by the Company or you of your employment shall be communicated by written Notice of Termination to you if such Notice of Termination is delivered by the Company and to the Company if such Notice of Termination is delivered by you, all in accordance with the following procedures: (a) The Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances alleged to provide a basis for termination. (b) Any Notice of Termination by the Company shall be in writing signed by the Chairman of the Board of Rural/Metro, specifying in detail the basis for such termination. (c) If the Company shall furnish a Notice of Termination for Cause and you in good faith notify the Company that a dispute exists concerning such termination within the 15 day period following your receipt of such notice, you may elect to continue your employment during such dispute. If it is thereafter determined that (i) 8 [Full Name] December 1, 1995 Page 8 Cause did exist, your "Termination Date" shall be the earlier of (A) the date on which the dispute is finally determined, either by mutual written agreement of the parties or pursuant to the alternative dispute resolution provisions of Section 17 or (B) the date of your death, or (ii) Cause did not exist, your employment shall continue as if the Company had not delivered its Notice of Termination and there shall be no Termination Date arising out of such notice. (d) If the Company shall furnish a Notice of Termination by reason of Disability and you in good faith notify the Company that a dispute exists concerning such termination within the 15-day period following your receipt of such notice, you may elect to continue your employment during such dispute. The dispute relating to the existence of a Disability shall be resolved by the opinion of the licensed physician selected by Rural/Metro; provided, however, that if you do not accept the opinion of the licensed physician selected by Rural/Metro, the dispute shall be resolved by the opinion of a licensed physician who shall be selected by you; provided further, however, that if Rural/Metro does not accept the opinion of the licensed physician selected by you, the dispute shall be finally resolved by the opinion of a licensed physician selected by the licensed physicians selected by Rural/Metro and you, respectively. If it is thereafter determined that (i) a Disability did exist, your Termination Date shall be the earlier of (A) the date on which the dispute is resolved or (B) the date of your death, or (ii) a Disability did not exist, your employment shall continue as if the Company had not delivered its Notice of Termination and there shall be no Termination Date arising out of such notice. For purposes of this Agreement, "Disability" shall be given the meaning ascribed to such term in your Employment Agreement at the time the Disability determination is being made. If there is no Employment Agreement that defines "Disability", "Disability" shall mean your inability to perform your customary duties for the Company due to a physical or mental condition that is considered to be of long-lasting or indefinite duration. (e) If you in good faith furnish a Notice of Termination for Good Reason and the Company notifies you that a dispute exists concerning the termination within the 15 day period following the Company's receipt of such notice, you may elect to continue your employment during such dispute. If it is thereafter determined that (i) Good Reason did exist, your Termination Date shall be the earlier of (A) the date on which the dispute is finally determined, either by mutual written agreement of the parties or pursuant to the alternative dispute resolution provisions of Section 17, (B) the date of your death or (C) one day prior to the second anniversary of a Change of Control, and your payments hereunder shall reflect events occurring after you delivered Notice of Termination; or (ii) Good Reason did not exist, your employment shall continue after such determination as if you had not delivered the Notice of Termination asserting Good Reason. (f) If you do not elect to continue employment pending resolution of a dispute regarding a Notice of Termination, and it is finally determined that the reason for termination set forth in such Notice of Termination did not exist, if such notice was delivered by you, you shall be deemed to have voluntarily terminated your employment other than for Good Reason and if delivered by the Company, the Company will be deemed to have terminated you other than by reason of Disability or Cause. (g) For purposes of this Agreement, a transfer from Rural/Metro to one of its subsidiaries or a transfer from a subsidiary to Rural/Metro or another subsidiary shall not be treated as a termination of employment. 11. SUCCESSORS. Rural/Metro will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Rural/Metro or any of its subsidiaries to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Rural/Metro or any subsidiary would be required to perform it if no such succession had taken place. Failure of Rural/Metro to obtain such 9 [Full Name] December 1, 1995 Page 9 assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation in the same amount and on the same terms to which you would be entitled hereunder if you terminate your employment for Good Reason following a Change of Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Termination Date. As used in this Agreement, "Rural/Metro" shall mean Rural/Metro as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. 12. BINDING AGREEMENT. This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 13. NOTICE. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to Rural/Metro shall be directed to the attention of the Chairman of the Board of Rural/Metro with a copy to the Secretary of Rural/Metro, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 14. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and the Chairman of the Board of Rural/Metro. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Arizona without regard to its conflicts of law principles. All references to sections of the Securities Exchange Act of 1934 or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company that arise prior to the expiration of this Agreement shall survive the expiration of the term of this Agreement. 15. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10 [Full Name] December 1, 1995 Page 10 16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 17. ALTERNATIVE DISPUTE RESOLUTION. All claims, disputes and other matters in question between the parties arising under this Agreement shall, unless otherwise provided herein (such as in Sections 9 and 10(d)), be resolved in accordance with the arbitration or alternative dispute resolution provisions included in your Employment Agreement. If no written Employment Agreement is in effect at the time of your termination of employment, or, if the Employment Agreement in effect at the time of your termination of employment does not include arbitration or alternative dispute resolution provisions, all claims, disputes and other matters in question between the parties arising under this Agreement shall be decided by arbitration in Phoenix, Arizona, in accordance with the Model Employment Arbitration Procedures of the American Arbitration Association (including such procedures governing selection of the specific arbitrator or arbitrators), unless the parties mutually agree otherwise. The Company shall pay the costs of any such arbitration. The award by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any state or Federal court having jurisdiction thereof. 18. EXPENSES AND INTEREST. If a good faith dispute shall arise with respect to the enforcement of your rights under this Agreement or if any arbitration or legal proceeding shall be brought in good faith to enforce or interpret any provision contained herein, or to recover damages for breach hereof, and you are the prevailing party, you shall recover from the Company any reasonable attorneys' fees and necessary costs and disbursements incurred as a result of such dispute or legal proceeding, and prejudgment interest on any money judgment obtained by you calculated at the rate of interest announced by Bank One, Arizona, NA from time to time as its prime rate from the date that payments to you should have been made under this Agreement. It is expressly provided that the Company shall in no event recover from you any attorneys' fees, costs, disbursements or interest as a result of any dispute or legal proceeding involving the Company and you. 19. PAYMENT OBLIGATIONS ABSOLUTE. Rural/Metro's obligation to pay you the compensation and to make the arrangements in accordance with the provisions herein shall be absolute and unconditional and shall not be affected by any circumstances; provided, however, that Rural/Metro may apply amounts payable under this Agreement to any debts owed to the Rural/Metro by you on your Termination Date. All amounts payable by Rural/Metro in accordance with this Agreement shall be paid without notice or demand. If Rural/Metro has paid you more than the amount to which you are entitled under this Agreement, Rural/Metro shall have the right to recover all or any part of such overpayment from you or from whomsoever has received such amount. 20. EFFECT ON EMPLOYMENT AGREEMENT. This Agreement supplements, and does not replace, your Employment Agreement, as it may be amended or replaced from time to time (the "Employment Agreement"). You will be entitled to receive all amounts due to you pursuant to your Employment Agreement, but some payments under your Employment Agreement may reduce your Severance Payments as provided in Section 2 and benefits due pursuant to your Employment Agreement may reduce 11 [Full Name] December 1, 1995 Page 11 the benefits due pursuant to Section 4. In addition, the IRS may consider payments under your Employment Agreement as part of your Total Payment, which could result in a reduction in payments as provided in Section 9. If there is any conflict between the provisions of this Agreement and your Employment Agreement, the provisions of this Agreement shall control. 21. ENTIRE AGREEMENT. This Agreement and your Employment Agreement set forth the entire agreement between you and the Company concerning the subject matter discussed in this Agreement and supersede all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether written or oral, by any officer, employee or representative of the Company. Any prior agreements or understandings with respect to the subject matter set forth in this Agreement are hereby terminated and cancelled. 22. DEFERRAL OF PAYMENTS. To the extent that any payment under this Agreement, when combined with all other payments received during the year that are subject to the limitations on deductibility under Section 162(m) of the Code, exceeds the limitations on deductibility under Section 162(m) of the Code, such payment shall, in the discretion of Rural/Metro, be deferred to the next succeeding calendar year. Such deferred amounts shall be paid no later than the 60th day after the end of such next succeeding calendar year, provided that such payment, when combined with any other payments subject to the Section 162(m) limitations received during the year, does not exceed the limitations on deductibility under Section 162(m) of the Code. 23. PARTIES. This Agreement is an agreement between you and Rural/Metro. In certain cases, though, obligations imposed upon Rural/Metro may be satisfied by a Rural/Metro subsidiary. Any payment made or action taken by a Rural/Metro subsidiary shall be considered to be a payment made or action taken by Rural/Metro for purposes of determining whether Rural/Metro has satisfied its obligations under this Agreement. If you would like to participate in this special benefits program, please sign and return the extra copy of this letter which is enclosed. Sincerely, ------------------------------ Warren Rustand Chairman of the Board Rural/Metro Corporation Enclosure ACCEPTANCE I hereby accept the offer to participate in this special benefit program and I agree to be bound by all of the provisions noted above. ------------------------------- EX-10.16(D) 3 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.16(d) EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made this 3rd day of November, 1995, by and between Warren Rustand ("Executive") and RURAL/METRO CORPORATION, its subsidiaries, affiliates, joint ventures and partnerships ("Rural/Metro"), effective October 1, 1995 ("Effective Date"). R E C I T A L S A. The Board of Directors of Rural/Metro believes it is in the best interests of Rural/Metro to employ Executive as Chairman of the Board and team leader of the Office of the Chief Executive. B. Rural/Metro has decided to offer Executive an employment agreement, the terms and provisions of which are set forth below. NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED AS FOLLOWS: 1. POSITION AND DUTIES. Executive will be employed as the Chairman of the Board of Rural/Metro and shall perform the duties of his position, as determined by the Board of Directors of Rural/Metro, in accordance with the policies, practices and bylaws of Rural/Metro. Executive shall also serve as the team leader of the Office of the Chief Executive. Executive shall serve Rural/Metro faithfully, loyally, honestly and to the best of his ability. Executive will devote his best efforts to the performance of his duties for, and in the business and affairs of, Rural/Metro. Rural/Metro reserves the right, in its sole discretion, to change or modify Executive's position, title and duties during the term of this Agreement, at which time Executive may be entitled to terminate this Agreement for Good Reason as provided in paragraph 8. 2. SALARY. During the first year of this Agreement, Executive's semimonthly salary will be based upon annual compensation of Two Hundred Seventy-Five Thousand and 00/100 Dollars ($275,000.00). Thereafter, the salary will be reviewed at least annually in accordance with Rural/Metro's executive compensation review policies and practices, all as determined by Rural/Metro, in its sole discretion. 3. MANAGEMENT INCENTIVE PROGRAM. Executive shall be eligible to participate in the Rural/Metro Management Incentive Program ("MIP") (or any other plan that is designated by the Board as replacing the MIP) and to receive such additional compensation as may be provided by the MIP from time to time. 4. SUPPLEMENTAL BENEFITS. A. RESTRICTED STOCK. Rural/Metro will recommend to the Senior Committee that Executive receive a grant of Twenty-Seven Thousand Five Hundred (27,500) shares of restricted stock pursuant to the terms and conditions of a separate Restricted Stock Agreement to be entered into by and between Executive and Rural/Metro. B. STOCK OPTIONS. Rural/Metro will recommend to the Senior Committee that Executive be given a grant of options on Two Hundred Fifty Thousand (250,000) shares of Rural/Metro stock with the terms and conditions of the options to be set forth in a separate Stock Option Agreement to be entered into by and between Executive and Rural/Metro. C. DEFERRED COMPENSATION. Executive will be credited with One Hundred Thousand and 00/100 Dollars ($100,000.00) per year in deferred compensation, such deferred compensation to be payable in accordance with the terms and conditions of a 2 separate Deferred Compensation Agreement to be entered into by and between Executive and Rural/Metro. Alternatively, Rural/Metro may elect to credit such amount to Executive's account under a Deferred Compensation Plan to be adopted by Rural/Metro. The amount of annual deferred compensation may be adjusted from time to time as the parties may agree. D. SPLIT DOLLAR LIFE INSURANCE. Rural/Metro will assist Executive in purchasing a permanent life insurance contract (i.e., a traditional whole life insurance contract, a universal life insurance contract, or a variable life insurance contract) in an amount of up to Two Million and 00/100 Dollars ($2,000,000.00) pursuant to the terms of a Split Dollar Life Insurance Agreement, the terms of which shall be agreed to by Executive and Rural/Metro. E. ANCILLARY AGREEMENTS. Rural/Metro and Executive shall enter into a Restricted Stock Agreement, one or more Stock Option Agreements, a Deferred Compensation Agreement or Plan, a Split Dollar Life Insurance Agreement and a Change of Control Agreement (collectively, the "Ancillary Agreements"). Nothing in this Agreement is intended to alter or modify the Ancillary Agreements. 5. EXPENSE REIMBURSEMENTS. A. MOVING ALLOWANCE. Executive will receive a Thirty Thousand Dollar ($30,000) moving allowance when and if Executive relocates his principal residence to Phoenix. B. INTERIM EXPENSES. Until such time as Executive relocates his principal residence to Phoenix, but in no event beyond thirty-six (36) months from the date of execution of this Agreement, Executive shall be reimbursed for the following expenses or Rural/Metro will pay such expenses on Executive's behalf: (1) Temporary housing, such as an apartment, condominium, or hotel, for Executive's use while in Phoenix on Rural/Metro business. Executive shall provide Rural/Metro's Compensation Committee with an estimate of the anticipated expenses and the expenses shall then be reimbursed or paid in accordance with any policies established by the Committee, which policies may but need not also provide for a related tax gross-up. (2) Travel expenses between Tucson and Phoenix incurred pursuant to Executive's employment by Rural/Metro. (3) Executive's office in Tucson. The office will remain open at Rural/Metro's expense and Rural/Metro will install a computer system compatible with Rural/Metro's Phoenix office system. In addition, Executive will be provided with an administrative assistant. (4) Reasonable dues paid to join or renew membership in professional or civic organizations. 6. TERM AND TERMINATION. This Agreement will continue in full force and effect until it is terminated by the parties. This Agreement may be terminated in any of the following ways: (a) it may be renegotiated and replaced by a written agreement signed by both parties; (b) Rural/Metro may elect to terminate this Agreement with or without "Cause", as defined below; (c) Executive may elect to terminate this Agreement with or without "Good Reason," as defined below; or (d) either party may serve notice on the other of its desire to terminate this Agreement at the end of the "Initial Term" or any "Renewal Term". The "Initial Term" of this Agreement shall expire by its terms on December 31, 1998, unless sooner terminated in accordance with the provisions of this Agreement. This Agreement will be renewed at the end of the Initial Term for additional one-year periods commencing on each January 1 and ending on the following December 31 (a -2- 3 "Renewal Term"), unless either party serves notice of desire to terminate or modify this Agreement on the other. Such notice must be given at least forty-five (45) days before the end of the Initial Term or the applicable Renewal Term. 7. TERMINATION BY RURAL/METRO. A. Termination For Cause. Rural/Metro may terminate this Agreement and Executive's employment for Cause at any time upon written notice. This means that Rural/Metro has the right to terminate the employment relationship for Cause at any time should there be Cause to do so. For purposes of this Agreement, "Cause" shall be limited to discharge resulting from a determination by Rural/Metro that Executive: (a) has been convicted of a felony involving dishonesty, fraud, theft or embezzlement; (b) has repeatedly failed or refused, after written notice from Rural/Metro, in a material respect to follow reasonable policies or directives established by Rural/Metro; (c) has willfully and persistently failed, after written notice from Rural/Metro, to attend to material duties or obligations imposed upon him under this Agreement; (d) has performed an act or failed to act, which, if he were prosecuted and convicted, would constitute a felony involving One Thousand Dollars ($1,000) or more of money or property of Rural/Metro; or (e) has misrepresented or concealed a material fact for purposes of securing employment with Rural/Metro or this Employment Agreement. The existence of "Cause" shall be determined by Rural/Metro's Board of Directors after notice to Executive and after providing Executive with an opportunity to be heard. Because Executive is in a position which involves great responsibilities, Rural/Metro is not required to utilize its progressive discipline policy. If this Agreement and Executive's employment is terminated for Cause, Executive shall receive no Severance Benefits. B. Termination Without Cause. Rural/Metro also may terminate this Agreement and Executive's employment without Cause at any time by giving thirty (30) days written notice to Executive. In the event this Agreement and Executive's employment are terminated by Rural/Metro without Cause, Executive shall be entitled to receive Severance Benefits pursuant to paragraph 10. 8. TERMINATION BY EXECUTIVE. Executive may terminate this Agreement and his employment with or without "Good Reason" in accordance with the provisions of this paragraph 8. A. Termination For Good Reason. Executive may terminate this Agreement and his employment for "Good Reason" by giving written notice to Rural/Metro within thirty (30) days, or such longer period as may be agreed to in writing by Rural/Metro, of Executive's receipt of notice of the occurrence of any event constituting "Good Reason," as described below. Executive shall have "Good Reason" to terminate this Agreement and his employment upon the occurrence of any of the following events: (a) Executive is demoted to a position of less stature or importance within Rural/Metro than the position described in paragraph 1; (b) Executive is required to relocate to an employment location that is more than fifty (50) miles from his current employment location (which the parties agree is Rural/Metro's present Scottsdale headquarters); (c) Executive's annualized salary rate is reduced to a level that is at least twenty percent (20%) less than the salary paid to Executive during any prior calendar year, unless Executive has agreed to said reduction; or (d) the potential incentive compensation (or bonus) to which Executive may become entitled under the MIP at any level of performance by the Executive or Rural/Metro is reduced by seventy-five percent (75%) or more as compared to any prior year. If Executive terminates this Agreement and his employment for Good Reason, Executive shall be entitled to receive Severance Benefits pursuant to paragraph 10. -3- 4 B. Termination Without Good Reason. Executive also may terminate this Agreement and his employment without Good Reason at any time by giving thirty (30) days notice to Rural/Metro. If Executive terminates this Agreement and his employment without Good Reason, Executive shall not be entitled to receive Severance Benefits pursuant to paragraph 10. 9. DEATH OR DISABILITY. This Agreement will terminate automatically on Executive's death. Any salary or other amounts due to Executive for services rendered prior to his death shall be paid to Executive's surviving spouse, or if Executive does not leave a surviving spouse, to Executive's estate. No other benefits shall be payable to Executive's heirs pursuant to this Agreement, but amounts may be payable pursuant to any life insurance or other benefit plans maintained by Rural/Metro. In the event Executive becomes "Disabled," Executive's employment hereunder and Rural/Metro's obligation to pay Executive's salary (less any amounts payable to Executive pursuant to any long-term disability insurance policy paid for by Rural/Metro) shall continue for a period of twelve (12) months from the date of Executive's initial absence due to such Disability. If at the end of said twelve (12) month period Executive has not recovered from such Disability, Executive's employment hereunder shall automatically cease and terminate. Executive shall be considered "Disabled" or to be suffering from a "Disability" for purposes of this paragraph 9 if, in the judgment of a licensed physician selected by the Board of Directors of Rural/Metro and confirmed by a licensed physician designated by Executive, he is unable to perform the essential functions of his position due to a physical or mental impairment, with or without reasonable accommodations, and such incapacity is expected to continue for a period of at least twelve (12) months from the date of the initial absence due to such incapacity. The determination by said physicians shall be binding and conclusive for all purposes. If the physician selected by the Board and the physician selected by Executive cannot agree, the two (2) physicians shall select a third (3rd) physician. The decision of the third (3rd) physician concerning Executive's Disability then shall be binding and conclusive on all interested parties. 10. SEVERANCE BENEFITS. If this Agreement and Executive's employment are terminated without Cause by Rural/Metro pursuant to paragraph 7.B. prior to the last day of the Initial Term or any Renewal Term, or if Executive elects to terminate this Agreement for Good Reason pursuant to paragraph 8.A., Executive shall receive the "Severance Benefits" provided by this paragraph. Executive also shall receive Severance Benefits if his employment is terminated due to Disability pursuant to paragraph 9. The Severance Benefits shall begin immediately following termination of employment and will continue to be payable until the latest of (a) the last day of the Initial Term or the then current Renewal Term, as the case may be; (b) for twenty-four (24) months; or (c) for the number of weeks determined in accordance with Rural/Metro's standard severance benefit policies, as in effect at the time of the execution of this Agreement. The Executive's "Severance Benefits" shall consist of the continuation of the Executive's salary then in effect pursuant to paragraph 2 and the continuation of any health, life (including the Split Dollar Life Insurance Agreement referred to in paragraph 4.D.), disability, or other insurance benefits that Executive was receiving as of his last day of active employment. If a particular insurance benefit may not be continued for any reason, Rural/Metro shall pay the cash equivalent to the Executive on a monthly basis or in a single lump sum. The amount of the cash equivalent of the benefit and whether the cash equivalent will be paid in monthly installments or in a lump sum will be determined by Rural/Metro in the exercise of its discretion. If Executive voluntarily terminates this Agreement and his employment without Good Reason prior to the end of the Initial Term or any Renewal Term, or if Rural/Metro terminates the Agreement and Executive's -4- 5 employment for Cause, no Severance Benefits shall be paid to Executive. No Severance Benefits are payable in the event of Executive's death while in the active employ of Rural/Metro. Severance Benefits shall immediately cease if Executive commits a material violation of any of the terms of this Agreement relating to confidentiality and non-disclosure, as set forth in paragraph 12, or the Covenant-Not- To-Compete, as set forth in paragraph 13. Only material violations will result in the loss of Severance Benefits. In addition, if a violation, even if material, is one that may be cured, the violation will not be considered to be material unless Executive fails to cure said violation within thirty (30) days after receiving written notice of said violation from Rural/Metro or unless Executive repeats said violation at any time after receiving said notice. If, at the end of the Initial Term of this Agreement, the parties elect not to renew or renegotiate its terms and Executive's employment is terminated, Executive shall receive Severance Benefits for twenty-four (24) months. If this Agreement is renewed and if at the end of the Renewal Term the parties elect not to renew or renegotiate its terms and Executive's employment is terminated, Executive also shall receive Severance Benefits for twenty-four (24) months, unless the terms under which this Agreement is renewed provide otherwise. The payment of Severance Benefits shall not be affected by whether Executive seeks or obtains other employment. Executive shall have no obligation to seek or obtain other employment and Executive's Severance Benefits shall not be impacted by Executive's failure to mitigate. 11. BENEFITS. Executive will be entitled to participate in any benefit plans, including, but not limited to, retirement plans, stock option plans, disability plans, life insurance plans and health and dental plans available to other Rural/Metro employees, subject to any restrictions (including waiting periods) specified in said plans. Rural/Metro shall use its best efforts to increase the maximum monthly benefit payable pursuant to the disability insurance plan to at least Twenty Thousand Dollars ($20,000.00). Executive is entitled to six (6) weeks of paid vacation per calendar year, with such vacation to be scheduled and taken by Executive in his discretion, provided that such vacation shall not interfere with the performance of Executive's duties hereunder. 12. CONFIDENTIALITY AND NON-DISCLOSURE. During the course of his employment, Executive will become exposed to a substantial amount of confidential and proprietary information, including, but not limited to financial information, annual reports, audited and unaudited financial reports, operational budgets and strategies, methods of operation, customer lists, strategic plans, business plans, marketing plans and strategies, new business strategies, merger and acquisition strategies, management systems programs, computer systems, personnel and compensation information and payroll data, and other such reports, documents or information (collectively the "Confidential and Proprietary Information"). In the event his employment is terminated by either party for any reason, Executive promises that he will not take with him any copies of such Confidential and Proprietary Information in any form, format, or manner whatsoever (including computer print-outs, computer tapes, floppy disks, CD roms, etc.) nor will he disclose the same in whole or in part to any person or entity, in any manner either directly or indirectly. Excluded from this Agreement is information that is already disclosed to third parties and is in the public domain or that Rural/Metro consents to be disclosed, with such consent to be in writing. The provisions of this paragraph shall survive the termination of this Agreement. 13. COVENANT-NOT-TO-COMPETE. A. Interests to be Protected. The parties acknowledge that prior to and during the term of his employment, Executive has been and will continue to perform essential services for Rural/Metro, its employees and shareholders, and for clients of Rural/Metro. Therefore, Executive will be given an opportunity to meet, work with and -5- 6 develop close working relationships with Rural/Metro's clients on a first-hand basis and will gain valuable insight as to the clients' operations, personnel and need for services. In addition, Executive will be exposed to, have access to, and be required to work with, a considerable amount of Rural/Metro's Confidential and Proprietary Information. The parties also expressly recognize and acknowledge that the personnel of Rural/Metro have been trained by, and are valuable to Rural/Metro, and that if Rural/Metro must hire new personnel or retrain existing personnel to fill vacancies it will incur substantial expense in recruiting and training such personnel. The parties expressly recognize that should Executive compete with Rural/Metro in any manner whatsoever, it could seriously impair the goodwill and diminish the value of Rural/Metro's business. The parties acknowledge that this covenant has an extended duration; however, they agree that this covenant is reasonable and it is necessary for the protection of Rural/Metro, its shareholders and employees. For these and other reasons, and the fact that there are many other employment opportunities available to Executive if he should terminate, the parties are in full and complete agreement that the following restrictive covenants (which together are referred to as the "Covenant-Not-To-Compete") are fair and reasonable and are freely, voluntarily and knowingly entered into. Further, each party has been given the opportunity to consult with independent legal counsel before entering into this Agreement. B. Devotion to Employment. Executive shall devote substantially all his business time and best efforts to the performance of his duties on behalf of Rural/Metro. During his term of employment, Executive shall not at any time or place or to any extent whatsoever, either directly or indirectly, without the express written consent of Rural/Metro, engage in any outside employment, or in any activity competitive with or adverse to Rural/Metro's business, practice or affairs, whether alone or as partner, officer, director, employee, shareholder of any corporation or as a trustee, fiduciary, consultant or other representative. This is not intended to prohibit Executive from engaging in nonprofessional activities such as personal investments or conducting to a reasonable extent private business affairs which may include other boards of directors' activity, as long as they do not conflict with Rural/Metro. Participation to a reasonable extent in civic, social or community activities is encouraged. C. Non-Solicitation of Clients. During the term of Executive's employment with Rural/Metro and for a period of twenty-four (24) months after the termination of employment with Rural/Metro, regardless of who initiates the termination and for whatever reason, Executive shall not directly or indirectly, for himself, or on behalf of, or in conjunction with, any other person(s), company, partnership, corporation, or governmental entity, in any manner whatsoever, call upon, contact, encourage, handle or solicit client(s) of Rural/Metro with whom he has worked with as an employee of Rural/Metro at any time prior to termination, or at the time of termination, for the purpose of soliciting or selling such customer the same, similar, or related services that he provided on behalf of Rural/Metro. D. Non-Solicitation of Employees. During the term of Executive's employment with Rural/Metro and for a period of twenty-four (24) months after the termination of employment with Rural/Metro, regardless of who initiates the termination and for any reason, Executive shall not directly or indirectly, for himself, or on behalf of, or in conjunction with, any other person(s), company, partnership, corporation, or governmental entity, seek to hire, and/or hire any of Rural/Metro's personnel or employees for the purpose of having such employee engage in services that are the same, similar or related to the services that such employee provided for Rural/Metro. E. Competing Business. During the term of this Agreement and for a period of twenty-four (24) months after the termination of employment with Rural/Metro, regardless of who initiates the termination and for any reason, Executive shall not, directly or indirectly, for himself, or on behalf of, or in conjunction with, any other person(s), company, partnership, corporation, or governmental entity, in any manner whatsoever, engage in the same or similar business as Rural/Metro, which would be in direct competition with any Rural/Metro line of business, in any geographical -6- 7 service area where Rural/Metro is engaged in business, or was considering engaging in business at any time prior to the termination or at time of termination. For the purposes of this provision, the term "competition" shall mean directly or indirectly engaging in or having a substantial interest in a business or operation which has been, is, or will be, performing the same services provided by Rural/Metro. F. Judicial Amendment. If the scope of any provision of this Agreement is found by the Court to be too broad to permit enforcement to its full extent, then such provision shall be enforced to the maximum extent permitted by law. The parties agree that the scope of any provision of this Agreement may be modified by a judge in any proceeding to enforce this Agreement, so that such provision can be enforced to the maximum extent permitted by law. If any provision of this Agreement is found to be invalid or unenforceable for any reason, it shall not affect the validity of the remaining provisions of this Agreement. G. Injunctive Relief, Damages and Forfeiture. Due to the nature of Executive's position with Rural/Metro, and with full realization that a violation of this Agreement will cause immediate and irreparable injury and damage, which is not readily measurable, and to protect Rural/Metro's interests, Executive understands and agrees that in addition to instituting legal proceedings to recover damages resulting from a breach of this Agreement, Rural/Metro may seek to enforce this Agreement with an action for injunctive relief, to cease or prevent any actual or threatened violation of this Agreement on the part of Executive. H. Survival. The provisions of this paragraph shall survive the termination of this Agreement. 14. DEFERRAL OF AMOUNTS PAYABLE UNDER THIS AGREEMENT. A payment due pursuant to this Agreement or the MIP may be deferred if and to the extent that the payment does not satisfy the requirements to be "qualified performance-based compensation" (as such term is defined by the regulations issued under Section 162(m) of the Internal Revenue Code of 1986 (the "Code")) and when combined with all other payments received during the year that are subject to the limitations on deductibility under Section 162(m) of the Code, the payment exceeds the limitations on deductibility under Section 162(m) of the Code. The deferral of payments shall be in the discretion of the Compensation Committee of Rural/Metro, and shall be made pursuant to the Deferred Compensation Agreement or Plan referred to in paragraph 4.C. Such deferred amounts shall be paid no later than the sixtieth (60th) day after the end of the next succeeding calendar year, provided that such payment, when combined with any other payments subject to the Section 162(m) limitations received during the year, does not exceed the limitations on deductibility under Section 162(m) of the Code. If the payments in such succeeding calendar year exceed the limitations on deductibility under Section 162(m) of the Code, such payments shall continue to be deferred to the next succeeding year. The above procedure shall be repeated until such payments can be paid without exceeding the limitation on deductibility under Section 162(m) of the Code. 15. AMENDMENTS. This Agreement and the Ancillary Agreements referred to in paragraph 4.E constitute the entire agreement between the parties as to the subject mater hereof. Accordingly, there are no side agreements or verbal agreements other than those which are stated in this document or in the Ancillary Agreements. Any amendment, modification or change in this Agreement or the Ancillary Agreements must be done so in writing and signed by both parties. 16. SEVERABILITY. In the event a court or arbitrator declares that any provision of this Agreement is invalid or unenforceable, it shall not affect or invalidate any of the remaining provisions. Further, the court shall have the authority to re-write that portion of the Agreement it deems unenforceable, to make it enforceable. -7- 8 17. GOVERNING LAW. The law of the Sate of Arizona shall govern the interpretation and application of all of the provisions of this Agreement. 18. INDEMNITY. Executive shall be indemnified in his position to the fullest extent permitted or required by the laws of the State of Delaware. 19. DISPUTE RESOLUTION. A. Mediation. Any and all disputes arising under, pertaining to or touching upon this Agreement (excepting the confidentiality and non-disclosure provisions of paragraph 12 and the Covenant-Not-To-Compete provisions of paragraph 13), or the statutory rights or obligations of either party hereto, shall, if not settled by negotiation, be subject to non-binding mediation before an independent mediator selected by the parties pursuant to paragraph 19.D. Any demand for mediation shall be made in writing and served upon the other party to the dispute, by certified mail, return receipt requested, at the business address of Rural/Metro, or at the last known residence address of Executive, respectively. The demand shall set forth with reasonable specificity the basis of the dispute and the relief sought. The mediation hearing will occur at a time and place convenient to the parties in Maricopa County, Arizona, within thirty (30) days of the date of selection or appointment of the mediator. B. Arbitration. In the event that the dispute is not settled through mediation, the parties shall then proceed to binding arbitration before a single independent arbitrator selected pursuant to paragraph 19.D. The mediator shall not serve as arbitrator. ALL DISPUTES INVOLVING ALLEGED UNLAWFUL EMPLOYMENT DISCRIMINATION, TERMINATION BY ALLEGED BREACH OF CONTRACT OR POLICY, OR ALLEGED EMPLOYMENT TORT COMMITTED BY RURAL/METRO OR A REPRESENTATIVE OF RURAL/METRO, INCLUDING CLAIMS OF VIOLATIONS OF FEDERAL OR STATE DISCRIMINATION STATUTES OR PUBLIC POLICY, SHALL BE RESOLVED PURSUANT TO THIS POLICY AND THERE SHALL BE NO RECOURSE TO COURT, WITH OR WITHOUT A JURY TRIAL. The arbitration hearing shall occur at a time and place convenient to the parties in Maricopa County, Arizona, within thirty (30) days of selection or appointment of the arbitrator. If Rural/Metro has adopted a policy that is applicable to arbitrations with executives, the arbitration shall be conducted in accordance with said policy to the extent that the policy is consistent with this Agreement and the Federal Arbitration Act, 9 U.S.C. Sections 1-16. If no such policy has been adopted, the arbitration shall be governed by such procedures as the parties may agree upon. The arbitrator shall issue written findings of fact and conclusions of law, and an award, within fifteen (15) days of the date of the hearing unless the parties otherwise agree. C. Damages. In cases of breach of contract or policy, damages shall be limited to contract damages. In cases of intentional discrimination claims prohibited by statute, the arbitrator may direct payment consistent with 42 U.S.C. Section 1981(a) and the Civil Rights Act of 1991. In cases of employment tort, the arbitrator may award punitive damages if proved by clear and convincing evidence. Any award of punitive damages shall not exceed two times (2x) any compensatory award and, in any event, shall not exceed Two Hundred Fifty Thousand Dollars ($250,000). The arbitrator may award fees to the prevailing party and assess costs of the arbitration to the non-prevailing party. Issues of procedure, arbitrability, or confirmation of award shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16, except that Court review of the arbitrator's award shall be that of an appellate court reviewing a decision of a trial judge sitting without a jury. D. Selection of Mediators or Arbitrators. The parties shall select the mediator or arbitrator from a panel list made available by Arizona Litigation Alternatives ("ALA"). If the parties are unable to agree to a mediator or arbitrator within ten (10) days of receipt of a demand for mediation or arbitration, the mediator or arbitrator will be chosen by alternatively striking from a list of five (5) mediators or arbitrators obtained by Rural/Metro from ALA. Executive shall have the first strike. -8- 9 IN WITNESS WHEREOF, Rural/Metro and Executive have executed this Agreement on this 3rd day of November, 1995. "EXECUTIVE" RURAL/METRO CORPORATION By: - -------------------------------- ----------------------------- Warren Rustand William C. Turner Member, Board of Directors and Compensation Committee -9- EX-21 4 SUBSIDIARIES 1 EXHIBIT 21. SCHEDULE III LIST OF SUBSIDIARIES STATE OR OTHER JURISDICTION NAME OF INCORPORATION - ---- ---------------- Subsidiaries of Rural/Metro Corporation (Delaware): City Wide Acquisition, Inc. Delaware Metro Care Corp. Ohio Rural/Metro Corporation, an Arizona corporation Arizona Valley Fire Service, Inc. Delaware Subsidiaries of Rural/Metro Corporation (Arizona): Coronado Health Services, Inc. Arizona Metropolitan Fire Department, Inc. Arizona R/M Management Co., Inc. Arizona Rural/Metro Corporation of Florida Florida Rural/Metro Corporation of Tennessee Tennessee Rural/Metro Fire Dept., Inc. Arizona Rural/Metro of Alabama, Inc. Delaware Rural/Metro of Georgia, Inc. Delaware Rural/Metro of Indiana, Inc. Delaware Rural/Metro of Nebraska, Inc. Delaware Rural/Metro of New York, Inc. Delaware Rural/Metro of Ohio, Inc. Delaware Rural/Metro of Oregon, Inc. Delaware Rural/Metro of South Carolina, Inc. Delaware Rural/Metro of South Dakota, Inc. Delaware Rural/Metro of Texas, Inc. Delaware W & W Leasing Company, Inc. Arizona RISC America Alabama Fire Safety Services,Inc.* Delaware Subsidiaries of Rural/Metro of Texas, Inc.: Allied Ambulance, Inc. Texas M.T.S. Ambulance, Inc. Texas Medical Transportation Services, Inc. Texas R/M of Texas G.P., Inc. Delaware R/M of Texas L.P., Inc. Delaware Rural/Metro Corporation of Abilene Texas Rural/Metro of Arlington, Inc. Delaware Rural/Metro of North Texas, Inc. Texas Subsidiaries of Rural/Metro Corporation of Florida: Rural/Metro of North Florida, Inc. Florida -1- 2 Subsidiaries of Rural/Metro of New York, Inc.: Corning Ambulance Service Inc. New York Eastern Paramedics, Inc. Delaware The George Heisel Corporation New York LaSalle Ambulance, Inc. New York Towns Ambulance Service, Inc. New York The Western New York Emergency Medical Services Training Institute Inc. New York Subsidiaries of The George Heisel Corporation: Beacon Transportation, Inc. New York National Ambulance & Oxygen Service, Inc. New York Subsidiaries of Rural/Metro of Nebraska, Inc.: Eastern Ambulance Service, Inc. Nebraska Subsidiaries of Eastern Ambulance Service, Inc. Eastern Ambulance Service, Inc. - Grand Island Nebraska Eastern Ambulance Service, Inc. - Hastings Nebraska Eastern Ambulance Service, Inc. - Lincoln (50% owned) Nebraska Eastern Ambulance Service, Inc. - Omaha Nebraska Subsidiaries of Rural/Metro of Ohio, Inc.: Gold Cross Ambulance Services, Inc. Delaware Physicians Ambulance Service, Inc. Delaware Rural/Metro of Central Ohio, Inc. Delaware Subsidiaries of Rural/Metro of Georgia, Inc.: E.M.S. Ventures, Inc. Georgia Rural/Metro of Atlanta, Inc. Delaware Subsidiaries of Rural/Metro of South Carolina, Inc.: EMS Ventures of South Carolina, Inc. South Carolina Subsidiaries of Rural/Metro of Central Ohio, Inc.: American Limousine Service, Inc. Ohio Subsidiaries of Gold Cross Ambulance Services, Inc.: Gold Cross Ambulance Service of Pa., Inc. Ohio Subsidiaries of Rural/Metro Corporation of Tennessee: Oak Ridge Medical Transport, Inc. Tennessee R/M of Tennessee G.P., Inc. Delaware R/M of Tennessee L.P., Inc. Delaware -2- 3 Subsidiaries of Rural/Metro of Indiana, Inc.: Aid Ambulance at Vigo County, Inc. Indiana The Aid Ambulance Company, Inc. Delaware The Aid Company, Inc. Indiana Subsidiaries of Rural/Metro of Alabama, Inc.: Medstar Emergency Medical Services, Inc. Alabama Southern Emergency Medical Services, Inc. Alabama - ----------- * RISC America Alabama Fire Safety Services, Inc. is owned by a limited partnership of which a subsidiary of the Company is a general partner. This list does not include inactive subsidiaries or interests in joint ventures or partnerships, specifically the yet to be activated limited partnerships known as Rural/Metro of Tennessee, L.P., Rural/Metro of Indiana, L.P., Rural/Metro of Indiana II, L.P., and Rural/Metro of Texas, L.P. The Company owns 100% of all its subsidiaries, except as noted. -3- EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 U.S.DOLLARS 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 1 2,568 0 62,626 0 3,593 75,106 43,778 0 206,173 19,603 87,062 0 0 96 77,633 206,173 181,586 181,586 0 164,658 0 22,445 4,136 12,792 5,305 7,487 0 0 0 7,487 .79 .79
-----END PRIVACY-ENHANCED MESSAGE-----