-----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, S8Lc1Xh+V/Ap6MQEXVRKBAbs0cfJlVVhBNtlQzsaNkWCWXeyIWlCr4UgCOVOaqmK VQ9qAbu2E3PZ/f+C8Z7+Bg== 0000950153-98-000166.txt : 19980218 0000950153-98-000166.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950153-98-000166 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980217 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: SEC FILE NUMBER: 000-22056 FILM NUMBER: 98541256 BUSINESS ADDRESS: STREET 1: 8401 EAST INDIAN SCHOOL RD CITY: SCOTTSDALE STATE: AZ ZIP: 85251 BUSINESS PHONE: 6029443886 10-Q 1 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ______________ Commission file number 0-22056 RURAL/METRO CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 86-0746929 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 8401 EAST INDIAN SCHOOL ROAD SCOTTSDALE, ARIZONA 85251 (Address of principal executive offices) (Zip Code) (602) 994-3886 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] At February 9, 1998 there were 13,532,600 shares of Common Stock outstanding, exclusive of treasury shares held by the Registrant. 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 8 Part II. Other Information Item 2 (c). Changes in Securities 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13
-2- 3 RURAL/METRO CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND JUNE 30, 1997 (IN THOUSANDS)
December 31, 1997 June 30, 1997 ----------------- ------------- (Unaudited) ASSETS CURRENT ASSETS Cash $ 2,261 $ 3,398 Accounts receivable, net 149,926 106,978 Inventories 9,757 8,645 Prepaid expenses and other 9,651 7,162 --------- --------- Total current assets 171,595 126,183 PROPERTY AND EQUIPMENT, net 82,634 70,645 INTANGIBLE ASSETS, net 187,051 160,282 OTHER ASSETS 10,542 6,956 --------- --------- $ 451,822 $ 364,066 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 7,015 $ 4,359 Accrued liabilities 31,227 17,244 Current portion of long-term debt 16,435 9,814 --------- --------- Total current liabilities 54,677 31,417 LONG-TERM DEBT, net of current portion 187,334 144,643 NON-REFUNDABLE SUBSCRIPTION INCOME 13,248 13,367 DEFERRED INCOME TAXES 12,836 10,772 OTHER LIABILITIES 2,270 4,059 --------- --------- Total liabilities 270,365 204,258 --------- --------- MINORITY INTEREST 8,490 -- --------- --------- STOCKHOLDERS' EQUITY Common stock 139 130 Additional paid-in capital 124,038 121,355 Retained earnings 50,487 40,334 Deferred compensation (458) (772) Treasury stock (1,239) (1,239) --------- --------- Total stockholders' equity 172,967 159,808 --------- --------- $ 451,822 $ 364,066 ========= =========
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 SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three months ended December 31, Six months ended December 31, ------------------------------ ------------------------------- 1997 1996 1997 1996 -------- ------- -------- -------- REVENUE Ambulance services $ 89,769 $62,465 $167,367 $121,493 Fire protection services 11,351 10,349 22,563 20,654 Other 10,222 4,716 19,185 9,377 -------- ------- -------- -------- Total revenue 111,342 77,530 209,115 151,524 -------- ------- -------- -------- OPERATING EXPENSES Payroll and employee benefits 58,269 41,867 110,504 82,501 Provision for doubtful accounts 15,612 10,404 28,826 20,159 Depreciation 4,712 2,918 8,813 5,651 Amortization of intangibles 1,681 1,110 3,145 2,200 Other operating expenses 18,869 13,757 35,282 26,947 -------- ------- -------- -------- Total expenses 99,143 70,056 186,570 137,458 -------- ------- -------- -------- OPERATING INCOME 12,199 7,474 22,545 14,066 Interest Expense, net 2,958 1,072 5,409 2,082 Other 130 -- 130 -- -------- ------- -------- -------- INCOME BEFORE INCOME TAXES 9,111 6,402 17,006 11,984 PROVISION FOR INCOME TAXES 3,687 2,631 6,924 4,914 -------- ------- -------- -------- NET INCOME $ 5,424 $ 3,771 $ 10,082 $ 7,070 ======== ======= ======== ======== BASIC EARNINGS PER SHARE $ 0.40 $ 0.33 $ 0.76 $ 0.63 ======== ======= ======== ======== DILUTED EARNINGS PER SHARE $ 0.38 $ 0.31 $ 0.73 $ 0.59 ======== ======= ======== ======== AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC 13,482 11,296 13,196 11,213 AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED 14,200 12,175 13,805 12,082
The accompanying notes are an integral part of these consolidated financial statements. -4- 5 RURAL/METRO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED) (IN THOUSANDS)
Six months ended December 31, -------------------------------- 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 10,082 $ 7,070 Adjustments to reconcile net income to cash used in operations -- Depreciation and amortization 11,958 7,851 Amortization of deferred compensation 314 327 Amortization of gain on sale of real estate (52) (52) Provision for doubtful accounts 28,826 20,159 Undistributed earnings of minority shareholder 130 -- Change in assets and liabilities, net of effect of businesses acquired -- Increase in accounts receivable (64,263) (34,355) Increase in inventories (997) (746) Increase in prepaid expenses and other (2,213) (310) Increase (decrease) in accounts payable 905 (838) Increase (decrease) in accrued liabilities and other 8,905 (3,605) (Decrease) increase in nonrefundable subscription income (129) 149 Increase in deferred income taxes 516 870 -------- -------- Net cash used in operating activities (6,018) (3,480) -------- -------- CASH FLOW FROM FINANCING ACTIVITIES Borrowings on revolving credit facilities, net 45,300 19,600 Repayment of debt and capital lease obligations (14,416) (6,488) Issuance of common stock 2,317 6,371 -------- -------- Net cash provided by financing activities 33,201 19,483 -------- -------- CASH FLOW FROM INVESTING ACTIVITIES Cash paid for businesses acquired (9,824) (9,284) Capital expenditures (14,909) (7,725) (Increase) decrease in other assets (3,587) 21 -------- -------- Net cash used in investing activities (28,320) (16,988) -------- -------- DECREASE IN CASH (1,137) (985) CASH, beginning of period 3,398 1,388 -------- -------- CASH, end of period $ 2,261 $ 403 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. -5- 6 RURAL/METRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. (1) INTERIM RESULTS In the opinion of management, the consolidated financial statements for the three and six month periods ended December 31, 1997 and 1996 include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated financial position and results of operations for that period. The results of operations for the three and six month periods ended December 31, 1997 and 1996 are not necessarily indicative of the results of operations for a full fiscal year. (2) ACQUISITIONS During the six months ended December 31, 1997, the Company purchased the stock of ambulance service providers operating in Arizona and Georgia and the assets of ambulance service providers operating in Alabama, Maryland, New Jersey and South Carolina. The acquisitions were accounted for as purchases in accordance with Accounting Principles Board Opinion No. 16 (APB 16) and, accordingly, the purchased assets and assumed liabilities were recorded at their estimated fair values at each respective acquisition date. The aggregate purchase price consisted of the following:
(in thousands) Cash $ 9,824 Rural/Metro common stock 325 Notes payable to sellers 6,470 Assumption of liabilities 13,889 ------- $30,508 =======
During the six months ended December 31, 1997, subsidiaries of the Company merged with and into ambulance service providers operating in Mississippi, New Jersey, New York and Tennessee. The Company issued an aggregate of 641,009 shares of its common stock in exchange for all of the issued and outstanding stock of the acquired companies. The transactions were accounted for as poolings-of-interest in accordance with APB 16. The acquisitions were not considered significant; accordingly, prior year financial statements have not been restated. The unaudited pro forma combined condensed statements of income for the fiscal year ended June 30, 1997 and the six months ended December 31, 1997 give effect to the acquisitions as if each had been consummated as of the beginning of each respective period. The pro forma combined condensed financial statements do not purport to represent what the Company's actual results of operations or financial position would have been had such transactions in fact occurred on such dates. The pro forma combined condensed statements of income also do not -6- 7 purport to project the results of operations of the Company for the current year or for any future period. RURAL/METRO CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME FOR THE YEAR ENDED JUNE 30, 1997 AND FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED SIX MONTHS ENDED JUNE 30, 1997 DECEMBER 31, 1997 ---------------------------- ------------------------------- PROFORMA PROFORMA HISTORICAL COMBINED HISTORICAL COMBINED ---------- -------- ---------- -------- Revenue $ 319,805 $ 427,067 $ 209,115 $ 223,957 Net income $ 12,720 $ 17,270 $ 10,082 $ 10,765 Earnings per share - basic $ 1.10 $ 1.30 $ 0.76 $ 0.80 Earnings per share - diluted $ 1.04 $ 1.23 $ 0.73 $ 0.76
Pro forma adjustments include adjustments to: (i) reflect amortization of the cost in excess of the fair value of net assets acquired; (ii) adjust payroll and related expenses for the effect of certain former owners of the acquired businesses not being employed by the Company and to reflect the difference between the actual compensation paid to officers of the businesses acquired and the lower level of aggregate compensation such individuals would have received under the terms of employment agreements executed between the Company and such individuals; (iii) adjust other operating expenses to reflect the reduction of expenses related to certain real estate and buildings not acquired and sellers' costs incurred in connection with the sale of their respective businesses; (iv) adjust interest expense to reflect interest expense related to debt issued in connection with the acquisitions; and (v) adjust income taxes to reflect the tax effect of the adjustments and the tax effect of treating all of the acquisitions as if they had C corporation status. The pro-forma combined condensed statements of income do not include the effects of the pending acquisition of Emergencias Cardio Coronarias (ECCO), as more fully described in "Liquidity and Capital Resources" included in Management's Discussion and Analysis of Financial Condition and Results of Operations. -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 service fees charged and amounts actually collected. The Company's provision for doubtful accounts generally is higher with respect to collections to be derived directly from patients than for collections to be derived from third-party payors and generally is higher for "911" emergency ambulance services than for general ambulance transport services. Because of the nature of the Company's ambulance services, it is necessary to respond to a number of calls, primarily "911" emergency ambulance service calls, which may not result in transports. Results of operations are discussed below on the basis of actual transports since transports are more directly related to revenue. Expenses associated with calls that do not result in transports are included in operating expenses. The percentage of calls not resulting in transports varies substantially depending upon the mix of general transport and "911" emergency ambulance service calls in the Company's markets and is generally higher in markets in which the calls are primarily "911" emergency ambulance service calls. Rates in the Company's markets take into account the anticipated number of calls that may not result in transports. The Company does not separately account for expenses associated with calls that do not result in transports. Revenue generated under fire protection service contracts is recognized over the term of the related contract. Subscription fees received in advance are deferred and recognized over the term of the subscription agreement, which is generally one year. Other revenue consists primarily of fees associated with alternative transportation, dispatch, fleet, billing and home health care services and is recognized when the services are provided. Other operating expenses consist primarily of rent and related occupancy expenses, maintenance and repairs, insurance, fuel and supplies, travel and professional fees. THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1996 REVENUE Total revenue increased $33.8 million, or 43.6%, from $77.5 million for the three months ended December 31, 1996 to $111.3 million for the three months ended December 31, 1997. Approximately $26.6 million of this increase resulted from the acquisition of ambulance service providers during the last two quarters of fiscal 1997 and the first two quarters of fiscal 1998. Ambulance service revenue in markets served by the Company in both of the three month periods ended December 31, 1996 and 1997 increased by 5.3%. Fire protection services revenue increased by $1.1 million, or 10.7%, from $10.3 million for the three months ended December 31, 1996 to $11.4 million for the three months ended December 31, 1997. Other revenue increased by $5.5 million, or 117.0%, in the three months ended December 31, 1997 compared to the three months ended December 31, 1996. -8- 9 Total ambulance transports increased by 84,000, or 38.7%, from 217,000 for the three months ended December 31, 1996 to 301,000 for the three months ended December 31, 1997. The acquisition of twenty-one ambulance service companies during the last two quarters of fiscal 1997 and the first two quarters of fiscal 1998 accounted for these additional transports. Fire protection services revenue increased due to revenue generated from new fire protection contracts awarded to the Company through competitive bidding and due to rate increases for fire protection services. Other revenue increased primarily because of fees received for providing billing, dispatch and other services pursuant to the Company's agreement with San Diego Fire and Life Safety Services. OPERATING EXPENSE Payroll and employee benefit expenses increased $16.4 million, or 39.1%, from $41.9 million for the three months ended December 31, 1996 to $58.3 million for the three months ended December 31, 1997. This increase was primarily due to the acquisition of twenty-one ambulance service providers during the last two quarters of fiscal 1997 and the first two quarters of fiscal 1998. Provision for doubtful accounts increased $5.2 million, or 50.0%, from $10.4 million for the three months ended December 31, 1996 to $15.6 million for the three months ended December 31, 1997. Provision for doubtful accounts increased from 13.4% of total revenue for the three months ended December 31, 1996 to 14.0% of total revenue for the three months ended December 31, 1997, reflecting the effect of the acquisition of ambulance service providers during the second half of fiscal 1997 and the first half of fiscal 1998 operating in markets with a greater mix of "911" emergency activity. Depreciation increased $1.8 million, or 62.1%, from $2.9 million for the three months ended December 31, 1996 to $4.7 million for the three months ended December 31, 1997, primarily as a result of depreciation expense on property and equipment obtained through recent ambulance service acquisitions. Depreciation increased from 3.8% of total revenue for the three months ended December 31, 1996 to 4.2% of total revenue for the three months ended December 31, 1997. Amortization of intangibles increased by $0.6 million, or 54.6%, from $1.1 million for the three months ended December 31, 1996 to $1.7 million for the three months ended December 31, 1997. This increase is primarily due to increased intangible assets which are the result of recent acquisition activity. Amortization of intangibles was 1.4% of total revenue for the three months ended December 31, 1996 and 1997. Other operating expenses increased approximately $5.1 million, or 37.0%, from $13.8 million for the three months ended December 31, 1996 to $18.9 million for the three months ended December 31, 1997, primarily due to increased expenses associated with the operation of the twenty-one ambulance service providers acquired during the last two quarters of fiscal 1997 and the first two quarters of fiscal 1998. Other operating expenses decreased from 17.7% of total revenue for the three months ended December 31, 1996 to 16.9% of total revenue for the three months ended December 31, 1997 as a result of operational efficiencies. Interest expense increased by $1.9 million from $1.1 million for the three months ended December 31, 1996 to $3.0 million for the three months ended December 31, 1997. This increase was caused by higher debt balances reflecting increased borrowings on the Company's revolving credit facility. The Company's effective tax rate decreased from 41.1% for the three months ended December 31, 1996 to 40.5% for the three months ended December 31, 1997, primarily the result of tax planning strategies implemented by the Company during fiscal 1996. -9- 10 SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 1996 Revenue Total revenue increased $57.6 million, or 38.0%, from $151.5 million for the six months ended December 31, 1996 to $209.1 million for the six months ended December 31, 1997. Approximately $42.6 million of this increase resulted from the acquisition of ambulance service providers during the last two quarters of fiscal 1997 and the first two quarters of fiscal 1998. Ambulance service revenue in markets served by the Company in both of the six month periods ended December 31, 1996 and 1997 increased by 4.9%. Fire protection services revenue increased by $1.9 million, or 9.2%, from $20.7 million for the six months ended December 31, 1996 to $22.6 million for the six months ended December 31, 1997. Other revenue increased by $9.8 million, or 104.3%, in the six months ended December 31, 1997 compared to the six months ended December 31, 1996. Total ambulance transports increased by 140,000, or 33.0%, from 424,000 for the six months ended December 31, 1996 to 564,000 for the six months ended December 31, 1997. The acquisitions of twenty-one ambulance service companies during the last two quarters of fiscal 1997 and the first two quarters of fiscal 1998 accounted for these additional transports. Fire protection services revenue increased due to revenue generated from new fire protection contracts awarded to the Company through competitive bidding and due to rate increases for fire protection services. Other revenue increased primarily because of fees received for providing billing, dispatch and other services pursuant to the Company's agreement with San Diego Fire and Life Safety Services. OPERATING EXPENSES Payroll and employee benefit expenses increased $28.0 million, or 33.9%, from $82.5 million for the six months ended December 31, 1996 to $110.5 million for the six months ended December 31, 1997. This increase was primarily due to the acquisition of twenty-one ambulance service providers during the last two quarters of fiscal 1997 and the first two quarters of fiscal year 1998. Provision for doubtful accounts increased $8.6 million, or 42.6%, from $20.2 million for the six months ended December 31, 1996 to $28.8 million for the six months ended December 31, 1997. Provision for doubtful accounts increased from 13.3% of total revenue for the six months ended December 31, 1996 to 13.8% of total revenue for the six months ended December 31, 1997, reflecting the effect of the acquisition of ambulance service providers during the second half of fiscal 1997 and first half of fiscal 1998 operating in markets with a greater mix of "911" emergency activity. Depreciation increased $3.1 million, or 54.4%, from $5.7 million for the six months ended December 31, 1996 to $8.8 million for the six months ended December 31, 1997, primarily as a result of depreciation expense on property and equipment obtained through recent ambulance service acquisitions. Depreciation increased from 3.7% of total revenue for the six months ended December 31, 1996 to 4.2% of total revenue for the six months ended December 31, 1997. Amortization of intangibles increased by $0.9 million, or 40.9%, from $2.2 million for the six months ended December 31, 1996 to $3.1 million for the six months ended December 31, 1997. This increase is primarily a result of intangible assets recorded in recent acquisitions. Amortization of intangibles was 1.5% of total revenue for the six months ended December 1996 and 1997. Other operating expenses increased approximately $8.4 million, or 31.2%, from $26.9 million for the six months ended December 31, 1996 to $35.3 million for the six months ended December 31, 1997, primarily due to increased expenses associated with the operation of twenty-one ambulance service providers acquired during the last two quarters of fiscal 1997 and the first two quarters of fiscal 1998. Other operating expenses decreased from 17.8% of total revenue for the six months ended December 31, 1996 to 16.9% of total revenue for the six months ended December 31, 1997 as a result of operational efficiencies realized through the integration of these acquired companies. -10- 11 Interest expense increased by $3.3 million from $2.1 million for the six months ended December 31, 1996 to $5.4 million for the six months ended December 31, 1997. This increase was attributable to increased borrowings on the Company's $200 million revolving credit facility. The Company's effective tax rate decreased from 41.0% for the six months ended December 31, 1996 to 40.7% for the six months ended December 31, 1997, primarily the result of tax planning strategies implemented by the Company during fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has financed its cash requirements principally through cash flow from operating activities, term and revolving indebtedness, capital equipment lease financing, the sale of stock through an initial public offering in July 1993, subsequent public stock offerings in May 1994 and April 1996, and the on-going exercise of stock options. During the six months ended December 31, 1997, the Company used cash flow from operations of $6.0 million. This compares to cash flow used in operations of $3.5 million for the six months ended December 31, 1996. This change resulted primarily from increases in accounts receivable and inventories partially offset by an increase in accrued liabilities. During the six months ended December 31, 1997 the Company increased its revolving credit facility from $175.0 million to $200.0 million. Approximately $175.5 million was outstanding on the revolving credit facility at December 31, 1997. Availability on the facility was $21.3 million at December 31, 1997. In November 1997, the Company entered into a $5.0 million term loan, which matures on March 31, 1998. The Company used the proceeds from the loan to fund acquisitions, capital expenditures and for general corporate purposes. During the six months ended December 31, 1997, the Company purchased either all the issued and outstanding stock or certain assets of nine ambulance service providers with operations in Alabama, Arizona, Georgia, Maryland, Mississippi, New Jersey, New York, South Carolina, Tennessee, Virginia, and the District of Columbia. The combined purchase price of the operations accounted for as purchases was $30.5 million. The Company paid cash of $9.8 million, issued notes payable to sellers of $6.5 million, issued 659,191 shares of common stock to sellers (641,009 shares were related to poolings-of-interest transactions and the remaining shares were valued at $325,000), and assumed $13.9 million of liabilities. The Company funded the cash portion of the acquisitions primarily from the Company's revolving credit facility. Subsequent to December 31, 1997, the Company agreed to purchase Emergencias Cardio Coronarias (ECCO) in Argentina, the largest ambulance company in Latin America. The purchase price is $35.0 million, comprised of cash and the Company's common stock. The transaction is expected to close in the Company's third quarter of fiscal year 1998. The acquisition is subject to several customary conditions and a $2.5 million breakup fee in the event conditions are satisfied and either party fails to close. The Company expects that cash flow from operations and additional borrowing capacity, either from existing or future debt facilities, will be sufficient to meet its operating and capital needs for existing operations as well as to fund certain service area expansions and acquisitions for the twelve months subsequent to December 31, 1997. The Company is engaged in an active acquisition program. In addition to using cash from operations, credit facilities, seller notes payable and the issuance of common stock, the Company may seek to raise additional capital through public or private debt or equity financing to fund acquisitions. The availability and desirability of these capital sources will depend upon prevailing market conditions, interest rates and the financial condition of the Company. There can be no assurance such financing will be available on favorable terms, if at all. -11- 12 RURAL/METRO CORPORATION AND SUBSIDIARIES PART II -- OTHER INFORMATION Item 2(c). Changes in Securities Pursuant to a private placement under Section 4(2) of the Securities Act, in October 1997, the Company issued 18,182 shares at $27.50 per share to the former shareholders of May Medical Transport, Inc. ("May") in connection with Company's acquisition of May. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - 10.54 Third Amendment to Credit Agreement by and among Registrant as guarantor, certain of its subsidiaries as borrowers, First Union National Bank (formerly known as First Union Bank of North Carolina), as agent, and various lenders, dated as of December 23, 1997. 10.55 Term Loan Agreement by and among Registrant, as borrower, and First Union National Bank, as lender, dated as of November 26, 1997. 27. Financial Data Schedules (b) Reports on Form 8-K - none -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: February 13, 1998 By /s/ Dean P. Hoffman -------------------------- Dean P. Hoffman, Vice President and Principal Accounting Officer -13- 14 EXHIBIT INDEX 10.54 Third Amendment to Credit Agreement by and among Registrant as guarantor, certain of its subsidiaries as borrowers, First Union National Bank (formerly known as First Union Bank of North Carolina), as agent, and various lenders, dated as of December 23, 1997. 10.55 Term Loan Agreement by and among Registrant, as borrower, and First Union National Bank, as lender, dated as of November 26, 1997. 27. Financial Data Schedules EX-10.54 2 EX-10.54 1 Ex. 10.54 THIRD AMENDMENT TO CREDIT AGREEMENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment") is made and entered into as of this 23rd day of December, 1997 by and among RURAL/METRO CORPORATION, a corporation organized under the laws of Delaware ("Rural/Metro" or the "Guarantor"), certain Subsidiaries of Rural/Metro designated on the signature pages hereto (collectively, the "Borrowers" and, together with Rural/Metro, the "Credit Parties"), the financial institutions who are or may become party hereto (collectively, the "Lenders"), and FIRST UNION NATIONAL BANK (formerly known as First Union National Bank of North Carolina), a national banking association ("First Union"), as Agent for the Lenders (the "Agent"). Statement of Purpose The Lenders have previously agreed to extend certain credit facilities to the Borrowers pursuant to the Credit Agreement dated as of September 29, 1995, by and among Rural/Metro, as Guarantor, the Borrowers, the Lenders, and the Agent as amended by the First Amendment to Credit Agreement dated as of December 20, 1996, the Second Amendment to Credit Agreement dated as of May 29, 1997 and as supplemented by various joinder agreements executed by the Credit Parties (as so amended and supplemented and as may be further amended, restated or otherwise modified, the "Credit Agreement"). The parties now desire to amend the Credit Agreement in order to increase the Aggregate Commitment from $175,000,000 to $200,000,000 and to reflect the revised Commitments of the Lenders on the terms and conditions set forth below. NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 1. Effect of Amendment. Except as expressly amended hereby, the Credit Agreement and Loan Documents shall be and remain in full force and effect. 2. Capitalized Terms. All capitalized undefined terms used in this Third Amendment shall have the meanings assigned thereto in the Credit Agreement. 3. Modification of Credit Agreement. The Credit Agreement is hereby modified as follows: (a) Section 1.1 is hereby modified to delete the definition of Aggregate Commitment therein and to insert the following in lieu thereof: "'Aggregate Commitment' means the aggregate amount of the Lenders' Commitments hereunder, as such amount may be reduced at any time or from time to time pursuant to Section 2.5. The Aggregate Commitment as of the date of the Third Amendment shall be Two Hundred Million Dollars ($200,000,000). 2 (b) Section 1.1 is hereby modified to add in appropriate alphabetical order the following defined term: "'Third Amendment' means the Third Amendment to the Credit Agreement dated as of December __, 1997 by and among the Credit Parties, the Lenders and the Agent." (c) Section 9.2 is hereby deleted in its entirety and the following shall be substituted in lieu thereof: " SECTION 9.2. Senior Debt Leverage Ratio. As of March 31, 1998 and the end of any fiscal quarter thereafter, permit the ratio of (a) the difference between (i) the Consolidated Debt of Rural/Metro and its Subsidiaries less (ii) the Consolidated Subordinated Debt of Rural/Metro and its Subsidiaries as of such fiscal quarter end to (b) the product of (i) Consolidated EBITDA for the period of two (2) consecutive fiscal quarters ending on such fiscal quarter end multiplied by (ii) two (2), to exceed 3.25 to 1.00. (Notwithstanding the above, for purposes of determining the Applicable Margin pursuant to Section 4.1(c) the Borrowers shall be required to calculate the Senior Debt Leverage Ratio pursuant to this Section for every fiscal quarter end.)" (d) Schedule 1 shall be deleted in its entirety and Schedule 1 attached hereto shall be substituted in lieu thereof. 4. Conditions. The effectiveness of the amendments set forth herein shall be conditioned upon delivery to the Agent of the following items: (a) Notes. The Borrowers shall issue and deliver to the Agent, in exchange for the Notes outstanding, new Notes, payable to each Lender in the amount of such Lender's respective Commitment as set forth on Schedule 1 attached hereto. (b) Officer's Certificate. The Agent shall have received a certificate from the chief executive officer or chief financial officer of Rural/Metro, on behalf of the Credit Parties, in form and substance reasonably satisfactory to the Agent, to the effect that all representations and warranties of the Credit Parties contained in the Credit Agreement and the other Loan Documents are true, correct and complete in all material respects; that the Credit Parties are not in violation of any of the covenants contained in the Credit Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Third Amendment, no Default or Event of Default has occurred and is continuing; and that the Credit Parties have satisfied each of the closing conditions to be satisfied thereby. 2 3 (c) Closing Certificate of each Credit Party. The Agent shall have received a certificate of the secretary or assistant secretary of each Credit Party certifying, as applicable, that (i) (A) the articles of incorporation and bylaws of such Credit Party (or applicable documentation in the case of any Credit Party organized as a partnership or a limited liability company) delivered to the Agent on September 29, 1995 (or, with respect to any Credit Party who joined the Credit Agreement after the Closing Date, the date of the applicable Joinder Agreement executed by such Credit Party) have not been repealed, revoked, rescinded or amended in any respect or (B) that, if such documents have not previously been provided to the Agent, such documents are attached thereto and have not been repealed, revoked, rescinded or amended in any respect; (ii) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Credit Party or the general partner or member of such Credit Party, as applicable, authorizing the transactions contemplated herein, the additional borrowings by the Borrowers contemplated hereunder and the execution, delivery and performance of this Third Amendment and the other documents related thereto (collectively, the "Third Amendment Documents") to which it is a party; and (iii) as to the incumbency and genuineness of the signature of each officer of such Credit Party or the general partner or member of such Credit Party, as applicable executing Third Amendment Documents to which such Credit Party is a party. (d) Certificates of Good Standing. The Agent shall have received short-form certificates as of a recent date of the good standing of each Credit Party under the laws of their respective jurisdictions of organization and such other jurisdictions requested by the Agents. (e) Opinions of Counsel. The Agent shall have received favorable opinions of counsel to the Credit Parties addressed to the Agent and the Lenders with respect to such Persons and the Loan Documents, as modified by this Third Amendment, reasonably satisfactory in form and substance to the Agent and the Lenders. (f) Expenses of Agent's Counsel. Agent's counsel shall have received payment for all outstanding reasonable fees and expenses. 5. Representations and Warranties/No Default. By their execution hereof, the Credit Parties hereby certify that each of the representations and warranties set forth in the Credit Agreement and the other Loan Documents is true and correct as of the date hereof as if fully set forth herein and that, as of the date hereof, no Default or Event of Default has occurred and is continuing. 6. Expenses. The Credit Parties shall pay all reasonable out-of-pocket expenses of the Agent in connection with the preparation, execution and delivery of this Third Amendment and the other Third Amendment Documents. 3 4 7. Governing Law. This Third Amendment shall be governed by, construed and enforced in accordance with the laws of the State of North Carolina without reference to the conflicts or choice of law principles thereof. 8. Counterparts. This Third Amendment may be executed in separate counterparts, each of which when executed and delivered is an original but all of which taken together constitute one and the same instrument. [Signature Pages Follow] 4 5 IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed as of the date and year first above written. BORROWERS: THE AID AMBULANCE COMPANY, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ AID AMBULANCE AT VIGO COUNTY, INC., an Indiana corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ THE AID COMPANY, INC., an Indiana corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ AMBULANCE TRANSPORT SYSTEMS, INC., a New Jersey corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 6 AMERICAN LIMOUSINE SERVICE, INC., an Ohio corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ BEACON TRANSPORTATION, INC., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ CITY WIDE AMBULANCE SERVICE, INC., an Ohio corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ CORNING AMBULANCE SERVICE INC., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ DONLOCK, LTD., a Pennsylvania corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 7 E.M.S. VENTURES, INC., a Georgia corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ EMS VENTURES OF SOUTH CAROLINA, INC., a South Carolina corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ EASTERN AMBULANCE SERVICE, INC., a Nebraska corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ EASTERN PARAMEDICS, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ GOLD CROSS AMBULANCE SERVICES, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 8 GOLD CROSS AMBULANCE SERVICE OF PA., INC., an Ohio corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ KEEFE & KEEFE, INC., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ KEEFE & KEEFE AMBULETTE, LTD., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ LASALLE AMBULANCE INC., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MEDI-CAB OF GEORGIA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MEDICAL EMERGENCY DEVICES AND SERVICES (MEDS), INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 9 MEDICAL TRANSPORTATION SERVICES, INC., a South Dakota corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MEDSTAR EMERGENCY MEDICAL SERVICES, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MERCURY AMBULANCE SERVICE, INC., a Kentucky corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ METRO CARE CORP., an Ohio corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ METROPOLITAN FIRE DEPT., INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 10 MULTI-CAB INC., a New Jersey corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MULTI-CARE, INC., a New Jersey corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MULTI-CARE INTERNATIONAL, INC., a New Jersey corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MULTI-CARE MEDICAL CAR SERVICE, INC., a New Jersey corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MULTI-HEALTH CORP., a Florida corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ MYERS AMBULANCE SERVICE, INC., an Indiana corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 11 NATIONAL AMBULANCE & OXYGEN SERVICE, INC., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ NORTH MISS. AMBULANCE SERVICE, INC., a Mississippi corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ PHYSICIANS AMBULANCE SERVICE, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ PROFESSIONAL MEDICAL SERVICES, INC., an Arkansas corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RMC CORPORATE CENTER, L.L.C., an Arizona limited liability company By: RURAL/METRO CORPORATION, an Arizona corporation, Its Member By:__________________________________________ Name:______________________________________ Title:_____________________________________ 12 RMC INSURANCE, LTD., a Barbados corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METROCOMMUNICATIONS SERVICES, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO INTERNATIONAL, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ R/M MANAGEMENT CO., INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL.METRO MID-ATLANTIC, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 13 R/M OF MISSISSIPPI, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF MISSISSIPPI, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ R/M PARTNERS, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO TEXAS HOLDINGS, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO CORPORATION, an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 14 RURAL/METRO CORPORATION OF FLORIDA, a Florida corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO CORPORATION OF TENNESSEE, a Tennessee corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ R/M OF TENNESSEE G.P., INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ R/M OF TENNESSEE L.P., INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF TENNESSEE L.P., a Delaware limited partnership By: R/M OF TENNESSEE G.P., INC., a Delaware corporation, Its General Partner By:__________________________________________ Name:______________________________________ Title:_____________________________________ 15 RURAL/METRO FIRE DEPT., INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF ALABAMA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF ARKANSAS, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF ARLINGTON, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 16 RURAL/METRO OF CALIFORNIA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO CANADIAN HOLDINGS, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF CENTRAL ALABAMA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF CENTRAL OHIO, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF GEORGIA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 17 RURAL/METRO OF INDIANA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF INDIANA, L.P., a Delaware limited partnership By: THE AID AMBULANCE COMPANY, INC., a Delaware corporation, Its General Partner By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF INDIANA II, L.P., a Delaware limited partnership By: THE AID AMBULANCE COMPANY, INC., a Delaware corporation, Its General Partner By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF KENTUCKY, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 18 RURAL/METRO OF NEBRASKA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF NEW YORK, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF NORTH FLORIDA, INC., a Florida corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF OHIO, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF OREGON, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 19 RURAL/METRO OF ROCHESTER, INC., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF SAN DIEGO, INC., a California corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF SOUTH CAROLINA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF SOUTH DAKOTA, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ RURAL/METRO OF TEXAS, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 20 RURAL/METRO OF TEXAS, L.P., a Delaware limited partnership By: R/M OF TEXAS G.P., INC., a Delaware corporation, Its General Partner By:__________________________________________ Name:______________________________________ Title:_____________________________________ R/M OF TEXAS G.P., INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ SIOUX FALLS AMBULANCE, INC., a South Dakota corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ SOUTHWEST AMBULANCE OF CASA GRANDE, INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ SOUTHWEST AMBULANCE OF SOUTHEASTERN ARIZONA, INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 21 SOUTH GEORGIA EMERGENCY MEDICAL SERVICES, INC., a Georgia corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ SOUTHWEST GENERAL SERVICES, INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ SW GENERAL, INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ TOWNS AMBULANCE SERVICE, INC., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ VALLEY FIRE SERVICE, INC., a Delaware corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 22 W & W LEASING COMPANY, INC., an Arizona corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ THE WESTERN NEW YORK EMERGENCY MEDICAL SERVICES TRAINING INSTITUTE INC., a New York corporation By:__________________________________________ Name:______________________________________ Title:_____________________________________ 23 AGENT: FIRST UNION NATIONAL BANK, as Agent By:__________________________________________ Name:______________________________________ Title:_____________________________________ 24 LENDERS: FIRST UNION NATIONAL BANK, as Lender By:__________________________________________ Name:______________________________________ Title:_____________________________________ 25 FLEET BANK, N.A. (formerly known as Natwest Bank N.A.) By:__________________________________________ Name:______________________________________ Title:_____________________________________ 26 THE FIRST NATIONAL BANK OF CHICAGO By:__________________________________________ Name:______________________________________ Title:_____________________________________ 27 ABN AMRO BANK N.V. By:__________________________________________ Name:______________________________________ Title:_____________________________________ By:__________________________________________ Name:______________________________________ Title:_____________________________________ 28 WELLS FARGO BANK, N.A. (formerly known as First Interstate Bank of Arizona, N.A. By:__________________________________________ Name:______________________________________ Title:_____________________________________ 29 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By:__________________________________________ Name:______________________________________ Title:_____________________________________ 30 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:__________________________________________ Name:______________________________________ Title:_____________________________________ 31 BANQUE PARIBAS By:__________________________________________ Name:______________________________________ Title:_____________________________________ By:__________________________________________ Name:______________________________________ Title:_____________________________________ 32 Confirmation of Subsidiary Guaranty By execution of this Third Amendment, the undersigned hereby expressly consents to the modifications and amendments set forth herein, and hereby acknowledges, represents and agrees that its guaranty obligations set forth in Article XI of the Credit Agreement remain in full force and effect. RURAL/METRO CORPORATION, A DELAWARE CORPORATION By:__________________________________________ Name:______________________________________ Title:_____________________________________ 33 Schedule 1.1
LENDER ADDRESS ------ COMMITMENT ------- AND COMMITMENT PERCENTAGE ---------- First Union National Bank $32,000,000 One First Union Center 16% 301 S. College St., TW-10 Charlotte, NC 28288-0608 Attn: Syndication Agency Services Phone: (704) 383-0281 Fax: (704) 383-0288 Fleet Bank, N.A. $28,000,000 1185 Avenue of Americas 14% New York, NY 10036 Attn: Robert A. Isaksen, V.P. Phone: (212) 819-5754 Fax: (212) 819-4110 The First National Bank of $24,000,000 777 South Figueroa St. Chicago 12% 4th Floor Los Angeles, CA 90017-5800 Attn: James B. Junker, V.P. Phone: (213) 683-4948 Fax: (213) 683-4999 Banque Paribas $25,000,000 2029 Century Park East 12.5% Suite 3900 Los Angeles, CA 90067 Attn: Don Unrun, Asst. VP Phone: (310) 551-7334 Fax: (310) 556-8759 ABN Amro Bank N.V. $21,000,000 LA International Branch 10.5% 300 S. Grand Avenue Suite 1115 Los Angeles, CA 90071 Attn: Ellen M. Coleman, VP and Director Phone: (213) 687-2306
34
COMMITMENT AND COMMITMENT LENDER PERCENTAGE ADDRESS Fax: (213) 687-2061 The Long-Term Credit Bank of $14,000,000 Los Angeles Agency Japan Limited 7% 444 S. Flower Street, Suite 3700 Los Angeles, CA 90071 Attn: Dennis Blank Phone: (213) 689-6330 Fax: (213) 622-6908 Wells Fargo Bank $28,000,000 100 W. Washington 14% 4th Floor Phoenix, AZ 85003 Attn: John Helms, VP Phone: (602) 528-6633 Fax: (602) 229-4409 Bank of America National Trust $28,000,000 Commercial Banking Department and Savings Association 14% 101 North 1st Avenue 13th Floor Phoenix, AZ 85003 Attn: Ted Cunningham, VP Phone: (602) 594-4361 Fax: (602) 594-2511
EX-10.55 3 EX-10.55 1 Ex. 10.55 TERM LOAN AGREEMENT TERM LOAN AGREEMENT, dated as of the 26th day of November, 1997, by and between RURAL/METRO CORPORATION, a corporation organized under the laws of Delaware, as borrower (the "Borrower"), and FIRST UNION NATIONAL BANK, as lender (the "Lender"). STATEMENT OF PURPOSE The Borrower has requested, and the Lender has agreed to extend, a term loan in a principal amount equal to $5,000,000 to the Borrower on the terms and conditions of this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Definitions. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Revolving Credit Agreement (as defined below). In addition, the following terms when used in this Agreement shall have the meanings assigned to them below: "Agreement" means this Term Loan Agreement, as amended, restated, supplemented or otherwise modified. "Borrower" means Rural/Metro Corporation, a Delaware corporation, in its capacity as borrower hereunder. "Closing Date" means the date of this Agreement. "Commitment" means the obligation of the Lender to make the Loan to the Borrower hereunder in an aggregate principal amount of $5,000,000. "Credit Facility" means the credit facility established pursuant to Article II hereof. "Default" means any of the events specified in Section 7.1 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default. "Event of Default" means any of the events specified in Section 7.1; provided, that any requirement for passage of time, giving of notice, or any other condition, has been satisfied. "Interest Period" means a period of one month with respect to the initial Interest Period and each successive Interest Period thereafter; provided that (a) the initial Interest Period shall 2 commence on the date of the initial advance of the Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the next preceding Interest Period expires, (b) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day (unless the next succeeding Business Day falls in another calendar month in which case the Interest Period shall end on the next preceding Business Day), (c) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, and (d) no Interest Period shall extend beyond the Maturity Date. "Lender" means First Union National Bank in its capacity as lender hereunder. "LIBOR" means the rate of interest determined on the basis of the rate for deposits in Dollars for a period equal to the applicable Interest Period commencing on the first day of such Interest Period appearing on Telerate Page 3750 as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period. In the event that such rate does not appear on Telerate Page 3750, "LIBOR" shall be determined by the Lender to be the rate per annum at which deposits in Dollars are offered by leading reference banks in the London interbank market to the Lender at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of the Loan. "Loan" means the term loan made to the Borrower pursuant to Section 2.1. "Loan Documents" means, collectively, this Agreement, the Note, and each other document, instrument and agreement executed and delivered by the Borrower in connection with this Agreement or otherwise referred to herein or contemplated hereby, all as may be amended, restated, supplemented or otherwise modified. "Maturity Date" means the date which is one hundred twenty (120) days from the Closing Date. "Note" means the separate Term Note made by the Borrower payable to the order of the Lender, substantially in the form of Exhibit A hereto, evidencing the Credit Facility, and any amendments and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extensions thereof, in whole or in part. "Obligations" means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest on (including interest accruing after the filing of any bankruptcy or similar petition) the Loan, (b) all payment and other obligations owing by the Borrower to the Lender under any Hedging Agreement and (c) all other reasonable fees (including reasonable attorney's fees), commissions, charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Borrower to the Lender pursuant to this Agreement or any other 2 3 Loan Document, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note, and whether or not for the payment of money. "Reserve Requirement" means the actual daily arithmetic reserve requirement imposed on the Lender by the Board of Governors of the Federal Reserve System (or any successor) under Regulation D on Eurocurrency liabilities (as defined in Regulation D) of the Lender for the applicable Interest Period as of the first day of such Interest Period, but subject to any changes in such reserve requirement becoming effective during the Interest Period. "Revolving Credit Agreement" means the Credit Agreement dated as of September 29, 1995 (as amended by the First Amendment to Credit Agreement dated as of December 20, 1996, as amended by the Second Amendment to Credit Agreement dated as of May 28, 1997, and as further amended, restated, supplemented or otherwise modified from time to time) by and among Rural/Metro Corporation, as Guarantor, certain Subsidiaries thereof listed on the signature pages thereto, as Initial Borrowers, any Additional Borrowers who may become party thereto, the Lenders referred to therein, and First Union National Bank (f/k/a First Union National Bank of North Carolina), as Agent for the Lenders. SECTION 1.2. Miscellaneous. (a) General. Unless otherwise specified, a reference in this Agreement to a particular section, subsection, Schedule or Exhibit is a reference to that section, subsection, schedule or Exhibit of this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. Any reference herein to "Charlotte time" shall refer to the applicable time of day in Charlotte, North Carolina. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (b) Revolving Credit Agreement. The terms and conditions of each article, section or subsection of the Revolving Credit Agreement which are incorporated in this Agreement by reference shall continue as such terms and conditions are set forth in the Revolving Credit Agreement on the Closing Date hereof irrespective of any termination of the Revolving Credit Agreement. A copy of the Revolving Credit Agreement is attached hereto as Exhibit B. ARTICLE II CREDIT FACILITY SECTION 2.1. Loan. Subject to the terms and conditions of this Agreement, the Lender agrees to make the Loan to the Borrower in a principal amount equal to the Commitment. 3 4 SECTION 2.2. Repayment of the Loan. The Borrower shall repay the principal amount of the Loan, together with all accrued and unpaid interest, in a single installment due and payable in full on the Maturity Date. SECTION 2.3. Term Note. The Loan and the obligation of the Borrower to repay the Loan shall be evidenced by the Note executed by the Borrower payable to the order of the Lender representing the Borrower's obligation to pay the Commitment. The Note shall be dated the Closing Date and shall bear interest on the unpaid principal amount thereof at the applicable interest rate per annum specified in Section 2.7. SECTION 2.4. Procedure for Advance of the Loan. Subject to the terms and conditions of this Agreement, not later than 1:00 p.m. (Charlotte time) on the Closing Date, the Lender will disburse the proceeds of the Loan in immediately available funds by crediting such proceeds to a deposit account of the Borrower maintained with the Lender. SECTION 2.5. Use of Proceeds. The Borrower shall use the proceeds of the Loan for working capital and general corporate requirements of the Borrower. SECTION 2.6. Prepayment of the Loan. Provided the Lender receives at least three (3) Business Days' prior notice thereof and Borrower contemporaneously pays all unpaid interest accrued thereon, the Borrower may from time to time prepay, at its option, any portion of the unpaid principal balance of the Note but only upon the expiration of any Interest Period therefor. Subject to the following sentence, any optional prepayment permitted hereby shall be without premium or penalty and shall be applied in the manner the Lender may elect in its sole and absolute discretion. Each prepayment referred to herein shall be accompanied by such amounts as shall be necessary to indemnify the Bank for any loss, cost or expense incurred by the Bank as set forth in Section 2.11 hereof. SECTION 2.7. Interest. (a) Rate of Interest. Subject to Section 2.7(b), the Loan shall bear interest on the unpaid principal balance outstanding from time to time at LIBOR plus 1.625%. (b) Default Rate of Interest. In the event of and so long as any Default or Event of Default shall exist under any Loan Document, interest shall be payable daily on the unpaid principal balance of the Note at a per annum rate equal to the rate then applicable to the Note plus two percent (2%) per annum. Interest shall continue to accrue on the Note after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign. (c) Interest Payment and Computation. Subject to prepayment and acceleration of the Loan as provided herein and to the provisions of Article VII hereof, interest on the unpaid principal balance of the Note shall be payable in arrears on the Maturity Date. Interest and fees provided hereunder shall be computed on the basis of a 360-day year and assessed for the actual number of 4 5 days elapsed from the first day of the Interest Period applicable thereto to, but not including, the last day thereof. (d) Maximum Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under the Note charged or collected pursuant to the terms of this Agreement or pursuant to the Note exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Lender has charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Lender shall promptly refund to the Borrower any interest received by the Lender in excess of the maximum lawful rate or shall apply such excess to the principal balance of the Obligations. It is the intent hereof that the Borrower not pay nor contract to pay, and that the Lender not receive nor contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable Law. SECTION 2.8. Upfront Fee. In consideration of making the Loan under this Agreement and in order to compensate the Lender for its obligations hereunder, the Borrower shall pay to the Lender on the Closing Date an upfront fee of $25,000. Such upfront fee shall be fully earned on the Closing Date and shall not be refundable or rebatable by reason of prepayment, acceleration upon Event of Default or any other circumstance and shall survive any termination of this Agreement. SECTION 2.9. Manner of Payment. Each payment (including prepayments) by the Borrower on account of the principal of or interest on the Loan or of any fee or other amounts payable to the Lender under this Agreement or the Note shall be made not later than 1:00 p.m. (Charlotte time) on the date specified for payment under this Agreement to the Lender, in immediately available funds and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on such date for the purposes of Section 8.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Subject to the definition of Interest Period, if any payment under this Agreement or the Note shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing interest, if any, in accordance with such payment. SECTION 2.10. Changed Circumstances. (a) Circumstances Affecting LIBOR Availability. If, with respect to any Interest Period, the Lender shall determine that, by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars in the applicable amounts are not being offered (through Telerate Page 3750 or otherwise) for such Interest Period to the Lender, then the Lender shall forthwith give notice thereof to the Borrower. Thereafter, until the Lender notifies the Borrower that such circumstances no longer exist (which notification shall be given promptly, but in 5 6 any event within ten (10) days after the Lender obtains actual knowledge that such circumstances no longer exist), the obligation of the Lender to make the Loan bearing interest based on LIBOR shall be suspended, and the Loan shall bear interest based on the Base Rate from and after the last day of the then current Interest Period applicable to the Loan. (b) Laws Affecting LIBOR Availability. If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Lender with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful or impossible for the Lender to honor its obligations hereunder to make or maintain the Loan bearing interest based on LIBOR, the Lender shall promptly give notice thereof to the Borrower. Thereafter, until the Lender notifies the Borrower that such circumstances no longer exist (which notification shall be given promptly, but in any event within ten (10) days after the Lender obtains actual knowledge that such circumstances no longer exist), (i) the obligation of the Lender to make the Loan bearing interest based on LIBOR shall be suspended, and thereafter the Loan shall bear interest based on the Base Rate from and after the last day of the then current Interest Period applicable to the Loan and (ii) notwithstanding clause (i) above, if the Lender may not lawfully continue to maintain the Loan bearing interest based on LIBOR to the end of the then current Interest Period applicable thereto, the interest rate applicable to the Loan shall immediately be converted to the Base Rate. (c) Increased Costs. If, after the date hereof, the introduction of, or any change in, any Applicable Law, or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Lender with any request or directive (whether or not having the force of law) of such Governmental Authority, central bank or comparable agency: (i) shall subject the Lender to any tax, duty or other charge with respect to the Loan or the Note or shall change the basis of taxation of payments to the Lender of the principal of or interest on the Loan or the Note or any other amounts due under this Agreement in respect thereof (except for changes in the rate of tax on the overall net income of the Lender); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System other than any change in the Reserve Requirements), special deposit, insurance or capital or similar requirement against assets of, deposits with or for the account of, or credit extended by the Lender or shall impose on the Lender or the foreign exchange and interbank markets any other condition affecting the Loan or the Note; and the result of any of the foregoing is to increase the costs to the Lender of maintaining the Loan bearing interest based on LIBOR or to reduce the yield or amount of any sum received or receivable by the Lender under this Agreement or under the Note in respect of a Loan bearing interest based on LIBOR, then the Lender shall promptly notify the Borrower of such fact and demand compensation 6 7 therefor and, within fifteen (15) days after such notice by the Lender, the Borrower shall pay to the Lender such additional amount or amounts as will compensate the Lender for such increased cost or reduction. The Lender will promptly notify the Borrower of any event of which it has knowledge which will entitle the Lender to compensation pursuant to this Section 2.10(c); provided, that the Lender shall incur no liability whatsoever to the Borrower in the event it fails to do so. The Lender shall supply the Borrower with a certificate setting forth the basis for determining such additional amount or amounts necessary to compensate the Lender. (d) Reserve Requirements. In the event that the Lender shall determine at any time that, by reason of Regulation D of the Board of Governors of the Federal Reserve System (or any successor regulation), the Lender is required to maintain Reserve Requirements during any period that the Loan bears interest based on LIBOR, then the Lender shall promptly notify the Borrower by written notice (or telephonic notice promptly confirmed in writing) specifying the additional amounts reasonably determined by the Lender to be required to indemnify the Lender against the cost of maintaining such Reserve Requirements (such written notice to provide a computation of such additional amounts) and the Borrower shall directly pay to the Lender such specified amounts as additional interest hereunder. SECTION 2.11. Indemnity. The Borrower hereby indemnifies the Lender against any loss or expense actually incurred by the Lender in connection with the Lender's obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain the Loan (a) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in connection with the Loan or (b) due to any payment or prepayment of any Loan on a date other than the last day of the Interest Period therefor. The Lender's calculations of any such loss or expense shall be furnished to the Borrower. SECTION 2.12. Capital Requirements. If, after the date of this Agreement, either (a) the introduction of, or any change in, or in the interpretation of, any Applicable Law or (b) compliance with any guideline or request from any central bank or comparable agency or other Governmental Authority (whether or not having the force of law), has the effect of reducing the rate of return on the capital of, or has affected the amount of capital required to be maintained by, the Lender or any corporation controlling the Lender as a consequence of, or with reference to its Commitment and other commitments of this type, below the rate which the Lender or such other corporation could have achieved but for such introduction, change or compliance, then within fifteen (15) days after written demand by the Lender, the Borrower shall pay to the Lender from time to time as specified by the Lender additional amounts sufficient to compensate the Lender or other corporation for such reduction. A certificate as to such amounts shall be submitted to the Borrower. 7 8 SECTION 2.13. Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder or under the Note shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholding, and all liabilities with respect thereto excluding, in the case of the Lender, income and franchise taxes (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Note to the Lender, (A) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.13) the Lender receives an amount equal to the amount such party would have received had no such deductions been made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (D) the Borrower shall deliver to the Lender evidence of such payment to the relevant taxing authority or other authority in the manner provided in Section 2.13(d). (b) Stamp and Other Taxes. In addition, the Borrower shall pay any present or future stamp, registration, recordation or documentary taxes or any other similar fees or charges or excise or property taxes (other than income, franchise, excise and property taxes to which the Lender would have been subject in the absence of this Agreement and the provision for security in connection with the execution of this Agreement), levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Loan, the other Loan Documents, or the perfection of any rights or security interest in respect thereto (hereinafter referred to as "Other Taxes"). (c) Indemnity. The Borrower shall indemnify the Lender for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.13) paid by the Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; provided, that this indemnification shall not apply to any Taxes, Other Taxes or related liability arising as the result of the gross negligence or willful misconduct of the Lender. Such indemnification shall be made within thirty (30) days from the date the Lender makes written demand therefor. (d) Evidence of Payment. Within thirty (30) days after the date of any payment of Taxes or Other Taxes, the Borrower shall furnish to the Lender the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment reasonably satisfactory to the Lender. (e) Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.13 shall survive the payment in full of the Obligations and the termination of the Commitment. 8 9 ARTICLE III CLOSING; CONDITIONS TO CLOSING AND INITIAL LOAN SECTION 3.1. Closing. The closing shall take place at the offices of Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street, Charlotte, North Carolina at 10:00 a.m. on November 26, 1997, or on such other date as the parties hereto shall mutually agree. SECTION 3.2. Conditions to Closing and Initial Loan. The obligation of the Lender to close this Agreement and to extend the Loan is subject to the satisfaction of each of the following conditions: (a) Loan Documents. The Loan Documents shall have been duly executed by Borrower and delivered to the Lender. (b) General Certificate. The Borrower shall have delivered to the Lender a general certificate as to the due organization and authority of the Borrower and the incumbency of its officers in form and substance satisfactory to the Lender. (c) Officer's Certificate. The Lender shall have received a certificate from the chief executive officer or chief financial officer of the Borrower, in form and substance satisfactory to the Lender, to the effect that all representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true, correct and complete; that the Borrower is not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing; and that the Borrower has satisfied each of the closing conditions. (d) Legal Opinion. The Lender shall have received the legal opinion of counsel to the Borrower in form and substance acceptable to the Lender. (e) Fees and Expenses. The Lender shall have received all fees, charges and other expenses (including, without limitation, legal fees and expenses) due in connection with the transactions contemplated hereby. (f) Other Documents, Instruments and Assurances. The Lender shall have received such other documents, instruments and assurances as may be deemed reasonably necessary by the Lender or its counsel in connection with the transactions contemplated hereby. SECTION 3.3. Waiver of Conditions Precedent. If the Lender makes the Loan or advance hereunder prior to the fulfillment of any of the conditions precedent set forth in this Article III, the making of such Loan or advance shall constitute only an extension of time for the fulfillment of such condition and not a waiver thereof, and the Borrower shall thereafter use its best efforts to fulfill each such condition promptly. 9 10 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BORROWER SECTION 4.1. Representations and Warranties. To induce the Lender to enter into this Agreement and to extend the Loan, the Borrower hereby represents and warrants to the Lender that each and every representation and warranty of the Borrower set forth in Article VI of the Revolving Credit Agreement is true, correct and complete in all material respects. SECTION 4.2. Survival of Representations and Warranties, Etc. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date, shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lender or any borrowing hereunder. ARTICLE V FINANCIAL INFORMATION AND NOTICES Until the Loan has been finally and indefeasibly paid and satisfied in full and the Commitment terminated, the Borrower will furnish or cause to be furnished to the Lender each and every financial statement, certificate or other document or instrument required to be delivered to the Lenders pursuant to Article VII of the Revolving Credit Agreement. So long as the Lender is the "Agent" under the Revolving Credit Agreement, the Borrower's furnishing of all such financial statements, certificates and other documents or instruments to the Agent which are required to be delivered to the Agent under the Revolving Credit Agreement shall constitute delivery to the Lender under this Article V. ARTICLE VI COVENANTS Until the Loan has been finally and indefeasibly paid and satisfied in full and the Commitment terminated, the Borrower will, and will cause each of its Subsidiaries to comply with each and every covenant and agreement set forth in Articles VIII, IX, and X of the Revolving Credit Agreement. ARTICLE VII DEFAULT AND REMEDIES SECTION 7.1. Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be 10 11 effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise: (a) Default in Payment. (i) The Borrower shall default in any payment of principal of the Loan or the Note when and as due (whether at maturity, by reason of acceleration or otherwise), (ii) the Borrower shall fail to make any payment of interest on the Loan or the Note or any fee due hereunder within three (3) Business Day after the same becomes due and payable or (iii) the Borrower shall fail to make any payment of any other amount due hereunder or under any other Loan Document within five (5) Business Days after written notice that such amount has become due and payable has been given to the Borrower by the Bank. (b) Misrepresentation. Any representation or warranty made by the Borrower under this Agreement, any Loan Document or any amendment hereto or thereto, shall prove to be incorrect or misleading in any material respect as of the date made. (c) Cross-Default to Revolving Credit Agreement. An Event of Default shall have occurred under the Revolving Credit Agreement. SECTION 7.2. Remedies. Upon the occurrence of an Event of Default, the Lender may, by notice to the Borrower: (a) Acceleration; Termination of Credit Facility. Declare the principal of and interest on the Loan and the Note at the time outstanding, and all other amounts owed to the Lender under this Agreement or any of the other Loan Documents and all other Obligations, to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Commitment; provided, that upon the occurrence of an Event of Default specified in Section 12.1(g) or (h) of the Revolving Credit Agreement, the Commitment shall be automatically terminated and all Obligations shall automatically become due and payable. (b) Rights of Collection. Exercise all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Borrower's Obligations. SECTION 7.3. Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of the rights and remedies of the Lender set forth in this Agreement is not intended to be exhaustive and the exercise by the Lender of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the Loan Documents or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or be construed to be a waiver of any 11 12 Event of Default. No course of dealing between the Borrower and the Lender or its agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default. SECTION 7.4. Set-off. Except to the extent prohibited by law, in addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Lender and any assignee of the Lender in accordance with this Agreement are hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, excluding government securities required by Applicable Law to be held as security for worker's compensation and similar claims) and any other indebtedness at any time held or owing by the Lender, or any such assignee or participant to or for the credit or the account of the Borrower against and on account of the Obligations irrespective of whether or not (a) the Lender shall have made any demand under this Agreement or any of the other Loan Documents or (b) the Lender shall have declared any or all of the Obligations to be due and payable as permitted by Section 7.2. ARTICLE VIII MISCELLANEOUS SECTION 8.1. Notices. (a) Method of Communication. Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the fifth (5th) Business Day following the date sent by certified mail, return receipt requested. A telephonic notice to the Lender as understood by the Lender will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice. (b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing. 12 13 If to the Borrower: Rural/Metro Corporation 8401 E. Indian School, Road Scottsdale, Arizona 85251 Attention: Mark E. Liebner Telephone: (602) 481-3229 Telecopy: (602) 481-3328 and Attention: William R. Crowell Telephone: (602) 481-3317 Telecopy: (602) 481-3279 With copies to: O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears One East Camelback Road, Suite 1100 Phoenix, Arizona 85012-1656 Attention: John B. Furman Telephone: (602) 263-2746 Telecopy: (602) 263-2900 and Attention: Karl A. Freeburg Telephone: (602) 263-2508 Telecopy: (602) 263-2900 If to the Lender: First Union National Bank One First Union Center 301 South College Street, TW-10 Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Telephone: (704) 383-0281 Telecopy: (704) 383-0288 SECTION 8.2. Expenses. The Borrower will pay all reasonable out-of-pocket expenses of the Lender in connection with: (a) the preparation, execution and delivery of this Agreement and each of the other Loan Documents, whenever the same shall be executed and delivered, including all reasonable due diligence expenses, reasonable appraiser's fees, reasonable search fees, recording fees, taxes and reasonable fees and disbursements of counsel for the Lender; (b) the preparation, execution and delivery of any waiver, amendment or consent by the Lender relating to this Agreement or any of the other Loan Documents including reasonable fees and disbursements of counsel for the Lender, reasonable search fees, reasonable appraiser's fees, recording fees and taxes imposed in connection therewith; and (c) consulting with one or more Persons, including appraisers, accountants, engineers and attorneys, concerning or related to the nature, scope or value of any right or remedy of the Lender hereunder or under any of the other Loan Documents, including any review of factual matters in connection therewith, which expenses shall include the reasonable fees and disbursements of such Persons. In addition, the Borrower will 13 14 pay all reasonable out-of-pocket expenses of the Lender in connection with prosecuting or defending any claim in any way arising out of, related to, connected with, or enforcing any provision of, this Agreement or any of the other Loan Documents, which expenses shall include the reasonable fees and disbursements of counsel (including the allocated cost of in-house counsel) and of experts and other consultants retained by the Lender. SECTION 8.3. Governing Law. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE EXPRESSLY SET FORTH THEREIN, SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF. SECTION 8.4. Consent to Jurisdiction. The Borrower hereby irrevocably consents to the personal jurisdiction of the state and federal courts located in Mecklenburg County, North Carolina, in any action, claim or other proceeding arising out of any dispute in connection with this Agreement, the Note and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations. The Borrower hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by the Lender in connection with this Agreement, the Note or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, by mailing of copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address for notice in Section 8.1. Nothing in this Section 8.5 shall affect the right of the Lender to serve legal process in any other manner permitted by Applicable Law or affect the right of the Lender to bring any action or proceeding against the Borrower or its properties in the courts of any other jurisdictions. SECTION 8.5. Arbitration. (a) Binding Arbitration. Upon demand of any party, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with or relating to the Note or any other Loan Documents ("Disputes"), between or among parties to the Note or any other Loan Document shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder. Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future, or claims concerning any aspect of the past, present or future relationships arising out of or connected with the Loan Documents. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association and Title 9 of the U.S. Code. All arbitration hearings shall be conducted in Charlotte, North Carolina. The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitation shall apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys. The single arbitrator selected for 14 15 expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted. The arbitrators shall be appointed as provided in the Arbitration Rules. (b) Preservation of Certain Remedies. Notwithstanding the preceding binding arbitration provisions, the parties hereto and to the other Loan Documents preserve, without diminution, certain remedies that such Persons may employ or exercise freely, either alone or in conjunction with or during a Dispute. Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies: (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Loan Documents or under applicable law or by judicial foreclosure and sale, (ii) all rights of self help including peaceful occupation of property and collection of rents, set off, and peaceful possession of property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and filing an involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute. SECTION 8.6. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. SECTION 8.7. Reversal of Payments. To the extent the Borrower makes a payment or payments to the Lender or the Lender receives any payment or proceeds of the collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Lender. SECTION 8.8. Injunctive Relief. The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Lender. Therefore, the Borrower agrees that the Lender, at the Lender's option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. SECTION 8.9. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender, all future holders of the Note, and their 15 16 respective successors and assigns, except that the Borrower shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender. SECTION 8.10. Performance of Duties. The Borrower's obligations under this Agreement and each of the Loan Documents shall be performed by the Borrower at its sole cost and expense. SECTION 8.11. Indemnification. The Borrower agrees to reimburse the Lender for all reasonable out-of-pocket costs and expenses, including all reasonable counsel (including the allocated cost of in-house counsel), appraisal, or other expert or consultant fees and disbursements incurred, and to indemnify and hold the Lender harmless from and against all losses suffered by the Lender in connection with (a) the exercise by the Lender of any right or remedy granted to it under this Agreement or any of the other Loan Documents, (b) any claim, and the prosecution or defense thereof, arising out of or in any way connected with this Agreement or any of the other Loan Documents, and (c) the collection or enforcement of the Obligations or any of them; provided, that the Borrower shall not be obligated to reimburse the Lender for costs and expenses, or indemnify the Lender for any loss, resulting from the gross negligence or willful misconduct of the Lender. SECTION 8.12. All Powers Coupled with Interest. All powers of attorney and other authorizations granted to the Lender and any Persons designated by the Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied or the Commitment has not been terminated. SECTION 8.13. Survival of Indemnities. Notwithstanding any termination of this Agreement, the indemnities to which the Lender is entitled under the provisions of this Article VIII and any other provision of this Agreement and the Loan Documents shall continue in full force and effect and shall protect the Lender against events arising after such termination as well as before. SECTION 8.14. Titles and Captions. Titles and captions of Articles, Sections and subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. SECTION 8.15. Severability of Provisions. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 8.16. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. 16 17 SECTION 8.17. Term of Agreement. This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations shall have been indefeasibly and irrevocably paid and satisfied in full. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination. SECTION 8.18. Independent Effect of Covenants. The Borrower expressly acknowledges and agrees that each covenant contained herein and in Articles VIII, IX and X of the Revolving Credit Agreement shall be given independent effect. Accordingly, the Borrower and any other applicable Person shall not engage in any transaction or other act otherwise permitted under any covenant contained herein or in Articles VIII, IX and X of the Revolving Credit Agreement if, before or after giving effect to such transaction or act, the Borrower or any other applicable Person shall or would be in breach of any other covenant contained herein or in Articles VIII, IX and X of the Revolving Credit Agreement. 17 18 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, all as of the day and year first written above. RURAL/METRO CORPORATION By: ____________________________________ Name: ____________________________________ Title: ____________________________________ FIRST UNION NATIONAL BANK By: ____________________________________ Name: ____________________________________ Title: ____________________________________ 18 EX-27 4 EX-27
5 6-MOS JUN-30-1997 JUL-01-1997 DEC-31-1997 2,261 0 194,919 44,993 9,757 171,595 133,432 50,798 451,822 54,677 203,769 0 0 139 172,828 451,822 209,115 209,115 0 157,744 0 28,826 5,409 17,006 6,924 10,082 0 0 0 10,082 0.76 0.73
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