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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _________)*
National Health Enhancement Systems, Inc.
(Name of Issuer)
Common Stock, par value $.001
(Title of Class of Securities)
636332 10 8
(CUSIP Number)
Rural/Metro Corporation, 8401 E. Indian School Road, Scottsdale, Arizona 85251,
(602) 994-3886
Attention: Steven Lee
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
January 10, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 636332 10 8 PAGE 2 OF 8 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Rural/Metro Corporation - Fed. ID No. 86-0746929
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
370,370
-------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY None
OWNED BY -------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 370,370
WITH -------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
370,370
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
Corporation (CO)
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 3
CUSIP NO. 636332 10 8 PAGE 3 OF 8 PAGES
ITEM 1. SECURITY AND ISSUER
This Statement relates to the Common Stock, par value $.001 per share
(the "Common Stock"), of National Health Enhancement Systems, Inc., a Delaware
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at 3200 North Central Avenue, Suite 1750, Phoenix, Arizona 85012.
ITEM 2. IDENTITY AND BACKGROUND
This Statement is being filed by Rural/Metro Corporation, a Delaware
corporation ("Rural/Metro"). Rural/Metro's principal business is providing
ambulance and fire protection services and other safety or health related
services to municipal, residential, commercial and industrial customers.
Set forth on Schedule A hereto is the (i) name, (ii) residence or
business address, (iii) present principal occupation or employment and the name,
principal business and address of any corporation or other organization in which
such employment is conducted, with respect to each executive officer, director
or controlling person of Rural/Metro. None of the individuals listed on Schedule
A has, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
which may have resulted in such individual becoming subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or a finding
that such individual has violated such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Rural/Metro acquired the 370,370 shares of Common Stock to which this
Statement relates for an aggregate purchase price of $2,500,000. Such purchase
price was paid out of internally generated funds available for investment.
ITEM 4. PURPOSE OF TRANSACTION
All of the 370,370 shares were acquired by Rural/Metro for investment
purposes only. Rural/Metro does not, and none of the individuals listed on
Schedule A, have any present plan or proposal which relates to or would result
in any of the actions described in clauses (b) and (c) and (e) through (j) of
Item 4 of Schedule 13D. Rural/Metro may from time to time acquire additional
shares of Common Stock in open market or private transactions. Such additional
shares, if any, also will be purchased for investment purposes only.
Pursuant to the Governance Agreement dated as of January 10, 1997 (the
"Governance Agreement"), between the Issuer and Rural/Metro, the Board of
Directors of the Issuer shall be increased to include one director proposed by
Rural/Metro. In addition, the Governance Agreement provides for an additional
director proposed by Rural/Metro to be elected to the Board of Directors,
commencing at the times and for only so long as Rural/Metro beneficially owns
20% or more of the total voting power of the Issuer.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
As of the date of this Report, Rural/Metro beneficially owns 370,370
shares of Common Stock, representing 7.4% of the Issuer's aggregate outstanding
Common Stock. Rural/Metro has the sole power to vote and dispose of all of such
Shares.
<PAGE> 4
CUSIP NO. 636332 10 8 PAGE 4 OF 8 PAGES
Rural/Metro acquired all of the 370,370 shares during the past 60 days
in a private transaction with the Issuer pursuant to a Subscription and Stock
Purchase Agreement dated as of January 10, 1997 (the "Stock Purchase
Agreement"), for an aggregate purchase price of $2,500,000.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Rural/Metro has no contracts, arrangements, understandings or
relationships with respect to any securities of the Issuer, including but not
limited to transfer or voting of any of the securities of the Issuer, finder's
fees, joint ventures, loan or option agreements, puts or calls, guarantees of
profits, divisions of profits or loss, or the giving or withholding of proxies,
except as set forth in the Governance Agreement, between the Issuer and
Rural/Metro, as described below.
The Governance Agreement includes certain terms and conditions
concerning Rural/Metro's participation in the corporate governance of the Issuer
including, but not limited to, (i) a restriction that Rural/Metro will not,
directly or indirectly, beneficially own voting securities of the Issuer equal
to or exceeding 25% of the total voting power; (ii) certain restrictions of
transfer during the Standstill Period (any period of time during which
Rural/Metro owns at least 10% of the total voting power of the Issuer); (iii)
the right of first negotiation of the Issuer in the event that Rural/Metro shall
desire to transfer any of its shares; (iv) certain restrictions on voting and
conduct by Rural/Metro during the Standstill Period; (v) the right of
Rural/Metro to purchase the same securities in any private placement by the
Issuer, at the same price and on the same terms and conditions as apply to other
purchasers in the private placement, during any Standstill Period; and (vi)
certain repurchase rights of the Issuer in the event of a change in control of
Rural/Metro.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibits
--------
1 Governance Agreement dated January 10, 1997, between
Rural/Metro and the Issuer.
<PAGE> 5
CUSIP NO. 636332 10 8 PAGE 5 OF 8 PAGES
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 20, 1997 RURAL/METRO CORPORATION
- -----------------------------
Date
/s/Mark E. Liebner
-----------------------------------------
Signature
Mark E. Liebner, Senior Vice President
and Chief Financial Officer
-----------------------------------------
Name/Title
The original statement shall be signed by each person on whose behalf the
statement is filed or his authorized representative. If the statement is signed
on behalf of a person by his authorized representative (other than an executive
officer or general partner of this filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statement, provided, however, that a power of attorney for this purpose
which is already on file with the Commission may be incorporated by reference.
The name and any title of each person who signs the statement shall be typed or
printed beneath his signature.
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL
CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
<PAGE> 6
CUSIP NO. 636332 10 8 PAGE 6 OF 8 PAGES
SCHEDULE A
<TABLE>
<CAPTION>
NAME ADDRESS PRINCIPAL OCCUPATION
- ---- ------- --------------------
<S> <C> <C>
Warren S. Rustand c/o Rural Metro Corporation Chairman of the Board, Chief
8401 E. Indian School Road Executive Officer and Director of
Scottsdale, Arizona 85251 Rural/Metro Corporation
Cor J. Clement Drentelaan 2 Consultant; Vice Chairman of the
4926 G.J. Lage Zwaluwe Board and Director of Rural/Metro
The Netherlands Corporation
James H. Bolin c/o Rural/Metro Corporation President and Director of
8401 E. Indian School Road Rural/Metro Corporation
Scottsdale, Arizona 85251
Robert T. Edwards c/o Rural/Metro Corporation Executive Vice President and
8401 E. Indian School Road Director of Rural/Metro
Scottsdale, Arizona 85251 Corporation
Louis G. Jekel Jekel & Howard Attorney, partner in the law firm of
7285 E. Stetson, Suite E Jekel & Howard; Secretary and
Scottsdale, Arizona 85251-0000 Director of Rural/Metro
Corporation
William C. Turner 4350 E. Camelback Road Chairman and Chief Executive Officer
Suite 240-B of Argyle Atlantic Corporation;
Phoenix, Arizona 85018 Director of Rural/Metro Corporation
Louis A. Witzeman Perspective Productions President; Chairman Emeritus
4325 N. Wells Fargo and Director of Rural/Metro
Suite 3 Corporation
Scottsdale, Arizona 85251
Frank G. Zarb Alexander & Alexander Chairman, Chief Executive Officer
Services, Inc. and President of Alexander &
1185 Avenue of the Americas Alexander; Director of Rural Metro
New York, New York 10036 Corporation
</TABLE>
<PAGE> 7
CUSIP NO. 636332 10 8 PAGE 7 OF 8 PAGES
<TABLE>
<CAPTION>
NAME ADDRESS PRINCIPAL OCCUPATION
- ---- ------- --------------------
<S> <C> <C>
Mark E. Liebner c/o Rural/Metro Corporation Senior Vice President-Chief
8401 E. Indian School Road Financial Officer and Treasurer of
Scottsdale, Arizona 85251 Rural/Metro Corporation
John E. Stuart c/o Rural/Metro Corporation Senior Vice President-Marketing
8401 E. Indian School Road and New Business Development of
Scottsdale, Arizona 85251 Rural/Metro Corporation
Tracy Bannon c/o Rural/Metro Corporation Vice President-Human Resources
8401 E. Indian School Road of Rural/Metro Corporation
Scottsdale, Arizona 85251
William R. Crowell c/o Rural/Metro Corporation Vice President-Financial Services of
8401 E. Indian School Road Rural/Metro Corporation
Scottsdale, Arizona 85251
Kurt R. Davis c/o Rural/Metro Corporation Vice President-Public Affairs and
8401 E. Indian School Road Corporate Communications of
Scottsdale, Arizona 85251 Rural/Metro Corporation
James E. Stenger c/o Rural/Metro Corporation Vice President-Executive Assistant
8401 E. Indian School Road to the President of Rural/Metro
Scottsdale, Arizona 85251 Corporation
Michel A. Sucher, M.D. c/o Rural/Metro Corporation Vice President-Medical Affairs of
8401 E. Indian School Road Rural/Metro Corporation
Scottsdale, Arizona 85251
Martin A. Yenawine c/o Rural/Metro Corporation Vice President-Assistant to the
8401 E. Indian School Road President of Rural/Metro
Scottsdale, Arizona 85251 Corporation
</TABLE>
<PAGE> 8
PAGE 8 OF 8 PAGES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1 Governance Agreement dated January 10, 1997,
between Rural/Metro and the Issuer.
</TABLE>
4
<PAGE> 1
Exhibit 1
GOVERNANCE AGREEMENT
AGREEMENT dated as of January 10, 1997, between NATIONAL HEALTH
ENHANCEMENT SYSTEMS, INC., a Delaware corporation (the "Company"), and
RURAL/METRO CORPORATION, a Delaware corporation (the "Stockholder").
WHEREAS, the Company and the Stockholder are parties to a Subscription
and Stock Purchase Agreement dated as of January 10, 1997 (the "Transaction
Agreement") pursuant to which, among other things, subject to the terms and
conditions contained in the Transaction Agreement, the Company will
simultaneously herewith issue to the Stockholder an aggregate of Three Hundred
Seventy Thousand Three Hundred Sixteen (370,370) shares (the "Shares") of common
stock, par value $.01 per share, of the Company (the "Common Stock"), in
exchange for payment to the Company of $2,500,000; and
WHEREAS, the Company and the Stockholder desire to establish in this
Agreement certain terms and conditions concerning the Stockholder's
participation in the corporate governance of the Company; and
WHEREAS, the Company and the Stockholder have entered into that certain
Investor Rights Agreement with respect to the Shares, and also desire to
establish in this Agreement certain additional terms and conditions concerning
the acquisition and disposition of securities of the Company by the Stockholder.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the Company and the Stockholder hereby agrees as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
SECTION 1.01. "Affiliate" shall have the meaning set forth in Rule
12b-2 under the Exchange Act (as in effect on the date of this Agreement).
SECTION 1.02. "Beneficially Own" with respect to any securities shall
mean having "beneficial ownership" of such securities (as determined pursuant to
Rule 13d-3 under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing.
SECTION 1.03. "Change in Control" means each of the following, with
respect to a party hereto:
<PAGE> 2
(a) Any transaction, or series of transactions, whereby any
person (as that term is used in Section 13 and 14(d)(2) of the Exchange Act),
excluding Affiliates of the party as of the date of this Agreement, is or
becomes the Beneficial Owner directly or indirectly, of Voting Securities of the
other party representing fifty percent (50%) or more of the Total Voting Power
of such party's then outstanding Voting Securities;
(b) Any merger, consolidation, or liquidation of a party in
which it is not the continuing or surviving corporation or pursuant to which
stock would be converted into cash, securities, or other property, other than a
merger or consolidation with a wholly owned subsidiary, a reincorporation of
such party in a different jurisdiction, or other transaction in which there is
no substantial change in the shareholders of such party; or
(c) The sale, transfer, or other disposition of all or
substantially all of the assets of the party.
SECTION 1.04. "Closing" shall have the meaning specified in the
Transaction Agreement.
SECTION 1.05. "Commission" shall mean the Securities and Exchange
Commission.
SECTION 1.06. "Exchange Act" shall mean the Securities Exchange Act of
1934.
SECTION 1.07. "Permitted Investment Percentage" shall mean the
percentage of the Total Voting Power that the Stockholder may Beneficially Own;
this limit shall be twenty-five percent (25%) of the Total Voting Power;
SECTION 1.08. "Person" shall mean any individual, partnership, joint
venture, corporation, trust, unincorporated organization, government or
department or agency of a government.
SECTION 1.09. "Registration Rights Agreement" shall mean the Investor
Rights Agreement between the Company and the Stockholder of even date herewith
pursuant to which the Shares may be sold under the Securities Act of 1933.
SECTION 1.10. "13D Group" shall mean any group of Persons acquiring,
holding, voting or disposing of Voting Securities which would be required under
Section 13(d) of the Exchange Act and the rules and regulations thereunder (as
in effect, and based on legal interpretations thereof existing, on the date
hereof) to file a statement on Schedule 13D with the Commission as a "person"
within the meaning of Section 13(d)(3) of the Exchange Act if such group
beneficially owned Voting Securities representing more than 5% of any class of
voting Securities then outstanding.
2
<PAGE> 3
SECTION 1.11. "Standstill Period" shall mean any period of time during
which the Stockholder Beneficially Owns Voting Securities representing at least
ten percent (10%) of the Total Voting Power. As of the effective date of this
Agreement and consummation of the Stockholder's purchase of the Shares, the
Stockholder Beneficially Owns Voting Securities representing ___ percent (__%)
of the Total Voting Power.
SECTION 1.12. "Total Voting Power" at any time shall mean the total
combined voting power in the general election of directors of all the Voting
Securities then outstanding.
SECTION 1.13. "Transfer" shall mean any sale, transfer, pledge,
encumbrance or other disposition, and to "Transfer" shall mean to sell,
transfer, pledge, encumber or otherwise dispose of.
SECTION 1.14. "Voting Securities" shall mean at any time shares of any
class of capital stock of the Company which are then entitled to vote generally
in the election of directors.
ARTICLE II
STANDSTILL, TRANSFER RESTRICTIONS AND VOTING
SECTION 2.01. Acquisition of Voting Securities.
(a) The Stockholder covenants and agrees that the Stockholder
will not, directly or indirectly, Beneficially Own any Voting Securities except
for (i) the Shares and (ii) additional Voting Securities of the Company if the
voting power in the general election of directors of all such additional Voting
Securities Beneficially Owned by the Stockholder, together with the voting power
in the general election of directors of the Shares then Beneficially Owned by
the Stockholder does not equal or exceed the Permitted Investment Percentage.
The Stockholder shall not permit any Affiliate (regardless of whether such
Person becomes an Affiliate of the Stockholder after the date of this Agreement)
to acquire, directly or indirectly, any Voting Securities.
(b) If at any time the Stockholder and its Affiliates
Beneficially Own more than the Permitted Investment Percentage, then the
Stockholder shall promptly take all action necessary to reduce the amount of
Voting Securities Beneficially Owned by such Persons to an amount not greater
than the Permitted Investment Percentage.
SECTION 2.02. Additional Restrictions on Transfer. The Stockholder
agrees to comply with the Registration Rights Agreement with respect to any
proposed Transfer of Voting Securities by the Stockholder. In addition, during
the Standstill Period, the Stockholder will not Transfer any Voting Securities
except for:
3
<PAGE> 4
(a) Transfers of Voting Securities pursuant to exercise of the
registration rights set forth in the Registration Rights Agreement or Transfers
of up to five percent (5%) of the Voting Securities in any calendar year
pursuant to Rule 144 under the Securities Act;
(b) Transfers of Voting Securities by the Stockholder to any
of its controlled Affiliates, provided that such Affiliate becomes a signatory
to this Agreement; and
(c) Transfers of Voting Securities by the Stockholder to any
Person, other than as described in (a) or (b) of this Section 2.02, provided
that no such Transfers under this clause (c) are made without the prior written
consent of the Company (which will not be unreasonably withheld) to any Person
(including its Affiliates and any Person or entities which are, to the
Stockholder's knowledge after inquiry of the Company, part of any 13D Group
which includes such transferee or any of its Affiliates) that, after giving
effect to such Transfer, would beneficially Own Voting Securities representing
more than five percent (5%) of the Total Voting Power, and provided, further,
that the Stockholder shall have complied in good faith with Section 2.03 in all
material respects.
SECTION 2.03. Right of First Negotiation. In the event that the
Stockholder shall desire to Transfer any Voting Securities under the
circumstances referred to in Section 2.02(c):
(a) The Stockholder shall give the Company written notice of
its bona fide intent to sell such Voting Securities (the "Notice of Intent to
Sell"), specifying the number of Voting Securities to be sold, the prospective
purchasers thereof if such prospective purchasers have been identified and the
minimum price and terms and conditions of such sale and offering to sell such
Voting Securities to the Company (or its designee) at such minimum price and on
such terms and conditions;
(b) The Company (or its designee) shall have the exclusive
right for a period of 30 days to negotiate in good faith the purchase of that
number of shares of Voting Securities set for the Notice of Intent to Sell and
to enter into a definitive agreement to purchase such Voting Securities, which
purchase shall occur as promptly as is reasonably practicable, but in no event
after the later of (i) the sixtieth day following the date of the definitive
Agreement and (ii) the fifth business day following receipt of all required
governmental approvals;
(c) If the Company (or its designee) and the Stockholder have
not entered into a definitive agreement to purchase the Voting Securities
described in the Notice of Intent to Sell within 30 days after receipt of the
Notice of Intent to Sell, then, subject to Section 2.02, the Stockholder shall
be free to enter into an agreement to sell or sell such Voting Securities to any
third party or the prospective purchasers specified in such notice, as the case
may be, at a price equal to or above the minimum price and on other terms and
conditions no less favorable to the Stockholder than those specified in such
notice, at any time within 75 days after the expiration of such 30-day period,
but not otherwise;
4
<PAGE> 5
(d) If the Stockholder shall not have entered into a
definitive agreement to sell the Voting Securities identified in the notice
given pursuant to paragraph (a) above within 75 days after the expiration of the
30-day period referred to in paragraph (c) above, then the Stockholder may not
thereafter sell such Voting Securities without first delivering another Notice
of Intent to Sell pursuant to paragraph (a) above and otherwise complying with
the provisions of this Section 2.03; and
(e) The sale by the Stockholder pursuant to the definitive
agreement referred to in paragraph (d) above shall be consummated no later than
the later of (i) the sixtieth day following the execution of the definitive
agreement and (ii) the fifth business day following receipt of all required
governmental approvals.
SECTION 2.04. Voting. During the Standstill Period:
(a) On all matters submitted to a vote of the Company's
stockholders at any annual or special meeting of the Company's stockholders
(other than the election of directors) all Voting Securities Beneficially Owned
by the Stockholder shall be voted, at the option of the Stockholder, either (i)
as recommended by the Board of Directors of the Company, or (ii) in the same
proportion as the votes cast by the other holders of Voting Securities, and
(b) In respect of the election of directors to the Company's
Board of Directors, all Voting Securities Beneficially Owned by the Stockholder
shall be voted in favor of the slate or nominees recommended by the Company's
Board of Directors.
SECTION 2.05. Further Restrictions on Conduct. The Stockholder
covenants and agrees that during the Standstill Period:
(a) Except solely by virtue of the Stockholder's
representation on the Board of Directors of the Company, neither the Stockholder
nor any Affiliate thereof will otherwise act, alone or in concert with others,
to seek to affect or influence the control of the management or Board of
Directors of the Company or the business, operations or policies of the Company;
(b) It shall not deposit any Voting Securities in a voting
trust (except a voting trust or agreement to which the Company is a party) or
subject any Voting Securities to any arrangement or agreement with respect to
the voting of such Voting Securities or other agreement having similar effect;
(c) Neither the Stockholder nor any Affiliate thereof shall
make, or in any way participate, directly or indirectly, in any "solicitation"
of "proxies" to vote, or seek to influence any Person with respect to the voting
of, any Voting Securities, or become a "participant" in a "solicitation" (as
such terms are defined in Regulation 14A under the Exchange
5
<PAGE> 6
Act, as in effect on the date hereof) in opposition to the recommendation of the
majority of the directors of the Company with respect to any matter;
(d) Neither the Stockholder nor any Affiliate thereof shall
initiate, propose or otherwise solicit any stockholders for the approval of any
stockholder proposals with respect to the Company or induce or attempt to induce
any other Person to initiate any stockholder proposal;
(e) Neither the Stockholder nor any Affiliate thereof shall
join a partnership, limited partnership, syndicate or other group, or
otherwise act in concert with any other Person, for the purpose of acquiring,
holding, voting or disposing of Voting Securities, or otherwise become a
"person" within the meaning of Section 13(d)(3) of the Exchange Act; and
(f) Neither the Stockholder nor any Affiliate thereof will
taken any other action inconsistent with the foregoing.
SECTION 2.06. Reports. The Stockholder shall deliver to the Company,
promptly after any acquisition or Transfer of Voting Securities, an accurate
written report specifying the amount and class of Voting Securities acquired or
Transferred in such transaction and the amount of each class of Voting
Securities owned by the Stockholder after giving effect to such transaction;
provided, however, that no such report need be delivered with respect to any
such acquisition or Transfer of Voting Securities by the Stockholder that is
reported in a statement on Schedule 13D filed with the Commission and delivered
to the Company by the Stockholder in accordance with Section 13(d) of the
Exchange Act and the rules thereunder. The Company shall be entitled to rely on
such reports and statements on Schedule 13D for all purposes of this Agreement.
SECTION 2.07. Limited Antidilution Provisions. During the Standstill
Period, the Stockholder shall have the right, but not the obligation, (the
"Purchase Right") to purchase that number of shares of Common Stock or equity
securities convertible into common stock ("Common Stock/Equivalents") in any
private placement by the Company of Common Stock/Equivalents, at the same price
and on the same terms and conditions as apply to other purchasers in such
private placement (the "Private Placement Terms") so as to maintain the
Stockholder's pro rata percentage ownership interest based upon issued and
outstanding shares of Common Stock/Equivalents immediately prior to such private
placement. The Company shall provide to the Stockholder at least twenty (20)
days prior written notice (the "Notice Period") of the Private Placement Terms,
the closing date of such private placement, and the number of shares of Common
Stock/Equivalents available to the Stockholder under the Purchase Right (the
"Notice"), and the Stockholder shall exercise the Purchase Right with respect to
such private placement, if it elects to exercise such Purchase Right, by
delivering to the Company written notice of its election no later than the end
of the Notice Period. If the Stockholder does not elect
6
<PAGE> 7
within the Notice Period to exercise the Purchase Right, then the Stockholder
shall be deemed to have elected not to exercise the Purchase Right as it relates
to the private placement transaction described in the Notice. Notwithstanding
any provision herein to the contrary, the Purchase Right shall not apply to (i)
any grant of options or warrants by the Company under any Board of
Directors-approved equity incentive or option plan or in connection with
services rendered or to be rendered, (ii) any acquisition transaction by the
Company in which it issues Common Stock/Equivalents of the Company as
consideration, in whole or in part, in such transaction, or (iii) any other
issuance of Common Stock/Equivalents, other than for cash or cash equivalents,
in a private placement transaction.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. Nomination of Member of Board of Directors. As soon as is
reasonably practicable after the Closing, the Board of Directors shall take such
action as is required under applicable law to increase the size of the Board of
Directors to at least seven (7) directors and to cause to be elected to the
Board of Directors, effective immediately, one director proposed by the
Stockholder, after consultation with the Company's Board of Directors, who shall
be reasonably satisfactory to the Company's Board of Directors. The rights set
forth in the Section 3.01 shall be personal and nontransferable.
SECTION 3.02. Stockholder's Right to an Additional Director. Commencing
at the time and for only so long as the Stockholder Beneficially Owns twenty
percent (20%) or more of the Total Voting Power, the Board shall take such
action as is required under applicable law to increase the size of the Board of
Directors to at least eight (8) directors and to cause to be elected to the
Board of Directors an additional director proposed by the Stockholder (for a
total of 2 nominees by the Stockholder), after consultation with the Company's
Board of Directors, who shall be reasonably satisfactory to the Company's Board
of Directors. The rights set forth in the Section 3.02 shall be personal and
nontransferable.
ARTICLE IV
CHANGE IN CONTROL PROVISIONS
SECTION 4.01. Change in Control of the Stockholder to a Competitor of
the Company.
In the event of a Change in Control of the Stockholder in favor of a
"Company Competitor", as defined on Schedule 4.01 attached hereto, the following
provisions shall apply:
(a) The Company (or its nominee) shall have the right, but not
the obligation, to purchase all Shares Beneficially Owned by the Stockholder or
its Affiliates (the "NHES Option"). The Company (or its nominee) may exercise
the NHES Option by delivering to the Stockholder, no later than thirty (30) days
after receipt by the Company of written notice of the Change in Control from the
Stockholder, written notice of its election to exercise the NHES
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Option, the number of Shares it elects to purchase under the NHES Option, and
the proposed time, place and date of closing of the purchase transaction (but
not later than 10 days after the end of such 30 day period) (the "Exercise
Notice"). The Company shall pay the exercise price at the closing in readily
available federal funds, and the Stockholder and its Affiliates shall deliver
the Shares to the Company (or its nominee) against payment therefor, free and
clear of any and all liens, encumbrances, or restrictions of any kind or nature
(except only those in favor of the Company under this Agreement and the
Registration Rights Agreement),and such closing shall take place as specified in
the Exercise Notice, except as otherwise agreed by the parties. The per Share
exercise price for the Shares shall be the lower of (i) the average traded price
for shares of common stock of the Stockholder on the date the Change in Control
became effective or (ii) the average traded price for shares of common stock of
the Stockholder on the business day immediately preceding the closing date for
exercise of the NHES Option.
(b) Except to the extent purchased by the Company pursuant to
the NHES Option, any Shares Beneficially Owned by the Stockholder or its
Affiliates shall be delivered to the Company within thirty (30) days after the
Change in Control and shall be held by the Company pursuant to a voting trust
agreement to be executed and delivered by the parties in the form attached
hereto as Exhibit 4.01(b) for the purpose of implementing the terms and
conditions of this Agreement (the "Voting Trust"). In the event that the
Stockholder and its Affiliates fail to execute and deliver the Voting Trust
and/or the Shares as required herein, then this Agreement shall constitute a
proxy pursuant to which the Stockholder hereby appoints the Company (or its
nominee) as its proxy with full, exclusive and irrevocable power to vote all of
such Shares in the discretion of the Company (or its nominee).
(c) Article III of this Agreement shall immediately terminate,
and except as otherwise determined by the Board of Directors, the individuals
designated by the Stockholder pursuant to Article III shall be deemed removed as
directors of the Company, effective as of the date of the Change in Control.
SECTION 4.02. Change in Control of the Company to a Competitor of the
Stockholder.
In the event of a Change in Control (or a proposed Change in Control)
of the Company in favor of an "RM Competitor", as defined on Schedule 4.02
attached hereto, the following provisions shall apply:
(a) In the event that the Board of Directors of the Company
desires to approve a transaction pursuant to which a Change in Control in favor
of an RM Competitor would occur upon closing of such transaction, then the
Company shall not complete such a transaction (the "Proposed Transaction")
without first delivering to the Stockholder a written notice (the "Transaction
Notice") describing in reasonable detail the material terms and conditions of
the Proposed Transaction and giving the Stockholder the right, but not the
obligation, (the "Right of First Refusal") to enter into the Proposed
Transaction with the Company on such terms and
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conditions. The Stockholder shall exercise the Right of First Refusal, if at
all, by delivering to the Company, for receipt by the Company within thirty (30)
days after the Stockholder's receipt of the Transaction Notice, its written
election to exercise such Right, which shall be binding and specifically
enforceable by the Company. If the Company does not receive the Stockholder's
written election to exercise the Right of First Refusal within the 30 days
specified above, then the Stockholder shall be deemed to have elected not to
exercise the Right of First Refusal, and the Company shall be free to enter into
and consummate the Proposed Transaction on terms and conditions not materially
more favorable to the Company than set forth in the Transaction Notice.
(b) With respect to any Change in Control in favor of an RM
Competitor to which Section 4.02(a) does not apply, the Stockholder shall have
the right, but not the obligation, to cause the Company to purchase all Shares
Beneficially Owned by the Stockholder or its Affiliates (the "RM Option"). The
Stockholder may exercise the RM Option (on behalf of itself and its Affiliates)
by delivering to the Company, no later than thirty (30) days after receipt by
the Stockholder of written notice of the Change in Control from the Company,
written notice of its election to exercise the RM Option, the number of Shares
it and its Affiliates elect to sell under the RM Option, and the proposed time,
place and date of closing of the purchase transaction (but not later than 10
days after the end of such 30 day period) (the "Exercise Notice"). The Company
shall pay the exercise price at the closing in readily available federal funds,
and the Stockholder and its Affiliates shall deliver the Shares to the Company
(or its nominee) against payment therefor, free and clear of any and all liens,
encumbrances, or restrictions of any kind or nature (except only those in favor
of the Company under this Agreement and the Registration Rights Agreement), and
such closing shall take place as specified in the Exercise Notice, except as
otherwise agreed by the parties. The per Share exercise price for the Shares
shall be the higher of (i) the average traded price for shares of common stock
of the Company on the date the Change in Control became effective or (ii) the
average traded price for shares of common stock of the Company on the business
day immediately preceding the closing date for exercise of the RM Option.
ARTICLE V
REPRESENTATION AND WARRANTIES
SECTION 5.01. Representation and Warranties of the Company. The Company
represents and warrants to the Stockholder that
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder;
(b) The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly
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authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or any of the transactions contemplated hereby, and
(c) This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company, and,
assuming this Agreement constitutes a valid and binding obligation of the
Stockholder, is enforceable against the Company in accordance with its terms.
SECTION 5.02. Representation and Warranties of the Stockholder. The
Stockholder represents and warrants to the Company that:
(a) It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder;
(b) The execution and delivery of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Stockholder and no other corporate proceedings on the part of
the Stockholder are necessary to authorize this Agreement or any of the
transactions contemplated hereby, and
(c) This Agreement has been duly executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the Stockholder,
and, assuming this Agreement constitutes a valid and binding obligation of the
Company, is enforceable against the Stockholder in accordance with its terms.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy) and shall be
given,
if to the Stockholder, to:
Rural/Metro Corporation
8401 East Indian School Road
Scottsdale, Arizona 85251
Attention: General Counsel
FAX: (602) 481-3328
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if to the Company, to:
National Health Enhancement Systems, Inc.
3200 North Central, Suite 1750
Phoenix, Arizona 85012
Attention: Chairman and CEO
FAX: (602) 274-6158
with a copy to:
Osborn Maledon, P.A.
2929 N. Central Avenue, Suite 2100
Phoenix, Arizona 85012-2794
Attention: Thomas H. Curzon, Esq.
FAX: (602) 235-9444
or such address or telecopy number as such party may hereafter specify for the
purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective when delivered personally, telegraphed,
or telecopied, or, if mailed, five business days after the date of mailing.
SECTION 6.02. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by the Stockholder and the Company, or in the case of a waiver,
by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 6.03. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
SECTION 6.04. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Arizona.
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SECTION 6.05. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts thereof signed by the other party hereto.
SECTION 6.06. Specific Performance. The Company and the Stockholder
each acknowledges and agrees that the parties' respective remedies at law for a
breach or threatened breach of any of the provisions of this Agreement would be
inadequate and, in recognition of that fact, agrees that, in the event of a
breach or threatened breach by the Company or the Stockholder of the provisions
of this Agreement, in addition to any remedies at law, the Stockholder and the
Company, respectively, without posting any bond shall be entitled to obtain
equitable relief in the form of specific performance, a temporary restraining
order, a temporary or permanent injunction or any other equitable remedy which
may then be available.
SECTION 6.07. Termination. This Agreement shall terminate:
(a) Prior to the Closing upon any termination of the
Transaction Agreement in accordance with its terms; and
(b) On such date as the Stockholder or its Affiliates no
longer Beneficially Own any Shares.
SECTION 6.08. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in not way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
NATIONAL HEALTH ENHANCEMENT
SYSTEMS, INC.
By: /s/ Gregory J. Petras
--------------------------------
Title: Chairman & CEO
--------------------------------
Date: January 10, 1997
--------------------------------
"Company"
RURAL/METRO CORPORATION
By: /s/ Mark E. Liebner
--------------------------------
Title: Senior Vice President & CFO
--------------------------------
Date: January 10, 1997
--------------------------------
"Stockholder"
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