1
THIS WARRANT AND THE SHARES OF COMMON STOCK (OR OTHER SECURITIES) ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
PURCHASE WARRANT
ISSUED BY
MHM EXTENDED CARE SERVICES, INC.
TO
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
DATED: JULY 7, 1995
2
THIS WARRANT AND THE SHARES OF COMMON STOCK (OR OTHER SECURITIES) ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
PURCHASE WARRANT
FOR THE PURCHASE OF 9,000* SHARES OF COMMON STOCK OF
MHM EXTENDED CARE SERVICES, INC.,
EXPIRES JULY 7, 1998
W I T N E S S E T H
WHEREAS, MHM EXTENDED CARE SERVICES, INC., a corporation organized and
existing pursuant to the laws of the State of Delaware, with its principal
offices located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Issuer")
has entered into an employment agreement dated July 7, 1995 (the "Employment
Agreement") with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("Holder"); and
WHEREAS, Issuer and Holder have agreed that in connection with the
Employment Agreement, a portion of the compensation of the Holder for his
services under the Employment Agreement will be in the form of a Warrant, which
Warrant will grant the right to Holder to purchase and acquire an equity
interest in Issuer in the form of shares of common stock, par value $.01 per
share, ("Common Stock") of the Issuer, on the terms and conditions hereinafter
set forth; and
WHEREAS, the aggregate number of shares of Common Stock the Issuer is
presently authorized to issue is 1,000,000, and there are presently 100,000
shares outstanding; and
WHEREAS, Issuer is duly authorized to issue to Holder this Warrant,
which Warrant shall, upon the occurrence of a Trigger Event (as hereinafter
defined), entitle, until exercise or prior expiration or termination, the
Holder by exercise thereof to purchase that number of shares of Common Stock
more fully described herein at a certain price (the "Exercise Price") as
hereinafter set forth, subject to adjustment as hereinafter provided, until
July 7, 1998 (the "Expiration Date") unless extended or earlier terminated
pursuant to the terms hereinafter set forth; and
-------------------
* Subject to adjustment and termination as more fully described hereinafter.
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WHEREAS, Issuer and Holder have agreed to provide herein for the
terms, conditions and provisions respecting this Warrant, the terms upon which
the Warrant shall be issued and exercised, and the respective rights and
limitations of rights of the Issuer and of Holder concerning the same; and
WHEREAS, Issuer and Holder have agreed that this Warrant, upon
execution by the Issuer shall be, and shall remain until its exercise or its
prior expiration, the valid, binding and legal obligation of Issuer.
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein and in the Purchase Agreement pursuant to which this Warrant is issued,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, Issuer
hereby agrees as follows:
1.1. The Warrant.
This Warrant evidences the right of the Holder hereof, for a
period of thirty (30) days following the occurrence of a Trigger Event as set
forth in Section 1.2 herein, to purchase 9,000 shares of Common Stock (the
"Shares") on the date of exercise (an "Exercise"), subject to adjustment from
time to time, pursuant to the provisions of paragraph 3 hereof, and subject to
termination as provided herein. Such thirty (30) day period shall not be
reduced in the event the Expiration Date is within said period.
1.2 Trigger Events.
(a) This Warrant shall only be exercisable for a period of
thirty (30) days following the occurrence of one of the following events
("Trigger Events"):
(i) the initial public offering by the Issuer of shares
of Common Stock; or
(ii) the disposition of the shares of Common Stock of
the Issuer by Mental Health Management, Inc., the present sole stockholder of
the Issuer, ("MHM") in a public offering, distribution to its stockholders or
sale or transfer for value to an unaffiliated third party;
(iii) the sale by the Issuer of all or substantially
all of its assets to an unaffiliated third party.
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(b) In the event of a Trigger Event, a notice thereof shall be
sent by the Issuer to the Holder, at least thirty (30) days before the
effective date of the Trigger Event (which date shall be specified in such
notice). Such notice shall also specify the date on which the right to
Exercise the Warrant shall expire, as provided in Section 1.1 of this Warrant.
1.3 Termination and Partial Termination.
(a) In the event the Holder's employment with the Issuer is
terminated for cause by the Issuer at any time during the term of this Warrant
, then this Warrant and all rights contained herein, shall immediately
terminate.
(b) In the event the Holder's employment with the Issuer
ceases at any time prior to the first anniversary of the date of this Warrant
because Holder voluntarily ceases employment with the Issuer, then, thereafter,
this Warrant shall only entitle the Holder to purchase one-third (1/3) of the
Shares, and all rights contained herein which relate to the Shares shall
thereafter relate to only one-third (1/3) of the Shares.
(c) In the event the Holder's employment with the Issuer
ceases at any time following the first anniversary of the date of this Warrant
but prior to the second (2nd) anniversary of the date of this Warrant because
Holder voluntarily ceases employment with the Issuer, then, thereafter, this
Warrant shall only entitle the Holder to purchase two-thirds (2/3) of the
Shares, and all rights contained herein which relate to the Shares shall
thereafter relate to only two-thirds (2/3) of the Shares.
2. Exercisability.
Upon the occurrence of a Trigger Event, Holder shall be
entitled to purchase the Shares and to receive a certificate or certificates
for the Shares so purchased, upon presentation and surrender to the Issuer,
with a form of subscription duly executed, and accompanied by payment of the
Exercise Price, either in cash or by certified or bank cashier's check payable
to the order of the Issuer, or by wired funds pursuant to the directions of
Issuer. Such issuance shall be under and subject to the terms and conditions
set forth in this Warrant.
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2.1 Issuer consents and agrees that the Shares to be delivered
upon exercise of this Warrant will, upon delivery, be free from all taxes,
liens, and charges with respect to the purchase thereof hereunder.
2.2 This Warrant may be exercised at any time permitted by
Sections 1.1 and 1.2, subject to termination and partial termination as set
forth in Section 1.3, except that if notice has been given as provided in
Section 5 of this Warrant in connection with the liquidation, dissolution, or
winding up of Issuer, the right to Exercise shall expire at the close of
business on the third full business day before the date specified in such
notice.
2.3 This Warrant shall entitle Holder, upon the occurrence of a
Trigger Event as set forth in Sections 1.1 and 1.2, to purchase the number of
Shares stated herein at the Exercise Price of $1.00 per Share, subject to
adjustment as set forth in this Warrant and subject to the provisions of
Section 1.3 of this Warrant. The Exercise Price represents the net book value
per share of the Shares, as reflected on its financial statements as of March
31, 1995. The parties hereto acknowledge that such amount shall be the
Exercise Price notwithstanding any changes in the net book value per share of
the Issuer which may have occurred from March 31, 1995 to the date of this
Warrant. For the purposes of this Warrant, the net book value per share of the
Issuer shall be determined by reference to the balance sheet for the Issuer's
most recently completed fiscal quarter, prepared in accordance with generally
accepted accounting principles applied in a manner consistent with the Issuer's
prior practices, and shall be deemed to be equal to the difference between the
total assets and total liabilities of the Issuer as reflected on such balance
sheet. The determination of the net book value per share of the Issuer shall
be made by the Issuer, and shall not be subject to contest.
2.4 This Warrant shall be exercised by surrendering it, together
with a subscription in the form annexed as Exhibit A hereto, duly executed,
accompanied by the tender of funds for the Exercise Price. The Warrant may be
surrendered at the office of the Company, to the attention of the Secretary of
the Company. As soon as practicable after the Warrant has been so exercised,
Issuer shall issue and deliver to, the order of Holder, or in such name or
names as may otherwise
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be directed by Holder, a certificate or certificates for the number of full
Shares to which Holder is entitled. All Warrants surrendered shall be
cancelled by Issuer.
2.5 The Issuer shall not be required to issue fractional shares
upon Exercise of this Warrant, but in lieu thereof shall issue, in addition to
Shares, a cash payment representing any fractional Share which might otherwise
be issuable except for this provision. The amount of the cash payment
hereunder shall be determined by the Issuer by multiplying the amount of such
fractional Share by the difference between the net book value per share of the
Issuer (as determined pursuant to Section 2.3 of this Warrant and the Exercise
Price then in effect.
2.6 All Shares issued upon the exercise of this Warrant, or any
replacement or substitution therefor, shall at all times be validly issued and
outstanding.
2.7 (a) This Warrant shall expire and no longer be exercisable
after 5:00 p.m. on the Expiration Date, unless extended or earlier terminated
pursuant to the terms set forth in this Warrant.
(b) In the event the Holder's employment with the Issuer is
continued after the initial term of the Employment Agreement, the term of this
Warrant shall be deemed to be extended for the duration of such continued
employment; provided, however, that no such extension shall extend the term of
this Warrant beyond an aggregate term, including the initial three-year term,
of five (5) years from the date of this Warrant.
3. Adjustments, Dividends, Etc.
The number of Shares for which this Warrant is exercisable,
and the price at which such Shares may be purchased upon exercise of this
Warrant, shall be subject to adjustment from time to time as set forth in this
Section 3. The Issuer shall give Holder notice of any event described below
which requires an adjustment pursuant to this Section 3 in accordance with
Section 9(b).
3.1 Stock Dividends, Subdivisions and Combinations. If at any
time the Issuer shall:
(a) take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock;
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(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (i) the number of Shares for which this Warrant is exercisable immediately
after the occurrence of any such event shall be adjusted to equal the number of
shares of Common Stock which a record holder of the same number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
occurrence of such event would own or be entitled to receive after the
happening of such event, and (ii) the Exercise Price shall be recalculated
after giving effect to the adjustment in the number of shares of Common Stock
for which this Warrant is exercisable pursuant to clause (i) above so that the
aggregate Exercise Price for the purchase of all of the Shares for which this
Warrant is exercisable is the same immediately before and after the happening
of such event.
A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value)
into shares of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Stock of such
shares of such other class of stock within the meaning of Section 3.8 and, if
the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may be,
of the outstanding shares of Common Stock within the meaning of this Section
3.1.
3.2 Issuance of Additional Shares of Common Stock.
(a) If at any time the Issuer shall issue or sell any additional
shares of Common Stock in exchange for consideration in an amount per
additional share of Common Stock less than the net book value per share of the
Issuer (as determined pursuant to Section 2.3), then (i) the number of shares
of Common Stock for which this Warrant is exercisable shall be adjusted to
equal the number of shares of Common Stock which is equal to nine (9%) percent
of the
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outstanding shares of Common Stock immediately after the issuance or sale of
such additional shares; and (ii) the Exercise Price shall be recalculated after
giving effect to the adjustment in the number of shares of Common Stock for
which this Warrant is exercisable pursuant to clause (i) above so that the
aggregate Exercise Price for the purchase of all of the Shares for which this
Warrant is exercisable is the same immediately before and after the happening
of such event.
(b) The provisions of this Section 3.2 shall not apply to
any issuance of additional shares of Common Stock for which an adjustment is
provided under Section 3.1. No adjustment of the number of Shares for which
this Warrant shall be exercisable shall be made under this Section 3.2 upon the
issuance of any additional shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any
convertible securities, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights or upon the issuance of such
convertible securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 3.3 or Section 3.4.
3.3 Issuance of Warrants or Other Rights. If at any time the
Issuer shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any additional shares of Common Stock or any convertible securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
the exercise of such warrants or other rights or upon conversion or exchange of
such convertible securities shall be less than the net book value per share of
the Issuer (as determined pursuant to the provisions of Section 2.3 of this
Warrant), then the number of Shares for which this Warrant is exercisable and
the Exercise Price shall be adjusted as provided in section 3.2 on the basis
that the maximum number of additional shares of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such convertible securities shall be deemed to have been issued
and
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outstanding and the Issuer shall have received all of the consideration payable
therefor, if any, as of the date of the actual issuance of such warrants or
other rights. No further adjustments of the number of Shares for which this
Warrant is exercisable or the Exercise Price shall be made upon the actual
issue of such Common Stock or of such convertible securities upon exercise of
such warrants or other rights or upon the actual issue of such Common Stock
upon such conversion or exchange of such convertible securities.
3.4 Issuance of Convertible Securities. If at any time the Issuer
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Issuer is the surviving
corporation) issue or sell, any convertible securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the net book value per share of the Issuer (as
determined pursuant to the provisions of Section 2.3 of this Warrant), then the
number of shares of Common Stock for which this Warrant is exercisable and the
Exercise Price shall be adjusted as provided in Section 3.2 on the basis that
the maximum number of additional shares of Common Stock necessary to effect the
conversion or exchange of all such convertible securities shall be deemed to
have been issued and outstanding and the Issuer shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such convertible securities. No further adjustment of the number of shares of
Common Stock for which this Warrant is exercisable and the Exercise Price shall
be made under this Section 3.4 upon the issuance of any convertible securities
which are issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights pursuant to Section
3.3. No further adjustments of the number of shares of Common Stock for which
this Warrant is exercisable and the Exercise Price shall be made upon the
actual issuance of such Common Stock upon conversion or exchange of such
convertible securities.
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3.5 Superseding Adjustment. If, at any time after any adjustment
of the number of Shares for which this Warrant is exercisable and the Exercise
Price shall have been made pursuant to Section 3.3 or Section 3.4 as the result
of any issuance of warrants, other rights or convertible securities,
(a) such warrants or other rights, or the right of
conversion or exchange in such other convertible securities, shall expire, and
all or a portion of such other convertible securities, as the case may be,
shall not have been exercised; or
(b) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or other rights, or the terms of
such other convertible securities, shall be increased solely by virtue of
provisions therein contained for an automatic increase in such consideration
per share upon the occurrence of a specified date or event, then as to this
Warrant such previous adjustment shall be rescinded and annulled and the
additional shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
warrants, other rights or options or other convertible securities on the basis
of treating the number of additional shares of Common Stock or other property,
if any, theretofore actually issued or issuable pursuant to the previous
exercise of any such warrants or other rights or any such right of conversion
or exchange, as having been issued on the date or dates of any such exercise
and for the consideration actually received and receivable therefor, and
treating any such warrants or other rights or any such other convertible
securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants
or other rights or other convertible securities; whereupon a new adjustment of
the number of Shares for which this Warrant is exercisable and the Exercise
Price shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.
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3.6 Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of
the number of Shares for which this Warrant is exercisable and the Exercise
Price provided for in this Section 3.
(a) Computation of Consideration. To the extent that any
additional shares of Common Stock or any convertible securities or any warrants
or other rights to subscribe for or purchase any additional shares of Common
Stock or any convertible securities shall be issued for cash consideration, the
consideration received by the Company therefor shall be the amount of the cash
received by the Issuer therefor, or, if such additional shares of Common Stock
or convertible securities are offered by the Issuer for subscription, the
subscription price, or, if such additional shares of Common Stock or
convertible securities are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price (in any such
case subtracting any amounts paid or receivable for accrued interest or accrued
dividends and deducting any compensation, discounts or expenses paid or
incurred by the Issuer for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such issuance shall
be for a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to be the
fair value of such consideration at the time of such issuance as determined by
the Board of Directors of the Issuer. In case any additional shares of Common
Stock or any convertible securities or any warrants or other rights to
subscribe for or purchase such additional shares of Common Stock or convertible
securities shall be issued in connection with any merger in which the Issuer
issues any securities, the amount of consideration therefor shall be deemed to
be the fair value, as determined by the Board of Directors of the Issuer, of
such portion of the assets and business of the nonsurviving corporation as such
Board shall determine to be attributable to such additional shares of Common
Stock, convertible securities, warrants or other rights, as the case may be.
The consideration for any additional shares of Common Stock issuable pursuant
to any convertible securities, warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the Issuer for issuing
such convertible securities, warrants or other rights plus the additional
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consideration, if any, payable to the Issuer upon exercise, conversion or
exchange of such convertible securities, warrants or other rights. In case of
the issuance of any additional shares of Common Stock or convertible securities
in payment or satisfaction of any dividends upon any class of stock other than
Common Stock, the Issuer shall be deemed to have received for such additional
shares of Common Stock or convertible securities a consideration equal to the
amount of such dividend so paid or satisfied.
(b) When Adjustments Made. The adjustments required by this
Section 3 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of Shares
for which this Warrant is exercisable or the Exercise Price that would
otherwise be required may be postponed (except in the case of a subdivision or
combination of shares of Common Stock, as provided for in Section 3.1) up to,
but not beyond the date of exercise of this Warrant if such adjustment either
by itself or together with other adjustments not previously made adds or
subtracts less than one (1%) percent of the Shares for which this Warrant is
exercisable immediately prior to the making of such adjustment. Any adjustment
representing a change of less than the minimum amount (except as aforesaid)
which is postponed shall be carried forward and made upon the earlier of: (i)
as soon as such adjustment, together with other adjustments required by this
Section 3 and not previously made, would result in a minimum adjustment; or
(ii) on the date of exercise. For the purposes of any adjustment, any
specified event shall be deemed to have occurred at the close of business in
the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Section 3, fractional interests in Common Stock shall be taken into account to
the nearest 10th of a share.
(d) When Adjustment Not Required. If the Issuer shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof, abandon
its plan to pay or deliver such dividend, distribution, subscription or
purchase rights, then thereafter no adjustment shall be required by reason of
the taking of such
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record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 3 by reason of the taking of any record
of the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, and Holder exercises this Warrant (or any part
thereof), any Shares issuable upon exercise by reason of such adjustment shall
be deemed to be the last Shares for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such shares or
other property shall be held by the Issuer in escrow for Holder to be issued to
Holder upon and to the extent that the event actually takes place, upon payment
of the Exercise Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned to the Issuer.
(f) Employee Benefits. Notwithstanding anything to the
contrary contained in this Section 3, there shall be no adjustment in the
Exercise Price or the number of Shares for which this Warrant is exercisable
upon the issuance of shares of Common Stock or options or warrants or other
rights for the purchase of Common Stock issued, sold or granted on or after the
date hereof by the Issuer to its officers, employees or directors pursuant to a
bona fide employee stock purchase, option or similar benefit plans or other
arrangements approved by the Board of Directors of the Issuer.
3.7 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Issuer shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Issuer is not the surviving corporation or where there
is a change or distribution with respect to the Common Stock of the Issuer), or
sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of Common Stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants
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or other subscription or purchase rights) in addition to or in lieu of common
stock of the successor or acquiring corporation ("Other Property"), are to be
received by or distributed to the holders of Common Stock of the Issuer, then
Holder shall have the right thereinafter to receive, upon exercise of this
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Issuer (if it is the surviving corporation) and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock of the Issuer for which this Warrant is
exercisable immediately prior to such event. For purposes of this Section 3.7,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
on liquidation and which is not subject to redemption and shall also include
any evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 3.7 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
3.8 No Adjustment for Certain Other Distributions. If at any
time the Issuer shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other distribution of
cash, any evidences of its indebtedness, any shares of stock of any class or
any other securities or property of any nature whatsoever (other than cash,
convertible securities or additional shares of Common Stock), or any warrants
or other rights to subscribe for or purchase any evidences of its indebtedness,
any shares of stock of any class or any other securities or property of any
nature whatsoever (other than cash, convertible securities or additional shares
of Common Stock); then Holder shall not be entitled to receive in respect of
this Warrant any amount in respect of such dividend or distribution.
3.9 Other Actions Requiring Adjustment. If at any time during the
term of this Warrant, Issuer shall take any action (other than as set forth in
Section 3.8 hereof) similar in
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nature or effect to the transactions described in Sections 3.1, 3.2, 3.3, 3.4
or 3.7; provided, however, that this Section 3.9 shall not be construed to
expand the provisions of such Sections 3.1, 3.2, 3.3, 3.4 or 3.7 hereof, then
the Issuer shall make appropriate adjustment to (i) the number of Shares for
which this Warrant is exercisable commensurate with the adjustments
contemplated by Sections 3.1, 3.2, 3.3, 3.4 and/or 3.7 hereof, and (ii) the
Exercise Price shall be recalculated after giving effect to the adjustment in
the number of shares of Common Stock for which this Warrant is exercisable
pursuant to clause (i) above so that the aggregate Exercise Price for the
purchase of all of the Shares for which this Warrant is exercisable is the same
immediately before and after the happening of such event.
4. Dividends and Interest.
Holder shall not, upon any exercise of this Warrant, be
entitled to any dividends that may have accrued with respect to Shares, or to
any interest that may have accrued upon any evidences of indebtedness, prior to
the date of its Exercise.
5. Liquidation, Dissolution, Winding Up.
In the event of the liquidation, dissolution, or winding up of
the Issuer, a notice thereof shall be sent by the Issuer to the Holder, at
least thirty (30) days before the record date (which date shall be specified in
such notice) for determining holders of Shares entitled to receive any
distribution upon such liquidation, dissolution, or winding up. Such notice
shall also specify the date on which the right to Exercise the Warrant shall
expire, as provided in Section 2.2 of this Warrant.
6. No Registration of Warrant and Shares.
Neither this Warrant nor the Shares issuable upon the Exercise
thereof are being registered with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933 (the "Act"). This Warrant, and any
replacement or substitution therefor, shall bear
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on the face thereof a legend substantially similar to the notice endorsed on
the first page of this Warrant. Each certificate for shares of Common Stock
(or other securities) issued pursuant to the exercise of this Warrant shall
bear on the face thereof a legend substantially as follows:
THE SHARES OF COMMON STOCK (OR OTHER SECURITIES) ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM.
7. No Rights as Securityholder Conferred.
This Warrant shall not entitle the Holder to any voting rights
or other rights as a shareholder or other securityholder of Issuer, or to any
other rights whatsoever except the rights herein expressed and set forth, and
no dividends shall be payable or accrue with respect of this Warrant or the
interest represented hereby or the Shares purchasable hereunder, until or
unless, and except to the extent that, this Warrant shall have been Exercised.
In addition, the Issuer shall have sole discretion with respect to all matters
involving the business, operations and financial condition of the Issuer,
including without limitation, matters relating to equity or debt financing,
dispositions of assets or property or security interests therein, transactions
or arrangements with MHM and other affiliates, declarations and payments of
dividends and distributions on Issuer's capital stock and acquisitions of
assets or property, or any reorganization, reclassification, merger,
consolidation, business combination or other corporate transaction whether
extraordinary or ordinary, and shall not be limited in any respect whatsoever
by any provision of this Warrant or any rights of the Holder.
8. Non-Transferability.
This Purchase Warrant is not transferable at any time.
17
- 16 -
9. Miscellaneous Provisions.
(a) The validity, interpretation, and performance of this
Warrant shall be governed by the laws of the State of Delaware.
(b) Each notice which is or may be required to be given in
connection with this Warrant shall be in writing, and given by telex, telegram,
telecopy, personal delivery, receipted delivery service, or by certified mail,
return receipt requested, prepaid and properly addressed as shown below.
Notices shall be effective on the date sent via telex, telegram or telecopy,
the date delivered personally or by receipted delivery service, or three (3)
days after the date mailed:
If to Issuer: MHM Extended Care Services, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
General Counsel
Mental Health Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Holder: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
--------------------------
--------------------------
(c) This Warrant contains the entire agreement of the parties with
respect to the subject matter hereof. It may not be changed orally, but only
by an agreement in writing executed by the
18
- 17 -
party against whom enforcement of any waiver, change, modification, extension
or discharge is sought.
(d) The section headings contained in this Warrant are for convenience
only and in no manner shall be construed as part of this Agreement.
IN WITNESS WHEREOF, Issuer has caused this Purchase Warrant to be
executed by its duly authorized officers, and its corporate seal hereunto
affixed.
Corporate Seal MHM EXTENDED CARE SERVICES, INC.
By:
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
Attest:
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Assistant Secretary
19
EXHIBIT A
SUBSCRIPTION FORM
[TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ____ shares of Common Stock of MHM Extended
Care Services, Inc., and herewith makes payment therefor, all at the price and
on the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the name
of and delivered to _______________________ whose address is
_______________________________________.
----------------------------------------
(Name of Registered Owner)
----------------------------------------
(Signature of Registered Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the Warrant in every particular,
without alteration or enlargement or any change whatsoever.
20
EXHIBIT B
TERMS AND CONDITIONS OF
INCIDENTAL REGISTRATION RIGHTS
------------------------------
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
issued under that Act, as they each may, from time to time, be in effect.
"Person" means an individual, a corporation, a partnership, a trust, an
unincorporated organization, or a government or any department, agency or
political subdivision thereof.
"Incidental Registration Statement" means a registration statement
(other than on Form S-8 (unless the Registrable Shares may be registered
thereunder), Form S-4, or any successor forms thereto, or on any other forms for
use solely in connection with mergers or other combinations or issuances of
securities to employees) filed by the Company with the Commission for a public
offering and sale or common stock of the Company, whether on behalf of the
Company or any stockholder.
21
"Registration Expenses" means the expenses described in paragraph 6 of
this Agreement.
"Registrable Shares" means (i) shares of Stock issued to Firestone
pursuant to the Warrant and (ii) any other shares of Stock issued in respect of
such stock (because or stock splits, stock dividends, reclassifications,
recapitalizations, mergers, consolidations, or similar events); provided,
however, that any shares of Stock previously sold by Firestone pursuant to a
registered public offering, Sections 4(1) or 4(2) or Rule 144 under the
Securities Act shall cease to be Registrable Shares.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under that Act, as they each may, from time to time, be in effect.
2. Incidental Registration Right.
(a) Whenever the Company proposes to file a Registration
Statement at any time or from time to time after the date hereof, it will, prior
to such filing, give written notice to Firestone of its intention to do so
(which notice shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable Blue Sky or
other state securities laws), and upon the written request of Firestone, given
within 20 days after receipt of any such notice (which request shall state the
intended methods of distribution of Registrable Shares by Firestone), the
Company will include in such registration (and any related qualification
2
22
under Blue Sky or other compliance filings) all Registrable Shares which the
Company has been requested by Firestone to register, to the extent necessary to
permit the sale or other disposition in accordance with the intended methods of
distribution specified in the request of Firestone. The Company shall only be
obligated to include such Registrable Shares in such registration statement if
Stockholder has indicated an intention to dispose of at least five hundred
thousand ($500,000) dollars in value of such shares.
(b) If the offering to which the proposed registration under this
paragraph 2 relates is to be distributed by or through an underwriter or
underwriters, Firestone, if requested by such underwriters, shall agree to sell
those Registrable Shares which are subject to the Incidental Registration
Statement to or through such underwriters at the same price and on the same
terms to be paid to the Company; provided, however, that if in the written
opinion of the underwriter or managing underwriter the registration of all or
part of the Registrable Shares which Firestone has requested to be included
would materially and adversely affect such public offering, then and in that
event the Company shall be required to register only that number of Registrable
Shares, if any, which the underwriter or managing underwriter believes may be
sold without causing such adverse effect. If Firestone proposes to distribute
its stock through such underwriting, Optionee shall
3
23
enter into an underwriting agreement with the underwriter or underwriters
selected for underwriting by the Company.
3. Opinion.
As a condition to including the Registrable Shares of Firestone in any
registration statement pursuant to paragraph 2 hereof, Firestone shall, if
requested by the Company, present an opinion of independent counsel reasonably
acceptable to the Company to the effect that no proposed public sale of the
Registrable Shares requested to be registered by said Firestone may be made
unless a registration statement under the Securities Act shall be in effect with
respect to such Registrable Shares.
4. Indemnification.
(a) In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless Firestone against any losses, claims,
damages or liabilities, joint or several, to which Firestone may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact
4
24
required to be stated therein or necessary to make the statements therein not
misleading; and the Company will reimburse Firestone for any legal or other
out-of-pocket expenses reasonably incurred by Firestone in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable to Firestone in any such
case if, and to the extent that, any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or omission made in the
Registration Statement, preliminary prospectus or prospectus, or the amendment
or supplement in reliance upon and in conformity with information furnished to
the Company by or on behalf of Firestone in writing, for use in the preparation
thereof.
(b) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, Firestone will
indemnify and hold harmless the Company, each of its directors and officers and
each underwriter (if any) and each person, if any, who controls the Company or
any such underwriter within the meaning of the Securities Act against any
losses, claims, damages or liabilities, joint or several, to which the Company
or any such director, officer, underwriter or controlling person may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue statement or alleged untrue statement
or any material fact contained in any Registration
5
25
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information furnished to the Company by or
on behalf of Firestone for use in connection with the preparation of the
Registration Statement or prospectus, or arise out of or are based upon any
other violation by Firestone of any Federal or state securities law or rule or
regulation thereunder and Firestone will reimburse the Company and each such
director, officer, underwriter and controlling person for any legal or other
out-of-pocket expenses reasonably incurred by the Company or any such director,
officer, underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) For purposes of administering the indemnification provisions of
this paragraph 4, the following procedures shall apply:
(i) After receipt by an indemnified party under this paragraph
4 of any notice of the commencement of any action, such indemnified party will,
if a claim in respect
6
26
thereof is to be made against an indemnifying party, notify the indemnifying
party in writing of the commencement thereof.
(ii) After notification is given as aforesaid, the indemnifying
party shall be entitled to participate in such action and, at its sole
discretion, to assume the defense thereof with counsel mutually satisfactory to
the indemnified and indemnifying parties.
7
27
REPURCHASE AGREEMENT
THIS AGREEMENT, made this 7th day of July, 1995, by and among MHM
Extended Care Services, Inc., a Delaware corporation (the "Company") and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, Ph.D., an individual, (the "Holder").
W I T N E S S E T H :
WHEREAS, pursuant to a Warrant (the "Warrant") issued on even date
herewith, the Company has issued certain rights to Holder to purchase shares of
the Company's Common Stock; and
WHEREAS, the Company and the Holder wish to make provision for the
Holder to require the Company to purchase all of the Holder's rights, title and
interest in the Warrant, all upon terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Ownership of the Warrant. As of the date of the execution of
this Agreement, the Holder is the legal and equitable owner of all of the
rights and privileges of, and all of the responsibilities under, the Warrant.
2. Purchase of Warrant at the Option of Holder. If the Holder
shall desire to sell all of the Holder's rights, title and interest in the
Warrant upon the last day of the initial or extended term of the Warrant (the
"Repurchase Date"), then the Holder shall send a notice (in the form set forth
as Exhibit A, attached hereto) to the Company within ninety (90) days prior to
the Repurchase Date, and, if it has received a properly completed notice, the
Company shall, within thirty (30) days following the Repurchase Date, be
obligated to repurchase from the Holder all of the Holder's rights, title and
interest in the Warrant at such time, at a price equal to the Fair Market Value
of the Warrant (as hereinafter defined) on the Repurchase Date. The purchase
price shall be paid in cash within thirty (30) days after the Repurchase Date.
For the purposes of this Agreement, the "Fair Market Value of this Warrant"
shall mean an amount equal to (a) the
28
-2-
Company's net revenues for its most recently completed fiscal year multiplied
by one and then (b) multiplied by the number of shares of the Company's Common
Stock which the Holder is then entitled to purchase under the terms of the
Warrant. For the purposes of this Agreement, the net revenues of the Company
shall be determined by reference to the Company's income statements, prepared
in accordance with generally accepted accounting principles, applied in a
manner consistent with the Company's prior practices. The right to require the
Company to repurchase the Holder's interest in the Warrant may only be
exercised within the time period set forth above. If this right is not
exercised, it shall immediately expire.
3. Intentionally Deleted.
4. Notices.
(a) Each notice, demand, request, consent, report, approval or
communication ("Notice") under this Agreement shall be in writing and given by
telex, telegram, telecopy, personal delivery or receipted delivery service or
certified U.S. mail, return receipt requested, prepaid and properly addressed
to the address of the party to be served as shown below. Notice shall be
effective on the date it was sent via telex, telegram or telecopy, the date
delivered personally or by receipted delivery service, or three (3) days after
the date the Notice was mailed.
(b) Each notice which is or may be required to be given in
connection with this Warrant shall be in writing, and given by telex, telegram,
telecopy, personal delivery, receipted delivery service, or by certified mail,
return receipt requested, prepaid and properly addressed as shown below.
Notices shall be effective on the date sent via telex, telegram or telecopy,
the date delivered personally or by receipted delivery service, or three (3)
days after the date mailed:
If to the Company: MHM Extended Care Services, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
General Counsel
Mental Health Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
29
-3-
If to Holder: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
--------------------------
--------------------------
(c) Each party may designate by Notice to the others in writing,
given in the foregoing manner, a new address to which any Notice may thereafter
be so given, served or sent.
5. Captions. The section headings contained in this Agreement are
for convenience only and in no manner shall be construed as part of this
Agreement.
6. Non-Transferability. The rights granted to the Holder
hereunder are personal and many not be transferred at any time.
7. Governing Law. The validity, interpretation, and performance
of this Agreement shall be governed by the laws of the State of Delaware.
8. Further Assurances. The parties hereto agree to execute any
and all other and further instruments and perform any and all acts which are or
may become necessary to effectuate the terms of this Agreement.
9. Binding Effect; Assignability. This Agreement shall be
binding upon and shall inure to the benefit of the parties, their respective
heirs, personal representatives, successors and, to the extent permitted,
assigns, but may not be assigned by any party without the prior written consent
of the other party. Notwithstanding the foregoing, the Company shall have the
right to assign all of its rights and obligations under this Agreement to a
wholly-owned subsidiary of the Company.
30
-4-
10. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties pertaining to the subject matter
hereof, and there are no other prior or contemporaneous, written or oral
agreements, understandings, undertakings, negotiations, promises, discussions,
warranties or covenants not specifically referred to or contained herein or
attached hereto. No supplement, modification, termination in whole or in part
or waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision
hereof (whether or not similar), nor shall any such waiver constitute a
continuing waiver unless otherwise expressly provided.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the corporate party hereto has caused this
Agreement to be executed by its respected duly authorized officers and has
affixed its respected corporate seals, and the individual party has hereunto
set his hand and seal, all on the day and year first above written.
Corporate Seal MHM Extended Care Services, Inc.
By:
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Attest:
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary
[SIG] [SIG] (SEAL)
------------------------- ---------------------------------
Witness ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
31
TERMS AND CONDITIONS OF
INCIDENTAL REGISTRATION RIGHTS
1. Certain Definitions.
As used in herein, the following terms shall have the following
respective meanings:
"Commission" means the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Company" means Mental Health Management, Inc., a corporation
organized and existing under the laws of the State of Delaware.
"Corporation" means ICH Services, Inc., L.L.C., a limited liability
company formerly organized and existing under the laws of the State of
Delaware.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
issued under that Act, as they each may, from time to time, be in effect.
"Former ICH Members" means the former Members of the Corporation.
"Person" means an individual, a corporation, a partnership, a trust,
an unincorporated organization, or a government or any department, agency or
political subdivision thereof.
"Incidental Registration Statement" means a registration statement
(other than on Form S-8 (unless the Registrable Shares may be registered
32
thereunder), Form S-4, or any successor forms thereto, or on any other forms
for use solely in connection with mergers or other combinations or issuances of
securities to employees) filed by the Company with the Commission for a public
offering and sale of Common Stock of the Company, whether on behalf of the
Company or any stockholder.
"Registration Expenses" means the expenses described in paragraph 5
hereof.
"Registrable Shares" means (i) shares of Common Stock of the Company
issued pursuant to paragraphs 3(h) (in respect of a payment of a reproration
amount only) or 3(i) of that certain Agreement dated November 18, 1993 by and
among the Company, the Corporation and the Members of the Corporation listed
therein (the "Members"), as amended by Amendment No. 1 thereto dated as of
October 12, 1995 and (ii) any other shares of Common Stock of the Company
issued in respect of such Common Stock (because of stock splits, stock
dividends, reclassifications, recapitalizations, mergers, consolidations, or
similar events); provided, however, that any such shares of Common Stock of the
Company previously sold by any Former ICH Member or its transferee pursuant to
a registered public offering, Sections 4(l) or 4(2) or Rule 144 shall thereupon
cease to be Registrable Shares.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission issued
under that Act, as they each may, from time to time, be in effect.
33
2. Incidental Registration Right.
(a) Whenever the Company proposes to file a Registration
Statement at any time or from time to time after the issuance to the Former ICH
Members of any Registrable Shares, it will, prior to such filing, give written
notice to the registered holders of the Registrable Shares (each, a "Holder,"
collectively, the "Holders") of its intention to do so (which notice shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable Blue Sky or other state securities
laws), and upon the written request of any Holder, given within 20 days after
receipt of any such notice (which request shall state the intended methods of
distribution of Registrable Shares by said Holders), the Company will include
in such registration (and any related qualification under Blue Sky or other
compliance filings) all Registrable Shares which the Company has been requested
by said Holders to register, to the extent necessary to permit the sale or
other disposition in accordance with the intended methods of distribution
specified in the request of said Holders.
(b) If the offering to which the proposed registration
under this paragraph 2 relates is to be distributed by or through an
underwriter or underwriters, the Holders, if requested by such underwriters,
shall agree to sell those Registrable Shares which are subject to the
Incidental Registration Statement to or through such underwriters at the same
price and on the same terms to be paid to the Company; provided, however, that
if in the written opinion of the managing underwriter the registration of all
or part of the Registrable Shares which the Holders have requested to be
included in addition to the shares being sold
34
by the Company pursuant to such offering, would materially and adversely affect
such public offering, then and in that event the Company shall be required to
register only that number of Registrable Shares, if any, which the underwriter
or managing underwriter reasonably believes may be sold without causing such
adverse effect. If any Holder proposes to distribute their Common Stock of the
Company through such underwriting, said Holder shall enter into an underwriting
agreement with the underwriter or underwriters selected for underwriting by the
Company containing such terms as are customary in such agreements; provided,
however, said Holder shall not be required to indemnify the underwriters for
any misstatement or omission contained in the Registration Statement except to
the extent it relates to information requested of and furnished by said Holder.
3. Amendments.
If the Company has delivered preliminary or final prospectuses to any
Holder pursuant to paragraph 2 hereof, and after having done so the prospectus
should be amended to comply with the requirements of the Securities Act, the
Company shall promptly notify said Holders, and if requested, said Holders
shall immediately cease making offers of Registrable Shares and return all
prospectuses in their possession relating to such registration to the Company.
The Company shall promptly amend its registration statement and provide said
Holders with revised prospectuses, and following receipt of the revised
prospectuses, said Holders shall be free to resume making offers of the
Registrable Shares in accordance with the terms thereof.
35
4. Opinion.
As a condition to including the Registrable Shares of any Holder in
any registration statement pursuant to paragraph 2 hereof, said Holder shall,
if requested by the Company, present an opinion of independent counsel
reasonably acceptable to the Company to the effect that no proposed public sale
of the Registrable Shares requested to be registered by said Holder may be made
unless a registration statement under the Securities Act shall be in effect
with respect to such Registrable Shares; provided, however, that no such
opinion shall be required for any registration statement to become effective
within two years after the issuance of the Registrable Shares.
5. Allocation of Expenses.
"Registration Expenses" shall mean all expenses pertaining to the
Registrable Shares incurred by the Company in complying with the terms hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and accountants for the Company,
state Blue Sky fees and expenses, exchange listing fees and expenses and the
expense of any special audits incident to or required by any such registration,
but excluding underwriting discounts and selling commissions. All Registration
Expenses incurred as a result of any registration made pursuant to paragraph 2
hereof (an "Incidental Registration Statement"), shall be borne by the Company.
36
6. Indemnification.
(a) In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Exhibit, the
Company will indemnify and hold harmless any selling Holders against any losses,
claim damages or liabilities, joint or several, to which said Holders may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement under
which such Registrable Shares were registered under the Securities Act; (ii)
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto; or (iii) an omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statement therein not misleading; and the Company will reimburse each
selling Holder for any legal or other out-of-pocket expenses reasonably
incurred by selling Holders in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable to any selling Holder in any such case if, and to
the extent that, any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or omission made in the Registration Statement,
preliminary prospectus or prospectus, or the amendment or supplement in
reliance upon and in conformity with information furnished to the Company by or
on behalf of said selling Holder in writing, for use in the preparation
thereof.
37
(b) In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Exhibit, each
selling Holder will indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any) and each person, if any,
who controls the Company or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director, officer, underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act or otherwise, insofar such losses, claims, damages or liabilities (or
actions in respect thereto arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were registered
under the Securities Act; (ii) any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to the
Registration Statement; or (iii) an omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; with respect to each of the foregoing, if the statement
or omission was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of said Holder for use in connection
with the preparation of the Registration Statement or prospectus, or arise out
of or are based upon any other violation by the selling Holder of any Federal
or state securities law or rule or regulation thereunder and the selling Holder
will reimburse the Company and each such director, officer, underwriter and
controlling person for any legal or other out-
38
of-pocket expenses reasonably incurred by the Company or any such director,
officer, underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) For purposes of administering the indemnification
provisions of this paragraph 4, the following procedures shall apply:
(i) After receipt by an indemnified party under
this paragraph 4 of any notice of he commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, notify the identifying party in writing of the commencement
thereof.
(ii) After notification is given as aforesaid, the
indemnifying party shall be entitled to participate in such action and, at its
sole discretion, to assume the defense thereof with counsel mutually
satisfactory to the indemnified and indemnifying parties.
7. Assignment.
The incidental registration rights afforded hereunder shall inure to
the benefit of and shall be binding upon the heirs, executors and personal
representatives of and successors of each Holder and transferees of the
Registrable Shares. The rights hereunder may be assigned to each Holder's
transferees.
39
The Former ICH Members acknowledge that the certificates for
such MHM Stock will bear a legend on the face thereof
substantially as follows:
"The shares represented by this certificate have been
acquired for investment and have not been registered under the
Securities Act of 1933 or under applicable state securities
laws. The shares may not be sold except pursuant to an
exemption therefrom, the availability of which must be
established to the satisfaction of the Buyer."
2. Each of the Former ICH Members represent and warrant that they
are "assignees" of ICH within the meaning of the Agreement and, therefore, are
entitled to receive any payment of Additional Consideration or following a
Disposition to be made to the Company under the Agreement.
3. Continuation of Agreement. The Agreement as amended hereby
shall continue in full force and effect.
4. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Amendment as of the date first above written.
MENTAL HEALTH MANAGEMENT, INC.
By:
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
FORMER ICH MEMBERS:
POINT VENTURE PARTNERS, L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------
Title: GENERAL PARTNER
-------------------------
.6-
40
POINT VENTURE PENNSYLVANIA, L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------
Title: GENERAL PARTNER
-------------------------
VENTURE FIRST II, L.P.
By: [SIG]
----------------------------
Name:
--------------------------
Title:
-------------------------
CANADIAN IMPERIAL BANK
OF COMMERCE TRUST COMPANY
(BAHAMAS) LIMITED, TRUSTEE
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Title: MANAGER, TRUST DEPT. AND
TRUST OFFICER
-------------------------
WALNUT CAPITAL CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Title: PRESIDENT
-------------------------
WINDY CITY, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Title: PRESIDENT
-------------------------
By:
-------------------------------
H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, DDS
.7-
41
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
▇. ▇. ▇▇▇▇▇▇
.8 -
42
AMENDMENT TO REPURCHASE AGREEMENT
THIS AMENDMENT TO REPURCHASE AGREEMENT ("Amendment") is made and
executed this 22 day of August, 1995, by and between MHM Extended Care
Services, Inc., a Delaware corporation (the "Company") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Ph.D. (the "Holder")
W I T N E S S E T H
WHEREAS, the Company and the Holder entered into a certain Repurchase
Agreement dated and effective as of the 7th day of July, 1995 (the "Agreement")
in connection with a Purchase Warrant issued by the Company to the Holder on
the same date (the "Warrant");
WHEREAS, the Company, in reviewing the Agreement, has determined that
the calculation provided in Section 2 of the Agreement that defines the "Fair
Market Price of the Warrant" could lead to potentially inequitable results that
would be detrimental to the Company, and desires to amend the Agreement to
avoid such potentially inequitable results;
WHEREAS, the Holder, acting in good faith and with a desire to deal
fairly with the Company, is willing to amend the Agreement in accordance with
the Company's desires, based on the Holder's belief that if the Holder
determines subsequently that any provision of the Warrant or the Agreement is
susceptible to an interpretation that could lead to potentially inequitable
results detrimental to the Holder, that the Company will reciprocate the
Holder's good faith and fair dealing in entering into this Amendment and will
amend the Warrant and/or the Agreement as necessary to avoid any such inequity;
WHEREAS, the Company acknowledges the Holder's willingness to enter
into this Amendment in accordance with the Company's desires, and agrees that
if the Holder determines subsequently that any provision of the Warrant or the
Agreement is susceptible to an interpretation that could lead to potentially
inequitable results detrimental to the Holder, the Company will reciprocate the
Holder's good faith and fair dealing and will amend the Warrant and/or the
Agreement as necessary to avoid any such inequity; and
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the foregoing recitals, the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto and each of them do agree as
follows:
1. Paragraph 2 of the Agreement is hereby amended and restated in
its entirety as follows:
-1-
43
2. Purchase of Warrant at the Option of Holder. If the Holder shall
desire to sell all of the Holder's rights, title and interest in the
Warrant upon the last day of the initial or extended term of the Warrant
(the "Repurchase Date"), then the Holder shall send a notice (in the form
set forth as Exhibit A, attached hereto) to the Company within ninety (90)
days prior to the Repurchase Date, and, if it has received a properly
completed notice, the Company shall, within thirty (30) days following the
Repurchase Date, be obligated to repurchase from the Holder all of the
Holder's rights, title and interest in the Warrant at such time, at a price
equal to the Fair Market Value of the Warrant (as hereinafter defined) on
the Repurchase Date. The purchase price shall be paid in cash within
thirty (30) days after the Repurchase Date. For the purposes of this
Agreement, the "Fair Market Value of the Warrant" shall mean an amount
equal to the product of (a) the Company's net revenues for its most
recently completed fiscal year, (b) divided by the total number of shares
of the Company's Common Stock outstanding on the Repurchase Date, (c)
multiplied by the number of shares of the Company's Common Stock which the
Holder is then entitled to purchase under the terms of the Warrant. For
the purposes of this Agreement, the net revenues of the Company shall be
determined by reference to the Company's income statements, prepared in
accordance with generally accepted accounting principles, applied in a
manner consistent with the Company's prior practices. The right to require
the Company to repurchase the Holder's interest in the Warrant may only be
exercised within the time period set forth above. If this right is not
exercised, it shall immediately expire.
2. In all other respects, except as otherwise provided for herein,
all other terms and conditions of the Agreement shall remain unchanged and in
full force and effect. Any conflict between the terms and conditions of the
Agreement and this Amendment (including the recitals hereto) shall be construed
in favor of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment the
date and year first above written.
Corporate Seal MHM Extended Care Services, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ President
-2-
44
Attest: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Secretary
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------- ----------------------------------------
Witness ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
-3-