1
EXHIBIT 2.1
Warrant Acquisition Agreement
This Warrant Acquisition Agreement (this "Agreement") is entered into as of
January 13, 1997 (the "Effective Date") by and between Community Care of
America, Inc., a Delaware corporation ("CCA"), on the one hand, and on the other
hand, Integrated Health Services, Inc., a Delaware corporation ("IHS").
WHEREAS, CCA and IHS are parties to that certain Management Agreement, dated as
of December 27, 1996 (the "Management Agreement"), pursuant to which IHS has
agreed to provide certain services to CCA, on the terms and conditions contained
therein; and
WHEREAS, in connection with the Management Agreement, CCA and IHS entered into
that certain Revolving Credit Agreement, dated as of December 27, 1996 (the
"Revolving Credit Agreement"), pursuant to which IHS agreed to make available to
CCA a line of credit (the "Line of Credit") for up to Two Million Dollars
($2,000,000) to be evidenced by a Subordinated Note (the "Subordinated Note");
and
WHEREAS, CCA and IHS have continued to negotiate the terms upon which IHS would
be willing to provide CCA with a Line of Credit for up to Five Million Dollars
($5,000,000); and
WHEREAS, in order to induce IHS to provide an aggregate Line of Credit to CCA of
Five Million Dollars ($5,000,000), CCA has agreed to issue to IHS warrants (the
"Warrants") to purchase up to 9.9% of the outstanding common stock of CCA (the
"Common Stock"), on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.1.DEFINITIONS As used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" of any particular Person means any executive officer, director
(regardless of whether an officer), general partner, trustee and any other
Person that controls, is controlled by or is under common control with such
particular Person, where "control" means the possession, directly or indirectly,
of the power to direct the management and policies of the particular Person
2
whether through the ownership of voting securities, contract or otherwise.
"Common Stock" shall mean CCA's common stock, $.0025 par value.
"day" shall mean any calendar day; "business day" shall mean any day
other than Saturdays, Sundays and days that are a banking holiday in New York
City; and "trading day" shall mean any day other than Saturdays, Sundays and
days that are a scheduled holiday for the principal securities market in which
the Common Stock is quoted or traded.
"Additional Transaction Documents" shall mean the Series A and Series B
Warrants described in Section 2.1 and the Registration Rights Agreement in the
form attached hereto as Exhibit 3.
"Person" shall mean any natural person and any corporation,
partnership, limited liability company, limited liability partnership, joint
venture, association, joint-stock partnership, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, limited liability partnership, partnership,
association or other business entity of which (i) if a corporation, a majority
of the total voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, limited liability
partnership, partnership, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled, directly or indirectly, by a Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a limited
liability company, limited liability partnership, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, limited liability partnership, partnership,
association or other business entity gains or losses or shall be or control any
managing director or general partner of such limited liability company, limited
liability partnership, partnership, association or other business entity.
"Underlying Common Stock" shall mean (i) the shares of Common Stock
issued or issuable upon exercise of the Warrant and (ii) any Common Stock issued
or issuable with respect to the securities referred to in clause (i) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
2. PURCHASE AND SALE OF THE WARRANTS.2.PURCHASE AND SALE OF THE WARRANTS
2.1. The Effective Date Transaction. Simultaneously with the execution
and delivery of this Agreement: (a) CCA is issuing to IHS the Series A Warrant,
in the form attached hereto as Exhibit 1 (the "A-Warrant"); (b) CCA is issuing
to IHS the Series B Warrant, in the form attached hereto as Exhibit 2 (the
"B-Warrant"); and (c) the Revolving Credit Agreement is deemed to have been
amended by CCA and IHS to provide an aggregate Line of Credit of Five Million
Dollars ($5,000,000) in consideration for the issuance and sale of the Warrants.
3. ADDITIONAL TRANSACTION DOCUMENTS.7.ADDITIONAL TRANSACTION DOCUMENTS.
3.1. Registration Rights Agreement. Simultaneously with the execution and
delivery of this Agreement, CCA and IHS shall enter into a Registration Rights
Agreement in the form attached hereto as Exhibit 3.
4. REPRESENTATIONS AND WARRANTIES OF CCA; COVENANTS OF CCA.8.REPRESENTATIONS AND
WARRANTIES OF CCA. CCA hereby represents and warrants to IHS that the
statements in the following subsections of this Section 4 are all true and
correct as of the Effective Date and covenants to CCA as follows:
4.1. Organization, Standing, and Qualification of CCA. CCA is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Copies of the Certificate of Incorporation and
Bylaws of CCA, and all the amendments thereof to date, have been, if requested,
delivered to IHS and are complete and correct. CCA has the power and the
authority to own the property and assets now owned by it and to conduct the
business presently being conducted by it.
4.2. Absence of Conflicting Agreements. Neither (a) the execution or
delivery of this Agreement, the Additional Transaction Documents, the amendment
to the Revolving Credit Agreement or the other instruments and documents
required or contemplated hereby and thereby, nor (b) the performance by CCA of
the transactions contemplated hereby or thereby, conflicts with, or constitutes
a breach of or a default or requires the consent of any third party under (i) to
the best of its knowledge after due inquiry, any applicable law, rule, judgment,
order, writ, injunction, or decree of any court, currently in effect; or (ii) to
the best of its knowledge after due inquiry, any applicable rule or regulation
of any administrative agency or other governmental authority currently in
effect; or (iii) any agreement, indenture, contract or instrument to which CCA
(or any of its Subsidiaries) is now a party or by which the assets of CCA (or
any of its Subsidiaries) are bound.
3
4.3. Authority. CCA has been and is duly authorized to execute and deliver
this Agreement, the Additional Transaction Documents, the Management Agreement,
the Revolving Credit Agreement (as amended hereby) and the other instruments and
transactions required or contemplated hereby and thereby, and to perform its
obligations hereunder and thereunder. The execution and delivery by CCA of this
Agreement, the Additional Transaction Documents, the Management Agreement, the
Revolving Credit Agreement (as amended hereby) and the other instruments and
transactions required or contemplated hereby and thereby, and the performance by
CCA of its obligations hereunder and thereunder do not and will not conflict
with any provision of the Certificate of Incorporation or Bylaws of CCA (or any
of its Subsidiaries) as amended to date. This Agreement, the Additional
Transaction Documents, the Management Agreement, the Revolving Credit Agreement
(as amended hereby) and the other instruments and transactions required or
contemplated hereby and thereby, when duly executed and delivered, will be the
legal, valid and binding obligation of CCA enforceable against it in accordance
with its and their terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization and similar laws affecting
creditors rights generally. Upon execution of this Agreement, CCA will have
received the full purchase price or other consideration to be paid or given by
IHS for the Warrants, as evidenced by the execution and delivery of the Warrants
by CCA.
4.4 Legal Proceedings. There are no claims, actions, suits or proceedings
or arbitrations, either administrative or judicial, pending, or, to the
knowledge of CCA, overtly threatened against or affecting CCA, its subsidiaries
or affiliates, affecting CCA's ability to consummate the transactions
contemplated herein or, except as may be set forth in reports filed by CCA with
the Securities and Exchange Commission ("SEC"), of a nature required to be
disclosed in reports filed with the SEC.
4.5. Consents. No authorization, consent, approval, license, exemption by,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary in connection with the execution, delivery and performance of this
Agreement by CCA other than any notice filing that is permitted to be made after
the event that causes such filing to be made. CCA will timely make all such
notice filings.
4.6. Capitalization. The authorized capital stock of CCA consists of the
following:
(a) Common Stock. A total of 15,000,000 authorized shares of Common Stock,
$.0025 par value, of which [7,597,801] shares are issued and outstanding.
(b) Preferred Stock. A total of authorized shares of Preferred Stock, none
of which is issued and outstanding.
(c) Options, Warrants, Reserved Shares. CCA will provide IHS within five
business days of the Effective Date a list of each stock option, warrant,
convertible security or other rights to acquire its Common Stock outstanding as
of the Effective Date. Except as disclosed in its filings under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), CCA has no obligation,
contingent or otherwise, to repurchase any shares of Common Stock, whether or
not currently outstanding.
4.7. Disclosure. No representation or warranty by CCA in this Agreement or
in any statement or certificate signed by any officer of CCA furnished or to be
furnished to IHS pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they are made, not misleading.
CCA's Form 10-K for the period ending December 31, 1995, filed on April 1, 1996;
Forms 10-Q for the periods ending March 30, 1996, June 31, 1996, and September
30, 1996; Forms 8-K filed on October 11, 1996, July 12, 1996, June 11, 1996, May
29, 1996 (as amended on July 30, 1996) and May 2, 1996 (as amended on July 12,
1996), and Proxy Statement dated May 10, 1996, each contained all material
information required to be stated therein under the Exchange Act and the rules
and regulations thereunder, as applicable, and as of their respective dates did
not contain any untrue statement of a material fact.
4
4.8. Registration Rights. CCA has not granted or agreed to grant any
Person any rights inconsistent with the rights granted under the Registration
Rights Agreement.
4.9 Reservation of Shares. CCA hereby represents and covenants that it has
reserved and at all times there shall be reserved for issuance such number and
type of securities as the holders of the Warrants are entitled to receive upon
exercise thereof. Prior to the issuance of any equity securities (or any
instrument exercisable for or convertible into equity securities) and whenever
otherwise required to satisfy this Section 4.9, CCA will amend its Certificate
of Incorporation to the extent necessary to ensure that there is reserved for
issuance a sufficient number and type of securities as the holders of the
Warrants are entitled to receive upon exercise thereof.
4.10 Press Release. CCA shall issue a press release on the Effective Date
in the form attached hereto as Exhibit 4.
5. REPRESENTATIONS AND WARRANTIES OF IHS.9.REPRESENTATIONS AND WARRANTIES OF
IHS. IHS represents and warrants to CCA as follows:
5.1. Purchase for Own Account; Investment Intent. The Warrants are being
acquired for IHS's own account, not as a nominee or agent, and not with a view
to or in connection with the sale or distribution of any part thereof, other
than pursuant to a transaction, or series of transactions, registered or exempt
from registration under the Securities Act.
6. INFORMATION & INSPECTION RIGHTS.14.INFORMATION & INSPECTION RIGHTS.
6.1. Information Rights. Prior to the expiration or full exercise of the
Warrants, CCA shall deliver to IHS and any other Registered Holder (as such term
is defined in the Warrants) of the Warrants copies of CCA's Forms 10-K, 10-Q and
8-K and CCA's Annual Reports to Stockholders and definitive proxy statement
promptly after such documents are filed with the SEC.
6.2 Inspection Rights. Prior to the expiration or full exercise of the
Warrants, IHS and any person IHS may designate as agent shall have the same
right as a stockholder to review all books and records, reports, accounts and
other financial documents of CCA and to copy the same and to make excerpts
therefrom, all at such reasonable times and as often as IHS may reasonably
request, upon prior written notice to CCA, so long as such review and copying
does not unreasonably interfere with the business of CCA and IHS and its agent
agree to keep confidential, and not disclose, except as may be required by law
or court order, any information obtained during such review of a confidential or
proprietary nature (and not otherwise known to IHS through other sources or
publicly known).
7. MISCELLANEOUS.17.MISCELLANEOUS.
7.1. Governing Law. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of Delaware without
regard to provisions regarding choice of laws.
7.2. Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any party hereto and the
closing of the transactions contemplated hereby.
7.3. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto whose rights or obligations hereunder are affected by such
amendments. Any assignment or transfer of the Warrants shall be governed by
the terms and conditions set forth therein. This Agreement and the rights and
obligations therein may not be assigned by CCA without the advance written
consent of IHS.
5
7.4. Notices. Except as may be otherwise provided herein, all notices and
other communications required or permitted hereunder shall be in writing and
shall be conclusively deemed to have been duly given (a) when hand delivered to
the other party; (b) when received when sent by facsimile to number set forth
below (provided, however, that notices given by facsimile shall not be effective
unless either (i) a duplicate copy of such facsimile notice is promptly given by
one of the other methods described in this Section, or (ii) the receiving party
delivers a written confirmation of receipt for such notice either by facsimile
or any other method described in this Section; and (c) the next business day
after deposit with a national overnight delivery service, postage prepaid,
addressed to the parties as set forth below with next-business-day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery service provider.
To: IHS To: CCA
Integrated Health Services, Inc. Community Care of America, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section by giving the other party
written notice of the new address in the manner set forth above.
7.5. Amendments. Any term of this Agreement may be amended only with the
written consent of CCA and IHS.
7.6. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to CCA or to IHS, upon any breach or default of any
party hereto under this Agreement, shall impair any such right, power or remedy
of CCA or IHS, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of CCA or IHS of any breach or default
under this Agreement and any waiver on the part of CCA or IHS of any provisions
or conditions of this Agreement, must be in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise, afforded to CCA or IHS shall be
cumulative and not alternative.
7.7. Finder's Fees. Each party hereby agrees to indemnify and to hold
harmless the other party hereto from and against any liability for any
commission or compensation in the nature of a finder's fee claimed by any broker
or other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which the indemnifying party or any of its
employees or representatives are responsible.
7.8. Titles and Subtitles. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6
7.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.10. Severability. Should any provision of this Agreement be
determined to be illegal or unenforceable, such determination shall not
affect the remaining provisions of this Agreement.
7.11. Public Disclosure. Each party hereto agrees that neither it nor its
Affiliates shall make any public statement or issue any press release relating
to this Agreement, the Additional Transaction Documents or the transactions
contemplated hereby or thereby, without the prior consent and approval of the
other party, unless such party determines that such disclosure is required by
law, in which case a copy of the disclosure shall provided to the other party
for review and comment a reasonable time prior to public disclosure.
IN WITNESS WHEREOF, the parties have executed this Warrant Acquisition
Agreement to be effective as of the date first above written.
INTEGRATED HEALTH SERVICES, INC. COMMUNITY CARE OF AMERICA, INC
By: By:
Name: Name:
Title: Title:
▇
▇▇▇▇▇▇▇ ▇▇. ▇-▇ ___________ Shares
No sale, offer or transfer of this warrant shall be made
unless a registration statement under the Securities Act
of 1933, as amended, with respect to such
transaction is then in effect or such
transfer is exempt from
registration under such Act.
Warrant
To Subscribe for and Purchase Shares of
Common Stock of
COMMUNITY CARE OF AMERICA, INC.
This certifies that, for value received, Integrated Health Services,
Inc., a Delaware corporation (the "Holder") or its registered assigns, is
entitled, subject to the terms and conditions of this Warrant, at any time or
from time to time at or after the time the Purchase Price (as defined herein)
has been established (the "Commencement Date") and at or before 5:00 P.M., New
York time, on January 13, 1999 (the "Expiration Date"), to subscribe for and
purchase an aggregate of _____________ (_________) fully paid and non-assessable
shares of the common stock, $.0025 par value ("Common Stock"), of Community Care
of America, Inc. (the "Company"), at the Purchase Price (as defined herein),
upon surrender of this Warrant and payment of the Purchase Price to the Company
at the address set forth herein for notices to the Company or at such other
place as the Company may designate by written notice to the Registered Holder.
The number of shares of Common Stock issuable upon exercise of this Warrant and
the Purchase Price are subject to adjustment and change as provided herein (any
reference hereinafter to Purchase Price shall mean the Purchase Price as
adjusted pursuant the terms of this Warrant). This Warrant is issued pursuant
to that certain Warrant Acquisition Agreement, dated of even date herewith,
between the Company and the Holder (the "Purchase Agreement").
1.Certain Definitions.
As used in this Warrant the following terms shall have the following
respective meanings:
"Common Stock Deemed Outstanding" means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 4.1(i) and
4.1(ii) hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time, but excluding any shares of Common Stock
issuable upon exercise of the IHS Warrants. "Convertible Securities" shall mean
any stock or securities directly or indirectly convertible into Common Stock.
"IHS Warrants" shall mean this Warrant and Warrant No. W-2, issued to the
Holder on even date herewith, and any warrants delivered in substitution or
exchange therefor as provided herein and therein.
"Market Price" as to any security on any day shall mean the closing sale
price of such security as reported for such day pursuant to the consolidated
quotation system or any other transaction reporting plan under Section 11A of
8
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or, if
there have been no sales so reported for such day, the average of the best bid
and best offer prices quoted under the consolidated quotation system or any
other such transaction reporting plan as of 4:00 P.M., New York time, on such
day, or, if on any day such security is not so quoted, the average of the best
bid and best offered prices on such day in the domestic over-the-counter market
as reported by any electronic communications network, as such term is used in
Rule 11Ac1-1(a)(8) under the Exchange Act or by the National Quotation Bureau,
Incorporated, or any similar successor or comparable organization. If at any
time such security is not listed on any domestic securities exchange or quoted
under a transaction reporting plan or in the domestic over-the-counter market,
the "Market Price" shall be the fair value thereof determined jointly by the
Company and the Registered Holders; provided that if such parties are unable to
reach agreement as to the Market Price, the Market Price shall be determined by
appraisal as set forth in Section 12 of this Warrant.
"Note" shall mean the Subordinated Note, dated as of December 27, 1996,
executed by the Company pursuant to that certain Revolving Credit Agreement,
dated as of December 27, 1996, between the Company and the Holder.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Person" shall mean any natural person and any corporation, partnership,
limited liability company, limited liability partnership, joint venture,
association, joint-stock partnership, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Purchase Price" shall mean the price per share equal to the average of the
high and low trading price of the Common Stock reported in The Wall Street
Journal, Eastern edition, for the first two full trading days following the Date
of Issuance (as such term is defined in Section 7.2 hereof) of this Warrant, as
such price may be adjusted from time to time pursuant to Section 4 hereof.
"Registered Holder" shall mean any Person in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Underlying Common Stock" shall mean (i) the shares of Common Stock issued
or issuable upon exercise of the Warrant and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Warrant" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
2. Exercise.
2.1 Exercise Period. The Warrant shall be exercisable in whole or in part
from and after 9:00 A.M., New York time, on the Commencement Date.
2.2 Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when the Company
has received all of the following items:
(a) an Election to Purchase in the form attached hereto as Exhibit A,
properly completed and executed by the Person (the "Purchaser") exercising all
or part of the purchase rights represented by this Warrant;
(b) this Warrant;
(c) if this Warrant is not registered in the name of the Purchaser, an
Assignment or Assignments in the form set forth in Exhibit B hereto evidencing
the assignment of this Warrant to the Purchaser, in which case the Registered
Holder shall have complied with the provisions set forth in Section 7.1 hereof;
and
(d) either (1) a check or wire transfer payable to the Company in an amount
equal to the product of the Purchase Price multiplied by the number of shares of
Common Stock being purchased upon such exercise (the "Aggregate Exercise
Price"), (2) a written notice to the Company that the Purchaser is exercising
the Warrant (or a portion thereof) by authorizing the Company to withhold from
9
issuance a number of shares of Common Stock issuable upon such exercise of the
Warrant which when multiplied by the Market Price of Common Stock is equal to
the Aggregate Exercise Price (and such withheld shares of Common Stock shall no
longer be issuable under this Warrant), or (3) if the Holder holds the Note, a
written notice to the Company that the Holder is exercising the Warrant (or a
portion thereof) by authorizing the Company to withhold and apply such amount of
principal or accrued but unpaid interest under the Note (whether or not then
due) as is equal to the Aggregate Purchase Price (and such amount of principal
or accrued and unpaid interest under the Note shall no longer be payable to the
Holder).
(ii) Certificates for shares of Common Stock purchased upon exercise of
this Warrant shall be delivered by the Company to the Purchaser within three
(3) business days after the date of the exercise, together with cash in lieu of
any fraction of a share of Common Stock that would be issuable upon such
exercise in an amount equal to the Market Price of such fractional share as of
the date of exercise. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issued upon an exercise
of this Warrant. Unless this Warrant has expired or all of the purchase rights
represented hereby have been exercised, the Company shall prepare a new
Warrant, substantially identical hereto, representing the rights formerly
represented by this Warrant which have not expired or been exercised and shall
within such three (3) business day period deliver such new Warrant to the
Purchaser.
(iii) The shares of Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the time of exercise,
and the Purchaser shall be deemed for all purposes to have become the record
holder of such Common Stock at such time.
(iv) The Company shall not close its books against the transfer of this
Warrant or of any share of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less than
the Purchase Price then in effect.
(v) The Company shall assist and cooperate with any Registered Holder or
Purchaser to make any governmental filings or obtain any governmental approvals
required prior to or in connection with any exercise of this Warrant (including,
without limitation, making at the Company's own expense any filings required to
be made by the Company).
3. Expiration Date.
The Warrant evidenced hereby may not be exercise after 5:00 P.M., New York
time, on the Expiration Date with respect to the shares of the Common Stock as
to which the Warrant may be exercised and, to the extent not exercised by the
Expiration Date, the Warrant evidenced hereby shall become void.
4. Adjustments.
Subject to the provisions of this Section 4, the Purchase Price and the
number of shares of the Common Stock as to which the Warrant may be exercised
shall be subject to adjustment from time to time as hereinafter set forth:
4.1 Effect on Purchase Price and Number of Shares of Certain Events. If
and whenever on or after the Commencement Date, the Company issues or
sells, or in accordance with this Section 4.1 is deemed to have issued or sold,
any share of Common Stock for a consideration per share less than the Purchase
Price in effect immediately prior to such time, then immediately upon such
issuance or sale the Purchase Price shall be reduced pursuant to this Section
4.1 to a new Purchase Price determined by dividing (A) the sum of (x) the
product derived by multiplying the Purchase Price in effect immediately prior
to such issue or sale times the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale, plus (y) the
consideration, if any, received by the Company upon such issue or sale, by (B)
the number of shares of Common Stock Deemed Outstanding immediately after such
issue or sale. Upon each such adjustment of the Purchase Price, the number of
shares of Common Stock issuable upon the exercise of this Warrant (to the
extent not theretofore exercised) shall be increased to a number determined by
multiplying the number of such shares so purchasable immediately prior to such
adjustment by a fraction, the numerator of which shall be the Purchase Price in
effect immediately prior to such adjustment and the denominator of which shall
be the Purchase Price in effect immediately after such adjustment. For
purposes of determining the Purchase Price as adjusted under this Section 4.1,
the following shall be applicable:
(i) Issuance of Rights or Options. If on or after the Commencement Date
the Company in any manner issues, grants or sells any Options and the price
per share for which a share of Common Stock is issuable upon the exercise of
any such Option, or upon conversion or exchange of any Convertible Security
issuable upon exercise of such Option, is less than the Purchase Price in
effect immediately prior to the time of the granting or sale of such Option,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options, or upon conversion or exchange of the total maximum
amounts of such Convertible Securities issuable upon the exercise of such
Options, shall be deemed to be outstanding for purposes of determining the
Common Stock Deemed Outstanding and to have been issued and sold by the Company
at such time for such price per share. For purposes of this Section 4.1(i),
the "price per share for which a share of Common Stock is issuable" shall be
equal
10
to the sum of the amount of consideration (if any) received or receivable by
the Company with respect to the issuance, grant or sale of the Option, plus the
amount of consideration (if any) that would be received by the Company with
respect to exercise of the Option in full plus the amount of consideration (if
any) that would be received by the Company with respect to conversion or
exchange in full of any Convertible Security issuable upon exercise of such
Option, all divided by the total number of shares of Common Stock issuable upon
exercise of the Option and conversion or exchange of the Convertible Security.
No further adjustment of the Purchase Price shall be made upon the actual issue
of such Common Stock or of such Convertible Security upon the exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If on or after the Commencement
Date the Company in any manner issues, grants or sells any Convertible Security
and the price per share for which a share of Common Stock is issuable upon
conversion or exchange thereof is less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding for purposes of determining the
Common Stock Deemed Outstanding and to have been issued and sold by the Company
at such time for such price per share. For the purposes of this Section
4.1(ii), the "price per share for which a share of Common Stock is
issuable" shall be equal to the sum of the amount of consideration (if any)
received or receivable by the Company with respect to the issuance, grant or
sale of the Convertible Security plus the amount of consideration (if any) that
would be received by the Company with respect to the conversion or exchange of
such Convertible Security in full, all divided by the total number of shares of
Common Stock issuable upon conversion or exchange of the Convertible Security.
No further adjustment of the Purchase Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Purchase Price has been or
is to be made pursuant to other provisions of this Section 4, no further
adjustment of the Purchase Price shall be made under this Section 4.1(ii) by
reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the amount to be
received by the Company upon the exercise of any Options outstanding as of the
Commencement Date, the additional consideration, if any, payable upon the
issuance, conversion or exchange of any Convertible Securities outstanding as of
the Commencement Date, or the rate at which any Convertible Securities
outstanding as of the Commencement Date are convertible into or exchangeable for
Common Stock changes at any time after the Commencement Date, then such Option
or Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed for purposes of this Section 4.1
to have been issued, granted or sold as of the date of such changes and the
Purchase Price shall be adjusted as provided herein; provided that no such
change shall at any time cause the Purchase Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
Upon the expiration of any Option described in Section 4.1(i) or the termination
of any right to convert or exchange any Convertible Securities described in
Section 4.1(ii) without the exercise or conversion in whole or in part of such
Option or Convertible Security, the Purchase Price then in effect and the number
of shares of Common Stock issuable hereunder shall be adjusted immediately to
the Purchase Price and the number of shares of Common Stock which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Securities, never been issued, granted or sold; provided that if
such expiration or termination would result in an increase in the Purchase Price
then in effect, such increase shall not be effective until thirty (30) days
after written notice thereof has been given to the Registered Holder. For
purposes of this Section 4.1, the expiration or termination of any Option or
Convertible Security which was outstanding as of the Commencement Date shall not
cause the Purchase Price hereunder to be adjusted unless, and only to the extent
that, a change in the term of such Option or Convertible Security caused it to
be deemed to have been issued after the Commencement Date pursuant to Section
4.1(iii).
(v) Calculation of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the net
amount received by the Company therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities shall be determined jointly by the Company and the
Registered Holder. If such parties are unable to reach agreement, such fair
value shall be determined by appraisal pursuant to Section 12.
(vi) Integrated Transactions. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
11
such Options by the parties thereto, the Options shall be deemed to have been
issued without consideration.
(vii) Each Series a Separate Security. In case an agreement relating to
Options or Convertible Securities provides that more than one Purchase Price,
conversion or exchange provisions are applicable to the securities issuable
thereunder, then the securities subject to each different exercise price,
conversion or exchange provisions shall be deemed to be subject to separate
Options or Convertible Securities for purposes of applying this Section 4.1.
(viii) Treasury Shares. The Common Stock outstanding at any given time
does not include shares owned or held by or for the account of the Company or
any Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(ix) Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
4.2 Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant (to the extent not theretofore
exercised) shall be proportionally increased. If the Company at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Purchase
Price shall be proportionately increased and the number of shares of Common
Stock issuable upon exercise of this Warrant (to the extent not theretofore
exercised) shall be proportionally decreased.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, spin-off, consolidation,
merger, sale or distribution of the Company's assets or other transaction, in
each case which is effected in such a way that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any Organic Change,
the Company shall make appropriate provision (in form and substance satisfactory
to the Registered Holders) to insure that each of the Registered Holders shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
issuable upon exercise of the Warrant had such Organic Change not taken place.
In any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Registered Holders) with respect to such Holders'
rights and interests to insure that the provisions of this Section 4, Section 5
and Section 6 hereof shall thereafter be applicable to the Warrant (including,
in the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is other than the Company, an immediate reduction in
the Purchase Price to the value of the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant (to
the extent not theretofore exercised), if the value so reflected is less than
the Purchase Price in effect immediately prior to such consolidation, merger or
sale). The Company shall not effect any such spin-off, consolidation, merger or
sale, unless prior to the consummation thereof, the successor entity (if other
than the Company) resulting from spin-off, consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form and substance
satisfactory to the Registered Holders), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
4.4 Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features or equity-based
valuation or any dividend or distribution of the capital stock issued by any
Person other than the Company), then the Company's Board of Directors shall make
an appropriate adjustment in the Purchase Price and the number of shares
issuable upon exercise of this Warrant (to the extent not theretofore exercised)
so as to protect the rights of the Registered Holders; provided that no such
adjustment shall increase the Purchase Price as otherwise determined pursuant to
this Section 4.
4.5 Calculation of Purchase Price; Notices.
(i) All calculations of the Purchase Price under this Section 4 shall be
computed to the nearest One-Thousandth (1/1000th) of a cent.
(ii) Immediately upon any adjustment of the Purchase Price, the Company
12
shall give written notice thereof to the Registered Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment, provided
however, that such notice shall not be deemed to be conclusive as to the
Purchase Price calculation. At the request of the Registered Holder, the
Company shall certify the Purchase Price of and the number of shares for which
a Warrant at the time may be exercised.
(iii) The Company shall give written notice to the Registered Holder at
least thirty (30) days prior to the date on which the Company closes its books
or takes a record (A) with respect to any subdivision or combination of the
Common Stock that is subject to Section 4.2, or any other dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation.
(iv) The Company shall also give written notice to the Registered Holder at
least thirty (30) days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
4.6 Excluded Transactions. The provisions of this Section 4 shall not
apply to the exercise of the IHS Warrants.
4.7 Expression of Purchase Price and Number of Shares. Irrespective of any
adjustments or change in the Purchase Price or the number of securities actually
purchasable under the Warrant, the Warrants theretofore and thereafter issued
may continue to express the purchase price and the number of securities
purchasable thereunder as the Purchase Price and the number of securities
purchasable were expressed in the Warrant when initially issued.
5. No Rights or Liabilities as Stockholders and Notice to Registered
Holder.
Nothing contained herein shall be construed as conferring upon the
Registered Holder the right to vote or to consent or to receive notice as a
stockholder in respect of the meetings of stockholders for the election of
directors of the Company or any other matter, or any other rights whatsoever as
a stockholder of the Company; provided, however, that in the event that:
(a) the Company shall take a record of the holders of its Common Stock or
other stock or securities for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities or to receive any other
right;
(b) the Company shall take action to accomplish any capital reorganization,
or reclassification of the capital stock of the Company, or a consolidation or
merger of the Company into, or a sale of all or substantially all of its assets
to, another corporation;
(c) the Company shall take action to redeem or convert any or all of
outstanding Common Stock or other stock or securities of the Company; or
(d) the Company shall take action looking to a voluntary dissolution,
liquidation or winding up of the Company;
then, and in each such case, the Company shall mail or cause to be mailed
to the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, spin-off consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion is to take place, and the
time, if any, is to be fixed, as of which the holders of record of Common Stock
or such other stock or securities shall be entitled to exchange their shares of
Common Stock or such other stock or securities for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, conversion or redemption.
Such notice shall be delivered at least thirty (30) days prior to the date
therein specified.
6. Duty to Register Common Stock.
The shares of Common Stock issuable under this Warrant are subject to a
Registration Rights Agreement with the Company dated of even date herewith.
7. Transfers and Exchanges.
7.1 Warrant Transferable. Subject to the transfer conditions referred to
in the legend endorsed hereon, this Warrant and all rights hereunder (including
those under the Purchase Agreement) are transferable, in whole or in part,
without charge to the Registered Holder, upon surrender of this Warrant with a
properly executed Assignment (in the form of Exhibit B hereto) at the principal
office of the Company. The Company shall record on its books the transferee as
the Registered Holder of the portion of this Warrant transferred pursuant to
this Section 7.1.
7.2 Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like terms representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
13
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
8. Valid Issuance and Payment of Taxes.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and non-assessable, and the Company shall pay all
taxes and other governmental charges that may be imposed in respect of the issue
or delivery thereof. The Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
certificate for shares of Common Stock in any name other than that of the
Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established that no tax or other
charge is due.
9. Mutilated or Missing Warrants.
In case any of the Warrants shall be mutilated, lost, stolen or destroyed,
the Company shall issue and deliver in exchange and substitution for, and upon
cancellation of the mutilated Warrant, or in lieu of, and in substitution for,
the Warrant lost, stolen or destroyed, a new Warrant of like tenor and
representing an equivalent right or interest, but only upon receipt of
reasonable evidence of such loss, theft, or destruction of such Warrant.
10. Reserve.
The Company hereby represents and covenants that it has reserved and at all
times there shall be reserved for issuance such number and type of securities as
the Registered Holders are entitled to receive upon exercise of the IHS
Warrants. Prior to the issuance of any equity securities (or any instrument
exercisable for or convertible into equity securities) and whenever otherwise
required to satisfy this Section 10, the Company will amend its Certificate of
Incorporation to the extent necessary to ensure that there is reserved for
issuance a sufficient number and type of securities as the Registered Holders of
the IHS Warrants are entitled to receive upon exercise thereof. 11. No
Impairment.
The Company will not, by amendment of its Certificate of Incorporation or
bylaws, or through reorganization, consolidation, merger, dissolution, issue or
sale of securities, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Registered Holders against impairment. Without
limiting the generality of the foregoing, the Company (a) shall not increase the
par value of any shares issuable upon exercise of this Warrant above the
Purchase Price and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock upon exercise of this Warrant.
12. Appraisal.
In case of any dispute as to valuation of a security under this Agreement,
the fair value of such security shall be determined by an appraiser without any
discount for liquidity or restrictions under the Securities Act. This appraisal
process shall be instituted within fourteen (14) days after a party to this
Agreement notifies the other party of its desire to submit the issue to an
appraiser. In the event that, within seven (7) days after a party to this
Agreement notifies the other party of its desire to submit the issue to an
appraiser, the parties do not agree on a single appraiser to determine the fair
value of such security, the fair value of such security shall be determined,
without any discount for liquidity or restrictions under the Securities Act, by
the majority determination of a panel of three (3) appraisers who shall be
selected in the following manner: the Company shall select one (1) appraiser and
the Registered Holder entitled to exercise this Warrant for the greatest number
of shares of Common Stock (in the event there shall be more than one Registered
Holder), on behalf of all of the Registered Holders, shall select one (1)
appraiser and the two (2) appraisers selected by the Company and the Registered
Holder shall jointly select a third appraiser. The appraiser selected jointly
by the parties and, if applicable, each member of the appraisal panel shall be
an individual who personally and whose Affiliates shall not have a previous
business relationship with either party. The appraiser and, if applicable, the
appraisal panel shall endeavor to complete the appraisal as soon as practicable.
The determination of such appraiser and, if applicable, the appraisal panel
shall be final and binding on the Company and the Registered Holders, and the
fees and expenses of such appraisal shall be borne equally by the Company, on
the one hand, and the Registered Holders, on the other.
13. Notices.
Except as may be otherwise provided herein, all notices and other
communications required or permitted hereunder shall be in writing and shall be
conclusively deemed to have been duly given (a) when hand delivered to the
other party, (b) when received when sent by facsimile to number set forth below
(provided, however, that notices given by facsimile shall not be effective
unless either (i) a duplicate copy of such facsimile notice is promptly given
by
14
one of the other methods described in this Section 13, or (ii) the receiving
party delivers a written confirmation of receipt for such notice either by
facsimile or any other method described in this Section 13) and (c) the next
business day after deposit with a national overnight delivery service, postage
prepaid, addressed to the parties as set forth below with next-business-day
delivery guaranteed, provided that the sending party receives a confirmation of
delivery from the delivery service provider.
To: the Registered Holder To: the Company
Integrated Health Services, Inc. Community Care of America, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 13 by giving the other party
written notice of the new address in the manner set forth above.
14. Headings.
The headings in this Warrant are for purposes of convenience in reference
only, and shall not be deemed to constitute a part hereof.
15. Governing Law.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of New York without regard to provisions
regarding choice of laws.
16. Severability.
If any term, provision, covenant or restriction of this Warrant 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 Warrant
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
17. No Inconsistent Agreements.
The Company will not on or after the date of this Warrant enter into any
agreement which is inconsistent with the rights granted to the Registered
Holders of this Warrant or otherwise conflicts with the provisions hereof. The
Company hereby represents and warrants that the rights granted to the Registered
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to holders of the Company's securities under any other
agreements, except rights that have been waived.
18. Saturdays, Sundays and Holidays.
If the Expiration Date falls on a Saturday, Sunday or legal holiday, the
Expiration Date shall automatically be extended until 5:00 p.m. the next
business day.
IN WITNESS WHEREOF, Community Care of America, Inc. has caused this Warrant
to be signed manually by a duly authorized officer of the Company on this 13th
day of January, 1997.
COMMUNITY CARE OF AMERICA, INC
By:
Name:
Title:
15
EXHIBIT A
ELECTION TO PURCHASE
To: Community Care of America, Inc.
----------------------------------
----------------------------------
----------------------------------
The undersigned hereby elects to exercise the Warrant represented by the within
Warrant Certificate to purchase __________ shares of the Common Stock issuable
upon the exercise of the Warrant and requests that certificates for such shares
shall be issued in the name of:
(Name)
(Address)
(Taxpayer number)
and be delivered to:
(Name)
at
(Address)
and, if said number of shares of the Common Stock shall not be all the
shares of the Common Stock evidenced by the within Warrant Certificate, that a
new Warrant Certificate for the balance remaining of such said shares be
registered in the name of:
(Name)
(Address)
(Taxpayer number)
and delivered to the undersigned at the address below stated.
Dated: _______________, 19__
Name of holder of Warrant Certificate:
(please print)
(Address)
(Signature)
16
EXHIBIT B
ASSIGNMENT
(to be executed by the registered holder
to effect a transfer of the within Warrant)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Name)
(Address)
the right to purchase the ________ shares of Common Stock evidenced by this
Warrant, and does hereby irrevocably constitute and appoint to transfer the said
right on the books of the Company, with full power of substitution.
Dated: _______________________
(Signature)
/
17
EXHIBIT 2
SERIES B Warrant
Warrant No. B-1 ___________ Shares
No sale, offer or transfer of this warrant shall be made
unless a registration statement under the Securities Act
of 1933, as amended, with respect to such
transaction is then in effect or such
transfer is exempt from
registration under such Act.
Warrant
To Subscribe for and Purchase Shares of
Common Stock of
COMMUNITY CARE OF AMERICA, INC.
This certifies that, for value received, Integrated Health Services,
Inc., a Delaware corporation (the "Holder") or its registered assigns, is
entitled, subject to the terms and conditions of this Warrant, at any time or
from time to time at or after the time the Purchase Price (as defined herein)
has been established (the "Commencement Date") and at or before 5:00 P.M., New
York time, on January 13, 2002 (the "Expiration Date"), to subscribe for and
purchase an aggregate of _____________ (_________) fully paid and non-assessable
shares of the common stock, $.0025 par value ("Common Stock"), of Community Care
of America, Inc. (the "Company"), at the Purchase Price (as defined herein),
upon surrender of this Warrant and payment of the Purchase Price to the Company
at the address set forth herein for notices to the Company or at such other
place as the Company may designate by written notice to the Registered Holder.
The number of shares of Common Stock issuable upon exercise of this Warrant and
the Purchase Price are subject to adjustment and change as provided herein (any
reference hereinafter to Purchase Price shall mean the Purchase Price as
adjusted pursuant the terms of this Warrant). This Warrant is issued pursuant
to that certain Warrant Acquisition Agreement, dated of even date herewith,
between the Company and the Holder (the "Purchase Agreement").
1.Certain Definitions.
As used in this Warrant the following terms shall have the following respective
meanings:
"Common Stock Deemed Outstanding" means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 4.1(i) and
4.1(ii) hereof regardless of whether the Options or Convertible Securities are
actually exercisable at such time, but excluding any shares of Common Stock
issuable upon exercise of the IHS Warrants. "Convertible Securities" shall mean
any stock or securities directly or indirectly convertible into Common Stock.
"IHS Warrants" shall mean this Warrant and Warrant No. W-2, issued to the
Holder on even date herewith, and any warrants delivered in substitution or
exchange therefor as provided herein and therein.
"Market Price" as to any security on any day shall mean the closing sale
price of such security as reported for such day pursuant to the consolidated
quotation system or any other transaction reporting plan under Section 11A of
18
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or, if
there have been no sales so reported for such day, the average of the best bid
and best offer prices quoted under the consolidated quotation system or any
other such transaction reporting plan as of 4:00 P.M., New York time, on such
day, or, if on any day such security is not so quoted, the average of the best
bid and best offered prices on such day in the domestic over-the-counter market
as reported by any electronic communications network, as such term is used in
Rule 11Ac1-1(a)(8) under the Exchange Act or by the National Quotation Bureau,
Incorporated, or any similar successor or comparable organization. If at any
time such security is not listed on any domestic securities exchange or quoted
under a transaction reporting plan or in the domestic over-the-counter market,
the "Market Price" shall be the fair value thereof determined jointly by the
Company and the Registered Holders; provided that if such parties are unable to
reach agreement as to the Market Price, the Market Price shall be determined by
appraisal as set forth in Section 12 of this Warrant.
"Note" shall mean the Subordinated Note, dated as of December 27, 1996,
executed by the Company pursuant to that certain Revolving Credit Agreement,
dated as of December 27, 1996, between the Company and the Holder.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities. "Person" shall mean any
natural person and any corporation, partnership, limited liability company,
limited liability partnership, joint venture, association, joint-stock
partnership, trust, unincorporated organization or government or other agency
or political subdivision thereof.
"Purchase Price" shall mean two times the price per share equal to the
average of the high and low trading price of the Common Stock reported in The
Wall Street Journal, Eastern edition, for the first two full trading days
following the Date of Issuance (as such term is defined in Section 7.2 hereof)
of this Warrant, as such price may be adjusted from time to time pursuant to
Section 4 hereof.
"Registered Holder" shall mean any Person in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Underlying Common Stock" shall mean (i) the shares of Common Stock issued
or issuable upon exercise of the Warrant and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Warrant" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
2. Exercise.
2.1 Exercise Period. The Warrant shall be exercisable in whole or in part
from and after 9:00 A.M., New York time, on the Commencement Date.
2.2 Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when the Company
has received all of the following items:
(a) an Election to Purchase in the form attached hereto as Exhibit A,
properly completed and executed by the Person (the "Purchaser") exercising all
or part of the purchase rights represented by this Warrant;
(b) this Warrant;
(c) if this Warrant is not registered in the name of the Purchaser, an
Assignment or Assignments in the form set forth in Exhibit B hereto evidencing
the assignment of this Warrant to the Purchaser, in which case the Registered
Holder shall have complied with the provisions set forth in Section 7.1 hereof;
and
(d) either (1) a check or wire transfer payable to the Company in an amount
equal to the product of the Purchase Price multiplied by the number of shares of
Common Stock being purchased upon such exercise (the "Aggregate Exercise
Price"), (2) a written notice to the Company that the Purchaser is exercising
the Warrant (or a portion thereof) by authorizing the Company to withhold from
19
issuance a number of shares of Common Stock issuable upon such exercise of the
Warrant which when multiplied by the Market Price of Common Stock is equal to
the Aggregate Exercise Price (and such withheld shares of Common Stock shall no
longer be issuable under this Warrant), or (3) if the Holder holds the Note, a
written notice to the Company that the Holder is exercising the Warrant (or a
portion thereof) by authorizing the Company to withhold and apply such amount of
principal or accrued but unpaid interest under the Note (whether or not then
due) as is equal to the Aggregate Purchase Price (and such amount of principal
or accrued and unpaid interest under the Note shall no longer be payable to the
Holder).
(ii) Certificates for shares of Common Stock purchased upon exercise of
this Warrant shall be delivered by the Company to the Purchaser within three (3)
business days after the date of the exercise, together with cash in lieu of any
fraction of a share of Common Stock that would be issuable upon such exercise in
an amount equal to the Market Price of such fractional share as of the date of
exercise. No fractional shares of Common Stock or scrip representing fractional
shares of Common Stock shall be issued upon an exercise of this Warrant. Unless
this Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and shall within such three (3) business day
period deliver such new Warrant to the Purchaser.
(iii) The shares of Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the time of exercise,
and the Purchaser shall be deemed for all purposes to have become the record
holder of such Common Stock at such time.
(iv) The Company shall not close its books against the transfer of this
Warrant or of any share of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less than
the Purchase Price then in effect.
(v) The Company shall assist and cooperate with any Registered Holder or
Purchaser to make any governmental filings or obtain any governmental approvals
required prior to or in connection with any exercise of this Warrant (including,
without limitation, making at the Company's own expense any filings required to
be made by the Company).
3. Expiration Date.
The Warrant evidenced hereby may not be exercise after 5:00 P.M., New York
time, on the Expiration Date with respect to the shares of the Common Stock as
to which the Warrant may be exercised and, to the extent not exercised by the
Expiration Date, the Warrant evidenced hereby shall become void.
4. Adjustments.
Subject to the provisions of this Section 4, the Purchase Price and the
number of shares of the Common Stock as to which the Warrant may be exercised
shall be subject to adjustment from time to time as hereinafter set forth:
4.1 Effect on Purchase Price and Number of Shares of Certain Events. If
and whenever on or after the Commencement Date, the Company issues or sells, or
in accordance with this Section 4.1 is deemed to have issued or sold, any share
of Common Stock for a consideration per share less than one half of the
Purchase Price in effect immediately prior to such time, then immediately upon
such issuance or sale the Purchase Price shall be reduced pursuant to this
Section 4.1 to a new Purchase Price determined by dividing (A) the sum of (x)
the product derived by multiplying one half of the Purchase Price in effect
immediately prior to such issue or sale times the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (y) the
consideration, if any, received by the Company upon such issue or sale, by (B)
the number of shares of Common Stock Deemed Outstanding immediately after such
issue or sale, and multiplying the result by two. Upon each such adjustment of
the Purchase Price, the number of shares of Common Stock issuable upon the
exercise of this Warrant (to the extent not theretofore exercised) shall be
increased to a number determined by multiplying the number of such shares so
purchasable immediately prior to such adjustment by a fraction, the numerator
of which shall be the Purchase Price in effect immediately prior to such
adjustment and the denominator of which shall be the Purchase Price in effect
immediately after such adjustment. For purposes of determining the Purchase
Price as adjusted under this Section 4.1, the following shall be applicable:
(i) Issuance of Rights or Options. If on or after the Commencement Date
the Company in any manner issues, grants or sells any Options and the price
per share for which a share of Common Stock is issuable upon the exercise of
any such Option, or upon conversion or exchange of any Convertible Security
issuable upon exercise of such Option, is less than one half of the Purchase
Price in effect immediately prior to the time of the granting or sale of such
Option, then the total maximum number of shares of Common Stock issuable upon
the exercise of such Options, or upon conversion or exchange of the total
maximum amounts of such Convertible Securities issuable upon the exercise of
such Options, shall be deemed to be outstanding for purposes of determining the
Common Stock Deemed Outstanding and to have been issued and sold by the Company
at such time for such price per share. For purposes of this Section 4.1(i),
the "price per share for which a share of Common Stock is issuable" shall be
equal
20
to the sum of the amount of consideration (if any) received or receivable
by the Company with respect to the issuance, grant or sale of the Option, plus
the amount of consideration (if any) that would be received by the Company with
respect to exercise of the Option in full plus the amount of consideration (if
any) that would be received by the Company with respect to conversion or
exchange in full of any Convertible Security issuable upon exercise of such
Option, all divided by the total number of shares of Common Stock issuable upon
exercise of the Option and conversion or exchange of the Convertible Security.
No further adjustment of the Purchase Price shall be made upon the actual issue
of such Common Stock or of such Convertible Security upon the exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If on or after the Commencement
Date the Company in any manner issues, grants or sells any Convertible Security
and the price per share for which a share of Common Stock is issuable upon
conversion or exchange thereof is less than one half of the Purchase Price in
effect immediately prior to the time of such issue or sale, then the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding for purposes of
determining the Common Stock Deemed Outstanding and to have been issued and sold
by the Company at such time for such price per share. For the purposes of this
Section 4.1(ii), the "price per share for which a share of Common Stock is
issuable" shall be equal to the sum of the amount of consideration (if any)
received or receivable by the Company with respect to the issuance, grant or
sale of the Convertible Security plus the amount of consideration (if any) that
would be received by the Company with respect to the conversion or exchange of
such Convertible Security in full, all divided by the total number of shares of
Common Stock issuable upon conversion or exchange of the Convertible Security.
No further adjustment of the Purchase Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon exercise
of any Options for which adjustments of the Purchase Price has been or is to be
made pursuant to other provisions of this Section 4, no further adjustment of
the Purchase Price shall be made under this Section 4.1(ii) by reason of such
issue or sale.
(iii) Change in Option Price or Conversion Rate. If the amount to be
received by the Company upon the exercise of any Options outstanding as of the
Commencement Date, the additional consideration, if any, payable upon the
issuance, conversion or exchange of any Convertible Securities outstanding as of
the Commencement Date, or the rate at which any Convertible Securities
outstanding as of the Commencement Date are convertible into or exchangeable for
Common Stock changes at any time after the Commencement Date, then such Option
or Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed for purposes of this Section 4.1
to have been issued, granted or sold as of the date of such changes and the
Purchase Price shall be adjusted as provided herein; provided that no such
change shall at any time cause the Purchase Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
Upon the expiration of any Option described in Section 4.1(i) or the termination
of any right to convert or exchange any Convertible Securities described in
Section 4.1(ii) without the exercise or conversion in whole or in part of such
Option or Convertible Security, the Purchase Price then in effect and the number
of shares of Common Stock issuable hereunder shall be adjusted immediately to
the Purchase Price and the number of shares of Common Stock which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Securities, never been issued, granted or sold; provided that if
such expiration or termination would result in an increase in the Purchase Price
then in effect, such increase shall not be effective until thirty (30) days
after written notice thereof has been given to the Registered Holder. For
purposes of this Section 4.1, the expiration or termination of any Option or
Convertible Security which was outstanding as of the Commencement Date shall not
cause the Purchase Price hereunder to be adjusted unless, and only to the extent
that, a change in the term of such Option or Convertible Security caused it to
be deemed to have been issued after the Commencement Date pursuant to Section
4.1(iii).
(v) Calculation of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the net
amount received by the Company therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities shall be determined jointly by the Company and the
Registered Holder. If such parties are unable to reach agreement, such fair
value shall be determined by appraisal pursuant to Section 12.
(vi) Integrated Transactions. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
21
such Options by the parties thereto, the Options shall be deemed to have been
issued without consideration.
(vii) Each Series a Separate Security. In case an agreement relating to
Options or Convertible Securities provides that more than one Purchase Price,
conversion or exchange provisions are applicable to the securities issuable
thereunder, then the securities subject to each different exercise price,
conversion or exchange provisions shall be deemed to be subject to separate
Options or Convertible Securities for purposes of applying this Section 4.1.
(viii) Treasury Shares. The Common Stock outstanding at any given time
does not include shares owned or held by or for the account of the Company
or any Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(ix) Record Date. If the Company takes a record of the holders of Common
Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
4.2 Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant (to the extent not theretofore
exercised) shall be proportionally increased. If the Company at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Purchase
Price shall be proportionately increased and the number of shares of Common
Stock issuable upon exercise of this Warrant (to the extent not theretofore
exercised) shall be proportionally decreased.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, spin-off, consolidation,
merger, sale or distribution of the Company's assets or other transaction, in
each case which is effected in such a way that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any Organic Change,
the Company shall make appropriate provision (in form and substance satisfactory
to the Registered Holders) to insure that each of the Registered Holders shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
issuable upon exercise of the Warrant had such Organic Change not taken place.
In any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Registered Holders) with respect to such Holders'
rights and interests to insure that the provisions of this Section 4, Section 5
and Section 6 hereof shall thereafter be applicable to the Warrant (including,
in the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is other than the Company, an immediate reduction in
the Purchase Price to the value of the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Common Stock issuable upon exercise of this Warrant (to
the extent not theretofore exercised), if the value so reflected is less than
one half of the Purchase Price in effect immediately prior to such
consolidation, merger or sale). The Company shall not effect any such spin-off,
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from spin-off,
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to the Registered Holders), the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
4.4 Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features or equity-based
valuation or any dividend or distribution of the capital stock issued by any
Person other than the Company), then the Company's Board of Directors shall make
an appropriate adjustment in the Purchase Price and the number of shares
issuable upon exercise of this Warrant (to the extent not theretofore exercised)
so as to protect the rights of the Registered Holders; provided that no such
adjustment shall increase the Purchase Price as otherwise determined pursuant to
this Section 4.
4.5 Calculation of Purchase Price; Notices.
(i) All calculations of the Purchase Price under this Section 4 shall be
computed to the nearest One-Thousandth (1/1000th) of a cent.
(ii) Immediately upon any adjustment of the Purchase Price, the Company
22
shall give written notice thereof to the Registered Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment, provided
however, that such notice shall not be deemed to be conclusive as to the
Purchase Price calculation. At the request of the Registered Holder, the
Company shall certify the Purchase Price of and the number of shares for which
a Warrant at the time may be exercised.
(iii) The Company shall give written notice to the Registered Holder at
least thirty (30) days prior to the date on which the Company closes its books
or takes a record (A) with respect to any subdivision or combination of the
Common Stock that is subject to Section 4.2, or any other dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation.
(iv) The Company shall also give written notice to the Registered Holder at
least thirty (30) days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
4.6 Excluded Transactions. The provisions of this Section 4 shall not
apply to the exercise of the IHS Warrants.
4.7 Expression of Purchase Price and Number of Shares. Irrespective of any
adjustments or change in the Purchase Price or the number of securities actually
purchasable under the Warrant, the Warrants theretofore and thereafter issued
may continue to express the purchase price and the number of securities
purchasable thereunder as the Purchase Price and the number of securities
purchasable were expressed in the Warrant when initially issued.
5. No Rights or Liabilities as Stockholders and Notice to Registered
Holder.
Nothing contained herein shall be construed as conferring upon the
Registered Holder the right to vote or to consent or to receive notice as a
stockholder in respect of the meetings of stockholders for the election of
directors of the Company or any other matter, or any other rights whatsoever as
a stockholder of the Company; provided, however, that in the event that:
(a) the Company shall take a record of the holders of its Common Stock or
other stock or securities for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities or to receive any other
right;
(b) the Company shall take action to accomplish any capital reorganization,
or reclassification of the capital stock of the Company, or a consolidation or
merger of the Company into, or a sale of all or substantially all of its assets
to, another corporation;
(c) the Company shall take action to redeem or convert any or all of
outstanding Common Stock or other stock or securities of the Company; or
(d) the Company shall take action looking to a voluntary dissolution,
liquidation or winding up of the Company;
then, and in each such case, the Company shall mail or cause to be mailed
to the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, spin-off consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion is to take place, and the
time, if any, is to be fixed, as of which the holders of record of Common Stock
or such other stock or securities shall be entitled to exchange their shares of
Common Stock or such other stock or securities for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, conversion or redemption.
Such notice shall be delivered at least thirty (30) days prior to the date
therein specified.
6. Duty to Register Common Stock.
The shares of Common Stock issuable under this Warrant are subject to a
Registration Rights Agreement with the Company dated of even date herewith.
7. Transfers and Exchanges.
7.1 Warrant Transferable. Subject to the transfer conditions referred to
in the legend endorsed hereon, this Warrant and all rights hereunder (including
those under the Purchase Agreement) are transferable, in whole or in part,
without charge to the Registered Holder, upon surrender of this Warrant with a
properly executed Assignment (in the form of Exhibit B hereto) at the principal
office of the Company. The Company shall record on its books the transferee as
the Registered Holder of the portion of this Warrant transferred pursuant to
this Section 7.1.
7.2 Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like terms representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
23
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
8. Valid Issuance and Payment of Taxes.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and non-assessable, and the Company shall pay all
taxes and other governmental charges that may be imposed in respect of the issue
or delivery thereof. The Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
certificate for shares of Common Stock in any name other than that of the
Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established that no tax or other
charge is due.
9. Mutilated or Missing Warrants.
In case any of the Warrants shall be mutilated, lost, stolen or destroyed,
the Company shall issue and deliver in exchange and substitution for, and upon
cancellation of the mutilated Warrant, or in lieu of, and in substitution for,
the Warrant lost, stolen or destroyed, a new Warrant of like tenor and
representing an equivalent right or interest, but only upon receipt of
reasonable evidence of such loss, theft, or destruction of such Warrant.
10. Reserve.
The Company hereby represents and covenants that it has reserved and at all
times there shall be reserved for issuance such number and type of securities as
the Registered Holders are entitled to receive upon exercise of the IHS
Warrants. Prior to the issuance of any equity securities (or any instrument
exercisable for or convertible into equity securities) and whenever otherwise
required to satisfy this Section 10, the Company will amend its Certificate of
Incorporation to the extent necessary to ensure that there is reserved for
issuance a sufficient number and type of securities as the Registered Holders of
the IHS Warrants are entitled to receive upon exercise thereof. 11. No
Impairment.
The Company will not, by amendment of its Certificate of Incorporation or
bylaws, or through reorganization, consolidation, merger, dissolution, issue or
sale of securities, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Registered Holders against impairment. Without
limiting the generality of the foregoing, the Company (a) shall not increase the
par value of any shares issuable upon exercise of this Warrant above the
Purchase Price and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock upon exercise of this Warrant.
12. Appraisal.
In case of any dispute as to valuation of a security under this Agreement,
the fair value of such security shall be determined by an appraiser without any
discount for liquidity or restrictions under the Securities Act. This appraisal
process shall be instituted within fourteen (14) days after a party to this
Agreement notifies the other party of its desire to submit the issue to an
appraiser. In the event that, within seven (7) days after a party to this
Agreement notifies the other party of its desire to submit the issue to an
appraiser, the parties do not agree on a single appraiser to determine the fair
value of such security, the fair value of such security shall be determined,
without any discount for liquidity or restrictions under the Securities Act, by
the majority determination of a panel of three (3) appraisers who shall be
selected in the following manner: the Company shall select one (1) appraiser and
the Registered Holder entitled to exercise this Warrant for the greatest number
of shares of Common Stock (in the event there shall be more than one Registered
Holder), on behalf of all of the Registered Holders, shall select one (1)
appraiser and the two (2) appraisers selected by the Company and the Registered
Holder shall jointly select a third appraiser. The appraiser selected jointly
by the parties and, if applicable, each member of the appraisal panel
shall be an individual who personally and whose Affiliates shall not have a
previous business relationship with either party. The appraiser and, if
applicable, the appraisal panel shall endeavor to complete the appraisal as
soon as practicable. The determination of such appraiser and, if applicable,
the appraisal panel shall be final and binding on the Company and the
Registered Holders, and the fees and expenses of such appraisal shall be borne
equally by the Company, on the one hand, and the Registered Holders, on the
other.
13. Notices.
Except as may be otherwise provided herein, all notices and other
communications required or permitted hereunder shall be in writing and shall be
conclusively deemed to have been duly given (a) when hand delivered to the other
party, (b) when received when sent by facsimile to number set forth below
(provided, however, that notices given by facsimile shall not be effective
unless either (i) a duplicate copy of such facsimile notice is promptly given by
24
one of the other methods described in this Section 13, or (ii) the receiving
party delivers a written confirmation of receipt for such notice either by
facsimile or any other method described in this Section 13) and (c) the next
business day after deposit with a national overnight delivery service, postage
prepaid, addressed to the parties as set forth below with next-business-day
delivery guaranteed, provided that the sending party receives a confirmation of
delivery from the delivery service provider.
To: the Registered Holder To: the Company
Integrated Health Services, Inc. Community Care of America, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 13 by giving the other party
written notice of the new address in the manner set forth above.
14. Headings.
The headings in this Warrant are for purposes of convenience in reference
only, and shall not be deemed to constitute a part hereof.
15. Governing Law.
I This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of New York without regard to provisions
regarding choice of laws.
16. Severability.
If any term, provision, covenant or restriction of this Warrant 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 Warrant
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
17. No Inconsistent Agreements.
The Company will not on or after the date of this Warrant enter into any
agreement which is inconsistent with the rights granted to the Registered
Holders of this Warrant or otherwise conflicts with the provisions hereof. The
Company hereby represents and warrants that the rights granted to the Registered
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to holders of the Company's securities under any other
agreements, except rights that have been waived.
18. Saturdays, Sundays and Holidays.
If the Expiration Date falls on a Saturday, Sunday or legal holiday, the
Expiration Date shall automatically be extended until 5:00 p.m. the next
business day.
IN WITNESS WHEREOF, Community Care of America, Inc. has caused this Warrant to
be signed manually by a duly authorized officer of the Company on this 13th day
of January, 1997.
COMMUNITY CARE OF AMERICA, INC.
By:
Name:
Title:
25
EXHIBIT A
ELECTION TO PURCHASE
To: Community Care of America, Inc.
----------------------------------
----------------------------------
----------------------------------
The undersigned hereby elects to exercise the Warrant represented by the within
Warrant Certificate to purchase __________ shares of the Common Stock issuable
upon the exercise of the Warrant and requests that certificates for such shares
shall be issued in the name of:
(Name)
(Address)
(Taxpayer number)
and be delivered to:
(Name)
at
(Address)
and, if said number of shares of the Common Stock shall not be all the shares of
the Common Stock evidenced by the within Warrant Certificate, that a new Warrant
Certificate for the balance remaining of such said shares be registered in the
name of:
(Name)
(Address)
(Taxpayer number)
and delivered to the undersigned at the address below stated.
Dated: _______________, 19__
Name of holder of Warrant Certificate:
(please print)
(Address)
(Signature)
26
EXHIBIT B
ASSIGNMENT
(to be executed by the registered holder
to effect a transfer of the within Warrant)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Name)
(Address)
the right to purchase the ________ shares of Common Stock evidenced by this
Warrant, and does hereby irrevocably constitute and appoint to transfer the said
right on the books of the Company, with full power of substitution.
Dated: _______________________
(Signature)
/
27
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 13th day of
January 1997 (the "Effective Date"), by and between Community Care of America,
Inc., a Delaware corporation (the "Company"), on the one hand, and on the other
hand, Integrated Health Services, Inc., a Delaware Corporation (the
"Stockholder").
RECITALS
WHEREAS, the Company and the Stockholder are parties to a Warrant
Acquisition Agreement, dated of even date herewith (the "Warrant Agreement"),
pursuant to which the Company issued Series A Warrants and Series B Warrants
(collectively, the "Warrants") to the Stockholder;
WHEREAS, the Stockholder may acquire shares of the Common Stock of the
Company, $0.0025 par value (the "Common Stock"), under the Warrants; and
WHEREAS, the Warrant Agreement provides that the Company shall extend
certain registration rights to the Stockholder;
NOW, THEREFORE, the parties hereby agrees as follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "register", "registered", and "registration" refer to a
registration affected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and the use, by the Company, of its best efforts to cause the
declaration or ordering of effectiveness of such registration statement or
document.
(b) The term "Underlying Common Stock" means (1) any of the shares of
Common Stock issued upon exercise of the Warrants, and (2) any shares of the
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the shares of Common Stock issued or issuable under the Warrants, excluding in
all cases, however, any Underlying Common Stock sold by a person in a
transaction in which his, her or its rights under Section 1 are not assigned.
(c) The term "Holder" means any person owning or having the right to
acquire Underlying Common Stock or any assignee thereof in accordance with
Section 1.10 hereof.
28
(d) The term "Person" means a natural person and any corporation,
partnership, limited liability company, limited liability partnership, joint
venture, association, joint-stock partnership, trust, unincorporated
organization or a government or any department or agency thereof.
1.2 Registration Rights. The Company covenants and agrees as follows:
(a) Piggyback Registration Rights. If, at any time after the first
anniversary of the Effective Date (but without any obligation to do so), the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration statement or Form S-8 or
Form S-4 or any successor form thereto), the Company shall, at such time,
promptly give each Holder written notice of such registration. The Company
shall, subject to the provisions of Section 1.6(b), cause all of the Underlying
Common Stock owned by each Holder to be registered under the Act under the
proposed registration statement, except that the Company shall not be required
to register the Underlying Common Stock owned by a Holder if, within twenty (20)
days after the Company gives notice of the proposed registration to the Holder,
the Holder gives the Company written notice in accordance with Section 2.5 that
he does not want all or a portion of the Underlying Common Stock held by him to
be so registered.
(b) Demand Registration Rights for Firm Commitment Underwritten Offerings.
At any time after the first anniversary of the Effective Date, the Holders
representing a majority of the Common Stock issued and issuable under the
Warrants (regardless of whether representing a majority of the then outstanding
Underlying Common Stock) may demand that the Company register under the Act, all
or a portion of the shares of Common Stock issued or issuable under the
Warrants, for sale pursuant to a firm commitment underwritten public offering,
provided that the Company shall not be obligated to effect such registration and
firm commitment underwritten public offering and sale of the Underlying Common
Stock on more than two occasions in the aggregate for all of the Holders (it
being understood that any firm commitment public offering that does not close
for whatever reason shall not count against such limit).
(c) Registration Rights for Shelf Offerings Not Involving Firm Commitment
Underwritings.
(1) If at any time after the first anniversary of the Effective Date the Company
is eligible to register on Form S-3 under the Act (or any successor "short form"
registration statement) securities which are to be offered or sold solely by or
on behalf of persons other than the Company, then the Holders of a majority of
the outstanding Underlying Common Stock may demand that the Company register
under the Act all or a portion of the Common Stock issued and issuable under the
Warrants for offer and sale in transactions not involving a firm commitment
underwritten offering. The Company shall as soon as practicable after the date
thereof register with the Commission on a Form S-3 registration statement (or
any successor "short form" registration statement) the Common Stock issued and
issuable under the Warrants. Thereafter, the Holders of a majority of the
outstanding Underlying Common Stock may, subject to the limitations set forth in
Section 1.2(c)(2) hereof, demand that the Company, on one occasion during each
twelve month period from the Effective Date, prepare and file a post effective
amendment to such registration statement, pursuant to Rule 424(b) under the Act,
containing a prospectus meeting the requirements of Section 10 of the Act in
order to permit the Holders to sell or distribute their Underlying Common Stock
in transactions not involving a firm commitment underwritten public offering,
and the Company shall prepare and file such other amendments and supplements
thereto, and take such other actions as may be necessary to keep such prospectus
and registration statement accurate and effective and to comply with the
provisions of the Act with respect to the disposition of the Underlying Common
Stock for a period of not less than ninety (90) days, provided that such time
period shall be extended by the amount of time that any Holder is prevented from
selling Underlying Common Stock under such registration statement as a result of
Section 1.2(c)(2) hereof.
(2) Notwithstanding the provisions of Section 1.2(c)(1) to the contrary, the
Company shall not be obligated to file a post effective amendment to such
registration statement pursuant to Rule 424(b) under the Act and/or a prospectus
meeting the requirements of Section 10 of the Act pursuant to this Section
1.2(c) during any period if (i) the Company shall furnish to the Holders
requesting such registration a certificate signed by the President of the
Company stating that, in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental at such time to the Company and
its stockholders to file such amendments to such registration statement or
prospectus (including by filing information incorporated by reference into such
registration statement and/or prospectus) necessary to meet the requirements of
Section 10 of the Act, in which event the Company shall have the right to defer
the filing of such amendments for a period of not more than sixty (60) days
after presentation of such certificate to the Holders, (ii) if the Company has
within twelve (12) months preceding the date of such request effected a
registration of its securities in which Holders were entitled to participate
pursuant to Section 1.2(a) or (b) hereof, or (iii) if the requesting Holder or
Holders receive an opinion from counsel to the Company that registration of such
Holder's or Holders' Underlying Common Stock is not required under the Act in
order to effect the sale or other distribution contemplated by such Holder or
Holders.
1.3 Obligations of the Company. Whenever undertaking under this Section 1
to effect the registration of any Underlying Common Stock, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the Commission a registration statement with
respect to such Underlying Common Stock and use its best efforts to cause such
registration statement to become effective and keep such registration statement
effective for ninety (90) days or such shorter period as requested by the
Holders of a majority of the Underlying Common Stock registered thereunder.
(b) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Underlying Common Stock owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as the Holders shall reasonably request, provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions.
(e) In the event that a firm commitment underwritten public offering is
utilized under the registration described in Section 1.2(a) or is demanded for
the registration described in Section 1.2(b), include the Underlying Common
Stock in such firm commitment underwritten public offering and enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Immediately notify each Holder of the Underlying Common Stock covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
promptly prepare and furnish to the Holders a reasonable number of copies of a
prospectus supplement or amendment so that, as thereafter delivered to the
purchasers of such Underlying Common Stock, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting registration of
Underlying Common Stock pursuant to this Section 1, on the date that such
Underlying Common Stock is delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in a firm commitment
underwritten public offering, addressed to the underwriters, if any, and to the
Holders requesting registration of the Underlying Common Stock and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in a firm commitment underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of the Underlying Common Stock.
(h) If the Common Stock of the Company is listed on a national securities
exchange or quoted on NASDAQ, use its best efforts to comply with the
requirements of such exchange or NASDAQ to include shares of Underlying Common
Stock covered by such registration statement for listing on each such securities
exchange or for quotation on NASDAQ.
29
1.4 Furnish Information.
(a) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 1 with respect to the Underlying Common
Stock of any selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Underlying Common Stock held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Underlying Common Stock.
(b) The Company shall give the Holders registering Underlying Common Stock
and their underwriters, if any, the opportunity to participate in the
preparation of the registration statement, each prospectus included therein or
filed with the Commission and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders and such underwriters or
their respective counsel, to conduct a reasonable investigation within the
meaning of the Act.
1.5 Expenses of Registration. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification, to the
extent set forth in Section 1.3, of the Underlying Common Stock with respect to
each registration pursuant to Section 1.2 for each Holder (which right may be
assigned as provided in Section 1.10), including (without limitation) all
registration, filing, and qualification fees, printers, legal and accounting
fees relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Underlying Common Stock (in the case of a firm
commitment underwritten public offering).
1.6 Underwritten Offers.
(a) Whenever a registration requested pursuant to Section 1.2(b) hereof is
for a firm commitment underwritten offering, the Holder(s) holding a majority of
the Underlying Common Stock so requested to be included in such registration
shall select the managing underwriter(s) of recognized standing to administer
the offering, and each Holder requesting registration of its Underlying Common
Stock for disposition in a firm commitment underwritten offering agrees to
include such Underlying Common Stock in such firm commitment underwritten
offering and shall be bound by the terms of the underwriting as agreed between
the majority of Holders requesting registration and the underwriters.
(b) In connection with a firm commitment underwritten offering of the
Company's capital stock under Section 1.2(a) hereof, the Company shall not be
required to include any of the Holders' securities in such underwriting unless
they accept the terms of the underwriting as agreed upon between the Company and
the underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
good faith will not jeopardize the success of the offering by the Company. If
the total amount of securities, including Underlying Common Stock, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Underlying Common Stock, which the underwriters determine
in good faith will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Underlying Common Stock and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
1.7 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.8 Indemnification. In the event any Underlying Common Stock is included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder who is not a director or executive officer of the Company,
any underwriter (as defined in the Act) for such Holder and each person, if any,
who controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, or the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Act, or the
Exchange Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
30
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.8(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company, nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, liabilities
(joint or several) or actions to which any of the foregoing persons may become
subject, under the Act, or the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.8(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder.
(c) Promptly after receipt by an indemnified party under this Section 1.8
of notice of the commencement of any action (including any governmental action)
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.7, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the firm commitment underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section 1.8 shall
survive the completion of any offering of Underlying Common Stock in a
registration statement under this Section 1, and otherwise.
1.9 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the Commission that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Commission Rule 144 promulgated under the Act;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any Underlying Common
Stock, forthwith upon request (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144 promulgated under the Act
and the Exchange Act, (ii) a copy of the most recent annual and quarterly
31
reports of the Company and such other report and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
1.10 Assignment of Registration Rights. The rights to cause the Company to
register Underlying Common Stock pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities, provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted or subject to volume or manner of sale limitations under the Act.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including transferees
of the Warrants and the Underlying Common Stock). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York.
2.3 Counterparts. This Agreement 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.
2.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
2.5 Notices. Except as may be otherwise provided herein, all notices and
other communications required or permitted hereunder shall be in writing and
shall be conclusively deemed to have been duly given (a) when hand delivered to
the other party, (b) when sent by facsimile to the number set forth below such
party's signature (provided, however, that notices given by facsimile shall not
be effective unless either (i) a duplicate copy of such facsimile notice is
promptly given by one of the other methods described in this Section 2.5, or
(ii) the receiving party delivers a written confirmation of receipt of such
notice either by facsimile or any other method described in this Section 2.5)
and (c) the next business day after deposit with a national overnight delivery
service, postage prepaid, addressed to the parties as set forth below such
party's signature, with next-business-day delivery guaranteed, provided that the
sending party receives a confirmation of delivery from the service provider. A
party may change or supplement the address given above, or designate additional
addresses, for purposes of this Section 2.5 by giving the other party written
notice of the new address in the manner set forth above.
2.6 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
2.7 Amendments and Waivers. The Company and Holders of a majority of the
Underlying Common Stock (to the extent issued and outstanding) can agree to an
amendment of, or a waiver to, the terms of this Agreement.
2.8 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
32
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTEGRATED HEALTH SERVICES, INC. COMMUNITY CARE OF AMERICA, INC.
By:
Name: By:
Title: Name:
Address for Notice: Title:
Address for Notice:
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President