STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement"), dated as of
December 22, 1995, between Magellan Health Services, Inc. (f/n/a Charter Medical
Corporation), a Delaware corporation (the "Company"), and the persons whose
names are set forth on Annex I hereto (such persons being referred to herein
individually as a "Buyer" and collectively as "Buyers").
WHEREAS, the Company desires to sell to Buyers, and Buyers desire to
purchase from the Company, shares of Common Stock, par value $.25 per share, of
the Company ("Common Stock") and warrants to purchase shares of Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and Buyers hereby agree as follows:
ARTICLE I
TERMS OF THE TRANSACTION
1.1 Agreement to Sell and to Purchase Common Stock and Warrants. At the
Closing (as hereinafter defined), and on the terms and subject to the conditions
set forth in this Agreement, the Company shall sell and deliver to each Buyer,
and each Buyer shall purchase and accept from the Company, the number of shares
of Common Stock (collectively, the "Shares") and warrants (collectively, the
"Warrants", and herein together with the Shares referred to as the "Securities")
to purchase the number of shares of Common Stock (subject to adjustment from
time to time as provided in the Warrants), set forth opposite the name of such
Buyer on Annex I hereto. The Warrants shall be in substantially the form set
forth as Exhibit A hereto.
1.2 Purchase Price and Payment. The aggregate purchase price for the
Securities is $69,732,000 (the "Purchase Price"). The parties acknowledge that
the Purchase Price, as calculated on a per share basis, is equal to 95% of the
average closing price of the Common Stock as reported in the Wall Street Journal
over the ten trading days beginning on Monday, November 13, 1995 and continuing
through the close of business on Monday, November 27, 1995, which average was
$18.350 per share (i.e. $18.350 x .95 = $17.433 per share). The portion of the
Purchase Price payable by each Buyer for the Securities to be purchased by it is
set forth opposite the name of such Buyer on Annex I hereto and shall be paid by
each Buyer on or before the Closing Date (as hereinafter defined) in immediately
available funds by confirmed wire transfer to a bank account to be designated by
the Company (such designation to occur no later than the third Business Day (as
hereinafter defined) prior to the Closing Date).
1.3 Allocation of the Purchase Price. The parties hereto acknowledge
that the allocation of the Purchase Price between the Shares and the Warrants
was made by them in arm's length negotiation and agree that a written allocation
of the Purchase Price between the Shares and the Warrants shall be provided
before Closing and such allocation shall be made as of the date of this
Agreement.
1
ARTICLE II
CLOSING AND CLOSING DATE
The closing of the transactions contemplated hereby (the "Closing")
shall take place (i) at the offices of Thompson & Knight, P.C., 1700 Pacific
Avenue, Suite 3300, Dallas, Texas, at 9:00 a.m., local time, on the third
Business Day following the satisfaction or waiver (subject to Applicable Law [as
hereinafter defined]) of each of the conditions to the obligations of the
parties set forth in Articles VI and VII hereof, or (ii) at such other time or
place or on such other date as the parties hereto shall agree. The date on which
the Closing is required to take place is herein referred to as the "Closing
Date". All Closing transactions shall be deemed to have occurred simultaneously.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Buyer, as of the date
hereof, that:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority in all material
respects to own, lease, and operate its properties and to carry on its business
as now being conducted. No actions or proceedings to dissolve the Company are
pending or, to the best knowledge of the Company, threatened.
3.2 Qualification. Each of the Company and the Subsidiaries (as
hereinafter defined) is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased, or operated
by it or the conduct of its business requires such qualification or licensing,
except where the failure to do so would not have a material adverse effect on
the business, assets, results of operations or financial condition of the
Company or on the ability of the Company to consummate the transactions
contemplated hereby.
3.3 Capitalization of the Company.
(a) The authorized capital stock of the Company consists of (i)
80,000,000 shares of Common Stock, of which, as of the date hereof, 28,650,715
shares are outstanding and 187,435 shares are held in the Company's treasury,
and (ii) 10,000,000 shares of Preferred Stock, without par value, of which, as
of the date hereof, no shares are outstanding. All outstanding shares of capital
stock of the Company have been validly issued and are fully paid and
nonassessable, and no shares of capital stock of the Company are subject to, nor
have any been issued in violation of, preemptive or similar rights. As of the
date hereof, (i) an aggregate of 4,851,186 shares of Common Stock are reserved
for issuance pursuant to stock options granted to certain directors, officers,
and employees; (ii) an aggregate of 172,981 shares of Common Stock are reserved
for issuance and issuable upon the exercise of outstanding warrants; (iii)
certain shares of Common Stock are reserved for issuance upon the exercise of
certain purchase rights which become exercisable pursuant to the terms of the
Rights Agreement (as hereinafter defined); and (iv) an aggregate of 3,557,900
shares of Common stock are reserved for issuance and issuable under the Exchange
Agreement (as hereinafter defined).
2
(b) Except as set forth above in subparagraph (a) of this Section 3.3
and as contemplated by this Agreement, there are outstanding (i) no shares of
capital stock or other voting securities of the Company; (ii) no securities of
the Company convertible into or exchangeable for shares of capital stock or
other voting securities of the Company; (iii) no options or other rights to
acquire from the Company, and no obligation of the Company to issue or sell, any
shares of capital stock or other voting securities of the Company or any
securities of the Company convertible into or exchangeable for such capital
stock or voting securities; and (iv) other than employee compensation plans
based on the Company's earnings and executive officer employment agreements, no
equity equivalents, interests in the ownership or earnings, or other similar
rights of or with respect to the Company. There are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of Common Stock or any other securities of the type described in clauses (i) -
(iv) of the preceding sentence.
3.4 Authority Relative to This Agreement. The Company has full
corporate power and authority to execute, deliver, and perform this Agreement
and the Ancillary Documents (as hereinafter defined) to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance by the Company of this Agreement and the Ancillary
Documents to which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action of the Company. This Agreement has been duly executed and
delivered by the Company and constitutes, and each Ancillary Document executed
or to be executed by the Company has been, or when executed will be, duly
executed and delivered by the Company and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally, and (ii) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances.
3.5 Noncontravention. The execution, delivery, and performance by the
Company of this Agreement and the Ancillary Documents to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (i) conflict with or result in a violation of any provision of
the Company's Restated Certificate of Incorporation or the Company's Bylaws, as
amended, or the charter, bylaws or other governing instruments of any
Subsidiary, (ii) conflict with or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or both)
a default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
agreement, or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
respective properties may be bound, (iii) result in the creation or imposition
of any Encumbrance upon the properties of the Company or any Subsidiary, or (iv)
assuming compliance with the matters referred to in Section 3.6, violate any
Applicable Law binding upon the Company or any Subsidiary, except, in the case
of clauses (ii), (iii), and (iv) above, for any such conflicts, violations,
defaults, terminations, cancellations, accelerations, or Encumbrances which
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, results of operations, or financial condition of the
Company and the Subsidiaries taken as a whole or the ability of the Company to
consummate the transactions contemplated hereby.
3.6 Governmental Approvals. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any Governmental
Entity (as hereinafter defined) is required to be obtained or made by the
Company or any Subsidiary in connection with the execution, delivery, or
performance by the Company of this Agreement and the Ancillary Documents to
which it is a party or the consummation by it of the transactions contemplated
hereby and thereby, other than (i) compliance with any applicable
3
requirements of the HSR Act (as hereinafter defined); (ii) compliance with any
applicable requirements of the Securities Act (as hereinafter defined); (iii)
compliance with any applicable requirements of the Exchange Act (as hereinafter
defined); (iv) compliance with any applicable state securities laws; and (v)
such consents, approvals, orders, or authorizations which, if not obtained, and
such declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a material adverse effect on the
business, assets, results of operations, or financial condition of the Company
or on the ability of the Company to consummate the transactions contemplated
hereby. The representations and warranties of the Company contained in this
Section 3.6, insofar as such representations and warranties pertain to
compliance by the Company with the requirements of the Securities Act and
applicable state securities laws, are based on the representations and
warranties of Buyers contained in Section 4.5.
3.7 Authorization of Issuance; Reservation of Shares. When issued and
delivered pursuant to this Agreement against payment therefor, the Securities
will have been duly authorized, issued and delivered and will constitute valid
and legally binding obligations of the Company entitled to the benefits provided
therein. When issued and delivered pursuant to the Agreement against payment
therefor, the Shares will be fully paid and nonassessable. During the period
within which the Warrants may be exercised, the Company will at all times have
authorized and reserved for the purpose of issue upon exercise of the Warrants,
a sufficient number of shares of Common Stock to provide for the exercise of the
Warrants. All shares of Common Stock which are issuable upon exercise of the
Warrants (the "Warrant Shares") will, when issued, be validly issued, fully paid
and nonassessable. The issuance of the Shares is not, and upon exercise of the
Warrants the issuance of the Warrant Shares will not be, subject to any
preemptive or similar rights.
3.8 Subsidiaries. Except as listed on Section 3.8 of the Company's
Disclosure Schedule attached hereto (the "Disclosure Schedule), there are no
"Significant Subsidiaries" as that term is defined in Regulation S-X promulgated
by the Securities and Exchange Commission (the "Commission"). Each Subsidiary is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Each Subsidiary has all requisite
corporate power and corporate authority to own, lease, and operate its
properties and to carry on its business as now being conducted. No actions or
proceedings to dissolve any Subsidiary are pending.
3.9 SEC Filings. The Company has filed with the Commission all forms,
reports, schedules, statements, and other documents (excluding exhibits)
required to be filed by it since September 30, 1993 under the Securities Act,
the Exchange Act, and all other federal securities laws. All forms, reports,
schedules, statements, and other documents (including all amendments thereto)
filed by the Company with the Commission since such date are herein collectively
referred to as the "SEC Filings". The SEC Filings, at the time filed, complied
in all material respects with all applicable requirements of federal securities
laws. None of the SEC Filings, including, without limitation, any financial
statements or schedules included therein, at the time filed, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading except as the same was corrected or superseded in a subsequent
document duly filed with the Commission. Except as set forth in Section 3.9 of
the Disclosure Schedule and except for those contracts not required to be filed
pursuant to the rules and regulations of the Commission, all material contracts
of the Company and the Subsidiaries have been included in the SEC Filings. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of the Company included in the SEC Filings present fairly
in all material respects, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto and, in the case of the unaudited consolidated interim financial
statements, except to the extent that preparation of such financial statements
in accordance with generally accepted accounting principles is not required by
applicable rules of the Commission), the
4
consolidated financial position of the Company as of the dates thereof and its
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end audit adjustments in the case of any unaudited
interim financial statements).
3.10 Absence of Undisclosed Liabilities. Except as set forth in Section
3.10 of the Disclosure Schedule or to the extent disclosed in the SEC Filings
filed prior to the date hereof, (a) as of June 30, 1995, neither the Company nor
any Subsidiary had any liabilities or obligations (whether accrued, absolute,
contingent, unliquidated, or otherwise) material to the Company and the
Subsidiaries considered as a whole, and (b) since June 30, 1995, neither the
Company nor any Subsidiary has incurred any such material liabilities or
obligations, other than those incurred in the ordinary course of business
consistent with past practice or pursuant to or as contemplated by this
Agreement.
3.11 Absence of Certain Changes. Except as disclosed in the SEC Filings
filed prior to the date hereof, since June 30, 1995, (i) there has not been any
material adverse change in, or any event or condition that might reasonably be
expected to result in any material adverse change in, the business, assets,
results of operations, condition (financial or otherwise), of the Company and
the Subsidiaries considered as a whole, other than as a result of legal or
regulatory changes affecting the U.S. health care industry generally and (ii)
neither the Company nor any Subsidiary has incurred any material liability,
engaged in any material transaction, or entered into any material agreement in
each case outside the ordinary course of business consistent with past practice.
3.12 Compliance With Laws. Except as set forth in Section 3.12 of the
Disclosure Schedule, since July 31, 1992, (i) the Company and the Subsidiaries
have complied in all material respects with all Applicable Laws (including
without limitation Applicable Laws relating to securities, properties, Medicare
or Medicaid participation, business products, advertising and sales practices,
employment practices, terms and conditions of employment, wages and hours,
safety, occupational safety, health, environmental protection, product safety,
and civil rights); (ii) neither the Company nor any Subsidiary has received any
written notice, which has not been dismissed or otherwise disposed of, that the
Company or any Subsidiary has not so complied and (iii) neither the Company nor
any Subsidiary is charged or, to the best knowledge of the Company, threatened
with, or, to the best knowledge of the Company, under investigation with respect
to, any violation of any Applicable Law relating to any aspect of the business
of the Company or any Subsidiary other than violations which in the reasonable
judgement of the Company, individually or in the aggregate, do not and will not
have a material adverse effect on the business, assets, results of operation or
financial condition of the Company or the ability of the Company to consummate
the transactions contemplated hereby.
3.13 Litigation. Except as set forth in Section 3.13 of the Disclosure
Schedule, (i) there is (whether insured or uninsured) no action, suit,
proceeding or investigation pending or, to the knowledge of the Company,
threatened in writing, at law or in equity, in any court or before any
Governmental Entity against the Company or any Subsidiary or affecting the
Company or any Subsidiary or any of the respective assets or properties of the
Company or any Subsidiary that, in the reasonable judgement of the Company,
individually or in the aggregate would have a material adverse effect on the
Company or would prevent the Company from consummating the transactions
contemplated by this Agreement, and (ii) the Company and the Subsidiaries and
their respective assets and properties are not subject to any order from any
Governmental Entity that has or is likely to have a material adverse effect on
the Company.
3.14 Prior Private Offerings. Since July 31, 1992, (i) all securities
offered or sold by the Company which were not registered pursuant to the
Securities Act and applicable state securities laws, were offered or sold
pursuant to valid exemptions from the Securities Act and applicable state
securities laws and (ii) no private offering memorandum or other information
furnished (whether in writing or
5
orally) to any offeree or purchaser of such securities, at the time of delivery
of such private offering memorandum or other information, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
3.15 Private Offering of the Securities. The Company agrees that
neither the Company nor anyone acting on its behalf has offered or will offer
the Securities or any part hereof or any similar securities for issue or sale
to, or has solicited or will solicit any offer to acquire any of the same from,
anyone so as to bring the issuance and sale of the Securities within the
provisions of Section 5 of the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer severally (and not jointly) represents and warrants to the
Company that:
4.1 Organization. If Buyer is a corporation, such Buyer is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. If Buyer is a partnership or trust, such
Buyer is duly formed and validly existing as a partnership or trust under the
laws of the jurisdiction of its formation.
4.2 Authority Relative to This Agreement. Buyer has full power and
authority to execute, deliver, and perform this Agreement and the Ancillary
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. If Buyer is a corporation, partnership or trust, the
execution, delivery, and performance by Buyer of this Agreement and the
Ancillary Documents to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action of Buyer. This Agreement has been duly executed and delivered
by Buyer and constitutes, and each Ancillary Document executed or to be executed
by Buyer has been, or when executed will be, duly executed and delivered by
Buyer and constitutes, or when executed and delivered will constitute, a valid
and legally binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally and (ii) equitable principles which may limit the
availability of certain equitable remedies (such as specific performance) in
certain instances.
4.3 Noncontravention. The execution, delivery, and performance by Buyer
of this Agreement and the Ancillary Documents to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby do not
and will not (i) if Buyer is a corporation, partnership or trust, conflict with
or result in a violation of any provision of the charter, bylaws, or similar
organizational documents of Buyer, (ii) conflict with or result in a violation
of any provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage,
indenture, lease, agreement, or other instrument or obligation to which Buyer is
a party or by which Buyer or any of its properties may be bound, (iii) result in
the creation or imposition of any Encumbrance upon the properties of Buyer, or
(iv) violate any Applicable Law binding upon Buyer, except, in the case of
clauses (ii), (iii), and (iv) above, for any such conflicts, violations,
defaults, terminations, cancellations, accelerations, or Encumbrances which
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, results
6
of operations, or financial condition of Buyer or on the ability of Buyer to
consummate the transactions contemplated hereby.
4.4 Governmental Approvals. Other than any HSR Act filing, no consent,
approval, order, or authorization of, or declaration, filing, or registration
with, any Governmental Entity is required to be obtained or made by Buyer in
connection with the execution, delivery, or performance by Buyer of this
Agreement or the consummation by it of the transactions contemplated hereby.
4.5 Purchase for Investment. Buyer has been furnished with all
information that it has requested for the purpose of evaluating the proposed
acquisition of the Securities pursuant hereto, and Buyer has had an opportunity
to ask questions of and receive answers from the Company regarding the Company
and its business, assets, results of operations, and financial condition and the
terms and conditions of the issuance of the Securities. Buyer is acquiring the
Securities to be purchased by it for its own account for investment and not for
distribution in any manner that would violate applicable securities laws, but
without prejudice to Buyer's rights to dispose of such Securities or a portion
thereof to a transferee or transferee, in accordance with such laws if at some
time in the future Buyer deems is advisable to do so. Buyer can bear the risk of
an investment in the Securities, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of a prospective investment in the Securities. The acquisition of such
Securities by Buyer at Closing shall constitute Buyer's confirmation of the
foregoing representations. Buyer understands that such Securities are being sold
to it in a transaction which is exempt from the registration requirements of the
Securities Act, and that, in making the representations and warranties contained
in Section 3.6 pertaining to compliance by the Company with the requirements of
the Securities Act and applicable securities laws, the Company is relying, to
the extent applicable, upon Buyer's representations set forth herein.
4.6 No Other Shares. Except for such rights as may be conferred
on Buyer by this Agreement and the Ancillary Documents, as of the date hereof,
Buyer does not beneficially own, directly or indirectly, any shares of capital
stock of the Company.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Press Releases. Except as may be required by Applicable Law or by
the rules of any national securities exchange, neither Buyer, on the one hand,
nor the Company, on the other, shall issue any press release with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the other party (which consent shall not be unreasonably withheld
under the circumstances). Any such press release required by Applicable Law or
by the rules of any national securities exchange shall only be made after
reasonable notice to the other party.
5.2 Stock Exchange Listing. The Company shall use its reasonable best
efforts to cause the Shares and the Warrant Shares to be approved for listing on
the American Stock Exchange, subject to official notice of issuance, prior to
the Closing Date, and at such time as the Common Stock is listed on the New York
Stock Exchange, cause the Shares and the Warrant Shares to be listed on the New
York Stock Exchange as soon as practicable thereafter.
7
5.3 Registration Rights.
(a) Registration of Shares. Within 30 days following the Closing, the
Company will prepare and file a registration statement under the Securities Act,
and shall use its best efforts to cause such registration statement to become
effective as promptly as possible thereafter, with respect to the resale of the
Registrable Shares (as hereinafter defined).
(b) Registration of Warrant Shares. Prior to the first date on which
the Warrant Shares are issuable upon exercise of the Warrants, the Company will
prepare and file one or more registration statements under the Securities Act,
and cause such registration statements to become effective as promptly as
possible, with respect to the issuance of the Warrant Shares upon exercise of
the Warrants and the resale of the Registrable Warrant Shares (as hereinafter
defined).
(c) Piggyback Registrations. Until such time as the Buyer Group (as
hereinafter defined) no longer beneficially owns in the aggregate at least 10%
of the Shares and Underlying Warrant Shares (as hereinafter defined) initially
purchased hereunder, whenever the Company proposes to register an offering of
any of its Common Stock under the Securities Act other than (i) under employee
compensation or benefit programs or otherwise on Form S-8 or an equivalent form,
(ii) an exchange offer or an offering of securities solely to the existing
stockholders or employees of the Company or to the existing stockholders of
another company in connection with a merger or acquisition or otherwise on Form
S-4 or an equivalent form or (iii) a secondary registration solely on behalf of
holders of securities of the Company, and the registration form to be used may
be used for the registration of the Registrable Securities (as hereinafter
defined), the Company will give prompt written notice to all Buyers of its
intention to effect such a registration and will include in such registration
and offering all Registrable Securities which are then owned by members of the
Buyer Group and with respect to which the Company has received written requests
for inclusion therein within 20 days after the receipt of the Company's notice
(a "Piggyback Registration"). The Company shall use reasonable efforts to cause
the managing underwriters of a proposed underwritten offering to permit the
Registrable Securities then owned by members of the Buyer Group which have been
requested to be included in the registration statement (or registration
statements) for such offering to be included therein and in the prospectus used
in connection therewith on the same terms and conditions as are provided for
therein for persons other than Buyers. Notwithstanding the foregoing, if the
Company gives notice of such a proposed registration, the total number of
Registrable Securities which shall be included in such registration shall be
reduced pro rata to such number, if any, as in the reasonable opinion of the
managing underwriters of such offering would not adversely affect the
marketability or offering price of all of the securities proposed to be offered
by the Company in such offering; provided however, that to the extent not
prohibited by any registration rights agreements existing as of the date hereof,
the securities to be included in the registration statement (or registration
statements) for any person other than Buyers and the Company shall be first
reduced prior to any such pro rata reduction. It is specifically agreed that the
Piggyback Registration rights set forth in this subparagraph (c) shall not be
assignable to any transferee of Registrable Securities if such transferee is not
a member of the Buyer Group.
(d) Registration Procedures. With respect to each registration
statement filed in accordance with this Section 5.3 (the "Registration
Statement"), the Company shall:
(i) cause the Registration Statement and the related
prospectus and any amendment or supplement, (A) to comply in all
material respects with the applicable requirements of the Securities
Act and under the rules and regulations promulgated thereunder, and (B)
not to contain any 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;
8
(ii) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith, and upon the mandatory expiration of the
Registration Statement, one or more additional registration statements,
as may be necessary to keep the Registration Statement effective on a
continual basis for so long as the Buyer Group collectively owns Shares
and Underlying Warrant Shares constituting more than 25% of the Shares
and Underlying Warrant Shares initially purchased hereunder; provided
that, the Company shall not be required to maintain the effectiveness
of the Registration Statement filed for a Piggyback Registration for
more than 90 days, and shall not be required to maintain the
effectiveness of any other Registration Statement filed hereunder for a
period in excess of three years from the Closing Date if after the
expiration of such period the Registrable Securities may be resold
without any restrictions under the Securities Act, it being agreed that
if the Registrable Securities remain subject to any restrictions under
the Securities Act (including any volume restrictions imposed upon
"affiliates" under Rule 144) the Company will continue to maintain the
effectiveness of such statement beyond the three year period subject to
the terms hereof;
(iii) furnish, upon written request, to each Buyer a copy of
any amendment or supplement to the Registration Statement or prospectus
prior to filing it after effectiveness and not file any such amendment
or supplement to which any such Buyer shall have reasonably objected on
the grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of the
rules or regulations promulgated thereunder;
(iv) furnish to each Buyer such number of copies of the
Registration Statement, each amendment and supplement thereto, the
prospectus used in connection therewith (including, without limitation,
each preliminary prospectus and final prospectus) and such other
document as such Buyer may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Buyer;
(v) use its best efforts to register or qualify all
Registrable Securities covered by the Registration Statement under such
other securities or blue sky laws of the states of the United States as
may be required for the issuance and sale of the Registrable
Securities, to keep such registration or qualification in effect for so
long as the Registration Statement remains in effect except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction in which it
is not and would not, but for the requirements of this Section 5.3, be
obligated to be so qualified, or to subject itself to taxation in any
such jurisdiction, or to consent to general service of process in any
such jurisdiction;
(vi) prior to any sale of the Registrable Securities effected
on the American Stock Exchange or the New York Stock Exchange, as
applicable, deliver to such national securities exchange copies of the
prospectus to be used in connection with the offering to be conducted
pursuant to the Registration Statement;
(vii) upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in the Registration
Statement, as then in effect, includes or in the judgment of the
Company may include an untrue statement of a material fact or omits or
may omit to state any material fact required to be stated in such
prospectus or necessary to make the statements in such prospectus not
misleading in the light of the circumstances in which they were made,
which circumstance requires amendment of the Registration Statement or
supplementation of the prospectus, prepare and file as promptly as
reasonably possible a supplement to or an amendment of such prospectus
as may be necessary so that, as when delivered (if required by the
Securities Act) to a purchaser of Registrable Securities, such
prospectus shall not include an untrue statement
9
of a material fact or omit to state a material fact required to be
stated in such prospectus or necessary to make the statements in such
prospectus not misleading in the light of the circumstances in which
they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations under the Securities Act and, in its
discretion, to make available to its securities holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with
the first month of the first fiscal quarter after the effective date of
the Registration Statement, which earnings statement shall satisfy the
provisions of section 11(a) of the Securities Act;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the Registration
Statement from and after a date not later than the effective date of
the Registration Statement;
(x) use its best efforts to list all Registrable Securities
covered by the Registration Statement on any national securities
exchange on which securities of the same class as the Registrable
Securities are then listed;
(xi) after any sale of the Registrable Securities pursuant to
this Section 5.3, to the extent not prohibited by law, cause any
restrictive legends to be removed and any transfer restrictions to be
rescinded with respect to the Registrable Securities;
(xii) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance, and
scope) and take all such other actions as the holders of a majority of
the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition
of such Shares;
(xiii) in the event of the issuance of any stop order
suspending the effectiveness of the Registration Statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the disqualification of any Common Stock included in the
Registration Statement for sale in any jurisdiction, the Company will
use its best efforts promptly to obtain the withdrawal of such order;
and
(xiv) use its best efforts to cause such Registrable
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the Buyers thereof to consummate the disposition
of such Shares.
(e) Obligations of Buyer. Each member of the Buyer Group holding
Registrable Securities shall furnish to the Company such information regarding
such member as the Company may from time to time reasonably request in writing
(and will notify the Company of any changes in such information) and as shall be
required by the Securities Act in connection with such registration. Each such
member of the Buyer Group shall enter into such customary agreements (including,
without limitation, underwriting agreements, custody agreements and powers of
attorney in customary form, substance and scope) and take all such other actions
as the Company or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of the Registrable Securities.
(f) Delay of Sales. During any period in which the Company is
maintaining the effectiveness of a Registration Statement for the Registrable
Securities pursuant to this Section 5.3, the Company shall have the right, upon
giving notice to the members of the Buyer Group holding Registrable Securities
of
10
the exercise of such right, to require such members not to sell any Registrable
Securities pursuant to such Registration Statement for a period of time the
Company deems reasonably necessary, which time shall be specified in such notice
but in no event longer than a period of 90 days, if (i) the Company is engaged
in an offering of shares by the Company for its own account or is engaged in or
proposes to engage in discussions or negotiations with respect to, or has
proposed or taken a substantial step to commence, or there otherwise is pending,
any merger, acquisition, other form of business combination, divestiture, tender
offer, financing or other transaction, or there is an event or state of facts
relating to the Company, in each case which is material to the Company (any such
negotiation, step, event or state of facts being herein called a "Material
Activity"), (ii) such Material Activity would, in the opinion of counsel for the
Company, require disclosure so as to permit the Registrable Securities to be
sold in compliance with applicable law, and (iii) such disclosure would, in the
reasonable judgment of the Company, be adverse to its interests; provided, that,
the Company shall have no right to delay the filing of a Registration Statement
or the selling of Registrable Securities if at any time during the twelve months
preceding the date on which such notice was given the Company had delayed the
selling of Registrable Securities pursuant to this subparagraph (f). The Company
shall have no obligation to include in any notice contemplated by this
subparagraph (f) any reference to or description of the facts based upon which
the Company is delivering such notice.
(g) Indemnification.
(i) The Company shall indemnify and hold harmless each member
of the Buyer Group holding Registrable Securities, and if such member
is a corporation or partnership, its directors, Affiliates (as
hereinafter defined) and officers, and each other person, if any, who
controls such member within the meaning of the Securities Act against
any losses, claims, damages, liabilities or expenses (including
reasonable fees and expenses of counsel), joint or several, to which
such member or any such director, Affiliate or officer or participating
or controlling person may become subject under the Securities Act or
otherwise in connection with or as a result of a sale by such member of
the Registrable Securities, insofar as such losses, claims, damages,
liabilities or expenses (or related actions or proceedings) arise out
of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
any preliminary prospectus, final prospectus or summary prospectus
contained in the Registration Statement, or any amendment or supplement
to the Registration Statement, or any document incorporated by
reference in the Registration Statement, or (ii) any omission or
alleged omission to state in any such document a material fact required
to be stated in any such document or necessary to make the statements
in any such document not misleading, and the Company will reimburse
such member and each such director, Affiliate, officer, participating
person and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or expense (or action
or proceeding in respect of any such loss, claim, damage, liability or
expense) which arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance
upon and in conformity with written information furnished to the
Company by such member or any such director, Affiliate, officer,
participating person or controlling person for use in the preparation
of the Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf
of such member or any such director, Affiliate, officer, participating
person or controlling person and shall survive the transfer of such
securities by such member.
11
(ii) Each member of the Buyer Group holding Registrable
Securities, severally and not jointly, shall indemnify and hold
harmless (in the same manner and to the same extent as set forth in
clause (i) of this subparagraph (g)) the Company, each director of the
Company, each officer of the Company who shall sign the Registration
Statement and each other person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any untrue
statement in or omission from the Registration Statement, any
preliminary prospectus, final prospectus or summary prospectus included
in the Registration Statement, or any amendment or supplement to the
Registration Statement, but only to the extent that such statement or
omission was made in direct reliance upon and in conformity with
written information furnished to the Company by such member for use in
the preparation of the Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of the
Registrable Securities by such member.
(iii) Indemnification under this Section 5.3 shall be made as
set forth in Article IX hereof.
(h) Registration Expenses. All expenses incident to the Company's
registration of the Registrable Securities pursuant to the provisions of this
Section 5.3, including, without limitation, all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, printing and
engraving expenses, messenger and delivery expenses and fees and disbursements
of counsel for the Company and all independent certified public accountants,
underwriters (excluding underwriting discounts and any selling commissions) and
any persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be paid by the Company; provided, that, all
expenses incurred by members of the Buyer Group holding Registrable Securities
to retain any counsel, accountant or other advisor will not be deemed to be
Registration Expenses and will be paid by such members pro rata based upon the
number of Registrable Securities included in the registration. The underwriting
discounts or commissions and any selling commissions together with any stock
transfer or similar taxes attributable to sales of the Registrable Securities
will be paid by the holders of the Registrable Securities pro rata based upon
the number of Registrable Securities held by them.
5.4 Board Representation. In connection with the Company's 1996 annual
meeting of stockholders, the Company will nominate a designee of Rainwater, Inc.
(the "Initial Designee") that is acceptable to the Company to fill a vacancy in
the Board of Directors of the Company existing on the date hereof and will use
its reasonable best efforts to cause the Initial Designee to become elected to
the Board. As long as Buyers and their Affiliates continue to beneficially own
in the aggregate at least 600,000 Shares, Warrant Shares and/or Underlying
Warrant Shares (appropriately adjusted for stock splits, combinations and
similar changes), the Company will continue to nominate the Initial Designee or
other designee of Rainwater, Inc. that is acceptable to the Company on each
subsequent date for re-nomination of the Initial Designee or other designee, as
applicable, and will use its reasonable best efforts to cause such designee to
become elected to the Board.
5.5 Fees and Expenses. The Company shall (i) at the Closing pay
Rainwater, Inc., the amount of $150,000; (ii) upon the earlier of the Closing or
the termination of this Agreement, unless this Agreement is terminated solely as
a result of any Buyer's breach of the terms hereof, reimburse Rainwater, Inc.
for (A) up to two filing fees for HSR Act approval of the transaction proposed
herein together with all other fees and expenses (including fees and expenses of
counsel) incurred in connection with such filings and (B) all other fees and
expenses (including fees and expenses of counsel, financial advisors,
accountants and other third party consultants) incurred in connection with this
Agreement and the
12
Ancillary Documents, up to a maximum of $100,000 for such other fees and
expenses incurred in connection with this Agreement and the Ancillary Documents;
and (iii) for so long as Buyers and their Affiliates continue to beneficially
own in the aggregate at least 600,000 Shares, Warrant Shares and/or Underlying
Warrant Shares (appropriately adjusted for stock splits, combinations and
similar changes), pay Rainwater, Inc. $75,000 annually, due quarterly in arrears
beginning March 31, 1995 (adjusted pro-rata for any period which is less than a
full quarter), and reimburse Rainwater, Inc. annually (payable quarterly in
arrears) for all fees and expenses, including legal fees, reasonably incurred by
Rainwater, Inc. in connection with the ownership of the Securities, up to a
maximum of $25,000 for any calendar year, unless the Company shall have approved
a greater amount.
5.6 Restrictions on Transfers; Restrictions on Exercise of
Warrants.
(a) Restrictions on Transfer of Shares, Warrants and Warrant
Shares. Subject to the provisions of subsection (c), no member of the Buyer
Group, without having obtained the prior written consent of the Company, shall:
(i) prior to the first anniversary of the Closing Date, sell
or transfer any of the Shares held by such member to any other person,
except for (A) Excluded Transfers (as hereinafter defined), or (B)
sales or transfers of a number of Shares, which together with all other
sales or transfers of Shares made by Rainwater, Inc. (or upon its
approval, other members of the Buyer Group) pursuant to this clause
(B), does not exceed 1% of the Shares initially purchased hereunder;
(ii) sell or transfer any of the Warrants held by such member
to any other person, except for Excluded Transfers; and
(iii) prior to the fourth anniversary of the Closing Date,
except for an Excluded Transfer, sell or transfer in a privately
negotiated transaction to a single purchaser and its Affiliates, or any
"Group" (as such term is defined in Rule 13d-5(b)(1) under the Exchange
Act) any combination of Shares, Warrants and/or Warrant Shares, if the
aggregate number of Shares, Warrant Shares and Underlying Warrant
Shares to be so transferred equals 5% or more of the Common Stock then
outstanding on a fully-diluted basis (i.e. including all shares of
Common Stock issuable under the terms of any options, warrants and
similar rights).
(b) Restrictions on Exercise of Warrants. Subject to the provisions of
subsection (d), the members of the Buyer Group shall not, during the time
periods set forth below, exercise Warrants to purchase less than the number of
Warrant Shares set forth opposite such time period (appropriately adjusted for
stock splits, combinations and similar changes):
Time Period Warrant Shares
----------- --------------
From the date immediately following
the first anniversary of the Closing Date 400,000
to and including the second Anniversary of
Closing Date
From the date immediately following
the second Anniversary of the Closing Date
to and including the third Anniversary of 200,000
Closing Date
13
From and after the third Anniversary
of the Closing Date No restriction
(c) Exceptions to Transfer Restrictions. Notwithstanding subsection
(a), any member of the Buyer Group may sell or transfer any of the Shares,
Warrants and/or Warrant Shares to any person pursuant to, as a result of, or in
connection with (i) a tender offer or an exchange offer approved by the Board of
Directors of the Company; (ii) the consummation of a merger (provided the
Company is not the surviving corporation in such merger), consolidation, or a
sale of all or substantially all the assets of the Company; or (iii) any other
"Fundamental Change Transaction" (as such term is defined in the Warrant).
(d) Exceptions to Warrant Exercise Restrictions. The limitations on
the exercise of the Warrants during the Exercise Period (as defined in the
Warrant) which are set forth in subsection (b) are subject to the following
exceptions:
(i) the holders may at any time exercise the balance of the
Warrants remaining outstanding at any time;
(ii) upon the written request of Rainwater, Inc., the holders
of the Warrants may exercise once in each calendar year Warrants to
purchase up to 100,000 Warrant Shares; and
(iii)any of the Warrants may be exercised in connection with
a transaction described in subsection (c).
(e) Transferees; No Other Restrictions. During the period in which the
restrictions set forth in this Section 5.6 remain applicable, neither Buyer nor
any transferee who is a member of the Buyer Group shall be entitled to, directly
or indirectly, sell or transfer any of the Shares, Warrants and/or Warrant
Shares in an Excluded Transfer to any person who is not a party to this
Agreement, unless the purported transferee executes an instrument acknowledging
that it is bound by the terms of this Section 5.6 and such instrument is
delivered to the Company. Except as provided in subsection (a) and this
subsection (e), and subject to compliance with the applicable provisions of the
Securities Act, the Shares, the Warrants and the Warrant Shares are freely
transferable.
5.7 Indemnification of Brokerage. The Company shall be solely
responsible for the payment of any amounts owed to Dean Witter Reynolds Inc. in
connection with the transactions contemplated herein. Each of the parties hereto
agrees to indemnify and hold harmless each other party from and against any
claim or demand for a commission or other compensation by any financial advisor,
broker, agent, finder, or similar intermediary claiming to have been employed by
or on behalf of such indemnifying party and to bear the cost of legal fees and
expenses incurred in defending against any such claim or demand.
5.8 Delivery of Information. The Company will deliver to each Buyer
promptly upon the filing thereof, copies of all registration statements (other
than the exhibits thereto and any registration statements on Form S-8 or its
equivalent) and reports on Forms 10-K (or their equivalents) which the Company
shall have filed with the Commission or any similar reports filed with any state
securities commission or office.
5.9 Rule 144 and Rule 144A Information. With a view to making available
to each Buyer the benefits of Rule 144 and Rule 144A promulgated under the 1933
Act and any other rule or regulation of the Commission that may at any time
permit the Buyers to sell Common Stock of the Company to the public without
registration, the Company agrees to:
14
(i) make and keep public information available, as those
terms are understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act
and the Exchange Act; and
(iii)furnish to each Buyer forthwith upon request (A) a
written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange
Act, (B) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company
under the Securities Act and the Exchange Act and (C) such other
information as may be reasonably requested by each Buyer in availing
itself of any rule or regulation of the Commission which permits the
selling of any such securities without registration.
(iv) comply with all rules and regulations of the Commission
applicable to the Company in connection with use of Rule 144A (or any
successor thereto); and
(v) within five business days of the Company's receipt of a
request made by, or on behalf of, any prospective transferee of who is
a Qualified Institutional Buyer (as defined in Rule 144A) and would be
purchasing Common Stock of the Company in reliance upon Rule 144A),
provide to such prospective transferee copies of annual audited and
quarterly unaudited financial statements of the Company for it to
comply with Rule 144A.
5.10 Standstill.
(a) General. Each Buyer agrees that during the two year period ending
on the second anniversary of the Closing Date, it will not, and it will cause
its Affiliates and employees not to, purchase additional shares of the Company's
Common Stock so that Buyers and their Affiliates and employees collectively own
20% or more of the Company's Common Stock then outstanding; provided, however,
that Buyers and their Affiliates and employees shall not be deemed to own 20% or
more of the Common Stock then outstanding solely by reason of the Company's
purchase of any Common Stock unless thereafter Buyers and their Affiliates and
employees purchase any additional shares of Common Stock (excluding any
acquisition of Warrant Shares upon exercise of the Warrants, which shall not be
restricted hereunder).
(b) Additional Standstill Obligations. Each Buyer further agrees that
during the two year period ending on the second anniversary of the Closing Date,
it will not, and it will cause its Affiliates and employees not to, without
prior Company consent, (i) effect or cause to be effected any (A) "solicitation"
of "proxies" (as such terms are used in the proxy rules of the Commission) with
respect to the Company or any action resulting in such person becoming a
"participant" in any "election contest" (as such terms are used in the proxy
rules of the Commission) with respect to the Company, or (B) any tender or
exchange offer or offer for a merger, consolidation, share exchange or business
combination involving the Company or substantially all of its assets, or (ii)
propose any matter for submission to a vote of the stockholders of the Company.
(c) Amendments to Rights Agreement. If the Company undertakes the
purchase of any Common Stock under circumstances in which any exercise of
Warrants would be considered to cause Buyers and their Affiliates to become an
"Acquiring Person" under the Rights Agreement, the Company agrees to amend the
Rights Agreement to either (i) include the Buyers and their Affiliates in the
definition of an "Initial Shareholder", or (ii) change the definition of "Exempt
Person" so as to exclude any exercise
15
of the Warrants from being considered as an additional purchase of shares of
Common Stock for purposes of the Rights Agreement.
5.11 Participation in Subsequent Private Placements. Until such time as
Buyers and their Affiliates no longer beneficially own in the aggregate at least
600,000 Shares, Warrant Shares and/or Underlying Warrant Shares, in the event
that the Company desires to issue any Equity Securities (as hereinafter defined)
for cash in a private placement transaction, the Company shall, prior to such
issuance, provide written notice to Rainwater, Inc. describing in detail the
Equity Securities to be issued, the potential purchasers thereof, if
specifically known, and the consideration to be received therefrom (a
"Preemptive Notice"). The Buyer Group shall have the right, during the 20
Business Days following receipt of the Preemptive Notice (the "Preemptive Right
Offer Period"), to elect to subscribe for and purchase (the "Preemptive Right")
at the same price, and on such other terms and conditions as are set forth in
the Preemptive Notice, such number of shares of Equity Securities (in the
Company's sole discretion either as a portion of or in addition to the Equity
Securities covered by the Preemptive Notice) as may be required to cause the
Equity Ownership Interest (as hereinafter defined) of the Buyer Group
immediately following such issuance to be equal to the Equity Ownership Interest
of the Buyer Group on the date of the Preemptive Notice. Any notice by the Buyer
Group of their election to exercise the Preemptive Right shall be provided by
Rainwater, Inc. on behalf of such group. Any Equity Securities to be purchased
by the Buyer Group shall be allocated pro-rata among the members of the Buyer
Group electing to exercise the Preemptive Right, as determined by Rainwater,
Inc.
5.12 No Solicitation. From the date of this Agreement to the earlier of
(i) the Closing Date, (ii) January 31, 1996, or (ii) the termination of this
Agreement in accordance with its terms (but not including upon or due to a
breach of this Agreement by the Company), the Company agrees that, except
pursuant to agreements in existence as of the date hereof, (A) it will not, (B)
it will not permit any Subsidiary to and (C) it will not authorize or permit any
officer, director or employee of the Company or any Subsidiary, or any
investment banker, attorney, financial advisor, accountant or other person
retained by the Company or any Subsidiary, directly or indirectly (including by
way of furnishing any information) to (i) solicit, initiate, assist, encourage
or accept any proposal regarding a financing, sale of stock, or any other
transaction involving the Company, which in each case is similar to the proposed
investment contemplated herein (a "Transaction"); (ii) engage in any
negotiations with respect to, or otherwise attempt to consummate, a Transaction;
(iii) provide any public or non-public information concerning the Company to any
person in connection with any proposal for a Transaction or to any person whom
the Company or any Subsidiary knows or has reason to believe is in the process
of planning or considering a Transaction; or (iv) reach any agreement or
understanding for or with respect to any Transaction. The Company will
immediately advise Buyer orally and, within one Business Day, in writing of any
such inquiries, requests for information or Transaction proposals of which it
has knowledge. If the Company or any Subsidiary receives from any person any
offer, inquiry or informational request referred to above, the Company will
promptly advise such person in writing of the terms of this Section 5.12 and
will send Buyer a copy of such notice.
5.13 Amendment of Schedules. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 6.1 and 7.1
have been fulfilled, the Schedules hereto shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude all information contained in any supplement or amendment thereto;
provided, however, that if the Closing shall occur, then all matters
16
disclosed pursuant to any such supplement or amendment at or prior to the
Closing shall be waived and no party shall be entitled to make a claim thereon
pursuant to the terms of this Agreement.
5.14 Access to Information. Between the date hereof and the Closing,
the Company (i) shall give Buyers and their authorized representatives
reasonable access to the Company's employees, offices and other facilities, and
all books and records of the Company and the Subsidiaries, (ii) shall permit
Buyer and its authorized representatives to make such inspections as they may
reasonably require to verify the accuracy of any representation or warranty
contained in Article III, and (iii) shall cause the Company's officers to
furnish Buyer and its authorized representatives with such financial and
operating data and other information with respect to the Company and the
Subsidiaries as Buyer may from time to time reasonably request; provided,
however, that no investigation pursuant to this Section shall affect any
representation or warranty of the Company contained in this Agreement or in any
agreement, instrument, or document delivered pursuant hereto or in connection
herewith; and provided further that the Company shall have the right to have a
representative present at all times.
5.15 HSR Act Notification. To the extent it is determined that the HSR
Act will be applicable to the transaction contemplated hereby, each of the
parties hereto shall (i) file or cause to be filed, as promptly as practicable
after the execution and delivery of this Agreement and in no event later than
January 10, 1996, with the Federal Trade Commission and the United States
Department of Justice, all reports and other documents required to be filed by
such party under the HSR Act concerning the transactions contemplated hereby and
(ii) promptly comply with or cause to be complied with any requests by the
Federal Trade Commission or the United States Department of Justice for
additional information concerning such transactions, in each case so that the
waiting period applicable to this Agreement and the transactions contemplated
hereby under the HSR Act shall expire as soon as practicable after the execution
and delivery of this Agreement. Each party hereto agrees to request, and to
cooperate with the other party or parties in requesting, early termination of
any applicable waiting period under the HSR Act.
5.16 Survival of Covenants. Except for any covenant or agreement which
by its terms expressly terminates as of a specific date, the covenants and
agreements of the parties hereto contained in this Agreement shall survive the
Closing without contractual limitation.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:
6.1 Representations and Warranties True. All the representations and
warranties of Buyers contained in this Agreement shall be true and correct on
and as of the Closing Date, except to the extent that any such representation or
warranty is made as of a specified date, in which case such representation or
warranty shall have been true and correct as of such specified date, except to
the extent contemplated by this Agreement or the Ancillary Documents.
6.2 Covenants and Agreements Performed. Buyers shall have performed
and complied with all covenants and agreements required by this Agreement, if
any, to be performed or complied with by them on or prior to the Closing Date.
17
6.3 HSR Act. To the extent that the HSR Act is applicable to the
transaction contemplated herein, all waiting periods (and any extensions
thereof) applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall have expired or been terminated.
6.4 Legal Proceedings. No Proceeding (as hereinafter defined) shall, on
the Closing Date, be pending or threatened seeking to restrain, prohibit, or
obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
6.5 Certificate. The Company shall have received a certificate executed
by each Buyer, and if Buyer is a corporation, partnership or trust, by a duly
authorized person on behalf of Buyer dated the Closing Date, representing and
certifying, in such detail as the Company may reasonably request, that the
conditions set forth in Sections 6.1 and 6.2 have been fulfilled.
6.6 Private Placement Information. The Company shall have received
evidence reasonably satisfactory it establishing the status (as "accredited
investors" or otherwise) of all Buyers who are assignees of the Buyer initially
executing this Agreement, to the extent reasonably required to establish that
the issuance and sale of the Securities is exempt from the registration
requirements of the Securities Act.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYERS
The obligations of Buyers to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
7.1 Representations and Warranties True. All the representations and
warranties (other than Section 3.11) of the Company contained in this Agreement
shall be true and correct on and as of the Closing Date (except that the
representations and warranties contained in Sections 3.3(a) and 3.8 shall be
true and correct in all material respects), except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such specified
date, except to the extent contemplated by this Agreement or the Ancillary
Documents.
7.2 Covenants and Agreements Performed. The Company shall have
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
7.3 Opinion of Counsel. Each Buyer shall have received an opinion of
legal counsel to the Company, dated the Closing Date, in form and substance
satisfactory to the Buyers and their counsel, covering those matters set forth
in Exhibit 7.3 attached hereto.
7.4 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
18
7.5 Certificates. Each Buyer shall have received a certificate or
certificates representing the Shares and the Warrants, as applicable, in
definitive form representing the Shares and Warrants purchased by it, (in the
case of the Warrants in substantially the form set forth in Exhibit A hereto)
registered in the name of such Buyer and duly executed by the Company.
7.6 Officer Certificate. Buyer shall have received a certificate
executed on behalf of the Company by the chief executive officer or the chief
financial officer of the Company, dated the Closing Date, representing and
certifying, in such detail as the Buyer may reasonably request, that the
conditions set forth in Sections 7.1, 7.2 and 7.4 have been fulfilled.
ARTICLE VIII
TERMINATION, AMENDMENT, AND WAIVER
8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:
(a) by mutual written consent of the Company and Buyers; or
(b) by the Company, if, on the Closing Date, any of the conditions set
forth in Article VI shall not have been satisfied and shall not have been waived
by the Company; or
(c) by Buyers, if, on the Closing Date, any of the conditions set
forth in Article VII shall not have been satisfied and shall not have been
waived by Buyers; or
(d) by the Company or Buyers if the Closing has not occurred by the
close of business on January 31, 1996, so long as the failure to consummate the
transaction on or before such date does not result from a breach of this
Agreement by the party seeking termination of this Agreement; provided that, if
the failure to consummate the transaction on or before such date is due solely
to the failure to have satisfied the condition in Section 6.3, then the earliest
date upon which this Agreement may be terminated pursuant to this subparagraph
(d) is March 31, 1996; or
(e) at any time before the Closing, by Company or Buyers, in the event
(i) of a material breach of this Agreement by any non-terminating party if such
non-terminating party fails to cure such breach within five Business Days
following notification by any one or more terminating parties, or (ii) upon
notification to the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement has become impossible or impractical with the use of best efforts, if
the failure of such condition to be satisfied is not caused by a breach by the
terminating party.
8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1 by the Company, on the one hand, or Buyers, on
the other, written notice thereof shall forthwith be given to the other party
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall become void and have no effect, except that the agreements
contained in this Section and in Sections 5.1, 5.5 and 5.7 and Article IX shall
survive the termination hereof. Nothing contained in this Section shall relieve
any party from liability for any breach of this Agreement.
8.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the parties hereto.
19
8.4 Waiver. No failure or delay by a party hereto in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege. The provisions
of this Agreement may not be waived except by an instrument in writing signed by
or on behalf of the party against whom such waiver is sought to be enforced.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION
9.1 Survival. The representations and warranties of the parties hereto
contained in this Agreement or in any certificate, instrument or document
delivered pursuant hereto shall survive the Closing, regardless of any
investigation made by or on behalf of any party, until the second anniversary of
the Closing Date; provided, however, that the representations and warranties of
the Company contained in Sections 3.1, 3.3., 3.4 and 3.7 shall survive until 30
days after the expiration of the limitation period under the applicable statute
of limitations (each such anniversary and time of expiration, a "Survival
Date"). No action may be brought with respect to a breach of any representation
after the Survival Date unless, prior to such time, the party seeking to bring
such an action has notified the other parties of such claim, specifying in
reasonable detail the nature of the loss suffered. The provisions of this
Section 9.1 shall have no effect upon any of the covenants of the parties set
forth in Article V or any of the other obligations of the parties hereto under
the Agreement, whether to be performed later, at or after the Closing.
9.2 Indemnification by Company. The Company shall indemnify, defend,
and hold harmless Buyers from and against any and all claims, actions, causes of
action, demands, losses, damages, liabilities, costs, and expenses (including
reasonable attorneys' fees and expenses) (collectively, "Damages"), asserted
against, resulting to, imposed upon, or incurred by Buyers, directly or
indirectly, by reason of or resulting from any breach by the Company of any of
its representations, warranties, covenants, or agreements contained in this
Agreement or in any certificate, instrument, or document delivered pursuant
hereto.
9.3 Indemnification by Buyers. Each Buyer severally (but not jointly)
shall indemnify, defend, and hold harmless the Company from and against any and
all Damages asserted against, resulting to, imposed upon, or incurred by the
Company, directly or indirectly, by reason of or resulting from any breach by
such Buyer of any of its representations, warranties, covenants, or agreements
contained in this Agreement or in any certificate, instrument, or document
delivered pursuant hereto.
9.4 Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 9.2 or 9.3 of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give written notice to
the indemnifying party of the commencement thereof, but the failure so to notify
the indemnifying party shall not relieve it of any liability that it may have to
any indemnified party except to the extent the indemnifying party demonstrates
that the defense of such action is prejudiced thereby. In case any such action
shall be brought against an indemnified party and it shall give written notice
to the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may wish, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party elects to assume the defense of
such action, the indemnified party shall have the right to employ separate
counsel at its own expense and to participate in the defense thereof. If the
indemnifying party elects not to assume (or fails to assume) the defense of such
action,
20
the indemnified party shall be entitled to assume the defense of such action
with counsel of its own choice, at the expense of the indemnifying party. If the
action is asserted against both the indemnifying party and the indemnified party
and there is a conflict of interests which renders it inappropriate for the same
counsel to represent both the indemnifying party and the indemnified party, the
indemnifying party shall be responsible for paying for separate counsel for the
indemnified party; provided, however, that if there is more than one indemnified
party, the indemnifying party shall not be responsible for paying for more than
one separate firm of attorneys to represent the indemnified parties, regardless
of the number of indemnified parties. The indemnifying party shall have no
liability with respect to any compromise or settlement of any action effected
without its written consent (which shall not be unreasonably withheld).
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by any party hereto shall be
in writing and shall be deemed to have been duly given or made if delivered
personally, or transmitted by first class registered or certified mail, postage
prepaid, return receipt requested, or sent by prepaid overnight delivery
service, or sent by cable, telegram, or telefax, to the parties at the addresses
and telefax numbers set forth opposite their names on the signature page hereof
(in the case of the Company) and on Annex I hereto (in the case of Buyers) (or
at such other addresses and telefax numbers as shall be specified by the parties
by like notice).
10.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
10.3 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors, and permitted assigns.
Except as otherwise expressly provided in this Agreement, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, except that any Buyer may assign to any partnership in which Rainwater,
Inc. is the sole managing partner, or to any other member of the Buyer Group,
any of Buyer's rights, interests, or obligations hereunder, upon notice to the
other party or parties. Prior to the Closing, any assignee of the initial Buyer
executing this Agreement shall, upon such assignment, execute this Agreement as
a Buyer and the provisions of Annex I shall be amended to accurately reflect the
portion of the Securities to be purchased by each Buyer. Except as provided in
Article IX, nothing in this Agreement, express or implied, is intended to or
shall confer upon any person other than the parties hereto, and their respective
heirs, legal representatives, successors, and permitted assigns, any rights,
benefits, or remedies of any nature whatsoever under or by reason of this
Agreement.
10.4 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
21
DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
10.6 Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
ARTICLE XI
DEFINITIONS
11.1 Certain Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Article:
"Affiliate" has the meaning specified in Rule 12b-2
promulgated under the Exchange Act.
"Ancillary Documents" means each agreement, instrument, and
document (other than this Agreement) executed or to be executed by the
Company or Buyer in connection with the transactions contemplated by
this Agreement, including without limitation the Warrants.
"Applicable Law" means any statute, law, rule, or regulation
or any judgment, order, writ, injunction, or decree of any Governmental
Entity to which a specified person or property is subject.
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in Atlanta, Georgia are
authorized or obligated by law or executive order to close.
"Buyer Group" shall mean collectively, all Buyers together
with their respective Affiliates and bona fide employees.
"Encumbrances" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions
(whether on voting, sale, transfer, disposition, or otherwise),
easements, and other encumbrances of every type and description,
whether imposed by law, agreement, understanding, or otherwise.
"Equity Ownership Interests" shall mean, with respect to the
members of the Buyer Group, at any time, the fraction (a) having as its
numerator the number of shares of Common Stock and Underlying Warrant
Shares held beneficially by all members of the Buyer Group at such
time, and (b) having as its denominator the aggregate number of shares
of Common Stock (calculated on a fully diluted basis) issued and
outstanding at such time.
"Equity Securities" means any capital stock of the Company,
and any securities directly or indirectly convertible into, or
exercisable or exchangeable for any capital stock of the Company, or
any right, option, warrant or other security which, with the payment of
additional consideration, the expiration of time or the occurrence of
any event shall give the holder thereof the right to acquire any
capital stock of the company or any security convertible into or
exercisable or exchangeable for, any capital stock of the Company.
22
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agreement" means that certain Exchange Agreement
among the Company and certain other parties dated as of December 13,
1995.
"Excluded Transfer" means any transfer by a member of the
Buyer Group to (i) an affiliate or bona fide employee of the
transferor, (ii) any other Buyer, or (iii) to any Affiliate or bona
fide employee of another Buyer.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any public, governmental, or
regulatory body, agency, department, commission, board, bureau, or
other authority or instrumentality (domestic or foreign).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization, or Governmental Entity.
"Proceedings" means all proceedings, actions, suits,
investigations, and inquiries by or before any arbitrator or
Governmental Entity.
"Registrable Securities" means the Registrable Shares and the
Registrable Warrant Shares.
"Registrable Shares" means the Shares and any Common Stock or
other Equity Securities issued with respect thereto by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise.
"Registrable Warrant Shares" means the Warrant Shares and any
Common Stock or other Equity Securities issued with respect thereto by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
"Rights Agreement" means that certain Rights Agreement, dated
as of July 21, 1992 between the Company and First Union National Bank
of North Carolina, as rights agent.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation more than 50% of whose
outstanding voting securities, or any general partnership, joint
venture, or similar entity more than 50% of whose total equity
interests, is owned, directly or indirectly, by the Company, or any
limited Partnership of which the Company or any Subsidiary is a general
partner.
"Underlying Warrant Shares" shall mean, at any time, all
shares of Common Stock which may be acquired upon exercise of the
Warrants. For purposes hereof, any person who holds Warrants shall be
deemed to be the holder of the Underlying Warrant Shares obtainable
upon exercise of such Warrants.
23
11.2 Certain Additional Defined Terms. In addition to such terms as
are defined in the opening paragraph of and the recitals to this Agreement and
in Section 11.1, the following terms are used in this Agreement as defined in
the Sections set forth opposite such terms:
Defined Term Section Reference
------------ -----------------
Closing..................................................................................................Article II
Closing Date.............................................................................................Article II
Commission..................................................................................................... 3.8
Damages........................................................................................................ 9.2
Disclosure Schedule............................................................................................ 3.8
Initial Designee............................................................................................... 5.4
Material Activity...............................................................................................5.3
Preemptive Notice..............................................................................................5.11
Preemptive Right...............................................................................................5.11
Preemptive Right Offer Period..................................................................................5.11
Piggyback Registration......................................................................................... 5.3
Purchase Price..................................................................................................1.2
Registration Expenses...........................................................................................5.3
Registration Statement............................................................................................?
SEC Filings.................................................................................................... 3.9
Securities......................................................................................................1.1
Shares..........................................................................................................1.1
Survival Date.................................................................................................. 9.1
Transaction................................................................................................... 5.12
Warrant Registration Agreement....................................................................................?
Warrant Shares..................................................................................................3.7
Warrants........................................................................................................1.1
24
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by their duly authorized representatives, all as
of the day and year first above written.
MAGELLAN HEALTH SERVICES, INC.
Address:
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326 By: /s/ E. Mac Crawford
Fax: (404) 814-5717 -----------------------------------
E. Mac Crawford, Chairman
and Chief Executive Officer
BUYER(S):
/s/ Richard E. Rainwater
---------------------------------------
Richard E. Rainwater
25
ANNEX I
Number of Shares Shares Underlying Total
Name of Buyer Address and Fax ------ Warrants Purchase Price
- ------------- --------------- -------- --------------
Richard E. 777 Main St. 4,000,000 2,000,000 $69,732,000
Rainwater Suite 2700
Fort Worth, TX
76102
(817)878-0460
EXHIBIT A
(Form of Warrants)
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR
UNLESS AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
THE RIGHT TO SELL OR OTHERWISE TRANSFER THIS WARRANT IS SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN A STOCK AND WARRANT PURCHASE AGREEMENT DATED DECEMBER
22, 1995, BETWEEN THE COMPANY AND THE INITIAL BUYERS OF THE WARRANTS, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY. THIS WARRANT
MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THE STOCK
AND WARRANT PURCHASE AGREEMENT AND IN THIS WARRANT, AND NO SALE OR TRANSFER OF
THIS WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL
HAVE BEEN COMPLIED WITH.
-----------------------------------------------
MAGELLAN HEALTH SERVICES, INC.
(Incorporated under the laws of the State of Delaware)
Void after 5:00 p.m., Atlanta, Georgia, local time,
on January , 2000.
-----
No. Right to Purchase
----- Shares
----------
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _________________________,
(the "Holder"), or registered assigns, is entitled to purchase from Magellan
Health Services, Inc. (f/n/a Charter Medical Corporation), a Delaware
Corporation (the "Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, ___________________________________________( )
fully paid and nonassessable shares of the Company's Common Stock, par value
$.25 per share (the "Common Stock"), at an exercise price per share of $26.150
(the "Exercise Price"). The term "Warrant Shares", as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof.
This Warrant is one of a series of Warrants (the "Warrants") issued
pursuant to, and is subject to all terms, provisions, and conditions contained
in, that certain Stock and Warrant Purchase Agreement, dated December 22, 1995
(the "Purchase Agreement"), by and among the Company, the Holder and other
purchasers of the Warrants. This Warrant is subject to the following additional
terms, provisions, and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof and the provisions of the Purchase Agreement
which restrict the exercise of the Warrants, this Warrant may be exercised by
the holder hereof, in whole or in part, by the surrender of this
A-1
Warrant, together with a completed Exercise Agreement in the form attached
hereto, to the Company during normal business hours on any business day at the
Company's principal office in Atlanta, Georgia (or such other office or agency
of the Company as it may designate by notice to the holder hereof), during the
Exercise Period (as defined in Paragraph 2), and upon payment to the Company of
the Exercise Price for the Warrant Shares specified in said Exercise Agreement,
which such payment shall be made in cash or by certified or official bank check.
The Company shall not be required to issue fractional Warrant Shares upon any
exercise of the Warrant, but instead shall pay to the holder of this Warrant the
cash value of any such fractional Warrant Shares. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or its designee as
the record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement
delivered, and payment made for such shares as aforesaid. Certificates for the
Warrant Shares so purchased, representing the aggregate number of shares
specified in said Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding ten business days, after this Warrant
shall have been so exercised. The certificates so delivered shall be in such
denominations as may be reasonably requested by the holder hereof, shall, unless
the Warrant Shares evidenced by such certificate have previously been registered
under the Securities Act of 1933, as amended (the "Securities Act") be imprinted
with a restrictive legend substantially similar to the legend appearing on the
face of this Warrant, and shall be registered in the name of said holder or such
other name as shall be designated by said holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of said certificates, deliver to
said holder a new Warrant representing the number of shares with respect to
which this Warrant shall not then have been exercised, which Warrant shall be
imprinted on its face with the same legend appearing on the face of this
Warrant. The Company shall pay all taxes and other expenses and charges payable
in connection with the preparation, execution, and delivery of stock
certificates (and any new Warrants) pursuant to this Paragraph 1 except that, in
case such stock certificates shall be registered in a name or names other than
the holder of this Warrant, funds sufficient to pay all stock transfer taxes
which shall be payable in connection with the execution and delivery of such
stock certificates shall be paid by the holder hereof to the Company at the time
of the delivery of such stock certificates by the Company as mentioned above.
2. Period of Exercise. Subject to the provisions of the Purchase
Agreement which restrict the exercise of the Warrants, this Warrant is
exercisable at any time or from time to time during the period commencing on
January ____, 1997 and ending 5:00 p.m. Atlanta, Georgia, local time, on January
, 2000 (the "Exercise Period").
3. Certain Actions Prohibited. The Company will not, by amendment of
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant.
Without limiting the generality of the foregoing,
(i) the Company will not increase the par value of the shares
of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect,
(ii) before taking any action which would cause an adjustment
reducing the Exercise Price below the then par value of the shares of
Common Stock so receivable, the Company will
A-2
take all such corporate action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Exercise Price
upon the exercise of this Warrant, or
(iii) the Company will not take any action which results in
any adjustment of the Exercise Price if the total number of shares of
Common Stock issuable after the action upon the exercise of this
Warrant would exceed the total number of shares of Common Stock then
authorized by the Company's charter and available for other the purpose
of issue upon such exercise.
4. Anti-dilution Provisions. The Exercise Price shall be subject to
adjustment from time to time as provided in this Paragraph 4. Upon each
adjustment of the Exercise Price, the holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
largest number of Warrant Shares obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
purchasable hereunder immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of this Paragraph 4, the term "Capital Stock", as used herein, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation which may be
authorized in the future by an amendment to the Company's charter, provided that
the shares purchasable pursuant to this Warrant shall include only shares of
Common Stock, or shares resulting from any subdivision or combination of the
Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in this Paragraph 4,
the stock or other securities or property provided for in this Paragraph 4.
(a) Subdivisions and Combinations. In case at any time the Company
shall (i) subdivide the outstanding shares of Capital Stock into a greater
number of shares, or (ii) combine the outstanding shares of Capital Stock into a
smaller number of shares, the Exercise Price in effect immediately prior thereto
shall be adjusted proportionately so that the adjusted Exercise Price shall bear
the same relation to the Exercise Price in effect immediately prior to such
event as the total number of shares of Capital Stock outstanding immediately
prior to such event shall bear to the total number of shares of Capital Stock
outstanding immediately after such event. Such adjustment shall become effective
immediately after the effective date of a subdivision or combination.
(b) Stock Dividends. In case the Company at any time after the date
hereof shall declare, order, pay or make any dividend or other distribution to
all holders of the Capital Stock payable in Capital Stock, then in each such
case, subject to Paragraph 4(d) hereof, the Exercise Price in effect immediately
prior to the close of business on the record date fixed for the determination of
holders of any class of securities entitled to receive such dividend or
distribution shall be reduced to a price (calculated to the nearest .001 of a
cent) determined by multiplying such Exercise Price by a fraction
(i) the numerator of which shall be the number of shares of
Capital Stock outstanding immediately prior to such dividend or
distribution, and
(ii) the denominator of which shall be the number of shares of
Capital Stock outstanding immediately after such dividend or
distribution.
Such adjustment shall be made on the date such dividend is paid or such
distribution is made and shall become effective retroactive to the record date
for the determination of shareholders entitled to receive such dividend or
distribution.
A-3
(c) Dividends other than Stock Dividends. In case the Company at any
time after the date hereof shall declare, order, pay or make any dividend or
other distribution to all holders of the Capital Stock, other than a dividend
payable in shares of Capital Stock (including, without limitation, dividends or
distributions payable in cash, evidences of indebtedness, rights, options or
warrants to subscribe for or purchase any Capital Stock or other securities, or
any other securities or other property), then, and in each such case, subject to
Paragraph 4(d) hereof, the Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
any class of securities entitled to receive such dividend or distribution shall
be reduced to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Exercise Price by a fraction
(i) the numerator of which shall be the "Market Price" (as
defined below) in effect on such record date or, if any class of
Capital Stock trades on an ex-dividend basis, the trading date
immediately prior to the date of commencement of ex-dividend trading,
less the value of such dividend or distribution (as determined in good
faith by the Board of Directors of the Company) applicable to one share
of Capital Stock, and
(ii) the denominator of which shall be such Market Price on
such record date or, if any class of Capital Stock trades on an
ex-dividend basis, the trading date immediately prior to the date of
commencement of ex-dividend trading.
Such adjustment shall be made on the date such dividend is paid or such
distribution is made and shall become effective retroactive to the record date
for the determination of shareholders entitled to receive such dividend or
distribution.
For the purpose hereof, "Market Price" shall mean, on any date
specified herein, (A) if any class of Capital Stock is listed or admitted to
trading on any national securities exchange, the highest price obtained by
taking the arithmetic mean over a period of 20 consecutive days on which such
national securities exchange (or if such stock is traded on more than one
national securities exchange, the exchange the Company has designated under the
Securities Exchange Act of 1934 to receive copies of reports filed by the
Company under such act) is open for trading on a regular basis (any such day is
a "Trading Day") ending the Trading Day immediately prior to such date of the
average, on each such Trading Day, of the high and low sale prices of shares of
each such class of Capital Stock or if no such sale takes place on such date,
the average of the highest closing bid and lowest closing asked prices thereof
on such date, in each case as officially reported on all national securities
exchanges on which each such class of Capital Stock is then listed or admitted
to trading, or (B) if no shares of any class of Capital Stock are then listed or
admitted to trading on any national securities exchange, the highest closing
price of any class of Capital Stock on such date in the over-the-counter market
as shown by the NASDAQ National Market System or, if no such shares of any class
of Capital Stock are then quoted in such system, as published by the National
Quotation Bureau, Inc. or any similar successor organization, and in either case
as reported by any member firm of the New York Stock Exchange selected by the
Company. If no shares of any class of Capital Stock are then listed or admitted
to trading on any national securities exchange and if no closing bid and asked
prices thereof are then so quoted or published in the over-the-counter market,
"Market Price" shall mean the higher of (x) the book value per share of Capital
Stock (assuming for the purposes of this calculation the economic equivalence of
all shares of all classes of Capital Stock) as determined on a fully diluted
basis in accordance with generally accepted accounting principles by the Board
of Directors of the Company as of the last day of any month ending within 60
days preceding the date as of which the determination is to be made or (y) the
fair value per share of Capital Stock (assuming for the purposes of this
calculation the economic equivalence of all shares of all classes of Capital
Stock), as determined on a fully diluted basis in good faith by the Board of
Directors of the Company, as of a date which is 15 days preceding the date as of
which the determination is to be made.
A-4
(d) Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required pursuant to this Paragraph 4 would be
less than one percent (1%) of the Exercise Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of such Exercise Price; provided that, upon the exercise of this Warrant, all
adjustments carried forward and not theretofore made up to and including the
date of such exercise shall, with respect to the portion of this Warrant then
exercised, be made to the nearest .001 of a cent.
(e) Fundamental Change Transaction. In case at any time after the date
hereof a purchase, tender, or exchange offer shall have been made to and
accepted by the holders of more than 50% of the outstanding shares of Capital
Stock, or the Company is otherwise a party to any transaction (including,
without limitation, a merger, consolidation, sale of all or substantially all
the Company's assets, liquidation, or recapitalization of the Capital Stock)
which is to be effected in such a way that as a result of such transaction or
offer (x) the holders of Common Stock (or any other securities of the Company
then issuable upon the exercise of this Warrant) shall be entitled to receive
stock or other securities or property (including cash) with respect to or in
exchange for Common Stock (or such other securities), or (y) the Capital Stock
ceases to be a publicly traded security either listed on the American Stock
Exchange, the New York Stock Exchange or the NASDAQ National Market System or
any successor thereto or comparable system (each such transaction being herein
called a "Fundamental Change Transaction"), then, as a condition of such
Fundamental Change Transaction, lawful and adequate provision shall be made
whereby the holder of this Warrant shall thereafter have the right to purchase
and receive upon the basis and upon the terms and conditions specified in this
Warrant, and in lieu of the shares of Common Stock (or such other securities)
purchasable immediately before such transaction upon the exercise hereof, such
stock or other securities or property (including cash) as may be issuable or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock (or such other securities) equal to the number of shares of Common
Stock (or such other securities) purchasable immediately before such transaction
upon the exercise hereof, had such Fundamental Change Transaction not taken
place. In any such case appropriate provision shall be made with respect to the
rights and interests of the holder of this Warrant to the end that the
provisions hereof (including, without limitation, the provisions for adjustments
of the Exercise Price and of the number of Warrant Shares purchasable upon
exercise hereof) shall thereafter be applicable, as nearly as reasonably may be,
in relation to the stock or other securities or property thereafter deliverable
upon the exercise hereof (including an immediate adjustment of the Exercise
Price if by reason of or in connection with such Fundamental Change Transaction
any securities are issued or event occurs which would, under the terms hereof,
require an adjustment of the Exercise Price). In the event of a consolidation or
merger of the Company with or into another corporation or entity as a result of
which a greater or lesser number of shares of common stock of the surviving
corporation or entity are issuable to holders of Capital Stock in respect of the
number of shares of Capital Stock outstanding immediately prior to such
consolidation or merger, then the Exercise Price in effect immediately prior to
such consolidation or merger shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Capital
Stock. The Company shall not effect any such Fundamental Change Transaction
unless prior to or simultaneously with the consummation thereof the successor
corporation or entity (if other than the Company) resulting from such
consolidation or merger or the corporation or entity purchasing such assets and
any other corporation or entity the shares of stock or other securities or
property of which are receivable thereupon by the holder of this Warrant shall
expressly assume, by written instrument executed and delivered (and satisfactory
in form) to the holder of this Warrant, (i) the obligation to deliver to such
holder such stock or other securities or property
A-5
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase and (ii) all other obligations of the Company hereunder.
(f) Notice of Adjustment. Upon the occurrence of any event requiring an
adjustment of the Exercise Price, then and in each such case the Company shall
promptly deliver to the holder of this Warrant a notice stating the Exercise
Price resulting from such adjustment and the increase or decrease, if any, in
the number of shares of Common Stock issuable upon exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Within 90 days after each fiscal year in which
any such adjustment shall have occurred, or within 30 days after any request
therefor by the holder of this Warrant stating that such holder contemplates
exercise of this Warrant, the Company will deliver to the holder of this Warrant
a certificate of the Company's chief financial officer confirming the statements
in the most recent notice delivered under this Paragraph 4(f).
(g) Other Notices. In case at any time:
(i) the Company shall declare or pay to all the holders of
Capital Stock any dividend (whether payable in Capital Stock, cash,
securities or other property);
(ii) the Company shall offer for subscription pro rata to all
the holders of Capital Stock any additional shares of stock of any class
or other rights;
(iii) there shall be any capital reorganization, or
reclassification of the Capital Stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all its
assets to, another corporation or other entity;
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding-up of the Company; or
(v) there shall be any other Fundamental Change Transaction;
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (a) at least 15 days prior to any event referred to in clause (i)
above, at least 30 days prior to any event referred to in clause (ii), (iii),
(iv) or (v) above, written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution, or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, or Transaction and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, or Transaction known to the Company, at least 30 days
prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution, or subscription rights, the date on
which such holders of Capital Stock shall be entitled thereto, and such notice
in accordance with the foregoing clause (b) shall also specify the date on which
such holders of Capital Stock shall be entitled to exchange their Capital Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, or Transaction, as the case may be. Such notice shall also state
that the action in question or the record date is subject to the effectiveness
of a registration statement under the Securities Act, or to a favorable vote of
security holders, if either is required.
A-6
(h) Certain Events. If any event occurs as to which, in the good faith
judgment of the Board of Directors of the Company, the other provisions of this
Paragraph 4 are not strictly applicable or if strictly applicable would not
fairly protect the exercise rights of the holder of this Warrant in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make such adjustment, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holder of this Warrant; provided, that no
such adjustment shall have the effect of increasing the Exercise Price as
otherwise determined pursuant to this Paragraph 4.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any warrant or
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, and Replacement of Warrant; Registration Rights.
(a) Warrant Transferable. The transfer of this Warrant and all rights
hereunder, in whole or in part, is registrable at the office or agency of the
Company referred to in Paragraph 7(e) hereof by the holder hereof in person or
by his duly authorized attorney, upon surrender of this Warrant properly
endorsed. Upon any transfer of this Warrant to any person, other than a person
who is at that time a holder of other Warrants, the Company shall have the right
to require the holder and the transferee to make customary representations to
the extent reasonably necessary to assure that the transfer will comply with the
Securities Act and any applicable state securities laws. Each holder of this
Warrant, by taking or holding the same, consents and agrees that this Warrant,
when endorsed in blank, shall be deemed negotiable, and that the holder hereof,
when this Warrant shall have been so endorsed, may be treated by the Company and
all other persons dealing with this Warrant as the absolute owner and holder
hereof for any purpose and as the person entitled to exercise the rights
represented by this Warrant and to the registration of transfer hereof on the
books of the Company; but until due presentment for registration of transfer on
such books the Company may treat the registered holder hereof as the owner and
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) hereof, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to be imprinted with the same legend appearing on the face of this
Warrant and to represent the right to purchase such number of shares as shall be
designated by said holder hereof at the time of such surrender. For purposes
hereof, the term "Warrant" shall be deemed to include any and all such
replacement Warrants, whether issued pursuant to this subparagraph (b) or any
other Paragraph hereof.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or
A-7
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly cancelled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal office in
Atlanta, Georgia (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Registration Rights. The issuance of any Warrant Shares required to
be reserved for purposes of exercise of this Warrant and the resale of such
Warrant Shares are entitled to the benefits of the registration rights set forth
in the Purchase Agreement.
8. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail, postage prepaid and addressed, to such holder at the address
shown for such holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such holder. All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail, postage prepaid and
addressed, to the office of the Company at 3414 Peachtree Road, N.E., Suite
1400, Atlanta, GA 30326, Attention:
-------------------------------------------,
or at such other address as shall have been furnished to the holder of this
Warrant by notice from the Company. Any such notice, request, or other
communication may be sent by telegram or telex, but shall in such case be
subsequently confirmed by a writing personally delivered or sent by certified or
registered mail as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
delivery thereof to (or the receipt by, in the case of a telegram or telex) the
person entitled to receive such notice at the address of such person for
purposes of this Paragraph 8, or, if mailed, at the completion of the third full
day following the time of such mailing thereof to such address, as the case may
be.
9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF DELAWARE, WITHOUT REGARD TO ANY
CHOICE OF LAW PRINCIPLES OF SUCH STATE.
10. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific enforcement of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
A-8
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall, to the extent provided
in Section 4(e), be binding upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all the Company's assets.
A-9
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on this day of 1996.
---- ------------------,
MAGELLAN HEALTH SERVICES, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
[CORPORATE SEAL]
Attest:
- -----------------------------
Name:
------------------------
Title:
------------------------
A-10
FORM OF EXERCISE AGREEMENT
Dated:
----------, -----
To:
--------------------------
--------------------------
--------------------------
Attention:
----------------
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase shares of Common Stock covered
-----
by such Warrant, and makes payment herewith in full therefor at the price
per share provided by such Warrant *[in cash or by certified or official bank
check in the amount of $ ] held by the undersigned and any applicable
--------
taxes payable by undersigned. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:
-------------------------------------------------------------
Signature:
--------------------------------------------------------
Title of Signing Officer or Agent(if any):
------------------------
Note: The above signature should correspond exactly with the
name on the face of the within Warrant or with the
name of the assignee appearing in the assignment form.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
A-11
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights represented by and under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints
------------------------------
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: , .
---------------------- -----
In the presence of
- -----------------------------------
Name:
---------------------------------------
Signature:
----------------------------------
Title of Signing Officer or Agent
(if any):
-----------------------------------
Address:
------------------------------------
------------------------------------
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
A-12
COMPANY DISCLOSURE SCHEDULE
Section 3.8. - List of Significant Subsidiaries
Charter Behavioral Health Systems Inc.
Section 3.9 - List of Material Agreements
Employment agreement of Craig L. McKnight is being filed with
the Company's 10-K for the year ended September 30, 1995.
Section 3.10 - List of Material Liabilities/Obligations
(a) the litigation and non-compliance with laws referred to in the
letter from Steve J. Davis to Steve Surbaugh dated November 10, 1995, and the
update thereto from Steve J. Davis to Cherie Fuzzell and Bob Miller dated
November 21, 1995 (copies of which have been delivered to Buyers), which in the
reasonable judgment of the Company, do not and will not, individually and in the
aggregate have a material adverse effect on the business, assets, results of
operations or financial condition of the Company.
(b) acquisition of a majority interest in Green Springs Health Systems
Inc.
Section 3.12 - Compliance with Laws
(ii) those notices of noncompliance referred to in the letter from
Steve J. Davis to Steve Surbaugh dated November 10, 1995, and the update thereto
from Steve J. Davis to Cherie Fuzzell and Bob Miller dated November 21, 1995
(copies of which have been delivered to Buyers).
Section 3.13 - Litigation
None
EXHIBIT 7.3
Matters to be Covered in Opinion of Counsel to Company
- ------------------------------------------------------
- due incorporation, valid existence and good standing of Company and
significant subsidiaries under the laws of the State of Delaware, and corporate
power to own, lease and operate properties and to carry on business as presently
conducted
- qualification to do business and good standing as a foreign
corporation in states necessary for conduct of current business
- confirmation of authorized and outstanding capital stock of Company
- issuance of shares duly authorized, and shares are validly issued,
fully paid and nonassessable
- warrant shares to be issued are validly authorized and reserved for
issuance and assuming no changes in law, warrant shares will be validly issued,
fully paid and nonassessable upon proper exercise of warrant and payment of
exercise price
- issuance of the Securities and any Warrant Shares upon exercise of
Warrants is not subject to any preemptive right under the Delaware General
Corporation Law or the certificate of incorporation or bylaws of Company
- due authorization, execution, delivery and performance of agreements
- agreements are legal, valid and binding upon Company
- agreements and transaction will not conflict with or violate
certificate of incorporation, bylaws or applicable law or breach, violate or
cause default under material contracts, judgements, orders etc., or result in
creation of material lien upon properties
- any required consents approvals, filings etc. required under
applicable law have been obtained
- confirmation of no material adverse litigation and proceedings
- issuance of Securities exempt from registration requirements
- confirmation that private offering of Warrants and Shares will not be
integrated with public offering of Warrant Shares and resale of Warrant Shares.
40334 00002 CORP 103264