Exhibit 4.21
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH REGISTRATION OR QUALIFICATION AS
MAY BE NECESSARY UNDER THE SECURITIES LAWS OF ANY STATE, OR AN EXEMPTION FROM
SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS UNDER THE ACT OR SUCH STATE LAW.
PHC, INC.
________________________________________
CLASS A COMMON STOCK PURCHASE WARRANT
________________________________________
Dated as of June 13, 2007
Reference is made to that certain Amended and Restated Revolving Credit,
Term Loan and Security Agreement dated as of the date hereof (as amended,
supplemented or modified from time to time, the "Loan Agreement"), among PHC,
INC. a Massachusetts corporation (the "Company") and certain of its subsidiaries
and CAPITALSOURCE FINANCE LLC (the "Lender"), an affiliate of CSE EQUITY
HOLDINGS LLC, a Delaware limited liability company ("CapitalSource"), and to the
other Loan Documents, pursuant to which the Lender has agreed to make certain
loans to the Borrowers (the "Loans"). This Warrant is issued at Closing under
the Loan Agreement and means and shall include any and all warrants issued in
substitution for and/or in replacement of this Warrant. The obligations of the
Lender to execute and deliver the Loan Documents and to consummate the
transactions thereunder are conditioned on, among other things, the issuance of
this Warrant to CapitalSource, and the Company has agreed to issue this Warrant
to CapitalSource in order to induce such affiliate to enter into the Loan
Documents.
Capitalized terms used in this Warrant and not elsewhere defined herein
shall have the meanings set forth in Schedule 1 to this Warrant or in the Loan
Agreement (if not defined herein).
1. Grant. In consideration of the foregoing and other value received, the
Company hereby grants to CapitalSource and/or its assigns or transferees
(collectively, the "Holder"), at the exercise price set forth in Section 3
below, the right to purchase up to 250,000 shares of Class A Common Stock (or
other security issued in accordance with Section 8) subject to adjustment from
time to time (the "Warrant Shares").
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2. Exercise Period. The right to exercise this Warrant, in whole or in
part, begins on the date hereof and expires on the tenth anniversary of the date
hereof (such date, the "Expiration Date").
3. Exercise Price. The exercise price of this Warrant is $3.09 on
execution] per share (the "Exercise Price").
4. Anti-Dilution Adjustment.
(a) Dilutive Transactions. Each time the Company enters into a Dilutive
Transaction, the number of Warrant Shares issuable hereunder shall be
increased to the number determined by performing the following calculation
and rounding the resulting number to the nearest whole share: divide: (i)
the Non-Dilutive Price of a Warrant Share then in effect multiplied by the
number of Warrant Shares then issuable hereunder, by (ii) the Weighted
Average Per Share Value.
(b) Readjustment. If any option, right or right to convert or exchange any
Common Stock Equivalent issued in connection with a Dilutive Transaction
expires without having been exercised prior to the exercise by the Holder
of its rights hereunder, the number of Warrant Shares then issuable
hereunder shall forthwith be readjusted to such lesser number as would have
been issuable had the option, right or Common Stock Equivalent never been
issued.
(c) Adjustment of Exercise Price. Upon each adjustment of the number of
Warrant Shares as provided in Subsection 4(a), the Exercise Price shall be
adjusted to the dollar figure (calculated to the nearest hundredth of a
cent) obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the
product thereof by the number of Warrant Shares purchasable pursuant hereto
immediately following such adjustment.
5. Other Adjustments.
(a) Adjustment for Change in Class A Common Stock. If the Company (i) pays
a dividend or makes a distribution on its Class A Common Stock in shares of
its Common Stock, (ii) subdivides, splits or reclassifies its outstanding
shares of Class A Common Stock into a greater number of shares, or (iii)
combines or reclassifies its outstanding shares of Common Stock into a
smaller number of shares (each, an "Adjustment Event"), the number of
Warrant Shares issuable hereunder immediately prior to such action shall be
proportionately adjusted so that the Holder will receive, upon exercise,
the aggregate number and kind of shares of capital stock of the Company
which it would have owned immediately following such action if the Holder
had exercised this Warrant in full immediately prior to such Adjustment
Event. The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or
reclassification. The adjustment shall be made successively whenever any
Adjustment Event occurs.
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(b) Adjustment for Reorganization. Subject to Section 11.9, if there occurs
any Change of Control, there shall thereafter be deliverable, upon exercise
of this Warrant (in lieu of the number of Warrant Shares theretofore
deliverable) the number of shares of stock or other securities or property
to which a holder of the number of shares of Class A Common Stock that
would otherwise have been deliverable upon exercise of this Warrant in full
would have been entitled upon such Change of Control if such Warrant had
been exercised in full immediately prior to such Change of Control.
(c) Adjustment of Exercise Price. Upon each adjustment of the number of
Warrant Shares issuable hereunder as provided in this Section 5, the
Exercise Price shall also be equitably and proportionately adjusted.
(d) Certificate as to Adjustments. In each case of any adjustment or
readjustment in the number of shares, securities or other property issuable
upon exercise of this Warrant and/or in the Exercise Price, the Company at
its expense will promptly provide written notice to the Holder stating the
number of shares of Class A Common Stock, other securities or other
property then issuable upon exercise of this Warrant and the applicable
Exercise Price after such adjustment, showing how such amounts were
calculated.
6. Participation in Dividends, Distributions, Repurchases or Redemptions.
If the Company declares any dividend or makes any distribution, in each case,
that is not in shares of Class A Common Stock, or repurchases or redeems any of
its capital stock (except forfeitures by holders, and/or repurchases by the
Company, of any shares of Class A Common Stock or options pursuant to any
employment agreements with executives of the Company or pursuant to any equity
incentive plan in existence on the date hereof that has been approved by the
stockholders of the Company and qualifies as an incentive plan under the
Internal Revenue Code of 1986, as amended (collectively, "Permitted
Redemptions")), the Company will pay the Holder the declared dividend, or offer
to include the Holder in such distribution, repurchase or redemption, as if the
Holder had exercised this Warrant in full immediately prior to such event or any
record date with respect thereto. If the Holder elects to participate in a
repurchase or redemption, this Warrant shall be modified (as of the date of such
event) so that the Holder shall be entitled to receive, upon exercise, the
number of Warrant Shares issuable hereunder less the number of Warrant Shares
redeemed or repurchased.
7. Prior Notice as to Certain Events.
(a) Dividends, Distributions, Subscription Rights. If the Company (i) pays
any dividend, or makes any distribution, or repurchases or redeems any of
its capital stock (except Permitted Redemptions), (ii) offers any
subscription rights to the holders of its capital stock to purchase any
additional shares of stock of any class or any other rights, or (iii)
authorizes the issuance of shares of Common Stock or Common Stock
Equivalents, then at least 15 Business Days prior to the action or record
date for such action, the Company will send written notice to the Holder of
the dates on which (A) the Company will close its books or take a record
for such action, (B) such action will occur, and (C) the holders of capital
stock of record will participate in such action.
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(b) Change of Control. If the Company (i) enters into any Change of Control
or reclassification of its capital stock or equity securities, (ii) is the
subject of a voluntary or involuntary dissolution, liquidation or winding
up or (iii) receives a notice from any holder of its equity securities that
such holder desires to exercise its right to "put" or sell such securities
back to the Company or to have such securities redeemed or repurchased by
the Company, then at least 15 Business Days prior to such action or
transaction, the Company will send written notice to the Holder of the
dates on which (A) the Company will close its books or take a record for
such action, (B) such action will occur, and (C) if applicable, the holders
of capital stock of record may exchange their capital stock for securities
or other property deliverable upon such action.
8. Intentionally Omitted
9. Reservation of Class A Common Stock; Par Value. The Company now has and
will have upon the exercise of this Warrant such number of its authorized but
unissued shares of Class A Common Stock as will be sufficient to permit the
exercise in full of this Warrant. Upon issuance, each of the Warrant Shares will
be validly issued, fully paid and nonassessable, free and clear of all
preemptive or similar rights, liens, security interests, charges and other
encumbrances and/or restrictions on sale or otherwise. Without limiting the
generality of the foregoing, the Company will (i) not permit the par value, if
any, of its Class A Common Stock to exceed the then effective Exercise Price,
and in furtherance of the foregoing, shall promptly cause the Certificate of
Incorporation of the Company to be amended to reduce the par value of the Class
A Common Stock if the Exercise Price is reduced below the current par value, and
(ii) not amend or modify any provision of the Certificate of Incorporation of
the Company or by-laws of the Company in any manner that would adversely affect
in any way the powers, preferences or rights of the Class A Common Stock or
which would adversely affect the rights of the Holder.
10. No Voting Rights; Limitations of Liability. Prior to exercise, this
Warrant will not entitle the Holder to any voting rights or other rights as a
stockholder of the Company not granted herein. No provision of this Warrant, in
the absence of affirmative action by the Holder to exercise this Warrant, and no
enumeration in this Warrant of the rights or privileges of the Holder, will give
rise to any liability of such Holder for the Exercise Price.
11. Registration Rights.
11.1 Effective Date. The rights of each Holder that holds Registrable
Securities under this Section 11 are effective as of the date hereof
and shall remain in full force and effect for so long as the Holder
continues to hold any Registrable Securities and regardless of any
transfer of this Warrant or its termination upon its exercise in full.
11.2 Intentionally Omitted.
11.3 Piggyback Registrations.
(1) RIGHT TO PIGGYBACK. Whenever the Company proposes to register
any of its securities under the Securities Act (other than
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pursuant to a registration on Form S-8 or Form S-4 or any
successor forms, a registration covering only an employee benefit
plan (as defined in Rule 405 of the Securities Act) or a
registration covering only securities proposed to be issued in
exchange for securities or assets of another corporation) and the
registration form to be used may be used for the registration of
Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice to all holders of Registrable
Securities and (subject to subsections (2) and (3) below) shall
include in such registration all Registrable Securities with
respect to which the Company has received written requests for
inclusion therein within 15 Business Days after the day on which
the Company's notice is deemed delivered under the terms hereof.
The foregoing right shall not apply to the Company registration
of shares of its Class A Common Stock on Form S-3 filed with the
SEC prior to the date hereof and awaiting SEC effectiveness.
(2) PRIORITY ON INITIAL REGISTRATION. If a Piggyback Registration
is an underwritten registration of shares being sold by the
Company, and the managing underwriter(s) advise the Company in
writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can
be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such
registration:
(i) first, the securities the Company proposes to sell;
(ii) second, to the extent a number of additional securities
are to be included in the registration, the Registrable
Securities requested to be included in such registration;
and
(iii) third, to the extent a number of additional securities
are to be included in the registration, all other securities
requested to be included in such registration pursuant to
the exercise of other piggyback registration rights granted
by the Company.
(3) PRIORITY ON SUBSEQUENT REGISTRATION. If a Piggyback
Registration is an underwritten registration other than a
registration of shares being sold by the Company, and the
managing underwriter(s) advise the Company in writing that in
their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the
offering, the Company will include in such registration:
(i) first, Registrable Securities requested to be included
in such registration;
(ii) second, to the extent a number of additional securities
are to be included in the registration, the securities the
Company proposes to sell; and
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(iii) third, to the extent a number of additional securities
are to be included in the registration, all other securities
requested to be included in such registration pursuant to
the exercise of other piggyback registration rights granted
by the Company.
11.4 Intentionally Omitted.
11.5 Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company will use its best
reasonable efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of
disposition therefor, and pursuant thereto, the Company will, as
expeditiously as possible, do all of the following:
(1) REGISTRATION STATEMENT. Prepare and file with the U.S.
Securities and Exchange Commission (the "SEC") a registration
statement with respect to such Registrable Securities and use its
best reasonable efforts to cause such registration statement to
become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders
of a majority of the Registrable Securities covered by such
registration statement copies of all such documents proposed to
be filed, which documents will be subject to the review and
approval of such counsel) and use its best reasonable efforts to
avoid the issuance of (or if issued, obtain the withdrawal of)
any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification
(or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction as soon as possible;
(2) AMENDMENTS & SUPPLEMENTS. Prepare and file with the SEC such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective for a period necessary
to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration
statement during such period in accordance with the intended
methods of disposition by the sellers thereof, which period shall
not be less than six months;
(3) FURNISH COPIES. Furnish to each seller of Registrable
Securities such number of copies of such registration statement,
each amendment and supplement thereto, the prospectus included
therein (including each preliminary prospectus) and such other
documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities covered
by such registration statement;
(4) BLUE-SKY COMPLIANCE. Use its best reasonable efforts to
register or qualify such Registrable Securities under such other
securities or blue sky laws of such United States jurisdictions
as any seller reasonably requests and do any and all other acts
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and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller
(provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction
other than with respect to the registration, qualification or
exemption therefrom of the Registrable Securities);
(5) NOTIFICATIONS. Notify each seller of such Registrable
Securities at any time when a registration statement related
thereto is effective under the Securities Act, of the happening
of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein
not misleading in light of the circumstances then existing, and,
at the request of any such seller, the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements
therein not misleading;
(6) LISTING. Use its best reasonable efforts to cause all such
Registrable Securities to be listed on any nationally recognized
United States trading market, if applicable, on which similar
securities of the same class issued by the Company are then
listed;
(7) TRANSFER AGENT; REGISTRAR. Provide a transfer agent and
registrar for all such Registrable Securities not later than the
effective date of such registration statement;
(8) OMITTED.
(9) SUPPLY INFORMATION. Make available for inspection by any
seller of Registrable Securities, underwriter participating in
any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such seller
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in
connection with such registration statement; and
(10) OBTAIN COLD COMFORT LETTER AND OPINIONS OF COUNSEL. Obtain a
cold comfort letter from the Company's independent public
accountants and opinions of counsel from the Company's attorneys,
each in customary form and covering such matters as are
customarily given or covered by independent public accountants
and attorneys, as applicable, in an underwritten public offering
of securities, addressed to the sellers.
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11.6 Registration Expenses. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to the registrations pursuant to this
Section 11, including, without limitation, all registration, filing and
qualification fees, printing and accounting fees, listing fees and
expenses, fees and expenses of compliance with securities or blue sky laws,
fees and disbursements of counsel for the Company and the reasonable fees
and disbursements of one counsel for the sellers of Registrable Securities.
Underwriting discounts and commissions relating to Registrable Securities
will be borne and paid ratably by the sellers of such Registrable
Securities.
11.7 Indemnification Provisions.
(1) INDEMNITY OF HOLDERS OF REGISTRABLE SECURITIES. The Company agrees
to indemnify, to the extent permitted by law, each holder of
Registrable Securities, its officers and directors and each Person who
controls each such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused
by any untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished in
writing to the Company or any underwriter by such holder expressly for
use therein or by such holder's failure to deliver to the Company in
writing the information and affidavits required by subsection (2) of
this Section 11.7 after the Company has furnished such holder with a
sufficient number of copies of the registration statement or
prospectus or any amendments or supplements thereto.
(2) DISCLOSURE AND INDEMNIFICATION BY HOLDERS OF REGISTRABLE
SECURITIES. In connection with any registration statement in which a
holder of such Registrable Securities is participating, each such
holder will furnish to the Company in writing such information and
affidavits relating to disclosure concerning such holder required to
be included in the registration statement as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the
Company, its directors and officers and each person who controls the
Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue
statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in
writing by such holder; provided, however, that the obligation to
indemnify will be several, not joint and several, among such holders;
and provided, further, however that the liability of each holder will
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be in proportion to and limited to the net amount received by such
holder from the sale of Registrable Securities pursuant to such
registration statement.
(3) NOTICE AND DEFENSE. Any person entitled to indemnification
hereunder will: (i) give prompt written notice to the indemnifying
party of any claim with respect to which it seeks indemnification, and
(ii) unless in the reasonable opinion of such indemnified party's
counsel a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. The failure to give
timely notice will not relieve the receiving party of any obligation
unless such delay unduly prejudices such party's ability to defend
such claim. If such defense is assumed, the indemnifying party will
not be subject to any liability for any settlement or omission made by
the indemnified party without its consent (but such consent will not
be unreasonably withheld) and an indemnified party will not be subject
to any liability for any settlement or omission made by the
indemnifying party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated
to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict
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of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(4) CONTINUING AND SURVIVING OBLIGATIONS; RIGHT OF CONTRIBUTION. The
indemnification provided for under this Warrant will remain in full
force and effect regardless of any investigation made by or on behalf
of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of
securities after the completion of any offering. The Company also
agrees to make such provisions, based on its relative fault, for
contribution to such party in the event the Company's indemnification
is unavailable for any reason. The relative fault of the Company and
the selling holder shall be determined by reference to, among other
things, whether the untrue statement or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the selling
holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
11.8 Rule 144 Requirements. With a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit
the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(1) make and keep public information available, as defined for
purposes of Rule 144 under the Securities Act;
(2) use its best reasonable efforts to file with the SEC in a timely
manner all reports and other documents required of the Company to be
filed under the Securities Act and the Securities Exchange Act of
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1934, as amended (the "Exchange Act"); and
(3) furnish to any holder of Registrable Securities, upon request, a
written statement by the Company as to its compliance with the
reporting requirements of Rule 144 under the Securities Act and of the
Securities Act, a copy of the most recent annual or quarterly report
of the Company and such other reports and documents of the Company as
such holder may reasonable request to avail itself of any similar rule
or regulation of the SEC allowing it to sell any such securities
without registration.
11.9 Mergers, Etc. The Company shall not, directly or indirectly, enter
into any Change of Control transaction in which the Company shall not be
the surviving Company unless the proposed surviving Company shall, prior to
such transaction, agree in writing to assume the obligations of the Company
under this Warrant, including but not limited to those under Section 11 of
this Warrant, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to be references to the securities that a
Holder would be entitled to receive in exchange for Registrable Securities
under and/or in connection with any such transaction; provided, however,
that the provisions of this Warrant shall not apply in the event of any
such transaction in which the Company is not the surviving Company if all
Holders holding Registrable Securities are entitled to receive in exchange
for all of their Registrable Securities consideration consisting solely of
(i) cash, (ii) securities of the acquiring Company that may be immediately
sold to the public without registration under the Securities Act, or (iii)
securities of the acquiring Company that the acquiring Company has agreed
to register, and actually does register, for resale to the public pursuant
to the Securities Act, provided such registration occurs contemporaneously
with consummation of the transaction.
11.10 Miscellaneous. The Company has not granted and will not grant to any
Person the right to request the Company to register any equity securities
of the Company, or any securities convertible or exchangeable into or
exercisable for such securities or any other Common Stock Equivalents, that
in any material manner are more favorable to such Person than those granted
herein.
12. Exercise Procedure. To exercise this Warrant, the Holder must deliver
to the principal office of the Company (prior to the Expiration Date) this
Warrant, the subscription substantially in the form of Exhibit A attached hereto
and the Exercise Price for the Warrant Shares being purchased. The Holder may
deliver the Exercise Price by any of the following methods, at its option: (i)
in legal tender, (ii) by bank cashier's or certified check, (iii) by wire
transfer to an account designated by the Company, or (iv) in accordance with
Section 13. Upon exercise, the Company, at its sole expense (including the
payment by the Company of any documentary, stamp, issue or transfer taxes), will
issue and deliver to Holder, within five Business Days after the date on which
the Holder exercises this Warrant, certificates for the Warrant Shares purchased
upon exercise of this Warrant. The Warrant Shares so purchased shall be deemed
issued, and the Holder deemed the holder of record of such Warrant Shares, as of
9:00 a.m. (New York City time) on the date on which the Holder exercises this
Warrant. The Company shall pay any and all documentary, stamp or issue, transfer
or similar taxes payable in respect of the issue or delivery of the Warrant
Shares. This Warrant may be exercised in whole or in part and in the event this
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Warrant is partially exercised, the Company shall forthwith issue and deliver to
the Holder a new Warrant of like tenor to purchase that number of Warrant Shares
with respect to which such partial exercise did not apply.
13. Cashless Exercise. In lieu of paying the applicable Exercise Price by
legal tender, check, or wire transfer, the Holder may elect to receive, upon any
exercise of this Warrant, that number of Warrant Shares equal to the quotient
obtained by dividing:
[(A-B)(X)] by (A), where:
A = the Fair Market Value of a share of Class A Common Stock on the
date of exercise;
B = the Exercise Price for a share of Class A Common Stock; and
X = the number of Warrant Shares (equal to or less than the number of
Warrant Shares then issuable hereunder) as to which this Warrant is
being exercised.
14. Sale of Warrant or Warrant Shares. Neither the issuance of this Warrant
nor the issuance of any of the Warrant Shares upon exercise of this Warrant have
been registered under the Securities Act or the Exchange Act or under the
securities laws of any state. The issuance of the Warrant Shares upon exercise
of this Warrant shall be subject to compliance with all applicable federal and
state securities laws. Neither this Warrant nor any of the Warrant Shares (when
issued) may be sold, assigned, transferred, pledged or hypothecated or otherwise
disposed of except: (i) as permitted by any effective registration statement
under the Securities Act and such registration or qualification as may be
required under the securities laws of any state in question, or (ii) as
permitted by an exemption from such registration and/or qualification
requirements under the Securities Act and the securities laws of any state or if
any such registration and/or qualification is not required. For so long as any
Warrant Shares are Registrable Securities, the Company shall cause each
certificate evidencing any such Warrant Shares to bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY APPLICABLE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH REGISTRATION
OR QUALIFICATION AS MAY BE NECESSARY UNDER THE SECURITIES LAWS OF ANY
STATE, OR AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS
UNDER THE ACT OR SUCH STATE LAW.
15. Intentionally Omitted
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16. Transfer. The Company will register this Warrant on its books and keep
such books at its offices. To effect a transfer permitted by clause (ii) under
Section 14 hereof, the Holder must present (either in person, or by duly
authorized attorney) written notice substantially in the form of Exhibit B
attached hereto. To prevent a transfer in violation of Section 14, the Company
may issue appropriate stop orders to its transfer agent.
17. Replacement of Warrant. If the Holder provides evidence that this
Warrant or any certificate or certificates representing the Warrant Shares have
been lost, stolen, destroyed or mutilated, the Company (at the request and
expense of the Holder) will issue a replacement warrant or certificates
evidencing such Warrant Shares, as applicable, upon reasonably satisfactory
indemnification by the Holder (if required by the Company).
18. Governing Law; Interpretation. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of Maryland without
giving effect to its choice of law provisions. Any judicial proceeding against
the Company or the Holder hereunder or with respect hereto shall be brought
exclusively in any federal or state court of competent jurisdiction located in
the State of Maryland. Each of the Company and the Holder (i) accepts the
non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby, (ii) waives personal service of process,
(iii) agrees that service of process upon it may be made as provided in the Loan
Agreement, (iv) waives any objection to jurisdiction and venue of any action
instituted hereunder and agrees not to assert any defense based on lack of
jurisdiction, venue or convenience, and (v) agrees that this Warrant was issued
in Maryland. Each party acknowledges that it participated in the negotiation and
drafting of this Warrant and that, accordingly, neither party shall move or
petition a court construing this Warrant to construe it more stringently against
one party than against any other.
19. Information Covenants.
(a) Notice of Stockholder Meetings. If a meeting of the stockholders of the
Company is called or if consents of the Company's stockholders are
solicited to consider and take action on a proposal for (i) the declaration
of a dividend or payment of a distribution with respect to the Class A
Common Stock, (ii) the voluntary dissolution, liquidation or winding up of
the Company, (iii) the issuance of shares of Class A Common Stock or any
Common Stock Equivalents, (iv) any Change of Control or (v) any other
action, then the Company send written notice thereof to each Holder at
least five (5) Business Days prior to the record date for determining
stockholders entitled to vote at such meeting or to take action with
respect to such consent.
(b) Cooperation. The Company shall cooperate with each Holder and each
holder of Warrant Shares in supplying such information as may be reasonably
necessary for such Person to complete and file any information reporting
forms presently or hereafter required by the SEC and/or any other
Governmental Authority as a condition to the availability of an exemption
under the Securities Act and any applicable state securities law for the
sale or purchase of this Warrant or any Warrant Shares.
107
(c) Proper Books and Records. The Company covenants that it will, and will
cause its Subsidiaries to, keep proper books and records in which full,
true and correct entries in conformity with generally accepted accounting
principles shall be made of all dealings and transactions in relation to
its business and activities.
20. Notice. All notices and other communications given to or made under
this Warrant shall be in writing and shall be given to the Company at its
address set forth in the Loan Agreement and to Holder at its address shown on
the books of the Company, or at such other address as such party may hereafter
specify in a notice given in the manner required under this Section 20, and
shall be given only by, and shall be deemed to have been received upon: (i)
registered or certified mail, return receipt requested, on the date on which
such received as indicated in such return receipt, (ii) delivery by a nationally
recognized overnight courier, one (1) Business Day after deposit with such
courier, or (iii) facsimile or electronic transmission, in each case upon
telephone or further electronic communication from the recipient acknowledging
receipt (whether automatic or manual from recipient), as applicable.
21. Assignment; Registration of Transfer. Subject to Section 14 hereof,
Warrant and the Warrant Shares may be assigned or transferred by the Holder.
This Warrant may not be assigned by the Company. This Warrant shall be binding
on and inure to the benefit of the parties hereto and their respective permitted
successors and assigns. Subject to the preceding sentence, nothing in this
Warrant shall be construed to give to any Person other than the Company, the
Holder and any holders of Registrable Securities any legal or equitable right,
remedy or cause of action under this Warrant. This Warrant may be amended or
modified only in writing signed by the Company and the Holder and their
permitted successors and assigns. Upon any assignment of this Warrant, a new
warrant in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a Holder.
[intentionally left blank - signature page follows]
108
[signature page to PHC, Inc. Warrant issued to CSE Equity Holdings LLC]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf, in its corporate name, by its President, and its corporate seal to be
hereunto affixed and the said seal to be attested by its Secretary, as of the
date first written above.
PHC, INC.
Attest: /s/ Paula C. Wurts By: /s/ Bruce A. Shear
___________________________ ________________________
Name: Paula C. Wurts Name: Bruce A. Shar
Title: Secretary Title: President
By signing below, the undersigned, as a shareholder and as the President of the
Company, hereby agrees to use his best reasonable efforts, including but not
limited to favorably voting his shares of capital stock in the Company, to cause
the Company to comply with its obligation in the second sentence of Section 9
above.
/s/ Bruce A. Shear
_________________________
Bruce A. Shear
109
EXHIBIT A
IRREVOCABLE SUBSCRIPTION
To: PHC, Inc.
The undersigned hereby elects to exercise its right under the attached
Warrant by purchasing ____ shares of the Class A Common Stock, and hereby
irrevocably subscribes to such issue. The certificates for such shares shall be
issued in the name of:
_____________________________________
(Name)
_____________________________________
(Address)
_____________________________________
(Taxpayer Number)
and delivered to:
_____________________________________
(Name)
_____________________________________
(Address)
PAYMENT EXERCISE: The aggregate Exercise Price of $____ per share is
enclosed.
or
CASHLESS EXERCISE: In lieu of payment of the aggregate Exercise Price
hereof, the attached Warrant is being exercised in accordance with Section
13 of the attached Warrant.
Date:_______________
Signed: _____________________________________
(Name of Holder, Please Print)
_____________________________________
(Address)
_____________________________________
(Signature)
110
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
_____________________________________
(Name)
_____________________________________-
(Address)
the attached Warrant, together with all right, title and interest therein
to purchase ____ shares of the Class A Common Stock, and does hereby irrevocably
appoint _______________________ as attorney-in-fact to transfer said Warrant on
the books of _______________________, with full power of substitution in the
premises.
Done this ______ day of ____________ 20____.
_____________________________________
(Signature)
____________________________________
(Name and title)
_____________________________________
(Address)
111
SCHEDULE 1 TO PHC, INC. WARRANT
"Change of Control" shall mean, with respect to the Company, the occurrence in
any transaction or series of transactions of any of the following: (i) a merger,
consolidation, reorganization, recapitalization or share or interest exchange,
sale or transfer or any other transaction or series of transactions in which its
stockholders immediately prior to such transaction or series of transactions
receive, in exchange for the stock or interests owned by them, cash, property or
securities of the resulting or surviving entity or any Affiliate thereof, and,
as a result thereof, Persons who, individually or in the aggregate, were holders
of 50% or more of its voting stock immediately prior to such transaction or
series of transactions hold less than 50% of the voting stock of the resulting
or surviving entity or such Affiliate thereof, calculated on a fully diluted
basis or (ii) a direct or indirect sale, transfer or other conveyance or
disposition, in any single transaction or series of transactions, of all or
substantially all of its assets.
"Class A Common Stock" means the Class A Common Stock, par value $.01 per share,
of the Company.
"Common Stock" means any class of common stock of the Company, including but not
limited to the Class A Common Stock and the Class B Common Stock, par value $.01
per share, of the Company.
"Common Stock Equivalent" means any security of the Company that is directly or
indirectly convertible, exercisable, or exchangeable into any Common Stock or
any other Common Stock Equivalent at any time.
"Common Stock Deemed Outstanding" means, at any given time, the sum of: (i) the
number of shares of Common Stock of the Company outstanding at such time, plus
(ii) the full number of shares of Common Stock issuable upon conversion,
exercise, or exchange of any Common Stock Equivalents outstanding at such time.
"Consideration" means:
(i) if the Company issues Common Stock, the gross proceeds received by the
Company for each such share of Common Stock;
(ii) if the Company issues Common Stock Equivalents, the gross proceeds
received by the Company for each such Common Stock Equivalent, plus the
minimum aggregate amount of gross proceeds, if any, payable to the Company
upon exchange or conversion of each such Common Stock Equivalent;
(iii) if the Company issues options or rights to subscribe for or to
purchase Common Stock or Common Stock Equivalents, the gross proceeds, if
any, received by the Company for each such option or right, plus the
minimum aggregate amount of gross proceeds, if any, payable to the Company
upon exercise of each such option or right and upon further exchange or
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Schedule 1 to Warrant (Con't)
conversion of each such Common Stock Equivalent into which such option or
right was exercised or converted;
(iv) if the Company issues a combination of securities consisting of Common
Stock or Common Stock Equivalents and other securities of the Company, and
if the amount of gross proceeds allocable to the Common Stock or Common
Stock Equivalents is not determinable on its face at the time of such
issuance, the portion of gross proceeds received by the Company, as
determined in good faith by the Company's Board of Directors; and
(v) if the Company receives any non-cash consideration, the fair value of
the non-cash consideration, as determined in good faith by the Company's
Board of Directors.
"Dilutive Transaction" means any transaction (other than Exempt Transactions)
effected on or after the date hereof, including but not limited to transactions
pursuant to or in connection with the Membership Purchase Agreement between the
Company, Pivotal Research Centers, L.L.C., and other parties dated April 30,
2004, in which the Company does any of the following, based on a Per Share Price
which is less than the Non-Dilutive Price: (i) issues or sells any Common Stock
or any Common Stock Equivalents; (ii) issues or sells any options, warrants or
other rights to purchase or otherwise acquire any Common Stock or any Common
Stock Equivalent; or (iii) decreases the subscription, exercise, conversion or
exchange price of the securities described in (i) or (ii) whether or not issued
or sold initially at a Per Share Price in excess of the Non-Dilutive Price.
"Employee Options" means options to purchase shares of Common Stock issued by
the Company pursuant to its currently effective stock option plan or
non-employee directors' stock option plan.
"Employee Option Shares" means both shares of Common Stock into which Employee
Options are exercisable and shares of Common Stock issued under the Company's
currently effective employee stock purchase plan.
"Exempt Transaction" means any transaction where the Company: (i) issues any
Common Stock upon conversion or exercise of securities outstanding or issued as
of the date hereof; (ii) issues any Common Stock upon exercise of this Warrant;
(iii) issues equity securities as a dividend or upon a stock split; or (iv)
issues Employee Options or Employee Option Shares in the aggregate not exceeding
the number of shares of such authorized as of the date hereof.
"Fair Market Value" of a share of Class A Common Stock means:
(i) the average of the daily closing prices for the thirty (30) consecutive
business days ending fifteen (15) business days before the date of
determination (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such 30 business day period) with
the closing price for each day being the last reported sales price or, in
case no such reported sales took place on such day, the average of the last
reported bid and asked prices, in either case on the principal national
securities exchange on which the Class A Common Stock is listed or admitted
to trading or as reported by Nasdaq (or if the Class A Common Stock is not
at the time listed or admitted for trading on any such exchange or if
prices of the Class A Common Stock are not reported by Nasdaq, then such
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Schedule 1 to Warrant (Con't)
price as shall be equal to the average of the last reported bid and asked
prices on such day as reported by The National Quotation Bureau
Incorporated or any similar reputable quotation and reporting service, if
such quotation is not reported by The National Quotation Bureau
Incorporated);
(ii) if clause (i) does not apply, and if the transaction involves the sale
by the Company of securities to unaffiliated third parties (utilizing the
services of an investment banker acceptable to Holder), the applicable per
share price in such transaction; and
(iii) in all other cases as determined in good faith by the Board of
Directors of the Company and approved by the Holder; provided that if the
Holder does not approve such determination by the Board of Directors, the
Fair Market Value shall be determined based on earnings and book value and
other appropriate items in accordance with the following procedure: (A) the
Holder will recommend three qualified, independent appraisers to the
Company; and (B) the Company will select one of the three appraisers (to be
compensated by the Company) to determine a value, which value will be the
"Fair Market Value". All appraisal costs will be paid by the Company.
For all purposes, the Company and the Holder agree that the Fair Market Value of
the Warrant Rights or Warrant Shares, as the case may be, shall be determined
without any reduction in value for lack of control or the inherent lack of
liquidity of non-public minority interests.
"Non-Dilutive Price" means the Fair Market Value of a share of Common Stock
immediately prior to the Dilutive Transaction.
"Other Securities" means any stock (other than Class A Common Stock) and other
securities of the Company or any other Person which the Holders at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to the Class A Common Stock, or which shall
be issuable or shall have been issued in exchange for or in replacement of Class
A Common Stock or Other Securities pursuant to this Warrant.
"Per Share Price" means the total Consideration for each share of Class A Common
Stock or Common Stock Equivalent issued or issuable by the Company in connection
with a Dilutive Transaction.
"Registrable Securities" means: (i) all of the shares of Class A Common Stock or
Other Securities now held or hereafter acquired by the Holder, including
(without limitation) shares of Class A Common Stock constituting Warrant Shares,
and (ii) all of the shares of Class A Common Stock issued or issuable, directly
or indirectly, with respect to the securities referred to in clause (i) by way
of a stock dividend or stock split in connection with a combination of shares,
recapitalization or Change of Control. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities upon the
earlier of (a) when they have been registered pursuant to an effective
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Schedule 1 to Warrant (Con't)
registration statement under the Securities Act, and registered and qualified
under the securities laws of all applicable states, or (b) at such time as all
of the Registrable Securities of a holder are transferable without limitation or
restriction by the holder thereof in a single brokerage transaction under the
provisions of Rule 144(k) or any similar rule then in effect, but subsection (b)
shall apply only if there is then an active public trading market for the class
of securities constituting the Registrable Securities so that the Registrable
Securities may be sold in a single transaction without negatively affecting the
sale price therefor.
"Warrant" means this Warrant, each New Warrant and each Warrant issued in
replacement or substitution hereof or thereof.
"Warrant Rights" means the right of the Holder to purchase Warrant Shares upon
the exercise hereof, with one Warrant Right equaling the right to purchase one
Warrant Share hereunder.
"Weighted Average Per Share Value" means the amount determined by performing the
following calculation and rounding the resulting number to the nearest whole
cent: divide:
(i) the sum of:
(a) the Non-Dilutive Price of a Warrant Share multiplied by the number
of shares of Common Stock Deemed Outstanding immediately prior to the
Dilutive Transaction, plus
(b) the aggregate Consideration, if any, received or to be received by
the Company in connection with the Dilutive Transaction, by
(ii) the number of shares of Common Stock Deemed Outstanding immediately
after the Dilutive Transaction.
115