EXHIBIT 2
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN TAKEN
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED, UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON, INCLUDING A PLEDGEE,
UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT THERETO SHALL BE
EFFECTIVE UNDER THE SECURITIES ACT, OR (B) AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT IS THEN AVAILABLE AND (2) THERE SHALL HAVE BEEN COMPLIANCE
WITH ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
WARRANT XX. 0 Xxxx 00, 0000
XXXXXXX
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE,
OF
PSYCHIATRIC SOLUTIONS, INC.
THIS IS TO CERTIFY THAT THE 1818 MEZZANINE FUND II, L.P., a Delaware
limited partnership, or its permitted registered assigns (the "HOLDER"), is the
owner of One Million Five Hundred Two Thousand One Hundred Forty (1,502,140)
Warrants (the "WARRANTS"), each of which entitles the registered holder thereof
to purchase from Psychiatric Solutions, Inc., a Delaware corporation (the
"COMPANY"), one fully paid, duly authorized and nonassessable share of Common
Stock (as defined in Section 13 hereof) of the Company, at any time or from time
to time on or before 5:00 p.m., New York City time, on the tenth anniversary of
the Issue Date (the "WARRANT EXPIRATION DATE"), at an exercise price of $.01 per
share (the "EXERCISE PRICE"), all on the terms and subject to the conditions
hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each
such Warrant (the "NUMBER ISSUABLE"), which is initially one (1) share, is
subject to adjustment from time to time pursuant to the provisions of Section 2
of this Warrant Certificate.
Capitalized terms used herein but not otherwise defined shall have the
meanings given to such terms in Section 13 hereof.
Section 1. EXERCISE OF WARRANT. The Warrants evidenced hereby may
be exercised, in whole or in part, by the Holder hereof at any time or from time
to time on or before 5:00 p.m., New York City time, on the Warrant Expiration
Date, upon delivery to
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the Company at the principal executive office of the Company in the United
States of America, of (a) this Warrant Certificate, (b) a written notice stating
that such Holder elects to exercise the Warrants evidenced hereby in accordance
with the provisions of this Section 1 and specifying the number of Warrants
being exercised and the name or names in which such Holder wishes the
certificate or certificates for shares of Common Stock to be issued and (c)
payment of the Exercise Price for the shares of Common Stock issuable upon such
exercise of such Warrants, which shall be payable by any one or any combination
of (i) cash, (ii) certified or official bank check payable to the order of the
Company, (iii) the surrender (which surrender shall be evidenced by cancellation
of the number of Warrants represented by any Warrant Certificate presented in
connection with a Cashless Exercise (as defined below)) of Warrants (represented
by one or more relevant Warrant Certificates), without the payment of the
Exercise Price in cash, in return for the delivery to the surrendering holder of
such number of shares of Common Stock equal to the number of shares of Common
Stock for which such Warrant is requested to be exercised (if the Exercise Price
were being paid in cash or certified or official bank check) reduced by that
number of shares of Common Stock equal to the quotient obtained by dividing (x)
the aggregate Exercise Price to be paid by (y) the Market Price of one share of
Common Stock on the Business Day which next precedes the day of exercise of the
Warrants, or (iv) by the delivery of shares of Common Stock having a value (as
defined by the next sentence) equal to the aggregate Exercise Price to be paid
that are either held by the Holder or are acquired in connection with such
exercise, and without payment of the Exercise Price in cash. Any share of Common
Stock delivered as payment of the Exercise Price in connection with an In-Kind
Exercise (as defined below) shall be deemed to have a value equal to the Market
Price of one share of Common Stock on the Business Day which next precedes the
day of exercise of the Warrants. An exercise of the Warrants in accordance with
clause (iii) above is herein referred to as a "CASHLESS EXERCISE" and an
exercise of the Warrants in accordance with clause (iv) is herein referred to as
an "IN KIND EXERCISE." The documentation and consideration, if any, delivered in
accordance with subsections (a), (b) and (c) above are collectively referred to
herein as the "WARRANT EXERCISE DOCUMENTATION."
As promptly as practicable, and in any event within five Business Days
after receipt of the Warrant Exercise Documentation, the Company shall deliver
or cause to be delivered (a) certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock specified in the
Warrant Exercise Documentation, (b) if applicable, cash in lieu of any fraction
of a share, as hereinafter provided, and (c) if less than the full number of
Warrants evidenced hereby are being exercised or used in a Cashless Exercise, a
new Warrant Certificate or Certificates, of like tenor, for the number of
Warrants evidenced by this Warrant Certificate, less the number of Warrants then
being exercised or used in a Cashless Exercise. Such exercise shall be deemed to
have been made at the close of business on the date of delivery of the Warrant
Exercise Documentation so that the Person entitled to receive shares of Common
Stock upon such exercise shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. No such surrender
shall be effective to constitute the person entitled to receive such shares as
the record holder thereof while the transfer books of the Company for the Common
Stock are closed for any purpose (but not
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for any period in excess of five days); but any such surrender of this Warrant
Certificate for exercise during any period while such books are so closed shall
become effective for exercise immediately upon the reopening of such books, as
if the exercise had been made on the date this Warrant Certificate was
surrendered and for the Number Issuable of Common Stock specified in the Warrant
Exercise Documentation and at the Exercise Price.
The Company shall pay all expenses in connection with, and all taxes
and other governmental charges (other than income taxes of the holder) that may
be imposed in respect of, the issue or delivery of any shares of Common Stock
issuable upon the exercise of the Warrants evidenced hereby. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock in any name other than that of the registered holder of the Warrants
evidenced hereby.
In connection with the exercise of any Warrants evidenced hereby, no
fractions of shares of Common Stock shall be issued, but in lieu thereof the
Company shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Current Market Price
per share of Common Stock on the Business Day which next precedes the day of
exercise. If more than one such Warrant shall be exercised by the Holder thereof
at the same time, the number of full shares of Common Stock issuable on such
exercise shall be computed on the basis of the total number of Warrants so
exercised.
All certificates representing the shares of Common Stock issued upon
exercise of the Warrants shall bear legends substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED, UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED BY ANY PERSON, INCLUDING A PLEDGEE, UNLESS (1) EITHER
(A) A REGISTRATION STATEMENT WITH RESPECT THERETO SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT, OR (B) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
IS THEN AVAILABLE AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE
STATE SECURITIES OR "BLUE SKY" LAWS.
Section 2. ADJUSTMENTS.
(a) ADJUSTMENT OF NUMBER ISSUABLE. The Number Issuable shall be
subject to adjustment from time to time as follows:
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(i) In case the Company shall at any time or from time to
time after the Issue Date:
(A) issue shares of the Capital Stock of the Company
as a dividend or other distribution on the outstanding shares of Common
Stock;
(B) subdivide the outstanding shares of Common Stock
into a larger number of shares;
(C) combine the outstanding shares of Common Stock
into a smaller number of shares; or
(D) issue any shares of its Capital Stock in a
reclassification of the Common Stock;
then, and in each such case, the Number Issuable in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Company) so that the holder of any Warrants evidenced hereby thereafter
exercised shall be entitled to receive the number of shares of Common Stock or
other securities of the Company which such holder would have owned or had been
entitled to receive upon or by reason of any of the events described above, had
such Warrants been exercised immediately prior to the happening of such event.
An adjustment made pursuant to this clause (i) shall be effective (x) in the
case of any such dividend or distribution, on the date immediately following the
close of business on the record date for the determination of holders of shares
of Common Stock entitled to receive such dividend or distribution, or (y) in the
case of any such subdivision, combination or reclassification, at the close of
business on the date upon which such corporate action becomes effective.
(ii) If after the Issue Date, the Company shall at any time
or from time to time issue or sell (x) shares of Common Stock or (y) securities
convertible into or exchangeable for shares of Common Stock, or any options,
warrants or other rights to acquire shares of Common Stock (excluding any
additional warrants issued in connection with any Additional Closing (as defined
in the Securities Purchase Agreement) pursuant to the terms of the Securities
Purchase Agreement), at a price per share that is less than the Current Market
Price per share of Common Stock then in effect as of the record date or issue
date, as the case may be, referred to in the following sentence (the "RELEVANT
DATE") (treating the price per share of Common Stock, in the case of the
issuance of any security convertible into, or exchangeable or exercisable for,
shares of Common Stock as equal to (x) the sum of the price for such security
convertible into, or, exchangeable or exercisable for, shares of Common Stock
plus any additional consideration payable (without regard to any anti-dilution
adjustments) upon the conversion, exchange or exercise of such security into
shares of Common Stock divided by (y) the number of shares of Common Stock
initially underlying such convertible, exchangeable or exercisable security), in
each case, other than issuances or sales for which an adjustment is made
pursuant to another paragraph of this Section 2, then, and in each such case,
the Number Issuable then in effect shall be adjusted by multiplying the
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Number Issuable in effect on the day immediately prior to the Relevant Date by a
fraction, (1) the numerator of which shall be the sum of the number of shares of
Common Stock outstanding on the Relevant Date, plus the number of additional
shares of Common Stock issued or to be issued (or the maximum number into which
such convertible or exchangeable securities initially may convert or exchange or
for which such options, warrants or other rights initially may be exercised),
and (2) the denominator of which shall be the sum of the number of shares of
Common Stock outstanding on the Relevant Date, plus the number of shares of
Common Stock which the aggregate consideration (plus the aggregate amount of any
additional consideration initially payable upon conversion, exchange or exercise
of such security) for the total number of such additional shares of Common Stock
so issued (or into which such convertible or exchangeable securities may convert
or exchange or for which such options, warrants or other rights may be
exercised) would purchase at the Current Market Price per share of Common Stock
on the Relevant Date. Such adjustment shall be made whenever such shares,
securities, options, warrants or other rights are issued, and shall become
effective retroactively to a date immediately following the close of business
(x) in the case of an issuance to the stockholders of the Company, as such, on
the record date for the determination of stockholders entitled to receive such
shares, securities, options, warrants or other rights and (y) in all other
cases, on the date (the "ISSUE DATE") of such issuance. Solely for purposes of
this clause (ii), (I) Common Stock shall include the Common Stock, par value
$.01 per share, of the Company and each other class of Capital Stock of the
Company that does not have a preference over any other class of Capital Stock of
the Company as to dividends or upon liquidation, dissolution or winding up of
the Company and, in each case, shall include any other class of Capital Stock of
the Company into which such stock is reclassified or reconstituted and (II) if
the provisions of any securities convertible into or exchangeable for shares of
Common Stock or options, warrants or other rights to acquire shares of Common
Stock are amended after the date of issuance so as to (directly or indirectly)
reduce the applicable conversion price, exchange price or exercise price such
amendment shall be deemed to be a new issuance of such securities as of the date
of such amendment.
(iii) In case the Company shall at any time or from time to
time after the Issue Date distribute to any holder of shares of its Common Stock
in respect of such shares (including any such distribution made in connection
with a consolidation or merger in which the Company is the resulting or
surviving corporation and the Common Stock is not changed or exchanged) cash,
evidences of indebtedness of the Company or another issuer, securities of the
Company or another issuer or other assets (excluding dividends or other
distributions of shares of Common Stock or other Capital Stock for which
adjustment is made under Section 2(a)(i) or dividends or other distributions
received by or set aside for the benefit of the holders of Common Stock pursuant
to Section 2(c) below) or rights or warrants to subscribe for or purchase
securities of the Company (excluding those in respect of which adjustments in
the Number Issuable is made pursuant to Section 2(a)(i) or Section 2(a)(ii)),
then, and in each such case, the Number Issuable then in effect shall be
adjusted by multiplying the Number Issuable in effect immediately prior to the
date of such distribution by a fraction (x) the numerator of which shall be the
Current Market Price
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per share of Common Stock on the record date referred to below and (y) the
denominator of which shall be such Current Market Price per share of Common
Stock less the then Fair Market Value (as determined in good faith by the Board
of Directors of the Company, a certified resolution with respect to which shall
be mailed to the holder of the Warrants evidenced hereby) of the portion of the
cash, evidences of indebtedness, securities or other assets so distributed or of
such subscription rights or warrants applicable to one share of Common Stock
(but such denominator shall in no event be zero). Such adjustment shall be made
whenever any such distribution is made and shall become effective retroactively
to a date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) In case the Company at any time or from time to time
shall take any action which could have a dilutive effect on the number of shares
of Common Stock that may be issued upon exercise of the Warrants, other than an
action described in any of Section 2(a)(i) through 2(a)(iii), inclusive, or
Section 2(b) or 2(c), then, the Number Issuable shall be adjusted in such manner
and at such time as the Board of Directors of the Company reasonably determines
to be equitable under the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the holder of the
Warrants evidenced hereby).
(v) Notwithstanding anything herein to the contrary, no
adjustment under this Section 2(a) need be made to the Number Issuable unless
such adjustment would require an increase or decrease of at least 1% of the
Number Issuable then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such Number
Issuable. Any adjustment to the Number Issuable carried forward and not
theretofore made shall be made immediately prior to the exercise of any Warrants
pursuant hereto.
(vi) The Company promptly shall deliver to each registered
holder of Warrants at least five Business Days prior to effecting any
transaction which would result in an increase or decrease in the Number Issuable
pursuant to this Section 2 a notice thereof, together with a certificate, signed
by the President or the Chief Executive Officer and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the increased or
decreased Number Issuable then in effect following such adjustment.
(vii) Notwithstanding anything contrary contained in this
Section 2(a), the Company shall be entitled to make such upward adjustments in
the Number Issuable, in addition to those otherwise required by this Section
2(a), as the Board of Directors of the Company in their discretion shall
determine to be advisable in order that any stock dividend, subdivision or
combination of shares, distribution of rights or warrants to purchase stock or
securities, or distribution of securities convertible into or exchangeable for
Common Stock, hereafter made by the Company to its shareholders shall not be
taxable; PROVIDED, HOWEVER, that any such adjustment shall be made, as
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nearly as practicable, in a manner which treats all holders of Warrants with
similar protections on an equal basis.
(b) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE
OF ASSETS. In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another Person (including without limitation,
the PMR Merger), or in case of any sale or other disposition to another Person
of all or substantially all of the assets of the Company (any of the foregoing,
a "TRANSACTION"), the Company, or such successor or purchasing Person
(including, in the case of the PMR Merger, PMR), as the case may be, shall
execute and deliver to each holder of the Warrants evidenced hereby,
simultaneously with effecting any of the foregoing Transactions, a certificate
that such holder of Warrants then outstanding shall have the right thereafter to
exercise such Warrants into the kind and amount of shares of stock or other
securities (of the Company or another issuer and, in the case of the PMR Merger,
of PMR) or property or cash receivable upon such Transaction by a holder of the
number of shares of Common Stock into which such Warrants could have been
exercised immediately prior to such Transaction. Such certificate shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 2 and shall contain other terms
substantially identical to the terms hereof. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Persons and other than the
Company, which controls or is controlled by the successor or purchasing Person
or which, in connection with such Transaction, issues stock, securities, other
property or cash to holders of Common Stock, then such certificate also shall be
executed by such Person, and such Person shall, in such certificate,
specifically assume the obligations of such successor or purchasing Person and
acknowledge its obligations to issue such stock, securities, other property or
cash to holders of the Warrants upon exercise thereof as provided above.
Simultaneously with the consummation of the PMR Merger, the Company shall cause
PMR to deliver the certificate referred to in the immediately preceding sentence
to each holder of the Warrants evidenced hereby. The provisions of this Section
2(b) similarly shall apply to successive Transactions.
(c) PMR MERGER. In the event that after the Issue Date the PMR
Merger shall occur, the Number Issuable in effect immediately prior to the PMR
Merger shall be adjusted so that the holder of any Warrants evidenced hereby
thereafter exercised shall be entitled to receive a number of shares, par value
$0.01 per share, of common stock of PMR (the "PMR COMMON STOCK") (subject to
further adjustment pursuant to the terms of this Warrant Certificate) equal to
(x) such holder's Proportionate Percentage (as defined below) multiplied by (y)
the number of shares of PMR Common Stock, representing 8.0% of the outstanding
shares of PMR Common Stock on a fully diluted basis after giving effect to the
transactions contemplated by the Transaction Documents (as defined in the
Securities Purchase Agreement), including, without limitation, the PMR Merger,
and assuming, without duplication, for purposes of this calculation, (i) the
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exercise, immediately prior to the consummation of the PMR Merger, of all
options under the Company's 1997 Incentive and Nonqualified Stock Option Plan
for Key Personnel, (ii) the grant and exercise, immediately prior to the
consummation of the PMR Merger, of the options to be granted to existing senior
management of the Company to purchase up to 550,000 shares of Common Stock,
(iii) the exercise of all options granted under PMR's 1997 Equity Incentive Plan
and PMR's Outside Directors' Non-Qualified Stock Option Plan of 1992 as of the
consummation of the PMR Merger (but excluding 979,788 options (such number being
determined without giving effect to the reverse stock split contemplated to be
undertaken by PMR prior to the PMR Merger), all of which have an exercise price
per share of PMR Common Stock in excess of $4.00 (such number being determined
without giving effect to the reverse stock split contemplated to be undertaken
by PMR prior to the PMR Merger) and (iv) the conversion, exercise or exchange of
all outstanding securities and securities that have been approved for issuance
into shares of PMR Common Stock as of the consummation of the PMR Merger,
including, without limitation, all warrants that may be issued under the
Securities Purchase Agreement. The "PROPORTIONATE PERCENTAGE" means, with
respect to the holder of any Warrants evidenced hereby, a fraction, the
numerator of which equals the number of shares of Common Stock issuable upon
exercise of such Warrants immediately prior to the PMR Merger and the
denominator of which equals the number of shares of Common Stock issuable upon
exercise immediately prior to the PMR Merger of all warrants issuable under the
Securities Purchase Agreement (assuming that all such warrants are issued
immediately prior to the PMR Merger).
(d) SPECIAL DISTRIBUTIONS. In the event that after the Issue Date
the Company shall declare a dividend or make any other distribution (including,
without limitation, in cash, in Capital Stock (which shall include, without
limitation, any options, warrants or other rights to acquire Capital Stock) of
the Company, whether or not pursuant to a shareholder rights plan, "poison pill"
or similar arrangement) in other property or assets, to holders of Common Stock
(a "SPECIAL DISTRIBUTION"), then the Board of Directors shall, if the holder so
elects by sending a Special Notice to the Company, set aside the amount of such
dividend or distribution that any holder of Warrants would have been entitled to
receive had it exercised such Warrants prior to the record date for such
dividend or distribution. Upon the exercise of Warrants evidenced hereby, such
electing holder or such holder's subsequent permitted transferee shall be
entitled to receive, such dividend or distribution that such holder would have
received had such Warrants been exercised immediately prior to the record date
for such dividend or distribution. Prior to any Special Distribution described
in this Section 2(c), the Company shall as provided in Section 4 hereof notify
each holder (not less than ten Business Days prior to the occurrence of such
Special Distribution) of its intent to make such Special Distribution and such
holder, if it elects to have such distribution set aside the amount thereof
rather than have an adjustment to the Number Issuable as provided in Section
2(a)(i) or (iii), shall notify the Company by sending to the Company a Special
Notice not less than three (3) Business Days prior to the date of any such
Special Distribution.
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Section 3. REDEMPTION. The Warrants and the shares of Common Stock
for which the Warrants are exercisable are subject to the Holder's put right set
forth in Article XIII of the Securities Purchase Agreement.
Section 4. NOTICE OF CERTAIN EVENTS. In case at any time or from
time to time after the Issue Date the Company shall declare any dividend or any
other distribution to the holders of its Common Stock, or shall authorize the
granting to the holders of its Common Stock of rights or warrants to subscribe
for or purchase any additional shares of stock of any class or any other right,
or shall authorize the issuance or sale of any other shares or rights which
would result in an adjustment to the Number Issuable pursuant to Section
2(a)(i), (ii) or (iii) or would result in a Special Distribution pursuant to
Section 2(c) hereof, or there shall be any capital reorganization or
reclassification of the Common Stock of the Company or consolidation or merger
of the Company with or into another Person, or any sale or other disposition of
all or substantially all the assets of the Company, or there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the Company,
then, in any one or more of such cases the Company shall mail to each holder of
the Warrants evidenced hereby at such holder's address as it appears on the
transfer books of the Company, as promptly as practicable but in any event at
least 15 days prior to the applicable date hereinafter specified, a notice
stating (a) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined, (b) the
issue date (as defined in Section 2(a)(ii) hereof) or (c) the date on which such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective; PROVIDED that in the
case of any event to which Section 2(b) applies, the Company shall give at least
ten Business Days' prior written notice as aforesaid. Such notice also shall
specify the date as of which it is expected that the holders of Common Stock of
record shall be entitled to exchange their Common Stock for shares of stock or
other securities or property or cash deliverable upon such reorganization,
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up.
Section 5. CERTAIN COVENANTS.
(a) The Company covenants and agrees that all shares of Capital
Stock of the Company which may be issued upon the exercise of the Warrants
evidenced hereby will be duly authorized, validly issued and fully paid and
nonassessable, will be free and clear of any Liens (as defined in the Securities
Purchase Agreement) and will not be subject to any preemptive or similar rights
that have not been waived.
(b) The Company shall at all times reserve and keep available for
issuance upon the exercise of the Warrants, such number of its authorized but
unissued shares of Common Stock as will from time to time be sufficient to
permit the exercise of all outstanding Warrants, and shall take all action
required to increase the authorized number of shares of Common Stock if at any
time there shall be insufficient authorized but unissued shares of Common Stock
to permit such reservation or to permit the exercise of all outstanding
Warrants.
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(c) In the event of a contemplated sale of all or substantially all
of the assets or of the Capital Stock of the Company (by way of sale, merger or
otherwise, specifically excluding the PMR Merger), the Company, if requested in
writing by holders of outstanding Warrants representing a majority of the shares
of Common Stock issuable upon the exercise of all outstanding Warrants, shall
use its reasonable efforts to cause such transaction to be structured in a
manner that requires the purchaser(s) to purchase the outstanding Warrants from
such holders at a price equal to the consideration such holders would have
received had they had exercised their Warrants immediately prior to the
consummation of such sale transaction less the exercise price of such Warrants.
Section 6. REGISTERED HOLDER. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes. The registered holder of this Warrant
Certificate, in its capacity as such, shall not be entitled to any rights
whatsoever as a stockholder of the Company, except as herein provided.
Section 7. TRANSFER OF WARRANTS. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America,
together with an appropriate investment letter, if deemed reasonably necessary
by counsel to the Company to assure compliance with applicable securities laws.
Thereupon, the Company shall issue in the name or names specified by the
registered holder hereof and, in the event of a partial transfer, in the name of
the registered holder hereof, a new Warrant Certificate or Certificates
evidencing the right to purchase such number of shares of Common Stock as shall
be equal to the number of shares of Common Stock then purchasable hereunder.
Section 8. DENOMINATIONS. The Company covenants that it will, at
its expense, promptly upon surrender of this Warrant Certificate at the
principal executive office of the Company in the United States of America,
execute and deliver to the registered holder hereof a new Warrant Certificate or
Certificates in denominations specified by such holder for an aggregate number
of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 9. AMENDMENTS. Any amendment, supplement or modification of
or to any provision of the Warrant Certificates, any waiver of any provision of
the Warrant Certificates, and any consent to any departure by the Company from
the terms of any provision of the Warrant Certificates, shall be effective (i)
only if it is made or given in writing and signed by the Company and holders of
at least a majority of the shares of Common Stock issuable upon the exercise of
all of the Warrants issued pursuant to the Securities Purchase Agreement, and
(ii) only in the specific instance and for the specific purpose for which made
or given. Any such amendment, supplement or modification made in accordance with
the previous sentence of this Section 9, shall be deemed effective for all
Warrants issued pursuant to the Securities Purchase Agreement. However, without
the consent of each holder of a Warrant Certificate affected, an
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amendment may not: (1) reduce the number of shares of Common Stock issuable
pursuant to such Warrant Certificate; or (2) make any change to this Section 9.
Section 10. REPLACEMENT OF WARRANTS. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case of
an insurance company or other institutional investor, its own unsecured
indemnity agreement shall be deemed to be reasonably satisfactory), or, in the
case of mutilation, upon surrender and cancellation thereof, the Company will
issue a new Warrant Certificate of like tenor for a number of Warrants equal to
the number of Warrants evidenced by this Warrant Certificate.
Section 11. GOVERNING LAW. THIS WARRANT CERTIFICATE SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 12. RIGHTS INURE TO REGISTERED HOLDER. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their respective
successors and permitted assigns. Nothing in this Warrant Certificate shall be
construed to give to any Person other than the Company and the registered holder
thereof any legal or equitable right, remedy or claim under this Warrant
Certificate, and this Warrant Certificate shall be for the sole and exclusive
benefit of the Company and such registered holder. Nothing in this Warrant
Certificate shall be construed to give the registered holder hereof any rights
as a holder of shares of Common Stock until such time, if any, as the Warrants
evidenced by this Warrant Certificate are exercised in accordance with the
provisions hereof.
Section 13. DEFINITIONS. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
legal holiday on which commercial banks in the City of New York are authorized
or required by law or executive order to close.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participation or other equivalents (however designated) of such Person's capital
stock (or equivalent ownership interests in a Person not a corporation) whether
now outstanding or hereafter issued, including, without limitation, all common
stock and preferred stock and any rights, warrants or options to purchase such
Person's capital stock.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" shall mean the Common Stock, par value $.01 per share,
of the Company.
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"CURRENT MARKET PRICE" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
Common Stock for those days during the period of 30 days, ending on such date,
on which the national securities exchanges were open for trading, and (b) if the
Common Stock is not then listed or admitted to trading on any national
securities exchange or quoted in the over-the-counter market, the Market Price
on such date.
"EXERCISE PRICE" shall have the meaning given it in the first paragraph
hereof.
"FAIR MARKET VALUE" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction assuming (i) that the Company's Common Stock is
valued "as if fully distributed" and (ii) no consideration is given for minority
interest discounts, or discounts related to illiquidity or restrictions on
transferability.
"ISSUE DATE" shall mean the Initial Closing Date (as defined in the
Securities Purchase Agreement).
"MARKET PRICE" shall mean, per share of Common Stock on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in THE WALL STREET JOURNAL or, if no such closing price on such
date is published in THE WALL STREET JOURNAL, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading; (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange but is designated as a national market system
security, the last trading price of the Common Stock on such date; or (c) if
there shall have been no trading on such date or if the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock on such date as shown by NASDAQ and reported by any member firm of
the NYSE, selected by the Company. If neither (a), (b) or (c) is applicable,
Market Price shall mean the Fair Market Value per share determined in good faith
by the Board of Directors of the Company which shall be deemed to be Fair Market
Value unless holders of at least 15% of Common Stock issued or issuable upon
exercise of the Warrants request that the Company obtain an opinion of a
nationally recognized investment banking firm chosen by the Company (who shall
bear the expense) and reasonably acceptable to such requesting holders of the
Warrants, in which event Fair Market Value shall be as determined by such
investment banking firm.
"NASDAQ" shall mean the National Market System of the Nasdaq Stock
Market.
"NUMBER ISSUABLE" shall have the meaning given it in the second
paragraph hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
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"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, estate, joint stock company, trust, organization,
business, or a government or an agency or political subdivision thereof.
"PMR" shall mean PMR Corporation, a Delaware corporation, and its
successors.
"PMR MERGER" shall mean the merger of Psychiatric Solutions, Inc. with
PMR Acquisition Corporation, a subsidiary of PMR, with Psychiatric Solutions,
Inc. being the surviving corporation, pursuant to the Agreement and Plan of
Merger, dated as of May 6, 2002, as amended, by and between PMR, PMR Acquisition
Corporation and the Company.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"SECURITIES PURCHASE AGREEMENT" shall mean that certain Securities
Purchase Agreement, dated as of the Issue Date, between the Company and The 1818
Mezzanine Fund II, L.P., as the same may be amended or modified from time to
time in accordance with its terms.
"SPECIAL NOTICE" shall mean the notice sent by a holder to the Company
indicating its preference to have any special distribution set aside for its
benefit upon exercise of the Warrant.
"WARRANT EXERCISE DOCUMENTATION" shall have the meaning given it in
Section 1 hereof.
Section 14. NOTICES. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, courier
services or personal delivery, (a) if to the holder of a Warrant, at such
holder's last known address appearing on the books of the Company; and (b) if to
the Company, at its principal executive office in the United States located at
the address designated for notices in the Securities Purchase Agreement, or such
other address as shall have been furnished to the party given or making such
notice, demand or other communication. All such notices and communications shall
be deemed to have been duly given: when delivered by hand, if personally
delivered; one Business Day after delivered to a courier if delivered by
commercial overnight courier service; and five Business Days after being
deposited in the mail, postage prepaid, if mailed.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
PSYCHIATRIC SOLUTIONS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chief Development Officer
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[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate
to ____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is__________________________________,
and irrevocably appoints ________________ as agent to transfer this security on
the books of the Company. Such agent may substitute another to act for
such agent.
Signature:
---------------------------------------------
Signature Guarantee:
---------------------------------------------
Date:
--------------------------
