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EXHIBIT 10.61
COMPREHENSIVE CARE CORPORATION
AMENDED
COMMON STOCK PURCHASE AGREEMENT
THIS AMENDED COMMON STOCK PURCHASE AGREEMENT ("Purchase Agreement") is
made and entered into as of the 15th day of April, 1995, by and among
COMPREHENSIVE CARE CORPORATION, a Delaware corporation (the "Company"), and the
persons whose names appear on the signature pages hereof (hereinafter
collectively called the "Purchasers").
R E C I T A L S:
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A. The Company desires to obtain financing by issuance of its
authorized and previously unissued shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"); and
B. The Purchasers desire to acquire shares of the Common Stock
(such shares referred to herein individually as a "Share" and collectively as
the "Shares") on the terms and conditions set forth herein.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATIONS, IT IS AGREED as
follows:
1. Issue of the Shares. Subject to the terms and conditions
hereof, the Company has authorized, from time to time the, issuance, of 150,000
shares for $6.50 per share under a Common Stock Purchase Agreement dated April
15, 1995 between the Company and Xxxxx X. Xxxxxxxx; plus 22,500 shares as an
adjustment for delay in registration of shares without additional payment
therefor. The Company acknowledges receipt of the $975,000 purchase price for
an aggregate of 172,500 Shares (allocated as provided in Section 9 hereof), for
an average purchase price of approximately $5.6521739 in cash for each Share.
The purchase price is or was payable upon the execution and delivery of this
Purchase Agreement.
2. Representations and Warranties of the Company. The Company
represents and warrants that, except as set forth on a Schedule hereto:
2.1 The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware, and
duly qualified to do business and in good standing as a foreign corporation in
the State of California and each state in which the nature of its business or
properties requires such qualification (except where failure as to qualify
would not have a material adverse effect on the Company taken as a whole), with
full power and authority,
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corporate and otherwise, to enter into and perform this Purchase Agreement,
and to execute and deliver the various instruments and documents provided for
herein.
2.2 The execution, delivery and performance by the
Company of this Purchase Agreement, and the making, execution and delivery by
the Company of the instruments contemplated hereby, have been duly authorized
by all necessary corporate action and will not violate any provision of law,
court order or decree, or of its Certificate of Incorporation or Bylaws, or
result in the breach of, or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to any agreement or instrument to which it is a party, or by
which it or its property may be bound or affected. This Purchase Agreement is
a valid and binding obligation of the Company, enforceable in accordance with
its terms.
2.3 Except as set forth in a Schedule attached hereto,
(a) there are no material lawsuits or proceedings pending, or, to the Company's
knowledge, threatened against or affecting the Company and (b) there are no
proceedings before any governmental commission, bureau or other administrative
agency pending, or, to the Company's knowledge, threatened against the Company.
2.4 The authorized capital of the Company is 12,500,000
shares of Common Stock, $0.01 par value per share, the number of which were
outstanding as of a recent date is set forth on Schedule 2.4 hereto, and 60,000
shares of Preferred Stock, $50.00 par value per share, of which no shares are
issued and outstanding. There are no shares of Common Stock reserved for
issuance for options, warrants or conversion of convertible securities, except
as listed on a Schedule hereto.
2.5 The Company's subsidiaries are as set forth in a
Schedule attached hereto.
2.6 The minute books of the Company have been properly
kept and reflect all transactions entered into by the Company which require
submission to or action by the stockholders or directors of the Company.
2.7 Any and all licenses and approvals required by the
Company for the conduct of its business have been obtained from the federal,
state, or local authorities concerned, all of which are in good standing.
2.8 The Shares of Common Stock issuable under this
Purchase Agreement have been duly authorized and, when issued against payment
therefor, will be validly issued, fully paid and nonassessable
2.9 Except for any applicable requirements of state
securities laws (as to which no representations or warranties are made), no
governmental permit, consent, approval or authorization is required in
connection with (i) the execution and delivery of this Purchase Agreement by
the Company or (ii) the offer, sale, issuance and delivery of the Shares
contemplated hereby by the Company; provided that, all representations made to
the Company by the Purchasers in this Purchase Agreement and in any other
document or instrument delivered in connection herewith are assumed for
purposes of this representation and warranty to be accurate and complete.
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2.10 Included in the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1994 are the consolidated balance sheets of
the Company at May 31, 1994 and May 31, 1993, and the consolidated statements
of operations, cash flows and stockholders' equity for the year ended May 31,
1994, with the report thereon of Xxxxxx Xxxxxxxx LLP, independent accountants.
Included in the Company's Quarterly Reports on Form 10-Q for the quarters ended
August 31, 1994 , November 30, 1994 and February 28, 1994 are the unaudited
consolidated balance sheets of the Company as of such dates, the unaudited
consolidated statements of operations for the three-month periods ended on such
dates and for the corresponding prior year periods, and the unaudited
consolidated statements of cash flows for the three-month periods ended on such
dates and for the corresponding prior year periods.
2.11 None of the Company's reports and filings with the
Securities and Exchange Commission ("SEC") contained a misstatement of a
material fact or omitted to state a material fact necessary to make the
statements contained therein, in the light of the circumstances in which they
were made or omitted, not misleading.
2.12 The Company Common Stock is traded on The New York
Stock Exchange, Inc. ("NYSE"). No assurance is made as to any future NYSE
listing of Shares of Common Stock.
2.13 The proceeds received by the Company from the Shares
will be applied to general corporate purposes.
3. Representations of Each of the Purchasers.
3.1 Investment Representations. This Purchase Agreement
is made with Purchasers by the Company in reliance upon the Purchasers'
representations to the Company, which by Purchasers' acceptance hereof,
Purchasers confirm, severally and not jointly, except as indicated herein, that
(a) Purchasers are acquiring the Shares for investment for their own account
and not for the beneficial interest of any other person, and not with a view to
the resale or distribution thereof, and that Purchasers will not distribute,
sell or otherwise dispose of the Shares except as permitted under the
Securities Act of 1933, as amended (the "Act"), the General Rules and
Regulations thereunder, and all applicable State "Blue Sky" laws; (b)
Purchasers have been afforded access to information and have been informed
fully concerning the Company, its financial condition and business prospects;
(c) Purchasers' financial circumstances are such as to permit Purchasers to
make this investment without having a present intention or need to liquidate
their investment and Purchasers also severally acknowledge their awareness that
their investment is subject to substantial risk of loss; (d) Purchasers
severally confirm further that they have been advised that Shares have not been
registered under the Act, and that, accordingly, the Shares will be what is
commonly known as "restricted securities," and are not freely transferrable by
the Purchasers except pursuant to an exemption from registration under the Act,
such as Rule 144, the substance of which is known to the Purchasers; (e) the
Purchaser is either an investment company as defined in the Investment Company
Act of 1940, a pension or profit sharing trust, or other financial institution
or institutional buyer; (f) Purchaser is an accredited investor as defined in
Rule 501(a) under Regulation D pursuant to the Act and any applicable state
securities laws; (g) a reasonable time prior to the sale of Shares, the
Company provided to Purchaser (A) the information contained in the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1994; (B) the
information contained in the Company's definitive proxy statements,
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Forms 10-Q and Forms 8-K filed since May 31, 1994; (C) a brief description of
the Shares, the use of the proceeds from the offering, and any material changes
in the Company's affairs not disclosed in the documents furnished; (D)
information identifying the contents of the material exhibits to the Company's
Form 10-K, and if requested in writing, such exhibits; and (E) the opportunity
to ask questions and receive answers concerning the terms of the offering and
to obtain any additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify other
required information; (j) Purchaser was not offered or sold the Shares by means
of any general solicitation or general advertising, including but not limited
to any advertisement, article, notice or communication published in any print
or broadcast media or any seminar or meeting to which attendees were invited by
any general solicitation or advertising; (k) no Purchaser that is an entity was
formed for the specific purpose of purchasing the Shares; and (l) each
Purchaser that is a trust has total assets in excess of $5,000,000 and its
purchase of the Shares is directed by a sophisticated person with such
knowledge in financial and business matters that he or she is capable of
evaluating the merits and risks of the prospective investment.
3.2 Other Representations. Each Purchasers, severally
and not jointly, represents as follows: (a) No governmental permit, consent,
approval or authorization is required in connection with (i) the execution and
delivery of this Purchase Agreement by the Purchaser or (ii) the purchase of
the Shares contemplated hereby by the Purchaser; (b) if Purchaser is an
entity, the Purchaser is duly organized and validly existing in good standing
under the laws of the state in which it is organized, and if Purchaser is an
individual, the Purchaser has capacity, and in either case with full power and
authority to enter into and perform this Purchase Agreement, and to execute and
deliver the various instruments and documents provided for herein; (c) the
execution, delivery and performance by the Purchaser of this Purchase
Agreement, and the making, execution and delivery by the Purchaser of the
instruments contemplated hereby, have been duly authorized by all necessary
corporate action and will not violate any provision of law, court order or
decree, or of its charter or bylaws, or result in the breach of, or constitute
a default under, or result in the creation of any lien, charge or encumbrance
upon any property or assets of the Purchaser pursuant to any agreement or
instrument to which it is a party, or by which it or its property may be bound
or affected; and (d) this Purchase Agreement is a valid and binding obligation
of the Purchaser, enforceable in accordance with its terms.
4. Condition to Issuance; Authority to List Shares on NYSE. So
long as the Company's Common Stock continues to be listed on the NYSE, the
obligation of the Company to issue, and the Purchasers to accept, the Shares is
conditioned upon the prior occurrence of one of the following events: the
satisfaction of the NYSE shareholder approval requirement for the issuance; the
availability for the issuance of an exception to the NYSE shareholder approval
policy evidenced by NYSE approval and compliance by the Company with the
conditions to such exception; or the approval for listing of the Shares on the
NYSE. Further, the Purchaser's obligation to accept such shares when issued
shall be limited to the extent that Xxxxxxx Investments would then hold record
title to an amount of outstanding Common Stock in excess of ten percent (10%)
of the Company's then outstanding Common Stock.
5. Transfer by Each of the Purchasers. Neither the Shares to be
purchased by Purchasers, nor any interest therein, shall be sold, transferred,
assigned, or otherwise disposed of, unless the Company shall previously have
received an opinion of counsel knowledgeable in federal securities law, in form
and substance satisfactory to the Company and accompanied by
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such supporting documents as the Company may reasonably request, to the effect
that registration under the Act is not required in connection with such
disposition pursuant to the Act or the General Rules and Regulations
thereunder. The certificates evidencing the Shares shall bear a conspicuous
notation, substantially as provided below, setting forth the restrictions on
transfer of the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO SECTION 4(2) OF SAID ACT OR REGULATION D
THEREUNDER AND NOT WITH A VIEW TO OR IN CONNECTION WITH THE
DISTRIBUTION THEREOF. THE SECURITIES MAY NOT BE OFFERED FOR
SALE OR SOLD OR OTHERWISE DISPOSED OF OR ENCUMBERED EXCEPT
UPON COMPLIANCE WITH SAID ACT AND AS PERMITTED BY THE PURCHASE
AGREEMENT, A COPY OF WHICH IS ON FILE AND MAY BE INSPECTED AT
THE PRINCIPAL OFFICE OF THE COMPANY.
6. Registration.
6.1 (a) Incidental Registration. The Company will
notify the Purchasers of any proposed filing of a registration statement at
least thirty (30) days prior to each time that the Company proposes to file
such registration statement covering shares of its Common Stock other than (i)
a registration statement for the purpose of registering employees' stock
options or plans or employees' stock purchase or other such director or
employee plans on Form S-8 or its equivalent, or (ii) a registration statement
filed in connection with a business combination, and will include in not more
than two (2) such registration statements any Shares issued to Purchasers which
Purchasers request to have so registered, by notifying the Company not later
than ten (10) days after the receipt by Purchasers of the Company's notice. If
any Purchaser requests such registration, all of the Purchasers shall be
entitled to register such number of their Shares at that time as they shall
specify in writing to the Company, subject to reduction on a pro rata basis if
in the reasonable judgment of the Company or its underwriter or investment
banker the inclusion of more shares could reasonably be expected to threaten
the success of the registration or in the event that the proposed registration
form is inappropriate to register their Shares at that time in the reasonable
judgment of counsel to the Company.
(b) Demand Registration. If the Company has not
instituted registration procedures within the period ending forty-five (45)
days after the date of this Purchase Agreement and which afford the Purchasers
an opportunity to include their shares in such registration proceedings, the
Purchasers shall be entitled to demand a registration with the SEC of some or
all of their Shares. The demand must be made by the holders of not less than
one-half of the Shares originally issued under the Purchase Agreement. The
obligations of the Company and of the Purchasers in connection with any demand
registration shall be as set forth in Section 5.1(c) below.
(c) Terms of Registrations. The foregoing rights
and duties shall be subject to the following terms and conditions:
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(i) The Company's duty to notify the
Purchasers and to include any Purchaser's Shares in any such
registration statement pursuant to an incidental registration under
Section 5.1(a) shall cease after any of the Purchasers' Common Stock
has been included in any two (2) effective registration statements,
including any pursuant to Section 5.1(b).
(ii) The Company shall bear the cost of
any registration statement and the incremental expense of including
therein any of the Purchasers' Shares pursuant to this Section 5.1,
except that the Purchasers shall bear the following expenses ratably
applicable to each Purchaser's Common Stock: any underwriting
discount or brokerage commissions, SEC or NYSE or "Blue Sky" filing or
similar fees, securities transfer taxes, if applicable, and the
Purchaser's own legal expenses.
(iii) The Company will use its best
efforts to cause such registration statement to become effective under
the Act; provided, however, that if any securities being sold directly
by the Company are included in such registration statement, the
Company may at its discretion elect not to proceed with such
registration statement or to withdraw such registration statement
after it has been filed but before it becomes effective under the Act
without regard to whether the registration statement also includes any
of the Purchasers' Shares. In the event that any such registration is
terminated by the Company prior to effectiveness, such registration
shall not be counted as one of the two (2) registration statements
under which a Purchaser is entitled to include Shares hereunder.
(iv) If such registration statement
relates to an underwritten public offering of the Company's Common
Stock for cash and the underwriters or managing underwriters of such
proposed offering determine in good faith that the marketability of
the underwritten Company's Common Stock so requires, Purchasers'
Common Stock which has been included in the registration statement
pursuant to this section shall not be offered or sold to the public
for such period up to sixty (60) days from the effective date of the
registration statement, as such underwriters shall specify in writing.
Nothing herein shall require Purchasers to offer such securities
through any such underwriter.
6.2 The Company's obligations to Purchasers shall require
it to use its best efforts to cause any such registration statement to be
prepared in accordance with the Act and filed in an expeditious manner with due
regard for continuity of the ordinary and necessary business operations of the
Company. In connection with any requests pursuant to Section 5.1, the Company
will (i) use its best efforts to permit a lawful distribution by Purchasers in
the manner specified by Purchasers; (ii) use its best efforts to qualify or
otherwise "blue sky" the proposed offering by Purchasers in California, New
York, Texas, and not more than two (2) additional jurisdictions agreed upon by
the holders of the majority of the shares included in the registration
statement; provided, however, if such offering is underwritten by an
underwriter, the Purchasers' Shares shall also be "blue skied" in all states
covered by the underwriting; and provided, further, that nothing herein
contained shall require the Company to qualify as a foreign corporation in a
jurisdiction in which it is not presently qualified or to become licensed as a
securities broker or dealer in any jurisdiction; (iii) use its best efforts to
obtain approval for listing the shares included in the registration statement
on the NYSE, or the other principal
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exchange, or the principal trading market or quotation system upon which shares
of Company Common Stock are then traded; (iv) provide Purchasers with a
reasonable number of registration statements and prospectuses (including
amendments and revisions) requested by Purchasers; and (v) use its best efforts
to have such prospectuses meet the requirements of Section 10(a) of the
Securities Act of 1933, as amended. The Company shall use reasonable efforts
to cause any effective registration statement which includes Purchasers' Shares
to remain effective for a period of at least ninety (90) days. Provided,
however, in the event of a deferral in the inclusion of Purchasers' Shares, as
provided in Section 5.1(c)(iv), such minimum period of ninety (90) days shall
be extended by the period of such deferral.
6.3 The Company's obligations under this Section 5 are
conditioned upon its being furnished by Purchasers with detailed descriptions
of Purchasers, their Shares to be covered in the requested registration
statement, their proposed method of distribution, and such other relevant
information and undertakings as may be required. If any Purchaser or
Purchasers do not furnish the requisite information, shares of such Purchasers
need not be included in the registration statement. However, this shall not
affect the right of the other Purchasers hereunder to have their Shares
included within the registration statement.
6.4 Anything herein to the contrary notwithstanding, if
the Company receives a request pursuant to Section 5.1 hereof and believes, in
good faith, that registration under the Act is not required in order to permit
the proposed sale or other disposition of such Shares covered by such request
either because it reasonably believes it can obtain a "no-action letter" from
the SEC permitting the proposed transactions without registration under the Act
or it is not required by reason of Rule 144(k) or otherwise, within ten (10)
days after receiving such request it will so notify Purchasers in writing and
proceed diligently with Purchasers' cooperation to seek to obtain such
"no-action letter" or opinion of counsel, as the case may be; provided,
however, that if such "no-action letter" or an opinion of counsel reasonably
satisfactory in form and substance to Purchasers and Purchasers' counsel (who
must be knowledgeable in federal securities law) is not obtained and submitted
to Purchasers within thirty (30) days from the date on which Purchaser made a
request pursuant to Section 5.1 hereof, the Company shall diligently proceed to
comply with such request in accordance with the terms hereof, without the
imposition on Purchasers of an incremental registration expense occasioned by
such delay.
6.5 In connection with any registration statement
pursuant to this Section 5, Purchasers shall severally and not jointly
indemnify and hold harmless the Company and each person (if any) who controls
the Company within the meaning of Section 15 of the Act from and against all
losses, claims, damages and liabilities to which the Company or any of them may
be subject, actually or allegedly caused by any untrue or allegedly untrue
statement of a material fact contained in any such registration statement or
related prospectus or actually or allegedly caused by an omission to state
therein a material fact actually or allegedly required to be stated therein or
necessary to make the statements therein not misleading, which statement or
omission shall have been made in reliance upon and in conformity with written
information furnished to the Company by Purchasers on Purchasers' behalf
specifically for use in connection with such registration statement.
Reciprocally, the Company hereby agrees to indemnify and hold harmless
Purchasers, any broker or other person who may be deemed an underwriter for
Purchasers and each person (if any) who controls the Purchasers or Purchasers'
underwriter within the meaning of Section 14 of the Act, from and against all
losses, claims, damages and liabilities to which such parties or any of them
may be subject, actually or allegedly caused by any untrue or
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allegedly untrue statement of a material fact contained in any such
registration statement or related prospectus or actually or allegedly caused by
any omission to state therein a material fact actually or allegedly required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such statement or omission shall have been made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of Purchasers specifically for use in connection with such
registration statement.
(a) The foregoing indemnity shall include
reimbursements for any legal or other expenses incurred by the
indemnified party or any director, officer or controlling person, as
defined above, in connection with investigating or defending any such
loss, damage, claim, liability or action.
(b) Promptly after receipt by an indemnified
party under this Section 5.5 of notice of commencement of any action,
the indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 5.5, notify the
indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it or him, as the case
may be, from any liability to any indemnified party otherwise than
under this Section 5.5 except to the extent that the failure to so
notify such party adversely affected the indemnifying party. In case
any such action is brought against any indemnified party and it or he
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the
extent desired, jointly, with any other indemnifying party similarly
notified, assume the defense and control the settlement thereof, with
counsel reasonably satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party as to its
or his election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this Section
5.5 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than
reasonable cost of investigation.
(c) The Company and the Purchasers each have the
right to make a reasonable investigation of the information contained
in any registration statement covered by this Section 5 to confirm its
accuracy, subject, however, to the obligation of each Purchaser to
keep in confidence, and not to use for purposes of effecting any
trades, any information derived until such time as the information is
filed with the SEC on a non-confidential basis..
6.6 To the extent transfers of the Shares are permitted
pursuant to Section 4 hereof, the Purchasers may transfer, assign or otherwise
dispose of their rights under this Section 5, as a whole or in part, to one or
more parties; but no such action by the Purchasers shall increase or otherwise
affect the nature or extent of the Company's obligations provided in this
Section.
7. Hypothecation of Shares. The Company expressly agrees that
any of the Purchasers may pledge, assign or otherwise hypothecate any of the
Shares acquired hereby to any other Purchaser.
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8. Choice of Law and Venue; Jury Trial Waiver
THE VALIDITY OF THIS PURCHASE AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT
SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN
THE STATE OF TEXAS. THE COMPANY AND EACH PURCHASER WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION. THE COMPANY AND EACH PURCHASER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE PURCHASE AGREEMENT OR THE NOTES OR ANY
OF THE AGREEMENTS, DOCUMENTS, INSTRUMENTS AND TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. THE COMPANY AND EACH PURCHASER
REPRESENTS FOR ITSELF THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A NON-JURY TRIAL BY THE COURT.
9. Governmental Authority. No consent, authorization, approval,
or other action by, and no notice to or filing with, any governmental authority
or regulatory body or any other Person is required for the execution, delivery
or performance of this Purchase Agreement, or the delivery and issuance of the
Shares, other than such actions as shall have been taken prior to the Closing.
10. Notices. Any notice or demand required or desired to be given
to or served upon the Company or the Purchasers in connection herewith shall be
in writing and deemed to have been sufficiently given or served for all
purposes when delivered in person or when deposited in the United States mail
certified or registered, postage prepaid, addressed or delivered as follows:
If to the Company: Comprehensive Care Corporation
x/x Xxxxxx Xxxxxx & Co.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx xxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Street, Chairman
If to the Purchasers: Xxxxx X. Xxxxxxxx
c/o The Xxxxxxxx Law Firm
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
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Number of
of Shares Purchased Purchasers:
172,500 Xxxxx X. Xxxxxxxx, an individual
Total: 172,500
or, if any other address shall at any time be designated by the Company or by
the Purchaser in writing in conformance with the provisions hereof, to such
other address.
11. Parties in Interest. All the terms and provisions of this
Purchase Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, other than purchasers of Shares
sold to the public pursuant to Section 5 hereof.
12. Section and Other Headings. Section and other headings herein
are for reference purposes only, and shall not be used in any way to govern,
limit, modify, construe or otherwise affect this Purchase Agreement.
13. Counterparts. This Purchase Agreement may be executed with
each Purchaser in one or more counterparts, each of which shall be deemed an
original, but all of which together shall be deemed but one and the same
instrument.
14. Attorneys' Fees. In the event of any suit or action arising
out of an Event of Default under this Purchase Agreement, the Purchasers shall
be entitled to reasonable attorneys' fees and costs of suit.
15. Entire Agreement. This Purchase Agreement amends, and
restates in full, the Common Stock Purchase Agreement dated April 15, 1995
between the Company and Xxxxx X. Xxxxxxxx, designated as the "Purchaser" or
"Purchasers" therein, which, as amended and restated herein, continues in full
force and effect and constitutes the entire agreement of the parties with
respect to the subject matter hereof, and the Purchasers are relying on no
representation, warranty or understanding not expressly contained herein.
IN WITNESS WHEREOF, the undersigned have caused this Purchase
Agreement to be executed by the undersigned persons thereunto duly authorized.
"Company"
COMPREHENSIVE CARE CORPORATION
By: /s/ Xxxxxx X. Street
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Xxxxxx X. Street, Chairman of
the Board, Chief Executive
Officer and President
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"Purchasers"
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx, an individual
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SCHEDULE 2.3
TO
COMMON STOCK PURCHASE AGREEMENT
Pending or Threatened
Litigation or Governmental Proceedings
INCORPORATED BY REFERENCE TO RELEVANT DISCLOSURE IN THE
COMPREHENSIVE CARE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED FEBRUARY 28, 1995
IN THE FORM AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
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SCHEDULE 2.4
TO
COMMON STOCK PURCHASE AGREEMENT
Shareholders' (Common Stock Purchase) Rights Plan *
1988 Incentive Stock Option Plan 491,130
1988 Non Statutory Stock Option Plan 200,000
Options not within a Plan 97,500
Directors' Stock Option Plan 200,000
Secured Convertible Note 333,333*
due January 1997
Private Placements (shares unissued) 472,500
Includes: Xxxxxxx (100,000+15,000+135,000);
Xxxxxxxx (150,000+22,500); RH Capital (150,000)
Option to purchase of American Mental Health Care, Inc. 44,054
Potential purchase price of American Mental Health Care, Inc. 132,162
Option issued to Physician Corporation of America 100,000
Shares issuable on Conversion of
Convertible Subordinated Debentures (approx.) ** 35,000***
Shares issuable upon proposed exchange with Debentureholders 150,000***
*Each share of Common Stock outstanding or issued will have one attached Right
to purchase, initially, one share of Common Stock. In the event a person
becomes an Acquiring Person, as defined in the Rights Agreement, the number of
shares purchasable with one Right will be subject to increase based on a
formula that provides generally for a purchase of $300 worth of shares of
Common Stock at a price equal to 50% of the then current market value, as
defined. **Subject to anti-dilution adjustments. ***Excludes shares issuable
upon future voluntary reductions of the conversion price in the discretion of
the Company.
2,214,508 shares, in addition to shares reserved as indicated above, were
outstanding at May 31, 1995. These shares outstanding included 2,148,414
shares represented by new certificates for post-reverse-split Common Stock and
an estimated 66,094 (subject to payment in lieu of fractional shares) of new
shares represented by unexchanged old certificates nominally representing
660,940 shares of pre-reverse split common stock. All numbers reflect the
1-for-10 reverse stock split effected in October 1994.
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SCHEDULE 2.5
TO
COMMON STOCK PURCHASE AGREEMENT
Subsidiaries
% STOCK OWNED STATE OF INCORP.
------------- ----------------
CareManor Hospital of Washington, Inc. 100% Washington
Trinity Oaks Hospital, Inc. 100% Texas
Starting Point, Inc. 100% California
CareInstitute (Non-Profit) 100% California
CareUnit Clinic of Washington, Inc. 100% Washington
CareUnit Hospital of Ohio, Inc. 100% Ohio
CareUnit, Inc. 100%(7) Delaware
Comprehensive Behavioral Care, Inc.,
formerly known as AccessCare, Inc. 86.5%(8) Nevada
Newport Point, Inc.(1)(4) 80% Delaware
Access Managed Care, Inc.(2) 100% Ohio
Managed Behavioral HealthCare, Inc.(1)(3) 100% Florida
N.P.H.S., Inc.(2) 100% California
NeuroAffiliates Company(2)(6) 100% California
CareUnit, Inc.(1) 100% California
Comprehensive Care Corporation(1) 100% Nevada
CareUnit Hospital of St. Louis, Inc.(1) 100% Missouri
CareUnit Hospital of Albuquerque, Inc.(1) 100% New Mexico
CareUnit Hospital of Nevada, Inc.(1) 100% Nevada
CareUnit of Chicago, Inc.(1) 100% Illinois
GVHC, Inc.(1) 50% Minnesota
CMP Properties, Inc.(1) 100% Oregon
CompCare Health Services, Ltd.(1) 100% Canada
AccessCare of Washington, Inc.(2)(5) 100% Washington
CareUnit of Florida, Inc.(2) 100% Florida
----------------
(1) Inactive and in the process of dissolution.
(2) Inactive.
(3) Formerly known as Mental Health Programs, Inc.
(4) Stock interest held by Starting Point, Inc.
(5) Stock interest held by AccessCare, Inc.
(6) Unincorporated. N.P.H.S. holds this interest.
(7) The Company has agreed to pledge these shares to secure its performance of
the letter agreement dated March 3, 1995 between the Company and a
representative of debentureholders, which requires that the Company offer up to
approximately $4,775,000 in cash, plus $1,150,000 in shares of Common Stock,
plus $765,000 in cash in lieu of interest, to exchanging debentureholders,
assuming the tender of all of the outstanding debentures.
(8) Reflects a purchase by Physician Corporation of America of shares of
preferred stock representing a 13.5% fully-diluted interest in the subsidiary.
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SCHEDULE 2.6
TO
COMMON STOCK PURCHASE AGREEMENT
Although some corporate minutes are not completed and executed, the Company
believes that the necessary corporate authorizations material to this
transaction are fully effective.
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SCHEDULE 2.9
TO
COMMON STOCK PURCHASE AGREEMENT
The Company has submitted a listing application to the NYSE covering certain
shares issuable by the Company, and intends to amend such application to
include these shares. In connection with the application, the Company has
applied for an exception to the NYSE Shareholder Approval Policy based on the
Company's severe financial distress. The Audit Committee of the Board of
Directors of the Company approved reliance upon that exception for such other
shares and will be asked to approve reliance upon exception for issuance of the
Shares pursuant to the foregoing Purchase Agreement. Such exception is also
subject to review and approval by the NYSE, and no assurances can be made that
such approval will be forthcoming. Under such exception, one or more news
releases and notices will be required that express the Company';s reliance on
the exception because of the financial distress of the Company.
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SCHEDULE 2.10
TO
COMMON STOCK PURCHASE AGREEMENT
In connection with the resignation of Xxxxxx Xxxxxxxx LLP ("Xxxxxxxx") from its
audit engagement with the Company, Xxxxxxxx indicated that "We have advised the
Company that if Xxxxxx Xxxxxxxx LLP is requested in the future to include our
reports on the Company's 1993 and 1994 financial statements in future filings
with the Securities and Exchange Commission, we would consider undertaking an
engagement to respond to each such request based on the existing facts and
circumstances. Any such engagement would require that we (a) perform a
post-audit review based on procedures and scopes as we considered necessary in
the circumstances, and (b) determine the appropriate form of any report
reissuance at that time based on the results of those procedures." There can be
no assurances that Xxxxxxxx would reissue its audit reports at this time
without additional or other qualifications or uncertainties. Also there are
no assurances made that events subsequent to the date of the most recent
audited or unaudited financial statements do not, or would not be expected to,
have material and adverse effects on the financial condition of the Company.
The Company's Form 8-K filed on or about May 22, 1995 and Form 8-K/A filed on
or about June 2, 1995 contain additional information. Also see Schedule 2.11.
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SCHEDULE 2.11
TO
COMMON STOCK PURCHASE AGREEMENT
The Securities and Exchange Commission ("SEC") has delivered comment letters to
the Company from time to time since early 1995 regarding the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1994, and which contains
requests that the Company amendment such report and subsequent Forms 10-Q in
conformity with such comments. The Company has responded and is attempting to
persuade the SEC that the Form 10- Q, and the financial statements therein,
does comply with applicable requirements, and that other comments are not an
appropriate basis to require amending any filings. No assurances can be made
of the outcome of the SEC comments. In the event such SEC comments are not
resolved in a manner favorable to the positions of management, the Company may
incur liability that potentially could arise in connection with SEC,
shareholder or similar claims under applicable securities laws, any of which
could have a materially adverse effect on the Company's financial condition.
Until such comments can be satisfactorily resolved, the Company may be unable
to register securities with the SEC, which could have a material and adverse
effect on the Company's financial condition. Purchasers may review and ask
questions concerning the SEC comment letters and the issues raised thereby.
Reference is made to the SEC Reports and to the Exhibits thereto, which provide
additional information relevant to an investment in the Shares.
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19
SCHEDULE 2.12
TO
COMMON STOCK PURCHASE AGREEMENT
As described in the Company's Form 10-Q for the period ended February 28, 1995,
the Company is subject to "listing watch" by the NYSE and fails to satisfy
continuing listing requirements of the NYSE. The Company has been required to
present financial plans and projections to the NYSE, and has generally not met
such projections, and may not have shown improvement in the necessary listing
standard criteria. The Company understands that continued listing of the
Common Stock on the NYSE was made subject to substantial improvement toward
meeting such requirements. No assurances can be made that the Company's Common
Stock will continue to be listed on the NYSE, or in the potential event of NYSE
delisting, that the Common Stock will be acceptable for quotation on the Nasdaq
Stock Market.
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RISK FACTORS
SCHEDULE
TO
COMMON STOCK PURCHASE AGREEMENT
In addition to all other factors described in the foregoing Purchase Agreement,
these Schedules, and the documents referred to therein or herein, Purchasers
should consider the following risk factors:
RISK FACTORS
History of Losses and Anticipated Future Losses; Uncertainty of Future
Profitability
There can be no assurance that the Company will be able to achieve
profitability and positive cash flows from operations or that profitability and
positive cash flow from operations, if achieved, can be sustained on an ongoing
basis. Moreover, if achieved, the level of that profitability or that positive
cash flow cannot accurately be predicted.
Need for Additional Funds; Uncertainty of Future Funding
The Company's negative cash flow from operations has consumed
substantial amounts of cash. Payment of amounts due the IRS on or before July
12, 1995 and retiring of 7 1/2% Convertible Subordinated Debentures, which the
Company has agreed to use its best efforts to do before approximately July 31,
1995, also will require substantial amounts of cash. Issuance of additional
equity securities by the Company could result in substantial dilution to
then-existing stockholders. There can be no assurance that additional
financing will be available on acceptable terms, if at all. In the event of a
failure to meet these obligations on a timely basis, the Company may become
liable for substantial amounts in addition to the negotiated amounts presently
contemplated pursuant to the debenture letter agreement or IRS settlement
agreement.
Disposition of Assets
The Company has been required to dispose of various properties in order to
raise working capital, and no assurance can be made that such dispositions will
not have adverse effects on the Company's financial condition or that the
Company has additional assets that could be disposed of in order to fund its
capital requirements.
In connection with a March 3, 1995 letter agreement with a representative of
the debentureholders, the Company has agreed to pledge all of the shares of its
CareUnit, Inc. subsidiary. The agreement provides that "At 150 days after the
date of this Agreement, provided that the Participating Securityholders have in
each material respect performed (with opportunity to cure if a cure is
possible) their obligations required to be performed hereunder on or prior to
such date, and if the Offer has not then been consummated, the Company shall
pledge (with the Trustee, or an alternate acceptable to the Company, to act as
pledgeholder on terms of a written agreement containing standard terms
reasonably acceptable to the Participating Securityholders) all of the Shares
as collateral for its obligation to purchase the Securities pursuant to the
Offer or otherwise. Such pledge may only be foreclosed upon following 180 days
after the date hereof at
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the request of any Securityholder or the Trustee if the Offer is not
consummated on or prior to such date, provided that the Participating
Securityholders have in each material respect performed (with opportunity to
cure if a cure is possible) their obligations required to be performed
hereunder on or prior to such date. ... Upon consummation of the Offer, the
said pledges shall be released." No assurances can be made that any such
pledged shares will be returned to the Company or that the Company will not be
required to perform such agreement, or otherwise satisfy its obligations to
debentureholders.
Dependence on Reimbursement by Third-Party Payors
The Company's ability to succeed in increasing revenues may depend in
part on the extent to which reimbursement of the cost of such treatment will be
available from government health administration authorities, private health
insurers and other organizations. Third-party payors are increasingly
challenging the price of medical products and services. As a result of
reimbursement changes and competitive pressures, the contractual obligations of
the Company have been subject to intense evaluation.
Uncertainty of Pricing; Healthcare Reform and Related Matters
The levels of revenues and profitability of healthcare companies may
be affected by the continuing efforts of governmental and third party payors to
contain or reduce the costs of healthcare through various means. In the United
States, there have been, and the Company expects that there will continue to
be, a number of federal and state proposals to implement governmental controls
on the price of healthcare. It is uncertain what legislative proposals will be
adopted or what actions federal, state or private payors for healthcare goods
and services may take in response to any healthcare reform proposals or
legislation. The Company cannot predict the effect healthcare reforms may have
on its business, and no assurance can be given that any such reforms will not
have a material adverse effect on the Company.
Management of Expansion
The Company's anticipated growth and expansion into areas and
activities requiring additional expertise, such as managed care, are expected
to place increased demands on the Company's resources. These demands are
expected to require the retention of current management and the addition of new
management personnel and the development of additional expertise by existing
management personnel. The failure to retain or acquire such services or to
develop such expertise could have a material adverse effect on the prospects
for the Company's success.
Management of Transition
The Company's prospects for success depend, to a degree, on its
ability to successfully implement its current restructuring plans. The failure
of the Company to successfully transition, or any unanticipated or significant
delays in such transition, could have a material adverse effect on the
Company's business. There can be no assurance that the Company will be able to
achieve its planned transition without disruption to its business or that the
new facilities or management information system will be adequate to sustain
future growth.
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22
Shares Eligible for Future Sale
The Company contemplates issuing substantial amounts of equity through
private placements and other private transactions that have been committed to
but not completed, pending listing on NYSE, shareholder approval, or the
exercise or conversion by holders of securities, and the Company anticipates
issuances of additional equity, including without limitation to holders of
approximately $9.5 million of outstanding convertible debentures. Issuance or
these shares, registration thereof pursuant to registration rights or
otherwise, and additional sales of these shares could adversely affect the
trading prices of the Common Stock.
Price Volatility in Public Market
The securities markets have from time to time experienced significant
price and volume fluctuations that may be unrelated to the operating
performance of particular companies. Trading prices of securities of companies
in the managed care sector have experienced significant volatility.
Anti-takeover Provisions
The Company's Restated Certificate of Incorporation provides for
60,000 authorized shares of Preferred Stock, the rights, preferences,
qualifications, limitations and restrictions of which may be fixed by the Board
of Directors without any further vote or action by the stockholders, which
could have the effect of diluting the Common Stock or reducing working capital
that would otherwise be available to the Company. The Company's Restated
Certificate of Incorporation also provides for a classified board of directors,
with directors divided into three classes serving staggered terms. In addition,
the Company's stock option plans generally provide for the acceleration of
vesting of options granted under such plans in the event of certain
transactions which result in a change of control of the Company. In addition,
Section 203 of the General Corporation Law of Delaware prohibits the Company
from engaging in certain business combinations with interested stockholders.
In addition each share of the Company's Common Stock includes one right on the
terms, and subject to the conditions, of the Rights Agreement between the
Company and Continental Stock Transfer & Trust Company. These provisions may
have the effect of delaying or preventing a change in control of the Company
without action by the stockholders, and therefore could adversely affect the
price of the Company's Common Stock.
Taxes
The Company may claim entitlement to tax deductions on account of
specified liability losses defined in Section 172(f) and intends to attempt to
reduce, by means of an offset against taxes due for the 1995 tax year, its
obligations to the Internal Revenue Service ("IRS") for amounts currently due
and payable to the IRS pursuant to a settlement agreement relating to tax years
1987 through 1991. Section 172(f) is an area of the tax law without
substantial legal precedent. There may be substantial opposition by the IRS to
such claims, and no assurances can be made of the ability to claim such
deductions. The accountants that are engaged to prepare such tax claims are
not independent with regard to the claims and will be compensated on a
contingent basis. In the event that prior tax returns are amended in order to
utilize some of the
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claimed deductions, neither the Company nor the IRS will be foreclosed by the
settlement agreement from raising additional issues.
The Company's ability to use any Net Operating Losses may be subject
to limitation in the event that the Company issues or agrees to issue
substantial amounts of additional equity.
The Company may be unable to utilize some or all of its allowable tax
deductions or losses, which depends upon factors including the availability of
sufficient net income from which to deduct such losses during limited carryback
and carryover period.
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