THE SECURITIES ISSUABLE UPON EXERCISE HEREOF (THE "SECURITIES") WILL BE ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY OTHER SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR HYPOTHECATED
UNTIL SUCH SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
OTHER APPLICABLE SECURITIES LAWS, OR IN THE OPINION OF COUNSEL TO THE COMPANY IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT dated as of October 21, 1997, executed by INTEGRATED
HEALTH SERVICES, INC., a Delaware corporation (the "Company"), for the benefit
of Xxxxxxx X. Xxxxxx (the "Holder").
The Company and the Holder wish to set forth the terms and conditions
whereby the Holder will have the option to purchase shares of the $.001 par
value common stock of the Company (the "Stock"). Accordingly, in consideration
of the mutual covenants and agreements contained herein and in that certain
Employment Agreement (the "Employment Agreement") dated as of the date hereof
between RoTech Medical Corporation, a subsidiary of the Company, and the Holder,
and intending to be legally bound hereby, the Company and the Holder hereby
agree as follows:
1. Grant of the Warrant. Subject to the terms and conditions set forth in
this Agreement and any adjustment required by Section 6 below, the Company
grants to Holder the warrant (the "Warrant") to purchase all or any part of
750,000 shares of the Stock (the "Warrant Shares") for the purchase price of
$33.16 per Warrant Share. The Company shall cause the Warrant Shares to be
registered pursuant to an S-3 registration statement.
2. Term of the Warrant. The Warrant granted hereunder shall expire at 5:00
p.m., Eastern Standard Time on the date which is on the tenth anniversary of the
date hereof (the "Expiration Time").
3. Restrictions on Exercisability. Unless accelerated, in the sole
discretion of the Company, or except as specifically provided otherwise herein,
the Warrant will become exercisable in accordance with the following vesting
schedule: the Warrant shall become exercisable with respect to twenty percent
(20%) of the Warrant Shares on October 22 of each year, commencing in 1998,
until the Warrant has become exercisable with respect to all of the Warrant
Shares; provided, however, that if Holder shall die during the term of his
employment with the Company, or if a Change of Control (as hereinafter defined)
shall occur, the Warrant shall become fully exercisable. For purposes hereof, a
"Change of Control" of the Company shall mean the occurrence of any of the
following events: (a) any party or two or more parties acting in concert shall
have acquired beneficial ownership, directly or indirectly, of, or shall have
acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their acquisition of,
control over, Stock of the Company representing 25% or more of the combined
voting power of all Stock of the Company, or (b) during any period of up to 24
consecutive months, commencing after the date hereof, individuals who at the
beginning of such 24-month period were directors of the Company (together with
any new director whose election by the Company's Board of Directors or whose
nomination for election by the Company's shareholders was approved by a vote of
at least fifty-one percent (51%) of the directors then still in office who
either were directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease to constitute a majority of the directors of the Company then in
office. As used herein, "beneficial ownership" shall have the meaning provided
in Rule 13d-3 promulgated pursuant to the Securities Exchange Act of 1934, as
amended.
4. Exercise of the Warrant. Subject to the restrictions set forth in
Section 3 above, the Holder may exercise the Warrant with respect to all or any
portion of the Warrant Shares at any time or from time to time prior to the
Expiration Time by tendering to the Company payment in full of the purchase
price for the Warrant Shares then being purchased together with written notice
to the Company of such exercise that sets forth the following, as applicable:
(a) if not yet registered as set forth in paragraph 1 above, an
acknowledgment that the Warrant Shares are being purchased for investment and
not for distribution or resale (other than a distribution or resale which, in
the opinion of counsel reasonably satisfactory to the Company, may be made
without violating the provisions of the Securities Act of 1933, as amended (the
"Act"), or any other applicable federal or state securities laws); and
(b) if not yet registered as at forth in paragraph 1 above, an
acknowledgment that Holder understands that the Warrant Shares are "restricted
securities" within the meaning of Rule 144 promulgated by the Securities and
Exchange Commission, that the Warrant Shares have not been registered under the
Act or any other applicable federal or state securities laws and must be held
indefinitely unless they are subsequently registered under such Act and all
applicable laws or an exemption from registration is available therefrom, and
that the Company is under no obligation to register the Warrant Shares under the
Act or any other applicable securities laws or to take any action which would
make available to the Holder any exemption from such registration.
The Company shall issue a stock certificate bearing an
appropriate legend, if applicable, representing the Warrant Shares then being
purchased upon the actual receipt by the Company of any such written notice and
payment; provided, however, that if the listing, registration or qualification
of the Warrant Shares then being purchased upon any securities exchange or under
any federal or state law or the consent and approval of any governmental
regulatory body shall be required in connection with the purchase of Warrant
Shares then being purchased by such Holder, the Company shall not be obligated
to issue or deliver a certificate representing such Warrant Shares unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained. Holder shall have no rights as a stockholder of the
Company with respect to his Warrant Shares then being purchased until the date
on which a stock certificate representing such Warrant Shares has been issued to
the Holder. The Warrant granted hereunder shall expire with respect to any
Warrant Shares as to which Holder has not exercised the Warrant on or before the
Expiration Time.
5. Transfer of the Warrant. The Warrant may be exercised only by the Holder
or by the Holder's heirs, personal representatives and executors in the event of
such Holder's death, and neither the Warrant nor any interest or right therein
shall be subject to or liable for any debts, contracts or engagements of the
Holder or be subject to disposition by transfer, alienation, pledge,
encumbrance, assignment or any other means, whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy).
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6. Adjustment.
(a) If the number of shares of issued and outstanding Stock changes at
any time on or before the Expiration Time as a result of any recapitalization,
stock split, stock dividend or other change in the capital structure of the
Company, the number of Warrant Shares covered by the Warrant shall be increased
or decreased in direct proportion to such change in the number of shares of
issued and outstanding Stock and the per share purchase price of such Warrant
Shares shall be adjusted accordingly so that it is the substantial equivalent of
the purchase price prior to such change.
(b) If the Company is merged into, or consolidated with, another
company, or another company is merged into the Company, or in the case of a sale
or conveyance to another company of the property of the Company as an entirety
on or before the Expiration Time, the Company shall provide in the agreement for
such merger, consolidation or sale that the Warrant is fully vested as of the
date that the merger, consolidation or sale is consummated, and the surviving or
new company shall grant to the Holder under substantially the same terms and
conditions as are contained in this Agreement the option to acquire for a
purchase price adjusted as provided in Section 6(a) above that number and class
of shares in the surviving or new company into which the shares of the Stock
then subject to this Warrant would have been converted or exchanged if the
Warrant had been exercised prior to the effective date of the merger or
consolidation.
7. Taxes. All amounts which, under federal, state or local law, are
required to be withheld from the amount reportable as taxable income with
respect to the exercise of this Warrant shall be so withheld by the Company.
Whenever the Company proposes or is required to issue or transfer shares of the
Stock hereunder, the Company shall have the right to require Holder to remit to
the Company an amount sufficient to satisfy any federal, state or local
withholding tax requirements prior to the delivery of any certificate or
certificates for such shares of the Stock.
8. Miscellaneous.
(a) Notices. All notices to the Company provided for in this Agreement
shall be in writing and shall either be hand-delivered, sent by registered or
certified mail, or delivered by a nationally recognized overnight delivery
service to the following address (or such other address as may be designated by
notice duly given in the manner provided herein):
Xxxx X. Xxxxx
Integrated Health Services, Inc.
Xxxxxx Xxxxx Corporate Campus
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Any such notice, including but not limited to notices and tenders under Section
4 hereof, shall be deemed delivered (i) when hand delivered, or (ii) three (3)
business days after the date deposited in the U.S. registered or certified mail,
addressed as provided above.
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(b) Integration; Modification. This Agreement between the Company and
Holder constitute the entire understanding and agreement between the Company and
the Holder regarding the subject matter hereof and supersede all prior
negotiations and agreements, whether oral or written, between the Company and
Holder with respect to the subject matter of this Agreement. This Agreement may
not be modified except by a written agreement signed by the Holder and a duly
authorized officer of the Company.
(c) Severability. In the event of the invalidity or unenforceability
of any part or provision of this Agreement, such invalidity or unenforceability
shall not affect the validity or enforceability of any other part or provision
of this Agreement, and the remainder of this Agreement shall continue in full
force and effect in accordance with its terms.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF MARYLAND.
(e) Arbitration. Any controversy arising out of, or relating to, this
Agreement, or any breach hereof, shall be settled by binding arbitration before
a single arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association In Baltimore, Maryland, or in any other place
the parties shall mutually agree, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
(f) Headings. The headings and paragraphs have been included herein
for convenience only and shall not be considered in interpreting this Agreement.
(g) Binding Effect. This Agreement shall be binding upon the Company
and shall inure to the benefit of the Company and Holder and their respective
heirs, legal representatives, successors and permitted assigns.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
executed this Agreement as of the date first above written.
Attest: INTEGRATED HEALTH SERVICES, INC.
By:
------------------ ------------------
Its: Executive Vice President
------------------------
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DATE:
-------------
Xxxx X. Xxxxx
Executive Vice President
Integrated Health Services, Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
Re: Notice of Exercise
Dear Xx. Xxxxx:
With respect to the exercise of an option to purchase _________ shares of
common stock of Integrated Health Services, Inc. (the "Warrant Shares") at a
purchase price of $33.16 per share, the notice of which is hereby given and the
payment of which is hereby enclosed, I hereby make the following acknowledgments
and representations:
(a) the Warrant Shares are being purchased for investment and not for
distribution or resale (other than a distribution or resale which, in the
opinion of counsel reasonably satisfactory to the Company, may be made without
violating the provisions of the Securities Act of 1933, as amended (the "Act"),
or any other applicable securities laws); and
(b) the undersigned understands that the Warrant Shares are
"restricted securities" within the meaning of Rule 144 promulgated by the
Securities and Exchange Commission, that the Warrant Shares have not been
registered under the Act or any other applicable securities laws and must be
held indefinitely unless they are subsequently registered under such Act and
applicable laws or an exemption from registration is available and that the
Company is under no obligation to register the Warrant Shares under the Act or
any other applicable securities laws or to take any action which would make
available to the Holder any exemption from such registration.
-------------------------
Xxxxxxx X. Xxxxxx
(Holder)
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