<PAGE>
As filed with the Securities and Exchange Commission on July 25, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MHM SERVICES, INC.
----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1223048
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7601 Lewinsville Road, Suite 200, McLean, VA 22102
------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Mental Health Management, Inc. 1993 Stock Option Plan
Mental Health Management, Inc. 1993 Stock Option Plan for Non-Employee Directors
Mental Health Management, Inc. Non-Employee Directors' Stock Option Plan
------------------------------------------------------------------------
(Full title of the plans)
Michael S. Pinkert, President
MHM Services, Inc.
7601 Lewinsville Road, Suite 200, McLean, VA 22102
(703) 749-4600
--------------------------------------
(Name, address, and telephone number,
including area code, of agent for service)
copy to:
Michael P. Gallagher, Esq. Steven J. Feder, Esq.
Ballard Spahr Andrews & Ingersoll Ballard Spahr Andrews & Ingersoll
1735 Market St., 51st Floor 1735 Market St., 51st Floor
Philadelphia, PA 19103 Philadelphia, PA 19103
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Calculation of Registration Fee
- ----------------------------------------------------------------------------------------------------
Proposed maximum Proposed Maximum Amount of
Title of securities Amount to be offering price aggregate Registration fee
to be registered registered (1) per share (2) offering price (2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 750,000 shares $ (2) $1,549,321.88 $534.25
par value $.01
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416(a) under the Securities Act of 1933, as amended, this
Registration Statement shall be deemed to cover an indeterminate number of
additional shares of Common Stock issuable in the event the number of
outstanding shares of MHM Services, Inc. is increased by split-up,
reclassification, stock dividend or the like.
(2) In accordance with Securities and Exchange Commission Rule 457(h)(1),
the price shown is based upon (i) 292,100 shares offered pursuant to
options outstanding exercisable at the following prices: 159,600 shares
at $3.75 per share, 51,000 shares at $3.00 per share, 50,000 shares at
$4.25 per share, 12,500 at $1.25 per share, 10,000 shares at $2.5625
per share and 9,000 shares at $1.625 per share; and (ii) 457,900 shares
reserved for issuance upon exercise of options to be granted in the
future, the proposed offering price of which has been determined based
upon the average of the high and low price per share of Common Stock on
July 19, 1996, as reported by the American Stock Exchange.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information required to be included in
Part I of this Registration Statement will be provided to all persons who are
selected to participate in the Mental Health Management, Inc. 1993 Stock Option
Plan, the Mental Health Management, Inc. 1993 Stock Option Plan for Non-Employee
Directors, or the Mental Health Management, Inc. Non-Employee Directors' Stock
Option Plan.
RESALE PROSPECTUS
The following Prospectus is to be used by directors, officers, and key
employees of MHM Services, Inc. who are "affiliates" (as defined in Rule 405
promulgated under the Securities Act of 1933, as amended), in connection with
the sale of Common Stock acquired upon the exercise of stock options granted
pursuant to the Mental Health Management, Inc. 1993 Stock Option Plan, the
Mental Health Management, Inc. 1993 Stock Option Plan for Non-Employee
Directors, or the Mental Health Management, Inc. Non-Employee Directors' Stock
Option Plan.
<PAGE>
PROSPECTUS
MHM SERVICES, INC.
750,000 SHARES OF COMMON STOCK
This Prospectus is to be used in connection with the sale by certain
directors, officers, and key employees of MHM Services, Inc. (the "Selling
Stockholders") of an aggregate of up to 750,000 shares of the common stock, par
value $.01 per share (the "Common Stock"), of MHM Services, Inc. (the "Company")
which have been acquired by such Selling Stockholders upon the exercise of stock
options granted by the Company pursuant to the Mental Health Management, Inc.
1993 Stock Option Plan, the Mental Health Management, Inc. 1993 Stock Option
Plan for Non-Employee Directors, or the Mental Health Management, Inc. Non-
Employee Directors' Stock Option Plan (collectively, the "Plans"). See "Selling
Stockholders." The shares of Common Stock offered hereby may be sold from time
to time in ordinary brokerage transactions at prevailing market prices by the
Selling Stockholders. See "Plan of Distribution." The price at which any
Selling Stockholder may sell shares and the brokerage commissions, if any, paid
in connection with a sale are unknown and may vary from transaction to
transaction.
The Company will pay no underwriting discounts or commissions and will
receive none of the proceeds from the sale of the Common Stock by the Selling
Stockholders. The expenses of the registration under the Securities Act of
1933, as amended (the "Securities Act"), of the shares of Common Stock offered
hereby will be borne by the Company.
The Common Stock of the Company is traded on the American Stock
Exchange under the symbol "MHM." On July 23, 1996, the closing price of the
Common Stock on the American Stock Exchange was $1.4375 per share.
____________________
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE DISCUSSION
UNDER "RISK FACTORS" ON PAGE 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
____________________
The date of this Prospectus is July 25, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements, and other information concerning the Company filed with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at its office at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission at
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661-2551 and 7 World Trade Center, 13th Floor, New York, NY 10048. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Common Stock is listed on the American Stock Exchange. Such
reports, proxy and information statements and other information can also be
inspected and copied at the offices of the American Stock Exchange, 86 Trinity
Place, New York, NY 10006-1881.
The Company has filed a registration statement on Form S-8 (herein,
together with all amendments and exhibits thereto, referred to as the
"Registration Statement") under the Securities Act with respect to the
securities offered pursuant to this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement and the exhibits filed as a part thereof. Statements contained herein
concerning any document filed as an exhibit are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company (File No. 1-12238) hereby incorporates by reference into
this Registration Statement the following documents: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995; (ii) the
Company's Current Report on Form 8-K filed November 9, 1995; (iii) the Company's
first amendment to its Annual Report, filed on Form 10-K/A on January 29, 1996;
(iv) the Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1995; (v) the Company's Current Report on Form 8-K filed February 12, 1996;
(vi) the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996; (vii) the Company's Current Report on Form 8-K filed April 17, 1996 (as
amended by the Company's Current Report on Form 8-K/A filed June 19, 1996);
(viii) the Company's Current Report on Form 8-K filed May 31, 1996; (ix) the
Company's Current Report on Form 8-K filed June 17, 1996 (as amended by the
Company's Current Report on Form 8-K/A filed June 25, 1996); and (x) the
description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-B, filed with the Commission by the Company on
January 27, 1995 (by which the Company succeeded to a Registration Statement on
Form 10, filed with the Commission on August 19, 1993).
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the dates of filing of such documents.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written request of
any such person, a copy of any or all of the information which has been or may
be incorporated by reference into this Prospectus, other than exhibits to such
documents. Written requests for such copies should be directed to MHM Services,
Inc., 7601 Lewinsville Road, Suite 200, McLean, Virginia 22102, Attn: Investor
Relations, telephone (703) 749-4600.
[INSIDE FRONT COVER]
2
<PAGE>
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS BASED ON THE COMPANY'S
CURRENT PLANS AND EXPECTATIONS RELATING TO, AMONG OTHER MATTERS, THE ANTICIPATED
USE OF PROCEEDS FROM THE SALE OF CERTAIN ASSETS OF THE COMPANY, THE PROPOSED
BUSINESS ACTIVITIES OF THE COMPANY AND THE PROPOSED ACTIVITIES OF THE COMPANY
RELATING TO IMPROVING ITS LIQUIDITY. SUCH STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES WHICH MAY CAUSE ACTUAL FUTURE ACTIVITIES AND RESULTS OF OPERATIONS
TO BE MATERIALLY DIFFERENT FROM THAT SUGGESTED IN THIS PROSPECTUS, INCLUDING,
AMONG OTHERS, THE POSSIBLE NEED TO USE THE NET CASH PROCEEDS FROM THE SALE OF
CERTAIN COMPANY ASSETS FOR THE RETIREMENT OF CERTAIN INDEBTEDNESS. FOR
ADDITIONAL INFORMATION, SEE "RISK FACTORS" AND "THE COMPANY."
RISK FACTORS
PRIOR LOSSES. The Company incurred losses of $4,023,000 for the fiscal
year ended September 30, 1995, and there can be no assurance that the Company
will return to profitability, or that the losses will not be higher for fiscal
year 1996 and future periods.
CHANGES IN MENTAL HEALTH INDUSTRY. Recently, the health care industry, in
general, and the mental health industry, in particular, have been the subject of
substantial uncertainty as a result of anticipated and on-going governmental and
other third-party payor efforts to contain health care costs. The Company's
management believes that a fundamental change has already occurred in the mental
health industry, reflecting a permanent departure from inpatient
hospitalization, upon which the Company's business has been substantially
dependent, as the primary service method in favor of more cost-effective
alternatives. This change is reflected in decreases in patient days, occupancy
rates, lengths of stay, and reimbursement rates for inpatient care. The
resulting impact has materially adversely affected the Company's operating
results as well as the Company's efforts to expand its present operations.
While the Company is taking steps to contain present and future operating costs,
there can be no assurance that such cost containment efforts will not have
further material adverse effects on the Company. See "The Company."
UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN. As a result of the
Company's continued negative operating results, as well as reduced collections
of accounts receivable, the Company has been experiencing difficulty generating
sufficient cash flows to meet its obligations and sustain its operations. The
report of the Company's independent auditors on the Company's financial
statements at September 30, 1995, included an explanatory paragraph which stated
that such conditions raise substantial doubt as to the Company's ability to
continue as a going concern. In an effort to improve this situation for both
the immediate future and the long-term, the Company has sold certain assets
relating to its Hospital Division, taking steps to reduce operating expenses,
attempting to raise additional capital, and working to improve its cash flows.
Nevertheless, there can be no assurance that the Company's efforts will result
in positive effects on the Company's financial condition. See "The Company."
INCREASED DEPENDENCE ON EXTENDED CARE SERVICES DIVISION. Of the Company's
two operating divisions, the Company's Hospital Division and the operation of
its seven freestanding behavioral healthcare treatment facilities historically
represented the majority of the Company's business. Overall, the freestanding
facilities represented 87%, 67%, and 59% of the Company's net revenues in the
fiscal years ended September 30, 1995, 1994, and 1993, respectively, and
3
<PAGE>
77%, 65%, and 67% of the Company's total assets as of September 30, 1995, 1994,
and 1993, respectively. The Company's freestanding facilities contributed
significantly to the Company's cash flows and helped to absorb certain
corporate-related expenses.
Recently, in an attempt to improve the Company's financial condition, the
Company sold six of its seven freestanding facilities and is currently pursuing
opportunities to sell the remaining facility. Upon the sale of the seventh
freestanding facility, the Company's only remaining business will be the
Extended Care Services Division. If the Extended Care Services Division is
unable to accomplish its growth objectives or produce positive earnings, the
sale of the Hospital Division's freestanding facilities could be disadvantageous
to the stockholders of the Company and could have a materially adverse effect on
the results of the Company's operations. The Company's Extended Care Services
Division, since its founding in October 1993, has generated only 13% and 3% of
net revenues for the years ended September 30, 1995 and 1994, respectively and
26% of net revenues for the first six months of fiscal 1996. In addition, the
rapid expansion of the Extended Care Services Division has resulted in increased
costs, and thus, with the allocation of overhead related to the operations of
the Extended Care Services Division, the Extended Care Services Division has not
yet achieved profitable results. The Company formed its Extended Care Services
Division to pursue opportunities to provide on-site care to nursing home
residents and other patients needing less acute care. In November 1993, the
Company acquired the assets of Atlanta-based ICH Services, L.L.C. (successor to
HCI Services, Inc.), which provides behavioral health and other specialized
medical services to residents of extended care facilities, such as nursing
homes, skilled nursing facilities, and assisted living facilities. The focus of
the Company's on-site medical and behavioral healthcare service programs is to
arrange for the provision of clinically-appropriate cost-effective care to
residents of extended care facilities.
While the Company intends to utilize a portion of the proceeds from the
sale of the freestanding facilities to expand the Extended Care Services
Division through acquisitions and internal growth, no assurances can be given
that the Company will have funds available for such purpose or that the Company
will be successful in selling its remaining freestanding facility, or in the
event acquisitions are consummated that the Company will be successful in
generating profits from the Extended Care Services Division, or that the
strategy of focusing on growing the Extended Care Services Division through
internal expansion and acquisitions will not result in further increased costs.
See "The Company."
POSSIBLE NEED TO USE PROCEEDS FROM THE SALE OF THE FREESTANDING FACILITIES
TO REPAY THE MEDIQ NOTE. As of July 10, 1996, the Company had $10,861,110
outstanding under its note payable to MEDIQ Incorporated ("MEDIQ") (original
principal amount of $11,500,000) that was executed in connection with the
distribution of the Company's stock to MEDIQ's stockholders (the "MEDIQ Note").
The MEDIQ Note bears interest at prime plus 1.5% per annum, with monthly
payments of interest only through September 1995, and then monthly principal and
interest payments for the following three years, based on a fifteen year
amortization period, with the remaining balance due in August 1998. The MEDIQ
Note may be prepaid in whole or in part without penalty. The MEDIQ Note is
collateralized by a note receivable obtained by the Company as partial
consideration for the sale of the Oakview Treatment Center, one of the Company's
former freestanding facilities. The Company pledged the note receivable to
MEDIQ in connection with obtaining a waiver from MEDIQ of an event of default
provision of the MEDIQ Note relating to the sale of the assets of a significant
subsidiary. See "The Company."
4
<PAGE>
The Company does not anticipate that cash flows from operations will be
sufficient to repay the MEDIQ Note upon maturity in 1998. In addition, as
reflected in the financial statements of the Company for the fiscal year ended
September 30, 1995, and the report of the Company's independent auditors
thereon, the Company has been experiencing difficulty generating sufficient cash
flows to meet its obligations and sustain its operations and, as a result, may
not be able to meet the monthly principal and interest obligations under the
MEDIQ Note. A portion of the net proceeds from the BHC Sale (as hereinafter
defined; see "The Company") is available to the Company to fund the monthly
obligations and a portion of the principal obligations upon maturity, if
necessary, of the MEDIQ Note. MEDIQ has pledged the MEDIQ Note as collateral
for certain of its indebtedness to a third party unaffiliated with MEDIQ or the
Company. In the event of default by MEDIQ on such indebtedness, such third
party would obtain all of MEDIQ's rights under the MEDIQ Note, including the
right to the payment of principal and interest as and when due in accordance
with the terms of the MEDIQ Note.
The MEDIQ Note also provides for certain events of default, including:
"The . . . sale of all or substantially all of the assets of [the Company] . .
." In an attempt to preclude the possibility of a dispute as to whether the BHC
Sale constitutes the sale of all or substantially all of the assets of the
Company for purposes of the MEDIQ Note, the Company, prior to the sale, sent
MEDIQ a letter requesting a waiver of this provision in connection therewith.
MEDIQ sent the Company a letter in which MEDIQ declined to grant such a waiver.
Since the completion of the BHC Sale, the Company has not received any notice of
default under the MEDIQ Note on this basis. Nevertheless, in the event MEDIQ
attempts to accelerate the MEDIQ Note, the Company intends to aggressively
defend its position in any legal proceeding. There can be no assurances that
the Company would be able to obtain a favorable decision in such a legal
proceeding. In the event the Company were to receive an adverse decision on
this matter, the outstanding principal balance on the MEDIQ Note would become
immediately due and payable in full. In that event, the Company may be required
to apply the remainder of the net proceeds from the BHC Sale toward the
repayment of the outstanding principal of the MEDIQ Note, obtain alternative
sources of cash with which to satisfy such obligation, or obtain from MEDIQ a
modification to the MEDIQ Note. The current balance of the net proceeds from
the BHC Sale is insufficient to repay the entire outstanding principal balance
of the MEDIQ Note. There can be no assurance that the Company will have
sufficient cash to repay the outstanding principal balance of the MEDIQ Note or
that other sources of cash will be available to the Company in the event the
Company was to receive an adverse decision on such matter. In such event, the
Company may be unable to fulfill its debt obligations and also sustain
operations at a level at which the Company could continue as a going concern.
RELATIONSHIPS OF CERTAIN PERSONS WITH MEDIQ. Michael F. Sandler, in
addition to being a member of the Company's Board of Directors, is also a
director, Senior Vice President - Finance, Treasurer, and Chief Financial
Officer, and a stockholder of MEDIQ. In addition, H. Scott Miller, also a
member of the Company's Board of Directors, is a director of MEDIQ and provides
financial advisory services to the trust described in the next paragraph.
Consequently, Mr. Sandler's and Mr. Miller's relationships with MEDIQ may be
adverse to the interests of stockholders of the Company generally.
In addition, approximately 29% of the outstanding shares of the Common
Stock are beneficially owned by Bessie G. Rotko. Mrs. Rotko is the lifetime
income beneficiary of a trust which holds approximately 19% and 56% of MEDIQ's
outstanding common stock and preferred stock, respectively. The Trustees,
Bessie G. Rotko, Michael J. Rotko, Judith M. Shipon, John Iskrant and PNC Bank,
National Association, share voting and investment power with respect to the
shares in the trust. As a result, Mrs. Rotko, together with several other
trustees, may
5
<PAGE>
have effective control over all matters requiring approval by the stockholders
of the Company. The address of the trustees is c/o MEDIQ Incorporated, One
MEDIQ Plaza, Pennsauken, NJ 08110. Mrs. Rotko is the mother of Michael J. Rotko
and Judith M. Shipon. In addition, Michael J. Rotko and Judith M. Shipon each
own approximately 2% and 7% of MEDIQ's outstanding common stock and preferred
stock, respectively. Michael J. Rotko is also the Chairman of the Board of
Directors of MEDIQ.
REIMBURSEMENT FOR MENTAL HEALTH SERVICES. A significant portion of the
Company's revenues are derived from reimbursement from government programs such
as Medicare and Medicaid, which are highly regulated and subject to change.
Future changes in reimbursement could have a material effect on the Company's
operating results.
COMPETITION. Competition in the mental health industry is intense. The
Company currently competes with companies that are larger and have greater
resources than the Company. Any material adverse change in the competitive
environment could have a material adverse effect on the Company's results of
operations and financial condition.
DILUTION. The Company's business strategy includes pursuing possible
acquisition opportunities, which has involved, and may involve in the future,
using shares of the Common Stock as consideration for business transactions.
The issuance of additional shares of the Common Stock in such transactions could
have a dilutive effect on the shares outstanding.
DEPENDENCE UPON EXISTING MANAGEMENT. The Company's business and operations
are dependent, in part, upon the continued services of existing senior
management, in particular Michael S. Pinkert, President, Chief Executive Officer
and a Director. The loss of Mr. Pinkert's services would have a material
adverse effect on the Company.
DIVIDEND POLICY. The Company has not declared any dividends on the Common
Stock and does not anticipate the declaration and payment of cash dividends in
the future. It is the present intention of the Company to retain any future
earnings to support the continued growth of the business. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon the Company's financial condition, results
of operations, capital requirements and such other factors as the Board of
Directors shall deem relevant.
THE COMPANY
The Company offers, arranges for and manages behavioral healthcare services
primarily through extended care treatment settings. Since its founding, the
Company's goal has been to offer the highest quality, cost-effective care in the
industry. Prior to the recent sales of six of the Company's freestanding
facilities, the Company's Hospital Division operated seven psychiatric and
substance abuse facilities, delivering a full spectrum of behavioral health
services ranging from traditional inpatient care to alternative care programs,
such as partial hospitalization and outpatient treatment. These seven
freestanding facilities generated 87% of net revenue for fiscal 1995 and
comprised 77% of the Company's total assets at the end of fiscal 1995. The
Company's Extended Care Services Division provides specialized medical and
behavioral health services to approximately 795 nursing homes in twelve states.
The Extended Care Services Division also provides behavioral health care to more
than 2,000 Medicaid patients residing in nursing homes under a contract with the
State of Georgia.
6
<PAGE>
Historically, the Company's principal businesses were the operation of
freestanding behavioral healthcare facilities and the management of behavioral
healthcare programs under contracts with acute care hospitals. The market for
behavioral healthcare has undergone dramatic changes in recent years. Pressure
on providers to reduce costs has resulted in an increase in the development and
utilization of alternatives to long-term in-patient care, and a decrease in the
utilization of in-patient care and reimbursement rates. With market forces
emphasizing managed care approaches to healthcare, this trend is anticipated to
continue.
In response to these changes and their adverse impact on the Company's
operating results, significant changes have been made in the structure of the
Company's operations. In August 1994, the Company merged its contract
management business (which represented 29% of the Company's net revenues in
fiscal 1994) with a competitor through the creation of a joint venture. In
March 1995, the Company sold its interest in the joint venture to such
competitor. In addition, the Company decided to pursue a growth strategy
focused on its Extended Care Services Division (which represented 13% of the
Company's net revenues in fiscal 1995) through the pursuit of non-physician
practice acquisition and management opportunities. Finally, the Company is
pursuing opportunities to sell its remaining freestanding behavioral healthcare
facility.
On April 5, 1996, the Company sold Oakview Treatment Center to a non-profit
corporation affiliated with a privately-owned operator of two psychiatric
hospitals for $50,000 in cash and $2,150,000 evidenced by two promissory notes
payable to the Company. The notes are payable in monthly installments of
principal and interest (at prime) based on a fifteen year amortization, with the
remaining principal due in five years (or earlier under certain circumstances).
In connection with obtaining a waiver from MEDIQ of an event of default
provision of the MEDIQ Note relating to the sale of the assets of a significant
subsidiary, the Company pledged one of the notes receivable (with a principal
balance of $1,875,000) as collateral for the Company's obligations under the
MEDIQ Note.
On May 31, 1996, the Company sold certain assets, consisting principally of
five of its freestanding behavioral healthcare facilities, to Behavioral
Healthcare Corporation ("BHC"), a Delaware corporation, with its principal
offices located in Nashville, Tennessee, pursuant to an Asset Purchase
Agreement, dated as of January 24, 1996, and amended as of April 11, 1996, by
and between the Company and BHC (the "BHC Sale"). The Hospitals were sold for
approximately $10,222,700, consisting of $8,864,500 in cash and $1,358,200 in
assumed liabilities of the freestanding facilities. The sale price is subject
to certain post-closing adjustments, pursuant to the terms of the Asset
Purchase Agreement, as amended.
The Company used a portion of the proceeds from the BHC Sale for (i) the
repayment of the principal amount outstanding under the Company's revolving
credit facility ($2,515,000, including related early termination fees of
$174,000); (ii) the extinguishment of a portion of the indebtedness not to be
assumed by BHC paid at the closing of the sale ($692,000, including early
termination fees of $139,000), which consisted primarily of indebtedness secured
by certain of the assets (particularly a facility and certain equipment)
acquired by BHC; and (iii) the funding of the Company's obligation to complete
repairs to two of the freestanding facilities in the amount of $284,000 (which
amount was placed in escrow). The Company anticipates using the remainder of
the proceeds from the BHC Sale for general working capital, which the Company
anticipates will include expansion of the Extended Care Services Division. See
"Risk Factors - POSSIBLE NEED TO USE PROCEEDS FROM THE SALE OF THE FREESTANDING
FACILITIES TO REPAY THE MEDIQ NOTE."
7
<PAGE>
The Company has not entered into any definitive agreement to sell its
remaining freestanding facility. Accordingly, there can be no assurance that
the Company will be successful in selling the facility.
The Company was incorporated in 1981 in Virginia, and changed its state of
incorporation to Delaware in 1994. From 1986 to August 1993, the Company was a
wholly-owned subsidiary of MEDIQ. In August 1993, MEDIQ distributed the stock
of the Company to MEDIQ's stockholders. The Company's principal executive
offices are located at 7601 Lewinsville Road, Suite 200, McLean, Virginia 22102,
and its telephone number is (703) 749-4600.
USE OF PROCEEDS
The Company will receive none of the proceeds from the sale of the
shares of Common Stock offered hereby. The Selling Stockholders are certain
directors, officers, and key employees of the Company and all net proceeds from
the sale of the shares of Common Stock offered hereby will belong to such
Selling Stockholders. See "Selling Stockholders." The shares of Common Stock
being offered hereby by the Selling Stockholders have been acquired by the
Selling Stockholders from the Company upon exercise of stock options granted by
the Company pursuant to the Plans.
8
<PAGE>
SELLING STOCKHOLDERS
This Prospectus is to be used in connection with the sale by certain
directors, officers, and key employees of the Company of shares of Common Stock
which have been or may be acquired by such directors, officers, and key
employees upon the exercise of stock options granted by the Company pursuant to
the Plans. The following persons may offer the following numbers of shares of
Common Stock pursuant to this Prospectus:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Number of
shares of
Common Stock
(and percent
Number of of the
shares of Maximum class)
Common Stock Number of beneficially
beneficially shares of owned after
Principal Position with owned prior Common completion
Name of Selling the Company during the to the Stock being of the
Stockholder past 3 years offering (1) offered (2) offering (3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abraham D. Gosman Director 13,583(4) 12,500 1,083 *
- -----------------------------------------------------------------------------------------------
Vicki S. Hammond Senior Vice President, 61,900(4) 54,000 7,900 *
Treasurer, Chief
Financial Officer, and
Secretary (5)
- -----------------------------------------------------------------------------------------------
Kenneth A. Kessler, M.D. Director 92,500 12,500 80,000(2.4%)
- -----------------------------------------------------------------------------------------------
Bernard J. Korman Director 256,720(4) 12,500 244,220(7.7%)
- -----------------------------------------------------------------------------------------------
Eugene N. Langen Vice President 13,599 10,000 3,599 *
Development and Secretary
- -----------------------------------------------------------------------------------------------
H. Scott Miller Director 13,287(6) 12,500 787*(6)
- -----------------------------------------------------------------------------------------------
Michael S. Pinkert President and Chief 204,374(4) 90,000 114,374(3.4%)
Executive Officer
- -----------------------------------------------------------------------------------------------
Michael F. Sandler Director 13,583 12,500 1,083 *
- -----------------------------------------------------------------------------------------------
Bruce Waldo Executive Vice 20,000 20,000 -0- *
President - Hospital
Division
- -----------------------------------------------------------------------------------------------
Carolyn Zimmerman Vice President 7,379(4) 6,200 1,179 *
and Chief
Financial Officer
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Includes all shares of the Common Stock subject to stock options, including
non-vested options as of the date of filing.
(2) Each Selling Stockholder may offer less than the number of shares
indicated.
(3) Assumes all shares obtained upon exercise of options are sold.
(4) Includes shares held in retirement accounts.
(5) Ms. Hammond resigned from the Company as of June 28, 1996.
(6) Includes shares held by Mr. Miller's spouse.
9
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered by the Selling Stockholders from
time to time may be sold on the American Stock Exchange, at prices and at terms
then prevailing, or in negotiated transactions or otherwise. The shares will be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers
or dealers will receive commissions or discounts from the Selling Stockholders
in amounts to be negotiated immediately prior to the sale. Such brokers or
dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this Prospectus. The amount of Common Stock which may be offered or sold by
means of Rule 144 by each Selling Stockholder, and any other persons with whom
he or she is acting in concert for the purpose of selling such securities, may
not exceed in any three month period one percent of the outstanding shares of
the Company's Common Stock (33,104 shares, based upon the number of outstanding
shares of the Company's Common Stock as of July 23, 1996).
The Company has furnished to each Selling Stockholder or will furnish
each Selling Stockholder with a copy of this Prospectus and has informed or will
inform each Selling Stockholder of the possible need for delivery of this
Prospectus upon sales made hereunder.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has adopted the provisions of Section 102(b)(7) of the
Delaware General Corporation Act (the "Delaware Act") which eliminate or limit
the personal liability of a director to the Company or its stockholders for
monetary damages for breach of fiduciary duty under certain circumstances.
Furthermore, under Section 145 of the Delaware Act, the Company shall indemnify
each of its directors and officers against expenses (including reasonable costs,
disbursements, and counsel fees) in connection with any proceeding involving
such person by reason of having been an officer or director, to the extent such
person acted in good faith and in a manner reasonably believed to be in, or not
opposed to, the best interest of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful. The determination of whether indemnification is proper under the
circumstances, unless made by a court, shall be made by a majority of a quorum
of disinterested members of the Company's Board of Directors, independent legal
counsel, or the stockholders of the Company. The Company has purchased
directors' and officers' liability insurance in an amount totalling $5,000,000,
subject to certain deductibles.
10
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer, or controlling person of the Company in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
11
<PAGE>
This Prospectus does not constitute an offer to sell, or the
solicitation of an offer to buy, the securities to which this Prospectus
relates in any jurisdiction or to any person to whom it is unlawful to make
such an offer or solicitation in such jurisdiction. No person has been
authorized to give any information or to make any representations, other than
as set forth in this Prospectus, in connection with the offering contained
herein, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof.
July 25, 1996
MHM SERVICES, INC.
750,000 Shares
Common Stock
($.01 par value)
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION........................................................ 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................. 2
RISK FACTORS................................................................. 3
THE COMPANY.................................................................. 6
USE OF PROCEEDS.............................................................. 8
SELLING STOCKHOLDERS......................................................... 9
PLAN OF DISTRIBUTION......................................................... 10
INDEMNIFICATION OF DIRECTORS AND OFFICERS.................................... 10
12
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE
MHM Services, Inc. (the "Company") (File No. 1-12238) hereby incorporates
by reference into this Registration Statement the following documents:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995.
(b) The Company's Current Report on Form 8-K filed November 9, 1995.
(c) The Company's first amendment to its Annual Report, filed on
Form 10-K/A on January 29, 1996.
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995.
(e) The Company's Current Report on Form 8-K filed February 12, 1996.
(f) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
(g) The Company's Current Report on Form 8-K filed April 17, 1996 (as
amended by the Company's Current Report on Form 8-K/A filed
June 19, 1996).
(h) The Company's Current Report on Form 8-K filed May 31, 1996.
(i) The Company's Current Report on Form 8-K filed June 17, 1996 (as
amended by the Company's Current Report on Form 8-K/A filed
June 25, 1996).
(j) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-B, filed with the
Commission by the Company on January 27, 1995 (by which the Company
succeeded to a Registration Statement on Form 10, filed with the
Commission on August 19, 1993).
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934,
as amended, prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
document.
II-1
<PAGE>
Item 4. DESCRIPTION OF SECURITIES
Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has adopted the provisions of Section 102(b)(7) of the Delaware
General Corporation Act (the "Delaware Act") which eliminate or limit the
personal liability of a director to the Company or its stockholders for monetary
damages for breach of fiduciary duty under certain circumstances. Furthermore,
under Section 145 of the Delaware Act, the Company shall indemnify each of its
directors and officers against expenses (including reasonable costs,
disbursements, and counsel fees) in connection with any proceeding involving
such person by reason of having been an officer or director, to the extent such
person acted in good faith and in a manner reasonably believed to be in, or not
opposed to, the best interest of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful. The determination of whether indemnification is proper under the
circumstances, unless made by a court, shall be made by a majority of a quorum
of disinterested members of the Company's Board of Directors, independent legal
counsel, or the stockholders of the Company. The Company has purchased
directors' and officers' liability insurance in an amount totalling $5,000,000,
subject to certain deductibles.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer, or controlling
person of the Company in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
II-2
<PAGE>
Item 8. EXHIBITS
4.1 Specimen copy of Common Stock Certificate (incorporated by reference
to the Company's Registration Statement on Form 8-B, filed with the
Commission by the Company on January 27, 1995 (by which the Company
succeeded to a Registration Statement on Form 10, filed with the
Commission on August 19, 1993))
4.2 The Company's Restated Certificate of Incorporation (incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, as amended)
4.3 The Company's Amended Bylaws (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, as amended)
5 Opinion of Ballard Spahr Andrews & Ingersoll
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5)
24 Power of Attorney (included on signature page)
99.1 Mental Health Management, Inc. 1993 Stock Option Plan (incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1993, as amended)
99.2 Amendment No. 1 to the Mental Health Management, Inc. 1993 Stock
Option Plan
99.3 Mental Health Management, Inc. 1993 Stock Option Plan for Non-Employee
Directors (incorporated by reference to the Company's Annual Report of
Form 10-K for the fiscal year ended September 30, 1993, as amended)
99.4 Mental Health Management, Inc. Non-Employee Directors' Stock Option
Plan
II-3
<PAGE>
Item 9. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in the volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this
Registration Statement or any material change in such information in
this Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Company pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended, that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from any registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended,
II-4
<PAGE>
that is incorporated by reference in this Registration Statement shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933, as amended, and will be governed by the
final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the County of Fairfax, Commonwealth of Virginia,
on the date below:
Dated: July 25, 1996 MHM Services, Inc.
By: /s/ Michael S. Pinkert
----------------------------------------------
Michael S. Pinkert, President
and Chief Executive Officer
By: /s/ Carolyn Zimmerman
----------------------------------------------
Carolyn Zimmerman
Vice President and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael S. Pinkert, as true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign the
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Michael S. Pinkert President, Chief Executive Officer, July 25, 1996
- ------------------------ and Director
Michael S. Pinkert
/s/ Carolyn Zimmerman Vice President and July 25, 1996
- ------------------------ Chief Financial Officer
Carolyn Zimmerman
/s/ Abraham D. Gosman Director July 25, 1996
- ------------------------
Abraham D. Gosman
/s/ Kenneth A. Kessler Director July 25, 1996
- ------------------------
Kenneth A. Kessler, M.D.
/s/ H. Scott Miller Director July 25, 1996
- ------------------------
Scott Miller
/s/ Michael F. Sandler Director July 25, 1996
- ------------------------
Michael F. Sandler
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
4.1 Specimen copy of Common Stock Certificate (incorporated by
reference to the Company's Registration Statement on Form 8-B,
filed with the Commission by the Company on January 27, 1995 (by
which the Company succeeded to a Registration Statement on Form
10, filed with the Commission on August 19, 1993))
4.2 The Company's Restated Certificate of Incorporation (incorporated
by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1995, as amended)
4.3 The Company's Amended Bylaws (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, as amended)
5 Opinion of Ballard Spahr Andrews & Ingersoll
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5)
24 Power of Attorney (included on signature page)
99.1 Mental Health Management, Inc. 1993 Stock Option Plan
(incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1993, as amended)
99.2 Amendment No. 1 to the Mental Health Management, Inc. 1993 Stock
Option Plan
99.3 Mental Health Management, Inc. 1993 Stock Option Plan for
Non-Employee Directors (incorporated by reference to the
Company's Annual Report of Form 10-K for the fiscal year
ended September 30, 1993, as amended)
99.4 Mental Health Management, Inc. Non-Employee Directors' Stock
Option Plan
<PAGE>
EXHIBIT 5
July 25, 1996
MHM Services, Inc.
7601 Lewinsville Road, Suite 200
McLean, VA 22101
Re: Mental Health Management, Inc. 1993 Stock Option Plan
Mental Health Management, Inc. 1993 Stock Option Plan for
Non-Employee Directors
Mental Health Management, Inc. Non-Employee
Directors' Stock Option Plan
Registration Statement on Form S-8
----------------------------------------------------------------
Gentlemen:
We have acted as counsel to MHM Services, Inc. (the "Company") in
connection with the registration under the Securities Act of 1933, as amended,
of 750,000 shares of common stock of the Company, par value $.01 per share (the
"Shares"), issuable upon exercise of stock options granted under the Mental
Health Management, Inc. 1993 Stock Option Plan, the Mental Health Management,
Inc. 1993 Stock Option Plan for Non-Employee Directors, and the Mental Health
Management, Inc. Non-Employee Directors' Stock Option Plan (together, the
"Plans").
In rendering our opinion, we have reviewed the Plans and such
certificates, documents, corporate records, and other instruments as in our
judgment are necessary or appropriate to enable us to render the opinion
expressed below. In giving this opinion, we are assuming the authenticity of
all instruments presented to us as originals, the conformity with the originals
of all instruments presented to us as copies and the genuineness of all
signatures.
Based upon the foregoing, we are of the opinion that the 750,000
Shares issuable upon exercise of options granted under the Plans, when issued in
accordance with the terms of the Plans, will be legally issued, fully paid, and
non-assessable.
We consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement,
relating to the Mental Health Management, Inc. 1993 Stock Option Plan, the
Mental Health Management, Inc. 1993 Stock Option Plan for Non-Employee Directors
and the Mental Health Management, Inc. Non-Employee Directors' Stock Option Plan
on Form S-8, of our report dated January 12, 1996 (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to the
Company's ability to continue as a going concern), on our audit of the
consolidated financial statements and financial statement schedule appearing in
the Annual Report on Form 10-K of MHM Services, Inc. (formerly "Mental Health
Management, Inc.") for the year ended September 30, 1995.
DELOITTE & TOUCHE LLP
Washington, D.C.
July 19, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF COUNSEL
The consent of Ballard Spahr Andrews & Ingersoll is contained in its
opinion filed as Exhibit 5 to the Registration Statement.
<PAGE>
EXHIBIT 99.2
First Amendment to the Mental Health Management, Inc.
1993 Stock Option Plan, dated June 25, 1996
The Mental Health Management, Inc. 1993 Stock Option Plan (the "Plan") is
hereby amended as follows:
1. Section 5 of the Plan is amended and restated in full to read as
follows:
(a) Officers and key employees of the Company and Subsidiaries shall
be eligible for selection by the Committee to participate in the Plan;
provided, however, that no member of the Committee shall be eligible to
participate in the Plan. An employee who has been granted an Option may,
if he or she is otherwise eligible, be granted an additional Option or
Options if the Committee shall so determine.
(b) Consultants and Directors who are not employees of the Company or
its Subsidiaries are eligible to be granted Non-Qualified Options under the
Plan, but may not be granted Incentive Stock Options.
2. Section 10(a) of the Plan is amended and restated to read in full
as follows:
(a) Unless otherwise determined by the Committee on or after the date
of grant, if the employment of a Grantee with the Company or a Subsidiary
shall at any time be terminated for cause, then and in that event all
rights of any kind under any Option then held by such Grantee shall
immediately lapse and terminate.
3. Section 10(b) of the Plan is amended and restated to read in full
as follows:
(b) Unless otherwise determined by the Committee on or after the date
of grant, if a Grantee shall at any time cease to be employed by the
Company for any reason other than the termination of the Grantee's
employment for cause or the death of the Grantee, then and in that event
the term of each Option held by such Grantee shall expire on the earlier of
(i) the terminate date set forth in the Option, or (ii) three (3) months
(or such longer period as may be specified in the Option) after the date on
which employment terminates. During such period, the Option shall be
exercisable only to the extent it was exercisable at the time of
termination of employment, unless otherwise specified in the Option. If,
however, the death of the Grantee should occur before the date on which the
Option would terminate hereunder, the termination of the Option will be
governed by subparagraph 10(c) below.
4. Section 10(c) of the Plan shall be amended and restated to read
in full as follows:
(c) Unless otherwise determined by the Committee on or after the date
of grant, upon the death of any Grantee, any Option then held by such
Grantee which shall not have
<PAGE>
lapsed or terminated prior to the Grantee's death, shall, notwithstanding
the termination date stated in such Option, be exercisable by the
executors, administrators, legatees or distributees of the Grantee's estate
for a period of six (6) months after the Grantee's death, as to that number
of Shares which were purchasable by the Grantee at the time of his or her
death; provided, however, that in no case shall an Incentive Stock Option
granted to an Optionee remain exercisable after a date ten (10) years after
the date on which such Incentive Stock Option was granted; nor in any case
shall an Incentive Stock Option granted to an Optionee-Shareholder remain
exercisable after a date five (5) years from the date on which such
Incentive Stock Option was granted.
<PAGE>
EXHIBIT 99.4
MENTAL HEALTH MANAGEMENT, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ARTICLE I
PURPOSE
The purpose of this Non-Employee Directors' Stock Option Plan (the
"Plan") is to enable Mental Health Management, Inc. (the "Company") to attract,
retain and motivate non-employee members of its Board of Directors and to
further promote the mutuality of interests between such directors and the
Company's shareholders.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the
following meanings:
2.1 "BOARD" shall mean the Board of Directors of the Company.
2.2 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
2.3 "COMMON STOCK" means the Common Stock, par value $.001 per share,
of the Company.
2.4 "ELIGIBLE DIRECTOR" shall mean any member of the Board who, on
the date of the granting of an Option, is not an officer or an employee of the
Company or any of the Company's subsidiaries.
2.5 "FAIR MARKET VALUE" for purposes of the Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the average of the high and low sales
prices of a share of Common Stock as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or if not listed or traded on any such exchange, on The Nasdaq Stock Market
("Nasdaq"), or, if such sales prices are not available, the average of the bid
and asked prices per share reported on Nasdaq, or, if such quotations are not
available, the fair market value as determined by the Board, which determination
shall be conclusive.
2.6 "PARTICIPANT" shall mean an Eligible Director to whom an Option
has been granted under the Plan.
<PAGE>
2.7 "STOCK OPTION" or "OPTION" shall mean any option to purchase
shares of Common Stock granted pursuant to Article VI of the Plan.
ARTICLE III
ADMINISTRATION
3.1 ADMINISTRATION. The Plan shall be administered and interpreted
by the Board.
3.2 GUIDELINES. Subject to Article VII hereof, the Board shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Option
granted under the Plan (and any agreements relating thereto); and to otherwise
supervise the administration of the Plan. The Board may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any Option
in the manner and to the extent it shall deem necessary to carry the Plan into
effect. Notwithstanding the foregoing, no action of the Board under this
Section 3.2 shall impair the rights of any Participant without the Participant's
consent, unless otherwise required by law.
3.3 DECISIONS FINAL. Any decision, interpretation or other action
made or taken in good faith by the Board arising out of or in connection with
the Plan shall be final, binding and conclusive on the Company, all members of
the Board and their respective heirs, executors, administrators, successors and
assigns.
ARTICLE IV
SHARE LIMITATION
4.1 SHARES. The aggregate number of shares of Common Stock that may
be subject to options granted pursuant to the Plan in any calendar year shall
not exceed 2% of the shares outstanding as of the first business day of such
year plus the number of shares available for any prior calendar years but not
covered by awards granted in such years, subject to adjustment as provided in
Section 4.1 hereof. In the event that the number of shares available for future
grant on any date is insufficient to make all grants required on such date, no
further grants shall be made in that year. Upon delivery of shares in full or
partial payment of the purchase price specified in any Option under the Plan,
the number of such shares shall be deducted from the number of shares granted to
the participant pursuant to such Option for purposes of determining the number
of shares which thereafter may be granted pursuant to the Plan. The shares
delivered under the Plan may be authorized but unissued shares or treasury
shares.
4.2 CHANGES. In the event of any merger, reorganization,
consolidation, recapitalization, dividend (other than a regular cash dividend),
stock split, or other change in corporate structure affecting the Common Stock,
such substitution or adjustment shall be made in the maximum aggregate number of
shares which may be issued under the Plan, the number of shares subject to Stock
Options to be granted to Eligible Directors pursuant to Section 6.2 and the
number
<PAGE>
and option price of shares subject to outstanding Options, as may be determined
to be appropriate by the Board, in its sole discretion, provided that the number
of shares subject to any Option shall always be a whole number.
ARTICLE V
ELIGIBILITY
5.1 ELIGIBLE DIRECTORS. Only Eligible Directors are eligible to be
granted Options under the Plan.
ARTICLE VI
STOCK OPTIONS
6.1 OPTIONS. All Stock Options granted under the Plan shall be non-
qualified stock options (I.E., options that do not qualify as incentive stock
options under section 422 of the Code).
6.2 GRANTS. Upon adoption of the Plan by the Board, each Eligible
Director who did not receive a grant of stock options under the Company's 1993
Stock Option Plan for Non-Employee Directors shall automatically be granted
Stock Options for 12,500 shares of Common Stock. Any new member of the Board
who is elected after adoption of the Plan, if an Eligible Director on the date
of such election, shall automatically be granted, as of the date of such
election, Stock Options for 12,500 shares of Common Stock.
<PAGE>
6.3 TERMS OF OPTIONS. Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the Board
shall deem desirable:
(a) STOCK OPTION CONTRACT. Each Stock Option shall be evidenced
by, and subject to the terms of, a Stock Option Contract executed by the Company
and the Participant. The Stock Option Contract shall specify the number of
shares of Common Stock subject to the Stock Option, the option price, the option
term, and the other terms and conditions applicable to the Stock Option.
(b) OPTION PRICE. The option price per share of Common Stock
purchasable upon exercise of a Stock Option shall be equal to the Fair Market
Value of a share of Common Stock on the date of grant.
(c) OPTION TERM. The term of each Stock Option shall be ten
years from the date of grant.
(d) EXERCISABILITY. All Stock Options shall be exercisable as
follows: 20% of each Stock Option grant shall be immediately exercisable; 20%
shall become exercisable on the first anniversary of the date of grant; 20%
shall become exercisable on the second anniversary of the date of grant; 20%
shall become exercisable on the third anniversary of the date of grant and 20%
shall become exercisable on the fourth anniversary of the date of grant.
(e) METHOD OF EXERCISE. Stock Options may be exercised in whole
or in part at any time during the option term by delivering to the Company
written notice of exercise specifying the number of shares of Common Stock to be
purchased and the option price therefor. The notice of exercise shall be
accompanied by payment in full of the option price and, if requested, by the
representation described in Section 9.2. Payment of the option price may be
made (i) in cash or by check payable to the Company or (ii) to the extent
determined by the Board on or after the date of grant, in shares of Common Stock
duly owned by the Participant (and for which the Participant has good title free
and clear of any liens and encumbrances) or (iii) by reduction in the number of
shares of Common Stock issuable upon such exercise, based, in each case, on the
Fair Market Value of the Common Stock on the last trading date preceding the
date of exercise. Upon payment in full of the option price and satisfaction of
the other conditions provided herein, a stock certificate representing the
number of shares of Common Stock to which the Participant is entitled shall be
issued and delivered to the Participant.
(f) DEATH. Unless otherwise determined by the Board on or after
the date of grant, if a Participant ceases to be a member of the Board by reason
of death, any Stock Option held by such Participant at the date of death shall
become immediately exercisable and may thereafter be exercised by the legal
representative of the Participant's estate until the earlier of one year after
the Participant's date of death or the expiration of the option term of such
Stock Option.
(g) DISABILITY. Unless otherwise determined by the Board on or
after the date of grant, if a Participant ceases to be a member of the Board by
reason of a disability that prevents him or her from performing the duties of a
director, any Stock Option held by such Participant shall become immediately
exercisable and may thereafter be exercised by the Participant until the earlier
of one year after such date or the expiration of the option term of such Stock
Option.
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If the Participant dies during such one-year period, any unexercised Stock
Options held by the Participant at the time of death may thereafter be exercised
by the legal representative of the Participant's estate until the earlier of one
year after the date of the Participant's death or the expiration of the option
term of such Stock Option.
(h) OTHER TERMINATION. Unless otherwise determined by the Board
on or after the date of grant, if a Participant ceases to be a member of the
Board for any reason other than for cause or death or disability, any Stock
Option held by such Participant that was exercisable on the date of such
termination may be exercised until the earlier of 90 days after such date or the
expiration of the option term of such Stock Option. If a Participant is removed
from the Board for cause, then any Stock Option held by such Participant shall
immediately terminate and not be exercisable. Any Option that was not
exercisable on the date of the Participant's termination of employment shall
terminate as of such date.
(i) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the Participant otherwise than by will or by the laws of descent
and distribution, to the extent consistent with the terms of the Plan and the
Option, and all Stock Options shall be exercisable, during the Participant's
lifetime, only by the Participant.
6.4 RIGHTS AS SHAREHOLDER. A Participant shall not be deemed to be
the holder of Common Stock, or have any of the rights of a holder of Common
Stock, with respect to shares subject to an Option, until the Option is
exercised and a stock certificate representing such shares of Common Stock is
issued to the Participant.
ARTICLE VII
TERMINATION OR AMENDMENT
7.1 TERMINATION OR AMENDMENT OF PLAN. The Board may at any time
amend, discontinue or terminate the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article IX); provided, however, that,
unless otherwise required by law, the rights of a Participant with respect to
Options granted prior to such amendment, discontinuance or termination may not
be impaired without the consent of such Participant and, provided further that,
without the approval of the Company's shareholders, no amendment may be made
that would (i) materially increase the number of shares of Common Stock that may
be issued under the Plan (except by operation of Section 4.2); (ii) materially
modify the requirements as to eligibility to participate in the Plan; or
(iii) materially increase the benefits accruing to Participants.
Notwithstanding the foregoing, the provisions of Article V and Article VI may
not be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act, or the rules
thereunder.
7.2 AMENDMENT OF OPTIONS. The Board may amend the terms of any Stock
Option previously granted, prospectively or retroactively, but, subject to
Article IV, no such amendment or other action by the Board shall impair the
rights of any holder without the holder's consent.
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ARTICLE VIII
UNFUNDED PLAN
8.1 UNFUNDED STATUS OF PLAN. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payment not yet
made to a Participant by the Company, nothing contained herein shall give the
Participant any rights that are greater than those of a general creditor of the
Company.
ARTICLE IX
GENERAL PROVISIONS
9.1 NONASSIGNMENT. Except as otherwise provided in the Plan, any
Option granted hereunder and the rights and privileges conferred thereby shall
not be sold, transferred, assigned, pledged or hypothecated in any way (whether
by operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any such Option, right or privilege contrary
to the provisions hereof, or upon the levy of any attachment or similar process
thereon, such Option and the rights and privileges conferred hereby shall
immediately terminate and the Option shall immediately be forfeited to the
Company.
9.2 LEGEND. The Board may require each person purchasing shares upon
exercise of a Stock Option to represent to the Company in writing that the
Participant is acquiring the shares without a view to distribution thereof. The
stock certificates representing such shares may include any legend which the
Board deems appropriate to reflect any restrictions on transfer.
All certificates representing shares of Common Stock delivered under
the Plan shall be subject to such stock transfer orders and other restrictions
as the Board may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange or
stock market upon which the Common Stock is then listed or traded, any
applicable Federal or state securities law, and any applicable corporate law,
and the Board may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
9.3 OTHER PLANS. Nothing contained in the Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
9.4 NO RIGHT TO CONTINUE AS DIRECTOR. Neither the Plan nor the grant
of any Option hereunder shall confer upon any person the right to continue as a
director of the Company or obligate the Company to nominate any director for
reelection by the Company's shareholders.
9.5 LISTING AND OTHER CONDITIONS.
(a) If the Common Stock is listed on a national securities
exchange or the Nasdaq Stock Market, the issuance of any shares of Common Stock
upon exercise of an Option shall
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be conditioned upon such shares being listed on such exchange or Nasdaq. The
Company shall have no obligation to issue any shares of Common Stock upon
exercise of an Option unless and until such shares are so listed, and the right
to exercise any Option shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the
opinion that any sale or delivery of shares of Common Stock upon exercise of an
Option is or may in the circumstances be unlawful or result in the imposition of
excise taxes under the statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to make such sale or
delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933, as amended, or
otherwise with respect to shares of Common Stock, and the right to exercise any
Option shall be suspended until, in the opinion of said counsel, such sale or
delivery shall be lawful or shall not result in the imposition of excise taxes.
(c) Upon termination of any period of suspension under this
Section 9.5, any Option affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become available during
the period of such suspension, but no such suspension shall extend the term of
any Option.
9.6 GOVERNING LAW. The Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Delaware.
9.7 CONSTRUCTION. Wherever any words are used in the Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
9.8 LIABILITY OF BOARD MEMBERS. No member of the Board nor any
employee of the Company or any of its subsidiaries shall be liable for any act
or action hereunder, whether of omission or commission, by any other member or
employee or by any agent to whom duties in connection with the administration of
the Plan have been delegated or, except in circumstances involving bad faith,
gross negligence or fraud, for anything done or omitted to be done by himself.
9.9 COSTS. The Company shall bear all expenses incurred in
administering the Plan, including expenses related to the issuance of Common
Stock upon exercise of Stock Options.
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9.10 SEVERABILITY. If any part of the Plan shall be determined to be
invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.
9.11 SUCCESSORS. The Plan shall be binding upon and inure to the
benefit of any successor or successors of the Company.
9.12 HEADINGS. Article and section headings contained in this Plan
are included for convenience only and are not to be used in construing or
interpreting the Plan.
ARTICLE X
TERM OF PLAN
10.1 EFFECTIVE DATE. The Plan shall be effective upon its adoption by
the Board, subject to approval of the Plan by the Company's shareholders.
10.2 TERMINATION. Unless sooner terminated, the Plan shall terminate
ten years after it is adopted by the Board and no Options may be granted
thereafter. Termination of the Plan shall not affect Options granted before
such date, which will continue to be exercisable after the Plan terminates.
